Onto Innovation Inc. (NYSE: ONTO) is a leading provider of process control, metrology, and inspection solutions for the semiconductor industry. With a rich history spanning over two decades, the company has established itself as a trusted partner for semiconductor manufacturers worldwide, enabling them to drive innovation and improve yield across the entire semiconductor value chain.

Business Overview

Onto Innovation's comprehensive portfolio of technologies includes solutions for un-patterned wafer quality, 3D metrology, macro defect inspection, metal interconnect composition, factory analytics, and advanced packaging lithography. The company's breadth of offerings, combined with its connected thinking approach, positions it as a unique problem-solver for its customers' most pressing challenges.

Financials

In the fiscal year 2023, Onto Innovation delivered impressive financial results, showcasing the strength and resilience of its business model. The company reported annual revenue of $815,868,000, a testament to its ability to capitalize on the growing demand for semiconductor manufacturing equipment. Net income for the year reached $121,159,000, highlighting the company's proficiency in driving operational efficiency and profitability.

Onto Innovation's strong financial performance was further bolstered by its robust cash flow generation. The company reported annual operating cash flow of $171,973,000 and annual free cash flow of $149,400,000, underscoring its financial discipline and ability to generate substantial cash to fund future growth initiatives.

Recent Developments

The first quarter of fiscal year 2024 was a standout period for Onto Innovation, with the company delivering revenue of $228,846,000, a 14.9% increase compared to the same period in the prior year. This impressive performance was driven by strong demand from specialty and advanced packaging customers, where revenue jumped 64% year-over-year. The company's Dragonfly systems, designed to support the packaging capacity growth for AI devices, saw a 30% increase in revenue compared to the prior quarter.

Onto Innovation's advanced nodes business also showed signs of improvement, with revenue incrementally increasing as expected. The company's Atlas OCD and Iris planar films solutions continued to gain traction, with orders to support advanced logic devices representing the largest growth in this segment.

The company's gross profit margin for the first quarter of fiscal year 2024 was 52.0%, in line with its guidance range of 51% to 53%. Onto Innovation's operating expenses for the quarter were $75,547,000, slightly above the guidance range, as the company made additional investments in applications engineering to extend its product and technology differentiation.

Outlook

Looking ahead, Onto Innovation provided guidance for the second quarter of fiscal year 2024, expecting revenue to be between $230 million and $240 million. The company anticipates gross margins to improve to 52% to 54%, reflecting the continued progress in its supply chain initiatives. For the full year, Onto Innovation expects its effective tax rate to be between 14% and 16%.

The company's focus in fiscal year 2024 remains on driving quarterly operating improvements, with several planned productivity initiatives expected to take effect in the third and fourth quarters, leading to further margin expansion.

Conclusion

Onto Innovation's strong performance in the first quarter and its improved outlook for the remainder of the year underscore the company's ability to capitalize on the growing demand for semiconductor manufacturing equipment. The company's diversified product portfolio, strong customer relationships, and commitment to innovation position it well to navigate the dynamic semiconductor industry landscape and deliver long-term value for its shareholders.