Onto Innovation Inc. (ONTO Quick QuoteONTO - Free Report) reported solid third-quarter 2021 results, with both the bottom line and the top line surpassing their respective Zacks Consensus Estimate. The year-over-year top-line expansion was backed by a solid demand environment coupled with higher adoption of new products. It remains well poised to continue this growth momentum in the upcoming quarter on multiple secular drivers.

Net Income

On a GAAP basis, net income in the September quarter was $36.4 million or 73 cents per share compared with $8.1 million or 16 cents per share in the prior-year quarter. The significant improvement in GAAP earnings was primarily attributable to healthy top-line growth and higher operating income.

Excluding non-recurring items, non-GAAP net income came in at $48.7 million or 98 cents per share compared with $19.6 million or 40 cents per share in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 6 cents.

Onto Innovation Inc. Price, Consensus and EPS Surprise

Revenues

Quarterly revenues were record high at $200.6 million compared with $126.5 million in the year-ago quarter as a result of increased adoption of new products coupled with a solid demand environment for both front-end and back-end products. In addition, the company is committed to augmenting its footprint in both served markets and new markets while tapping lucrative opportunities. These markets include image sensors and heterogeneous packaging, as well as RF and power devices. The top line surpassed the consensus estimate of $195 million.

Based on sources of revenues, 85.2% of revenues were derived from Systems and Software, 8.9% from Parts, and 5.9% from Services.

Other Details

Total operating expenses increased to $66.2 million from $59.6 million in the prior-year quarter. Non-GAAP gross profit improved to $110.5 million from $68.9 million with respective margins of 55% and 54%. The year-over-year increase was driven by a favorable product mix on the back of higher revenues. Non-GAAP operating income was $58.9 million compared with $23.8 million in the year-ago quarter.

Cash Flow & Liquidity

During the first nine months of 2021, Onto Innovation generated $126.3 million cash from operating activities compared with $72.9 million in the year-ago period. As of Sep 25, 2021, the company had $152.2 million in cash and cash equivalents with $26.7 million of other non-current liabilities.

Bullish Q4 Guidance

Encouraged by robust third-quarter results and a healthy demand curve, Onto Innovation has offered bullish guidance for the fourth quarter of 2021. The company expects revenues in the range of $210-$220 million compared with the prior guidance of $190-$200 million. GAAP earnings per share are expected in the range of 75-89 cents compared with the prior outlook of 62-76 cents. Non-GAAP earnings per share are estimated in the band of $1.02-$1.16 compared with the previous projection of 85-99 cents.

Zacks Rank & Stocks to Consider

Onto Innovation currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader industry are Harmonic Inc. (HLIT Quick QuoteHLIT - Free Report) , SeaChange International, Inc. (SEAC Quick QuoteSEAC - Free Report) , and Aviat Networks, Inc. (AVNW Quick QuoteAVNW - Free Report) . While Harmonic sports a Zacks Rank #1 (Strong Buy), SeaChange International and Aviat Networks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Harmonic delivered a trailing four-quarter earnings surprise of 61.1%, on average.

SeaChange International delivered a trailing four-quarter earnings surprise of 28.9%, on average.

Aviat Networks delivered a trailing four-quarter earnings surprise of 32.1%, on average.