What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-10 compared with 2022-08-09 · 85 added, 79 removed, 108 unchanged (60% of the section changed)

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Forward-Looking Statements

Certain statements in this Quarterly Report on Form 10-Q (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:

Certain statements in this Quarterly Report on Form 10-Q (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”), or incorporated by reference in this Form 10-Q, may be considered “forward-looking statements” or may be based on “forward-looking statements,” including, but not limited to, those concerning:

anticipated effects of, and future actions to be taken in response to, the COVID-19 pandemic;

the anticipated impact of new export control regulations;

our business momentum and future growth;

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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 January 1, 2022 (the “2021 Form 10-K”) filed with the Securities and Exchange Commission on February 25, 2022 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.

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.

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This includes integrated circuits to enable information processing and management (logic integrated circuits), memory storage (NAND, 3D-NAND, NOR, and DRAM), analog devices (e.g., Wi-Fi and 5G radio integrated circuits, power devices), MEMS sensor devices (accelerometers, pressure sensors, microphones), image sensors, and other end markets including components for hard disk drives, LEDs, and power management.

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

The semiconductor and electronics industries have also 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.

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Three Months Ended

September 25,

Gross profit as a percent of revenue

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Diluted earnings per share

In the fiscal quarter ended July 2, 2022 (the “July 2022 quarter”), revenue increased 6.2% compared to the fiscal quarter ended April 2, 2022 (the “April 2022 quarter”), primarily due to an increase in sales to OSAT customers in specialty device advance packaging and flash memory customers for advanced nodes applications, partially offset by a decline in sales DRAM and Foundry customers in advanced nodes applications.

Gross profit as a percentage of revenue in the July 2022 quarter compared to the April 2022 quarter decreased primarily due to sales of lithography systems with lower margins in the July 2022 quarter and increased manufacturing costs to support the growth of our business.

The increase in operating expenses in the July 2022 quarter compared to the April 2022 quarter is primarily due to increases in headcount and variable compensation.

Our cash, cash equivalents and marketable securities balance increased to $545.0 million at the end of the July 2022 quarter compared to $511.3 million at the end of the January 2022 quarter.

In the fiscal quarter ended October 1, 2022 (the “October 2022 quarter”), revenue decreased 0.8% compared to the fiscal quarter ended July 2, 2022 (the “July 2022 quarter”), primarily due to a decline in sales to DRAM customers in advanced nodes applications and OSAT customers in specialty device and advanced packaging applications, partially offset by an increase in sales to foundry customers for advanced node applications and MEMS customers in specialty device advance packaging applications.

Gross profit as a percentage of revenue in the October 2022 quarter compared to the July 2022 quarter increased primarily due to favorable customer and product mix.

The increase in operating expenses in the October 2022 quarter compared to the July 2022 quarter is primarily due to an increase in research and development expenses, which includes the write-off of purchased in process research and development assets.

Our cash, cash equivalents and marketable securities balance increased to $552.7 million as of October 1, 2022 compared to $511.3 million as of January 1, 2022.

This increase was primarily the result of $87.2 million of cash generated from operating activities.

This source of cash was partially offset by net cash of $6.9 million used for capital expenditures.

Employee headcount as of July 2, 2022 was approximately 1,500.

Impact of the COVID-19 Pandemic on Our Business .

As of the filing of this Form 10-Q, our operations have been impacted by our pandemic response, as described below, given the global nature of our workforce and our operations.

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.

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

As governmental authorities continue to implement or modify restrictions on commercial operations, we have continued to ensure compliance with these directives while also maintaining business continuity for our essential operations.

We have a global workforce.

Although our manufacturing facilities are in the United States, we maintain offices and have employees in the United States, South Korea, Japan, Taiwan, China, Singapore and Europe.

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 our devices to further support our hybrid work environments.

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.

This source of cash was partially offset by cash of $11.5 million used for purchases of our common stock, $9.8 million used for capital expenditures and $4.6 million used for the purchase of acquired research and development assets.

Employee headcount as of October 1, 2022 was approximately 1,600.

Expanded U.S.

Export Controls

In October 2022, the Bureau of Industry and Security (“BIS”) of the U.S.

Department of Commerce issued an interim final rule to implement new export controls related to the Chinese semiconductor manufacturing, advanced computing, and supercomputer industries (the “New Export Controls”).

The New Export Controls include restrictions on certain semiconductor integrated circuits, commodities containing such integrated circuits, and semiconductor manufacturing equipment and restrict the ability of U.S.

persons to support the development or production of integrated circuits at certain semiconductor fabrication facilities in China.

The primary impact of the New Export Controls on Onto Innovation is that we’re now required to obtain a license to do business with certain Chinese customers that produce certain advanced computing integrated circuits.

The New Export Controls also expanded the scope of foreign-produced items subject to license requirements to entities on the Entity List of the Export Administration Regulations (“EAR”) that are located in China and added new entities to the EAR’s Unverified List (which names parties ineligible for license exceptions under the EAR), including Yangtze Memory Technologies Co., Ltd .

We may experience a temporary loss of revenues while we apply for licenses to continue doing business with certain customers affected by the new export rules.

A failure to obtain required license could result in a reduction of anticipated revenues.

We have and will continue to assess the impact of the New Export Controls and the addition of new entities to the Unverified List on our business, financial condition and results of operations.

We have estimated these new restrictions will negatively impact our revenue by approximately $10.0 million and $80.0 million for the fiscal quarter ended December 31, 2022 and the fiscal year 2023, respectively.

Impact of COVID-19 and the Global Semiconductor Supply Shortage

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.

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Our supply chain is strained in some cases as the availability of materials, logistics and freight options are challenging in many jurisdictions, which have resulted in long lead times, rising prices and supply chain disruptions.

We expect supply chain shortages as well as inflationary cost pressures to persist throughout the remainder of the year.

Demand for our products was consistent with or exceeded our expectations for the first half of fiscal 2022.

However, further disruptions to our supply chain in connection with the sourcing of materials, inflationary pressures, 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 appropriate precautionary measures to provide a safe work environment for our employees and customers.

The full 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, and the pace of recovery, including with respect to supply chain shortage.

Trade tensions between the United States and China may escalate as a result of COVID-19 or otherwise and could result in the imposition of additional tariffs, trade restrictions or policy changes, any of which could increase costs of our product components and pricing of, and consumer demand for, our products, which could have a negative effect on our results of operations.

Although the inherent uncertainty of the ongoing 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 I, Item 1A – Risk Factors of our 2021 Form 10-K.

Results of Operations for the Three and Six Months Ended July 2, 2022 and June 26, 2021

We expect supply chain shortages as well as inflationary cost pressures to persist throughout the remainder of the year and into fiscal year 2023.

While demand for our products has remained strong, further disruptions to our supply chain in connection with the sourcing of materials, inflationary pressures, 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.

We are continuing to serve our customers while taking appropriate precautionary measures to provide a safe work environment for our employees and customers

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

Results of Operations for the Three and Nine Months Ended October 1, 2022 and September 25, 2021

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

Our revenue of $256.3 million increased 32.5% for the three months ended July 2, 2022 as compared to the same period in

2021, in which revenue totaled $193.4 million.

For the six-month periods ended July 2, 2022 and June 26, 2021, our revenue totaled $497.7 million and $362.7 million, respectively, representing a year-over-year increase of 37.2%.

Our revenue of $254.3 million increased 26.8% for the three months ended October 1, 2022 as compared to the same period in 2021, in which revenue totaled $200.6 million.

For the nine-month periods ended October 1, 2022 and September 25, 2021, our revenue totaled $751.9 million and $563.3 million, respectively, representing a year-over-year increase of 33.5%.

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,

Systems and software

Total revenue

Total systems and software revenue increased $57.9 million and $125.8 million for the three and six months ended July 2, 2022, respectively, as compared to the three and six months ended June 26, 2021, respectively, primarily due to increases of units shipped in our metrology, inspection and lithography product lines.

The increases in parts and services revenue for the three and six months ended July 2, 2022, as compared to the three and six months ended June 26, 2021, were primarily due to servicing a larger installed base.

Total systems and software revenue increased $45.1 million and $170.9 million for the three and nine months ended October 1, 2022, respectively, as compared to the three and nine months ended September 25, 2021, respectively, primarily due to increases of units shipped in our metrology, inspection and lithography product lines.

The increases in parts and services revenue for the three and nine months ended October 1, 2022, as compared to the three and nine months ended September 25, 2021, were 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.

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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 $132.1 million and $263.2 million for the three and six months ended July 2, 2022, respectively, as compared to $105.5 million and $195.9 million for the three and six months ended June 26, 2021, respectively.

Our gross profit represented 51.5% and 52.9% of our revenue for the three and six months ended July 2, 2022, respectively, and 54.5% and 54.0% for the three and six months ended June 26, 2021, respectively.

The decreases in gross profit as a percentage of revenue for both the three and six months ended July 2, 2022, as compared to the three and six months ended June 26, 2021, were primarily due to product mix, h igher freight and logistics costs, and higher personnel cost due to an increase in headcount to provide manufacturing capacity requirements, partially offset by an increase in sales volume.

Our gross profit was $138.8 million and $402.0 million for the three and nine months ended October 1, 2022, respectively, as compared to $109.4 million and $305.3 million for the three and nine months ended September 25, 2021, respectively.

Our gross profit represented 54.6% and 53.5% of our revenue for the three and nine months ended October 1, 2022, respectively, and 54.5% and 54.2% for the three and nine months ended September 25, 2021, respectively.

The increase in gross profit as a percentage of revenue for the three months ended October 1, 2022 as compared to the three months ended September 25, 2021 was primarily due to higher sales volume.

The decrease in gross profit as a percentage of revenue for the nine months ended October 1, 2022, as compared to the nine months ended September 25, 2021, was primarily due to product mix, h igher freight and logistics costs, and higher personnel cost due to an increase in headcount to provide manufacturing capacity requirements, partially offset by an increase in sales volume.

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 $25.6 million and $52.0 million for the three and six months ended July 2, 2022, respectively, as compared to $25.5 million and $47.5 million for the three and six months ended June 26, 2021, respectively.

The increases in research and development expenses for both the three and six months ended July 2, 2022, as compared to the three and six months ended June 26, 2021, were primarily due to increased compensation costs from additional headcount, as well as annual merit and promotion increases, and increased consulting, outside service and material expenses for new product initiatives.

Our research and development expenses were $32.2 million and $84.1 million for the three and nine months ended October 1, 2022, respectively, as compared to $23.8 million and $71.3 million for the three and nine months ended September 25, 2021, respectively.

The increases in research and development expenses for both the three and nine months ended October 1, 2022, as compared to the three and nine months ended September 25, 2021, were primarily due to the write-off of acquired in-process research and development expenses, increased compensation costs from additional headcount and increased consulting, outside service and material expenses for new product initiatives.

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 were $16.9 million and $32.5 million for the three and six months ended July 2, 2022, respectively, as compared to $15.4 million and $28.5 million for the three and six months ended June 26, 2021, respectively.

The increases in sales and marketing expenses for both the three and six months ended July 2, 2022, as compared to the three and six months ended June 26, 2021, were primarily due to increased compensation costs and increased travel related expenses as pandemic travel restrictions were lifted.

Our sales and marketing expenses were $16.8 million and $49.3 million for the three and nine months ended October 1, 2022, respectively, as compared to $12.9 million and $41.4 million for the three and nine months ended September 25, 2021, respectively.

The increases in sales and marketing expenses for both the three and nine months ended October 1, 2022, as compared to the three and nine months ended September 25, 2021, were primarily due to increased compensation costs from additional headcount and increased travel related expenses as pandemic travel restrictions were lifted.

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 $18.3 million and $34.8 million for the three and six months ended July 2, 2022, respectively, as compared to $16.3 million and $31.8 million for the three and six months ended June 26, 2021, respectively.

The increases in general and administrative expenses for both the three and six months ended July 2, 2022, as compared to the three and six months ended June 26, 2021, were primarily due to increased compensation costs and increased litigation expenses.

Our general and

administrative expenses were $16.8 million and $51.6 million for the three and nine months ended October 1, 2022, respectively, as compared to $16.5 million and $48.4 million for the three and nine months ended September 25, 2021, respectively.

The increases in general and administrative expenses for both the three and nine months ended October 1, 2022, as compared to the three and nine months ended September 25, 2021, were primarily due to increased compensation costs from additional headcount and increased litigation expenses.

Amortization of Identifiable Intangible Assets .

Amortization of identifiable intangible assets was $13.8 million and $27.6 million for the three and six months ended July 2, 2022, respectively, as compared to $12.3 million and $24.7 million for the three and six months ended June 26, 2021, respectively.

The increases in amortization expense for both the three and six months ended July 2, 2022, as compared to the three and six months ended June 26, 2021, were primarily due to in-process research and development becoming classified as a finite-lived intangible asset and amortization commencing in the second half of 2021.

Amortization of identifiable intangible assets was $13.8 million and $41.5 million for the three and nine months ended October 1, 2022, respectively, as compared to $13.0 million and $37.7 million for the three and nine months ended September 25, 2021, respectively.

The increases in amortization expense for both the three and nine months ended October 1, 2022, as compared to the three and nine months ended September 25, 2021, were primarily due to in-process research and development becoming classified as a finite-lived intangible asset and amortization commencing in the second half of 2021.

Interest income, net .

Net interest income was $0.7 million and $1.0 million for the three and six months ended July 2, 2022, respectively, as compared to $0.3 million and $0.7 million for the three and six months ended June 26, 2021, respectively.

The increases in net interest income for both the three and six months ended July 2, 2022, as compared to the three and six months ended June 26, 2021, were due to higher interest rates during the 2022 period.

Net interest income was $1.5 million and $2.6 million for the three and nine months ended October 1, 2022, respectively, as compared to $0.2 million and $0.9 million for the three and nine months ended September 25, 2021, respectively.

The increases in net interest income for both the three and nine months ended October 1, 2022, as compared to the three and nine months ended September 25, 2021, were due to higher interest rates during the 2022 period.

Other expense, net .

Net other expense was $0.9 million and $1.1 million for the three and six months ended July 2, 2022, respectively, as compared to $0.3 million and $1.5 million for the three and six months ended June 26, 2021, respectively.

The increase in other expense, net for the three months ended July 2, 2022, as compared to the three months ended June 26, 2021, was primarily due to higher foreign exchange losses during the 2022 period.

The decrease in other expense, net for the six months ended July 2, 2022, as compared to the six months ended June 26, 2021, was primarily due to lower foreign exchange losses during the 2022 period.

Net other expense was $1.0 million and $2.0 million for the three and nine months ended October 1, 2022, respectively, as compared to $0.3 million and $1.8 million for the three and nine months ended September 25, 2021, respectively.

The increase in other expense, net for both the three and nine months ended October 1, 2022, as compared to the three and nine months ended September 25, 2021, was primarily due to higher foreign exchange losses during the 2022 period.

Income Taxes .

We recorded an income tax provision of $5.7 million and $11.3 million for the three and six months ended July 2, 2022, respectively, as compared to income tax provision of $0.9 million and $3.4 million for the same period in 2021.

Our effective tax rate of 10% differs from the statutory rate of 21% for both the three and six months ended July 2, 2022, 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 3% and 5% differs from the statutory rate of 21% for the three and six months ended June 26, 2021, respectively, primarily due to (i) foreign and research and development tax credits, (ii) the deduction related to FDII, (iii) excess tax benefits associated with equity compensation, and (iv) a one-time tax benefit associated with a release of reserves due to the expiration of the applicable statute of limitations.

We recorded an income tax provision of $7.6 million and $18.9 million for the three and nine months ended October 1, 2022, respectively, as compared to income tax provision of $6.6 million and $10.0 million for the same periods in 2021.

Our effective tax rate of 13% and 11% for the three and nine months ended October 1, 2022, respectively, 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 15% and 10% for the three and nine months ended September 25, 2021, respectively, differs from the statutory rate of 21%, primarily due to (i) foreign and research and development tax credits, (ii) the deduction related to FDII, (iii) excess tax benefits associated with equity compensation, and (iv) a one-time tax benefit associated with a release of reserves due to the expiration of the applicable statute of limitations.

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.

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

Two recent pieces of tax legislation were passed during the quarter ended October 1, 2022.

The CHIPS Act of 2022 (the “CHIPS Act”), (H.R.

4346) creates a new advanced manufacturing investment credit under new Internal Revenue Code section 48D and was signed into law by President Biden on August 9, 2022.

The Inflation Reduction Act (the “IRA”), (H.R.

5376), signed into law by President Biden on August 16, 2022, has a number of tax-related provisions, including (i) a 15-percent book minimum tax (corporate AMT) on “adjusted financial statement income” (AFSI) of applicable corporations;

(ii) a plethora of clean energy tax incentives in the form of tax credits, some of which include a direct-pay option or transferability provisions;

and (iii) a 1-percent excise tax on certain corporate stock buybacks.

Neither of these acts are expected to impact our financial statements for the current 2022 tax year.

Beginning in 2022, the U.S.

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While it is possible that Congress may defer, modify, or repeal this provision, potentially with retroactive effect, we have no assurance that this provision will be deferred, modified, or repealed.

Changes in our tax provisions or an increase in our tax liabilities, whether due to changes in applicable laws and regulations, the interpretation or application thereof, or a final determination of tax audits or litigation or agreements, could have a material adverse effect on our financial position, results of operations and/or cash flows.

Changes in our tax provisions or an increase in our tax liabilities, whether due to changes in applicable laws and regulations, the interpretation or application thereof, or a final determination of

tax audits or litigation or agreements, could have a material adverse effect on our financial position, results of operations and/or cash flows.

Liquidity and Capital Resources

At July 2, 2022, we had $545.0 million of cash, cash equivalents and marketable securities and $909.0 million in working capital.

At October 1, 2022, we had $552.7 million of cash, cash equivalents and marketable securities and $953.1 million in working capital.

At January 1, 2022, we had $511.3 million of cash, cash equivalents and marketable securities and $793.6 million in working capital.

Net cash and cash equivalents provided by operating activities for the six months ended July 2, 2022 and June 26, 2021 were $55.4 million and $76.4 million, respectively.

The net cash and cash equivalents provided by operating activities during the six months ended July 2, 2022 resulted primarily from net income, adjusted to exclude the effect of non-cash operating charges of $143.0 million, partially offset by a decrease in cash provided from operating assets and liabilities of $87.6 million, primarily due to increases in inventories and accounts receivable.

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.

Net cash and cash equivalents used in investing activities for the six months ended July 2, 2022 and June 26, 2021 were $33.2 million and $76.4 million, respectively.

During the six months ended July 2, 2022, net cash and cash equivalents used in investing activities included purchases of marketable securities of $174.7 million and capital expenditures of $6.9 million, partially offset by proceeds from sales of marketable securities of $148.4 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.

Net cash and cash equivalents used in financing activities for the six months ended July 2, 2022 and June 26, 2021 were $6.1 million and $3.3 million, respectively.

During the six months ended July 2, 2022, financing activities used cash to primarily pay taxes related to shares withheld for share-based compensation plans of $8.3 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 $4.5 million.

During the six months ended June 26, 2021, financing activities used cash primarily 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 October 1, 2022 and September 25, 2021 were $87.2 million and $126.3 million, respectively.

The net cash and cash equivalents provided by operating activities during the nine months ended October 1, 2022 resulted primarily from net income, adjusted to exclude the effect of non-cash operating charges of $214.2 million, partially offset by a decrease in cash provided from operating assets and liabilities of $127.0 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 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.

Net cash and cash equivalents used in investing activities for the nine months ended October 1, 2022 and September 25, 2021 were $29.2 million and $110.9 million, respectively.

During the nine months ended October 1, 2022, net cash and cash equivalents used in investing activities included purchases of marketable securities of $289.5 million, capital expenditures of $9.8 million and purchase of intangible assets of $4.6 million, partially offset by proceeds from sales of marketable securities of $274.6 million.

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.

Net cash and cash equivalents used in financing activities for the nine months ended October 1, 2022 and September 25, 2021 were $17.9 million and $0.4 million, respectively.

During the nine months ended October 1, 2022, financing activities used cash primarily for repurchases of common stock of $11.5 million, tax payments related to shares withheld to satisfy employee tax obligations in connection with the vesting of awards under share-based compensation plans of $8.6 million and payments related to contingent consideration for acquired business of $2.3 million, partially offset by proceeds from sales of shares through share-based compensation plans of $4.5 million.

During the nine months ended September 25, 2021, financing activities used cash 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 $6.8 million.

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

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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.

In the first quarter of 2021, the Company acquired Inspectrology, LLC for $24.0 million in cash and an earnout subject to the achievement of certain revenue targets earned for fiscal 2021 through 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 $5.0 million depending on fiscal 2022 results.

As of July 2, 2022, we have accrued $2.2 million for the potential earnout.

As of October 1, 2022, we have accrued $1.7 million for the potential earnout.

I n 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.

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

During the three and nine months ended October 1, 2022, we repurchased 0.2 million shares of common stock under this repurchase authorization and those shares were subsequently retired.

As of October 1, 2022, there was $88.5 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 July 2, 2022, the available line of credit was approximately $125.2 million with an available interest rate of 3.3%.

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

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

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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.

In addition, although the ultimate impact of the COVID-19 pandemic and its effects on economic conditions and the global supply chain on our future results remains uncertain, we believe our business model and our current cash reserves leave us well-positioned to manage our business through this crisis as it continues to unfold.

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.

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

5 unchanged sentences

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