PART I FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Onto Innovation Inc.'s unaudited financial statements show a year-over-year decline in revenue and net income for Q3 and the first nine months of 2023, alongside increased assets and operating cash flow Condensed Consolidated Statements of Operations Highlights (In thousands, except per share data) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Oct 1, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Oct 1, 2022 | | :--- | :--- | :--- | :--- | :--- | | **Revenue** | $207,185 | $254,253 | $597,012 | $751,913 | | **Gross Profit** | $106,852 | $138,849 | $312,288 | $401,999 | | **Operating Income** | $34,006 | $59,307 | $87,848 | $175,502 | | **Net Income** | $35,886 | $52,215 | $90,850 | $157,120 | | **Diluted EPS** | $0.73 | $1.05 | $1.84 | $3.15 | Condensed Consolidated Balance Sheets Highlights (In thousands) | Metric | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $206,585 | $175,872 | | Marketable securities | $423,079 | $371,912 | | Total current assets | $1,221,202 | $1,134,872 | | **Total assets** | **$1,862,188** | **$1,794,863** | | Total current liabilities | $135,758 | $160,558 | | **Total liabilities** | **$166,046** | **$198,437** | | **Total stockholders' equity** | **$1,696,142** | **$1,596,426** | Condensed Consolidated Statements of Cash Flows Highlights (In thousands) | Metric | Nine Months Ended Sep 30, 2023 | Nine Months Ended Oct 1, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $110,387 | $87,208 | | Net cash used in investing activities | ($66,259) | ($29,226) | | Net cash used in financing activities | ($9,082) | ($17,897) | | **Net increase in cash and cash equivalents** | **$30,713** | **$30,781** | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail financial statement preparation, fair value measurements, and balance sheet specifics, highlighting a single operating segment, key customer revenue concentration, a 2023 restructuring, and an ongoing legal proceeding - The company operates in a **single reportable segment**: the design, development, manufacture, and support of high-performance process control systems for microelectronics device manufacturers[70](index=70&type=chunk) Revenue by Geographic Region (Nine Months Ended) | Region | Sep 30, 2023 Revenue (in thousands) | Oct 1, 2022 Revenue (in thousands) | YoY Change | | :--- | :--- | :--- | :--- | | South Korea | $122,205 | $171,055 | -28.6% | | China | $108,294 | $215,578 | -49.8% | | United States | $103,756 | $79,164 | +31.1% | | Taiwan | $85,802 | $151,460 | -43.4% | | Southeast Asia | $68,040 | $45,627 | +49.1% | | Japan | $60,832 | $33,423 | +82.0% | | Europe | $48,083 | $55,606 | -13.5% | | **Total** | **$597,012** | **$751,913** | **-20.6%** | - For the nine months ended September 30, 2023, Samsung Semiconductor and Taiwan Semiconductor Manufacturing Co. Ltd. accounted for **20%** and **11%** of total revenue, respectively[71](index=71&type=chunk) - The company initiated a restructuring plan in 2023, recording **$3.2 million** in employee severance costs and **$2.3 million** in inventory write-downs during the first nine months of the year[75](index=75&type=chunk) - In the legal case Optical Solutions Inc. v. Nanometrics Incorporated, the trial date is set for December 4, 2023, with the company believing the loss contingency is **remote** and does not anticipate a **material impact**[54](index=54&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the **20.6%** year-over-year revenue decline for the first nine months of 2023 to decreased metrology product shipments and U.S. export regulations, while maintaining strong liquidity despite lower gross margin and net income - Revenue for the nine months ended September 30, 2023, decreased by **20.6%** year-over-year, primarily due to a decrease in shipments of metrology product lines to customers in advanced nodes applications[89](index=89&type=chunk) - U.S. government export controls have resulted in **lower net sales in China** for the first nine months of fiscal 2023 compared to the same period in the prior year[87](index=87&type=chunk) Gross Profit Margin Analysis | Period | Gross Profit (in thousands) | Gross Profit Margin | | :--- | :--- | :--- | | **Three Months Ended** | | | | Sep 30, 2023 | $106,852 | 51.6% | | Oct 1, 2022 | $138,849 | 54.6% | | **Nine Months Ended** | | | | Sep 30, 2023 | $312,288 | 52.3% | | Oct 1, 2022 | $401,999 | 53.5% | - General and administrative expenses for the nine months ended September 30, 2023, increased by **$4.5 million** compared to the prior year period, primarily due to **$3.2 million** in restructuring charges for employee severance[95](index=95&type=chunk) - As of September 30, 2023, the company had **$629.7 million** in cash, cash equivalents, and marketable securities, and **$1,085.4 million** in working capital, without utilizing its available **$100.0 million** line of credit[101](index=101&type=chunk)[106](index=106&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=34&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company reports no material changes in market risk compared to its 2022 Annual Report on Form 10-K - There have been **no material changes** in market risk from the information presented in the 2022 Form 10-K[108](index=108&type=chunk) [Item 4. Controls and Procedures](index=34&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2023, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of September 30, 2023, the principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were **effective** at a reasonable assurance level[110](index=110&type=chunk) - **No changes** in internal control over financial reporting occurred during the fiscal quarter ended September 30, 2023, that have materially affected, or are reasonably likely to materially affect, internal controls[111](index=111&type=chunk) PART II OTHER INFORMATION [Item 1. Legal Proceedings](index=34&type=section&id=Item%201.%20Legal%20Proceedings) The company refers to Note 7 of the financial statements for details on material pending legal proceedings, including the case with Optical Solutions Inc - For a description of material pending legal proceedings, the report refers to the "Legal Matters" section of **Note 7** to the Condensed Consolidated Financial Statements[113](index=113&type=chunk) [Item 1A. Risk Factors](index=34&type=section&id=Item%201A.%20Risk%20Factors) The company identifies key risks including international operations, U.S. export regulations impacting China business, the cyclical semiconductor industry, dependency on large customers, and potential supply chain disruptions from limited suppliers and geopolitical conflicts - The company is exposed to **supply chain risks** due to its dependence on a **limited group of suppliers** for some components and subassemblies, with the conflict in Israel noted as a potential risk due to sourcing from a supplier in the country[130](index=130&type=chunk)[131](index=131&type=chunk) - A substantial portion of revenue is derived from a **few large customers**, where the loss, delay, or cancellation of a large order could **significantly harm revenue and cash flows**[118](index=118&type=chunk)[147](index=147&type=chunk) - **U.S. export controls**, particularly the October 2022 regulations targeting China's semiconductor industry, have **adversely affected** the company's ability to compete and win business in China and may continue to **negatively impact results**[173](index=173&type=chunk)[174](index=174&type=chunk)[176](index=176&type=chunk) - The **cyclical nature of the semiconductor industry** **significantly impacts** the company's operating results, as its business depends on the capital expenditures of semiconductor device manufacturers[201](index=201&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=53&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company details its Q3 2023 share repurchase activity, noting that shares purchased were primarily for tax obligations on vested employee equity awards, with **$31.6 million** remaining under the repurchase authorization - As of September 30, 2023, **$31.6 million** remained available for future repurchases under the company's share repurchase authorization[210](index=210&type=chunk) - During the three months ended September 30, 2023, the company repurchased **3 thousand shares**, which were shares withheld through net share settlements to cover tax withholding obligations on vested employee equity awards[211](index=211&type=chunk)[212](index=212&type=chunk)

Financial Data and Key Metrics Changes - The company reported third-quarter revenue of $207 million, a 19% decline year-over-year but a 10% increase compared to the second quarter [28] - Operating income was $50 million, representing 24% of revenue, up from 21% in the second quarter [35] - Net income for the third quarter was $48 million, or 23% of revenue, compared to 20% in the second quarter [35] Business Line Data and Key Metrics Changes - Advanced nodes revenue was $26 million, accounting for 13% of total revenue, reflecting a significant decline [28] - Specialty devices and advanced packaging achieved record revenue of $135 million, increasing 20% over the second quarter and representing 65% of total revenue [28] - Software and services revenue reached $46 million, a 13% increase over the second quarter, contributing 22% to total revenue [54] Market Data and Key Metrics Changes - The advanced nodes market is experiencing weakness, with a 30% decline in revenue for the third quarter [20] - Demand for high bandwidth memory (HBM) is surging, with expectations for a 50% growth in the dragonfly G3 product line in the fourth quarter [22] - The company noted that its exposure to the Chinese market is lower than peers, with only 15% of revenue coming from China compared to 40%-50% for others [75] Company Strategy and Development Direction - The company is focusing on the AI semiconductor market, which is expected to grow significantly, with AI-related semiconductors projected to reach $300 billion to $500 billion by 2030 [51] - Advanced packaging technologies are seen as critical for the AI era, with the company emphasizing the importance of 3D and 2.5D packaging [38] - The company is targeting a gross margin of 54% as a baseline goal, with ongoing cost reduction initiatives expected to yield $25 million in savings over the next two years [57] Management's Comments on Operating Environment and Future Outlook - Management expects fourth-quarter revenue to be flat compared to the third quarter, with improvements in gross and operating margins despite a less favorable product mix [22] - The company anticipates that AI device volumes will drive revenue growth in the first half of 2024, independent of a recovery in advanced nodes [43] - Management acknowledged challenges in production capacity and supply chain issues but expressed optimism about future demand and operational improvements [90] Other Important Information - The company added over $110 million in new orders in the last 2.5 months, primarily for high bandwidth memory and process control for 2.5D packaging [38] - Inventory levels decreased to $346 million, down $6 million from the previous quarter, as the company actively manages inventory [55] - The company has $32 million remaining under its existing share repurchase authorization [40] Q&A Session Summary Question: What is the outlook for panel lithography shipments? - Management indicated that $30 million of planned lithography shipments in 2023 will move into 2024 due to production issues [42] Question: How is the company addressing the production capacity challenges? - Management noted that they are working to improve internal capacity and expect to reach full capacity by mid-next year [90] Question: What is the company's exposure to the Chinese market? - The company stated that its exposure to China is lower than peers, with only 15% of revenue coming from that region [75] Question: What are the expectations for advanced nodes recovery? - Management does not anticipate a recovery in advanced nodes in the near term but expects growth in other areas, particularly related to AI [43] Question: Can you clarify the recent order sizes and delivery timelines? - Management confirmed that the company has received over $210 million in orders for delivery between the second half of 2023 and the first half of 2024 [81]

Financial Data and Key Metrics Changes - The company reported revenue of $199 million for the first quarter, a decrease of 17% year-over-year, and just below the midpoint of guidance [1] - Earnings per share (EPS) was $0.92, which is $0.04 above the midpoint of the EPS guidance range of $0.80 to $0.95 [1] - Operating income was $49 million, representing 25% of revenue, down from 31% in the prior year [30] - Net income for the first quarter was $45 million, down 30% year-over-year [30] - Cash and short-term investments increased to $584 million, up $36 million from the start of the year [11] Business Line Data and Key Metrics Changes - Revenue from power devices increased by 20% year-over-year [27] - Advanced nodes revenue was $66 million, a decline of 35% year-over-year, representing 33% of total revenue [29] - Specialty devices and advanced packaging revenue was $93 million, down 6% year-over-year, accounting for 47% of total revenue [29] - Software and services revenue was $40.2 million, down 4% year-over-year, representing 20% of total revenue [29] Market Data and Key Metrics Changes - Revenue from memory customers declined approximately 50% from the fourth quarter [40] - Advanced logic revenue was flat from the fourth quarter, representing 53% of advanced nodes revenue [40] - The company expects strong demand from specialty customers and power, packaging, and EUV wafer manufacturing [62] Company Strategy and Development Direction - The company is focusing on strategic supply chain initiatives and expanding development engagements, expecting over $10 million in cost synergies in 2024 [39] - The company aims to optimize inventory levels to return to the mid-$200 million range by the end of 2023 [45] - The company is committed to delivering $25 million to $30 million in cost reductions for the year [30] Management's Comments on Operating Environment and Future Outlook - Management believes the specialty and advanced packaging markets reached the bottom in the first quarter, with solid growth expected in the second quarter and a stronger second half [47] - The recovery in advanced nodes is anticipated to be slower, with uncertainty regarding the rate of recovery [47] - Management expressed confidence in the momentum of the Iris films segment, expecting strong double-digit revenue growth [65] Other Important Information - The company was awarded the Novel Technology Collaboration Award by TSMC for contributions to process control [24] - The company repurchased an additional 46,000 shares of common stock, bringing the total to over 1 million shares under the current program [31] - The company opened a second demo center in Taiwan to facilitate customer access to advanced equipment [43] Q&A Session Summary Question: Outlook for the second half of the year - Management indicated that while there is expected growth in the second half, it will not be a massive snap back [50] Question: Cost savings and operating expenses - Management confirmed that some cost savings were captured in Q1, with more expected in Q2 and significant benefits anticipated in Q3 and Q4 [70] Question: Performance of the Iris tool - Management expressed confidence in continued share gains for the Iris tool, with expectations for strong double-digit revenue growth [65]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File No. 001-39110 ONTO INNOVATION INC. (Exact name of registrant as specified in its charter) (State or other jurisdiction of inco ...

Financial Data and Key Metrics Changes - The company achieved a significant milestone by surpassing $1 billion in revenue for the year, with a revenue growth of 32%, well above the market estimate of 9% for wafer fab equipment in 2022 [4][11][29] - Fourth quarter revenue was reported at $253 million, up 12% year-over-year, and $3 million above the midpoint of guidance [29][52] - Operating income for the full year reached $302 million, with net income of $275 million, marking a 43% increase in earnings [11][23] - Gross margins for the fourth quarter were 54%, consistent with previous guidance, despite inflationary pressures on raw materials and labor [30][52] Business Line Data and Key Metrics Changes - Revenue from specialty devices and advanced packaging grew 15% year-over-year, achieving $125.4 million, representing 49% of total revenue [51] - Advanced nodes revenue was $85.3 million, growing 16% year-over-year, accounting for 34% of total revenue [51] - Software and services revenue slightly declined by 1% year-over-year to $42.6 million, representing 17% of total revenue [51] Market Data and Key Metrics Changes - The company expects a decline in specialty and advanced packaging by mid to upper teens in Q1 2023, with advanced nodes revenue anticipated to drop by approximately 30% due to reduced memory spending and restrictions in China [16][56] - The overall wafer fab equipment spending estimates are down 20% for 2023, with some analysts forecasting a 30% decline when excluding front-end and lithography spending [35][56] Company Strategy and Development Direction - The company plans to reduce annual spending by $25 million to $30 million, focusing on operational efficiencies and strategic investments in R&D [15][56] - The company aims to optimize inventory levels, targeting a return to the mid $200 million range in 2023 [53] - The long-term outlook for chip growth remains strong, with estimates suggesting a market size of $1 trillion by 2030 [57] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to outperform despite a weakening environment, citing a backlog that supports revenue doubling in lithography and growth in power and compound semiconductor customers [17][18] - The company anticipates a slow start to 2023 but expects improvements in margins and operational efficiencies as the year progresses [15][56] - Management noted that while factory expansions are slowing, customer engagement remains strong for developing new technologies [10] Other Important Information - The company repurchased over 1 million shares year-to-date, returning $65.2 million to shareholders under a $100 million authorization [14] - Cash and short-term investments totaled $548 million, with operating cash flow of $137 million for the year, down from 2021 levels due to increased inventory management [13] Q&A Session Summary Question: What is the expected revenue decline for 2023? - Management indicated a revenue decline of 18% to 22% year-over-year, with expectations of stabilization in Q2 [60][75] Question: How are cost savings being achieved? - Cost savings are expected to be approximately $16 million in operating expenses and $11 million in cost of goods sold, with a focus on operational efficiencies [41][62] Question: What is the outlook for memory spending? - Management suggested that memory spending may resume at the earliest in late 2023 or into 2024, primarily in R&D rather than production [104] Question: How does the company view the compound semiconductor market? - The company sees significant growth potential in the compound semiconductor market, with expectations of double-digit growth rates in the coming years [90][123] Question: What is the company's capital allocation strategy? - The company is open to share buybacks and M&A opportunities, maintaining a healthy balance sheet while seeking growth avenues [120]

Onto Innovation Inc. (NYSE:ONTO) Q3 2022 Earnings Conference Call October 27, 2022 4:30 PM ET Company Participants Michael Sheaffer - Senior Director Investor Relations, Corporate Communications & Market Research Mike Plisinski - Chief Executive Officer Mark Slicer - Chief Financial Officer Conference Call Participants Craig Ellis - B. Riley Securities Mark Miller - The Benchmark Company Hans Chung - D.A. Davidson Trevor Janoski - Needham Operator Good day and welcome to the Onto Innovation Third Quarter Ea ...

| --- | --- | --- | --- | --- | |-------|-------|-------|-----------------------|-------| | | | | | | | | | | | | | | | | | | | | | | Onto Innovation | | | | | | Investor Presentation | | | | | | AUGUST 2022 | | Safe Harbor • The information presented herein contains forward-looking statements that relate to anticipated future operating results and performance. These statements are only predictions based on management's current expectations and assumptions, including market size and forecasted growth, Total ...

Financial Data and Key Metrics Changes - The company reported record revenues of $256.3 million for Q2 2022, exceeding previous guidance by approximately $8 million [24] - Gross margins for Q2 were 52%, down from 54% in Q1, primarily due to the recognition of lithography systems revenue [26] - Net income for Q2 was $64 million, or $1.28 per share, which was $0.02 above the midpoint of previous guidance [28] - Cash at the end of Q2 was $545 million, an increase of $34 million since the start of the year [29] Business Line Data and Key Metrics Changes - Advanced nodes revenue was $94.5 million, growing 47% year-over-year and representing 37% of total revenue [25] - Specialty device and advanced packaging revenue reached $117.3 million, up 28% year-over-year, accounting for 46% of total revenue [25] - Software and services revenue set a record at $44.5 million, growing 19% year-over-year and representing 17% of total revenue [25] Market Data and Key Metrics Changes - Revenue from the advanced nodes market was down slightly from Q1 but up 47% year-over-year [16] - Revenue from the Iris platform grew 49% year-over-year, with expectations to meet or exceed $50 million in revenue from this segment by year-end [19] - The company has a backlog exceeding $700 million, indicating strong demand across various markets [39] Company Strategy and Development Direction - The company aims to transform into a partner of choice for connected solutions across the semiconductor value chain [40] - There is a focus on increasing manufacturing efficiencies and leveraging supply chain improvements to enhance gross margins [11][12] - The company is actively working on expanding capacity to meet growing demand, particularly for advanced nodes and specialty devices [50] Management's Comments on Operating Environment and Future Outlook - Management expects stronger revenue in the second half of 2022 compared to the first half, driven by growth in advanced nodes and NAND customers [35] - There are anticipated declines in specialty and advanced packaging customers after a strong Q2, with expectations for recovery in Q4 [38] - The company is confident in its visibility and demand, with a book-to-bill ratio remaining above 1 [67] Other Important Information - The company is prioritizing M&A as a key strategy for shareholder value creation, alongside potential stock buybacks [89][92] - The impact of the US CHIPS Act and European funding for chip production is expected to create opportunities, although the timeline for order book impact remains fluid [87][88] Q&A Session Summary Question: Production issues for inspection systems in Q2 - Management acknowledged challenges with suppliers unable to meet demand, impacting $5 million in revenue, but expects to resolve these constraints by Q4 [44][45] Question: Future gross margins for JetStep lithography systems - Management indicated steady improvements in gross margins over the next six quarters, with expectations to return to 54%-55% range in Q3 and Q4 [46] Question: Long-term outlook for JetStep systems and backlog - The company has already booked full capacity for 2023 and is working on increasing capacity for 2024 demand [50] Question: Market share and size of the Atlas product line - Estimated market size for Atlas is $400 million to $500 million, with a significant share in high-end applications [80] Question: Revenue potential from increased capacity next year - Management indicated a backlog of $100 million and potential for additional revenue if supply constraints are alleviated [82] Question: Impact of the US CHIPS Act on order book - Management expects aggressive announcements from customers as funding rules are established, with a timeline of about a year for significant impacts [88]

Onto Innovation Inc. (NYSE:ONTO) Q1 2022 Earnings Conference Call May 3, 2022 4:30 PM ET Company Participants Michael Sheaffer – Investor Relations Michael Plisinski – Chief Executive Officer Steven Roth – Chief Financial Officer Conference Call Participants Craig Ellis – B. Riley Securities Quinn Bolton – Needham Tom Diffely – D.A. Davidson Brian Chin – Stifel Dave Duley – Steelhead Mark Miller – The Benchmark Company Operator Good day and welcome to the Onto Innovation First Quarter Earnings Release Confe ...

Onto Innovation Inc. (NYSE:ONTO) Q4 2021 Results Conference Call February 8, 2022 4:30 PM ET Company Participants Michael Sheaffer - IR Michael Plisinski - CEO Steven Roth - CFO Conference Call Participants Craig Ellis - B. Riley Securities Quinn Bolton - Needham Brian Chin - Stifel Mark Miller - Benchmark Company David Duley - Steelhead Securities Hans Chung - D.A. Davidson Operator Good day, ladies and gentlemen, and welcome to the Onto Innovation Fourth Quarter Earnings Release Conference Call. Today's c ...