Onto Innovation Inc 10-Q for FY2026 Q3
Onto Innovation Inc. (ONTO)
About this 10-Q
Onto Innovation Inc filed this 10-Q on November 9, 2026, covering the quarter ended September 30, 2026 (FY2026 Q3).
Onto Innovation reported revenue of $409.7 million for three months ended September 30, 2026, up 87.8%, with gross margin reaching 54.8%. The Rigaku investment generated a $40.8 million unrealized loss. AI summary
Headline figures
Quarter ended September 30, 2026, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $409.75M
- up 87.8% from $218.19M a year earlier
- Net income
- $46.85M
- up 66.0% from net income of $28.22M a year earlier
- Diluted EPS
- $0.95
- up 66.7% from $0.57 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File No.
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification Number) |
(Address of principal executive offices, including zip code)
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act
Title of Each Class |
Trading Symbol(s) |
Name of Each Exchange on Which Registered |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
The number of outstanding shares of the registrant’s Common Stock on October 30, 2026 was
TABLE OF CONTENTS
Item No. |
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PART I FINANCIAL INFORMATION |
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Item 1. |
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Condensed Consolidated Balance Sheets at September 30, 2026 and January 3, 2026 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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PART II OTHER INFORMATION |
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Item 1. |
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Item 1A. |
Risk Factors |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
Other Information |
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Item 6. |
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements
ONTO INNOVATION INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 27, |
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September 30, |
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September 27, |
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2026 |
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2026 |
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Revenue |
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Cost of revenue |
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Gross profit |
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Operating expenses: |
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Research and development |
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Sales and marketing |
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General and administrative |
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Amortization |
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Restructuring and other |
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Total operating expenses |
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Operating income |
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Other income, net |
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Unrealized gain (loss) on investment in Rigaku |
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— |
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Interest income, net |
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Foreign currency exchange losses |
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Other (expense) income, net |
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Total other income, net |
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Income before provision for income taxes |
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Provision for income taxes |
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Net income |
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$ |
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$ |
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$ |
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Earnings per share: |
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Basic |
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$ |
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$ |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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$ |
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Weighted average number of shares outstanding: |
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Basic |
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Diluted |
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The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
1
ONTO INNOVATION INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 27, |
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September 30, |
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September 27, |
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2026 |
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2025 |
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2026 |
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2025 |
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Net income |
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$ |
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$ |
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$ |
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$ |
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Other comprehensive (loss) income, net of tax: |
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Change in net unrealized (losses) gains on available-for-sale marketable securities |
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Change in currency translation adjustments |
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Total other comprehensive (loss) income, net of tax |
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Total comprehensive income |
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$ |
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$ |
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$ |
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$ |
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The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
2
ONTO INNOVATION INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
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September 30, |
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January 3, |
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ASSETS |
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Current Assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Marketable securities |
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Accounts receivable, net of allowance of $ |
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Inventories, net |
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Prepaid expenses and other current assets, net |
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Total current assets |
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Property, plant and equipment, net |
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Goodwill |
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Identifiable intangible assets, net |
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Investment in Rigaku |
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— |
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Deferred income taxes |
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Other assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued liabilities |
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Deferred revenue |
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Other current liabilities |
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Total current liabilities |
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2031 Notes, net |
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Deferred and other tax liabilities |
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Other non-current liabilities |
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Total liabilities |
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Stockholders’ equity: |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated other comprehensive loss |
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Accumulated earnings |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
3
ONTO INNOVATION INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
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Nine Months Ended |
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September 30, |
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September 27, |
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2026 |
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2025 |
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Cash flows from operating activities: |
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Net income |
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$ |
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$ |
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Adjustments to reconcile net income to net cash and cash equivalents provided by operating activities: |
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Amortization of intangibles |
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Accretion of discount on marketable securities |
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Depreciation |
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Share-based compensation |
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Provision for inventory valuation |
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Unrealized (gain) loss on investment in Rigaku |
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Deferred income taxes |
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Amortization of debt discount and issuance costs |
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Other, net |
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Changes in operating assets and liabilities |
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Net cash and cash equivalents provided by operating activities |
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Cash flows from investing activities: |
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Purchases of marketable securities |
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Proceeds from maturities and sales of marketable securities |
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Purchases of property, plant and equipment |
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( |
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Purchase of investment in Rigaku |
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Purchases of non-marketable equity securities |
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Acquisition related adjustments |
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Net cash and cash equivalents provided by (used in) investing activities |
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Cash flows from financing activities: |
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Purchases and retirement of common stock |
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Tax payments related to shares withheld for share-based compensation plans |
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Issuance of shares through share-based compensation plans |
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Payment for bridge commitment fees |
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( |
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Proceeds from issuance of 2031 Notes, net of issuance costs |
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Payment for capped call options |
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Net cash and cash equivalents provided by (used in) financing activities |
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( |
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Effect of exchange rate changes on cash and cash equivalents |
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Net increase in cash and cash equivalents |
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Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period |
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$ |
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$ |
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Supplemental disclosure of cash flow information: |
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Income taxes paid (net of refunds) |
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$ |
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$ |
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Supplemental noncash disclosure of cash flow information: |
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Unpaid excise tax on repurchases of common stock |
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$ |
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$ |
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The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
4
ONTO INNOVATION INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
(Unaudited)
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Common Stock |
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Additional |
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Accumulated |
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Accumulated |
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Shares |
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Amount |
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Capital |
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Loss |
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Earnings |
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Total |
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Balance at January 3, 2026 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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Share-based compensation |
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— |
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— |
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— |
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— |
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Issuance of shares through share-based compensation plans, net |
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— |
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— |
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— |
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— |
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— |
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Purchases of common stock |
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— |
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— |
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— |
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— |
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— |
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— |
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Share-based compensation plan withholdings |
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( |
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— |
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( |
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— |
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— |
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( |
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Currency translation |
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— |
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— |
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— |
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( |
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— |
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( |
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Unrealized loss on investments |
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— |
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— |
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— |
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( |
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— |
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Balance at March 31, 2026 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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Share-based compensation |
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— |
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— |
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— |
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— |
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Issuance of shares through share-based compensation plans, net |
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— |
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— |
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— |
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Purchases of common stock |
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( |
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— |
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( |
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— |
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— |
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( |
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Capped call option purchase, net of tax impact |
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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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Share-based compensation plan withholdings |
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( |
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— |
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( |
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— |
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— |
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( |
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Currency translation |
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— |
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— |
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— |
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( |
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— |
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( |
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Unrealized loss on investments |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Balance at June 30, 2026 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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Share-based compensation |
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— |
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— |
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— |
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— |
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Issuance of shares through share-based compensation plans, net |
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— |
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— |
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— |
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— |
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— |
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Share-based compensation plan withholdings |
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( |
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— |
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( |
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— |
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— |
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( |
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Currency translation |
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— |
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— |
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— |
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— |
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Unrealized loss on investments |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
Balance at September 30, 2026 |
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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
|
|
Common Stock |
|
|
Additional |
|
|
Accumulated |
|
|
Accumulated |
|
|
|
|
|||||||||
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Loss |
|
|
Earnings |
|
|
Total |
|
||||||
Balance at December 28, 2024 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Share-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Issuance of shares through share-based compensation plans, net |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Purchases of common stock |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Share-based compensation plan withholdings |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Currency translation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Unrealized gain on investments |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Balance at March 29, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Share-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Issuance of shares through share-based compensation plans, net |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Purchases of common stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Share-based compensation plan withholdings |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Currency translation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Unrealized loss on investments |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Balance at June 28, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Share-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Issuance of shares through share-based compensation plans, net |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Purchases and retirement of common stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Share-based compensation plan withholdings |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Currency translation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Unrealized gain on investments |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Balance at September 27, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
6
ONTO INNOVATION INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. Basis of Presentation
The accompanying interim unaudited Condensed Consolidated Financial Statements have been prepared by Onto Innovation Inc. (the “Company,” “Onto Innovation,” “we,” “our” or “us”) and in the opinion of management reflect all adjustments, consisting of normal recurring accruals, necessary for their fair presentation in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Any reference in these notes to applicable guidance is meant to refer to U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”). Certain reclassifications have been made to prior-period amounts to conform to current-period presentation. The interim results for the three and nine month periods ended September 30, 2026 are not necessarily indicative of results to be expected for the entire year or any future periods. This interim financial information should be read in conjunction with the financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended January 3, 2026 (the “2025 Form 10-K”) filed with the Securities and Exchange Commission on February 24, 2026. The accompanying Condensed Consolidated Balance Sheet at January 3, 2026 has been derived from the audited consolidated financial statements included in the 2025 Form 10-K.
On February 18, 2026, the Company’s Board of Directors (“Board”) changed the Company’s fiscal year-end from a 52-53-week fiscal year ending on the Saturday closest to December 31 to a December 31 fiscal year-end. The Company made the fiscal year change on a prospective basis and will not adjust operating results for prior periods. Additionally, the Company has adopted calendar quarter fiscal period ends commencing with the first quarter ended March 31, 2026. The change affects the prior year comparability of the Company’s fiscal quarters in 2025 and has resulted in shifts in the quarterly periods, which is not expected to have a material impact on our quarterly financial results. Our fiscal year ended January 3, 2026 was a 53-week fiscal year. The third quarter of the fiscal year ended January 3, 2026 ended on September 27, 2025. Throughout this document, the three month period ended September 30, 2026 represents the quarterly period that commenced on July 1, 2026, and ended on September 30, 2026. The three month period ended September 27, 2025 represents the quarterly period that commenced on June 29, 2025 and ended on September 27, 2025. The nine month period ended September 30, 2026 represents the period that commenced on January 4, 2026, the first day of our fiscal year, and ended on September 30, 2026. The nine month period ended September 27, 2025 represents the period that commenced on December 29, 2024 and ended on September 27, 2025.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Estimates made by management include excess and obsolete inventory, fair value of assets acquired and liabilities assumed in a business combination, recoverability and useful lives of property, plant and equipment and identifiable intangible assets, recoverability of goodwill, recoverability of deferred tax assets, allowance for credit losses, liabilities for product warranty, share-based payments and liabilities for tax uncertainties. Actual results could differ from those estimates.
These estimates and assumptions are based on historical experience and on various other factors which the Company believes to be reasonable under the circumstances. The Company may engage third-party valuation specialists to assist with estimates related to the valuation of financial instruments, assets and stock awards associated with various contractual arrangements. Such estimates often require the selection of appropriate valuation methodologies and significant judgment. Actual results could differ from these estimates under different assumptions or circumstances and such differences could be material.
Significant Accounting Policies
In addition to the significant accounting policies disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended January 3, 2026, the Company has adopted the following accounting policy during the period.
Equity Investments
Investments in equity securities in which a company has the ability to exercise significant influence, but not control, are accounted for under the equity method in accordance with ASC 323, Investments - Equity Method and Joint Ventures, unless the company elects the fair value option under ASC 825, Financial Instruments. The fair value option may be elected on an instrument-by-instrument basis, must be elected at initial recognition, and is irrevocable once made.
7
For equity securities for which the fair value option has been elected, the investment is measured at fair value at each reporting date, with all changes in fair value recognized in net income. For investments denominated in foreign currency, the investment is remeasured to U.S. dollars at the closing spot exchange rate at each reporting date, and the change in the U.S. dollar fair value attributable to both the change in the security’s quoted price and the change in exchange rates is recognized in net income without bifurcation. No amounts related to these investments are recorded in other comprehensive income. Dividends are recognized as income when the Company’s right to receive payment is established and do not reduce the carrying amount of the investment.
Upon initial recognition, the Company elected the fair value option for its investment in Rigaku Holdings Corporation (“Rigaku”). For further information, see Note 2, “Acquisitions and Investments,” and Note 3, “Fair Value Measurements.”
Recent Accounting Pronouncements
Recently Adopted or Effective
In December 2025, the FASB issued ASU 2025-12, “Codification Improvements,” which addresses suggestions received from stakeholders regarding the ASC and makes other incremental improvements to U.S. GAAP. The update represents changes to the ASC that clarify, correct errors in or make other improvements to a variety of topics that are intended to make it easier to understand and apply. The amendments in this update are effective for the Company beginning January 1, 2027, with early adoption permitted. The Company adopted this ASU during the quarter ended June 30, 2026. In connection with the adoption, the Company elected an accounting policy to allocate the excess of the repurchase price over par for all shares repurchased and retired to additional paid-in capital on a prospective basis.
In July 2025, the FASB issued ASU 2025-05, “Financial Instruments - Credit Losses (Topic 326),” which simplifies the estimation of credit losses on current accounts receivable and current contract assets arising from transactions accounted for under Accounting Standards Codification 606, Revenue from Contracts with Customers. The guidance allows all entities to use a practical expedient to assume that the current conditions as of the balance sheet date will remain unchanged for the remaining life of the asset when developing a reasonable and supportable forecast as part of estimating expected credit losses on these assets. The guidance is effective for fiscal years beginning after December 15, 2025, and interim periods within those fiscal years. Early adoption is permitted. Entities that elect the practical expedient are required to apply the amendments prospectively. The Company adopted this ASU during the quarter ended March 31, 2026 and elected the practical expedient. The adoption did not have a material impact on the condensed consolidated financial statements.
Updates Not Yet Effective
In December 2025, the FASB issued ASU 2025-11, “Interim Reporting (Topic 270): Narrow-Scope Improvements,” to clarify and reorganize U.S. GAAP interim reporting guidance to improve navigability, applicability, and consistency without changing the fundamental nature or volume of required interim disclosures. This amendment clarifies when ASC 270 is applicable, establishes a disclosure principle requiring disclosure of material events or changes occurring since the most recent annual reporting period, and consolidates into ASC Topic 270 a comprehensive list of interim disclosures required by other codification topics. The amendment also clarifies the form and content of interim financial statements, including guidance for condensed interim reporting. The amendment is effective for the Company for interim periods in 2028, with early adoption permitted. The impact of the adoption of the amendments in this update is not expected to be material to the Company’s consolidated financial position and results of operations.
In December 2025, the FASB issued ASU 2025‑10, “Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities,” to establish specific guidance for the recognition, measurement, presentation, and disclosure of government grants received to reduce diversity and increase consistency amongst business entities in accounting for such grants. This amendment amends ASC Topic 832 to require that a government grant received by a business entity should not be recognized as income until it is probable that a business entity will comply with the conditions attached to the grant and the grant will be received, with any grant related to an asset to be purchased, constructed or acquired such as long-lived assets or inventory to be recognized on the balance sheet as either deferred income or as an adjustment to the cost basis of the related asset, or the cost accumulation approach, as such costs are incurred. Any grant income or deferred income shall be recognized in earnings on a systematic and rational basis over the periods in which a business entity recognizes as expenses the costs for which the grant is intended to compensate, whereas any grants accounted for using the cost accumulation approach will not have a direct subsequent recognition in earnings, but rather reduced depreciation or amortization in accounting for the related asset. Entities are also required to present grants recognized in earnings separately under other income or deducted from the related expense, and provide disclosures of the nature of the government grant received, the accounting policies used to account for the grant, and the significant terms and conditions of the grant. The amendment is effective for the Company for annual and interim periods in 2029, with early adoption and multiple transition methods permitted. The Company is currently evaluating the potential impact of this standard on its consolidated financial statements.
8
In December 2025, the FASB issued ASU 2025-09, “Derivatives and Hedging (Topic 815): Hedge Accounting Improvements,” to amend certain aspects of its hedge accounting guidance to better reflect an entity’s risk management activities in the financial statements. The guidance expands the hedged risks permitted to be aggregated in a group of individual forecasted transactions and increases the variable price components eligible to be designated as the hedged risk in the forecasted purchase or sale of nonfinancial assets. For public business entities, the provisions of ASU 2025-09 are effective for fiscal years beginning after December 15, 2026. Early adoption is permitted. The Company is currently evaluating the potential impact of this standard on its consolidated financial statements.
In September 2025, the FASB issued ASU 2025-06, “Intangibles-Goodwill and Other-Internal Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software,” which removes all references to software development stages and clarifies the threshold entities apply to begin capitalizing costs. ASU 2025-06 is effective for annual periods beginning after December 15, 2027 and interim reporting periods within those annual reporting periods. The ASU may be applied prospectively, retrospectively or through a modified transition approach with early adoption permitted. The Company is currently evaluating the potential impact of this standard on its consolidated financial statements.
In November 2024, the FASB issued ASU 2024-03, “Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40),” which requires additional disclosure of certain costs and expenses, including inventory purchases, employee compensation, selling expense and depreciation expense within the notes to financial statements. The guidance is effective for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact that the updated standard will have on its financial statements and related disclosures.
NOTE 2. Acquisitions and Investments
Investment in Rigaku
On August 10, 2026, the Company completed the previously announced acquisition of
The Company’s
The investment in Rigaku is presented as “Investment in Rigaku,” a non-current asset, on the Condensed Consolidated Balance Sheets. The investment is remeasured to fair value at each reporting date based on the quoted market price of Rigaku’s common stock on the Tokyo Stock Exchange, translated into U.S. dollars at the closing spot exchange rate. All changes in the U.S. dollar fair value of the investment, including amounts attributable to changes in Rigaku’s share price and changes in the Japanese yen to U.S. dollar exchange rate, are recognized in net income within “Unrealized gain (loss) on investment in Rigaku” under “Other income, net” in the Condensed Consolidated Statements of Operations. The components are not bifurcated, and no amounts related to this investment are recorded in other comprehensive income. Dividends declared by Rigaku, if any, are recognized as dividend income when the Company’s right to receive payment is established and do not reduce the carrying amount of the investment.
Under the fair value option, the Company does not recognize its proportionate share of Rigaku’s net income or loss, amortization of acquisition-date basis difference, or equity method adjustments for Rigaku’s other comprehensive income items. Changes in the fair value of the investment are recognized currently in net income but are not taxable or deductible until realized. The resulting difference between the carrying amount of the investment and its tax basis is a temporary difference, for which the Company recognizes deferred taxes.
The following table summarizes the activity in the Company’s investment in Rigaku:
9
|
September 30, 2026 |
|
|
|
(in thousands) |
|
|
Balance, beginning of the period |
$ |
|
|
Initial recognition at acquisition date |
|
|
|
Unrealized gain (loss) on investment in Rigaku |
|
( |
) |
Balance, end of period |
$ |
|
|
The following table presents the unrealized gain (loss) on the Company’s investment in Rigaku recognized in net income:
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
September 30, |
|
|
September 27, |
|
|
September 30, |
|
|
September 27, |
|
||||
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
(in thousands) |
|
|||||||||||||
Unrealized gain (loss) on investment in Rigaku still held at the reporting date |
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Total unrealized gain (loss) on investment in Rigaku |
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
All amounts presented above relate to the investment in Rigaku, which was held as of September 30, 2026.
The Company evaluates the significance of its investment in Rigaku under Regulation S-X. The investment has not met the
Completed Acquisition
On November 17, 2025 (the “Acquisition Date”), the Company completed the previously announced acquisition of Semilab USA LLC (“Semilab USA”), pursuant to the Equity Purchase Agreement (the “Purchase Agreement”), dated as of June 27, 2025, by and among the Company, Semilab International Zrt. (the “Seller”), Semilab Zrt. and Semilab USA, as amended by the Amendment to Equity Purchase Agreement, dated October 9, 2025.
The preliminary Acquisition Date fair value of consideration transferred consisted of the following:
|
At Acquisition Date |
|
|
|
(in thousands, except per share data) |
|
|
Cash paid |
$ |
|
|
Issuance of common stock (1) |
|
|
|
Cash paid to extinguish Semilab USA’s debt |
|
|
|
Total purchase consideration |
$ |
|
|
|
|
|
|
(1) The fair value is based on the issuance of |
|
||
The Company accounted for the acquisition of Semilab USA in accordance with ASC Topic 805, Business Combinations (“ASC 805”). The acquired assets and assumed liabilities were recorded at their estimated fair values. The Company determined the estimated fair values with the assistance of valuations performed by a third-party specialist, discounted cash flow analysis, and estimates made by management.
The acquisition strengthens the Company’s capabilities in inline wafer contamination monitoring, materials characterization, and unique surface charge metrology. The goodwill recognized reflects the anticipated benefits from expanding the Company’s product portfolio and its growth opportunities in both new and existing markets. As the purchase price exceeded the fair value of Semilab USA’s identifiable net assets, goodwill was recorded in connection with the transaction. The Company does not expect the goodwill to be deductible for income tax purposes.
A portion of the overall purchase price was allocated to acquired intangible assets. Amortization expense associated with acquired intangible assets is not deductible for tax purposes. Therefore, a deferred tax liability of $
The inventory fair value step‑up is non‑recurring and is recognized as an increase to cost of revenue as the related inventory is sold. For the year ended January 3, 2026, the Company recognized $
10
The remaining balance of approximately $
The following table summarizes the preliminary purchase price allocation of the fair values of the assets acquired and liabilities assumed:
|
At Acquisition Date |
|
|
|
(in thousands) |
|
|
Cash and cash equivalents |
$ |
|
|
Accounts receivable |
|
|
|
Inventories |
|
|
|
Prepaid expenses and other current assets |
|
|
|
Property, plant and equipment |
|
|
|
Intangible assets |
|
|
|
Other assets |
|
|
|
Accounts payable |
|
( |
) |
Accrued expenses and other current liabilities |
|
( |
) |
Other long-term liabilities |
|
( |
) |
Total identifiable net assets |
|
|
|
Goodwill |
|
|
|
Total purchase consideration |
$ |
|
|
During the third quarter of 2026, the Company recorded measurement-period adjustments related to the finalization of certain acquired net assets and closing consideration, resulting in a $
The following table sets forth the preliminary amounts, allocated to the intangible assets identified and their estimated useful lives as of the Acquisition Date:
|
At Acquisition Date |
|
|||||
|
Fair Value |
|
|
Weighted Average Useful Life |
|
||
|
(in thousands) |
|
|
(in years) |
|
||
Developed technology |
$ |
|
|
|
|
||
Customer relationships |
|
|
|
|
|
||
Backlog |
|
|
|
|
|
||
Tradename |
|
|
|
|
|
||
Total amortizable intangible assets |
$ |
|
|
|
|
||
The developed technology intangible assets were valued using the relief-from-royalty method under the income approach, which estimates value based on the royalty a market participant would pay to license the technology. Under this approach, the after‑tax royalty savings attributable to ownership represent the economic benefit of the asset. The key assumptions used in the valuation included the estimated royalty rate, projected revenue attributable to the developed technology, the expected useful life of the asset, and a discount rate reflecting the risks associated with the projected cash flows. The assets are amortized on a straight‑line basis over their estimated
The customer relationships and backlog intangible assets were valued using the multi-period excess earnings method under the income approach, which isolates the net cash flows attributable to each asset and discounts them to present value. Significant assumptions included projected customer revenue and attrition rates, estimated operating margins, contributory asset charges, the expected useful life of the asset, and a discount rate reflecting the risks associated with the asset‑specific cash flows. The customer relationship asset is amortized on a straight-line basis over its
There were no significant contingencies assumed as part of the acquisition.
The purchase price allocation for the Semilab USA acquisition is preliminary and reflects management’s current estimates of the fair value of the assets acquired and liabilities assumed in accordance with ASC 805. The Company is still evaluating certain items within the measurement period. Accordingly, the provisional amounts recognized for the acquired net assets are subject to change during the remainder of the measurement period (which will not exceed 12 months from the Acquisition Date). Any such revisions or changes may be material.
11
From the Acquisition Date through January 3, 2026, Semilab USA contributed $
NOTE 3. Fair Value Measurements
Recurring Fair Value Measurements
The following tables present information about the Company’s assets and liabilities that are regularly measured and carried at fair value on a recurring basis and indicate the level within the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value, which is described further within Note 4, “Fair Value Measurements” to the consolidated financial statements in the 2025 Form 10-K:
|
|
September 30, 2026 |
|
|||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Total |
|
|||
|
|
(in thousands) |
|
|||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|||
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
|
|||
Federal and municipal notes and bonds |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Cash |
|
|
|
|
|
|
|
|
|
|||
Money market funds |
|
|
|
|
|
|
|
|
|
|||
Asset-backed securities |
|
|
|
|
|
|
|
|
|
|||
Certificates of deposit |
|
|
|
|
|
|
|
|
|
|||
Commercial paper |
|
|
|
|
|
|
|
|
|
|||
Corporate bonds |
|
|
|
|
|
|
|
|
|
|||
Total cash and cash equivalents |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Marketable Securities: |
|
|
|
|
|
|
|
|
|
|||
Federal and municipal notes and bonds |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Cash |
|
|
|
|
|
|
|
|
|
|||
Money market funds |
|
|
|
|
|
|
|
|
|
|||
Asset-backed securities |
|
|
|
|
|
|
|
|
|
|||
Certificates of deposit |
|
|
|
|
|
|
|
|
|
|||
Commercial paper |
|
|
|
|
|
|
|
|
|
|||
Corporate bonds |
|
|
|
|
|
|
|
|
|
|||
Total marketable securities |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Other assets: |
|
|
|
|
|
|
|
|
|
|||
Foreign currency forward contracts |
|
|
|
|
|
|
|
|
|
|||
Investment in Rigaku |
|
|
|
|
|
|
|
|
|
|||
Total assets |
|
$ |
|
|
$ |
|
|
$ |
|
|||
12
|
|
January 3, 2026 |
|
|||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Total |
|
|||
|
|
(in thousands) |
|
|||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|||
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
|
|||
Federal and municipal notes and bonds |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Cash |
|
|
|
|
|
|
|
|
|
|||
Money market funds |
|
|
|
|
|
|
|
|
|
|||
Commercial paper |
|
|
|
|
|
|
|
|
|
|||
Corporate bonds |
|
|
|
|
|
|
|
|
|
|||
Total cash and cash equivalents |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Marketable Securities: |
|
|
|
|
|
|
|
|
|
|||
Federal and municipal notes and bonds |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Certificates of deposit |
|
|
|
|
|
|
|
|
|
|||
Commercial paper |
|
|
|
|
|
|
|
|
|
|||
Corporate bonds |
|
|
|
|
|
|
|
|
|
|||
Total marketable securities |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Other assets: |
|
|
|
|
|
|
|
|
|
|||
Foreign currency forward contracts |
|
|
|
|
|
|
|
|
|
|||
Total assets |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Items classified within Level 1 of the fair value hierarchy are valued using quoted prices in active markets for identical assets or liabilities. The Company’s marketable securities, comprised of Level 2 available-for-sale debt securities, are valued using observable inputs to quoted market prices, benchmark yields, reported trades, broker/dealer quotes or alternative pricing sources with reasonable levels of price transparency. The foreign currency forward contracts are primarily measured based on the foreign currency spot and forward rates quoted by the banks or foreign currency dealers.
There were no impairments of the Company’s assets measured and carried at fair value during the three and nine months ended September 30, 2026 and September 27, 2025. There were no changes in valuation techniques during the three and nine months ended September 30, 2026 and September 27, 2025.
Investment in Rigaku
Following the Rigaku Transaction, the Company owns shares of common stock of Rigaku, which is publicly traded on the Tokyo Stock Exchange. The investment is measured at fair value on a recurring basis using the unadjusted quoted market price in the active market for the identical security, translated into U.S. dollars at the closing spot exchange rate at the reporting date, and is therefore classified within Level 1 of the fair value hierarchy. The Company’s investment in Rigaku is subject to contractual transfer restrictions for three years following the August 10, 2026 closing, subject to customary exceptions. Because the restrictions apply to the Company as the holder and are not characteristics of the shares, they are not reflected in the fair value measurement. At September 30, 2026, the fair value of the investment was $
There were
Financial Instruments Not Measured at Fair Value on a Recurring Basis
The Company reports its financial instruments at fair value with the exception of its 2031 Notes. The estimated fair value of the 2031 Notes was determined based on the trading price of the 2031 Notes as of the last day of trading for the period. The Company classifies the fair value of the 2031 Notes as a Level 2 measurement, as the 2031 Notes are not actively traded in the market. On or after March 1, 2031, until the close of business on the second Scheduled Trading Day (as defined in the Indenture governing the 2031 Notes, which is further described in Note 7 below) immediately before the maturity date, the 2031 Notes will be convertible at the option of the noteholders at any time.
At September 30, 2026 the carrying value, net of unamortized debt discount and issuance costs, and estimated fair values of the 2031 Notes are as follows:
13
|
|
September 30, 2026 |
|
|||||
|
|
Level 2 |
|
|||||
|
|
Carrying Value, net |
|
|
Estimated Fair Value |
|
||
|
|
(in thousands) |
|
|||||
Senior Convertible Notes: |
|
|
|
|
|
|
||
2031 Notes |
|
$ |
|
|
$ |
|
||
Total senior convertible notes |
|
$ |
|
|
$ |
|
||
Assets Measured at Fair Value on a Non-Recurring Basis
At September 30, 2026 and January 3, 2026, the Company held investments of $
NOTE 4. Marketable Securities
At September 30, 2026 and January 3, 2026, marketable securities are categorized as follows:
|
|
Amortized Cost |
|
|
Gross Unrealized |
|
|
Gross Unrealized |
|
|
Estimated |
|
||||
|
|
(in thousands) |
|
|||||||||||||
September 30, 2026 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Federal and municipal notes and bonds |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Certificates of deposit |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Commercial paper |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Corporate bonds |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Total marketable securities |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
January 3, 2026 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Federal and municipal notes and bonds |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Certificates of deposit |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Commercial paper |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate bonds |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total marketable securities |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
As of September 30, 2026, all of the Company’s marketable securities are available to the Company for use in its current operations. As a result, the Company has classified all of these securities as current assets even though the stated maturity of some individual securities may be one year or more beyond the balance sheet date.
|
|
September 30, 2026 |
|
January 3, 2026 |
|
|||
|
|
Fair Value |
|
|
Fair Value |
|
||
|
|
(in thousands) |
|
|||||
Due within one year |
|
$ |
|
|
$ |
|
||
Due after one through five years |
|
|
|
|
|
|
||
Total marketable securities |
|
$ |
|
|
$ |
|
||
The aggregate fair value of marketable securities with unrealized losses was $
14
NOTE 5. Derivative Instruments and Hedging Activities
The Company, when it considers it to be appropriate, enters into forward contracts to hedge the economic exposure arising from foreign currency denominated transactions. These contracts are typically denominated in euro, Chinese renminbi, Japanese yen, Korean won, Singapore dollars and Taiwanese dollars. Foreign currency forward contracts are not designated as hedges for accounting purposes, and therefore, the change in fair value is recorded in “Other (expense) income, net,” in the Condensed Consolidated Statements of Operations. The Company records its forward contracts at fair value in either “Prepaid expenses and other current assets, net” or “Other current liabilities” in the Condensed Consolidated Balance Sheets.
The dollar equivalent of the U.S. dollar forward contracts notional amount and related fair values as of September 30, 2026 and January 3, 2026 were as follows:
|
|
September 30, 2026 |
|
|
January 3, 2026 |
|
||
|
|
(in thousands) |
|
|||||
Notional amount |
|
$ |
|
|
$ |
|
||
Fair value of asset |
|
$ |
|
|
$ |
|
||
NOTE 6. Balance Sheet Components
Inventories
Inventories, net of reserves are comprised of the following:
|
|
September 30, 2026 |
|
|
January 3, 2026 |
|
||
|
|
(in thousands) |
|
|||||
Materials |
|
$ |
|
|
$ |
|
||
Work-in-process |
|
|
|
|
|
|
||
Finished goods |
|
|
|
|
|
|
||
Total inventories, net |
|
$ |
|
|
$ |
|
||
Property, Plant and Equipment
Property, plant and equipment, net is comprised of the following:
|
|
September 30, 2026 |
|
|
January 3, 2026 |
|
||
|
|
(in thousands) |
|
|||||
Machinery and equipment |
|
$ |
|
|
$ |
|
||
Land and building |
|
|
|
|
|
|
||
Computer equipment and software |
|
|
|
|
|
|
||
Leasehold improvements |
|
|
|
|
|
|
||
Furniture and fixtures |
|
|
|
|
|
|
||
Total property, plant and equipment, gross |
|
|
|
|
|
|
||
Accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
Total property, plant and equipment, net |
|
$ |
|
|
$ |
|
||
For the three and nine months ended September 30, 2026, depreciation expense was $
NOTE 7. Debt Obligations
Indenture and Notes
On May 21, 2026, the Company issued $
The Company offered and sold the 2031 Notes to the initial purchasers in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and for resale by the initial
15
purchasers to persons reasonably believed to be qualified institutional buyers pursuant to the exemption from registration provided by Rule 144A under the Securities Act.
The net proceeds from the offering were approximately $
The Company used (i) approximately $
The 2031 Notes will mature on June 1, 2031, unless earlier converted, redeemed or repurchased. The 2031 Notes will not bear regular interest, and the principal amount of the 2031 Notes will not accrete. After giving effect to the initial purchasers’ discount and issuance costs, the 2031 Notes have an effective interest rate of
Before March 1, 2031, noteholders will have the right to convert their 2031 Notes only under the following circumstances:
As of September 30, 2026, none of the foregoing conditions permitting early conversion of the 2031 Notes had been satisfied. Accordingly, the 2031 Notes were not convertible at the option of the noteholders as of such date, and the Company has classified the 2031 Notes as a non-current liability.
The Company may not redeem the 2031 Notes at its option at any time before June 6, 2029. The Company will have the option to redeem the 2031 Notes, in whole or in part (subject to the partial redemption limitation set forth in the Indenture), at any time, and from time to time, on or after June 6, 2029 and before the 31st Scheduled Trading Day immediately before the maturity date, at a cash redemption price equal to the principal amount of the 2031 Notes to be redeemed, plus accrued and unpaid special interest and additional interest, if any, to, but excluding, the redemption date, but only if the Last Reported Sale Price per share of the Common Stock exceeds
16
The conversion rate for the 2031 Notes will initially be
The 2031 Notes are presented as “2031 Notes, net” within non-current liabilities on the condensed consolidated balance sheet as of September 30, 2026 and are carried at amortized cost. The Company evaluated the terms of the 2031 Notes under applicable accounting guidance and concluded that the 2031 Notes are appropriately accounted for as a single liability instrument, with no bifurcation or other separate accounting required.
The initial purchasers’ discount of $
The 2031 Notes consisted of the following components:
|
September 30, 2026 |
|
|
|
(in thousands) |
|
|
Principal |
$ |
|
|
Unamortized debt issuance costs |
|
( |
) |
Net carrying amount of the liability component |
$ |
|
|
As of September 30, 2026, the Company had unamortized debt issuance costs, including the initial purchasers’ discount, which are being amortized to interest expense over the contractual term of the 2031 Notes using the effective interest method. The remaining amortization period is approximately five years, through the maturity date of June 1, 2031. Such amortization represents non-cash interest expense and will be recognized over the remaining term of the 2031 Notes. Amortization of the debt issuance costs was $
The future contractual principal payments related to the 2031 Notes are as follows. As the 2031 Notes do not bear regular interest, the table below reflects contractual principal repayments only and excludes non‑cash interest expense associated with the amortization of debt issuance costs.
|
Amount |
|
|
Fiscal Years |
(in millions) |
|
|
2026 |
$ |
|
|
2027 |
|
|
|
2028 |
|
|
|
2029 |
|
|
|
2030 |
|
|
|
Thereafter |
|
|
|
Total Payments |
$ |
|
|
17
Capped Call Transactions
In May 2026, in connection with the pricing of the 2031 Notes and the exercise by the initial purchasers of their option in full to purchase additional 2031 Notes, respectively, the Company entered into privately negotiated capped call transactions (the “Capped Call Transactions”) with several financial institutions, including one or more of the initial purchasers and/or their respective affiliates (the “Option Counterparties”).
The Capped Call Transactions cover, subject to anti-dilution adjustments substantially similar to those applicable to the 2031 Notes, approximately
The Capped Call Transactions are separate transactions (in each case entered into by the Company with the Option Counterparties), and are not part of the terms of the 2031 Notes and will not change the noteholders’ rights under the 2031 Notes. Noteholders will not have any rights with respect to the Capped Call Transactions. The Company concluded that the Capped Call Transactions met the criteria for equity classification because they were indexed to the Common Stock and the Company has the discretion to settle the Capped Call Transactions in shares or cash. As a result, the $
The Company structured the Capped Call Transactions as tax-integrated for federal income tax purposes pursuant to applicable U.S. Treasury Regulations. Accordingly, the $
Indebtedness
On April 20, 2026, in connection with the Rigaku Transaction, we entered into a commitment letter with Goldman Sachs Bank USA (“Goldman Sachs”) for a senior secured 364-day $
NOTE 8. Commitments and Contingencies
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 30, |
|
|
September 27, |
|
||
|
|
2026 |
|
|
2025 |
|
||
|
|
(in thousands) |
|
|||||
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.”
18
Legal Matters
From time to time, the Company is subject to legal proceedings and claims in the ordinary course of business. The Company does not believe that any current legal matters will have a material adverse effect on our financial position, results of operations or cash flows.
Line of Credit
The Company had a credit agreement with a bank that provided for a variable-rate line of credit secured by the marketable securities the Company had with the bank. At January 3, 2026, the Company was permitted to borrow up to
Leases
As of September 30, 2026, there were no material changes in the Company’s leases from those disclosed in the 2025 Form 10-K, other than those described below.
On June 18, 2026, the Company entered into a lease agreement (the “Lease”) for a new corporate headquarters facility located at 3000 Minuteman Road in Andover, Massachusetts. The leased premises consist of approximately
NOTE 9. Revenue
The following table represents a disaggregation of revenue by timing of revenue:
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
September 30, |
|
|
September 27, |
|
|
September 30, |
|
|
September 27, |
|
||||
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
(in thousands) |
|
|||||||||||||
Point-in-time |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Over-time |
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenue |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The following table lists the different sources of revenue:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||||||||||||||||||
|
|
September 30, |
|
|
September 27, |
|
|
September 30, |
|
|
September 27, |
|
||||||||||||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||||||||||||||||||
|
|
(in thousands, except for percentages) |
|
|||||||||||||||||||||||||||||
Systems and software |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||||||
Parts |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||||||
Services |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||||||
Total revenue* |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||||||
*The sum of the individual percentages may not equal 100% due to rounding. |
|
|||||||||||||||||||||||||||||||
See Note 13, “Segment Reporting and Geographic Information” for additional discussion of the Company’s disaggregated revenue by geography.
Contract Assets and Contract Liabilities
Contract assets consist of amounts we have not invoiced but have completed the related performance obligation. These amounts generally arise from variances between the contractual payment terms and the transaction price assigned to the open
19
performance obligations (e.g., we have recognized revenue in an amount greater than the amount that is billable under the contract). The contract assets amounts are recorded in “Accounts receivable” in the Condensed Consolidated Balance Sheets. As of September 30, 2026 the Company had
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 “Deferred revenue” in the Condensed Consolidated Balance Sheets. For contracts with a duration longer than one year, deferred revenue is recorded in “Other non-current liabilities” in the Condensed Consolidated Balance Sheets. As of September 30, 2026 and January 3, 2026, the Company carried a long-term deferred revenue balance of $
Changes in deferred revenue were as follows:
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
September 30, |
|
|
September 27, |
|
|
September 30, |
|
|
September 27, |
|
||||
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
(in thousands) |
|
|||||||||||||
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 10. Share-Based Compensation
The following table presents the detail of share-based compensation expense amounts included in the Company’s Condensed Consolidated Statement of Operations:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 27, |
|
|
September 30, |
|
|
September 27, |
|
||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Cost of revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Research and development |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Sales and marketing |
|
|
|
|
|
|
|
|
|
|
|
|
||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Restructuring and other |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Total share-based compensation expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
As of September 30, 2026, there was $
NOTE 11. Income Taxes
The Company recorded an income tax provision of $
The Company’s effective tax rate was
The Company’s effective tax rate differed from the U.S. federal statutory rate of
20
investment in Rigaku, tax benefits associated with the Foreign Derived Intangible Income (“FDII”) deductions, federal research and development tax credits, foreign tax credits, and excess tax benefits associated with equity compensation.
Basic earnings per share is calculated using the weighted average number of shares of Common Stock outstanding during the period. Restricted stock units and employee stock purchase grants are included in the calculation of diluted earnings per share, except when their effect would be anti-dilutive. For the three and nine months ended September 30, 2026,
The Company’s basic and diluted earnings per share amounts are as follows:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 27, |
|
|
September 30, |
|
|
September 27, |
|
||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(in thousands, except for per share data) |
|
|||||||||||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic earnings per share - weighted average shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Effect of potential dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Restricted stock units and employee stock purchase grants - dilutive shares |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted earnings per share - weighted average shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Diluted |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
NOTE 13. Segment Reporting and Geographic Information
The Company is organized and operates as
21
The table below presents the Company’s consolidated operating results including significant segment expenses:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 27, |
|
|
September 30, |
|
|
September 27, |
|
||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Adjusted cost of revenue (1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Adjusted research and development (2) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Adjusted sales and marketing (1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Adjusted general and administrative (1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other segment items: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Restructuring and other (3) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Merger and acquisitions related (3) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Amortization |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total other income, net |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Provision for income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
(1) Excludes restructuring and other expenses and merger and acquisition related expenses |
|
|||||||||||||||
(2) Excludes merger and acquisition related expenses or benefits |
|
|||||||||||||||
(3) The Company excludes these expenses in order to provide better comparability between periods as they are not representative of the Company’s ongoing operations. |
|
|||||||||||||||
The Company’s significant operations outside the United States include sales, service and application offices in Asia and Europe. For geographical revenue reporting, revenue is attributed to the geographic location to which the product is shipped. Revenue by geographic region is as follows:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 27, |
|
|
September 30, |
|
|
September 27, |
|
||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Revenue from customers: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Taiwan |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
South Korea |
|
|
|
|
|
|
|
|
|
|
|
|
||||
United States |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Europe |
|
|
|
|
|
|
|
|
|
|
|
|
||||
China |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Southeast Asia |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Japan |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The following customers accounted for 10.0% or more of total revenue for the indicated periods:
|
|
Nine Months Ended |
|
|||||
|
|
September 30, |
|
|
September 27, |
|
||
|
|
2026 |
|
|
2025 |
|
||
Customer A |
|
|
% |
|
|
% |
||
Customer B |
|
|
% |
|
|
% |
||
Customer C |
|
|
% |
|
|
% |
||
Customer D |
|
|
% |
|
^ |
|
||
^ The customer accounted for less than 10.0% of total revenue during the period. |
|
|
|
|
|
|
||
Three customers’ accounts receivable balances were individually greater than
22
Substantially all of the Company’s long-lived assets are located within the United States of America.
NOTE 14. Share Repurchase Authorization
In February 2024, the Board approved a share repurchase authorization (the “2024 Authorization”), which allows the Company to repurchase up to $
Additionally, in May 2026, the Board approved a share repurchase authorization (the “2026 Authorization”), which allowed the Company to repurchase up to $
NOTE 15. Restructuring and Other
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 revenue for streamlining of certain manufacturing activities and other charges, including 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, charges for streamlining of certain operating activities and impairment charges such as plant, property and equipment.
Restructuring and other expenses recorded in the Condensed Consolidated Statements of Operations are as follows:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 27, |
|
|
September 30, |
|
|
September 27, |
|
||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Cost of revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total restructuring and other |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
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”) are considered “forward-looking statements” or are based on “forward-looking statements,” including, but not limited to, those concerning:
23
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. Actual results may differ materially and adversely from those included in such forward-looking statements as a result of various factors, including risks and uncertainties, many of which are beyond Onto Innovation’s control. Such factors include, but are not limited to, the Company’s ability to leverage its resources to improve its position in its core markets; its ability to weather difficult economic environments; its ability to open new market opportunities and target high-margin markets; the strength/weakness of the back-end and/or front-end semiconductor market segments; fluctuations in customer capital spending; the Company’s ability to effectively manage its supply chain and adequately source components from suppliers to meet customer demand; the effects of political, economic, legal, and regulatory changes or uncertainties, changes in U.S. tariff and trade policy and related retaliatory actions, and geopolitical conflicts, including the ongoing conflict involving Israel, the U.S., Iran and other actors, on the Company’s global operations; the Company’s ability to adequately protect its intellectual property rights and maintain data security; the effects of natural disasters or public health emergencies on the global economy and on the Company’s customers, suppliers, employees, and business; its ability to effectively maneuver global trade issues and changes in trade and export regulations, tariffs and license policies; the Company’s ability to maintain relationships with its customers and manage appropriate levels of inventory to meet customer demands; the Company’s ability to realize the anticipated benefits of the Rigaku Transaction (as defined below), including as a result of fluctuations in the price of the Rigaku common stock; and the Company’s ability to successfully integrate acquired businesses and technologies, including the business of Semilab USA and to realize the anticipated benefits of such acquisitions. Additional information and considerations regarding the risks faced by Onto Innovation are available in our Annual Report on Form 10-K for the fiscal year ended January 3, 2026 (the “2025 Form 10-K”) filed with the Securities and Exchange Commission (the “SEC”) on February 24, 2026, in Part II, Item 1A. “Risk Factors” and elsewhere in this Form 10-Q, and in the other filings that we make with the SEC from time to time. Forward-looking statements reflect our position as of the date of this Form 10-Q 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 the 2025 Form 10-K 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 2025 Form 10-K.
For more information, please see our critical accounting estimates as previously disclosed in the 2025 Form 10-K and recent accounting pronouncements discussed in Note 1, “Basis of Presentation” to the Condensed Consolidated Financial Statements include in Part 1, Item 1 of this Form 10-Q.
24
Executive Summary
We are a worldwide leader in the design, development, manufacture and support of process control tools that perform macro-defect inspection and metrology, lithography systems, and process control analytical software used by semiconductor and advanced packaging device manufacturers. We deliver comprehensive solutions throughout the semiconductor fabrication process with our families of proprietary products that provide critical yield-enhancing information, enabling microelectronic device manufacturers to drive down costs and time to market of their devices. We provide process and yield management solutions used in both wafer processing facilities, often referred to as “front-end” manufacturing, and in device packaging and test facilities, commonly referred to as “back-end” manufacturing. Our advanced process control software portfolio includes powerful solutions for standalone tools, groups of tools, or factory-wide suites to enhance productivity and achieve significant cost savings.
Our principal market is semiconductor capital equipment. Semiconductors packaged as integrated circuits (“ICs”), or “chips,” are used in consumer electronics, server and enterprise systems, mobile computing (including smart phones and tablets), data storage devices, and embedded automotive and control systems. Our core focus is the measurement and control of the structure, composition, and geometry of semiconductor devices as they are fabricated on silicon wafers to improve device performance and manufacturing yields.
Our products and services are used by our customers who manufacture many types of ICs for a multitude of applications, each having unique manufacturing challenges. This includes ICs to enable information processing and management (logic ICs), memory storage (NAND, 3D-NAND, NOR, and DRAM), analog devices (e.g., Wi-Fi and 5G radio ICs, power devices), MEMS sensor devices (accelerometers, pressure sensors, microphones), image sensors, and other end markets including components for AI, hard disk drives, LEDs, and power management.
The semiconductor and electronics industries have also been characterized by constant technological innovation. 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:
|
Three Months Ended |
|
|||||
|
September 30, |
|
|
June 30, |
|
||
|
2026 |
|
|
2026 |
|
||
|
(in thousands, except for percentages and per share data) |
|
|||||
Revenue |
$ |
409,748 |
|
|
$ |
343,129 |
|
Gross profit |
$ |
224,482 |
|
|
$ |
183,254 |
|
Gross profit as a percentage of revenue |
|
54.8 |
% |
|
|
53.4 |
% |
Total operating expenses |
$ |
129,033 |
|
|
$ |
119,704 |
|
Net income |
$ |
46,846 |
|
|
$ |
60,102 |
|
Diluted earnings per share |
$ |
0.95 |
|
|
$ |
1.21 |
|
Our cash, cash equivalents and marketable securities balance increased to $1.25 billion at September 30, 2026, compared to $639.6 million at January 3, 2026. This increase was primarily the result of $1.2 billion of cash provided by financing activities and $166.6 million of cash generated from operating activities. These increases were offset by cash used in investing activities of $1.3 billion, which included the purchase of the Company’s equity investment in Rigaku of $719.5 million. Employee headcount at September 30, 2026 was approximately 1,952.
On May 21, 2026, we issued $1.5 billion aggregate principal amount of 2031 Notes. The 2031 Notes were issued pursuant to the Indenture. Pursuant to the purchase agreement between the Company and the representative of the initial purchasers of the 2031 Notes, we granted the initial purchasers an option to purchase up to an additional $200 million aggregate principal amount of 2031 Notes. On May 19, 2026, the initial purchasers exercised this option in full and the 2031 Notes issued on May 21, 2026 include the additional $200 million aggregate principal amount of 2031 Notes. Also in May 2026, in connection with the pricing
25
of the 2031 Notes and the exercise by the initial purchasers of their option in full to purchase additional Notes, respectively, we entered into the Capped Call Transactions with several financial institutions, including one or more of the initial purchasers and/or their respective affiliates.
On August 10, 2026, the Company completed the Rigaku Transaction, funded with a portion of the net proceeds from the 2031 Notes and cash on hand. In connection with the Rigaku Transaction, we received the right to nominate one director to Rigaku’s board of directors.
The Company does not control Rigaku and does not consolidate Rigaku’s financial results. At initial recognition, the Company irrevocably elected the fair value option under ASC 825, Financial Instruments, for its investment in Rigaku, which is presented as “Investment in Rigaku,” a non-current asset, on the Condensed Consolidated Balance Sheets. The investment is remeasured to fair value at each reporting date based on the quoted market price of Rigaku’s common stock on the Tokyo Stock Exchange, translated into U.S. dollars at the closing spot exchange rate. All changes in the U.S. dollar fair value of the investment, including amounts attributable to changes in Rigaku’s share price and changes in the Japanese yen to U.S. dollar exchange rate, are recognized in net income within “Unrealized gain (loss) on investment in Rigaku” under “Other income (expense), net” in the Condensed Consolidated Statements of Operations. We recognized an unrealized loss of $40.8 million for the three and nine months ended September 30, 2026.
For a discussion of the risks related to our business and operations, see Part I, Item 1A - Risk Factors of the 2025 Form 10-K and Part II, Item 1A - Risk Factors of this Form 10-Q.
Results of Operations for the Three and Nine Months ended September 30, 2026 and September 27, 2025
Revenue. Our revenue is primarily derived from the sale of our systems, software licensing, services and spare parts. Our revenue of $409.7 million increased 87.8% for the three months ended September 30, 2026 as compared to the three months ended September 27, 2025, for which revenue totaled $218.2 million. For the nine months ended September 30, 2026 and September 27, 2025, our revenue totaled $1.04 billion and $738.4 million, respectively, representing a year-over-year increase of 41.5%.
The following table lists, for the periods indicated, the different sources of our revenue in dollars and as percentages of our total revenue:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||||||||||||||||||
|
|
September 30, |
|
|
September 27, |
|
|
September 30, |
|
|
September 27, |
|
||||||||||||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||||||||||||||||||
|
|
(in thousands, except for percentages) |
|
|||||||||||||||||||||||||||||
Systems and software |
|
$ |
358,316 |
|
|
|
87.4 |
% |
|
$ |
173,795 |
|
|
|
79.7 |
% |
|
$ |
899,513 |
|
|
|
86.1 |
% |
|
$ |
619,451 |
|
|
|
83.9 |
% |
Parts |
|
|
28,465 |
|
|
|
6.9 |
% |
|
|
23,930 |
|
|
|
11.0 |
% |
|
|
83,728 |
|
|
|
8.0 |
% |
|
|
61,955 |
|
|
|
8.4 |
% |
Services |
|
|
22,967 |
|
|
|
5.6 |
% |
|
|
20,468 |
|
|
|
9.4 |
% |
|
|
61,585 |
|
|
|
5.9 |
% |
|
|
56,991 |
|
|
|
7.7 |
% |
Total revenue* |
|
$ |
409,748 |
|
|
|
100.0 |
% |
|
$ |
218,193 |
|
|
|
100.0 |
% |
|
$ |
1,044,826 |
|
|
|
100.0 |
% |
|
$ |
738,397 |
|
|
|
100.0 |
% |
*The sum of the individual percentages may not equal 100% due to rounding. |
|
|||||||||||||||||||||||||||||||
Total systems and software revenue increased $185.6 million and $281.2 million for the three and nine months ended September 30, 2026, respectively, as compared to the three and nine months ended September 27, 2025, respectively. The increase was attributable to increased demand for inspection and metrology systems. The increase in total parts and services revenue for the three and nine months ended September 30, 2026, as compared to the three and nine months ended September 27, 2025, was primarily due to higher customer support activity and service contract revenue.
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 and as percentages of our total revenue:
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
September 30, |
|
|
September 27, |
|
|
September 30, |
|
|
September 27, |
|
||||
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
(in thousands, except for percentages) |
|
|||||||||||||
Gross profit |
$ |
224,482 |
|
|
$ |
110,623 |
|
|
$ |
554,125 |
|
|
$ |
375,978 |
|
Gross profit as a percentage of revenue |
|
54.8 |
% |
|
|
50.7 |
% |
|
|
53.0 |
% |
|
|
50.9 |
% |
26
The increase in gross profit as a percentage of revenue for the three and nine months ended September 30, 2026 as compared to the three and nine months ended September 27, 2025 was primarily due to increased sales of newer product lines with higher standard margins.
Operating Expenses.
Our operating expenses consist of:
27
Total other income, net. Total other expense was $30.5 million and $21.0 million for the three and nine month periods ended September 30, 2026, as compared to total other income of $8.3 million and $24.3 million for the three and nine month periods ended September 27, 2025. The decrease in total other income, net for the three months ended September 30, 2026, as compared to the three months ended September 27, 2025, and for the nine month period ended September 30, 2026, as compared to the nine month period ended September 27, 2025, was primarily attributable to recognition of an unrealized loss in Rigaku during the period of $40.8 million.
Income Taxes. We recorded an income tax provision of $18.1 million and $30.8 million for the three and nine month periods ended September 30, 2026, respectively, compared to $3.8 million and $17.1 million for the three and nine month periods ended September 27, 2025, respectively. Our effective tax rate was 27.9% and 18.0% for the three and nine month periods ended September 30, 2026, respectively, compared to 12.0% for both the three and nine month periods ended September 27, 2025.
The following table reconciles our GAAP effective tax rate to our non-GAAP adjusted effective tax rate, which excludes the tax impact associated with the investment in Rigaku. We believe the non-GAAP adjusted effective tax rate provides useful information to investors in evaluating our effective tax rate because the changes in the fair value are driven by the market price of Rigaku’s shares and, because no tax benefit is recognized on unrealized losses due to a valuation allowance, may result in significant period to period variability in our effective tax rate. Management uses the non-GAAP adjusted effective tax rate to evaluate tax impacts from ordinary operations.
|
Three Months Ended |
|
|
Nine Months Ended |
|
||
|
September 30, |
|
|
September 30, |
|
||
|
2026 |
|
|
2026 |
|
||
GAAP effective tax rate |
|
27.90 |
% |
|
|
18.00 |
% |
Tax impact associated with the investment in Rigaku |
10.8 pts. |
|
|
3.5 pts. |
|
||
Non-GAAP adjusted effective tax rate excluding Rigaku |
|
17.10 |
% |
|
|
14.50 |
% |
There was no comparable adjustment in the 2025 periods because the investment in Rigaku occurred in 2026.
Our effective tax rate differed from the U.S. federal statutory rate of 21% primarily due to the impact of foreign taxes, including the Pillar Two global minimum tax, the tax impact associated with the unrealized loss on our investment in Rigaku, tax benefits associated with the Foreign Derived Intangible Income (“FDII”) deductions, federal research and development tax credits, foreign tax credits, and excess tax benefits associated with equity compensation.
Our future effective income tax rate depends on various factors, including changes in tax legislation, the geographic composition and amount of our pre-tax income, non-deductible expenses incurred in connection with business combinations, and research and development tax credits as a percentage of aggregate pre-tax income.
Liquidity and Capital Resources
Our cash, cash equivalents and marketable securities consist of the following in dollars for the periods indicated:
|
|
|
|
|
|
|
||
|
|
September 30, |
|
|
January 3, |
|
||
|
|
(in thousands) |
|
|||||
Cash and cash equivalents |
|
$ |
400,677 |
|
|
$ |
346,119 |
|
Marketable securities |
|
|
850,794 |
|
|
|
293,503 |
|
Total cash, cash equivalents and marketable securities |
|
$ |
1,251,471 |
|
|
$ |
639,622 |
|
Sources and Uses of Cash
A summary of net cash and cash equivalents provided by (used in) operating, investing, and financing activities is as follows in dollars for the periods indicated:
|
|
Nine Months Ended |
|
|||||
|
|
September 30, |
|
|
September 27, |
|
||
|
|
2026 |
|
|
2025 |
|
||
|
|
(in thousands) |
|
|||||
Net cash and cash equivalents provided by operating activities |
|
$ |
166,579 |
|
|
$ |
233,319 |
|
Net cash and cash equivalents used in investing activities |
|
$ |
(1,274,608 |
) |
|
$ |
231,931 |
|
Net cash and cash equivalents provided by (used in) financing activities |
|
$ |
1,162,695 |
|
|
$ |
(77,864 |
) |
Operating Activities
28
Net cash and cash equivalents provided by operating activities for the nine month period ended September 30, 2026 was $166.6 million. The net cash and cash equivalents provided by operating activities during the nine month period ended September 30, 2026 resulted primarily from net income, adjusted to exclude the effect of non-cash operating charges of $152.0 million. Significant non-cash operating charges included depreciation, amortization, share-based compensation and provision for inventory valuation. Cash provided by operating activities for the first nine months of 2026 decreased compared to the corresponding period in fiscal 2025, primarily due to timing of accounts receivable payments and higher inventory levels driven by revenue growth, partially offset by increased in accounts payable and accrued expense due to the timing of vendor payments and higher operational activity.
Investing Activities
Net cash and cash equivalents used in investing activities for the nine month period ended September 30, 2026 was $1.3 billion. During the nine month period ended September 30, 2026, net cash and cash equivalents used in investing activities included the purchase of the Company’s equity investment in Rigaku of $719.5 million, purchases of marketable securities of $987.8 million and capital expenditures of $8.8 million, offset by proceeds from maturities and sales of marketable securities of $435.0 million and acquisition related adjustments of $6.5 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 provided by financing activities for the nine month period ended September 30, 2026 was $1.2 billion. During the nine month period ended September 30, 2026, financing activities provided cash from proceeds of the 2031 Notes, partially offset by cash used for the Capped Call Transaction and repurchases of common stock, as well as for tax payments related to shares withheld to satisfy employee tax obligations in connection with the vesting of awards under share-based compensation plans.
In February 2024, the Onto Innovation Board of Directors (the “Board”) approved a share repurchase authorization (the “2024 Authorization”), which allows us to repurchase up to $200 million worth of shares of Common Stock. Under the 2024 Authorization, repurchases may be made through both public market and private transactions from time to time. Any amount paid to repurchase the shares in excess of par value, including transaction costs, would be recorded directly as a decrease to additional paid-in capital. During the three and nine month periods ended September 30, 2026, no shares of Common Stock were repurchased under the 2024 Authorization. During the three and nine months ended September 27, 2025, no shares and 492 thousand shares, respectively, of Common Stock were repurchased under the 2024 Authorization. At September 30, 2026, there was $99.9 million available for future share repurchases under the 2024 Authorization.
Additionally, in May 2026, the Board approved a share repurchase authorization (the “2026 Authorization”), which allowed the Company to repurchase up to $300 million worth of shares of Common Stock solely in connection with the 2031 Notes issuance. During the three and nine months ended September 30, 2026, no shares and 805 thousand shares, respectively, of Common Stock were repurchased under the 2026 Authorization. The 2026 Authorization is no longer in effect and any and all remaining and unused amount under the 2026 Authorization is no longer available for repurchase.
Indebtedness
As of September 30, 2026, the net carrying amount of our 2031 Notes of $1.47 billion (principal balance of $1.5 billion maturing in 2031) is presented in non-current liabilities in our condensed consolidated balance sheets. If the closing price of Common Stock exceeds $496.34 (or 130% of the conversion price of $381.80) for 20 of the last 30 trading days of any future quarter, our 2031 Notes would become convertible at the option of the holders during the subsequent fiscal quarter and the debt would be reclassified to current liabilities in our consolidated balance sheets.
On April 20, 2026, in connection with the Rigaku Transaction, we entered into a commitment letter with Goldman Sachs Bank USA (“Goldman Sachs”) for a senior secured 364-day $500 million bridge term loan credit facility (the “Bridge Commitment”). Following the issuance of the 2031 Notes and Capped Call Transactions, the Company terminated the Bridge Commitment in full on May 21, 2026, and no amounts were drawn thereunder. The Company incurred total costs of $4.4 million in connection with the Bridge Commitment, all of which were expensed as incurred and recorded in “Other (expense) income, net” in the Condensed Consolidated Statements of Operations during the six months ended June 30, 2026. No amounts were incurred during the three month period ended September 30, 2026.
The Company had a credit agreement with a bank that provides for a variable-rate line of credit which was secured by the marketable securities the Company has with the bank. At January 3, 2026 the Company was permitted to borrow up to 70.0% of the value of eligible securities held at the time the line of credit would be accessed, up to a maximum of $100.0 million. The
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available line of credit as of January 3, 2026 was $100.0 million with an available interest rate of 4.3%. The Company terminated this line of credit in the first quarter of 2026, and did not utilize the line of credit while it was active.
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 and marketable securities 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 2025 Form 10-K, outside of the market risks associated with the Company’s Investment in Rigaku described below.
Investment in Rigaku
As discussed in Note 1, “Basis of Presentation,” the Company is exposed to equity price related to its investment in Rigaku. The investment is measured at fair value based on Rigaku’s quoted market price on the Tokyo Stock Exchange. Accordingly, changes in the fair value of the investment are recognized in earnings.
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 30, 2026. 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 30, 2026 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 30, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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 8, “Commitments and Contingencies,” to the Condensed Consolidated Financial Statements included in Part 1, Item 1 of this Form 10-Q.
Item 1A. Risk Factors.
There have been no material changes from the risk factors previously disclosed under the heading “Risk Factors” in the 2025 Form 10-K, as updated by the risk factors previously disclosed under the heading “Risk Factors” in the Company’s Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2026, filed with the SEC on May 5, 2026, and June 30, 2026, filed with the SEC on August 6, 2026. We may disclose additional changes to risk factors or additional factors from time to time in our future filings with the SEC.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
In February 2024, the Onto Innovation Board of Directors (the “Board”) approved a share repurchase authorization (the “2024 Authorization”), which allows us to repurchase up to $200 million worth of shares of Common Stock. Under the 2024 Authorization, repurchases may be made through both public market and private transactions from time to time. Any amount paid to repurchase the shares in excess of par value, including transaction costs, would be recorded directly as a decrease to additional paid-in capital. During the three and nine month periods ended September 30, 2026, no shares of Common Stock were repurchased under the 2024 Authorization. During the three and nine months ended September 27, 2025, no shares and 492 thousand shares, respectively, of Common Stock were repurchased under the 2024 Authorization. At September 30, 2026, there was $99.9 million available for future share repurchases under the 2024 Authorization.
Additionally, in May 2026, the Board approved a share repurchase authorization (the “2026 Authorization”), which allowed the Company to repurchase up to $300 million worth of shares of Common Stock solely in connection with the 2031 Notes issuance. During the three and nine months ended September 30, 2026, no shares and 805 thousand shares, respectively, of Common Stock were repurchased under the 2026 Authorization. The 2026 Authorization ceased to be in effect and any and all remaining and unused amount under the 2026 Authorization is no longer available for repurchase.
For further information, see Note 14, “Share Repurchase Authorization,” of the Notes to the Condensed Consolidated Financial Statements.
In addition to our share repurchase program, we withhold shares of Common Stock 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.
The following table provides details of Common Stock purchased during the three months ended September 30, 2026 (in thousands, except per share data):
Period |
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Total Number |
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Average Price Paid per Share |
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|
Total Number of Shares Purchased as Part of Publicly Announced Program |
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Maximum Approximate Dollar Value of Shares that May Yet be Purchased Under the Program |
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||||
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(in thousands, except for per share data) |
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|||||||||||||
July 1, 2026 to July 31, 2026 |
|
|
— |
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|
$ |
— |
|
|
|
— |
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$ |
99,935 |
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August 1, 2026 to August 31, 2026 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
99,935 |
|
September 1, 2026 to September 30, 2026 |
|
|
6 |
|
|
$ |
254.48 |
|
|
|
— |
|
|
$ |
99,935 |
|
Three months ended September 30, 2026 |
|
|
6 |
|
|
$ |
254.48 |
|
|
|
— |
|
|
|
|
|
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
During the fiscal quarter ended September 30, 2026, the following officers and directors (as defined in Rule 16a-1(f) under the Exchange Act) adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement” (as those terms are defined in Item 408 of Regulation S-K), as follows:
On
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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. |
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101.SCH* |
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents |
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104* |
Cover Page Interactive Data File (formatted as Inline XBRL and included in Exhibit 101) |
^Schedules omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish supplementally a copy of any omitted schedule or exhibit to the SEC upon request.
* Filed herewith.
** Furnished herewith.
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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.
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Onto Innovation Inc. |
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Date: |
November 9, 2026 |
By: |
/s/ Michael P. Plisinski |
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Michael P. Plisinski |
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Chief Executive Officer |
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Date: |
November 9, 2026 |
By: |
/s/ Brian K. Roberts |
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Brian K. Roberts |
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Chief Financial Officer and Principal Accounting Officer |
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33
Exhibit 31.1
Rule 13a-14(a) Certification of Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Michael P. Plisinski, certify that:
Date: November 9, 2026
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By: |
/s/ Michael P. Plisinski |
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Michael P. Plisinski |
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Chief Executive Officer |
Exhibit 31.2
Rule 13a-14(a) Certification of Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Brian K. Roberts, certify that:
Date: November 9, 2026
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By: |
/s/ Brian K. Roberts |
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Brian K. Roberts |
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Chief Financial Officer |
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Michael P. Plisinski, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Onto Innovation Inc. on Form 10-Q for the period ended September 30, 2026 fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in the Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of Onto Innovation Inc.
Date: November 9, 2026
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By: |
/s/ Michael P. Plisinski |
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Michael P. Plisinski |
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Chief Executive Officer |
Exhibit 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Brian K. Roberts, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Onto Innovation Inc. on Form 10-Q for the period ended September 30, 2026 fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in the Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of Onto Innovation Inc.
Date: November 9, 2026
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By: |
/s/ Brian K. Roberts |
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Brian K. Roberts |
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Chief Financial Officer |