Q4 2024 Onto Innovation Inc Earnings Call
Good day and welcome to the onto innovation fourth quarter earnings release Conference call. Today's conference is being recorded at this time I would like to turn the conference over to Sidney Ho Investor Relations. Please go ahead.
Speaker Change: Thank you Rachel and good afternoon, everyone onto innovation issued this 2020 for fourth quarter and full year financial results. This afternoon. Shortly after the market close if you did not receive a copy of the release. Please refer to the company's website, where a copy of the release is posted.
Michael Prusinski: Joining us on the call today are Michael Prusinski, Chief Executive Officer, and Mark <unk>, Chief Financial Officer.
Speaker Change: I'd like to remind you that the statements made by management on this call will contain forward looking statements within the meaning of the federal Securities law. It.
Speaker Change: Those statements are subject to a range of changes risks and uncertainties that can cause actual results to vary materially for more information regarding the risk factors that may impact onto innovation results I would I wouldn't encourage you to review our earnings release.
Speaker Change: SEC filings onto innovation does not undertake the obligation to update these forward looking statements in light of new information or future events.
Speaker Change: Today's discussion of our financial results will be presented on a non-GAAP financial basis, unless otherwise specified.
Speaker Change: A reminder, a detailed reconciliation between GAAP and non-GAAP results can be found in today's earnings release.
Mike: Let me turn the call over to our CEO, Mike <unk> Mike.
Mike: Thank you Sydney good after.
Mike: The moon, everyone. Thank you for joining us on our call today, we capped off 2024 with our sixth consecutive quarter of growth and a new quarterly revenue record of 264 million.
Growth from specialty and advanced packaging markets was strong throughout the year and also culminated in a record fourth quarter led by strong AI packaging demand.
Mike: Financially gross margins improved every quarter in the air to end up nearly 55% in the fourth quarter. We will continue our focus on driving gross and operating margin improvement throughout 2025.
Mike: Now, let's review the fourth quarter business highlights starting with our specialty devices and advanced packaging markets, which grew a healthy 30% for the calendar year, our largest market overall in the quarter was AI packaging led by strong growth in shipments to support two and a half the logic packaging.
Mike: As expected orders from H P. M declined after a record third quarter. However, as H B M water allocations from end markets are becoming clearer between the three main suppliers. We are seeing a pickup in demand to support the growth of two and a half dealogic packaging.
Mike: For the full year inspection revenue inspection tool revenue for AI packaging more than doubled and was split nearly equally between two and a half dealogic and H P. M.
Mike: To support the growing complexity in advanced packaging processes customers are adopting more of our front end metrology tools to improve improve control in both two and a half the logic and H B M processes.
Mike: For the year and metrology revenue in advanced packaging exceeded $50 million more than triple that of 2023.
Mike: And we expect additional growth into the new year.
Mike: In addition to AI packaging interest is growing in the panel market, particularly for the use of glass panels for enterprise server and AI applications.
Mike: We're pleased that in the quarter Firefly was adopted at two leading panel manufacturers for applications in glass and advanced IC substrates. He's.
Mike: These leaders selected Firefly technology or the ability of our integrated multi sensor technology to solve a variety of application challenges beyond high resolution defect inspection, ultimately reducing or eliminating manual processes.
Mike: In addition, the new customers expand our panel install base is they're not currently jet step X 500 lithography customers. This is creating potential opportunities for future cross selling and the adoption of integrated solutions like Sept best used in panel level fan out applications.
Mike: Also in the quarter revenue from power devices set another record and was the second largest market in the fourth quarter behind two and a half the packaging for the airpower revenue grew 10% despite soft end market demand delaying several customer expansions.
Mike: During the year, we believe our customers focused on driving yield improvements and we were pleased that our portfolio of solutions and applications experience could contribute to that effort.
Mike: Switching gears to our advanced nodes markets, we saw our fourth consecutive quarter of growth momentum, we expect will strengthen more significantly in 2025.
Mike: In the quarter logic and memory, both grew and as expected gate all around revenue was the largest increase nearly doubling over the prior quarter. In addition to growth for our Atlas OCD tools.
Mike: For our Irish film Metrology also increase with successful qualifications in memory logic and packaging, reaching nearly $100 million in revenue for the year, we expect demand for our Iris films to grow further in the new year as we expand both customers and markets served.
Mike: Concluding our highlights for the fourth quarter. We've recently launched several new products aimed at strengthening and expanding our opportunities in advanced packaging advanced nodes and power semiconductors. These products are in the process of being proven out at several top five semiconductor manufacturers and leading power manufacturers, we expect incremental.
Mike: Revenues from these new products. Starting later this year and more meaningful revenue in 2026, when these products ramp into higher volumes.
Mark: Now I'll turn the call over to Mark to review, our financial highlights and provide first quarter guidance.
Mark: Thanks, Mike and good afternoon, everyone as Mike highlighted we had another strong performance by the onto team wrapping up 2024 exceeding the midpoint for revenue and exceeding the high end of our EPS guidance for Q4 fourth quarter revenue of $264 million increased 5% versus the third quarter and up 21% versus.
Mark: The prior year with fourth quarter, EPS, increasing 13% sequentially to $1 51 up 42% versus the prior year.
Mark: Specialty devices and advanced packaging continued to be the growth driver during 'twenty 'twenty four as well as strengthening of advanced nodes exiting Q4 with sequential quarter over quarter growth throughout the year.
Mark: Before going into further details on our Q4 performance and our outlook for Q1.
Mark: At first like to quickly highlight our full year financial performance by the team in 2024.
Mark: We achieved 21% revenue growth.
Mark: 37% operating income growth.
Mark: Cash from operations and EPS, both achieved 43% growth twice the rate of earnings growth for 2024.
Mark: Now shifting back to Q4 and looking at the quarterly revenue by markets. Our biggest market remains specialty devices and advanced packaging, which increased 5% from Q3 with record quarterly revenue of $170 million and represents 64% of revenue.
Mark: Advanced nodes, which had revenue of $48 million increased 12% over Q3 and represents 18% of revenue.
Mark: Software and services with revenue of 46 million decreased by 4% compared to Q3, representing 18% of revenue.
Mark: As Mike stated, we achieved 55% gross margin for the fourth quarter at the high end of our guidance range of 54% to 55%.
Mark: Achieving 300 basis point improvement since the beginning of the year.
Mark: As reflected in our GAAP gross margin during the quarter, we incurred merger and acquisition related expenses and restructuring charges relating to the exit and impairment of certain assets as a result of the acquisitions, we announced in October.
Mark: Fourth quarter operating expenses were $68 million at the high end of our guidance range as we continued to accelerate R&D investments within the quarter.
Mark: Our operating income of 75 million was 29% of revenue for the fourth quarter compared to 28% for Q3, we achieved quarter over quarter operating margin improvement throughout 2024 totaling approximately 300 basis point improvement since the start of the year.
Mark: Our net income performance improved 200 basis points to 28% of revenue for Q4 supported from favorable investment income and tax rate within the quarter.
Mark: Now moving to the balance sheet.
Mark: We ended the fourth quarter with cash and short term investments of $852 million cash.
Cash remained relatively flat to Q3, as we executed $25 million of share buybacks at an average price of 159 per share under our existing $200 million authorization.
Mark: In addition, we finalized and closed the two previously announced acquisitions.
Mark: We achieved operating cash flow of $56 million or 21% of revenue down from previous record levels for Q2, and Q3, primarily due to the timing of shipments in the quarter.
Mark: Inventory ended the quarter at $287 million down 21 million versus Q3, and achieving six quarters of consecutive decline in exiting 2024 below 300 million as projected.
We expect to stay relatively flat for the first quarter and expect to maintain inventory levels at one seven to one eight turns in line with external benchmarks.
Mark: Now turning to our outlook for the first quarter. We currently expect revenue for the first quarter to be between 260 and $274 million.
Mark: We expect gross margins will be 54% to 56%.
Mark: For operating expenses, we expect to be between $69 million to $72 million.
Mark: For the full year, we expect our effective tax rate to be between 14% to 16% we.
Mark: We expect our diluted share count for the first quarter to be approximately $49 8 million shares.
Based upon these assumptions, we anticipate our non-GAAP earnings for the first quarter to be between $1 40, and $1 54 per share.
Mike: And with that I will turn it back to Mike for additional insights into Q1 further commentary on 2025, Mike.
Thank you Mark.
Mike: Specific to our outlook for the first quarter, we see strong growth in advanced nodes from both logic and memory, we expect DRAM to see the most significant growth in the first quarter, partially in support of the 69 million V. P. A we announced last month, we expect gate all around demand to grow as well even after a very strong fourth.
Mike: Quarter, and we also see NAND orders, increasing to support expansion and demand for high stack three D. NAND.
Mike: As mentioned earlier and packaging, we see orders picking up for H P. M. As our customers' end market demand becomes clear and they ramp to support the growth in two and a half dealogic.
Mike: Expect these additional tools to be required mid twenties 25 for.
For power, we expect the first quarter to see a seasonal dip followed by growth in each of the subsequent quarters similar to the pattern. We saw in 2024 for the year, we expect total power revenue to exceed the record year in 2024.
Mike: Overall, we continue to see three secular end markets driving our business over the next two years first the demand for AI continues to grow at a very high pace.
Mike: <unk> TSMC forecasted that its revenue growth from AI accelerators.
We will grow at a mid 40% CAGR in the next five years.
Similarly, the Nvidia describe the demand for its Blackwell processors as staggering more recently the U S government announced a 500 billion Stargate project over the next four years to build new AI infrastructure in the U S.
Mike: New and more efficient AI models like deep sea could proliferate the use of AI and edge devices, which could be a catalyst for mobile refresh increasing demand for advanced packaging logic and memory and specialty devices.
Mike: Overall, we expect there to be a multiyear growth driver for us.
Mike: The second secular driver is for gate, all around DDR, five memory and high stack three D. Nine three D NAND.
Mike: This is increasing since these technologies contribute to more powerful and energy efficient system designs to support performance in energy starved AI in enterprise server applications.
Mike: Which leads us to our third secular driver the electrification of everything.
Mike: In addition to electric vehicle smart grids and infrastructure, there's an urgent need to reduce power consumption for all the AI infrastructure that is expected to be built out over the coming years. According to studies by various government agencies and consulting firms our consumption by data centers are expected to increase from 4%.
Mike: Of U S electricity generation today, two 7% to 12% by 'twenty 30.
Mike: New technologies, such as gallium nitride based power semiconductors are being adopted because of the benefits and power efficiency density and size when compared to silicon.
Mike: In conclusion, we believe our products today are well positioned to support the demands.
Our leading customers who through their process innovations are enabling these new markets. We expect our recently announced products will extend our ability to serve our customers as they invest in the new innovations required for the future.
Mike: That concludes our prepared remarks, Rachel please open the call for questions from our covering analysts.
Rachel: Thank you.
Speaker Change: Eldon via the telephone and we'd like to ask a question. Please signal by pressing star one on your telephone keypad.
Speaker Change: If you are using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.
Speaker Change: Please limit yourself to one question and one follow up in order to give as many analysts as possible an opportunity you may rejoin the queue with additional questions.
Speaker Change: Again, please star one.
Speaker Change: Good question.
Speaker Change: And we will take our first question from Matthew Prisco with Cantor Fitzgerald.
Matthew Prisco: Hey, guys. Thanks for taking the question I guess I'll start off with HBM, given the pick up in demand Youre seeing there any more color you can on that front and then just maybe given the robust growth in 24 based on the industry capacity adds how would you think about growth potential from threw off at higher level in 2025.
Matthew Prisco: So.
Matthew Prisco: On the H B M front I think it is playing out largely as we described in the last quarter. A if we look at the amount of capacity required for H B M capacity required to support the cost growth.
Matthew Prisco: Weren't seeing the the level of expansion we expected.
Matthew Prisco: We are sort of.
Matthew Prisco: Surmise that this was because we're going to.
Matthew Prisco: And custom our customers were waiting for allocations from the.
Essentially the big driver in video.
That's become clearer we are starting to see those customers expand and start to place orders and our work with us on timing of shipments et cetera for the mid to second half year.
Matthew Prisco: I think one of the one of the important points here, though to try and understand the HBM demand is how much capacity was added in 2024, we estimate about 230000 wafer starts per month was added in 'twenty 'twenty four roughly half of that was required.
Matthew Prisco: <unk> by the market.
Matthew Prisco: So what we're seeing right now is a little over.
Matthew Prisco: You know that have being added which implies the market is doubling in order to meet the demand of the co ops.
Matthew Prisco: And we see actually our attach rates are at the same level or even increasing as we see more adoption of our front end metrology equipment in this market.
Matthew Prisco: Helpful. Thank you and then and then for the follow up maybe you can help us think through the moving parts for advanced node into 2025, given that gate all around strength in the DRAM growth and early signs of life in NAND would it be realistic to kind of return back to those prior peak levels you saw in Q1.
Matthew Prisco: Thanks.
Matthew Prisco: Ah we're approaching it so where where I don't think we're quite going to get to the prior peak levels, but we're definitely getting within shooting range.
Matthew Prisco: Okay.
Matthew Prisco: Thank you.
Speaker Change: Next question comes from Craig Ellis with B Riley Securities.
Craig Ellis: Yeah. Thanks for taking my question and my congratulations to you and the team on the robust execution in 2024.
Craig Ellis: Wanted to start with a high level question, so as the business starts to the year with strength.
Craig Ellis: Really in all three businesses and in some digestion in specialty, but then sequential growth and you should look at that and as you factor in the benefit from new products and you mentioned that may be more second half weighted how do you think onto will stack up versus what some larger companies.
Craig Ellis: You were saying might be 5% year on year industry growth.
Craig Ellis: Yeah.
Craig Ellis: Well first the new products will have a kind of an incremental effect on this year and a much larger effect on next year. So taking those to the side I think those are kind of exciting drivers for our future.
Yes.
Craig Ellis: We've based.
Craig Ellis: Based on the position we've articulated in our prepared remarks and the growth in.
Craig Ellis: In the secular growth drivers were aligned with we would expect.
Craig Ellis: <unk> to outperform you know the the.
Craig Ellis: The wf feed numbers that have been talked about certainly you know above 5%.
Craig Ellis: Well above 5%.
Craig Ellis: Well, Okay, I'll get out the decoder ring and see if that's 300.
Craig Ellis: 100 basis points or better.
Craig Ellis: And and any color there welcome.
Craig Ellis: Mark I'll follow up with a question from you. So I really like the implications of what Mike said earlier about advanced nodes, continuing to rise and becoming a more material part of revenue because that's key to continued gross margin expansion I think through the year last year, we were up about 100 basis points not looking for spin.
Speaker Change: Civic guidance, but as you look through calendar 'twenty, five and the potential mix of business and your ongoing cost reduction efforts can you give us any color on how much gross margin expansion as possible on any key puts and takes would be helpful. Thank you.
Craig Ellis: Yeah no. Thanks, Craig for the question on gross margins I mean, certainly our goal as you know as we did in 2024 quarter or quarter over quarter improvement certainly the mix of advanced nodes is going to help propel that and accelerate that.
Craig Ellis: You know our goal is to continue to take 55% as the baseline and move that forward throughout the year I think the mix helps as I said, but also the effort of the team to continue to.
Craig Ellis: Work with our suppliers and execute efficiencies within our plant network. So all of that together, we should as Mike said in his remarks, and I said, we should see improvement.
Craig Ellis: You know I won't give specific ranges, but you know as we said quarter over quarter improvement of 50 basis points or more is the goal.
Craig Ellis: Yeah.
Speaker Change: Thank you.
Speaker Change: Your next question comes from the line of Charles <unk> with Needham.
Speaker Change: Yeah, Good evening, Hey, Kelly.
Speaker Change: Yes.
Speaker Change: Great.
Speaker Change: So Mike we're after the bid.
Speaker Change: This year.
Speaker Change: Obviously, you talked about a few moving parts.
Speaker Change: Eight all around.
Speaker Change: You add something new I quite frankly at this time.
Speaker Change: Did I hear you.
Speaker Change: Yes.
Speaker Change: AI packaging HCM.
Speaker Change: What sort of visibility I mean, if I look at everything altogether for the overall business through the rest of the year.
Speaker Change: The ability right now.
Speaker Change: Based on the order based on the pipeline, what's your expectation for Florida.
Speaker Change: So, let's say the profile of the year, where the overall business.
Speaker Change: I mean, I mean give us as much color as possible arrangement outer quarters.
Speaker Change: Thanks.
Speaker Change: Yeah, well as you know Theres, a theres a lot of moving parts in the outer quarters are going to be the least visible for us and that's traditional semiconductor business. So nothing's changed there I would say directionally, what we're seeing is a continued.
Speaker Change: And those areas that I mentioned, so certainly the advance nodes and frankly it is fairly healthy across the board. So gate all around DRAM, especially think that will lead the growth and then three D. NAND is also growing pretty nicely from again from a bottom but.
Speaker Change: Healthy.
Speaker Change: Compared to prior years.
Speaker Change: Except for 2022.
Speaker Change: So that's that's a directional on the.
Speaker Change: The AI packaging, there's quite a bit going on there you'll see lots of gyrations, there's concerns or let's say questions around tariffs and chip tariffs and what's that going to do the markets and so I think that's.
Speaker Change: A handicap that I'm not willing to place bets on but the general trend of general demand the share we have and the expanding position we have with growing our metrology applications in there are new applications for our sensors like the subsurface.
Speaker Change: Defect inspection capability all of that adds to our let's say opportunities to continue to outperform the overall market.
Speaker Change: As we look ahead to 2025.
Speaker Change: Okay.
Speaker Change: Thanks.
Quick follow up.
Speaker Change: Mike you gave some some of your own internal market research numbers H B.
Speaker Change: I think you said 230 K capacity <unk> at 2024.
Speaker Change: In the half was required by the market.
Speaker Change: I believe you said something a little bit more we're looking at about 100, and maybe you didn't expect.
Speaker Change: Expectation of about 45, how much.
Speaker Change: Do you think will be needed.
Speaker Change: Your current view on how much the order or how much.
Speaker Change: Right now.
Speaker Change: Yeah. So if you take the 230 and you say if about half wasn't wasn't leveraged or or used then then that implies 115000, roughly 115000 wafer starts we're required to match last year's cost capacity roughly.
Speaker Change: If you're doubling that then you're doubling the other and so you're essentially seeing we're essentially seeing the 115 or more thousand wafer starts being added in 2025, which matches the demand profile that we would expect.
Speaker Change: Thank you to keep your next question.
Speaker Change: Yeah.
Speaker Change: Go ahead sorry.
Edward Yang: Thank you. Your next question comes from the line of Edward Yang with Oppenheimer <unk> Company.
Edward Yang: Hi, Thanks, Mike and <unk>.
Speaker Change: Congrats on the packaging revenue growth.
Speaker Change: 180% over 2023 was that above your target I thought Ah <unk>.
Speaker Change: January presentation, you had something along the lines of a 160%.
Speaker Change: It might've been.
Speaker Change: Yeah.
Speaker Change: I don't recall specifically yeah.
Speaker Change: Yeah, So I might have said over 160% and then we ended up at 180%.
Speaker Change: Okay.
Speaker Change: And can you <unk>.
Speaker Change: As to the magnitude of the revenue pick up you see in demand for the.
Speaker Change: Mental H P M.
Speaker Change: It doesn't seem like it's in the first quarter guidance you mentioned, it's more.
Speaker Change: Mid to second half.
Speaker Change: 25, yes.
Speaker Change: Yeah, that's correct and I think that's still being worked out meaning I think there's some upside to what we're seeing the customers are talking to us about their their needs both for inspection and some growing metrology needs. We're also looking at some of the <unk> potential.
Speaker Change: For three D as well so.
Speaker Change: That's.
Speaker Change: That's all going to be probably maybe some little bit in Q2, but mostly in the second half.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: First question comes from Brian Chin with Stifel.
Speaker Change: Hi, there. Thanks, thanks for letting us ask a few questions.
Speaker Change: So we get questions a lot about.
Speaker Change: Whether process control intensity for H B M will decline, it's been pretty high.
Speaker Change: These early phases, I do understand that thinking but.
Speaker Change: What we here however is that yields are getting more challenging when you stack 12 die or have you moved to H B M. Four so are you actually seeing process control intensity really sustaining or maybe even increasing some.
Speaker Change: This experience Sam expansion and does that also some of what you know.
Speaker Change: Yep 12.
Speaker Change: 12 high die.
Speaker Change: H band four is that part of what maybe is driving some of the upward our thinking on the H b M demand profile into midyear or second half.
Speaker Change: Yeah, I think you're exactly right I do believe that process control intensity is increasing and I think it's going to continue to increase not just because as you're stacking the risk of yield loss for our you know the final layer is going to cost significantly more but also the.
Speaker Change: City of shrinking and shrinking.
Speaker Change: Shrinking the interconnects and more dense interconnects means the interfaces between the Interconnects as more critical and that's that's going to be a very.
Speaker Change: A new setup new challenges for process control that you know some of our echo scan in some of our new products. The three D. I are designed to address.
Speaker Change: Okay great.
Speaker Change: And then maybe.
Speaker Change: I think when a eyeballs your January our investor slide deck. It it kind of just eyeballing. It. It suggests maybe you have around 60% share of existing AI packaging, Sam and then on top of that you're adding 300 million incremental Sam.
Speaker Change: With some of the new products like <unk> as you just mentioned I guess, what are you targeting for that in terms of share for that new $300 million of incremental sand through 2026, and do you also think youll retain kind of that 60% share on the existing Sam.
Speaker Change: Oh.
Speaker Change: Yeah.
Speaker Change: You know our intention is of course to.
Speaker Change: Grow our share so not just maintain.
Speaker Change: And of course, our competitors tend to take so that that.
Speaker Change: That's the nature of the Beast on the incremental Sam and I think if anything the you know the competition is creating a an opportunity for us to accelerate some of our road maps and really.
Speaker Change: Get some new products released sooner to market than than we had anticipated which is also exciting for the team.
And happening now, but on the incremental Sam that's a good question in the case of echos scan.
Speaker Change: You know, we don't really see an alternative if you want to measure avoids one micron and below and atmosphere are without having the risk of additional yield loss due to immersion you know immersing. These these samples and we think this is one of the only technologies. So you know we would be targeting are very high.
Speaker Change: The percentage of share of that Sam <unk> on the three D. Bump that's a that's a different question theres a very embedded competitor Theyre strong incumbent then we will see so any incremental share gain there.
Speaker Change: Could be could be viewed positively and you know it.
Speaker Change: Depending on where the bump technology goes as they get.
Speaker Change: Smaller and denser the strength of our <unk> technology becomes greater and we think that then we should have a greater share greater entitlement.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Goodbody Shred trade with Evercore.
Speaker Change: Okay.
Speaker Change: Hi, Thanks for taking my question the first one I had.
Speaker Change: Great amount of color on the H B M ramp.
Speaker Change: One of the things that came from TSMC earnings the big increase in Capex, and it's mostly driven by peak.
Speaker Change: Increasing the spending to wake.
Speaker Change: The advance packaging pieces goes down.
Speaker Change: Advanced packaging capacity expansion so.
Speaker Change: If I, if I think about tsmc's.
Advanced packaging Capex bank doubling into 2025.
Speaker Change: How how should I think about the linearity linearity to your revenue from from doing the integration point of view.
Speaker Change:
Speaker Change: Yeah, I don't have.
Speaker Change: So generally speaking I'll just answer generally speaking, if if someone's going to double capacity, they're going to bring in more of the process control it'll be more frontloaded a in order to use the process control to qualify the equipment as its coming online and then monitor of the Prost.
Speaker Change: The CS as well so that's just the nature of the general nature of the process control I would expect that to be the same.
Speaker Change: The same for the KOL loss as you've described it the two and a half to logic packaging and I think that's what we're seeing in our in our forecast as well.
Speaker Change: The reason I hesitate is because we're also seeing new opportunities. So there's new applications, where we're working on.
Speaker Change: We're working on with customers that are being qualified that could change that that trajectory as we as those applications come online.
Speaker Change: They're new so there they havent been been in process in previous ramps.
Speaker Change: Which goes to it goes to bryan's increasing capital.
Speaker Change: Capital intensity, we're seeing it across the board an increase in process control capital intensity.
Speaker Change: Got it and just to follow up on that guys.
Speaker Change: That unit offering change drastically if they can't get cold wise anyway.
Speaker Change: All right.
Speaker Change: <unk> kind of range.
Speaker Change: How does that impact your life.
Speaker Change: Okay.
Speaker Change: Not too much so we don't see any significant differences.
Speaker Change: Thank you. Your next question comes from David Duley with Steelhead Securities.
David Duley: Good afternoon. Thanks for taking my question I was wondering if you might be able to help us understand a.
Speaker Change: A couple of things first.
As far as the new product contribution in 2025, but what can we expect I think from you know the void detection. The three D bump there might be a couple of other ones, maybe just help us understand what the contribution might be in calendar 2025, and then could you just elaborate a little bit more on the lithography.
Speaker Change: Hum business and you talked about glass panel adoption I was just wondering if you could give us some more details there. Thank you.
Speaker Change: Okay.
Speaker Change: So what I mentioned earlier is that a new product adoption.
Speaker Change: Incremental revenues previously I talked about the prima scan being oh at least $20 million in revenue for 2025, we would expect some incremental additional revenue if we shipped an echo scan, we'd hope to close that in the in the calendar year.
Speaker Change: Year, we'd hope to close maybe one other one so you're talking about incremental tool orders so not huge in the Grand scheme of things, but those qualifications means successful application and tool of record positions established for the next ramps, which would be expected and it most likely 'twenty.
26, so I think that's.
Speaker Change: That's where we'd really see the benefit from the new products.
Speaker Change: Going to lift though.
Speaker Change: The.
Speaker Change: What we're seeing is fairly significant increase in the application studies coming out of our our pace lab. So the work we're doing with our new HRP.
Speaker Change: Stepper, that's that's being qualified or or let's say running demos down in the pace lab. We also have a customer that has a hybrid tool I believe we shipped it six months ago, that's been running really well and they're starting to qualified customers and hopefully we'll start to see some ramp dish.
Speaker Change: Additional orders from them, but most likely for ramping in delivery in early 'twenty six.
Speaker Change: And then we're you know we're talking to several customers about our tools.
Speaker Change: And qualifications later in this year and into early 'twenty six so the panel market is still it's still.
Speaker Change: I'd say.
Speaker Change: In its infancy, but definitely growing and we're seeing more and more customers.
Speaker Change: Customers engaged in defining their roadmaps to include glass or panel processing.
Thank you we'll take our next question from Mark Miller with Benchmark company.
Speaker Change: Congrats on another great quarter, you mentioned that you were seeing some increase in and then was that a surprise what are your expectations for Dan I know Oh research had a very strong increase in shipments I'm just wondering what youre thinking about man this year.
Speaker Change: Yeah, I'd say I'd say it was a bit of a surprise.
Speaker Change: We've seen some increases but they were very very small so as a percentage basis, but are you.
Speaker Change: The base was so small.
Speaker Change: But now it's becoming a more meaningful part of of 2025.
Speaker Change: Largely we're seeing the you know.
Speaker Change: At least to two primary customers ramping to support high stack three D. NAND applications and that's a that's driving a lot of the upside we're seeing in the three D NAND market.
Speaker Change: Okay.
Speaker Change: Large increase in R&D expenses will.
Speaker Change: Will that continue into 2025 sequentially there was a large increase.
Speaker Change: Yeah I mean.
Speaker Change: We're continuing to look at the portfolio and as Mike said we.
Speaker Change: We do have the new products launching but there's certainly expenses.
Expenses and certain other.
Speaker Change: Areas, where we will continue to place dollars to continue to drive the portfolio Roadmaps with the customers yeah customers are driving a much higher pace of innovation requirement from us as I mentioned the process control intensity in the applications.
Speaker Change: The challenges theyre, having a requiring us to pull in road maps for inspection for even for lithography for.
Metrology as well so so yeah, I don't think that theres going to be.
Speaker Change: A significant increase in 2025, but of course there is.
Speaker Change: Uh huh.
Speaker Change: Incremental increase.
Speaker Change: Thank you.
Speaker Change: This does conclude today's question and answer session I would now like to turn the call back to Sidney Ho for any additional or closing remarks.
Speaker Change: Thank you.
Speaker Change: We will be participating in a number of investor conferences throughout the quarter. We look forward to seeing many of you. There a replay of the call today will be available on our website at approximately 730 Eastern time. This evening, we like to thank you for your continued interest in onto innovation Rachel Please conclude the call.
Speaker Change: Thank you.
Speaker Change: On today's call.
Speaker Change: For your participation you may now disconnect.
Speaker Change: Okay.
Speaker Change: [music].