• Revenue: $264 million for Q4, a 5% increase from Q3 and 21% year-over-year growth.
• Gross Margin: Improved to 55% in Q4.
• EPS: Increased 13% sequentially to $1.51, up 42% year-over-year.
• Operating Income: $75 million, representing 29% of revenue for Q4.
• Cash and Short-term Investments: $852 million at the end of Q4.
• Operating Cash Flow: $56 million, or 21% of revenue for Q4.
• Inventory: $287 million, down $21 million from Q3.
• Specialty Devices and Advanced Packaging Revenue: $170 million, 64% of total revenue.
• Advanced Nodes Revenue: $48 million, 18% of total revenue.
• Software and Services Revenue: $46 million, 18% of total revenue.
• Full Year 2024 Revenue Growth: 21%.
• Full Year 2024 Operating Income Growth: 37%.
• Full Year 2024 EPS Growth: 43%.
• Q1 2025 Revenue Guidance: Between $262 million and $274 million.
• Q1 2025 Gross Margin Guidance: 54% to 56%.
• Q1 2025 Operating Expenses Guidance: $69 million to $72 million.
• Q1 2025 EPS Guidance: Between $0.40 and $0.54 per share.

• Warning! GuruFocus has detected 2 Warning Sign with ONTO.

Release Date: February 06, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Onto Innovation Inc (NYSE:ONTO) achieved its sixth consecutive quarter of growth, setting a new quarterly revenue record of $264 million.
• Gross margins improved every quarter in 2024, reaching nearly 55% in the fourth quarter.
• The specialty device and advanced packaging markets grew by 30% for the calendar year, with AI packaging demand leading the growth.
• Metrology revenue in advanced packaging exceeded $50 million, more than tripling from 2023, with expectations for further growth.
• Onto Innovation Inc (NYSE:ONTO) launched several new products aimed at expanding opportunities in advanced packaging, advanced nodes, and power semiconductors, with anticipated incremental revenues starting later in 2025.

Negative Points

• Orders from HBM declined after a record third quarter, although a pickup in demand is expected as market allocations become clearer.
• Revenue from software and services decreased by 4% compared to the third quarter.
• The company incurred merger and acquisition-related expenses and restructuring charges, impacting GAAP gross margins.
• Operating expenses were at the high end of guidance due to accelerated R&D investments.
• The first quarter of 2025 is expected to see a seasonal dip in power revenue before growth resumes in subsequent quarters.

Q & A Highlights

Q: Can you provide more color on the HBM demand and growth potential for Onto Innovation in 2025? A: Michael Plisinski, CEO: The HBM demand is playing out as expected. We saw a delay in capacity expansions as customers awaited allocations from major drivers like NVIDIA. Now, with clearer allocations, customers are expanding and placing orders for mid to late 2025. In 2024, about 230,000 wafer starts per month were added, with half required by the market. We anticipate a doubling of this capacity in 2025, indicating strong growth potential.

Q: How do you see Onto Innovation's growth stacking up against industry expectations of 5% year-on-year growth? A: Michael Plisinski, CEO: We expect to outperform the industry growth rate of 5%. Our alignment with secular growth drivers and new product introductions will contribute to growth well above this industry average.

Q: What is the outlook for advanced nodes in 2025, considering gate-all-around and DRAM growth? A: Michael Plisinski, CEO: We are approaching prior peak levels in advanced nodes, driven by strong growth in gate-all-around and DRAM. While we may not reach previous peaks, we are getting close, indicating a healthy growth trajectory.

Q: Can you elaborate on the process control intensity for HBM and its impact on demand? A: Michael Plisinski, CEO: Process control intensity is increasing due to the complexity of stacking and shrinking interconnects. This requires more advanced process control solutions, which we are addressing with our EchoScan and 3DI products. We expect this trend to drive demand for our solutions.

Q: What is the expected contribution of new products like EchoScan and 3D bump in 2025? A: Michael Plisinski, CEO: We anticipate incremental revenues from new products in 2025, with EchoScan expected to generate at least $20 million. These products are in the qualification phase and will likely ramp up significantly in 2026, establishing tool-of-record positions for future growth.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.