10-Q 1 onto-10q_20210925.htm 10-Q onto-10q_20210925.htm
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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 September 25, 2021

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 6, 2021 was 49,278,444.

 

 

 

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 September 25, 2021 and September 26, 2020

1

 

Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 25, 2021 and September 26, 2020

2

 

Condensed Consolidated Balance Sheets at September 25, 2021 and December 26, 2020

3

 

Condensed Consolidated Statements of Cash Flows for the nine months ended September 25, 2021 and September 26, 2020

4

 

Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 25, 2021 and September 26, 2020

5

 

Notes to Condensed Consolidated Financial Statements

7

Item 2.

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

19

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

25

Item 4.

Controls and Procedures

25

 

 

 

 

PART II    OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

26

Item 1A.

Risk Factors

26

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

38

Item 3.

Defaults Upon Senior Securities

39

Item 4.

Mine Safety Disclosures

39

Item 5.

Other Information

39

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

 

 

Nine Months Ended

 

 

 

September 25,

 

 

September 26,

 

 

September 25,

 

 

September 26,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenue

 

$

200,589

 

 

$

126,492

 

 

$

563,255

 

 

$

401,368

 

Cost of revenue

 

 

91,231

 

 

 

57,604

 

 

 

257,972

 

 

 

198,264

 

Gross profit

 

 

109,358

 

 

 

68,888

 

 

 

305,283

 

 

 

203,104

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

23,811

 

 

 

19,678

 

 

 

71,282

 

 

 

62,772

 

Sales and marketing

 

 

12,880

 

 

 

11,924

 

 

 

41,413

 

 

 

36,864

 

General and administrative

 

 

16,548

 

 

 

14,358

 

 

 

48,362

 

 

 

50,421

 

Amortization

 

 

12,993

 

 

 

13,646

 

 

 

37,674

 

 

 

41,081

 

Total operating expenses

 

 

66,232

 

 

 

59,606

 

 

 

198,731

 

 

 

191,138

 

Operating income

 

 

43,126

 

 

 

9,282

 

 

 

106,552

 

 

 

11,966

 

Interest income, net

 

 

234

 

 

 

544

 

 

 

899

 

 

 

2,440

 

Other expense, net

 

 

(291

)

 

 

(899

)

 

 

(1,824

)

 

 

(2,065

)

Income before provision for income taxes

 

 

43,069

 

 

 

8,927

 

 

 

105,627

 

 

 

12,341

 

Provision for income taxes

 

 

6,621

 

 

 

836

 

 

 

10,015

 

 

 

1,230

 

Net income

 

$

36,448

 

 

$

8,091

 

 

$

95,612

 

 

$

11,111

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.74

 

 

$

0.17

 

 

$

1.94

 

 

$

0.23

 

Diluted

 

$

0.73

 

 

$

0.16

 

 

$

1.92

 

 

$

0.22

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

49,361

 

 

 

48,900

 

 

 

49,190

 

 

 

49,231

 

Diluted

 

 

49,762

 

 

 

49,131

 

 

 

49,684

 

 

 

49,551

 

 

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

 

 

 

September 25,

 

 

September 26,

 

 

September 25,

 

 

September 26,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net income

 

$

36,448

 

 

$

8,091

 

 

$

95,612

 

 

$

11,111

 

Other comprehensive gain (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in net unrealized gains (losses) on

     available-for-sale marketable securities

 

 

461

 

 

 

(72

)

 

 

(237

)

 

 

197

 

Change in currency translation adjustments

 

 

55

 

 

 

1,803

 

 

 

(1,307

)

 

 

2,067

 

Total other comprehensive gain (loss), net of tax

 

 

516

 

 

 

1,731

 

 

 

(1,544

)

 

 

2,264

 

Total comprehensive income

 

$

36,964

 

 

$

9,822

 

 

$

94,068

 

 

$

13,375

 

 

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)

 

 

 

September 25,

2021

 

 

December 26,

2020

 

ASSETS

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

152,207

 

 

$

136,720

 

Marketable securities

 

 

309,344

 

 

 

237,002

 

Accounts receivable, less allowance of $1,007 and $784

 

 

179,766

 

 

 

149,251

 

Inventories, net

 

 

222,311

 

 

 

191,217

 

Prepaid expenses and other current assets

 

 

21,846

 

 

 

17,471

 

Total current assets

 

 

885,474

 

 

 

731,661

 

Property, plant and equipment, net

 

 

85,685

 

 

 

87,950

 

Goodwill

 

 

313,891

 

 

 

306,632

 

Identifiable intangible assets, net

 

 

292,892

 

 

 

318,357

 

Deferred income taxes

 

 

2,254

 

 

 

2,235

 

Other assets

 

 

23,067

 

 

 

21,337

 

Total assets

 

$

1,603,263

 

 

$

1,468,172

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

50,867

 

 

$

40,183

 

Accrued liabilities

 

 

42,642

 

 

 

37,075

 

Deferred revenue

 

 

26,551

 

 

 

14,334

 

Other current liabilities

 

 

28,557

 

 

 

28,499

 

Total current liabilities

 

 

148,617

 

 

 

120,091

 

Deferred income taxes

 

 

54,354

 

 

 

55,623

 

Other non-current liabilities

 

 

26,742

 

 

 

27,712

 

Total liabilities

 

 

229,713

 

 

 

203,426

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Common stock

 

 

49

 

 

 

49

 

Additional paid-in capital

 

 

1,248,703

 

 

 

1,233,967

 

Accumulated other comprehensive income

 

 

3,024

 

 

 

4,568

 

Retained earnings

 

 

121,774

 

 

 

26,162

 

Total stockholders’ equity

 

 

1,373,550

 

 

 

1,264,746

 

Total liabilities and stockholders’ equity

 

$

1,603,263

 

 

$

1,468,172

 

 

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

 

 

 

September 25,

 

 

September 26,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

95,612

 

 

$

11,111

 

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

operating activities:

 

 

 

 

 

 

 

 

Amortization of intangibles

 

 

37,674

 

 

 

41,081

 

Depreciation

 

 

11,044

 

 

 

9,834

 

Share-based compensation

 

 

15,107

 

 

 

12,983

 

Acquired inventory step-up amortization

 

 

253

 

 

 

10,172

 

Provision for inventory valuation

 

 

6,262

 

 

 

5,437

 

Other, net

 

 

893

 

 

 

546

 

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

 

 

(40,565

)

 

 

(18,305

)

Net cash and cash equivalents provided by operating activities

 

 

126,280

 

 

 

72,859

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of marketable securities

 

 

(250,486

)

 

 

(250,928

)

Proceeds from sales of marketable securities

 

 

177,529

 

 

 

201,764

 

Cash received from convertible note receivable

 

 

—

 

 

 

2,848

 

Purchase of business, net of cash acquired

 

 

(26,795

)

 

 

—

 

Purchases of property, plant and equipment

 

 

(11,176

)

 

 

(3,391

)

Net cash and cash equivalents used in investing activities

 

 

(110,928

)

 

 

(49,707

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Purchase of common stock

 

 

—

 

 

 

(52,000

)

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

 

 

(6,780

)

 

 

(3,546

)

Payment of contingent consideration for acquired business

 

 

—

 

 

 

(435

)

Issuance of shares through share-based compensation plans

 

 

6,409

 

 

 

2,845

 

Net cash and cash equivalents used in financing activities

 

 

(371

)

 

 

(53,136

)

Effect of exchange rate changes on cash and cash equivalents

 

 

506

 

 

 

917

 

Net increase (decrease) in cash and cash equivalents

 

 

15,487

 

 

 

(29,067

)

Cash and cash equivalents at beginning of period

 

 

136,720

 

 

 

130,673

 

Cash and cash equivalents at end of period

 

$

152,207

 

 

$

101,606

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Income taxes paid (net of refunds)

 

$

16,524

 

 

$

4,562

 

 

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

 

 

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

 

 

—

 

 

 

—

 

 

 

—

 

 

 

537

 

 

 

—

 

 

 

537

 

Unrealized loss on investments

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(567

)

 

 

—

 

 

 

(567

)

Balance at June 26, 2021

 

 

49,189

 

 

$

49

 

 

$

1,241,680

 

 

$

2,508

 

 

$

85,326

 

 

$

1,329,563

 

Net income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

36,448

 

 

 

36,448

 

Share-based compensation

 

 

—

 

 

 

—

 

 

 

4,110

 

 

 

—

 

 

 

—

 

 

 

4,110

 

Issuance of shares through share-based

   compensation plans, net

 

 

93

 

 

 

—

 

 

 

3,193

 

 

 

—

 

 

 

—

 

 

 

3,193

 

Share-based compensation plan

    withholdings

 

 

(4

)

 

 

—

 

 

 

(280

)

 

 

—

 

 

 

—

 

 

 

(280

)

Currency translation

 

 

—

 

 

 

—

 

 

 

—

 

 

 

55

 

 

 

—

 

 

 

55

 

Unrealized loss on investments

 

 

—

 

 

 

—

 

 

 

—

 

 

 

461

 

 

 

—

 

 

 

461

 

Balance at September 25, 2021

 

 

49,278

 

 

$

49

 

 

$

1,248,703

 

 

$

3,024

 

 

$

121,774

 

 

$

1,373,550

 

 

 

5

 

Table of Contents

 

 

 

Common Stock

 

 

Additional Paid-in

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Total

 

Balance at December 31, 2019

 

 

50,184

 

 

$

50

 

 

$

1,269,437

 

 

$

(598

)

 

$

(4,863

)

 

$

1,264,026

 

Repurchase of common stock

 

 

(1,250

)

 

 

(1

)

 

 

(33,613

)

 

 

—

 

 

 

—

 

 

 

(33,614

)

Net loss

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(4,404

)

 

 

(4,404

)

Share-based compensation

 

 

—

 

 

 

—

 

 

 

3,955

 

 

 

—

 

 

 

—

 

 

 

3,955

 

Issuance of shares through share-based

   compensation plans

 

 

240