Sign in
OI

ONTO INNOVATION INC. (ONTO)·Q4 2024 Earnings Summary

Executive Summary

  • Record Q4 revenue of $263.939M and sixth consecutive quarter of growth; non-GAAP diluted EPS of $1.51 exceeded the high end of guidance, while GAAP diluted EPS was $0.98 due to acquisition and restructuring charges .
  • Non-GAAP gross margin reached 55% and operating margin 29%; advanced packaging remained the largest market, and advanced nodes posted a fourth straight quarter of sequential growth .
  • Q1 2025 guidance calls for revenue of $260–$274M and non-GAAP EPS of $1.40–$1.54, with gross margin targeted at 54–56% and OpEx $69–$72M, implying continued margin expansion and growth breadth across logic, DRAM and NAND .
  • Management highlighted rising process control intensity in HBM and new product ramps (EchoScan, 3DI, Iris G2) as catalysts, alongside a $69M DRAM metrology VPA beginning deliveries in Q1 2025 .

What Went Well and What Went Wrong

  • What Went Well

    • Advanced packaging (AI) and advanced nodes drove a new quarterly revenue record; non-GAAP EPS beat the high end of guidance: “Record quarterly revenue of $264 million… non-GAAP diluted earnings per share of $1.51 above the high end of guidance range” .
    • Mix and execution expanded margins: “Gross margins improved every quarter in the year to end at nearly 55% in the fourth quarter” .
    • Strategic product traction: Firefly adopted at two leading panel manufacturers; metrology revenue in advanced packaging exceeded $50M in 2024 and tripled YoY, with additional growth expected .

  • What Went Wrong

    • GAAP margins compressed from Q3 due to restructuring and M&A-related charges, with GAAP GM at 50% vs 54% in Q3 and GAAP EPS below prior guidance range .
    • Software & Services down 4% sequentially to $46M; HBM orders muted after a record Q3 as allocations and capacity plans finalized, delaying some revenue timing .
    • Lithography revenue timing remains variable and panel-level market still in its infancy; broader OSAT capacity additions and tariff questions add uncertainty to AI packaging trajectories .

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Revenue ($USD Thousands)$218,856 $252,210 $263,939
GAAP Gross Margin %49% 54% 50%
Non-GAAP Gross Margin %52% 55% 55%
GAAP Operating Income ($USD Thousands)$28,230 $53,072 $42,460
Non-GAAP Operating Income ($USD Thousands)$56,391 $69,999 $75,468
GAAP Net Income ($USD Thousands)$30,309 $53,051 $48,817
Non-GAAP Net Income ($USD Thousands)$52,443 $66,386 $74,831
GAAP Diluted EPS ($USD)$0.61 $1.07 $0.98
Non-GAAP Diluted EPS ($USD)$1.06 $1.34 $1.51

Segment breakdown

SegmentQ3 2024Q4 2024
Specialty Devices & Advanced Packaging Revenue ($USD Millions)$161 (64%) $170 (64%)
Advanced Nodes Revenue ($USD Millions)$42 (17%) $48 (18%)
Software & Services Revenue ($USD Millions)$49 (19%) $46 (18%)

KPIs and balance sheet trend

KPIQ2 2024Q3 2024Q4 2024
Cash from Operations ($USD Millions)$65 $67 $56
Cash & Short-term Investments ($USD Thousands)$786,032 $855,404 $852,328
Inventory ($USD Thousands)$319,712 $308,304 $286,979
Share Repurchases ($USD Millions)——$25 at $159 avg price

Context and reconciliation notes

  • GAAP margin impacts: Q4 incurred merger/acquisition and restructuring charges; reconciliation tables detail adjustments and their effect on GAAP vs non-GAAP margins and EPS .
  • Non-GAAP performance: Non-GAAP EPS up sequentially to $1.51, above guidance high end; operating margin 29% .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueQ4 2024$253–$267M Actual $263.939M Beat vs guidance (near high end)
GAAP Diluted EPSQ4 2024$1.04–$1.19 Actual $0.98 Lower vs guidance (due to charges)
Non-GAAP Diluted EPSQ4 2024$1.33–$1.48 Actual $1.51 Bold beat vs high end
Gross Margin % (non-GAAP)Q4 202454–55% Actual 55% Achieved high end
OpEx (non-GAAP)Q4 2024$66–$68M Actual $68.418M High end
RevenueQ1 2025n/a$260–$274M New
GAAP Diluted EPSQ1 2025n/a$1.14–$1.28 New
Non-GAAP Diluted EPSQ1 2025n/a$1.40–$1.54 New
Gross Margin % (non-GAAP)Q1 2025n/a54–56% New
OpEx (non-GAAP)Q1 2025n/a$69–$72M New
Effective Tax RateFull-year 2025n/a14–16% New
Diluted Share CountQ1 2025n/a~49.8M New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3)Current Period (Q4)Trend
AI Packaging (2.5D logic, HBM)Q2: Expect ~10% 2H pause in AI packaging; overall advanced packaging growth; Dragonfly strong . Q3: HBM muted, 2.5D logic improving; half the decline previously projected; backlog strengthening .HBM orders declined after record Q3, now picking up; metrology adoption rising; Firefly adopted at two panel manufacturers .Improving in 2025 with higher process control intensity .
Advanced Nodes (Gate-All-Around)Q2: Iris/Atlas traction; Q4 logic >70% gate-all-around . Q3: Nodes grew 32% q/q; continued recovery .Fourth consecutive growth; gate-all-around nearly doubled q/q; stronger in 2025 .Accelerating .
DRAM/NANDQ2: Growth into 2H; HBM capacity additions anticipated . Q3: NAND growing off small base; HBM expansion visibility limited .DRAM most significant growth in Q1; NAND orders increasing for high-stack 3D NAND .Improving .
Panel/GlassQ2: Shipped JetStep X500 for glass; demos (PACE lab) . Q3: Tuck-in acquisitions; panel SAM expansion .Firefly wins at two panel leaders; cross-sell opportunities (StepFAST) .Building .
Power SemiconductorsQ2: Nearly record revenue . Q3: Record quarter .Another record; seasonal dip in Q1 then growth each subsequent quarter .Robust .
Supply Chain/InventoryQ2: Inventory -$10M; aim < $300M by year-end . Q3: Inventory $308M; further reduction expected .Inventory $287M; six consecutive quarters of decline; expect ~flat Q1 .Improving .
MarginsQ2: GM 53%; expected improvement . Q3: Non-GAAP GM 55% at high end .CFO targeting baseline 55% and 50bps q/q improvement in 2025 .Expanding .
China/Macro/TariffsQ3: China ~10–15% of sales; local competition .AI packaging narrative includes tariff questions; management cautious .Stable exposure; policy watch .

Management Commentary

  • “We capped off 2024 with our sixth consecutive quarter of growth and a new quarterly revenue record of $264 million… gross margins improved every quarter in the year to end at nearly 55% in the fourth quarter” — CEO Michael Plisinski .
  • “Our largest market overall in the quarter was AI packaging… metrology revenue in Advanced Packaging exceeded $50 million, more than triple that of 2023” — CEO .
  • “We achieved 55% gross margin for the fourth quarter… operating income of $75 million was 29% of revenue… net income performance improved to 28% of revenue” — CFO Mark Slicer (non-GAAP) .
  • “Specific to our outlook for the first quarter, we see strong growth in advanced nodes from both logic and memory… we expect DRAM to see the most significant growth… and we also see NAND orders increasing” — CEO .

Q&A Highlights

  • Process control intensity in HBM is increasing (12-high die stacks, HBM4), expanding SAM; EchoScan and 3DI positioned to address voids and dense interconnects .
  • Gross margin framework: target baseline 55% and aim for ≥50bps q/q improvement through 2025 via mix shift (advanced nodes) and manufacturing efficiencies .
  • AI packaging visibility: incremental tools required mid-2025; some upside potential; logic packaging capacity expands as allocations clarify; HBM orders to follow .
  • NAND: stronger than expected contribution as two primary customers ramp high-stack 3D NAND; growth off a small base .
  • Tariffs/macro: questions around chip tariffs add uncertainty; management not placing bets but expects overall AI demand and share position to drive outperformance vs WFE .

Estimates Context

  • Wall Street consensus (S&P Global) was unavailable at time of analysis due to API limits; we attempted retrieval but were unable to access data (Daily Request Limit exceeded). As a result, we cannot provide a definitive beat/miss vs S&P Global consensus for Q4 2024 [functions.GetEstimates error].
  • Relative to company guidance: non-GAAP EPS of $1.51 exceeded the $1.33–$1.48 range, while GAAP EPS of $0.98 fell below the $1.04–$1.19 range due to restructuring and M&A-related charges impacting GAAP results .

Key Takeaways for Investors

  • Non-GAAP execution remains strong: EPS beat and 55% gross margin at the high end despite GAAP charges; operating margin reached 29% .
  • Mix tailwinds: advanced nodes and AI packaging continue to drive growth; gate-all-around nearly doubled sequentially in Q4 and is poised for further expansion in 2025 .
  • HBM intensity rising: yields and interconnect complexity are increasing capital intensity; Onto’s EchoScan/3DI roadmap targets incremental SAM and share gains .
  • DRAM/NAND momentum: $69M DRAM metrology VPA starts in Q1; NAND orders increasing for high-stack architectures, broadening growth beyond AI packaging .
  • Margin trajectory: CFO’s goal of ≥50bps q/q non-GAAP gross margin improvement supported by advanced-node mix and supply chain efficiencies .
  • Inventory discipline and cash generation: six quarters of inventory declines, $56M operating cash in Q4; balance sheet remains strong with ~$852M cash and short-term investments .
  • Near-term trading lens: positive catalysts include Q1 guidance, metrology VPA deliveries, and rising process control intensity; watch for HBM order timing, tariff headlines, and any panel lithography ramp signals .