美國
證券交易委員會
華盛頓特區20549
表格
(標記一個)
根據1934年證券交易法第13或15(d)條款的季度報告。 |
截止至本季度結束
或
根據1934年證券交易法第13或15(d)條款的過渡報告 |
在從 至過渡期間
委員會檔案號碼。
（依憑章程所載的完整登記名稱）
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(依據所在地或其他管轄區) 的註冊地或組織地點) |
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(國稅局雇主識別號碼) 識別號碼) |
(總辦事處地址，包括郵遞區號)
註冊人的電話號碼，包括區號：(
根據本法第12(b)條所註冊的證券。
每個班級的標題 |
交易標的（s） |
註冊的每個交易所的名稱 |
請用勾選標記表示申報人是否：（1）已在過去12個月（或註冊人根據要求提交的更短期限內）依據1934年證券交易法第13條或第15(d)條的要求提交了所有報告，以及（2）在過去90天內一直受到申報要求的約束。
請用勾選標記指示，公司是否在過去12個月期間（或公司要求提交此類檔案的較短期間）已經按照《S-T法規第405條》要求提交每個互動式數據檔案。
請勾選判斷登記人是大型加速申報者、加速申報者、非加速申報者、較小型報告公司或新興成長公司。請參閱交易所法案規則120億2中"large accelerated filer"、"accelerated filer"、"smaller reporting company"和"emerging growth company"的定義。
☒ |
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加速歸檔人 |
☐ |
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非加速歸檔人 |
☐ |
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小型報告公司 |
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新興成長型企業 |
如果一家新興成長型企業，請打勾表示公司已選擇不使用擴展過渡期以符合根據《交易所法案》第13(a)條所提供的任何新的或修訂財務會計準則。 ☐
請勾選是否為外殼公司 (依照交易所法規定定義的外殼公司條款120億2)。是
2024年10月15日，登記公司普通股的優先股數量。
表 內容
項目編號 |
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頁面 |
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第一部份 基本報表 |
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项目1。 |
1 |
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1 |
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2 |
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3 |
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4 |
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5 |
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项目2。 |
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项目3。 |
24 |
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项目4。 |
24 |
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第二部分 其他資訊 |
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项目1。 |
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项目1A。 |
風險因素 |
25 |
项目2。 |
41 |
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项目3。 |
42 |
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项目4。 |
42 |
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项目5。 |
42 |
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第6項。 |
43 |
第一部分 財務資訊
項目1. 基本報表
onto innovation inc
綜合財務報表摘要綜合損益表
(以千為單位，除每股數據外)
(未經查核)
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三個月結束 |
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截止九個月 |
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九月二十八日 |
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九月三十日 |
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九月二十八日 |
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九月三十日 |
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2024 |
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2023 |
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2024 |
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2023 |
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收入 |
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$ |
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$ |
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$ |
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收入成本 |
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毛利 |
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營運費用： |
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研究與開發 |
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銷售和行銷 |
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一般及行政 |
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攤銷 |
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營運開支總額 |
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營業收入 |
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利息收入淨額 |
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其他（費用）收入（淨額） |
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( |
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所得稅預備前收入 |
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所得稅預約 |
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淨收入 |
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$ |
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$ |
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$ |
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$ |
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每股盈利： |
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基本 |
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$ |
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$ |
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$ |
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$ |
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稀釋 |
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$ |
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$ |
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$ |
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$ |
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加權平均已發行股份數目： |
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基本 |
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稀釋 |
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附註是此基本報表的一個重要部分。
1
onto innovation inc
綜合所得綜合財務報表綜合收益綜合財務報表
(以千為單位)
(未經查核)
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結束於三個月的期間 |
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九個月結束了 |
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九月二十八日, |
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九月三十日， |
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九月二十八日, |
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九月三十日， |
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2024 |
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2023 |
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2024 |
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2023 |
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凈利潤 |
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$ |
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$ |
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$ |
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$ |
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其他綜合損益（稅後淨額）： |
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未實現外匯兌換收益變動 |
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貨幣兌換調整變動 |
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( |
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其他綜合損益(淨額)(稅後) |
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( |
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( |
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累計綜合收益 |
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$ |
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$ |
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$ |
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$ |
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附註是此基本報表的一個重要部分。
2
onto innovation inc
簡明綜合賬目表縮編平衡表
(以千為單位)
(未經查核)
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九月二十八日 |
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十二月三十日， |
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資產 |
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流動資產： |
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現金及現金等值 |
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$ |
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$ |
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可交易證券 |
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應收帳款，減少了 $ 的津貼 |
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庫存 (淨值) |
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預付費用及其他流動資產 |
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流動資產總額 |
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物業、工廠及設備淨值 |
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善良 |
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可識別無形資產淨值 |
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延期所得稅 |
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其他資產 |
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總資產 |
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$ |
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$ |
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負債及股東權益 |
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流動負債： |
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應付帳款 |
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$ |
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$ |
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累計負債 |
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延期收入 |
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其他流動負債 |
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流動負債總額 |
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其他非流動負債 |
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負債總額 |
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股東權益： |
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普通股 |
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額外支付資本 |
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累積其他綜合損失 |
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( |
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( |
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累積收益 |
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股東權益總數 |
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負債總和股東權益 |
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$ |
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$ |
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附註是此基本報表的一個重要部分。
3
onto innovation inc
綜合財務報表摘要現金流量表
(以千為單位)
(未經查核)
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九個月結束了 |
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九月二十八日, |
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九月三十日， |
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2024 |
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2023 |
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經營活動現金流量： |
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凈利潤 |
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$ |
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$ |
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調整淨利潤以達到提供現金及現金等價物的淨額 |
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無形資產攤銷 |
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折舊 |
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基於股份的報酬 |
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存貨估值準備 |
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推延所得稅 |
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( |
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( |
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其他，淨額 |
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( |
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營運資產和負債的變動 |
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( |
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( |
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經營活動提供之淨現金及現金等價物 |
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投資活動之現金流量: |
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可銷售證券的購入 |
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( |
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( |
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可轉讓證券的到期和銷售收入 |
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固定資產購入 |
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( |
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( |
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投資活動中使用的淨現金及現金等價物 |
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( |
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( |
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來自籌資活動的現金流量: |
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普通股的購買和養老 |
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( |
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與股份酬勞計劃相關的扣股稅款 |
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( |
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( |
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收購業務的條件性考慮金支付 |
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( |
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( |
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透過基於股份的報酬計劃發行股份 |
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用於融資活動的淨現金及現金等價物 |
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( |
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( |
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匯率變動對現金及現金等價物的影響 |
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( |
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( |
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現金及現金等價物的淨（減少）增加額 |
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( |
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期初現金及現金等價物餘額 |
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期末現金及現金等價物 |
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$ |
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$ |
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現金流量資訊的補充披露： |
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已支付的所得稅（扣除退稅） |
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$ |
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$ |
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附註是此基本報表的一個重要部分。
4
onto innovation inc
股東權益簡明合併財務報表
(以千為單位)
(未經查核)
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普通股 |
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額外的已實收入股本 |
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累計 |
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累計 |
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股份 |
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金額 |
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資本 |
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虧損 |
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累積盈餘 |
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總計 |
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2023年12月30日結存 |
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$ |
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$ |
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$ |
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$ |
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$ |
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凈利潤 |
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— |
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— |
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— |
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— |
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基於股份的報酬 |
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— |
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— |
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— |
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— |
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透過發行股份 |
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— |
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— |
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— |
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股份為基礎的補償計劃 |
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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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貨幣翻譯 |
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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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投資未實現虧損 |
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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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2024年3月30日結餘 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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凈利潤 |
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— |
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— |
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— |
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— |
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基於股份的報酬 |
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— |
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— |
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— |
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— |
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通過發行股份進行 |
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— |
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— |
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— |
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— |
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— |
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股份報酬計劃 |
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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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貨幣翻譯 |
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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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投資未實現虧損 |
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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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截至2024年6月29日的餘額 |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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凈利潤 |
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— |
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— |
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— |
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— |
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基於股份的報酬 |
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— |
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— |
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— |
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— |
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通過發行股份籌措資金 |
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— |
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— |
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— |
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股份報酬計畫 |
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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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貨幣翻譯 |
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— |
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— |
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— |
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— |
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投資未實現收益 |
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— |
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— |
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— |
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— |
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2024年9月28日結餘 |
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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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普通股 |
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額外的已實收入股本 |
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累計 |
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累計 |
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股份 |
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金額 |
|
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資本 |
|
|
虧損 |
|
|
累積盈餘 |
|
|
總計 |
|
||||||
2022年12月31日結餘 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||
凈利潤 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
基於股份的報酬 |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
通過發行股份進行 |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
購買普通股股份 |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
基於股份的報酬計畫 |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
貨幣翻譯 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
投資未實現收益 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
2023年4月1日結餘 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||
凈利潤 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
基於股份的報酬 |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
通過發行股份進行 |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
股份報酬計劃 |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
貨幣翻譯 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
投資未實現虧損 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
2023年7月1日的結餘 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||
凈利潤 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
基於股份的報酬 |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
通過發行股份 |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
普通股的購買和養老 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
基於股份的薪酬計劃 |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
貨幣翻譯 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
投資未實現虧損 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
截至2023年9月30日的結餘 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||
附註是此基本報表的一個重要部分。
6
onto innovation inc
基本合併財務報表附註日期基本報表
（以千為單位，除每股數據和百分比外）
(未經查核)
備註1. 簡介
由Onto Innovation Inc.（以下簡稱"公司"、"Onto Innovation"、"我們"或"我們"）及其合併子公司（除非有其他說明或上下文暗示，一律合稱"公司"）根據管理層的意見編製的附註未經審計的簡明合併基本報表，所有調整均考慮了根據美國通行的核可會計原則（"U.S. GAAP"）必要的一般性反覆應計，以便公平呈現。編製基本報表需要管理層進行影響財務報表和附註中報告金額的估計和假設。實際金額可能與報告金額有實質差異。2024年9月28日結束的三個月和九個月的中期結果 不一定代表整個年度或任何未來期間的預期結果。應該閱讀這份中期財務資訊以及2023年12月30日結束的公司10-K年度報告（"2023 Form 10-K"）及其附註中包含的財務報表一起。2023年12月30日的附註簡明合併資產負債表是從性審計合併基本報表和2023 Form 10-K中獲得的。 2024年9月28日 並非必然指示整個年度或任何未來期間的預期結果。這份中期財務信息 應與附註於公司2023年12月30日年度報告（"2023 Form 10-K"）提交至證券交易委員會的2024年2月26日之中的財務報表和附註一同閱讀。2023年12月30日的附註簡明合併資產負債表是來自2023 Form 10-K中包含的經過審計合併財務報表。
公司以52或53週的財政年度結束於最接近12月31日的週六。我們於2024年12月28日（"2024年度財政年度"）結束的財政年度是52週的財政年度。公司2024年度的第一季度於2024年3月30日結束，第二季度於2024年6月29日結束，第三季度於2024年9月28日結束。我們於2023年12月30日結束的財政年度是52週的財政年度。2023年12月30日結束的財政年度的第三季度於2023年9月30日結束。
估計的使用
遵循U.S.GAAP編製的財務報表需要行政部門對財務報表的資產和負債金額的報告以及披露在財務報表日期後勾範資產和負債以及報告的營業收入和支出金額進行估計和假設。管理層的估計包括庫存的過剩和陳舊、企業合併中獲得的資產和承擔的負債的公平價值、資產的恢復性和有用壽命，以及可識別無形資產、商譽的恢復性、可短期資產、應收帳款壞賬之許可金額、產品保固負債、以股份為基礎的支付與稅務不確定性的負債。實際結果可能與這些估計有所不同。
這些估計和假設是基於歷史經驗和公司認為在情況下合理的各種其他因素。公司可能聘請第三方估值專家來協助估計與財務工具、資產和與各種合同安排相關的股票獎勵的估值相關事項。這些估計通常需要選擇適當的估值方法和做出重要判斷。在不同的假設或情況下，實際結果可能與這些估計不同，而且這些差異可能是重大的。
採用會計準則
最近通過或生效
在截至2024年9月28日的三個月和九個月期間，與公司年度報告形式10-k（即截至2023年12月30日的財政年度）中描述的重要會計準則或潛在重要會計準則相比，沒有最近的會計準則公告或會計準則變更。
更新尚未生效
2023年11月，財務會計準則委員會（“FASB”）發布了《會計準則更新》（“ASU”）2023-07，“分部報告（主題280）：關於報告部門披露的改進”，擴展了關於上市公司報告部門的披露，並要求有關報告部門的更加增強信息的披露，包括信息
7
關於報告節段的費用、中期節段利潤或損失，以及上市實體的首席營運決策者如何使用已報告的節段利潤或損失資訊來評估節段表現和分配資源。本指引適用於2023年12月15日後開始發行的基本報表，以及2024年12月15日後開始的基本報表之中期期間，並允許提前適用。公司須在2024財政年度採用該標準，終了於2024年12月28日的年度報告期，並回溯揭示過去的時期。公司預計採用ASU 2023-07對其合併財務報表不會造成重大影響。
2023年12月，FASB發布了ASU 2023-09，“利潤稅（主題740）：改善利潤稅披露”，要求上市實體在稅率協調和所支付的所得稅資訊方面披露一致的類別和更大的細分。還包括某些其他修訂以提高利潤稅披露的效果。本指引適用於2024年12月15日後開始發行的年度報表，並允許提前適用。公司須在2025財政年度前瞻性地採用該標準，終了於2025年12月27日的年度報告期。公司目前正在評估採用對其合併財務報表的影響。
附註2. 公允價值衡量
金融工具的公允價值
公司已評估使用可得的市場信息和第三方來源提供的估計公允價值金融工具。使用不同的市場假設和/或估計方法可能對估計的公允價值金額產生顯著影響。由於這些工具的短期到期性質，現金及現金等價物、應收賬款、應付賬款和應計負債的帳面價值近似公允價值。
公允價值分類
公司對公允價值衡量應用三級評價階層。該階層將輸入劃分為三個廣泛的層次。一級輸入是秉持的行情價格（未經調整）的活躍市場上的相同資產或負債。二級輸入是活躍市場上類似資產和負債的行情價格，或者對該資產或負債具有可觀察性的輸入，無論是通過市場協調還是直接或間接地，在資產或負債的完整期限內。三級輸入是基於管理層假設而形成的不可觀察輸入，用於測量資產和負債的公允價值。金融資產或負債的公允價值衡量分類層次取決於對公允價值衡量具有重要作用的最低級別輸入。
以下表格顯示了在2024年9月28日和2023年12月30日定期衡量的資產和負債公允價值。 2024年9月28日和2023年12月30日資產和負債公允價值的表
|
|
公平價值計量使用 |
|||||||
|
|
九月二十八日, |
|
|
12月30日， |
|
|
||
資產： |
|
|
|
|
|
|
|
||
可供出售債務工具： |
|
|
|
|
|
|
|
||
政府票據和債券 |
|
$ |
|
|
$ |
|
|
||
存款證明 |
|
|
|
|
|
|
|
||
商業本票 |
|
|
|
|
|
|
|
||
公司債券 |
|
|
|
|
|
|
|
||
資產總額 |
|
$ |
|
|
$ |
|
|
||
負債： |
|
|
|
|
|
|
|
||
外匯即期合約 |
|
$ |
|
|
$ |
|
|
||
總負債 |
|
$ |
|
|
$ |
|
|
||
歸屬於待售金融資產的二級債務證券使用可觀察的輸入值評估，包括報價市場價格、基準殖利率、報告交易、經紀/經銷商報價或具有合理價格透明度的替代定價來源。外幣遠期合約主要基於外幣即期和遠期進行衡量。
8
報價來自銀行或外匯經銷商。投資價格取得自第三方定價提供者，其利用上述可觀察輸入建立價格模型，適用於每個資產類別。
有關公司可交易證券公允價值的討論，請參閱註釋3。
注意 3. 可銷售證券
在 截至2024年9月28日和2023年12月30日，可銷售證券分類如下：
|
|
攤銷後成本 |
|
|
未實現投資增值 |
|
|
未實現投資虧損 |
|
|
公平價值 |
|
||||
2024年9月28日 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
政府票據和債券 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
存款證明 |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
商業本票 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
公司債券 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
可銷售證券總額 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
2023年12月30日 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
政府票據和債券 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
存款證明 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
商業本票 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
公司債券 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
可銷售證券總額 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
根據安防列表，不論Condensed Consolidated Balance Sheets分類，按到期日期分類的可交易證券攤銷成本和估計公允價值如下所示： 2024年9月28日和2023年12月30日資產和負債公允價值的表
|
|
2024年9月28日 |
|
|
2023年12月30日 |
|
||||||||||
|
|
攤銷後成本 |
|
|
公平價值 |
|
|
攤銷後成本 |
|
|
公平價值 |
|
||||
一年內到期的 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
一到五年後到期 |
|
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|
||||
五到十年後到期 |
|
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|
||||
十年後到期的 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
可銷售證券總額 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
公司已評估其投資政策並確定其所有具市場流通性的證券，包括債券，均應歸類為可供出售。公司持有的可供出售債券按公允價值列示，未實現收益與損失則記錄於股東權益項下的「累積其他全面損失」。可供出售證券的實現淨收益與損失列示於綜合損益表的「其他（費用）收益，淨」中，在2024年9月28日與2023年9月30日結束的三個月及九個月內，毫無影響。公司在打算出售證券時，或者當需出售證券的機會大於否時，按照證券的攤銷成本，記錄可供出售債券的信用損失。售出證券的成本基於特定識別法。
公司確定2024年9月28日及2023年12月30日的市場證券的毛未實現損失屬於暫時性。公司定期檢視其投資組合，以識別並評估具可能受信用損失或其他因素影響的市場證券。在判定未實現損失是否被視為信用損失時，考慮的因素包括公允價值低於成本基準的時段及程度，信用品質以及公司持有證券的意願和能力達到預期的市場價值恢復所需的持有時間。
9
下表彙總了市場可交易證券的估計公平價值和總未實現持有虧損，按投資工具和未實現虧損部位期間進行合計，於 2024年9月28日和2023年12月30日資產和負債公允價值的表
|
|
未實現虧損部位為 |
|
|
未實現虧損部位為 |
|
||||||||||
|
|
公平價值 |
|
|
未實現虧損總額 |
|
|
公平價值 |
|
|
未實現虧損總額 |
|
||||
2024年9月28日 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
政府票據和債券 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
存款證明 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
商業本票 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
公司債券 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
總計 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
2023年12月30日 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
政府票據和債券 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
存款證明 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
商業本票 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
公司債券 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
總計 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
詳情請參閱附註2，了解公司可供出售金融資產的公平價值討論。
注意事項 4.衍生工具及對沖活動
本公司認為適當時，會簽訂遠期合約，以對沖因外幣計價交易所產生的經濟風險。在 2024 年 9 月 28 日和 2023 年 12 月 30 日，這些合約以歐元、中國人民幣、日圓、韓元、新加坡元和台幣計價。外幣遠期合約不會被指定為會計目的對沖，因此公平價值的變動會記錄在簡明綜合業務報表中的「其他（費用）收入淨值」中。本公司將其以公平價值計算的遠期合約記錄在簡明綜合資產負債表中的「預付費用及其他流動資產」或「其他流動負債」中。
截至以下的美元遠期合約及相關公平價值的美元等值 二零二四年九月二十八日及二零二三年十二月三十日如下：
|
|
二零二四年九月二十八日 |
|
|
二零二三年十二月三十日 |
|
||
名義金額 |
|
$ |
|
|
$ |
|
||
責任公平價值 |
|
$ |
( |
) |
|
$ |
( |
) |
10
備註 5. 已購買無形資產
無形資產
2024年9月28日和2023年12月30日的已購買無形資產如下：
|
|
毛餘額 |
|
|
累積攤提 |
|
|
淨值 |
|
|||
2024年9月28日 |
|
|
|
|
|
|
|
|
|
|||
有限壽命無形資產： |
|
|
|
|
|
|
|
|
|
|||
開發出的科技 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
客戶和分銷商關係 |
|
|
|
|
|
|
|
|
|
|||
商標和商號 |
|
|
|
|
|
|
|
|
|
|||
可辨識無形資產總額 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
2023年12月30日 |
|
|
|
|
|
|
|
|
|
|||
有限壽命無形資產： |
|
|
|
|
|
|
|
|
|
|||
開發出的科技 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
客戶和分銷商關係 |
|
|
|
|
|
|
|
|
|
|||
商標和商號 |
|
|
|
|
|
|
|
|
|
|||
可辨識無形資產總額 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
假設可識別無形資產的毛額攜帶價值和預估壽命不變，未來預估的攤銷費用為：
|
預期的攤銷 |
|
|
財政年度： |
費用 |
|
|
2024（餘額） |
$ |
|
|
2025 |
|
|
|
2026 |
|
|
|
2027 |
|
|
|
2028 |
|
|
|
2029 |
|
|
|
此後 |
|
|
|
總計 |
$ |
|
|
備註 6. 資產負債表元件
存貨
存貨淨額由以下組成：
|
|
2024年9月28日 |
|
|
2023年12月30日 |
|
||
原材料 |
|
$ |
|
|
$ |
|
||
在製品 |
|
|
|
|
|
|
||
成品 |
|
|
|
|
|
|
||
存貨總額，扣除存貨準備 |
|
$ |
|
|
$ |
|
||
11
Property, Plant and Equipment
Property, plant and equipment, net is comprised of the following:
|
|
September 28, 2024 |
|
|
December 30, 2023 |
|
||
Machinery and equipment |
|
$ |
|
|
$ |
|
||
Land and building |
|
|
|
|
|
|
||
Computer equipment and software |
|
|
|
|
|
|
||
Leasehold improvements |
|
|
|
|
|
|
||
Furniture and fixtures |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
Total property, plant and equipment, net |
|
$ |
|
|
$ |
|
||
Other assets
Other assets are comprised of the following:
|
|
September 28, 2024 |
|
|
December 30, 2023 |
|
||
Operating lease right-of-use assets |
|
$ |
|
|
$ |
|
||
Other |
|
|
|
|
|
|
||
Total other assets |
|
$ |
|
|
$ |
|
||
Accrued liabilities
Accrued liabilities are comprised of the following:
|
|
September 28, 2024 |
|
|
December 30, 2023 |
|
||
Payroll and related expenses |
|
$ |
|
|
$ |
|
||
Warranty |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total accrued liabilities |
|
$ |
|
|
$ |
|
||
Other current liabilities
Other current liabilities are comprised of the following:
|
|
September 28, 2024 |
|
|
December 30, 2023 |
|
||
Customer deposits |
|
$ |
|
|
$ |
|
||
Current operating lease obligations |
|
|
|
|
|
|
||
Income tax payable |
|
|
|
|
|
|
||
Accrued professional fees |
|
|
|
|
|
|
||
Other accrued taxes |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total other current liabilities |
|
$ |
|
|
$ |
|
||
Other non-current liabilities
Other non-current liabilities are comprised of the following:
|
|
September 28, 2024 |
|
|
December 30, 2023 |
|
||
|
$ |
|
|
$ |
|
|||
Unrecognized tax benefits (including interest) |
|
|
|
|
|
|
||
Deferred revenue |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total other non-current liabilities |
|
$ |
|
|
$ |
|
||
12
NOTE 7. Commitments and Contingencies
Intellectual Property Indemnification Obligations
The Company has entered into agreements with customers that include limited intellectual property indemnification obligations that are customary in the industry. These guarantees generally require the Company to compensate the other party for certain damages and costs incurred as a result of third-party intellectual property claims arising from these transactions. The nature of the intellectual property indemnification obligations prevents the Company from making a reasonable estimate of the maximum potential amount it could be required to pay to its customers. Historically, the Company has not made any indemnification payments under such agreements and
Warranty Reserves
The Company generally provides a warranty on its products for a period of
Changes in the Company’s warranty reserves are as follows:
|
|
Nine Months Ended |
|
|||||
|
|
September 28, |
|
|
September 30, |
|
||
|
|
2024 |
|
|
2023 |
|
||
Balance, beginning of the period |
|
$ |
|
|
$ |
|
||
Accruals |
|
|
|
|
|
|
||
Usage |
|
|
( |
) |
|
|
( |
) |
Balance, end of the period |
|
$ |
|
|
$ |
|
||
Warranty reserves are reported in the Condensed Consolidated Balance Sheets under the captions “Accrued liabilities” and “Other non-current liabilities.”
Legal Matters
From time to time, the Company is subject to legal proceedings and claims in the ordinary course of business. In the opinion of management, any potential liabilities resulting from any current disputes would not have a material adverse effect on the Company’s unaudited interim condensed consolidated financial statements.
Line of Credit
The Company has a credit agreement with a bank that provides for a variable-rate line of credit which is secured by the marketable securities the Company has with the bank. The Company is permitted to borrow up to
NOTE 8. Revenue
13
The following table represents a disaggregation of revenue by timing of revenue:
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
September 28, |
|
|
September 30, |
|
|
September 28, |
|
|
September 30, |
|
||||
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Point-in-time |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Over-time |
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenue |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
See Note 14 for additional discussion of the Company’s disaggregated revenue in detail.
Contract Liabilities
The Company records contract liabilities when the customer has been billed in advance of the Company completing its performance obligations primarily with respect to liabilities related to service contracts and installation. For contracts that have a duration of one year or less, these amounts are recorded as current deferred revenue in the Condensed Consolidated Balance Sheets. For contracts with a duration longer than one year, these amounts are recorded in other non-current liabilities in the Condensed Consolidated Balance Sheets. As of September 28, 2024 and December 30, 2023, the Company carried a long-term deferred revenue balance of $
Changes in deferred revenue were as follows:
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
September 28, |
|
|
September 30, |
|
|
September 28, |
|
|
September 30, |
|
||||
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Balance, beginning of the period |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Deferral of revenue |
|
|
|
|
|
|
|
|
|
|
|
||||
Recognition of current year deferred revenue |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Recognition of prior period deferred revenue |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Balance, end of the period |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
NOTE 9. Share-Based Compensation
Restricted Stock Unit Activity
A summary of the Company’s restricted stock unit activity with respect to the nine months ended September 28, 2024 is as follows:
|
|
Number of Shares |
|
|
Weighted Average |
|
||
Nonvested at December 30, 2023 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
$ |
|
||
Vested |
|
|
( |
) |
|
$ |
|
|
Forfeited |
|
|
( |
) |
|
$ |
|
|
Nonvested at September 28, 2024 |
|
|
|
|
$ |
|
||
Of the
14
As of September 28, 2024 and December 30, 2023, there was $
NOTE 10. Other (Expense) Income, Net
Other (expense) income, net, is comprised of the following:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 28, |
|
|
September 30, |
|
|
September 28, |
|
|
September 30, |
|
||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Foreign currency exchange losses, net |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Other |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Total other (expense) income, net |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
NOTE 11. Income Taxes
The following table provides details of income taxes:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 28, |
|
|
September 30, |
|
|
September 28, |
|
|
September 30, |
|
||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Income before income taxes |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Provision for income taxes |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Effective tax rate |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
The income tax provision for the three and nine months ended September 28, 2024 was computed based on the Company’s annual forecast of profit by jurisdiction and forecasted effective tax rate for the year. The increase in the Company’s income tax provision for the three and nine months ended September 28, 2024 as compared to the three and nine months ended September 30, 2023 was primarily due, in each case, to an increase in quarterly earnings, partially offset by an increase in the excess benefits associated with equity compensation. The Company’s recorded effective tax rate for the periods presented is less than the U.S. statutory rate primarily due to projected Foreign Derived Intangible Income deductions, federal research and development tax credits, and excess tax benefits associated with equity compensation.
The Company currently has a partial valuation allowance recorded against certain foreign and state net operating loss and credit carryforwards where the unrealizability of such deferred tax assets is more likely than not. Each quarter, the Company assesses the likelihood that it will be able to recover its deferred tax assets. The Company considers available evidence, both positive and negative, including forecasted earnings, in assessing its need for a valuation allowance. As a result of the Company’s analysis, it concluded that it is more likely than not that a portion of its deferred tax assets will not be realized. Therefore, the Company continues to provide a valuation allowance against certain deferred tax assets. The Company continues to monitor available evidence and may reverse some or all of its remaining valuation allowance in future periods, if appropriate. The Company has a recorded valuation allowance against a certain portion of its deferred tax assets of $
The Organization for Economic Co-operation and Development (“OECD”) has been working on a Base Erosion and Profits Shifting (“BEPS”) project that would change various aspects of the existing framework under which the Company’s tax obligations are determined in many of the countries in which we operate. As part of the BEPS project, the OECD issued policies aimed to modernize global tax systems, including a country-by-country 15% minimum effective tax rate (“Pillar Two”) for multinational companies. Numerous countries have enacted, or are in the process of enacting, legislation to implement the Pillar Two model rules with a subset of the rules becoming effective during the current year, and the remaining rules becoming effective in later periods. At this point in time, the Company does not expect any material tax impact associated with Pillar Two rules in the countries where it operates. As these rules continue to evolve with new legislation and guidance, the Company will continue to monitor and account for the enactment of Pillar Two and the potential impacts such rules may have on its effective tax rate and cash flows in future years.
15
Basic earnings per share is calculated using the weighted average number of shares of common stock outstanding during the period. Restricted stock units, employee stock purchase grants and stock options are included in the calculation of diluted earnings per share, except when their effect would be anti-dilutive.
The Company’s basic and diluted earnings per share amounts are as follows:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 28, |
|
|
September 30, |
|
|
September 28, |
|
|
September 30, |
|
||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic earnings per share - weighted average shares |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Effect of potential dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Restricted stock units and employee stock |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted earnings per share - weighted average shares |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Diluted |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
NOTE 13. Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive loss, net of tax, were as follows:
|
|
Foreign currency |
|
|
Net unrealized gains on |
|
|
Accumulated other |
|
|||
Balance at December 30, 2023 |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
Net current period other comprehensive income |
|
|
|
|
|
|
|
|
|
|||
Balance at September 28, 2024 |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
Foreign currency |
|
|
Net unrealized (losses) gains on |
|
|
Accumulated other |
|
|||
Balance at December 31, 2022 |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Net current period other comprehensive (loss) income |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Balance at September 30, 2023 |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
For the nine months ended September 28, 2024 and September 30, 2023, tax effects on net income of amounts recorded in other comprehensive income (loss) were $
NOTE 14. Segment Reporting and Geographic Information
The Company is engaged in the design, development, manufacture and support of high-performance control metrology, defect inspection, lithography and data analysis systems used by microelectronics device manufacturers. The Company and its subsidiaries currently operate in a single operating segment: the design, development, manufacture and support of high-performance process control defect inspection and metrology, lithography and process control software systems used by microelectronics device manufacturers. Therefore, the Company has
16
decision maker is the Chief Executive Officer (the “CEO”). The CEO allocates resources and assesses performance of the business and other activities at the reportable segment level.
The following table lists the different sources of revenue:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||||||||||||||||||
|
|
September 28, |
|
|
September 30, |
|
|
September 28, |
|
|
September 30, |
|
||||||||||||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||||||||||||||||||
Systems and software |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||||||
Parts |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||||||
Services |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||||||
Total revenue |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||||||
The Company’s significant operations outside the United States include sales, service and application offices in Asia and Europe.
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 28, |
|
|
September 30, |
|
|
September 28, |
|
|
September 30, |
|
||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Revenue from third parties: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
South Korea |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Taiwan |
|
|
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China |
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|
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United States |
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|
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Southeast Asia |
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|
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Japan |
|
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|
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Europe |
|
|
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|
|
|
|
|
|
|
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|
||||
Total revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The following customers accounted for 10% or more of total revenue for the indicated periods:
|
|
Nine Months Ended |
|
|||||
|
|
September 28, |
|
|
September 30, |
|
||
|
|
2024 |
|
|
2023 |
|
||
Customer A |
|
|
% |
|
|
% |
||
Customer B |
|
|
% |
|
|
% |
||
Customer C |
|
|
% |
|
^ |
|
||
^ The customer accounted for less than 10% of total revenue during the period. |
|
|
|
|
|
|
||
Substantially all of the Company’s long-lived assets are located within the United States of America.
NOTE 15. Share Repurchase Authorization
In February 2024, the Onto Innovation Board of Directors approved a new share repurchase authorization, which allows the Company to repurchase up to $
17
NOTE 16. Restructuring
From time to time, the Company approves restructuring plans, which include workforce reductions, to streamline operations and align the Company’s cost structure with its business outlook. These restructuring plans may result in charges to cost of goods sold for streamlining of certain manufacturing activities or for inventory write-downs primarily related to the exit of older product lines. Charges to operating expenses primarily include employee severance costs that are paid during the period incurred and charges for streamlining of certain operating activities.
Restructuring expenses recorded in the Condensed Consolidated Statements of Operations are as follows:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 28, |
|
|
September 30, |
|
|
September 28, |
|
|
September 30, |
|
||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Cost of goods sold |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total restructuring expenses |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
Certain statements in this Form 10-Q, or incorporated by reference in this Form 10-Q, of Onto Innovation Inc. (referred to in this Form 10-Q, together with its consolidated subsidiaries, unless otherwise specified or suggested by the context, as the “Company,” “Onto Innovation,” “we,” “our” or “us”) may be considered “forward-looking statements” or may be based on “forward-looking statements,” including, but not limited to, those concerning:
Statements contained or incorporated by reference in this Form 10-Q that are not purely historical are forward-looking statements and are subject to safe harbors under Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by words such as, but not limited to, “anticipate,” “believe,” “continue,” “estimate,” “expect,” “intend,” “plan,” “should,” “may,” “could,” “will,” “would,” “forecast,” “project” and words or phrases of similar meaning, as they relate to our management or us.
Forward-looking statements contained herein reflect our current expectations, assumptions and projections with respect to future events and are subject to certain risks, uncertainties and assumptions, including, but not limited to, those identified in Part II, Item 1A. “Risk Factors” and elsewhere in this Form 10-Q. Actual results may differ materially and adversely from those included in such forward-looking statements. Forward-looking statements reflect our position as of the date of this Form 10-Q
18
and we undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Critical Accounting Estimates
The preparation of condensed consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) requires management to make judgments, assumptions and estimates that affect the amounts reported.
Estimates and assumptions about future events and their effects cannot be determined with certainty. We base our estimates on historical experience and on various other assumptions believed to be applicable and reasonable under the circumstances. These estimates may change as new events occur, as additional information is obtained and as our operating environment changes. In addition, management is periodically faced with uncertainties, the outcomes of which are not within our control and will not be known for prolonged periods of time. Certain of these uncertainties are discussed in our Annual Report on Form 10-K for the fiscal year ended December 30, 2023 (the “2023 Form 10-K”) filed with the Securities and Exchange Commission (the “SEC”) on February 26, 2024 in the Items entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” There have been no material changes in our critical accounting estimates from the information presented in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in the 2023 Form 10-K.
For more information, please see our critical accounting estimates as previously disclosed in the 2023 Form 10-K and recent accounting pronouncements discussed in Note 1 to the Condensed Consolidated Financial Statements.
Executive Summary
We are a worldwide leader in the design, development, manufacture and support of metrology and inspection tools for the semiconductor industry, including process control tools that perform optical metrology on patterned and unpatterned wafers, wafer macro-defect inspection, including macro-inspection of both 2D and 3D wafer features, wafer substrate and panel substrate lithography systems, and process control analytical software. Our products are primarily used by silicon wafer manufacturers, semiconductor integrated circuit fabricators, and advanced packaging manufacturers operating in the semiconductor market. Our products are also used for process control in a number of other specialty device manufacturing markets, including light emitting diodes (“LED”), vertical-cavity surface-emitting lasers (“VCSEL”), micro-electromechanical systems (“MEMS”), CMOS image sensors (“CIS”), silicon and compound semiconductor (SiC and GaN) power devices, analog devices, RF filters, data storage, and certain industrial and scientific applications.
We provide process and yield management solutions used in bare silicon wafer production and wafer processing facilities, often referred to as “front-end” manufacturing, and advanced packaging of chips and test facilities, or “back-end” manufacturing, through a portfolio of standalone systems for optical metrology, macro-defect inspection, packaging lithography, as well as transparent and opaque thin film measurements. Our automated and integrated metrology systems measure critical dimensions, device structures, topography, shape, and various thin film compositions, including three-dimensional features and film thickness, as well as optical and material properties. Our primary areas of focus include products that provide critical yield-enhancing and actionable information, which is used by microelectronic device manufacturers to improve yield and time to market of their next-generation devices. Our systems feature sophisticated software and production-worthy automation. In addition, our advanced process control software portfolio includes powerful solutions for standalone tools, groups of tools, and factory-wide and enterprise-wide suites to enhance productivity and achieve significant cost savings. Our systems are backed by worldwide customer service and applications support.
The semiconductor and electronics industries have been characterized by constant technological innovations. We believe that, over the long term, our customers will continue to invest in advanced technologies and new materials to enable smaller design rules and higher density applications that fuel demand for process control equipment.
The following table summarizes certain key financial information for the periods indicated below (in thousands, except per share and percent data):
19
|
Three Months Ended |
|
|||||
|
September 28, |
|
|
June 29, |
|
||
|
2024 |
|
|
2024 |
|
||
Revenue |
$ |
252,210 |
|
|
$ |
242,327 |
|
Gross profit |
$ |
136,379 |
|
|
$ |
128,236 |
|
Gross profit as a percent of revenue |
|
54 |
% |
|
|
53 |
% |
Total operating expenses |
$ |
83,307 |
|
|
$ |
79,403 |
|
Net income |
$ |
53,051 |
|
|
$ |
52,949 |
|
Diluted earnings per share |
$ |
1.07 |
|
|
$ |
1.07 |
|
Our cash, cash equivalents and marketable securities balance increased to $855.4 million at September 28, 2024, compared to $697.8 million at December 30, 2023. This increase was primarily the result of $189.7 million of cash generated from operating activities, and $9.2 million of cash from issuance of shares through share-based compensation plans, partially offset by cash used for capital expenditures of $27.3 million and $18.4 million for tax payments related to net share settlement of employee stock-based compensation plans. Employee headcount at September 28, 2024 was approximately 1,518.
In 2022 and 2023, the United States government implemented additional export regulations for U.S. semiconductor technology sold in China. We have applied for, and in some cases received, export licenses to continue doing business with our customers that are affected by the new export rules. However, the new export controls have continued to negatively impact our net sales in China for the first, second, and third fiscal quarters of 2024.
For a discussion of the risks related to our business and operations, see Part II, Item 1A – Risk Factors of this Form 10-Q.
Results of Operations for the Three and Nine Months Ended September 28, 2024 and September 30, 2023
Revenue. Our revenue is primarily derived from the sale of our systems, software licensing, services and spare parts. Our revenue of $252.2 million increased 21.7% for the three months ended September 28, 2024 as compared to the three months ended September 30, 2023, in which revenue totaled $207.2 million. For the nine months ended September 28, 2024 and September 30, 2023, our revenue totaled $723.4 million and $597.0 million, respectively, representing a year-over-year increase of 21.2%
The following table lists, for the periods indicated, the different sources of our revenue in dollars (thousands) and as percentages of our total revenue:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||||||||||||||||||
|
|
September 28, |
|
|
September 30, |
|
|
September 28, |
|
|
September 30, |
|
||||||||||||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||||||||||||||||||
Systems and software |
|
$ |
217,135 |
|
|
|
86 |
% |
|
$ |
169,346 |
|
|
|
82 |
% |
|
$ |
622,400 |
|
|
|
86 |
% |
|
$ |
495,523 |
|
|
|
83 |
% |
Parts |
|
|
19,995 |
|
|
|
8 |
% |
|
|
20,100 |
|
|
|
10 |
% |
|
|
56,890 |
|
|
|
8 |
% |
|
|
58,665 |
|
|
|
10 |
% |
Services |
|
|
15,080 |
|
|
|
6 |
% |
|
|
17,739 |
|
|
|
8 |
% |
|
|
44,092 |
|
|
|
6 |
% |
|
|
42,824 |
|
|
|
7 |
% |
Total revenue |
|
$ |
252,210 |
|
|
|
100 |
% |
|
$ |
207,185 |
|
|
|
100 |
% |
|
$ |
723,382 |
|
|
|
100 |
% |
|
$ |
597,012 |
|
|
|
100 |
% |
Total systems and software revenue increased $47.8 million and $126.9 million for the three and nine months ended September 28, 2024, respectively, as compared to the three and nine months ended September 30, 2023, respectively. The increases for the three months ended September 28, 2024 were primarily due to an increase in shipments of our inspection and metrology product lines to DRAM and NAND customers, which was partially offset by a decrease in shipments of our lithography product lines to OSAT customers. The increases for the nine months ended September 28, 2024 were primarily due to an increase
20
in shipments of our inspection product lines to DRAM and foundry customers, which was partially offset by a decrease in shipments of our metrology and lithography product lines. The decrease in total parts and services revenue for the three and nine months ended September 28, 2024, as compared to the three and nine months ended September 30, 2023, was primarily due to lower demand by several of our customers, resulting in a decline in their spare parts requirements. Parts and services revenue is generated from part sales, maintenance service contracts, and system upgrades, as well as time and material billable service calls.
Gross Profit. Our gross profit has been and will likely continue to be affected by a variety of factors, including manufacturing efficiencies, provision for excess and obsolete inventory, pricing by competitors or suppliers, new product introductions, production volume, customization and reconfiguration of systems, international and domestic sales mix, system and software product mix and parts and service margins.
The following table lists, for the periods indicated, our gross profit in dollars (thousands) and as percentages of our total revenue:
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
September 28, |
|
|
September 30, |
|
|
September 28, |
|
|
September 30, |
|
||||
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Gross profit |
$ |
136,379 |
|
|
$ |
106,852 |
|
|
$ |
382,900 |
|
|
$ |
312,288 |
|
Gross profit as a percentage of revenue |
|
54.1 |
% |
|
|
51.6 |
% |
|
|
52.9 |
% |
|
|
52.3 |
% |
The increase in gross profit as a percentage of revenue for the three and nine months ended September 28, 2024 as compared to the three and nine months ended September 30, 2023 was primarily due to increased volume and change in product mix.
Operating Expenses.
Our operating expenses consist of:
21
Interest income, net. Net interest income was $8.7 million and $24.5 million for the three and nine month periods ended September 28, 2024, respectively, as compared to $5.7 million and $13.9 million for the three and nine month periods ended September 30, 2023, respectively. The increases in net interest income for both the three and nine month periods ended September 28, 2024, as compared to the three and nine month periods ended September 30, 2023, were due to higher cash and marketable securities balances and higher interest rates during the 2024 period.
Other (expense) income, net. Other expense, net was $0.7 million for the three month period ended September 28, 2024, as compared to $1.0 million for the same period in the prior year. Other income, net was $10 thousand for the nine month period ended September 28, 2024, as compared to other expense, net of $3.0 million for the same period in the prior year. Decreases in foreign exchange losses, net during all of the comparative periods presented were the primary drivers in the period over period changes.
Income Taxes. We recorded an income tax provision of $8.0 million and $16.3 million for the three and nine month periods ended September 28, 2024, respectively, as compared to $2.8 million and $7.9 million for the three and nine month periods ended September 30, 2023, respectively. Our effective tax rates of 13% and 10% for the three and nine month periods ended September 28, 2024 respectively, differ from the statutory rate of 21%, primarily due to (i) research and development tax credits, (ii) the deduction related to foreign derived intangible income (“FDII”), and (iii) excess tax benefits associated with equity compensation. Our effective tax rate of 7% and 8% for the three and nine month periods ended September 30, 2023, respectively, differed from the statutory rate of 21%, primarily due to (i) research and development tax credits, (ii) the deduction related to FDII, and (iii) excess tax benefits associated with equity compensation.
Our future effective income tax rate depends on various factors, such as possible changes in tax legislation, the geographic composition of our pre-tax income, the amount of our pre-tax income as business activities fluctuate, non-deductible expenses incurred in connection with business combinations, and research and development tax credits as a percentage of aggregate pre-tax income.
We currently have a partial valuation allowance recorded for certain foreign and state loss and credit carryforwards where the realizability of such deferred tax assets is substantially in doubt. Each quarter we assess the likelihood that we will be able to recover our deferred tax assets primarily relating to state research and development credits. We consider available evidence, both positive and negative, including historical levels of income, expectations and risks associated with estimates of future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance. As a result of our analysis, we concluded that it is more likely than not that a portion of our net deferred tax assets will not be realized. Therefore, we continue to provide a valuation allowance against certain net deferred tax assets. We continue to monitor available evidence and may reverse some or all of the valuation allowance in future periods, if appropriate.
The Organization for Economic Co-operation and Development (“OECD”) has been working on a Base Erosion and Profits Shifting project that, upon implementation, would change various aspects of the existing framework under which our tax obligations are determined in many of the countries in which we operate. In this regard, the OECD has proposed policies aiming
22
to modernize global tax systems, including a country-by-country 15% minimum effective tax rate (“Pillar Two”) for multinational companies. Numerous countries have enacted, or are in the process of enacting, legislation to implement the Pillar Two model rules with a subset of the rules becoming effective during the current year, and the remaining rules becoming effective in later periods. At this point in time, we do not expect any material tax impact associated with Pillar Two rules in the countries where we operate. As these rules continue to evolve with new legislation and guidance, we will continue to monitor and account for the enactment of Pillar Two and the potential impacts such rules may have on our effective tax rate and cash flows in future years.
Liquidity and Capital Resources
Our cash, cash equivalents and marketable securities consist of the following in dollars (thousands) for the periods indicated:
|
|
September 28, |
|
|
December 30, |
|
||
|
|
2024 |
|
|
2023 |
|
||
Cash and cash equivalents |
|
$ |
188,738 |
|
|
$ |
233,508 |
|
Marketable securities |
|
|
666,666 |
|
|
|
464,303 |
|
Total cash, cash equivalents and marketable securities |
|
$ |
855,404 |
|
|
$ |
697,811 |
|
Sources and Uses of Cash
A summary of cash provided by (used in) operating, investing, and financing activities is as follows in dollars (thousands) for the periods indicated:
|
|
Nine Months Ended |
|
|||||
|
|
September 28, |
|
|
September 30, |
|
||
|
|
2024 |
|
|
2023 |
|
||
Cash provided by operating activities |
|
$ |
189,677 |
|
|
$ |
110,387 |
|
Cash used in investing activities |
|
$ |
(222,451 |
) |
|
$ |
(66,259 |
) |
Cash used in financing activities |
|
$ |
(10,000 |
) |
|
$ |
(9,082 |
) |
Operating Activities
Net cash and cash equivalents provided by operating activities for the nine months ended September 28, 2024 were $189.7 million. The net cash and cash equivalents provided by operating activities during the nine months ended September 28, 2024 resulted primarily from net income, adjusted to exclude the effect of non-cash operating charges, of $214.7 million. Significant non-cash operating charges included depreciation, amortization, share-based compensation, provision for inventory valuation and deferred income taxes. Cash provided by operating activities for the first nine months of fiscal 2024 increased compared to the corresponding period in fiscal 2023 primarily due to improved inventory management, higher cash collections and higher investment income.
Our working capital was $1,313.2 million at September 28, 2024 and $1,135.5 million at December 30, 2023.
Investing Activities
Net cash and cash equivalents used in investing activities for the nine months ended September 28, 2024 were $222.5 million. During the nine months ended September 28, 2024, net cash and cash equivalents used in investing activities included purchases of marketable securities of $538.1 million and capital expenditures of $27.3 million, partially offset by proceeds from maturities and sales of marketable securities of $343.0 million .
From time to time, we evaluate whether to acquire new or complementary businesses, products or technologies. We may fund all of or a portion of the price of these investments or acquisitions in cash, stock, or a combination of cash and stock.
Financing Activities
Net cash and cash equivalents used in financing activities for the nine months ended September 28, 2024 were $10 million. During the nine months ended September 28, 2024, financing activities used cash primarily for tax payments related to shares withheld to satisfy employee tax obligations in connection with the vesting of awards under share-based compensation plans of $18.4 million, partially offset by proceeds from sales of shares through share-based compensation plans of $9.2 million.
23
In February 2024, the Onto Innovation Board of Directors approved a share repurchase authorization, which allows the Company to repurchase up to $200 million worth of shares of its common stock. Repurchases may be made through both public market and private transactions from time to time. During the three and nine months ended September 28, 2024, we repurchased no shares of common stock under this repurchase authorization. As of September 28, 2024, there was $200 million available for future share repurchases under this share repurchase authorization.
We have a credit agreement with a bank that provides for a variable-rate line of credit that is secured by the marketable securities we have with the bank. We are permitted to borrow up to 70% of the value of eligible securities held at the time the line of credit is accessed, up to a maximum of $100 million. As of September 28, 2024, the available line of credit was $100 million with an available interest rate of 6.6%. The credit agreement is available to us until such time that either party terminates the arrangement at its discretion. As of the date of this filing, we have not utilized the line of credit.
Our future capital requirements will depend on many factors, including the timing and amount of our revenue and our investment decisions, which will affect our ability to generate additional cash. We expect that our existing cash, cash equivalents, marketable securities and availability under our line of credit will be sufficient to meet our anticipated cash requirements for working capital, capital expenditures and other cash needs for the next 12 months following the filing of this Form 10-Q. Thereafter, if cash generated from operations and financing activities is insufficient to satisfy our working capital requirements, we may seek additional funding through bank borrowings, sales of securities or other means. A reduction in or volatility with respect to our stock price or a general market downturn could materially impact our ability to sell securities on favorable terms or at all. There can be no assurance that we will be able to raise any such capital on terms acceptable to us or at all.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes in market risk from the information presented in Part II, Item 7A. “Quantitative and Qualitative Disclosures About Market Risk,” in the 2023 Form 10-K.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time period specified in SEC rules and forms. These controls and procedures are also designed to ensure that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating disclosure controls and procedures, we have recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Management is required to apply judgment in evaluating its controls and procedures.
We performed an evaluation under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, to assess the effectiveness of the design and operation of our disclosure controls and procedures under the Exchange Act as of September 28, 2024. Based on that evaluation, our management, including our principal executive officer and principal financial officer, concluded that our disclosure controls and procedures were effective as of September 28, 2024 at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during our fiscal quarter ended September 28, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
24
PART II OTHER INFORMATION
Item 1. Legal Proceedings
For a description of our material pending legal proceedings refer to the information set forth under “Legal Matters” of Note 7, “Commitments and Contingencies,” to the Condensed Consolidated Financial Statements included in Part 1, Item 1 of this Form 10-Q.
Item 1A. Risk Factors.
Below is a summary of the principal factors and uncertainties that make investing in our company risky. You should read this summary together with the more detailed description of each risk factor contained further below.
Risks Related to Our Operations
Risks Related to Our Customers
Risks Related to Product Development
25
Risks Related to Intellectual Property and Data Security
Risks Related to Competition
Risks Related to Our International Operations
Risks Related to Laws, Legal Proceedings, Financial Markets and the Environment
Risks Related to Growth and Acquisitions
26
Risks Related to the Global Economy and the Semiconductor Industry
General Risk Factors
Risks Related to Our Operations
If we do not manage our supply chain effectively, our operating results may be adversely affected, and any increases in material, labor, supplier, logistics and other operating costs, or supply chain delays and shortages, could lower our margins or result in lost sales.
We need to continually evaluate our global supply chains and assess opportunities to reduce costs. We must also enhance quality, speed and flexibility to meet changing demand for our products and product mix and uncertain market conditions. Our success also depends in part on refining our cost structure and supply chains so that we have flexibility and can maintain and improve profitability. Deterioration in the tariff environment, political instability or changes in suppliers may cause our costs to increase and, if we are not able to offset the increased costs by charging higher sales prices, will cause a decline in our margins. To improve margins on our products, we would need to negotiate price reductions with our vendors. But we cannot be certain that we will be able to do so in a timely manner, or at all. Failure to achieve the desired level of cost reductions could adversely affect our financial results. Despite our efforts to control costs and increase efficiency in our facilities, changes in demand could still cause us to realize lower operating margins and profitability.
Further, our gross margins and financial performance may be adversely affected by increases in our operating costs, such as material, labor, supplier costs, logistics and energy costs, all of which have been and may continue to be subject to inflationary pressures. Operating costs have increased and may continue to increase further as a result of supply chain disruptions in connection with the sourcing of components, materials, equipment, engineering support, and services, labor shortages, high inflation rates, and cost increases attributable to the COVID-19 pandemic and the effects of the Russia-Ukraine conflict. In addition, we source components for certain of our tools from a supplier in Israel. If the conflict in Israel and the surrounding area escalates, it could disrupt our supply chain, resulting in a material adverse impact on our business.
These risks may be heightened because we obtain some of the components and subassemblies included in our systems from a limited group of suppliers and do not have long-term contracts with many of our suppliers. Our dependence on limited-source suppliers of components and our lack of long-term contracts with certain of our suppliers expose us to several risks, including a potential inability to obtain an adequate supply of components, price increases, late deliveries and poor component quality. A significant number of our suppliers are the sole source or single source for certain components or subassemblies. If such a supplier is unable or unwilling to manufacture and deliver components to us on the time schedule and of the quality or quantity that we require, we may be forced to seek to engage an additional or replacement supplier or redesign our product to use alternative components, which could result in additional expenses and delays in product development or shipment of product to our customers. Disruption or termination of the supply of components has delayed and could in the future delay shipments of some of our systems. Such delays may damage our customer relationships and reduce our sales. The lead time required for shipments of some of our components can be greater than six months. In addition, the lead time required to qualify new suppliers for lasers and certain optics could be as long as a year, and the lead time required to qualify new suppliers of other components could be as long as nine months. In some cases, we may need to purchase components in advance of receiving customer orders for product. If we are unable to accurately predict our component needs, or if our component supply is disrupted, we may miss market opportunities by not being able to meet the demand for our systems. Further, a significant increase in the price of one or more of these components or subassemblies could seriously harm our results of operations and cash flows.
Our efforts to mitigate any cost increases, labor impacts and supply chain delays and shortages may not be successful, and we cannot predict the duration of these current trends or other future increases in operating costs. We may not be able to pass cost increases through to our customers fully (or at all), and if supply chain delays and shortages delay delivery of our products,
27
our customers may seek to purchase from our competitors. Any such occurrence may have a material adverse impact on our gross margins and business, financial position, results of operations and cash flows.
Variations in the amount of time it takes for us to sell our systems may cause fluctuations in our operating results, which could cause our stock price to decline.
Variations in the length of our sales cycles could cause our revenue and cash flows, and consequently, our business, financial condition, operating results and cash flows to fluctuate widely from period to period. This variation could cause our stock price to decline. Our customers generally take a long time to evaluate our inspection and/or film metrology systems and many people are involved in the evaluation process. We expend significant resources educating and providing information to our prospective customers regarding the uses and benefits of our systems in the semiconductor fabrication process. The length of time it takes for us to make a sale depends upon many factors, including, but not limited to:
Because of the number of factors influencing the sales process, the period between our initial contact with a customer and the time when we recognize revenue from that customer and receive payment, if ever, varies widely in length. Our sales cycles, including the time it takes for us to build a product to customer specifications after receiving an order to the time we recognize revenue, typically range from three to twenty-four months. Sometimes our sales cycles can be much longer, particularly with customers in Asia. During these cycles, we commit substantial resources to our sales efforts in advance of receiving any revenue, and we may never receive any revenue from a customer despite our sales efforts. If we do make a sale, our customers often purchase only one of our systems, the performance of which they then evaluate for a lengthy period before purchasing any more of our systems. The number of additional products a customer purchases, if any, depends on many factors, including the customer’s capacity requirements. The period between a customer’s initial purchase and any subsequent purchases can vary from three months to a year or longer, and variations in the length of this period could cause further fluctuations in our operating results and, possibly, in our stock price.
We are subject to order and shipment uncertainties. Our profitability will decline if we fail to accurately forecast customer demand when managing inventory.
We typically plan production and inventory levels based on internal forecasts of customer demand, which can be highly unpredictable and can fluctuate substantially, which could lead to excess inventory write-downs and result in negative impacts on gross margin and net income. We have limited visibility into our customers’ inventories, future customer demand and the product mix that our customers will require, which could adversely affect our production forecasts and operating margins. Certain of our customers have publicly stated their intent to decrease their memory product inventory levels as lead time for components begins to decrease. This has and could continue to result in a temporary decrease in demand for our products as customers delay capacity expansions until inventory levels are sufficiently reduced. In addition, innovation in our industry could render significant portions of our inventory obsolete. If we overestimate our customers’ requirements, we may have excess inventory, which could lead to obsolete inventory and unexpected costs. Conversely, if we underestimate our customers’ requirements, or if we experience sustained disruptions to our supply chain or shipping delays, we may have inadequate inventory, which could lead to foregone revenue opportunities, loss of potential market share and damage to customer relationships as product deliveries may not be made on a timely basis, disrupting our customers’ production schedules. In response to anticipated long lead times to obtain inventory and materials from outside suppliers and foundries, we periodically order materials in advance of customer demand. This advance ordering has in the past and may in the future result in excess inventory levels or unanticipated inventory write-downs if expected orders fail to materialize, or other factors make our products less saleable. In addition, any significant future cancellation or deferral of product orders could adversely affect our revenue and margins, increase inventory write-downs due to obsolete inventory, and adversely affect our operating results and stock price.
Our earnings could be negatively affected, and our inventory levels could materially increase, if we are unable to predict our inventory needs in an accurate and timely manner and adjust our orders for parts and subcomponents in the event that our needs increase or decrease materially due to unexpected increases or decreases in demand for our products. Any material increase in our inventories could result in an adverse effect on our financial position, while any material decrease in our ability to procure needed inventories could result in an inability to supply customer demand for our products, thus adversely affecting our revenue.
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If we deliver systems with defects, our credibility will be harmed, and the sales and market acceptance of our systems will decrease.
Our systems are complex and have occasionally contained errors, defects and bugs when introduced. Defects may be created during probing, bumping, dicing or general handling, and can have a major impact on device and process quality. When this occurs, our credibility and the market acceptance and sales of our systems could be harmed. Further, if our systems contain errors, defects or bugs, computer viruses or malicious code as a result of cyber-attacks to our computer networks, we may be required to expend significant capital and resources to alleviate these problems. Defects could also lead to product liability as a result of product liability lawsuits against us or against our customers. We have agreed to indemnify our customers under certain circumstances against liability arising from defects in our systems provided that we also include a cap on our liability in the related sales agreements. Our product liability insurance policy currently provides both aggregate coverage as well as an overall umbrella coverage. In the event of a successful product liability claim, we could be obligated to pay damages significantly in excess of our product liability insurance limits.
Our integrated metrology systems are integrated with systems sold independently by wafer fabrication equipment suppliers, and a decrease in sales by these suppliers, or the development of competing systems by these suppliers, could harm our business.
We believe that sales of integrated metrology systems will continue to be an important source of our net revenues. Sales of our integrated metrology systems depend upon the ability of a small number of wafer fabrication equipment suppliers to sell semiconductor manufacturing equipment products that are compatible with our metrology systems as components. If these suppliers are unable to sell such products, if they choose to focus their attention on products that do not integrate with our systems, or if they choose to develop competing systems, our business could suffer.
We must attract and retain experienced senior executives and other key personnel with knowledge of semiconductor device manufacturing and inspection, metrology or lithography equipment and related software to help support our future growth, and competition for such personnel in our industry is high.
Our success depends, to a significant degree, upon the continued contributions of our key executive management, engineering, sales and marketing, customer support, finance and manufacturing personnel. The loss of any of these key personnel, each of whom would be extremely difficult to replace, through resignations, retirement or other circumstances, could harm our business and operating results. Despite our employment and noncompetition agreements with key members of our senior management team, these individuals or other key employees may still leave us, which could have a material adverse effect on our business. We do not have key person life insurance on any of our executives. In addition, to support our future growth, we will need to attract and retain additional qualified employees. Competition for such personnel in our industry is intense, and we may not be successful in attracting and retaining qualified employees.
The expansion of high technology companies worldwide and growth in the demand for semiconductors have increased demand and competition for qualified personnel. Competition for engineering and other technical personnel in some of the markets in which we operate is especially intense due to continued increases in the number of technology companies worldwide. In order to attract and retain executives and other key employees, we must provide a competitive compensation package, including cash and stock-based compensation. If the anticipated value of our stock-based incentive awards does not materialize so that they cease to be viewed as valuable, if our profits decrease, or if our total compensation package is not viewed as competitive, our ability to attract, retain and motivate executives and key employees could be weakened.
Any prolonged disruption in the operations of our manufacturing facilities could have a material adverse effect on our revenue.
We produce the majority of our systems in our manufacturing facilities located in Wilmington, Massachusetts, Milpitas, California and Bloomington, Minnesota. We also use contract manufacturers in China, Japan and the United States. Our manufacturing processes are highly complex and require sophisticated and costly equipment and a specially designed facility. As a result, any prolonged disruption in the operations of our manufacturing facilities could seriously harm our ability to satisfy our customer order deadlines. Restrictions on our access to or operation of manufacturing facilities or on our support operations or workforce, or similar limitations for our vendors and suppliers, may impact our ability to meet customer demand and could have a material adverse effect on our financial condition and results of operations. If we cannot timely deliver our systems, our results from operations and cash flows could be materially and adversely affected.
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We outsource select manufacturing activities to third-party service providers, which decreases our control over the performance of these functions, may result in lower quality and functionality of our products, and exposes us to additional supply chain risks.
We outsource select product manufacturing to third-party service providers. Outsourcing reduces our control over the performance of the outsourced functions. Dependence on outsourcing may also adversely affect our ability to bring new products to market. If we do not effectively manage our outsourcing strategy or if third-party service providers do not perform as anticipated, we may experience operational difficulties, increased costs, manufacturing interruptions or inefficiencies in the operation of our supply chain, any or all of which could delay our delivery of products to our customers, and materially and adversely affect our business, financial condition, and results of operations.
Our third-party service providers could also be, and certain of our service providers have been, subject to cybersecurity incidents or other events that negatively impact their operations and their ability to perform services for us in a timely manner or at all. Such disruptions could impact our ability to manufacture products in a timely manner or force us to work with another service provider at a higher cost. Any such event could materially and adversely affect our business, financial condition, and results of operations. In addition, some of our third-party party services providers also have product designs, know-how, data files and other important confidential information regarding our products. If a third-party service provider experiences a cybersecurity event in which such confidential information is publicly exposed or shared with bad actors, it could materially and adversely impact our competitive position in the market.
Our ability to fulfill our backlog may have an effect on our long-term ability to procure contracts and fulfill current contracts.
Our ability to fulfill our backlog may be limited by our ability to devote sufficient financial and human capital resources and may be limited by available material supplies and our suppliers’ own supply chain issues. If we do not fulfill our backlog in a timely manner, we may experience delays in product delivery, which would postpone receipt of revenue from those delayed deliveries. Delayed fulfillment also increases the risk that a customer may change or cancel an order due to evolution of the customer’s technological, production or market needs, which would result in a loss of revenue. Additionally, if we are consistently unable to fulfill our backlog, this may be a disincentive to customers to award large contracts to us in the future until they are comfortable that we can effectively manage our backlog.
Risks Related to Our Customers
Our largest customers account for a substantial portion of our revenue, and our revenue and cash flows could decline considerably if one or more of these customers were to purchase significantly fewer of our systems or delay or cancel a large order.
Sales to end user customers that individually represent at least ten percent of our revenue typically account for, in the aggregate, a considerable amount of our revenue. We operate in the highly concentrated, capital-intensive semiconductor device manufacturing industry. Historically, a substantial portion of our revenue in each quarter and year has been derived from sales to relatively few customers, and this trend is expected to continue. If any of our key customers were to purchase significantly fewer of our systems in the future, or if they delay or cancel a large order, our revenue and cash flows could meaningfully decline. We expect that we will continue to depend on a small number of large customers for a sizable portion of our revenue. In addition, as large semiconductor device manufacturers seek to establish closer relationships with their suppliers, we expect that our customer base will become even more concentrated.
Risks Related to Product Development
If we are not successful in developing new and enhanced products for the semiconductor device manufacturing industry, we will lose sales and market share to our competitors.
We operate in an industry that is highly competitive and subject to evolving industry standards, rapid technological changes, rapid changes in consumer demands and the rapid introduction of new, higher performance systems with shorter product life cycles. To be competitive in our demanding market, we must continually design, develop and introduce in a timely manner new lithography, inspection and metrology process control systems that meet the performance and price demands of semiconductor device manufacturers. We must also continue to refine our current systems so that they remain competitive. We expect to continue to make significant investments in our research and development activities and at times may make inventory investments prior to commercialization. We may experience difficulties or delays in our development efforts with respect to new systems, and we may not ultimately be successful in our product enhancement efforts to improve and advance products or in responding effectively to technological change, as not all research and development activities result in viable commercial
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products. In addition, we cannot provide assurance that we will be able to develop new products for the most opportunistic new markets and applications. Any significant delay in releasing new systems could cause our products to become obsolete, adversely affect our reputation, give a competitor a first-to-market advantage or cause a competitor to achieve greater market share. Our competitors may also develop products, including through the use of artificial intelligence, that may have performance advantages over systems we currently offer or may offer in the future, which could similarly weaken our competitive position.
Further, customers that may otherwise desire to purchase our products from us and purchase other products from our competitors may nevertheless purchase competing products from our competitors rather than purchase our products due to a variety of reasons, including to gain favorable or volume pricing from our competitors.
If new products developed by us do not gain general market acceptance, we will be unable to generate revenue and recover our investments, which may result in a write down of inventory.
Inspection, lithography and metrology product development is inherently risky because it is difficult to foresee developments in semiconductor device manufacturing technology, coordinate technical personnel, and identify and eliminate system design flaws. Further, our products are leading edge and complex, and often the applications to our customers’ businesses are unique. Any new systems we introduce may not achieve or sustain a significant degree of market acceptance and sales.
We expect to spend a significant amount of time and resources developing new systems and refining our existing systems. In light of the long product development cycles inherent in our industry, these expenditures will be made well in advance of the prospect of deriving revenue from the sale of those systems. The long lead times for some components may also require us to place orders for components and accumulate inventory in advance of market acceptance of our products.
Our ability to commercially introduce and successfully market new systems is subject to a wide variety of challenges during the development cycle, including start-up bugs, design defects, and other matters that could delay introduction of these systems. Since our customers are not obligated by long-term contracts to purchase our systems, our anticipated product orders may not materialize, or orders that are placed may be canceled.
If we do not achieve market acceptance of new products, we may be unable to generate sufficient revenue and cash flow to recover our research and development costs and may experience a write down of our investments in inventory. As a result, our market share, revenue, operating results or stock price could be negatively impacted.
Even if we are able to develop new products that gain market acceptance, sales of these new products could impair our ability to sell existing products.
Competition from our new systems could have a negative effect on sales of our existing systems and the prices that we could charge for these systems. We may also divert sales and marketing resources from our current systems in order to successfully launch and promote our new or next generation systems. This diversion of resources could have a further negative effect on sales of our current systems and the value of inventory.
If our relationships with our large customers deteriorate, our product development activities could be adversely affected.
The success of our product development efforts depends on our ability to anticipate market trends and the price, performance and functionality requirements of semiconductor device manufacturers. In order to anticipate these trends and ensure that critical development projects proceed in a coordinated manner, we must continue to collaborate closely with our largest customers. Our relationships with these and other customers provide us with access to valuable information regarding trends in the semiconductor device industry, which enables us to better plan our product development activities. If our current relationships with our large customers are impaired, or if we are unable to develop similar collaborative relationships with important customers in the future, our product development activities could be adversely affected.
Risks Related to Intellectual Property and Data Security
We may fail to adequately protect our intellectual property and, therefore, lose our competitive advantage.
Our future success and competitive position depend in part upon our ability to obtain and maintain proprietary technology for our principal product families. If we fail to adequately protect our intellectual property, it will give our competitors a significant advantage. We own or have licensed a number of patents relating to our metrology, lithography, wafer and defect inspection systems, as well as artificial intelligence and machine learning systems, and software, including both embedded and application software, and have filed applications for additional patents. Any of our pending patent applications may be rejected, however, and we may be unable to develop additional proprietary technology that is patentable in the future. In addition, the patents that we do own or that have been issued or licensed to us may not provide us with competitive advantages and/or may be
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invalidated, unenforceable and/or challenged by third parties. Third parties may also design around our patents or copy our patented inventions without our knowledge.
In addition to patent protection, we rely upon copyrights for protection of our proprietary software and documentation, trademarks for protection of our brand and source of goods, and trade secret law and confidentiality and non-compete agreements for protection of our confidential and proprietary information and technology. These measures do not guarantee protection of our intellectual property, however. We can give no assurance that our copyrights will be upheld or will successfully deter infringement by third parties. There can be no assurances that our confidentiality agreements with employees and other third parties will be sufficient to protect our trade secrets and proprietary information or that such information will not be disclosed, that others will not independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets, or that we can fully protect our trade secrets and proprietary information. Violations by others of our confidentiality agreements and the loss of employees who have specialized knowledge and expertise could harm our competitive position and cause our sales and operating results to decline as a result of increased competition. It is also possible that third parties will misappropriate our trade secrets or other confidential information. We may be subject to cybersecurity breaches in which a third party obtains our confidential information. Third parties may also reverse engineer our products to copy our technology. Failure to protect our trademarks can lead to other companies selling products using confusing similar names, thereby damaging our brand. In some countries, it can be difficult to register trademarks because of the strict examination process or blocking trademarks for other goods. Costly and time-consuming litigation might be necessary to enforce and determine the scope of our intellectual property rights, and failure to obtain or maintain trade secret protection might adversely affect our ability to continue our research or bring products to market. Any of these circumstances could result in harm to our competitive position in the market.
Monitoring and preventing unauthorized use are also difficult and the measures we take to protect our intellectual property rights may not be adequate. There is a risk that we may be unable to adequately protect our intellectual property rights in certain foreign countries. For example, our competitors may independently develop similar technology or duplicate our products. If this occurs, it could be easier for our competitors to develop and sell competing products in these countries. Accordingly, infringement of our intellectual property rights poses a serious risk to our ability to conduct business.
Protection of our intellectual property rights, or the efforts of third parties to enforce their own intellectual property rights against us, may result in costly and time-consuming litigation, substantial damages, lost product sales and/or the loss of important intellectual property rights.
From time to time, we may be required to initiate litigation in order to enforce our intellectual property rights or to determine the non-infringement, scope or validity of a third party’s intellectual property rights. Any litigation, regardless of outcome, could be expensive and time consuming and could subject us to significant liabilities or require us to re-engineer our products or obtain expensive licenses from third parties. There can be no assurance that any patents, copyrights or other intellectual property rights issued to or licensed by us will not be challenged, invalidated or circumvented, or that the rights granted thereunder will provide us with a competitive advantage. Furthermore, there is no assurance that any litigation we are involved in will yield the result that we seek as (i) the lawsuit may be dismissed or there could be an adverse finding, (ii) we may not be able to pursue the lawsuit due to the laws of the applicable country or (iii) there may be a subsequent unfavorable change in law that limits our ability to pursue the lawsuit. For example, litigation discovery practice in China, Japan, South Korea, continental Europe and Taiwan is not as robust as in the United States, so it can be more difficult to determine if a company is infringing on our patents and more challenging to bring a lawsuit.
In addition, our commercial success depends in part on our ability to avoid infringing or misappropriating patents or other intellectual property rights owned by third parties. From time to time, we receive communications from third parties asserting that our products or systems infringe, or may infringe, on the intellectual property rights of these third parties. These claims of infringement may lead to protracted and costly litigation, which could require us to pay substantial damages or have the sale of our products or systems stopped by an injunction. Infringement claims could also cause product or system delays or require us to redesign our products or systems, and these delays could result in the loss of substantial revenue. We may also be required to obtain a license from the third party or cease activities utilizing the third party’s intellectual property rights. We may not be able to enter into such a license or such a license may not be available on commercially reasonable terms. Accordingly, the loss of an intellectual property dispute could hinder our ability to sell our products or systems or make the sale of our products or systems more expensive, which could lead to reduced revenue or lower margins, respectively.
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If our network security measures are breached and unauthorized access is obtained to a customer’s data, to our data, or to our information technology systems, we may incur significant legal and financial exposure and liabilities and may experience disruptions in our operations.
As part of our business, we store our data and certain data about our customers, vendors and employees in our information technology system. We also rely on our information technology system for business operations. If there is a breach as a result of third-party action, including through the use of artificial intelligence, employee misuse, human error, malfeasance, break-ins or otherwise, of our security measures designed to protect this information and prevent data loss and other security breaches, and someone obtains unauthorized access to our customers’, vendors’ or employees’ data or disrupts our access to our own data and systems, we could face loss of business, regulatory investigations or court orders or damage to our reputation, and we could be required to expend significant capital and other resources to alleviate the problem, as well as incur significant costs and liabilities, including due to litigation, indemnity obligations, damages for contract breach, penalties for violation of applicable laws or regulations, and costs for remediation and other incentives offered to customers.
Cyber-attacks and other malicious internet-based activities continue to increase. The Russia–Ukraine conflict and related sanctions imposed by the U.S. government may expose government entities and public and private U.S. companies to attempted or actual cybersecurity attacks launched in retaliation, and these attacks could materially disrupt our supply chain or our systems and operations or those of our customers and suppliers.
As the techniques used to obtain unauthorized access or sabotage systems change frequently and generally are not identified until they are launched against a target, our ability to anticipate these techniques or to implement adequate preventative measures is reduced. In addition, third parties have made attempts to fraudulently induce employees or users to disclose information to gain access to our data or our customers’ data. As a result of any of these events, our or our customers’ and vendors’ information could be accessed or disclosed improperly. In addition, cybersecurity incidents affecting our customers could result in substantial delays in our ability to ship to those customers or install our products, which could result in delays in revenue recognition or the cancellation of orders. As discussed herein under the heading “We outsource select manufacturing activities to third-party service providers, which decreases our control over the performance of these functions and may result in lower quality and functionality of our products, and exposes us to increased supply chain risks,” cybersecurity incidents affecting our service providers could negatively impact our ability to timely and cost-effectively produce products and/or negatively impact our competitive position in the market. Likewise, cybersecurity events impacting our suppliers could result in substantial delays in our ability to obtain necessary components for our products from those suppliers, which could hamper our ability to ship our products to our customers, harming our results of operations and our customer relationships. Any or all of the above issues could negatively affect our ability to attract new customers, cause existing customers to choose to purchase from our competitors, result in reputational damage or subject us to third-party lawsuits, regulatory fines or other action or liability, which could adversely affect our operating results.
Compliance with data protection laws may be costly and may impede development of new products, and any failure to comply with, or inquiries under, these laws may could have a material adverse effect on our business, results of operations, and financial condition.
The General Data Protection Regulation (“GDPR”) is a regulation in European Union (“EU”) law on data protection and privacy for the individuals within the EU and the European Economic Area (“EEA”). It also addresses the export of personal data outside the EU and EEA areas. The United Kingdom has adopted legislation that substantially implements the GDPR and provides for a similar penalty structure. We are also subject to the California Consumer Privacy Act of 2018 (“CCPA”) and the California Privacy Rights Act (“CPRA”), an amendment and expansion of the CCPA. We may also be subject to other data privacy laws in the United States and the other countries in which we operate. In many cases, these laws apply not only to third-party transactions, but also to transfers of information between us and our subsidiaries, and among the subsidiaries and other parties with which we have commercial relations. The introduction of new products or expansion of our activities in certain jurisdictions may subject us to additional laws and regulations. These U.S. federal and state and foreign laws and regulations, including GDPR which can be enforced by private parties or government entities, are constantly evolving and can be subject to significant change. In addition, the application and interpretation of these laws and regulations, including GDPR, are often uncertain, particularly in our evolving industry, and may be interpreted and applied differently from country to country. Appropriate technical and organizational measures are necessary to implement these data protection principles. These laws and regulations can be costly to comply with and may delay or impede the development of new products, result in negative publicity, increase our operating costs, require significant management time and attention, or subject us to inquiries or investigations, claims or other remedies, including fines, which may be significant, or demands that we modify or cease existing business practices. A failure by us, our suppliers, or other parties with whom we do business to comply with posted privacy policies or with other federal, state, or international privacy-related or data protection laws and regulations, including GDPR, CCPA, CPRA and other new or changing privacy laws and regulations, could result in proceedings against us by governmental entities or others, which could have a material adverse effect on our business, results of operations, and financial condition.
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Risks Related to Competition
Some of our current and potential competitors have significantly greater resources than we do, and increased competition could impair sales of our products or cause us to reduce our prices.
The market for semiconductor capital equipment is highly competitive. We face substantial competition from established companies in each of the markets we serve. We principally compete with KLA, Nova, Camtek, Ushio, Canon, and PDF Solutions. Each of our products also competes with products that use different metrology, inspection or lithography techniques. Some of our competitors have greater financial, engineering, manufacturing and marketing resources, broader product offerings and service capabilities and larger installed customer bases than we do. As a result, these competitors may be able to respond more quickly to new or emerging technologies or market developments by devoting greater resources to the development, promotion and sale of products, which, in turn, could impair sales of our products. Further, there may be significant merger and acquisition activity among our competitors and potential competitors, which, in turn, may provide them with a competitive advantage over us by enabling them to rapidly expand their product offerings and service capabilities to meet a broader range of customer needs.
Many of our existing and potential customers in the semiconductor device manufacturing industry are large companies that require global support and service for their semiconductor capital equipment. Some of our competitors have more extensive support and service infrastructures than we do, which could place us at a disadvantage when competing for the business of global semiconductor device manufacturers. Many of our competitors are investing heavily in the development of new systems that will compete directly with our systems. We have, from time to time, selectively reduced prices on our systems in order to protect our market share, and competitive pressures may necessitate further price reductions. We expect our competitors in each product area to continue to improve the design and performance of their products and to introduce new products with competitive prices and performance characteristics. These product introductions would likely require us to decrease the prices of our systems and increase the level of discounts that we grant our customers. Price reductions or lost sales as a result of these competitive pressures would reduce our total revenue and could adversely impact our financial results.
Because of the high cost of switching equipment vendors in our markets, it is sometimes difficult for us to win new customers from our competitors even if our systems are superior to theirs.
We believe that once a semiconductor device manufacturer has selected one vendor’s capital equipment for a production-line application, the manufacturer generally relies upon that capital equipment and, to the extent possible, subsequent generations of the same vendor’s equipment for the life of the application. Once a vendor’s equipment has been installed in a production line application, a semiconductor device manufacturer must often make substantial technical modifications and may experience production-line downtime in order to switch to another vendor’s equipment. Accordingly, unless our systems offer performance or cost advantages that outweigh a customer’s expense of switching to our systems, it will be difficult for us to achieve significant sales to that manufacturer once it has selected another vendor’s capital equipment for an application.
Risks Related to Our International Operations
Tariffs, export regulations, and other market barriers have impacted and may continue to impact our ability to compete for the business of domestic customers in China and other jurisdictions, which has adversely affected and may continue to adversely affect our, business, financial condition and results of operations.
The semiconductor device industry is a high-visibility industry in many of the European and Asian countries in which we sell our products. Because the governments of these countries have provided extensive financial support to our semiconductor device manufacturing customers in these countries, we believe that our customers could be disproportionately affected by any trade embargoes, excise taxes, tariffs, or other restrictions imposed by their governments on trade with U.S. companies such as ourselves, particularly with respect to the ongoing tensions between the United States and China.
Over the last several years, the U.S. government has significantly expanded export controls on certain technologies and commodities to certain markets, particularly with respect to semiconductor and other high technology exports to China. For example, the U.S. Department of Commerce (“DoC”) has imposed export controls on the transfer of certain U.S. products and technologies to “military end users” in China, as well as restrictions on the transfer of U.S. products to certain companies, including Huawei Technologies Co., Ltd., and its affiliates. Most recently, in 2022, the DoC imposed new export controls related to the Chinese semiconductor manufacturing, advanced computing, and supercomputer industries. In 2022, the DoC also added a number of companies in China to the Unverified List and Entity List of the Export Administration Regulations (“EAR”), including Yangtze Memory Technologies Co., Ltd (YMTC). In October 2023, the DoC revised and expanded the 2022 export controls.
The effect of these changes, among others, is that Onto Innovation is required to conduct additional end-use diligence and in some instances obtain export licenses before providing products to certain customers. There can be no assurance that export
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licenses applied for by us or our customers will be granted in a timely manner or at all. We have experienced and may continue to experience a temporary loss of revenues while we are obtaining licenses with certain customers affected by export controls. Failure to obtain any required license could result in a reduction of anticipated revenues until we are able to replace unlicensed orders with other customer orders for which a license has been obtained or is not required, and there can be no assurance that replacement orders will be obtained on favorable terms, in a timely manner, or at all. In addition, any licenses that are granted to us or to our customers may have a short duration or require us to satisfy various conditions. Any of these occurrences could have a material adverse effect on our revenues, business, financial condition and results of operations. Further, we hold inventory of products that may be affected by these recent U.S. government actions, including potential order cancellations. If the sale of these products is delayed or we are unable to return or dispose of our inventory on favorable economic terms, we may incur additional carrying costs for the inventory or otherwise record charges associated with this inventory.
The administrative processing, attendant delays and risk of ultimately not obtaining required export approvals also put us at a disadvantage relative to our non-U.S. competitors who may not be required to comply with U.S. export controls. This difficulty and uncertainty has adversely affected our ability to compete for and win business from domestic customers in China.
It is possible that the U.S. government will impose additional export controls on our products or systems, which could lead to further revenue losses. Such changes could result in additional restrictions on our ability to sell products to customers in China and other jurisdictions. Foreign customers affected by current or future U.S. government sanctions, controls or threats of sanctions or controls may respond by developing their own solutions to replace our products or by utilizing our foreign competitors’ products (who are not subject to the same export controls and can fulfill the orders). In addition, these export controls may also reduce overall global demand for our customers’ products or for other products produced or manufactured in the U.S. or based on U.S. technology, in turn reducing demand for our products, which could have a material adverse effect on our business, financial condition and results of operations. Increased restrictions on China exports may also lead to regulatory retaliation by the Chinese government, which may adversely impact our business. International trade disputes could result in increases in tariffs and other trade restrictions and protectionist measures that could adversely impact our operations and reduce the competitiveness of our products relative to local and global competitors.
We are subject to compliance with domestic and foreign laws and regulations, and the burden of complying with such laws and regulations, or any failure to comply, has adversely affected and may continue to adversely affect our business, financial condition and results of operations.
Our business is subject to risks inherent in doing business internationally, including compliance with, inconsistencies among, and unexpected changes in, a wide variety of foreign laws and regulatory environments, including, among other issues, with respect to employees, protection of our intellectual property, and a wide variety of operational regulations and trade and export controls under domestic, foreign, and international law.
We are faced with various risks that may be associated with our compliance with existing, new, different, inconsistent or conflicting laws, regulations and rules enacted by governments and/or their regulatory agencies in the countries in which we operate as well as rules and policies implemented at our customer sites. These laws, regulations, rules and policies could relate to any of an array of issues including, but not limited to, environmental, tax, intellectual property, trade secrets, product liability, contracts, antitrust, employment, securities, import/export and unfair competition. The cost of maintaining compliance under multiple and changing regulatory regimes may adversely affect our business, financial condition and results of operations, and, in the case of export controls, has adversely affected and may continue to adversely affect our results of operations. As discussed herein under the heading “Tariffs, export regulations, and other market barriers have impacted and may continue to impact both our ability to compete for the business of domestic customers in China and our results of operations,” the U.S. government issued new export control rules in 2022 and 2023 aimed at restricting China’s access to semiconductor equipment and advanced computing technology, among other things. To comply with the new rules, Onto Innovation has had to expend time and resources that might otherwise have been used for revenue generating activities. Further regulatory changes could require additional diversion of resources to compliance efforts. In addition, in the event that we fail to comply with or violate U.S. or foreign laws or regulations or customer policies, we could be subject to civil or criminal claims or proceedings that may result in monetary fines, penalties or other costs against us or our employees, which may adversely affect our operating results, financial condition, customer relations and ability to conduct our business.
Political and economic instability may result in reduced demand for our products.
We are subject to various global risks related to political and economic instabilities in countries in which we derive sales. If terrorist activities, armed conflict, civil or military unrest or political instability occurs outside of the United States, these events may result in reduced demand for our products or adversely affect our supply chain. For example, the Ukraine–Russia geographic region is a major source of critical raw materials used for semiconductor manufacturing (such as neon and palladium), and any supply chain disruptions or shortages of such materials due to the ongoing conflict in that region could impact our customers in
35
a manner that reduces demand for our products. Similarly, if the conflict in Israel and the surrounding area escalates further, it could result in disruptions to our supply chain and/or the operations of our customers in a manner that reduces demand for our products.
In addition, due to the complex relationships among China, Hong Kong, Taiwan, and the United States, there is risk that political, diplomatic, and national security influences might lead to trade, technology, or capital disputes, or disruptions affecting the semiconductor industry. In particular, the escalation of geopolitical tensions between China and Taiwan may cause disruptions in the markets in which we operate and lead to a decreased demand for our products, which could adversely affect our business in Asia or have a negative impact on the regional or global economy.
Furthermore, an outbreak of hostilities or other political upheaval in China, Taiwan, Japan, or South Korea, or an economic downturn in Asia or globally, would likely harm the operations of our customers in these countries. The effect of these types of events on our revenue and cash flows could be material because we derive substantial revenue from sales to semiconductor device foundries in Taiwan such as Taiwan Semiconductor Manufacturing Company Ltd., from memory chip manufacturers in South Korea such as Samsung Electronics Co., Ltd., and from semiconductor device manufacturers in Japan such as Toshiba Corporation.
Natural disasters, changes in climate, public health crises, and geo-political conflicts could materially adversely affect our worldwide operations (or those of our business partners).
The occurrence of one or more natural disasters, such as hurricanes, tropical storms, fires, cyclones, earthquakes, tsunamis, flooding, typhoons, volcanic eruptions and weather conditions such as major or extended winter storms, droughts and tornadoes, whether as a result of climate change or otherwise, may disrupt manufacturing or other operations. For example, our Milpitas operations are located near major earthquake fault lines in California. We cannot provide any assurance that alternate means of conducting our operations (whether through alternate production capacity or service providers or otherwise) would be available if a major disruption were to occur or that, if such alternate means were available, they could be obtained on favorable terms.
Our business may also be affected by public health issues (for example, an outbreak of a contagious disease such as COVID-19, avian influenza, measles or Ebola). The effects of the public health crisis caused by the COVID-19 pandemic and the resulting economic impact have affected, and may continue to affect, our operations and those of our suppliers, third-party service providers, and customers. The extent to which the economic effects of the COVID-19 pandemic could continue to impact our business, results of operations, and financial conditions is difficult to predict and depends on numerous evolving factors including any future resurgences of the pandemic and the intensity and duration of any resulting adverse macroeconomic conditions. The COVID-19 pandemic exposed our business, results of operations, and financial condition to the following adverse impacts: disruptions to our supply chain in connection with the sourcing of materials, support, and services; disruption of operations due to unavailability of employees as a result of illness, travel restrictions and other factors; and a decrease in demand for our products; Additional sustained or prolonged outbreaks of COVID-19, or any ongoing, worsening or recurring supply chain disruptions or macroeconomic effects of the pandemic could have a material adverse effect on our business, results of operations, legal exposure, or financial condition and may also heighten many of the other risks described in this “Risk Factors” section.
There may also be conflict or uncertainty in the countries in which we operate, including safety issues, disruptions of service from utilities, nuclear power plant accidents or general economic or political unrest, including war, civil unrest or terrorist attacks. We have no material operations in Russia, Belarus, Ukraine, or Israel. Consequently, to date, our operations have not been materially adversely affected by Russia’s invasion of Ukraine, or the Israel-Hamas conflict. However, if the Russia-Ukraine or Israel-Hamas conflicts escalate further and/or the U.S. or other jurisdictions impose additional sanctions on the governments or entities involved, this could result in disruptions to the global economy and/or supply chains that could adversely affect our business.
36
We may face difficulties in staffing and managing foreign branch operations due to political tensions or cultural differences.
During periods of tension between the governments of the United States and certain other countries, it is often difficult for U.S. companies such as ours to staff and manage operations in such countries. Language and other cultural differences may also inhibit our sales and marketing efforts and create internal communication problems among our U.S. and foreign research and development teams, increasing the difficulty of managing multiple remote locations performing various development, quality assurance, and yield ramp analysis projects.
Currency fluctuations may impact our international sales or expose us to exchange rate risk.
A substantial portion of our international sales are denominated in U.S. dollars. As a result, if the dollar rises in value in relation to foreign currencies, our systems will become more expensive to customers outside the United States and may be less competitive with systems produced by competitors outside the United States. These conditions could negatively impact our international sales. Foreign sales also expose us to collection risk in the event it becomes more expensive for our foreign customers to convert their local currencies into U.S. dollars. Additionally, in the event a larger portion of our revenue becomes denominated in foreign currencies, we would be subject to a potentially significant exchange rate risk, and any failure to sufficiently hedge or otherwise manage these risks could materially and adversely affect our financial condition, results of operations, and liquidity.
Our internal controls with respect to anti-corruption laws may not be effective, and any failure to comply with such laws may result in severe sanctions and liabilities, which may negatively affect our business, operating results and financial condition.
We are subject to the Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”), and other laws that prohibit improper payments or offers of payments to foreign governments and their officials and political parties by U.S. persons and issuers as defined by the statute, for the purpose of obtaining or retaining business. Also, similar worldwide anti-bribery laws, such as the U.K. Bribery Act and Chinese anti-corruption laws, generally prohibit companies and their intermediaries from making improper payments to non-U.S. officials for the purpose of obtaining or retaining business. Some of our distribution partners are located in parts of the world that have experienced governmental corruption to some degree and, in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices. The policies and procedures we have implemented to discourage these practices by our employees, our existing safeguards and any future improvements may prove to be ineffective, and our employees, consultants, sales agents or distributors may engage in conduct for which we might be held responsible. Violations of the FCPA or international anti-corruption laws may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could negatively affect our business, operating results and financial condition. In addition, the U.S. government may seek to hold us liable for successor liability FCPA violations committed by companies in which we invest or that we acquire. We cannot assure you that our internal control policies and procedures will protect us from reckless or negligent acts committed by our employees, distributors, partners, consultants or agents.
Risks Related to Laws, Legal Proceedings, Financial Markets and the Environment
Changes in tax rates or tax liabilities could affect results.
As a global company, we are subject to taxation in the United States and various other countries. Significant judgment is required to determine and estimate worldwide tax liabilities. Our future annual and quarterly tax rates could be affected by numerous factors, including changes in the (1) applicable tax laws; (2) composition of earnings in countries with differing tax rates; or (3) recoverability of our deferred tax assets and liabilities. Beginning in 2022, the U.S. Tax Cuts and Jobs Act of 2017 (“TCJA”) eliminated the existing option to deduct research and development expenditures and requires taxpayers to amortize them over five years pursuant to IRC Section 174. Although Congress is considering legislation that would defer the amortization requirement to later years, we have no assurance that the provision will be repealed or otherwise modified. The requirement reduced our cash flows for 2022 and 2023, and may continue to reduce our cash flows unless repealed. In addition, recent proposals to increase the U.S. corporate income tax rate, increase U.S. taxation of international business operations and impose a global minimum tax could have a negative impact on our tax position depending upon the terms of the final enacted legislation. Based on the nature of the uncertainties around specific legislation to be enacted, we have not quantified the impact of this risk. Many countries and organizations such as the Organization for Economic Cooperation and Development are also actively considering changes to existing tax laws or have proposed or enacted new laws that could increase our tax obligations in countries
37
where we do business or cause us to change the way we operate our business. Any of these developments or changes in federal, state, or international tax laws or tax rulings could adversely affect our effective tax rate and our results of operations.
In addition, we are subject to regular examination of our income tax returns by the Internal Revenue Service and other tax authorities. We regularly assess the likelihood of favorable or unfavorable outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. Although we believe our tax estimates are reasonable, there can be no assurance that any final determination will not be materially different from the treatment reflected in our historical income tax provisions and accruals, which could materially and adversely affect our results of operations.
In December 2021, the Organization for Economic Co-operation and Development (“OECD”), released guidance covering various topics, including country-by-country reporting, definitional changes to permanent establishment and Base Erosion and Profit Shifting (“BEPS”), an initiative that aims to standardize and modernize global tax policy. The proposed guidance also established a global minimum tax of 15%. Depending on the final form of guidance adopted by OECD members and legislation ultimately enacted, if any, there may be significant consequences for us due to our international business activities, including, but not limited to, an increase in our tax uncertainty and adverse effects on our provision for income taxes.
Turmoil or fluctuations in the credit markets and the financial services industry may negatively impact our business, results of operations, financial condition or liquidity, and our factoring arrangements may expose us to additional risks.
In the past, global credit markets and the financial services industry have experienced periods of turmoil and upheaval characterized by the tightening of the credit markets, the weakening of the global economy and an unprecedented level of intervention from the United States and other governments. Adverse economic conditions, such as sustained periods of economic uncertainty or a crisis in the financial markets may have a material adverse effect on our liquidity and financial condition if our ability to obtain credit from the capital financial markets, or from trade creditors was impaired. If banks and financial institutions with whom we have banking relationships enter receivership or become insolvent in the future, we may be unable to access, and we may lose, some or all of our existing cash, cash equivalents and investments to the extent those funds are not insured or otherwise protected by the FDIC. In addition, a worsening economy or an economic crisis could also adversely impact our customers’ ability to finance the purchase of systems from us or our suppliers’ ability to provide us with product, either of which may negatively impact our business and results of operations.
We are subject to various environmental laws and regulations that could impose substantial costs upon us, and failure to comply with such laws and regulations may harm our business, operating results and financial condition.
Some of our operations use substances regulated under various federal, state, local, and international laws governing the environment, including those relating to the storage, use, discharge, disposal, labeling, and human exposure to hazardous and toxic materials. We could incur costs, fines and civil or criminal sanctions, third-party property damage or personal injury claims, or could be required to incur substantial investigation or remediation costs, if we were to violate or become liable under environmental laws. Liability under environmental laws can be joint and several and without regard to comparative fault. Compliance with current or future environmental laws and regulations could restrict our ability to expand our facilities or require us to acquire additional expensive equipment, modify our manufacturing processes, or incur other significant expenses. For example, we are or expect to become subject to various new or proposed climate-related and other sustainability laws and regulations, including, for example, the state of California’s new climate change disclosure requirements, the EU’s new Corporate Sustainability Reporting Directive and proposed climate-change disclosure requirements from the SEC. Compliance with such laws and regulations, as well as the overall increased focus and scrutiny from the SEC and other regulators, investors, customers, vendors, employees, and other stakeholders concerning environmental, social and governance (“ESG”) and climate matters, could impose additional costs on us. We may unintentionally violate environmental laws or regulations in the future as a result of human error, equipment failure or other causes. In addition to the potential adverse effects on our business operations of such an event, we are committed to maintaining safe working conditions for our employees and sourcing, manufacturing, and distributing our products in a responsible and environmentally friendly manner, and any failure on our part to do so may cause reputational harm for the Company.
Legal proceedings, claims and investigations may expose us to increased costs and may negatively affect our business and results of operations.
We have been from time to time, and in the future may be, involved in legal proceedings or claims regarding any number of matters, including intellectual property infringement, contract disputes, trade compliance, antitrust, environmental regulations, privacy and data protection, securities, product performance, product liability, employment and workplace safety, and other matters. In addition, we may receive, and have received, inquiries, warrants, subpoenas, and other requests for information in connection with government investigations of potential or suspected violations of law by our company and/or other companies
38
that we work with. We have also received, and may receive in the future, claims from customers who believe we owe them product warranty protection, indemnification or other obligations.
Legal proceedings, claims, and government investigations, whether with or without merit, may be time-consuming and expensive to respond to and defend. They may also divert management’s attention and our other resources from day-to-day operational matters; constrain our ability to sell products and services; result in adverse judgments for damages, injunctive relief, penalties and fines; and negatively affect our business and results of operations. We cannot predict the outcome of current or future legal proceedings, claims or investigations.
Risks Related to Growth and Acquisitions
We may choose to acquire new and complementary businesses, products or technologies instead of developing them ourselves, and we may be unable to complete these acquisitions or may not be able to successfully integrate an acquired business in a cost-effective and non-disruptive manner.
Our success depends on our ability to continually enhance and broaden our product offerings in response to customer-anticipated process changes, strategic opportunities for growth, and industry technology trends. To this end, we have, from time to time, engaged in the process of identifying, analyzing and negotiating possible acquisition transactions, and, from time to time, acquiring one or more businesses, and we expect to continue to do so in the future. We may choose to acquire new and complementary businesses, products, technologies and/or services instead of developing them ourselves. We may, however, face competition for acquisition targets from larger and more established companies with greater financial resources, making it more difficult for us to complete acquisitions. We cannot provide any assurance that we will be successful in consummating future acquisitions on favorable terms or that we will realize the benefits that we anticipate from one or more acquisitions that we consummate. Integrating any business, product, technology or service into our current operations could be expensive and time-consuming and/or disrupt our ongoing business. Further, there are numerous risks associated with acquisitions and potential acquisitions, including, but not limited to:
Our inability to consummate one or more acquisitions on favorable terms, or our failure to realize the intended benefits from one or more acquisitions, could have a material adverse effect on our business, liquidity, financial position and/or results of operations, including as a result of our incurrence of indebtedness and related interest expense and our assumption of unforeseen contingent liabilities. We might need to raise additional funds through public or private equity or debt financings to finance any acquisition. In that event, we could be forced to obtain financing on terms that are not favorable to us and, in the case of equity financing, that result in dilution to our stockholders. In addition, any impairment of goodwill or other intangible assets, amortization of intangible assets, write-down of other assets or charges resulting from the costs of acquisitions and purchase accounting could harm our business and operating results.
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If we cannot effectively manage growth, our business may suffer.
Over the long-term, we intend to grow our business by increasing our sales efforts and completing strategic acquisitions. To effectively manage growth, we must, among other things:
Growth of our business will likely challenge our management, financial, operational, technical, sales, administrative, and other resources. Any failure to effectively manage our growth may cause our business to suffer and our stock price to decline.
Risks Related to the Global Economy and the Semiconductor Industry
Cyclicality in the semiconductor device industry has led to substantial decreases in demand for our systems in the past and may, from time to time, continue to do so.
Our operating results are subject to significant variation due to global economic conditions and the cyclical nature of the semiconductor device industry. Our business depends upon the capital expenditures of semiconductor device manufacturers, which, in turn, depend upon the current and anticipated market demand for semiconductors and products using semiconductors. The timing, length and severity of the up-and-down cycles in the semiconductor equipment industry are difficult to predict. In recent history, the industry has experienced significant downturns, generally in connection with declines in economic conditions. This cyclical nature of the industry in which we operate affects our ability to accurately predict future revenue and, thus, future expense levels. When cyclical fluctuations result in lower-than-expected revenue levels, operating results may be adversely affected, and cost reduction measures may be necessary in order for us to remain competitive and financially sound. During a down cycle, we must be in a position to adjust our cost and expense structure to prevailing market conditions and to continue to motivate and retain our key employees. In addition, during periods of rapid growth, we must be able to increase manufacturing capacity and personnel to meet customer demand. We can provide no assurance that these objectives can be met in a timely manner in response to industry cycles, and we cannot predict when and to what extent sales may normalize, or when and to what extent gross margins may improve, following any such occurrence. If we fail to respond to industry cycles, our business could be seriously harmed.
We may also experience supplier or customer issues as a result of adverse macroeconomic conditions. If our customers have difficulties in obtaining capital or financing, this could result in lower sales. Customers with liquidity issues could also result in an increase in bad debt expense. These conditions could also affect our key suppliers, which could affect their ability to supply parts and result in delays of our customer shipments.
Our future rate of growth is highly dependent on the development and growth of the market for microelectronic device inspection, lithography and metrology equipment.
We target our products to address the needs of microelectronic device manufacturers for defect inspection, metrology and lithography. If for any reason the market for microelectronic device inspection, lithography or metrology equipment fails to grow in the long term, we may be unable to maintain current revenue levels in the short term and maintain our historical growth in the long term. Growth in the inspection market is dependent to a large extent upon microelectronic manufacturers replacing manual inspection with automated inspection technology. Growth in the metrology market is dependent to a large extent upon new chip designs and capacity expansion of microelectronic manufacturers. Growth in the lithography market is dependent on the development of cost-effective packaging with high fine pitch RDLs, ultimately migrating to multi-die, large, form-factor packages. There can be no assurance that manufacturers will undertake these actions at the rate we expect.
General Risk Factors
Provisions of our charter documents and of Delaware law could discourage potential acquisition proposals and/or delay, deter or prevent a change in control of our company.
Provisions of our certificate of incorporation and by-laws may inhibit changes in control of our company not approved by our Board of Directors. These provisions also limit the circumstances in which a premium can be paid for our common stock and in which a proxy contest for control of our board may be initiated. These provisions provide for:
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We are also entitled to avail ourselves of the protections of Section 203 of the Delaware General Corporation Law, which could inhibit changes in control of the Company.
Our stock price is volatile.
The market price of our common stock has fluctuated widely. Consequently, the current market price of our common stock may not be indicative of future market prices, and we may be unable to sustain or increase the value of an investment in our common stock. Factors affecting our stock price may include:
In addition, the stock market has experienced periods of significant price and volume fluctuations. These fluctuations have particularly affected the market prices of the securities of high technology companies like ours. Any such market fluctuations in the future could adversely affect the market price of our common stock.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
In February 2024, the Onto Innovation Board of Directors approved a new share repurchase authorization, which allows the Company to repurchase up to $200 million worth of shares of its common stock. There were no repurchases of common stock under this authorization during the three and nine months ended September 28, 2024. There was $200 million available for future share repurchases under this share repurchase authorization at September 28, 2024. For further information, see Note 15, “Share Repurchase Authorization,” of the Notes to the Condensed Consolidated Financial Statements.
In addition to our share repurchase program, we withhold common stock shares associated with net share settlements to cover tax withholding obligations upon the vesting of restricted stock unit awards under the Company’s equity incentive program. During the three and nine months ended September 28, 2024, we withheld 2 thousand and 99 thousand shares through net share settlements. For the three and nine months ended September 28, 2024, net share settlements cost $0.5 million and $18.4 million, respectively. Please refer to Note 9, “Share-Based Compensation,” of the Notes to the Condensed Consolidated Financial Statements for further discussion regarding our equity incentive plan.
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The following table provides details of common stock purchased during the three months ended September 28, 2024 (in thousands, except per share data):
Period |
|
Total Number |
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|
Average Price Paid per Share |
|
|
Total Number of Shares Purchased as Part of Publicly Announced Program |
|
|
Maximum Approximate Dollar Value of Shares that May Yet be Purchased Under the Program |
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||||
June 30, 2024 - July 29, 2024 |
|
|
1 |
|
|
$ |
207.39 |
|
|
|
— |
|
|
$ |
200,000 |
|
July 29, 2024 - August 29, 2024 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
200,000 |
|
August 29, 2024 - September 28,2024 |
|
|
1 |
|
|
$ |
201.80 |
|
|
|
— |
|
|
$ |
200,000 |
|
Three months ended September 28, 2024 |
|
|
2 |
|
|
$ |
201.82 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
1 Includes shares withheld through net share settlements. |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
During the fiscal quarter ended September 28, 2024, the following officers, as defined in Rule 16a-1(f) under the Exchange Act, as amended, adopted a “Rule 10b5-1 trading arrangement” as defined in Regulation S-K Item 408, as follows:
On August 16, 2024, Mark R. Slicer, the Company’s Chief Financial Officer, adopted a Rule 10b5-1 trading arrangement providing for the sale from time to time of an aggregate of up to 1,100 shares of our common stock. The trading arrangement is intended to satisfy the affirmative defense in Rule 10b5-1(c). The duration of the trading arrangement is until August 15, 2025, or earlier if all transactions under the trading arrangement are completed.
On August 26, 2024, Michael P. Plisinski, the Company’s Chief Executive Officer, adopted a Rule 10b5-1 trading arrangement providing for the sale from time to time of an aggregate of up to 152,267 shares of our common stock. The trading arrangement is intended to satisfy the affirmative defense in Rule 10b5-1(c). The duration of the trading arrangement is until December 31, 2025, or earlier if all transactions under the trading arrangement are completed.
On September 11, 2024, Srinivas Vedula, the Company’s Senior Vice President of Customer Success, adopted a Rule 10b5-1 trading arrangement providing for the sale from time to time of an aggregate of (i) up to 827 shares of our common stock and (ii) up to 100% of the shares of our common stock issued upon the settlement of 1,847 outstanding RSUs, less the number of shares traded to cover tax withholding obligations in connection with the vesting and settlement of such RSUs. The trading arrangement is intended to satisfy the affirmative defense in Rule 10b5-1(c). The duration of the trading arrangement is until September 11, 2025, or earlier if all transactions under the trading arrangement are completed.
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Item 6. Exhibits
Exhibit No. |
Description |
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|
|
101.INS* |
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
|
|
101.SCH* |
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents |
|
|
104* |
Cover Page Interactive Data File (formatted as Inline XBRL and included in Exhibit 101) |
* Filed herewith.
** Furnished herewith.
43
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
Onto Innovation Inc. |
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|
|
|
|
Date: |
October 31, 2024 |
By: |
/s/ Michael P. Plisinski |
|
|
Michael P. Plisinski |
|
|
|
Chief Executive Officer |
|
|
|
|
|
Date: |
October 31, 2024 |
By: |
/s/ Mark R. Slicer |
|
|
Mark R. Slicer |
|
|
|
Chief Financial Officer and Principal Accounting Officer |
|
44