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

Thank you, Todd, and good afternoon, everyone. Onto Innovation issued its 2020 second quarter financial results this afternoon, shortly after the market closed. If you have not received a copy of the release, please 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, products, 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 is a wide range of assumptions that the Company believes is 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 Onto Innovation's Form 10-K report for the year ended December 2019, as well as other filings with the 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. As a reminder, a detailed reconciliation between GAAP and non-GAAP results can be found in today's earnings release. I will go ahead and turn the call over to Mike Plisinski.

Mike?.

Thank you, Mike. Good afternoon, everyone and thank you for joining our call this afternoon. Our second quarter results highlights the progress we are making on two key initiatives for 2020. The first initiative is to unlock the operational efficiencies across the newly merged company.

Over the last nine months, we've implemented improvements in the business structure, systems and processes and supply chain. These efforts are beginning to show through in our financials with improving gross margin and lower operating expenses.

Our second initiative was to leverage our broader scale of technology and talent to accelerate the delivery of comprehensive solutions to our customer's high value problems.

By working closely with our customers, our team has made excellent progress in the quarter, and we announced four new optical metrology platforms, further enhanced by a new AI-diffract engine which reduces the time to solution for us to be modeling by 80%.

This incredibly talented team is pushing optical capabilities beyond the reach of our competitors, and maintaining the best solution for high volume manufacturing at the very leading edge designs.

In addition, our inspection team expanding into the growing CMOS image sensor market, with the competitive win at a leading supplier of high end sensors for mobile, automotive, and medical applications.

Finally, we see the investments in panel level packaging increasing, and our growing backlog provides the confidence that Onto StepFAST solution, which includes JetStep lithography, Dragonfly inspection and Discover Analytics is providing unique and compelling value proposition.

In summary, we're very pleased with the progress made in the second quarter across both strategic initiatives, which together strengthen our financial foundation and broaden our growth opportunities across the semiconductor value chain. Now I'll provide some detail on the second quarter, beginning with our largest segment the advanced nodes.

Spending in this segment was better than expected and maintained the strong levels from the first quarter in both logic and memory. Not surprisingly, we did see some concentration in the quarter, with two of the top five semiconductor manufacturers, one logic and another memory combining for over 35% of total revenue.

Our new metrology suite was developed in collaboration with our customers to deliver the greater precision, accuracy and productivity required for the latest 3D-NAND, sub 7 nanometer logic and one alpha DRAM devices.

This suite was released on schedule due to the extraordinary efforts and creativity employed by our development teams, to overcome the limitations our COVID-19 safety protocols based on our development and application teams.

The ability for the Atlas 5 to deliver TEM quality measurements that optical speeds will make it the preferred solution for high volume manufacturing of next generation logic and memory devices.

Equally compelling, the Aspect metrology is a new technology platform, leveraging the infrared spectrum to measure high aspect ratio channel holes and word lines, that are critical features for next generation 3D-NAND products. Prior to Aspect metrology, this was not only possible with slower X-ray tools.

IMPULSE 5 system, integrated metrology system enables higher productivity and higher performance and includes our industry proven indie metrology capability, and embedded process aware control system for more stable measurements at higher throughput than competing systems.

As an integrated system the attach rate is one to one with the process tool, so this business will grow with volume providing a more linear revenue stream at scale.

Finally, the successful adoption of our element compositional metrology tool by a top three semiconductor manufacturer, significantly broadens our market for the element FTIR from silicon substrate manufacturers to now include leading-edge front end wafer fabrication.

The element metrology uses FTIR technology to monitor elements and contaminants in exotic materials, which can be critical to final yield, especially below 10 nanometer design rules.

As mentioned, our customer engagements have been positive and we expect these products to begin contributing to revenue in the fourth quarter and continue to expand into 2021. Our specialty and packaging market declined by an estimated 10% in the quarter, primarily as a result of the U.S.

Department of Commerce ruling in May, targeting chip suppliers to Huawei. This ruling impacted one of our OSAT customers. As a result of the ruling, their expansion plans were delayed as they look to replace the capacity vacated by Huawei.

Underscoring the strength in the market, our customers already replaced the last demand from Huawei, and we expect shipments to resume this quarter.

A growing demand for 5G enabled mobile devices is not only creating unit volume demand, but also demand for more advanced inspection and metrology that ensures not only the processes meeting design specifications, but also identifies potential and costly field reliability issues.

Our unique combination of Dragonfly 2D inspection, 3D metrology and Clearfind provides the most flexible process control solution on the market, coupled with our AI enhanced TrueADC software and Discovery analytics, we provide a complete solution for yield, reliability and excursion monitoring.

This unique capability helped propel our inspection product revenue to grow by 26% in the first-half of 2020, compared with the first-half of 2019. For the third quarter, we see additional double digit growth for Onto inspection. Another exciting development in the quarter was the growing demand we see for Onto’s panel lithography solutions.

The complexity and cost of designing complete devices at the latest nodes is creating the drive towards heterogeneous packages or chiplets. This trend means that designers can design chiplets for the node, where cost benefit is most optimized. Through panel level packaging, these chiplets can be combined to provide custom devices in a single package.

Applications for this technology range from processors for new artificial intelligence and data center applications to 5G communications packages.

The JetStep lithography is proving to be the best choice for this new packaging technology, due to its industry leading wide filled optics and integrated control systems able to compensate for the variation inherent in the process. We expect to see additional orders for 2021 delivery before the end of the year.

And with that, I'll turn the call over to Steve Roth to review the financial highlights..

Thanks, Mike, and good afternoon, everyone. In my remarks this afternoon, I'll provide some details behind our Q2 results, and also provide some insight into what we see for gross margin and operating expenses in the third quarter.

Our second quarter revenue was $134.9 million, slightly above the midpoint of our guidance, and a decrease from $139.9 million in the first quarter.

Quarter-over-quarter, our Q2 results represent a 4% decrease and was mainly driven by lower metrology and software sales in the quarter, offset by strength in our wafer business and another record quarter for our service business. Breaking down the revenue by market, revenue from advanced nodes accounted for 43% of revenue.

Specialty devices in advanced packaging customers accounted for 33% of revenue, and the remaining 24% came from our software and services business. Within advanced nodes, memory was the primary driver with both DRAM and NAND being at consistent levels quarter-over-quarter.

In the specialty devices and advanced packaging market, increases in wafer manufacturing and foundry customers were more than offset by a delay in business from an OSAT customer that Mike just mentioned, and a decrease in metrology sales from RF customers in the quarter.

Turning to gross margin, we saw improved margins even with the decline in revenue, with second quarter gross margins at 53%, driven by increased strength in the wafer business. This compares to a gross margin of 52% reported in the first quarter.

As we look forward to Q3, we continue to see product mix as a primary driver of gross margin, and currently anticipate margins to be in the range of 51% to 53%. Now, moving to operating expenses, second quarter operating expense was $47.7 million and at the low end of our guidance range.

The impact of merger synergies implemented at the beginning of the quarter, in addition to lower consulting costs upon go live of the new computer system in Q1 were the primary drivers for the lower operating expense.

For the third quarter, we expect to see the full impact of the operating expense synergies we implemented in Q2, and reduced R&D spending in the quarter based on the timing of new product introductions. We're currently forecasting our Q3 operating expenses to be in the range of $46 million to $48 million.

As we look back at the operating expenses of the premerger companies, you'll see that the combined operating expenses were approximately $52 million a quarter in 2019. Comparing that to the midpoint of the guidance I just gave for the third quarter, which is the positive impact of the merger synergies are having on our operating expenses.

And that does not include the above-the-line supply chain synergies that are having a positive effect on our gross margin. Net income increased for the second quarter and was $20.8 million or $0.42 per share, a lower revenue than reported in Q1, and above our guidance. In the first quarter, we reported net income of $19.7 million or $0.39 per share.

Higher gross margin, lower operating expenses and a lower tax rate contributed to the better than expected performance in the quarter.

Now turning to cash investments which are on a GAAP basis, we ended the quarter with cash position of $312 million up $20 million from Q1, that's after executing early in the quarter on a repurchase of $18.4 million of our stock for previously authorized repurchase program. Our free cash flow for the quarter was approximately $36 million.

Cash receivable also declined in the quarter which helped generate cash, however, those gains were offset by a similar increase in inventory, as a result of delayed customer shipments and inventory for new products. And with that I'll turn the call back to Mike for additional guidance. Thanks..

Thank you, Steve. As you know, we are operating in an unprecedented time. Macroeconomic conditions impacted by the global pandemic and trade tensions with China are creating additional levels of uncertainty for markets.

Specific to COVID-19, we will maintain our current high levels of safety protocols, through the end of the year and possibly into the middle of next year. Our team has done an outstanding job leveraging technology and process innovation to maintain our production commitments and development programs.

Similar to last quarter, our guidance assumes these protocols continue to be effective, and our suppliers maintain their commitments.

With regards to trade with China, outside of broadening the application of our compliance controls, at this time we see no significant impact to our business from the regulations around the military end use of our products.

As we saw in the second quarter, we expect the ruling specific to Huawei to result in a shift in supply chains, that are unlikely to reduce overall global demand for wafer manufacturing and packaging services.

The market in China has been growing steadily and the increased emphasis on the localization of manufacturing makes it important market for equipment suppliers. With roughly 10% of our revenues coming from domestic Chinese suppliers, we are committed to supporting our partners while complying to all government regulations.

Now, turning to the third quarter, we expect revenue to be $127 million plus or minus $5 million. In this revenue range, we project earnings to be $0.28 to $0.40 per share, once again benefiting from the improvements in supply chain and other operational initiatives, Steve just highlighted.

The overall decline in the third quarter is exclusively from our largest market the advanced nodes. We see this decline to be limited to the third quarter. We project demand for our products in this segment to return sharply in the fourth quarter, maintaining a near equal mix of capacity and technology buys.

As a result, we expect the fourth quarter to be Onto Innovation's strongest quarter for the year, and positioning us well as we look ahead to 2021. In contrast, we see specialty devices and advanced packaging growing by over 20% in the third quarter.

Consistent with the first-half of the year, we see expansions in 5G enabled handsets continuing to be a strong driver for this segment. Qualcomm and TSMC have projected 200 million units this year, doubling each of the next two years. We are halfway through the year and those encouraging projections continue to be supportive.

Our leading position across this ecosystem from the specialty device manufacturers for RF communications, power NAND to the most advanced packaging line is enabling us to maintain our double digit growth in this segment into the third quarter.

We also expect our NovusEdge and Element FTIR products to see double digit growth from increasing wafer manufacturing spend in the quarter. In summary, the talented Onto Innovation team has made great progress strengthening our financial foundation, by expanding our growth opportunities across the semiconductor value chain.

We see growth returning from our silicon manufacturers. In advance nodes we see future share gain opportunities created by our metrology suite, which is pushing the limits of optical metrology beyond what was previously possible, and Onto advanced packaging where we currently enjoy strong demand for our unique inspection in lithography solutions.

Our strong balance sheet and disciplined financial model will provide a sustainable model for profitable growth and feel the innovation our customers depend on.

And with that, we'll open the lines for questions from our covering analysts, Todd?.

Thank you. [Operator Instructions] We'll take our first question from Craig Ellis with B. Riley FBR..

Thanks for taking the questions, and congratulations on good execution in the quarter guys. Steve, I wanted to just start with two clarifications for you, if I could. One, there was mention in the prepared remarks on a headwind from an OSAT customer given a customer issue of theirs.

Did that have a negative revenue impact on the quarter? And if so, how significant was it? And then the other clarification is on the quarter's gross margins, real strong 150 basis points better than what I thought. And I think better than four we had the guidance midpoint.

What accounted for the upside in gross margin?.

Okay. So on the customer push out, there was a customer had tools going into China, obviously, as Mike mentioned. Some of those tools were we had anticipated at one point delivering possibly in the second quarter, they clearly pushed out of the second quarter. And we were opening into the third quarter.

Now it even looks like it's going to push into the fourth quarter. Some of it into, well, maybe some of it even out of the year. But there was a -- so that was the big issue. And again, they lost their customer, it was Huawei so they had to scramble to try to replace that business and they've been doing that.

On the gross margin side, well Mike, actually do you have any further comment on that?.

Yes, I'll just clarify. In fact, that customer already filled that capacity and as we expect to ship at least half the orders in this quarter, and the other half the remaining systems in the fourth quarter. So, the demand was quickly replaced and those firm orders are already being scheduled for shipment in this quarter..

And was that a few million, Mike? Or is that more like mid-single digit million? Can you help us scope beside that?.

It's several million. No, it was a fairly sizable amount of orders, so between zero and ten..

Okay, great. Thanks..

And then on the margin, Craig, so again, mix was coming into play for sure. Our wafer business had a higher percentage coming off of a low in the previous quarter, so that helped the margin a little bit, as well as the supply chain synergies that we've been talking about.

We said most of those will start impacting a lot more as we exit the year, but some of those are starting to trickle in. So that was also helping some of the gross margin..

Yes. Congratulations on that. Good performance. Moving on to the first question, so Mike, you've offered a lot of good color on the quarter, and then some segment color on the outlook.

With regards to the dynamics that you're seeing in advanced nodes in 3Q, is that something that's seasonal? Or are there programmatic things or any shifts, like you described with the OSAT downstream customer issues at play with the sequential decline in that big segment?.

So, from the advanced nodes, part of the question, I think you asked about advanced nodes. We don't see that as seasonal. There was no strong order volume across the board from both memory and logic customers and both the first and second quarters. And we see this more as somewhat of a pause from some of our larger spenders in the first-half.

And remember, we talked last quarter that we were projecting a pause and the timing of which wasn't really clear. Well, now it's more clear. It's coming more in the third quarter, and we expect the relatively strong snap back in the fourth quarter..

Great. And then last for me and on that point. So, I know you're not giving specific guidance for the fourth quarter, but given that we could see potential record revenues.

Are we potentially seeing something in the 149, 150 to 160 range? Or are there drivers out there, especially given the power of the new products that were announced Aspect, Atlas 5, et cetera? That could mean that we could actually touch levels above $160 million in the fourth quarter?.

I wouldn't expect $160 million in the fourth quarter. The new products are exciting and gaining traction but those will be incremental sales and then ramping into 2021 and beyond that. So they will have minimal impact on our fourth quarter. The bulk of the snapback is the adoption of our current technologies for next generation production volume ramp..

Got it. Thanks so much, guys. Good luck..

Thank you. We'll take our next question from Patrick Ho with Stifel..

Thank you very much, and congrats on a nice quarter. Mike, maybe first off on the front end metrology business, obviously a lot of it always depends on customer timing of when they buy and when they take their systems. But what I'm trying to get maybe a little color from you is the potential lead times, particularly for some of the standalone systems.

Do you feel that there's still about a quarter kind of lead time before process tools come in? And for the integrated systems, especially the new systems that you have and that you recently introduced, do they go simultaneously when process tools are taken?.

Yes, the integrated systems will be more simultaneous with the process equipment. So as it's being delivered, they're going to want those integrated modules to help ramp the products. So those will be more one to one. The standalone, I would say, is still roughly one to two quarters ahead of the process ramp.

So, as customers are planning for their ramp, they're buying more metrology up ahead in order to more quickly ramp the process equipment and the process, and then they level out and adjust sampling and use those tools in a more optimized fashion..

Great. That's helpful. Moving on to the advanced packaging side of things, you've obviously seen a bit of a pickup that continues into the third quarter. In past calls, you've talked about other new markets requiring these advanced packaging processes in areas like memory. You've talked about high-performance computing.

Can you at least qualitatively, I guess, note, where you’re seeing some of the strength in the near-term.

Is it more of this diversification into quote these non-mobility or non-smartphone advanced processes that we're seeing right now? Or is this still, I guess, biased towards mobility?.

I would say there's both happening, almost simultaneously. So, we definitely see a lot of drive towards mobility and because of our large footprint across multiple customers serving the mobility market, there's a strong effect on us.

But in addition, we see high performance computing and support for our work from home, driving more advanced memory and processor architectures to provide that high performance capability. So we've talked about TSMC and others have really highlighted their growing demand in the 5 nanometer node. Those devices are all being packaged.

And as most people know, that's obviously a large backend customer for us..

Great. One question from me, for Steve, in terms of the OpEx management, obviously you guys have exceeded your plans for the cost synergy efforts on the OpEx line, and that's contributing already today.

But you're probably getting some benefits in the near-term, as it relates to travel expenses and maybe other expenses that aren't being accumulated during this current pandemic.

As you get through a more normal environment once again, whenever that is, how do you manage both the projected uptick that will come with OpEx as things kind of return to a more -- kind of managing it at these more attractive levels? What's the fine balance that you'll be doing, as you get back to a more normalized environment?.

So, that’s a good question, Pat. I mean, as there’s the ebbs and flows in any quarter I mentioned, timing of project expenses will always be the ebbs and flows of some dollar amounts quarter-to-quarter. I mean, again, you're right, the probably the biggest one that jumps out at you from a kind of reduced expenses, maybe from COVID is the travel.

But it's not that significant. I mean, when you're talking, $48.7 million, you're talking a couple of hundred thousand dollars a quarter, maybe a million if it was back to normal operations. We obviously have always people embedded in the field. So it's really just you're talking, the U.S.

people going out overseas, maybe sending engineers or something for some critical meeting sales guys, whatever. So it's not a huge expense for us. So I'm comfortable. There'll be slight couple hundred thousand dollar uptick here and there but I still also don't think we're done with synergy. So there'll be other things to give and take within the year.

So, I'm quite comfortable where we're headed with the op expenses. The midpoint of my guidance is $47 million, I think you'll see quarters that will be below that again. So, I'd be kind of modeling in that range..

Great. Thank you very much..

Thank you. We'll take our next question from Quinn Bolton with Needham and Company..

Hey guys, just wanted to follow-up on the third quarter outlook and the softness in advanced nodes.

Is that sort of across logic foundry, DRAM, NAND? Or is it specific to one of those segments and then I've follow-up question there?.

Good question, Quinn. It is more balanced across the two large customers that we talked about, that combined for 35% of the, basically the first-half spent, we talked about the second quarter, but they were similar levels in the first quarter. And so those two customers represent a memory and logic, basically customer.

So, we're seeing that those drops from those customers as we delivered a tremendous amount of equipment to them in the first-half. Now, we expect that to return. But, we see this pause in the third quarter. Otherwise, we've got increases.

For instance, China, we see customers increasing our spend, so we've expanded our opportunities quite significantly in China, even in the third quarter. So it's really those two customers represent the bulk of the downtick, and a little bit of smidgens of change one way or another, some others..

And I guess outside of those two large customers for the advanced nodes that are pausing in the third quarter, or the packaging the wafer business.

Are those businesses trending flat to up and it's really just the deposit of those two large customers? Or are you seeing a pause elsewhere in the business? I mean, it sounds like the advanced packaging or the OSAT orders push from Q2 to Q3. So, it sounds like that would actually be a tailwind in that side of the business for the third quarter.

So just trying to make sure I've got all the moving parts..

Yes. So, advanced packaging is continuing to be very strong part of our business. I mentioned, the first-half of the year is up 26% over the first-half of last year. So even with and that's without the orders from the push out.

So even without those orders, we saw a nice 26% growth in that segment and then inspection segment for the first-half of the year. And we talked about another double digit growth heading into the third quarter. So, that's fairly steady, consistent growth on the specialty and advanced packaging side..

Got it. And then I guess a question for Steve. You gave guidance for gross margin 51% to 53% in the third quarter.

Is that more driven by just the mix shift you see away from some of the advanced nodes? Or is it more just lower absorption on a lower revenue figure? And I guess that -- I know, you're not going to give guidance for the December quarter, but to the extent that advanced nodes and revenue come back to peak levels.

Would you expect a nice recovery in gross margin? I won't ask you to quantify it.

But would you expect a recovery in gross margin with that revenue increase in the fourth quarter?.

Yes. And to answer the second part of that question first, I guess, obviously, the higher revenue gives better leverage on the overall manufacturing operations. So, we were kind of coming out of the forming of the new company, as you remember, we were guiding like in the 50% to 52% gross margin ranges. Now we're doing 51% to 53%.

And once we hit 53%, in Q2, and keeping up in that kind of that range. Now, we are at obviously lower revenues. So we've got some fixed costs above the line, which is coming into my thoughts for the -- even though we're on lower revenues, we're kind of maintaining. The midpoint were down, but we have the possibility of being in that 53% range.

Going into Q4, Quinn, yes, I think with the higher revenues, better absorption of over the old manufacturing operations, I would anticipate you're going to still see our margin steady, keeping up with this 52% to 53% range, maybe even higher interest rate and depend on what the mix looks like when we get there..

And I guess just a question on the kind of the longer-term models. Is this accelerated growth -- sorry $600 million model gross margins at that level of revenue in the 54% range.

Is that still the right target for kind of that $600 million annual run rate?.

Yes, absolutely. I test that all the time. And I feel confident once we start getting back up into those new levels, especially with the synergies that we've talked about that we put in for supply chain. That'll start impacting the margins exiting the year. We are pretty comfortable being at that -- hit the 54% to $600 million range..

Perfect. Okay. Thank you..

Thank you. We'll take our next question from Tom Diffely with D.A. Davidson..

Yes, good afternoon.

So Steve, I'm curious have you exceeded your initial goal of $25 million of synergies at this point, and now you're working on additional synergies?.

So, I think Tom, we actually said $20 million in synergies was the published number that I think we had out there from the deal. And we announced on the last call that I think that we were past that. I think, I'm not sure if we didn't have the actual number, but I think we said $24 million we had implemented as of the time of the last earnings call.

So yes, we've exceeded that number. But we also said, we don't think we're done. There is obviously the low hanging fruit stuff and things like that was easier things to get going. And then the supply chain synergies, obviously the above line stuff. We talked about that having most of an impact exiting the year.

And you can imagine that's an area where we're going to have a lot more work to do, as we start getting to common platforms and things that we could see in the future. So, yes, we've exceeded what we've talked about from the initial discussion, and we're obviously continuing to shoot higher..

Okay. Great. And Mike, I'm just curious, do you see a direct link between industry unit volumes in advanced packaging? Or is advanced packaging much more of a technology buy versus just a unit driven buy? And the reason I'm asking is that we're expecting potentially double digit unit growth next year.

And I'm wondering how much a catalyst that might be..

No, I think we've always looked at advanced packaging as a unit volume driven business, and the front end as a more technology driven business. And that's holding true. I'd say the only difference is some -- pretty significant inflections, like the panel lithography, which is a technology shift that we're starting to see.

And that will take some time to ramp and there'll be some growth due to the technology shift versus just the volumes. But in general packaging is certainly a unit volume driven business..

Okay, great. And then finally, I was a little surprised when you said that the RF business was soft. I thought 5G with a really nice little uptick in RF..

Sorry.

Was that me Tom or is that?.

I thought Mike, but it doesn't matter.

So, what drover the softness in the RF business, when it seems like a lot of companies are seeing some RF strength right now because of 5G?.

I'm not sure I said RF was soft. I think I highlighted multiple times where 5G RF was quite strong and driving growth. So actually, I talked about the entire ecosystem from the RF communications devices, but then also the MEMS and the power that we're also seeing some pretty decent growth..

No. Mike, he is talking about the reference that I made to the metrology weakness in RF in the second quarter. That was really the weakness in just the metrology sales, not inspection sales and RF tension..

So not total RF, just adoption of our metrology..

Okay. Well, thanks for the clarification. Thanks again..

[Operator Instructions] We'll take our next question from Krish Sankar with Cowen and Company..

Hi, thanks for taking my question. I had two of them. Mike, you spoke about the strength in DRAM in Q2.

How much of that is cyclical versus share gains? Is there a way to quantify it?.

We definitely see the adoption of our Atlas Metrology expanding into more of the high end applications. So from that respect, we'd consider that share gains. So we look at the level of utilization, the number of applications going on to the tools and how many of those applications shipped to us.

So, I'd say there's some level of share gains, but there's always been a strength of ours and that continues to be a strength.

I think the opportunity for us is to drive into some of the, let's say, less sophisticated, less challenging layers and to gain where we haven't been particularly focused or strong, and penetrate some of that and increase our share gain opportunities even further. And that's where these new products are focused at achieving..

Got it. Thanks, Mike. And then just as a follow-up, last time you spoke about your potential order strength from silicon wafer manufacturers in the back-half.

Are you seeing that? Or do you think that's been delayed?.

No, we're definitely seeing that. I mentioned, we expect to see double digit growth after that little pause in the second quarter. We're seeing that coming back pretty strong for both the Elements FTIR and for our NovusEdge platform, both inspection and metrology serving the wafer manufacturers..

Got it. Thank you very much. Sorry, I missed that. Thank you again..

No problem..

This concludes our questions for the day. I'd like to turn it back to Mike Plisinski for closing remarks..

Thank you, Todd. And I would like to once again acknowledge the incredible passion of our employees and their commitment to our valued customers. I also want to thank our suppliers and investors and hope you and your families stay safe and healthy. Thank you for your attention..

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