UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended
OR
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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.
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification Number) |
(Address of principal executive offices, including zip code)
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act
Title of Each Class |
Trading Symbol(s) |
Name of Each Exchange on Which Registered |
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New York Stock Exchange ( |
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.
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).
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.
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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
The number of outstanding shares of the Registrant’s Common Stock on April 19, 2022 was
TABLE OF CONTENTS
Item No. |
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Page |
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PART I FINANCIAL INFORMATION |
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Item 1. |
1 |
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Condensed Consolidated Statements of Operations for the three months ended April 2, 2022 and March 27, 2021 |
1 |
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Condensed Consolidated Statements of Comprehensive Income for the three months ended April 2, 2022 and March 27, 2021 |
2 |
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Condensed Consolidated Balance Sheets at April 2, 2022 and January 1, 2022 |
3 |
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Condensed Consolidated Statements of Cash Flows for the three months ended April 2, 2022 and March 27, 2021 |
4 |
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5 |
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6 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
17 |
Item 3. |
23 |
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Item 4. |
23 |
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PART II OTHER INFORMATION |
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Item 1. |
23 |
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Item 1A. |
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Item 2. |
39 |
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Item 3. |
39 |
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Item 4. |
39 |
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Item 5. |
39 |
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Item 6. |
40 |
Signatures
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
ONTO INNOVATION INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
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Three Months Ended |
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April 2, |
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March 27, |
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2022 |
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2021 |
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Revenue |
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$ |
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$ |
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Cost of revenue |
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Gross profit |
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Operating expenses: |
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Research and development |
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Sales and marketing |
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General and administrative |
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Amortization |
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Total operating expenses |
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Operating income |
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Interest income, net |
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Other expense, net |
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( |
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( |
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Income before provision for income taxes |
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Provision for income taxes |
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Net income |
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$ |
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$ |
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Earnings per share: |
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Basic |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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Weighted average shares outstanding: |
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Basic |
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Diluted |
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The accompanying notes are an integral part of these financial statements.
1
ONTO INNOVATION INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
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Three Months Ended |
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April 2, |
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March 27, |
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2022 |
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2021 |
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Net income |
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$ |
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$ |
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Other comprehensive loss, net of tax: |
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Change in net unrealized losses on available-for-sale marketable securities |
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( |
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( |
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Change in currency translation adjustments |
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( |
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( |
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Total other comprehensive loss, net of tax |
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( |
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( |
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Total comprehensive income |
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$ |
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$ |
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The accompanying notes are an integral part of these financial statements.
2
ONTO INNOVATION INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
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April 2, 2022 |
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January 2, 2022 |
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ASSETS |
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Current Assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Marketable securities |
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Accounts receivable, less allowance of $ |
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Inventories, net |
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Prepaid expenses and other current assets |
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Total current assets |
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Property, plant and equipment, net |
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Goodwill |
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Identifiable intangible assets, net |
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Deferred income taxes |
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Other assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued liabilities |
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Deferred revenue |
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Other current liabilities |
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Total current liabilities |
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Deferred income taxes |
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Other non-current liabilities |
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Total liabilities |
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Commitments and contingencies |
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Stockholders’ equity: |
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Common stock |
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Additional paid-in capital |
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Accumulated other comprehensive (loss) income |
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( |
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Retained earnings |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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The accompanying notes are an integral part of these financial statements.
3
ONTO INNOVATION INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
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Three Months Ended |
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April 2, |
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March 27, |
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2022 |
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2021 |
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Cash flows from operating activities: |
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Net income |
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$ |
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$ |
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Adjustments to reconcile net income to net cash and cash equivalents provided by operating activities: |
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Amortization of intangibles |
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Depreciation |
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Share-based compensation |
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Acquired inventory step-up amortization |
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— |
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Provision for inventory valuation |
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Deferred income taxes |
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( |
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Other, net |
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Changes in operating assets and liabilities, net of effects of business acquired |
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( |
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Net cash and cash equivalents provided by operating activities |
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Cash flows from investing activities: |
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Purchases of marketable securities |
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( |
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( |
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Proceeds from maturities and sales of marketable securities |
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Purchase of business, net of cash acquired |
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— |
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( |
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Purchases of property, plant and equipment |
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( |
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( |
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Net cash and cash equivalents used in investing activities |
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( |
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( |
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Cash flows from financing activities: |
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Tax payments related to shares withheld for share-based compensation plans |
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( |
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( |
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Payment of contingent consideration for acquired business |
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( |
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— |
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Issuance of shares through share-based compensation plans |
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Net cash and cash equivalents used in financing activities |
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( |
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Effect of exchange rate changes on cash and cash equivalents |
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( |
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( |
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Net increase (decrease) in cash and cash equivalents |
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( |
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Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period |
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$ |
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$ |
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Supplemental disclosure of cash flow information: |
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Income taxes paid (net of refunds) |
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$ |
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$ |
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The accompanying notes are an integral part of these financial statements.
4
ONTO INNOVATION INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
(Unaudited)
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Common Stock |
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Additional Paid-in |
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Accumulated Other Comprehensive |
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Retained |
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Shares |
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Amount |
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Capital |
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Loss |
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Earnings |
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Total |
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Balance at January 1, 2022 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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Share-based compensation |
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— |
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— |
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— |
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— |
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Issuance of shares through share-based compensation plans |
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— |
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— |
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— |
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Share-based compensation plan withholdings |
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( |
) |
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— |
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( |
) |
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— |
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— |
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( |
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Currency translation |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Unrealized loss on investments |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Balance at April 2, 2022 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Common Stock |
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Additional Paid-in |
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Accumulated Other Comprehensive |
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Retained |
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Shares |
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Amount |
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Capital |
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Income |
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Earnings |
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Total |
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Balance at December 26, 2020 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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Share-based compensation |
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— |
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— |
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— |
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— |
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Issuance of shares through share-based compensation plans |
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— |
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— |
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— |
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Share-based compensation plan withholdings |
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( |
) |
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— |
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( |
) |
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— |
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— |
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( |
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Currency translation |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Unrealized loss on investments |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Balance at March 27, 2021 |
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$ |
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$ |
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$ |
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$ |
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$ |
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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)
(Unaudited)
NOTE 1. Basis of Presentation
The Company operates on a 52- or 53-week fiscal year ending on the Saturday closest to December 31st. 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 ends on July 1, 2022 and the third quarter ends on October 1, 2022. Our fiscal year ended January 1, 2022 was a 53-week fiscal year.
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. 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 April 2, 2022 are not necessarily indicative of results to be expected for the entire year or any future periods. This interim financial information should be read in conjunction with the financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended January 1, 2022 (the “2021 Form 10-K”) filed with the Securities and Exchange Commission (“SEC”) on February 25, 2022. The accompanying Condensed Consolidated Balance Sheet at January 1, 2022 has been derived from the audited consolidated financial statements included in the 2021 Form 10-K.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates made by management include the allowance for credit losses, excess and obsolete inventory, fair value of assets acquired and liabilities assumed in a business combination, recoverability and useful lives of property, plant and equipment and identifiable intangible assets, recoverability of goodwill, recoverability of deferred tax assets, liabilities for product warranty, contingencies, including litigation reserves and share-based payments and liabilities for tax uncertainties. 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
There have been no recent accounting pronouncements or changes in accounting pronouncements during the three months ended April 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.
NOTE 2. Business Combination
Inspectrology, LLC
During the first quarter of 2021, the Company acquired Inspectrology, LLC (“Inspectrology”), a supplier of overlay metrology for controlling lithography and etch processes in the compound semiconductor market for $
6
There is potential earnout for up to an additional payment of $
NOTE 3. 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 April 2, 2022 and January 1, 2022:
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Fair Value Measurements Using |
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Carrying Value |
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Quoted Prices in Active Markets for Identical Assets (Level 1) |
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Significant Other Observable Inputs (Level 2) |
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Significant Unobservable Inputs (Level 3) |
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April 2, 2022 |
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Assets: |
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Available-for-sale debt securities: |
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Municipal notes and bonds |
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$ |
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$ |
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$ |
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$ |
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Asset-backed securities |
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Certificates of deposit |
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Commercial paper |
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Corporate bonds |
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Total assets |
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$ |
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$ |
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$ |
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$ |
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Liabilities: |
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Foreign currency forward contracts |
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$ |
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$ |
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$ |
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$ |
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Contingent consideration - acquisitions |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale debt securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal notes and bonds |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Asset-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificates of deposit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forward contracts |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Total liabilities |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
7
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 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. Level 3 investments consisted of contingent consideration related to an acquisition for which the Company uses revenue projections to value this liability.
See Note 4 for additional discussion regarding the fair value of the Company’s marketable securities.
NOTE 4. Marketable Securities
At April 2, 2022 and January 1, 2022, marketable securities are categorized as follows:
|
|
Amortized Cost |
|
|
Gross Unrealized Holding Gains |
|
|
Gross Unrealized Holding Losses |
|
|
Fair Value |
|
||||
April 2, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal notes and bonds |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Asset-backed securities |
|
|
|
|
|
|
|
|
|
|
|