ONTO INNOVATION INC.

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”). Certain reclassifications have been made to prior-period amounts to conform to current-period presentation. 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 and nine-month periods ended September 27, 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 ended on June 28, 2025 and the third quarter ended on September 27, 2025. Our fiscal year ended December 28, 2024 was a 52-week fiscal year. The third quarter of the fiscal year ended December 28, 2024 ended on September 28, 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

Updates Not Yet Effective

In September 2025, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2025-06, Intangibles-Goodwill and Other-Internal Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which removes all references to software development stages and clarifies the threshold entities apply to begin capitalizing costs. ASU No. 2025-06 is effective for annual periods beginning after December 15, 2027 and interim reporting periods within those annual reporting periods. The ASU may be applied prospectively, retrospectively or through a modified transition approach with early adoption permitted. The Company is currently evaluating the potential impact of this standard on its consolidated financial statements.

In July 2025, the FASB issued ASU No. 2025-05, Financial Instruments - Credit Losses (Topic 326), which simplifies the estimation of credit losses on current accounts receivable and current contract assets arising from transactions accounted for under Accounting Standards Codification 606, Revenue from Contracts with Customers. The guidance allows all entities to use a practical expedient to assume that the current conditions as of the balance sheet date will remain unchanged for the remaining life of the asset when developing a reasonable and supportable forecast as part of estimating expected credit losses on these assets. The guidance is effective for fiscal years beginning after December 15, 2025, and interim periods within those fiscal years. Early adoption is permitted. Entities that elect the practical expedient are required to apply the amendments prospectively. The Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements.

Other than the standards listed above, there have been no recent accounting pronouncements or changes in accounting pronouncements during the three and nine months ended September 27, 2025, as compared to the recent accounting pronouncements described in the 2024 Form 10-K, that are of significance, or potential significance, to the Company.

NOTE 2. Acquisitions

Proposed Acquisition

On June 27, 2025, we entered into an Equity Purchase Agreement (the “Purchase Agreement”) to acquire all the outstanding membership interests of Semilab USA LLC (“Semilab USA”) from Semilab International Zrt. (“Semilab”), for $475.0 million in cash(subject to certain customary purchase price adjustments) and 706,215 shares of the Company’s common stock (the “Transaction”). On September 25, 2025, each of the Company and Semilab received a request for additional information and documentary material (a “Second Request”) from the U.S. Department of Justice in connection with the Transaction. In response to the Second Request, and in order to increase the likelihood of a timely closing for the Transaction, on October 9, 2025, the parties entered into an amendment to the Purchase Agreement (the “Purchase Agreement Amendment”), pursuant to which the parties agreed that the Fourier-Transform infrared spectroscopy reflectometry systems business conducted by Semilab and its affiliates would not be included in the Transaction and would instead be retained by Semilab. The Purchase Agreement Amendment amends the purchase price that the Company will pay to Semilab in the transaction to $432.3 million in cash (subject to certain customary purchase price adjustments) and 641,771 shares of the Company’s common stock, par value $0.001 per share. This represents a reduction of approximately $50.0 million in total Transaction value to approximately $495.0 million based upon the closing value of the Company’s common stock on June 27, 2025. The Company continues to anticipate that the Transaction will be completed in 2025.

For the three and nine months ended September 27, 2025, the Company incurred $2.1 million and $4.6 million of Transaction-related costs, respectively, in each case recorded within the caption “General and administrative” in the Company’s Condensed Consolidated Statements of Operations.

NOTE 3. 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 September 27, 2025 and December 28, 2024:

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

Non-recurring Fair Value Measurements

During the nine-month period ended September 27, 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 circumstances indicate that decline in value may have occurred. As of September 27, 2025, there have been no impairments recorded for the non-marketable equity investment.

NOTE 4. Marketable Securities

At September 27, 2025 and December 28, 2024, marketable securities are categorized as follows:

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 September 27, 2025 and December 28, 2024:

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 and nine-months ended September 27, 2025 and September 28, 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 September 27, 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.

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 September 27, 2025 and December 28, 2024:

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

NOTE 5. 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. These contracts are typically 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 September 27, 2025 and December 28, 2024 were as follows:

NOTE 6. Goodwill and Purchased Intangible Assets

Goodwill

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

Purchased Intangible Assets

Purchased intangible assets as of September 27, 2025 and December 28, 2024 are as follows:

During the nine months ended September 27, 2025, the Company disposed of fully amortized identifiable intangible assets whose gross carrying value totaled$117 million. There wereno disposals of identifiable intangible assets during thethree and nine months ended September 28, 2024.

Assuming no change in the gross carrying value of identifiable intangible assets and estimated lives, future estimated amortization expenses are:

NOTE 7. Balance Sheet Components

Inventories

Inventories, net are comprised of the following:

Property, Plant and Equipment

Property, plant and equipment, net is comprised of the following:

Other assets

Other assets are comprised of the following:

Accrued liabilities

Accrued liabilities are comprised of the following:

Other current liabilities

Other current liabilities are comprised of the following:

Other non-current liabilities

Other non-current liabilities are comprised of the following:

NOTE 8. 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 agreements generally require the Company to compensate the other party for certain damages and costs incurred as a result of third-party intellectual property claims. 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 andno amount has been accrued in the accompanying Condensed Consolidated Financial Statements with respect to these indemnification obligations.

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:

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.

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 September 27, 2025 was $100.0 million with an available interest rate of 4.8%. 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 9. Revenue

The following table represents a disaggregation of revenue by timing of revenue:

See Note 15 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 September 27, 2025 and December 28, 2024, the Company had contract assets of$3.4 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, deferred revenue is recorded in “Other non-current liabilities” in the Condensed Consolidated Balance Sheets. As of September 27, 2025 and December 28, 2024, the Company carried a long-term deferred revenue balance of $5.9 million and $4.0 million, respectively, within “Other non-current liabilities” in the Condensed Consolidated Balance Sheets.

Changes in deferred revenue were as follows:

NOTE 10. Share-Based Compensation

The following table presents the detail of share-based compensation expense amounts included in the Company’s Condensed Consolidated Statement of Operations:

As of September 27, 2025, there was $44.1 million of total unrecognized compensation cost related to restricted stock units granted under the Company’s stock plans. That cost is expected to be recognized over a weighted average period of 2.0 years following September 27, 2025.

Equity Awards

The Company granted the following restricted stock units (“RSUs” and each, an “RSU”) and market-based performance restricted stock units (“PSUs” and each, a “PSU”) during thenine months ended September 27, 2025:

NOTE 11. Other (Expense) Income, Net

Other (expense) income, net, is comprised of the following:

NOTE 12. Income Taxes

The following table provides details of income taxes:

The income tax provision for the three and nine months ended September 27, 2025 was computed based on the Company’s annual forecast of profit by jurisdiction and forecasted effective tax rate for the year. The decrease in the Company’s income tax provision for the three months ended September 27, 2025 compared to the three months ended September 28, 2024 was primarily due to lower profitability before taxes. The increase in the Company’s income tax provision for the nine months ended September 27, 2025 compared to the nine months ended September 28, 2024 was primarily due to fewer excess tax 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 September 27, 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. In June 2025, the Group of Seven (“G7”) countries (Canada, France, Germany, Italy, Japan, the U.K. and the United States) agreed to exclude U.S. Multi-National entities (MNEs) from certain aspects of Pillar Two (the “G7 Statement”) in exchange for the United States not imposing retaliatory taxes through the One Big Beautiful Bill Act. We will continue to monitor the G7 Statement, which has not yet been incorporated into the OECD framework. 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.

On July 4, 2025, the United States enacted tax reform legislation through the One Big Beautiful Bill Act. Included in this legislation are provisions that allow for the immediate expensing of domestic U.S. research and development expenses, immediate expensing of certain capital expenditures, and other changes to the U.S. taxation of profits derived from foreign operations. The impact of the Act has been accounted for in the provision for taxes for the quarter ended September 27, 2025 and the amount is determined to be immaterial. The Company continues to evaluate the impact the new legislation will have on the Consolidated Financial Statements for future years. However, as the assessment is ongoing, the Company is not able to quantify the impact at this time.

NOTE 13. 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 and employee stock purchase grants are included in the calculation of diluted earnings per share, except when their effect would be anti-dilutive. For the three and nine months ended September 27, 2025, the weighted average number of restricted stock units excluded from the computation of diluted earnings per share were 101 thousand and 80 thousand, respectively. Anti-dilutive shares for the three and nine months ended September 28, 2024 were immaterial.

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

NOTE 14. Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss, net of tax, were as follows:

For the nine-month period ended September 27, 2025, tax effects on net income of amounts recorded in other comprehensive income was$117 thousand. For the nine-month period ended September 28, 2024, tax effects on net income of amounts recorded in other comprehensive loss was $358 thousand.

NOTE 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.

The table below presents the Company’s consolidated operating results including significant segment expenses:

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 and nine months ended September 27, 2025, depreciation expense was $5.0 million and $15.2 million, respectively. For the three and nine months ended September 28, 2024, depreciation expense was $3.9 million and $10.8 million, respectively.

The following table lists the different sources of revenue:

The Company’s significant operations outside the United States include sales, service and application offices in Asia and Europe. For geographical revenue reporting, revenue is attributed to the geographic location to which the product is shipped. Revenue by geographic region is as follows:

The following customers accounted for 10% or more of total revenue for the indicated periods:

Three customers’ net accounts receivable balances were individually greater than 10% of net accounts receivable at September 27, 2025, representing, in the aggregate approximately 46% 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 16. 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 thethree and nine months ended September 27, 2025,0 and 492 thousand shares of the Company’s common stock were repurchased under the share repurchase authorization, respectively. At September 27, 2025, there was $99.9 million available for future share repurchases under this share repurchase authorization.

NOTE 17. Restructuring and Other

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 and other charges, including 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, charges for streamlining of certain operating activities and impairment charges such as plant, property and equipment.

Restructuring and other expenses recorded in the Condensed Consolidated Statements of Operations are as follows: