Onto Innovation Reports 2024 Third Quarter Results

Solid execution drives revenue, gross margin and EPS in the upper half of guidance

Onto Innovation Inc. (NYSE: ONTO) (“Onto Innovation,” “Onto,” or the “Company”) today announced financial results for the third fiscal quarter of 2024.

Third Quarter Financial Highlights

• Revenue of $252 million led by a recovery in advanced nodes and continued strength in advanced packaging supporting strong AI demand.
• GAAP gross margin 54% and non-GAAP gross margin of 55%.
• GAAP operating income of $53 million and non-GAAP operating income of $70 million.
• GAAP net income of $53 million and non-GAAP net income of $66 million.
• GAAP diluted earnings per share of $1.07 and non-GAAP diluted earnings per share of $1.34 were near the high end of guidance range.
• Record cash from operations of $67 million, or 27% of revenue.

Third Quarter Business Highlights

• Record quarterly inspection revenue led by the Dragonfly® platform.
• Record quarterly revenue from power semiconductor customers.
• Revenue from advanced nodes customers grew more than 30% sequentially.
• Officially opened Packaging Applications Center of Excellence (PACE) to customers and collaborating partners for development of solutions to support 2.5D and 3D packaging architectures.

Michael Plisinski, chief executive officer of Onto Innovation, commented, “The Onto Innovation team executed well in the third quarter setting quarterly records for inspection revenue as well as revenue from power semiconductor customers. We see demand for innovative process control solutions increasing in several end markets to support required yield targets. We are working hard to meet these demands through close customer collaborations and by leveraging our broader set of technologies and industry partnerships. The opening of the PACE lab is a great example of creating an environment where customers and partners can come together to solve challenges to the benefit of the industry.”

Onto Innovation Inc.

Key Quarterly Financial Data

(In thousands, except per share amounts)

U.S. GAAP

 

 

 

September 28, 2024

 

 

June 29, 2024

 

 

September 30, 2023

 

Revenue

 

$

252,210

 

 

$

242,327

 

 

$

207,185

 

Gross profit margin

 

 

54

%

 

 

53

%

 

 

52

%

Operating income

 

$

53,072

 

 

$

48,833

 

 

$

34,006

 

Net income

 

$

53,051

 

 

$

52,949

 

 

$

35,886

 

Net income per diluted share

 

$

1.07

 

 

$

1.07

 

 

$

0.73

 

NON-GAAP

 

 

 

September 28, 2024

 

 

June 29, 2024

 

 

September 30, 2023

 

Revenue

 

$

252,210

 

 

$

242,327

 

 

$

207,185

 

Gross profit margin

 

 

55

%

 

 

53

%

 

 

52

%

Operating income

 

$

69,999

 

 

$

64,530

 

 

$

49,592

 

Net income

 

$

66,386

 

 

$

65,354

 

 

$

47,613

 

Net income per diluted share

 

$

1.34

 

 

$

1.32

 

 

$

0.96

 

Outlook

For the fourth fiscal quarter ending December 28, 2024, the Company is providing the following guidance:

• Revenue is expected to be in the range of $253 to $267 million.
• GAAP diluted earnings per share is expected to be in the range of $1.04 to $1.19.
• Non-GAAP diluted earnings per share is expected to be in the range of $1.33 to $1.48.

Webcast & Conference Call Details

Onto Innovation will host a conference call at 4:30 p.m. Eastern Time today, October 31, 2024, to discuss its third quarter 2024 financial results and other matters in greater detail. To participate in the call, please dial [phone] or International: [phone] and reference conference ID 9129765 at least five (5) minutes prior to the scheduled start time. A live webcast will also be available at www.ontoinnovation.com.

To listen to the live webcast, please go to the website at least fifteen (15) minutes early to register, download and install any necessary audio software. There will be a replay of the conference call available for one year on the Company’s website at www.ontoinnovation.com.

Discussion of Non-GAAP Financial Measures

The Company has provided in this release non-GAAP financial measures, including non-GAAP gross margin as a percentage of revenue, non-GAAP operating income, non-GAAP operating expenses, non-GAAP net income, non-GAAP diluted earnings per share and non-GAAP operating margin as a percentage of revenue, which exclude amortization of intangibles, merger and acquisition-related expenses and benefits, litigation expenses and benefits and restructuring costs. Non-GAAP gross margin as a percentage of revenue, non-GAAP operating income, non-GAAP operating expenses, non-GAAP net income, non-GAAP diluted earnings per share and non-GAAP operating margin as a percentage of revenue can also exclude certain other gains and losses that are either isolated or cannot be expected to occur again with any predictability or otherwise are not representative of our ongoing operations, tax provisions/benefits related to the previous items, and significant discrete tax events. We exclude the above items because they are outside of our normal operations and/or, in certain cases, are difficult to forecast accurately for future periods.

We utilize several different financial measures, both GAAP and non-GAAP, in analyzing and assessing the overall performance of our business, in making operating decisions, forecasting and planning for future periods, and determining payments under compensation programs. We consider the use of the non-GAAP measures to be helpful in assessing the performance of the ongoing operations of our business. We believe that disclosing non-GAAP financial measures provides useful supplemental data that, while not a substitute for financial measures prepared in accordance with GAAP, allows for greater transparency in the review of our financial and operational performance. We also believe that disclosing non-GAAP financial measures provides useful information to investors and others in understanding and evaluating our operating results and future prospects in the same manner as management and in comparing financial results across accounting periods and to those of peer companies. More specifically, management adjusts for the excluded items for the following reasons:

Amortization of intangibles: we do not acquire businesses and assets on a predictable cycle. The amount of purchase price allocated to the purchased intangible assets and the term of amortization can vary significantly and are unique to each acquisition or purchase. We believe that excluding amortization of purchased intangible assets allows the users of our financial statements to better review and understand the historic and current results of our operations, and also facilitates comparisons to peer companies.

Merger or acquisition related expenses and benefits: we incur expenses or benefits with respect to certain items associated with our mergers and acquisitions, such as transaction and integration costs, change in control payments, adjustments to the fair value of assets, etc. We exclude such expenses or benefits as they are related to acquisitions and have no direct correlation to the operation of our on-going business.

Restructuring expenses: we incur restructuring and impairment charges on individual or groups of employed assets, which arise from unforeseen circumstances and/or often occur outside of the ordinary course of our on-going business. Although these events are reflected in our GAAP financials, these transactions may limit the comparability of our on-going operations with prior and future periods.

Litigation expenses and benefits: we may incur charges or benefits as well as legal costs in connection with litigation and other contingencies unrelated to our core operations. We exclude these charges or benefits, when significant, as well as legal costs associated with significant legal matters, because we do not believe they are reflective of on-going business and operating results.

Income tax expense: we estimate the tax effect of the items identified to determine a non-GAAP annual effective tax rate applied to the pretax amount to calculate the non-GAAP provision for income taxes. We also adjust for items for which the nature and/or tax jurisdiction requires the application of a specific tax rate or treatment.

From time to time in the future, there may be other items excluded if we believe that doing so is consistent with the goal of providing useful information to investors and management.

There are limitations in using non-GAAP financial measures because the non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles and may be different from non-GAAP financial measures used by other companies. The non-GAAP financial measures are limited in value because they exclude certain items that may have a material impact on our reported financial results. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with GAAP in the United States. Investors should review the reconciliation of the non-GAAP financial measures to their most directly comparable GAAP financial measures as provided in the tables accompanying this press release.

Forward Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”) which include, but are not limited to, statements regarding Onto Innovation’s business momentum and future growth; technology development, product introduction and acceptance of Onto Innovation’s products and services; Onto Innovation’s manufacturing practices and ability to deliver both products and services consistent with its customers’ demands and expectations and strengthen its market position; Onto Innovation’s expectations regarding the semiconductor market outlook; Onto Innovation’s future quarterly financial outlook; as well as other matters that are not purely historical data. Onto Innovation wishes to take advantage of the “safe harbor” provided for by the Act and cautions that actual results may differ materially from those projected as a result of various factors, including risks and uncertainties, many of which are beyond Onto Innovation’s control. Such factors include, but are not limited to, the Company’s ability to leverage its resources to improve its position in its core markets; its ability to weather difficult economic environments; its ability to open new market opportunities and target high-margin markets; the strength/weakness of the back-end and/or front-end semiconductor market segments; fluctuations in customer capital spending; the Company’s ability to effectively manage its supply chain and adequately source components from suppliers to meet customer demand; the effects of political, economic, legal, and regulatory changes or conflicts on the Company's global operations; its ability to adequately protect its intellectual property rights and maintain data security; the effects of natural disasters or public health emergencies on the global economy and on the Company’s customers, suppliers, employees, and business; its ability to effectively maneuver global trade issues and changes in trade and export regulations and license policies; the Company’s ability to maintain relationships with its customers and manage appropriate levels of inventory to meet customer demands; and the Company’s ability to successfully integrate acquired businesses and technologies. Additional information and considerations regarding the risks faced by Onto Innovation are available in Onto Innovation’s Form 10-K report for the year ended December 30, 2023, and other filings with the Securities and Exchange Commission. As the forward-looking statements are based on Onto Innovation’s current expectations, the Company cannot guarantee any related future results, levels of activity, performance, or achievements. Onto Innovation does not assume any obligation to update the forward-looking information contained in this press release, except as required by law.

About Onto Innovation

Onto Innovation is a leader in process control, combining global scale with an expanded portfolio of leading-edge technologies that include: Un-patterned wafer quality; 3D metrology spanning chip features from nanometer scale transistors to large die interconnects; macro defect inspection of wafers and packages; metal interconnect composition; factory analytics; and lithography for advanced semiconductor packaging. Our breadth of offerings across the entire semiconductor value chain combined with our connected thinking approach results in a unique perspective to help solve our customers’ most difficult yield, device performance, quality, and reliability issues. Onto Innovation strives to optimize customers’ critical path of progress by making them smarter, faster and more efficient. With headquarters and manufacturing in the U.S., Onto Innovation supports customers with a worldwide sales and service organization. Additional information can be found at www.ontoinnovation.com.

Source: Onto Innovation Inc. ONTO-I

(Financial tables follow)

ONTO INNOVATION INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands) - (Unaudited)

 

 

September 28, 2024

 

 

December 30, 2023

 

ASSETS

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash, cash equivalents and marketable securities

 

$

855,404

 

 

$

697,811

 

Accounts receivable, net

 

 

253,716

 

 

 

226,556

 

Inventories

 

 

308,304

 

 

 

327,773

 

Prepaid expenses and other current assets

 

 

40,524

 

 

 

31,127

 

Total current assets

 

 

1,457,948

 

 

 

1,283,267

 

Net property, plant and equipment

 

 

120,090

 

 

 

103,611

 

Goodwill and intangibles, net

 

 

443,897

 

 

 

483,186

 

Other assets

 

 

51,430

 

 

 

39,648

 

Total assets

 

$

2,073,365

 

 

$

1,909,712

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

91,576

 

 

$

91,931

 

Other current liabilities

 

 

53,160

 

 

 

55,795

 

Total current liabilities

 

 

144,736

 

 

 

147,726

 

Other non-current liabilities

 

 

25,104

 

 

 

25,451

 

Total liabilities

 

 

169,840

 

 

 

173,177

 

Stockholders’ equity

 

 

1,903,525

 

 

 

1,736,535

 

Total liabilities and stockholders’ equity

 

$

2,073,365

 

 

$

1,909,712

 

ONTO INNOVATION INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts) - (Unaudited)

 

Three Months Ended

 

Nine Months Ended

 

 

September 28, 2024

 

September 30, 2023

 

September 28, 2024

September 30, 2023

 

Revenue

$

252,210

 

$

207,185

 

$

723,382

$

597,012

 

Cost of revenue

 

115,831

 

 

100,333

 

 

340,482

 

284,724

 

Gross profit

 

136,379

 

 

106,852

 

 

382,900

 

312,288

 

Operating expenses:

 

 

 

 

 

 

 

Research and development

 

28,277

 

 

26,136

 

 

81,876

 

80,421

 

Sales and marketing

 

19,451

 

 

14,755

 

 

56,746

 

46,416

 

General and administrative

 

22,465

 

 

18,131

 

 

60,298

 

56,130

 

Amortization

 

13,114

 

 

13,824

 

 

39,338

 

41,473

 

Total operating expenses

 

83,307

 

 

72,846

 

 

238,258

 

224,440

 

Operating income

 

53,072

 

 

34,006

 

 

144,642

 

87,848

 

Interest income, net

 

8,667

 

 

5,694

 

 

24,524

 

13,900

 

Other (expense) income, net

 

(724

)

 

(1,001

)

 

10

 

(2,992

)

Income before provision for income taxes

 

61,015

 

 

38,699

 

 

169,176

 

98,756

 

Provision for income taxes

 

7,964

 

 

2,813

 

 

16,323

 

7,906

 

Net income

$

53,051

 

$

35,886

 

$

152,853

$

90,850

 

Earnings per share:

 

 

 

 

 

 

 

Basic

$

1.07

 

$

0.73

 

$

3.10

$

1.86

 

Diluted

$

1.07

 

$

0.73

 

$

3.08

$

1.84

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

Basic

 

49,426

 

 

49,043

 

 

49,333

 

48,933

 

Diluted

 

49,694

 

 

49,401

 

 

49,669

 

49,259

 

ONTO INNOVATION INC.

NON-GAAP FINANCIAL SUMMARY

(In thousands, except percentage and per share amounts) - (Unaudited)

 

Three Months Ended

 

Nine Months Ended

 

 

September 28, 2024

 

September 30, 2023

 

September 28, 2024

 

September 30, 2023

 

Revenue

$

252,210

 

$

207,185

 

$

723,382

 

$

597,012

 

Gross profit

$

137,498

 

$

106,893

 

$

385,580

 

$

314,688

 

Gross margin as percentage of revenue

 

55

%

 

52

%

 

53

%

 

53

%

Operating expenses

$

67,499

 

$

57,301

 

$

193,752

 

$

175,636

 

Operating income

$

69,999

 

$

49,592

 

$

191,828

 

$

139,052

 

Operating margin as a percentage of revenue

 

28

%

 

24

%

 

27

%

 

23

%

Net income

$

66,386

 

$

47,613

 

$

190,192

 

$

131,413

 

Net income per diluted share

$

1.34

 

$

0.96

 

$

3.83

 

$

2.67

 

RECONCILIATION OF GAAP GROSS PROFIT,

OPERATING EXPENSES AND OPERATING INCOME TO NON-GAAP

GROSS PROFIT, OPERATING EXPENSES AND OPERATING INCOME

(In thousands, except percentages) - (Unaudited)

 

Three Months Ended

 

Nine Months Ended

 

 

September 28, 2024

 

September 30, 2023

 

September 28, 2024

 

September 30, 2023

 

U.S. GAAP gross profit

$

136,379

 

$

106,852

 

$

382,900

 

$

312,288

 

Pre-tax non-GAAP items:

 

 

 

 

 

 

 

 

Merger and acquisition related expenses

 

35

 

 

41

 

 

105

 

 

121

 

Restructuring expenses

 

1,084

 

 

—

 

 

2,575

 

 

2,279

 

Non-GAAP gross profit

$

137,498

 

$

106,893

 

$

385,580

 

$

314,688

 

U.S. GAAP gross margin as a percentage of revenue

 

54

%

 

52

%

 

53

%

 

52

%

Non-GAAP gross margin as a percentage of revenue

 

55

%

 

52

%

 

53

%

 

53

%

U.S. GAAP operating expenses

$

83,307

 

$

72,846

 

$

238,258

 

$

224,440

 

Pre-tax non-GAAP items:

 

 

 

 

 

 

 

 

Merger and acquisition related expenses

 

527

 

 

834

 

 

2,095

 

 

2,235

 

Restructuring expenses

 

2,167

 

 

—

 

 

3,046

 

 

3,226

 

Litigation expenses

 

—

 

 

887

 

 

27

 

 

1,870

 

Amortization of intangibles

 

13,114

 

 

13,824

 

 

39,338

 

 

41,473

 

Non-GAAP operating expenses

 

67,499

 

 

57,301

 

 

193,752

 

 

175,636

 

Non-GAAP operating income

$

69,999

 

$

49,592

 

$

191,828

 

$

139,052

 

U.S. GAAP operating margin as a percentage of revenue

 

21

%

 

16

%

 

20

%

 

15

%

Non-GAAP operating margin as a percentage of revenue

 

28

%

 

24

%

 

27

%

 

23

%

ONTO INNOVATION INC.

RECONCILIATION OF GAAP NET INCOME TO

NON-GAAP NET INCOME

(In thousands, except share and per share data) - (Unaudited)

 

Three Months Ended

 

Nine Months Ended

 

 

September 28, 2024

 

September 30, 2023

 

September 28, 2024

 

September 30, 2023

 

U.S. GAAP net income

$

53,051

 

$

35,886

 

$

152,853

 

$

90,850

 

Pre-tax non-GAAP items:

 

 

 

 

 

 

 

 

Merger and acquisition related expenses

 

562

 

 

875

 

 

2,200

 

 

2,356

 

Restructuring expenses

 

3,251

 

 

—

 

 

5,621

 

 

5,505

 

Litigation expenses

 

—

 

 

887

 

 

27

 

 

1,870

 

Amortization of intangibles

 

13,114

 

 

13,824

 

 

39,338

 

 

41,473

 

Net tax provision adjustments

 

(3,592

)

 

(3,859

)

 

(9,847

)

 

(10,641

)

Non-GAAP net income

$

66,386

 

$

47,613

 

$

190,192

 

$

131,413

 

Non-GAAP net income per diluted share

$

1.34

 

$

0.96

 

$

3.83

 

$

2.67

 

ONTO INNOVATION INC

SUPPLEMENTAL INFORMATION - RECONCILIATION OF FOURTH QUARTER 2024

GAAP TO NON-GAAP GUIDANCE

 

Low

 

 

High

 

Estimated GAAP net income per diluted share

$

1.04

 

 

$

1.19

 

Estimated non-GAAP items:

 

 

 

 

 

Amortization of intangibles

 

0.27

 

 

 

0.27

 

Merger and acquisition related expenses

 

0.01

 

 

 

0.01

 

Restructuring expenses

 

0.07

 

 

 

0.07

 

Net tax provision adjustments

 

(0.06

)

 

 

(0.06

)

Estimated non-GAAP net income per diluted share

$

1.33

 

 

$

1.48

 

 

 

 

 

 

 

 

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