ONTO INNOVATION INC.

Current report

Risks Related to Our Convertible Senior Notes

Current report

We may lack the cash or financing capacity to satisfy required cash payments under the 2031 Notes , including upon conversion, following a fundamental change, or at maturity.

Current report

On May 21, 2026, we issued the 2031 Notes pursuant to the Indenture and entered into the Capped Call Transactions. If a Fundamental Change occurs (as defined in the Indenture), holders may require us to repurchase the 2031 Notes in cash at 100% of principal plus accrued and unpaid special or additional interest, if any, to, but excluding, the applicable repurchase date. If holders convert, we will settle conversions by paying cash up to the aggregate principal amount of the 2031 Notes to be converted and paying or delivering, as the case may be, cash, shares, or a combination thereof, at our election, in respect of the remainder, if any, of our conversion obligation in excess of the aggregate principal amount of the 2031 Notes being converted. We must also repay any 2031 Notes that remain outstanding at maturity in cash, which could require refinancing. Our ability to fund required cash amounts will depend on cash on hand, cash flows, and access to capital markets and credit facilities, and may be limited by law, regulation, or agreements governing our indebtedness. We may not redeem the 2031 Notes before June 6, 2029, and any optional redemption thereafter requires our common stock to trade above 130% of the conversion price for a specified period and certain other conditions are satisfied, which may affect the timing and magnitude of cash outflows. Failure to make a required cash payment would constitute a default under the Indenture and could result in cross-defaults or accelerations under any other indebtedness we may then have outstanding.

Current report

Conversion of the 2031 Notes may adversely affect our liquidity, dilute existing stockholders, and depress the price of our common stock, and the Capped Call Transaction provide only partial offset.

Current report

If the conditional conversion feature of the 2031 Notes is triggered, holders may convert their 2031 Notes during specified periods. Upon any conversion, we will be required to settle at least the aggregate principal amount of the 2031 Notes in cash, which could adversely affect liquidity. Even if no conversions occur, applicable accounting rules could require us to reclassify all or a portion of the 2031 Notes as current liabilities, reducing our reported working capital.

Current report

The 2031 Notes are initially convertible at 2.6192 shares of common stock per $1,000 principal amount, equivalent to an initial conversion price of approximately $381.80 per share. If we elect to settle the remainder of our conversion obligation in shares, existing stockholders will be diluted. The conversion rate is subject to adjustment upon certain events and may be increased for a limited period in connection with specified corporate events, which could amplify dilution. The Capped Call Transaction offset dilution only up to an initial cap of approximately $509.06 per share, and above that level dilution will not be mitigated. In addition, the existence of the 2031 Notes may encourage short selling by market participants, because conversions can be used to satisfy short positions, and expectations of potential conversion could depress our common stock price.

Current report

The 2031 Notes and related Capped Call Transactions may affect the trading price of our common stock and introduce volatility in our reported financial results.

Current report

Banks party to the Capped Call Transactions (or their affiliates) may establish, adjust, or unwind hedges in our common stock or related derivatives, including during any conversion observation period and around redemption or unwind events, which could increase or decrease the trading price of our common stock and, during an observation period, affect the amount of conversion consideration and the value of the 2031 Notes. In addition, the 2031 Notes and Capped Call Transactions are subject to complex accounting requirements. Although the Capped Call Transactions are accounted for in stockholders' equity and therefore not remeasured each period, conversions and changes in our share count may affect diluted earnings per share, and application of the relevant accounting standards may introduce period-to-period volatility in our reported results.

Current report

We are subject to counterparty risk with respect to the Capped Call Transactions, and the Capped Call Transactions may not operate as planned.

Current report

The option counterparties are financial institutions, and we are subject to the risk that any or all of them might default under the Capped Call Transactions. Our exposure to the credit risk of the option counterparties is not secured by any collateral. If an option counterparty becomes subject to insolvency proceedings, we will become an unsecured creditor in those proceedings with a claim equal to our exposure at that time under the capped call transactions with such option counterparty. Our exposure will depend on many factors but, generally, an increase in our exposure will be correlated to an increase in the market price subject to the cap and in the volatility of our common stock. In addition, upon a default by an option counterparty, we may suffer adverse tax consequences and more dilution than we currently anticipate with respect to our common stock. We can provide no assurances as to the financial stability or viability of the option counterparties.

Current report

On May 21, 2026 we issued the 2031 Notes to the initial purchasers in reliance upon Section 4(a)(2) of the Securities Act, for an aggregate offering price of $1.5 billion, in transactions not involving any public offering. The 2031 Notes were resold by the initial purchasers to persons whom the initial purchasers reasonably believe are “qualified institutional buyers” as defined in, and in accordance with, Rule 144A under the Securities Act. Any shares of Common Stock that may be issued upon conversion of the 2031 Notes will be issued in reliance upon Section 3(a)(9) of the Securities Act as involving an exchange by us exclusively with our security holders. Initially, a maximum of 5,893,200 shares of Common Stock may be issued upon conversion of the 2031 Notes, based on the maximum conversion rate of 3.9288 shares of Common Stock per $1,000 principal amount of 2031 Notes, which is subject to customary anti-dilution adjustment provisions.

Current report

In February 2024, the Board approved a share repurchase authorization (the “2024 Authorization”), which allowed the Company to repurchase up to $200 million worth of shares of Common Stock. Under the 2024 Authorization, 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. During the three and six months ended June 30, 2026, no shares of the Company’s common stock were repurchased under the 2024 Authorization. During the three and six months ended June 28, 2025, no shares, and 492 thousand shares, respectively, of the Company’s common stock were repurchased under the 2024 Authorization. At June 30, 2026, there was $99.9 million available for future share repurchases under the 2024 Authorization.

Current report

Additionally, in May 2026, the Board approved a share repurchase authorization (the “2026 Authorization,”) which allowed the Company to repurchase up to $300 million worth of shares of Common Stock solely in connection with the 2031 Notes issuance. During the three and six months ended June 30, 2026, 805 thousand shares of the Company’s common stock were repurchased under the 2026 Authorization. The 2026 Authorization ceases to be in effect and any and all remaining and unused amount under the 2026 Authorization is no longer available for repurchase.

Previous report

Our ability to complete our acquisition of Rigaku shares is subject to various closing conditions, including the receipt of consents and approvals from governmental authorities, which may impose conditions that could adversely affect us or cause the transaction not to be completed; and if we are able to complete the transaction, we may be unable to realize the anticipated benefits.

Previous report

On April 20, 2026, we entered into a share purchase agreement (the Purchase Agreement) to acquire 27% of the outstanding common stock of Rigaku from Atom Investments, L.P., an affiliate of The Carlyle Group (Carlyle). The acquisition is subject to customary closing conditions, including certain regulatory approvals, as specified in the Purchase Agreement. No assurance can be given that the required conditions to closing will be satisfied, and, even if all required approvals are obtained and the required conditions are satisfied, no assurance can be given as to the terms, conditions and timing of such approvals. Any delay in completing the acquisition could cause the company not to realize, or to be delayed in realizing, some or all of the benefits that we expect to achieve if the acquisition is successfully completed within its expected time frame. Even if the transaction closes timely, we also cannot be sure that we will recognize the anticipated benefits of the transaction. As a minority shareholder in Rigaku, we will not be able to direct Rigaku’s management or cause dividends or distributions to be made to us. The value of our Rigaku shares could also decline for a number of reasons, including reasons that are outside of our control, which could adversely affect our financial position. Our Rigaku shares are also subject to certain restrictions on transfer, which could make it difficult for us to sell our shares. If we are unable to successfully maximize the benefits of our investment in and collaboration with Rigaku, our business, financial condition and operating results could be adversely affected.

Current report — wording carried from elsewhere

For further information, see Note 14, “Share Repurchase Authorization,” of the Notes to the Condensed Consolidated Financial Statements.