What changed in this filing

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Item 9A. Controls and Procedures

2024-02-26 compared with 2023-02-24 · 256 added, 330 removed, 806 unchanged (42% of the section changed)

7 unchanged sentences

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 December 30, 2023 at the reasonable assurance level.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f).

Internal control over financial reporting is a process

designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control —

Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (“COSO”).

Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial

statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

Based on our evaluation, our management concluded that our internal control over financial reporting was effective as of December 30, 2023.

7 unchanged sentences

Other Information.

Rule 10b5-1 Plan Elections

The table below provides the details of all trading plans adopted or terminated by a director or officer during the Company’s last fiscal quarter.

Each of the trading plans is intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) of the Exchange Act.

Officer's name

Adoption date

Expiration date

Aggregate number of securities to be sold

Chief Executive Officer

Vice President, General Counsel & Corporate Secretary

Disclosure Regarding Foreign Jurisdictions that Prevent Inspection.

Not applicable.

Certain information required by Part III is omitted from this Form 10-K because we expect to file a definitive proxy statement within one hundred twenty (120) days after the end of our fiscal year pursuant to Regulation 14A (the “Proxy Statement”) for our Annual Meeting of Stockholders currently scheduled for May 9, 2023, and the information included in the Proxy Statement is incorporated herein by reference.

Certain information required by Part III is omitted from this Form 10-K because we expect to file a definitive proxy statement within one hundred twenty (120) days after the end of our fiscal year pursuant to Regulation 14A (the “Proxy Statement”) for our Annual Meeting of Stockholders currently scheduled for May 22, 2024, and the information included in the Proxy Statement is incorporated herein by reference, as specified below.

Directors, Executive Officers and Corporate Governance.

The information required by this Item with respect to directors and executive officers is incorporated by reference to the information under the headings “Proposal 1:

Election of Directors,”

“Executive Officers”

and “Corporate Governance Principles and Practices”

in the Proxy Statement.

Information regarding compliance with Section 16 of the Exchange Act is incorporated by reference to the information under the heading “Delinquent Section 16(a) Reports”

in the Proxy Statement, if any.

The information required by this Item with respect to directors and executive officers is incorporated by reference to the information under the headings “Proposal 1:

Election of Directors,” “Executive Officer Biographies” and “Corporate Governance Principles and Practices” in the Proxy Statement.

Information regarding compliance with Section 16 of the Exchange Act is incorporated by reference to the information under the heading “Delinquent Section 16(a) Reports” in the Proxy Statement, if any.

Code of Business Conduct and Ethics.

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Executive Compensation.

The information required by this Item is incorporated by reference to the information under the headings “Executive Officer Compensation,”

“Compensation of Directors,”

“Executive Officer Compensation Tables,”

“Compensation Committee Report on Executive Officer Compensation,”

“Stock Ownership/Retention Guidelines for Directors”

and “Compensation Committee Interlocks and Insider Participation”

in the Proxy Statement.

The information required by this Item is incorporated by reference to the information under the headings “Executive Officer Compensation,” “Compensation of Directors,” “Executive Officer Compensation Tables,” “Compensation Committee Report on Executive Officer Compensation,” “Stock Ownership/Retention Guidelines for Directors” and “Compensation Committee Interlocks and Insider Participation” in the Proxy Statement.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by this Item is incorporated by reference to the information under the headings “Security Ownership of Certain Beneficial Owners”

and “Equity Compensation Plan Information”

in the Proxy Statement.

The information required by this Item is incorporated by reference to the information under the headings “Security Ownership of Certain Beneficial Owners” and “Equity Compensation Plan Information” in the Proxy Statement.

Certain Relationships and Related Transactions, and Director Independence.

The information required by this Item is incorporated by reference to the information under the headings “Related Persons Transaction Policy”

and “Board Independence”

in the Proxy Statement.

The information required by this Item is incorporated by reference to the information under the headings “Related Persons Transaction Policy” and “Board Independence” in the Proxy Statement.

Principal Accountant Fees and Services.

The information required by this Item is incorporated by reference to the information under the heading “Proposal 3:

Ratification of Appointment of Independent Registered Public Accounting Firm”

in the Proxy Statement.

The information required by this Item is incorporated by reference to the information under the heading “Proposal 3:

Ratification of Appointment of Independent Registered Public Accounting Firm” in the Proxy Statement.

Exhibits and Financial Statement Schedule.

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See Index to financial statements on page F-1 of this report.

Exhibits are as set forth in the “Exhibit Index”, provided below.

Where so indicated, exhibits, which were previously filed, are incorporated by reference.

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Exhibit No./Appendix Reference

Agreement and Plan of Merger, dated as of June 23, 2019, by and among Nanometrics Incorporated, Rudolph Technologies, Inc.

and PV Equipment Inc.

June 24, 2019

Amended and Restated Certificate of Incorporation of Onto Innovation Inc.

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February 25, 2020

Nanometrics Incorporated Amended and Restated 2005 Equity Incentive Plan

April 4, 2017

Form of Performance-Based Restricted Stock Unit Agreement

March 24, 2015

Nanometrics Incorporated Amended and Restated 2005 Equity Incentive Plan forms of Stock Option and Restricted Stock Unit Agreements

March 13, 2008

Rudolph Technologies, Inc.

2018 Stock Plan

Amended form of Employee Restricted Stock Unit Purchase Agreement pursuant to the Rudolph Technologies, Inc.

2009 Stock Plan

August 3, 2017

Rudolph Technologies, Inc.

2018 Stock Plan

Form of Employee Performance Stock Unit Purchase Agreement pursuant to the Rudolph Technologies, Inc.

Form of Employee Restricted Stock Unit Purchase Agreement pursuant to the Rudolph Technologies, Inc.

2018 Stock Plan

August 2, 2018

Exhibit Description

Date of First Filing

Exhibit No./Appendix Reference

Onto Innovation Inc.

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2020 Stock Plan

August 5, 2021

Form of Director Restricted Stock Unit Purchase Agreement for usage under the Onto Innovation Inc.

2020 Stock Plan

August 5, 2021

Form of Employee Performance Stock Unit Purchase Agreement for usage under the Onto Innovation Inc.

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November 4, 2021

Exhibit Description

Date of First Filing

Exhibit No./Appendix Reference

Onto Innovation Inc.

2020 Employee Stock Purchase Plan

Form of Indemnification Agreement

November 6, 2019

Form of Onto Innovation Inc.

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September 13, 2021

Management Agreement, dated as of July 24, 2000 by and between Rudolph Technologies, Inc.

and Steven R.

Roth as restated and amended on July 29, 2014.

August 6, 2014

Employment Agreement, dated as of November 9, 2015, by and between Rudolph Technologies, Inc.

and Michael Plisinski.

November 9, 2015

Employment Agreement, dated as of September 15, 2023, by and between Onto Innovation Inc.

and Michael P.

Plisinski* incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed with the SEC on September 15, 2023 (File No.

September 15, 2023

Offer Letter to Yoon Ah E.

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Offer Letter to Mark Slicer, dated April 1, 2022, by and between Mark Slicer and Onto Innovation Inc.

Executive Change in Control Agreement, dated July 5, 2022, by and between Onto Innovation Inc.

and Yoon Ah Oh

November 10, 2022

Form of Executive Change in Control Agreement

Exhibit Description

Date of First Filing

Exhibit No./Appendix Reference

February 24, 2023

Subsidiaries.

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Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Onto Innovation Inc.

Incentive Compensation Recovery Policy

Inline XBRL Instance Document

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Reports of Independent Registered Public Accounting Firm (PCAOB ID Number 42 )

Consolidated Statements of Operations for the years ended December 31, 2022, January 1, 2022 and

December 26, 2020

Consolidated Statements of Comprehensive Income for the years ended December 31, 2022, January 1, 2022 and December 26, 2020

Consolidated Balance Sheets as of December 31, 2022 and January 1, 2022

Consolidated Statements of Cash Flows for the years ended December 31, 2022, January 1, 2022 and

December 26, 2020

Consolidated Statements of Stockholders’

Equity for the years ended December 31, 2022, January 1, 2022 and December 26, 2020

Consolidated Statements of Operations for the years ended December 30, 2023, December 31, 2022 and

January 1, 2022

Consolidated Statements of Comprehensive Income for the years ended December 30, 2023, December 31, 2022 and January 1, 2022

Consolidated Balance Sheets as of December 30, 2023 and December 31, 2022

Consolidated Statements of Cash Flows for the years ended December 30, 2023, December 31, 2022 and

January 1, 2022

Consolidated Statements of Stockholders’ Equity for the years ended December 30, 2023, December 31, 2022 and January 1, 2022

Notes to the Consolidated Financial Statements

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We have audited the accompanying consolidated balance sheets of Onto Innovation Inc.

(the Company) as of December 31, 2022, and January 1, 2022, the related consolidated statements of operations, comprehensive income, stockholders’

equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and January 1, 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with U.S.

(the Company) as of December 30, 2023,and December 31, 2022, the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 30, 2023, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 30, 2023 and December 31, 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 30, 2023, in conformity with U.S.

generally accepted accounting principles.

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These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

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Reserve for Excess and Obsolete Inventory

Description of the Matter

Description of

As described in Notes 2 and 7 to the consolidated financial statements, the Company records inventory net of a reserve for excess and obsolete inventory resulting in net inventories of $328 million as of December 30, 2023.

The valuation of certain of the Company’s inventory is subject to risks associated with supply and demand.

As described in Note 2 to the consolidated financial statements, the Company maintains reserves for excess and obsolete inventory equal to the difference between the cost of inventory and its estimated net realizable value based upon assumptions about historical and future demand for the Company’s products and market conditions

Auditing management’s estimate of the excess and obsolete inventory reserve was subjective and required significant judgment as the excess and obsolete inventory reserve is sensitive to changes in the Company’s operations and assumptions used to estimate the reserve including management’s assumptions with regards to product life-cycles, product demand and market conditions, which includes historical usage, expected future usage, on-hand quantities of individual materials, and anticipated engineering design changes or advancements.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s excess and obsolete inventory reserve process, including those over

the validity and reasonableness of the data and assumptions used in estimating the excess and obsolete inventory reserve.

To test the adequacy of the Company’s excess and obsolete inventory reserve, we performed audit procedures that included, among others, assessing methodologies and assumptions used, testing the completeness and accuracy of the underlying data used by management in its analysis including the usage of historical materials, considering potential product obsolescence, observing physical inventory on-hand and inspecting historical gross margins to assess whether any items are being sold at a loss or lower margins that may need to be included in the reserve.

We assessed the historical accuracy of management’s estimated excess and obsolete inventory reserve and performed sensitivity analyses to evaluate changes in the estimate that result from changes in the Company’s significant assumptions.

expected future usage, on-hand quantities of individual materials, and anticipated engineering design changes or advancements.

Addressed the

Matter in Our

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s excess and obsolete inventory reserve process, including those over the validity and reasonableness of the data and assumptions used in estimating the excess and obsolete inventory reserve.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2008.

Iselin, New Jersey

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Opinion on Internal Control Over Financial Reporting

We have audited Onto Innovation Inc.’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

We have audited Onto Innovation Inc.’s internal control over financial reporting as of December 30, 2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

In our opinion, Onto Innovation Inc.

(the Company) maintained, in all material respects, effective internal control over financial reporting as of December 30, 2023, based on the COSO criteria.

equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and financial statement schedule listed in the Index at Item 15(a) and our report dated February 24, 2023 expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 30, 2023 and December 31, 2022, the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 30, 2023, and the related notes and financial statement schedule listed in the Index at Item 15(a) and our report dated February 26, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting .

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

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Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

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Other expense, net

Income before provision (benefit) for income taxes

Provision (benefit) for income taxes

Income before provision for income taxes

Provision for income taxes

Earnings per share:

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Accounts receivable, less allowance of $ 2,659 at December 30, 2023 and

$ 1,303 at January 1, 2022

$ 1,572 at December 31, 2022

Prepaid expenses and other current assets

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Deferred income taxes

LIABILITIES AND STOCKHOLDERS’

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

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Commitments and contingencies (Note 8)

Stockholders’

Stockholders’ equity:

Preferred stock, $ 0.001 par value, 3,000 shares authorized, no shares

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Common stock, $ 0.001 par value, 97,000 shares authorized, 49,086 and

49,300 issued and outstanding at December 31, 2022 and January 1, 2022,

48,684 issued and outstanding at December 30, 2023 and December 31, 2022,

respectively.

Additional paid-in capital

Accumulated other comprehensive income

Accumulated other comprehensive loss

Accumulated earnings

Total stockholders’

Total liabilities and stockholders’

Total stockholders’ equity

Total liabilities and stockholders’ equity

The accompanying notes are an integral part of these consolidated financial statements.

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Purchases of property, plant and equipment

Proceeds from sale of property, plant and equipment

Acquisitions, net of cash acquired

Cash received from convertible note receivable

Net cash and cash equivalents used in investing activities

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Issuance of shares through share-based compensation plans

Net cash and cash equivalents provided by (used in) financing activities

Net cash and cash equivalents (used in) provided by financing activities

Effect of exchange rate changes on cash and cash equivalents

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ONTO INNOVATION INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the years ended December 30, 2023,

January 1, 2022 and December 26, 2020

December 31, 2022 and January 1, 2022

(In thousands)

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Comprehensive

Accumulated Earnings /

Income / (Loss)

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based compensation plans, net

Repurchase of common stock

Share-based compensation

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Currency translation

Unrealized gain on investments

Balance at December 26, 2020

Unrealized loss on investments

Balance at January 1, 2022

Issuance of shares through share-

based compensation plans, net

Repurchase of common stock

Share-based compensation

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Unrealized loss on investments

Balance at January 1, 2022

Balance at December 31, 2022

Issuance of shares through share-

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Currency translation

Unrealized loss on investments

Unrealized gain on investments

Balance at December 30, 2023

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Onto Innovation Inc.

(“Onto Innovation”

or the “Company”) is 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.

(“Onto Innovation” or the “Company”) is 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.

The Company delivers 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.

The Company provides 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.

The Company’s 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.

Onto Innovation’s systems are backed by worldwide customer service and applications support.

The Company provides 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.

Onto Innovation’s systems are backed by worldwide customer service and applications support.

The Company has branch sales and service offices or subsidiaries in Korea, Japan, China, Taiwan, Singapore, Malaysia, Vietnam and in several countries in Europe.

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The fiscal year of 2023 began on January 1, 2023 and ended December 30, 2023.

The fiscal year of 2021 began on December 27, 2020 and ended January 1, 2022.

The fiscal year of 2022 began on January 2, 2022 and ended December 31, 2022.

The fiscal year of 2021 began on December 27, 2020 and ended January 1, 2022.

Revenue Recognition .

Revenue is recognized when control of the promised goods or services are transferred to the Company’s customers in an amount that reflects the consideration the Company expects to be entitled to receive in exchange for those goods or services.

Revenue is recognized when control of the promised goods or services is transferred to the Company’s customers in an amount that reflects the consideration the Company expects to be entitled to receive in exchange for those goods or services.

The Company accounts 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.

The Company has elected to account for shipping and handling activities as the fulfillment of a promise to transfer goods to the customer and therefore records these activities under the caption “Cost of revenue.”

Sales tax and any other taxes collected concurrent with revenue producing activities are excluded from revenue.

The Company accounts for shipping and handling activities as the fulfillment of a promise to transfer goods to the customer and therefore records these activities under the caption “Cost of revenue.” Sales tax and any other taxes collected concurrent with revenue producing activities are excluded from revenue.

Incidental items that are immaterial in the context of the contract are recognized as expense.

These accounting policy elections are consistent with the manner in which the Company has historically recorded these items.

Contracts with customers may include multiple performance obligations.

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To indicate transfer of control, the Company 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.

The Company generally transfers control for system sales when the customer or the customer’s agent picks up the system at the Company’s facility.

The Company provides an assurance warranty on its systems for a period of twelve to fourteen months against defects in material and workmanship.

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Services Revenue

Revenue from services primarily consists of service contracts, which provide additional maintenance coverage beyond the Company’s assurance warranty on its products, service labor, consulting and training.

Revenue from service contracts is recognized ratably over the term of the service contract.

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The Company does not disclose the value of remaining performance obligations for contracts with an original expected length of one year or less and contracts for which the Company recognizes revenue in the amount to which it has the right to invoice.

For additional information on the Company’s revenue recognition, see Note 9 of Notes to the Consolidated Financial Statements.

Business Combinations.

The Company accounts 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 the Company uses its best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date as well as contingent consideration, where applicable, the Company’s 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, the Company records 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 its consolidated statements of operations.

Accounting for business combinations requires the Company’s management to make significant estimates and assumptions, especially at the acquisition date including its estimates for intangible assets, contractual obligations assumed, restructuring liabilities, pre-acquisition contingencies, and contingent consideration, where applicable.

Although the Company believes the assumptions and estimates it has 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.

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Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates or actual results.

Use of Estimates.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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.

ONTO INNOVATION INC.

1 unchanged sentence

(In thousands, except per share data)

Use of Estimates.

Significant estimates made by management include the allowance for credit losses, 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, liabilities for product warranty, contingencies, including litigation reserves and share-based payments and liabilities for tax uncertainties.

recoverability of deferred tax assets, liabilities for product warranty, contingencies, including litigation reserves and share-based payments and liabilities for tax uncertainties.

Actual results could differ from those estimates.

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Marketable Securities.

The Company determined that all of its investment securities are to be classified as available-for-sale.

Available-for-sale debt securities are carried at fair value, with the unrealized gains and losses reported in stockholders’

equity under the caption “Accumulated other comprehensive loss.”

Realized gains and losses and, interest and dividends on available-for-sale securities are included in interest income and other, net.

The Company determined that its investment securities are to be classified as available-for-sale.

Available-for-sale debt securities are carried at fair value, with the unrealized gains and losses reported in stockholders’ equity under the caption “Accumulated other comprehensive loss.” Realized gains and losses and, interest and dividends on available-for-sale securities are included in interest income and other, net.

Available-for-sale securities are classified as current assets regardless of their maturity date if they are available for use in current operations.

The Company reviews its investment portfolio to identify and evaluate investments that have indications of possible impairment.

Factors considered in determining whether a loss is other-than-temporary include the length of time and extent to which fair value has been less than the cost basis, credit quality and the Company’s ability and intent to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value.

When a decline in fair value is determined to be other-than-temporary, unrealized losses on available-for-sale securities are charged against earnings.

The specific identification method is used to determine the gains and losses on marketable securities.

For additional information on the Company’s marketable securities, see Note 4 of Notes to the Consolidated Financial Statements.

Allowance for Credit Losses.

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Provisions for expected credit losses are classified as selling, general and administrative expense in the Consolidated Statements of Operations.

If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

Inventories .

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The Company evaluates inventories for excess quantities and obsolescence.

The Company establishes inventory reserves when conditions exist that suggest that inventory may be in excess of anticipated demand or is obsolete based upon assumptions about historical and future demand for the Company’s products and market conditions.

In addition, inventories are evaluated for potential obsolescence due to the effect of known and anticipated engineering design changes.

2 unchanged sentences

historical usage rates, forecasted sales, product end-of-life dates, estimated current and future market values and new product introductions.

When recorded, reserves are intended to reduce the carrying value of the Company’s inventory to its net realizable value.

If actual demand for the Company’s products deteriorates, or market conditions are less favorable than those that the Company projects, additional reserves may be required.

ONTO INNOVATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(In thousands, except per share data)

When recorded, reserves are intended to reduce the carrying value of the Company’s inventory to its net realizable value.

If actual demand for the Company’s products deteriorates, or market conditions are less favorable than those that the Company projects, additional reserves may be required.

Property, Plant and Equipment.

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Depreciation of property, plant and equipment is computed using the straight-line method over the estimated useful lives of the assets, which are five to twenty-two years for buildings, three to ten years for machinery and equipment, three to ten years for furniture and fixtures, three years for computer equipment, and three to seven years for software.

Leasehold improvements are amortized using the straight-line method over the lesser of the lease term or the estimated useful life of the related asset.

Leasehold improvements are amortized using the straight-line

ONTO INNOVATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(In thousands, except per share data)

method over the lesser of the lease term or the estimated useful life of the related asset.

Repairs and maintenance costs are expensed as incurred and major renewals and betterments are capitalized.

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If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset, which is generally based on discounted cash flows.

There were no impairments of long-lived assets for the years ended December 31, 2022, January 1, 2022 and December 26, 2020.

Goodwill and Indefinite Lived Intangible Assets.

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If the carrying value is higher than the fair value, the difference would be recognized as an impairment loss.

Intangible assets with indefinite lives, including in-process research and development (“IPR&D”), are tested for impairment if impairment indicators arise and, at a minimum, annually.

However, the Company is permitted to first assess qualitative factors to determine if a quantitative impairment test is necessary.

Further testing is only required if the entity determines, based on the qualitative assessment, that it is more likely than not that an indefinite-lived intangible asset’s fair value is less than its carrying amount.

Otherwise, no further impairment testing is required.

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We consider many factors in evaluating whether the value of intangible assets with indefinite lives may not be recoverable, including, but not limited to estimates of future cash flows, the discount rate, terminal growth rates, general economic conditions, our outlook and market performance of our industry and recent and forecasted financial performance.

There was no impairment of goodwill or IPR&D for the years ended December 31, 2022, January 1, 2022 and December 26, 2020.

For additional information on the Company’s goodwill and purchased intangible assets, see Note 5 of Notes to the Consolidated Financial Statements.

Concentration of Credit Risk.

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Government, and U.S.

The Company’s accounts receivable result primarily from the sale of semiconductor equipment, related accessories and replacement parts.

The Company’s customer base is highly concentrated and historically, a relatively small number of customers have accounted for a significant portion of its revenues.

The Company’s accounts receivable result primarily from the sale of semiconductor equipment, related accessories and replacement parts.

The Company’s customer base is highly concentrated and historically, a relatively small number of customers have accounted for a significant portion of its revenues.

Write-offs of uncollectible accounts have historically not been material.

The Company actively monitors its customers’ financial strength to reduce the risk of loss.

ONTO INNOVATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(In thousands, except per share data)

The Company generally provides a warranty on its products for a period of twelve to fourteen months against defects in material and workmanship.

1 unchanged sentence

The estimated future warranty obligations are affected by the warranty periods, sales volumes, product failure rates, material usage and labor and replacement costs incurred in correcting a product failure.

If actual product failure rates, material usage, labor or replacement costs differ from the Company’s estimates, revisions to the estimated warranty obligations would be required.

The warranty accrual represents the best estimate of the amount necessary to settle future and existing claims on products sold as of the balance sheet date.

If actual product failure rates, material usage, labor or replacement costs differ from the Company’s estimates, revisions to the estimated warranty obligations would be required.

The warranty accrual represents the best estimate of the amount necessary to settle future and existing

ONTO INNOVATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(In thousands, except per share data)

claims on products sold as of the balance sheet date.

The Company periodically assesses the adequacy of its recorded warranty reserve and adjusts the amounts in accordance with changes in these factors.

Income Taxes .

The Company accounts for income taxes using the asset and liability approach for deferred taxes which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s consolidated financial statements or tax returns.

A valuation allowance is recorded to reduce a deferred tax asset to that portion which more likely than not will be realized.

For additional information on the Company’s income taxes, see Note 12 of Notes to the Consolidated Financial Statements.

Translation of Foreign Currencies.

The Company’s international branches and subsidiaries primarily generate and expend cash in their local functional currency.

Accordingly, all balance sheet accounts of these local functional currency branches and subsidiaries are translated into U.S.

1 unchanged sentence

dollars using average rates in effect for the period.

The resulting translation adjustments are recorded as cumulative translation adjustments and are recorded directly as a separate component of stockholders’

equity under the caption, “Accumulated other comprehensive loss.”

The Company had accumulated exchange losses resulting from the translation of foreign operation financial statements of $ 7,115 and $ 1,764 as of December 31, 2022 and January 1, 2022, respectively.

The resulting translation adjustments are recorded as cumulative translation adjustments and are recorded directly as a separate component of stockholders’ equity under the caption, “Accumulated other comprehensive loss.” The Company had accumulated exchange losses resulting from the translation of foreign operation financial statements of $ 8,664 and $ 7,115 as of December 30, 2023 and December 31, 2022, respectively.

Share-based Compensation .

1 unchanged sentence

Compensation expense is recognized using the straight-line attribution method to recognize share-based compensation over the service period of the award, with adjustments recorded for forfeitures as they occur.

For additional information on the Company’s share-based compensation plans, see Note 10 of Notes to the Consolidated Financial Statements.

Research and Development Costs .

1 unchanged sentence

Derivative Instruments and Hedging Activities .

The Company’s policy is to mitigate the effect of exchange rate fluctuations on certain foreign currency denominated business exposures.

The Company has a policy that allows for the use of derivative financial instruments to hedge foreign currency exchange rate fluctuations on forecasted revenue and net monetary assets or liabilities denominated in various foreign currencies.

2 unchanged sentences

The Company does not believe that it is exposed to more than a nominal amount of credit risk in its foreign currency hedges, as counterparties are large, global and well-capitalized financial institutions.

The Company’s exposures are in liquid currencies (Japanese yen, euros, Korean won, Taiwanese dollars, Chinese renminbi, Singapore dollars and Israeli shekel), so there is minimal risk that appropriate derivatives to maintain the Company’s hedging program would not be available in the future.

To hedge foreign currency risks, the Company uses foreign currency exchange forward contracts, where possible and prudent.

4 unchanged sentences

The dollar equivalent of the U.S.

dollar forward contracts and related fair values as of December 31, 2022 and January 1, 2022 were as follows:

dollar forward contracts and related fair values as of December 30, 2023 and December 31, 2022 were as follows:

Notional amount

Fair value of liability

During the years ended December 31, 2022 and January 1, 2022, the Company recognized losses of $ 3,487 and $ 1,650 on maturities of forward contracts, respectively.

During the year ended December 30, 2023, the Company recognized a gain of $ 263 on maturities of forward contracts.

During the years ended December 31, 2022 and January 1, 2022, the Company recognized losses of $ 3,487 and $ 1,650 on maturities of forward contracts, respectively.

The aggregate notional amounts of matured contracts were $ 319,370 , $ 365,985 and $ 420,460 for 2023, 2022 and 2021, respectively.

5 unchanged sentences

The Company does not recognize gain contingencies until realized.

See Note 8 of the Notes to the Consolidated Financial Statements, “Commitments and Contingencies”

for a detailed description.

See Note 8 of the Notes to the Consolidated Financial Statements, “Commitments and Contingencies” for a detailed description.

Recent Accounting Pronouncements.

Recently Adopted and Issued

Recently adopted and issued accounting guidance is not applicable or did not have, or is not expected to have, a material impact to the Company.

Recently Adopted or Effective

The Company has not adopted any new accounting standards during the 2023 fiscal year that have a material impact on the Company’s Condensed Consolidated Financial Statements.

Updates Not Yet Effective

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures,” which expands disclosures about a public entity’s reportable segments and requires more enhanced information about a reportable segment’s expenses, interim segment profit or loss, and how a public entity’s chief operating decision maker uses reported segment profit or loss information in assessing segment performance and allocating resources.

The guidance is effective for financial statements issued for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

The Company is required to adopt this standard in the fiscal year 2024 for the annual reporting period ending December 28, 2024, with retrospective disclosure of prior periods presented.

The Company is currently in the process of evaluating the impact of adoption on its Consolidated Financial Statements.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures,” which requires public entities to disclose consistent categories and greater disaggregation of information in the rate reconciliation and for income taxes paid.

It also includes certain other amendments to improve the effectiveness of income tax disclosures.

The guidance is effective for financial statements issued for annual periods beginning after December 15, 2024, with early adoption permitted.

The Company is required to adopt this standard prospectively in fiscal year 2025 for the annual reporting period ending December 27, 2025.

The Company is currently in the process of evaluating the impact of adoption on its Consolidated Financial Statements.

Fair Value Measurements:

3 unchanged sentences

The carrying value of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximates fair value because of the short-term maturity of these instruments.

ONTO INNOVATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(In thousands, except per share data)

Fair Value Hierarchy

3 unchanged sentences

Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the asset or liability.

Level 3 inputs are unobservable inputs based on management’s assumptions used to measure assets and liabilities at fair value.

A financial asset’s or liability’s fair value measurement classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

ONTO INNOVATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(In thousands, except per share data)

The following tables provide the assets and liabilities carried at fair value measured on a recurring basis at December 31, 2022 and January 1, 2022:

Fair Value Measurements Using

Quoted Prices in

Active Markets

for Identical

Assets (Level 1)

Inputs (Level 2)

Inputs (Level 3)

December 31, 2022

Available-for-sale debt securities:

Municipal notes and bonds

Asset-backed securities

Certificates of deposit

Commercial paper

Corporate bonds

Foreign currency forward contracts

Total liabilities

Level 3 inputs are unobservable inputs based on management’s assumptions used to measure assets and liabilities at fair value.

A financial asset’s or liability’s fair value measurement classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

The following table provides the assets and liabilities carried at fair value measured on a recurring basis at December 30, 2023 and December 31, 2022:

Fair Value Measurements Using

Quoted Prices in

Active Markets

for Identical

Assets (Level 1)

Inputs (Level 2)

Significant Other Observable

Inputs (Level 2)

January 1, 2022

Available-for-sale debt securities:

Municipal notes and bonds

Government notes and bonds

Asset-backed securities

7 unchanged sentences

Investment prices are obtained from third party pricing providers, which model prices utilizing the above observable inputs, for each asset class.

See Note 4 for additional discussion regarding the fair value of the Company’s marketable securities.

ONTO INNOVATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(In thousands, except per share data)

See Note 4 for additional discussion regarding the fair value of the Company’s marketable securities.

Marketable Securities:

At December 31, 2022 and January 1, 2022, marketable securities are categorized as follows:

At December 30, 2023 and December 31, 2022, marketable securities are categorized as follows:

Holding Gains

1 unchanged sentence

December 30, 2023

Municipal notes and bonds

Asset-backed securities

Government notes and bonds

Certificates of deposit

2 unchanged sentences

Total marketable securities

January 1, 2022

Municipal notes and bonds

December 31, 2022

Government notes and bonds

Asset-backed securities

3 unchanged sentences

Total marketable securities

The amortized cost and estimated fair value of marketable securities classified by the maturity date listed on the security, regardless of the Consolidated Balance Sheet classification, is as follows at December 31, 2022 and January 1, 2022:

ONTO INNOVATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(In thousands, except per share data)

December 30, 2023

January 1, 2022

December 31, 2022

Due within one year

3 unchanged sentences

Total marketable securities

ONTO INNOVATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(In thousands, except per share data)

The following table summarizes the estimated fair value and gross unrealized holding losses of marketable securities, aggregated by investment instrument and period of time in an unrealized loss position, at December 31, 2022 and January 1, 2022.

In Unrealized Loss Position

3 unchanged sentences

December 30, 2023

Municipal notes and bonds

Asset-backed securities

Government notes and bonds

Certificates of deposit

2 unchanged sentences

Total marketable securities

January 1, 2022

Municipal notes and bonds

December 31, 2022

Government notes and bonds

Asset-backed securities

Certificates of deposit

2 unchanged sentences

Total marketable securities

See Note 3 for additional discussion regarding the fair value of the Company’s marketable securities.

Goodwill and Purchased Intangible Assets:

3 unchanged sentences

The Company performed its annual assessment in the fourth quarter of fiscal 2023 and concluded that no impairment charge was required.

The changes in the carrying amount of goodwill are as follows:

Balance at December 26, 2020

Goodwill from Inspectrology acquisition

Balance at January 1, 2022

Goodwill adjustment

Balance at December 31, 2022

There were no changes to the carrying amount of goodwill for the years ended December 30, 2023 and December 31, 2022.

ONTO INNOVATION INC.

2 unchanged sentences

Purchased Intangible Assets

Purchased intangible assets as of December 31, 2022 and January 1, 2022 are as follows:

Purchased intangible assets as of December 30, 2023 and December 31, 2022 are as follows:

Gross Carrying Amount

6 unchanged sentences

Total identifiable intangible assets

January 1, 2022

December 31, 2022

Finite-lived intangible assets:

3 unchanged sentences

Total identifiable intangible assets

Intangible asset amortization expense amounted to $ 55,284 , $ 51,366 and $ 53,746 for the years ended December 31, 2022, January 1, 2022 and December 26, 2020, respectively.

Intangible asset amortization expense amounted to $ 54,822 , $ 55,284 and $ 51,366 for the years ended December 30, 2023, December 31, 2022 and January 1, 2022, respectively.

Assuming no change in the gross carrying value of identifiable intangible assets and estimated lives, estimated amortization expenses are $ 49,137 for 2024, $ 32,587 for 2025, $ 31,394 for 2026, $ 23,173 for 2027 and $ 12,288 for 2028.

1 unchanged sentence

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.

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.

5 unchanged sentences

The Company accounts for the lease and non-lease components as a single lease component.

Lease costs for operating leases were $ 6,368 and $ 5,964 for the years ended December 31, 2022 and January 1, 2022, respectively.

Lease costs for operating leases were $ 6,527 and $ 6,368 for the years ended December 30, 2023 and December 31, 2022, respectively.

Operating lease costs are generally recognized over the lease term.

The Company elected the practical expedient to not provide comparable presentation for periods prior to adoption.

Details of the Company’s operating leases are as follows:

Cash Flow Information

42 unchanged sentences

Accrued professional fees

Other accrued taxes

Total other current liabilities

21 unchanged sentences

The Company estimates the costs that may be incurred during the warranty period and records a liability in the amount of such costs at the time revenue is recognized.

The Company’s estimate is based primarily on historical experience.

The Company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary.

Settlements of warranty reserves are generally associated with sales that occurred during the 12 to 14 months prior to the year-end and warranty accruals are related to sales during the same year.

Changes in the Company’s warranty reserves are as follows:

Balance, beginning of the period

Warranty liability assumed from Inspectrology acquisition

Balance, end of the period

1 unchanged sentence

From time to time, the Company is subject to legal proceedings and claims in the ordinary course of business.

The following reflects an overview of the material developments with regard to the Company’s pending material legal proceedings.

Optical Solutions Inc.

1 unchanged sentence

18-cv-00417-BLF):

On August 2, 2017, Nanometrics was named as defendant in a complaint filed in New Hampshire Superior Court (the “Complaint”).

The Complaint, brought by Optical Solutions, Inc.

(“OSI”), alleges claims arising from a purported exclusive purchase contract between OSI and Nanometrics pertaining to certain products.

The relief sought is the award of damages in an amount to be proven at trial, attorney’s fees and cost as well as other relief the court deems just and proper.

On September 18, 2017, Nanometrics removed the action to the United States District Court for the District of New Hampshire (the “District of New Hampshire”).

On September 25, 2017, Nanometrics moved to transfer the Complaint to the United States District Court for the Northern District of California (the “Northern District of California”).

On December 20, 2017, Nanometrics filed its complaint against OSI in the California Superior Court for the County of Santa Clara alleging claims arising from OSI’s breach of certain purchase orders.

The relief sought is the award of damages in an amount to be proven at trial including pre- and post-judgment interest, punitive damages, restitution for benefits unjustly received by OSI, attorney’s fees and cost as well as other relief the court deems just and proper.

Nanometrics’

complaint was later removed by OSI to the Northern District of California.

On May 29, 2018, the District of New Hampshire issued an order granting Nanometrics’

motion to transfer the Complaint to the Northern District of California and denying Nanometrics’

motion to dismiss the Complaint without prejudice.

On June 14, 2018, the Complaint was consolidated with Nanometrics’

complaint against OSI.

(“OSI”), alleged claims arising from a purported exclusive purchase contract between OSI and Nanometrics pertaining to certain products.

The relief sought was the award of damages in an amount to be proven at trial, attorney’s fees and costs as well as other relief the court deems just and proper.

On September 18, 2017, Nanometrics removed the action to the United States District Court for the District of New Hampshire (the “District of New Hampshire”).

On September 25, 2017, Nanometrics moved to transfer the Complaint to the United States District Court for the Northern District of California (the “Northern District of California”).

The relief sought was the award of damages in an amount to be proven at trial including pre- and post-judgment interest, punitive damages, restitution for benefits unjustly received by OSI, attorney’s fees and costs as well as other relief the court deems just and proper.

Nanometrics’ complaint was later removed by OSI to the Northern District of California.

On May 29, 2018, the District of New Hampshire issued an order granting Nanometrics’ motion to transfer the Complaint to the Northern District of California and denying Nanometrics’ motion to dismiss the Complaint without prejudice.

On June 14, 2018, the Complaint was consolidated with Nanometrics’ complaint against OSI.

On August 9, 2018, OSI filed an Amended Complaint.

On September 19, 2018, Nanometrics filed a motion to dismiss OSI’s Amended Complaint for failure to state a claim.

Nanometrics’

motion to dismiss was heard on February 28, 2019.

On March 5, 2019, the Northern District of California granted Nanometrics’

motion to dismiss with leave to amend.

On September 19, 2018, Nanometrics filed a motion to dismiss OSI’s Amended Complaint for failure to state a claim.

Nanometrics’ motion to dismiss was heard on February 28, 2019.

On March 5, 2019, the Northern District of California granted Nanometrics’ motion to dismiss with leave to amend.

OSI filed a Second Amended Complaint on March 29, 2019.

Nanometrics filed a motion to dismiss OSI’s Second Amended Complaint on May 31, 2019.

In October 2019, Nanometrics was renamed Onto Innovation Inc.

as a result of the Merger.

Thereafter, the Company’s second motion to dismiss was heard on November 14, 2019.

On November 26, 2019, the Northern District of California granted the Company’s motion to dismiss with leave to amend.

Thereafter, the Company’s second motion to dismiss was heard on November 14, 2019.

On November 26, 2019, the Northern District of California granted the Company’s motion to dismiss with leave to amend.

OSI filed a Third Amended Complaint on January 21, 2020.

On March 2, 2020, the Company filed a motion to dismiss OSI’s Third Amended Complaint and a hearing on the motion was held on June 11, 2020.

On June 23, 2020, the Northern District of California granted the Company’s motion to dismiss with prejudice with regard to two claims asserted by OSI and dismissed two other claims asserted by OSI with leave to amend.

Thereafter, on July 7, 2020, OSI filed a Fourth Amended

On March 2, 2020, the Company filed a motion to dismiss OSI’s Third Amended Complaint and a hearing on the motion was held on June 11, 2020.

Thereafter, on July 7, 2020, OSI filed a Fourth Amended Complaint.

On August 14, 2020, the Company filed a motion to dismiss with regard to one of the two remaining claims.

ONTO INNOVATION INC.

1 unchanged sentence

(In thousands, except per share data)

On August 14, 2020, the Company filed a motion to dismiss with regard to one of the two remaining claims.

On December 1, 2020, the Northern District of California denied this final motion to dismiss and as a result the Company filed its Answer in this matter on December 22, 2020.

Discovery is now closed and the trial date is set for December 4, 2023.

At this time, the loss contingency in this matter is remote and the Company does not anticipate the outcome of the matter to have a material impact on its financial position, results of operations, or cash flows.

December 1, 2020, the Northern District of California denied this final motion to dismiss and as a result the Company filed its Answer in this matter on December 22, 2020.

Discovery was closed and a trial date set for December 2023.

Prior to trial, however, the parties resolved all outstanding claims between them in a confidential out-of-court settlement during fiscal 2023.

The settlement did not have a material impact on the Company’s financial position, results of operations or cash flows.

Open and Committed Purchase Orders

9 unchanged sentences

Total revenue

See Note 14 of the Notes to the Consolidated Financial Statements for additional discussion of the Company’s disaggregated revenue in detail.

Contract Liabilities

1 unchanged sentence

For contracts that have a duration of one year or less, these amounts are recorded as current deferred revenue in the Consolidated Balance Sheets.

As of December 31, 2022 and January 1, 2022, the Company carried a long-term deferred revenue balance of $ 2,852 and $ 1,693 , respectively, in “other non-current liabilities”

on the Consolidated Balance Sheets.

As of December 30, 2023 and December 31, 2022, the Company carried a long-term deferred revenue balance of $ 2,462 and $ 2,852 , respectively, in “other non-current liabilities” on the Consolidated Balance Sheets.

Changes in deferred revenue were as follows:

Balance, beginning of the period

Deferred revenue assumed from Inspectrology acquisition

Deferral of revenue

Recognition of deferred revenue

Revenue recognized

Balance, ending of the period

4 unchanged sentences

Share-Based Compensation Plans

The Company’s share-based compensation plans are intended to attract and retain employees and to provide an incentive for them to assist the Company to achieve long-range performance goals and to enable them to participate in long-term growth of the Company.

The Company settles restricted stock unit awards, employee stock purchase option exercises and stock option exercises with newly issued common shares.

Onto Innovation Inc.

2020 Stock Plan (the “2020 Plan”) .

The 2020 Plan provides for the grant of 3,744 stock options and other stock awards to employees, directors and consultants at an exercise price equal to the fair market value of the common stock on the date of grant.

2 unchanged sentences

however, other vesting periods are allowable under the 2020 Plan.

Restricted stock units (“RSU”) granted to employees have time based or performance-based vesting.

Restricted stock units (“RSUs”) granted to employees have time based or performance-based vesting.

As of December 30, 2023, there were 2,868 shares of common stock available for issuance pursuant to future grants under the 2020 Plan.

Onto Innovation Inc.

2020 Employee Stock Purchase Plan (the “2020 ESPP”).

Under the terms of the 2020 ESPP, eligible employees may have up to 10 % of eligible compensation deducted from their pay and applied to the purchase of shares of Company common stock.

The price the employee pays for each share of stock is 85 % of the lesser of the fair market value of Company common stock at the beginning or the end of the applicable six-month purchase period.

The 2020 ESPP is intended to qualify under Section 423 of the Internal Revenue Code and is a compensatory plan as defined by FASB ASC 718, “Stock Compensation.”

Through the Company’s employee stock purchase plans, employees purchased 142 , 242 and 91 shares during the twelve months ended December 31, 2022, January 1, 2022 and December 26, 2020, respectively.

As of December 31, 2022 and January 1, 2022, there were 1,116 and 1,258 , shares available for issuance under the Company’s employee stock purchase plan, respectively.

The 2020 ESPP is intended to qualify under Section 423 of the Internal Revenue Code and is a compensatory plan as defined by FASB ASC 718, “Stock Compensation.” Through the Company’s employee stock purchase plans, employees purchased 91 , 142 and 242 shares during the twelve months ended December 30, 2023, December 31, 2022 and January 1, 2022, respectively.

As of December 30, 2023 and December 31, 2022, there were 1,025 and 1,116 , shares available for issuance under the Company’s employee stock purchase plan, respectively.

The following table reflects share-based compensation expense by type of award:

10 unchanged sentences

Restricted Stock Units

During fiscal years 2022, 2021 and 2020, the Company issued both service-based RSUs and market-based performance RSUs (“PRSUs”).

During fiscal years 2023, 2022 and 2021, the Company issued both service-based RSUs and market-based performance RSUs (“PRSUs”).

Service-based RSUs typically vest over a period of 3 years or less.

Market-based PRSUs generally vest three years from the grant date if certain performance criteria are achieved and require continued employment.

Based upon the terms of such awards, the number of shares that can be earned over the performance periods is based on the Company’s Common Stock price performance compared to the market price performance of a designated benchmark index, ranging from 0 % to 200 % of target.

The designated benchmark index was the Philadelphia Semiconductor Sector Index for market-based PRSUs issued in 2023, 2022 and 2021.

The stock price performance or market price performance is measured using the closing price for the 20 -trading days prior to the dates the performance period begins and ends.

The following table summarizes the Company’s combined service-based RSUs and market-based PRSUs:

Nonvested at December 31, 2019

The following table summarizes the Company’s combined service-based RSUs and market-based PRSUs:

Nonvested at December 26, 2020

1 unchanged sentence

Nonvested at December 31, 2022

Nonvested at December 30, 2023

Of the 584 shares outstanding at December 30, 2023, 494 are service-based RSUs and 90 are market-based PRSUs.

The fair value of the Company’s service-based RSUs was calculated based on the fair market value of the Company’s stock at the date of grant.

The fair value of the Company’s market-based PRSUs granted during fiscal years 2022, 2021, and 2020 was calculated using a Monte Carlo simulation model at the date of the grant, resulting in a weighted average grant-date fair value per share of $ 85.49 , $ 80.04 , and $ 47.86 , respectively.

As of December 31, 2022, there was $ 28,653 of total unrecognized compensation cost related to restricted stock units granted under the plans.

The fair value of the Company’s service-based RSUs was calculated based on the fair market value of the Company’s stock at the date of grant.

The fair value of the Company’s market-based PRSUs granted during fiscal years 2023, 2022, and 2021 was calculated using a Monte Carlo simulation model at the date of the grant, resulting in a weighted average grant-date fair value per share of $ 100.79 , $ 85.49 , and $ 80.04 , respectively.

As of December 30, 2023, there was $ 26,559 of total unrecognized compensation cost related to RSUs granted under the plans.

That cost is expected to be recognized over a weighted average period of 1.4 years.

1 unchanged sentence

The Company has a 401(k) savings plan that allows employees to contribute up to 100 % of their annual compensation to the Plan on a pre-tax or after-tax basis, limited to a maximum annual amount as set periodically by the Internal Revenue Service.

The plan provides a 50 % match of all employee contributions up to 6 percent of the employee’s salary.

Matching contributions to the plan totaled $ 2,965 , $ 2,544 and $ 2,315 for the years ended December 31, 2022, January 1, 2022 and December 26, 2020, respectively.

The plan provides a 50 % match of all employee contributions up to 6 percent of the employee’s salary.

Matching contributions to the plan totaled $ 3,128 , $ 2,965 and $ 2,544 for the years ended December 30, 2023, December 31, 2022 and January 1, 2022, respectively.

Other Expense, Net:

7 unchanged sentences

The components of income tax expense are as follows:

Total income tax expense (benefit)

Total income tax expense

The income before tax is comprised of the following:

2 unchanged sentences

The provision for income taxes differs from the amount of income tax determined by applying the applicable U.S.

federal income tax rate of 21 % for the years ended December 31, 2022, January 1, 2022 and December 26, 2020, to income before provision for income taxes as follows:

federal income tax rate of 21 % for the years ended December 30, 2023, December 31, 2022 and January 1, 2022, to income before provision for income taxes as follows:

Federal income tax provision at statutory rate

1 unchanged sentence

Foreign taxes, net of federal effect

Foreign Derived Intangible Income ( “

FDII ”

Foreign Derived Intangible Income ( “ FDII ” ) Deduction

US tax on foreign source income

1 unchanged sentence

Research and development tax credit

Tax impact of audit and statue closures

Tax impact of audit and statute closures

Change in valuation allowance

Impact of the CARES Act

Provision (benefit) for income taxes

Provision for income taxes

Effective tax rate

10 unchanged sentences

Depreciation and amortization

Capitalized research and development

Operating lease liabilities

6 unchanged sentences

Gross deferred tax liabilities

Net deferred tax liabilities

At December 31, 2022 and January 1, 2022, the Company had recorded valuation allowances of $ 11,772 and 10,948 , respectively, on a certain portion of the Company’s deferred tax assets to reflect the deferred tax assets at the net amount that is more likely than not to be realized.

The Company maintains a valuation allowance against a portion of its federal and foreign tax credit carryforwards and state net operating losses and research and development credits of $ 1,601 and $ 10,171 , respectively.

Net deferred tax assets (liabilities)

At December 30, 2023 and December 31, 2022, the Company had recorded valuation allowances of $ 13,960 and $ 11,772 , respectively, on a certain portion of the Company’s deferred tax assets to reflect the deferred tax assets at the net amount that is more likely than not to be realized.

The Company maintains a valuation allowance against its federal foreign tax credit carryforwards of $ 2,317 and state research and development credits of $ 11,644 .

In assessing the realizability of deferred tax assets, the Company uses a more likely than not standard.

2 unchanged sentences

Management considers the scheduled reversal of deferred income tax liabilities, projected future taxable income and tax planning strategies when making this assessment.

In making the determination that it is more likely than not that the Company’s deferred tax assets will be realized as of December 31, 2022, the Company relied primarily on the reversal of deferred tax liabilities as well as projected future taxable income.

In making the determination that it is more likely than not that the Company’s deferred tax assets will be realized as of December 30, 2023, the Company relied primarily on the reversal of deferred tax liabilities as well as projected future taxable income.

At December 30, 2023, the Company had tax effected state and foreign net operating loss carryforwards of $ 860 and $ 228 , respectively.

3 unchanged sentences

The state research & development credits have no expiration dates.

As of December 31, 2022, the Company has provided U.S.

As of December 30, 2023, the Company has not provided U.S.

income taxes on all its foreign earnings.

The Company continues to permanently reinvest the cash held offshore to support its working capital needs.

The Company has accrued $ 82 for additional foreign withholding taxes that may be required from its United Kingdom and China entities in the event of a cash distribution.

ONTO INNOVATION INC.

3 unchanged sentences

Balance, beginning of the period

Gross increases—tax positions in prior period

Gross decreases—tax positions in prior period

Gross increases—current-period tax positions

Gross increases—tax positions in prior period

Gross decreases—tax positions in prior period

Gross increases—current-period tax positions

Closure of audit/statute limitation

Balance, end of the period

The unrecognized tax benefits at December 31, 2022 and January 1, 2022 were $ 13,010 and $ 12,373 , respectively, of which $ 7,614 and $ 7,832 , respectively, would be reflected as an adjustment to income tax expense if recognized.

The year over year increase from 2021 to 2022 is primarily due to additional unrecognized tax benefits related to federal and state tax exposures, offset by expiring tax statues.

The unrecognized tax benefits at December 30, 2023 and December 31, 2022 were $ 13,142 and $ 13,010 , respectively, of which $ 7,231 and $ 7,614 , respectively, would be reflected as an adjustment to income tax expense if recognized.

The year over year increase from 2022 to 2023 is primarily due to additional unrecognized tax benefits related to federal and state tax exposures, offset by expiring tax statutes.

It is reasonably possible that certain amounts of unrecognized tax benefits may reverse in the next 12 months;

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The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense.

During the years ended December 31, 2022, January 1, 2022 and December 26, 2020, the Company recognized approximately $ 149 , $( 814 ) and $( 193 ), respectively, in interest and penalties (benefit) expense associated with uncertain tax positions.

As of December 31, 2022 and January 1, 2022, the Company had accrued interest and penalties expense included in the table of unrecognized tax benefits of $ 628 and $ 430 , respectively.

During the years ended December 30, 2023, December 31, 2022 and January 1, 2022, the Company recognized approximately $ 146 , $ 149 and $( 814 ), respectively, in interest and penalties (benefit) expense associated with uncertain tax positions.

As of December 30, 2023 and December 31, 2022, the Company had accrued interest and penalties expense included in the table of unrecognized tax benefits of $ 823 and $ 628 , respectively.

The Company is subject to U.S.

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In the normal course of business, the Company is subject to tax audits in various jurisdictions, and such jurisdictions may assess additional income taxes or other taxes against it.

Although the Company believes its tax estimates are reasonable, the final determination of tax audits and any related litigation could be materially different from the Company’s historical income tax provisions and accruals.

The results of an audit or litigation could have a material adverse effect on the Company’s results of operations or cash flows in the period or periods for which that determination is made.

Accumulated Other Comprehensive Income (Loss):

Comprehensive income includes net income, foreign currency translation adjustments, and net unrealized gains and losses on available-for-sale debt securities.

See the Consolidated Statements of Comprehensive Income for the effect of the components of comprehensive income on the Company’s net income.

The components of accumulated other comprehensive income (loss), net of tax, are as follows:

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income (loss)

Balance at December 26, 2020

Net current period other comprehensive income

Reclassifications

Balance at January 1, 2022

Net current period other comprehensive loss

Reclassifications

Balance at December 31, 2022

Net current period other comprehensive income (loss)

Balance at December 30, 2023

ONTO INNOVATION INC.

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Therefore, the Company has one reportable segment.

The Company’s chief operating decision maker is the Chief Executive Officer (the “CEO”).

The CEO allocates resources and assesses performance of the business and other activities at the reportable segment level.

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Total revenue

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.

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The following chart identifies our customers that represented 10% or more of total revenue for each of the last three fiscal years:

Taiwan Semiconductor Manufacturing Co.

Samsung Semiconductor

Taiwan Semiconductor Manufacturing Co.

SK Hynix Inc.

The customer accounted for less than 10% of total revenue during the period.

At December 31, 2022, two customers, Samsung Semiconductor and Taiwan Semiconductor Manufacturing Co.

Ltd., accounted for more than 10 % of net accounts receivable.

At January 1, 2022, one customer, Taiwan Semiconductor Manufacturing Co.

Ltd., accounted for more than 10 % of net accounts receivable.

Substantially all of the Company’s long-lived assets are located within the United States of America.

At December 30, 2023 and December 31, 2022, two customers, Taiwan Semiconductor Manufacturing Co.

and Samsung Semiconductor, accounted for more than 10 % of net accounts receivable.

Substantially all of the Company’s long-lived assets are located within the United States of America.

ONTO INNOVATION INC.

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Restricted stock units and stock options are included in the calculation of diluted earnings per share, except when their effect would be anti-dilutive.

The Company’s basic and diluted earnings per share amounts are as follows:

Basic earnings per share - weighted average shares

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At December 30, 2023, there was $ 31,577 available for future share repurchases under this share repurchase authorization.

The following table summarizes the Company’s stock repurchases:

Shares of common stock repurchased

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Average price paid per share

Restructuring

The Company initiated a restructuring plan to streamline operations and align the Company’s cost structure with its business outlook for 2023.

During the twelve months ended December 30, 2023, restructuring costs of $ 3,571 were recorded in operating expenses for employee severance and $ 7,027 were recorded in cost of goods sold for inventory write-downs primarily related to the exit of older product lines.

All employee severance costs were paid during the twelve-month period.

ONTO INNOVATION INC.

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Deferred tax valuation

Allowance for convertible

notes receivable

PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) 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.

23 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures