Onto Innovation Reports 2024 First Quarter Results

Rhea-AI Summary

Onto Innovation reported their financial results for the first fiscal quarter of 2024, with revenue reaching $229 million driven by customer capacity expansions for high-performance computing and high bandwidth memory supporting AI market growth. The GAAP gross margin and non-GAAP gross margin were 52%, with GAAP operating income of $43 million and GAAP net income of $47 million. Non-GAAP operating income was $57 million and non-GAAP net income reached $58 million. First quarter highlights include revenue from specialty and advanced packaging customers reaching a record $161 million, Dragonfly G3 inspection system shipments increasing by over 30%, and new capabilities released for the Dragonfly G3 inspection system enabling 100% wafer inspection for critical sub-surface defects.

Positive

• Record revenue of $229 million driven by customer capacity expansions for high-performance computing and high bandwidth memory supporting AI market growth.

• GAAP and non-GAAP gross margin of 52%.

• GAAP operating income of $43 million and GAAP net income of $47 million.

• Non-GAAP operating income of $57 million and non-GAAP net income of $58 million.

• Revenue from specialty and advanced packaging customers set a quarterly record of $161 million.

• Dragonfly G3 inspection system shipments increased over 30% above the prior quarter.

Negative

• Operating income increased but gross profit margin decreased from the previous quarter.

• The company's GAAP net income showed growth, but the non-GAAP net income saw a lesser increase.

Financial Analyst

Onto Innovation's first quarter financial results indicate a robust revenue growth to $229 million, which is consistent with the company’s guidance. This performance is primarily driven by a demand upsurge in the High-Performance Computing (HPC) and High Bandwidth Memory (HBM) segments, serving the burgeoning AI market. The reported GAAP and non-GAAP gross margins stand at 52% which is comparatively strong, signaling efficient cost control measures. However, one would note that gross margins have slightly dipped from the previous year's 53%, potentially due to increased costs or pricing pressures. The increase in net income to $47 million from previous quarters does indicate a solid bottom line and effective operational leverage. Looking ahead, guidance for Q2 expects a continuity in revenue growth, albeit with a slight decrease in GAAP EPS, which could be indicative of anticipated cost increases or investment in the business. It's critical for investors to monitor whether these investments translate into sustained top-line growth and margin expansion.

Technology Market Analyst

Onto Innovation's recent developments in inspection system shipments, particularly the Dragonfly® G3, reflect a strategic alignment with the AI packaging industry's growth trajectory. The company’s ability to innovate, as seen with the Dragonfly G3's new capability enabling 100% wafer inspection, positions it well within the semiconductor equipment market. This technology is central to ensuring the reliability of increasingly complex AI chips, which could pave the way for Onto's sustained growth. Moreover, the adoption of its Firefly® G3 system by a leading panel manufacturer signifies penetration into new verticals. The company's focus on specialized and advanced packaging, which set a quarterly revenue record, demonstrates a strong product-market fit. For investors, the company’s alignment with industry trends such as advanced packaging for AI, memory and new chiplet architectures is a positive indicator of its future prospects.

Process control equipment for AI packaging drives revenue to high end of guidance

WILMINGTON, Mass.--(BUSINESS WIRE)-- Onto Innovation Inc. (NYSE: ONTO) (“Onto Innovation,” “Onto,” or the “Company”) today announced financial results for the first fiscal quarter of 2024.

First Quarter Financial Highlights

• Revenue of $229 million, driven by customer capacity expansions for high-performance computing (HPC) and high bandwidth memory (HBM) supporting AI market growth.
• GAAP gross margin and non-GAAP gross margin of 52%.
• GAAP operating income of $43 million and GAAP net income of $47 million.
• Non-GAAP operating income of $57 million and non-GAAP net income of $58 million.
• GAAP diluted earnings per share of $0.94 and non-GAAP diluted earnings per share of $1.18.
• Cash from operations of $57 million, or 25% of revenue.

First Quarter Business Highlights

• Revenue from specialty and advanced packaging customers set another quarterly record of $161 million.
• Dragonfly^® G3 inspection system shipments to support AI packaging increased over 30% above the prior quarter.
• New capability released for the Dragonfly G3 inspection system enables 100% wafer inspection for critical sub-surface defects.
• New Firefly^® G3 inspection system selected by leading panel manufacturer to find/categorize critical defects on advanced chiplet substrates.

Michael Plisinski, chief executive officer of Onto Innovation, commented, “We are very proud of our longstanding partnerships with the market leaders enabling the new era of AI through their innovations in 3D and 2.5D packaging. The increasing complexity of advanced packaging is not only creating new opportunities for our Dragonfly systems, but we are also seeing adoption of our front-end metrology systems. High performance computing for AI is currently creating demand for our packaging inspection and metrology systems, and we are beginning to see increases in demand for advanced memory and new chiplet architectures, setting the stage for what we expect to be a stronger 2025.”

Onto Innovation Inc.
Key Quarterly Financial Data
(In thousands, except per share amounts)
US GAAP
		March 30, 2024				December 30, 2023				April 1, 2023
Revenue		$	228,846			$	218,856			$	199,165
Gross profit margin			52	%			49	%			53	%
Operating income		$	42,738			$	28,230			$	29,035
Net income		$	46,853			$	30,309			$	29,068
Net income per diluted share		$	0.94			$	0.61			$	0.59

US NON-GAAP
		March 30, 2024				December 30, 2023				April 1, 2023
Revenue		$	228,846			$	218,856			$	199,165
Gross profit margin			52	%			52	%			54	%
Operating income		$	57,300			$	56,391			$	48,895
Net income		$	58,452			$	52,443			$	45,047
Net income per diluted share		$	1.18			$	1.06			$	0.92

Outlook

For the second fiscal quarter ending June 29, 2024, the Company is providing the following guidance:

• Revenue is expected to be in the range of $230 to $240 million.
• GAAP diluted earnings per share is expected to be in the range of $0.88 to $1.00.
• Non-GAAP diluted earnings per share is expected to be in the range of $1.14 to $1.26.

Webcast & Conference Call Details

Onto Innovation will host a conference call at 4:30 p.m. Eastern Time today, May 9, 2024, to discuss its first quarter 2024 financial results and other matters in greater detail. To participate in the call, please dial (888) 256-1007 or International: +1 (929) 477-0448 and reference conference ID 7501855 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 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 restructuring costs. Non-GAAP gross margin as a percentage of revenue, non-GAAP operating income, 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, 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 operation 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 unique transactions may limit the comparability of our on-going operations with prior and future periods.

Litigation expenses: 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 our products and services; Onto Innovation’s manufacturing practices and ability to deliver both products and services consistent with our 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; elemental layer composition; overlay metrology; 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)
		March 30, 2024				December 30, 2023
ASSETS
Current assets
Cash, cash equivalents and marketable securities		$	740,931			$	697,811
Accounts receivable, net			231,865				226,556
Inventories			329,517				327,773
Prepaid and other assets			30,523				31,127
Total current assets			1,332,836				1,283,267
Net property, plant and equipment			106,795				103,611
Goodwill and intangibles, net			470,074				483,186
Other assets			43,666				39,648
Total assets		$	1,953,371			$	1,909,712
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued liabilities		$	91,170			$	91,931
Other current liabilities			55,883				55,795
Total current liabilities			147,053				147,726
Other non-current liabilities			24,767				25,451
Total liabilities			171,820				173,177
Stockholders’ equity			1,781,551				1,736,535
Total liabilities and stockholders’ equity		$	1,953,371			$	1,909,712

ONTO INNOVATION INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts) - (Unaudited)
		Three Months Ended
		March 30, 2024				April 1, 2023
Revenue		$	228,846			$	199,165
Cost of revenue			110,561				94,190
Gross profit			118,285				104,975
Operating expenses:
Research and development			26,554				27,242
Selling, general and administrative			35,881				34,874
Amortization			13,112				13,824
Total operating expenses			75,547				75,940
Operating income			42,738				29,035
Interest income, net			7,361				3,448
Other income (expense), net			793				(281	)
Income before income taxes			50,892				32,202
Provision for income taxes			4,039				3,134
Net income		$	46,853			$	29,068
Earnings per share:
Basic		$	0.95			$	0.60
Diluted		$	0.94			$	0.59
Weighted average shares
outstanding:
Basic			49,230				48,788
Diluted			49,638				49,109

ONTO INNOVATION INC.
NON-GAAP FINANCIAL SUMMARY
(In thousands, except percentage and per share amounts) - (Unaudited)
	Three Months Ended
	March 30, 2024			April 1, 2023
Revenue	$	228,846		$	199,165
Gross profit	$	119,108		$	107,294
Gross margin as percentage of
revenue		52	%		54	%
Operating expenses	$	61,808		$	58,399
Operating income	$	57,300		$	48,895
Operating margin as a
percentage of revenue		25	%		25	%
Net income	$	58,452		$	45,047
Net income per diluted share	$	1.18		$	0.92

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
	March 30, 2024			April 1, 2023
U.S. GAAP gross profit	$	118,285		$	104,975
Pre-tax non-GAAP items:
Merger and acquisition related expenses		35			40
Restructuring expenses		788			2,279
Non-GAAP gross profit	$	119,108		$	107,294
U.S. GAAP gross margin as a
percentage of revenue		52	%		53	%
Non-GAAP gross margin as a
percentage of revenue		52	%		54	%
U.S. GAAP operating expenses	$	75,547		$	75,940
Pre-tax non-GAAP items:
Merger and acquisition related expenses		339			1,008
Restructuring expenses		258			2,034
Litigation expenses		30			675
Amortization of intangibles		13,112			13,824
Non-GAAP operating expenses		61,808			58,399
Non-GAAP operating income	$	57,300		$	48,895
GAAP operating margin as a
percentage of revenue		19	%		15	%
Non-GAAP operating margin
as a percentage of revenue		25	%		25	%

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
	March 30, 2024			April 1, 2023
U.S. GAAP net income	$	46,853		$	29,068
Pre-tax non-GAAP items:
Merger and acquisition related expenses		374			1,048
Restructuring expenses		1,046			4,313
Litigation expenses		30			675
Amortization of intangibles		13,112			13,824
Net tax provision adjustments		(2,963	)		(3,881	)
Non-GAAP net income	$	58,452		$	45,047
Non-GAAP net income per
diluted share	$	1.18		$	0.92

ONTO INNOVATION INC
SUPPLEMENTAL INFORMATION - RECONCILIATION OF SECOND QUARTER 2024
GAAP TO NON-GAAP GUIDANCE
	Low				High
Estimated GAAP net income per diluted share	$	0.88			$	1.00
Estimated non-GAAP items:
Amortization of intangibles		0.27				0.27
Restructuring expenses		0.03				0.03
Net tax provision adjustments		(0.04	)			(0.04	)
Estimated non-GAAP net income per diluted share	$	1.14			$	1.26

 

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Michael Sheaffer

+1.919.750.6732

Mike.Sheaffer@OntoInnovation.com

Source: Onto Innovation Inc.

FAQ

What was Onto Innovation's revenue for the first fiscal quarter of 2024?

Onto Innovation reported revenue of $229 million for the first fiscal quarter of 2024.

What was the GAAP gross margin for Onto Innovation in the first quarter of 2024?

The GAAP gross margin for Onto Innovation in the first quarter of 2024 was 52%.

Who is the chief executive officer of Onto Innovation?

The chief executive officer of Onto Innovation is Michael Plisinski.

What was the percentage increase in Dragonfly G3 inspection system shipments from the previous quarter?

Dragonfly G3 inspection system shipments increased over 30% above the prior quarter.