UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended
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.
(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 |
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 |
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 October 15, 2024 was
TABLE OF CONTENTS
Item No. |
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PART I FINANCIAL INFORMATION |
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Item 1. |
1 |
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1 |
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2 |
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Condensed Consolidated Balance Sheets at September 28, 2024 and December 30, 2023 |
3 |
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4 |
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5 |
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7 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
18 |
Item 3. |
24 |
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Item 4. |
24 |
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PART II OTHER INFORMATION |
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Item 1. |
25 |
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Item 1A. |
Risk Factors |
25 |
Item 2. |
41 |
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Item 3. |
42 |
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Item 4. |
42 |
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Item 5. |
42 |
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Item 6. |
43 |
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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Nine Months Ended |
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September 28, |
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September 30, |
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September 28, |
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September 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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Revenue |
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$ |
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$ |
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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) income, net |
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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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$ |
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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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$ |
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$ |
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Diluted |
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$ |
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$ |
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$ |
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$ |
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Weighted average number of 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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Nine Months Ended |
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September 28, |
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September 30, |
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September 28, |
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September 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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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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Other comprehensive income (loss), net of tax: |
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Change in net unrealized gains on |
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Change in currency translation adjustments |
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( |
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( |
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Total other comprehensive income (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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$ |
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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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September 28, |
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December 30, |
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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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Other non-current liabilities |
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Total liabilities |
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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 |
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( |
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( |
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Accumulated 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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Nine Months Ended |
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September 28, |
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September 30, |
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2024 |
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2023 |
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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 |
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Amortization of intangibles |
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Depreciation |
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Share-based compensation |
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Provision for inventory valuation |
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Deferred income taxes |
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( |
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( |
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Other, net |
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( |
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Changes in operating assets and liabilities |
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( |
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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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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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Purchases and retirement of common stock |
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( |
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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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( |
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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 (decrease) increase 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 |
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Accumulated |
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Accumulated |
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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 December 30, 2023 |
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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 |
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— |
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— |
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— |
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Share-based compensation plan |
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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 30, 2024 |
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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 |
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— |
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— |
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— |
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— |
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— |
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Share-based compensation plan |
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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 June 29, 2024 |
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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 |
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— |
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— |
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— |
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Share-based compensation plan |
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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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Unrealized gain on investments |
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— |
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— |
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— |
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— |
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Balance at September 28, 2024 |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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5
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Common Stock |
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Additional |
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Accumulated |
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Accumulated |
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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 December 31, 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 |
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— |
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— |
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— |
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— |
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— |
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Purchases of common stock |
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( |
) |
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— |
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( |
) |
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— |
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( |
) |
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( |
) |
Share-based compensation plan |
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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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Unrealized gain on investments |
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— |
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— |
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— |
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— |
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Balance at April 1, 2023 |
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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 |
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— |
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— |
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— |
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|||
Share-based compensation plan |
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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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( |
) |
Unrealized loss on investments |
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— |
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— |
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— |
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( |
) |
|
|
— |
|
|
|
( |
) |
Balance at July 1, 2023 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Share-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Issuance of shares through |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Purchases and retirement of common stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Share-based compensation plan |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Currency translation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Unrealized loss on investments |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Balance at September 30, 2023 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||
The accompanying notes are an integral part of these financial statements.
6
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 and nine months ended September 28, 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 ended on June 29, 2024 and the third quarter ended on September 28, 2024. Our fiscal year ended December 30, 2023 was a 52-week fiscal year. The third quarter of the fiscal year ended December 30, 2023 ended on September 30, 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 and nine months ended September 28, 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 including information
7
about the 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 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 fiscal year 2024 for the annual reporting period ending December 28, 2024, with retrospective disclosure of prior periods presented. The Company expects there will be no material impact on its Consolidated Financial Statements from the adoption of ASU 2023-07.
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 September 28, 2024 and December 30, 2023:
|
|
Fair Value Measurements Using |
|||||||
|
|
September 28, |
|
|
December 30, |
|
|
||
Assets: |
|
|
|
|
|
|
|
||
Available-for-sale debt securities: |
|
|
|
|
|
|
|
||
Government notes and bonds |
|
$ |
|
|
$ |
|
|
||
Certificates of deposit |
|
|
|
|
|
|
|
||
Commercial paper |
|
|
|
|
|
|
|
||
Corporate bonds |
|
|
|
|
|
|
|
||
Total assets |
|
$ |
|
|
$ |
|
|
||
Liabilities: |
|
|
|
|
|
|
|
||
Foreign currency forward contracts |
|
$ |
|
|
$ |
|
|
||
Total liabilities |
|
$ |
|
|
$ |
|
|
||
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
8
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 September 28, 2024 and December 30, 2023, marketable securities are categorized as follows:
|
|
Amortized Cost |
|
|
Gross Unrealized Holding Gains |
|
|
Gross Unrealized Holding Losses |
|
|
Fair Value |
|
||||
September 28, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Government notes and bonds |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Certificates of deposit |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Commercial paper |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate bonds |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total marketable securities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
December 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Government notes and bonds |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Certificates of deposit |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Commercial paper |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate bonds |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total marketable securities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The amortized cost and estimated fair value of marketable securities classified by the maturity date listed on the security, regardless of the Condensed Consolidated Balance Sheets classification, is as follows at September 28, 2024 and December 30, 2023:
|
|
September 28, 2024 |
|
|
December 30, 2023 |
|
||||||||||
|
|
Amortized Cost |
|
|
Fair Value |
|
|
Amortized Cost |
|
|
Fair Value |
|
||||
Due within one year |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Due after one through five years |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Due after five through ten years |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Due after ten years |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total marketable securities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
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 (expense) income, net” on the Condensed Consolidated Statements of Operations and were not material during the three and nine months ended September 28, 2024 and September 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 September 28, 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.
9
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 September 28, 2024 and December 30, 2023:
|
|
In Unrealized Loss Position For |
|
|
In Unrealized Loss Position For |
|
||||||||||
|
|
Fair Value |
|
|
Gross Unrealized Losses |
|
|
Fair Value |
||||||||