Onto Innovation Q3 2023 Earnings Call Transcript

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Provided by Quartr
November 9, 2023

There are 10 speakers on the call.

Operator

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

Speaker 1

Thank you, Rachel, and good afternoon, everyone. ON2 Innovation issued its Q3 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 Slacer, Chief Financial Officer. I would like to remind you that the statements made by management on this call will contain forward looking statements within the meaning of federal securities laws.

Speaker 1

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 I will now go ahead and turn the call over to our CEO, Mike Plucinski. Mike?

Speaker 2

Thank you, Mike. Good afternoon, and thank you for joining the call today. We finished the Q3 just above the midpoint of guidance For operating income and earnings despite top line revenue near the low end of guidance, this financial performance is just beginning to reflect the improvements from the Initiatives we outlined in July. Shortly, Mark will outline how we expect to accelerate additional improvements through the next several quarters. Now I'll share what we see as a new wave of opportunities for ON2 Innovation following recent visits with several customers in Asia, including Those leading the innovations in memory and packaging that are enabling this new era of artificial intelligence.

Speaker 2

Gartner estimates that today semiconductors supporting artificial intelligence are estimated to represent less than 10% of the approximated $500,000,000,000 Semiconductor Market. By 2,030, the overall market for semiconductors is expected to double reaching $1,000,000,000,000 in revenue. However, semiconductors supporting AI are expected to increase 6x to 8x reaching $300,000,000,000 to $500,000,000,000 in sales As applications and hardware migrate from data centers to edge computing, just as advanced packaging was critical to ushering in the mobility era, We believe it will be critical to this new era of artificial intelligence. By using the latest 3 d and 2.5 d packaging technologies, Companies like NVIDIA are able to deliver the performance required by end markets while delaying the higher costs of migrating to more advanced nodes. Controlling the formation of these 3 d and 2.5 d interconnects is critical to yields and creating a surge in demand for the DragonFly platform's Comprehensive inspection and metrology capabilities.

Speaker 2

In the last two and a half months, we added over 100 $10,000,000 in new orders in addition to the $120,000,000 in orders announced last August. These new orders include all 3 suppliers of high bandwidth memory, Process control for 2.5D Packaging and emerging applications for our unique echo acoustic metrology. We'll now turn to another secular driver for Onto Innovation, the market demand for power semiconductors to support the electrification of of everything from automobiles to gas powered garden tools. Revenue from power customers remained near record levels in the 3rd quarter and included inspection, metrology and software products. In the quarter, we delivered our new Element S systems to 5 silicon carbide customers To more effectively control the thickness of the epitaxel layer, which is critical for high voltage breakdown resistance of the device.

Speaker 2

Our software also gained a new customer in the compound semiconductor market with a significant order from a leader in wireless communications devices. By demonstrating the power of integrating our Discover Enterprise Process Analytics with our equipment control solutions, We're able to help the customer achieve better process targets where their previously installed systems had struggled. Based on the results, we expect this customer will place additional orders in the future and roll this out to factories across the globe. The Advanced Nodes customer spending reflects the broader weakness in demand for data center and mobile devices. As anticipated, we saw large drops in DRAM and Logic revenue resulting in a 30% decline in the 3rd quarter.

Speaker 2

However, we are making steady progress with our films metrology and delivered several systems to support gate all around pilot production in the quarter. The transition to gate all around transistors will be an important inflection for ON2 innovation as we believe our positions in OCD Integrated And film's metrology will result in an estimated 30% increase in opportunity over our position in leading edge FinFET nodes. And now I'll turn over the call to Mark to provide financial highlights for the quarter.

Speaker 3

Thanks, Mike, and good afternoon, everyone. We closed the Q3 with revenue of $207,000,000 down 19% over the same period last year and up 10% versus the 2nd quarter. Despite revenue below the midpoint of guidance, we did exceed the midpoint of our EPS guidance range, achieving $0.96 for the 3rd quarter. The revenue decline from the same period last year is primarily due to the decline in our Advanced Nodes business, which had revenue of $26,000,000 and represents 13% of revenue. Specialty Device and Advanced Packaging with record revenue of $135,000,000 Increased 20% over Q2 and represents 65% of revenue.

Speaker 3

For Software and Services, we achieved revenue of $46,000,000 increasing 13% over Q2 and representing 22% of revenue. We achieved 52% gross margin for the 3rd quarter, exceeding our guidance range of 50% to 51%, driven by favorable mix and our cost optimization efforts. 3rd quarter operating expenses were $57,000,000 at the low end of our guidance range of $57,000,000 to $59,000,000 We are realizing the benefits of our cost reduction initiatives put in place earlier in the year, driving our OpEx run rate well below our 2022 levels, while still maintaining investments in technologies to help enable advances in manufacturing of AI and power devices. Our operating income of $50,000,000 was 24 percent of revenue for the Q3 compared to 21% for the 2nd quarter. Our net income in the 3rd quarter was $48,000,000 23 percent of revenue versus 20% for the 2nd quarter.

Speaker 3

Both our operating income and net income performance versus the 2nd quarter highlight our improving operating leverage. Now moving to the balance sheet. We ended the 3rd quarter with cash and short term investments of $630,000,000 An increase of $82,000,000 from the beginning of the year with operating cash flow of $29,000,000 within the quarter, representing 14% of revenue for Q3. Inventory ended the quarter at $346,000,000 a decrease of $6,000,000 from Q2 as we actively manage down our inventory levels across the network. We are projecting further reduction in Q4.

Speaker 3

However, we are now targeting to be between $300,000,000 $320,000,000 by the end of the year. This is a shift in our previous projection and is primarily due to the ramp in our DragonFly G3 orders, which is requiring us to procure long lead time components. We are pleased that our focus is now paying off within the with a quarter over quarter reduction, But we are certainly not satisfied with the current inventory levels and this will remain a critical working capital focus area until we can get back to consistent cash flow performance levels of over 20%. Accounts receivable increased $22,000,000 to $210,000,000 in the quarter and our days sales outstanding increased 2 days to 92 days. During the quarter, we did not execute any share repurchases We have $32,000,000 remaining under our existing $100,000,000 authorization.

Speaker 3

Now turning to our outlook for Q4. We currently expect revenue for the Q3 to be between $200,000,000 $216,000,000 We We expect gross margins will be between 51% to 53%. We are expanding our gross margin range, partially reflecting The work on supply chain and operational efficiencies we have previously outlined is part of our 2023 cost reduction programs. We expect to see continued improvement in each of the next two quarters. For operating expenses, we expect to be between $56,000,000 to 58,000,000 For the full year 'twenty three, we expect our effective tax rate to be between 13% to 14%.

Speaker 3

We expect our diluted share count For Q4 to be approximately 49,500,000 shares. Based upon these assumptions, we anticipate our non GAAP earnings to be between $0.90 per share and $1.10 per share. As outlined during our June 1 Analyst Day, The programs we have in place are on track to deliver approximately $25,000,000 of gross margin cost reductions over the next 2 years, starting in 2024 and into 2025. We have already negotiated greater than 50% of the $25,000,000 in savings and we will start to see a portion of these savings realized in our gross margins starting in Q1 as we target 54% as a baseline goal. And with that, I will turn it back to Mike for additional insights into Q4.

Speaker 3

Mike?

Speaker 2

Thank you, Mark. As Mark mentioned, we expect 4th quarter revenue to be essentially flat with the 3rd quarter, but with improvement in both gross and operating margins Despite the unfavorable product mix of lower advanced node metrology systems. In the 4th quarter, we see additional push outs The advanced node market reflecting recent public announcements from leading memory manufacturers indicating a decrease in their product Production utilization for the second half of twenty twenty three. In addition, the tool move in dates at new U. S.

Speaker 2

Fabs are pushed out as a result of This weakness is being offset by the surge in demand we see for the Dragonfly G3, Which we expect to grow another 50% in the 4th quarter, almost exclusively in support of customers ramping high bandwidth memory in 2.5D packaging. Based on current visibility and customer engagements, we expect the demand will continue to build into next year, resulting in overall growth for ONTU Innovation in the first half of twenty twenty four. As the era of artificial intelligence progresses, We believe the market will increasingly turn to panel level packaging, where we expect our JetStep lithography tool play an important role in enabling the next generation of chiplet architectures. Supporting this belief, recently we received an order from a new JetStep lithography customer to support their development of advanced packaging on a glass substrate. Though not without challenges, the glass substrate has inherently better stability than substrates and as a result can take full advantage of our leading resolution and overlay capabilities.

Speaker 2

The advantage will be the ability to print Smaller and denser interconnects to support the needs of next generation chiplet architectures. This new tool will ship in the middle of 2024 and if the Customers successful. We expect many additional orders for glass substrates in 2025. Given the current slowdown in high performance server markets and our lithography production not yet achieving full capacity, we've worked with customers to realign tool shipments. This means for the year, roughly $30,000,000 of planned lithography shipments in 2023 will move into 2024.

Speaker 2

Though the impacts to 2023 revenue is disappointing, this allows our team to further optimize the manufacturing process and be prepared for the next market ramp, which we expect in 2025. In conclusion, we believe the AI era that is just beginning Of course, everyone knows the impact that NVIDIA had on the market over the last few months in terms of unit volumes and revenue. Already we see new products being announced by AMD and Intel to respond to this growing demand. And just this week Samsung introduced their new generative AI model that is designed for AI applications on their devices for edge computing. We believe this expansion of offerings and new applications is an early indication of the broader growth of the industry.

Speaker 2

Given our established positions with the market leaders, We see this as a long term driver for Onto Innovation as well. As I mentioned, AI device volumes are expected to drive our revenue growth In the first half of twenty twenty four over the second half of twenty twenty three, independent of a recovery in advanced nodes. If the advanced node spending resumes in the second half of twenty twenty four, then that will only further increase the revenue opportunities we see in the coming year. And with that, I will turn the call over to Rachel for questions from our covering analysts. Thank

Operator

Our first question comes from the line of Craig Ellis with B. Riley Securities. Please go ahead.

Speaker 4

Yes. Thanks for taking the question and nice to see all the Dragonfly momentum in the business. Mike, I wanted Start just by clarifying a comment that you made about expectations for Panalitho shipments this year. You said that $30,000,000 of expected revenue would rip from this year to next. So does that mean that in addition to the $10,000,000 that we saw in 3Q, there's $20,000,000 from 4Q that shifts into next year or am I misinterpreting what you're saying?

Speaker 2

From the total year, I think we had some slips also prior earlier. So it's just we haven't been able to drive enough increased production capacity to cover the currently booked Quarter and makeup for the slips from prior quarters. So as a result, we're not catching up where we're skipping steps and we need to stop that. So in total, dollars 30,000,000 is moving from 2023 to 2024, And that's in the numbers that we've been guiding to.

Speaker 4

Got it. And then really like to hear the 54% gross margin And the Q1, and I know you don't give a full income statement guide 2 quarters out, but can you just provide some color on Some of the things you're seeing that support that 54%, for example, is advanced nodes now at a trough and just bouncing along the bottom. And I expect there's incremental momentum out of specialty, but would appreciate any color.

Speaker 3

Yes. Hi, Craig. It's Mark. Yes. So I think certainly for Advanced Nodes, I mean That continues.

Speaker 3

That won't be the ramp in Q1 driving that margin improvement. Certainly with Dragonfly and our inspection business, We're implementing 2nd shift, 3rd shifts. We're driving supply chain efficiencies through that process. So certainly going to Continue to see gross margin improvement in our inspection business with those tools and that ramp up. But we've also been able to take cost out, As I've alluded to throughout 2023, and those are that's fixed.

Speaker 3

I mean, that is not that's not variable stuff. So that will continue to drive the So we'll continue to see that leverage. And as I've said, our goal is certainly 54% is our baseline goal, Driving towards that goal of exiting 55 plus getting us back on model.

Speaker 4

And then lastly, if I could, Mike, historically, I always thought that Specialty had A decent GaN component, but it sounds like you're really getting good traction with silicon carbide. Any more color on what's going on with your customers there?

Speaker 2

You're correct. So historically, we've had a much stronger position in the GaN, But recently, we've seen a lot of increased order uptick for our from silicon carbide customers. And I think that just That's a lot of what the market is focused on right now. So it's including several different types of metrology systems As well as inspection, all driving into those silicon carbide new silicon carbide customers And it's also geographically dispersed. We're seeing Europe, U.

Speaker 2

S, Japan, Korea, China,

Operator

Our next question comes from the line of Brian Chin with Stifel.

Speaker 5

Please go ahead.

Speaker 6

Hi, there. I appreciate it. Thanks for letting us ask a few questions. Yes, Mike, maybe just Clarification on remarks you made and then maybe sort of a follow-up question on that. But I think previously you'd referenced Couple of months ago, dollars 100,000,000 plus in Dragonfly orders into sort of mid next year.

Speaker 6

It sounds like you made a reference to maybe an additional Follow on similar size, maybe a little bit larger, slug of orders. Is that right? And can you kind of talk more about that and sort of what timeframe against What the time frame against those orders in terms of deliveries are into next year?

Speaker 2

Yes. So we did not more, but we got another $110,000,000 in orders. We actually got more than $110,000,000 but the bulk of it, let's say $110,000,000 or so, will be Delivered through the first half of next year, so Q2 of twenty twenty four. There is some additional orders that extend beyond that, but The vast majority is all Q4, Q1, Q2.

Speaker 6

Got it. Got it. And obviously that's part of feeding some of your outlook for the first half revenue for next year to be above Second half of this year, I think. I guess also in terms of do you have the visibility, do you kind of anticipate that Order rates will sort of level off second half when packaging and maybe advanced nodes starts to pick up the pace at some point next year?

Speaker 2

I think Advanced Nodes will at some point pick up the pace. That we're hoping for. The leveling off, it's unclear. I'm surprised How rapidly we're seeing the expansions and how broad. So originally, We are seeing a lot of demand for the Dragonfly for inspection and some of the metrology capabilities in Dragonfly.

Speaker 2

But as customers are ramping so We're finding new challenges that some of our other metrology systems Are solving and we're seeing orders for them. I mentioned the echo on the call. There's some others as well. So I think there's so that as the ramp happens and customers start driving yields and productivity up, I think we're going to find that there's more opportunities for process control, maybe even through the second half that keeps that Pace of revenue for us up.

Speaker 6

Yes. Maybe one last quick one. I think you've shipped some Atlas OCD tools for data all around applications in recent quarters, but what's your latest thinking in terms of the timeframe when you'll start to receive volume based Orders and then start to ship against that backlog.

Speaker 2

Yes, that's the $1,000,000 question. I think customers our customers are getting pretty ready and it's really The visibility they have into customer their customers adopting those lines. So of course, We have some construction delays here in the United States, but there's other pilot lines and low volume production lines around the globe That I think are more ready for volume as soon as customers decide to take that plunge. From a timing standpoint, what we hear is sort of end of 2024, we should see Orders preparing for a more aggressive ramp in 2025.

Speaker 6

Okay, great. Thank you.

Operator

We will take our next question from the line of Charles Hsie with Needham. Please go ahead.

Speaker 7

Hey, good afternoon. Mike, Mark, I want to have a follow-up on the question related to the Hi, Ben. With memory plus 2.5b, if I hear you correctly, Looks like you've got enough orders as much as $210,000,000 plus To deliver between second half twenty twenty three and the first half twenty twenty four, is that correct? Because you kind of mentioned about $100,000,000 plus, that's your prior announcement, but you got another $110,000,000 And that's all of that is going to deliver through the first half of twenty twenty four. So I want to make sure I heard that correct.

Speaker 2

Yes, that's correct.

Speaker 7

Thanks. So it looks like there's a good amount of The growth from second half twenty twenty three into first half twenty twenty four because I think that what you guided for, I mean, this Quarter's Q on Q growth of that part of the AI packaging related revenue and the next quarter's growth kind of suggests something $70,000,000 to $80,000,000 but the next that means next year is going to get to something like the first half next year $130,000,000 to $140,000,000 So that looks like a very good incremental revenue out there, but I'm just kind of curious what about other part of your business? Advance note, it doesn't sound like you're expecting a recovery. But the 3rd piece, I think, You don't really break it down, but the specialty devices, it has been strong second half, but what about first half next year? Is it flat or up or down from the second half twenty twenty three level?

Speaker 7

Next.

Speaker 2

Yes. So I think 2 things. So going back to the HBM and the packaging, a couple of Really significant events happened in the last few months that helped drive that business. One is, We had talked about having some evaluations out at the 3rd HBM memory manufacturer. We had 2, not the 3rd.

Speaker 2

Very quickly, the demo and eval tools demonstrated or The evaluation tools demonstrated our value and we quickly saw some aggressive ramps. In addition, We saw new metrology opportunities. So that's contributing to the stronger growth we see in the first half of next year. Going back to Power Semi, which is one of the big areas of growth in the specialty area, We do see a bit and it's hard to say right now because we're not getting the same kind of lead times and not having the same kind of Pressure to ramp as the AI guys right now, but we do see a little bit Of a slower pace in the first half, but not significantly. And I'm guessing that, that will start to pick up as the rest of this year progresses.

Speaker 7

Thanks. Lastly, can you kind of give us a breakdown, I mean, that Incremental 110 follow on orders, how much of that is HBM? How much of that is the 0.5d tax?

Speaker 2

I knew you'd ask that. Right now, It's more heavily towards HBM, but

Speaker 7

Let's see now.

Speaker 2

Yes, it's actually still pretty well balanced as I'm looking at the data. Yes. It's still pretty well balanced between the 2 groups.

Speaker 7

Yes. Welcome. Thanks so much.

Operator

Our next question comes from the line of Vedmati Srotri with Jefferies. Please go ahead.

Speaker 8

Hi. Thanks for taking my question. So I wanted to double click on the Littoral panel opportunity. So I know we started the year with about $80,000,000 that you were expecting. And then in the Q2, there were some push outs, so it came down to $60,000,000 And so now could you give me a sense of how much Little Bank turns out to be in 2023?

Speaker 8

And You said $30,000,000 gets pushed out. So is it if you could help me understand what happens in the second half of twenty twenty or Q4?

Speaker 2

Yes. So you're right. We did have the plan and the expectation to be able to deliver $80,000,000 this year in the bookings. Because of the $30,000,000 moving out, that means we'll deliver $50,000,000 this year and not the full eighty Those other tools are going to move into deliveries for next year.

Speaker 8

And that wouldn't impact your gross margins, right? Because I understand those tools carry your carry lower gross margins. So they'll be offsetting your the cost saving initiatives would offset that. Is that fair?

Speaker 2

Well, we're still shipping lithotools now. So built into the gross margin profiles where We're delivering now the last couple of quarters, last several quarters is 2 to 3 to 4 litho tools a quarter. And so that's going to continue, but at the same time, we've talked a lot about how aggressively we're driving the litho margins north. And I think each of the quarters next year, we're going to see improving gross margins from litho to the point where it's not going to be The big issue that it's been, for sure all of this year, if that makes sense.

Speaker 8

Yes, got it. And then the other question I wanted to ask is, so a lot of your peers are benefiting from China being a stronger Territory, is that playing out for you in any sense, like if you could elaborate on that?

Speaker 2

Now China is definitely not as Strong for us as it is for our peers. I've seen 40% 50% of our peers' revenue is coming from China. For us, It's more like 15%.

Speaker 3

Yes. So in Q3, we're about 15% and year to date, we're at 18% to 19%.

Speaker 2

Yes. So it's a lot of specialty devices, a lot of the new markets where we have some Generally unique metrology that then brings in some of our other products, but Yes, it's definitely not the 50% we see from some of our others.

Speaker 8

Got it. Thank you. And I have one more, but I'll get back in the queue.

Operator

We will take our next Question from the line of David Duley with Steelhead. Please go ahead.

Speaker 5

Yes. Thanks for letting me ask a question. If we could just Kind of dig in on this lithography issue. You've had systems push out for 2 quarters in a row, I guess, is my recollection is correct. And is this more of the just kind of go into you mentioned it's your internal production issue or is it Tools performance or if the customer is not ready for it, could you just elaborate in greater detail about why we're seeing these pushes?

Speaker 2

Yes. That's a good question. So it's been a mix. As you know, in Q2, the issue was Tied more towards the customers making some changes that we had to adapt to and weren't able to complete all of the work Required. But as we move those tools into the next quarter, we were unable which would be this quarter, We are unable to deliver what we had already committed for the quarter plus pick up some of this extra work.

Speaker 2

These tools are large. They take up days in the factory. Delays actually have a pretty big impact. The other I think the other thing to understand is in these systems, we have about 3,200 out of 17,000 parts, major parts, not screws and nuts and bolts, but 17,000 major parts to make a litho tool. Out of that, around 3,200 are custom engineered parts by the team here.

Speaker 2

And to give you an idea, In our most advanced metrology system, there's only about 100 custom engineered parts. So the level of Complexity of these systems and the manufacturing flows and the calibration times, the integration times, It's just taking more effort to drive the discipline in the processes We've been able to drive improvements in the system fairly significantly. So in the first four systems, Since the first four systems we delivered, we've improved cycle times by 40%. We've doubled The capability of our overlay, I think we've improved throughput something like 30% or 20%. So there's definitely trade offs.

Speaker 2

There's a benefit of having the highly engineered system, but the cost is the complexity in manufacturing.

Speaker 5

And how so essentially, you can't basically take the systems that slipped last quarter into this quarter and build Basically, I have to build twice as many. How do you fix this problem? When will that problem be fixed? Obviously, you need more internal capacity. So is that why it doesn't get better till the middle of the year or whenever?

Speaker 5

Go ahead.

Speaker 2

Yes, exactly. It's We need to finish some of these processes. We need to get our supply chains to be more responsive. We've had a lot of issues with incoming quality that also require then rework and take too much time and too much base base, so we can't move these systems. So as we work through all this and again we're making steady progress, it's just not fast enough.

Speaker 2

It's no fun for me to keep guiding and then Updating the guidance or missing the guidance. So we're resetting, giving the time team to get more predictable. And I expect Middle of next year, so by the Q2, we will be able to reach our full capacity, which is Significantly more than $80,000,000

Speaker 5

And so let's just pull that down too. So you're going to go from 3 tools a quarter to be able to produce 6 tools a quarter, Because that seems like what your problem is now.

Speaker 2

Yes, that's fair. Yes.

Speaker 5

Okay. All right. One final one for me and thank you very much for that clarification. That was appreciated. You mentioned the TAM for your films tool would Grow by 30% as we move to gate all around and I'm seeing backside powers in that calculation too.

Speaker 5

Could you just help us understand what the TAM is and Also help us understand what you're kind of what that means or how much revenue that would be for ONTU?

Speaker 2

So the SAM, I don't have actually that well broken down. I'm trying to think what our Publicly stated SAM is for the FinFETs at 10,000 wafer starts and it would be obviously 30% above that. But the comment was really around our growing position within Gate all around and then How that will increase our opportunity given the same amount of wallet shares, given the same amount of expansion. So if they both expanded a FinFET node, The gate all around node expanded by 10,000 wafer starts, we'd see 30% more revenue estimated 30% more revenue In that gate all around expansion, then the positions we have in FinFET. And this is driven by More layers going to us on the OCD, insertion opportunities in integrated and then as well as The films, layers that we've been able to start to win and qualify for Tula record positions.

Speaker 2

But I don't have the exact dollar number for you.

Speaker 5

Okay. We'll get that based number another time. Thanks for answering my questions. Thanks.

Speaker 2

You're welcome.

Operator

We will take our next question from the line of Mark Miller with Benchmark. Please go ahead.

Speaker 9

Thank you for the question. I just want to clarify something. The litho tools that were delayed last Due to customer specified mods, but the reason these tools are further pushed out is a component availability, fab availability. I'm just Why the further push out in those 2 tools?

Speaker 2

Yes, it's a good question. It's different tools. So those tools from Q2 Were delivered. They shipped shortly after the quarter or within the early part of this quarter. The additional slip outs were sort of the knock on effect.

Speaker 2

So we had a little bit of delay in the other ones. We couldn't start The additional tools, the tools that were already planned for Q3 and with some other manufacturing production issues, so these were mostly internal issues. We ended up not delivering on time. So the first Q2 was tied to, I'd say, customer change requests. Q3 was tied to our own execution.

Speaker 9

Okay. Thank you. Just wondering too, what are you seeing in China? And is the power the slow the little slowing in the power segment, is that in China or somewhere else?

Speaker 2

I don't think so. I don't think We see a slowdown in China per se, overall, just not. I think we're doing a nice job of Rebuilding and recovering from some of the customers, the good customers we had that were put on the entity list. So I think that's a growing part of the business. I think more of the and again, it's still early because our Bookings in that part of the market are not generally out super far, but I think that's more in the more established markets.

Speaker 2

So some of that pause or delay or lower visibility right now is more in the established Europe and U. S. Markets.

Speaker 9

And your largest area in terms of geographic sales in the September quarter was?

Speaker 2

And the September quarter was Korea. Yes, Korea. Korea.

Operator

It appears there are no further questions at this time. Mr. Schaeffer, I'd like to turn the conference back to you for any additional or

Speaker 1

Thank you. Just a quick reminder for everybody about some upcoming events. First, ONTU Management will in the Morgan Stanley TMT Conference in Barcelona next week, and we will be participating in the Wolfe Research Small and Mid Cap Conference in New York on December 6. Thanks again for joining us today. A replay of the call is going to be available on our website approximately 7:30 Eastern Time this evening.

Operator

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

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