ONTO INNOVATION INC. 10-K

Item 9A. Controls and Procedures. Evaluation of Disclosure Controls and Procedures We maintain disclosure controls and procedures that are designed to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time period specified in SEC rules and forms. These controls and procedures are also designed to ensure that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating disclosure controls and procedures, we have recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Management is required to apply judgment in evaluating its controls and procedures. We performed an evaluation under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, to assess the effectiveness of the design and operation of our disclosure controls and procedures under the Exchange Act as of December 28, 2024. 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 28, 2024 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 41 Table of Contents 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). Based on our evaluation, our management concluded that our internal control over financial reporting was effective as of December 28, 2024. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may be circumvented or deteriorate. Attestation Report of the Registered Public Accounting Firm Our consolidated financial statements as of and for the year ended December 28, 2024 have been audited by Ernst & Young LLP, our independent registered public accounting firm, in accordance with the standards of the Public Company Accounting Oversight Board (United States). Ernst & Young LLP has also audited our internal control over financial reporting as of December 28, 2024, as stated in its attestation report included elsewhere in this Form 10-K. Changes in Internal Control over Financial Reporting There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during our fiscal quarter ended December 28, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information. Rule 10b5-1 Plan Elections During the fiscal quarter ended December 28, 2024, none of our directors or officers (as defined in Rule 16a-1 under the Exchange Act) adopted, modified or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 105b-1 trading arrangement” (as those terms are defined in Item 408 of Regulation S-K). Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. Not applicable. 42 Table of Contents PART III 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 21, 2025, and such information included in the Proxy Statement is incorporated herein by reference, as specified below. Item 10. 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 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. We have adopted a code of business conduct and ethics that applies to our principal executive officer, principal financial officer and controller. This code of business conduct and ethics is posted on our internet website address at http://investors.ontoinnovation.com. We will post on our website any amendment to or waiver from a provision of our code of business conduct and ethics as may be required, and within the time period specified, by applicable SEC rules. We have adopted an insider trading policy governing the purchase, sale and other dispositions of our securities by our directors, officers and employees that we believe is reasonably designed to promote compliance with insider trading laws, rules and regulations, and any applicable listing standards. Item 11. 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. Item 12. 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. Item 13. 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. Item 14. 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. 43 Table of Contents PART IV Item 15. Exhibits and Financial Statement Schedules. (a) The following documents are filed as part of this Form 10-K: 1. Financial Statements The consolidated financial statements and consolidated financial statement information required by this Item are included on pages F-1 through F-9 of this report. The Reports of Independent Registered Public Accounting Firm appear on pages F-1 through F-3 of this report. 2. Financial Statement Schedule See Index to financial statements on page 47 of this report. 3. Exhibits Exhibits are as set forth in the “Exhibit Index”, provided below. Where so indicated, exhibits, which were previously filed, are incorporated by reference. 44 Table of Contents Exhibit No. Exhibit Description Form File Number Date of First Filing Exhibit No./Appendix Reference 3.1 Amended and Restated Certificate of Incorporation of Onto Innovation Inc. 8-K 001-39110 October 28, 2019 3.2 3.2 Amended and Restated Bylaws of Onto Innovation Inc. 8-K 001-39110 January 27, 2020 3.1 4.1 Form of Common Stock Certificate 10-K 001-39110 February 25, 2020 4.2 4.2 Description of Securities 10-K 001-39110 February 25, 2020 4.1 10.1* Onto Innovation Inc. 2020 Stock Plan, as amended and restated 10-Q 001-39110 August 8, 2024 10.1 10.2*+ Form of Employee Stock Option Agreement for usage under the Onto Innovation Inc. 2020 Stock Plan, as amended and restated - - - - 10.3*+ Form of Director Stock Option Agreement for usage under the Onto Innovation Inc. 2020 Stock Plan, as amended and restated - - - - 10.4*+ Form of Executive Restricted Stock Unit Grant Agreement for usage under the Onto Innovation Inc. 2020 Stock Plan, as amended and restated - - - - 10.5*+ Form of Executive Performance Stock Unit Grant Agreement for usage under the Onto Innovation Inc. 2020 Stock Plan, as amended and restated - - - - 10.6* Form of Employee Restricted Stock Unit Agreement for usage under the Onto Innovation Inc. 2020 Stock Plan, as amended and restated 10-K 001-39110 February 26, 2024 10.6 10.7* Form of Director Restricted Stock Unit Purchase Agreement for usage under the Onto Innovation Inc. 2020 Stock Plan, as amended and restated 10-K 001-39110 February 26, 2024 10.7 10.8* Form of Employee Performance Stock Unit Purchase Agreement for usage under the Onto Innovation Inc. 2020 Stock Plan, as amended and restated 10-Q 001-39110 August 5, 2021 10.1 10.9* Form of Employee Incentive Restricted Stock Unit Purchase Agreement for usage under the Onto Innovation Inc. 2020 Stock Plan, as amended and restated 10-Q 001-39110 November 4, 2021 10.1 45 Table of Contents Exhibit No. Exhibit Description Form File Number Date of First Filing Exhibit No./Appendix Reference 10.10* Onto Innovation Inc. 2020 Employee Stock Purchase Plan S-8 333-238492 May 19, 2020 10.2 10.11* Form of Onto Innovation Inc. Indemnification Agreement 8-K 001-39110 September 13, 2021 10.1 10.12* 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. 001-39110). 8-K 001-39110 September 15, 2023 10.1 10.13* Offer Letter to Yoon Ah E. Oh, dated October 4, 2021, by and between Yoon Ah E. Oh and Onto Innovation Inc. 10-Q 001-39110 May 3, 2022 10.1 10.14* Offer Letter to Mark Slicer, dated April 1, 2022, by and between Mark Slicer and Onto Innovation Inc. 8-K 001-39110 May 17, 2022 10.1 10.15*+ Offer Letter to Ramil Yaldaei, dated April 25, 2023, by and between Ramil Yaldaei and Onto Innovation Inc. - - - - 10.16*+ Offer Letter to Srinivas Vedula, dated August 30, 2021 - - - - 10.17* Form of Executive Change in Control Agreement 10-K 001-39110 February 24, 2023 10.13 19+ Onto Innovation Inc. Insider Trading Policy - - - - 21.1+ Subsidiaries. - - - - 23.1+ Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm. - - - - 31.1+ Rule 13a-14(a) Certification of Chief Executive Officer of the Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. - - - - 31.2+ Rule 13a-14(a) Certification of Chief Financial Officer of the Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. - - - - 32.1+ Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. - - - - 32.2+ Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. - - - - 97 Onto Innovation Inc. Incentive Compensation Recovery Policy 10-K 001-39110 February 26, 2024 97 101.INS Inline XBRL Instance Document 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (formatted in inline XBRL and contained in Exhibit 101) * Management contract, compensatory plan or arrangement. + Filed herewith 46 Table of Contents ONTO INNOVATION INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE Page Consolidated Financial Statements: Reports of Independent Registered Public Accounting Firm (PCAOB ID Number 42 ) F- 1 Consolidated Statements of Operations for the years ended December 28, 2024, December 30, 2023 and December 31, 2022 F- 4 Consolidated Statements of Comprehensive Income for the years ended December 28, 2024, December 30, 2023 and December 31, 2022 F- 5 Consolidated Balance Sheets as of December 28, 2024 and December 30, 2023 F- 6 Consolidated Statements of Cash Flows for the years ended December 28, 2024, December 30, 2023 and December 31, 2022 F- 7 Consolidated Statements of Stockholders’ Equity for the years ended December 28, 2024, December 30, 2023 and December 31, 2022 F- 8 Notes to the Consolidated Financial Statements F- 9 Consolidated Financial Statement Schedule: Schedule of Valuation and Qualifying Accounts F- 32 Item 16. Form 10-K Summary . None 47 Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Onto Innovation Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Onto Innovation Inc. (the Company) as of December 28, 2024 and December 30, 2023, the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 28, 2024, 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 28, 2024 and December 30, 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 28, 2024, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 28, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 25, 2025 expressed an unqualified opinion thereon. Basis for Opinion 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. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosure to which it relates. Reserve for Excess and Obsolete Inventory Description of the Matter As described in Notes 2 and 8 to the consolidated financial statements, the Company records inventory net of a reserve for excess and obsolete inventory resulting in net inventories of $287.0 million as of December 28, 2024. 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 F- 1 Table of Contents 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. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2008. Iselin, New Jersey February 25, 2025 F- 2 Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Onto Innovation Inc. Opinion on Internal Control Over Financial Reporting We have audited Onto Innovation Inc.’s internal control over financial reporting as of December 28, 2024, 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 28, 2024, based on the COSO criteria. 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 28, 2024 and December 30, 2023, the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 28, 2024, and the related notes and financial statement schedule listed in the Index at Item 15(a) and our report dated February 25, 2025 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. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. 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. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP Iselin, New Jersey February 25, 2025 F- 3 Table of Contents ONTO INNOVATION INC. CONSOLIDATED STATEM ENTS OF OPERATIONS (In thousands, except per share data) Year Ended December 28, 2024 December 30, 2023 December 31, 2022 Revenue $ 987,321 $ 815,868 $ 1,005,183 Cost of revenue 472,013 395,614 465,962 Gross profit 515,308 420,254 539,221 Operating expenses: Research and development 116,767 104,442 111,953 Sales and marketing 76,155 61,765 65,688 General and administrative 85,846 83,147 69,582 Amortization 49,437 54,822 55,284 Total operating expenses 328,205 304,176 302,507 Operating income 187,103 116,078 236,714 Interest income, net 33,489 20,356 5,011 Other expense, net ( 145 ) ( 3,852 ) ( 141 ) Income before provision for income taxes 220,447 132,582 241,584 Provision for income taxes 18,777 11,423 18,250 Net income $ 201,670 $ 121,159 $ 223,334 Earnings per share: Basic $ 4.09 $ 2.47 $ 4.52 Diluted $ 4.06 $ 2.46 $ 4.49 Weighted average number of shares outstanding: Basic 49,343 48,971 49,424 Diluted 49,660 49,318 49,764 The accompanying notes are an integral part of these consolidated financial statements. F- 4 Table of Contents ONTO INNOVATION INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands) Year Ended December 28, 2024 December 30, 2023 December 31, 2022 Net income $ 201,670 $ 121,159 $ 223,334 Other comprehensive income (loss), net of tax: Change in net unrealized gains (losses) on available-for-sale marketable securities ( 137 ) 3,660 ( 2,447 ) Change in currency translation adjustments ( 5,827 ) ( 1,549 ) ( 8,879 ) Total other comprehensive income (loss), net of tax ( 5,964 ) 2,111 ( 11,326 ) Total comprehensive income $ 195,706 $ 123,270 $ 212,008 The accompanying notes are an integral part of these consolidated financial statements. F- 5 Table of Contents ONTO INNOVATION INC. CONSOLIDATED BALANCE SHEETS (In thousands, except per share data) December 28, 2024 December 30, 2023 ASSETS Current Assets: Cash and cash equivalents $ 212,945 $ 233,508 Marketable securities 639,383 464,303 Accounts receivable, less allowance of $ 2,585 at December 28, 2024 and $ 2,659 at December 30, 2023 308,142 226,556 Inventories 286,979 327,773 Prepaid expenses and other current assets 30,073 31,127 Total current assets 1,477,522 1,283,267 Property, plant and equipment, net 123,868 103,611 Goodwill 329,980 315,811 Identifiable intangible assets, net 127,457 167,375 Deferred income taxes 42,811 18,836 Other assets 15,453 20,812 Total assets $ 2,117,091 $ 1,909,712 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 56,261 $ 49,869 Accrued liabilities 49,974 42,062 Deferred revenue 33,828 24,763 Other current liabilities 30,026 31,032 Total current liabilities 170,089 147,726 Deferred and other tax liabilities 4 — Other non-current liabilities 21,116 25,451 Total liabilities 191,209 173,177 Commitments and contingencies (Note 9) Stockholders’ equity: Preferred stock, $ 0.001 par value, 3,000 shares authorized, no shares issued and outstanding — — Common stock, $ 0.001 par value, 97,000 shares authorized, 49,238 and 49,086 issued and outstanding at December 28, 2024 and December 30, 2023, respectively. 49 49 Additional paid-in capital 1,275,146 1,262,029 Accumulated other comprehensive loss ( 13,863 ) ( 7,899 ) Accumulated earnings 664,550 482,356 Total stockholders’ equity 1,925,882 1,736,535 Total liabilities and stockholders’ equity $ 2,117,091 $ 1,909,712 The accompanying notes are an integral part of these consolidated financial statements. F- 6 Table of Contents ONTO INNOVATION INC. CONSOLIDATED STATEM ENTS OF CASH FLOWS (In thousands) Year Ended December 28, 2024 December 30, 2023 December 31, 2022 Cash flows from operating activities: Net income $ 201,670 $ 121,159 $ 223,334 Adjustments to reconcile net income to net cash and cash equivalents provided by operating activities: Depreciation 12,872 12,390 9,378 Amortization of intangibles 49,437 54,822 55,284 Share-based compensation 28,577 25,513 24,426 Write-off of acquired in-process research and development 4,168 — 5,652 Provision for inventory valuation 19,187 10,015 9,313 Deferred income taxes ( 26,476 ) ( 22,429 ) ( 33,601 ) Other, net 722 2,991 ( 563 ) Change in operating assets and liabilities, net of effects of business acquired: Accounts receivable ( 83,685 ) 12,151 ( 65,140 ) Income taxes 3,109 1,798 ( 5,006 ) Inventories 19,943 ( 16,462 ) ( 93,905 ) Prepaid expenses and other assets 2,093 ( 14,013 ) ( 4,954 ) Accounts payable 6,225 ( 4,681 ) 1,181 Accrued and other liabilities 7,834 ( 11,281 ) 11,304 Net cash and cash equivalents provided by operating activities 245,676 171,973 136,703 Cash flows from investing activities: Purchases of marketable securities ( 708,707 ) ( 480,458 ) ( 371,287 ) Proceeds from maturities and sales of marketable securities 540,824 396,844 338,645 Purchases of property, plant and equipment ( 31,903 ) ( 22,573 ) ( 18,405 ) Proceeds from sale of property, plant and equipment — 2,800 — Acquisitions, net of cash acquired ( 26,761 ) — ( 4,644 ) Net cash and cash equivalents used in investing activities ( 226,547 ) ( 103,387 ) ( 55,691 ) Cash flows from financing activities: Purchases of common stock ( 25,069 ) ( 3,197 ) ( 65,257 ) Tax payments related to shares withheld for share-based compensation plans ( 19,045 ) ( 10,762 ) ( 8,874 ) Payment of contingent consideration for acquired business ( 737 ) ( 801 ) ( 2,287 ) Issuance of shares through share-based compensation plans 9,178 5,285 8,068 Net cash and cash equivalents used in financing activities ( 35,673 ) ( 9,475 ) ( 68,350 ) Effect of exchange rate changes on cash and cash equivalents ( 4,019 ) ( 1,476 ) ( 6,391 ) Net increase in cash and cash equivalents ( 20,563 ) 57,635 6,270 Cash and cash equivalents at beginning of year 233,508 175,872 169,602 Cash and cash equivalents at end of year $ 212,945 $ 233,508 $ 175,872 Supplemental disclosure of cash flow information: Income taxes paid, net $ 35,505 $ 34,104 $ 58,687 The accompanying notes are an integral part of these consolidated financial statements. F- 7 Table of Contents ONTO INNOVATION INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY For the years ended December 28, 2024, December 30, 2023 and December 31, 2022 (In thousands) Common Stock Additional Paid-in Accumulated Other Comprehensive Accumulated Shares Amount Capital Income / (Loss) Earnings Total Balance at January 1, 2022 49,300 $ 49 $ 1,256,179 $ 1,316 $ 168,511 $ 1,426,055 Issuance of shares through share- based compensation plans, net 509 1 8,067 — — 8,068 Repurchase of common stock ( 1,018 ) ( 1 ) ( 36,167 ) — ( 29,089 ) ( 65,257 ) Net income — — — — 223,334 223,334 Share-based compensation — — 24,426 — — 24,426 Share-based compensation plan withholdings ( 107 ) — ( 8,874 ) — — ( 8,874 ) Currency translation — — — ( 8,879 ) — ( 8,879 ) Unrealized loss on investments — — — ( 2,447 ) — ( 2,447 ) Balance at December 31, 2022 48,684 $ 49 $ 1,243,631 $ ( 10,010 ) $ 362,756 $ 1,596,426 Issuance of shares through share- based compensation plans, net 573 — 5,285 — — 5,285 Repurchase of common stock ( 46 ) — ( 1,638 ) — ( 1,559 ) ( 3,197 ) Net income — — — — 121,159 121,159 Share-based compensation — — 25,513 — — 25,513 Share-based compensation plan withholdings ( 125 ) — ( 10,762 ) — — ( 10,762 ) Currency translation — — — ( 1,549 ) — ( 1,549 ) Unrealized gain on investments — — — 3,660 — 3,660 Balance at December 30, 2023 49,086 $ 49 $ 1,262,029 $ ( 7,899 ) $ 482,356 $ 1,736,535 Issuance of shares through share- based compensation plans, net 411 — 9,178 — — 9,178 Repurchase of common stock ( 157 ) — ( 5,593 ) — ( 19,476 ) ( 25,069 ) Net income — — — — 201,670 201,670 Share-based compensation — — 28,577 — — 28,577 Share-based compensation plan withholdings ( 102 ) — ( 19,045 ) — — ( 19,045 ) Currency translation — — — ( 5,827 ) — ( 5,827 ) Unrealized loss on investments — — — ( 137 ) — ( 137 ) Balance at December 28, 2024 49,238 $ 49 $ 1,275,146 $ ( 13,863 ) $ 664,550 $ 1,925,882 The accompanying notes are an integral part of these consolidated financial statements F- 8 Table of Contents ONTO INNOVATION INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. Organization and Nature of Operations: 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. 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 has branch sales and service offices or subsidiaries in Korea, Japan, China, Taiwan, Singapore, Malaysia, Vietnam and in several countries in Europe. The Company operates in a single reportable segment and is a provider of process characterization equipment and software for wafer fabs and advanced packaging facilities. 2. Summary of Significant Accounting Policies: Consolidation. The consolidated financial statements reflect the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated. Fiscal Year. The Company operates on a 52- or 53-week fiscal year ending on the Saturday closest to December 31. The fiscal year of 2024 was a 52-week fiscal year that began on December 31, 2023 and ended December 28, 2024. The fiscal year of 2023 was a 52-week fiscal year that began on January 1, 2023 and ended December 30, 2023. The fiscal year of 2022 was a 52-week fiscal year that began on January 2, 2022 and ended December 31, 2022. Segment Reporting. The Company is organized and operates as one reportable segment, the design, development, manufacture and support of high-performance control metrology, defect inspection, lithography and data analysis systems used by microelectronics device manufacturers. The Company’s chief operating decision maker, the Chief Executive Officer, reviews financial information presented on a consolidated basis for purposes of making operating decisions and assessing financial performance. For additional information on the Company’s segment reporting, see Note 15 of Notes to the Consolidated Financial Statements. Revenue Recognition . 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 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. Contracts with customers may include multiple performance obligations. For such arrangements, the Company allocates revenue to each performance obligation based on its relative standalone selling price. The Company generally determines standalone selling prices based on the prices charged to customers or the expected cost-plus margin. Systems and Software Revenue Revenue from systems is recognized when the Company transfers control of the product to the customer. 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. The Company provides for the estimated cost of product warranties at the time revenue is recognized. F- 9 Table of Contents ONTO INNOVATION INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Depending on the terms of the systems arrangement, the Company may also defer the recognition of a portion of the consideration expected to be received because the Company has to satisfy a future obligation (e.g., installation and extended warranties). The Company uses 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 provides the customer with a right to use the software as it exists when made available to the customer. Revenue from software licenses, which is primarily sold with our systems, is recognized upfront at the point in time when the software is made available to the customer. Revenue from licensing support and maintenance is recognized as the support and maintenance are provided, which is over the contract period. Parts Revenue Revenue from parts is recognized when the Company transfers control of the product, which typically occurs when the Company ships the product from its facilities to the customer. 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. Revenue from service labor and consulting is recognized as services are performed. Revenue from installation services is recognized at a point in time when installation is complete. Practical Expedients The Company generally expenses sales commissions when incurred because the amortization period is one year or less. These costs are recorded within selling, general and administrative expenses. The Company does not adjust the amount of consideration for the effects of a significant financing components, if any, as the payment terms are one year or less. 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 10 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. 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. For additional information on the Company’s business combinations, see Note 3 of these Notes to the Consolidated Financial Statements. F- 10 Table of Contents ONTO INNOVATION INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 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. 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. Actual results could differ from those estimates. These estimates and assumptions are based on historical experience and on various other factors which the Company believes to be reasonable under the circumstances. The Company may engage third-party valuation specialists to assist with estimates related to the valuation of financial instruments, assets and stock awards associated with various contractual arrangements, goodwill and identifiable intangible assets. Such estimates often require the selection of appropriate valuation methodologies and significant judgment. Actual results could differ from these estimates under different assumptions or circumstances and such differences could be material. Cash and Cash Equivalents. Cash and cash equivalents include cash and highly liquid debt instruments with original maturities of three months or less when purchased. Marketable Securities. 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 5 of Notes to the Consolidated Financial Statements. Allowance for Credit Losses. The Company maintains an allowance for credit losses that is estimated based on a combination of factors including write-off history, aging analysis, forecast of future economic conditions and any specific known troubled accounts. The Company believes the allowance is adequate to cover expected losses on trade receivables. 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 . 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. The Company reviews and sets standard costs as needed, but at a minimum, on an annual basis, at current manufacturing costs in order to approximate actual costs. 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. Once a reserve has been established, it is maintained until the item to which it relates is scrapped or sold. The Company regularly evaluates its ability to realize the value of inventory based on a combination of factors including the following: 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 F- 11 Table of Contents ONTO INNOVATION INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 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. Property, plant and equipment are stated at cost. 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. Repairs and maintenance costs are expensed as incurred and major renewals and betterments are capitalized. Long-Lived Assets and Finite-Lived Acquired Intangible Assets. Long-lived assets, such as property, plant, and equipment, and identifiable acquired intangible assets with finite useful lives, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. 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. Goodwill and Indefinite Lived Intangible Assets. Goodwill and indefinite lived intangible assets are tested for impairment on an annual basis or when an event or changes in circumstances indicate that its carrying value may not be recoverable. Goodwill impairment is tested at the reporting unit level, which is defined as an operating segment or one level below the operating segment. The Company has three reporting units and one operating segment. No goodwill impairment occurred in fiscal years 2024, 2023, or 2022. 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. 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. The indefinite-lived intangible asset impairment test consists of a one-step analysis that compares the fair value of the intangible asset with its carrying amount. If the carrying amount of an intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. 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. For additional information on the Company’s goodwill and purchased intangible assets, see Note 6 of Notes to the Consolidated Financial Statements. Concentration of Credit Risk. Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of accounts receivable, cash and cash equivalents and marketable securities. The Company maintains cash and cash equivalents and marketable securities with higher credit quality issuers and monitors the amount of credit exposure to any one issuer. The Company’s investment policy provides guidelines and limits regarding credit quality, investment concentration, investment type, and maturity that the Company believes will provide liquidity while reducing risk of loss of capital. Investments are of a short-term nature and include investments in commercial paper, corporate debt securities, asset-backed securities, U.S. Treasury, U.S. Government, and U.S. Agency debt. 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. F- 12 Table of Contents ONTO INNOVATION INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Warranties. The Company generally provides a warranty on its products for a period of twelve to fourteen months against defects in material and workmanship. The Company provides for the estimated cost of product warranties at the time revenue is recognized. 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. 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 13 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. dollars at the fiscal period-end exchange rate, and income and expense accounts are translated into U.S. 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 state ments of $ 14.5 million and $ 8.7 million as of December 28, 2024 and December 30, 2023 , respectively. Share-based Compensation . The Company measures the cost of employee services received in exchange for the award of equity instruments based on the fair value of the award at the date of grant. 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 11 of Notes to the Consolidated Financial Statements. Research and Development Costs . Expenditures for research and development are expensed as incurred. 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. The Company carries derivative financial instruments (derivatives) on the balance sheet at their fair values, in either prepaid expenses and other current assets or other current liabilities in the Consolidated Balance Sheets. The Company does not use derivatives for trading or speculative purposes. 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 and Singapore dollars), 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. These hedge contracts are valued using standard valuation formulas with assumptions about future foreign currency exchange rates derived from existing exchange rates, interest rates, and other market factors. F- 13 Table of Contents ONTO INNOVATION INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The dollar equivalent of the U.S. dollar forward contracts and related fair values as of December 28, 2024 and December 30, 2023 were as follows: December 28, December 30, 2024 2023 (in thousands) Notional amount $ 45,883 $ 51,551 Fair value of (asset) liability ( 61 ) 1,370 During the years ended December 28, 2024 and December 31, 2022, the Company recognized losses of $ 1.1 million and $ 3.5 million on maturities of forward contracts, respectively. During the year ended December 30, 2023, the Company recognized a gain of $ 0.3 million on maturities of forward contracts. The aggregate notional amounts of matured contracts were $ 423.4 million, $ 319.4 million and $ 366.0 million for 2024, 2023 and 2022, respectively. Contingencies and Litigation . The Company is subject to the possibility of losses from various contingencies, including certain legal proceedings, lawsuits and other claims. The Company accrues for a loss contingency when it concludes that the likelihood of a loss is probable and the amount of the loss can be reasonably estimated. If the Company concludes that loss contingencies that could be material to any one of its financial statements are not probable, but are reasonably possible, or are probable, but cannot be estimated, then the Company discloses the nature of the loss contingencies, together with an estimate of the range of possible loss or a statement that such loss is not reasonably estimable. The Company expenses as incurred the costs of defending legal claims against the Company. The Company does not recognize gain contingencies until realized. See Note 9 of the Notes to the Consolidated Financial Statements, “Commitments and Contingencies” for a detailed description. Recent Accounting Pronouncements. Recently Adopted or 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 adopted the new standard in fiscal year 2024 for annual and retrospective reporting periods with all interim disclosures to begin in the first quarter of fiscal year 2025. Refer to Note 15 for additional discussion regarding the Company’s segment reporting. Updates Not Yet Effective 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 January 3, 2026. The Company does not expect the amendment to have a material impact on its Consolidated Financial Statements upon adoption. In November 2024, the FASB issued ASU 2024-03, “Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures” (Subtopic 220-40) which requires additional disclosure of certain costs and expenses, including inventory purchases, employee compensation, selling expense and depreciation expense within the notes to financial statements. The guidance is effective for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact that the updated standard will have on its financial statements and related disclosures. F- 14 Table of Contents ONTO INNOVATION INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 3. Business Combination: Lumina Instruments Inc. During the fourth quarter of 2024, the Company acquired Lumina Instruments Inc. (“Lumina”), to strengthen Onto Innovation’s inspection portfolio through the addition of Lumina’s highly differentiated laser based optical defect inspection technology . The Company paid $ 25.0 million in cash to acquire Lumina. The acquisition has been accounted for using the acquisition method of accounting in accordance with FASB Accounting Standards Codification (“ASC”) Topic 805, “Business Combinations.” Under the acquisition method of accounting, the total purchase consideration of the acquisition is allocated to the tangible assets and identifiable intangible assets acquired based on their relative fair values. The excess of the purchase consideration over the net tangible and identifiable intangible assets is recorded as goodwill, the amount of which represents the expected benefits to the Company of future technology and the knowledgeable and experienced employees who joined the Company. The following table summarizes the purchase consideration and estimated fair values of the assets acquired and liabilities assumed: At Acquisition Date (in thousands) Cash and cash equivalents $ 1,566 Accounts receivable 333 Inventories 908 Prepaid expenses and other current assets 14 Identifiable intangible assets 9,420 Total assets acquired 12,241 Accounts payable ( 26 ) Accrued liabilities ( 77 ) Deferred tax liabilities ( 1,307 ) Net assets acquired 10,831 Goodwill 14,169 Total purchase consideration $ 25,000 4. Fair Value Measurements: Fair Value of Financial Instruments The Company has evaluated the estimated fair value of financial instruments using available market information and valuations as provided by third-party sources. The use of different market assumptions and/or estimation methodologies could have a significant effect on the estimated fair value amounts. 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. Fair Value Hierarchy The Company applies a three-level valuation hierarchy for fair value measurements. This hierarchy prioritizes the inputs into three broad levels. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. 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. F- 15 Table of Contents ONTO INNOVATION INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The following table provides the assets and liabilities carried at fair value measured on a recurring basis at December 28, 2024 and December 30, 2023: Fair Value Measurements Using Significant Other Observable Inputs (Level 2) December 28, 2024 December 30, 2023 (in thousands) Assets: Available-for-sale debt securities: Government notes and bonds $ 284,863 $ 195,800 Certificates of deposit 73,421 67,467 Commercial paper 136,557 99,635 Corporate bonds 144,542 101,401 Foreign currency forward contracts 61 — Total assets $ 639,444 $ 464,303 Liabilities: Foreign currency forward contracts — $ 1,370 Total liabilities $ — $ 1,370 Available-for-sale debt securities classified as Level 2 are valued using observable inputs to quoted market prices, benchmark yields, reported trades, broker/dealer quotes or alternative pricing sources with reasonable levels of price transparency. The foreign currency forward contracts are primarily measured based on the foreign currency spot and forward rates quoted by the banks or foreign currency dealers. Investment prices are obtained from third party pricing providers, which model prices utilizing the above observable inputs, for each asset class. See Note 5 for additional discussion regarding the fair value of the Company’s marketable securities. 5. Marketable Securities: At December 28, 2024 and December 30, 2023, marketable securities are categorized as follows: Amortized Cost Gross Unrealized Holding Gains Gross Unrealized Holding Losses Fair Value (in thousands) December 28, 2024 Government notes and bonds $ 284,763 $ 387 $ 287 $ 284,863 Certificates of deposit 73,390 49 18 73,421 Commercial paper 136,496 103 42 136,557 Corporate bonds 144,331 283 72 144,542 Total marketable securities $ 638,980 $ 822 $ 419 $ 639,383 December 30, 2023 Government notes and bonds $ 195,733 $ 393 $ 326 $ 195,800 Certificates of deposit 67,377 93 3 67,467 Commercial paper 99,591 54 10 99,635 Corporate bonds 101,146 391 136 101,401 Total marketable securities $ 463,847 $ 931 $ 475 $ 464,303 F- 16 Table of Contents ONTO INNOVATION INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 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 28, 2024 and December 30, 2023: December 28, 2024 December 30, 2023 Amortized Cost Fair Value Amortized Cost Fair Value (in thousands) Due within one year $ 432,088 $ 432,616 $ 331,136 $ 330,937 Due after one through five years 140,917 140,792 132,711 133,366 Due after five through ten years 235 235 — — Due after ten years 65,740 65,740 — — Total marketable securities $ 638,980 $ 639,383 $ 463,847 $ 464,303 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 28, 2024 and December 30, 2023. In Unrealized Loss Position For Less Than 12 Months In Unrealized Loss Position For Greater Than 12 Months Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses (in thousands) December 28, 2024 Government notes and bonds $ 37,636 $ 287 $ — $ — Certificates of deposit 8,260 18 — — Commercial paper 18,317 42 — — Corporate bonds 13,260 71 3,200 1 Total marketable securities $ 77,473 $ 418 $ 3,200 $ 1 December 30, 2023 Government notes and bonds $ 82,776 $ 325 $ 180 $ 1 Certificates of deposit 11,839 3 — — Commercial paper 20,121 10 — — Corporate bonds 20,268 103 5,999 33 Total marketable securities $ 135,004 $ 441 $ 6,179 $ 34 See Note 4 for additional discussion regarding the fair value of the Company’s marketable securities. 6. Goodwill and Purchased Intangible Assets: Goodwill and purchased intangible assets with indefinite useful lives are not amortized but are reviewed for impairment annually during the fourth quarter of each fiscal year and whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. The process of evaluating the potential impairment of goodwill and intangible assets requires significant judgment. The Company regularly monitors current business conditions and considers other factors including, but not limited to, adverse industry or economic trends, restructuring actions and lower projections of profitability that may impact future operating results. The Company performed its annual assessment in the fourth quarter of fiscal 2024 and concluded that no impairment charge was required. F- 17 Table of Contents ONTO INNOVATION INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Goodwill The changes in the carrying amount of goodwill are as follows: Year Ended December 28, 2024 December 30, 2023 (in thousands) Balance, beginning of the period $ 315,811 $ 315,811 Acquired business 14,169 — Balance, end of the period $ 329,980 $ 315,811 The $14.2 million of goodwill acquired in 2024 resulted from the purchase of Lumina Instruments, Inc. See Note 3, “Business Combination,” for further details. Purchased Intangible Assets Purchased intangible assets as of December 28, 2024 and December 30, 2023 are as follows: Gross Carrying Amount Accumulated Amortization Net (in thousands) December 28, 2024 Finite-lived intangible assets: Developed technology $ 387,716 $ 298,013 $ 89,703 Customer and distributor relationships 73,321 39,370 33,951 Trademarks and trade names 14,171 10,368 3,803 Total identifiable intangible assets $ 475,208 $ 347,751 $ 127,457 December 30, 2023 Finite-lived intangible assets: Developed technology $ 378,197 $ 254,350 $ 123,847 Customer and distributor relationships 73,321 34,782 38,539 Trademarks and trade names 14,171 9,182 4,989 Total identifiable intangible assets $ 465,689 $ 298,314 $ 167,375 Intangible asset amortization expense amounted to $ 49.4 million, $ 54.8 million and $ 55.3 million for the years ended December 28, 2024, December 30, 2023 and December 31, 2022, respectively. Assuming no change in the gross carrying value of identifiable intangible assets and estimated lives, estimated amortization expenses are $ 33.8 million for 2025, $ 32.6 million for 2026, $ 24.4 million for 2027, $ 13.5 million for 2028, and $ 6.2 million for 2029. 7. Leasing Arrangements: 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. F- 18 Table of Contents ONTO INNOVATION INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Lease costs for operating leases were $ 6.4 million and $ 6.5 million for the years ended December 28, 2024 and December 30, 2023, 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. December 28, December 30, Lease term and discount rate 2024 2023 Weighted average remaining lease term in years 3.5 4.2 Weighted average discount rate 5.1 % 4.7 % Supplemental cash flows information related to leases was as follows: Year Ended December 28, 2024 December 30, 2023 (in thousands) Cash paid for operating lease liabilities $ 6,372 $ 6,527 Right-of-use assets obtained in exchange for operating lease liabilities $ 1,334 $ 3,678 As of December 28, 2024, 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 December 28, 2024 is as follows: Operating Lease (in thousands) 2025 $ 6,095 2026 4,308 2027 2,869 2028 2,447 2029 1,123 Total undiscounted operating lease payments 16,842 Less: imputed interest 1,683 Present value of operating lease liabilities $ 15,159 8. Balance Sheet Components: Inventories Inventories are comprised of the following: December 28, December 30, 2024 2023 (in thousands) Materials $ 176,814 $ 234,471 Work-in-process 91,672 67,816 Finished goods 18,493 25,486 Total inventories $ 286,979 $ 327,773 F- 19 Table of Contents ONTO INNOVATION INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Property, Plant and Equipment Property, plant and equipment, net, is comprised of the following: December 28, December 30, 2024 2023 (in thousands) Land and building $ 46,583 $ 47,889 Machinery and equipment 86,317 69,828 Furniture and fixtures 4,081 3,921 Computer equipment and software 32,755 17,790 Leasehold improvements 20,405 22,089 Total property, plant and equipment, gross 190,141 161,517 Accumulated depreciation ( 66,273 ) ( 57,906 ) Total property, plant and equipment, net $ 123,868 $ 103,611 Other assets Other assets is comprised of the following: December 28, December 30, 2024 2023 (in thousands) Operating lease right-of-use assets $ 13,939 $ 18,360 Other 1,514 2,452 Total other assets $ 15,453 $ 20,812 Accrued liabilities Accrued liabilities is comprised of the following: December 28, December 30, 2024 2023 (in thousands) Payroll and related expenses $ 39,850 $ 33,052 Warranty 10,075 8,934 Other 49 76 Total accrued liabilities $ 49,974 $ 42,062 Other current liabilities Other current liabilities is comprised of the following: December 28, December 30, 2024 2023 (in thousands) Customer deposits $ 10,700 $ 9,972 Current operating lease obligations 5,416 5,494 Income tax payable 8,492 3,210 Accrued professional fees 618 1,751 Other accrued taxes 839 3,570 Other 3,961 7,035 Total other current liabilities $ 30,026 $ 31,032 F- 20 Table of Contents ONTO INNOVATION INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Other non-current liabilities Other non-current liabilities is comprised of the following: December 28, December 30, 2024 2023 (in thousands) Non-current operating lease obligations $ 9,743 $ 14,027 Unrecognized tax benefits (including interest) 5,489 7,358 Deferred revenue 4,009 2,462 Other 1,875 1,604 Total non-current liabilities $ 21,116 $ 25,451 9. Commitments and Contingencies: Intellectual Property Indemnification Obligations The Company has entered into agreements with customers that include limited intellectual property indemnification obligations that are customary in the industry. These guarantees generally require the Company to compensate the other party for certain damages and costs incurred as a result of third-party intellectual property claims arising from these transactions. The nature of the intellectual property indemnification obligations prevents the Company from making a reasonable estimate of the maximum potential amount it could be required to pay to its customers. Historically, the Company has not made any indemnification payments under such agreements and no amount has been accrued in the accompanying consolidated financial statements with respect to these indemnification guarantees. Warranty Reserves The Company generally provides a warranty on its products for a period of 12 to 14 months against defects in material and workmanship. 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: Year Ended December 28, 2024 December 30, 2023 (in thousands) Balance, beginning of the period $ 9,380 $ 11,830 Accruals 12,348 9,505 Usage ( 10,870 ) ( 11,955 ) Balance, end of the period $ 10,858 $ 9,380 Warranty reserves are reported in the Consolidated Balance Sheets under the captions “Accrued liabilities” and “Other non-current liabilities.” Legal Matters From time to time, the Company is subject to legal proceedings and claims in the ordinary course of business. We do not believe that any current legal matters will have a material adverse effect on our financial position, results of operations or cash flows. Open and Committed Purchase Orders As of December 28, 2024, the Company has open and committed purchase orders of $ 438.2 million, of which $ 243.9 million is for less than one year. F- 21 Table of Contents ONTO INNOVATION INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Line of Credit The Company has a credit agreement with a bank that provides for a variable-rate line of credit which is secured by the marketable securities the Company has with the bank. The Company is 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. The available line of credit as of December 28, 2024 was approximately $ 100 million with an available interest rate of 6.2 %. The credit agreement is available to the Company until such time that either party terminates the arrangement at their discretion. As of the date of this filing, the Company has not utilized the line of credit. 10. Revenue The following table represents a disaggregation of revenue by timing of revenue: Year Ended December 28, 2024 December 30, 2023 December 31, 2022 (in thousands) Point-in-time $ 927,368 $ 761,797 $ 958,409 Over-time 59,953 54,071 46,773 Total revenue $ 987,321 $ 815,868 $ 1,005,183 See Note 15 of the Notes to the Consolidated Financial Statements for additional discussion of the Company’s disaggregated revenue in detail. Contract Assets and Contract Liabilities Contract assets consist of amounts we have not invoiced but have completed the related performance obligation. These amounts generally arise from variances between the contractual payment terms and the transaction price assigned to the open performance obligations (e.g., we have recognized revenue in an amount greater than the amount that is billable under the contract). The contract assets amounts are recorded in “Accounts receivable” in the Consolidated Balance Sheets. As of December 28, 2024 and December 30, 2023, the Company had contract assets of $ 10.1 million and $ 8.0 million, respectively. The Company records contract liabilities when the customer has been billed in advance of the Company completing its performance obligations primarily with respect to liabilities related to service contracts and installation. For contracts that have a duration of one year or less, these amounts are recorded as “Deferred revenue” in the Consolidated Balance Sheets. For contracts with a duration longer than one year, these amounts are recorded in “Other non-current liabilities” in the Consolidated Balance Sheets. As of December 28, 2024 and December 30, 2023, the Company carried a long-term deferred revenue balance of $ 4.0 million and $ 2.5 million, respectively. Changes in deferred revenue were as follows: Year Ended December 28, 2024 December 30, 2023 (in thousands) Balance, beginning of the period $ 27,225 $ 33,014 Deferral of revenue 76,584 75,602 Recognition of current year deferred revenue ( 48,711 ) ( 55,825 ) Recognition of prior period deferred revenue ( 17,262 ) ( 25,566 ) Balance, ending of the period $ 37,836 $ 27,225 F- 22 Table of Contents ONTO INNOVATION INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 11. Share-Based Compensation and Employee Benefit Plans: 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, as amended and restated (the “2020 Plan”) . The 2020 Plan provides for the grant of 3.7 million 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. Options granted under the 2020 Plan typically grade vest over a three-year period and expire ten years from the date of grant. Restricted stock units granted under the 2020 Plan typically vest over a three-year period for employees and one year for directors; however, other vesting periods are allowable under the 2020 Plan. Restricted stock units (“RSUs”) granted to employees have time based or performance-based vesting. As of December 28, 2024, there were 2.7 million 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 Topic 718, “Stock Compensation.” Through the Company’s employee stock purchase plans, employees purchased 83 thousand, 91 thousand and 142 thousand shares during the twelve months ended December 28, 2024, December 30, 2023 and December 31, 2022, respectively. As of December 28, 2024 and December 30, 2023, there were 0.9 million and 1.0 million, shares available for issuance under the Company’s employee stock purchase plan, respectively. Share-based compensation was allocated in the Company’s Consolidated Statement of Operations as follows : Year Ended December 28, 2024 December 30, 2023 December 31, 2022 (in thousands) Cost of revenue $ 4,771 $ 4,405 $ 4,271 Research and development 5,499 6,072 6,068 Sales and marketing 5,606 4,859 4,233 General and administrative 12,702 10,176 9,854 Total share-based compensation expense before income taxes 28,577 25,513 24,426 Income tax benefit 6,209 5,497 5,237 Total share-based compensation expense, net of income taxes $ 22,368 $ 20,016 $ 19,189 Restricted Stock Units During fiscal years 2024, 2023 and 2022, 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 2024, 2023 and 2022. 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. F- 23 Table of Contents ONTO INNOVATION INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The following table summarizes the Company’s combined service-based RSUs and market-based PRSUs: Number of Shares (in thousands) Weighted Average Grant Date Fair Value Nonvested at January 1, 2022 765 $ 48.25 Granted 410 $ 82.48 Vested ( 373 ) $ 42.87 Forfeited ( 59 ) $ 58.98 Nonvested at December 31, 2022 743 $ 69.01 Granted 319 $ 89.23 Vested ( 415 ) $ 59.20 Forfeited ( 63 ) $ 84.11 Nonvested at December 30, 2023 584 $ 85.41 Granted 171 $ 191.25 Vested ( 329 ) $ 81.10 Forfeited ( 17 ) $ 105.31 Nonvested at December 28, 2024 409 $ 132.39 Of the 409 thousand shares outstanding at December 28, 2024, 327 thousand are service-based RSUs and 82 thousand 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 2024, 2023, and 2022 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 $ 251.51 , $ 100.79 , and $ 85.49 , respectively. As of December 28, 2024, there was $ 29.2 million 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 1.3 years. 401(k) Savings Plan 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 $ 3.2 million, $ 3.1 million and $ 3.0 million for the years ended December 28, 2024, December 30, 2023 and December 31, 2022, respectively. 12. Other Expense, Net: Other expense, net is comprised of the following: Year Ended December 28, 2024 December 30, 2023 December 31, 2022 (in thousands) Foreign currency exchange losses, net $ ( 276 ) $ ( 4,091 ) $ ( 73 ) Other 131 239 ( 68 ) Total other expense, net $ ( 145 ) $ ( 3,852 ) $ ( 141 ) F- 24 Table of Contents ONTO INNOVATION INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 13. Income Taxes: The components of income tax expense are as follows: Year Ended December 28, 2024 December 30, 2023 December 31, 2022 (in thousands) Current: Federal $ 40,688 $ 28,326 $ 47,963 State 1,156 879 987 Foreign 3,409 4,647 2,901 45,253 33,852 51,851 Deferred: Federal ( 25,287 ) ( 22,429 ) ( 31,622 ) State ( 871 ) 242 ( 1,506 ) Foreign ( 318 ) ( 242 ) ( 473 ) ( 26,476 ) ( 22,429 ) ( 33,601 ) Total income tax expense $ 18,777 $ 11,423 $ 18,250 The income before tax is comprised of the following: Year Ended December 28, 2024 December 30, 2023 December 31, 2022 (in thousands) Domestic operations $ 207,747 $ 107,640 $ 239,527 Foreign operations $ 12,700 $ 24,942 $ 2,057 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 28, 2024, December 30, 2023 and December 31, 2022, to income before provision for income taxes as follows: Year Ended December 28, 2024 December 30, 2023 December 31, 2022 (in thousands, except for percentages) Federal income tax provision at statutory rate $ 46,294 $ 27,842 $ 50,732 State taxes, net of federal effect 2,171 1,389 467 Foreign taxes, net of federal effect 854 ( 2,000 ) ( 481 ) Foreign Derived Intangible Income ( “ FDII ” ) Deduction ( 16,960 ) ( 12,662 ) ( 25,445 ) US tax on foreign source income ( 207 ) 184 1,423 Tax effect of share-based compensation ( 6,883 ) ( 2,288 ) ( 2,497 ) Non-deductible officer's compensation 3,412 2,301 1,910 Research and development tax credit ( 6,640 ) ( 6,410 ) ( 7,146 ) Change in tax reserves ( 2,648 ) ( 1,133 ) ( 1,084 ) Change in valuation allowance ( 1,790 ) 2,180 ( 276 ) Withholding taxes 785 640 937 Other 389 1,380 ( 290 ) Provision for income taxes $ 18,777 $ 11,423 $ 18,250 Effective tax rate 9 % 9 % 8 % Prior year amounts were reclassified to conform to current year classification requirements for comparability purposes. The total tax provision amounts remained unchanged. F- 25 Table of Contents ONTO INNOVATION INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Deferred tax assets and liabilities are comprised of the following: December 28, 2024 December 30, 2023 (in thousands) Deferred tax assets: Reserves and accruals $ 20,315 $ 16,658 Deferred revenue 4,677 4,082 Share-based compensation 3,792 3,495 Tax credit carryforward 12,170 13,960 Net operating losses 1,618 1,088 Depreciation and amortization 162 156 Capitalized research and development 48,943 34,165 Operating lease liabilities 2,968 3,744 Other 1,162 2,875 Gross deferred tax assets 95,807 80,223 Less: valuation allowance ( 12,170 ) ( 13,960 ) Total deferred tax assets after valuation allowance 83,637 66,263 Deferred tax liabilities: Depreciation and amortization ( 38,144 ) ( 43,908 ) Operating lease right of use assets ( 2,682 ) ( 3,519 ) Other ( 4 ) — Gross deferred tax liabilities ( 40,830 ) ( 47,427 ) Net deferred tax assets $ 42,807 $ 18,836 At December 28, 2024 and December 30, 2023, the Company had recorded valuation allowances of $ 12.2 million and $ 14.0 million, 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 $ 0.3 million and state research and development credits of $ 11.9 million. In assessing the realizability of deferred tax assets, the Company uses a more likely than not standard. If it is determined that it is more-likely-than-not that deferred tax assets will not be realized, a valuation allowance must be established against the deferred tax assets. The ultimate realization of the assets is dependent on the generation of future taxable income during the periods in which the associated temporary differences become deductible. 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 28, 2024, the Company relied primarily on the reversal of deferred tax liabilities as well as projected future taxable income. At December 28, 2024, the Company had tax effected federal, state, and foreign net operating loss carryforwards of $ 0.5 million, $ 0.9 million and $ 0.2 million, respectively. The federal, state and foreign net operating loss carryforwards expire on various dates begin ning in 2033 through 2049. At December 28, 2024, the Company had foreign tax credit carryforwards and state research & development credits of $ 0.3 million, and $ 16.8 million, respectively. The foreign tax credit carryforwards are set to expire at various dates beginning December 31, 2032 . The state research & development credit carryforwards are set to expire at various dates beginning December 31, 2028. As of December 28, 2024, 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 $ 0.5 million for additional foreign withholding taxes from an expected liquidating distribution from its Israel entity. F- 26 Table of Contents ONTO INNOVATION INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The total amount of unrecognized tax benefits are as follows: Year Ended December 28, 2024 December 30, 2023 December 31, 2022 (in thousands) Balance, beginning of the period $ 13,142 $ 13,010 $ 12,373 Gross increases—tax positions in prior period 1,416 29 456 Gross decreases—tax positions in prior period ( 33 ) ( 100 ) — Gross increases—current-period tax positions 1,761 1,785 1,729 Closure of audit/statute limitation ( 3,291 ) ( 1,582 ) ( 1,548 ) Balance, end of the period $ 12,995 $ 13,142 $ 13,010 The unrecognized tax benefits at December 28, 2024 and December 30, 2023 were $ 13.0 million and $ 13.1 million, respectively, of which $ 6.7 million and $ 7.2 million, respectively, would be reflected as an adjustment to income tax expense if recognized. The year over year decrease from 2023 to 2024 is primarily due to expiring tax statutes, offset by additional unrecognized tax benefits related to foreign net operating losses. It is reasonably possible that certain amounts of unrecognized tax benefits may reverse in the next 12 months; however, the Company does not expect such reversals to have a significant impact on its results of operations or financial position. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. During the years ended December 28, 2024, December 30, 2023 and December 31, 2022, the Company recognized approximately $( 223 ) thousand , $ 146 thousand and $ 149 thousand, respectively, in interest and penalties (benefit) expense associated with uncertain tax positions. As of December 28, 2024 and December 30, 2023, the Company had accrued interest and penalties expense included in the table of unrecognized tax benefits of $ 564 thousand and $ 823 thousand, respectively. The Company is subject to U.S. federal income tax as well as income tax in multiple state and foreign jurisdictions. The Company is subject to ordinary statute of limitation rules of three and four years for federal and state returns, respectively. However, due to tax attribute carryforwards, the Company is subject to examination for tax years 2015 forward for U.S. federal tax purposes with respect to carryforward amounts. The Company is also subject to examination in various states for tax years 2003 forward with respect to carryforward amounts. The Company is subject to examination for tax years 2016 forward for various foreign jurisdictions. The Company believes that adequate amounts have been reserved for any adjustments that may ultimately result from any future examinations of these years. 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. 14. 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. F- 27 Table of Contents ONTO INNOVATION INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The components of accumulated other comprehensive income (loss), net of tax, are as follows: Foreign currency translation adjustments Net unrealized gains (losses) on marketable securities Accumulated other comprehensive income (loss) (in thousands) Balance at January 1, 2022 $ 1,764 $ ( 448 ) $ 1,316 Net current period other comprehensive loss ( 8,879 ) ( 2,447 ) ( 11,326 ) Balance at December 31, 2022 ( 7,115 ) ( 2,895 ) ( 10,010 ) Net current period other comprehensive income (loss) ( 1,549 ) 3,660 2,111 Balance at December 30, 2023 ( 8,664 ) 765 ( 7,899 ) Net current period other comprehensive loss ( 5,827 ) ( 137 ) ( 5,964 ) Balance at December 28, 2024 $ ( 14,491 ) $ 628 $ ( 13,863 ) For the twelve months ended December 28, 2024, December 30, 2023 and December 31, 2022, tax effects on net income of amounts recorded in other comprehensive income (loss) were $( 36.8 ) thousand, $ 0.9 million and $( 0.7 ) million, respectively. 15. Segment Reporting and Geographic Information: The Company is organized and operates as one operating and reportable segment; the design, development, manufacture and support of high-performance control metrology, defect inspection, lithography and data analysis systems used by microelectronics device manufacturers. This determination is based on the management approach which designates internal information regularly available to the Chief Operating Decision Maker (“CODM”) for making decisions and assessing performance as the source of determination of the Company’s reportable segments. The Company’s CODM, the Chief Executive Officer, reviews financial information presented on a consolidated basis for the purpose of making operating decisions and assessing financial performance. The CODM uses net income as the measure of profit or loss to allocate resources and assess performance. The CODM regularly reviews net income as reported on the Company’s consolidated statements of operations. Financial forecasts and budget to actual results used by the CODM to assess performance and allocate resources, as well as those used for strategic decisions related to headcount and capital expenditures are also reviewed on a consolidated basis. The CODM considers the impact of the significant segment expenses in the table below on net income when deciding whether to reinvest profits, propose share repurchase, or pursue strategic mergers and acquisitions. The measure of segment assets is reported on the balance sheet as total assets. The CODM does not review segment assets at a level other than that presented in the Company’s consolidated balance sheets. F- 28 Table of Contents ONTO INNOVATION INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The table below presents the Company’s consolidated operating results including significant segment expenses: Year Ended December 28, 2024 December 30, 2023 December 31, 2022 (in thousands) Revenue $ 987,321 $ 815,868 $ 1,005,183 Less: Restructuring expenses (1) 23,077 10,599 — Merger and acquisitions related expenses (2) 7,652 2,607 5,761 Litigation expenses (3) 27 11,337 3,935 Cost of revenue (excluding 1 & 2) 457,855 388,429 465,883 Research and development (excluding 1 & 2) 109,572 103,656 105,648 Sales and marketing (excluding 1 & 2) 75,911 61,604 65,558 General and administrative (excluding 1, 2 & 3) 76,687 66,736 66,400 Amortization 49,437 54,822 55,284 Operating income 187,103 116,078 236,714 Interest income, net 33,489 20,356 5,011 Other expense, net ( 145 ) ( 3,852 ) ( 141 ) Provision for income taxes 18,777 11,423 18,250 Net income $ 201,670 $ 121,159 $ 223,334 The following table lists the different sources of revenue: Year Ended December 28, 2024 December 30, 2023 December 31, 2022 (in thousands, except for percentages) Systems and software $ 850,443 86 % $ 683,316 84 % $ 865,707 86 % Parts 76,584 8 % 74,604 9 % 84,266 8 % Services 60,294 6 % 57,948 7 % 55,210 6 % Total revenue $ 987,321 100 % $ 815,868 100 % $ 1,005,183 100 % The Company’s significant operations outside the United States include sales, service and application offices in Asia and Europe. For geographical revenue reporting, revenue is attributed to the geographic location to which the product is shipped. Revenue by geographic region is as follows: Year Ended December 28, 2024 December 30, 2023 December 31, 2022 (in thousands) Revenue from third parties: Taiwan $ 307,538 $ 141,915 $ 199,104 South Korea 285,695 169,323 224,172 China 116,387 136,940 250,968 United States 104,109 130,292 121,487 Southeast Asia 64,912 87,585 71,062 Japan 56,999 93,831 58,133 Europe 51,681 55,982 80,256 Total revenue $ 987,321 $ 815,868 $ 1,005,183 F- 29 Table of Contents ONTO INNOVATION INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The following customers represented 10% or more of the Company’s total revenue for the respective years: Year Ended Customer December 28, 2024 December 30, 2023 December 31, 2022 Customer A 23 % 14 % 15 % Customer B 17 % 19 % 13 % Customer C 12 % ^ 11 % ^ Total customer revenue was less than 10% of total revenue. Two customers’ net accounts receivable balances were individually greater than 10 % of net accounts receivable at December 28, 2024, representing, in the aggregate approximately 47 % of the Company’s total net accounts receivable. Two customers’ net accounts receivable balances were individually greater than 10 % of net accounts receivable at December 30, 2023 , representing, in the aggregate approximately 29 % of the Company’s total net accounts receivable. Substantially all of the Company’s long-lived assets are located within the United States of America. 16. Earnings Per Share: Basic income per share is calculated using the weighted average number of shares of common stock outstanding during the period. 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: Year Ended December 28, 2024 December 30, 2023 December 31, 2022 (in thousands, except for per share data) Numerator: Net income $ 201,670 $ 121,159 $ 223,334 Denominator: Basic earnings per share - weighted average shares outstanding 49,343 48,971 49,424 Effect of potential dilutive securities: Restricted stock units, employee stock purchase grants and stock options - dilutive shares 317 347 340 Diluted earnings per share - weighted average shares outstanding 49,660 49,318 49,764 Earnings per share: Basic $ 4.09 $ 2.47 $ 4.52 Diluted $ 4.06 $ 2.46 $ 4.49 17. Share Repurchase Authorization: In February 2024, the Onto Innovation Board of Directors approved a new share repurchase authorization, which allows the Company to repurchase up to $ 200 million worth of shares of its common stock. Repurchases may be made through both public market and private transactions from time to time with shares purchased being subsequently retired. During the twelve months ended December 28, 2024, the Company repurchased and retired 157 thousand shares of its common stock under this repurchase authorization. At December 28, 2024, there was $ 174.9 million available for future share repurchases under this share repurchase authorization. F- 30 Table of Contents ONTO INNOVATION INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The following table summarizes the Company’s stock repurchases: Year Ended December 28, 2024 December 30, 2023 December 31, 2022 (in thousands, except for per share data) Shares of common stock repurchased 157 46 1,018 Cost of stock repurchased $ 25,065 $ 3,197 $ 65,257 Average price paid per share $ 159.16 $ 69.29 $ 64.09 18. Restructuring From time to time, the Company approves restructuring plans, which include workforce reductions, to streamline operations and align the Company’s cost structure with its business outlook. These restructuring plans may result in charges to cost of goods sold for streamlining of certain manufacturing activities or for inventory write-downs primarily related to the exit of older product lines. Charges to operating expenses primarily include employee severance costs that are paid during the period incurred, and charges for streamlining of certain operating activities. Restructuring expenses recorded in the Condensed Consolidated Statements of Operations are as follows: Year Ended December 28, December 30, December 31, 2024 2023 2022 (in thousands) Cost of goods sold $ 14,068 $ 7,027 $ - Operating expenses 9,009 3,572 - Total restructuring expenses $ 23,077 $ 10,599 $ - F- 31 Table of Contents ONTO INNOVATION INC. AND SUBSIDIARIES SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS (In thousands) Column A Column B Column C Column D Column E Description Balance at Beginning of Period Charged to (Recovery of) Costs and Expense Charged to Other Accounts (net) Deductions Balance at End of Period Fiscal Year 2024: Allowance for credit losses $ 2,659 $ 100 $ — $ 174 $ 2,585 Deferred tax valuation allowance 13,960 — — 1,790 12,170 Fiscal Year 2023: Allowance for credit losses $ 1,572 $ 245 $ 1,200 $ 358 $ 2,659 Deferred tax valuation allowance 11,772 2,188 — — 13,960 Fiscal Year 2022: Allowance for credit losses $ 1,303 $ 356 $ — $ 87 $ 1,572 Deferred tax valuation allowance 10,948 824 — — 11,772 F- 32 Table of Contents SIGNATURES 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. Onto Innovation Inc. (Registrant) By: /s/ Michael P. Plisinski Michael P. Plisinski Chief Executive Officer Date: February 25, 2025 PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED. Signature Title Date /s/ Michael P. Plisinski Chief Executive Officer (Principal Executive Officer) February 25, 2025 Michael P. Plisinski /s/ Mark R. Slicer Senior Vice President, Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) February 25, 2025 Mark R. Slicer /s/ Leo Berlinghieri Director February 25, 2025 Leo Berlinghieri /s/ Stephen D. Kelley Director February 25, 2025 Stephen D. Kelley /s/ Susan D. Lynch Director February 25, 2025 Susan D. Lynch /s/ David B. Miller Director February 25, 2025 David B. Miller /s/ Stephen S. Schwartz Director February 25, 2025 Stephen S. Schwartz /s/ Christopher A. Seams Director February 25, 2025 Christopher A. Seams /s/ May Su Director February 25, 2025 May Su /s/ Christine A. Tsingos Director February 25, 2025 Christine A. Tsingos