ONTO INNOVATION INC. 10-Q

Item 1. Financial Statements ONTO INNOVATION INC. CONDENSED CONSOLIDATED S TATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) Three Months Ended March 29, March 30, 2025 2024 Revenue $ 266,607 $ 228,846 Cost of revenue 123,374 110,561 Gross profit 143,233 118,285 Operating expenses: Research and development 28,030 26,554 Sales and marketing 19,716 18,318 General and administrative 23,908 17,563 Amortization 8,445 13,112 Total operating expenses 80,099 75,547 Operating income 63,134 42,738 Interest income, net 9,266 7,361 Other (expense) income, net ( 743 ) 793 Income before provision for income taxes 71,657 50,892 Provision for income taxes 7,562 4,039 Net income $ 64,095 $ 46,853 Earnings per share: Basic $ 1.30 $ 0.95 Diluted $ 1.30 $ 0.94 Weighted average number of shares outstanding: Basic 49,180 49,230 Diluted 49,408 49,638 The accompanying notes are an integral part of these financial statements. 1 Table of Contents ONTO INNOVATION INC. CONDENSED CONSOLIDATED STATEM ENTS OF COMPREHENSIVE INCOME (In thousands) (Unaudited) Three Months Ended March 29, March 30, 2025 2024 Net income $ 64,095 $ 46,853 Other comprehensive income (loss), net of tax: Change in net unrealized gains (losses) on available-for-sale marketable securities 338 ( 657 ) Change in currency translation adjustments 2,013 ( 2,593 ) Total other comprehensive income (loss), net of tax 2,351 ( 3,250 ) Total comprehensive income $ 66,446 $ 43,603 The accompanying notes are an integral part of these financial statements. 2 Table of Contents ONTO INNOVATION INC. CONDENSED CONSOLIDA TED BALANCE SHEETS (In thousands) (Unaudited) March 29, 2025 December 28, 2024 ASSETS Current Assets: Cash and cash equivalents $ 203,727 $ 212,945 Marketable securities 646,884 639,383 Accounts receivable, less allowance of $ 2,090 and $ 2,585 291,583 308,142 Inventories, net 292,657 286,979 Prepaid expenses and other current assets 34,454 30,073 Total current assets 1,469,305 1,477,522 Property, plant and equipment, net 127,152 123,868 Goodwill 330,037 329,980 Identifiable intangible assets, net 119,012 127,457 Deferred income taxes 46,641 42,811 Other assets 22,905 15,453 Total assets $ 2,115,052 $ 2,117,091 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 55,364 $ 56,261 Accrued liabilities 41,669 49,974 Deferred revenue 39,206 33,828 Other current liabilities 38,238 30,026 Total current liabilities 174,477 170,089 Deferred and other tax liabilities 4 4 Other non-current liabilities 20,949 21,116 Total liabilities 195,430 191,209 Commitments and contingencies Stockholders’ equity: Common stock 49 49 Additional paid-in capital 1,259,964 1,275,146 Accumulated other comprehensive loss ( 11,512 ) ( 13,863 ) Accumulated earnings 671,121 664,550 Total stockholders’ equity 1,919,622 1,925,882 Total liabilities and stockholders’ equity $ 2,115,052 $ 2,117,091 The accompanying notes are an integral part of these financial statements. 3 Table of Contents ONTO INNOVATION INC. CONDENSED CONSOLIDATED S TATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Three Months Ended March 29, March 30, 2025 2024 Cash flows from operating activities: Net income $ 64,095 $ 46,853 Adjustments to reconcile net income to net cash and cash equivalents provided by operating activities: Amortization of intangibles 8,445 13,112 Amortization (accretion) of premium (discount) on marketable securities, net ( 1,537 ) ( 1,585 ) Depreciation 4,395 3,388 Share-based compensation 6,814 6,486 Provision for inventory valuation 1,534 2,197 Deferred income taxes ( 3,774 ) ( 5,556 ) Other, net 1,171 ( 691 ) Changes in operating assets and liabilities 10,837 ( 7,073 ) Net cash and cash equivalents provided by operating activities 91,980 57,131 Cash flows from investing activities: Purchases of marketable securities ( 208,526 ) ( 207,743 ) Proceeds from maturities and sales of marketable securities 203,012 122,902 Purchases of property, plant and equipment ( 8,233 ) ( 6,975 ) Purchases of non-marketable equity securities ( 8,000 ) — Acquisitions, net of cash acquired ( 57 ) — Net cash and cash equivalents used in investing activities ( 21,804 ) ( 91,816 ) Cash flows from financing activities: Purchases and retirement of common stock ( 75,015 ) — Tax payments related to shares withheld for share-based compensation plans ( 8,684 ) ( 9,088 ) Issuance of shares through share-based compensation plans 4,179 4,015 Net cash and cash equivalents used in financing activities ( 79,520 ) ( 5,073 ) Effect of exchange rate changes on cash and cash equivalents 126 ( 2,857 ) Net decrease in cash and cash equivalents ( 9,218 ) ( 42,615 ) Cash and cash equivalents at beginning of period 212,945 233,508 Cash and cash equivalents at end of period $ 203,727 $ 190,893 Supplemental disclosure of cash flow information: Income taxes paid (net of refunds) $ 770 $ 921 The accompanying notes are an integral part of these financial statements. 4 Table of Contents ONTO INNOVATION INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (In thousands) (Unaudited) Common Stock Additional Paid-in Accumulated Other Comprehensive Accumulated Shares Amount Capital Loss Earnings Total Balance at December 28, 2024 49,238 $ 49 $ 1,275,146 $ ( 13,863 ) $ 664,550 $ 1,925,882 Net income . — — — 64,095 64,095 Share-based compensation — — 6,814 — — 6,814 Issuance of shares through share-based compensation plans, net 140 — 4,179 — — 4,179 Purchases of common stock ( 492 ) — ( 17,491 ) — ( 57,524 ) ( 75,015 ) Share-based compensation plan withholdings ( 49 ) — ( 8,684 ) — — ( 8,684 ) Currency translation — — — 2,013 — 2,013 Unrealized loss on investments — — — 338 — 338 Balance at March 29, 2025 48,837 $ 49 $ 1,259,964 $ ( 11,512 ) $ 671,121 $ 1,919,622 Common Stock Additional Paid-in Accumulated Other Comprehensive Accumulated Shares Amount Capital Loss Earnings Total Balance at December 30, 2023 49,086 $ 49 $ 1,262,029 $ ( 7,899 ) $ 482,356 $ 1,736,535 Net income — — — — 46,853 46,853 Share-based compensation — — 6,486 — — 6,486 Issuance of shares through share-based compensation plans, net 169 — 4,015 — — 4,015 Share-based compensation plan withholdings ( 53 ) — ( 9,088 ) — — ( 9,088 ) Currency translation — — — ( 2,593 ) — ( 2,593 ) Unrealized loss on investments — — — ( 657 ) — ( 657 ) Balance at March 30, 2024 49,202 $ 49 $ 1,263,442 $ ( 11,149 ) $ 529,209 $ 1,781,551 The accompanying notes are an integral part of these financial statements. 5 Table of Contents ONTO INNOVATION INC. NOTES TO CONDENSED CONSOLI DATED FINANCIAL STATEMENTS (Unaudited) NOTE 1. Basis of Presentation The accompanying interim unaudited Condensed Consolidated Financial Statements have been prepared by Onto Innovation Inc. (together with its consolidated subsidiaries, unless otherwise specified or suggested by the context, the “Company,” “Onto Innovation,” “we,” “our” or “us”) and in the opinion of management reflect all adjustments, consisting of normal recurring accruals, necessary for their fair presentation in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Preparing financial statements requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Actual amounts could differ materially from reported amounts. The interim results for the three month period ended March 29, 2025 are not necessarily indicative of results to be expected for the entire year or any future periods. This interim financial information should be read in conjunction with the financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 28, 2024 (the “2024 Form 10-K”) filed with the Securities and Exchange Commission on February 25, 2025. The accompanying Condensed Consolidated Balance Sheet at December 28, 2024 has been derived from the audited consolidated financial statements included in the 2024 Form 10-K. The Company operates on a 52- or 53-week fiscal year ending on the Saturday closest to December 31. Our fiscal year ending January 3, 2026 (“fiscal year 2025”) is a 53-week fiscal year. The first quarter of the Company’s fiscal year 2025 ended on March 29, 2025, the second quarter ends on June 28, 2025 and the third quarter ends on September 27, 2025. Our fiscal year ended December 28, 2024 was a 52-week fiscal year. The first quarter of the fiscal year ended December 28, 2024 ended on March 30, 2024. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP 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. Estimates made by management include 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, allowance for credit losses, liabilities for product warranty, 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. 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. Recent Accounting Pronouncements There have been no recent accounting pronouncements or changes in accounting pronouncements during the three months ended March 29, 2025, as compared to the recent accounting pronouncements described in the Company’s Annual Report on Form 10-K for the fiscal year ended December 28, 2024 , that are of significance, or potential significance, to the Company. 6 Table of Contents NOTE 2. 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. The following tables provide the assets and liabilities carried at fair value measured on a recurring basis at March 29, 2025 and December 28, 2024: Fair Value Measurements Using Significant Other Observable Inputs (Level 2) March 29, 2025 December 28, 2024 (in thousands) Assets: Available-for-sale debt securities: Government notes and bonds $ 272,881 $ 284,863 Certificates of deposit 87,224 73,421 Commercial paper 151,651 136,557 Corporate bonds 135,128 144,542 Foreign currency forward contracts — 61 Total assets $ 646,884 $ 639,444 Liabilities: Foreign currency forward contracts $ 89 $ — Total liabilities $ 89 $ — 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 3 for additional discussion regarding the fair value of the Company’s marketable securities. Non-recurring Fair Value Measurements During the three months ended March 29, 2025 , the Company invested $ 8.0 million in the equity of a privately-held company. There were no such investments at December 28, 2024. This non-marketable equity investment is recorded at fair value on a non-recurring basis and is classified as a Level 3 asset in “Other assets” on the Condensed Consolidated Balance Sheets. This non-marketable equity investment is generally accounted for under the measurement alternative, defined as cost, less impairments, adjusted for subsequent observable price changes and is periodically assessed for impairment when events or 7 Table of Contents circumstances indicate that decline in value may have occurred. As of March 29, 2025 , there have been no impairments recorded for the non-marketable equity investment. NOTE 3. Marketable Securities At March 29, 2025 and December 28, 2024, marketable securities are categorized as follows: Amortized Cost Gross Unrealized Holding Gains Gross Unrealized Holding Losses Fair Value (in thousands) March 29, 2025 Government notes and bonds $ 272,438 $ 552 $ 109 $ 272,881 Certificates of deposit 87,180 52 8 87,224 Commercial paper 151,630 45 24 151,651 Corporate bonds 134,799 345 16 135,128 Total marketable securities $ 646,047 $ 994 $ 157 $ 646,884 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 The amortized cost and estimated fair value of marketable securities classified by the maturity date listed on the security, regardless of the Condensed Consolidated Balance Sheets classification, are as follows at March 29, 2025 and December 28, 2024: March 29, 2025 December 28, 2024 Amortized Cost Fair Value Amortized Cost Fair Value (in thousands) Due within one year $ 453,458 $ 453,877 $ 432,088 $ 432,616 Due after one through five years 169,544 169,962 140,917 140,792 Due after five through ten years 235 235 235 235 Due after ten years 22,810 22,810 65,740 65,740 Total marketable securities $ 646,047 $ 646,884 $ 638,980 $ 639,383 The Company has evaluated its investment policies and determined that all of its marketable securities, which are comprised of debt securities, are to be classified as available-for-sale. The Company’s 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.” Gross realized gains and losses on available-for-sale securities are included in “Other (expense) income, net” on the Condensed Consolidated Statements of Operations and were not material during the three months ended March 29, 2025 and March 30, 2024. The Company records credit losses for its available-for-sale debt securities when it intends to sell the securities, it is more-likely-than not that it will be required to sell the securities before a recovery, or when it does not expect to recover the entire amortized cost basis of the securities. The cost of securities sold is based on the specific identification method. The Company has determined that the gross unrealized losses on its marketable securities at March 29, 2025 and December 28, 2024 are temporary in nature. The Company regularly reviews its investment portfolio to identify and evaluate marketable securities that have indications of possible impairment from credit losses or other factors. Factors considered in determining whether an unrealized loss is considered to be a credit loss 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 securities for a period of time sufficient to allow for any anticipated recovery in market value. 8 Table of Contents 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 March 29, 2025 and December 28, 2024: 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) March 29, 2025 Government notes and bonds $ 42,961 $ 109 $ — $ — Certificates of deposit 26,790 8 — — Commercial paper 61,339 24 — — Corporate bonds 21,912 16 — — Total $ 153,002 $ 157 $ — $ — 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 $ 77,473 $ 418 $ 3,200 $ 1 See Note 2 for additional discussion regarding the fair value of the Company’s marketable securities. NOTE 4. Derivative Instruments and Hedging Activities The Company, when it considers it to be appropriate, enters into forward contracts to hedge the economic exposures arising from foreign currency denominated transactions. At March 29, 2025 and December 28, 2024, these contracts were denominated in euro, Chinese renminbi, Japanese yen, Korean won, Singapore dollars, and Taiwanese dollars. Foreign currency forward contracts are not designated as hedges for accounting purposes, and therefore, the change in fair value is recorded in “Other (expense) income, net,” in the Condensed Consolidated Statements of Operations. The Company records its forward contracts at fair value in either “Prepaid expenses and other current assets” or “Other current liabilities” in the Condensed Consolidated Balance Sheets. The dollar equivalent of the U.S. dollar forward contracts and related fair values as of March 29, 2025 and December 28, 2024 were as follows: March 29, 2025 December 28, 2024 (in thousands) Notional amount $ 44,928 $ 45,883 Fair value of (asset) liability $ 89 $ ( 61 ) NOTE 5. Goodwill and Purchased Intangible Assets Goodwill The changes in the carrying amount of goodwill are as follows: Three Months Ended March 29, March 30, 2025 2024 (in thousands) Balance, beginning of the period $ 329,980 $ 315,811 Acquired business 57 — Balance, end of the period $ 330,037 $ 315,811 9 Table of Contents Purchased Intangible Assets Purchased intangible assets as of March 29, 2025 and December 28, 2024 are as follows: Gross Carrying Amount Accumulated Amortization Net (in thousands) March 29, 2025 Finite-lived intangibles: Developed technology $ 387,716 $ 305,014 $ 82,702 Customer and distributor relationships 73,321 40,517 32,804 Trademarks and trade names 14,171 10,665 3,506 Total identifiable intangible assets $ 475,208 $ 356,196 $ 119,012 December 28, 2024 Finite-lived intangibles: 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 Assuming no change in the gross carrying value of identifiable intangible assets and estimated lives, future estimated amortization expenses are: Expected Amortization Expense Fiscal Year: (in thousands) 2025 (remainder) $ 25,336 2026 32,588 2027 24,367 2028 13,482 2029 6,232 2030 6,109 Thereafter 10,898 Total $ 119,012 NOTE 6. Balance Sheet Components Inventories Inventories, net are comprised of the following: March 29, 2025 December 28, 2024 (in thousands) Materials $ 182,249 $ 176,814 Work-in-process 85,953 91,672 Finished goods 24,455 18,493 Total inventories, net $ 292,657 $ 286,979 10 Table of Contents Property, Plant and Equipment Property, plant and equipment, net is comprised of the following: March 29, 2025 December 28, 2024 (in thousands) Machinery and equipment $ 89,115 $ 86,317 Land and building 47,829 46,583 Computer equipment and software 36,440 32,755 Leasehold improvements 20,644 20,405 Furniture and fixtures 3,805 4,081 Total property, plant and equipment, gross 197,833 190,141 Accumulated depreciation ( 70,681 ) ( 66,273 ) Total property, plant and equipment, net $ 127,152 $ 123,868 Other assets Other assets are comprised of the following: March 29, 2025 December 28, 2024 (in thousands) Operating lease right-of-use assets $ 13,486 $ 13,939 Non-marketable equity securities 8,000 — Other 1,419 1,514 Total other assets $ 22,905 $ 15,453 Accrued liabilities Accrued liabilities are comprised of the following: March 29, 2025 December 28, 2024 (in thousands) Payroll and related expenses $ 30,596 $ 39,850 Warranty 11,004 10,075 Other 69 49 Total accrued liabilities $ 41,669 $ 49,974 Other current liabilities Other current liabilities are comprised of the following: March 29, 2025 December 28, 2024 (in thousands) Customer deposits $ 7,396 $ 10,700 Current operating lease obligations 5,953 5,416 Income tax payable 18,854 8,492 Accrued professional fees 822 618 Other accrued taxes 1,136 839 Other 4,077 3,961 Total other current liabilities $ 38,238 $ 30,026 11 Table of Contents Other non-current liabilities Other non-current liabilities are comprised of the following: March 29, 2025 December 28, 2024 (in thousands) Non-current operating lease obligations $ 8,661 $ 9,743 Unrecognized tax benefits (including interest) 5,882 5,489 Deferred revenue 4,393 4,009 Other 2,013 1,875 Total other non-current liabilities $ 20,949 $ 21,116 NOTE 7. 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 Condensed 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. Warranty provisions are generally related to current period sales. Settlements of warranty reserves are generally associated with sales that occurred during the 12 to 14 months prior to the period-end. Changes in the Company’s warranty reserves are as follows: Three Months Ended March 29, March 30, 2025 2024 (in thousands) Balance, beginning of the period $ 10,858 $ 9,380 Accruals 3,773 2,761 Usage ( 2,639 ) ( 2,903 ) Balance, end of the period $ 11,992 $ 9,238 Warranty reserves are reported in the Condensed 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. In the opinion of management, any potential liabilities resulting from any current disputes would not have a material adverse effect on the Company’s unaudited interim condensed consolidated financial statements. 12 Table of Contents 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 $ 100.0 million. The available line of credit as of March 29, 2025 was $ 100.0 million with an available interest rate of 5.0 %. The credit agreement is available to the Company until such time that either party terminates the arrangement at their discretion. The Company has not utilized the line of credit as of the date of this filing. NOTE 8. Revenue The following table represents a disaggregation of revenue by timing of revenue: Three Months Ended March 29, March 30, 2025 2024 (in thousands) Point-in-time $ 249,279 $ 213,850 Over-time 17,328 14,996 Total revenue $ 266,607 $ 228,846 See Note 14 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 Condensed Consolidated Balance Sheets. As of March 29, 2025 and December 28, 2024, the Company had contract assets of $ 8.2 million and $ 10.1 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 Condensed Consolidated Balance Sheets. For contracts with a duration longer than one year, these amounts are recorded in “Other non-current liabilities” in the Condensed Consolidated Balance Sheets. As of March 29, 2025 and December 28, 2024, the Company carried a long-term deferred revenue balance of $ 4.4 million and $ 4.0 million, respectively. Changes in deferred revenue were as follows: Three Months Ended March 29, March 30, 2025 2024 (in thousands) Balance, beginning of the period $ 37,836 $ 27,225 Deferral of revenue 28,982 17,303 Recognition of current year deferred revenue ( 8,987 ) ( 6,123 ) Recognition of prior period deferred revenue ( 14,232 ) ( 9,526 ) Balance, end of the period $ 43,599 $ 28,879 13 Table of Contents NOTE 9. Share-Based Compensation Restricted Stock Unit Activity A summary of the Company’s restricted stock unit activity with respect to the nine months ended March 29, 2025 is as follows: Number of Shares (in thousands) Weighted Average Grant Date Fair Value Nonvested at December 28, 2024 409 $ 132.39 Granted 128 $ 129.27 Vested ( 110 ) $ 108.09 Forfeited ( 6 ) $ 138.19 Nonvested at March 29, 2025 421 $ 137.72 Of the 421 thousand nonvested shares outstanding at March 29, 2025 , 332 thousand are service-based RSUs and 89 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 common stock at the date of grant. The fair value of the Company’s market-based PRSUs granted during fiscal years 2025 and 2024 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 $ 140.94 and $ 251.51 , respectively. Share-Based Compensation Expense The following table presents the detail of share-based compensation expense amounts included in the Company’s Condensed Consolidated Statement of Operations: Three Months Ended March 29, March 30, 2025 2024 (in thousands) Cost of revenue $ 1,107 $ 1,136 Research and development 1,062 1,287 Sales and marketing 1,339 1,217 General and administrative 3,306 2,846 Total share-based compensation expense $ 6,814 $ 6,486 As of March 29, 2025 and December 28, 2024 , there was $ 35.4 million and $ 29.2 million of total unrecognized compensation cost related to restricted stock units granted under the Company’s stock plans, respectively. That cost is expected to be recognized over a weighted average period of 1.5 and 1.3 years following both March 29, 2025 and December 28, 2024 , respectively. NOTE 10. Other (Expense) Income, Net Other (expense) income, net, is comprised of the following: Three Months Ended March 29, March 30, 2025 2024 (in thousands) Foreign currency exchange (losses) gains, net $ ( 762 ) $ 642 Other 19 151 Total other (expense) income, net $ ( 743 ) $ 793 14 Table of Contents NOTE 11. Income Taxes The following table provides details of income taxes: Three Months Ended March 29, March 30, 2025 2024 (in thousands) Income before income taxes $ 71,657 $ 50,892 Provision for income taxes $ 7,562 $ 4,039 Effective tax rate 11 % 8 % The income tax provision for the three months ended March 29, 2025 was computed based on the Company’s annual forecast of profit by jurisdiction and forecasted effective tax rate for the year. The increase in the Company’s income tax provision for the three months ended March 29, 2025 as compared to the three months ended March 30, 2024 was primarily due to an increase in quarterly earnings as well as fewer excess benefits associated with equity compensation. The Company’s recorded effective tax rate for the periods presented is less than the U.S. statutory rate primarily due to projected Foreign Derived Intangible Income deductions, federal research and development tax credits, and excess tax benefits associated with equity compensation. The Company currently has a partial valuation allowance recorded against certain foreign and state net operating loss and credit carryforwards where the unrealizability of such deferred tax assets is more likely than not. Each quarter, the Company assesses the likelihood that it will be able to recover its deferred tax assets. The Company considers available evidence, both positive and negative, including forecasted earnings, in assessing its need for a valuation allowance. As a result of the Company’s analysis, it concluded that it is more likely than not that a portion of its deferred tax assets will not be realized. Therefore, the Company continues to provide a valuation allowance against certain deferred tax assets. The Company continues to monitor available evidence and may reverse some or all of its remaining valuation allowance in future periods, if appropriate. The Company has a recorded valuation allowance against a certain portion of its deferred tax assets of $ 12.2 million at each of March 29, 2025 and December 28, 2024. The Organization for Economic Co-operation and Development (“OECD”) has been working on a Base Erosion and Profits Shifting (“BEPS”) project that would change various aspects of the existing framework under which the Company’s tax obligations are determined in many of the countries in which we operate. As part of the BEPS project, the OECD issued policies aimed to modernize global tax systems, including a country-by-country 15% minimum effective tax rate (“Pillar Two”) for multinational companies. Numerous countries have enacted, or are in the process of enacting, legislation to implement the Pillar Two model rules with a subset of the rules becoming effective during the current year, and the remaining rules becoming effective in later periods. At this point in time, the Company does not expect any material tax impact associated with Pillar Two rules in the countries where it operates. As these rules continue to evolve with new legislation and guidance, the Company will continue to monitor and account for the enactment of Pillar Two and the potential impacts such rules may have on its effective tax rate and cash flows in future years. NOTE 12. Earnings Per Share Basic earnings per share is calculated using the weighted average number of shares of common stock outstanding during the period. Restricted stock units, employee stock purchase grants and stock options are included in the calculation of diluted earnings per share, except when their effect would be anti-dilutive. 15 Table of Contents The Company’s basic and diluted earnings per share amounts are as follows: Three Months Ended March 29, March 30, 2025 2024 (in thousands, except for per share data) Numerator: Net income $ 64,095 $ 46,853 Denominator: Basic earnings per share - weighted average shares outstanding 49,180 49,230 Effect of potential dilutive securities: Restricted stock units and employee stock purchase grants - dilutive shares 228 408 Diluted earnings per share - weighted average shares outstanding 49,408 49,638 Earnings per share: Basic $ 1.30 $ 0.95 Diluted $ 1.30 $ 0.94 NOTE 13. Accumulated Other Comprehensive Loss The components of accumulated other comprehensive loss, net of tax, were as follows: Foreign currency translation adjustments Net unrealized gains on available-for-sale marketable securities Accumulated other comprehensive loss (in thousands) Balance at December 28, 2024 $ ( 14,491 ) $ 628 $ ( 13,863 ) Net current period other comprehensive income 2,013 338 2,351 Balance at March 29, 2025 $ ( 12,478 ) $ 966 $ ( 11,512 ) Foreign currency translation adjustments Net unrealized (losses) gains on available-for-sale marketable securities Accumulated other comprehensive loss (in thousands) Balance at December 30, 2023 $ ( 8,664 ) $ 765 $ ( 7,899 ) Net current period other comprehensive (loss) income ( 2,593 ) ( 657 ) ( 3,250 ) Balance at March 30, 2024 $ ( 11,257 ) $ 108 $ ( 11,149 ) For the three months ended March 29, 2025, tax effects on net income of amounts recorded in other comprehensive income was $ 94 thousand. For the three months ended March 30, 2024, tax effects on net income of amounts recorded in other comprehensive loss was $ 181 thousand . NOTE 14. Segment Reporting and Geographic Information The Company is engaged in 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 and its subsidiaries currently operate in a single operating segment: the design, development, manufacture and support of high-performance process control defect inspection and metrology, lithography and process control software systems used by microelectronics device manufacturers. Therefore, the Company has one reportable segment. The Company’s chief operating decision maker is the Chief Executive Officer (the “CEO”). The CEO allocates resources and assesses performance of the business and other activities at the reportable segment level. The measure of segment assets is reported on the Condensed 16 Table of Contents Consolidated Balance Sheets as “Total assets.” The CEO does not review segment assets at a level other than that presented in the Company’s Condensed Consolidated Balance Sheets. The table below presents the Company’s consolidated operating results including significant segment expenses: Three Months Ended March 29, March 30, 2025 2024 (in thousands) Revenue $ 266,607 $ 228,846 Less: Adjusted cost of revenue (1) 119,739 109,737 Adjusted research and development (1) 28,720 26,358 Adjusted sales and marketing (1) 19,716 18,223 Adjusted general and administrative (2) 21,937 17,228 Other segment items: Restructuring expenses (3) 4,758 1,046 Merger and acquisitions related expenses (3) 158 374 Litigation expenses (3) — 30 Amortization 8,445 13,112 Operating income 63,134 42,738 Interest income, net 9,266 7,361 Other (expense) income, net ( 743 ) 793 Provision for income taxes 7,562 4,039 Net income $ 64,095 $ 46,853 (1) Excludes restructuring expenses and merger and acquisition related expenses (2) Excludes restructuring expenses, litigation expenses and merger and acquisition related expenses (3) The Company excludes these expenses in order to provide better comparability between periods as they are not representative of the Company's ongoing operations. Depreciation expense is a significant expense related to research and development expenses, sales and marketing expenses and general and administrative expenses as shown above. For the three months ended March 29, 2025 and March 30, 2024, depreciation expense was $ 4.4 million and $ 3.4 million, respectively. The following table lists the different sources of revenue: Three Months Ended March 29, March 30, 2025 2024 (in thousands, except for percentages) Systems and software $ 231,150 87 % $ 194,836 85 % Parts 18,176 7 % 20,108 9 % Services 17,281 6 % 13,902 6 % Total revenue $ 266,607 100 % $ 228,846 100 % 17 Table of Contents 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: Three Months Ended March 29, March 30, 2025 2024 (in thousands) Revenue from third parties: Taiwan $ 102,581 $ 71,103 South Korea 93,314 80,239 United States 25,597 20,868 Europe 16,544 6,229 China 12,176 20,994 Japan 8,369 13,335 Southeast Asia 8,026 16,078 Total revenue $ 266,607 $ 228,846 The following customers accounted for 10% or more of total revenue for the indicated periods: Three Months Ended March 29, March 30, 2025 2024 Customer A 24 % 26 % Customer B 21 % 26 % Customer C 14 % 12 % Three customers’ net accounts receivable balances were individually greater than 10 % of net accounts receivable at March 29, 2025 , representing, in the aggregate approximately 53 % 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 28, 2024 , representing, in the aggregate approximately 47 % 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. NOTE 15. 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. Any amount paid to repurchase the shares in excess of par value, including transaction costs, would be recorded directly as a decrease to additional paid-in capital and accumulated earnings. During the three months ended March 29, 2025 , 492 thousand shares of the Company’s common stock were repurchased under the share repurchase authorization. At March 29, 2025 , there was $ 99.9 million available for future share repurchases under this share repurchase authorization. NOTE 16. 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 18 Table of Contents 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: Three Months Ended March 29, March 30, 2025 2024 (in thousands) Cost of goods sold $ 3,635 $ 788 Operating expenses 1,123 258 Total restructuring expenses $ 4,758 $ 1,046