What changed in this filing

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Item 1. Financial Statements

2022-11-10 compared with 2022-08-09 · 103 added, 51 removed, 456 unchanged (25% of the section changed)

4 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 25,

Cost of revenue

16 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 25,

Other comprehensive loss, net of tax:

39 unchanged sentences

(In thousands)

Six Months Ended

Nine Months Ended

September 25,

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

6 unchanged sentences

Proceeds from maturities and sales of marketable securities

Purchase of business, net of cash acquired

Acquisitions, net of cash acquired

Purchases of property, plant and equipment

1 unchanged sentence

Cash flows from financing activities:

Purchases and retirement of common stock

Tax payments related to shares withheld for share-based compensation plans

3 unchanged sentences

Effect of exchange rate changes on cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Net increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

23 unchanged sentences

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

15 unchanged sentences

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

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

4 unchanged sentences

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,” or “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.

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 six months ended July 2, 2022 are not necessarily indicative of results to be expected for the entire year or any future periods.

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.

2 unchanged sentences

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 ends on October 1, 2022.

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.

8 unchanged sentences

Adoption of Accounting Standards

There have been no recent accounting pronouncements or changes in accounting pronouncements during the six months ended July 2, 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.

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

1 unchanged sentence

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.

As of January 1, 2022, $ 2,287 of the earnout has been achieved and was recorded in operating expenses.

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 July 2, 2022, the Company has accrued $ 2,178 for the potential earnout.

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 .

11 unchanged sentences

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 July 2, 2022 and January 1, 2022:

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:

Fair Value Measurements Using

5 unchanged sentences

Unobservable Inputs

October 1, 2022

Available-for-sale debt securities:

22 unchanged sentences

Marketable Securities

At July 2, 2022 and January 1, 2022, marketable securities are categorized as follows:

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

Amortized Cost

1 unchanged sentence

Gross Unrealized Holding Losses

October 1, 2022

Municipal notes and bonds

11 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 July 2, 2022 and January 1, 2022:

October 1, 2022

January 1, 2022

6 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 six months ended July 2, 2022 and January 1, 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 July 2, 2022 and January 1, 2022 are temporary in nature.

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 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 July 2, 2022 and January 1, 2022:

In Unrealized Loss Position For

4 unchanged sentences

Gross Unrealized Losses

October 1, 2022

Municipal notes and bonds

11 unchanged sentences

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 July 2, 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.

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.

1 unchanged sentence

The dollar equivalent of the U.S.

dollar forward contracts and related fair values as of July 2, 2022 and January 1, 2022 were as follows:

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

Notional amount

Fair value of liability

Fair value of assets (liability)

Purchased Intangible Assets

Intangible Assets

Purchased intangible assets as of July 2, 2022 and January 1, 2022 are as follows:

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

Gross Carrying Amount

Accumulated Amortization

October 1, 2022

Finite-lived intangibles:

14 unchanged sentences

Inventories, net are comprised of the following:

October 1, 2022

January 1, 2022

4 unchanged sentences

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

October 1, 2022

January 1, 2022

7 unchanged sentences

Other assets is comprised of the following:

October 1, 2022

January 1, 2022

3 unchanged sentences

Accrued liabilities is comprised of the following:

October 1, 2022

January 1, 2022

3 unchanged sentences

Other current liabilities is comprised of the following:

October 1, 2022

January 1, 2022

6 unchanged sentences

Other non-current liabilities is comprised of the following:

October 1, 2022

January 1, 2022

5 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 $ 16,710 of receivables during the six months ended July 2, 2022.

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

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 July 2, 2022.

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

Intellectual Property Indemnification Obligations

11 unchanged sentences

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

Six Months Ended

Nine Months Ended

September 25,

Balance, beginning of the period

42 unchanged sentences

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 July 2, 2022 was approximately $ 125.2 million with an available interest rate of 3.3 %.

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

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

2 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 25,

Point-in-time

4 unchanged sentences

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 July 2, 2022 and January 1, 2022, the Company carried a long-term deferred revenue balance of $ 2,310 and $ 1,693 , respectively, in other non-current liabilities on 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.

Changes in deferred revenue were as follows:

Three Months Ended

Six Months Ended

Nine Months Ended

September 25,

Balance, beginning of the period

5 unchanged sentences

Restricted Stock Unit Activity

A summary of the Company’s restricted stock unit activity with respect to the six months ended July 2, 2022 is as follows:

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

Number of Shares

2 unchanged sentences

Nonvested at January 1, 2022

Nonvested at July 2, 2022

Of the 746 nonvested shares outstanding at July 2, 2022, 647 are service-based RSUs and 99 are market-based PRSUs.

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 July 2, 2022 and January 1 2022, there was $ 37,531 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 1.9 years and 1.5 years for July 2, 2022 and January 1, 2022, 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.

Other Expense, Net

1 unchanged sentence

Three Months Ended

Six Months Ended

Nine Months Ended

September 25,

Foreign currency exchange losses, net

2 unchanged sentences

Three Months Ended

Six 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 six months ended July 2, 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 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.

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 six months ended July 2, 2022 as compared to the three and six months ended June 26, 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 six months ended June 26, 2021 for a release of reserves due to expiration of the applicable statute of limitations.

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.

6 unchanged sentences

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 July 2, 2022 and January 1, 2022.

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.

Earnings Per Share

3 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 25,

Basic earnings per share - weighted average shares

Effect of potential dilutive securities:

Employee stock options, employee stock purchase grants and

restricted stock units - dilutive shares

Employee stock options, employee stock

purchase grants and restricted stock units - dilutive shares

Diluted earnings per share - weighted average shares

1 unchanged sentence

Accumulated Other Comprehensive Income (Loss)

The components of accumulated other comprehensive loss, net of tax, at July 2, 2022, as well as the activity for the six months ended July 2, 2022, were as follows:

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:

Foreign currency

6 unchanged sentences

Reclassifications

Balance at July 2, 2022

For the six months ended July 2, 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 $ 681 and $ 0 , respectively.

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.

Segment Reporting and Geographic Information

8 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 25,

Systems and software

4 unchanged sentences

Three Months Ended

Six 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:

Six Months Ended

SK Hynix Inc.

Nine Months Ended

September 25,

Taiwan Semiconductor Manufacturing Co.

SK Hynix Inc.

Yangtze Memory Technologies Co., Ltd

Samsung Semiconductor

Share Repurchase Authorization

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.

In November 2020, the Onto Innovation Board of Directors approved a share repurchase authorization, which allows the Company to repurchase up to $ 100,000 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.

No shares were purchased in the three and six months ended July 2, 2022.

At July 2, 2022, there was $ 100 million available for future share repurchases under this share repurchase authorization.

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.

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