What changed in this filing

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Item 1A. Risk Factors

2025-05-08 compared with 2024-10-31 · 111 added, 75 removed, 439 unchanged (30% of the section changed)

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• Our ability to fulfill our backlog may have an effect on our long-term ability to procure contracts and fulfill current contracts.

• We are implementing a new enterprise resource planning system.

Our failure to implement it successfully, on time and on budget could have a material adverse effect on us.

Risks Related to Our Customers

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Our success also depends in part on refining our cost structure and supply chains so that we have flexibility and can maintain and improve profitability.

Deterioration in the tariff environment, political instability or changes in suppliers may cause our costs to increase and, if we are not able to offset the increased costs by charging higher sales prices, will cause a decline in our margins.

To improve margins on our products, we would need to negotiate price reductions with our vendors.

But we cannot be certain that we will be able to do so in a timely manner, or at all.

Failure to achieve the desired level of cost reductions could adversely affect our financial results.

Recent deterioration in the tariff environment, as discussed in more detail herein under the heading “Tariffs, export regulations, and other market barriers have impacted and may continue to impact our ability to compete for the business of domestic customers in China and other jurisdictions, which has adversely affected and may continue to adversely affect our, business, financial condition and results of operations,” has caused and may continue to cause our costs to increase.

If we are unable to successfully negotiate price reductions with our suppliers, adjust our operations to reduce tariff exposure, and/or offset the increased costs by charging higher sales prices, our margins will decline, resulting in an adverse impact to our on business and results of operations.

Political instability and/or changes in suppliers may also cause our costs to increase.

Despite our efforts to control costs and increase efficiency in our facilities, changes in demand could still cause us to realize lower operating margins and profitability.

Further, our gross margins and financial performance may be adversely affected by increases in our operating costs, such as material, labor, supplier costs, logistics and energy costs, all of which have been and may continue to be subject to inflationary pressures.

Operating costs have increased and may continue to increase further as a result of supply chain disruptions in connection with the sourcing of components, materials, equipment, engineering support, and services, labor shortages, high inflation rates, and cost increases attributable to the COVID-19 pandemic and the effects of the Russia-Ukraine conflict.

Operating costs have increased and may continue to increase further as a result of higher tariffs, supply chain disruptions in connection with the sourcing of components, materials, equipment, engineering support, and services, labor shortages, high inflation rates, and cost increases attributable to the effects of geopolitical events, such as the Russia-Ukraine conflict.

In addition, we source components for certain of our tools from a supplier in Israel.

If the conflict in Israel and the surrounding area escalates, it could disrupt our supply chain, resulting in a material adverse impact on our business.

If the conflict in Israel and Gaza and the surrounding area escalates, it could disrupt our supply chain, resulting in a material adverse impact on our business.

These risks may be heightened because we obtain some of the components and subassemblies included in our systems from a limited group of suppliers and do not have long-term contracts with many of our suppliers.

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Further, a significant increase in the price of one or more of these components or subassemblies could seriously harm our results of operations and cash flows.

Our efforts to mitigate any cost increases, labor impacts and supply chain delays and shortages may not be successful, and we cannot predict the duration of these current trends or other future increases in operating costs.

We may not be able to pass cost increases through to our customers fully (or at all), and if supply chain delays and shortages delay delivery of our products,

our customers may seek to purchase from our competitors.

Our efforts to mitigate any cost increases, including any cost increases resulting from existing or future tariffs, labor impacts and supply chain delays, disruptions and shortages may not be successful, and we cannot predict the duration of these current trends or other future increases in operating costs.

We may not be able to pass cost increases through to our customers fully (or at all), and if supply chain delays, disruptions and shortages delay delivery of our products, our customers may seek to purchase from our competitors.

Any such occurrence may have a material adverse impact on our gross margins and business, financial position, results of operations and cash flows.

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Variations in the length of our sales cycles could cause our revenue and cash flows, and consequently, our business, financial condition, operating results and cash flows to fluctuate widely from period to period.

This variation could cause our stock price to decline.

This variation could cause our

stock price to decline.

Our customers generally take a long time to evaluate our inspection and/or film metrology systems, and many people are involved in the evaluation process.

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We have limited visibility into our customers’ inventories, future customer demand and the product mix that our customers will require, which could adversely affect our production forecasts and operating margins.

Certain of our customers have publicly stated their intent to decrease their memory product inventory levels as lead time for components begins to decrease.

This has and could continue to result in a temporary decrease in demand for our products as customers delay capacity expansions until inventory levels are sufficiently reduced.

In addition, innovation in our industry could render significant portions of our inventory obsolete.

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Defects could also lead to product liability as a result of product liability lawsuits against us or against our customers.

We have agreed to indemnify our customers under certain circumstances against liability arising from defects in our systems provided that we also include a cap on our liability in the related sales agreements.

We have agreed to indemnify our customers under certain circumstances against liability arising from defects in our systems provided that we also include a cap on our liability in the

related sales agreements.

Our product liability insurance policy currently provides both aggregate coverage as well as an overall umbrella coverage.

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Competition for engineering and other technical personnel in some of the markets in which we operate is especially intense due to continued increases in the number of technology companies worldwide.

In order to attract and retain executives and other key employees, we must provide a competitive compensation package, including cash and stock-based compensation.

If the anticipated value of our stock-based incentive awards does not materialize so that they cease to be viewed as valuable, if our profits decrease, or if our total compensation package is not viewed as competitive, our ability to attract, retain and motivate executives and key employees could be weakened.

In order to attract and retain executives and other key employees, we must provide a competitive compensation package, including cash and share-based compensation.

If the anticipated value of our share-based incentive awards does not materialize so that they cease to be viewed as valuable, if our profits decrease, or if our total compensation package is not viewed as competitive, our ability to attract, retain and motivate executives and key employees could be weakened.

Any prolonged disruption in the operations of our manufacturing facilities could have a material adverse effect on our revenue.

We produce the majority of our systems in our manufacturing facilities located in Wilmington, Massachusetts, Milpitas, California and Bloomington, Minnesota.

We also use contract manufacturers in China, Japan and the United States.

We produce the majority of our systems in our manufacturing facilities in the following locations:

Wilmington, Massachusetts;

Milpitas, California;

Tucson, Arizona;

and Bloomington, Minnesota.

We also use contract manufacturers in Japan, Taiwan, Vietnam and the United States.

Our manufacturing processes are highly complex and require sophisticated and costly equipment and a specially designed facility.

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If we do not effectively manage our outsourcing strategy or if third-party service providers do not perform as anticipated, we may experience operational difficulties, increased costs, manufacturing interruptions or inefficiencies in the operation of our supply chain, any or all of which could delay our delivery of products to our customers, and materially and adversely affect our business, financial condition, and results of operations.

Our third-party service providers could also be, and certain of our service providers have been, subject to cybersecurity incidents or other events that negatively impact their operations and their ability to perform services for us in a timely manner or at all.

Such disruptions could impact our ability to manufacture products in a timely manner or force us to work with another service provider at a higher cost.

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Additionally, if we are consistently unable to fulfill our backlog, this may be a disincentive to customers to award large contracts to us in the future until they are comfortable that we can effectively manage our backlog.

We are implementing a new enterprise resource planning system.

Our failure to implement it successfully, on time and on budget could have a material adverse effect on us.

We are in the process of completing a multi-year implementation of a complex new enterprise resource planning (“ERP”) system.

ERP implementations are complex, time-consuming, labor intensive, and involve substantial expenditures on system software and implementation activities.

The ERP system is critical to our ability to provide important information to our management, obtain and deliver products, provide services and customer support, send invoices and track payments, fulfill contractual obligations, accurately maintain books and records, provide accurate, timely and reliable reports on our financial and operating results, and otherwise operate our business.

ERP implementations also require transformation of business and financial processes in order to reap the benefits of the ERP system.

Any such implementation involves risks inherent in the conversion to a new computer system, including loss of information and potential disruption to our normal operations.

The implementation and maintenance of the new ERP system has required, and will continue to require, the investment of significant financial and human resources and the implementation may be subject to delays and cost overruns.

In addition, we may not be able to successfully complete the implementation of the new ERP system without experiencing difficulties.

Any disruptions, delays or deficiencies in the design and implementation or the ongoing maintenance of the new ERP system could adversely affect our ability to process orders, ship products, provide services and customer support, send invoices and track payments, fulfill contractual obligations, accurately maintain books and records, provide accurate, timely and reliable reports on our financial and operating results, including reports required by the SEC such as the evaluation of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, and otherwise operate our business.

Additionally, if we do not effectively implement the ERP system as planned or the system does not operate as intended, the effectiveness of our internal control over financial reporting could be adversely affected or our ability to assess it adequately could be delayed.

Risks Related to Our Customers

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We expect to continue to make significant investments in our research and development activities and at times may make inventory investments prior to commercialization.

We may experience difficulties or delays in our development efforts with respect to new systems, and we may not ultimately be successful in our product enhancement efforts to improve and advance products or in responding effectively to technological change, as not all research and development activities result in viable commercial

In addition, we cannot provide assurance that we will be able to develop new products for the most opportunistic new markets and applications.

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Our relationships with these and other customers provide us with access to valuable information regarding trends in the semiconductor device industry, which enables us to better plan our product development activities.

If our current relationships with our large customers are impaired, or if we are unable to develop similar collaborative relationships with important customers in the future, our product development activities could be adversely affected.

If our current relationships

with our large customers are impaired, or if we are unable to develop similar collaborative relationships with important customers in the future, our product development activities could be adversely affected.

Risks Related to Intellectual Property and Data Security

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Any of our pending patent applications may be rejected, however, and we may be unable to develop additional proprietary technology that is patentable in the future.

In addition, the patents that we do own or that have been issued or licensed to us may not provide us with competitive advantages and/or may be

invalidated, unenforceable and/or challenged by third parties.

In addition, the patents that we do own or that have been issued or licensed to us may not provide us with competitive advantages and/or may be invalidated, rendered unenforceable and/or challenged by third parties.

Third parties may also design around our patents or copy our patented inventions without our knowledge.

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Protection of our intellectual property rights, or the efforts of third parties to enforce their own intellectual property rights against us, may result in costly and time-consuming litigation, substantial damages, lost product sales and/or the loss of important intellectual property rights.

From time to time, we may be required to initiate litigation in order to enforce our intellectual property rights or to determine the non-infringement, scope or validity of a third party’s intellectual property rights.

From time to time, we may be required to initiate litigation in order to enforce our intellectual property rights or to determine the noninfringement, scope or validity of a third party’s intellectual property rights.

Any litigation, regardless of outcome, could be expensive and time consuming and could subject us to significant liabilities or require us to re-engineer our products or obtain expensive licenses from third parties.

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In addition, our commercial success depends in part on our ability to avoid infringing or misappropriating patents or other intellectual property rights owned by third parties.

From time to time, we receive communications from third parties asserting that our products or systems infringe, or may infringe, on the intellectual property rights of these third parties.

From time to time, we receive communications from third parties asserting

that our products or systems infringe, or may infringe, on the intellectual property rights of these third parties.

These claims of infringement may lead to protracted and costly litigation, which could require us to pay substantial damages or have the sale of our products or systems stopped by an injunction.

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We also rely on our information technology system for business operations.

If there is a breach as a result of third-party action, including through the use of artificial intelligence, employee misuse, human error, malfeasance, break-ins or otherwise, of our security measures designed to protect this information and prevent data loss and other security breaches, and someone obtains unauthorized access to our customers’, vendors’ or employees’ data or disrupts our access to our own data and systems, we could face loss of business, regulatory investigations or court orders or damage to our reputation, and we could be required to expend significant capital and other resources to alleviate the problem, as well as incur significant costs and liabilities, including due to litigation, indemnity obligations, damages for contract breach, penalties for violation of applicable laws or regulations, and costs for remediation and other incentives offered to customers.

If there is a breach as a result of third-party action, including through the use of artificial intelligence, employee error, malfeasance, break-ins or otherwise, of our security measures designed to protect this information and prevent data loss and other security breaches, and someone obtains unauthorized access to our customers’, vendors’ or employees’ data or disrupts our access to our own data and systems, we could face loss of business, regulatory investigations or court orders or damage to our reputation, and we could be required to expend significant capital and other resources to alleviate the problem, as well as incur significant costs and liabilities, including due to litigation, indemnity obligations, damages for contract breach, penalties for violation of applicable laws or regulations, and costs for remediation and other incentives offered to customers.

Cyber-attacks and other malicious internet-based activities continue to increase.

The Russia–Ukraine conflict and related sanctions imposed by the U.S.

government may expose government entities and public and private U.S.

companies to attempted or actual cybersecurity attacks launched in retaliation, and these attacks could materially disrupt our supply chain or our systems and operations or those of our customers and suppliers.

As the techniques used to obtain unauthorized access or sabotage systems change frequently and generally are not identified until they are launched against a target, our ability to anticipate these techniques or to implement adequate preventative measures is reduced.

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In addition, cybersecurity incidents affecting our customers could result in substantial delays in our ability to ship to those customers or install our products, which could result in delays in revenue recognition or the cancellation of orders.

As discussed herein under the heading “We outsource select manufacturing activities to third-party service providers, which decreases our control over the performance of these functions and may result in lower quality and functionality of our products, and exposes us to increased supply chain risks,” cybersecurity incidents affecting our service providers could negatively impact our ability to timely and cost-effectively produce products and/or negatively impact our competitive position in the market.

As discussed herein under the heading “We outsource select manufacturing activities to third-party service providers, which decreases our control over the performance of these functions and may result in lower quality and functionality of our products,” cybersecurity incidents affecting our service providers could negatively impact our ability to timely and cost-effectively produce products and/or negatively impact our competitive position in the market.

Likewise, cybersecurity events impacting our suppliers could result in substantial delays in our ability to obtain necessary components for our products from those suppliers, which could hamper our ability to ship our products to our customers, harming our results of operations and our customer relationships.

Any or all of the above issues could negatively affect our ability to attract new customers, cause existing customers to choose to purchase from our competitors, result in reputational damage or subject us to third-party lawsuits, regulatory fines or other action or liability, which could adversely affect our operating results.

Compliance with data protection laws may be costly and may impede development of new products, and any failure to comply with, or inquiries under, these laws may could have a material adverse effect on our business, results of operations, and financial condition.

Compliance with data protection laws may be costly and may impede development of new products, and any failure to comply with, or inquiries under, these laws could have a material adverse effect on our business, results of operations, and financial condition.

The General Data Protection Regulation (“GDPR”) is a regulation in European Union (“EU”) law on data protection and privacy for the individuals within the EU and the European Economic Area (“EEA”).

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Appropriate technical and organizational measures are necessary to implement these data protection principles.

These laws and regulations can be costly to comply with and may delay or impede the development of new products, result in negative publicity, increase our operating costs, require significant management time and attention, or subject us to inquiries or investigations, claims or other remedies, including fines, which may be significant, or demands that we modify or cease existing business practices.

which may be significant, or demands that we modify or cease existing business practices.

A failure by us, our suppliers, or other parties with whom we do business to comply with posted privacy policies or with other federal, state, or international privacy-related or data protection laws and regulations, including GDPR, CCPA, CPRA and other new or changing privacy laws and regulations, could result in proceedings against us by governmental entities or others, which could have a material adverse effect on our business, results of operations, and financial condition.

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We face substantial competition from established companies in each of the markets we serve.

We principally compete with KLA, Nova, Camtek, Ushio, Canon, and PDF Solutions.

We principally compete with KLA, Nova, Camtek, Ushio, Canon, GigaVis Co.

and PDF Solutions.

Each of our products also competes with products that use different metrology, inspection or lithography techniques.

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Tariffs, export regulations, and other market barriers have impacted and may continue to impact our ability to compete for the business of domestic customers in China and other jurisdictions, which has adversely affected and may continue to adversely affect our business, financial condition and results of operations.

The semiconductor device industry is a high-visibility industry in many of the European and Asian countries in which we sell our products.

Because the governments of these countries have provided extensive financial support to our semiconductor device manufacturing customers in these countries, we believe that our customers could be disproportionately affected by any trade embargoes, excise taxes, tariffs, or other restrictions imposed by their governments on trade with U.S.

companies such as ourselves, particularly with respect to the ongoing tensions between the United States and China.

Over the last several years, the U.S.

Recent changes in U.S.

trade policy have adversely affected and may continue to adversely affect our business.

In 2025, the U.S.

implemented a number of tariffs on goods imported into the U.S.

While some of the U.S.

Tariffs have been paused for a period of 90 days, certain U.S.

Tariffs are currently in effect, including a base tariff on all imports into the U.S.

and additional tariffs on imports into the U.S.

In addition, in retaliation for the tariffs imposed on U.S.

imports, a number of other countries, including China, announced reciprocal tariffs on goods imported from the U.S.

While most countries paused their reciprocal tariffs on U.S.

imported goods, those reciprocal tariffs could be reinstated at any time.

China has imposed reciprocal tariffs on all U.S.

goods imported into China (“China Tariffs”).

Tariffs, China Tariffs, as well as tariffs imposed by other countries, may continue to evolve.

As discussed above under the heading “If we do not manage our supply chain effectively, our operating results may be adversely affected, and any increases in material, labor, supplier, logistics and other operating costs, or supply chain delays and shortages, could lower our margins or result in lost sales,” the U.S.

increased, and may continue to increase, our supply chain costs.

The China Tariffs, and any other reciprocal tariffs that may be reinstated by other countries, has harmed and may continue to harm demand for our products from customers in those regions, or may cause our customers in those regions to push out or cancel previously placed purchase orders.

Additionally, over the last several years, the U.S.

government has significantly expanded export controls on certain technologies and commodities to certain markets, particularly with respect to semiconductor and other high technology exports to China.

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In 2022, the DoC also added a number of companies in China to the Unverified List and Entity List of the Export Administration Regulations (“EAR”), including Yangtze Memory Technologies Co., Ltd (YMTC).

In October 2023, the DoC revised and expanded the 2022 export controls.

In October 2023, as well as 2024 and early 2025, the DoC revised and expanded the 2022 export controls.

The effect of these changes, among others, is that Onto Innovation is required to conduct additional end-use diligence and, in some instances, obtain export licenses before providing products to certain customers.

There can be no assurance that export

licenses applied for by us or our customers will be granted in a timely manner or at all.

There can be no assurance that export licenses applied for by us or our customers will be granted in a timely manner or at all.

We have experienced and may continue to experience a temporary loss of revenues while we are obtaining licenses with certain customers affected by export controls.

Failure to obtain any required license could result in a reduction of anticipated revenues until we are able to replace unlicensed orders with other customer orders for which a license has been obtained or is not required, and there can be no assurance that replacement orders will be obtained on favorable terms, in a timely manner, or at all.

In addition, any licenses that are granted to us or to our customers may have a short duration or require us to satisfy various conditions.

In addition, any licenses that are granted to us or to our customers may have a short duration or require us to satisfy various conditions, and it is possible that licenses that have been granted may be revoked or we may not be successful in obtaining reissuance of such licenses upon their expiration or in the event modifications are required to a previously issued license.

Any of these occurrences could have a material adverse effect on our revenues, business, financial condition and results of operations.

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export controls.

This difficulty and uncertainty has adversely affected our ability to compete for and win business from domestic customers in China.

These difficulties and uncertainties have adversely affected our ability to compete for and win business from domestic customers in China.

It is possible that the U.S.

government will impose additional export controls on our products or systems, which could lead to further revenue losses.

Such changes could result in additional restrictions on our ability to sell products to customers in China and other jurisdictions.

For example, it remains uncertain what changes, if any, the new U.S.

presidential administration will make with respect to U.S.

export control policy.

Any such changes could result in additional restrictions on our ability to sell products to customers in China and other jurisdictions.

Foreign customers affected by current or future U.S.

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Increased restrictions on China exports may also lead to regulatory retaliation by the Chinese government, which may adversely impact our business.

International trade disputes could result in increases in tariffs and other trade restrictions and protectionist measures that could adversely impact our operations and reduce the competitiveness of our products relative to local and global competitors.

We are subject to compliance with domestic and foreign laws and regulations, and the burden of complying with such laws and regulations, or any failure to comply, has adversely affected and may continue to adversely affect our business, financial condition and results of operations .

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The cost of maintaining compliance under multiple and changing regulatory regimes may adversely affect our business, financial condition and results of operations, and, in the case of export controls, has adversely affected and may continue to adversely affect our results of operations.

As discussed herein under the heading “Tariffs, export regulations, and other market barriers have impacted and may continue to impact both our ability to compete for the business of domestic customers in China and our results of operations,” the U.S.

government issued new export control rules in 2022 and 2023 aimed at restricting China’s access to semiconductor equipment and advanced computing technology, among other things.

herein under the heading “Tariffs, export regulations, and other market barriers have impacted and may continue to impact our ability to compete for the business of domestic customers in China and other jurisdictions, which has adversely affected and may continue to adversely affect our business, financial condition and results of operations,” the U.S.

government issued new export control rules between 2022 and 2025 aimed at restricting China’s access to semiconductor equipment and advanced computing technology, among other things.

To comply with the new rules, Onto Innovation has had to expend time and resources that might otherwise have been used for revenue generating activities.

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If terrorist activities, armed conflict, civil or military unrest or political instability occurs outside of the United States, these events may result in reduced demand for our products or adversely affect our supply chain.

For example, the Ukraine–Russia geographic region is a major source of critical raw materials used for semiconductor manufacturing (such as neon and palladium), and any supply chain disruptions or shortages of such materials due to the ongoing conflict in that region could impact our customers in

a manner that reduces demand for our products.

Similarly, if the conflict in Israel and the surrounding area escalates further, it could result in disruptions to our supply chain and/or the operations of our customers in a manner that reduces demand for our products.

In addition, due to the complex relationships among China, Hong Kong, Taiwan, and the United States, there is risk that political, diplomatic, and national security influences might lead to trade, technology, or capital disputes, or disruptions affecting the semiconductor industry.

Similarly, if the conflict in Israel and Gaza and the surrounding area escalates, it could result in disruptions to our supply chain and/or the operations of our customers in a manner that reduces demand for our products.

In addition, due to the complex relationships among China, Hong Kong, Taiwan, and the United States, there is risk that political, diplomatic, and national security influences might lead to further trade, technology, or capital disputes, or disruptions affecting the semiconductor industry.

In particular, the escalation of geopolitical tensions between China and Taiwan may cause disruptions in the markets in which we operate and lead to a decreased demand for our products, which could adversely affect our business in Asia or have a negative impact on the regional or global economy.

Furthermore, an outbreak of hostilities or other political upheaval in China, Taiwan, Japan, or South Korea, or an economic downturn in Asia or globally, would likely harm the operations of our customers in these countries.

The effect of these types of events on our revenue and cash flows could be material because we derive substantial revenue from sales to semiconductor device foundries in Taiwan such as Taiwan Semiconductor Manufacturing Company Ltd., from memory chip manufacturers in South Korea such as Samsung Electronics Co., Ltd., and from semiconductor device manufacturers in Japan such as Toshiba Corporation.

such as Toshiba Corporation.

Natural disasters, changes in climate, public health crises, and geo-political conflicts could materially adversely affect our worldwide operations (or those of our business partners).

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Our business may also be affected by public health issues (for example, an outbreak of a contagious disease such as COVID-19, avian influenza, measles or Ebola).

The effects of the public health crisis caused by the COVID-19 pandemic and the resulting economic impact have affected, and may continue to affect, our operations and those of our suppliers, third-party service providers, and customers.

The extent to which the economic effects of the COVID-19 pandemic could continue to impact our business, results of operations, and financial conditions is difficult to predict and depends on numerous evolving factors including any future resurgences of the pandemic and the intensity and duration of any resulting adverse macroeconomic conditions.

The COVID-19 pandemic exposed our business, results of operations, and financial condition to the following adverse impacts:

The effects of a public health crisis may affect our operations and those of our suppliers, third-party service providers, and customers.

The extent to which the economic effects of a public health crisis could impact our business, results of operations, and financial conditions are difficult to predict, and depend on numerous evolving factors including any future resurgences of the public health crisis and the intensity and duration of any resulting adverse macroeconomic conditions.

A public health crisis could expose our business, results of operations, and financial condition to the following adverse impacts:

disruptions to our supply chain in connection with the sourcing of materials, support, and services;

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and a decrease in demand for our products.

Additional sustained or prolonged outbreaks of COVID-19, or any ongoing, worsening or recurring supply chain disruptions or macroeconomic effects of the pandemic could have a material adverse effect on our business, results of operations, legal exposure, or financial condition and may also heighten many of the other risks described in this “Risk Factors” section.

Any sustained or prolonged public health crises, or any ongoing, worsening or recurring supply chain disruptions or macroeconomic effects of such crises could have a material adverse effect on our business, results of operations, legal exposure, or financial condition and may also heighten many of the other risks described in this “Risk Factors” section.

There may also be conflict or uncertainty in the countries in which we operate, including safety issues, disruptions of service from utilities, nuclear power plant accidents or general economic or political unrest, including war, civil unrest or terrorist attacks.

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Consequently, to date, our operations have not been materially adversely affected by Russia’s invasion of Ukraine, or the Israel-Hamas conflict.

However, if the Russia-Ukraine or Israel-Hamas conflicts escalate further and/or the U.S.

However, if the Russia-Ukraine

conflict and/or the conflicts in Israel and Gaza and the surrounding area escalate further, and/or the U.S.

or other jurisdictions impose additional sanctions on the governments or entities involved, this could result in disruptions to the global economy and/or supply chains that could adversely affect our business.

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or (3) recoverability of our deferred tax assets and liabilities.

Beginning in 2022, the U.S.

Due to the pace of legislative changes and the scale of our business activities, any substantial changes in tax policies or legislative initiatives may materially and adversely affect our business, the taxes we are required to pay, our financial position, and results of operations.

For example, beginning in 2022, the U.S.

Tax Cuts and Jobs Act of 2017 (“TCJA”) eliminated the existing option to deduct research and development expenditures and requires taxpayers to amortize them over five years pursuant to IRC Section 174.

Although Congress is considering legislation that would defer the amortization requirement to later years, we have no assurance that the provision will be repealed or otherwise modified.

The requirement reduced our cash flows for 2022 and 2023, and may continue to reduce our cash flows unless repealed.

In addition, recent proposals to increase the U.S.

corporate income tax rate, increase U.S.

taxation of international business operations and impose a global minimum tax could have a negative impact on our tax position depending upon the terms of the final enacted legislation.

Based on the nature of the uncertainties around specific legislation to be enacted, we have not quantified the impact of this risk.

Many countries and organizations such as the Organization for Economic Cooperation and Development are also actively considering changes to existing tax laws or have proposed or enacted new laws that could increase our tax obligations in countries

where we do business or cause us to change the way we operate our business.

Any of these developments or changes in federal, state, or international tax laws or tax rulings could adversely affect our effective tax rate and our results of operations.

The requirement reduced our cash flows for 2022, 2023 and 2024, and may continue to reduce our cash flows.

In addition, any changes to U.S.

and global corporate income tax laws, including increasing U.S.

taxation of international business operations and imposing a global minimum tax could have a negative impact on our tax position in the future.

Many countries and organizations, such as the OECD, which is discussed further below, are also actively considering changes to existing tax laws or have proposed or enacted new laws that could increase our tax obligations in countries where we do business or cause us to change the way we operate our business.

of these developments or changes in federal, state, or international tax laws or tax rulings could adversely affect our effective tax rate and our results of operations.

The OECD has released guidance covering various topics, including country-by-country reporting, definitional changes to permanent establishment and Base Erosion and Profit Shifting (“BEPS”), an initiative that aims to standardize and modernize global tax policy.

The guidance also established a global minimum tax of 15%.

This guidance has been implemented by several jurisdictions, including jurisdictions in which we operate, and many other jurisdictions are in the process of implementing it.

Depending on the final form of legislation ultimately enacted, there may be significant consequences for us due to our international business activities, including, but not limited to, an increase in our tax uncertainty and adverse effects on our provision for income taxes.

presidential administration has directed the U.S.

Department of Treasury to develop options for “protective measures” in response to tax rules imposed by non-U.S.

countries that are extraterritorial or disproportionately affect U.S.

companies (which may include taxes imposed under the OECD guidance) and legislation has been introduced that would increase U.S.

tax rates on non-U.S.

companies and investors if their home jurisdictions impose discriminatory or extraterritorial taxes on U.S.

companies, but we cannot predict whether such protective measures or legislation will be adopted or what, if any, responsive measures will be adopted by non-U.S.

In addition, we are subject to regular examination of our income tax returns by the Internal Revenue Service and other tax authorities.

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Although we believe our tax estimates are reasonable, there can be no assurance that any final determination will not be materially different from the treatment reflected in our historical income tax provisions and accruals, which could materially and adversely affect our results of operations.

In December 2021, the Organization for Economic Co-operation and Development (“OECD”), released guidance covering various topics, including country-by-country reporting, definitional changes to permanent establishment and Base Erosion and Profit Shifting (“BEPS”), an initiative that aims to standardize and modernize global tax policy.

The proposed guidance also established a global minimum tax of 15%.

Depending on the final form of guidance adopted by OECD members and legislation ultimately enacted, if any, there may be significant consequences for us due to our international business activities, including, but not limited to, an increase in our tax uncertainty and adverse effects on our provision for income taxes.

Turmoil or fluctuations in the credit markets and the financial services industry may negatively impact our business, results of operations, financial condition or liquidity, and our factoring arrangements may expose us to additional risks.

In the past, global credit markets and the financial services industry have experienced periods of turmoil and upheaval characterized by the tightening of the credit markets, the weakening of the global economy and an unprecedented level of intervention from the United States and other governments.

Adverse economic conditions, such as sustained periods of economic uncertainty or a crisis in the financial markets may have a material adverse effect on our liquidity and financial condition if our ability to obtain credit from the capital financial markets, or from trade creditors was impaired.

If banks and financial institutions with whom we have banking relationships enter receivership or become insolvent in the future, we may be unable to access, and we may lose, some or all of our existing cash, cash equivalents and investments to the extent those funds are not insured or otherwise protected by the FDIC.

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Compliance with current or future environmental laws and regulations could restrict our ability to expand our facilities or require us to acquire additional expensive equipment, modify our manufacturing processes, or incur other significant expenses.

For example, we are or expect to become subject to various new or proposed climate-related and other sustainability laws and regulations, including, for example, the state of California’s new climate change disclosure requirements, the EU’s new Corporate Sustainability Reporting Directive and proposed climate-change disclosure requirements from the SEC.

Compliance with such laws and regulations, as well as the overall increased focus and scrutiny from the SEC and other regulators, investors, customers, vendors, employees, and other stakeholders concerning environmental, social and governance (“ESG”) and climate matters, could impose additional costs on us.

For example, we are, or may become subject to various new or proposed climate-related and other sustainability laws and regulations, including, for example, the state of California’s new climate change disclosure requirements, the EU’s new Corporate Sustainability Reporting Directive and proposed climate-change disclosure requirements from the SEC.

Compliance with such laws and regulations, as well as any increased focus or scrutiny from the SEC and other regulators, investors, customers, vendors, employees, and other stakeholders concerning sustainability and climate matters, could impose additional costs on us.

We may unintentionally violate environmental laws or regulations in the future as a result of human error, equipment failure or other causes.

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We have been from time to time, and in the future may be, involved in legal proceedings or claims regarding any number of matters, including intellectual property infringement, contract disputes, trade compliance, antitrust, environmental regulations, privacy and data protection, securities, product performance, product liability, employment and workplace safety, and other matters.

In addition, we may receive, and have received, inquiries, warrants, subpoenas, and other requests for information in connection with government investigations of potential or suspected violations of law by our company and/or other companies

that we work with.

We have also received, and may receive in the future, claims from customers who believe we owe them product warranty protection, indemnification or other obligations.

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• general economic conditions;

• political changes or uncertainties, including as a result of the upcoming U.S.

presidential election, hostilities or natural disasters such as hurricanes and floods;

• political changes, hostilities or natural disasters such as hurricanes and floods;

• the impact of infectious disease pandemics, on the global economy and on our customers, suppliers, employees, and business;

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

What changed 10-Q

Item 1A. Risk Factors