Onto Innovation’s Earnings Call: Record Revenue Amid Challenges

Onto Innovation ((ONTO)) has held its Q1 earnings call. Read on for the main highlights of the call.

Onto Innovation’s recent earnings call painted a picture of both triumph and challenge. While the company celebrated record-breaking revenue and growth, driven by advancements in nodes and metrology business expansion, it also faced hurdles such as tariff impacts and a decline in specialty device and advanced packaging revenue. The sentiment was mixed, with a cautious outlook due to the expected Q3 revenue low point, yet optimism was maintained through strong operating cash flow and strategic plans to mitigate tariff effects.

Record-Breaking Revenue and Growth

Onto Innovation achieved a milestone with its revenue reaching $267 million for the quarter, marking a 17% increase compared to the previous year. This record-breaking performance was accompanied by a 28% rise in first-quarter EPS, showcasing the company’s robust financial health.

Advanced Nodes Revenue Surge

The company reported a significant surge in advanced nodes revenue, which soared by 96% over Q4 to $93 million. This segment alone accounted for 35% of the total revenue, highlighting its critical role in Onto Innovation’s growth strategy.

Strong Operating Cash Flow

Onto Innovation’s disciplined approach to working capital management resulted in a record operating cash flow of $92 million. This financial strength provides a solid foundation for the company to navigate future challenges.

Successful Metrology Business Expansion

The metrology business experienced a successful expansion, with record quarters for new products like Iris films Metrology and IMPULSE 5 Integrated Metrology. This growth underscores the company’s innovation and market leadership.

Impact of Tariffs

Tariffs have posed a challenge for Onto Innovation, affecting costs and export tools due to products manufactured in the U.S. The company is accelerating strategic programs to enhance resilience and mitigate these impacts.

Specialty Device and Advanced Packaging Revenue Decline

Revenue from specialty devices and advanced packaging markets saw a 24% decline from Q4. This downturn highlights the volatility in these segments and the need for strategic adjustments.

Challenges with 2.5D Packaging Tools

Current inspection tools fell short of meeting new sensitivity requirements, prompting Onto Innovation to develop a new inspection platform to address these challenges.

Expected Q3 Revenue Low Point

The company anticipates that Q3 will mark a low point for the year, primarily due to a significant pause in memory investments. This forecast reflects the cautious sentiment expressed during the earnings call.

Forward-Looking Guidance

Onto Innovation provided forward-looking guidance, projecting second-quarter revenue between $240 million and $260 million, with a gross margin of 54% to 56%. Operating expenses are expected to range from $72 million to $75 million, and non-GAAP earnings are projected at $1.21 to $1.35 per share. These forecasts indicate a strategic focus on maintaining financial stability amid market fluctuations.

In summary, Onto Innovation’s earnings call revealed a company navigating both growth and challenges. While record-breaking revenue and advanced nodes expansion are promising, tariff impacts and a decline in certain segments present hurdles. The forward-looking guidance suggests a balanced approach to sustaining growth and addressing market dynamics.