What changed in this filing

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Item 1. Financial Statements

2023-05-04 compared with 2022-11-10 · 347 added, 233 removed, 326 unchanged (64% of the section changed)

1 unchanged sentence

ONTO INNOVATION INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

CONDENSED CONSOLIDATED S TATEMENTS OF OPERATIONS

(In thousands, except per share data)

Three Months Ended

Nine Months Ended

September 25,

Cost of revenue

10 unchanged sentences

Earnings per share:

Weighted average shares outstanding:

Weighted average number of shares outstanding:

The accompanying notes are an integral part of these financial statements.

ONTO INNOVATION INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONDENSED CONSOLIDATED STATEM ENTS OF COMPREHENSIVE INCOME

(In thousands)

Three Months Ended

Nine Months Ended

September 25,

Other comprehensive loss, net of tax:

Change in net unrealized gains (losses) on

Other comprehensive income (loss), net of tax:

Change in net unrealized losses on

available-for-sale marketable securities

Change in currency translation adjustments

Total other comprehensive loss, net of tax

Total other comprehensive income (loss), net of tax

Total comprehensive income

1 unchanged sentence

ONTO INNOVATION INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

CONDENSED CONSOLIDA TED BALANCE SHEETS

(In thousands)

9 unchanged sentences

Deferred income taxes

LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIES AND STOCKHOLDERS’

Current liabilities:

8 unchanged sentences

Commitments and contingencies

Stockholders’ equity:

Stockholders’

Additional paid-in capital

Accumulated other comprehensive (loss) income

Retained earnings

Total stockholders’ equity

Total liabilities and stockholders’ equity

Accumulated other comprehensive loss

Accumulated earnings

Total stockholders’

Total liabilities and stockholders’

The accompanying notes are an integral part of these financial statements.

ONTO INNOVATION INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

CONDENSED CONSOLIDATED S TATEMENTS OF CASH FLOWS

(In thousands)

Nine Months Ended

September 25,

Three Months Ended

Cash flows from operating activities:

3 unchanged sentences

Share-based compensation

Write-off of acquired in-process research and development

Acquired inventory step-up amortization

Provision for inventory valuation

Deferred income taxes

Changes in operating assets and liabilities, net of effects of business acquired

Changes in operating assets and liabilities

Net cash and cash equivalents provided by operating activities

2 unchanged sentences

Proceeds from maturities and sales of marketable securities

Acquisitions, net of cash acquired

Purchases of property, plant and equipment

Net cash and cash equivalents used in investing activities

Net cash and cash equivalents provided by (used in) investing activities

Cash flows from financing activities:

12 unchanged sentences

ONTO INNOVATION INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

(In thousands)

Additional Paid-in

Comprehensive

Balance at January 1, 2022

Balance at December 31, 2022

Share-based compensation

Issuance of shares through share-based

compensation plans

Share-based compensation plan

Currency translation

Unrealized loss on investments

Balance at April 2, 2022

Issuance of shares through

share-based compensation

Issuance of shares through share-based

compensation plans, net

Purchases of common stock

Share-based compensation plan

1 unchanged sentence

Unrealized gain on investments

Balance at July 2, 2022

Share-based compensation

Issuance of shares through share-based

compensation plans, net

Purchases and retirement of common stock

Share-based compensation plan

Currency translation

Unrealized loss on investments

Balance at October 1, 2022

Additional Paid-in

Balance at April 1, 2023

Comprehensive

Balance at December 26, 2020

Income / (Loss)

Balance at January 1, 2022

Share-based compensation

Issuance of shares through share-based

compensation plans

Share-based compensation plan

Currency translation

Unrealized loss on investments

Balance at March 27, 2021

Issuance of shares through

share-based compensation

Issuance of shares through share-based

compensation plans, net

Share-based compensation plan

1 unchanged sentence

Unrealized loss on investments

Balance at June 26, 2021

Share-based compensation

Issuance of shares through share-based

compensation plans, net

Share-based compensation plan

Currency translation

Unrealized gain on investments

Balance at September 25, 2021

Balance at April 2, 2022

The accompanying notes are an integral part of these financial statements.

ONTO INNOVATION INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share data)

NOTES TO CONDENSED CONSOLI DATED FINANCIAL STATEMENTS

(In thousands, except per share data and percentages)

Basis of Presentation

The accompanying interim unaudited Condensed Consolidated Financial Statements have been prepared by Onto Innovation Inc.

(together with its consolidated subsidiaries, unless otherwise specified or suggested by the context, the “Company,” “Onto Innovation,” “we,” “our” or “us”) and in the opinion of management reflect all adjustments, consisting of normal recurring accruals, necessary for their fair presentation in accordance with accounting principles generally accepted in the United States of America (“U.S.

(together with its consolidated subsidiaries, unless otherwise specified or suggested by the context, the “Company,”

“Onto Innovation,”

“we,”

“our”

or “us”) and in the opinion of management reflect all adjustments, consisting of normal recurring accruals, necessary for their fair presentation in accordance with accounting principles generally accepted in the United States of America (“U.S.

GAAP”).

Preparing financial statements requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes.

Actual amounts could differ materially from reported amounts.

The interim results for the three and nine months ended October 1, 2022 are not necessarily indicative of results to be expected for the entire year or any future periods.

This interim financial information should be read in conjunction with the financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended January 1, 2022 (the “2021 Form 10-K”) filed with the Securities and Exchange Commission (“SEC”) on February 25, 2022.

The accompanying Condensed Consolidated Balance Sheet at January 1, 2022 has been derived from the audited consolidated financial statements included in the 2021 Form 10-K.

The Company operates on a 52- or 53-week fiscal year ending on the Saturday closest to December 31 st .

Our fiscal year ending December 31, 2022 (“fiscal year 2022”) is a 52-week fiscal year.

The first quarter of the Company’s fiscal year 2022 ended on April 2, 2022, the second quarter ended on July 2, 2022 and the third quarter ended on October 1, 2022.

Our fiscal year ended January 1, 2022 was a 53-week fiscal year.

The interim results for the three months ended April 1, 2023 are not necessarily indicative of results to be expected for the entire year or any future periods.

This interim financial information should be read in conjunction with the financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”) filed with the Securities and Exchange Commission (“SEC”) on February 24, 2023.

The accompanying Condensed Consolidated Balance Sheet at December 31, 2022 has been derived from the audited consolidated financial statements included in the 2022 Form 10-K.

The Company operates on a 52- or 53-week fiscal year ending on the Saturday closest to December 31.

Our fiscal year ending December 30, 2023 (“fiscal year 2023”) is a 52-week fiscal year.

The first quarter of the Company’s fiscal year 2023 ended on April 1, 2023, the second quarter ends on July 1, 2023 and the third quarter ends on September 30, 2023.

Our fiscal year ended December 31, 2022 was a 52-week fiscal year.

The first quarter of the fiscal year ended December 31, 2022 ended on April 2, 2022.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.

Significant estimates made by management include the allowance for credit losses, excess and obsolete inventory, fair value of assets acquired and liabilities assumed in a business combination, recoverability and useful lives of property, plant and equipment and identifiable intangible assets, recoverability of goodwill, recoverability of deferred tax assets, liabilities for product warranty, contingencies, including litigation reserves and share-based payments and liabilities for tax uncertainties.

The preparation of financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.

Significant estimates made by management include excess and obsolete inventory, fair value of assets acquired and liabilities assumed in a business combination, recoverability and useful lives of property, plant and equipment and identifiable intangible assets, recoverability of goodwill, recoverability of deferred tax assets, allowance for credit losses, liabilities for product warranty, contingencies, including litigation reserves and share-based payments and liabilities for tax uncertainties.

Actual results could differ from those estimates.

4 unchanged sentences

Adoption of Accounting Standards

There have been no recent accounting pronouncements or changes in accounting pronouncements during the nine months ended October 1, 2022, as compared to the recent accounting pronouncements described in the Company’s Annual Report on Form 10-K for the fiscal year ended January 1, 2022, that are of significance, or potential significance to the Company.

Business Combination

Inspectrology, LLC

During the first quarter of 2021, the Company acquired Inspectrology, LLC (“Inspectrology”), a supplier of overlay metrology for controlling lithography and etch processes in the compound semiconductor market, for $ 24,015 in cash and an earnout subject to achievement of certain revenue targets earned for fiscal year 2021 and fiscal year 2022.

The earnout achieved for fiscal 2021 was $ 2.3 million and was paid in the first half of fiscal 2022.

There is potential earnout for up to an additional payment of $ 5,000 based on fiscal year 2022 results.

As of October 1, 2022, the Company has accrued $ 1,730 for the potential earnout.

Certain payments, including the earnout, are subject to the principals remaining with the Company for a period of one to three years .

There have been no recent accounting pronouncements or changes in accounting pronouncements during the three months ended April 1, 2023, as compared to the recent accounting pronouncements described in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, that are of significance, or potential significance to the Company.

Fair Value Measurements

8 unchanged sentences

Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the asset or liability.

Level 3 inputs are unobservable inputs based on management’s assumptions used to measure assets and liabilities at fair value.

A financial asset’s or liability’s fair value measurement classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

The following tables provide the assets and liabilities carried at fair value measured on a recurring basis at October 1, 2022 and January 1, 2022:

Level 3 inputs are unobservable inputs based on management’s assumptions used to measure assets and liabilities at fair value.

A financial asset’s or liability’s fair value measurement classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

The following tables provide the assets and liabilities carried at fair value measured on a recurring basis at April 1, 2023 and December 31, 2022:

Fair Value Measurements Using

5 unchanged sentences

Unobservable Inputs

October 1, 2022

April 1, 2023

Available-for-sale debt securities:

5 unchanged sentences

Foreign currency forward contracts

Contingent consideration - acquisitions

Total liabilities

January 1, 2022

December 31, 2022

Available-for-sale debt securities:

8 unchanged sentences

The foreign currency forward contracts are primarily measured based on the foreign currency spot and forward rates quoted by the banks or foreign currency dealers.

Investment prices are obtained from third party pricing providers, which model prices utilizing the above observable inputs, for each asset class.

Investment prices are obtained from third party pricing providers, which

model prices utilizing the above observable inputs, for each asset class.

Level 3 investments consisted of contingent consideration related to an acquisition for which the Company uses revenue projections to value this liability.

See Note 4 for additional discussion regarding the fair value of the Company’s marketable securities.

See Note 3 for additional discussion regarding the fair value of the Company’s marketable securities.

Marketable Securities

At October 1, 2022 and January 1, 2022, marketable securities are categorized as follows:

At April 1, 2023 and December 31, 2022, marketable securities are categorized as follows:

Amortized Cost

1 unchanged sentence

Gross Unrealized Holding Losses

October 1, 2022

April 1, 2023

Municipal notes and bonds

4 unchanged sentences

Total marketable securities

January 1, 2022

December 31, 2022

Municipal notes and bonds

4 unchanged sentences

Total marketable securities

The amortized cost and estimated fair value of marketable securities classified by the maturity date listed on the security, regardless of the Condensed Consolidated Balance Sheets classification, is as follows at October 1, 2022 and January 1, 2022:

October 1, 2022

January 1, 2022

April 1, 2023

December 31, 2022

Amortized Cost

5 unchanged sentences

The Company has evaluated its investment policies and determined that all of its marketable securities, which are comprised of debt securities, are to be classified as available-for-sale.

The Company’s available-for-sale debt securities are carried at fair value, with the unrealized gains and losses reported in Stockholders’ equity under the caption “Accumulated other comprehensive income (loss).” Gross realized gains and losses on available-for-sale securities are included in “Other expense (income)” on the Condensed Consolidated Statements of Operations and were not material during the three and nine months ended October 1, 2022 and January 1, 2022.

The Company’s available-for-sale debt securities are carried at fair value, with the unrealized gains and losses reported in Stockholders’

equity under the caption “Accumulated other comprehensive income (loss).”

Gross realized gains and losses on available-for-sale securities are included in “Other expense, net”

on the Condensed Consolidated Statements of Operations and were not material during the three months ended April 1, 2023 and December 31, 2022.

The Company records credit losses for its available-for-sale debt securities when it intends to sell the securities, it is more-likely-than not that it will be required to sell the securities before a recovery, or when it does not expect to recover the entire amortized cost basis of the securities.

The cost of securities sold is based on the specific identification method.

The Company has determined that the gross unrealized losses on its marketable securities at October 1, 2022 and January 1, 2022 are temporary in nature.

The Company has determined that the gross unrealized losses on its marketable securities at April 1, 2023 and December 31, 2022 are temporary in nature.

The Company regularly reviews its investment portfolio to identify and evaluate marketable securities that have indications of possible impairment from credit losses or other factors.

Factors considered in determining whether an unrealized loss is considered to be a credit loss include the length of time and extent to which fair value has been less than the cost basis, credit quality and the Company’s ability and intent to hold the securities for a period of time sufficient to allow for any anticipated recovery in market value.

The following table summarizes the estimated fair value and gross unrealized holding losses of marketable securities, aggregated by investment instrument and period of time in an unrealized loss position, at October 1, 2022 and January 1, 2022:

In Unrealized Loss Position For

4 unchanged sentences

Gross Unrealized Losses

October 1, 2022

April 1, 2023

Municipal notes and bonds

3 unchanged sentences

Corporate bonds

January 1, 2022

December 31, 2022

Municipal notes and bonds

Asset-backed securities

Certificates of deposit

1 unchanged sentence

Corporate bonds

See Note 3 for additional discussion regarding the fair value of the Company’s marketable securities.

See Note 2 for additional discussion regarding the fair value of the Company’s marketable securities.

Derivative Instruments and Hedging Activities

The Company, when it considers it to be appropriate, enters into forward contracts to hedge the economic exposures arising from foreign currency denominated transactions.

At October 1, 2022 and January 1, 2022, these contracts included the future sale of euro, Israeli shekel, Japanese yen, Korean won, Singapore dollar, Taiwanese dollar, and Chinese renminbi to purchase U.S.

Foreign currency forward contracts are not designated as hedges for accounting purposes, and therefore, the change in fair value is recorded in “Other expense, net,” in the Condensed Consolidated Statements of Operations.

At April 1, 2023 and December 31, 2022, these contracts included the future sale of euro, Israeli shekel, Japanese yen, Korean won, Singapore dollar, Taiwanese dollar, and Chinese renminbi to purchase U.S.

Foreign currency forward contracts are not designated as hedges for accounting purposes, and therefore, the change in fair value is recorded in “Other expense, net,”

in the Condensed Consolidated Statements of Operations.

The Company records its forward contracts at fair value in either prepaid expenses and other current assets or other current liabilities in the Condensed Consolidated Balance Sheets.

The dollar equivalent of the U.S.

dollar forward contracts and related fair values as of October 1, 2022 and January 1, 2022 were as follows:

October 1, 2022

January 1, 2022

dollar forward contracts and related fair values as of April 1, 2023 and December 31, 2022 were as follows:

April 1, 2023

December 31, 2022

Notional amount

Fair value of assets (liability)

Fair value of liability

Purchased Intangible Assets

Intangible Assets

Purchased intangible assets as of October 1, 2022 and January 1, 2022 are as follows:

Purchased intangible assets as of April 1, 2023 and December 31, 2022 are as follows:

Gross Carrying Amount

Accumulated Amortization

October 1, 2022

April 1, 2023

Finite-lived intangibles:

3 unchanged sentences

Total identifiable intangible assets

January 1, 2022

December 31, 2022

Finite-lived intangibles:

6 unchanged sentences

2023 (remainder)

Balance Sheet Details

Balance Sheet Components

Inventories, net are comprised of the following:

October 1, 2022

January 1, 2022

April 1, 2023

December 31, 2022

Work-in-process

3 unchanged sentences

Property, plant and equipment, net is comprised of the following:

October 1, 2022

January 1, 2022

April 1, 2023

December 31, 2022

Machinery and equipment

3 unchanged sentences

Furniture and fixtures

Accumulated depreciation and amortization

Accumulated depreciation

Total property, plant and equipment, net

Other assets is comprised of the following:

October 1, 2022

January 1, 2022

Other assets are comprised of the following:

April 1, 2023

December 31, 2022

Operating lease right-of-use assets

1 unchanged sentence

Accrued liabilities

Accrued liabilities is comprised of the following:

October 1, 2022

January 1, 2022

Accrued liabilities are comprised of the following:

April 1, 2023

December 31, 2022

Payroll and related expenses

1 unchanged sentence

Other current liabilities

Other current liabilities is comprised of the following:

October 1, 2022

January 1, 2022

Other current liabilities are comprised of the following:

April 1, 2023

December 31, 2022

Customer deposits

4 unchanged sentences

Other non-current liabilities

Other non-current liabilities is comprised of the following:

October 1, 2022

January 1, 2022

Other non-current liabilities are comprised of the following:

April 1, 2023

December 31, 2022

Non-current operating lease obligations

4 unchanged sentences

The Company maintains arrangements under which eligible accounts receivable in Japan are sold without recourse to unrelated third-party financial institutions.

The Company sold $ 21,498 of receivables during the nine months ended October 1, 2022.

The Company sold $ 4,297 of receivables during the three months ended April 1, 2023.

These receivables were not included in the Condensed Consolidated Balance Sheets as the criteria for sale treatment had been met.

There were no material gains or losses on the sale of such receivables.

There were no amounts due from such third-party financial institutions at October 1, 2022.

There were no amounts due from such third-party financial institutions at April 1, 2023.

Intellectual Property Indemnification Obligations

6 unchanged sentences

The Company estimates the costs that may be incurred during the warranty period and records a liability in the amount of such costs at the time revenue is recognized.

The Company’s estimate is based primarily on historical experience.

The Company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary.

1 unchanged sentence

Settlements of warranty reserves are generally associated with sales that occurred during the 12 to 14 months prior to the period-end.

Changes in the Company’s warranty reserves are as follows:

Nine Months Ended

September 25,

Changes in the Company’s warranty reserves are as follows:

Three Months Ended

Balance, beginning of the period

Warranty liability assumed in acquisition

Balance, end of the period

Warranty reserves are reported in the Condensed Consolidated Balance Sheets under the captions “Accrued liabilities” and “Other non-current liabilities.”

Warranty reserves are reported in the Condensed Consolidated Balance Sheets under the captions “Accrued liabilities”

and “Other non-current liabilities.”

Legal Matters

From time to time, the Company is subject to legal proceedings and claims in the ordinary course of business.

The following reflects an overview of the material developments with regard to the Company’s pending material legal proceedings.

Optical Solutions Inc.

1 unchanged sentence

18-cv-00417-BLF):

On August 2, 2017, Nanometrics was named as defendant in a complaint filed in New Hampshire Superior Court (the “Complaint”).

The Complaint, brought by Optical Solutions, Inc.

(“OSI”), alleges claims arising from a purported exclusive purchase contract between OSI and Nanometrics pertaining to certain products.

The relief sought is the award of damages in an amount to be proven at trial, attorney’s fees and cost as well as other relief the court deems just and proper.

On September 18, 2017, Nanometrics removed the action to the United States District Court for the District of New Hampshire (the “District of New Hampshire”).

On September 25, 2017, Nanometrics moved to transfer the Complaint to the United States District Court for the Northern District of California (the “Northern District of California”).

On December 20, 2017, Nanometrics filed its complaint against OSI in the California Superior Court for the County of Santa Clara alleging claims arising from OSI’s breach of certain purchase orders.

The relief sought is the award of damages in an amount to be proven at trial including pre- and post-judgment interest, punitive damages, restitution for benefits unjustly received by OSI, attorney’s fees and cost as well as other relief the court deems just and proper.

Nanometrics’ complaint was later removed by OSI to the Northern District of California.

On May 29, 2018, the District of New Hampshire issued an order granting Nanometrics’ motion to transfer the Complaint to the Northern District of California and denying Nanometrics’ motion to dismiss the Complaint without prejudice.

On June 14, 2018, the Complaint was consolidated with Nanometrics’ complaint against OSI.

On August 9, 2018, OSI filed an Amended Complaint.

On September 19, 2018, Nanometrics filed a motion to dismiss OSI’s Amended Complaint for failure to state a claim.

Nanometrics’ motion to dismiss was heard on February 28, 2019.

On March 5, 2019, the Northern District of California granted Nanometrics’ motion to dismiss with leave to amend.

OSI filed a Second Amended Complaint on March 29, 2019.

Nanometrics filed a motion to

dismiss OSI’s Second Amended Complaint on May 31, 2019.

In October 2019, Nanometrics was renamed Onto Innovation Inc.

as a result of the merger between Nanometrics and Rudolph Technologies, Inc.

Thereafter, the Company’s second motion to dismiss was heard on November 14, 2019.

On November 26, 2019, the Northern District of California granted the Company’s motion to dismiss with leave to amend.

OSI filed a Third Amended Complaint on January 21, 2020.

On March 2, 2020, the Company filed a motion to dismiss OSI’s Third Amended Complaint and a hearing on the motion was held on June 11, 2020.

On June 23, 2020, the Northern District of California granted the Company’s motion to dismiss with prejudice with regard to two claims asserted by OSI and dismissed two other claims asserted by OSI with leave to amend.

Thereafter, on July 7, 2020, OSI filed a Fourth Amended Complaint.

On August 14, 2020, the Company filed a motion to dismiss with regard to one of the two remaining claims.

On December 1, 2020, the Northern District of California denied this final motion to dismiss and as a result the Company filed its Answer in this matter on December 22, 2020.

This matter is currently in discovery.

The Northern District of California granted a joint stipulation that the discovery cutoff is January 12, 2023 and the trial date is set for December 4, 2023.

At this time, the loss contingency in this matter is remote and the Company does not anticipate the outcome of the matter to have a material impact on its financial position, results of operations, or cash flows.

On August 2, 2017, Nanometrics was named as defendant in a complaint filed by Optical Solutions, Inc.

(“OSI”) in New Hampshire Superior Court (the “OSI Action”).

OSI’s complaint alleged claims arising from a purchase contract between OSI and Nanometrics.

The relief sought was the award of damages in an amount to be proven at trial, attorney’s fees and costs, and such other relief that the court deemed just and proper.

The OSI Action was subsequently removed to the United States District Court for the District of New Hampshire and then transferred to the United States District Court for the Northern District of California (the “Northern District of California”).

On December 20, 2017, Nanometrics filed its own complaint against OSI in the California Superior Court for the County of Santa Clara alleging claims arising from OSI’s breach of certain purchase orders (the “Nanometrics Action”).

The relief sought was the

award of damages in an amount to be proven at trial, including pre- and post-judgment interest, punitive damages, restitution for benefits unjustly received by OSI, attorney’s fees and costs, and such other relief the court deemed just and proper.

The Nanometrics Action was later removed to the Northern District of California and then consolidated with the OSI Action.

On July 7, 2020, after the Northern District of California granted the Company’s motion to dismiss with prejudice with regard to two of OSI’s claims and dismissed two other claims asserted by OSI with leave to amend, OSI filed a Fourth Amended Complaint.

On August 14, 2020, the Company filed a motion to dismiss one of the two remaining claims.

On December 1, 2020, the Northern District of California denied the Company’s motion and as a result the Company filed its Answer in this matter on December 22, 2020.

Discovery is now closed.

On March 1, 2023, the Company filed a motion for summary judgment, and the hearing on that motion is scheduled for June 29, 2023.

The trial date is set for December 4, 2023.

At the time of filing of this Quarterly Report on Form 10-Q (this “Form 10-Q”), the loss contingency in this matter is remote and the Company does not anticipate the outcome of the matter to have a material impact on its financial position, results of operations, or cash flows.

Line of Credit

1 unchanged sentence

The Company is permitted to borrow up to 70 % of the value of eligible securities held at the time the line of credit is accessed.

The available line of credit as of October 1, 2022 was approximately $ 138.0 million with an available interest rate of 4.8 %.

The available line of credit as of April 1, 2023 was approximately $ 100.0 million with an available interest rate of 6.5 %.

The credit agreement is available to the Company until such time that either party terminates the arrangement at their discretion.

The Company has not utilized the line of credit to date.

The Company has not utilized the line of credit as of the date of this filing.

The following table represents a disaggregation of revenue by timing of revenue:

Three Months Ended

Nine Months Ended

September 25,

Point-in-time

Total revenue

See Note 15 for additional discussion of the Company’s disaggregated revenue in detail.

See Note 14 for additional discussion of the Company’s disaggregated revenue in detail.

Contract Liabilities

The Company records contract liabilities when the customer has been billed in advance of the Company completing its performance obligations primarily related to service contracts and installation.

The Company records contract liabilities when the customer has been billed in advance of the Company completing its performance obligations primarily with respect to liabilities related to service contracts and installation.

For contracts that have a duration of one year or less, these amounts are recorded as current deferred revenue in the Condensed Consolidated Balance Sheets.

As of October 1, 2022 and January 1, 2022, the Company carried a long-term deferred revenue balance of $ 2,269 and $ 1,693 , respectively, in other non-current liabilities on the Condensed Consolidated Balance Sheets.

As of April 1, 2023 and December 31, 2022, the Company carried a long-term deferred revenue balance of $ 2,681 and $ 2,852 , respectively, in “Other non-current liabilities”

on the Condensed Consolidated Balance Sheets.

Changes in deferred revenue were as follows:

Three Months Ended

Nine Months Ended

September 25,

Balance, beginning of the period

Deferred revenue assumed in acquisition

Deferral of revenue

3 unchanged sentences

Restricted Stock Unit Activity

A summary of the Company’s restricted stock unit activity with respect to the nine months ended October 1, 2022 is as follows:

A summary of the Company’s restricted stock unit activity with respect to the three months ended April 1, 2023 is as follows:

Number of Shares

1 unchanged sentence

Grant Date Fair Value

Nonvested at January 1, 2022

Nonvested at October 1, 2022

Of the 751 nonvested shares outstanding at October 1, 2022, 652 are service-based RSUs and 99 are market-based PRSUs.

The fair value of the Company’s service-based RSUs was calculated based on the fair market value of the Company’s stock at the date of grant.

The fair value of the Company’s market-based PRSUs granted during fiscal years 2022 and 2021 was calculated using a Monte Carlo simulation model at the date of the grant, resulting in a weighted average grant-date fair value per share of $ 85.49 and $ 80.04 , respectively.

As of October 1, 2022 and January 1 2022, there was $ 33,262 and $ 21,019 of total unrecognized compensation cost related to restricted stock units granted under the Company’s stock plans, respectively.

That cost is expected to be recognized over a weighted average period of 1.7 years and 1.5 years for October 1, 2022 and January 1, 2022, respectively.

Nonvested at December 31, 2022

Nonvested at April 1, 2023

Of the 669 nonvested shares outstanding at April 1, 2023, 566 are service-based RSUs and 103 are market-based PRSUs.

The fair value of the Company’s service-based RSUs was calculated based on the fair market value of the Company’s stock at the date of grant.

The fair value of the Company’s market-based PRSUs granted during fiscal years 2023 and 2022 was calculated using a Monte Carlo simulation model at the date of the grant, resulting in a weighted average grant-date fair value per share of $ 100.79 and $ 85.49 , respectively.

As of April 1, 2023 and December 31 2022, there was $ 31,644 and $ 28,653 of total unrecognized compensation cost related to restricted stock units granted under the Company’s stock plans, respectively.

That cost is expected to be recognized over a weighted average period of 1.6 years and 1.5 years for April 1, 2023 and December 31, 2022, respectively.

Other Expense, Net

1 unchanged sentence

Three Months Ended

Nine Months Ended

September 25,

Foreign currency exchange losses, net

2 unchanged sentences

Three Months Ended

Nine Months Ended

September 25,

Income before income taxes

1 unchanged sentence

Effective tax rate

The income tax provision for the three and nine months ended October 1, 2022 was computed based on the Company’s annual forecast of profit by jurisdiction and forecasted effective tax rate for the year.

The income tax provision in the 2022 periods reflected the impact of a change in U.S.

The income tax provision for the three months ended April 1, 2023 was computed based on the Company’s annual forecast of profit by jurisdiction and forecasted effective tax rate for the year.

The income tax provision for the three months ended April 1, 2023 and April 2, 2022 reflected the impact of a change in U.S.

tax law effective January 1, 2022, which requires the capitalization and amortization of research and development expenditures incurred after December 31, 2021.

The increase in the Company’s income tax provision for the three and nine months ended October 1, 2022 as compared to the three and nine months ended September 25, 2021 is primarily due to an increase in quarterly earnings, offset by an increase in the Foreign Derived Intangible Income (“FDII”) deduction, and a one-time benefit recorded for the nine months ended September 25, 2021 for a release of reserves due to expiration of the applicable statute of limitations.

The Company’s recorded effective tax rate is less than the U.S.

The decrease in the Company’s income tax provision for the three months ended April 1, 2023 as compared to the three months ended April 2, 2022 was primarily due to a decrease in quarterly earnings and an increase in the federal research and development tax credit,

offset by a decrease in the Foreign Derived Intangible Income (“FDII”) deduction.

The Company’s recorded effective tax rate for the periods presented is less than the U.S.

statutory rate primarily due to projected FDII deductions, federal research and development tax credits, and excess tax benefits associated with equity compensation.

2 unchanged sentences

The Company considers available evidence, both positive and negative, including forecasted earnings, in assessing its need for a valuation allowance.

As a result of the Company’s analysis, it concluded that it is more likely than not that a portion of its deferred tax assets will not be realized.

Therefore, the Company continues to provide a valuation allowance against certain deferred tax assets.

The Company continues to monitor available evidence and may reverse some or all of its remaining valuation allowance in future periods, if appropriate.

The Company has a recorded valuation allowance against a certain portion of its deferred tax assets of $ 10,948 for both October 1, 2022 and January 1, 2022.

The Company has a recorded valuation allowance against a certain portion of its deferred tax assets of $ 11,473 and $ 11,772 for the quarter ending April 1, 2023 and December 31, 2022, respectively.

Earnings Per Share

1 unchanged sentence

Restricted stock units, employee stock purchase grants and stock options are included in the calculation of diluted earnings per share, except when their effect would be anti-dilutive.

The Company’s basic and diluted earnings per share amounts are as follows:

Three Months Ended

Nine Months Ended

September 25,

Basic earnings per share - weighted average shares

4 unchanged sentences

Earnings per share:

Accumulated Other Comprehensive Income (Loss)

The components of accumulated other comprehensive loss, net of tax, at October 1, 2022, as well as the activity for the nine months ended October 1, 2022, were as follows:

Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss, net of tax, at April 1, 2023, as well as the activity for the three months ended April 1, 2023, were as follows:

Foreign currency

2 unchanged sentences

Accumulated other

comprehensive income (loss)

Balance at January 1, 2022

Net current period other comprehensive loss

comprehensive loss

Balance at December 31, 2022

Net current period other comprehensive income

Reclassifications

Balance at October 1, 2022

For the nine months ended October 1, 2022, tax effects on net income of amounts recorded in other comprehensive loss for net unrealized losses on available-for-sale marketable securities and foreign currency translation adjustments were $ 962 and $ 0 , respectively.

Balance at April 1, 2023

For the three months ended April 1, 2023, tax effects on net income of amounts recorded in other comprehensive loss for net unrealized gains on available-for-sale marketable securities and foreign currency translation adjustments was $ 298.

Segment Reporting and Geographic Information

1 unchanged sentence

The Company and its subsidiaries currently operate in a single operating segment:

the design, development, manufacture and support of high-

performance process control defect inspection and metrology, lithography and process control software systems used by microelectronics device manufacturers.

the design, development, manufacture and support of high-performance process control defect inspection and metrology, lithography and process control software systems used by microelectronics device manufacturers.

Therefore, the Company has one reportable segment.

The Company’s chief operating decision maker is the Chief Executive Officer (the “CEO”).

The CEO allocates resources and assesses performance of the business and other activities at the reportable segment level.

1 unchanged sentence

Three Months Ended

Nine Months Ended

September 25,

Systems and software

Total revenue

The Company’s significant operations outside the United States include sales, service and application offices in Asia and Europe.

For geographical revenue reporting, revenue is attributed to the geographic location to which the product is shipped.

1 unchanged sentence

Three Months Ended

Nine Months Ended

September 25,

Revenue from third parties:

3 unchanged sentences

The following customers accounted for 10% or more of total revenue for the indicated periods:

Nine Months Ended

September 25,

Three Months Ended

Samsung Semiconductor

Taiwan Semiconductor Manufacturing Co.

SK Hynix Inc.

Yangtze Memory Technologies Co., Ltd

Samsung Semiconductor

Share Repurchase Authorization

1 unchanged sentence

Repurchases may be made through both public market and private transactions from time to time with shares purchased being subsequently retired.

During the three and nine month periods ended October 1, 2022, the Company purchased and retired 172 thousand shares of its common stock.

The amount paid to repurchase the shares in excess of par value, including transaction costs, is recorded directly as a decrease to additional paid-in capital.

At October 1, 2022, there was $ 88,465 available for future share repurchases under this share repurchase authorization.

During the three month period ended April 1, 2023, the Company purchased and retired 46 shares of its common stock.

The amount paid to repurchase the shares in excess of par value, including transaction costs, is recorded directly as a decrease to additional paid-in capital and retained earnings.

At April 1, 2023, there was $ 31,577 available for future share repurchases under this share repurchase authorization.

Restructuring

The Company initiated a restructuring plan to streamline operations and align the Company's cost structure with its business outlook for 2023.

During the three months ended April 1, 2023, restructuring cost of $ 2,034 were recorded in operating expense for employee severance and $ 2,279 was recorded in cost of goods sold for inventory write-downs.

All employee severance costs were paid during the quarter.

The Company anticipates that these activities will continue into subsequent quarters of 2023 and anticipates recording additional restructuring charges.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

Certain statements in this Form 10-Q, or incorporated by reference in this Form 10-Q, of Onto Innovation Inc.

(referred to in this Form 10-Q, together with its consolidated subsidiaries, unless otherwise specified or suggested by the context, as the “Company,”

“Onto Innovation,”

“we,”

“our”

or “us”) may be considered “forward-looking statements”

or may be based on “forward-looking statements,”

including, but not limited to, those concerning:

our business momentum and future growth;

technology development, product introduction and acceptance of our products and services;

our manufacturing practices and ability to deliver both products and services consistent with our customers’

demands and expectations and to strengthen our market position, including our ability to source components, materials, and equipment due to supply chain delays or shortages;

our expectations of the semiconductor market outlook;

future revenue, gross profits, research and development and engineering expenses, selling, general and administrative expenses, and cash requirements;

the effects of political, economic, legal, and regulatory changes or conflicts on our global operations;

the effects of natural disasters or public health emergencies, such as the current COVID-19 pandemic, on the global economy and on our customers, suppliers, employees, and business;

our dependence on certain significant customers and anticipated trends and developments in and management plans for our business and the markets in which we operate;

our ability to be successful in managing our cost structure and cash expenditures and results of litigation.

Statements contained or incorporated by reference in this Form 10-Q that are not purely historical are forward-looking statements and are subject to safe harbors under Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995.

Forward-looking statements may be identified by words such as, but not limited to, “anticipate,”

“believe,”

“continue,”

“estimate,”

“expect,”

“intend,”

“plan,”

“should,”

“may,”

“could,”

“will,”

“would,”

“forecast,”

“project”

and words or phrases of similar meaning, as they relate to our management or us.

Forward-looking statements contained herein reflect our current expectations, assumptions and projections with respect to future events and are subject to certain risks, uncertainties and assumptions, including, but not limited to, those identified in Part II, Item 1A.

“Risk Factors”

and elsewhere in this Form 10-Q.

Actual results may differ materially and adversely from those included in such forward-looking statements.

Forward-looking statements reflect our position as of the date of this Form 10-Q and we undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Critical Accounting Policies and Estimates

The preparation of condensed consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States (“U.S.

GAAP”) requires management to make judgments, assumptions and estimates that affect the amounts reported.

Certain of these significant accounting policies are considered to be critical accounting policies, as defined below.

A critical accounting policy is defined as one that is both material to the presentation of our condensed consolidated financial statements and requires management to make difficult, subjective or complex judgments that could have a material effect on our financial condition or results of operations.

Specifically, these policies have the following attributes:

(1) we are required to make judgments and assumptions about matters that are highly uncertain at the time of the estimate;

and (2) different estimates we could reasonably have used, or changes in the estimate that are reasonably likely to occur, could have a material effect on our financial position and results of operations.

Estimates and assumptions about future events and their effects cannot be determined with certainty.

We base our estimates on historical experience and on various other assumptions believed to be applicable and reasonable under the circumstances.

These estimates may change as new events occur, as additional information is obtained and as our operating environment changes.

In addition, management is periodically faced with uncertainties, the outcomes of which are not within our control and will not be known for prolonged periods of time.

Certain of these uncertainties are discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (the “2022 Form 10-K”) filed with the Securities and Exchange Commission on February 24, 2023 in the Items entitled “Risk Factors”

and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Based on a critical assessment of our accounting policies and the underlying judgments and uncertainties affecting the application of those policies, we believe that our condensed consolidated financial statements are fairly stated in accordance with U.S.

GAAP and provide a fair presentation of our financial position and results of operations.

There have been no material changes in our critical accounting policies and estimates from the information presented in Part II, Item 7.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations,”

in the 2022 Form 10-K.

For more information, please see our critical accounting policies and estimates as previously disclosed in our 2022 Form 10-K and recent accounting pronouncements discussed in Note 1 to the Condensed Consolidated Financial Statements.

Executive Summary

We are a worldwide leader in the design, development, manufacture and support of metrology and inspection tools for the semiconductor industry, including process control tools that perform optical metrology on patterned and unpatterned wafers, wafer macro-defect inspection, including macro-inspection of both 2D and 3D wafer features, wafer substrate and panel substrate lithography systems, and process control analytical software.

Our products are primarily used by silicon wafer manufacturers, semiconductor device fabricators, and advanced packaging manufacturers operating in the semiconductor market.

Our products are also used for process control in a number of other specialty device manufacturing markets, including light emitting diodes (“LED”), vertical-cavity surface-emitting lasers (“VCSEL”), micro-electromechanical systems (“MEMS”), CMOS image sensors (“CIS”), silicon and compound semiconductor (SiC and GaN) power devices, analog devices, RF filters, data storage, and certain industrial and scientific applications.

We provide process and yield management solutions used in bare silicon wafer production and wafer processing facilities, often referred to as “front-end”

manufacturing, and advanced packaging of chips and test facilities, or “back-end”

manufacturing, through a portfolio of standalone systems for optical metrology, macro-defect inspection, packaging lithography, as well as transparent and opaque thin film measurements.

Our automated and integrated metrology systems measure critical dimensions, device structures, topography, shape, and various thin film compositions, including three-dimensional features and film thickness, as well as optical, electrical and material properties.

Our primary areas of focus include products that provide critical yield-enhancing and actionable information, which is used by microelectronic device manufacturers to improve yield and time to market of their next-generation devices.

Our systems feature sophisticated software and production-worthy automation.

In addition, our advanced process control software portfolio includes powerful solutions for standalone tools, groups of tools, and factory-wide and enterprise-wide suites to enhance productivity and achieve significant cost savings.

Our systems are backed by worldwide customer service and applications support.

The semiconductor and electronics industries have been characterized by constant technological innovations.

We believe that, over the long term, our customers will continue to invest in advanced technologies and new materials to enable smaller design rules and higher density applications that fuel demand for process control equipment.

The following table summarizes certain key financial information for the periods indicated below (in thousands, except per share and percent data):

Three Months Ended

Gross profit as a percent of revenue

Total operating expenses

Diluted earnings per share

In the fiscal quarter ended April 1, 2023 (the “April 2023 quarter”), revenue decreased 21% compared to the fiscal quarter ended December 31, 2022 (the “December 2022 quarter”), primarily due to a decline in sales to memory customers in advanced nodes applications, and foundry and power customers in specialty device and advanced packaging applications.

Gross profit as a percentage of revenue in the April 2023 quarter compared to the December 2022 quarter decreased primarily due to a decrease in revenue volume, partially offset by a favorable product mix.

Operating expenses in the April 2023 quarter compared to the December 2022 quarter were relatively flat primarily due to lower travel and project expenses, offset by restructuring charges related to employee severance.

In the first quarter of 2023, customer demand weakened due to a reduction in wafer fabrication equipment spending.

As a result, we initiated a restructuring plan that included workforce reductions and the write-down of inventory for older product lines.

We incurred a charge of $2.0 million for employee severance costs and $2.3 million for inventory write-downs of older product lines.

We anticipate that these activities will continue into subsequent quarters of 2023 and anticipate recording additional restructuring charges.

Our cash, cash equivalents and marketable securities balance increased to $583.5 million as of April 1, 2023 compared to $547.8 million as of December 31, 2022.

This increase was primarily the result of $50.1 million of cash generated from operating activities.

This source of cash was partially offset by cash of $3.2 million used for purchases of our common stock, $7.9 million used for capital expenditures and $6.3 million used for tax payments related to shares withheld to satisfy employee tax obligations in connection with the vesting of awards under share-based compensation plans.

Employee headcount as of April 1, 2023 was approximately 1,580.

We experienced supply chain constraints and inflationary pressures in 2022, and although there have been improvements in supply chain performance, we expect supply chain shortages as well as inflationary cost pressures to persist throughout fiscal 2023.

In 2022, the United States government implemented additional export regulations for U.S.

semiconductor technology sold in China.

We have applied for export licenses to continue doing business with our customers that are affected by the new export rules.

However, the new export controls have resulted in lower net sales in China for the first quarter of fiscal 2023 compared to the same period last year.

For a discussion of the risks related to the our business and operations, see Part II, Item 1A –

Risk Factors of this Form 10-Q.

Results of Operations for the Three Months Ended April 1, 2023 and April 2, 2022

Our revenue is primarily derived from the sale of our systems, software licensing, services and spare parts.

Our revenue of $199.2 million decreased 17.5% for the three months ended April 1, 2023 as compared to three months ended April 2, 2022, in which revenue totaled $241.3 million.

The following table lists, for the periods indicated, the different sources of our revenue in dollars (thousands) and as percentages of our total revenue:

Three Months Ended

Systems and software

Total revenue

Total systems and software revenue decreased $42.6 million for the three months ended April 1, 2023, as compared to the three months ended April 2, 2022, primarily due to decreases of units shipped in our metrology, inspection and lithography product lines.

The increase in parts and services revenue for the three months ended April 1, 2023, as compared to the three months ended April 2, 2022, was primarily due to servicing a larger installed base.

Parts and services revenue is generated from part sales, maintenance service contracts, and system upgrades, as well as time and material billable service calls.

Gross Profit.

Our gross profit has been and will likely continue to be affected by a variety of factors, including manufacturing efficiencies, provision for excess and obsolete inventory, pricing by competitors or suppliers, new product introductions, production volume, customization and reconfiguration of systems, international and domestic sales mix, system and software product mix and parts and service margins.

Our gross profit was $105.0 million and $131.0 million for the three months ended April 1, 2023 and April 2, 2022, respectively.

Our gross profit represented 52.7% and 54.3% of our revenue for the three months ended April 1, 2023 and April 2, 2022, respectively.

The decrease in gross profit as a percentage of revenue for the three months ended April 1, 2023 as compared to the three months ended April 2, 2022 was primarily due to lower sales volume and charges related to excess and obsolete inventory for older product lines.

Operating Expenses.

Our operating expenses consist of:

Research and Development .

We believe that it is critical to continue to make substantial investments in research and development to ensure the availability of innovative technology that meets the current and projected requirements of our customers’

most advanced designs.

We have maintained and intend to continue our commitment to investing in research and development in order to continue to offer new products and technologies.

Accordingly, we devote a significant portion of our technical, management and financial resources to research and development programs.

Research and development expenditures consist primarily of salaries and related expenses of employees engaged in research, design and development activities.

They also include consulting fees, the cost of related supplies and legal costs to defend our patents.

Our research and development expenses were $27.2 million and $26.3 million for the three months ended April 1, 2023 and April 2, 2022, respectively.

The increases in research and development expenses for the three months ended April 1, 2023, as compared to the three months ended April 2, 2022, were primarily due to increased compensation costs and material expenses for new product initiatives, partially offset by decreased outside service expenses.

Sales and Marketing .

Sales and marketing expenses are primarily comprised of salaries, commissions and related costs for sales and marketing personnel, as well as other non-personnel related expenses.

Our sales and marketing expenses of $15.6 million remained flat for the three months ended April 1, 2023 as compared to the three months ended April 2, 2022.

General and Administrative .

General and administrative expenses are primarily comprised of salaries and related costs for corporate and administrative personnel, as well as other non-personnel related expenses.

Our general and administrative expenses were $19.2 million and $16.5 million for the three months ended April 1, 2023 and April 2, 2022, respectively.

The increases in general and administrative expenses for the three months ended April 1, 2023, as compared to the three months ended April 2, 2022, were primarily due to restructuring charges for employee severance costs and increased merger and acquisition related expenses.

Amortization of Identifiable Intangible Assets .

Amortization of identifiable intangible assets remained consistent period over period and was $13.8 million for both the three months ended April 1, 2023 and April 2, 2022.

Interest income, net .

Net interest income was $3.4 million and $0.4 million for the three months ended April 1, 2023 and April 2, 2022, respectively.

The increase in net interest income for the three months ended April 1, 2023, as compared to the three months ended April 2, 2022, was due to higher average marketable securities balances and interest rates during the 2023 period.

Other expense, net .

Net other expense was $0.3 million and $0.2 million for the three months ended April 1, 2023 and April 2, 2022, respectively.

The increase in other expense, net for the three months ended April 1, 2023, as compared to the three months ended April 2, 2022, was primarily due to higher foreign exchange losses during the 2023 period.

Income Taxes .

We recorded an income tax provision of $3.1 million and $5.6 million for the three months ended April 1, 2023 and April 2, 2022, respectively.

Our effective tax rate of 10% for the three months ended April 1, 2023, differs from the statutory rate of 21%, primarily due to (i) research and development tax credits, (ii) the deduction related to foreign derived intangible income (“FDII”), and (iii) excess tax benefits associated with equity compensation.

Our effective tax rate of 9% for the three months ended April 2, 2022, differs from the statutory rate of 21%, primarily due to (i) foreign and research and development tax credits, (ii) the deduction related to FDII, and (iii) excess tax benefits associated with equity compensation.

Our future effective income tax rate depends on various factors, such as possible changes in tax legislation, the geographic composition of our pre-tax income, the amount of our pre-tax income as business activities fluctuate, non-deductible expenses incurred in connection with business combinations, and research and development tax credits as a percentage of aggregate pre-tax income.

We currently have a partial valuation allowance recorded for certain foreign and state loss and credit carryforwards where the realizability of such deferred tax assets is substantially in doubt.

Each quarter we assess the likelihood that we will be able to recover our deferred tax assets primarily relating to state research and development credits.

We consider available evidence, both positive and negative, including historical levels of income, expectations and risks associated with estimates of future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance.

As a result of our analysis, we concluded that it is more likely than not that a portion of our net deferred tax assets will not be realized.

Therefore, we continue to provide a valuation allowance against certain net deferred tax assets.

We continue to monitor available evidence and may reverse some or all of the valuation allowance in future periods, if appropriate.

Liquidity and Capital Resources

At April 1, 2023, we had $583.5 million of cash, cash equivalents and marketable securities and $1,006.7 million in working capital.

At December 31, 2022, we had $547.8 million of cash, cash equivalents and marketable securities and $974.3 million in working capital.

Net cash and cash equivalents provided by operating activities for the three months ended April 1, 2023 and April 2, 2022 were $50.1 million and $45.5 million, respectively.

The net cash and cash equivalents provided by operating activities during the three months ended April 1, 2023 resulted primarily from net income, adjusted to exclude the effect of non-cash operating charges, of $51.1 million, partially offset by a decrease in cash provided from operating assets and liabilities of $1.0 million, primarily due to an increase in inventories and a decrease in accrued liabilities, offset by a decrease in accounts receivable.

The net cash and cash equivalents provided by operating activities during the three months ended April 2, 2022 resulted primarily from net income, adjusted to exclude the effect of non-cash operating charges, of $70.8 million, partially offset by a decrease in cash provided from operating assets and liabilities of $25.4 million, primarily due to increases in inventories and accounts receivable.

Net cash and cash equivalents provided by investing activities for the three months ended April 1, 2023 was $13.2 million.

For the three months ended April 2, 2022, investing activities used net cash and cash equivalents of $33.3 million.

During the three months ended April 1, 2023, net cash and cash equivalents provided by investing activities included proceeds from maturities and sales of marketable securities of $109.7 million, partially offset by purchases of marketable securities of $88.6 million and capital expenditures of $7.9 million.

During the three months ended April 2, 2022, net cash and cash equivalents used in investing activities included purchases of marketable securities of $97.5 million and capital expenditures of $2.5 million, partially offset by proceeds from maturities and sales of marketable securities of $66.7 million.

Net cash and cash equivalents used in financing activities for the three months ended April 1, 2023 and April 2, 2022 were $9.5 million and $7.6 million, respectively.

During the three months ended April 1, 2023, financing activities used cash primarily for tax payments related to shares withheld to satisfy employee tax obligations in connection with the vesting of awards under share-based compensation plans of $6.3 million and repurchases of common stock of $3.2 million.

During the three months ended April 2, 2022, financing activities used cash to primarily pay taxes related to shares withheld for share-based compensation plans of $5.3 million and pay contingent consideration for acquired business of $2.3 million, partially offset by proceeds from sales of shares through share-based compensation plans of $6.0 thousand.

In November 2020, the Onto Innovation Board of Directors approved a share repurchase authorization, which allows the Company to repurchase up to $100 million worth of shares of its common stock.

Repurchases may be made through both public market and private transactions from time to time with shares purchased being subsequently retired.

During the three months ended April 1, 2023, we repurchased 46 thousand shares of common stock under this repurchase authorization and those shares were subsequently retired.

As of April 1, 2023, there was $31.6 million available for future share repurchases under this share repurchase authorization.

We have a credit agreement with a bank that provides for a line of credit that is secured by the marketable securities we have with the bank.

We are permitted to borrow up to 70% of the value of eligible securities held at the time the line of credit is accessed.

As of April 1, 2023, the available line of credit was approximately $100.0 million with an available interest rate of 6.5%.

The credit agreement is available to us until such time that either party terminates the arrangement at its discretion.

As of the date of this filing, we have not utilized the line of credit.

Our future capital requirements will depend on many factors, including the timing and amount of our revenue and our investment decisions, which will affect our ability to generate additional cash.

We expect that our existing cash, cash equivalents, marketable securities and availability under our line of credit will be sufficient to meet our anticipated cash requirements for working capital, capital expenditures and other cash needs for the next 12 months following the filing of this Form 10-Q.

Thereafter, if cash generated from operations and financing activities is insufficient to satisfy our working capital requirements, we may seek additional funding through bank borrowings, sales of securities or other means.

However, the ongoing impacts of the COVID-19 pandemic have in the past caused disruption in the capital markets and were they to do the same in the future, may have an impact on our ability to access such additional funding.

In addition, a reduction in or volatility with respect to our stock price or a general market downturn could materially impact our ability to sell securities on favorable terms or at all.

There can be no assurance that we will be able to raise any such capital on terms acceptable to us or at all.

Quantitative and Qualitati ve Disclosures About Market Risk

There have been no material changes in market risk from the information presented in Part II, Item 7A.

“Quantitative and Qualitative Disclosures About Market Risk,”

in the 2022 Form 10-K.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements