ONTO INNOVATION INC. Forward-Looking Statements
Certain statements in this Quarterly Report on Form 10-Q (this "Form 10-Q") ofOnto 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," or "Onto Innovation ," "we," "our" or "us") are forward-looking statements, including 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 and the measures being taken to limit the spread of COVID-19, including impact on demand for our products, reductions 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; 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 timing of future product releases; failure to respond adequately to either 20 --------------------------------------------------------------------------------
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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; 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 integrate the businesses ofRudolph Technologies, Inc. ("Rudolph") andNanometrics Incorporated ("Nanometrics")promptly and effectively and to achieve the anticipated synergies and value-creation contemplated by the merger of Rudolph and Nanometrics consummated onOctober 25, 2019 (the "Merger") within the expected time frame; unanticipated difficulties or expenditures relating to the integration of the Rudolph and Nanometrics businesses; the response of business partners and retention as a result of the Merger; the diversion of management time in connection with the integration; and the "Risk Factors" set forth in Item 1A of the Company's Annual Report on Form 10-K for the year endedDecember 31, 2019 (the "2019 Form 10-K") and in Part II, Item 1A of this Form 10-Q. You should carefully review the cautionary statements and "Risk Factors" contained in the 2019 Form 10-K and in 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 theSecurities and Exchange Commission (the "SEC"). The forward-looking statements reflect our position as of the date that they are made, 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.
The Merger
OnOctober 25, 2019 , the Merger of Nanometrics with Rudolph was consummated and resulted in the combined company, which was renamedOnto Innovation Inc. The Company accounts for the Merger as a reverse acquisition using the acquisition method of accounting in accordance with generally accepted accounting principles, with Rudolph being treated as the acquiring entity for accounting purposes. Because Rudolph is treated as the accounting acquirer in the Merger, the financial statements filed with this Form 10-Q include the financial results of Rudolph for all periods presented and the financial results of the former Nanometrics for the periods on or afterOctober 26, 2019 .
Critical Accounting Policies
The preparation of condensed consolidated financial statements and related disclosures in conformity with accounting principles generally accepted inthe 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 2019 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 withU.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 2019 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
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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," 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. In the first nine months of 2020, we completed integration activities and launched four new metrology systems into the marketplace. These new products were introduced as logic and foundry customers were increasing their capacity while following aggressive plans to transition their manufacturing to smaller nodes. Customer interactions centered around satisfying the immediate demand for logic devices with our existing product portfolio, while partnering with R&D groups to prepare for the process controls needed for the next generation of semiconductors that will require the latest systems from us. Our strong engineering teams have, and will continue to, deliver new products to our customers, followed by our field engineers providing customer support, while simultaneously achieving and surpassing our cost synergy targets that were established at the onset of our Merger.
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 26, June 27, September 30,
2020 2020 2019 (1)
Revenue $ 126,492 $ 134,948 $ 62,935
Gross profit $ 68,888 $ 71,585 $ 31,511
Gross profit as a percent of
revenue 54 % 53 % 50 %
Total operating expenses $ 59,606 $ 63,655 $ 26,221
Net income $ 8,091 $ 7,424 $ 6,560
Diluted earnings per share $ 0.16 $ 0.15 $ 0.26
(1) The results for September include the results for
• In the September 2020 quarter, revenue decreased 6.3% compared to
the June 2020 quarter, primarily due to the timing in spending by two
of our top metrology customers in the September 2020 quarter after
significant equipment purchases in the first half of the year.
• The increase in gross margin as a percentage of revenue in
the September 2020 quarter compared to the June 2020 quarter was
primarily driven by strengthening product margins across several
product lines and record service revenues in the September 2020 quarter. In addition, lower merger related expenses in the September
2020 quarter contributed to the margin improvement.
• The decrease in operating expenses in the September 2020 quarter
compared to the June 2020 quarter was mainly driven by a decrease in
employee-related expenses resulting from employees taking Paid Time Off
(PTO) during the September 2020 quarter as employees began taking
vacations, which in previous quarters were low due to COVID-19. In
addition, we completed a milestone in a contracted R&D project, which
lowered expenses in the quarter. Finally, we continue to control our
headcount as we focus on identifying additional synergies from the
Merger.
Our cash, cash equivalents and marketable securities balance increased to $340.4
million at the end of the September 2020 quarter compared to $320.2 million at
the end of the December 2019 quarter. This increase was primarily the result
of $72.9 million of cash generated from operating activities and $2.8 million of
cash received from convertible notes. These sources of cash were partially
offset by $52.7 million of share repurchases, including net share settlement on
employee stock-based compensation; and $3.4 million of capital expenditures.
Employee headcount as of September 26, 2020 was approximately 1,250.
Key Events in Fiscal 2020
Trade Restriction and Emerging Regulation. OnApril 28, 2020 , theU.S. Department of Commerce's Bureau of Industry and Security ("BIS") issued new rules that require increased investigation of our customers' end users inChina . Further, onMay 15, 2020 , BIS announced new Export Administration Regulations ("EAR") specifically applicable toHuawei Technologies Co., Ltd. and its affiliates. We have assessed the potential impact of the new BIS rules and EAR, and do not believe that they will have a material direct impact on our business, financial condition or results of operations, however 22 --------------------------------------------------------------------------------
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additional companies in
Impact of the COVID-19 Pandemic on Our Business. The spread of the COVID-19 during 2020 has caused an economic downturn on a global scale, as well as significant volatility in the financial markets. As ofNovember 2, 2020 , 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. 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 theU.S. , we maintain offices inthe United States ,South Korea ,Japan ,Taiwan ,China ,Singapore andEurope . 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. 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. We cannot at this time predict the impact that the COVID-19 pandemic will have on our financial condition and operations, although we are continuing to monitor our supply chain and orders from customers for COVID-19-related changes. 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. 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. However, 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 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 of treatments or vaccines, and the resumption of widespread economic activity. Trade tensions betweenthe United States andChina 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 Form 10-Q for the fiscal quarters endedMarch 28 andJune 27, 2020 and Part I, Item 1A of our 2019 Form 10-K.
Results of Operations for the Three and Nine Months Ended
Revenue. Our revenue is primarily derived from the sale of our systems, services, spare parts and software licensing. Our revenue of$126.5 million increased 101.0% for the three months endedSeptember 26, 2020 as compared to the three months endedSeptember 30, 2019 , in which revenue totaled$62.9 million . For the nine month periods endedSeptember 26, 2020 andSeptember 30, 2019 , our revenue totaled$401.4 million and$185.3 million , respectively, representing a year-over-year increase of 116.6%. 23 --------------------------------------------------------------------------------
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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 26, September 30, September 26, September 30,
2020 2019 2020 2019
Systems and software $ 97,774 77 % $ 52,786 84 % $ 321,062 80 % $ 154,207 83 %
Parts 18,815 15 % 7,142 11 % 48,719 12 % 22,292 12 %
Services 9,903 8 % 3,007 5 % 31,587 8 % 8,839 5 %
Total revenue $ 126,492 100 % $ 62,935 100 % $ 401,368 100 % $ 185,338 100 %
Total systems and software revenue increased $166.9 million for the nine months
ended September 26, 2020 as compared to the nine months ended September 30, 2019
primarily due to the inclusion of revenue from legacy Nanometrics for the first
three quarters of 2020. The year-over-year change in systems revenue was
primarily due to the inclusion of $155.6 million of revenue from legacy
Nanometrics for the period and an increase in legacy Rudolph systems and
software of $11.3 million . The year-over-year increase in parts and services
revenue in absolute dollars from the nine months ended September 30, 2019 to the
nine months ended September 26, 2020 was primarily due to the inclusion of $47.4
million of parts and service revenue from legacy Nanometrics for the period and
an increase in legacy Rudolph parts and services of $1.8 million . Parts and
services revenue is generated from part sales, maintenance service contracts,
system upgrades, as well as time and material billable service calls.
Gross Profit. Our gross profit has been and will 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. Our gross profit was $68.9 million and $203.1 million for
the three and nine months ended September 26, 2020 , respectively, as compared to
$31.5 million and $95.4 million for the three and nine months ended September
30, 2019 , respectively. Our gross profit represented 54.5% and 50.6% of our
revenue for the three and nine months ended September 26, 2020 , respectively,
and 50.1% and 51.5% for the three and nine months ended September 30, 2019 ,
respectively. The decrease in gross profit as a percentage of revenue for the
nine months ended September 26, 2020 , as compared to the nine months ended
September 30, 2019 , is primarily due charges to cost of goods sold of $10.2
million for the sale of inventory written-up to fair value upon the Merger.
Operating Expenses.
Our operating expenses consist of:
• Research and Development. The process control defect inspection and
metrology, advanced packaging lithography, and data analysis systems and
software market is characterized by continuous technological development
and product innovations. We believe that the rapid and ongoing
development of new products and enhancements of existing products,
including the transition to copper and low-k dielectrics, wafer level
packaging, the continuous shrinkage in critical dimensions, and theevolution of ultra-thin gate process control is critical to our success.
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 $19.7 million and $62.8 million for the three
and nine months ended
the nine month period ended
month period ended
in the 2020 period of
of legacy Nanometrics resulting from the Merger. We continue to maintain
our commitment to investing in new product development and enhancement to
existing products.
• Sales and Marketing. Sales and marketing expenses are primarily comprised
of salaries and related costs for sales and marketing personnel, as well
as commissions and other non-personnel related expenses. Our sales and
marketing expenses were
nine months ended
million and
30, 2019, respectively. The year-over-year dollar increase in sales and
marketing expenses for the nine month period ended
compared to the nine month period ended
due to the inclusion in the 2020 period of $23.7 million in sales and
marketing expenses of legacy Nanometrics resulting from the Merger.
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• General and Administrative. General and administrative expenses are
primarily comprised of salaries and related costs for general
administrative personnel, as well as other non-personnel related
expenses. Our general and administrative expenses were
$50.4 million for the three and nine months endedSeptember 26, 2020 , respectively, as compared to$10.3 million and$28.7 million for the three and nine months endedSeptember 30, 2019 , respectively. The
year-over-year dollar increase in general and administrative expenses for
the nine month period ended
month period ended
in the 2020 period of $24.6 million in general and administrative
expenses of legacy Nanometrics resulting from the Merger.
• Amortization of Identifiable Intangible Assets. Amortization of
identifiable intangible assets was $13.6 million and $41.1 million for
the three and nine months ended September 26, 2020 , respectively, as
compared to $0.4 million and $1.2 million for the same periods in
2019. The year-over-year increase in amortization expense for the nine
month period ended September 26, 2020 as compared to the nine month
period ended September 30, 2019 was due to additional amortization
recorded in the 2020 period associated with purchased intangible assets
recorded as a result of the Merger.
Interest income, net. Net interest income was $0.5 million and $2.4 million for
the three and nine months ended September 26, 2020 , respectively, as compared to
$1.0 million and $2.7 million for the same periods in 2019. The decrease in net
interest income for the three and nine months ended September 26, 2020 as
compared to the three and nine months ended September 30, 2019 was due to lower
interest rates during the 2020 period, partially offset by additional interest
income on a higher marketable securities balance following the Merger.
Income Taxes. We recorded an income tax provision of $0.8 million and $1.2
million for the three and nine months ended September 26, 2020 respectively, as
compared to income tax provision of $0.3 million and $2.2 million for the three
and nine months ended September 30, 2019 . Our effective tax rate of 10% differs
from the statutory rate of 21% for the nine months ended September 26, 2020
primarily due to computed research and development credits on forecasted earning
levels, the deduction related to foreign derived intangible income (FDII), as
well as a one-time provision for additional withholding tax related to a
dividend distribution from the Company's Korea subsidiary, offset by a one-time
benefit related to the filings of our 2019 foreign income tax returns. Our
effective tax rate of 9% differs from the statutory rate of 21% for the three
months ended September 26, 2020 primarily due to computed research and
development credits on forecasted earning levels, the deduction related to
foreign derived intangible income (FDII), as well as a one-time benefit related
to the filings of our 2019 foreign income tax returns.
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. OnMarch 27, 2020 , the "Coronavirus Aid, Relief and Economic Security Act" (the "CARES Act") was enacted. The CARES Act includes provisions relating to refundable payroll tax credits, deferment of the employer portion of certain payroll taxes, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. These changes did not have a material impact on our consolidated financial position, results of operations, and cash flows.
Liquidity and Capital Resources
AtSeptember 26, 2020 , we had$340.4 million of cash, cash equivalents and marketable securities and$579.5 million in working capital. AtDecember 31, 2019 , we had$320.2 million of cash, cash equivalents and marketable securities and$555.9 million in working capital. Operating activities provided$72.9 million in net cash and cash equivalents for the nine months endedSeptember 26, 2020 . The net cash and cash equivalents provided by operating activities during the nine months endedSeptember 26, 2020 resulted primarily from net income, adjusted to exclude the effect of non-cash operating charges, of$91.2 million , partially 25 --------------------------------------------------------------------------------
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offset by a decrease in cash provided from operating assets and liabilities of$18.3 million . Operating activities provided$24.9 million in net cash and cash equivalents for the nine months endedSeptember 30, 2019 . The net cash and cash equivalents provided by operating activities during the nine months endedSeptember 30, 2019 resulted primarily from net income, adjusted to exclude the effect of non-cash operating charges of$31.0 million , partially offset by a decrease in cash provided from operating assets and liabilities of$6.1 million . Investing activities used net cash and cash equivalents of$49.7 million during the nine months endedSeptember 26, 2020 resulting from 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 of$5.1 million were provided by investing activities during the nine months endedSeptember 30, 2019 through proceeds from sales of marketable securities of$62.2 million , partially offset by purchases of marketable securities of$52.9 million and capital expenditures of$4.2 million . Net cash and cash equivalents used in financing activities during the nine months endedSeptember 26, 2020 of$53.1 million resulted from the purchase of shares of our common stock under a share repurchase authorizations of$52.0 million , tax payments related to shares withheld for share-based compensation plans of$3.5 million and payment of contingent consideration for acquired business of$0.4 million , partially offset by proceeds from sales of shares through share-based compensation plans of$2.8 million . For the nine months endedSeptember 30, 2019 , financing activities used$2.3 million resulting from the payment of contingent consideration for an acquired business of$1.1 million , the purchase of shares of our common stock under share repurchase authorizations of$0.7 million and tax payments related to shares withheld for share-based compensation plans of$0.8 million , partially offset by proceeds from sales of shares through share-based compensation plans of$0.3 million . 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. Following the Merger, we assumed the share repurchase authorization approved onMarch 14, 2019 by the former Nanometrics Board of Directors. This share repurchase authorization allows us to purchase up to$80.0 million worth of shares of our common stock. Under the terms of this share repurchase authorization, shares may be repurchased through open market or privately negotiated transactions. During the nine months endedSeptember 26, 2020 , we repurchased 1.9 million shares of common stock under this repurchase authorization and those shares were subsequently retired. AtSeptember 26, 2020 , there was$28.0 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 ofSeptember 26, 2020 , the available line of credit was approximately$71.2 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 recent 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 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. 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.
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