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Onto Innovation (ONTO) Q1 Earnings Beat on Record Revenues

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Onto Innovation Inc. ONTO reported strong first-quarter 2021 results, with both the top line and the bottom line beating the respective Zacks Consensus Estimate. Backed by solid order trends, the company registered record quarterly revenues and remains well poised to continue this growth momentum in the second quarter on multiple secular drivers.

Net Income

On a GAAP basis, net income in the March quarter was $24.1 million or 49 cents per share against net loss of $4.4 million or loss of 9 cents per share in the prior-year quarter. The significant improvement in GAAP earnings was primarily attributable to healthy top-line growth.

Excluding non-recurring items, non-GAAP net income came in at $36.3 million or 73 cents per share compared with $19.7 million or 39 cents per share in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 4 cents.

Onto Innovation Inc. Price, Consensus and EPS Surprise

Onto Innovation Inc. Price, Consensus and EPS Surprise
Onto Innovation Inc. Price, Consensus and EPS Surprise

Onto Innovation Inc. price-consensus-eps-surprise-chart | Onto Innovation Inc. Quote

Revenues

Quarterly revenues were record high at $169.3 million compared with $139.9 million in the year-ago quarter as demand for both front-end and back-end products soared. In addition, increased adoption of optical metrology solutions and strength in high-performance computing and specialty devices, particularly in 5G smartphones, and baseband RF were tailwinds. The top line surpassed the consensus estimate of $162 million.

Based on sources of revenues, 84% of revenues were derived from Systems and Software, 10% from Parts and 6% from Services.

Other Details

Total operating expenses declined to $63 million from $67.9 million in the prior-year quarter. Non-GAAP gross profit improved to $91 million from $72.5 million a year ago with respective margins of 54% and 52%. The year-over-year increase was driven by a favorable product mix on the back of higher revenues. Non-GAAP operating income was $41.9 million compared with $22.9 million in the year-ago quarter.

Cash Flow & Liquidity

During the first three months of 2021, Onto Innovation generated $51 million cash from operating activities compared with $8.9 million in the year-ago period. As of Mar 27, 2021, the company had $392.9 million in cash and cash equivalents with $85 million of non-current liabilities.

Q2 Guidance

With strong first-quarter results and healthy demand curve, Onto Innovation has offered a bullish guidance for the second quarter of 2021. The company expects revenues in the range of $173-$184 million. GAAP earnings per share (EPS) are expected in the range of 58-67 cents. Non-GAAP EPS are estimated in the band of 76-85 cents.

Zacks Rank & Stocks to Consider

Onto Innovation currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry are Ooma, Inc. OOMA, Corning Incorporated GLW, and Clearfield, Inc. CLFD, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Ooma delivered an earnings surprise of 163.7%, on average, in the trailing four quarters.

Corning has a long-term earnings growth expectation of 17.7%. It delivered an earnings surprise of 39%, on average, in the trailing four quarters.

Clearfield delivered an earnings surprise of 79.8%, on average, in the trailing four quarters.

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