Q2 2022 Onto Innovation Inc Earnings Call
Good day, ladies and gentlemen, 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 Michael Sheaffer. Please go ahead Sir.
Thank you Kyle and good afternoon, everyone onto innovation issued its 2022 second quarter financial results. This afternoon. Shortly after the market close if you haven't received a copy of the release. Please refer to the Companys website, where a copy of the release is posted.
Many of US on the call today are Michael <unk>, Chief Executive Officer, and Mark Schweitzer, Chief Financial Officer, as always I'd like to remind you that the statements made by management on this call will contain forward looking statements within the meaning of federal Securities laws, such statements are subject to a range of changes risks and uncertainties that could cause actual results to vary materially.
For more information regarding the risk factors that may impact onto innovation results I would encourage you to review our earnings release, and our SEC filings onto innovation does not undertake any obligation to update. These forward looking statements in light of new information or future events. 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 results can be found in today's earnings release I will now go ahead and turn the call over to Mike Lozinski Mike.
Thank you, Mike and good afternoon, and welcome to the onto innovation second quarter earnings call.
We have many exciting highlights to cover today, but before we do I want to first welcome Mark Slicer to his first earnings call with onto innovation as many of you are aware Mark joins us from Boston Scientific where he was senior Vice President Global financial operations. In this role he was responsible for the financial performance of the worldwide.
<unk> and distribution network, having a production value of approximately $3 billion annually.
March experience driving global supply chain improvements gross margin expansion and M&A will be an asset to our team as we build the scale to support the growing demand for our connected solutions in.
In fact, we're on pace for systems revenue to grow 30%. This year following 48% growth in 2021. We believe this strong performance is a result of the compelling value of our connected solutions and our customer success team, which has been realigned to support our customers' goals we.
We see this leading to deeper and earlier collaborations with strategic customers across the value chain, which in turn will help onto innovation sustain our strong performance in the years ahead.
So let's begin with a look at the growth in the second quarter. Once again the onto innovation team delivered another record breaking quarter a $256 million.
Of revenue aided by customer acceptance of our jet step X 500 lithography systems.
This is a significant milestone for the jet step lithography program, which was designed to meet the growing demand for advanced substrates to support heterogeneous packages for high performance compute applications and.
In addition to strong volume growth, we see an increase in the number of interconnect layers per panel flown.
Factory output considering these factors, we anticipate capacity constraints could continue through 2024.
The acceleration of the multiyear program to meet this demand compounded by the impacts of Covid supply chains were rising logistics costs resulted in initial product margins well below our targets.
Through each of these next six quarters, we have systematically improving manufacturing efficiencies volume supply agreements leveraging lead times to use more cost effective logistics and increasing the performance and productivity of the platform.
With these efforts and in spite of elevated supply chain costs, we expect our corporate gross margin for.
For the second half of 2022 to return to recent norms of 54% to 55% for the remainder of the year and that includes the projected shipment of two <unk> systems in the third quarter and three in the fourth quarter.
Including contributions from those target fee business, our specialty and advanced packaging revenue increased 19% over the prior quarter.
Another highlight from this market included the successful launch of our new EVP 40 module for the Dragonfly G III.
This system provides increased throughput and sensitivity required to monitor yield loss at the edge of wafers for advanced memory and logic devices. We enhance this platform further by integrating our 200 ADC software, which includes the machine learning classifications required to deliver process insights to our customers not just <unk>.
Accounts from less sophisticated alternatives.
This same value proposition was recently adopted by a notice edgeway from.
No <unk> customer and the wafer manufacturing.
And is partially in this differentiation partially contributed to onto securing more than $100 million of orders extending into 2025 to support the capacity expansion of their silicon for EV applications.
Due to the rapid demand for our <unk> 40, a few of our new suppliers struggled to meet their delivery commitments in the quarter. This impact is inspection shipments in the second quarter by roughly $5 million.
We expect improvements in the third quarter, but will still be constrained until the fourth quarter.
Turning now to the advanced nodes market revenue was down slightly over the first quarter, but up 47% year over year.
Leading this growth was our Atlas OCD platform for measuring critical dimensions of <unk> transistors at the nanometer scale last month, our Atlas five was honored by industry experts at semi Americas and semiconductor Digest with the best of West Award at Semicon West Trade show.
This award recognizes innovative new products each year that are significantly advancing semiconductor manufacturing capabilities.
Of course, one of the biggest advances in the industry as the transition from Finfet transistors to a higher performance, but more complicated nano sheets transistor structure.
Atlas <unk> metrology has been qualified by several leading logic manufacturers for their critical nano sheet process control steps. We've received orders for both three and two nanometer nanometer nodes. We believe this demonstrates the performance advantage of our patented optical sensors and advanced analytics overhang.
X Ray and other optical alternatives for volume production.
Likewise, the expansion of our metrology technology into the plane of films market is proving valuable to customers.
The Iris platform is currently delivering throughput at twice the speed of alternative systems, while maintaining comparable stability in.
In the second quarter revenue from Iris grew 49% over last year, and we are on track to meet or exceed our goal of achieving $50 million in revenue from this market segment by the end of the year.
Over the last two years, we've seen revenue from meta pulse acoustic metrology double that of preceding years addressing applications in <unk> NAND power in many segments.
Our new EKO acoustic metrology is positioned to extend that capability to newer industry challenges for example in <unk> NAND as the tier stacks continued to growth new opaque hard mask materials are being transitioned for critical channel whole formation Echo metrology is uniquely positioned.
To take advantage of these technology inflections and as already entering the market with an order backlog of $20 million.
Now I'll turn the call over to Mark for a review of the financial highlights in our third quarter outlook.
Thanks, Mike and good afternoon, everyone first let me, thank Mike and the entire auto team for an incredible welcome I am excited to be part of onto innovation and look forward to contributing to the next phase of profitable and leveraged growth ahead of us.
I will start by providing some details on Q2 results then followed with an outlook for the third quarter as Mike mentioned, we had another record quarter with second quarter revenues of $256 3 million.
Approximately 8 million above the high end of our previous guidance range supported by the recognition of the <unk> 500 lithography systems within the quarter.
Breaking down the revenue by market advanced nodes revenue of $94 5 million grew 47% year over year and represents a 37% represents 37% of revenue.
Specialty device and advanced packaging, which benefited from the X 500 revenue within the quarter achieved $117 3 million grew 28% year over year and represents 46% of revenue.
Software and services revenue of $44 5 million setting another quarterly record grew 19% year over year and represented 17% of revenue.
As was mentioned during Q1 once able to recognize the revenue on those geography systems. This will create a headwind on the quarterly gross margins, which were 52% down from 54% in the first quarter. In addition, we continued to experience significant disruptions and inflationary cost pressures.
Our supply chain, which are also impacting gross margins in the quarter.
Second quarter operating expenses were $59 million at the midpoint of our previous guidance.
We did see an increase sequentially by approximately $2 million from the first quarter, primarily from higher compensation costs.
However, we continue to drive significant operating expense leverage as on a year over year comparison operating expenses as a percentage of revenue decreased by 600 basis points.
We also posted strong operating margins at 29% continuing to demonstrate the leverage in our operating model as our operating margin increased by approximately 300 basis points compared to a year ago.
Operating margin is down from 1% from Q1, primarily due to the gross margin impact from the lithography systems.
We do expect our operating margin to Reaccelerate in Q3.
Net income in the second quarter was $64 million or $1 28 per share <unk> <unk> above the midpoint of our previous guidance.
Moving to the balance sheet, we ended the second quarter with cash of $545 million up $34 million since the start of the year and up $3 1 million since Q1.
During the quarter, we did leverage our overall strong cash position to make further investments in our inventory and our infrastructure to support the growth of the business.
Inventory increased to $281 million in the quarter on higher planned revenue in the second half of 'twenty, two as well as increasing certain safety stock levels as a hedge against ongoing ongoing supply chain disruptions.
Accounts receivable increased to $235 million in the quarter and our days sales outstanding increased to 83 days due to the timing of the revenue within the quarter.
We do expect to get back to the normal trend of cash generation in the second half of 'twenty two.
Now turning to our outlook for Q3.
We currently expect revenue for the third quarter to be between $242 million and $258 million.
We expect our gross margins will be between 54% to 55% driven by sales mix, expanding our supply chain and leveraging our fixed cost structure.
For operating expenses, we expect to be between 60 million to $62 million.
For the full year 'twenty, two assuming no changes to tax legislation, we expect our effective tax rate to be between 13% to 14%.
We expect our diluted share count for Q3 to be approximately 50 million shares.
Based upon these assumptions, we anticipate our non-GAAP earnings to be between $1 21 per share to $1 42 per share.
And with that I will turn it back to Mike for additional insights into Q3, and the remainder of 'twenty two.
Thank you Mark.
We continue to believe revenue in the second half of 2022 will be stronger than the first half within the advanced nodes market in the third quarter, we see double digit growth from logic and NAND customers more than offsetting declines in spending from DRAM manufacturers.
The logic spending is primarily for sub five nanometer nodes, where we see increases in sampling rates and layer share gains, resulting in higher attach rates for Atlas metrology.
And <unk> NAND strong Atlas sales are being complemented by growing adoption of our aspect metrology.
We expect repeat orders and another top five NAND manufacturer to adopt aspect for production in the quarter.
The aspect metrology system is providing superior precision stability and robustness for high aspect ratio channel whole metrology relative to competitive solutions using traditional simpler interferometry into for metric designs.
We expect this product to be a larger contributor to revenue as manufacturers move high stack <unk> NAND into higher volumes of production.
We do foresee a decline for our specialty and advanced packaging customers. After such a strong second quarter. We expect this to pick up again in the fourth quarter, particularly for packaging and power devices.
<unk> to our view of a stronger second half bookings outpaced billings in the second quarter, adding to our backlog, which is now over $700 million. Given this unprecedented visibility we project system sales to advanced node customers to grow over 40% for the year and systems for specialty devices and advanced packaging to grow.
Over 20% each well ahead of fab equipment spending estimates of 8% to 10% for the industry overall.
Even with this exciting growth we're still in the early stages of transforming our company into a partner of choice for connected solutions across the semiconductor value chain.
So we're happy with the progress made so far we see our best and most exciting advances are still to come.
And with that we will open the call for your questions Kyle.
<unk> please open the lines.
Thank you, ladies and gentlemen, if you would like to ask a question. Please seaton by pressing star one on your telephone keypad, if youre using a speakerphone. Please make sure your mute function is turned off.
To reach our equipment again press star one to ask a question you pause just for a moment to assemble the queue.
We take our quick question from Quinn Bolton.
Needham and company your line is open.
Hey, guys congratulations on the nice results.
Especially on recognizing revenue on the jet setbacks 500, I wanted to start just with a couple of clarifications. Mike I think you had mentioned that there were some production issues.
For the inspection systems in Q2, and $5 million revenue, which was affected and it sounds like some of those constraints continue into Q3 can you just kind of give us a sense of what youre seeing for that market, especially with the very strong demand for dragon fly with <unk>.
Sure.
And that that's actually the challenge so the suppliers some of our suppliers were unable to meet that strong demand. So you know we announced the product we had.
I think it was over 11 or over 10 customers add up to $75 million in backlog and customers.
Or let's say the customers one of the tools in the first several quarters first two quarters and our.
Our some of our suppliers in fact some fairly.
Smaller obscure suppliers were unable to meet the meet the demand we are working with them to increase their capacity and their production capabilities. There were some quality issues, where we had to help them work through some rework and as we get through that we'll be able to meet full.
<unk> demand and be right back on track we are accelerating so we did we did ship tools in the second quarter, we will ship more tools in the third quarter and finally relieve the constraints in the fourth quarter.
Got it.
Second question Amit.
<unk> lithography systems I know the initial systems that you recognize in the second quarter here pretty low gross margins just given the long eval.
Costs, but as you look forward to Q3 Q4 could you give us some sense, where those margins go as you begin to recognize.
Tools that didn't that did not go through those extended valves.
Yes, so as I mentioned still there'll be steady improvements over the next six quarters and without trying to Peel back individual product line gross margins.
Did provide commentary that we'll be back into the 50, 455% range in the third and fourth quarters and that will include two jets step lithography systems.
In the third quarter and three in the fourth.
Got it. Thank you I'll go back in the queue.
And then and then that will continue to improve throughout 2023.
Got it okay. Thank you.
Yes.
Thank you we take our next question from Craig Ellis with B Riley Securities. Your line is open.
Yes, thanks for taking the question.
Congratulations on Rev. Rec on jet step X 500, just a significant milestone archives. So congratulations I wanted to start just by following up with a longer term question. So nice to see the momentum building as we go through the back half.
With.
Two and three product shipping, respectively, and $3 <unk> can you provide us any color on just the way the linearity could shake out in 2023 and as is.
Is the backlog.
Simply that $100 million minus what you have shipped in <unk> and plan to ship in the second half or have you added to the prior $100 million backlog.
So.
Might recall, we were <unk>.
Capacity constrained. So we are already booked our full capacity for 2023 in fact, we increased capacity for 2023, and then book that and that was done early early last year. So right now we're working on.
2024, and looking at the demand and our manufacturing constraints and increase in capacity to serve 2020 for demand.
From a linearity perspective.
Don't recall, if we're going to be at Max capacity in the first quarter, but it would be the starting the first quarter and then leveling off for the next.
Three quarters or will start right out at that top level for all four quarters.
Got it and then Mike It would be great just to get some additional color on the commentary around.
The two nanometer gate all around.
Advanced.
Trends are sure architecture qualifications and just some of the things youre seeing in that part of the market.
Yes, so we are seeing a lot of movement.
Bunch of pull ins.
People trying to accelerate their ability to to ramp and then recently we had some.
Some customers publicly announced delays to their 303 nanometer.
Process, but from our perspective, and what we're seeing there is still.
Decent demand for the Atlas in order to ramp the pilot production.
And eventually volume for the nano sheet transition.
We are seeing different timelines from different different logic suppliers. So.
One thats announced they're already running production other a little bit maybe a year behind and then a third of it.
Even further behind than that that's all everybody is racing to bring that to production.
Relatively quickly so I see a lot of movement in competition in this space, what's nice for US is that the Atlas is proving to be a.
Very.
Potent tool for them to be able to make the critical measurement for the new nano sheet.
Process steps.
And those critical measurements are requiring far more sampling.
And because of the APC control there. So we're actually taking our data and adjusting the process, so providing true APC automatic process control.
Order to meet the.
Yield requirement so.
That's also adding to the attach rate.
And if I could sneak in just one more before hopping back in the queue, Mike It sounded like from your commentary that aspect strength that you are seeing across a number of manufacturers is indeed quite strong and while there spent a lot of concern or played about capital spending in the memory market. It seems like where you're positioned for.
Layer account increases which are predominantly 128 player.
Up to I think there've been three different announcements about 230 layer. It seems like that's benefiting the company's position in the marketplace is that right and can you just give us a little bit more color on what youre seeing in the NAND area.
Yes.
Definitely correct.
I think it also.
<unk> brings in the eco product line as well so we're seeing opportunities.
<unk> there as well.
On the hard math Claire.
From an.
And overall NAND perspective.
This transition to high stack <unk> NAND is going to be similar to the transistor transition, it's going to be a big step function. It's all about bit density.
Where historically, we just had the Atlas now we have Atlas aspect and MPD.
The echo product line, providing a more complete solution for process control in the case of channel whole development formation as well as other features in the in the <unk> NAND like the hard math glare.
In addition, we're leveraging our hybrid hybrid metrology capabilities to provide to take the different data streams from these tools and further enhance the information we're providing the customers. So that becomes very unique it's one thing to get measurement capability from <unk>.
Three different tools and you can mix and match and maybe replace but when they are combination of data streams provide some unique value that becomes.
Yes.
Let's say more sticky.
Got it thanks very much Mike.
Thank you we take our next question from Brian Chin with Stifel. Your line is open.
Hi, good afternoon. Good afternoon, thanks for letting us ask a few questions maybe just.
And this would happen with.
Few questions on lithography.
Wondering mark if you could provide where gross margins would have been <unk> <unk>.
Excluding litho number one and number two.
54% to 55% level in second half of it was a pretty good snapback, so kind of curious what some of those initial gross margin improvement levers youre seeing.
In terms of that recovery and also maybe if youre seeing a better mix with Atlas towards et cetera also in terms of the other products in second half.
Yes, yes, thanks, Brian certainly on the gross margin I mean, as Mike mentioned I don't think we're going to get into the specifics of the litho tool, but as we commented on I mean, certainly we see a return back into that 54% to 55%.
Range.
And obviously baked within that we do continue to see.
Cost pressures and supply chain pressures, which we made comment on so.
Don't expect that.
Be any different in Q3 and Q4, so we'll see some of those headwinds will still have to try and offset.
Okay got it.
The big helpers in sort of the lower revenue contribution second half relative to <unk>.
With Whatsapp.
No Brian we also will see as I mentioned, a steady improvement in the gross margin throughout the next six quarters, specifically to the litho and we've also been working on increasing the value proposition for our existing tools driving throughput driving other enhancements to help.
Offset some of the supply chain challenges we've seen.
So I think we're definitely taking several steps to maintain or continue to expand the gross margin.
Fight the headwinds that we face.
Okay fair enough.
And then I guess I think I'm obliged again asked about memory and so Mike.
And the construct of your higher second half versus first half and certainly your new product <unk>.
Expansions.
A big role I think in that for the year as well as probably in the second half.
But what sort of risks are you dialing in in terms of memory, obviously, it seems a little bit fluid in terms of recent commentary from some of the key spenders and memory are specifically one earlier today. So kind of curious what are you dialing in in terms of.
Maybe a downtick in DRAM seems like NAND seems pretty healthy still but what are you thinking through second half and maybe even the tease out sort of next year in terms of the fluidity.
Yes for sure we think we have the.
The announcements baked in to our commentary.
I did mention in the prepared remarks that DRAM would be down, but offset by continued strength in NAND and logic.
Logic, particularly for the advanced nodes so.
Yes.
Barring.
Future surprises.
<unk> fallen off the bus kind of thing our channel checks are discussions with the customers.
No.
We're pretty confident the visibility we have the fact that the book to Bill was continued to be higher over one.
Leads us to believe we are still we're still in an environment, where the equipment is in high demand.
For us it's not just.
The volume.
We're also tied to several technology transitions not just with the with the transistors, the nano sheets or the sub five nanometer, but also with certain DRAM transitions one a one b that they all have different names, but there are some DRAM technology transitions.
As well as of course, the three D. NAND the high stack three D. NAND, we've been talking about flipped.
Flipping to the specialty and advanced packaging.
Alright.
We do see some opportunities with the lithography with some of the new products certainly the high demand of the dragonfly.
Looks to be very solid and we've talked about.
Pretty strong backlog in the wafer manufacturing space, so the very conservative wafer manufacturers driving.
Driving expansions to support the.
Growing demand for <unk> wafers in our position.
Our process control solutions and materials solutions.
To serve that market so.
You take all of these different shots on goal and you can add them up and take a factor for some of the negativity and we still.
We still see the stronger second half.
And.
Some of the numbers, we've talked about for growth.
Advanced node from 20%.
More for packaging and specialty.
Okay, great. Thank you.
Thank you we take our next question from Hans Chung with da Davidson. Your line is open.
Thank you for taking my question so.
First can.
Can you.
Some color around that.
<unk> packaging segment.
How much of the business.
Sort of.
More exposure acute.
<unk> and Marquis and then.
And also what's the revenue mix between.
Compound semi versus.
Yes.
Yeah.
The other piece.
And also.
How much exposure to the silicon carbide. Thank you.
[laughter] that was a lot.
I don't think we have all the breakdowns that you're asking for but just to give you a kind of.
To step back and provide some.
Higher level view.
Sure.
Let's say a consumer market.
I'd say that the primary driver there is our <unk> business and that.
Factored in we definitely mentioned a slowdown there.
But on the flip side part of our packaging business and part of the demand for the dragonfly is been around pack.
Packaging for advanced memory, and logic devices and the.
The efforts that customers are investing in to improve yields for those devices by driving higher yields by better process monitoring on the edge.
See a higher yield lots of die.
I think thats.
One part of it.
In the specialty I'd say a bulk of R. R.
Our business is tied to compound semi.
And to the extent I think silicon carbide is still relatively small there but to the extent that.
Yes.
That our customers are investing in the silicon carbide ramp where.
Sure.
We certainly have positions I don't know do you have more detail.
No.
Sorry, we don't have that.
Finally broken down tons.
Okay.
Fair.
The next question is a more medium term so I remember.
Before we come in and out there in terms of demand.
There there will be 80% of the <unk> NAND will be more than 176 layers.
Just curious how how does that.
I was late to your revenue opportunity in <unk> NAND and then.
Would that be kind.
Kind of across the Atlas assay.
Or the acuity.
Dermatology or it's more like more weighted to the analysts.
All of the Atlas is definitely the workhorse.
That's well established in process tool of record in every NAND manufacturer. So.
That's for sure.
<unk>.
The workhorse of the bulk of the revenue opportunities, but we're further adding to that with the aspect and the and the eco product lines and we think that those combination.
Especially as we see a ramp into.
The higher stack <unk> NAND those combinations are going to increase and certainly increase in percentage of our overall revenue there.
How much is a little bit unclear because theres still.
Trying to determine how much process monitoring theyre going to do with these tools is it going to be in line and every step or is it going to be a sampling rate and that's what they're working on now is as part of ramping up production.
Okay. Thank you.
Yes for sure.
We will see.
Each of these tools, we're already seeing them being qualified for production. So they will be part of production the amount that what's in question is the attach rate.
Got it.
Yeah.
Attempt.
We take our next question from David Duley Steelhead Securities. Your line is open.
Yes. Thank you for taking my question.
Congratulations on nice results.
I guess I was wondering if you could.
Provide us a little bit more detail.
How big do you think the size of the Apple market is at this point and what sort of market share do you have.
That product line in that space.
Yeah.
So.
These are estimates because it's not broken down.
By any industry analyst.
I would say it's about.
$4 million to $500 million or so.
Out of the optical metrology market of about one to $1 2 billion now.
So and then in that I would say we have well.
Pretty good share I'd say, we're probably.
I don't know.
Certainly dominant in the high end the high end OLED applications I think.
Some of the more common OCD applications, we might have a little less sure but overall that's.
That's the view I can't say for sure what the shares.
Say, 50% on the high end or more.
And then on the common share may be.
30, 40% something like this so we're a little more expensive for that that's where our iris platform and is coming into play where we're able to offer that upgrade ability. So we can go after cost effectively the lower end of that market and be able to compete and gain share there.
And then offer the upgrade ability to.
Hello, CD and full capability of our of our Atlas and then the other penetration points are the planar films, which is the other half of that optical metrology market.
Okay.
Now as far as the lithography business goes you talked about shipping five I guess up five units in the second half that sounds similar to the revenue recognition level that you just had in the first half.
So I guess roughly $48 million for the calendar year.
Can you help us understand with your increase in capacity next year, what's the revenue potential as if theres no supply constraints.
Yes.
Yes.
So I had mentioned we had $100 million in backlog, you've got the $40 million.
Coming out so that's at least $60 million.
If we can squeeze a little more and we will try.
Okay.
Okay.
Yes.
And as far as you have.
You mentioned a couple times system sales in 2022 advanced nodes, and then advanced packaging and specialty could you just repeat those growth rates for me because.
Somehow or another I missed them.
Yes, sorry.
Yes advanced nodes.
The 47% year over year and represented 37% of revenue specialty device and advanced packaging.
<unk> grew 28% year over year.
It represents 46% of revenue software and services.
Grew at 19% year over year and represent 17% of revenue.
Actually Matt I think Mike mentioned, what the system's growth was going to be for the calendar year for both segments at one point or another.
You just reported quarter.
Yes, sorry, I had mentioned that based on the projections we see.
The advanced node systems revenue would be around 40% over 40% and the <unk>.
<unk> on the projections that pace we're at.
The.
Advanced packaging and specialty systems revenue would be over 20%.
Thank you.
Youre welcome.
We take our next question from Mark Miller with the benchmark company.
Your line is open thank.
Thank you for the question with the recently signed U S Chip spill Europe previously.
Authorized funding for internal chip production and also I believe there is at least seven hubs.
Totaling over $80 billion that are supposed to start coming up next year wanted us.
One of these.
Opportunity to start hitting your order book.
Yeah.
Yes.
I guess as soon as they start ordering equipment.
Right now that's a pretty fluid situation. So my understanding is.
The government is going to set up an entire I won't say bureaucracy, but a body to govern how the funds will be allocated because it's quite a big amount and there is two different groups that are being considered or two different bodies being considered for this as that comes up.
Then the rules will come out for how the money will be distributed obviously there are sensitivities, we saw that in the debate between.
The various stakeholders on the policymakers on the <unk>.
<unk> itself.
From that then we'll start to see hopefully pretty aggressive announcements from our customers.
Yeah.
And pretty aggressive ramps that we've got a break ground they've got to build the fabs. The shelves and then start ordering equipment to fill them.
So it's really a year.
Some have already started so we're optimistic.
<unk> is probably the furthest along Samsung coming up and Intel would be behind them.
But.
It'll be I wouldn't expect anything.
In the next six months.
Okay.
Youre building up significant cash what are your priorities again for cash.
Priority is a primarily for M&A, we think thats still the best opportunity for <unk>.
Shareholder value creation.
<unk>.
And then we've talked about buybacks, we have an authorized buyback out there.
Million.
Yes.
Thank you.
Okay.
Once again, ladies and gentlemen, please press star one to ask a question star one to ask a question.
We take our next question from Eric Green.
Three items.
Your line is open.
Thank you congratulations on the great quarter and good outlook.
Actually this is just a follow up to the immediately prior question.
It looks like you're about $11 of cash on the balance sheet right now and you are trading at maybe 10 times next year's earnings.
Why isn't that stock repurchases.
Your priority or maybe more balanced in your capital allocation focus relative to acquisitions, given how low risk. It may seem it so attractive at these levels. Thanks.
Yeah, Yeah, no I mean, certainly.
We continue to consider M&A first priority.
So in that in that regard I think.
From a cash standpoint.
Making sure we have those funds available.
Obviously, a priority so yes.
We have formula as we look at.
The investments we could make on the buyback and the pipeline we have for M&A and we make decisions based on on basically the best returns and so.
Yes.
That's just prudent manner.
Management I guess.
Thank you.
In Q and it appears there are no further questions at this time I'd like to turn the call back to my question for any additional or closing comments.
Thanks, Kyle I would like to thank everybody for joining us today, a replay of the call is going to be available on our website by 730 Eastern time. This evening wed like to thank you for your continued interest in onto innovation a call. Please Paul Thank you.
And this concludes today's call. Thank you for your participation you may now disconnect.
Okay.
Okay.