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Onto Innovation Reports 2022 First Quarter Results

05/03/2022

Record quarterly revenue of $241 million exceeds guidance, resulting in 43% year-over-year growth

Record quarterly net income of $53 million increased 121% over the same period last year

Onto Innovation Inc. (NYSE: ONTO) (“Onto Innovation,” “Onto,” or the “Company”) today announced financial results for the first quarter of 2022.

2022 First Quarter Financial Highlights

  • Record quarterly revenue of $241 million grew 43% year-over-year.
  • Quarterly gross profit margin of 54% increased from 53% in the same period last year.
  • First quarter operating margin improved to 24% GAAP and 31% non-GAAP, an increase of 50% and 24%, respectively compared to the same period last year.
  • Quarterly diluted earnings per share of $1.07 increased 118% year-over-year and non-GAAP diluted earnings per share of $1.31 increased 79% year-over-year.
  • Record cash balance totaled $542 million, or $10.96 per share.

2022 First Quarter Business Highlights

  • Advanced Nodes revenue of $100 million grew 42% year-over-year.
  • Specialty and Advanced Packaging revenue of $100 million grew 58% over the same period last year.
  • Software and Services revenue of $41 million grew 17% year-over-year.

Onto Innovation Inc.

Key Quarterly Financial Data

(In thousands, except per share amounts)

 

GAAP

 

 

 

April 2, 2022

 

 

January 1, 2022

 

 

March 27, 2021

 

Revenue

 

$

241,350

 

 

$

225,644

 

 

$

169,279

 

Gross profit margin

 

 

54

%

 

 

55

%

 

 

53

%

Operating income

 

$

58,744

 

 

$

49,855

 

 

$

27,485

 

Net income

 

$

53,330

 

 

$

46,737

 

 

$

24,113

 

Net income per diluted share

 

$

1.07

 

 

$

0.94

 

 

$

0.49

 

NON-GAAP

 

 

 

April 2, 2022

 

 

January 1, 2022

 

 

March 27, 2021

 

Revenue

 

$

241,350

 

 

$

225,644

 

 

$

169,279

 

Gross profit margin

 

 

54

%

 

 

55

%

 

 

54

%

Operating income

 

$

74,264

 

 

$

69,036

 

 

$

41,874

 

Net income

 

$

65,628

 

 

$

61,218

 

 

$

36,339

 

Net income per diluted share

 

$

1.31

 

 

$

1.23

 

 

$

0.73

 

Michael Plisinski, chief executive officer for Onto Innovation, commented, “The strong start to the year reflects the continued robust demand for semiconductor manufacturing equipment across all of our served markets. However, the higher demand for equipment is also creating an environment of ongoing supply chain shortages and challenges impacting the industry to varying degrees. I am proud of how the Onto Innovation team and our supplier partners worked together to mitigate many of these issues and exceeded our expectations for shipments of our core products in the first quarter.”

“While we have growing demand and orders for our products, which remain very solid across our served markets over the next several quarters, we expect supply chain cost and delivery issues to continue to be factors through the end of the year.”

First Quarter 2022 GAAP Financial Results

  • First quarter revenue totaled $241.4 million, an increase of 43% compared to $169.3 million in the 2021 first quarter and an increase of 7% when compared to $225.6 million in the 2021 fourth quarter.
  • Gross profit margin was 54.3% of revenue compared to 53.4% in the first quarter of 2021 and 54.9% in the previous quarter. The sequential quarterly decrease was primarily due to increasing freight costs.
  • Operating expenses for the first quarter of 2022 totaled $72.3 million, a decrease of 2% compared to $73.9 million in the fourth quarter of 2021. The quarter-over-quarter decrease in operating expenses was mainly due to lower merger and acquisition costs.
  • GAAP net income for the first quarter of 2022 exceeded guidance at $53.3 million, or $1.07 per diluted share, compared to $46.7 million, or $0.94 per diluted share, for the 2021 fourth quarter.

First Quarter 2022 Non-GAAP Financial Results

  • First quarter 2022 non-GAAP net income was $65.6 million, or $1.31 per diluted share, and was above the high end of previous guidance, compared to non-GAAP net income of $61.2 million, or $1.23 per diluted share, in the fourth quarter of 2021. Non-GAAP results exclude merger-related and litigation expenses, restructuring costs and the amortization of intangible assets as detailed in the accompanying tables.

Balance Sheet

  • As of April 2, 2022, cash and marketable securities increased $30.6 million from the fourth quarter and ended the quarter at $541.9 million.
  • Working capital increased $54.0 million from the 2021 fourth quarter and ended the quarter at $847.6 million.
  • Accounts receivable totaled $206.7 million as of the end of the first quarter and inventory ended the quarter at $263.0 million.

Outlook

Management provided an outlook for the second quarter, the fiscal period ending July 2, 2022, that excludes revenue from the Company’s new lithography systems, awaiting customer acceptance. Based on current estimates, management expects:

  • $234 to $248 million in revenue.
  • $0.90 to $1.09 in diluted GAAP EPS.
  • $1.16 to $1.35 in diluted non-GAAP EPS.

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

Webcast & Conference Call Details

Onto Innovation will host a conference call at 4:30 p.m. Eastern Time today, May 3, 2022, to discuss its first quarter 2022 financial results in greater detail. To participate in the call, please dial (888) 204-4368 or international: +1 (929) 477-0402 and reference conference ID 9289193 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 from 7:30 p.m. ET on May 3 until 7:30 p.m. ET on May 10, 2022. To access the replay, please dial (888) 203-1112 and reference conference ID 9289193 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 second quarter 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 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 and any potential impact as a result of the novel coronavirus situation; the Company’s ability to effectively manage its supply chain and adequately source components from suppliers to meet customer demand; its ability to adequately protect its intellectual property rights and maintain data security; its ability to effectively maneuver global trade issues and changes in trade and export 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 January 1, 2022 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)

 

 

 

April 2,

2022

 

 

January 1,

2022

 

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash, cash equivalents and marketable securities

 

$

541,911

 

 

$

511,343

 

Accounts receivable, net

 

 

206,695

 

 

 

177,205

 

Inventories

 

 

263,008

 

 

 

243,108

 

Prepaid and other assets

 

 

20,628

 

 

 

16,433

 

Total current assets

 

 

1,032,242

 

 

 

948,089

 

Net property, plant and equipment

 

 

81,689

 

 

 

82,094

 

Intangibles, net

 

 

579,323

 

 

 

593,092

 

Other assets

 

 

29,153

 

 

 

26,538

 

Total assets

 

$

1,722,407

 

 

$

1,649,813

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

108,498

 

 

$

96,387

 

Other current liabilities

 

 

76,181

 

 

 

58,139

 

Total current liabilities

 

 

184,679

 

 

 

154,526

 

Other non-current liabilities

 

 

65,407

 

 

 

69,232

 

Total liabilities

 

 

250,086

 

 

 

223,758

 

Stockholders’ equity

 

 

1,472,321

 

 

 

1,426,055

 

Total liabilities and stockholders’ equity

 

$

1,722,407

 

 

$

1,649,813

 

ONTO INNOVATION INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

 

 

 

Three Months Ended

 

 

 

April 2,

 

 

January 1,

 

 

March 27,

 

 

 

2022

 

 

2022

 

 

2021

 

Revenue

 

$

241,350

 

 

$

225,644

 

 

$

169,279

 

Cost of revenue

 

 

110,327

 

 

 

101,841

 

 

 

78,810

 

Gross profit

 

 

131,023

 

 

 

123,803

 

 

 

90,469

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

26,341

 

 

 

24,836

 

 

 

21,964

 

Sales and marketing

 

 

15,632

 

 

 

15,822

 

 

 

13,104

 

General and administrative

 

 

16,487

 

 

 

19,598

 

 

 

15,559

 

Amortization

 

 

13,819

 

 

 

13,692

 

 

 

12,357

 

Total operating expenses

 

 

72,279

 

 

 

73,948

 

 

 

62,984

 

Operating income

 

 

58,744

 

 

 

49,855

 

 

 

27,485

 

Interest income, net

 

 

377

 

 

 

264

 

 

 

361

 

Other expense, net

 

 

(204

)

 

 

(64

)

 

 

(1,244

)

Income before income taxes

 

 

58,917

 

 

 

50,055

 

 

 

26,602

 

Provision for income taxes

 

 

5,587

 

 

 

3,318

 

 

 

2,489

 

Net income

 

$

53,330

 

 

$

46,737

 

 

$

24,113

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.08

 

 

$

0.95

 

 

$

0.49

 

Diluted

 

$

1.07

 

 

$

0.94

 

 

$

0.49

 

Weighted average shares

outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

49,437

 

 

 

49,386

 

 

 

49,000

 

Diluted

 

 

49,915

 

 

 

49,847

 

 

 

49,572

 

ONTO INNOVATION INC.

NON-GAAP FINANCIAL SUMMARY

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

 

 

Three Months Ended

 

 

April 2, 2022

 

January 1, 2022

 

March 27, 2021

 

Revenue

$

241,350

 

$

225,644

 

$

169,279

 

Gross profit

$

131,018

 

$

123,963

 

$

91,029

 

Gross margin as percentage of revenue

 

54

%

 

55

%

 

54

%

Operating expenses

$

56,754

 

$

54,927

 

$

49,155

 

Operating income

$

74,264

 

$

69,036

 

$

41,874

 

Operating margin as a percentage of revenue

 

31

%

 

31

%

 

25

%

Net income

$

65,628

 

$

61,218

 

$

36,339

 

Net income per diluted share

$

1.31

 

$

1.23

 

$

0.73

 

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

 

 

April 2, 2022

 

January 1, 2022

 

March 27, 2021

 

U.S. GAAP gross profit

$

131,023

 

$

123,803

 

$

90,469

 

Pre-tax non-GAAP items:

 

 

 

 

 

 

 

 

 

Merger and acquisition related expenses

 

(5

)

 

160

 

 

254

 

Restructuring expenses

 

 

 

 

 

306

 

Non-GAAP gross profit

$

131,018

 

$

123,963

 

$

91,029

 

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

 

54

%

 

55

%

 

53

%

Non-GAAP gross margin as a percentage of revenue

 

54

%

 

55

%

 

54

%

U.S. GAAP operating expenses

$

72,279

 

$

73,948

 

$

62,984

 

Pre-tax non-GAAP items:

 

 

 

 

 

 

 

 

 

Merger and acquisition related expenses

 

657

 

 

4,624

 

 

969

 

Litigation expenses

 

1,049

 

 

705

 

 

503

 

Amortization of intangibles

 

13,819

 

 

13,692

 

 

12,357

 

Non-GAAP operating expenses

 

56,754

 

 

54,927

 

 

49,155

 

Non-GAAP operating income

$

74,264

 

$

69,036

 

$

41,874

 

GAAP operating margin as a percentage of revenue

 

24

%

 

22

%

 

16

%

Non-GAAP operating margin as a percentage of revenue

 

31

%

 

31

%

 

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

 

 

April 2, 2022

 

January 1, 2022

 

March 27, 2021

 

U.S. GAAP net income

$

53,330

 

$

46,737

 

$

24,113

 

Pre-tax non-GAAP items:

 

 

 

 

 

 

 

 

 

Merger and acquisition related expenses

 

652

 

 

4,784

 

 

1,223

 

Restructuring expenses

 

 

 

 

 

306

 

Litigation expenses

 

1,049

 

 

705

 

 

503

 

Amortization of intangibles

 

13,819

 

 

13,692

 

 

12,357

 

Net tax provision adjustments

 

(3,222

)

 

(4,700

)

 

(2,163

)

Non-GAAP net income

$

65,628

 

$

61,218

 

$

36,339

 

Non-GAAP net income per diluted share

$

1.31

 

$

1.23

 

$

0.73

 

ONTO INNOVATION INC

SUPPLEMENTAL INFORMATION - RECONCILIATION OF SECOND QUARTER 2022

GAAP TO NON-GAAP GUIDANCE

 

 

Low

 

High

Estimated GAAP net income per diluted share

$

0.90

 

 

$

1.09

 

Estimated non-GAAP items:

 

 

 

 

 

Amortization of intangibles

 

0.28

 

 

 

0.28

 

Litigation expenses

 

0.02

 

 

 

0.02

 

Net tax provision adjustments

 

(0.04

)

 

 

(0.04

)

Estimated non-GAAP net income per diluted share

$

1.16

 

 

$

1.35

 

 

Michael Sheaffer
+1.978.253.6273
Mike.Sheaffer@OntoInnovation.com

Source: Onto Innovation Inc.

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