# ONTO INNOVATION INC. (ONTO)

Informational only - not investment advice.

CIK: 0000704532
SIC: 3829 Measuring & Controlling Devices, NEC
SIC breadcrumb: [Manufacturing](/division/D/) > [SIC Major Group 38](/major-group/38/) > [SIC 3829 Measuring & Controlling Devices, NEC](/industry/3829/)
Latest 10-K filed: 2026-02-24
SEC page: https://www.sec.gov/edgar/browse/?CIK=704532
Filing source: https://www.sec.gov/Archives/edgar/data/704532/000119312526066937/onto-20260103.htm

## Selected Fundamentals
| Metric | Value | Unit | FY | Filed |
| --- | ---: | --- | ---: | --- |
| Revenue | 1005263000 | USD | 2026 | 2026-02-24 |
| Net income | 136759000 | USD | 2026 | 2026-02-24 |
| Assets | 2367741000 | USD | 2026 | 2026-02-24 |

## Financials

Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-02-24. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0000704532.json. Derived margins are computed from the extracted annual SEC facts.

| Metric | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2022 | 2023 | 2024 | 2026 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Revenue |  | 221,129,000 | 255,098,000 | 273,784,000 | 305,896,000 | 556,496,000 | 1,005,183,000 | 815,868,000 | 987,321,000 | 1,005,263,000 |
| Net income | 2,905,000 | 44,035,000 | 32,909,000 | 45,096,000 | 223,334,000 | 31,025,000 | 223,334,000 | 121,159,000 | 201,670,000 | 136,759,000 |
| Operating income | 4,973,000 | 29,095,000 | 59,288,000 | 51,084,000 | -5,043,000 | -26,677,000 | 236,714,000 | 116,078,000 | 187,103,000 | 132,927,000 |
| Gross profit | 89,667,000 | 114,124,000 | 134,595,000 | 148,279,000 | 135,028,000 | 278,453,000 | 539,221,000 | 420,254,000 | 515,308,000 | 499,770,000 |
| Diluted EPS | 0.12 | 1.75 | 1.27 | 1.74 | 0.06 | 0.63 | 4.49 | 2.46 | 4.06 | 2.78 |
| Assets | 235,540,000 | 287,830,000 | 309,699,000 | 418,040,000 | 1,448,580,000 | 1,468,172,000 | 1,794,863,000 | 1,909,712,000 | 2,117,091,000 | 2,367,741,000 |
| Liabilities | 48,212,000 | 44,056,000 | 47,316,000 | 56,152,000 | 184,554,000 | 203,426,000 | 198,437,000 | 173,177,000 | 191,209,000 | 267,094,000 |
| Stockholders' equity | 187,328,000 | 293,735,000 | 333,154,000 | 361,888,000 | 1,264,026,000 | 1,264,746,000 | 1,596,426,000 | 1,736,535,000 | 1,925,882,000 | 2,100,647,000 |
| Cash and cash equivalents | 38,154,000 | 47,062,000 | 34,899,000 | 112,388,000 | 130,673,000 | 136,720,000 | 175,872,000 | 233,508,000 | 212,945,000 | 346,119,000 |
| Net margin |  | 19.91% | 12.90% | 16.47% | 73.01% | 5.58% | 22.22% | 14.85% | 20.43% | 13.60% |
| Operating margin |  | 13.16% | 23.24% | 18.66% | -1.65% | -4.79% | 23.55% | 14.23% | 18.95% | 13.22% |

## Quarterly

Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-05-05. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0000704532.json.

Flow metrics use discrete quarter-length periods from 10-Q/10-Q/A filings. Q4 revenue and net income are derived only when annual FY and nine-month YTD facts exist for the same fiscal year; derived Q4 values are labeled. EPS Q4 is not derived.

| Quarter | End date | Revenue | Net income | Diluted EPS | Method |
| --- | --- | ---: | ---: | ---: | --- |
| 2021-Q3 | 2021-06-26 |  | 35,051,000 |  | reported discrete quarter |
| 2021-Q4 | 2022-01-01 |  | 46,737,000 |  | derived Q4 = FY annual - nine-month YTD |
| 2022-Q2 | 2022-04-02 |  | 53,330,000 |  | reported discrete quarter |
| 2022-Q1 | 2022-04-02 |  | 53,330,000 |  | reported discrete quarter |
| 2022-Q2 | 2022-07-02 | 256,310,000 |  | 1.03 | reported discrete quarter |
| 2022-Q3 | 2022-07-02 |  | 51,575,000 |  | reported discrete quarter |
| 2022-Q3 | 2022-10-01 | 254,253,000 |  | 1.05 | reported discrete quarter |
| 2023-Q1 | 2023-04-01 | 199,165,000 | 29,068,000 | 0.59 | reported discrete quarter |
| 2023-Q2 | 2023-04-01 |  | 29,068,000 |  | reported discrete quarter |
| 2023-Q2 | 2023-07-01 | 190,662,000 |  | 0.53 | reported discrete quarter |
| 2023-Q3 | 2023-07-01 |  | 25,896,000 |  | reported discrete quarter |
| 2023-Q3 | 2023-09-30 | 207,185,000 |  | 0.73 | reported discrete quarter |
| 2024-Q1 | 2024-03-30 | 228,846,000 |  | 0.94 | reported discrete quarter |
| 2024-Q2 | 2024-06-29 | 242,327,000 |  | 1.07 | reported discrete quarter |
| 2024-Q3 | 2024-09-28 | 252,210,000 |  | 1.07 | reported discrete quarter |
| 2025-Q1 | 2025-03-29 | 266,607,000 | 64,095,000 | 1.30 | reported discrete quarter |
| 2025-Q2 | 2025-06-28 | 253,597,000 | 33,911,000 | 0.69 | reported discrete quarter |
| 2025-Q3 | 2025-09-27 | 218,193,000 | 28,224,000 | 0.57 | reported discrete quarter |
| 2026-Q1 | 2026-03-31 | 291,949,000 | 33,750,000 | 0.67 | reported discrete quarter |

## Macro Cross-References
- [CPIAUCSL](/indicator/CPIAUCSL/): Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
- [UNRATE](/indicator/UNRATE/): Unemployment Rate
- [FEDFUNDS](/indicator/FEDFUNDS/): Federal Funds Effective Rate
- [CES0500000003](/indicator/CES0500000003/): Average Hourly Earnings of All Employees, Total Private
- [DFEDTARU](/indicator/DFEDTARU/): Federal Funds Target Range - Upper Limit
- [DFEDTARL](/indicator/DFEDTARL/): Federal Funds Target Range - Lower Limit
- [DGS3MO](/indicator/DGS3MO/): Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
- [DGS2](/indicator/DGS2/): Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
- [DGS10](/indicator/DGS10/): Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
- [DGS30](/indicator/DGS30/): Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
- [T10Y2Y](/indicator/T10Y2Y/): 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
- [CPILFESL](/indicator/CPILFESL/): Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
- [CPIUFDSL](/indicator/CPIUFDSL/): Consumer Price Index for All Urban Consumers: Food
- [CPIENGSL](/indicator/CPIENGSL/): Consumer Price Index for All Urban Consumers: Energy
- [CUSR0000SAH1](/indicator/CUSR0000SAH1/): Consumer Price Index for All Urban Consumers: Shelter
- [PCEPI](/indicator/PCEPI/): Personal Consumption Expenditures: Chain-type Price Index
- [PCEPILFE](/indicator/PCEPILFE/): Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
- [PPIACO](/indicator/PPIACO/): Producer Price Index by Commodity: All Commodities
- [T10YIE](/indicator/T10YIE/): 10-Year Breakeven Inflation Rate
- [U6RATE](/indicator/U6RATE/): Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
- [PAYEMS](/indicator/PAYEMS/): All Employees, Total Nonfarm
- [CIVPART](/indicator/CIVPART/): Labor Force Participation Rate
- [EMRATIO](/indicator/EMRATIO/): Employment-Population Ratio
- [UNEMPLOY](/indicator/UNEMPLOY/): Unemployed
- [CE16OV](/indicator/CE16OV/): Employment Level
- [ICSA](/indicator/ICSA/): Initial Claims
- [JTSJOL](/indicator/JTSJOL/): Job Openings: Total Nonfarm
- [JTSQUR](/indicator/JTSQUR/): Quits: Total Nonfarm
- [GDPC1](/indicator/GDPC1/): Real Gross Domestic Product
- [A191RL1Q225SBEA](/indicator/A191RL1Q225SBEA/): Real Gross Domestic Product: Percent Change from Preceding Period
- [INDPRO](/indicator/INDPRO/): Industrial Production: Total Index
- [TCU](/indicator/TCU/): Capacity Utilization: Total Index
- [HOUST](/indicator/HOUST/): New Privately-Owned Housing Units Started: Total Units
- [PERMIT](/indicator/PERMIT/): New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
- [RSAFS](/indicator/RSAFS/): Advance Retail Sales: Retail Trade
- [PCE](/indicator/PCE/): Personal Consumption Expenditures
- [DSPIC96](/indicator/DSPIC96/): Real Disposable Personal Income
- [PSAVERT](/indicator/PSAVERT/): Personal Saving Rate
- [M2SL](/indicator/M2SL/): M2
- [BOPGSTB](/indicator/BOPGSTB/): U.S. International Trade in Goods and Services: Balance
- [MSPUS](/indicator/MSPUS/): Median Sales Price of Houses Sold for the United States
- [HSN1F](/indicator/HSN1F/): New One Family Houses Sold: United States
- [RHORUSQ156N](/indicator/RHORUSQ156N/): Homeownership Rate in the United States
- [TTLCONS](/indicator/TTLCONS/): Total Construction Spending: Total Construction in the United States
- [RRVRUSQ156N](/indicator/RRVRUSQ156N/): Rental Vacancy Rate in the United States
- [TOTALSL](/indicator/TOTALSL/): Total Consumer Credit Owned and Securitized
- [REVOLSL](/indicator/REVOLSL/): Revolving Consumer Credit Owned and Securitized
- [DRCCLACBS](/indicator/DRCCLACBS/): Delinquency Rate on Credit Card Loans, All Commercial Banks
- [GDP](/indicator/GDP/): Gross Domestic Product
- [GPDI](/indicator/GPDI/): Gross Private Domestic Investment
- [GCE](/indicator/GCE/): Government Consumption Expenditures and Gross Investment
- [PCEC](/indicator/PCEC/): Personal Consumption Expenditures
- [NETEXP](/indicator/NETEXP/): Net Exports of Goods and Services
- [GFDEBTN](/indicator/GFDEBTN/): Federal Debt: Total Public Debt
- [GFDEGDQ188S](/indicator/GFDEGDQ188S/): Federal Debt: Total Public Debt as Percent of Gross Domestic Product
- [FYFSD](/indicator/FYFSD/): Federal Surplus or Deficit
- [FGRECPT](/indicator/FGRECPT/): Federal Government Current Receipts
- [FGEXPND](/indicator/FGEXPND/): Federal Government: Current Expenditures
- [MANEMP](/indicator/MANEMP/): All Employees, Manufacturing
- [USCONS](/indicator/USCONS/): All Employees, Construction
- [USTRADE](/indicator/USTRADE/): All Employees, Retail Trade
- [USFIRE](/indicator/USFIRE/): All Employees, Financial Activities
- [USGOVT](/indicator/USGOVT/): All Employees, Government
- [AWHAETP](/indicator/AWHAETP/): Average Weekly Hours of All Employees, Total Private
- [DGORDER](/indicator/DGORDER/): Manufacturers' New Orders: Durable Goods
- [NEWORDER](/indicator/NEWORDER/): Manufacturers' New Orders: Nondefense Capital Goods Excluding Aircraft
- [BUSINV](/indicator/BUSINV/): Total Business Inventories
- [EXPGS](/indicator/EXPGS/): Exports of Goods and Services
- [IMPGS](/indicator/IMPGS/): Imports of Goods and Services
- [IR](/indicator/IR/): Import Price Index (End Use): All Commodities
- [PPIFIS](/indicator/PPIFIS/): Producer Price Index by Commodity: Final Demand

## Latest quarter (10-Q)

Latest 10-Q source: https://www.sec.gov/Archives/edgar/data/704532/000119312526206707/onto-20260331.htm

Extracted between Part I Item 2 and the next Item 3/4 or Part II heading after HTML sanitization.
Confidence: high
Filing date: 2026-05-05
Report date: 2026-03-31

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:

•
our business momentum and future growth;

•
technology development, product introduction and acceptance of our products and services;

•
our manufacturing practices and ability to deliver both products and services consistent with our customers’ demands and expectations and to strengthen our market position, including our ability to source components, materials, and equipment due to supply chain delays or shortages;

•
the integration of Semilab USA LLC (“Semilab USA”);

•
our expectations of the semiconductor market outlook;

•
future revenue, gross profits, research and development and engineering expenses, selling, general and administrative expenses, and cash requirements;

•
the anticipated effects of tariffs and trade disputes on our business and financial results;

•
the effects of natural disasters or public health emergencies on the global economy and on our customers, suppliers, employees, and business;

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

•
our ability to be successful in managing our cost structure and cash expenditures and results of litigation.

17

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 realize the anticipated benefits of the proposed investment in and strategic partnership with Rigaku; the Company’s ability to complete the proposed transaction on the timing expected or at all; the ability to obtain required regulatory approvals for the proposed transaction on the timing expected or at all; the availability of debt financing for the transaction; the Company’s timing and ability to repay its debt; and the Company’s ability to successfully integrate acquired businesses and technologies, including the business of Semilab USA and to realize the anticipated benefits of such acquisitions. Additional information and considerations regarding the risks faced by Onto Innovation are available in our Annual Report on Form 10-K for the fiscal year ended January 3, 2026 (the “2025 Form 10-K”) filed with the Securities and Exchange Commission (the “SEC”) on February 24, 2026, in Part II, Item 1A. “Risk Factors” and elsewhere in this Form 10-Q, and in the other filings that we make with the SEC from time to time. Forward-looking statements reflect our position as of the date of this Form 10-Q and we undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Critical Accounting Estimates

The preparation of condensed consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) requires management to make judgments, assumptions and estimates that affect the amounts reported.

Estimates and assumptions about future events and their effects cannot be determined with certainty. We base our estimates on historical experience and on various other assumptions believed to be applicable and reasonable under the circumstances. These estimates may change as new events occur, as additional information is obtained and as our operating environment changes. In addition, management is periodically faced with uncertainties, the outcomes of which are not within our control and will not be known for prolonged periods of time. Certain of these uncertainties are discussed in the 2025 Form 10-K in the Items entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” There have been no material changes in our critical accounting estimates from the information presented in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the 2025 Form 10-K.

For more information, please see our critical accounting estimates as previously disclosed in the 2025 Form 10-K and recent accounting pronouncements discussed in Note 1 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

18

Table of Contents

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 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

March 31,

2026

January 3,

2026

(in thousands, except for percentages and per share data)

Revenue

$

291,949

$

266,866

Gross profit

$

146,389

$

123,792

Gross profit as a percentage of revenue

50.1

%

46.4

%

Total operating expenses

$

112,875

$

109,934

Net income

$

33,750

$

10,529

Diluted earnings per share

$

0.67

$

0.21

•
In the fiscal quarter ended March 31, 2026 (the “March 2026 quarter”), revenue increased 9.4% compared to the fiscal quarter ended January 3, 2026 (the “January 2026 quarter”), primarily due to revenue attributed to the acquired Semilab USA business of $16.8 million and higher sales to logic and memory customers in advanced nodes.

•
Gross profit as a percentage of revenue for the March 2026 quarter increased by 3.7% compared to the January 2026 quarter. This margin increase was primarily driven by reductions in inventory write downs, restructuring costs related to infrastructure transition, and reductions in costs related to contract manufacturing set-up. In addition, during the March 2026 quarter $2.2 million of additional inventory step-up amortization was recognized compared to the January 2026 quarter.

•
Operating expenses for the March 2026 quarter increased by 2.7% compared to the January 2026 quarter. This increase was driven by an increase in intangible amortization expense, offset by reductions in transaction costs related to the acquisition of Semilab USA.

Our cash, cash equivalents and marketable securities balance increased to $654.2 million at March 31, 2026, compared to $639.6 million at January 3, 2026. This increase was primarily the result of $26.3 million of cash generated from operating activities partially offset by capital expenditures of $3.6 million and $6.7 million for tax payments related to net share settlement of employee stock-based compensation plans. Employee headcount at March 31, 2026 was approximately 1,790.

On April 20, 2026, we entered into a definitive share purchase agreement (the “Transaction”) with Atom Investment, L.P., an affiliate of The Carlyle Group, to acquire 27% of the outstanding common stock of Rigaku Holdings Corporation (“Rigaku”) for approximately $710 million. The 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 se

[Excerpt truncated for page length; source filing is linked above.]

## Latest 10-K MD&A

Extracted between Item 7 and the next Item 7A/8 heading after HTML sanitization.
Confidence: high

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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 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:

Year Ended

January 3,

2026

December 28,

2024

(in thousands, except for percentages

 and per share data)

 Revenue

$

1,005,263

$

987,321

 Gross profit

$

499,770

$

515,308

 Gross profit as a percent of revenue

49.7

%

52.2

%

 Total operating expenses

$

366,843

$

328,205

 Net income

$

136,759

$

201,670

 Diluted earnings per share

$

2.78

$

4.06

•
In fiscal 2025, revenue increased 2% compared to fiscal 2024, primarily due to higher sales to NAND and OSAT customers as well as revenue attributed to the acquired Semilab USA business, partially offset by lower sales to Foundry and DRAM customers.

•
Gross profit as a percentage of revenue decreased to 49.7% for fiscal 2025 compared to 52.2% for fiscal 2024. This was primarily driven by write-downs of excess and obsolete inventory, restructuring costs related to infrastructure transition and costs related to contract manufacturing set-up in fiscal 2025.

•
The increase in operating expenses in fiscal 2025 compared to fiscal 2024 was primarily due to increased restructuring expenses, transaction and amortization costs related to the acquisition of Semilab USA, research and development project costs and compensation cost.

Our cash, cash equivalents and marketable securities balance decreased to $639.6 million at the end of fiscal 2025 from $852.3 million at the end of fiscal 2024. This decrease was primarily the result of cash used for acquisitions of $436.1 million, purchases of common stock of $75.0 million, capital expenditures of $28.5 million, $13.5 million for tax payments related to net share settlement of employee stock-based compensation plans and purchase of non-marketable equity securities of $8.0 million, partially offset by $328.3 million of cash generated from operating activities and $13.4 million of cash from issuance of shares through share-based compensation plans.

35

Table of Contents

In recent years, the U.S. government implemented additional export regulations for U.S. semiconductor technology sold in China. We have applied for export licenses to continue doing business with our customers that are affected by the new export rules. However, the new export controls have resulted in lower net sales in China for fiscal 2025 compared to the prior fiscal years.

For a discussion of the risks related to our business and operations, see Part I, Item 1A – Risk Factors of this Annual Report on Form 10-K.

Results of Operations

The following table sets forth, for the periods indicated, our results of operations as percentages of our revenue. Our results of operations are reported as one business segment.

Year Ended

January 3,

2026

December 28,

2024

December 30,

2023

Revenue

100.0

 %

100.0

 %

100.0

 %

Cost of revenue

50.3

 %

47.8

 %

48.5

 %

Gross profit

49.7

 %

52.2

 %

51.5

 %

Operating expenses:

Research and development

13.1

 %

11.5

 %

12.7

 %

Sales and marketing

7.0

 %

7.7

 %

7.6

 %

General and administrative

10.7

 %

8.1

 %

9.8

 %

Amortization

3.9

 %

5.0

 %

6.7

 %

Restructuring and other

1.8

 %

0.9

 %

0.4

 %

Total operating expenses

36.5

 %

33.2

 %

37.2

 %

Operating income

13.2

 %

19.0

 %

14.3

 %

Interest income, net

3.5

 %

3.4

 %

2.5

 %

Other expense, net

(0.5

)%

—

%

(0.5

)%

Income before provision for income taxes

16.2

 %

22.4

 %

16.3

 %

Provision for income taxes

2.6

 %

1.9

 %

1.4

 %

Net income

13.6

 %

20.5

 %

14.9

 %

Results of Operations for 2025, 2024 and 2023

Revenue. Our revenue is derived from the sale of our systems and software, spare parts, and services. Our revenue was $1,005.3 million, $987.3 million and $815.9 million for the years ended January 3, 2026, December 28, 2024 and December 30, 2023, respectively. This represents an increase of 2% from 2024 to 2025 and an increase of 21% from 2023 to 2024.

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

Year Ended

January 3,

2026

December 28,

2024

December 30,

2023

(in thousands, except for percentages)

Systems and software

$

847,835

84

 %

$

850,443

86

 %

$

683,316

84

 %

Parts

84,200

8

 %

76,584

8

 %

74,604

9

 %

Services

73,228

8

 %

60,294

6

 %

57,948

7

 %

Total revenue

$

1,005,263

100

 %

$

987,321

100

 %

$

815,868

100

 %

Total systems and software revenue decreased $2.6 million for the year ended January 3, 2026, as compared to the year ended December 28, 2024, primarily due to a decrease in units shipped of our inspection product line to customers in support of advanced packaging needs for chips used in AI applications, partially offset by an increase in metrology product line units shipped to customers in Advanced Nodes and units shipped to Semilab USA customers in SiC specialty devices. Parts and services revenue is generated from part sales, maintenance service contracts, and system upgrades, as well as time and material billable service calls. During fiscal 2025, the increase in total parts and services revenue was primarily due to increased spending by our customers on system upgrades and repairs of existing systems.

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Total systems and software revenue increased $167.1 million for the year ended December 28, 2024, as compared to the year ended December 30, 2023, primarily due to an increase in units shipped of our inspection product line to customers in support of advanced packaging needs for chips used in AI applications. Parts and services revenue is generated from part sales, maintenance service contracts, and system upgrades, as well as time and material billable service calls. During fiscal 2024, the increase in total parts and services revenue was primarily due to increased spending by our customers on system upgrades and repairs of existing systems.

The following table sets forth, for the periods indicated, our revenue by geographic region as percentages of our revenue.

Year Ended

January 3,

2026

December 28,

2024

December 30,

2023

(in thousands, except for percentages)

Revenue

$

1,005,263

$

987,321

$

815,868

Taiwan

32

 %

31

 %

17

 %

South Korea

28

 %

29

 %

21

 %

United States

12

 %

11

 %

16

 %

Japan

10

 %

6

 %

11

 %

China

7

 %

12

 %

17

 %

Southeast Asia

6

 %

6

 %

11

 %

Europe

5

 %

5

 %

7

 %

Total revenue

100

 %

100

 %

100

 %

The overall Asia region continues to account for a majority of our revenues as a substantial amount of the worldwide capacity investments for semiconductor manufacturing continue to occur in this region and we expect that trend to continue.

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, inventory step-up from purchase accounting, customization and reconfiguration of systems, international and domestic sales mix, system and software product mix, and parts and services margins. Our gross profit was $499.8 million, $515.3 million and $420.3 million for the years ended January 3, 2026, December 28, 2024, and December 30, 2023, respectively. Our gross profit represented 49.7%, 52.2% and 51.5% of our revenue for the years ended January 3, 2026, December 28, 2024, and December 30, 2023, respectively. The decrease in gross profit as a percentage of revenue from 2024 to 2025 was primarily due to restructuring and other expenses for the write down of excess and obsolete inventory. The increase in gross profit as a percentage of revenue from 2023 to 2024 was primarily due to an increase in revenue volume and change in product mix, partially offset by write-downs related to the impairment and exit of certain lithography inventory.

Operating Expenses.

Our operating expenses consist of:

•
Research and Development. We believe that it is critical to continue to make substantial investments in research and development to ensure the availability of innovative technology that meets the current and projected requirements of our customers’ most advanced designs. We have maintained, and intend to continue, our commitment to investing in research and development in order to continue to offer new products and technologies. Accordingly, we devote a significant portion of our technical, management and financial resources to research and development programs. Research and development expenditures consist primarily of salaries and related expenses of employees engaged in research, design and development activities. They also include consulting fees, the cost of related supplies and legal costs to defend our intellectual property. Our research and development expenses were $132.0 million, $113.9 million and $104.4 million in fiscal years 2025, 2024 and 2023, respectively. The year-over-year dollar increase from 2024 through 2025 was primarily due to increases in compensation costs, production expenses and depreciation and amortization. The year-over-year dollar increase from 2023 through 2024 was primarily due to increase in compensation costs, outside services costs, product development costs, travel costs, research and development project costs, freight and duty costs, and depreciation expenses. We continue to maintain our commitment to investing in new product development and enhancement to existing products.

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•
Sales and Marketing. Sales and marketing expenses are primarily comprised of salaries and related costs for sales and marketing personnel, as well as commissions and other non-personnel related expenses. Our sales and marketing expenses were $70.0 million, $76.0 million and $61.8 million in fiscal years 2025, 2024 and 2023, respectively. The year-over-year dollar decrease from 2024 through 2025 was primarily due to decreases in compensation costs, outside services and fees, and facilities expenses. The year-over-year dollar increase from 2023 through 2024 was primarily due to increases in total compensations costs, travel costs, outside service costs, sales and marketing costs and production expenses.

•
General and Administrative. General and administrative expenses are primarily comprised of salaries and related costs for general administrative personnel, as well as other non-personnel related expenses. Our general and administrative expenses were $107.1 million, $79.9 million and $79.6 million in fiscal years 2025, 2024 and 2023, respectively. The year-over-year dollar increase from 2024 through 2025 was primarily due to increases in compensation costs, outside services and fees, travel costs, facilities expenses, and other general expenses. The year-over-year dollar increase from 2023 through 2024 was primarily due to increases in depreciation expense, facilities expense and partially offset by a decrease in freight and duty costs.

•
Amortization of Identifiable Intangible Assets. Amortization of identifiable intangible assets, primarily purchased technology, was $39.4 million, $49.4 million and $54.8 million in fiscal years 2025, 2024 and 2023, respectively. The year-over-year dollar decrease from 2024 to 2025 was due to certain assets becoming fully amortized, partially offset by Semilab USA amortization of $5.6 million. The year-over-year dollar decrease from 2023 through 2024 was due to certain assets becoming fully amortized.

•
Restructuring and Other. Restructuring and other expenses were $18.4 million, $9.0 million and $3.6 million in fiscal years 2025, 2024 and 2023, respectively. The year-over-year increase from 2024 through 2025 was primarily due to an increase in business transformation projects that includes the streamlining of various operating activities. The year-over-year increase from 2023 through 2024 was primarily due to an increase in employee severance costs and business transformation projects that includes the streamlining of various operating activities.

Interest income, net. In fiscal years 2025, 2024 and 2023, net interest income was $35.0 million, $33.5 million and $20.4 million, respectively. The increases in net interest income from 2024 to 2025 and from 2023 to 2024 were due to higher average balances and higher interest rates during both the 2025 and 2024 periods, respectively.

Income taxes. The following table provides details of income tax:

Year Ended

January 3,

2026

December 28,

2024

December 30,

2023

(in thousands, except for percentages)

Income before provision for income taxes

$

162,902

$

220,447

$

132,582

Provision for income taxes

$

26,143

$

18,777

$

11,423

Effective tax rate

16

%

9

%

9

%

The income tax provision differs from the federal statutory income tax rate of 21% for 2025 primarily due to a benefit related to the Foreign Derived Intangible Income Deduction (“FDII”) of $6.9 million, tax benefits for research and development credits of $7.2 million, and excess tax benefits of share-based compensation of $2.4 million. These benefits were partially offset by non-deductible officer’s compensation of $3.1 million. The effective tax rate for the year ended Jan 3, 2026 was impacted by the enactment of the One Big Beautiful Bill Act (“OBBBA”) that resulted in less FDII benefit from the prior fiscal year.

The income tax provision differs from the federal statutory income tax rate of 21% for 2024 primarily due to a benefit related to the Foreign Derived Intangible Income Deduction (“FDII”) of $17.0 million, tax effect of share-based compensation of $6.9 million, tax benefits for research and development credits of $6.6 million, a decrease to the Company’s valuation allowance of $1.8 million, and a one-time benefit of $3.2 million related to the recognition of a tax benefit associated with the lapse of a statute of limitations. These benefits were partially offset by non-deductible officer’s compensation of $3.4 million.

The income tax provision differs from the federal statutory income tax rate of 21% for 2023 primarily due to a benefit related to the FDII of $13.0 million, excess benefits related to stock compensation of $3.4 million, tax benefits for research and development credits of $6.4 million, and a one-time benefit of $1.6 million related to the recognition of a tax benefit associated with the lapse of a statute of limitations. These benefits were partially offset by the inclusion of U.S. tax on foreign source income of $0.5 million and non-deductible officer’s compensation of $2.3 million, and an increase to the Company’s valuation allowance of $2.9 million.

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Our future effective income tax rate depends on various factors, such as 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 acquisitions and research and development credits as a percentage of aggregate pre-tax income.

Liquidity and Capital Resources

Our cash, cash equivalents and marketable securities consist of the following:

Year Ended

January 3,

2026

December 28,

2024

(in thousands)

 Cash and cash equivalents

$

346,119

$

212,945

 Marketable securities

293,503

639,383

Total cash, cash equivalents and marketable securities

$

639,622

$

852,328

Sources and Uses of Cash

A summary of cash provided by (used in) operating, investing, and financing activities is as follows:

Year Ended

January 3,

2026

December 28,

2024

December 30,

2023

(in thousands)

 Cash provided by operating activities

$

328,315

$

245,676

$

171,973

 Cash used in investing activities

$

(121,568

)

$

(226,547

)

$

(103,387

)

 Cash used in financing activities

$

(75,150

)

$

(35,673

)

$

(9,475

)

Operating Activities

Cash provided by operating activities during fiscal 2025 was $328.3 million, which reflects net income, adjusted to exclude the effect of non-cash operating charges, of $131.5 million. Significant non-cash operating charges included depreciation, amortization, share-based compensation, provision for inventory valuation and deferred income taxes. Cash provided by operating activities in fiscal 2025 increased compared to fiscal 2024 primarily due to improved cash collections and higher accounts payable balances driven by increased contract manufacturing activity, partially offset by higher cash outflows for income taxes resulting from the timing of payments and the settlement of prior period liabilities, as well as a use of cash in accrued and other liabilities.

Cash provided by operating activities during fiscal 2024 was $245.7 million, which reflects net income, adjusted to exclude the effect of non-cash operating charges, of $290.2 million. Significant non-cash operating charges included depreciation, amortization, share-based compensation, provision for inventory valuation, deferred income taxes and write off of acquired in-process research and development. Cash provided by operating activities in fiscal 2024 increased compared to fiscal 2023 primarily due to higher net income and continued improvements in inventory management.

Our working capital was $1,049.1 million at January 3, 2026 and $1,307.4 million at December 28, 2024.

Investing Activities

We used $121.6 million, $226.5 million and $103.4 million of cash in investing activities in fiscal 2025, 2024 and 2023, respectively. Capital expenditures, net of proceeds in fiscal 2025, 2024 and 2023 were $28.5 million, $31.9 million and $19.8 million. Capital expenditures were primarily for enterprise resource planning systems implementation, investments in facility improvements, demonstration and testing equipment, manufacturing and network equipment. Proceeds from sales and maturities of marketable securities, net of purchases of marketable securities was $351.1 million for fiscal 2025, purchases of marketable securities, net of proceeds from sales and maturities of marketable securities, for fiscal 2024 and 2023 was $167.9 million and $83.6 million, respectively. Net cash paid for acquisitions in fiscal 2025 and 2024 was $436.1 million and $26.8 million, respectively. There were no acquisitions in fiscal 2023.

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

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We used $75.1 million, $35.7 million and $9.5 million of cash in financing activities for fiscal 2025, 2024 and 2023, respectively. Purchases of our common stock were $75.0 million, $25.1 million and $3.2 million in fiscal 2025, 2024 and 2023, respectively. Tax withholding payments for vested equity awards, partially offset by proceeds from sales of shares through share-based compensation plans were $0.1 million, $9.9 million and $5.5 million for fiscal 2025, 2024 and 2023, respectively. Payments for contingent consideration for acquired business were $0.7 million and $0.8 million in fiscal 2024 and 2023, respectively. There were no payments of contingent consideration for acquired business in fiscal 2025.

We have a credit agreement with a bank that provides for a variable-rate line of credit that is secured by the marketable securities we have with the bank. We are permitted to borrow up to 70% of the value of eligible securities held at the time the line of credit is accessed, up to a maximum of $100 million. As of January 3, 2026, the available line of credit was approximately $100.0 million with an available interest rate of 4.3%. The credit agreement is available to us until such time that either party terminates the arrangement at its discretion. As of the date of this filing, we have not utilized the line of credit.

Our future capital requirements will depend on many factors, including the timing and amount of our revenue and our investment decisions, which will affect our ability to generate additional cash. We expect that our existing cash, cash equivalents, marketable securities and availability under our line of credit will be sufficient to meet our anticipated cash requirements for working capital, capital expenditures and other cash needs for the next 12 months following the filing of this Form 10-K. 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. In addition, 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.

Contractual Obligations

The following table summarizes our significant contractual obligations at January 3, 2026, and the effect such obligations are expected to have on our liquidity and cash flows in future periods. We are currently unable to provide a reasonably reliable estimate of the amount or periods when cash settlement of this liability may occur.

Payments due by period

Total

Less than 1

year

1-3

years

3-5

years

More than

5 years

(in thousands)

Operating lease obligations

$

19,770

$

7,080

$

8,434

$

3,596

$

660

Purchase obligations (1)

256,414

248,091

8,323

—

—

Total

$

276,184

$

255,171

$

16,757

$

3,596

$

660

(1)
Represents our agreements to purchase goods and services consisting of outstanding purchase orders for goods and services.

Critical Accounting Estimates

Management’s discussion and analysis of our financial condition and results of operations are based upon our Consolidated Financial Statements included in this Form 10-K, which have been prepared in accordance with accounting principles generally accepted in the United States. Note 2 of Notes to Consolidated Financial Statements describes the significant accounting policies used in the preparation of the consolidated financial statements. Certain of these significant accounting policies are considered to be critical accounting policies and involve critical accounting estimates. We review the accounting policies we use in reporting our financial results on a regular basis. The preparation of the financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to revenue recognition, accounts receivable, inventories, business acquisitions, intangible assets, share-based payments, income taxes and warranty obligations. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Results may differ from these estimates due to actual outcomes being different from those on which we based our assumptions. These estimates and judgments are regularly reviewed by management on an ongoing basis at the end of each quarter prior to the public release of our financial results.

Management believes that the following are critical accounting estimates:

Revenue Recognition. Revenue is recognized when control of the promised goods or services are transferred to our customers in an amount that reflects the consideration we expect to be entitled to receive in exchange for those goods or

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services. We account for a contract when it has approval and commitment from both parties, the rights of the parties and payment terms are identified, the contract has commercial substance and collectability of consideration is probable.

Contracts with customers may include multiple performance obligations. For such arrangements, we allocate revenue to each performance obligation based on its relative standalone selling price. We generally determine standalone selling prices based on the prices charged to customers or the expected cost-plus margin.

Revenue from systems is recognized when we transfer control of the product to our customer. To indicate transfer of control, we must have a present right to payment, legal title must have passed to the customer and the customer must have the significant risks and rewards of ownership. We generally transfer control for system sales when the customer or the customer’s agent picks up the system at our facility. We provide an assurance warranty on our systems for a period of twelve to fourteen months against defects in material and workmanship. We provide for the estimated cost of product warranties at the time revenue is recognized.

Depending on the terms of the systems arrangement, we may also defer the recognition of a portion of the consideration expected to be received because we have to satisfy a future obligation (e.g., installation and extended warranties). We use an observable price to determine the standalone selling price for separate performance obligations or a cost-plus margin approach when one is not available.

Revenue from software licenses, which is primarily sold without systems, is recognized upfront at the point in time when the software is made available to the customer. Software licenses provide the customer with limited rights to use the software. Revenue from licensing support and maintenance is recognized as the support and maintenance are provided, which is over the contract period.

Revenue from parts is recognized when we transfer control of the product, which typically occurs when we ship the product from our facilities to the customer.

Revenue from services primarily consists of service contracts, which provide additional maintenance coverage beyond our assurance warranty on our products, service labor, consulting and training. Revenue from service contracts is recognized ratably over the term of the service contract. Revenue from service labor and consulting is recognized as services are performed.

We record contract liabilities when the customer has been billed in advance of completing our performance obligations. These amounts are recorded as deferred revenue in the Consolidated Balance Sheets.

Business combinations. We account for business combinations under the acquisition method of accounting, which requires us to recognize separately from goodwill the assets acquired, and the liabilities assumed at their acquisition date fair values. While we use our best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date as well as contingent consideration, where applicable, our estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recognized in our consolidated statements of operations. Accounting for business combinations requires our management to make significant estimates and assumptions, especially at the acquisition date including our estimates for intangible assets, contractual obligations assumed, restructuring liabilities, pre-acquisition contingencies, and contingent consideration, where applicable. Although we believe the assumptions and estimates we have made in the past have been reasonable and appropriate, they are based, in part, on historical experience and information obtained from the management of the acquired companies and are inherently uncertain. Estimates in valuing certain acquired intangible assets under the income approach include growth in future expected cash flows from product sales, acquired technologies, technology obsolescence rates, estimated cash flows from the projects when completed and discount rates. Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates or actual results.

Inventory Valuation. Inventories are stated at the lower of cost or net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less predictable costs of completion, disposal and transportation. Cost is generally determined on a first-in, first-out basis, and includes material, labor and manufacturing overhead costs. We review and set standard costs as needed, but at a minimum, on an annual basis, at current manufacturing costs in order to approximate actual costs. We maintain reserves for our excess and obsolete inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future product lifecycles, product demand and market conditions. If actual product lifecycles, product demand and market conditions are less favorable than those originally projected by management, additional inventory write-downs may be required.

Indefinite-Lived and Long-Lived Assets. Goodwill is tested for impairment during the fourth quarter, or whenever events or circumstances indicate that its carrying value may not be recoverable. Goodwill impairment is tested at the reporting unit

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level, which is defined as an operating segment or one level below the operating segment. Goodwill is reviewed for impairment using either a qualitative assessment or a quantitative goodwill impairment test. If the Company chooses to perform a qualitative assessment and determine the fair value more likely than not exceeds the carrying value, no further evaluation is necessary. When the Company performs the quantitative goodwill impairment test, it compares fair value to carrying value, which includes goodwill. If fair value exceeds carrying value, the goodwill is not considered impaired. If the carrying value is higher than the fair value, the difference would be recognized as an impairment loss.

For other long-lived assets, we periodically review long-lived assets, other than goodwill, for impairment whenever changes in events or circumstances indicate that the carrying amount of an asset may not be recoverable. Assumptions and estimates used in the determination of impairment losses, such as future cash flows and disposition costs, may affect the carrying value of long-lived assets and the impairment of such long-lived assets, if any, could have a material effect on our consolidated financial statements.

Income Taxes. As part of the process of preparing our consolidated financial statements, we are required to estimate our current tax exposure together with our temporary differences resulting from differing treatment of items for tax and accounting purposes. These temporary differences result in deferred tax assets and liabilities, which are included within our consolidated balance sheet. We must assess the likelihood that our deferred tax assets will be recovered from future taxable income and to the extent we believe that recovery is not likely, we must establish a valuation allowance. Management judgment is required in determining our provision for income taxes and any valuation allowance recorded against our deferred tax assets. The need for a valuation allowance is based on our estimates of taxable income by jurisdiction in which we operate and the period over which our deferred taxes will be recoverable. In the event that actual results differ from these estimates or we adjust these estimates in future periods, we may need to adjust the valuation allowance, which could materially impact our financial position and results of operations.

We recognize liabilities for uncertain tax positions based on a two-step process. The first step requires us to determine if the weight of available evidence indicates that the tax position has met the threshold for recognition; therefore, we must evaluate whether it is more likely than not that the position will be sustained on audit, including resolution of any related appeals or litigation processes. The second step requires us to measure the tax benefit of the tax position taken, or expected to be taken, in an income tax return as the largest amount that is more than 50% likely of being realized when effectively settled. This measurement step is inherently difficult and requires subjective estimations of such amounts to determine the probability of various possible outcomes. We reevaluate the uncertain tax positions each quarter based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues, and new audit activity. Such a change in recognition or measurement could result in the recognition of a tax benefit or an additional charge to the tax provision in the period.

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