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Dynamic quotes 
OFFON

ONTO INNOVATION INC.

(ONTO)
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ONTO INNOVATION INC. Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

11/04/2021 | 04:12pm EST

Forward-Looking Statements


Certain statements in this Quarterly Report on Form 10-Q (this "Form 10-Q") of
Onto Innovation Inc. (referred to in this Form 10-Q, together with its
consolidated subsidiaries, unless otherwise specified or suggested by the
context, as the "Company," "Onto Innovation," "we," "our" or "us") may be
considered "forward-looking statements," including, but not limited to, those
concerning:

• anticipated effects of, and future actions to be taken in response to the

         COVID-19 pandemic,


  • our business momentum and future growth,


  • acceptance of our products and services,

• our ability to deliver both products and services consistent with our

         customers' demands and expectations and to strengthen our market
         position,


  • our expectations of the semiconductor market outlook,

• future revenue, gross profits, research and development and engineering

         expenses, selling, general and administrative expenses,


  • product introductions,


  • technology development,


  • manufacturing practices,


  • cash requirements,


      •  our dependence on certain significant customers and anticipated trends
         and developments in and management plans for our business and the markets
         in which we operate,


  • our anticipated revenue as a result of acquisitions, and


• our ability to be successful in managing our cost structure and cash

expenditures and results of litigation.



The statements contained in this Form 10-Q that are not purely historical are
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and within the meaning of 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.

The forward-looking statements contained herein reflect our expectations with
respect to future events and are subject to certain risks, uncertainties and
assumptions. Actual results may differ materially from those included in such
forward-looking statements for a number of reasons including, but not limited
to, the following:

• effects of the COVID-19 pandemic including measures being taken to limit

the spread of COVID-19, the severity, including the virulence and

transmissibility, of newly identified strains of COVID-19, the timing,

availability, efficacy and public utilization of vaccines for COVID-19

which have an impact on demand for our products, reduction in production

levels, R&D activities, and qualification activities with our customers,

         increased costs, disruptions to our supply chain and a decrease in
         availability under our credit agreement;

• cybersecurity incidents could result in business disruption, theft of

intellectual property, the loss of or inability to access valuable

information, essential data or assets or subject us to litigation or

regulatory enforcement actions associated with our obligations related to

matters such as privacy and data protection;

• variations in the level of orders which can be affected by general

economic conditions;

• seasonality and growth rates in the semiconductor manufacturing industry

         and in the markets served by our customers;


  • the global economic and political climates;


  • difficulties or delays in product functionality or performance;


  • the delivery performance of sole source vendors;


  • the shortage of semiconductor chips or other key components;


  • the timing of future product releases;

• failure to respond adequately to either changes in technology or customer

         preferences;


  • changes in pricing by us or our competitors;


  • our ability to manage growth; changes in management;


  • risk of nonpayment of accounts receivable;


  • changes in budgeted costs;

• our ability to leverage our resources to improve our position in our core

         markets, to weather difficult economic environments, to open new market
         opportunities and to target high-margin markets;


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• the strength/weakness of the back-end and/or front-end semiconductor

market segments;

• the imposition of tariffs or trade restrictions and costs, burdens and

restrictions associated with other governmental actions;

• the ability to successfully complete and/or unanticipated difficulties or

expenditures in the integration of the businesses of Rudolph

Technologies, Inc. ("Rudolph") and Nanometrics Incorporated

("Nanometrics") within the expected time frame and to maintain the

anticipated synergies and value-creation contemplated by the merger of

Rudolph and Nanometrics (the "2019 Merger");

• the "Risk Factors" set forth in Item 1A of the Company's Annual Report on

Form 10-K for the year ended December 26, 2020 (the "2020 Form 10-K"), in

Part II, Item 1A of the Company's Quarterly Report on Form 10-Q for the

quarter ended March 27, 2021 (the "Q1 2021 Form 10-Q"), in Part II, Item

         1A of the Company's Quarterly Report on Form 10-Q for the quarter ended
         June 26, 2021 (the "Q2 2021 Form 10-Q") and in Part II, Item 1A of this
         Form 10-Q.


You should carefully review the cautionary statements and "Risk Factors"
contained in the 2020 Form 10-K, the Q1 2021 Form 10-Q, the Q2 2021 Form 10-Q
and this Form 10-Q. You should also review any additional disclosures and
cautionary statements and "Risk Factors" we include from time to time in our
Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other filings we
make with the Securities and Exchange Commission (the "SEC"). The
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 Policies

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. Certain of these significant
accounting policies are considered to be critical accounting policies, as
defined below.

A critical accounting policy is defined as one that is both material to the
presentation of our condensed consolidated financial statements and requires
management to make difficult, subjective or complex judgments that could have a
material effect on our financial condition or results of
operations. Specifically, these policies have the following attributes: (1) we
are required to make judgments and assumptions about matters that are highly
uncertain at the time of the estimate; and (2) different estimates we could
reasonably have used, or changes in the estimate that are reasonably likely to
occur, could have a material effect on our financial position and results of
operations.

Estimates and assumptions about future events and their effects cannot be
determined with certainty. We base our estimates on historical experience and on
various other assumptions believed to be applicable and reasonable under the
circumstances. These estimates may change as new events occur, as additional
information is obtained and as our operating environment changes. In addition,
management is periodically faced with uncertainties, the outcomes of which are
not within our control and will not be known for prolonged periods of time.
Certain of these uncertainties are discussed in our 2020 Form 10-K in the Items
entitled "Risk Factors" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations." Based on a critical assessment of our
accounting policies and the underlying judgments and uncertainties affecting the
application of those policies, we believe that our condensed consolidated
financial statements are fairly stated in accordance with U.S. GAAP and provide
a fair presentation of our financial position and results of operations.

For more information, please see our critical accounting policies as previously
disclosed in our 2020 Form 10-K and recent accounting pronouncements discussed
in Note 1 to the Condensed Consolidated Financial Statements.

Executive Summary


We are a worldwide leader in the design, development, manufacture and support of
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 family 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," 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.

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The following table summarizes certain key financial information for the periods indicated below (in thousands, except per share and percent data):

                                                    Three Months Ended
                                      September 25,      June 26,       September 26,
                                          2021             2021             2020
Revenue                              $       200,589     $ 193,387     $       126,492
Gross profit                         $       109,358     $ 105,456     $        68,888
Gross profit as a percent of revenue              55 %          55 %                54 %
Total operating expenses             $        66,232     $  69,515     $        59,606
Net income                           $        36,448     $  35,051     $         8,091
Diluted earnings per share           $          0.73     $    0.71     $          0.16


• In the fiscal quarter ended September 25, 2021 (the "September 2021

quarter"), revenue increased 3.7% compared to the fiscal quarter ended

June 26, 2021 (the "June 2021 quarter"), primarily due to an increase

        in sales to foundry customers for advanced nodes applications,
        partially offset by a decline in sales to memory customers.

• Gross margin as a percentage of revenue in the September 2021 quarter

compared to the June 2021 quarter was relatively flat primarily driven

by shift in sales to products with slightly higher margins, partially

        offset charges for excess and obsolete inventory and higher freight
        costs.


      • The decrease in operating expenses in the September 2021 quarter
        compared to the June 2021 quarter was mainly driven by a decrease in

employee-related expenses as a result of higher variable compensation

plan costs recorded in the June 2021 quarter.



Our cash, cash equivalents and marketable securities balance increased to $461.6
million at the end of the September 2021 quarter compared to $373.7 million at
the end of the fiscal quarter ended December 26, 2020. This increase was
primarily the result of $126.3 million of cash generated from operating
activities. This source of cash was partially offset by net cash of $26.8
million used for the purchase of Inspectrology and $11.2 million used for
capital expenditures. Employee headcount as of September 25, 2021 was
approximately 1,349.

Key Events


Business Combination. On December 31, 2020, the Company acquired Inspectrology,
LLC, a leading supplier of overlay metrology for controlling lithography and
etch processes in the compound semiconductor market. The purchase consideration
consisted of $27,015 in cash paid at closing and a potential earnout of $10,000,
subject to achievement of certain revenue targets earned for fiscal year 2021
and fiscal year 2022.

Trade Restriction and Emerging Regulation. The United States Department of
Commerce has added certain China-based entities to the U.S. Entity List,
restricting our ability to provide products and services to such entities
without an export license. In addition, the U.S. Department of Commerce has
imposed new export licensing requirements related to China-based customers
alleged to engage in military end uses, as well as requiring that an export
license be obtained for the purchase and use of certain semiconductor capital
equipment based on U.S. technology. As of September 25, 2021, we currently have
purchase orders of approximately $4.9 million from customers in China which are
affected by these restrictions. We have filed for licenses with the U.S.
government and are waiting for a response to ship these orders. In addition,
companies in China are being considered as potential military suppliers and
these new additions may have a material impact to our sales in China. We
continue to monitor the trade related actions governments may take during the
remainder of 2021.

Impact of the COVID-19 Pandemic on Our Business. Events surrounding the ongoing
COVID-19 pandemic initially resulted in a reduction in economic activity across
the globe, and the timing and extent of the ongoing economic recovery remains
uncertain. As a result, we have experienced volatility in the markets that our
products are sold into, driven by the move to a stay-at-home economy and
fluctuations in consumer and business spending, which has affected demand for
certain of our products. The ultimate extent to which COVID-19 will impact our
business depends on future developments, which are highly uncertain and very
difficult to predict, including the effectiveness and utilization of vaccines
for COVID-19 and its variants, new information that may emerge concerning the
severity of COVID-19 and its variants, and actions to contain or limit their
spread. As of November 4, 2021, our operations have been impacted by our
pandemic response, as described below, and the global nature of our workforce
and our operations, but we have not experienced significant financial impact
directly related to the pandemic.

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We have prioritized the health and safety of our employees and customers in our
pandemic response. As governmental authorities implement restrictions on
commercial operations, we have continued to ensure compliance with these
directives while also maintaining business continuity for our essential
operations. We have a global workforce. Although our manufacturing is conducted
solely in the U.S., we maintain offices in the United States, South Korea,
Japan, Taiwan, China, Singapore and Europe. Our operations at these offices are
subject to various governmental directives and, as a result thereof, we have
instituted a work-from-home policy for these employees to the extent
practical. Where our essential employees are required to continue to report to
work to perform their responsibilities, we have implemented staggered shifts or
otherwise adjusted work schedules to maximize our operating capacity while
adhering to applicable restrictions, including recommended distancing between
persons. We have also provided our essential employees with appropriate
protective equipment and have enhanced and increased cleanings at our
facilities. At this time, we have not experienced any reduction in productivity,
though we have incurred certain costs related to the implementation of these
policies and practices. In addition, we have enhanced our email screening and
cyber monitoring of all of our devices to further support our work from home
policy. As certain countries have relaxed restrictions over the past few months,
we have restarted certain activities in accordance with local guidelines. We may
take further actions that we determine to be in the best interests of our
employees or as may be required by federal, state, or local authorities.

To date, the COVID-19 pandemic has disrupted the way that we conduct business
but has not had a material adverse impact on our operations. We have not
experienced significant delays in customer deliveries, but we are impacted by
the global shortage in electronic components and our supply chain is strained in
some cases as the availability of materials, logistics and freight options are
challenging in many jurisdictions. Demand for our products was consistent with
or exceeded our expectations for the third quarter of fiscal 2021. However,
further disruptions to our supply chain in connection with the sourcing of
materials, equipment and engineering support, and services from geographic areas
that have been impacted by COVID-19 may pose risks to our business, results of
operations and financial condition. In this time of uncertainty as a result of
the COVID-19 pandemic, we are continuing to serve our customers while taking
every precaution to provide a safe work environment for our employees and
customers.

The extent of the pandemic's effect on our operational and financial performance
will depend in large part on future developments, which cannot be predicted with
confidence at this time. Future developments include the duration, scope and
severity of the pandemic, the severity of newly identified strains of COVID-19,
the actions taken to contain or mitigate its impact, such as the extent of
restrictions on gatherings and travel, the impact on governmental programs and
budgets, the development, administration, efficacy and public utilization of
treatments and vaccines, and the resumption of widespread economic activity.
Trade tensions between the United States and China may escalate as a result of
COVID-19 or otherwise and could result in the imposition of additional tariffs,
trade restrictions or policy changes, any of which could increase costs of our
product components and pricing of, and consumer demand for, our products, which
could have a negative effect on our results of operations.

Although the inherent uncertainty of the unprecedented and rapidly evolving crisis makes it difficult to predict with any confidence the likely impact on our future operations, the COVID-19 pandemic could have a material adverse impact on our consolidated business, results of operations and financial condition.


For a discussion of certain risks related to the international nature of our
business and our operations and the COVID-19 pandemic, see Part II, Item 1A -
Risk Factors of this Form 10-Q, Part II, Item 1A - Risk Factors of our Q1 2021
Form 10-Q, Part II, Item 1A - Risk Factors of our Q2 2021 Form 10-Q and Part I,
Item 1A - Risk Factors of our 2020 Form 10-K.

Results of Operations for the Three and Nine Months Ended September 25, 2021 and September 26, 2020


Revenue. Our revenue is primarily derived from the sale of our systems,
services, spare parts and software licensing. Our revenue of $200.6 million
increased 58.6% for the three months ended September 25, 2021 as compared to the
same period in 2020, in which revenue totaled $126.5 million. For the nine-month
periods ended September 25, 2021 and September 26, 2020, our revenue totaled
$563.3 million and $401.4 million, respectively, representing a year-over-year
increase of 40.3%.

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The following table lists, for the periods indicated, the different sources of our revenue in dollars (thousands) and as percentages of our total revenue:




                                      Three Months Ended                                 Nine Months Ended
                            September 25,             September 26,            September 25,            September 26,
                                 2021                     2020                     2021                     2020
Systems and software     $ 170,937         85 %    $  97,774        77 %    $ 475,345        84 %    $ 321,062        80 %
Parts                       17,804          9 %       18,815        15 %       53,919        10 %       48,719        12 %
Services                    11,848          6 %        9,903         8 %       33,991         6 %       31,587         8 %
Total revenue            $ 200,589        100 %    $ 126,492       100 %    $ 563,255       100 %    $ 401,368       100 %




Total systems and software revenue increased $154.3 million for the nine months
ended September 25, 2021 as compared to the nine months ended September 26, 2020
primarily due to an increase of units shipped in our metrology and inspection
product lines. The year-over-year increase in parts and services revenue in
absolute dollars from the nine months ended September 26, 2020 to the nine
months ended September 25, 2021 was primarily due to servicing a larger
installed base. Parts and services revenue is generated from part sales,
maintenance service contracts, and system upgrades, as well as time and material
billable service calls.

Gross Profit. Our gross profit has been and will likely continue to be affected
by a variety of factors, including inventory step-up from purchase accounting,
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. Our gross
profit was $109.4 million and $305.3 million for the three and nine months ended
September 25, 2021, respectively, as compared to $68.9 million and $203.1
million for the three and nine months ended September 26, 2020,
respectively. Our gross profit represented 54.5% and 54.2% of our revenue for
the three and nine months ended September 25, 2021, respectively, and 54.5% and
50.6% for the three and nine months ended September 26, 2020, respectively. The
increase in gross profit as a percentage of revenue for the nine months ended
September 25, 2021, as compared to the nine months ended September 26, 2020, is
primarily due to charges to cost of goods sold of $9.9 million in the 2020
period for the sale of inventory written-up to fair value upon the 2019 Merger
and strengthening product margins across several product lines.

Operating Expenses.

Our operating expenses consist of:

• Research and Development. We believe that it is critical to continue to

         make substantial investments in research and development to ensure the
         availability of innovative technology that meets the current and
         projected requirements of our customers' most advanced designs. We have

maintained and intend to continue our commitment to investing in research

and development in order to continue to offer new products and

technologies. Accordingly, we devote a significant portion of our

technical, management and financial resources to research and development

         programs. Research and development expenditures consist primarily of
         salaries and related expenses of employees engaged in research, design
         and development activities. They also include consulting fees, the cost

of related supplies and legal costs to defend our patents. Our research

and development expenses were $23.8 million and $71.3 million for the

three and nine months ended September 25, 2021, respectively, as compared

to $19.7 million and $62.8 million for the three and nine months ended

September 26, 2020, respectively. The year-over-year dollar increase for

         the nine-month period ended September 25, 2021 as compared to the
         nine-month period ended September 26, 2020 was primarily due to an
         increase in new product initiatives.

• Sales and Marketing. Sales and marketing expenses are primarily comprised

of salaries, commissions and related costs for sales and marketing

personnel, as well as other non-personnel related expenses. Our sales and

marketing expenses were $12.9 million and $41.4 million for the three and

nine months ended September 25, 2021, respectively, as compared to $11.9

million and $36.9 million for the three and nine months ended September

26, 2020, respectively. The year-over-year increase in sales and

marketing expenses for the nine-month period ended September 25, 2021 as

compared to the nine-month period ended September 26, 2020 was primarily

         due to increased variable compensation plan costs.


     •   General and Administrative. General and administrative expenses are

primarily comprised of salaries and related costs for administrative

personnel, as well as other non-personnel related expenses. Our general

and administrative expenses were $16.5 million and $48.4 million for the

three and nine months ended September 25, 2021, respectively, as compared

to $14.4 million and $50.4 million for the three and nine months ended

September 26, 2020, respectively. The year-over-year dollar decrease in

general and administrative expenses for the nine-month period ended

September 25, 2021 as compared to the nine-month period ended September

         26, 2020 was primarily


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         due to higher compensation expense in the 2020 period related to
         restructuring charges as a result of the 2019 Merger.


     •   Amortization of Identifiable Intangible Assets.  Amortization of
         identifiable intangible assets was $13.0 million and $37.7 million for
         the three and nine months ended September 25, 2021, respectively, as
         compared to $13.6 million and $41.1 million, respectively, for the same

periods in 2020. The year-over-year decrease in amortization expense for

the nine-month period ended September 25, 2021 as compared to the

nine-month period ended September 26, 2020 was due to certain intangible

assets becoming fully amortized during this period, partially offset by

amortization in the 2021 period for the Inspectrology acquisition.



Interest income, net. Net interest income was $0.2 million and $0.9 million for
the three and nine months ended September 25, 2021, respectively, as compared to
$0.5 million and $2.4 million, respectively, for the same periods in 2020. The
decrease in net interest income for the nine months ended September 25, 2021 as
compared to the nine months ended September 26, 2020 was due to lower interest
rates during the 2021 period.

Other expense, net. Net other expense was $0.3 million and $1.8 million,
respectively, for the three and nine months ended September 25, 2021, as
compared to $0.9 million and $2.1 million, respectively, for the three and nine
months ended September 26, 2020. The decrease in other expense, net for the nine
months ended September 25, 2021 as compared to the nine months ended September
26, 2020 was primarily due to higher foreign exchange losses during the 2020
period.

Income Taxes. We recorded an income tax provision of $6.6 million and $10.0
million, respectively, for the three and nine months ended September 25, 2021 as
compared to income tax provision of $0.8 million and $1.2 million, respectively,
for the same periods in 2020. Our effective tax rate of 10% differs from the
statutory rate of 21% for the nine months ended September 25, 2021 primarily due
to (i) research and development tax credits, (ii) the deduction related to
foreign derived intangible income (FDII), (iii) excess tax benefits associated
with equity compensation, and (iv) a release of reserves due to expiration of
the applicable statute of limitations. Our effective tax rate of 10% differs
from the statutory rate of 21% for the nine months ended September 26, 2020,
primarily due to (i) the deduction related to foreign derived intangible income
(FDII), (ii) research and development tax credits, and (iii) a one-time
provision for additional withholding tax related to a dividend distribution from
the Company's Korea subsidiary

Our future effective income tax rate depends on various factors, such as possible further tax legislation, the geographic composition of our pre-tax income, the amount of our pre-tax income as business activities fluctuate, non-deductible expenses incurred in connection with business combinations, and research and development tax credits as a percentage of aggregate pre-tax income.


We currently have a partial valuation allowance recorded for certain foreign and
state loss and credit carryforwards where the realizability of such deferred tax
assets is substantially in doubt. Each quarter we assess the likelihood that we
will be able to recover our deferred tax assets primarily relating to state
research and development credits. We consider available evidence, both positive
and negative, including historical levels of income, expectations and risks
associated with estimates of future taxable income and ongoing prudent and
feasible tax planning strategies in assessing the need for a valuation
allowance. As a result of our analysis, we concluded that it is more likely than
not that a portion of our net deferred tax assets will not be
realized. Therefore, we continue to provide a valuation allowance against
certain net deferred tax assets. We continue to monitor available evidence and
may reverse some or all of the valuation allowance in future periods, if
appropriate.

Liquidity and Capital Resources


At September 25, 2021, we had $461.6 million of cash, cash equivalents and
marketable securities and $736.9 million in working capital.  At December 26,
2020, we had $373.7 million of cash, cash equivalents and marketable securities
and $611.6 million in working capital.

Net cash and cash equivalents provided by operating activities for the nine months ended September 25, 2021 and September 26, 2020 were $126.3 million and $72.9 million, respectively.

• The net cash and cash equivalents provided by operating activities

           during the nine months ended September 25, 2021 resulted 

primarily from

           net income, adjusted to exclude the effect of non-cash operating
           charges of $166.8 million, partially offset by a decrease in cash
           provided from operating assets and liabilities of $40.5 million,
           primarily due to increases in inventories and accounts
receivable.


        •  The net cash and cash equivalents provided by operating activities
           during the nine months ended September 26, 2020 resulted 

primarily from

           net income, adjusted to exclude the effect of non-cash operating
           charges of $91.2


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           million, partially offset by a decrease in cash provided from 

operating

           assets and liabilities of $18.3 million, primarily related to 

increases

           in inventories and accounts receivable.


Net cash and cash equivalents used in investing activities for the nine months
ended September 25, 2021 and September 26, 2020 were $110.9 million and $49.7
million, respectively.

        •  During the nine months ended September 25, 2021, net cash and cash
           equivalents used in investing activities included purchases of
           marketable securities of $250.4 million, purchase of a business of
           $26.8 million and capital expenditures of $11.2 million, partially
           offset by proceeds from sales of marketable securities of $177.5
           million.


        •  During the nine months ended September 26, 2020, net cash and cash
           equivalents provided by investing activities included purchases of
           marketable securities of $250.9 million and capital expenditures of
           $3.4 million, partially offset by proceeds from sales of

marketable

           securities of $201.8 million and cash received from convertible note
           receivable of $2.8 million.


Net cash and cash equivalents used in financing activities were $0.4 million and
$53.1 million for the nine months ended September 25, 2021 and September 26,
2020, respectively.

• During the nine months ended September 25, 2021, financing activities

           used cash for tax payments related to shares withheld for

share-based

           compensation plans of $6.8 million. This use of cash was primarily
           offset by proceeds from sales of shares through share-based
           compensation plans of $6.4 million.

• During the nine months ended September 26, 2020, financing activities

           used $52.0 million in cash for the purchase of shares of our 

common

           stock under a share repurchase authorizations and tax payments 

of $3.5

           million related to shares withheld for share-based compensation 

plans

           and payment of $0.4 million in contingent consideration for

acquired

           business, partially offset by proceeds of $2.8 million from

sales of

           shares through share-based compensation plans.


From time to time, we evaluate whether to acquire new or complementary
businesses, products and/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. On December 31, 2020, the Company acquired Inspectrology, LLC
for $27,015 in cash and a potential earnout of $10,000, subject to the
achievement of certain revenue targets earned for fiscal 2021 and 2022.

In November 2020, the Onto Innovation Board of Directors approved a new share
repurchase authorization, which allows the Company to repurchase up to $100
million worth of shares of its common stock. Repurchases may be made through
both public market and private transactions from time to time with shares
purchased being subsequently retired. At September 25, 2021, there was $100
million available for future share repurchases.

We have a credit agreement with a bank that provides for a line of credit that
is secured by the marketable securities we have with the bank. We are permitted
to borrow up to 70% of the value of eligible securities held at the time the
line of credit is accessed. As of September 25, 2021, the available line of
credit was approximately $110.9 million with an available interest rate of
1.8%. The credit agreement is available to us until such time that either party
terminates the arrangement at its discretion.  To date, we have not utilized the
line of credit.

Our future capital requirements will depend on many factors, including the
timing and amount of our revenue and our investment decisions, which will affect
our ability to generate additional cash. In addition, although the ultimate
impact of the COVID-19 pandemic on our future results remains uncertain, we
believe our business model and our current cash reserves leave us
well-positioned to manage our business through this crisis as it continues to
unfold. We expect that our existing cash, cash equivalents, marketable
securities and availability under our line of credit will be sufficient to meet
our anticipated cash requirements for working capital, capital expenditures and
other cash needs for the next 12 months following the filing of this Form 10-Q.
Thereafter, if cash generated from operations and financing activities is
insufficient to satisfy our working capital requirements, we may seek additional
funding through bank borrowings, sales of securities or other means. Market
conditions due to the COVID-19 pandemic or other factors may have an impact on
our ability to access such additional funding. Our borrowing capacity under our
existing line of credit is tied to the value of eligible securities held at the
time of borrowing, which may be negatively impacted by market conditions due to
COVID-19 and government responses thereto or other factors. In addition, a
reduction in or volatility with respect to our stock price or the 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.

                                       25

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