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Onto Innovation Reports 2021 Third Quarter Results

11/04/2021

Record quarterly revenue exceeds guidance, resulting in 59% year-over-year growth

Continued revenue growth expected for the fourth quarter extending into 2022

Onto Innovation Inc. (NYSE: ONTO) (“Onto Innovation,” “Onto,” or the “Company”) today announced financial results for the third quarter of 2021.

2021 Third Quarter Financial Highlights

  • Quarterly revenue of $200.6 million represents 59% year-over-year growth compared to the third quarter of 2020.
  • Gross margin improved to 55% from 54% year-over-year.
  • Operating margin improved to 21% GAAP and 29% non-GAAP, in line with the Company’s $800 million long-term operating model.
  • Year-to-date cash flow from operations totaled $126.3 million, or 22% of revenue.

2021 Third Quarter Business Highlights

  • Metrology revenue from advanced logic customers increased 95% over the second quarter, driven by investments in next-generation transistor structures and expanding applications.
  • New top five IDM selected Onto Innovation’s integrated metrology platform, contributing to 50% integrated metrology revenue growth year-to-date over the same period in 2020.
  • Inspection revenue increased 21% over the prior quarter.
  • Received commitments for six additional manufacturing slots for advanced packaging lithography tool deliveries in 2022 and 2023.
  • Record software revenue grew 28% over the prior quarter driven by specialty device manufacturers.

Onto Innovation Inc.

Key Financial Data for the Quarters Ended September 25, 2021,

June 26, 2021, and September 26, 2020

(in thousands, except per share amounts)

 

US GAAP

 

 

 

September 2021

 

 

June 2021

 

 

September 2020

 

Revenue

 

$

200,589

 

 

$

193,387

 

 

$

126,492

 

Gross profit margin

 

 

55

%

 

 

55

%

 

 

54

%

Operating income

 

$

43,126

 

 

$

35,941

 

 

$

9,282

 

Net income

 

$

36,448

 

 

$

35,051

 

 

$

8,091

 

Net income per diluted share

 

$

0.73

 

 

$

0.71

 

 

$

0.16

 

 

US NON-GAAP

 

 

 

September 2021

 

 

June 2021

 

 

September 2020

 

Revenue

 

$

200,589

 

 

$

193,387

 

 

$

126,492

 

Gross profit margin

 

 

55

%

 

 

55

%

 

 

54

%

Operating income

 

$

58,910

 

 

$

49,652

 

 

$

23,786

 

Net income

 

$

48,733

 

 

$

45,879

 

 

$

19,602

 

Net income per diluted share

 

$

0.98

 

 

$

0.92

 

 

$

0.40

 

Michael Plisinski, chief executive officer for Onto Innovation commented, “The Onto team delivered another record quarter on the top line, while improving operating margins for the seventh straight quarter. New product adoption is not only supporting revenue growth but also expanding our opportunities in both our served markets and new markets, including image sensors and heterogenous packaging, as well as RF and power devices.”

“With several of our advanced nodes and specialty customers announcing expansions for next year and a record backlog that is more than twice the backlog at this time last year, we are optimistic that demand for Onto Innovation’s solutions will remain strong going into 2022.”

Third Quarter 2021 GAAP Financial Results

  • Third quarter revenue totaled $200.6 million, an increase of 4% compared with $193.4 million for the second quarter of 2021 and above the high-end of guidance.
  • Gross profit margin was 55% of revenue in both the third and second quarter of 2021. In the third quarter of 2020, gross margin was 54%.
  • Operating expenses totaled $66.2 million, a decrease of $3.3 million compared to $69.5 million in the second quarter of 2021. The decrease was primarily the result of lower variable compensation plan costs in the third quarter.
  • Operating income was $43.1 million, an increase of $7.2 million compared to $35.9 million in the second quarter of 2021.
  • GAAP net income was $36.4 million, or $0.73 per diluted share, and at the high end of guidance compared with $35.1 million, or $0.71 per diluted share, for the second quarter of 2021.

Third Quarter 2021 Non-GAAP Financial Results

  • Gross profit margin was 55% of revenue in both the third and second quarter of 2021. In the third quarter of 2020, gross margin was 54%. Non-GAAP gross margin has increased in each of the last seven consecutive reported quarters.
  • Operating income was $58.9 million, an increase of $9.3 million, and represented 29% of revenue in the third quarter of 2021. This compares to an operating income of $49.7 million in the second quarter of 2021.
  • Non-GAAP net income was $48.7 million, or $0.98 per diluted share, compared to non-GAAP net income of $45.9 million, or $0.92 per diluted share, in the second quarter of 2021.
  • Non-GAAP results exclude merger and acquisition related expenses, restructuring costs, litigation expenses and the amortization of intangible assets as detailed in the accompanying tables.

Balance Sheet

  • As of September 25, 2021, cash and marketable securities increased to $461.6 million, an increase of $50.7 million over the prior quarter.
  • Working capital increased $58.4 million from the second quarter of 2021 and ended the quarter at $736.9 million.
  • Accounts receivable increased to $179.8 million in the third quarter mainly due to the increase in revenue and timing of shipments in the quarter. In addition, inventory increased to $222.3 million by quarter end.

Outlook

Management provided an outlook for the fourth quarter, the fiscal period ending January 1, 2022. Based on current estimates, management expects:

  • $210 million to $220 million in revenue
  • $0.75 to $0.89 in diluted GAAP EPS
  • $1.02 to $1.16 in diluted non-GAAP EPS

The guidance assumes that well-publicized supply chain issues will not materially impact our vendors’ scheduled deliveries in the quarter.

Webcast and Conference Call Details
Onto Innovation will host a conference call at 4:30 p.m. Eastern Time today, November 4, 2021, to discuss its third quarter 2021 financial results in greater detail. To participate in the call, please dial (800) 823-1563 or International: +1 (334) 777-6989 and reference conference ID 6712375 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 15 minutes early to register, download and install any necessary audio software. There will be a replay of the conference call available from 7:30 p.m. ET on November 4, 2021, until 7:30 p.m. ET on November 11, 2021. To access the replay, please dial (888) 203-1112 and reference conference ID 6712375 at any time during that period. A replay will also be available at www.ontoinnovation.com.

Discussion of Non-GAAP Financial Measures
The Company has provided in this release non-GAAP financial measures, including non-GAAP net income and non-GAAP EPS, which exclude amortization of acquisition-related intangible assets, certain acquisition-related expenses and benefits, litigation expenses and restructuring costs. Non-GAAP net income and non-GAAP EPS 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 purchased intangible assets: 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 charges: 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.

Significant litigation charges or benefits and legal costs: 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 in order 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 Onto Innovation’s business momentum and future growth; the benefit to customers of Onto Innovation’s products and customer service; Onto Innovation’s ability to both deliver 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 2021 and 2022 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 length, severity and potential business impact of the COVID-19 pandemic; the Company’s ability to leverage its resources to improve its position in its core markets; its ability to manage supply chain delays and shortages; its ability to successfully integrate acquired businesses and technologies; 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; and fluctuations in customer capital spending. 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 26, 2020 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.

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 helps our customers solve their 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. Headquartered in Wilmington, Massachusetts, 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 25,

 

 

December 26,

 

2021

2020

ASSETS

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash, cash equivalents and marketable securities

 

$

461,551

 

 

$

373,722

 

Accounts receivable, net

 

 

179,766

 

 

 

149,251

 

Inventories

 

 

222,311

 

 

 

191,217

 

Prepaid and other assets

 

 

21,846

 

 

 

17,471

 

Total current assets

 

 

885,474

 

 

 

731,661

 

Net property, plant and equipment

 

 

85,685

 

 

 

87,950

 

Intangibles, net

 

 

606,783

 

 

 

624,989

 

Other assets

 

 

25,321

 

 

 

23,572

 

Total assets

 

$

1,603,263

 

 

$

1,468,172

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

93,509

 

 

$

77,258

 

Other current liabilities

 

 

55,108

 

 

 

42,833

 

Total current liabilities

 

 

148,617

 

 

 

120,091

 

Other non-current liabilities

 

 

81,096

 

 

 

83,335

 

Total liabilities

 

 

229,713

 

 

 

203,426

 

Stockholders’ equity

 

 

1,373,550

 

 

 

1,264,746

 

Total liabilities and stockholders’ equity

 

$

1,603,263

 

 

$

1,468,172

 

ONTO INNOVATION INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 25,

 

 

June 26,

 

 

September 26,

 

 

September 25,

 

 

September 26,

 

 

 

2021

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenue

 

$

200,589

 

 

$

193,387

 

 

$

126,492

 

 

$

563,255

 

 

$

401,368

 

Cost of revenue

 

 

91,231

 

 

 

87,931

 

 

 

57,604

 

 

 

257,972

 

 

 

198,264

 

Gross profit

 

 

109,358

 

 

 

105,456

 

 

 

68,888

 

 

 

305,283

 

 

 

203,104

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

23,811

 

 

 

25,507

 

 

 

19,678

 

 

 

71,282

 

 

 

62,772

 

Sales and marketing

 

 

12,880

 

 

 

15,429

 

 

 

11,924

 

 

 

41,413

 

 

 

36,864

 

General and administrative

 

 

16,548

 

 

 

16,255

 

 

 

14,358

 

 

 

48,362

 

 

 

50,421

 

Amortization

 

 

12,993

 

 

 

12,324

 

 

 

13,646

 

 

 

37,674

 

 

 

41,081

 

Total operating expenses

 

 

66,232

 

 

 

69,515

 

 

 

59,606

 

 

 

198,731

 

 

 

191,138

 

Operating income

 

 

43,126

 

 

 

35,941

 

 

 

9,282

 

 

 

106,552

 

 

 

11,966

 

Interest income, net

 

 

234

 

 

 

304

 

 

 

544

 

 

 

899

 

 

 

2,440

 

Other expense, net

 

 

(291

)

 

 

(289

)

 

 

(899

)

 

 

(1,824

)

 

 

(2,065

)

Income before income taxes

 

 

43,069

 

 

 

35,956

 

 

 

8,927

 

 

 

105,627

 

 

 

12,341

 

Provision for income taxes

 

 

6,621

 

 

 

905

 

 

 

836

 

 

 

10,015

 

 

 

1,230

 

Net income

 

$

36,448

 

 

$

35,051

 

 

$

8,091

 

 

$

95,612

 

 

$

11,111

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.74

 

 

$

0.71

 

 

$

0.17

 

 

$

1.94

 

 

$

0.23

 

Diluted

 

$

0.73

 

 

$

0.71

 

 

$

0.16

 

 

$

1.92

 

 

$

0.22

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

49,361

 

 

 

49,193

 

 

 

48,900

 

 

 

49,190

 

 

 

49,231

 

Diluted

 

 

49,762

 

 

 

49,701

 

 

 

49,131

 

 

 

49,684

 

 

 

49,551

 

ONTO INNOVATION INC.

NON-GAAP FINANCIAL SUMMARY

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

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 25,

 

June 26,

 

September 26,

 

September 25,

 

September 26,

 

2021

2021

2020

2021

2020

Revenue

$

200,589

 

$

193,387

 

$

126,492

 

$

563,255

 

$

401,368

 

Gross profit

$

110,505

 

$

105,457

 

$

68,873

 

$

306,991

 

$

213,323

 

Gross margin as percentage of revenue

 

55

%

 

55

%

 

54

%

 

55

%

 

53

%

Operating expenses

$

51,595

 

$

55,805

 

$

45,087

 

$

156,555

 

$

142,399

 

Operating income

$

58,910

 

$

49,652

 

$

23,786

 

$

150,436

 

$

70,924

 

Operating margin as a percentage of revenue

 

29

%

 

26

%

 

19

%

 

27

%

 

18

%

Net income

$

48,733

 

$

45,879

 

$

19,602

 

$

130,951

 

$

60,155

 

Net income per diluted share

$

0.98

$

0.92

$

0.40

$

2.64

$

1.21

RECONCILIATION OF U.S. 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 25,

 

June 26,

 

September 26,

 

September 25,

 

September 26,

 

2021

2021

2020

2021

2020

U.S. GAAP gross profit

$

109,358

 

$

105,456

 

$

68,888

 

$

305,283

 

$

203,104

 

Pre-tax non-GAAP items:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Merger and acquisition related expenses

 

13

 

 

1

 

 

(15

)

 

268

 

 

10,219

 

Restructuring expenses

 

1,134

 

 

 

 

 

 

1,440

 

 

 

Non-GAAP gross profit

$

110,505

 

$

105,457

 

$

68,873

 

$

306,991

 

$

213,323

 

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

 

55

%

 

55

%

 

54

%

 

54

%

 

51

%

Non-GAAP gross margin as a percentage of revenue

 

55

%

 

55

%

 

54

%

 

55

%

 

53

%

U.S. GAAP operating expenses

$

66,232

 

$

69,515

 

$

59,606

 

$

198,731

 

$

191,138

 

Pre-tax non-GAAP items:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Merger and acquisition related expenses

 

1,289

 

 

1,386

 

 

645

 

 

3,644

 

 

4,259

 

Restructuring expenses

 

 

 

 

 

228

 

 

 

 

3,399

 

Litigation expenses

 

355

 

 

 

 

 

 

858

 

 

 

Amortization of intangibles

 

12,993

 

 

12,324

 

 

13,646

 

 

37,674

 

 

41,081

 

Non-GAAP operating expenses

 

51,595

 

 

55,805

 

 

45,087

 

 

156,555

 

 

142,399

 

Non-GAAP operating income

$

58,910

 

$

49,652

 

$

23,786

 

$

150,436

 

$

70,924

 

GAAP operating margin as a percentage of revenue

 

21

%

 

19

%

 

7

%

 

19

%

 

3

%

Non-GAAP operating margin as a percentage of revenue

 

29

%

 

26

%

 

19

%

 

27

%

 

18

%

ONTO INNOVATION INC.

RECONCILIATION OF U.S. GAAP NET INCOME TO

NON-GAAP NET INCOME

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

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 25,

 

June 26,

 

September 26,

 

September 25,

 

September 26,

 

2021

2021

2020

2021

2020

U.S. GAAP net income

$

36,448

 

$

35,051

 

$

8,091

 

$

95,612

 

$

11,111

 

Pre-tax non-GAAP items:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Merger and acquisition related expenses

 

1,302

 

 

1,387

 

 

630

 

 

3,912

 

 

14,478

 

Restructuring expenses

 

1,134

 

 

 

 

228

 

 

1,440

 

 

3,399

 

Litigation expenses

 

355

 

 

 

 

 

 

858

 

 

 

Amortization of intangibles

 

12,993

 

 

12,324

 

 

13,646

 

 

37,674

 

 

41,081

 

Net tax provision adjustments

 

(3,499

)

 

(2,883

)

 

(2,993

)

 

(8,545

)

 

(9,914

)

Non-GAAP net income

$

48,733

 

$

45,879

 

$

19,602

 

$

130,951

 

$

60,155

 

Non-GAAP net income per diluted share

$

0.98

$

0.92

$

0.40

$

2.64

$

1.21

ONTO INNOVATION INC

SUPPLEMENTAL INFORMATION - RECONCILIATION OF FOURTH QUARTER 2021

GAAP TO NON-GAAP GUIDANCE

 

 

Low

 

High

Estimated GAAP net income per diluted share

$

0.75

 

$

0.89

Estimated non-GAAP items:

 

 

 

 

 

Amortization of intangibles

 

0.28

 

 

0.28

Merger and acquisition related expenses

 

0.03

 

 

0.03

Litigation expenses

 

0.01

 

 

0.01

Net tax provision adjustments

 

(0.05

)

 

(0.05

)

Estimated non-GAAP net income per diluted share

$

1.02

 

$

1.16

 

Michael Sheaffer
+1.978.253.6273
Mike.Sheaffer@OntoInnovation.com

Source: Onto Innovation Inc.

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