Q2 2020 Onto Innovation Inc Earnings Call
Good day and welcome to the onto innovation second quarter earnings release Conference call. Today's conference is being recorded at this time I would like to turn the conference over to Mike Shaffer Investor Relations. Please go ahead Sir.
Thank you Todd and good afternoon, everyone.
Onto innovation issued its 2022nd quarter financial results. This afternoon. Shortly after the market's closed if youre not received a copy of the release. Please refer to the company's website at www dot onto innovation dotcom.
A copy of the release is supposed to joining us on the call today or Michael Plisinski, Chief Executive Officer, and Steven Roth Chief Financial Officer.
There's always the case I need to remind you the safe Harbor regulations any matters today that are not historical facts, particularly comments regarding the company's future plans products objectives forecasts and expected performance consist of forward looking statements within the meaning of the private Securities Litigation Reform Act with 1995.
Just a miss whether expressed or implied are being made based on currently available information into companies best judgment at this time.
Within days as a wider range of wide range of assumptions that the company believes there's a reason is to be reasonable. However, it must be recognized these statements are subject to a range of certainties that can cause <unk> actual results to vary materially.
Does the company cautions that these statements or no guarantees of future performance risk factors that may impact on two renovations results are currently described it ought to innovations form 10-K reports for the year ended December 20 high teen.
As well as other filings with the Securities and Exchange Commission watch renovations to start update forward looking statements that expressly disclaims any obligation to do so today's discussion of our financial results will be presented on a non-GAAP financial basis, unless otherwise specified as a reminder, a detailed reconciliation between GAAP and non-GAAP Roe.
Charles can be found in today's earnings release.
No go ahead and turn the call over to Mike Kaczynski.
[music].
Thank you Mike Good afternoon, everyone and thank you for joining our call. This afternoon, our second quarter results highlight the progress we're making on two key initiatives for 2020.
The first initiative is to unlock the operational efficiencies across the newly merged company over the last nine months, we've implemented improvements in the business structure systems and processes and supply chain.
Efforts are beginning to show through in our financials with improving gross margin and lower operating expenses.
Second initiative.
What's to leverage our broader scale technology and talent to accelerate the delivery of comprehensive solutions to our customers high value problems.
Working closely with our customers. Our team has made excellent progress in the quarter and we announced for new optical metrology platforms further enhanced by a new AI defect engine, which reduces the time to solution for those to be modeling by 80%. This incredibly talented team is pushing optical capabilities beyond the reach of our company.
Editors and maintaining the best solution for high volume manufacturing, that's a very leading edge designs.
In addition, our inspection team expanding into the growing Cmos image sensor market with a competitive win another leading supplier of high end sensors for mobile automotive and medical applications. Finally, we see the investments in panel level packaging, increasing and our growing backlog provides the confidence that.
On to step fast solution, which includes Jetstep lithography Firefly inspection and discover analytics is providing unique and compelling value proposition.
In summary, so very pleased with the progress made in the second quarter across both strategic initiatives, which together strengthen our financial foundation and broaden our growth opportunities across the semiconductor value chain.
I'll provide some detail in the second quarter, beginning with our largest segment the advance nodes spending in this segment was better than expected and maintains a strong levels from the first quarter in both logic and memory not surprisingly we did see some concentration the corridor. That's two of the top five semiconductor manufacturers, one logic and another memory.
Combining full with 35% of total revenue.
Our new metrology suite was developed in collaboration with our customers to deliver the greater precision accuracy and productivity required for the latest Threed NAND sub seven nanometer logic in one elfa DRAM devices.
This suite was released on schedule due to the extraordinary efforts and creativity employed by our development teams to overcome the limitations our covert 19 safety protocols protocols based on our development in application teens.
The ability for the Atlas five to deliver time quality measurements that optical speed well make it the preferred solution for high volume manufacturing of next generation logic logic and memory devices.
Really compelling the aspect metrology is the new technology platform leveraging the infrared spectrum to measure high aspect ratio channel holes in word lines that have critical features for next generation Threed NAND products.
Prior to aspect metrology this was not only possible with slower x-ray tools.
Impulse five system integrated metrology system enables high productivity and higher performance and includes our industry proven in die metrology capability and embedded processing, where control systems for more stable measurements at higher throughput than competing systems as an integrated system the attach rates.
One to one with the process tool. So this business will grow volume providing them on a maybe a more linear revenue stream at scale.
Finally, the successful adoption of our element compositional metrology tool by a top three semiconductor manufacturer significantly broadens our market. So the element F. T IR from Silicon substrate manufacturers to now include leading edge front end wafer fabrication.
The element metrology.
Was.
Uh huh.
Sorry, the element metrology uses left the IR technology to monitor elements into Canada, contaminants and exotic materials, which can be critical to final yield, especially below 10 nanometer design.
As mentioned our customer engagements have been positive and we expect these products to begin contributing to revenue in the fourth quarter and continue to expand into 2021.
Our specialty and packaging markets declined by an estimated 10% in the quarter, primarily as a result of the U.S. Department of Commerce ruling in May targeting chip suppliers to walk away. This ruling impacted one of our own OSAT customers as a result of the ruling their expansion plans would do.
Laid as they look to replace the capacity vacated bicuar ways.
Underscoring the strength in the market our customer is already replace the lost demand from far away and we expect shipments to resume this quarter.
Growing demand for Fiveg enabled mobile devices is not only creating unit volume demand, but also demand for more advanced inspection and metrology that ensures not only the processes meeting design specifications, but also identified potential and costly field in reliability issues are unique combination of.
Dragon flight to the inspection Threed metrology and clear fine provides that provides the most flexible process control solution on the market coupled with our AI enhance true 80 see software and discover analytics, we provide a complete solution for yield and reliability and excursion modern monitoring this unique.
He helped propel our inspection product revenue to grow by 26% in the first half of 2020 compared with the first half of 29 team.
Third quarter, we see additional double digit growth for onto inspection.
Another exciting development in the quarter was the growing demand we see for onto his panel lithography solutions, the complexity and cost of designing complete devices at the latest nodes is creating the drive towards heterogeneous packages are triplets. This trend means that designers can design triplets. So then though.
Where cost benefit as most optimized.
Panel level packaging. These triplets can be combine to provide custom devices in a single package.
Applications.
This technology ranged from processors for new artificial intelligence and datacenter applications to five GE communications pathogens and.
Jetstep lithography is proving to be the best choice to this new packaging technology due to its industry, leading wide field optics and integrated control system able to compensate for the variation inherent in the process. We expect to see additional orders for 2021 delivery before the end of the year.
With that I'll turn the call over to Steve Ross to review the financial highlights.
Thanks, Mike and good afternoon, everyone. My remarks afternoon, I'll provide some details behind our Q2 results and also provide some insight into what we see from gross margin and operating expenses in the third quarter.
Our second quarter revenue was 134.9 billion slightly above the midpoint of our guidance and a decrease from 139.9 million in the first quarter.
Quarter over quarter, or Q2 results, representing 4% decrease was mainly driven by lower metrology software sales in the quarter offset by strengthening our wafer business and another record quarter for our service business.
Breaking down the revenue by market revenue from advanced nodes accounted for 43% of revenue.
Specialty devices and advanced packaging customers account for 33% revenue.
The remaining 24% came from our software and services business.
And then advanced nodes memory was the primary driver.
DRAM and NAND being a consistent levels quarter over quarter.
And especially the devices and advanced packaging market increases in wafer manufacturing in foundry customers were more than offset by a delay in business from and those that customer that Mike just mentioned and a decrease in metrology sales from RF customers in the quarter.
Turning to gross margin, we saw improved margins, even with the decline in revenue with second quarter gross margins at 53% driven by increased increased rents in the wafer business.
This compares to a gross margin of 52% reported in the first quarter.
As we look forward to Q3, we continue to see product mix is the primary driver of gross margin and currently anticipate margins to be in the range of 51% to 353%.
Now moving to operating expenses second quarter operating expenses was 47.7 million at the low end of our guidance range.
The impact of merger synergies implemented at the beginning of the quarter. In addition to lower consulting costs. Upon go lives of the new computer system in Q1, where the primary drivers lower operating subs.
For the third quarter, we expect to see the full impact of Oh, the operating expense Energy's we implemented in Q2.
And reduced R&D spending in the quarter based on the timing of new product introductions.
Currently forecasting our Q3 operating expenses to be in the range of 46 to 48 million.
If you look back at the operating expenses of the pre merger companies.
We'll see that the combined operating expenses were approximately 52 million a quarter in 2019.
Comparing that mid to the midpoint of guidance I just gave for the third quarter. She was the positive impact of the merger synergies are having on our operating expenses and it does and that does not include the above the line supply chain synergies there were having a positive effect on gross margin.
Net income for the second quarter net income increased for the second quarter and was 28 million 42 cents per share a lower revenue and reported in Q1 and above our guidance.
The first quarter reported net income of 19.7 billion or 39 cents for sure.
Our gross margin lower operating expenses and a lower tax rate entry, which is better than expected performance in the core.
Now turning to cash in investments, which are on a GAAP basis.
We ended the quarter with cash the cash position of 312 million up 20 million from Q1.
That's after executing early in the quarter on a repurchase of $18.4 million or stock previously authorized repurchase program.
Our free cash flow for the quarter was approximately 36 million.
Got you Steve will also declined in the quarter, which helped generate cash. However, those gains were offset by similar increase in inventory as a result of delayed customer shipments and inventory for new products.
I will turn the call back to Mike for additional guidance like.
Thank you Steve.
As you know, we're operating an unprecedented times macroeconomic conditions impacted by the global pandemic and trade tensions that China are creating additional levels of uncertainty for markets.
Perfect to cope with 19, we'll maintain our current high levels of safety protocols through the end of the air and possibly into the middle of next year.
Team has done an outstanding job leveraging technology and process innovation to maintain a product production commitments and development programs similar to last quarter. Our guidance assumes these protocols continues to be effective and our suppliers maintain their commitments.
With regard to try to trade with China outside of broadening the application of our compliance controls at this time, we see no significant impact to our business from the regulations around the military and use of our products as we saw in the second quarter. We expect the ruling specific so why weights will result in a shift in supply chain.
Chains that are unlikely to reduce overall global demand for wafer manufacturing and packaging services.
The market in China has been growing steadily in the increased emphasis on the localization of manufacturing makes it an important market for equipment suppliers with roughly 10% of our revenues coming from domestic Chinese suppliers, we're committed to supporting our partners, while complying to all government regulations.
Now turning to the third quarter, we expect revenue to be 127 million plus or minus 5 million and this revenue range. We project earnings to be 28, 40 cents per share once again benefiting from the improvements in supply chain. Another operational on this is Steve just highlighted.
The overall decline in the third quarter is exclusively from our largest market. The advanced nodes. We see this decline to be limited to the third quarter. We project demand for our products in this segment to return sharply in the fourth quarter, maintaining a near equal mix of capacity and technology buys.
As a result, we expect the fourth quarter to begin onto innovation strongest quarter for the year and positioning us well as we look I had to 2021.
In contrast, we see specialty devices in advanced packaging growing to over 20% and a third quarter consistent with the first half of the year, we see expansions in Fiveg enabled handsets continuing to be a strong driver for this segment Qualcomm and TSMC had projected 200 million units this year doubling each of the net.
Two years, we're halfway through the air and those encouraging projections continued to be supported.
Our leading position across the sequel system from the specialty device manufacturers bar communications power in mens to the most advanced packaging line is enabling us to maintain our double digit growth and this segment into the third quarter. We also expect our no. Besides an element of T.I., our products to see double digit growth something.
Great thing wafer manufacturing spends in the quarter.
In summary, the talented onto innovation team has made great progress strengthening our financial foundation, while expanding our growth opportunities across the semiconductor value chain, we see growth returning from my Silicon met manufactures and advanced nodes, we see future share gain opportunities created by our metrology suite, which is.
Pushing the limits of optical metrology beyond what was previously thought possible and out to advanced packaging, where we currently enjoy strong demand for our unique inspection lithography solutions.
Strong balance sheet and disciplined financial model will provide a sustainable model for profitable growth and fuel the innovation our customers depend on.
And with that well open the lines for questions from our covering analysts Todd.
Thank you if you would like to ask a question. Please signal by pressing star one on your telephone keypad. If you were using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment again press star one to ask a question.
Punks for just a moment to allow everyone an opportunity to signal for questions.
We'll take our first question from Craig Ellis with B. Riley FBR.
Thanks for taking the questions and congratulations on good execution in the quarter guys. Steve I wanted to just start with two clarifications for you if I could up one there was mentioned in the prepared remarks on a headwind from I know chat customer given a customer issue affairs I did that have a negative revenue when.
Packed on the quarter and if so how significant wants it and then.
The other clarification is on the quarters gross margins real strong 150 basis points better than what I thought then I think better than where we had the guidance midpoint what accounted for the upside in gross margin.
Okay.
So on the customer Pushouts sick, they was Ah that customer had who's going to try and obviously as Mike mentioned.
Some of those tools, we're where we had anticipated at one point delivery, possibly in the second quarter. They clearly pushed out of the second quarter and into and we were hoping to the third quarter now even looks like it's kind of push into the fourth quarter.
Some some of it says into well maybe some of it out to United Your.
But there is Ah.
So that that was the big issue into getting would they lost their their customer.
Yeah.
So while way and they were so they had to scramble to try to replace that that business and they've been doing that.
On the gross margin side.
Well, Mike actually you have inc. for the coming up.
Yeah, I'll I'll just clarify in fact, the customer already.
Oh filled that capacity and have we expect to ship.
At least half the orders in this quarter and the other half the remaining systems in the or in the fourth quarter. So the demand was quickly replaced and goes from orders.
Our already being scheduled for shipment in this quarter.
And but set a few million my Chris that more like mid single digit million can you help us script.
No it's Ah.
It's several million.
No. It's it was a fairly sizable amount of borders so you know between zero and 10.
Okay, great. Thanks.
And then on the margin Craig.
So again mixes coming into play for sure we had Ah we wafer business.
Had a higher percentage coming up in below the previous course that helped the margin a little bit as well as the supply chain synergies that you know we've been talking about.
He said most of those will start impacting a lot more as we exit the year, but some of those are starting to trickle in so that was also helping some of the mark the gross margin yep.
Congratulations on that a good performance Sir.
Moving on to the first question. So Mike you you offered a lot of good color on the quarter and then some segment color and the outlook with regards to the dynamics that you're seeing in advance nodes. In Threeq you is that something that seasonal for our there programmatic things or any shifts like you described with the Oh sad downstream.
Customer should the to play out what the sequential decline came back big segment.
So from the advance nodes are part of the question I think you asked about events nodes, we don't see that a seasonal there was a strong order volume up.
Across the board from both memory and logic customers and and both a second first and second quarters.
And we see this more they as somewhat of a pause from some of our larger spenders and though in the first half.
And do you remember, we talked last quarter that we were projecting a pause and the timing of which wasn't really clear will now it's more clear it's coming more in the third quarter and we expect a relatively strong snap back in the fourth quarter.
Great and then last for me and on that point, so and I know, you're not giving specific guidance for the fourth quarter, but given that we could see potential record revenue start for every potentially seeing something in the 149 150 to 160 range or are there drivers out there, especially given the power of the new products, but for us.
Now to aspect that that's five et cetera that could mean that we could actually touched a lot more to above 160 million in the fourth quarter.
I I wouldn't expect 160 million in the in the fourth quarter. The the new products are exciting and gaining traction, but those will be incremental sales and then ramping into 2021 and beyond that so they will have minimal impact on our fourth quarter the bulk of the snap.
Back is the the adoption of our current technologies for you know next generation or production volume ramp.
Got it thanks, so much guys. Good luck.
Thank you well take our next question from Patrick home with Stifel.
Thank you very much and congrats on a nice quarter.
Mike maybe first off on the front end metrology business.
We see a lot of me are always depends on customer timing of when they buy and when they take their systems, but what I'm trying to get maybe a little color from you use other potential lead times are particularly for some of the Standalone systems do you feel that there's still a bottom quarter kinda lead time people process tools.
I mean and for the integrated systems, especially the new systems that you have and that you recently [laughter] they'd go simultaneously when processed foods like taking.
Yeah, the integrated systems will be more more simultaneous with the process equipment. So as its being delivered they're going to want those integration integrated modules or to help ramp the products. So so those will be more one to one or the standalone I would say is still roughly.
One to two quarters ahead of the process ramp so as as a customers are.
Planning for there for their ramp their buying more metrology up ahead in order to.
More quickly ramp the process equipment and the process and then they level out in a just sampling and and use those tools into more.
More optimized fashion.
Great that's helpful.
So the advanced packaging side of things.
Obviously, given that it would pick up there continues to sort of core in past calls you've talked about other.
New markets of acquiring these advanced packaging toxicities in areas like memory.
You've talked about a high performance computing can you at least qualitatively or I guess nope, where you're seeing some of the strength in the near term schemes get more just diversification into cold These non mobility.
Or non smartphone advanced process seems odd that were seems like no. One was just too I guess bias towards hub mobility.
I would say, there's both happening here almost simultaneously. So we definitely see a lot of drive towards mobility and because of our large footprint across multiple customers serving the mobility market. There's a there's a strong effect on us but in addition, we see.
The high performance computing and and support for work from home.
Driving more advanced memory and processor architectures to provide that.
Hi performance capabilities. So we've we've talked about you know TSMC and others have have really highlighted there they're growing demand in the five nanometer node those thing those devices are all being packaged.
And and as ever most people know that's a obviously a large backend customers for us.
Great question for me for Stephen in terms of the Opex management.
Obviously, you guys have exceeded your plans for the cost synergy efforts on the op X Y and that's contributing already today, but you're probably getting some benefits in the near term and as it relates to travel expenses, maybe other expenses that there aren't being accumulated during this just kind of pandemic.
And you get to more normal environment. Once again whenever that is how do you managed to generate optic thatll come without access can kinda crunch time.
Hi, I'm managing it after you more attractive levels like what's the fine balance that you'll be doing.
As you get back to a more normalized.
Arm.
So that's good question Pat I mean, there's obviously ebbs and flows in any quarter I mentioned timing of project expenses, there will always be the ebbs and flows of some dollar amounts quarter to quarter I mean again, you're right. The probably the biggest one that jumps out you promote cabbage reduce expenses, maybe from koby did the travel but.
Not that significant I mean, yeah, when you're talking.
$47 million, it's you're talking a couple hundred thousand dollars in a quarter or maybe maybe you know million. If it's if everyone. If it was back to normal operations.
Yeah, we obviously have all the people embedded in the field. So it's really just you're talking you know the U.S. people going overseas, maybe sending engineered or something for some critical meeting sales guys. Whatever so it's not a huge expense for us so.
I'm comfortable there will be so slight couple hundred thousand dollar uptick here and there, but I also think we're done with synergies there'll be other things that give and take within that within the year. So I'm I'm quite comfortable where we're headed with the op expenses you know the midpoint of my guidance is 47 million I think you'll see quarters that will be below that again, so so I'd be.
Kind of modeling in that range.
Great. Thank you very much.
Thank you well take our next question from Quinn, Bolton with Needham and company.
[laughter] just one follow up on on the third quarter outlook and softness in advance news, that's sort of across logic foundry DRAM NAND <unk>.
Yes, it's specific to one of those segments and then a follow up question.
Good question Quinn it it is.
More balanced across the the two large customers that we talked about that combined for 35% of the basically the first half spend we talked about the second quarter.
But they were similar levels and the and the first quarter and so those represent a those two customers represented a memory in the logic.
Uh huh.
Basically customer so we expect yeah. So so we're seeing that those.
Drops from those customers as we delivered a tremendous amount of equipment to them in the first half now we expect that to return, but you know we see this pause in the third quarter.
[laughter] otherwise otherwise we've got increases for instance, China or we see customers increasing our spend so we've expanded oh opportunities quite significantly in China or even in the third quarter. So it's really those two customers represent a you know, but the bulk of the downtick and.
You know a little bit of smidgen, some change one way or another.
You know from others.
And I guess.
Outside of those two large customers for the advanced nodes that are pausing in the third quarter.
The packaging the wafer business.
Yes for those business is trending flat to up and it's really just the deposit those two large customers.
Are you seeing.
A pause elsewhere in the business I mean, just like the advanced packaging.
Well you shed orders pushed from Q2 Q3, so it sounds like that would actually be a tailwind and that sort of business for the third quarter. So just trying to make sure I've got all the moving parts.
Yeah. So advanced packaging is continuing to be very strong part of our business I mentioned, the first half of the year as 20, it's up 26% over the first half of last year. So so even with and that that's without the orders from the from the push outs, so even with those without those order.
As we saw a nice 26% growth in that segment and then inspection segment for the.
First half a year and we talked about another no double digit growth heading into the third quarter.
So so that's a fairly steady consistent growth on the specialty and advanced packaging side.
Got it and then I guess first for Steve you gave guidance for gross margin. If you want to 53% in this third quarter is that more driven by just the mix shift you see a wafer somebody advanced nodes or is it more I just want to absorption on a lower revenue figure and I guess.
So I know you're not going against for the December quarter, but you said that advanced nodes and revenue come back to peak levels.
Do you expect a nice recovery in gross margin I won't ask you to quantify it.
But would you expect to recurring gross margin with revenue increasing the fourth quarter.
Ah yes, they had to answer your second part of the question first I guess I'm you know obviously the higher revenue goes better leverage on the overall manufacturing operations. So yeah, we were kind of coming out of the forming in the new companies do remember we were guiding like in the 50% to 52% gross margin ranges now we're doing 51 to 50.
Three.
You know and obviously had 53 in Q2, keeping up in that kinda that range that we are obviously lower revenues. So you've got some fixed cost above the line, which is coming into my thoughts for though even though were lower revenues were kind of maintaining at midpoint were down but it. We're we have the possibility being in that 53% range going into Q4 Quinn Yeah, I think with you know the high.
Revenues, you know better absorption of all global manufacturing operations, you know I would I would anticipate you're going to you still see our margins stay keeping up and as 50 to 53 range, maybe even higher interest rate can depend on what the mix looks like when we get there.
And I guess it just a question on that kind of longer term models is the 600 groups are sort of 600 million model.
And it at that level revenue in the 50%.
For some ranges that's still the right.
Good for kind of about 600 million annual run rate.
Yeah, absolutely like I tests that all the time and I feel confident once we start coming back up into those reps, they really levels, especially with the synergies that we talked about that we've put in for supply chain that'll start impacting the margins exiting the year, yeah, we're pretty comfortable being in that you know.
That hit the 54 to 600 million range.
Perfect. Okay. Thank you.
Thank you well take our next question from Tom Diffely with D.A. Davidson.
Yes. Good afternoon, so Steve I'm curious have you exceeded your initial goal of $25 million of synergies at this point in that you're working on additional synergies.
So I think Tom we actually said EUR 20 million and synergies with the published a number that I think we had out there from the deal and we announced on the last call that I think that we were passed that I think.
I'm not sure if we didnt out the actual number but.
I think we said 24 million, we had implemented as of Ah.
As of the time with that of the last earnings call. So yeah, we've exceeded that number but we also said we don't think we're done.
You know, there's obviously the low hanging fruit stuff like that with easier thing, it's a good going but.
Ah, Yes, and then in supply chain synergies, obviously, they bud light. So we talked about that having most of it in fact exiting year and you can imagine that's an area, where we're going to have a lot more work to do you know as we start for getting could comment platforms and things that we can see in the future. So yeah. We've exceeded the what we've talked about from the initial discussion and then work.
Obviously continued to the tissue higher.
Okay great.
Mike I'm curious do you see I'm, a direct link between industry unit volumes, the advanced packaging or advanced packaging bunch more of a technology Fiberxon just to a unit driven by.
And the reason I'm asking is that we're expecting it potentially double digit unit growth next year and I'm wondering how much a catalyst that might be.
Right No I think we've always looked at advanced packaging as a unit volume driven business and the front end does the more technology driven business. So.
And that's that's holding true I'd I I'd say, the only difference as some.
Pretty significant inflections like the panel lithography, which is you know technology shifts that we're starting to see and that will take some time to ramp and there'll be some you know some growth due to the technology shift versus just the the volumes, but in general packaging is is certainly a unit volume driven.
Driven business.
Okay, Great and then I use finally, I was a little surprise when you said that the RF business was soft I thought Fiveg will give you a nice little uptick in or.
Yes.
Sorry, that's me Tom or is that.
Oh, I thought Mike, but Ah you know doesn't [laughter].
So what what drove the softness in the RF business when it seems like a lot company, we've seen some RF strength right now because of Fiveg.
I'm not sure I said, the RF was soft, though I think I highlighted multiple times, where five GE RF was was quite strong and driving growth. So actually I talked about the entire ecosystem from you know the RF communications devices, but then also the Mems and the power.
That we're also seeing some you know some pretty decent growth and so now.
Oh, you know he likes ease and talking to the the reference that I made to the metrology weakness in RF.
In the quarter in this in the second quarter as part that was that was really the weakness in just over metrology sales not inspection sales and our Uh huh.
So not totally Laura just the adoption of our metrology.
[music].
Okay. Thanks to the clarification.
Yeah.
[laughter].
Like let's look a question. Please press star one well take our next question from Krish Shankar with Cowen and company.
Hi, Thanks for taking my question I two of them. Mike you you spoke about the strength in d. them in Q2.
How much of that it's cyclical versus she is game is little bit of quantified.
HM we definitely see the adoption of our Atlas metrology expanding into more of the high end applications. So from that respect would lead to consider that share gain opportunity you know share gains. So we looked at the level of utilization the number of applications.
Going onto the tools and and how many.
Of those applications shift to us so I'd say, there's there's some level of share gains, but that's always been a strength of ours or so.
And that continues to be a strength I think the opportunity for US is too is to drive into some of the.
Say less sophisticated less challenging layers and to gain where we haven't been particularly focused are strong and penetrate some of that and increase our share gain opportunities even even further.
And that's where it all depends if these new products a focus that had achieving.
Got it thanks, Mike and then just as a follow up the last time you spoke about Oh.
ER audit put into August trend from Silicon before the crisis in the Bakken or you see that will do you think that's been delayed.
Oh, we're definitely seeing that I mentioned, we expect to see double digit growth Oh.
After the little pause in the second quarter, where were seeing that coming back pretty strong for both the element into T.I.R. and for our Novus edge.
That fall into false inspection and metrology, serving the away from manufacturers.
Got it got it. Thank you very much sorry, I missed the thank you.
Yep no problem.
This concludes our questions for the day I'd like to turn it back to Mike Plisinski for closing remarks.
Thank you Todd and I would like to once again knowledge the incredible passing of our employees and their commitment to our valued customers I also want to thank our suppliers and investors and hope you and your family stay safe unhealthy.
Thank you for your attention.
This concludes todays call. Thank you for your participation you may now disconnect.
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