Earnings Call Transcript - ONTO Q1 2024

Operator, Operator

Good day, and welcome to the Onto Innovation First Quarter Earnings Release Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mike Sheaffer, Investor Relations. Please go ahead.

Michael Sheaffer, Investor Relations

Thank you, Rachel, and good afternoon, everyone. Onto Innovation issued its 2024 first quarter financial results this afternoon shortly after the market closed. 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. Joining us on the call today are Michael Plisinski, Chief Executive Officer; and Mark Slicer, Chief Financial Officer. 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 laws. 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's results, I would encourage you to review our earnings release and our SEC filings. Onto Innovation does not undertake the 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'll now go ahead and turn the call over to our CEO, Mike Plisinski. Mike?

Michael Plisinski, CEO

Thanks, Mike. Good afternoon, everyone, and thank you for joining our earnings call this afternoon. Strong and anticipated demand for high-bandwidth memory and logic packaging for AI devices resulted in first quarter revenue at the very high end of our guidance range, 15% over the same period a year ago. Margins came in within guidance, and as Mark will soon outline, we expect to increase gross margin next quarter and improve further in the second half of the year. Before Mark begins, we'll now review the first quarter highlights, starting with the specialty and advanced packaging customers where we delivered our third consecutive quarterly revenue record, a solid 64% increase over the same period a year ago. In the first quarter, revenue for our Dragonfly systems jumped 30% over the prior quarter, almost exclusively to support packaging capacity growth for AI devices. In addition to volume, we also project demand to increase to address new and emerging critical defects. For example, wafers that are being stacked for high-bandwidth memory are used in 2.5D Logic packaging, may be as thin as 50 to 100 microns. These ultrathin wafers are then prone to the formation of small embedded micro cracks, which may propagate through the silicon, making it more susceptible to breakage. Responding to our customers' needs, our Dragonfly platform has been enhanced with a new sensor to detect the subsurface defects at production capable speeds with orders from several customers and shipments starting in the second quarter. After a record year in 2023, revenue from power device manufacturers declined in the first quarter, but we continue to add new customers and expand our footprint at existing customers. We expect to see growth return in the second quarter and carry through to the second half of the year. Much of this demand is to improve yield to increase the factory output without increasing the number of wafer starts. Now turning to our advanced nodes business. Revenue did incrementally improve as expected, but remains at quite low levels. Orders to support advanced logic devices represented the largest growth and was roughly half of the revenue from the advanced nodes customers in the quarter and included both Atlas OCD and Iris planar films. Now I'll turn the call over to Mark to review our financial highlights and the second quarter guidance.

Mark Slicer, CFO

Thanks, Mike, and good afternoon, everyone. Before I get into the details, as Mike highlighted, we achieved first quarter revenue and EPS at the high end of our guidance, and we generated strong operating cash flow of $57 million, representing 25% of revenue. First quarter revenue of $229 million was up 5% versus the fourth quarter and up 15% versus the prior year. First quarter EPS increased 11% sequentially to $1.18 and up 28% versus the prior year. Both revenue and EPS at the high end of our guidance range is due to the continued strength of our Dragonfly system to support the demand for advanced packaging of AI compute devices. Looking at the quarterly revenue by markets, advanced nodes, which had revenue of $27 million increased 45% over Q4 and represents 12% of revenue. Specialty devices and advanced packaging with quarterly revenue of $158 million, up slightly over Q4 represents 69% of revenue. Software and services with revenue of $44 million increased 4% over Q4, while representing 19% of revenue. We achieved 52% gross margin for the first quarter, in line with our guidance range of 51% to 53%. First quarter operating expenses were $62 million, above our guidance range as we made additional investments in applications engineering within the quarter, extending our product and technology differentiation and fast emerging applications like ultrathin wafer process control that Mike mentioned, as well as process tools and inspection for the litho panel packaging for the emerging glass panels. Our operating income of $57 million was 25% of revenue for the first quarter compared to 26% from the fourth quarter. Our higher net income performance of 26% came from favorable investment income resulting from our increased cash balance, while our operating income was impacted by the higher operating expenses within the quarter. Now moving to the balance sheet. We ended the fourth quarter with cash and short-term investments of $741 million, achieving operating cash flow of $57 million within the quarter, converting 100% of our operating income into cash. Inventory ended the quarter at $330 million, up only $2 million versus Q4, while we continue to ramp Dragonfly production, requiring us to procure longer lead time components. We do expect further reduction in inventory as we remain focused on inventory optimization to drive consistent operating cash flow performance levels exceeding 20% of revenue. Now turning to our outlook for the second quarter. We currently expect revenue for the second quarter to be between $230 million and $240 million. We expect gross margins will improve to 52% to 54%, reflecting the improvements in the supply chain initiatives discussed in prior quarters. For operating expenses, we expect to be between $62 million and $64 million as our annual compensation elements occur within the second quarter each year. Consistent with the prior year, we do expect a decline in operating expenses in the second half as we move past these annual compensation events. For the full year '24, we expect our effective tax rate to be between 14% to 16%, which does not assume any impact for potential tax legislative changes that may occur during the year. We expect our diluted share count for the second quarter to be approximately 49.9 million shares. Based upon these assumptions, we anticipate our non-GAAP earnings for the second quarter to be between $1.14 per share to $1.26 per share. Our focus in 2024 remains on our targeted programs for quarterly operating improvements. We have several planned productivity improvements that will take effect in the third and fourth quarters and that we expect to provide continued margin improvement. In addition, we expect stronger metrology sales and an improving gross margin from our lithography systems as we work out the last of the very low margin initial orders.

Michael Plisinski, CEO

Thank you, Mark. For the second quarter, we project demand for AI compute will maintain the record levels of quarterly revenue for Dragonfly systems. As mentioned earlier, we expect power semiconductor revenue to grow in the second quarter, returning to near record levels led by strong Iris's metrology adoption for planar films applications. In the advanced nodes, we expect revenue to increase in both logic and NAND, while DRAM revenues remain soft. The newly projected NAND demand is driven by the need for enterprise solid-state drives and high-density AI servers. These enterprise drives have NAND stacks of over 200 layers where our Atlas and Aspect metrology have established tool of record positions at several of the top NAND suppliers. Also in the quarter, we are on track to ship our first JetStep system to support lithography on glass panels. We believe glass panels will be critical to realize high volume and high-performance chiplet architectures over the next 2 to 3 years. This new system will allow customers to maximize capital investment by supporting both panel production and glass substrate R&D. Through our PACE lab, we are demonstrating the process and process control solutions required for this technology. In addition, we have nearly 20 companies spanning across process chemistry, substrate manufacturing, and process equipment, engaging in discussions on potential areas of research and development, important to our manufacturing partners. This new era of AI is revealing many exciting opportunities for Onto Innovation in both packaging and advanced nodes. Based on the traction we see with our products and the current demand drivers, our outlook for the year is improving, and we maintain our expectation for the second half of the year to be incrementally higher, providing nice momentum going into what is widely believed to be a stronger year for capital equipment in 2025.

Operator, Operator

We would now like to open the call for questions from our covering analysts. Rachel, please open the lines.

Craig Ellis, Analyst

Congratulations on the very strong execution. Mike, I wanted to start just by following up on advanced nodes because it's been so quiet for so long and now we're starting to see a nice recovery. So I wanted to understand what you and the team are seeing with respect to the breadth of the logic gains that you talked about? And then the same question for the breadth of the NAND gains?

Michael Plisinski, CEO

Sure. So for NAND, we'll start there. I mean we've always been extremely strong and well adopted in NAND customers. I think from customer penetration perspective, every NAND supplier that we're aware of is using our Atlas OCD and several that are working on high stack 3D NAND, which we were talking about 2 or 3 years ago with the introduction of our Aspect, are adopting Aspects, but the ramp just wasn't there. So now we're starting to see the market demand or market pull for these high stack devices where the Aspect and the Atlas OCD, we expect to have some benefit from the work we did several years back. If you recall, that's all tied to measuring multiple parameters around these elevator shafts that run up and down the stacks, sag while angles, tilt, all of that. Going to the Logic, I think you asked about, I wouldn't say we're not seeing a ramp as much as we're seeing just continued adoption, continued proliferation of the market position that we carved out when we first started talking about how important gate all around was. I mentioned in my prepared remarks that the expansions are involving both that orders are involving both the Atlas OCD and the Iris planar films. So it's nice to see both establishing a position in getting repeat business as the pilot line starts to move to low volume and then eventually high volume.

Craig Ellis, Analyst

That's very helpful. And then the follow-up question relates to Advanced Packaging and Specialty. Clearly, Dragonfly is very, very strong in AI-related high bandwidth memory and other applications that you talked about a new opportunity. It sounded like it was related to wafer thinness and product customization that starts to ship in Q2. I was wondering if you could help size that opportunity and how that factors into your view for a stronger second half and potential for greater shrink in '25?

Michael Plisinski, CEO

Yes. Every time we bring up a metrology item, the question is on sizing. And the challenge with sizing is always sampling rates. So there's a couple of knobs they can turn. Right now, we know it's a high-value problem, and we know that these thin wafers are becoming more numerous; they're still relatively low compared to the total number of wafers, but high value, so they're tied to high-bandwidth memory, they're tied to the advanced logic we just talked about. So a lot of value in them that will justify the process control. So for us, we're trying to understand, okay, is this we're seeing several customers, not just memory and logic, but also some other specialty device manufacturers adopting this technology, particularly automotive. So is this going to be more widely like a must-have for every thin wafer application? Is it going to be 2 or 3 per factory? Or is it going to be 100% at certain process steps? These are all hot technologies just coming out to solve an emerging critical challenge. And I think sizing it would be a little bit premature. But compared to when I look at the interest from the customers and the risk of not capturing these defects and having entire wafers break inside a tool, which obviously losing a $50,000 wafer is bad enough, but then having to stop the line, clean out the tool, requalify that tool and bring it up into production, that's also an impact. So we'll see. But I think towards the end of the year, we'll have a much better understanding of where the size of this new sensor technology could be.

Craig Ellis, Analyst

Yes, that's helpful insight even without specific numbers, Mike. But just to clarify, as we consider the year, it seems there will be a stronger second half than the first half. Are we looking at low single-digit growth from one half to the next, or mid to high single digits? Any additional information on the extent of the half-on-half growth would be appreciated.

Michael Plisinski, CEO

Single digits. So when I use the word incremental, you can think 3% to 6% kind of numbers, 3% to 7%, something like this land in the middle, 5-ish.

Brian Chin, Analyst

Ask a few questions. So it sounds like your expectation for second half improvement in WFE has somewhat strengthened. And just to clarify, I guess, first, do you also expect packaging to be higher in the second half versus the first half?

Michael Plisinski, CEO

I expect it to be better than I was indicating in prior quarters. So I've always talked about what I expect to be a digestion period. Based on the velocity of orders and discussions and things like this, it could be a more muted digestion period; it could be a low digestion period. But right now, I'd say that I think it's still some level of digestion probably in the quarter and then reigniting a quarter later.

Brian Chin, Analyst

Got it. So when you mention the quarter, are you referring to the second quarter or the third quarter?

Michael Plisinski, CEO

No, second quarter. I mentioned in my remarks that we expect to be maintaining these record levels. So continuing to be very strong in the second quarter, which is an improvement over the past; I thought we would be slightly down, but we won't be. Then the third and fourth quarters, there's a lot of discussions going on, but timing is not clear. Is it all going to be in the fourth quarter? Is some of it going to come in? There's been a trend towards pulling stuff in. We don't know yet exactly where it all shakes out.

Brian Chin, Analyst

Yes. I'm not sure if you're excluding specialty from that, but it seemed like it was a bit weaker than expected in Q1. Was that a widespread issue? Is your anticipated improvement in Q2 and beyond related to catching up on some of the delays from Q1? How does this affect your outlook for the year regarding specialty?

Michael Plisinski, CEO

I think by specialty might mean power semi because specialty, of course, is very strong because it includes the specialty in AP is one category we talked to. But if you mean power semiconductors. So power semiconductors was weak. We projected it to be weak in the first quarter, but it's reaccelerating. And in the second quarter, we mentioned it will be near peak levels. And we have talked about in prior comments, I'm not sure if I mentioned it today, but we have talked to being relatively flattish to the record we set last year. So it might pull down single digits or will end up being flat, maybe slightly up, but so relatively flattish to the record we set last year in power semi. So we're expecting a much stronger second half for power semiconductors.

Brian Chin, Analyst

Okay. Got it. And if I could just sneak one last one in. I know obviously, it's pretty early to talk about 2025, but even qualitatively, what sort of indications are you receiving from your advanced packaging customers about their demand in '25? And I know you're already sort of lapping record levels now in terms of peak production for Dragonfly and for that tool. And so I imagine these discussions need to happen kind of earlier to make sure you can prepare the capacity in advance?

Michael Plisinski, CEO

You'd imagine that. I wish the customers would think that way too. We are having discussions about 2025. So we're already having those discussions, in particular for our customers supplying packaging for AI, right? So I would say it's still too early to say what that means for the entire year, though. I would just say it's positive that they're seeing demand already. We're only just starting this year, and they're already talking about what's going into next year. So I'd say that's a positive indication for 2025. And then, of course, you've got the advanced nodes that we expect to improve more meaningfully in 2025. So there's some optimism for hitting on all cylinders in 2025.

Yu Shi, Analyst

Mike, Mark. Thanks for getting me to ask a couple of questions. So I think the first one, 30% higher in terms of the Dragonfly revenue supporting the AI chip ramp. If my math is right, I think last year, you probably talked about the total of $230 million of the orders starting from Q2 last year to the first half this year. And if Q2 is kind of flattish, sounds like you're saying it's at the similar level, maintain the strength, you're going to deliver the entire $230 million worth of orders by the end of next quarter. I did notice you talked about a little bit of potential digestion ahead. But I also recall you said that there are orders you already received that will deliver in the second half this year but just not at the same level. So can you kind of help us understand this particular part of the Dragonfly revenue? What's the run rate into the second half compared with the first half levels that you're currently seeing?

Michael Plisinski, CEO

So I don't know exactly the math, but I would say your general conclusion is more or less correct. We would have burned through nearly all of the $240 million in Q2 if that was all we ever received for orders. Of course, we've received many other orders since then, such that, a, my confidence has improved, as I mentioned to Brian earlier, I believe it's Brian, that where I talked about digestion period before, now I'm seeing less of that. There may be a slight dip, but not significant. So yes, so I can't really say with specificity. On timing, Q3, Q4 and all that because we just don't know yet. But I can say that the orders have continued to come in. They're coming in from all of the 3 HBM suppliers. They're coming in from AI packaging logic providers. And yes, and they've strengthened since our last call, since the last time we spoke.

Yu Shi, Analyst

Got it. So Mike, it seems that the second half could possibly be mid-single digits higher than the first half, especially considering some adjustment related to AI and Dragonfly. A few things you mentioned are quite intriguing. You're observing some early data related to demand, and you also noted the increased demand for NAND. Everyone is focused on NAND recovery since it's currently the worst performing segment of WFE. I'm curious about the nature of these positive signs you're seeing—whether they stem from technology upgrades, increased product penetration, or if there are upcoming capacity additions. Any insights on NAND would be appreciated.

Michael Plisinski, CEO

Yes. I believe the increase in demand is primarily due to a transition in technology. Specifically, there is a shift towards AI servers that require high-performance solid-state drives, particularly NAND drives. I think there hasn't been much expansion of factory capacity, so companies are repurposing existing lines and tooling that were used for previous generations. This repurposing and revamping process explains why we are seeing an increase in orders. Measuring this demand has been quite challenging, and to my knowledge, we are one of the few companies capable of measuring these high stack channel holes with over 200 stacks of NAND, which is crucial for yield. Regarding gate-all-around technology, this isn't new; we have been receiving orders to support it from various manufacturers for over a year, likely around 18 months. This trend is continuing, and it's encouraging to see that it includes some Iris films as well. We are reaffirming our position and potential market share during this critical technology transition. However, I want to clarify that I don't anticipate a significant ramp in production just yet. Companies are still in preparation for a ramp-up.

Mark Slicer, CFO

Yes, it would be the $158.

David Duley, Analyst

Congratulations on nice results. My questions are going to have to do with lithography for advanced packaging. I guess first of all, there's just been a big push by foundry logic customers and now further pushed by the OSATs to expand their capacity. And I'm just wondering if you've seen your lithography tools broaden out in either applications or customers at this point? And then I have a follow-on about glass substrates, but I'll let you answer that one first.

Michael Plisinski, CEO

Okay. Applications, I don't believe so, but we don't often know exactly what the applications are and which customers some of our customers are serving. Some serve multiple customers and some are vertical. So I don't know if that's expanded. It's been high-performance compute. I would be willing to bet 80% or 100% of it is remaining high-performance compute applications. We added customers that we've talked about through the different earnings calls. For instance, the step where we talked about on the prepared remarks for glass that can do glass and traditional IC substrates is a new customer. And we've also had existing customers open up new lines and expand new factories and new lines with our JetStep. So that's also a nice positive for us. As we look ahead, we're obviously expecting to start adding additional customers as the market starts to recover and high-performance compute server that really the server market starts to get healthy again.

David Duley, Analyst

Now as far as the adoption of glass substrates, I thought that was something that was beneficial to your technology. And I guess I thought that, that might help some of the major GPU guys start to move to more of a chiplet or advanced packaging structures. Could you just kind of talk about what the roadmap is with labs substrates and which parts of the market are going to adopt it first? And will the big GPU customers start to adopt some sort of more advanced packaging for that GPU?

Michael Plisinski, CEO

Yes, I think there are a few factors at play. First, we have a high volume requirement for a complex chiplet architecture that involves connecting multiple die, which results in a relatively large package needed for efficient and productive processing. It's likely that we will move towards a panel that fits within that framework. The reason we're looking at glass is that as we make these interconnects smaller—reducing from around 8 to 10 microns down to 5 or even 3—we can utilize IC substrates. However, below that, especially around 1 micron or less, a more stable material will be necessary. Currently, silicon is being used on a wafer basis for some of the GPU applications you've mentioned, but to scale wider, a different solution on a panel will be more efficient, and we believe that will be glass. Glass will enable 1 micron RDL and offers some advantages in heat dissipation. However, there are significant processing challenges, particularly with etching. Our wafer application centers are collaborating with the broader ecosystem to find and develop solutions to these challenges to accelerate the adoption of glass substrates in panel form for the market. This involves not only enhancing lithography capabilities but also improving process control. Additionally, we are working with partners on other solutions, including laser drilling, etching, and various chemistries.

David Duley, Analyst

So just to summarize, glass substrates are way better for, as you mentioned, I guess, high-density interconnects. Is that an enabling feature for GPUs to start to use that type of architecture technology?

Michael Plisinski, CEO

That would be an enabling speaking, yes, but they'd also have to have then the volumes to justify moving from wafer to panel.

Vedvati Shrotre, Analyst

I wanted to double-click on the advanced packaging trajectory that you talked about in terms of orders. Could you remind us what's going on with the lead times? Are they the same 3 to 6 months kind of lead times for your Dragonfly inspection products?

Michael Plisinski, CEO

Yes, I would say the lead times remain the same. Lead times are interesting because we build based on a forecast. We collaborate with our customers on forecasting, so it's not about the time from placing an order to receiving parts, which could take a year. Instead, we work within a 3- to 6-month window, and that hasn't changed. Even as we've increased our production, we've kept that timeline consistent.

Vedvati Shrotre, Analyst

Got it. So when you talk about the second half and some kind of a digestion in Q3, is that primarily based on what's in your order book right now? I'm just trying to understand, is this kind of conservatism where you're going off the order book right now, and there could be more that could be added? Or if you could provide more color on that?

Michael Plisinski, CEO

I strive to be as accurate as possible. It's not solely about the order books; it involves our projections, which are not perfect. Things could change, so we shouldn't overly focus on Q3 and Q4 because there have been fluctuations as customers adjust their plans, whether they're becoming more ambitious or facing challenges in other areas. In reality, nothing has been pushed out; everything has been pulled in. That could still change. Based on what we know now, we anticipate some digestion in the second half and a dip, but that could also shift if customers decide to place additional orders. Conversations are taking place that could lead to that. However, my most accurate perspective is what I have shared today.

Vedvati Shrotre, Analyst

That's helpful. Is there a distinction in the ordering trend between HBM and non-HBM customers?

Michael Plisinski, CEO

I wouldn't say there's a different ordering trend. However, high-bandwidth memory is driving a significant portion of our business. DRAM is still quite slow, with only incremental orders coming in. High-bandwidth memory is a major driver, and advanced logic packaging is also contributing greatly.

Vedvati Shrotre, Analyst

So the digestion is pretty well spread between HBM and non-HBM products?

Michael Plisinski, CEO

I would say it's tied to AI. So it's actually tied to AI very specifically. So we see power semiconductors in the second half growing, advanced nodes are growing. I think the AI is the question because it's been so strong, it's ramped so much. And I think, is Q3 going to be a little down and then a big surge in Q4 possible? Is that going to get spread around and we see less? These are all the things that customers are working with us on.

Vedvati Shrotre, Analyst

Right. Okay. And then shifting gears to specialty devices. So most of the power semi companies have started to take down their CapEx this year. What's sort of giving you the confidence that this continues to grow through, I mean, remainder of the year?

Michael Plisinski, CEO

Well, that's the interesting dynamic with process control, is that companies, if they don't have really, really high yields, they can focus on driving more they can focus on output either by driving more capital spend or in a time like this, they can focus on driving the yields up, and generally driving the yields up means bringing in more sophisticated tools to help identify in the process where yield loss is occurring and then go and address that. So that's what we're seeing right now. And our confidence comes from our backlog and the conversations that we're having with the customers. So pretty confident right now in the power semi to remain strong.

Vedvati Shrotre, Analyst

And then on the advanced nodes, how is your visibility into the back half of this year?

Michael Plisinski, CEO

I'd say the visibility is good. It aligns with what the customers are experiencing. Customers are opening new factories and ramping up new lines. As long as those plans stay on track, we will see consistent results. However, we have experienced some delays announced by a few of our large customers. We're hopeful that these delays are already accounted for and that there won't be any further issues, but I can't make any guarantees. I can tell you that we are in close contact, meeting and collaborating with them regularly, and they share information with us as soon as they have it.

Vedvati Shrotre, Analyst

Right. And so is it fair to assume that it will be kind of a sequential growth every quarter here onwards?

Michael Plisinski, CEO

Yes. For advanced nodes, I think that's pretty fair to say.

Vedvati Shrotre, Analyst

Right. And then maybe one last one that I'll squeeze in. On the margin side, you mentioned productivity gains coming around in the back half of this year. Could you kind of help us quantify that? Like what kind of operating expenses and gross margins we should be looking at?

Mark Slicer, CFO

Yes. From the perspective of gross margin, we are anticipating quarter-over-quarter improvement. Our goal is to return to historically seen revenue levels by the end of 2024. As previously mentioned, we have plans in place, including collaboration with our suppliers and enhancing efficiencies. I believe a careful approach to achieving this will be through the planned margin improvement each quarter. Typically, our operating expenses are higher in the first half of the year due to factors like compensation, but we expect a slight decrease in the latter half. Therefore, I do not foresee operating expenses exceeding the peak levels of the second quarter.

Mark Miller, Analyst

Just was wondering, you mentioned that certainly high bandwidth memory has been playing a major role. Can you estimate in terms of your current backlog, what percent of the backlog is related to high bandwidth memory for AI applications?

Michael Plisinski, CEO

I don't have that in front of me, but I would say it's a high percentage of the backlog.

Mark Miller, Analyst

And extrapolating, it's always dangerous to do this. But extrapolating the next year, do you think that will be also one of the most significant constituents of your backlog? And what did that gate all around, how will that be increasing as a percent of your backlog?

Michael Plisinski, CEO

I don't have significant concerns about the backlog due to our 3 to 6 months of building to forecast. While the backlog was strong during COVID, it wasn't particularly noteworthy for us over the previous 20 years as an indicator of our business trajectory. Regarding high bandwidth memory, I find it intriguing but there is concern about a potential bubble forming. Many companies are increasing their capacity for HBM, with several aiming to capture market share while the current leader works to maintain its position. There is an influx of capacity, and it’s uncertain whether this will result in excess or if AI demand will exceed expectations, leading to another surge in HBM utilization. Accordingly, I anticipate that gate-all-around will represent a larger portion of our revenue or backlog next year, particularly in the second half.

Michael Sheaffer, Investor Relations

Thanks again for joining us today. Just a quick reminder for everybody about 3 upcoming events. First, Onto management will be participating in an annual institutional investor conference in Beverly Hills on May 22 and 23. Next, we'll be participating in the Cross-Sector Insight Conference being held in Boston on June 4 and 5. And finally, we'll be at the Small and Mid-Cap Conference in New York on June 6. A replay of the call today is going to be available on our website approximately 7:30 Eastern Time this evening. I would like to thank you for your continued interest in Onto Innovation. Rachel, please conclude the call.

Operator, Operator

Thank you. This does conclude today's call. Thank you for your participation. You may now disconnect.