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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 30, 2024

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 001-39110

 

ONTO INNOVATION INC.

(Exact name of registrant as specified in its charter)

 

Delaware

 

94-2276314

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

 

16 Jonspin Road, Wilmington, Massachusetts 01887

(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: (978) 253-6200

Securities registered pursuant to Section 12(b) of the Act

Title of Each Class

Trading Symbol(s)

Name of Each Exchange on Which Registered

Common Stock, $0.001 par value per share

ONTO

New York Stock Exchange (NYSE)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

The number of outstanding shares of the Registrant’s Common Stock on April 16, 2024 was 49,275,852.

 

 


TABLE OF CONTENTS

 

Item No.

 

Page

 

PART I FINANCIAL INFORMATION

 

 

 

 

Item 1.

Financial Statements (unaudited)

1

 

Condensed Consolidated Statements of Operations for the three months ended March 30, 2024 and April 1, 2023

1

 

Condensed Consolidated Statements of Comprehensive Income for the three months ended March 30, 2024 and April 1, 2023

2

 

Condensed Consolidated Balance Sheets at March 30, 2024 and December 30, 2023

3

 

Condensed Consolidated Statements of Cash Flows for the three months ended March 30, 2024 and April 1, 2023

4

 

Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 30, 2024 and April 1, 2023

5

 

Notes to Condensed Consolidated Financial Statements

6

Item 2.

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

17

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

22

Item 4.

Controls and Procedures

22

 

 

 

 

PART II OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

23

Item 1A.

Risk Factors

23

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

40

Item 3.

Defaults Upon Senior Securities

40

Item 4.

Mine Safety Disclosures

40

Item 5.

Other Information

40

Item 6.

Exhibits

41

 

Signatures

 


PART I FINANCIAL INFORMATION

Item 1. Financial Statements

ONTO INNOVATION INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 

 

 

Three Months Ended

 

 

 

March 30,

 

 

April 1,

 

 

 

2024

 

 

2023

 

Revenue

 

$

228,846

 

 

$

199,165

 

Cost of revenue

 

 

110,561

 

 

 

94,190

 

Gross profit

 

 

118,285

 

 

 

104,975

 

Operating expenses:

 

 

 

 

 

 

Research and development

 

 

26,554

 

 

 

27,242

 

Sales and marketing

 

 

18,318

 

 

 

15,637

 

General and administrative

 

 

17,563

 

 

 

19,237

 

Amortization

 

 

13,112

 

 

 

13,824

 

Total operating expenses

 

 

75,547

 

 

 

75,940

 

Operating income

 

 

42,738

 

 

 

29,035

 

Interest income, net

 

 

7,361

 

 

 

3,448

 

Other income (expense), net

 

 

793

 

 

 

(281

)

Income before provision for income taxes

 

 

50,892

 

 

 

32,202

 

Provision for income taxes

 

 

4,039

 

 

 

3,134

 

Net income

 

$

46,853

 

 

$

29,068

 

Earnings per share:

 

 

 

 

 

 

Basic

 

$

0.95

 

 

$

0.60

 

Diluted

 

$

0.94

 

 

$

0.59

 

Weighted average number of shares outstanding:

 

 

 

 

 

 

Basic

 

 

49,230

 

 

 

48,788

 

Diluted

 

 

49,638

 

 

 

49,109

 

 

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

1


ONTO INNOVATION INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

 

 

 

Three Months Ended

 

 

 

March 30,

 

 

April 1,

 

 

 

2024

 

 

2023

 

Net income

 

$

46,853

 

 

$

29,068

 

Other comprehensive loss, net of tax:

 

 

 

 

 

 

Change in net unrealized gains (losses) on
     available-for-sale marketable securities

 

 

(657

)

 

 

1,392

 

Change in currency translation adjustments

 

 

(2,593

)

 

 

1,090

 

Total other comprehensive (loss) income, net of tax

 

 

(3,250

)

 

 

2,482

 

Total comprehensive income

 

$

43,603

 

 

$

31,550

 

 

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

 

2


ONTO INNOVATION INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

 

 

 

March 30,
2024

 

 

December 30,
2023

 

ASSETS

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

190,893

 

 

$

233,508

 

Marketable securities

 

 

550,038

 

 

 

464,303

 

Accounts receivable, less allowance of $2,657 and $2,659

 

 

231,865

 

 

 

226,556

 

Inventories, net

 

 

329,517

 

 

 

327,773

 

Prepaid expenses and other current assets

 

 

30,523

 

 

 

31,127

 

Total current assets

 

 

1,332,836

 

 

 

1,283,267

 

Property, plant and equipment, net

 

 

106,795

 

 

 

103,611

 

Goodwill

 

 

315,811

 

 

 

315,811

 

Identifiable intangible assets, net

 

 

154,263

 

 

 

167,375

 

Deferred income taxes

 

 

24,247

 

 

 

18,836

 

Other assets

 

 

19,419

 

 

 

20,812

 

Total assets

 

$

1,953,371

 

 

$

1,909,712

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

55,907

 

 

$

49,869

 

Accrued liabilities

 

 

35,263

 

 

 

42,062

 

Deferred revenue

 

 

26,350

 

 

 

24,763

 

Other current liabilities

 

 

29,533

 

 

 

31,032

 

Total current liabilities

 

 

147,053

 

 

 

147,726

 

Other non-current liabilities

 

 

24,767

 

 

 

25,451

 

Total liabilities

 

 

171,820

 

 

 

173,177

 

Commitments and contingencies

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Common stock

 

 

49

 

 

 

49

 

Additional paid-in capital

 

 

1,263,442

 

 

 

1,262,029

 

Accumulated other comprehensive loss

 

 

(11,149

)

 

 

(7,899

)

Accumulated earnings

 

 

529,209

 

 

 

482,356

 

Total stockholders’ equity

 

 

1,781,551

 

 

 

1,736,535

 

Total liabilities and stockholders’ equity

 

$

1,953,371

 

 

$

1,909,712

 

 

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

3


ONTO INNOVATION INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Three Months Ended

 

 

 

March 30,

 

 

April 1,

 

 

 

2024

 

 

2023

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

46,853

 

 

$

29,068

 

Adjustments to reconcile net income to net cash and cash equivalents provided by
operating activities:

 

 

 

 

 

 

Amortization of intangibles

 

 

13,112

 

 

 

13,824

 

Depreciation

 

 

3,388

 

 

 

2,916

 

Share-based compensation

 

 

6,486

 

 

 

6,119

 

Provision for inventory valuation

 

 

2,197

 

 

 

5,360

 

Deferred income taxes

 

 

(5,556

)

 

 

(5,626

)

Other, net

 

 

(691

)

 

 

(611

)

Changes in operating assets and liabilities

 

 

(8,658

)

 

 

(983

)

Net cash and cash equivalents provided by operating activities

 

 

57,131

 

 

 

50,067

 

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of marketable securities

 

 

(207,743

)

 

 

(88,590

)

Proceeds from maturities and sales of marketable securities

 

 

122,902

 

 

 

109,683

 

Purchases of property, plant and equipment

 

 

(6,975

)

 

 

(7,855

)

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

 

 

(91,816

)

 

 

13,238

 

Cash flows from financing activities:

 

 

 

 

 

 

Purchases and retirement of common stock

 

 

 

 

 

(3,197

)

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

 

 

(9,088

)

 

 

(6,273

)

Issuance of shares through share-based compensation plans

 

 

4,015

 

 

 

 

Net cash and cash equivalents used in financing activities

 

 

(5,073

)

 

 

(9,470

)

Effect of exchange rate changes on cash and cash equivalents

 

 

(2,857

)

 

 

777

 

Net (decrease) increase in cash and cash equivalents

 

 

(42,615

)

 

 

54,612

 

Cash and cash equivalents at beginning of period

 

 

233,508

 

 

 

175,872

 

Cash and cash equivalents at end of period

 

$

190,893

 

 

$

230,484

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Income taxes paid (net of refunds)

 

$

921

 

 

$

808

 

 

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

 

4


ONTO INNOVATION INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)

 

 

Common Stock

 

 

Additional
Paid-in

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Earnings

 

 

Total

 

Balance at December 30, 2023

 

 

49,086

 

 

$

49

 

 

$

1,262,029

 

 

$

(7,899

)

 

$

482,356

 

 

$

1,736,535

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

46,853

 

 

 

46,853

 

Share-based compensation

 

 

 

 

 

 

 

 

6,486

 

 

 

 

 

 

 

 

 

6,486

 

Issuance of shares through
    share-based compensation
    plans, net

 

 

169

 

 

 

 

 

 

4,015

 

 

 

 

 

 

 

 

 

4,015

 

Share-based compensation plan
    withholdings

 

 

(53

)

 

 

 

 

 

(9,088

)

 

 

 

 

 

 

 

 

(9,088

)

Currency translation

 

 

 

 

 

 

 

 

 

 

 

(2,593

)

 

 

 

 

 

(2,593

)

Unrealized loss on investments

 

 

 

 

 

 

 

 

 

 

 

(657

)

 

 

 

 

 

(657

)

Balance at March 30, 2024

 

 

49,202

 

 

$

49

 

 

$

1,263,442

 

 

$

(11,149

)

 

$

529,209

 

 

$

1,781,551

 

 

 

 

 

Common Stock

 

 

Additional
Paid-in

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Earnings

 

 

Total

 

Balance at December 31, 2022

 

 

48,684

 

 

$

49

 

 

$

1,243,631

 

 

$

(10,010

)

 

$

362,756

 

 

$

1,596,426

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

29,068

 

 

 

29,068

 

Share-based compensation

 

 

 

 

 

 

 

 

6,119

 

 

 

 

 

 

 

 

 

6,119

 

Issuance of shares through
    share-based compensation
    plans, net

 

 

225

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchases of common stock

 

 

(46

)

 

 

 

 

 

(1,638

)

 

 

 

 

 

(1,559

)

 

 

(3,197

)

Share-based compensation plan
    withholdings

 

 

(62

)

 

 

 

 

 

(6,273

)

 

 

 

 

 

 

 

 

(6,273

)

Currency translation

 

 

 

 

 

 

 

 

 

 

 

1,090

 

 

 

 

 

 

1,090

 

Unrealized gain on investments

 

 

 

 

 

 

 

 

 

 

 

1,392

 

 

 

 

 

 

1,392

 

Balance at April 1, 2023

 

 

48,801

 

 

$

49

 

 

$

1,241,839

 

 

$

(7,528

)

 

$

390,265

 

 

$

1,624,625

 

 

 

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

5


ONTO INNOVATION INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share data and percentages)

(Unaudited)

 

NOTE 1. Basis of Presentation

The accompanying interim unaudited Condensed Consolidated Financial Statements have been prepared by Onto Innovation Inc. (together with its consolidated subsidiaries, unless otherwise specified or suggested by the context, the “Company,” “Onto Innovation,” “we,” “our” or “us”) and in the opinion of management reflect all adjustments, consisting of normal recurring accruals, necessary for their fair presentation in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Preparing financial statements requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Actual amounts could differ materially from reported amounts. The interim results for the three months ended March 30, 2024 are not necessarily indicative of results to be expected for the entire year or any future periods. This interim financial information should be read in conjunction with the financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 30, 2023 (the “2023 Form 10-K”) filed with the Securities and Exchange Commission on February 26, 2024. The accompanying Condensed Consolidated Balance Sheet at December 30, 2023 has been derived from the audited consolidated financial statements included in the 2023 Form 10-K.

The Company operates on a 52- or 53-week fiscal year ending on the Saturday closest to December 31. Our fiscal year ending December 28, 2024 (“fiscal year 2024”) is a 52-week fiscal year. The first quarter of the Company’s fiscal year 2024 ended on March 30, 2024, the second quarter ends on June 29, 2024 and the third quarter ends on September 28, 2024. Our fiscal year ended December 30, 2023 was a 52-week fiscal year. The first quarter of the fiscal year ended December 30, 2023 ended on April 1, 2023.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Estimates made by management include excess and obsolete inventory, fair value of assets acquired and liabilities assumed in a business combination, recoverability and useful lives of property, plant and equipment and identifiable intangible assets, recoverability of goodwill, recoverability of deferred tax assets, allowance for credit losses, liabilities for product warranty, share-based payments and liabilities for tax uncertainties. Actual results could differ from those estimates.

These estimates and assumptions are based on historical experience and on various other factors which the Company believes to be reasonable under the circumstances. The Company may engage third-party valuation specialists to assist with estimates related to the valuation of financial instruments, assets and stock awards associated with various contractual arrangements. Such estimates often require the selection of appropriate valuation methodologies and significant judgment. Actual results could differ from these estimates under different assumptions or circumstances and such differences could be material.

Adoption of Accounting Standards

Recently Adopted or Effective

There have been no recent accounting pronouncements or changes in accounting pronouncements during the three months ended March 30, 2024, as compared to the recent accounting pronouncements described in the Company’s Annual Report on Form 10-K for the fiscal year ended December 30, 2023, that are of significance, or potential significance to the Company.

Updates Not Yet Effective

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” which expands disclosures about a public entity’s reportable segments and requires more enhanced information about a reportable segment’s expenses, interim segment profit or loss, and how a public entity’s chief operating decision maker uses reported segment profit or loss information

6


in assessing segment performance and allocating resources. The guidance is effective for financial statements issued for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is required to adopt this standard in the fiscal year 2024 for the annual reporting period ending December 28, 2024, with retrospective disclosure of prior periods presented. The Company is currently in the process of evaluating the impact of adoption on its Consolidated Financial Statements.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which requires public entities to disclose consistent categories and greater disaggregation of information in the rate reconciliation and for income taxes paid. It also includes certain other amendments to improve the effectiveness of income tax disclosures. The guidance is effective for financial statements issued for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is required to adopt this standard prospectively in fiscal year 2025 for the annual reporting period ending December 27, 2025. The Company is currently in the process of evaluating the impact of adoption on its Consolidated Financial Statements.

NOTE 2. Fair Value Measurements

Fair Value of Financial Instruments

The Company has evaluated the estimated fair value of financial instruments using available market information and valuations as provided by third-party sources. The use of different market assumptions and/or estimation methodologies could have a significant effect on the estimated fair value amounts. The carrying value of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximates fair value because of the short-term maturity of these instruments.

Fair Value Hierarchy

The Company applies a three-level valuation hierarchy for fair value measurements. This hierarchy prioritizes the inputs into three broad levels. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the asset or liability. Level 3 inputs are unobservable inputs based on management’s assumptions used to measure assets and liabilities at fair value. A financial asset’s or liability’s fair value measurement classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

The following tables provide the assets and liabilities carried at fair value measured on a recurring basis at March 30, 2024 and December 30, 2023:

 

 

 

Fair Value Measurements Using
Significant Other Observable
Inputs (Level 2)

 

 

March 30,
2024

 

 

December 30,
2023

 

 

Assets:

 

 

 

 

 

 

 

Available-for-sale debt securities:

 

 

 

 

 

 

 

Government notes and bonds

 

$

248,929

 

 

$

195,800

 

 

Certificates of deposit

 

 

54,821

 

 

 

67,467

 

 

Commercial paper

 

 

123,344

 

 

 

99,635

 

 

Corporate bonds

 

 

122,944

 

 

 

101,401

 

 

Foreign currency forward contracts

 

 

202

 

 

 

 

 

Total assets

 

$

550,240

 

 

$

464,303

 

 

Liabilities:

 

 

 

 

 

 

 

Foreign currency forward contracts

 

$

 

 

$

1,370

 

 

Total Liabilities

 

$

 

 

$

1,370

 

 

Available-for-sale debt securities classified as Level 2 are valued using observable inputs to quoted market prices, benchmark yields, reported trades, broker/dealer quotes or alternative pricing sources with reasonable levels of price transparency. The foreign currency forward contracts are primarily measured based on the foreign currency spot and forward

7


rates quoted by the banks or foreign currency dealers. Investment prices are obtained from third party pricing providers, which model prices utilizing the above observable inputs, for each asset class.

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

NOTE 3. Marketable Securities

At March 30, 2024 and December 30, 2023, marketable securities are categorized as follows:

 

 

 

Amortized Cost

 

 

Gross Unrealized Holding Gains

 

 

Gross Unrealized Holding Losses

 

 

Fair Value

 

March 30, 2024

 

 

 

 

 

 

 

 

 

 

 

 

Government notes and bonds

 

$

249,211

 

 

$

90

 

 

$

373

 

 

$

248,928

 

Certificates of deposit

 

 

54,800

 

 

 

37

 

 

 

15

 

 

 

54,822

 

Commercial paper

 

 

123,380

 

 

 

15

 

 

 

50

 

 

 

123,345

 

Corporate bonds

 

 

122,896

 

 

 

177

 

 

 

130

 

 

 

122,943

 

Total marketable securities

 

$

550,287

 

 

$

319

 

 

$

568

 

 

$

550,038

 

December 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

Government notes and bonds

 

$

195,733

 

 

$

393

 

 

$

326

 

 

$

195,800

 

Certificates of deposit

 

 

67,377

 

 

 

93

 

 

 

3

 

 

 

67,467

 

Commercial paper

 

 

99,591

 

 

 

54

 

 

 

10

 

 

 

99,635

 

Corporate bonds

 

 

101,146

 

 

 

391

 

 

 

136

 

 

 

101,401

 

Total marketable securities

 

$

463,847

 

 

$

931

 

 

$

475

 

 

$

464,303

 

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 March 30, 2024 and December 30, 2023:

 

 

 

March 30, 2024

 

 

December 30, 2023

 

 

 

Amortized Cost

 

 

Fair Value

 

 

Amortized Cost

 

 

Fair Value

 

Due within one year

 

$

355,655

 

 

$

355,387

 

 

$

331,136

 

 

$

330,937

 

Due after one through five years

 

 

145,917

 

 

 

145,936

 

 

 

132,711

 

 

 

133,366

 

Due after five through ten years

 

 

115

 

 

 

115

 

 

 

 

 

 

 

Due after ten years

 

 

48,600

 

 

 

48,600

 

 

 

 

 

 

 

Total marketable securities

 

$

550,287

 

 

$

550,038

 

 

$

463,847

 

 

$

464,303

 

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 loss.” Gross realized gains and losses on available-for-sale securities are included in “Other income (expense), net” on the Condensed Consolidated Statements of Operations and were not material during the three months ended March 30, 2024 and December 30, 2023. 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 March 30, 2024 and December 30, 2023 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.

8


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 March 30, 2024 and December 30, 2023:

 

 

 

In Unrealized Loss Position For
Less Than 12 Months

 

 

In Unrealized Loss Position For
Greater Than 12 Months

 

 

 

Fair Value

 

 

Gross Unrealized Losses

 

 

Fair Value

 

 

Gross Unrealized Losses

 

March 30, 2024

 

 

 

 

 

 

 

 

 

 

 

 

Government notes and bonds

 

$

95,000

 

 

$

200

 

 

$

41,367

 

 

$

173

 

Certificates of deposit

 

 

18,340

 

 

 

16

 

 

 

 

 

 

 

Commercial paper

 

 

88,615

 

 

 

50

 

 

 

 

 

 

 

Corporate bonds

 

 

48,457

 

 

 

98

 

 

 

6,270

 

 

 

31

 

Total

 

$

250,412

 

 

$

364

 

 

$

47,637

 

 

$

204

 

December 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

Government notes and bonds

 

$

82,776

 

 

$

325

 

 

$

180

 

 

$

1

 

Certificates of deposit

 

 

11,839

 

 

 

3

 

 

 

 

 

 

 

Commercial paper

 

 

20,121

 

 

 

10

 

 

 

 

 

 

 

Corporate bonds

 

 

20,268

 

 

 

103

 

 

 

5,999

 

 

 

33

 

Total

 

$

135,004

 

 

$

441

 

 

$

6,179

 

 

$

34

 

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

NOTE 4. Derivative Instruments and Hedging Activities

The Company, when it considers it to be appropriate, enters into forward contracts to hedge the economic exposures arising from foreign currency denominated transactions. At March 30, 2024 and December 30, 2023, these contracts were denominated in euro, Chinese renminbi, Japanese yen, Korean won, Singapore dollars, and Taiwanese dollars. Foreign currency forward contracts are not designated as hedges for accounting purposes, and therefore, the change in fair value is recorded in “Other income (expense), net,” in the Condensed Consolidated Statements of Operations. The Company records its forward contracts at fair value in either prepaid expenses and other current assets or other current liabilities in the Condensed Consolidated Balance Sheets.

The dollar equivalent of the U.S. dollar forward contracts and related fair values as of March 30, 2024 and December 30, 2023 were as follows:

 

 

 

March 30, 2024

 

 

December 30, 2023

 

Notional amount

 

$

32,122

 

 

$

51,551

 

Fair value of asset (liability)

 

$

202

 

 

$

(1,370

)

 

9


NOTE 5. Purchased Intangible Assets

Intangible Assets

Purchased intangible assets as of March 30, 2024 and December 30, 2023 are as follows:

 

 

 

Gross Carrying Amount

 

 

Accumulated Amortization

 

 

Net

 

March 30, 2024

 

 

 

 

 

 

 

 

 

Finite-lived intangibles:

 

 

 

 

 

 

 

 

 

Developed technology

 

$

378,197

 

 

$

266,019

 

 

$

112,178

 

Customer and distributor relationships

 

 

73,321

 

 

 

35,929

 

 

 

37,392

 

Trademarks and trade names

 

 

14,171

 

 

 

9,478

 

 

 

4,693

 

Total identifiable intangible assets

 

$

465,689

 

 

$

311,426

 

 

$

154,263

 

December 30, 2023

 

 

 

 

 

 

 

 

 

Finite-lived intangibles:

 

 

 

 

 

 

 

 

 

Developed technology

 

$

378,197

 

 

$

254,350

 

 

$

123,847

 

Customer and distributor relationships

 

 

73,321

 

 

 

34,782

 

 

 

38,539

 

Trademarks and trade names

 

 

14,171

 

 

 

9,182

 

 

 

4,989

 

Total identifiable intangible assets

 

$

465,689

 

 

$

298,314

 

 

$

167,375

 

Assuming no change in the gross carrying value of identifiable intangible assets and estimated lives, future estimated amortization expenses are:
 

 

Expected Amortization

 

Fiscal Year:

Expense

 

2024 (remainder)

$

36,025

 

2025

 

32,587

 

2026

 

31,394

 

2027

 

23,173

 

2028

 

12,288

 

2029

 

5,038

 

Thereafter

 

13,758

 

Total

$

154,263

 

 

NOTE 6. Balance Sheet Components

Inventories

Inventories, net are comprised of the following:

 

 

 

March 30, 2024

 

 

December 30, 2023

 

Materials

 

$

222,499

 

 

$

234,471

 

Work-in-process

 

 

80,372

 

 

 

67,816

 

Finished goods

 

 

26,646

 

 

 

25,486

 

Total inventories, net

 

$

329,517

 

 

$

327,773

 

 

10


Property, Plant and Equipment

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

 

 

 

March 30, 2024

 

 

December 30, 2023

 

Machinery and equipment

 

$

72,098

 

 

$

69,828

 

Land and building

 

 

47,840

 

 

 

47,889

 

Computer equipment and software

 

 

21,047

 

 

 

17,790

 

Leasehold improvements

 

 

22,104

 

 

 

22,089

 

Furniture and fixtures

 

 

3,914

 

 

 

3,921

 

 

 

 

167,003

 

 

 

161,517

 

Accumulated depreciation

 

 

(60,208

)

 

 

(57,906

)

Total property, plant and equipment, net

 

$

106,795

 

 

$

103,611

 

Other assets

Other assets are comprised of the following:

 

 

 

March 30, 2024

 

 

December 30, 2023

 

Operating lease right-of-use assets

 

$

16,969

 

 

$

18,360

 

Other

 

 

2,450

 

 

 

2,452

 

Total other assets

 

$

19,419

 

 

$

20,812

 

Accrued liabilities

Accrued liabilities are comprised of the following:

 

 

 

March 30, 2024

 

 

December 30, 2023

 

Payroll and related expenses

 

$

26,413

 

 

$

33,052

 

Warranty

 

 

8,793

 

 

 

8,934

 

Other

 

 

57

 

 

 

76

 

Total accrued liabilities

 

$

35,263

 

 

$

42,062

 

Other current liabilities

Other current liabilities are comprised of the following:

 

 

 

March 30, 2024

 

 

December 30, 2023

 

Customer deposits

 

$

9,192

 

 

$

9,972

 

Current operating lease obligations

 

 

5,370

 

 

 

5,494

 

Income tax payable

 

 

6,519

 

 

 

3,210

 

Accrued professional fees

 

 

803

 

 

 

1,751

 

Other accrued taxes

 

 

3,587

 

 

 

3,570

 

Other

 

 

4,062

 

 

 

7,035

 

Total other current liabilities

 

$

29,533

 

 

$

31,032

 

Other non-current liabilities

Other non-current liabilities are comprised of the following:

 

 

 

March 30, 2024

 

 

December 30, 2023

 

Non-current operating lease obligations

 

$

12,770

 

 

$

14,027

 

Unrecognized tax benefits (including interest)

 

 

7,816

 

 

 

7,358

 

Deferred revenue

 

 

2,529

 

 

 

2,462

 

Other

 

 

1,652

 

 

 

1,604

 

Total other non-current liabilities

 

$

24,767

 

 

$

25,451

 

 

11


 

 

 

NOTE 7. Commitments and Contingencies

Factoring

The Company maintains arrangements under which eligible accounts receivable in Japan are sold without recourse to unrelated third-party financial institutions. The Company sold $3,447 of receivables during the three months ended March 30, 2024. 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 March 30, 2024.

Intellectual Property Indemnification Obligations

The Company has entered into agreements with customers that include limited intellectual property indemnification obligations that are customary in the industry. These guarantees generally require the Company to compensate the other party for certain damages and costs incurred as a result of third-party intellectual property claims arising from these transactions. The nature of the intellectual property indemnification obligations prevents the Company from making a reasonable estimate of the maximum potential amount it could be required to pay to its customers. Historically, the Company has not made any indemnification payments under such agreements and no amount has been accrued in the accompanying Condensed Consolidated Financial Statements with respect to these indemnification guarantees.

Warranty Reserves

The Company generally provides a warranty on its products for a period of 12 to 14 months against defects in material and workmanship. The Company estimates the costs that may be incurred during the warranty period and records a liability in the amount of such costs at the time revenue is recognized. The Company’s estimate is based primarily on historical experience. The Company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary. Warranty provisions are generally related to current period sales. Settlements of warranty reserves are generally associated with sales that occurred during the 12 to 14 months prior to the period-end.

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

 

 

 

Three Months Ended

 

 

 

March 30,

 

 

April 1,

 

 

 

2024

 

 

2023

 

Balance, beginning of the period

 

$

9,380

 

 

$

11,830

 

Accruals

 

 

2,761

 

 

 

2,551

 

Usage

 

 

(2,903

)

 

 

(3,879

)

Balance, end of the period

 

$

9,238

 

 

$

10,502

 

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

Legal Matters

From time to time, the Company is subject to legal proceedings and claims in the ordinary course of business. In the opinion of management, any potential liabilities resulting from any current disputes would not have a material adverse effect on the Company’s unaudited interim condensed consolidated financial statements.

Line of Credit

The Company has a credit agreement with a bank that provides for a line of credit which is secured by the marketable securities the Company has with the bank. 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 March 30, 2024 was approximately $100 million with

12


an available interest rate of 7.1%. The credit agreement is available to the Company until such time that either party terminates the arrangement at their discretion. The Company has not utilized the line of credit as of the date of this filing.

NOTE 8. Revenue

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

 

 

Three Months Ended

 

 

March 30,

 

 

April 1,

 

 

2024

 

 

2023

 

Point-in-time

$

213,850

 

 

$

186,374

 

Over-time

 

14,996

 

 

 

12,791

 

Total revenue

$

228,846

 

 

$

199,165

 

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

Contract Liabilities

The Company records contract liabilities when the customer has been billed in advance of the Company completing its performance obligations primarily with respect to liabilities related to service contracts and installation. For contracts that have a duration of one year or less, these amounts are recorded as current deferred revenue in the Condensed Consolidated Balance Sheets. As of March 30, 2024 and December 30, 2023, the Company carried a long-term deferred revenue balance of $