ONTO INNOVATION INC. Leases Disclosure
The Company determines if an arrangement is a lease at its inception. Operating lease arrangements are comprised primarily of real estate and equipment agreements for which the right-of-use assets are included in “Other assets” and the corresponding lease liabilities, depending on their maturity, are included in “Other current liabilities” or “Other non-current liabilities” in the Consolidated Balance Sheets.
Right-of-use assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. The lease term includes options to extend the lease when it is reasonably certain that the option will be exercised. Lease agreements frequently require the Company to pay real estate taxes, insurance and maintenance costs. Leases with a term of one year or less are not recorded on the Consolidated Balance Sheets and lease expense for these leases is recognized on a straight-line basis over the lease term. Lease costs for operating leases were $7.0 million and $6.4 million for the years ended January 3, 2026 and December 28, 2024, respectively. Operating lease costs are generally recognized over the lease term.
The Company uses its estimated incremental borrowing rate in determining the present value of lease payments considering the term of the lease, which is derived from information available at the lease commencement date, giving consideration to publicly available data for instruments with similar characteristics. The Company accounts for the lease and non-lease components as a single lease component.
Lease term and incremental borrowing rate |
|
January 3, |
|
|
December 28, |
|
||
Weighted average remaining lease term in years |
|
|
3.6 |
|
|
|
3.5 |
|
Weighted average incremental borrowing rate |
|
|
5.5 |
% |
|
|
5.1 |
% |
Supplemental cash flows information related to leases was as follows:
|
|
Year Ended |
|
|||||
|
|
January 3, |
|
|
December 28, |
|
||
|
|
(in thousands) |
|
|||||
Cash paid for operating lease liabilities |
|
$ |
7,031 |
|
|
$ |
6,372 |
|
Right-of-use assets obtained in exchange for operating lease liabilities |
|
$ |
9,054 |
|
|
$ |
1,334 |
|
As of January 3, 2026, there was an insignificant amount of commitments for operating leases that have not yet commenced. The reconciliation of the maturities of operating leases to the lease liabilities recorded on the Consolidated Balance Sheet as of January 3, 2026 is as follows:
|
|
Operating Lease |
|
|
|
|
(in thousands) |
|
|
2026 |
|
$ |
7,080 |
|
2027 |
|
|
4,475 |
|
2028 |
|
|
3,959 |
|
2029 |
|
|
2,612 |
|
2030 |
|
|
984 |
|
thereafter |
|
|
660 |
|
Total undiscounted operating lease payments |
|
|
19,770 |
|
Less: imputed interest |
|
|
2,296 |
|
|
|
$ |
17,474 |
|
About Leases Disclosures
Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.
Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.