ONTO INNOVATION INC. 10-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Interest Rate and Credit Market Risk We are exposed to changes in interest rates and market liquidity including our investments in certain available-for-sale securities. Our available-for-sale securities consist of fixed and variable rate income investments, such as municipal notes, municipal bonds and corporate bonds. We continually monitor our exposure to changes in interest rates, market liquidity and credit ratings of issuers for our available-for-sale securities. It is possible that we are at risk if interest rates, market liquidity or credit ratings of issuers change in an unfavorable direction. The magnitude of any gain or loss will be a function of the difference between the fixed or variable rate of the financial instrument and the market rate, and our financial condition and results of operations could be materially affected. Based on a sensitivity analysis performed on our financial investments held as of December 31, 2022, a hypothetical increase of 100 basis points in interest rates would result in a decrease of $2.0 million in the fair value of our available-for-sale debt securities and would not have a material impact on our consolidated financial position, results of operations or cash flows. Foreign Currency Risk We enter into foreign currency forward contracts to minimize the short-term impact of exchange rate fluctuations on certain foreign currency denominated monetary assets and liabilities, primarily cash and intercompany receivables and payables. In addition, we hedge certain anticipated foreign currency cash flows, primarily on revenues denominated in Japanese yen. These forward contracts are not designated as accounting hedges, so the change in fair value of the forward exchange contracts is recognized under the caption “Other expense, net” in the Consolidated Statements of Operations for each reporting period. As of December 31, 2022, and January 1, 2022, we had six and seven outstanding forward contracts, respectively, with a total notional contract value of $27.9 million and $32.3 million, respectively. We do not use derivative financial instruments for trading or speculative purposes. Item 8. Financial Statements and Supplementary Data. The consolidated financial statements and related information required by this Item are set forth on the pages indicated in Item 15(a) of this Form 10-K. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None.