Matthew Prisco

Matthew Prisco inquired about the drivers behind Microchip's above-seasonal March quarter guidance and continued strength, asking if it's due to better end demand, potential restocking, or idiosyncratic opportunities as the sell-in versus sell-through gap fades. He also asked for an update on inventory reserve and underutilization charges rolling off, and other levers for gross margin improvement.

Answer

Eric Bjornholt (CFO) explained that strength is due to distribution inventory largely corrected, strong backlog, and growing orders. He noted inventory reserves are expected to normalize this quarter, while underutilization charges will continue for a couple of years. Steve Sanghi (Executive Chair) and Eric Bjornholt (CFO) added that improved product mix from high-margin growth vectors like data center, Ethernet, and connectivity will also drive gross margin.

Matthew Prisco with Cantor Fitzgerald inquired about the drivers behind Microchip's above-seasonal March quarter guidance and future growth, specifically asking if it's due to improved end demand, potential restocking, or idiosyncratic opportunities as the distribution sell-in versus sell-through gap narrows. He also asked for an update on the expected normalization of inventory reserve and underutilization charges and other levers for gross margin improvement during the broad-based recovery.

Answer

CFO Eric Bjornholt explained that confidence stems from strong backlog, high bookings, and anticipated growth in seasonally strong June and September quarters, despite lead times still being short. He noted that distribution inventory is largely corrected, but some direct customers are still reducing inventory. Regarding gross margins, Eric Bjornholt expects inventory reserves to normalize this quarter, while underutilization charges (over $50 million last quarter) will decrease modestly but remain significant, taking a couple of years to fully resolve. He also highlighted high-margin growth vectors like data center, Ethernet, and connectivity businesses as drivers for product mix improvement towards the 65% long-term target.

Matthew Prisco asked about the significant gross margin performance, which is ahead of schedule, inquiring about the primary drivers behind this rapid improvement over the past 90 days and the expected magnitude of continued expansion before the Farmers Branch facility ramps up. He also asked about FormFactor's DRAM revenue growth potential through the year, considering the HBM4 transition, accelerating supplier build plans, robust pricing, and strong tester market growth.

Answer

Senior VP, FormFactor, Inc. Aric McKinnis attributed the faster-than-expected gross margin improvement to workforce reduction, enhanced manufacturing yields, and reduced cycle times, noting that future progress might be at a more moderate pace. CEO Mike Slessor confirmed that industry tailwinds, including HBM4 and robust demand, are driving aggressive investment in existing capacity and the Farmers Branch ramp, expecting continued DRAM growth.

Matthew Prisco inquired about the significant improvement in gross margins, specifically the drivers behind the faster-than-expected progress towards the mid-40% level, and how these factors will contribute to continued expansion before the Farmers Branch ramp. He also asked about FormFactor's DRAM revenue growth outlook for the year, considering the HBM4 transition, accelerating supplier build plans, robust pricing, and strong tester market growth, and how these industry dynamics link to FormFactor's growth potential.

Answer

Senior VP Aric McKinnis attributed the strong gross margin performance to workforce reduction and reallocation, improved manufacturing yields, and reduced cycle times, noting that while future progress might be slower, the company remains on track for target model gross margins in 2026. CEO Mike Slessor confirmed that HBM4 transition and related industry dynamics are powerful tailwinds, driving aggressive investment in existing capacity and the Farmers Branch ramp, and expressed expectations for continued robust DRAM growth, particularly in memory, where FormFactor aims to expand competitive advantage and capacity.

Matthew Prisco inquired about the demand dynamics within NXP's core automotive business versus its accelerated growth drivers and any impact from component price increases on unit demand.

Answer

Rafael Sotomayor, President and CEO, highlighted that NXP's automotive business returned to year-on-year growth in Q4 2025, with the Q1 2026 guide also showing year-on-year growth. He confirmed that content gains remain unchanged and that most VPAs (volume purchase agreements) are complete, with pricing reflected in the Q1 guide. NXP is modeling low single-digit price declines across the business.

Matthew Prisco inquired about NXP's internal customer ordering trends over the past few months, including linearity through the quarter and into Q1. He also asked for details on demand dynamics within the core auto business versus accelerated growth drivers, and any impact from component price increases.

Answer

Bill Betz, CFO, indicated that all internal signals, including backlog, distribution backlog, customer escalations, and short-term orders, have improved significantly. Jeff Palmer, VP of Investor Relations, added that trends in the second half of 2025 accelerated, nearing NXP's Analyst Day growth rates. Rafael Sotomayor, President and CEO, noted that the auto business returned to year-on-year growth in Q4, with content gains unchanged. He confirmed that most VPAs (volume purchase agreements) are complete, and NXP is modeling low single-digit price declines across the business.

Matthew Prisco from Cantor Fitzgerald sought clarification on the next-gen Dragonfly's evaluation tool shipment timeline, the potential for market share gains in 2026, and the primary growth drivers and headwinds for the upcoming year.

Answer

CEO Michael Plisinski affirmed that evaluation tools for the next-gen Dragonfly are on track to ship this year, with a potentially faster production ramp due to customer familiarity. For 2026, he identified the next-gen Dragonfly as a strong growth driver across multiple applications. Plisinski also highlighted significant progress in the films market with the Iris and new Iris G2 platforms as key contributors to future growth.

Matthew Prisco inquired about the performance of the new 2.5D inspection tool against competitors, its expected ramp timeline, and customer feedback on the 3DI and Iris systems.

Answer

CEO Michael Plisinski detailed that the new 2.5D tool is a completely new platform designed to be a market leader, with evaluation units shipping in the second half of the year and a quick ramp expected. Regarding the Iris systems, he noted positive customer engagement and performance, while also mentioning that the R&D team is working through normal new product challenges like long-term stability.

Matthew Prisco asked for more detail on the pickup in HBM demand and inquired about Onto Innovation's growth potential in 2025, particularly for advanced nodes, given the strong performance in 2024.

Answer

CEO Michael Plisinski explained that HBM orders are increasing as end-market allocations from major customers become clearer, with 2025 capacity additions expected to meet a doubling of market demand. He noted that attach rates for their tools are stable or increasing. Regarding advanced nodes, Plisinski stated that while revenue won't reach prior peak levels, it is getting 'within shooting range.'

Matthew Prisco asked for an update on the competitive landscape and market share dynamics in dimensional metrology, covering both integrated and standalone OCD. He also inquired about the revenue contribution outlook for the Ellipson and Metrion systems in 2025 and their growth potential into 2026.

Answer

President & CEO Gabriel Waisman stated that the competitive landscape is largely unchanged, with Nova maintaining leadership in integrated metrology and gaining market share in standalone OCD due to its unique technology. For Ellipson and Metrion, he confirmed they are on track with the business plan, seeing adoption by advanced node manufacturers, and expects growth as they become process tools of record.

Matthew Prisco requested details on the drivers of the strong Q1 sequential growth and its sustainability, and also asked for guidance on how to model the revenue ramp from material metrology design wins like Metrion.

Answer

President and CEO Gabriel Waisman attributed the growth to strong end markets like AI and HPC, Nova's position in advanced logic and packaging, and the Sentronics acquisition. Regarding Metrion, he explained that adoption begins with R&D and one tool per fab, with proliferation into high-volume manufacturing expected over time, similar to the historical adoption of XPS technology.

Matthew Prisco asked for details on the market traction for the new Eagle G5 and Hawk products, including key applications and drivers for their strong reception. He also requested early insights into Camtek's overall growth prospects for 2026.

Answer

COO Ramy Langer explained that the Hawk's appeal lies in its high throughput and advanced capabilities for future needs like microbumps and hybrid bonding, while the Eagle G5 offers a best-in-class, high-speed solution at its price point. For 2026, Mr. Langer expressed optimism, citing rapid growth in HPC and technological shifts like HBM4, suggesting it would be another growth year for Camtek assuming a positive market environment.

Matthew Prisco asked for insights into growth expectations for the second half of the year, given the healthy Q3 backlog, and requested an update on the new product ramp, questioning what drove the upgraded forecast for 'significant' revenue in 2025.

Answer

Executive Ramy Langer confirmed a solid business outlook for Q3 based on the current backlog and pipeline but stated it was too early to provide specific guidance beyond Q2. Regarding new products, Langer reported excellent performance feedback and increased orders for both the Eagle G5 and Hawk, confirming they will generate 'significant revenues' this year as they open up new applications and take more business than previously expected.

Matthew Prisco asked about the market traction for the new Eagle G5 and Hawk products, including orders and customer reception, and how they expand Camtek's addressable market. He also inquired about the impact of the industry's shift to HBM on process control intensity.

Answer

Ramy Langer, an executive, detailed that the Eagle G5 enhances competitiveness while the Hawk opens new markets for high-end applications, potentially increasing the TAM by at least $200 million. He confirmed strong orders for both. Rafi Amit, an executive, added the Hawk also offers superior throughput. Regarding HBM, Ramy Langer stated the transition positively increases process control intensity, and Rafi Amit clarified that most customers use Camtek systems for 100% inspection and metrology.

Matthew Prisco of Cantor Fitzgerald asked about current trends in the semiconductor photonics business and the ramp timing for previously announced major wins. He also inquired about the company's willingness to continue paying down debt versus buying back stock amid the uncertain economic backdrop.

Answer

CEO John Lee stated that design wins in semiconductor photonics remain highly engaged, with complex integrated subsystems going into production on the most advanced lithography and metrology tools. CFO Ram Mayampurath confirmed that debt repayment remains the primary capital allocation priority after internal investment. He noted the modest Q1 share repurchase was an accretive opportunity to offset dilution but does not reflect a shift in the company's focus on deleveraging.

Matthew Prisco asked for more detail on the semiconductor business, including customer utilization rates and ordering patterns, to inform the 2025 outlook. He also inquired about progress on MKS's photonics initiatives and how pushouts from a major lithography customer might affect the ramp of a recent design win.

Answer

President and CEO John Lee responded that utilization rates for HBM DRAM and logic/foundry are picking up, while NAND remains muted. He noted that 2025 is still expected to be an up year for WFE. Regarding photonics, Lee highlighted a new design win with a second customer and explained that long lead times for these subsystems mean short-term customer pushouts have minimal impact, reaffirming his long-term confidence in the growth strategy.