Good day, welcome to the Onto Innovation Q4 earnings release conference call. 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, Jenny. Good afternoon, everyone. Onto Innovation issued its 2022 Q4 and full year 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, where a copy of the release is posted. Joining us on the call today are Michael Plisinski, Chief Executive Officer, and Mark Slicer, Chief Financial Officer. I would like to remind you that the statements made by management on this call will contain forward-looking statements within the meaning of Federal security laws. Those statements are subject to a range of changes, risks, and uncertainties that can cause actual results to vary materially. For more information regarding the risk factors that may impact Onto Innovation's results, I would encourage you to review our earnings release and our SEC filings. Onto Innovation does not undertake the obligation to update these forward-looking statements in light of new information or future events. Today's discussion of our financial results will be presented on a non-GAAP financial basis, unless otherwise specified. As a reminder, a detailed reconciliation between GAAP and non-GAAP results can be found in today's earnings release. I will now go ahead and turn the call over to our CEO, Mike Plisinski. Mike? Thank you, Mike. Good afternoon, everyone, and thank you for joining our call today. With our strong finish in the Q4, Onto Innovation has achieved an exciting milestone, crossing $1 billion in revenue this year. Throughout the year, we saw consistently strong demand for our systems, with revenue growing 32%, well exceeding market estimates of 9% growth for wafer fab equipment in 2022. Even more exciting, earnings for the year grew 43% while we increased investments in R&D, manufacturing capacity, and established new training centers closer to our customers in Asia. Beyond the strong financial performance, we expanded our position in several areas of future growth. Starting with advanced nodes, Atlas optical metrology has been qualified by all three of the market leaders developing Gate-All-Around transistors. This increases our logic opportunity by over 20% versus prior nodes. In NAND, we extended our already strong position with Atlas OCD by qualifying our Aspect IR metrology at top three NAND producers for measuring critical parameters of NAND with over 230 layers. Moving across the value chain to specialty devices and advanced packaging, our latest inspection products have proven themselves capable in submicron applications in both front-end and advanced packaging. This year, we had over 15 customers replace the incumbent competitors' tools with the Dragonfly G3 for submicron inspection. We estimate this to be one of the fastest-growing segments in our macro inspection market. In panel packaging, we finished the year with roughly $40 million in revenue and expect to double that in 2023. We estimate this market to be roughly $280 million, with Yole projecting a CAGR of 12% through 2026. This high level of performance across the value chain would not have been possible without the passion and talent of our entire global team and their unrelenting commitment to our customers' success. Based on these results, we see even greater years ahead for our Onto Innovation team as these technologies migrate into production. Turning to our Q4, we capped off this record year with revenue of $253 million above our midpoint of guidance. Earnings of $1.57 per share was well above the high end of guidance, aided by favorable tax and investment income, which Mark will speak to shortly. In the Q4, revenue from our specialty in advanced packaging customers grew 22% sequentially, setting a new revenue record. As expected, leading that growth was our power and compound semi markets, which grew 54% over the Q3. Several of these customers selected Onto Innovation specifically for our connected solutions, integrating software and systems to improve yield. For example, aligning patterns layer to layer is particularly challenging in compound semiconductor applications due to use of thick, transparent materials. By employing Discover Run-to-Run software to analyze our overlay data and other process data, we're able to automatically provide more precise corrections to the lithography systems. This improves layer to layer accuracy by over 50%, translating to several million dollars in additional yield per year. In the quarter, our inspection sensitivity and compelling cost of ownership resulted in several notable wins in hybrid bonding for future three-D chip stacking applications. In addition, Dragonfly G3 inspection was selected to provide process control to a supplier of Mini LEDs for next generation displays of a leading smartphone manufacturer. The Mini LED market is still small, but we expect additional orders in 2023 from this customer, as well as others ramping to support growth estimates of 22% annually through 2028. Turning to the advanced nodes, after a record Q3, revenue declined 23%, impacted by both the U.S. restrictions announced last October and market declines in memory, especially NAND. Looking deeper, we see nearly half of our advanced nodes revenue in the quarter was in support of R&D and pilot line production of next-generation nodes. As mentioned earlier, this included the sign-off and repeat order for Atlas metrology at our third customer investing in Gate-All-Around technology. We also successfully completed an Aspect metrology evaluation at our fourth leading NAND manufacturer. The Aspect IR metrology is the only in-line solution for characterizing lateral recesses, which are critical to maintaining the correct electrical parameters for NAND. Prior to Aspect metrology, customers would resort to far slower sampling measurements using offline X-ray systems. Finally, in the Q4, we won tool a record position for Iris films at another top five semiconductor manufacturer. Since its market release 2 years ago, Iris metrology has now been qualified at 3 of the top five semiconductor manufacturers as well as several new power device customers. Even while factory expansions slow, our customers are fully engaged with us to develop and deliver the solutions they require to successfully migrate their new technologies into full production. Before I go into our outlook for the Q1 and give some color on the year, I'll turn the call over to Mark for the financial highlights. Mark? Thanks, Mike. Good afternoon, everyone. As Mike highlighted, we had another strong quarter with Q4 revenues of $253 million, up 12% over the same period last year, and $3 million above the midpoint of our Q4 guidance range. This strong Q4 finish helped us achieve the significant milestone of surpassing $1 billion in revenue in 2022. This is an incredible achievement for a team that just came together three years ago and started at a base of just under $600 million in annual combined revenue. We also achieved several other financial records, setting company highs in full year operating income of $302 million and net income of $275 million, contributing to our strong financial performance for the year. Now I'll move on to quarterly revenue by market. Advanced Nodes revenue of $85.3 million grew 16% year-over-year and represents 34% of revenue. Specialty Device and Advanced Packaging achieved $125.4 million in revenue, grew 15% year-over-year, and represents 49% of revenue. Software and services revenue of $42.6 million was slightly down 1% year-over-year and represents 17% of revenue. We achieved 54% gross margin for the Q4, in line with our previous guidance range. We continue to experience inflationary pressures on raw materials and labor. Q4 operating expenses were $61 million at the midpoint of our previous guidance and flat to the previous quarter. Our operating expenses slightly declined as a percent of revenue year-over-year and flat to the prior quarter. Our mix within operating expenses shifted with more investment into R&D during 2022 to support the strategic programs Mike highlighted earlier in his opening comments, which will help propel our growth during the next phase of expansion. Our operating income of $76 million, which increased 10% year-over-year, was 30% of revenue for the Q4. Our record level net income in the Q4 was $78 million or $1.57 per share, up 28% over the same period last year. Seventeen cents above the high end of our previous guidance range of $1.25 per share-$1.40 per share. During the quarter, we had several one-time discrete tax items that positively impacted our full year effective tax rate, bringing it down to 10.4% as compared to our previous guidance range of 12%-13%. Excluding the impact of these one-time tax benefits, we would still have exceeded the high end of our guidance range by approximately $0.01. Now moving to the balance sheet. Our cash and short-term investments were $548 million, with operating cash flow of $137 million for the year, down from 2021 levels, driven primarily by the increase in inventory within the year as we managed through supply chain issues, increased safety stock levels, and ordered long lead time items. Inventory ended the year at $324 million as we continued to receive in key components within the quarter to support the growth in our lithography business and to service our expanded install base. One of our top priorities for 2023 is to optimize our levels of inventory and return to the mid $200 million range in 2023. As a result, we expect inventories to start declining in the first half of 2023 and throughout the year. This will contribute to our free cash flow returning to historic performance levels of over 20%. Accounts receivable increased to $241 million in the quarter, and our day sales outstanding increased 3 days to 87 days, primarily due to the timing of revenue and receipts within the quarter. As commented on during previous quarters, we continually assess our capital allocation strategy, which includes the balance between internal investments, M&A, and share repurchases. During the quarter, we repurchased an additional 846,000 shares of common stock, bringing our year to date total share repurchases to just over 1 million shares, resulting in a return of capital to shareholders of $65.2 million. The share repurchases were executed under our existing $100 million authorization. Turning to our outlook for Q1. We currently expect revenue for the Q1 to be $200 million ±3 percentage points. We expect gross margins will be between 51%-53% as we pivot from and manage through our manufacturing cost profile in place, supporting our record revenue year. For operating expenses, we expect to be between $53 million-$55 million. For the full year 2023, we expect our effective tax rate to be between 14%-16%. We expect our diluted share count for Q1 to be approximately 49.2 million shares. Based upon these assumptions, we anticipate our non-GAAP earnings to be between $0.80 per share-$0.95 per share. As we enter 2023, we have already started to execute plans to reduce annual spending in the range of $25 million-$30 million, which includes driving further operational efficiencies at our manufacturing sites, staff reductions, reduced discretionary spending such as travel and outside services, while offsetting our annual employee compensation increases. With these efforts, we expect to move back into our long-term operating model when industry growth returns. With that, I will turn it back to Mike for additional insights into 2023. Mike? Thank you, Mark. As Mark just mentioned, we expect a slow start to 2023. For the Q1, we see specialty and advanced packaging declining by mid to upper teens, impacted by both the broader market slowdowns and the effects of seasonality. We expect advanced nodes revenue to decline by an estimated 30%, primarily due to sharp reductions in memory spending and restrictions in China. Looking beyond the quarter, we see customers reducing wafer starts or delaying expansion plans in response to the current oversupply of chip inventories. Advanced logic investments continue, higher volumes are not expected until 2024, with slowing smartphone sales driving down utilization of lines in advanced packaging. Overall, wafer fab equipment spending estimates are down 20% for 2023. Analysts at Stifel and Morgan Stanley are forecasting equipment spending to be down an estimated 30% after excluding front-end and lithography spending. Despite this weakening environment, we remain confident in our thesis for outperformance, which includes backlog to support our lithography business doubling in revenue this year, Novis Edge inspection increasing 50% to support EUV wafer manufacturing, and we expect revenue from our power and compound semiconductor customers to grow this year. In total, we see at least $70 million in incremental revenue from these markets, giving us a range of market outperformance that is down about 18%-22% year-over-year. In response to the industry slowdown, we've taken steps this quarter to reduce our overall expenses by about 11%, which includes both operating and manufacturing expenses. The majority of these reductions were in variable costs with minimal impact to our full-time employees. These adjustments will allow us to maintain a healthy financial model while continuing to invest in the R&D programs critical to our customers. We will also take advantage of this time to focus on supply chain initiatives that will strengthen our margins, and again, move us closer to our long-term operating model when growth returns to our markets. Though timing for that return to growth is not clear, the longer-term estimates for chip growth has not diminished, and is currently estimated to be $1 trillion by 2030, nearly double the current demand. In addition to strong unit growth, the complexity of the device is increasing, and thus requiring additional process control innovations at a higher capital intensity to maintain viable yields. This is a great environment for Onto Innovation to continue to expand our customer partnerships across the semiconductor value chain and contribute to the introduction of the exciting new devices that will enable a smarter, greener, and more connected future. With that, we'll open the call for your questions. Operator? Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask a question. We'll pause just a moment to allow everyone an opportunity to signal for questions. We will go to our first question from Brian Chin with Stifel. Hi there. Good evening. Thanks for letting us ask a few questions. Mike, maybe just to clarify, I think what I heard in the remarks, but the way you're kind of aligning the year at this point, you see revenues down, was it 18%-22% year-over-year? Correct. Okay. To clarify that. I guess, do you see maybe revenue tapering off a little bit further into 2Q, and then maybe stabilizing there and kind of flattening out for the year? Is that sort of the contour that you're anticipating, or is there sort of a different pattern? We see a lot of movement right now. That's what we believe. We think we're gonna stabilize Q1, Q2, and start to see some improvements. Again, there's been a lot of movement both in and out. We've seen movements into Q2, we've seen movements out. Right now, you know, we're expecting that to be flattish, maybe slightly up from Q1. Flattish to slightly up. Okay. How about, you know, gross margins relative to some of the cost reduction efforts that you talked about, I think the 25 to 30 for the year. Are they focused sort of balanced between OpEx and above the line? Or how should we sort of maybe dial that into our models? Yeah. Brian, it's Mark. No, I think, you know, I would say it's probably 60/40. I mean, there's definitely more down in the OpEx, because I think there's, you know, there's a little bit more discretionary in that level related to travel and other kind of third-party services and things like that. I mean, we are looking at all areas of gross margin as well, you know, driving efficiencies there. You know, we've had some benefit from freight reductions and things like that, so that will flow through margin. margin. Got it. That's helpful. Then, I guess, tied to the gross margin guide for Q1, obviously there's some volume impact there, but how much does mix come into play there? It sounds like, you know, the panel, lithography business should still be incrementally strong this year. How much is maybe mix related to in that gross margin guide? Yeah. Certainly there's some amount of mix in there, but, I think the bulk of it is being able to make the adjustments relative to the change in volumes, the adjustments to manufacturing costs and capacity relative to the change in volumes. You know, so that's the bulk of it. There is some impact of a relatively strong lithography quarter, so it's nearly 50% greater than the prior quarter. We do expect margins to start to move back into our level even as early as Q2, and moving into the second half of the year as well. A reminder, we did say we're gonna have incremental improvements throughout the year on the lithography tool margins and end 2023 with those margins at target. Okay, great. All right. thanks. Appreciate that. We will go next to Craig Ellis with B. Riley Securities. Yeah, thanks for taking the question, and congratulations on all the financial records in calendar 2022, guys. Nice to see. I wanted to start just by digging a little bit deeper into the cost savings. Nice to see that you're protecting margins. The question is for the savings that look like about $16 million in OpEx and $11 million in COGS, how much of that is included in the guidance that you've given for the Q1? Then with some incremental benefit through the year, how should we think about the linearity of what's left beyond what you realize in 1Q? Yeah. Craig, it's Mark. Yeah, no, certainly, a portion of that, those savings are in our guide for Q1. We've certainly tried to start executing even at the end of Q4 to have those reductions be impactful to our Q1 guide and our results. There's certainly a lot of work we still need to do and we plan to do, as Mike just made note that the improvement around margin, you know, that'll occur in Q2 and beyond. We will see obviously, historically Q2 does, you know, pop up from an operating expense standpoint with the annualization of our merit and other stock-based comp items. Again, we're doing our best, and we've got plans in place, and we've done a, you know, we started to execute to offset those as much as we can. I think you'll see. You know, I would say it's probably proportional throughout the year. You know, we're gonna continue to look for areas to drive the efficiencies up. Okay, proportional through the year, but with COGS really starting in two Q rather than one Q. Is that right? Yeah. I would say there are some elements in Q1. I think you'll see the majority of that, you're right, probably in Q2 and beyond. Okay. Got it. 'Cause I think. Yep. Go ahead. No, it's just the pivot from Q4 into Q1 and just looking through the kind of the overall absorption and volume issues. Got it. Mike, just, very helpful to get your view on industry generally and where the company will shake out. It looks like the excess growth to industry, is pretty similar to what you saw three months ago. If we take litho out of WFE, we're at about -28, your midpoint's -20, so that's about the 750 basis points you were looking for before. Is that the right read? And related to that, it looks like at least versus my tracking, panel litho's up a little bit versus what we were expecting before. I was looking for 60 this year. I think you talked about 80. Just help me frame the macro and then come back to the micro point on panel litho. Definitely since our last call in November, we've seen, let's say, more of a pullback, a more broad pullback, from, you know, as I mentioned in my prepared remarks, from the advanced nodes, even logic a little bit. DRAMs and memory, NAND and DRAM, very significant pullbacks. Yeah. even in. Thanks. In the packaging area. Yeah. As far as the, you know, what we're seeing, when we originally talked, we talked about a 20% down market. Now we're looking at maybe a 30% down ex front-end litho. That looks to be where the market's leveling out. Based on the several areas of booked out performance, and litho being one of the areas, as you pointed out, we've had those bookings of the full $80 million in place with. The Novis Edge is also booked with that upside. We already have several orders for compound semiconductor manufacturers that bought complete suites of tools, which is quite exciting. The value proposition of our broad portfolio and the connected solutions we have with the software is really resonating in the compound semi market. We see bookings there going up primarily from power customers. That's part of why we believe we're gonna, you know, why we're confident in our thesis for outperformance in 2023. Yeah. Just on that last point, Mike, I think, if I think back over the last 18 months, we first started seeing customers buying full suites of tools, and I think I remember seeing that in DRAM and NAND. Now you're seeing it as well in compound semi. So it seems like the solutions that you're offering are really resonating and, you know, any thoughts on what the demand profile looks like more intermediate term beyond just 2023? How do you look at the growth potential for compound semi on a multi-year basis? We think on a multi-year basis, we think our position in compound semi is just in the early stages of building out. We've always had a very strong software focus there, and we have a good software position. As far as the inspection and metrology, that hasn't been as big a focus as we looked at other areas. Now what we're finding out is there's a number of high-value problems that, for instance, our submicron resolution for the inspection, many of those 15 customers were tied to several of those 15 customers were tied to power applications. Then the metrology, where it wasn't really promoted to those customers, we're finding some real opportunities. As far as the size, which you asked for, we haven't really looked at 2024. It obviously depend on the continued growth there. The numbers we see is double digit continued growth, annual growth rates, at least for the next few years. With that, we expect to grow better than that, better than Well, I mean, if it's, if it's 10%, maybe we're gonna grow another, you know, 50% better to 15% or 20% based on the fact that we're introducing new products into a broader portfolio or suite that seems to resonate with the customers. it's solving Got it. Real problems for them. Go ahead. Yeah, there's, I think, Sorry, I just mentioned it's also solving. Yeah. Yeah. Yeah. Yeah. Go ahead, Craig. We've been picking up data points that the yields are certainly tough in certain areas of compound semi, so your solutions would be quite appropriate. Lastly, I think you mentioned that there were three specific initiatives, thin films, Novus Edge, and panel that could add an incremental $70 million of revenues. Looks like panel would be about half of that. Did the other two shake out about 50% each, or how do we think about the relative contribution of the three? Thin films is additional upside. That could be potential upside. We mentioned a lot of that, but a lot of that is tied to some of the front end, right? We didn't mention that. What we said was Novus Edge and then compound semi power devices, and that includes a suite of products, but it's the power market that we see driving fairly good growth. As far as the shakeout, I'd say it's 50/50 of the other $30 million, right? 50%, so $15 million each, roughly. Got it. Thanks very much, guys. Good luck. You're welcome. We will go next to Quinn Bolton with Needham & Company. Hey, guys. Just wanted to maybe follow up on the compound and power market. I think last quarter you said it was the second-largest segment. I apologize if I missed what you said it was this quarter, but wondering if you could just sort of give us a size. How big is that business for you now on an annualized basis? You know, Quinn, we don't break it out. It's definitely becoming a more significant part of the business. It remains one of the largest segments in the Q4. It grew a lot. We also had a lot of foundry logic spend, as we mentioned. You know, DRAM tanked. Foundry logic stayed okay. It's still relatively second in the categories, which is a high. Like I mentioned, it grew 54% quarter to quarter. Does it continue that way? No, I don't think so. It's a lot of small numbers right now. Does it continue double digits? You know, I think that's reasonable. Got it. Got it. Okay. Then just thinking about the year, you know, you got it to $200 million at the midpoint for the March quarter. You know, if I just look at you're down 20%, you know, outlook for 2023, you know, from the billion-dollar base, you know, kind of feels like you're gonna run rate at about $200 million for each of the 4 quarters. So I just wanted to make sure that I'm thinking about the linearity. It sounded like in response to an earlier question, like you thought maybe there was a little bit of chance for growth in Q2. You know, I think previously you were looking for a slightly stronger second half. Just trying to get the shape of the year right, in terms of your current expectations. Yeah, Quinn, I think that's about right. Obviously, you know, things changed a lot from last November when we first guided, so we're just trying to reflect what we believe is a, you know, I guess a bottom-end scenario. Hopefully we can start, you know, as we start getting better visibility and seeing more of the other activity, packaging, for instance, we'll see what the smartphone refresh cycle looks like, et cetera. 5G transition, you know, when we move past this inflationary period and re-recessionary mindset, we'll see what that does to, you know, to inventories and then further expansions. Right now, that would sort of be our bottom case. Got it. Okay. I guess, for Mark, you know, it sounds like with the cost reduction actions, you can get back towards a 54% gross margin in Q2, and if not Q2, certainly by second half of the year. That's on, you know, kind of flattish revenues. I look into 2024, 2025, you know, to the extent revenue gets back to the $250 million or higher quarterly level, it feels like there'd be some pretty good absorption benefits to gross margins. I guess I wanted to ask you know, getting to 55% or 56%, you know, feels like you could get there pretty easily just on an absorption basis. I wonder, you know, are there some cost, you know, offsets that maybe come back as revenue starts to grow that would pressure margins or do you think that, you know, getting to 55%, 56%, maybe even higher as revenue recovers is now possible with some of these cost reduction actions you've taken? Yeah. No, Quinn, you're absolutely right. I mean, our goal is obviously to go through and have these reductions be effective this year, help drive the profitability and stay where we, you know, stay in that range of that, you know, higher margin and maintain the OpEx. Certainly for 2024 and beyond, I mean, our goal is to get quickly back on track to the long-term operating model and reap the benefits of the, I guess, the operational efficiencies that we're trying to drive in 2023. Yeah, Quinn, it's, you know, it's kind of funny to say, but, you know, never let a good downturn go to waste. What we mentioned is we're gonna still invest in supply chain initiatives and some of the... Remember the second-level synergies we talked about after the merger that we never got to because we were just growing so fast? Now we have a chance to get to those, and we've got some pretty aggressive plans to try and complete some of them this year, so they'll be impactful in 2024. There's, there's quite a bit of, of strength that we hope to bring into our foundation for 2024. Great. My, my last question was just really just a clarification on the, on the lithography margins. Mike, I think you said that you now expect to get to kind of target levels by the end of 2023. I thought previously you thought some of those margin improvements might not happen until 2024 because of the time to increase manufacturing and, you know, just time to reduce component costs. I'm wondering, have you been able to pull in some of that margin benefit or perhaps improve pricing that's leading to better margins, or did I misinterpret your comments around lithography margins? Yeah, I think it's a little bit of both. We've been very aggressively pursuing the margin situation, both from a cost side as well as a little bit on the pricing side. We're also seeing some of our advances, some of the new advanced technology we're beginning to release, we're seeing the ability to charge for the value of that. You know, two years ago when we booked a lot of these orders, we were still selling, you know, PowerPoint presentations and demo lab equipment, so they didn't really get to see. Now we're proven, we're understood, the capability is clear, and we're able to charge more of the value for the new capabilities we're bringing in, whether it's overlay upgrades or illumination and throughput upgrades and things like this. Got it. Okay. Thank you. We'll go next to Hans Chung with D.A. Davidson. Hi, Craig. Good afternoon. Thank you for taking my question. First, I want to follow up on the industry commentary. I was wondering what's your thought on the memory downturn, like, given your conversation with the customer, when do you think the memory spending could resume? I would say at the earliest it's the tail end of 2023 and, you know, possibly into 2024. The caveat to that is that would be production, but there could be some spending in R&D. More spending in some of the high stack 3D NAND lines, which are still in the infancy. We could see that where the customers want to, when they go to market, be more aggressive with their newer products going to market and hopefully make up some of the ASP erosion and a similar story in DRAM. That'll be the inflection or that'll be the decision points that our customers are thinking through. Right now, they're really focused on watching the inventory levels, watching ASPs, and working this through the supply chains. Got it. Okay. Given just in your prepared remarks, the Atlas V that's being selected by all three the manufacturer for the Gate-All-Around transistor. Does that imply you have 100% market share? Just wondering, is there any competition on that? There is competition. We don't have a 100% share, we're, you know, depending on which customer we talk about, our share position is different, each one. In general, we're fighting to achieve over 50% share, and we have that at the majority. If I take the average, it would be well over 50% market share. If I take, you know, the average of all three of them. Again, these decisions aren't fully made, so we continue to fight and try and bring more layers onto our systems. We're also looking at, you know, the Gate-All-Around transistor is the hardest thing to measure, but we're also looking at moving outwards, outside of that into the back-end align metallization layers that are further downstream. They're a little easier. Again, with our platform, the capability of our platform to be optimized for price performance, we're better suited for those applications as well. I see. Is that share similar or higher compared to the previous nodes? It's definitely higher. In my remarks, I mentioned that, you know, based on this, we would expect at least a 20% improvement in revenue based on the dynamics of higher capital intensity and higher share. Got it. Versus prior nodes. Yep. Got it. Okay. Also I was wondering, like, you mentioned like mini LED, it's kind of smaller right now, but, since like it could have some potential here. Just wondering how would you characterize the size of the opportunity from mini LED? I chuckle because I've got several display customers, and they have different opinions on the Mini LEDs, so I want to be a little bit careful. I think there are certain applications where the Mini LEDs are being looked at, and certainly very aggressively by one of the large smartphone manufacturers. Whether or not that proliferates and becomes the, you know, the new display type replacing AMOLED displays, I'm not sure yet. There's certainly different opinions from the experts in the display manufacturing. Okay. Got it. Lastly, just, I wonder if you have any update on the capital allocation strategy, especially given like you have a very healthy balance sheet, and would you consider more share buyback, or would you kind of prioritize for the M&A and so on? Yeah, no, definitely, as we look at the capital allocation, I mean, if the opportunity presents itself based on our, you know, set criteria for buybacks, we will execute that in the quarter, and continue to do that within the approved limits. We're also, of course, looking for M&A opportunities and being, you know, as aggressive as we can there. It's a great time right now. We'll continue to search that as well. Okay. Thank you. Thank you, Hans. We'll go next to David Duley with Steelhead Securities. Thanks for taking my question. One of the things I think in your press release, you were talking about, how your Dragonfly system was qualified, I think, to do some hybrid bonding applications. Could you just talk a little bit about what's going on in that particular product line and area? It turns out one of the critical issues with hybrid bonding is the surface roughness of these, of these pads. When you're pushing them together, any kind of deformity, particle, or issue with the roughness, you have a bad adhesion, and of course, it just takes one of the thousands or millions of interconnects per die, depending on what we're talking about here, to then now destroy two packages that you've just tried to connect. The ability for the Dragonfly G3 to not only have the sensitivity to detect the defects, but also leveraging the ADC to eliminate all the nuisance defects so the customers can really focus on the true yield-killing defect, that's a big advantage. In addition, you may recall the Clearfind has always been a source of a reliability, like improved reliability, where resist residue, which can't be seen through normal optical techniques, can also be on these pads, and you can have a good bond, you can have an electrical test okay, but because of the resist residue, that bond through heating and cooling and, you know, from cars and, you know, taking your phone out, walking around, in the weather, you have a break. You know, it ends up being a electrical failure. That is another big advantage for the Dragonfly G3. Now, is this die-to-die attachment or die to substrate is when you talk to pads? That's die to substrate or? We're seeing applications for both. We're involved in both die-to-die and die to substrate. Okay. regarding your compound semiconductor business, is the recent increase in growth rate, you talked about power. I was just wondering, is there a significant contribution from silicon carbide at this point, or is that a focus? Or, can you help us understand what your exposure is there? Yeah, we definitely have seen more interest in growing interest from silicon carbide. It's still small part of the, you know, the overall power, but it's certainly a fast-growing area and an area that people are investing a lot in, and they have a lot of yield issues. We're engaged there. I'd say, you know, from the growth we saw in the last quarter, it was, I'd say, less than half, maybe a third, maybe a little less than a third silicon carbide and the rest GaN and some other compound semi applications. Okay. Final question from me is, you know, you talked about additional qualifications, I think, for the Iris, but it wasn't on the list of products that are gonna grow on a year-over-year basis. I'm imagining that's because of the memory sector. Maybe just give us a little bit more color. I think that product was, you know, a quarter ago, was expected to grow year-over-year, and now you've excluded it on that list. Is that the area where you're seeing the most reductions in, you know, to kind of adjust for your new guidance for next year? Actually, the Iris is gonna grow, but not as significantly as some of the other products. You know, it's relatively mild growth is in the face of several of those customers, you know, reducing expense fairly significantly. You mentioned the memory. Memory is expected to be down 50% for wafer capital equipment. Logic will also be down maybe in the 10%-15% range. Yet our Iris platform, based on the initial penetration and the new customers that continue to adopt it, and including some power customers that are adopting it, the Iris platform will grow, but it'll be incremental. It won't be huge. The beautiful part is we're planting all these seeds across the, across the major customers. When expansions do occur next year, hopefully, maybe easier earlier late this year, we should see fairly significant growth in Iris. Okay, great. Thank you. Yep. As a reminder, it is star one for questions if you have a question at this time. We'll go next to Mark Miller with Benchmark. Let me add my congratulations on a very good year in 2022. I was wondering if you could estimate, in terms of the projected sales decline, what% of that is coming from the related to the U.S. restrictions? Oh, it was about 8%-10%. 8%-10%? Okay. A big client. Yeah. And that was mostly booked. You know, that was a big hit. Okay. there, you know, there's been a lot of funding by the U.S., Europe and Japan, as well as several new fabs have been announced and are currently coming up. You're not optimistic. Are you optimistic when these opportunities will start to show up in orders for you? Will it be more 2024? We're seeing orders now, so, you know, from, although that's not CHIPS Act money, but some of the, you know, like the TSMC fab going into Arizona, we're seeing orders now. Those incremental orders are happening. You know, the Samsung Taylor fab, the Ohio fab from Intel, et cetera, I don't think we see any real significant volume of orders until 2024. Thank you. At this time, I would like to turn the call back to Michael Sheaffer for any additional or closing comments. Thank you. We'd like to thank everybody for joining us today. A replay of the call will be available on our website about 7:30 P.M. Eastern Time this evening. I would like to thank you for your continued interest in Onto Innovation. Jenny, please conclude the call. Thank you. Again, this concludes today's call. Thank you for your participation. You may now disconnect.