ONTO INNOVATION INC. [ONTO] Filings

10-Q 1 onto-10q_20220702.htm 10-Q onto-10q_20220702.htm

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 July 2, 2022

☐	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 July 19, 2022 was 49,680,837.

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 six months ended July 2, 2022 and June 26, 2021	1
	Condensed Consolidated Statements of Comprehensive Income for the three and six months ended July 2, 2022 and June 26, 2021	2
	Condensed Consolidated Balance Sheets at July 2, 2022 and January 1, 2022	3
	Condensed Consolidated Statements of Cash Flows for the six months ended July 2, 2022 and June 26, 2021	4
	Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended July 2, 2022 and June 26, 2021	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	23
Item 4.	Controls and Procedures	23

	PART II OTHER INFORMATION

Item 1.	Legal Proceedings	23
Item 1A.	Risk Factors	23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 3.	Defaults Upon Senior Securities	40
Item 4.	Mine Safety Disclosures	40
Item 5.	Other Information	40
Item 6.	Exhibits	40

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						Six Months Ended
	July 2,			June 26,			July 2,			June 26,
	2022			2021			2022			2021
Revenue	$	256,310		$	193,387		$	497,660		$	362,666
Cost of revenue		124,183			87,931			234,510			166,741
Gross profit		132,127			105,456			263,150			195,925
Operating expenses:
Research and development		25,637			25,507			51,978			47,471
Sales and marketing		16,913			15,429			32,545			28,533
General and administrative		18,306			16,255			34,793			31,814
Amortization		13,820			12,324			27,639			24,681
Total operating expenses		74,676			69,515			146,955			132,499
Operating income		57,451			35,941			116,195			63,426
Interest income, net		661			304			1,038			665
Other expense, net		(859	)		(289	)		(1,063	)		(1,533	)
Income before provision for income taxes		57,253			35,956			116,170			62,558
Provision for income taxes		5,678			905			11,265			3,394
Net income	$	51,575		$	35,051		$	104,905		$	59,164
Earnings per share:
Basic	$	1.04		$	0.71		$	2.12		$	1.20
Diluted	$	1.03		$	0.71		$	2.10		$	1.19
Weighted average shares outstanding:
Basic		49,617			49,193			49,525			49,105
Diluted		49,907			49,701			49,909			49,645

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

Table of Contents

ONTO INNOVATION INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

	Three Months Ended						Six Months Ended
	July 2,			June 26,			July 2,			June 26,
	2022			2021			2022			2021
Net income	$	51,575		$	35,051		$	104,905		$	59,164
Other comprehensive loss, net of tax:
Change in net unrealized gains (losses) on available-for-sale marketable securities		552			(567	)		(2,449	)		(698	)
Change in currency translation adjustments		(5,934	)		537			(9,546	)		(1,362	)
Total other comprehensive loss, net of tax		(5,382	)		(30	)		(11,995	)		(2,060	)
Total comprehensive income	$	46,193		$	35,021		$	92,910		$	57,104

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

Table of Contents

ONTO INNOVATION INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

	July 2, 2022			January 1, 2022
ASSETS
Current Assets:
Cash and cash equivalents	$	180,175		$	169,602
Marketable securities		364,825			341,741
Accounts receivable, less allowance of $1,439 and $1,303		234,731			177,205
Inventories, net		280,613			243,108
Prepaid expenses and other current assets		25,287			16,433
Total current assets		1,085,631			948,089
Property, plant and equipment, net		82,986			82,094
Goodwill		315,811			315,811
Identifiable intangible assets, net		249,742			277,281
Deferred income taxes		4,461			4,822
Other assets		22,829			21,716
Total assets	$	1,761,460		$	1,649,813
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	72,248		$	53,345
Accrued liabilities		38,957			43,042
Deferred revenue		32,121			29,979
Other current liabilities		33,341			28,160
Total current liabilities		176,667			154,526
Deferred income taxes		25,422			40,281
Other non-current liabilities		31,428			28,951
Total liabilities		233,517			223,758
Commitments and contingencies
Stockholders’ equity:
Common stock		50			49
Additional paid-in capital		1,265,156			1,256,179
Accumulated other comprehensive (loss) income		(10,679	)		1,316
Retained earnings		273,416			168,511
Total stockholders’ equity		1,527,943			1,426,055
Total liabilities and stockholders’ equity	$	1,761,460		$	1,649,813

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

Table of Contents

ONTO INNOVATION INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Six Months Ended
	July 2,			June 26,
	2022			2021
Cash flows from operating activities:
Net income	$	104,905		$	59,164
Adjustments to reconcile net income to net cash and cash equivalents provided by operating activities:
Amortization of intangibles		27,639			24,681
Depreciation		4,666			7,484
Share-based compensation		12,815			10,997
Acquired inventory step-up amortization		—			252
Provision for inventory valuation		4,494			3,706
Deferred income taxes		(13,962	)		—
Other, net		2,415			1,892
Changes in operating assets and liabilities, net of effects of business acquired		(87,584	)		(31,748	)
Net cash and cash equivalents provided by operating activities		55,388			76,428
Cash flows from investing activities:
Purchases of marketable securities		(174,730	)		(142,072	)
Proceeds from maturities and sales of marketable securities		148,426			102,027
Purchase of business, net of cash acquired		—			(26,795	)
Purchases of property, plant and equipment		(6,902	)		(9,558	)
Net cash and cash equivalents used in investing activities		(33,206	)		(76,398	)
Cash flows from financing activities:
Tax payments related to shares withheld for share-based compensation plans		(8,337	)		(6,499	)
Payment of contingent consideration for acquired business		(2,287	)		—
Issuance of shares through share-based compensation plans		4,499			3,215
Net cash and cash equivalents used in financing activities		(6,125	)		(3,284	)
Effect of exchange rate changes on cash and cash equivalents		(5,484	)		752
Net increase (decrease) in cash and cash equivalents		10,573			(2,502	)
Cash and cash equivalents at beginning of period		169,602			136,720
Cash and cash equivalents at end of period	$	180,175		$	134,218

Supplemental disclosure of cash flow information:
Income taxes paid (net of refunds)	$	32,945		$	4,980

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

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

	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		24,113
Share-based compensation		—			—		4,890			—			—		4,890
Issuance of shares through share-based compensation plans		240			—		3,085			—			—		3,085
Share-based compensation plan withholdings		(41	)		—		(2,492	)		—			—		(2,492	)
Currency translation		—			—		—			(1,899	)		—		(1,899	)
Unrealized loss on investments		—			—		—			(131	)		—		(131	)
Balance at March 27, 2021		48,957		$	49	$	1,239,450		$	2,538		$	50,275	$	1,292,312
Net income		—			—		—			—			35,051		35,051
Share-based compensation		—			—		6,107			—			—		6,107
Issuance of shares through share-based compensation plans, net		288			—		130			—			—		130
Share-based compensation plan withholdings		(56	)		—		(4,007	)		—			—		(4,007	)
Currency translation		—

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10-Q	[2022-05-03]
10-K	[2022-02-25]
10-Q	[2021-11-04]
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10-Q	[2021-04-29]
10-K	[2021-02-19]
10-Q	[2020-11-02]
10-Q	[2020-08-04]
10-Q	[2020-05-05]
10-K	[2020-02-25]
10-Q	[2019-11-07]
10-Q	[2019-07-31]
10-Q	[2019-05-01]
10-K	[2019-02-25]
10-Q	[2018-10-31]
10-Q	[2018-08-02]
10-Q	[2018-05-03]
10-K	[2018-02-26]
10-Q	[2017-11-03]
10-Q	[2017-08-03]
10-Q	[2017-05-03]
10-K	[2017-03-03]
10-Q	[2016-10-28]
10-Q	[2016-07-28]
10-Q	[2016-04-29]
10-K	[2016-02-24]
10-Q	[2015-10-30]
10-Q	[2015-07-24]
10-Q	[2015-04-29]
10-K	[2015-02-25]
10-Q	[2014-10-31]
10-Q	[2014-08-01]
10-Q	[2014-05-06]
10-K	[2014-03-07]
10-Q	[2013-11-07]
10-Q	[2013-08-02]
10-Q	[2013-05-07]
10-K	[2013-03-12]
10-Q	[2012-11-07]
10-Q	[2012-08-09]
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10-K	[2012-03-14]