Onto Innovation (ONTO) Q3 2024 earnings summary

Executive summary

• Q3 2024 revenue reached $252.2 million, up 21.7% year-over-year and 4.1% sequentially, driven by strong inspection, metrology, and advanced packaging demand, as well as increased sales to NAND and DRAM customers.

• Gross margin improved to 54%-55%, with GAAP net income of $53.1 million (26% of revenue) and non-GAAP net income of $66 million, reflecting operational efficiency and favorable product mix.

• Diluted EPS was $1.07 GAAP and $1.34 non-GAAP, both near the high end of guidance, with net income up from $35.9 million in Q3 2023.

• Record operating cash flow of $67 million, representing 27% of revenue, with cash and equivalents at $855.4 million at quarter-end.

• Announced acquisitions of Lumina Instruments and Kulicke & Soffa's lithography business to expand inspection and lithography capabilities.

Financial highlights

• Q3 2024 revenue: $252.2 million (+21.7% YoY, +4.1% QoQ); EPS: $1.34 non-GAAP (+40% YoY), $1.07 GAAP.

• Gross margin: 54%-55%, at the high end of guidance, up from 51.6% a year ago.

• Operating income: $70 million non-GAAP (28% margin), $53.1 million GAAP (21% margin); operating expenses: $67 million, reflecting increased R&D.

• Cash and short-term investments: $855.4 million; inventory: $308 million, down $12 million sequentially.

• Operating cash flow for nine months: $189.7 million; working capital at quarter-end: $1,313.2 million.

Outlook and guidance

• Q4 2024 revenue expected between $253 million and $267 million; gross margin 54%-55%.

• Operating expenses projected at $66-$68 million; non-GAAP EPS guidance: $1.33-$1.48; GAAP EPS: $1.04-$1.19.

• Inventory expected to decline by $8-$10 million in Q4, targeting below $300 million by year-end.

• Management expects continued investment in advanced semiconductor technologies to drive long-term demand for process control equipment.

• Anticipates another solid year of growth in 2025, with confidence in outgrowing WFE market growth.