Onto Innovation (NYSE: ONTO) posts 35% Q2 revenue jump and $1.5B convert deal
Onto Innovation Inc. delivered strong Q2 2026 performance, with revenue of $343.1 million, up 35.3% year over year, and gross margin of 53.4%. Net income was $60.1 million, or $1.21 diluted EPS. For the first half of 2026, revenue reached $635.1 million, a 22.1% increase from the prior year period, while net income was $93.9 million.
Liquidity strengthened sharply: combined cash, cash equivalents and marketable securities rose to about $1.9 billion, driven largely by issuing $1.5 billion of 0.00% convertible senior notes due 2031 and related capped call transactions, alongside $204.9 million of concurrent share repurchases. The planned $710 million purchase of a 27% stake in Rigaku Holdings represents a sizable strategic minority investment expected to close in the second half of 2026. The November 2025 acquisition of Semilab USA contributed $46.1 million of revenue and a $9.0 million operating loss in the first half of 2026.
Positive
- Q2 2026 revenue grew 35.3% year over year to $343.1 million, with gross margin expanding to 53.4%, reflecting strong demand for higher-margin inspection and metrology systems.
- Liquidity improved significantly, with cash, cash equivalents and marketable securities reaching about $1.9 billion, supported by positive operating cash flow and the $1.5 billion convertible notes issuance.
Negative
- The company added $1.5 billion of 0.00% convertible senior notes due 2031, creating a large future repayment obligation and potential dilution of up to approximately 5.9 million shares under maximum conversion scenarios.
Filing Explained
At June 30, 2026, Onto had $1.5 billion of convertible debt outstanding, with any share dilution conditional rather than current.
Onto Innovation’s Form 10-Q is an unaudited quarterly report covering the period ended
At
Onto also purchased capped calls covering approximately 3.9 million shares, which the filing says are generally expected to reduce potential dilution or offset certain excess cash payments, subject to a
The filing identifies
Key Figures
Key Terms
Capped Call Transactions financial
Make-Whole Fundamental Change financial
Foreign Derived Intangible Income financial
measurement alternative financial
multi-period excess earnings method financial
relief-from-royalty method financial
AI-generated analysis. How Rhea-AI works. Not financial advice.
FAQ
How did Onto Innovation (ONTO) perform financially in Q2 2026?
What is Onto Innovation’s (ONTO) revenue and profit for the first half of 2026?
What is Onto Innovation’s (ONTO) cash and investment position as of June 30, 2026?
What are the key terms of Onto Innovation’s (ONTO) 2031 convertible notes?
What is the Rigaku Transaction described by Onto Innovation (ONTO)?
How did the Semilab USA acquisition impact Onto Innovation’s (ONTO) 2026 results?
Where is Onto Innovation (ONTO) generating most of its revenue geographically in 2026?
Table of Contents
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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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 July 31, 2026 was
Table of Contents
TABLE OF CONTENTS
Item No. |
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PART I FINANCIAL INFORMATION |
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Item 1. |
Financial Statements (unaudited) |
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Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2026 and June 28, 2025 |
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Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2026 and June 28, 2025 |
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Condensed Consolidated Balance Sheets at June 30, 2026 and January 3, 2026 |
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Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2026 and June 28, 2025 |
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Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2026 and June 28, 2025 |
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Notes to Condensed Consolidated Financial Statements |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
Quantitative and Qualitative Disclosures about Market Risk |
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Item 4. |
Controls and Procedures |
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PART II OTHER INFORMATION |
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Item 1. |
Legal Proceedings |
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Item 1A. |
Risk Factors |
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Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
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Item 3. |
Defaults Upon Senior Securities |
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Item 4. |
Mine Safety Disclosures |
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Item 5. |
Other Information |
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Item 6. |
Exhibits |
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Signatures
Table of Contents
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
ONTO INNOVATION INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
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Three Months Ended |
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Six Months Ended |
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June 28, |
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2026 |
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2025 |
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2026 |
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2025 |
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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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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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Earnings per share: |
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Basic |
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$ |
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Diluted |
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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
Table of Contents
ONTO INNOVATION INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 28, |
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June 30, |
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June 28, |
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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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The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
2
Table of Contents
ONTO INNOVATION INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
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June 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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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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― |
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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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Commitments and contingencies |
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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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( |
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( |
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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
Table of Contents
ONTO INNOVATION INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
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Six Months Ended |
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June 30, |
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June 28, |
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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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( |
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( |
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Depreciation |
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Share-based compensation |
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Provision for inventory valuation |
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Deferred income taxes |
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( |
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Other, net |
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( |
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Changes in operating assets and liabilities |
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( |
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( |
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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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( |
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( |
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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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( |
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Purchases of non-marketable equity securities |
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— |
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( |
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Acquisition related adjustments |
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— |
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( |
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Net cash and cash equivalents used in investing activities |
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( |
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( |
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Cash flows from financing activities: |
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Purchases and retirement of common stock |
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( |
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( |
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Tax payments related to shares withheld for share-based compensation plans |
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( |
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( |
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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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— |
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Proceeds from issuance of 2031 Notes, net of issuance costs |
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— |
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Payment for capped call options |
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( |
) |
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— |
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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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( |
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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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Unpaid debt issuance costs related to issuance of 2031 Notes |
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$ |
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$ |
— |
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Unpaid debt issuance costs related to bridge loan facility |
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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
Table of Contents
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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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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( |
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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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(805 |
) |
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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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( |
) |
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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( |
) |
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 June 30, 2026 |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
|
|||||
5
Table of Contents
|
|
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 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
6
Table of Contents
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 six month periods ended June 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 second quarter of the fiscal year ended January 3, 2026 ended on June 28, 2025. Throughout this document, the three month period ended June 30, 2026 represents the quarterly period that commenced on April 1, 2026, and ended on June 30, 2026. The three month period ended June 28, 2025 represents the quarterly period that commenced on March 30, 2025 and ended on June 28, 2025. The six-month period ended June 30, 2026 represents the period that commenced on January 4, 2026, the first day of our fiscal year, and ended on June 30, 2026. The six-month period ended June 28, 2025 represents the quarterly period that commenced on December 29, 2024 and ended on June 28, 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.
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,
7
Table of Contents
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, with no 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.
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
8
Table of Contents
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
Proposed Investment
On April 20, 2026, the Company entered into a definitive share purchase agreement (“the Rigaku Transaction”) with Atom Investment, L.P., an affiliate of The Carlyle Group, to acquire
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 641,771 shares of the Company’s common stock, par value $0.001 per share ("Common Stock") with a per share value of $127.30 on the Acquisition Date. |
|
||
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 $
9
Table of Contents
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 |
$ |
|
|
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, including the final determination of the working capital adjustment, which remains subject to post‑closing review procedures outlined in the Purchase Agreement. 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.
From the Acquisition Date through January 3, 2026, Semilab USA contributed $
10
Table of Contents
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 Company’s Annual Report on Form 10-K for the fiscal year ended January 3, 2026:
|
|
June 30, 2026 |
|
|||||||||||||||||||||
|
|
Cash and Cash Equivalents |
|
|
Marketable Securities |
|
||||||||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Total |
|
||||||
|
|
(in thousands) |
|
|||||||||||||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Federal and municipal notes and bonds |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Money market funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Certificates of deposit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Commercial paper |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Corporate bonds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total Cash, Cash Equivalents, and Marketable Securities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Foreign currency forward contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
|
|
January 3, 2026 |
|
|||||||||||||||||||||
|
|
Cash and Cash Equivalents |
|
|
Marketable Securities |
|
||||||||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Total |
|
||||||
|
|
(in thousands) |
|
|||||||||||||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Federal and municipal notes and bonds |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Money market funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Certificates of deposit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Commercial paper |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Corporate bonds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total Cash, Cash Equivalents, and Marketable Securities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
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 six months ended June 30, 2026 and June 28, 2025. There were no changes in valuation techniques during the three and six months ended June 30, 2026 and June 28, 2025.
11
Table of Contents
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 0.00% Convertible Senior Notes due 2031 (“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 June 30, 2026 the carrying value, net of unamortized debt discount and issuance costs, and estimated fair values of the 2031 Notes are as follows:
|
|
June 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 June 30, 2026 and January 3, 2026, the Company held investments of $
NOTE 4. Marketable Securities
At June 30, 2026 and January 3, 2026, marketable securities are categorized as follows:
|
|
Amortized Cost |
|
|
Gross Unrealized |
|
|
Gross Unrealized |
|
|
Estimated |
|
||||
|
|
(in thousands) |
|
|||||||||||||
June 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 June 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
12
Table of Contents
some individual securities may be one year or more beyond the balance sheet date. The following table shows the fair value of the Company’s marketable securities, by contractual maturity, as of June 30, 2026:
|
|
June 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 $
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” 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 June 30, 2026 and January 3, 2026 were as follows:
|
|
June 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:
|
|
June 30, 2026 |
|
|
January 3, 2026 |
|
||
|
|
(in thousands) |
|
|||||
Materials |
|
$ |
|
|
$ |
|
||
Work-in-process |
|
|
|
|
|
|
||
Finished goods |
|
|
|
|
|
|
||
Total inventories, net |
|
$ |
|
|
$ |
|
||
13
Table of Contents
Property, Plant and Equipment
Property, plant and equipment, net is comprised of the following:
|
|
June 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 six months ended June 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 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 has used or intends to use (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:
14
Table of Contents
As of June 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 130% of the conversion price on (1) each of at least 20 Trading Days, whether or not consecutive, during the 30 consecutive Trading Days ending on, and including, the Trading Day immediately before the date the Company sends the related redemption notice; and (2) the Trading Day immediately before the date the Company sends such notice. In addition, calling any Note for redemption will constitute a Make-Whole Fundamental Change (as defined in the Indenture) with respect to that Note, in which case the conversion rate applicable to the conversion of that Note will be increased in certain circumstances if it is converted after it is called for redemption. Pursuant to the partial redemption limitation, the Company may not elect to redeem less than all of the outstanding 2031 Notes unless at least $100.0 million aggregate principal amount of 2031 Notes are outstanding and not subject to redemption as of the time it sends the related redemption notice.
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 June 30, 2026 and are carried at amortized cost. The Company evaluated the terms of the 2031 Notes under
15
Table of Contents
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 $30 million is treated as a debt issuance cost for financial reporting purposes and as original issue discount for U.S. federal income tax purposes. Accordingly, the Company established a deferred tax asset of approximately $6.5 million at issuance. The $30 million of original issue discount is deductible for tax purposes over the term of the notes under Section 163 of the Internal Revenue Code of 1986, as amended.
The 2031 Notes consisted of the following components:
|
June 30, 2026 |
|
|
|
(in thousands) |
|
|
Principal |
$ |
1,500,000 |
|
Unamortized debt issuance costs |
|
28,269 |
|
Net carrying amount of the liability component |
$ |
1,471,731 |
|
As of June 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 $0.7 million during each of the three and six months ended June 30, 2026.
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 |
|
1,500 |
|
Total Payments |
$ |
1,500 |
|
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
16
Table of Contents
discretion to settle the Capped Call Transactions in shares or cash. As a result, the 1 million paid was recorded as a reduction to additional paid-in-capital within the Company’s condensed consolidated balance sheet.
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:
|
|
Six Months Ended |
|
|||||
|
|
June 30, |
|
|
June 28, |
|
||
|
|
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.”
Legal Matters
From time to time, the Company is subject to legal proceedings and claims in the ordinary course of business. In the opinion of management, any potential liabilities resulting from any current disputes would not have a material adverse effect on the Company’s unaudited interim condensed consolidated financial statements.
Line of Credit
The Company 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
17
Table of Contents
Leases
As of June 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 |
|
|
Six Months Ended |
|
||||||||||
|
June 30, |
|
|
June 28, |
|
|
June 30, |
|
|
June 28, |
|
||||
|
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 |
|
|
Six Months Ended |
|
||||||||||||||||||||||||||
|
|
June 30, |
|
|
June 28, |
|
|
June 30, |
|
|
June 28, |
|
||||||||||||||||||||
|
|
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 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 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 June 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 June 30, 2026 and January 3, 2026, the Company carried a long-term deferred revenue balance of $
18
Table of Contents
Changes in deferred revenue were as follows:
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
June 30, |
|
|
June 28, |
|
|
June 30, |
|
|
June 28, |
|
||||
|
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 |
|
|
Six Months Ended |
|
||||||||||
|
|
June 30, |
|
|
June 28, |
|
|
June 30, |
|
|
June 28, |
|
||||
|
|
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 June 30, 2026, there was $
NOTE 11. Income Taxes
During the three and six months ended June 30, 2026, the Company recognized an income tax provision of $
The effective tax rate for the periods presented is less than the U.S. statutory rate primarily due to projected Foreign Derived Intangible Income deductions, federal research and development tax credits, and excess tax benefits associated with equity compensation.
NOTE 12. Earnings Per Share
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 six months ended June 30, 2026, 25 thousand and 28 thousand, respectively, restricted stock units were excluded from the computation of diluted earnings per share as their impact would have been antidilutive. For the three and six months ended June 28, 2025, 121 thousand and 70 thousand, respectively, restricted stock units were excluded from the computation of diluted earnings per share as their impact would have been antidilutive. For the
19
Table of Contents
three and six months ended June 30, 2026, 603 thousand shares issuable upon conversion of the Company’s convertible notes were excluded from the computation of diluted earnings per share as their impact would have been antidilutive.
The Company’s basic and diluted earnings per share amounts are as follows:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
June 30, |
|
|
June 28, |
|
|
June 30, |
|
|
June 28, |
|
||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(in thousands, except for per share data) |
|
|||||||||||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income |
|
$ |
60,102 |
|
|
$ |
33,911 |
|
|
$ |
93,852 |
|
|
$ |
98,006 |
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic earnings per share - weighted average shares outstanding |
|
|
49,412 |
|
|
|
48,925 |
|
|
|
49,575 |
|
|
|
49,053 |
|
Effect of potential dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Restricted stock units and employee stock purchase grants - dilutive shares |
|
|
270 |
|
|
|
91 |
|
|
|
266 |
|
|
|
160 |
|
Diluted earnings per share - weighted average shares outstanding |
|
|
49,682 |
|
|
|
49,016 |
|
|
|
49,841 |
|
|
|
49,213 |
|
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
1.22 |
|
|
$ |
0.69 |
|
|
$ |
1.89 |
|
|
$ |
2.00 |
|
Diluted |
|
$ |
1.21 |
|
|
$ |
0.69 |
|
|
$ |
1.88 |
|
|
$ |
1.99 |
|
NOTE 13. Segment Reporting and Geographic Information
The Company is organized and operates as one operating and reportable segment: the design, development, manufacture and support of high-performance control metrology, defect inspection, lithography and data analysis systems used by microelectronics device manufacturers. This determination is based on the management approach which designates internal information regularly available to the Chief Operating Decision Maker (“CODM”) for making decisions and assessing performance as the source of determination of the Company’s reportable segments. The Company’s CODM, the Chief Executive Officer, reviews financial information presented on a consolidated basis for the purpose of making operating decisions and assessing financial performance. The CODM uses net income as the measure of profit or loss to allocate resources and assess performance. The measure of segment assets is reported on the balance sheet as total assets.
20
Table of Contents
The table below presents the Company’s consolidated operating results including significant segment expenses:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
June 30, |
|
|
June 28, |
|
|
June 30, |
|
|
June 28, |
|
||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Adjusted cost of revenue (1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Adjusted research and development (2) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Adjusted sales and marketing (2) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Adjusted general and administrative (2) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
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 |
|
|||||||||||||||
(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 |
|
|
Six Months Ended |
|
||||||||||
|
|
June 30, |
|
|
June 28, |
|
|
June 30, |
|
|
June 28, |
|
||||
|
|
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:
|
|
Six Months Ended |
|
|||||
|
|
June 30, |
|
|
June 28, |
|
||
|
|
2026 |
|
|
2025 |
|
||
Customer A |
|
|
% |
|
|
% |
||
Customer B |
|
|
% |
|
|
% |
||
Customer C |
|
|
% |
|
|
% |
||
Customer D |
|
|
% |
|
^ |
|
||
^ The customer accounted for less than 10.0% of total revenue during the period. |
|
|
|
|
|
|
||
21
Table of Contents
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 allowed 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 goods sold 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 |
|
|
Six Months Ended |
|
||||||||||
|
|
June 30, |
|
|
June 28, |
|
|
June 30, |
|
|
June 28, |
|
||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Cost of goods sold |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
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:
22
Table of Contents
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 complete the Rigaku Transaction on the timing expected or at all; the Company’s ability to realize the anticipated benefits of the Rigaku Transaction; 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
23
Table of Contents
“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 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 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 |
|
|||||
|
June 30, |
|
|
March 31, |
|
||
|
(in thousands, except for percentages and per share data) |
|
|||||
Revenue |
$ |
343,129 |
|
|
$ |
291,949 |
|
Gross profit |
$ |
183,254 |
|
|
$ |
146,389 |
|
Gross profit as a percentage of revenue |
|
53.4 |
% |
|
|
50.1 |
% |
Total operating expenses |
$ |
119,704 |
|
|
$ |
112,875 |
|
Net income |
$ |
60,102 |
|
|
$ |
33,750 |
|
Diluted earnings per share |
$ |
1.21 |
|
|
$ |
0.67 |
|
24
Table of Contents
Our cash, cash equivalents and marketable securities balance increased to $1.9 billion at June 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 $87.8 million of cash generated from operating activities partially offset by capital expenditures of $7.2 million. Employee headcount at June 30, 2026 was approximately 1,867.
On May 21, 2026, we issued $1.5 billion aggregate principal amount of 2031 Notes. The 2031 Notes were issued pursuant to an Indenture, dated May 21, 2026 (the “Indenture”), between the Company and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”). 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 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 April 20, 2026, we entered into a definitive share purchase agreement (the “Rigaku Transaction”) with Atom Investment, L.P., an affiliate of The Carlyle Group, to acquire 27% of the outstanding common stock of Rigaku Holdings Corporation for approximately $710 million. The Rigaku Transaction is expected to close in the second half of 2026. Also on April 20, 2026, we entered into a commitment letter with Goldman Sachs Bank USA, which provides for a senior secured 364-day $500 million bridge term loan credit facility (the “Bridge Commitment”). The Bridge Commitment was intended to be available to the Company to finance, together with other sources of funds, the Rigaku Transaction and related fees and expenses on or prior to the closing of the Transaction. On May 21, 2026, we terminated the Bridge Commitment, incurring total costs of $4.4 million.
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 Six Months ended June 30, 2026 and June 28, 2025
Revenue. Our revenue is primarily derived from the sale of our systems, software licensing, services and spare parts. Our revenue of $343.1 million increased 35.3% for the three months ended June 30, 2026 as compared to the three months ended June 28, 2025, for which revenue totaled $253.6 million. For the six months ended June 30, 2026 and June 28, 2025, our revenue totaled $635.1 million and $520.2 million, respectively, representing a year-over-year increase of 22.1%.
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 |
|
|
Six Months Ended |
|
||||||||||||||||||||||||||
|
|
June 30, |
|
|
June 28, |
|
|
June 30, |
|
|
June 28, |
|
||||||||||||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||||||||||||||||||
|
|
(in thousands, except for percentages) |
|
|||||||||||||||||||||||||||||
Systems and software |
|
$ |
294,040 |
|
|
|
85.7 |
% |
|
$ |
214,506 |
|
|
|
84.6 |
% |
|
$ |
541,197 |
|
|
|
85.2 |
% |
|
$ |
445,656 |
|
|
|
85.7 |
% |
Parts |
|
|
28,713 |
|
|
|
8.4 |
% |
|
|
19,849 |
|
|
|
7.8 |
% |
|
|
55,263 |
|
|
|
8.7 |
% |
|
|
38,025 |
|
|
|
7.3 |
% |
Services |
|
|
20,376 |
|
|
|
5.9 |
% |
|
|
19,242 |
|
|
|
7.6 |
% |
|
|
38,618 |
|
|
|
6.1 |
% |
|
|
36,523 |
|
|
|
7.0 |
% |
Total revenue* |
|
$ |
343,129 |
|
|
|
100.0 |
% |
|
$ |
253,597 |
|
|
|
100.0 |
% |
|
$ |
635,078 |
|
|
|
100.0 |
% |
|
$ |
520,204 |
|
|
|
100.0 |
% |
*The sum of the individual percentages may not equal 100% due to rounding. |
|
|||||||||||||||||||||||||||||||
Total systems and software revenue increased $79.5 million, and $95.5 million for the three and six months ended June 30, 2026, respectively, as compared to the three and six months ended June 28, 2025, respectively. The increase was attributable to stronger demand for inspection and metrology systems. The increase in total parts and services revenue for the three and six months ended June 30, 2026, as compared to the three and six months ended June 28, 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.
25
Table of Contents
The following table lists, for the periods indicated, our gross profit in dollars and as percentages of our total revenue:
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
June 30, |
|
|
June 28, |
|
|
June 30, |
|
|
June 28, |
|
||||
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
(in thousands, except for percentages) |
|
|||||||||||||
Gross profit |
$ |
183,254 |
|
|
$ |
122,122 |
|
|
$ |
329,643 |
|
|
$ |
265,355 |
|
Gross profit as a percentage of revenue |
|
53.4 |
% |
|
|
48.2 |
% |
|
|
51.9 |
% |
|
|
51.0 |
% |
The increase in gross profit as a percentage of revenue for the three and six months ended June 30, 2026 as compared to the three and six months ended June 28, 2025 was primarily due to increased sales of newer product lines with higher standard margins. The increase for the three month period also benefited from lower restructuring expenses compared to the prior year period.
Operating Expenses.
Our operating expenses consist of:
26
Table of Contents
Total other income, net. Total other income, net was $4.9 million and $9.5 million for the three and six month periods ended June 30, 2026, as compared to $7.5 million and $16.0 million for the three and six month periods ended June 28, 2025. The decrease in total other income, net for the three months ended June 30, 2026, as compared to the three months ended June 28, 2025, and for the six months ended June 30, 2026, as compared to the six months ended June 28, 2025, was attributable to expenses associated with increased capital markets activity and fees related to the Bridge Commitment, as well as amortization of debt issuance costs.
Income Taxes. We recorded an income tax provision of $8.4 million and $12.7 million for the three and six month periods ended June 30, 2026, as compared to $5.8 million and $13.4 million for the three and six month periods ended June 28, 2025. Our effective tax rate of 12.3% and 11.9% for the three and six month periods ended June 30, 2026 and our effective tax rate of 14.7% and 12.0% for the three month period ended June 28, 2025, respectively, differed from the statutory rate of 21.0%, primarily due to the tax benefit associated with the Foreign Derived Intangible Income (“FDII”) deductions, federal research and development tax credits, and excess tax benefits associated with equity compensation.
Our future effective income tax rate depends on various factors, such as possible changes in tax legislation, the geographic composition of our pre-tax income, the amount of our pre-tax income as business activities fluctuate, non-deductible expenses incurred in connection with business combinations, and research and development tax credits as a percentage of aggregate pre-tax income.
Liquidity and Capital Resources
Our cash, cash equivalents and marketable securities consist of the following in dollars for the periods indicated:
|
|
|
|
|
|
|
||
|
|
June 30, |
|
|
January 3, |
|
||
|
|
(in thousands) |
|
|||||
Cash and cash equivalents |
|
$ |
1,253,205 |
|
|
$ |
346,119 |
|
Marketable securities |
|
|
628,945 |
|
|
|
293,503 |
|
Total cash, cash equivalents and marketable securities |
|
$ |
1,882,150 |
|
|
$ |
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:
|
|
Six Months Ended |
|
|||||
|
|
June 30, |
|
|
June 28, |
|
||
|
|
2026 |
|
|
2025 |
|
||
|
|
(in thousands) |
|
|||||
Net cash and cash equivalents provided by operating activities |
|
$ |
87,829 |
|
|
$ |
149,923 |
|
Net cash and cash equivalents used in investing activities |
|
$ |
(342,764 |
) |
|
$ |
(64,820 |
) |
Net cash and cash equivalents provided by (used in) financing activities |
|
$ |
1,162,965 |
|
|
$ |
(83,226 |
) |
Operating Activities
27
Table of Contents
Net cash and cash equivalents provided by operating activities for the six months ended June 30, 2026 was $87.8 million. The net cash and cash equivalents provided by operating activities during the six months ended June 30, 2026 resulted primarily from net income, adjusted to exclude the effect of non-cash operating charges, of $76.4 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 six 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 six months ended June 30, 2026 was $342.8 million. During the six months ended June 30, 2026, net cash and cash equivalents used in investing activities included purchases of marketable securities of $652.1 million and capital expenditures of $7.2 million, partially offset by proceeds from maturities and sales of marketable securities of $316.6 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 six months ended June 30, 2026 was $1.16 billion. During the six months ended June 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 six months ended June 30, 2026, no shares of the Company’s common stock were repurchased under the 2024 Authorization. During the three and six months ended June 28, 2025, no shares, and 492 thousand shares, respectively, of the Company’s common stock were repurchased under the 2024 Authorization. At June 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 six months ended June 30, 2026, 805 thousand shares of the Company’s common stock were repurchased under the 2026 Authorization. The 2026 Authorization ceases to be in effect and any and all remaining and unused amount under the 2026 Authorization is no longer available for repurchase.
Indebtedness
As of June 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 our 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”). The Bridge Commitment was intended to provide a stop-gap source of funds, together with other sources, to finance the Rigaku Transaction and related fees and expenses on or prior to closing. In connection with the Bridge Commitment, the Company executed an Engagement Letter, Bridge Commitment Letter, Bridge Administrative Agent Fee Letter, and Bridge Arranger Fee Letter (collectively, the “Bridge Documents”). The Company incurred total costs of $4.4 million in connection with the Bridge Commitment, including a $3.75 million commitment, underwriting and structuring fee, as well as other related expenses. On May 21, 2026, following successful execution of the 2031 Notes offering and Capped Call Transactions, we
28
Table of Contents
delivered an executed Notice of Bridge Commitment Termination to Goldman Sachs, terminating the Bridge Commitment in full. No additional fees were owed in connection with the termination.
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 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 during the six months ended June 30, 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.
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 June 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 June 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 June 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.
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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 Report on Form 10-Q for the quarterly period ended March 31, 2026, filed with the SEC on May 5, 2026, except as set forth below. We may disclose additional changes to risk factors or additional factors from time to time in our future filings with the SEC.
Risks Related to Our Convertible Senior Notes
We may lack the cash or financing capacity to satisfy required cash payments under the 2031 Notes , including upon conversion, following a fundamental change, or at maturity.
On May 21, 2026, we issued the 2031 Notes pursuant to the Indenture and entered into the Capped Call Transactions. If a Fundamental Change occurs (as defined in the Indenture), holders may require us to repurchase the 2031 Notes in cash at 100% of principal plus accrued and unpaid special or additional interest, if any, to, but excluding, the applicable repurchase date. If holders convert, we will settle conversions by paying cash up to the aggregate principal amount of the 2031 Notes to be converted and paying or delivering, as the case may be, cash, shares, or a combination thereof, at our election, in respect of the remainder, if any, of our conversion obligation in excess of the aggregate principal amount of the 2031 Notes being converted. We must also repay any 2031 Notes that remain outstanding at maturity in cash, which could require refinancing. Our ability to fund required cash amounts will depend on cash on hand, cash flows, and access to capital markets and credit facilities, and may be limited by law, regulation, or agreements governing our indebtedness. We may not redeem the 2031 Notes before June 6, 2029, and any optional redemption thereafter requires our common stock to trade above 130% of the conversion price for a specified period and certain other conditions are satisfied, which may affect the timing and magnitude of cash outflows. Failure to make a required cash payment would constitute a default under the Indenture and could result in cross-defaults or accelerations under any other indebtedness we may then have outstanding.
Conversion of the 2031 Notes may adversely affect our liquidity, dilute existing stockholders, and depress the price of our common stock, and the Capped Call Transaction provide only partial offset.
If the conditional conversion feature of the 2031 Notes is triggered, holders may convert their 2031 Notes during specified periods. Upon any conversion, we will be required to settle at least the aggregate principal amount of the 2031 Notes in cash, which could adversely affect liquidity. Even if no conversions occur, applicable accounting rules could require us to reclassify all or a portion of the 2031 Notes as current liabilities, reducing our reported working capital.
The 2031 Notes are initially convertible at 2.6192 shares of common stock per $1,000 principal amount, equivalent to an initial conversion price of approximately $381.80 per share. If we elect to settle the remainder of our conversion obligation in shares, existing stockholders will be diluted. The conversion rate is subject to adjustment upon certain events and may be increased for a limited period in connection with specified corporate events, which could amplify dilution. The Capped Call Transaction offset dilution only up to an initial cap of approximately $509.06 per share, and above that level dilution will not be mitigated. In addition, the existence of the 2031 Notes may encourage short selling by market participants, because conversions can be used to satisfy short positions, and expectations of potential conversion could depress our common stock price.
The 2031 Notes and related Capped Call Transactions may affect the trading price of our common stock and introduce volatility in our reported financial results.
Banks party to the Capped Call Transactions (or their affiliates) may establish, adjust, or unwind hedges in our common stock or related derivatives, including during any conversion observation period and around redemption or unwind events, which could increase or decrease the trading price of our common stock and, during an observation period, affect the amount of conversion consideration and the value of the 2031 Notes. In addition, the 2031 Notes and Capped Call Transactions are subject to complex accounting requirements. Although the Capped Call Transactions are accounted for in stockholders' equity and therefore not remeasured each period, conversions and changes in our share count may affect diluted earnings per share, and application of the relevant accounting standards may introduce period-to-period volatility in our reported results.
We are subject to counterparty risk with respect to the Capped Call Transactions, and the Capped Call Transactions may not operate as planned.
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The option counterparties are financial institutions, and we are subject to the risk that any or all of them might default under the Capped Call Transactions. Our exposure to the credit risk of the option counterparties is not secured by any collateral. If an option counterparty becomes subject to insolvency proceedings, we will become an unsecured creditor in those proceedings with a claim equal to our exposure at that time under the capped call transactions with such option counterparty. Our exposure will depend on many factors but, generally, an increase in our exposure will be correlated to an increase in the market price subject to the cap and in the volatility of our common stock. In addition, upon a default by an option counterparty, we may suffer adverse tax consequences and more dilution than we currently anticipate with respect to our common stock. We can provide no assurances as to the financial stability or viability of the option counterparties.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On May 21, 2026 we issued the 2031 Notes to the initial purchasers in reliance upon Section 4(a)(2) of the Securities Act, for an aggregate offering price of $1.5 billion, in transactions not involving any public offering. The 2031 Notes were resold by the initial purchasers to persons whom the initial purchasers reasonably believe are “qualified institutional buyers” as defined in, and in accordance with, Rule 144A under the Securities Act. Any shares of Common Stock that may be issued upon conversion of the 2031 Notes will be issued in reliance upon Section 3(a)(9) of the Securities Act as involving an exchange by us exclusively with our security holders. Initially, a maximum of 5,893,200 shares of Common Stock may be issued upon conversion of the 2031 Notes, based on the maximum conversion rate of 3.9288 shares of Common Stock per $1,000 principal amount of 2031 Notes, which is subject to customary anti-dilution adjustment provisions.
For further information, see Note 7, “Debt Obligations,” of the Notes to the Condensed Consolidated Financial Statements.
In February 2024, the Board approved a share repurchase authorization (the “2024 Authorization”), which allowed the Company 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 six months ended June 30, 2026, no shares of the Company’s common stock were repurchased under the 2024 Authorization. During the three and six months ended June 28, 2025, no shares, and 492 thousand shares, respectively, of the Company’s common stock were repurchased under the 2024 Authorization. At June 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 six months ended June 30, 2026, 805 thousand shares of the Company’s common stock were repurchased under the 2026 Authorization. The 2026 Authorization ceases 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.
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The following table provides details of Common Stock purchased during the three months ended June 30, 2026 (in thousands, except per share data):
Period |
|
Total Number |
|
|
Average Price Paid per Share |
|
|
Total Number of Shares Purchased as Part of Publicly Announced Program(1) |
|
|
Maximum Approximate Dollar Value of Shares that May Yet be Purchased Under the Program |
|
||||
|
|
(in thousands, except for per share data) |
|
|||||||||||||
April 1, 2026 to April 30, 2026 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
99,935 |
|
May 1, 2026 to May 31, 2026 |
|
|
816 |
|
|
$ |
254.77 |
|
|
|
805 |
|
|
$ |
99,935 |
|
June 1, 2026 to June 30, 2026 |
|
|
19 |
|
|
$ |
278.50 |
|
|
|
— |
|
|
$ |
99,935 |
|
Three months ended June 30, 2026 |
|
|
835 |
|
|
$ |
255.31 |
|
|
|
805 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
(1) Approved under the 2026 Authorization |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
During the fiscal quarter ended June 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
On
On
On
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of an aggregate of up to
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Item 6. Exhibits
Exhibit No. |
Description |
|
|
2.1^ |
Share Purchase Agreement, dated as of April 21, 2026 (Tokyo time), by and between Onto Innovation Inc. and Atom Investments, L.P., incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed with the SEC on April 21, 2026 (File No. 001-39110). |
|
|
3.1 |
Amended and Restated Certificate of Incorporation of Onto Innovation Inc., dated October 25, 2019, incorporated by reference to Exhibit 3.2 to the Company’s Form 8-K filed with the SEC on October 28, 2019 (File No. 001-39110). |
|
|
3.2 |
Amended and Restated Bylaws of Onto Innovation Inc., dated January 22, 2020, incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed with the SEC on January 27, 2020 (File No. 001-39110). |
|
|
4.1 |
Indenture, dated May 21, 2026, between Onto Innovation Inc. and U.S. Bank Trust Company, National Association, as Trustee, incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K filed with the SEC on May 21, 2026 (File No. 001-39110). |
|
|
4.2 |
Form of Global Note representing Onto Innovation Inc.’s 0.00% Convertible Senior Notes due 2031, incorporated by reference to and included within Exhibit 4.1 to the Company’s Form 8-K filed with the SEC on May 21, 2026 (File No. 001-39110). |
|
|
10.1 |
Form of Capped Call Confirmation, incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed with the SEC on May 21, 2026 (File No. 001-39110). |
|
|
31.1* |
Rule 13a-14(a) Certification of Chief Executive Officer of the Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
31.2* |
Rule 13a-14(a) Certification of Chief Financial Officer of the Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
32.1** |
Certification of the Chief Executive Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
32.2** |
Certification of the Chief Financial Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
101.INS* |
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
|
|
101.SCH* |
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents |
|
|
104* |
Cover Page Interactive Data File (formatted as Inline XBRL and included in Exhibit 101) |
^Schedules ommitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to finish supplementally a copy of any ommitted 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.
|
|
Onto Innovation Inc. |
|
|
|
|
|
Date: |
August 6, 2026 |
By: |
/s/ Michael P. Plisinski |
|
|
Michael P. Plisinski |
|
|
|
Chief Executive Officer |
|
|
|
|
|
Date: |
August 6, 2026 |
By: |
/s/ Brian K. Roberts |
|
|
Brian K. Roberts |
|
|
|
Chief Financial Officer and Principal Accounting Officer |
|
35