Good day. Welcome to the Onto Innovation Fourth Quarter Earnings Release Conference Call. During today's call, there will be a question-and-answer session. [Operator Instructions] Today’s conference is being recorded. At this time, I would like to turn the conference over to Michael Sheaffer, Investor Relations. Please go ahead, sir..

Thank you, Karina. Good afternoon everyone. Onto Innovation issued its 2019 fourth quarter and full year financial results this afternoon shortly after the market closed. If you have not received a copy of the release, pleased refer to the company's website at www.ontoinnovation.com, where a copy of the release is posted.

Joining us on the call today are Michael Plisinski, Chief Executive Officer; and Steven Roth, Chief Financial Officer.

As is always the case, I need to remind you of the safe harbor regulations, any matters today that are not historical facts, particularly comments regarding the company's future plans, objectives, forecasts and expected performance consist of forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Such estimates, whether expressed or implied, are being made based on currently available information and the company's best judgment at this time. Within these are a wide range of assumptions that the company believes to be reasonable.

However, it must be recognized that these statements are subject to a range of uncertainties that can cause the actual results to vary materially. Thus, the company cautions that these statements are no guarantee of future performance.

Risk factors that may impact Onto Innovation's results are currently described in both Rudolph Technologies’ Form 10-K report and Nanometrics’ Form 10-K report for the year ended December 2018 as well as other filings with Securities and Exchange Commission.

Onto Innovation does not update forward-looking statements and expressly disclaims any obligation to do so. Today's discussion of our financial results will be presented on a non-GAAP financial basis unless otherwise specified. A detailed reconciliation between GAAP and non-GAAP results can be found in today's earnings release.

And now, I will go ahead and turn the call over to Mike Plisinski.

Mike?.

Thank you, Mike. Good afternoon everyone and welcome to Onto Innovation’s fourth quarter earnings call. I'll start with an update on the most exciting event for the fourth quarter, the merger of Nanometrics and Rudolph Technologies, which resulted in the launch of Onto Innovation.

Onto Innovation is positioned to benefit from nearly every major technology inflection across the semiconductor value chain from the continued evolution of advanced nodes in both memory and logic fabs to the growth of specialty devices for sensing and communications and the essential advanced packaging that opens the door for greater levels of integration and performance in a smaller form factor.

We closed this transformational merger in late October and since then Onto Innovation team has been working diligently to integrate our businesses and formed the foundation for future innovation and shareholder value creation.

In these past three months, we have integrated our talented customer support teams in order to more efficiently leverage our combined infrastructure and ultimately improve our customers’ experience with our portfolio solutions.

We have identified and implemented $14 million in annualized synergies and we are confident in ending this year with $20 million of annualized cost synergies with additional synergies to follow. Finally, our technology teams have been busy exploring potential revenue synergies to strengthen our core markets and expand our SAM.

Of course, it will take time for these benefits to be fully realized, but the effort is progressing very well. Turning to the specifics of our fourth quarter, the Onto Innovation team delivered solid results with revenue coming in at $120.6 million, which was above the mid-point of our forecasted range.

Non-GAAP earnings per share came in at $0.41 at the high-end of our guidance. As a reminder, we'll be reporting our results in three categories. The first category is advanced semiconductor nodes, which includes DRAM, NAND and logic including foundry.

The second category is specialty devices and advanced packaging, which includes those categories and our nascent silicon wafer manufacturing market. And our third category is software and services. For the fourth quarter, advanced nodes declined slightly overall.

Atlas III+ metrology sales doubled over the third quarter predominantly to support the ramping of ten, seven and five nanometer logic nodes by two of the top five semiconductor manufacturers.

The Atlas platforms increased throughput and more sensitive broad spectrum metrology – optical metrology is well suited to help customers control the increasingly more complex 3D measurements required for yields at the leading edge.

The growth in logic mostly offset the decline in memory we projected last quarter after strong demand from NAND customers in the third quarter. Revenue from our specialty device and packaging – advanced packaging segment increased 7% from the third quarter.

As a reminder, this is generally a unit volume driven business where growth is typically through expansions to meet higher chip volume versus technology transitions. As a result, the business is generally more susceptible to the effects of seasonality with Q4 and Q1 typically being the slower quarters.

However, revenue in the fourth quarter reflects a growing demand for 5G enabled devices with advanced packaging revenue increasing 5%.

The Dragonfly inspection system achieved record revenue in the quarter and enjoyed broad adoption across the most demanding advanced packaging applications, including multiple tools shipped to a top five memory manufacturer for stacked DRAM packaging applications.

Other wins included 2D inspection with clarifying technology and 3D bump inspection for top five logic and foundry customers in support of their announced 5G and high-performance computing applications.

Rounding out the customer wins, several OSAT customers took delivery of their first Dragonfly system for bump inspection to support expansion of their packaging lines for mobility products.

Revenue from silicon wafer manufacturers grew by over 50% in the fourth quarter, driven by record shipments of our QS series FTIR metrology systems to substrate manufacturers worldwide. Also contributing to the growth where multiple shipments of NovusEdge in the quarter, including to a new customer.

In the last year, NovusEdge has been adopted by four of the top five silicon wafer manufacturers and our QS series FTIR is positioned on all of the top five. We believe this will position us well for continued growth in 2020.

Also during the fourth quarter, we delivered and recognized a second JetStep lithography system for a panel packaging customer, who is increasing capacity for 2020.

This customer has developed a reputation for high quality and high yielding advanced panel processes and has attracted a growing number of customers for devices such as power management and RF modules, microcontrollers and FPGAs.

This customer is also incorporating our Firefly inspection tool to provide feed-forward metrology data to the JetStep lithography system using our StepFAST software solution as they begin to move toward high volume manufacturing in mid 2020.

Finally, rounding out the quarter, our software and services business continues to grow as each company had invested in infrastructure and technology to provide more value enhancing services to our customers.

As mentioned at the start of the call, we see opportunities to leverage our broader infrastructure to improve efficiencies and deliver more value enhancing services. In summary, over the full year, our new products helped to strengthen our position in core markets and open opportunities in new markets.

The Atlas III+ expanded our optical metrology position across the leading edge logic and memory customers. We have now secured tool-of-record positions with leaders in logic, 3D NAND and DRAM resulting in a more balanced foundation from which to grow in 2020.

Likewise, we are pleased with the selection of Dragonfly inspection by 15 new customers in 2019 across diverse markets and advanced packaging and across a wide variety of applications such as packaging our wireless power devices and automotives.

Shipments of our NovusEdge inspection and FTIR metrology product lines, more than doubled from 2018 to 2019. We believe this market will continue to grow and be a more meaningful part of our business in 2020. Combined these new products resulted in over $130 million of revenue in 2019 and provide a strong base to grow from as we look ahead to 2020.

Specific to the first quarter of 2020, we see specialty devices and packaging segment continuing to grow into the first quarter. We see DRAM spending increasing in the first quarter offsetting a pause in logic and NAND and leading to revenue in the range of $136 million plus or minus 6%.

And this revenue range earnings per share would be $0.23 to $0.41 per share. The midpoint of this revenue range represents an increase of 13% over the reported fourth quarter after being adjusted downward to reflect the projected impact of the coronavirus on the timing of our shipments to China.

Absent that adjustment, we expected our midpoint in the upper half of our guidance range.

By now, many of you are aware that the rapid spread of the coronavirus has resulted in a mandated extension of the Chinese Lunar New Year holiday to February 10, strict quarantine of a number of cities and provinces and other travel restrictions across the country. This has delayed some of our planned shipments in February.

Our guidance reflects the best information available from our customers as to when they believe travel restrictions will be lifted and shipments to their factories can resume. It's important to note that we did not see any impact on demand at this time.

The impact is only on the timing of shipments and as we managed through the situation and assess timing, our first priority will be to the safety and wellbeing of our staff and their families. Looking more broadly at 2020, we see demand for 5G enabled devices and high-performance computing sparking a broader recovery in the market.

Gartner forecasts that worldwide mobile phones will see a modest increase this year versus a decline in 2019. Driving a majority of that increase are the 5G enabled handsets, which Gartner predicts will account for 12% of all mobile phone shipments in 2020 increasing to 43% of all mobile phones in 2022.

As a result, we expect to see a number of Onto Innovation markets expand in 2020. The most obvious impact of this growth is in our specialty devices and advanced packaging segment.

Underscoring this opportunity is our release from earlier in the month announcing the receipt of orders for 15 inspection systems from two customers rapidly expanding advanced packaging capacity to support wafer level packaging of 5G devices.

We see continued growth in these markets in 2020 driven by volume increases as well as additional devices migrating to advanced packaging.

We also see 5G and high-performance computing benefiting our advanced node segments in which leaders such as SK Hynix recently forecasts 5G smartphones will drive a 25% increase in DRAM content per phone while NAND will benefit from 20% increase per phone.

And TSMC recently cited growing demand for their 5-nanometer process from 5G processors, RF front-end modules and advanced computing. We expect our advanced semiconductor node segment to grow modestly with sustained levels of logic foundry spending and a pickup in memory spending starting with DRAM.

In conclusion, semiconductor markets are becoming more diverse every year. We see chip innovations and cameras, sensing and communications enabling new customer products such as smart home, smart grids and wearable health monitors.

We see innovations in the advanced nodes for both memory and logic enabling data centers and AI engines to open up entirely new markets such as medicine, autonomous, driving and energy.

We see a growing number of customers increasing their focus on advanced packaging technology to unlock the full potential of new chip designs and more tightly integrated in high-performing form factors. Across the spectrum, Onto Innovation is an important partner to our customers.

Our merger strengthens our ability to provide value enhancing services to our customers, increase our pace of product innovation and deliver more comprehensive integrated solutions to challenges further down our customers’ roadmap.

We are only at the very start of this journey, but we are committed to maximizing our potential to the benefit of all of our stakeholders, customers, shareholders and our team. With that, I'll turn the call over to Steve Roth to review the financial highlights..

Thanks, Mike. Before I begin my financial remarks today, I want to remind you as usual, the financial results discussed here will be provided on a non-GAAP basis and then our non-GAAP presentation for the new merged company no longer excludes stock-based compensation as the former Rudolph financials did.

In addition as detailed in our last conference call, Rudolph was deemed the financial acquirer in the merger. And therefore the combined financial results presented today represent the results of Rudolph for the full fourth quarter, but only the results of former Nanometrics since the closing of the merger on October 25.

I recognize that this partial quarter makes comparability of prior periods somewhat difficult and I'll try to bridge those differences for comparative purposes to the prior periods. As Mike mentioned, our reported fourth quarter revenue was $120.6 million above the midpoint of our guidance.

That revenue excludes both 10 million of Nanometrics’ October shipments and $1.7 million of deferred revenue that would have rolled into the quarter, but was eliminated in the merger accounting. Therefore on a total quarter basis as if the merger was completed at the beginning of the quarter, our full quarter revenue would have been $132.3 million.

That's a 3% decrease from the $136 million in combined revenue if you add the two separate companies third quarter reported revenue together.

Breaking the revenue down by market, revenue from advanced nodes account for 44% of revenue with strength in logic and foundry offset by lower memory business, specialty devices and advanced packaging customers accounted for 35% of revenue and the remaining 21% of revenue came from our software and services business.

We had one customer in the fourth quarter representing 10% of greater sales. As we have discussed, one of the benefits of the merged company is the broad and diverse customer base with over 150 customers from silicon wafer manufacturers all the way to advanced packaging customers.

Turning to gross margin, fourth quarter gross margin was 51% and was impacted by the cleanup of inventory items as we prepared to go live with a new ERP system in January, which we did not non-GAAP out. Excluding those inventory adjustments, our Q4 gross margin would have been approximately 52%.

As we look forward to our first full combined quarter in Q1, we see the revenue volume per Mike's guidance or that Mike just provided and product mix primarily affecting the margin and therefore expect our gross margins to be in the range of 50% to 52%.

Fourth quarter operating expenses as reported were $40.7 million and excluded $8.7 million of fourth quarter Nanometrics expenses prior to the closing. On a full quarter basis, total operating expenses would have been approximately $49.4 million.

Operating expenses reported by each separate company in the third quarter of 2019 when combined equaled $51.8 million. Portion of the decrease between the periods is due to the merger synergies having a partial positive effect on Q4 expenses.

Historically, operating expenses increased quarter-over-quarter from Q4 to Q1 as during the first quarter we performed our annual compensation reviews and equity grants and bonus plans and payroll taxes reset for the year.

We have also implemented a significant portion of our synergies, mainly around business rationalization, streamlining corporate overhead and eliminating duplicative public company costs, which on an annual basis totals $14 million and puts us well on our way to achieving our stated goal of $20 million by the end of 2020.

The quarterly benefit of those synergies will partially offset the normal Q1 operating expense increases that I just mentioned. And based on that, we are currently our Q1 operating expenses to be in the range of $49.5 million to $51.5 million. Net income for the fourth quarter was $18.1 million or $0.41 per share and at the higher end of our guidance.

That per share amount was based on 43 million diluted shares outstanding due to the deal being closed in the middle of the quarter. For the first quarter, we are estimating a diluted share count of approximately 50.5 million shares in our earnings per share calculations.

That's share count difference negatively impacts Q1 guidance by approximately $0.04 per share when compared to Q4. Now turning to cash and investments, which are on a GAAP basis, we ended the year with cash and – cash position of $320.2 million after paying out approximately $25 million in merger expenses.

On a 50.5 million diluted share account that equates to $6.34 per share. As the industry continues to improve and we begin to benefit from the synergies in our operations and improve our working capital metrics, we're targeting cash flow to be approximately 20% of revenue in 2020. Now, I would like to open the call to questions.

Operator?.

Thank you. [Operator Instructions] We'll take our first question from Patrick Ho with Stifel. Please go ahead..

Thank you very much and thank you for the color in helping to get the financials in order on a going forward basis.

Mike, first off, in terms of your front end metrology business, can you give a little bit of color quote one on the NAND flash environment and maybe on the timing of when you believe broader-based NAND flash spending would come? And secondly, on the DRAM side, some of the comments you made I think from the metrology and obviously there's been increasing capital intensity trends related to metrology use as layers increase.

How do we look at the DRAM market in particular – specifically on the metrology and in terms of capital intensity trip, how that plays out?.

So, I'll start with the 3D NAND. So after relatively strong for several quarters of 2019, we had the pause in the fourth quarter.

We see 3D NAND picking – staying a little bit pause for the first half and picking up more in the second half and the magnitude of which could determine obviously the strength of a year-over-year comparison, but for sure strengthening in the second half from what we're seeing. On the DRAM side, we see a little bit of the opposite.

We see a stronger demand in the first half starting in the first quarter. And part of that is bringing in equipment for some of the – I think is well-publicized.

Samsung has announced Beyontec expansion and going into the second and third quarter and obviously bring in the metrology equipment sooner than the process equipment to help qualified process equipment. So….

Okay, great. That's helpful..

Does that answer your question?.

Yes, it does. And maybe Steve, in terms of OpEx management actually looks really good in Q1 relative to some of the expectations I have. How do you see that progressing? And what I'm trying to get at is the cost synergies are still going to be put into place. I'm sure you're looking at new investments.

How do we look at the trends as 2020 progresses for OpEx management?.

Yes. I mean, I would say you can – it models down quarter-over-quarter the way we look at it right now, obviously some of the synergies timing coming, like you said, they phase in.

But yes, I would say that, right now the guidance that I gave for Q1 is a high point because as I said, there is a lot of costs – a lot of – some of the costs are not linear. So there's always this uptick in the first quarter. And then I was expecting the trail down from here, Patrick, from that guidance..

Great. Thank you very much..

And we'll take our next question from Quinn Bolton with Needham. Please go ahead..

Hey guys, congratulations on the nice results in the first quarter as a combined company. I wanted to start just kind of with WFE and sort of how you see the profile of spending across the advanced nodes and the specialty side of the business first half versus second half. Certainly, it sounds like advanced foundry logic may be front half loaded.

You talked about NAND being stronger in the second half, DRAM being a little bit more steady in Q2, Q3.

So when you put all that together, how do you see the pattern of revenue on a sequential basis or half-over-half basis in 2020?.

You're speaking specifically about us.

Correct?.

Correct..

So we're seeing – yes, and that will depend obviously on customer mix, application strength, market share, et cetera. So from our perspective, we're seeing logics. So we'll start with logic foundry, give you a kind of a complete picture. Logic foundry has maintained relatively high levels and we see that continuing into 2020.

And then the DRAM, we see picking up rather nicely into 2020. And then 3D NAND is really the – I'd say the wildcard a little bit. That's certainly we see a pickup in the second half over the first half and the magnitude of which will determine as it going to grow over year-over-year or is it going to stay a little bit depressed..

Okay, great. And then second question you mentioned that without the coronavirus you would have probably guided closer to the middle or upper middle part of the first quarter revenue range. I am wondering on that coronavirus effect whether you're seeing delays in the tool deliveries to one of the larger NAND players in China.

Is that a specific risk? Or are you just sort of generally trying to be conservative with the March quarter guidance given everything that's going on with the outbreak?.

No, that's a specific risk. That's – I mean they're obviously right in the center of ground zero. So, clearly, we've had a lot of detailed discussions there and we're working with the customers to obviously balance the demands that they still have with the realities of the situation on the ground..

Great. And then last one for me just is we come through the year and so it sounds like gross margin in the first quarter at 50% to 52%. It sounds like there are some mix or some sort of quarters pits specific factors.

How do you see that gross margin trending beyond the first quarter?.

Yes. This is Steve, Quinn. I would say this is – our plan is obviously with where we see the industry going for the year. This is our low point in Q1.

And so, I would trend those margins back up depending on how you model us, but we're going to start getting – seeing those margins improve like we think fairly significantly for us in getting closer towards our model range by the end of the year as long as the year plans out like we think it is..

Okay. Great. Thank you..

And we’ll take our next question from Craig Ellis with B. Riley FBR. Please go ahead..

Hi, this is actually Peter Peng calling in for Craig Ellis and thanks for taking our question.

On the cost synergies from $14 million to $20 million, how should we think about getting there? Is this mostly third and fourth quarter weighted? Or do you see incremental coming in second quarter?.

I think some it will be incremental. That's what's kind of ties into my response to Patrick and that we see the op expenses trending down from here.

So there'll be, but clearly there's some that we've identified that are longer – longer within the 12 month period to implement that we see we'll have in place by the end of the year, but they won't really have that much effect on the P&L.

So I'd say there is going to be a portion of that differential that will keep trending into the second, third and fourth quarter. But there clearly are some that we see kind of exiting the year that will get us on track to hit the 2020, but it might not have a material effect on the 2020 financials..

Okay.

And just on the revenue synergies, can you just kind of talk about the potential and when that could hit your – hit revenues more meaningfully?.

So I think that's something we'll quantify as we get a little more detail and we continue to work through that. I would say probably around the time of our Analyst Day, in the middle of the year, we'll have a quantification of that.

When you say more meaningful impact, I would think that more meaningful impact is a 2021, probably first half 2021 type activity with I would hope some level of revenue synergies starting in the end of this year..

Got it. And just on – just a broader context against kind of the – I think there is kind of two views. One is Lam talked about something in the 20% WFE growth and then Kelly is a little bit lower.

Just against this backdrop, how do you think your front-end business would do against that?.

We think we'll be right between the two. Not exactly, but I think with the balanced portfolio and the balanced segments that we're serving, a lot will depend on the – how aggressively each of the – especially in the second half we've already talked about 3D NAND and that ramp. I think outside of that you already can model.

The logic is pretty much – logic and foundry customers that have been very vocal about their expansions, that sustained growth and we're fairly well positioned there. And then the DRAM has always been a strength of ours.

And as we see more fab starting to react to, let's say, the Samsung announcements, I would expect that to add some additional growth as well. So, yes – so I think – yes, that's pretty much. That should give you an idea of where to model us..

Got it. Great. Thank you guys..

And we will take our next question from Krish Sankar with Cowen and Company. Please go ahead..

Yes. Hi. Thanks for taking my question. Mike, I had a couple of product specific questions. Number one, on your plainer thin-film metrology solution where you guys had been viewed as an alternative to KLA.

Where do you think your market share was exiting 2019? And where was it exiting 2018?.

So plainer films, I would say, we’re a very, very tiny segment of that market in the single-digit percentage range growth here..

Did you guys gained share last year you think or….

On the plainer films, I don't think so. We had a nice revenue growth for us. I don't even think we talked about it because it was relatively small from a share gain perspective..

Got it. Got it. All right. And then on the legacy Nanometrics – yes, go ahead please..

Rudolph and Nanometrics, from a plainer film perspective, each had certain capabilities that we think might – as we bring the companies together and technologies together might provide an opportunity to go into this market a little more aggressively.

But neither side had the perfect solution as it stood by themselves as evidenced not in the market share..

Got it. That's very helpful, Mike. And then two quick questions. One is if my memory serves me right. I think a year, year and a half, two years ago, you guys Nanometrics took some businesses away from Nova at Samsung. How does that business trending today? And is it all pretty much tied to NAND? And then I had a follow up..

We have more strengths within that customer in the DRAM space. And we do have, let’s say, opportunities, growing opportunities on the 3D NAND space. But for sure our strength is we're stronger in DRAM..

Got it.

And then a final question, any update on the OLED stepper tool?.

No, I think as we've mentioned that our focus right now is on the commercial side and unfortunately with most of our customers being in China, they extended Lunar New Year and they – and there's been no updates since our last call..

Thank God. Mike, very helpful. Thank you..

And we will take our next question from Tom Diffely with D.A. Davidson. Please go ahead..

Yes, good afternoon. Moving over to the unit driven side of the business, after a strong 2018 with unit growth, 2019 was pretty soft for the industry.

What do you – what are your views of 2020 for unit growth? And how may the coronavirus be impacting the near-term part of that?.

I think it's impacting near-term and the longer that the country remains under travel restrictions. There could be a ripple effect to other regions that are supporting for instance Huawei, the domestic Chinese handset manufacturers. But right now, it's – we're not seeing a ripple effect.

We're not seeing any decrease in the demands outside of China, so the suppliers supplying outside of China. And it's really so far limited to the Chinese suppliers that can't receive equipment..

All right.

So is your view of 2028 a recovery year for units in the industry?.

Oh, yes. Due to the 5G, the mobile handsets, the increased content in those handsets from the 5G perspective and the other high performance computing markets we cited, we do believe there's a unit volume increase as we head into 2020, absolutely..

Okay, great. And then maybe a little update on some of the tools and packages you put together for the non-STEMI businesses, things like MEMS or RFs sensors, that type of thing..

When you – Tom, can you repeat that – kind of repeat that what are you looking for? What's going on? And if you wanted the RFs….

Yes, discuss the – yes, discuss the potential out there for business in the MEMS market or in the RF market or in the sensors market where you can put together kind of the package of your tools..

I think as we've discussed in prior calls, we're pretty well positioned in those markets from an inspection and software point of view. We steadily grew our customer base in those markets. And I think that's positioning us well for taking advantage of the outside growth, which we foresee in 2020 as the 5G enabled devices grow, the unit volume grows.

So I think that that's one of the reasons I highlighted that being a growth or a strength. What’s also important to note is that the integrated metrology systems from Nanometrics, former Nanometrics, the IMPULSE are also tied to some CIS and some of these unit volume driven businesses, some of the mobile support devices.

So we think when we continue to bring these businesses together and continue to drive the relationships with the customers and the integrated solutions with the customers will only increase our opportunities in these markets..

Okay, great.

And then finally, when you look at the JetStep tool that you sold during the quarter, was that driven by just pure capacity needs or was that a technology purchased by the customer?.

That's a good question. Actually, it’s driven by capacity need. So the customer is planning to ramp. They're attracting additional customers and they're planning actually very large factory. They've announced a very large panel – panel factory, exclusive for panel lines.

But this step is actually required just to meet the current growing demand in their existing line..

Great, thanks for your time..

[Operator Instructions] We'll take our next question from David Duley with Steelhead Securities. Please go ahead..

Thanks for taking my questions. And I just had a couple of clarifications. I had a little audio problems earlier.

Now one of the questions earlier was if Lam is predicting that the WFE market is up more than 20% in 2020, how will your front-end business revenue look versus the 20% growth in the industry? In other words, how is the – is the Nanometrics business is going – metrology business is going to keep up with that growth rate or be higher or lower?.

No, we're not going to keep up with that growth rate. I was answering based on overall, not just that particular segments. So if you look at Lam, they're talking about specific customers driving a relatively high growth, that's a process equipment, which will be different growth rates than process control equipment for some of the reasons I discussed.

And we talked about DRAM being one of the bigger, bigger drivers of growth in 2020. So I don't believe Lam was speaking about that. I think they were highlighting 3D NAND..

So the Nano business will not grow at a 20% growth rate in 2020 is essentially what we're trying to figure out?.

I would agree. Yes, that's correct..

Okay. For the back-end driven business, I think that without the impact of the coronavirus, which I don't think anyone, really knows what that impact will be, let's just assume that it's minimal. TSMC has projected the revenue growth of non-memory next year is going to be around 8% and the foundry logic guys will go twice that.

Is the 8% benchmark for your unit volume driven business a good guesses to what that business might grow in this upcoming year?.

Yeah, that's a fair guess or a fair benchmark..

Okay..

Just so you – just to frame it a little bit in that category is also the wafer solutions business, which is growing certainly above that smaller base. But as I mentioned in my prepared remarks, we do expect that to be a more meaningful part of the business moving into 2020. And so that will have an increased effect on the growth.

But in general, the advanced packaging specialty devices, the unit volume driven business, I believe would grow in that range that you mentioned..

Okay. Also a big Taiwanese foundry customer has talked about spending like $15 billion in the current year and I think 10% on the back end or $1.5 billion. That's certainly a huge increase in the CapEx budget for backend spending from that customer.

I'm just wondering is that a good opportunity for you? Are you – will you benefit from that increased level of spending from that customer in either lithography or in bump inspection?.

For sure in the process control space, we've always had a strong market position, including at that customer where they've been the 10% customer before. So, yes, the expansions on Covas [ph] or Info would be – would benefit us nicely….

And then….

Not on lithography….

On the lithography, I'm sorry, go ahead..

I said not, not on lithography at this time..

Okay. And then Steve, just a clarification, could you just highlight again your guidance for the March quarter on operating expenses, the dollar numbers and then the gross margins. Again, I missed them or part of them during your prepared remarks..

Okay. So, on the gross margin we said 50% to 52% and on the OpEx number $49.5 million to $51.5 million..

Okay. Thank you..

It appears there are no further questions at this time. I'd like to turn the call back over to Mr. Sheaffer for any additional or closing remarks..

Thank you. We'd like to thank everyone for participating in the call today and for your interest in Onto Innovation. Hope you have a great rest of your day. That concludes remarks for our call. Karina, please wrap it up..

Thank you. Once again, that concludes today's conference. Thank you for your participation. You may now disconnect your phone lines..