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Table of Contents

 

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 October 1, 2022

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 October 18, 2022 was 49,516,929.

 

 


 

Table of Contents

 

TABLE OF CONTENTS

 

Item No.

 

Page

 

PART I    FINANCIAL INFORMATION

 

 

 

 

Item 1.

Financial Statements (unaudited)

1

 

Condensed Consolidated Statements of Operations for the three and nine months ended October 1, 2022 and September 25, 2021

1

 

Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended October 1, 2022 and September 25, 2021

2

 

Condensed Consolidated Balance Sheets at October 1, 2022 and January 1, 2022

3

 

Condensed Consolidated Statements of Cash Flows for the nine months ended October 1, 2022 and September 25, 2021

4

 

Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended October 1, 2022 and September 25, 2021

5

 

Notes to Condensed Consolidated Financial Statements

7

Item 2.

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

18

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

24

Item 4.

Controls and Procedures

24

 

 

 

 

PART II    OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

24

Item 1A.

Risk Factors

24

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

40

Item 3.

Defaults Upon Senior Securities

41

Item 4.

Mine Safety Disclosures

41

Item 5.

Other Information

41

Item 6.

Exhibits

41

 

Signatures

 


 

Table of Contents

 

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

 

 

Nine Months Ended

 

 

 

October 1,

 

 

September 25,

 

 

October 1,

 

 

September 25,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenue

 

$

254,253

 

 

$

200,589

 

 

$

751,913

 

 

$

563,255

 

Cost of revenue

 

 

115,404

 

 

 

91,231

 

 

 

349,914

 

 

 

257,972

 

Gross profit

 

 

138,849

 

 

 

109,358

 

 

 

401,999

 

 

 

305,283

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

32,150

 

 

 

23,811

 

 

 

84,128

 

 

 

71,282

 

Sales and marketing

 

 

16,769

 

 

 

12,880

 

 

 

49,314

 

 

 

41,413

 

General and administrative

 

 

16,801

 

 

 

16,548

 

 

 

51,594

 

 

 

48,362

 

Amortization

 

 

13,822

 

 

 

12,993

 

 

 

41,461

 

 

 

37,674

 

Total operating expenses

 

 

79,542

 

 

 

66,232

 

 

 

226,497

 

 

 

198,731

 

Operating income

 

 

59,307

 

 

 

43,126

 

 

 

175,502

 

 

 

106,552

 

Interest income, net

 

 

1,516

 

 

 

234

 

 

 

2,554

 

 

 

899

 

Other expense, net

 

 

(962

)

 

 

(291

)

 

 

(2,025

)

 

 

(1,824

)

Income before provision for income taxes

 

 

59,861

 

 

 

43,069

 

 

 

176,031

 

 

 

105,627

 

Provision for income taxes

 

 

7,646

 

 

 

6,621

 

 

 

18,911

 

 

 

10,015

 

Net income

 

$

52,215

 

 

$

36,448

 

 

$

157,120

 

 

$

95,612

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.05

 

 

$

0.74

 

 

$

3.17

 

 

$

1.94

 

Diluted

 

$

1.05

 

 

$

0.73

 

 

$

3.15

 

 

$

1.92

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

49,680

 

 

 

49,361

 

 

 

49,582

 

 

 

49,190

 

Diluted

 

 

49,949

 

 

 

49,762

 

 

 

49,928

 

 

 

49,684

 

 

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

1


 

Table of Contents

ONTO INNOVATION INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

October 1,

 

 

September 25,

 

 

October 1,

 

 

September 25,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net income

 

$

52,215

 

 

$

36,448

 

 

$

157,120

 

 

$

95,612

 

Other comprehensive loss, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in net unrealized gains (losses) on

     available-for-sale marketable securities

 

 

(1,007

)

 

 

461

 

 

 

(3,456

)

 

 

(237

)

Change in currency translation adjustments

 

 

(4,119

)

 

 

55

 

 

 

(13,665

)

 

 

(1,307

)

Total other comprehensive loss, net of tax

 

 

(5,126

)

 

 

516

 

 

 

(17,121

)

 

 

(1,544

)

Total comprehensive income

 

$

47,089

 

 

$

36,964

 

 

$

139,999

 

 

$

94,068

 

 

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

 


2


 

Table of Contents

 

ONTO INNOVATION INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

 

 

 

October 1,

2022

 

 

January 1,

2022

 

ASSETS

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

200,383

 

 

$

169,602

 

Marketable securities

 

 

352,329

 

 

 

341,741

 

Accounts receivable, less allowance of $1,182 and $1,303

 

 

235,527

 

 

 

177,205

 

Inventories, net

 

 

307,864

 

 

 

243,108

 

Prepaid expenses and other current assets

 

 

26,533

 

 

 

16,433

 

Total current assets

 

 

1,122,636

 

 

 

948,089

 

Property, plant and equipment, net

 

 

84,253

 

 

 

82,094

 

Goodwill

 

 

315,811

 

 

 

315,811

 

Identifiable intangible assets, net

 

 

235,970

 

 

 

277,281

 

Deferred income taxes

 

 

4,287

 

 

 

4,822

 

Other assets

 

 

24,810

 

 

 

21,716

 

Total assets

 

$

1,787,767

 

 

$

1,649,813

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

63,951

 

 

$

53,345

 

Accrued liabilities

 

 

45,346

 

 

 

43,042

 

Deferred revenue

 

 

28,778

 

 

 

29,979

 

Other current liabilities

 

 

31,478

 

 

 

28,160

 

Total current liabilities

 

 

169,553

 

 

 

154,526

 

Deferred income taxes

 

 

15,504

 

 

 

40,281

 

Other non-current liabilities

 

 

33,336

 

 

 

28,951

 

Total liabilities

 

 

218,393

 

 

 

223,758

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Common stock

 

 

50

 

 

 

49

 

Additional paid-in capital

 

 

1,259,498

 

 

 

1,256,179

 

Accumulated other comprehensive (loss) income

 

 

(15,805

)

 

 

1,316

 

Retained earnings

 

 

325,631

 

 

 

168,511

 

Total stockholders’ equity

 

 

1,569,374

 

 

 

1,426,055

 

Total liabilities and stockholders’ equity

 

$

1,787,767

 

 

$

1,649,813

 

 

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

 


3


 

Table of Contents

 

ONTO INNOVATION INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Nine Months Ended

 

 

 

October 1,

 

 

September 25,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

157,120

 

 

$

95,612

 

Adjustments to reconcile net income to net cash and cash equivalents provided by

operating activities:

 

 

 

 

 

 

 

 

Amortization of intangibles

 

 

41,461

 

 

 

37,674

 

Depreciation

 

 

6,980

 

 

 

11,044

 

Share-based compensation

 

 

18,929

 

 

 

15,107

 

Write-off of acquired in-process research and development

 

 

4,406

 

 

 

 

Acquired inventory step-up amortization

 

 

 

 

 

253

 

Provision for inventory valuation

 

 

7,175

 

 

 

6,262

 

Deferred income taxes

 

 

(24,560

)

 

 

 

Other, net

 

 

2,742

 

 

 

893

 

Changes in operating assets and liabilities, net of effects of business acquired

 

 

(127,045

)

 

 

(40,565

)

Net cash and cash equivalents provided by operating activities

 

 

87,208

 

 

 

126,280

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of marketable securities

 

 

(289,504

)

 

 

(250,486

)

Proceeds from maturities and sales of marketable securities

 

 

274,636

 

 

 

177,529

 

Acquisitions, net of cash acquired

 

 

(4,572

)

 

 

(26,795

)

Purchases of property, plant and equipment

 

 

(9,786

)

 

 

(11,176

)

Net cash and cash equivalents used in investing activities

 

 

(29,226

)

 

 

(110,928

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Purchases and retirement of common stock

 

 

(11,540

)

 

 

 

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

 

 

(8,569

)

 

 

(6,780

)

Payment of contingent consideration for acquired business

 

 

(2,287

)

 

 

 

Issuance of shares through share-based compensation plans

 

 

4,499

 

 

 

6,409

 

Net cash and cash equivalents used in financing activities

 

 

(17,897

)

 

 

(371

)

Effect of exchange rate changes on cash and cash equivalents

 

 

(9,304

)

 

 

506

 

Net increase in cash and cash equivalents

 

 

30,781

 

 

 

15,487

 

Cash and cash equivalents at beginning of period

 

 

169,602

 

 

 

136,720

 

Cash and cash equivalents at end of period

 

$

200,383

 

 

$

152,207

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Income taxes paid (net of refunds)

 

$

47,107

 

 

$

16,524

 

 

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

 


4


 

Table of Contents

 

ONTO INNOVATION INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)

 

 

Common Stock

 

 

Additional Paid-in

 

 

Accumulated

Other

Comprehensive

 

 

Retained

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Earnings

 

 

Total

 

Balance at January 1, 2022

 

 

49,300

 

 

$

49

 

 

$

1,256,179

 

 

$

1,316

 

 

$

168,511

 

 

$

1,426,055

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

53,330

 

 

 

53,330

 

Share-based compensation

 

 

 

 

 

 

 

 

4,832

 

 

 

 

 

 

 

 

 

4,832

 

Issuance of shares through share-based

   compensation plans

 

 

184

 

 

 

 

 

 

6

 

 

 

 

 

 

 

 

 

6

 

Share-based compensation plan

    withholdings

 

 

(46

)

 

 

 

 

 

(5,289

)

 

 

 

 

 

 

 

 

(5,289

)

Currency translation

 

 

 

 

 

 

 

 

 

 

 

(3,612

)

 

 

 

 

 

(3,612

)

Unrealized loss on investments

 

 

 

 

 

 

 

 

 

 

 

(3,001

)

 

 

 

 

 

(3,001

)

Balance at April 2, 2022

 

 

49,438

 

 

$

49

 

 

$

1,255,728

 

 

$

(5,297

)

 

$

221,841

 

 

$

1,472,321

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

51,575

 

 

 

51,575

 

Share-based compensation

 

 

 

 

 

 

 

 

7,983

 

 

 

 

 

 

 

 

 

7,983

 

Issuance of shares through share-based

   compensation plans, net

 

 

219

 

 

 

1

 

 

 

4,493

 

 

 

 

 

 

 

 

 

4,494

 

Share-based compensation plan

    withholdings

 

 

(53

)

 

 

 

 

 

(3,048

)

 

 

 

 

 

 

 

 

(3,048

)

Currency translation

 

 

 

 

 

 

 

 

 

 

 

(5,934

)

 

 

 

 

 

(5,934

)

Unrealized gain on investments

 

 

 

 

 

 

 

 

 

 

 

552

 

 

 

 

 

 

552

 

Balance at July 2, 2022

 

 

49,604

 

 

$

50

 

 

$

1,265,156

 

 

$

(10,679

)

 

$

273,416

 

 

$

1,527,943

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

52,215

 

 

 

52,215

 

Share-based compensation

 

 

 

 

 

 

 

 

6,114

 

 

 

 

 

 

 

 

 

6,114

 

Issuance of shares through share-based

   compensation plans, net

 

 

86

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchases and retirement of common stock

 

 

(172

)

 

 

 

 

 

(11,540

)

 

 

 

 

 

 

 

 

(11,540

)

Share-based compensation plan

    withholdings

 

 

(3

)

 

 

 

 

 

(232

)

 

 

 

 

 

 

 

 

(232

)

Currency translation

 

 

 

 

 

 

 

 

 

 

 

(4,119

)

 

 

 

 

 

(4,119

)

Unrealized loss on investments

 

 

 

 

 

 

 

 

 

 

 

(1,007

)

 

 

 

 

 

(1,007

)

Balance at October 1, 2022

 

 

49,515

 

 

$

50

 

 

$

1,259,498

 

 

$

(15,805

)

 

$

325,631

 

 

$

1,569,374

 

 

 

5


 

Table of Contents

 

 

 

Common Stock

 

 

Additional Paid-in

 

 

Accumulated

Other

Comprehensive

 

 

Retained

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income

 

 

Earnings

 

 

Total

 

Balance at December 26, 2020

 

 

48,758

 

 

$

49

 

 

$

1,233,967

 

 

$

4,568

 

 

$

26,162

 

 

$

1,264,746

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

24,113