What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-04 compared with 2021-08-05 · 75 added, 67 removed, 139 unchanged (51% of the section changed)

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Actual results may differ materially from those included in such forward-looking statements for a number of reasons including, but not limited to, the following:

effects of the COVID-19 pandemic and the measures being taken to limit the spread of COVID-19, including impact on demand for our products, reduction in production levels, R&D activities, and qualification activities with our customers, increased costs, disruptions to our supply chain and a decrease in availability under our credit agreement;

the severity, including the virulence and transmissibility, of newly identified strains of COVID-19, the timing, availability, efficacy and public utilization of vaccines for COVID-19;

effects of the COVID-19 pandemic including measures being taken to limit the spread of COVID-19, the severity, including the virulence and transmissibility, of newly identified strains of COVID-19, the timing, availability, efficacy and public utilization of vaccines for COVID-19 which have an impact on demand for our products, reduction in production levels, R&D activities, and qualification activities with our customers, increased costs, disruptions to our supply chain and a decrease in availability under our credit agreement;

cybersecurity incidents could result in business disruption, theft of intellectual property, the loss of or inability to access valuable information, essential data or assets or subject us to litigation or regulatory enforcement actions associated with our obligations related to matters such as privacy and data protection;

variations in the level of orders which can be affected by general economic conditions;

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the imposition of tariffs or trade restrictions and costs, burdens and restrictions associated with other governmental actions;

the ability to successfully complete the integration of the businesses of Rudolph Technologies, Inc.

the ability to successfully complete and/or unanticipated difficulties or expenditures in the integration of the businesses of Rudolph Technologies, Inc.

(“Rudolph”) and Nanometrics Incorporated (“Nanometrics”) within the expected time frame and to maintain the anticipated synergies and value-creation contemplated by the merger of Rudolph and Nanometrics (the “2019 Merger”);

unanticipated difficulties or expenditures relating to the completion of the integration of the Rudolph and Nanometrics businesses;

the response of business partners and retention as a result of the 2019 Merger;

the diversion of management time in connection with the integration;

the “Risk Factors” set forth in Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 26, 2020 (the “2020 Form 10-K”), in Part II, Item 1A of the Company’s Quarterly Report on Form 10-Q for the quarter ended March 27, 2021 (the “Q1 2021Form 10-Q”) and in Part II, Item 1A of this Form 10-Q.

You should carefully review the cautionary statements and “Risk Factors” contained in the 2020 Form 10-K, the Q1 2021 Form 10-Q and this Form 10-Q.

the “Risk Factors” set forth in Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 26, 2020 (the “2020 Form 10-K”), in Part II, Item 1A of the Company’s Quarterly Report on Form 10-Q for the quarter ended March 27, 2021 (the “Q1 2021 Form 10-Q”), in Part II, Item 1A of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 26, 2021 (the “Q2 2021 Form 10-Q”) and in Part II, Item 1A of this Form 10-Q.

You should carefully review the cautionary statements and “Risk Factors” contained in the 2020 Form 10-K, the Q1 2021 Form 10-Q, the Q2 2021 Form 10-Q and this Form 10-Q.

You should also review any additional disclosures and cautionary statements and “Risk Factors” we include from time to time in our Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other filings we make with the Securities and Exchange Commission (the “SEC”).

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We are a worldwide leader in the design, development, manufacture and support of process control tools that perform macro-defect inspection and metrology, lithography systems, and process control analytical software used by semiconductor and advanced packaging device manufacturers .

We deliver comprehensive solutions throughout the semiconductor fabrication process with our families of proprietary products that provide critical yield-enhancing information, enabling microelectronic device manufacturers to drive down costs and time to market of their devices.

We deliver comprehensive solutions throughout the semiconductor fabrication process with our family of proprietary products that provide critical yield-enhancing information, enabling microelectronic device manufacturers to drive down costs and time to market of their devices.

We provide process and yield management solutions used in both wafer processing facilities, often referred to as “front-end,” and in device packaging and test facilities, commonly referred to as “back-end” manufacturing.

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Three Months Ended

September 25,

September 26,

Gross profit as a percent of revenue

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Diluted earnings per share

In the fiscal quarter ended June 26, 2021 (the “June 2021 quarter”), revenue increased 14.2% compared to the fiscal quarter ended March 27, 2021 (the “March 2021 quarter”), primarily due to an increase in sales in our specialty device markets, mainly from our RF and Power customers, partially offset by a decline in sales in our advanced nodes markets .

The increase in gross margin as a percentage of revenue in the June 2021 quarter compared to the March 2021 quarter was primarily driven by shift in sales to products with slightly higher margins.

The increase in operating expenses in the June 2021 quarter compared to the March 2021 quarter was mainly an increase in employee-related expenses.

Our cash, cash equivalents and marketable securities balance increased to $410.8 million at the end of the June 2021 quarter compared to $373.7 million at the end of the fiscal quarter ended December 26, 2020.

In the fiscal quarter ended September 25, 2021 (the “September 2021 quarter”), revenue increased 3.7% compared to the fiscal quarter ended June 26, 2021 (the “June 2021 quarter”), primarily due to an increase in sales to foundry customers for advanced nodes applications, partially offset by a decline in sales to memory customers.

Gross margin as a percentage of revenue in the September 2021 quarter compared to the June 2021 quarter was relatively flat primarily driven by shift in sales to products with slightly higher margins, partially offset charges for excess and obsolete inventory and higher freight costs.

The decrease in operating expenses in the September 2021 quarter compared to the June 2021 quarter was mainly driven by a decrease in employee-related expenses as a result of higher variable compensation plan costs recorded in the June 2021 quarter.

Our cash, cash equivalents and marketable securities balance increased to $461.6 million at the end of the September 2021 quarter compared to $373.7 million at the end of the fiscal quarter ended December 26, 2020.

This increase was primarily the result of $126.3 million of cash generated from operating activities.

This source of cash was partially offset by net cash of $26.8 million used for the purchase of Inspectrology and $11.2 million used for capital expenditures.

Employee headcount as of June 26, 2021 was approximately 1,294.

Employee headcount as of September 25, 2021 was approximately 1,349.

Business Combination.

On December 31, 2020, the Company acquired Inspectrology, LLC, a leading supplier of overlay metrology for controlling lithography and etch processes in the compound semiconductor market.

The purchase consideration consisted of $27,015 in cash paid at closing and a potential earnout of $10,000, subject to achievement of certain revenue targets earned for fiscal year 2021 and fiscal year 2022.

Trade Restriction and Emerging Regulation.

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Department of Commerce has imposed new export licensing requirements related to China-based customers alleged to engage in military end uses, as well as requiring that an export license be obtained for the purchase and use of certain semiconductor capital equipment based on U.S.

As of June 26, 2021, we currently have purchase orders of approximately $7.3 million from customers in China which are affected by these restrictions.

As of September 25, 2021, we currently have purchase orders of approximately $4.9 million from customers in China which are affected by these restrictions.

We have filed for licenses with the U.S.

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In addition, companies in China are being considered as potential military suppliers and these new additions may have a material impact to our sales in China.

We continue to monitor the trade related actions governments may take during 2021.

We continue to monitor the trade related actions governments may take during the remainder of 2021.

Impact of the COVID-19 Pandemic on Our Business .

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The ultimate extent to which COVID-19 will impact our business depends on future developments, which are highly uncertain and very difficult to predict, including the effectiveness and utilization of vaccines for COVID-19 and its variants, new information that may emerge concerning the severity of COVID-19 and its variants, and actions to contain or limit their spread.

As of August 5, 2021, our operations have been impacted by our pandemic response, as described below, and the global nature of our workforce and our operations, but we have not experienced significant financial impact directly related to the pandemic.

As of November 4, 2021, our operations have been impacted by our pandemic response, as described below, and the global nature of our workforce and our operations, but we have not experienced significant financial impact directly related to the pandemic.

We have prioritized the health and safety of our employees and customers in our pandemic response.

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Our operations at these offices are subject to various governmental directives and, as a result thereof, we have instituted a work-from-home policy for these employees to the extent practical.

Where our essential employees are required to continue to report to work to perform their responsibilities, we have implemented staggered shifts or otherwise adjusted work schedules to maximize our operating capacity while adhering to applicable restrictions, including recommended

distancing between persons.

We have also provided our essential employees with appropriate protective equipment and have enhanced and increased cleanings at our facilities.

At this time, we have not experienced any reduction in productivity, though we have incurred certain costs related to the implementation of these policies and practices.

In addition, we have enhanced our email screening and cyber monitoring of all of our devices to further support our work from home policy.

As certain countries have relaxed restrictions over the past few months, we have restarted certain activities in accordance with local guidelines.

We may take further actions that we determine to be in the best interests of our employees or as may be required by federal, state, or local authorities.

We cannot at this time predict the impact that the COVID-19 pandemic will have on our financial condition and operations, although we are continuing to monitor our supply chain and orders from customers for COVID-19-related changes.

Disruptions to our supply chain in connection with the sourcing of materials, equipment and engineering support, and services from geographic areas that have been impacted by COVID-19 may pose risks to our business, results of operations and financial condition.

In this time of uncertainty as a result of the COVID-19 pandemic, we are continuing to serve our customers while taking every precaution to provide a safe work environment for our employees and customers.

To date, the COVID-19 pandemic has disrupted the way that we conduct business but has not had a material adverse impact on our operations.

However, the extent of the pandemic’s effect on our operational and financial performance will depend in large part on future developments, which cannot be predicted with confidence at this time.

We have not experienced significant delays in customer deliveries, but we are impacted by the global shortage in electronic components and our supply chain is strained in some cases as the availability of materials, logistics and freight options are challenging in many jurisdictions.

Demand for our products was consistent with or exceeded our expectations for the third quarter of fiscal 2021.

However, further disruptions to our supply chain in connection with the sourcing of materials, equipment and engineering support, and services from geographic areas that have been impacted by COVID-19 may pose risks to our business, results of operations and financial condition.

The extent of the pandemic’s effect on our operational and financial performance will depend in large part on future developments, which cannot be predicted with confidence at this time.

Future developments include the duration, scope and severity of the pandemic, the severity of newly identified strains of COVID-19, the actions taken to contain or mitigate its impact, such as the extent of restrictions on gatherings and travel, the impact on governmental programs and budgets, the development, administration, efficacy and public utilization of treatments and vaccines, and the resumption of widespread economic activity.

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Although the inherent uncertainty of the unprecedented and rapidly evolving crisis makes it difficult to predict with any confidence the likely impact on our future operations, the COVID-19 pandemic could have a material adverse impact on our consolidated business, results of operations and financial condition.

For a discussion of certain risks related to the international nature of our business and our operations and the COVID-19 pandemic, see Part II, Item 1A – Risk Factors of this Form 10-Q, Part II, Item 1A – Risk Factors of our Q1 2021 Form 10-Q and Part I, Item 1A – Risk Factors of our 2020 Form 10-K.

Results of Operations for the Three and Six Months Ended June 26, 2021 and June 27, 2020

For a discussion of certain risks related to the international nature of our business and our operations and the COVID-19 pandemic, see Part II, Item 1A – Risk Factors of this Form 10-Q, Part II, Item 1A – Risk Factors of our Q1 2021 Form 10-Q, Part II, Item 1A – Risk Factors of our Q2 2021 Form 10-Q and Part I, Item 1A – Risk Factors of our 2020 Form 10-K.

Results of Operations for the Three and Nine Months Ended September 25, 2021 and September 26, 2020

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

Our revenue of $193.4 million increased 43.3% for the three months ended June 26, 2021 as compared to the same period in 2020, in which revenue totaled $134.9 million.

For the six month periods ended June 26, 2021 and June 27, 2020, our revenue totaled $362.7 million and $274.9 million, respectively, representing a year-over-year increase of 31.9%.

Our revenue of $200.6 million increased 58.6% for the three months ended September 25, 2021 as compared to the same period in 2020, in which revenue totaled $126.5 million.

For the nine-month periods ended September 25, 2021 and September 26, 2020, our revenue totaled $563.3 million and $401.4 million, respectively, representing a year-over-year increase of 40.3%.

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

Six Months Ended

Nine Months Ended

September 25,

September 26,

September 25,

September 26,

Systems and software

Total revenue

Total systems and software revenue increased $81.1 million for the six months ended June 26, 2021 as compared to the six months ended June 27, 2020 primarily due to an increase of units shipped in our metrology and inspection product lines.

The year-over-year increase in parts and services revenue in absolute dollars from the six months ended June 27, 2020 to the six months ended June 26, 2021 was primarily due to servicing a larger installed base.

Total systems and software revenue increased $154.3 million for the nine months ended September 25, 2021 as compared to the nine months ended September 26, 2020 primarily due to an increase of units shipped in our metrology and inspection product lines.

The year-over-year increase in parts and services revenue in absolute dollars from the nine months ended September 26, 2020 to the nine months ended September 25, 2021 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 continue to be affected by a variety of factors, including inventory step-up from purchase accounting, 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 $105.5 million and

$195.9 million for the three and six months ended June 26, 2021 , respectively, as compared to $71.6 million and $134.2 million for the three and six months ended June 27, 2020, respectively.

Our gross profit represented 54.5% and 54.0% of our revenue for the three and six months ended June 26, 2021 , respectively, and 53.0% and 48.8% for the three and six months ended June 27, 2020, respectively.

The increase in gross profit as a percentage of revenue for the six months ended June 26, 2021 , as compared to the six months ended June 27, 2020, is primarily due to charges to cost of goods sold of $9.9 million in the 2020 period for the sale of inventory written-up to fair value upon the 2019 Merger and strengthening product margins across several product lines.

Our gross profit has been and will likely continue to be affected by a variety of factors, including inventory step-up from purchase accounting, 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 $109.4 million and $305.3 million for the three and nine months ended September 25, 2021, respectively, as compared to $68.9 million and $203.1 million for the three and nine months ended September 26, 2020, respectively.

Our gross profit represented 54.5% and 54.2% of our revenue for the three and nine months ended September 25, 2021, respectively, and 54.5% and 50.6% for the three and nine months ended September 26, 2020, respectively.

The increase in gross profit as a percentage of revenue for the nine months ended September 25, 2021, as compared to the nine months ended September 26, 2020, is primarily due to charges to cost of goods sold of $9.9 million in the 2020 period for the sale of inventory written-up to fair value upon the 2019 Merger and strengthening product margins across several product lines.

Operating Expenses.

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

Our research and development expenses were $25.5 million and $47.5 million for the three and six months ended June 26, 2021, respectively, as compared to $22.2 million and $43.1 million for the three and six months ended June 27, 2020, respectively.

The year-over-year dollar increase for the six month period ended June 26, 2021 as compared to the six month period ended June 27, 2020 was primarily due to an increase in new product initiatives.

Our research and development expenses were $23.8 million and $71.3 million for the three and nine months ended September 25, 2021, respectively, as compared to $19.7 million and $62.8 million for the three and nine months ended September 26, 2020, respectively.

The year-over-year dollar increase for the nine-month period ended September 25, 2021 as compared to the nine-month period ended September 26, 2020 was primarily due to an increase in new product initiatives.

Sales and Marketing .

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

Our sales and marketing expenses were $15.4 million and $28.5 million for the three and six months ended June 26, 2021, respectively, as compared to $11.9 million and $24.9 million for the three and six months ended June 27, 2020, respectively.

The year-over-year increase in sales and marketing expenses for the six month period ended June 26, 2021 as compared to the six month period ended June 27, 2020 was primarily due to increased variable compensation plan costs.

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 were $12.9 million and $41.4 million for the three and nine months ended September 25, 2021, respectively, as compared to $11.9 million and $36.9 million for the three and nine months ended September 26, 2020, respectively.

The year-over-year increase in sales and marketing expenses for the nine-month period ended September 25, 2021 as compared to the nine-month period ended September 26, 2020 was primarily due to increased variable compensation plan costs.

General and Administrative .

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

Our general and administrative expenses were $16.3 million and $31.8 million for the three and six months ended June 26, 2021, respectively, as compared to $15.9 million and $36.1 million for the three and six months ended June 27, 2020, respectively.

The year-over-year dollar decrease in general and administrative expenses for the six month period ended June 26, 2021 as compared to the six month period ended June 27, 2020 was primarily due to higher compensation expense in the 2020 period related to restructuring charges as a result of the 2019 Merger.

Our general and administrative expenses were $16.5 million and $48.4 million for the three and nine months ended September 25, 2021, respectively, as compared to $14.4 million and $50.4 million for the three and nine months ended September 26, 2020, respectively.

The year-over-year dollar decrease in general and administrative expenses for the nine-month period ended September 25, 2021 as compared to the nine-month period ended September 26, 2020 was primarily

due to higher compensation expense in the 2020 period related to restructuring charges as a result of the 2019 Merger.

Amortization of Identifiable Intangible Assets .

Amortization of identifiable intangible assets was $12.3 million and $24.7 million for the three and six months ended June 26, 2021, respectively, as compared to $13.7 million and $27.4 million for the same periods in 2020.

The year-over-year decrease in amortization expense for the six month period ended June 26, 2021 as compared to the six month period ended June 27, 2020 was due to certain intangible assets becoming fully amortized during this period, partially offset by amortization for the business acquired in fiscal 2021.

Amortization of identifiable intangible assets was $13.0 million and $37.7 million for the three and nine months ended September 25, 2021, respectively, as compared to $13.6 million and $41.1 million, respectively, for the same periods in 2020.

The year-over-year decrease in amortization expense for the nine-month period ended September 25, 2021 as compared to the nine-month period ended September 26, 2020 was due to certain intangible assets becoming fully amortized during this period, partially offset by amortization in the 2021 period for the Inspectrology acquisition.

Interest income, net .

Net interest income was $0.3 million and $0.7 million for the three and six months ended June 26, 2021, respectively, as compared to $0.7 million and $1.9 million for the same periods in 2020.

The decrease in net interest income for the six months ended June 26, 2021 as compared to the six months ended June 27, 2020 was due to lower interest rates during the 2021 period.

Net interest income was $0.2 million and $0.9 million for the three and nine months ended September 25, 2021, respectively, as compared to $0.5 million and $2.4 million, respectively, for the same periods in 2020.

The decrease in net interest income for the nine months ended September 25, 2021 as compared to the nine months ended September 26, 2020 was due to lower interest rates during the 2021 period.

Other expense, net .

Net other expense was $0.3 million and $1.5 million for the three and six months ended June 26, 2021, as compared to $1.2 million for both the three and six months ended June 27, 2020.

The increase in other expense, net for the six months ended June 26, 2021 as compared to the six months ended June 27, 2020 was primarily due to higher foreign exchange losses during the 2021 period.

Net other expense was $0.3 million and $1.8 million, respectively, for the three and nine months ended September 25, 2021, as compared to $0.9 million and $2.1 million, respectively, for the three and nine months ended September 26, 2020.

The decrease in other expense, net for the nine months ended September 25, 2021 as compared to the nine months ended September 26, 2020 was primarily due to higher foreign exchange losses during the 2020 period.

Income Taxes .

We recorded an income tax provision of $0.9 million and $3.4 million for the three and six months ended June 26, 2021, respectively, as compared to income tax benefit of $6 thousand and income tax provision of $0.4 million for the same period in 2020.

Our effective tax rate of 5.4% differs from the statutory rate of 21% for the six months ended June 26, 2021 primarily due to (i) research and development tax credits, (ii) the deduction related to foreign derived intangible income (FDII), (iii) excess tax benefits associated with equity compensation, and (iv) a release of reserves due to expiration of the

applicable statute of limitations.

Our effective tax rate of 12% differs from the statutory rate of 21% for the six months ended June 27, 2020, primarily due to (i) changes in mix of forecasted earnings by jurisdiction, (ii) computed research and development credits on forecasted earning levels, and (iii) a one-time provision for additional withholding tax related to a dividend distribution from the Company’s Korea subsidiary

We recorded an income tax provision of $6.6 million and $10.0 million, respectively, for the three and nine months ended September 25, 2021 as compared to income tax provision of $0.8 million and $1.2 million, respectively, for the same periods in 2020.

Our effective tax rate of 10% differs from the statutory rate of 21% for the nine months ended September 25, 2021 primarily due to (i) research and development tax credits, (ii) the deduction related to foreign derived intangible income (FDII), (iii) excess tax benefits associated with equity compensation, and (iv) a release of reserves due to expiration of the applicable statute of limitations.

Our effective tax rate of 10% differs from the statutory rate of 21% for the nine months ended September 26, 2020, primarily due to (i) the deduction related to foreign derived intangible income (FDII), (ii) research and development tax credits, and (iii) a one-time provision for additional withholding tax related to a dividend distribution from the Company’s Korea subsidiary

Our future effective income tax rate depends on various factors, such as possible further 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.

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Liquidity and Capital Resources

At June 26, 2021, we had $410.8 million of cash, cash equivalents and marketable securities and $678.5 million in working capital.

At September 25, 2021, we had $461.6 million of cash, cash equivalents and marketable securities and $736.9 million in working capital.

At December 26, 2020, we had $373.7 million of cash, cash equivalents and marketable securities and $611.6 million in working capital.

Net cash and cash equivalents provided by operating activities for the six months ended June 26, 2021 and June 27, 2020 were $76.4 million and $46.9 million, respectively.

The net cash and cash equivalents provided by operating activities during the six months ended June 26, 2021 resulted primarily from net income, adjusted to exclude the effect of non-cash operating charges, of $108.1 million, partially offset by a decrease in cash provided from operating assets and liabilities of $31.7 million.

The net cash and cash equivalents provided by operating activities during the six months ended June 27, 2020 resulted primarily from net income, adjusted to exclude the effect of non-cash operating charges of $59.8 million, partially offset by a decrease in cash provided from operating assets and liabilities of $12.9 million.

Net cash and cash equivalents used in investing activities for the six months ended June 26, 2021 was $76.4 million, while during the six months ended June 27, 2020 investing activities provided $7.3 million.

During the six months ended June 26, 2021, net cash and cash equivalents used in investing activities included purchases of marketable securities of $142.1 million, purchase of a business of $26.8 million and capital expenditures of $9.6 million, partially offset by proceeds from sales of marketable securities of $102.0 million.

During the six months ended June 27, 2020, net cash and cash equivalents provided by investing activities included proceeds from sales of marketable securities of $147.5 million and cash received from convertible note receivable of $2.8 million, partially offset by purchases of marketable securities of $140.4 million and capital expenditures of $2.6 million.

Net cash and cash equivalents used in financing activities were $3.3 million and $55.5 million for the six months ended June 26, 2021 and June 27, 2020, respectively.

During the six months ended June 26, 2021, financing activities used cash for tax payments related to shares withheld for share-based compensation plans of $3.2 million.

Net cash and cash equivalents provided by operating activities for the nine months ended September 25, 2021 and September 26, 2020 were $126.3 million and $72.9 million, respectively.

The net cash and cash equivalents provided by operating activities during the nine months ended September 25, 2021 resulted primarily from net income, adjusted to exclude the effect of non-cash operating charges of $166.8 million, partially offset by a decrease in cash provided from operating assets and liabilities of $40.5 million, primarily due to increases in inventories and accounts receivable.

The net cash and cash equivalents provided by operating activities during the nine months ended September 26, 2020 resulted primarily from net income, adjusted to exclude the effect of non-cash operating charges of $91.2

million, partially offset by a decrease in cash provided from operating assets and liabilities of $18.3 million, primarily related to increases in inventories and accounts receivable.

Net cash and cash equivalents used in investing activities for the nine months ended September 25, 2021 and September 26, 2020 were $110.9 million and $49.7 million, respectively.

During the nine months ended September 25, 2021, net cash and cash equivalents used in investing activities included purchases of marketable securities of $250.4 million, purchase of a business of $26.8 million and capital expenditures of $11.2 million, partially offset by proceeds from sales of marketable securities of $177.5 million.

During the nine months ended September 26, 2020, net cash and cash equivalents provided by investing activities included purchases of marketable securities of $250.9 million and capital expenditures of $3.4 million, partially offset by proceeds from sales of marketable securities of $201.8 million and cash received from convertible note receivable of $2.8 million.

Net cash and cash equivalents used in financing activities were $0.4 million and $53.1 million for the nine months ended September 25, 2021 and September 26, 2020, respectively.

During the nine months ended September 25, 2021, financing activities used cash for tax payments related to shares withheld for share-based compensation plans of $6.8 million.

This use of cash was primarily offset by proceeds from sales of shares through share-based compensation plans of $6.4 million.

During the six months ended June 27, 2020, financing activities used cash for the purchase of shares of our common stock under a share repurchase authorization of $52.0 million and tax payments related to shares withheld for share-based compensation plans of $3.3 million and payment of contingent consideration for acquired business of $0.4 million, partially offset by proceeds from sales of shares through share-based compensation plans of $0.2 million.

During the nine months ended September 26, 2020, financing activities used $52.0 million in cash for the purchase of shares of our common stock under a share repurchase authorizations and tax payments of $3.5 million related to shares withheld for share-based compensation plans and payment of $0.4 million in contingent consideration for acquired business, partially offset by proceeds of $2.8 million from sales of shares through share-based compensation plans.

From time to time, we evaluate whether to acquire new or complementary businesses, products and/or technologies.

We may fund all of or a portion of the price of these investments or acquisitions in cash, stock, or a combination of cash and stock.

On December 31, 2020, the Company acquired Inspectrology, a leading supplier of overlay metrology for controlling lithography and etch processes in the compound semiconductor market for $27,015 in cash and a potential earnout of $10,000, subject to the achievement of certain revenue targets earned for fiscal 2021 and 2022.

On December 31, 2020, the Company acquired Inspectrology, LLC for $27,015 in cash and a potential earnout of $10,000, subject to the achievement of certain revenue targets earned for fiscal 2021 and 2022.

I n November 2020, the Onto Innovation Board of Directors approved a new 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.

At June 26, 2021, there was $100 million available for future share repurchases.

At September 25, 2021, there was $100 million available for future share repurchases.

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 June 26, 2021, the available line of credit was approximately $99.4 million with an available interest rate of 1.8%.

As of September 25, 2021, the available line of credit was approximately $110.9 million with an available interest rate of 1.8%.

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

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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.

Market conditions due to the COVID-19 pandemic may have an impact on our ability to access such additional funding.

Our borrowing capacity under our existing line of credit is tied to the value of eligible securities held at the time of borrowing, which may be negatively impacted by market conditions due to COVID-19 and government responses thereto.

Market conditions due to the COVID-19 pandemic or other factors 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 the general market downturn could materially impact our ability to sell securities on favorable terms or at all.

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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 2. Management’s Discussion and Analysis