Annual Report +
2025 Proxy
The next five years present tremendous
opportunities for Onto Innovation as we position
ourselves at the forefront of several
transformative, high-growth secular trends that
are reshaping the semiconductor industry.
Artificial intelligence (AI) is expected to expand
at a compound annual growth rate (CAGR) of
more than 30% over the next 5-7 years and has
the potential to fundamentally transform how
work gets done globally. This growth is driving
demand for advanced logic nodes and
cutting-edge memory technologies to support
AI and edge applications. Additionally,
innovations in advanced packaging, such as
2.5D/3D heterogeneous integration and hybrid
bonding, are enhancing functionality, delivering
greater integration, and boosting performance.
Finally, the electrification of everything—from
vehicles to smart infrastructure—continues to
accelerate, driving overall increased demand for
semiconductor devices.
By accelerating our pace of innovation, we aim
to address the evolving needs of our customers
in these high growth markets. We are excited
about the potential of our new products to
tackle emerging challenges and help us
maintain our critical position in the supply chain.
We recently introduced new inspection and
metrology capabilities, including the EchoScan™
system for hybrid bonding and 3Di™ technology
for bump metrology applications. Additionally,
we announced our JetStep® lithography system
for one-micron glass applications, featuring
wide-field optics and high-resolution imaging,
which are designed to support next-generation
panel level packaging. For advanced nodes, we
launched the Iris™ G2 system to support our
customers in the critical films area. To drive
even greater performance, we announced the
appointment of Dr. Ido Dolev as executive vice
president for all of our product solutions at the
end of 2024. Under Dr. Dolev’s leadership, we
have unified our business units to more
effectively address the increased pace of
innovation demanded by our customers.
Reflecting on 2024, we achieved remarkable
growth, with Dragonfly® inspection tool revenue
and Iris film metrology revenue both more than
doubling over 2023. We also began shipments
of new capabilities, such as sub-surface defect
inspection. Our strong alignment to high growth
markets resulted in revenue increasing by 21% in
2024 over 2023, while our work on supply chain
initiatives, which began in 2023, resulted in an
improvement over 2023 of 70 basis points in
gross margin and 400 basis points in operating
margins, even as we see a much higher level of
competition in these markets.
We are proud to play a pivotal role in enabling
the products that drive a smarter, more
connected, and greener future. Together, we
look forward to shaping the technologies of
tomorrow and delivering exceptional value for all
our stakeholders.
On behalf of the entire team at Onto Innovation
and the board of directors, we extend our
heartfelt gratitude for your continued support
and confidence.
Sincerely,
Dear Fellow Stockholders
Michael P. Plisinski
Chief Executive Officer
Christopher A. Seams
Chairman of the Board
Safe Harbor
Certain statements in this document are “forward-looking statements” or are based on “forward-looking
statements,” including, but not limited to, those concerning: our business momentum and future growth;
technology development, product introduction and acceptance of our products and services; our
manufacturing practices and ability to deliver both products and services consistent with our customers’
demands and expectations and to strengthen our market position; our expectations of the semiconductor
market outlook; and future revenue, gross profits, research and development and engineering expenses,
selling, general and administrative expenses, and cash requirements. Statements contained or incorporated by
reference in this proxy statement that are not purely historical are forward-looking statements and are subject
to safe harbors created under Section 27A of the Securities Act of 1933, as amended, Section 21E of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation
Reform Act of 1995. Forward-looking statements may be identified by words such as, but not limited to,
“anticipate,” “believe,” “continue,” “estimate,” “expect,” “intend,” “plan,” “should,” “may,” “could,” “will,” “would,”
“forecast,” “project” and words or phrases of similar meaning, as they relate to our management or us.
Forward-looking statements contained herein reflect our current expectations, assumptions and projections
with respect to future events and are subject to certain risks, uncertainties and assumptions, including, but not
limited to, the following: our ability to leverage our resources to improve our position in core markets; our ability
to weather difficult economic environments; our ability to open new market opportunities and target
high-margin markets; the strength/weakness of the back-end and/or front-end semiconductor market
segments; fluctuations in customer capital spending; our abilityto effectively manage our supply chain and
adequately source components from suppliers to meet customer demand; the effects of political, economic,
legal, and regulatory changes or conflicts on our global operations; the effects of natural disasters or public
health emergencies on the global economy and on our customers, suppliers, employees, and business; our
dependence on certain significant customers and anticipated trends and developments in and management
plans for our business and the markets in which we operate; our ability to be successful in managing our cost
structure and cash expenditures and results of litigation; and those identified in Part I, Item 1A. “Risk Factors” of
our Form 10-K for the fiscal year ended December 28, 2024. Actual results may differ materially and adversely
from those included in the forward-looking statements. Forward-looking statements reflect our position as of
the date of this proxy statement and we undertake no obligation to update any forward-looking statements,
whether as a result of new information, future events or otherwise, except as required by law.
LOCATION
HEADQUARTERS
Onto Innovation
16 Jonspin Road
Wilmington, Massachusetts 01887
Phone 978.253.6200
ontoinnovation.com
OTHER LOCATIONS
View all locations on our website:
https://ontoinnovation.com/company/locations
TRANSFER AGENT
MAIL CORRESPONDENCE TO
Computershare Trust Company, N.A.
Stockholder Services
P.O. Box 43006
Providence RI 02940-3006
SEND OVERNIGHT CORRESPONDENCE TO
Computershare
150 Royall St., Suite 101
Canton, MA 02021
ONLINE INQUIRIES
www-us.computershare.com/investor/contact
PHONE
781.575.4223 or 800.368.5948
INVESTOR INFORMATION
GENERAL STOCKHOLDER AND INVESTOR QUESTIONS MAY
BE DIRECTED TO
Onto Innovation
Attn: Investor Relations
16 Jonspin Road
Wilmington, Massachusetts 01887
investors@ontoinnovation.com
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Ernst & Young, LLP
Iselin, New Jersey
STOCK SYMBOL
Common stock is traded on the New York Stock
Exchange under the symbol: ONTO
ANNUAL MEETING
Stockholders are invited to attend the Annual
Meeting at 8:00 a.m. (PT) on Wednesday,
May 21, 2025 at our offices, located at:
1550 Buckeye Drive
Milpitas, CA 95035
Stockholder Information
page intentionally left blank
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 28, 2024
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)
Delaware
94-2276314
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
16 Jonspin Road, Wilmington, MA 01887
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (978) 253-6200
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of Each Class
Trading Symbol
Name of Exchange on Which Registered
Common Stock, $0.001 par value per share
ONTO
New York Stock
Exchange (NYSE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or
an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth
company” in Rule 12b-2 of the Exchange Act.:
Large accelerated filer
☒
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared
or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in
the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of the registrant’s voting Common Stock held by non-affiliates of the registrant was approximately $10,757,963,994 based
on the closing price of the Common Stock on the New York Stock Exchange on June 28, 2024.
The number of shares of the registrant’s Common Stock outstanding as of February 3, 2025 was 49,270,256.
DOCUMENTS INCORPORATED BY REFERENCE
Items 10, 11, 12, 13 and 14 of Part III of this Annual Report on Form 10-K incorporate by reference information from the definitive proxy statement
for the registrant’s annual meeting of stockholders scheduled to be held on May 21, 2025.
TABLE OF CONTENTS
Item No.
Page
PART I
1.
Business......................................................................................................................................................
2
1A.
Risk Factors................................................................................................................................................
11
1B.
Unresolved Staff Comments ......................................................................................................................
28
1C.
Cybersecurity .............................................................................................................................................
28
2.
Properties....................................................................................................................................................
30
3.
Legal Proceedings ......................................................................................................................................
30
4.
Mine Safety Disclosures.............................................................................................................................
30
PART II
5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities.................................................................................................................................................
31
6.
[Reserved] ..................................................................................................................................................
32
7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations ....................
33
7A.
Quantitative and Qualitative Disclosures About Market Risk...................................................................
41
8.
Financial Statements and Supplementary Data..........................................................................................
41
9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure....................
41
9A.
Controls and Procedures.............................................................................................................................
41
9B.
Other Information.......................................................................................................................................
42
9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspection.........................................................
42
PART III
10.
Directors, Executive Officers and Corporate Governance.........................................................................
43
11.
Executive Compensation............................................................................................................................
43
12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters..
43
13.
Certain Relationships and Related Transactions, and Director Independence...........................................
43
14.
Principal Accountant Fees and Services ....................................................................................................
43
PART IV
15.
Exhibits and Financial Statement Schedules..............................................................................................
44
16.
Form 10-K Summary .................................................................................................................................
47
Signatures
1
FORWARD-LOOKING STATEMENTS
Certain statements in this Annual Report on Form 10-K (this “Form 10-K”), or incorporated by reference in this Form
10-K, of Onto Innovation Inc. (referred to in this Form 10-K, together with its consolidated subsidiaries, unless otherwise
specified or suggested by the context, as the “Company,” “Onto Innovation,” “we,” “our” or “us”) are “forward-looking
statements” or are based on “forward-looking statements,” including, but not limited to, those concerning:
•
our business momentum and future growth;
•
technology development, product introduction and acceptance of our products and services;
•
our manufacturing practices and ability to deliver both products and services consistent with our customers’
demands and expectations and to strengthen our market position, including our ability to source components,
materials, and equipment due to supply chain delays or shortages;
•
our expectations of the semiconductor market outlook;
•
future revenue, gross profits, research and development and engineering expenses, selling, general and
administrative expenses, and cash requirements;
•
the effects of political, economic, legal, and regulatory changes or conflicts on our global operations;
•
the effects of natural disasters or public health emergencies on the global economy and on our customers, suppliers,
employees, and business;
•
our dependence on certain significant customers and anticipated trends and developments in and management plans
for our business and the markets in which we operate; and
•
our ability to be successful in managing our cost structure and cash expenditures and results of litigation.
Statements contained or incorporated by reference in this Form 10-K that are not purely historical are forward-looking
statements and are subject to safe harbors created under Section 27A of the Securities Act of 1933, as amended (the “Securities
Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities
Litigation Reform Act of 1995. Forward-looking statements may be identified by words such as, but not limited to, “anticipate,”
“believe,” “continue,” “estimate,” “expect,” “intend,” “plan,” “should,” “may,” “could,” “will,” “would,” “forecast,” “project”
and words or phrases of similar meaning, as they relate to our management or us.
Forward-looking statements contained herein reflect our current expectations, assumptions and projections with respect
to future events and are subject to certain risks, uncertainties and assumptions, such as those identified in Part I, Item 1A. “Risk
Factors” and elsewhere in this Form 10-K. Actual results may differ materially and adversely from those included in such
forward-looking statements. Forward-looking statements reflect our position as of the date of this report and we undertake no
obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except
as required by law.
2
PART I
Item 1. Business.
General
Onto Innovation® is a worldwide leader in the design, development, manufacture and support of metrology and inspection
tools for the semiconductor industry, including process control tools that perform optical metrology and inspection on patterned
and unpatterned wafers, including macro defect inspection of both 2D and 3D wafer features, wafer substrate and panel substrate
lithography systems, and process control analytical software. Our products are primarily used by silicon wafer manufacturers,
semiconductor integrated circuit (“IC”) fabricators, and advanced packaging manufacturers operating in the semiconductor
market. Our products are also used for process control in a number of other specialty device manufacturing markets, including
light emitting diodes (“LED”), vertical-cavity surface-emitting lasers (“VCSEL”), micro-electromechanical systems
(“MEMS”), CMOS image sensors (“CIS”), silicon and compound semiconductor (SiC and GaN) power devices, analog
devices, RF filters, data storage, and certain industrial and scientific applications.
We provide process and yield management solutions used in bare silicon wafer production and wafer processing facilities,
often referred to as “front-end” manufacturing, and advanced packaging of chips and test facilities, or “back-end”
manufacturing, through a portfolio of standalone systems for optical metrology, macro-defect inspection, packaging
lithography, as well as transparent and opaque thin film measurements. Our automated and integrated metrology systems
measure critical dimensions, device structures, topography, shape, and various thin film compositions, including three-
dimensional features and film thickness, as well as optical and material properties. Our primary areas of focus include products
that provide critical yield-enhancing and actionable information, which is used by microelectronic device manufacturers to
improve yield and time to market of their next-generation devices. Our systems feature sophisticated software and production-
worthy automation. In addition, our advanced process control software portfolio includes powerful solutions for standalone
tools, groups of tools, and factory-wide and enterprise-wide suites to enhance productivity and achieve significant cost savings.
Our systems are backed by worldwide customer service and applications support.
Industry Background
We participate in the sale, design, manufacture, marketing and support of process control systems across all major
segments of the semiconductor industry for optical critical dimension (“OCD”) metrology, thin film metrology, silicon wafer
inspection, including 2D and 3D macro inspection and lithography tools for advanced packaging and advanced analytical
software for semiconductor manufacturing as well as inspection systems for certain industrial applications and scientific
research. Our principal market is semiconductor capital equipment. Semiconductors packaged as ICs, or “chips”, are used in
consumer electronics, server and enterprise systems, mobile computing (including smart phones and tablets), data storage
devices, and embedded automotive and control systems. Our core focus is the measurement and control of the structure,
composition, and geometry of semiconductor devices as they are fabricated on silicon wafers to improve device performance
and manufacturing yields. Our end customers manufacture many types of ICs for a multitude of applications, each having
unique manufacturing challenges. This includes ICs to enable information processing and management (logic ICs), memory
storage (NAND, 3D-NAND, and DRAM), analog devices (e.g., Wi-Fi and 5G radio ICs, power devices), MEMS sensor devices
(accelerometers, pressure sensors, microphones), CMOS image sensors, and other specialty end markets including components
for hard disk drives, LEDs, and power management devices.
Markets
Advanced Nodes. “Advanced nodes” refers to leading-edge ICs where the sizes of transistors and other features continue
to shrink. Advanced nodes are associated with transistor dimensions less than 10 nanometers (nm), with the most advanced
logic devices now in production using 3nm and soon 2nm transistor dimensions. Our metrology systems used to measure and
characterize these small features are generally purchased when a customer is beginning development at a new, smaller node, in
order to set up and test new manufacturing equipment being installed for production at the new node. Our process
control/metrology equipment is generally installed prior to the installation of the actual process equipment for that reason.
Additional process control equipment is normally purchased when the initial process yields have been stabilized and more
manufacturing capacity is required to meet production demands. Therefore, our sales to customers for advanced nodes is
generally higher when manufacturing lines for new nodes are being established and may not represent continuous sales revenue
until our initial systems reach high levels of utilization driven by the need for greater capacity.
The growth in artificial intelligence (AI) based applications has generated significant demand and new technology
requirements in the advanced node segment, including for both logic and memory devices. Demand for our products also
3
continues to be driven by our customers’ desire for higher overall chip performance enabled by a greater number of transistors
per square millimeter, while improving power efficiency, logic processing capability, data storage volume and manufacturing
yield. To achieve these goals, our customers have increased their use of more complex materials and processing methods in
their manufacturing flow. The primary path for performance gains is geometric scaling, known as node shrinks, or scaling of
transistor dimensions. In some cases, our customers are implementing new materials and methods in high volume
manufacturing, including materials and device architectures to reduce power consumption. To scale NAND memory, for
example, a 3D layered architecture has been implemented for several customers with more than 150 storage cell layers for
devices in production. Additional innovation continues in Data Storage, Power Devices, MEMS, and Image Sensors. We
believe the use of these new materials and manufacturing methods has increased demand for our products such as the Atlas®
product line, which is capable of measuring advanced nodes as certain features shrink beyond 7nm, to 5nm, 3nm and in the
most advanced of cases, 2 nm or less.
To shrink features, new methods, including multiple patterning lithography and extreme ultra-violet (“EUV”)
lithography, have been developed. The EUV process is driving significantly higher requirements for the silicon wafers that are
entering the EUV chamber. Small particles on the backside of the wafer measuring a few micrometers (microns) can distort the
images being projected onto the top side. Our NovusEdge® inspection tool has been installed at major silicon wafer
manufacturers to detect backside contamination and edge cracking as a final quality control mechanism before wafers are
shipped to the semiconductor fabrication processes. The top side of wafers used for the EUV process is covered with an epitaxial
layer, which must also be scanned for any impurities. This compositional analysis may be measured using our Element® system
using Fourier Transform Infrared (“FTIR”) algorithms.
Advanced Packaging. “Advanced packaging” refers to a variety of technologies on either wafer or panel level substrates
(or both) that enable the miniaturization of electronic products, such as smartphones, watches, and tablets. Historically, IC
packaging refers to the final stage of semiconductor device fabrication, in which a single circuit made from semiconducting
material (a die or chip) is encased in a molded package using small wires to provide connections to a carrier that can be soldered
to a printed circuit board and also prevents physical damage and corrosion to the chip. Advanced packaging refers loosely to
the multi-layer conductors and chip structures (other than wires) that often interconnect multiple die, feed them with electric
power and create signal paths to and from the Printed Circuit (“PC”) board, dissipate their heat, and protect them from damage.
Today, the drive to pack more functions into a small space and reduce their power requirements demands that chip packages
do much more than ever before to combine multiple chips and functions into a single molded package.
One example of the technology used in advanced packaging is the 3D integration of semiconductors. This technology
involves stacking individual chips in one integrated package. Through-silicon vias (“TSVs”) are vertical copper interconnects
that are embedded from the bottom surface of a die to the top surface and use small copper/solder “bumps” to connect one chip
to another. TSVs allow power and communication to be shared among the individually stacked components. This offers the
advantages of shorter signal paths and, in turn, reduced power consumption, enhanced bandwidths, integration of heterogeneous
components such as memory and logic chips, and smaller surface area. The processes required for 3D integration vary from
one manufacturer to another and many continue to be optimized for yield and to ensure the functioning of individual stacked
chips.
Heterogeneous integrated (“HI”) packaging is another advanced packaging technology using copper pillars/bumps to
vertically connect a wide variety of stacked die for 2.5D, and 3D integration techniques as well as horizontally connected chips
and is considered the next disruptive technology for several reasons. First, HI packages using 3D stacking can significantly
reduce the space needed inside an electronic device, such as a smartphone, by combining multiple chips/functions into a “system
in a package” (“SIP”). Next, HI packages also improve a system’s performance by reducing power and signal conductor lengths,
which previously were routed from package to package through a PC board using thin redistribution layers (“RDLs”) to connect
chips that are side-by-side. Lastly, the technology is currently considered the preferred vehicle for next generation uses, such
as SIP, and package on package formats. As a result of the small overall form factor, HI packages provide the functionality
needed in high-end mobile and wearable products.
Our inspection systems and software are used for process control and detection of potential reliability failures in nearly
all of these packages. Inspection rates for advanced packages are high throughout the assembly process to avoid a single
defective chip from being assembled into a relatively expensive package. Thus, unlike the cyclical nature of our metrology
equipment associated with node shrinks, our sales revenue for advanced packaging is generally driven by assembly volumes.
Recently, the growth in AI applications has generated significant demand and new technology requirements in the advanced
packaging segment at both the wafer process and panel process levels.
Panel Substrate Manufacturing. One current process to manufacture advanced packaging involves attaching known
good die to a 300mm wafer. SIP packages can often contain side-by-side die, meaning the package can be large and limit the
number of packages being placed on a wafer. In order to meet the growing demand at reduced average selling prices,
4
manufacturers are looking to scalable technology. Advanced packaging facilities looking to improve Cost of Ownership and
increase productivity are transitioning from 300mm wafers to large rectangular panels, which can be as large as 650mm x
650mm. This larger size enables companies manufacturing large area packages to increase the number of devices being
processed at each step as they are no longer limited to operating within the constraints of a round wafer. By responding to
market opportunities and addressing the stringent demands of customers’ technical roadmaps, we believe that Onto Innovation
is optimally positioned to capitalize on the emerging market of high-volume manufacturing of advanced IC substrates. For
example, the JetStep® X500 lithography system, having emerged from the flat panel display market, is readily capable of
processing RDLs on very thin advanced organic laminate panels in the semiconductor advanced packaging market. The Firefly®
series of panel level macro inspection tools, designed for high resolution inspection, can provide defect detection and location
information to the JetStep X500 tool for each die, which greatly improves lithography throughput using our exclusive
StepFAST™ process. It also delivers a combination of defect classification and process throughput in a single software
platform. It reduces capital investment requirements and provides a reliable pathway to transition from wafer to panel-based
processes.
Technology
We believe that our expertise in our core technologies of optics and software and our combined investment in research
and development will enable us to rapidly develop new technologies and products in order to quickly respond to emerging
industry trends and competitive challenges. The breadth of our technology enables us to offer a diverse combination of
metrology, inspection, and process control solutions. Unique features have been designed into our lithography systems to meet
our customers’ changing process requirements. Our metrology and inspection technologies provide process control for the
majority of advanced node wafers processed today in a semiconductor wafer fab. In front-end processes, OCD metrology, thin
film metrology, wafer stress metrology and macro defect detection and classification technologies allow yield enhancement for
critical processes such as photolithography, diffusion, etch, chemical mechanical planarization (“CMP”) and outgoing quality
control. Within the back-end manufacturing processes, our 2D/3D advanced macro defect inspection provides our customers
with critical quality assurance and process information. Defects may be created during probing, bumping, dicing, assembly
processes (RDLs, TSVs, copper pillars, etc.) or general handling and can have a major impact on device and process quality.
Lastly, we turn the gathered data into useful knowledge for our customers to make yield-enhancing decisions, which lower
their scrap cost and environmental impact and improve their margins.
Onto Innovation’s Products
Automated Metrology Systems. The Atlas family of products represents our line of high-performance automated
metrology systems providing OCD and thin film metrology and wafer stress metrology for transistor and interconnect
metrology applications. The thin film and OCD technology is supported by our suite of solutions including our latest
introductions of AI Diffract™ software, SpectraProbe™ software and NanoGen™ scalable computing engine, which enables
visualization, modeling, and analysis of complex structures.
AI Diffract is a modeling, visualization and analysis software that takes signals from the metrology systems, providing
critical dimension, thickness, and optical properties from in-line measurements. The software has an intuitive three-dimensional
modeling interface to provide visualization of today’s advanced and complex semiconductor devices. There are proprietary
fitting algorithms in AI Diffract that enable very accurate and very fast calculations for signal processing for high fidelity
model-based measurements. SpectraProbe is a model-less fitting engine that enables fast time to solution for in-line excursion
detection and control. SpectraProbe complements the high-fidelity modeling of AI Diffract with a simple machine learning
interface for rapid recipe deployment. The software is supported by NanoGen, an enterprise scale computing hardware system
that is deployed to run the computing intensive analysis software. NanoGen leverages commercial server chips and networking
architecture and is optimized to support the workload of AI Diffract and SpectraProbe analysis.
Integrated Metrology Systems. Our integrated metrology (“IM”) systems are installed directly onto wafer processing
equipment to provide near real-time measurements for improved process control and maximum throughput. Our IM systems
are sold directly to end user customers. The IMPULSE® family of products includes the latest technology for OCD, and thin
film metrology, and has been successfully qualified on multiple independent wafer fabrication equipment suppliers’ platforms.
Silicon Wafer All-surface Inspection/Characterization. “All-surface” refers to inspection of the wafer frontside, edge,
and backside as well as wafer’s locator notch. The edge inspection process focuses on the area near the wafer edge, an area that
poses difficulty for traditional wafer frontside inspection technology due to its varied topography and process variation. Edge
bevel inspection looks for defects on the side edge of a wafer. Edge bead removal and edge exclusion metrology involve a
topside surface measurement required exclusively in the lithography process, primarily to determine if wafers have been
properly aligned for the edge exclusion region. The primary reason for wafer backside inspection is to determine if
5
contamination has been created that may spread throughout the wafer fab. For instance, it is critical that the wafer backside be
free of defects prior to the EUV lithography process to prevent focus and exposure problems on the wafer frontside.
Our materials characterization products include systems that are used to monitor the physical, optical, and material
characteristics of discrete electronic industry, opto-electronic, HB-LED (high brightness LEDs), solar PV (solar photovoltaics),
compound semiconductor, strained silicon and silicon-on-insulator (“SOI”) devices, including composition, crystal structure,
layer thickness, dopant concentration, contamination and electron mobility.
We have a broad portfolio of products for materials characterization including photoluminescence mapping and Fourier
Transform Infrared (“FTIR”) spectroscope in automated and manual systems for substrate quality and epitaxial thickness
metrology. The NanoSpec® line supports thin film measurement across all applications in both low volume production and
research applications.
Macro Defect Inspection. Chip manufacturers deploy advanced macro defect inspection throughout the production line
to monitor key process steps, gather process-enhancing information and ultimately, lower manufacturing costs. Field-
established tools such as the F30™, NSX®, Firefly®, and the latest Dragonfly® G3 inspection systems are found in the wafer
fab (front-end) and packaging (back-end) facilities around the world. These high-speed tools incorporate features such as wafer-
less recipe creation, tool-to-tool correlation and multiple inspection resolutions. Using Discover® yield management software,
the vast amounts of data gathered through automated inspection can be analyzed and classified to determine trends and locate
root causes that directly affect yield.
Automated Defect Classification and Pattern Analysis. Automating the defect detection and classification process is
best done by a system that can mimic, or even extend, the response of the human eye, but at a much higher speed, with higher
resolution and more consistency. To do this, our systems capture full-color whole wafer images using simultaneous dark and
bright field illumination. The resulting bright and dark field images are compared to those from an “ideal” wafer having no
defects using our Automated Defect Classification (“ADC”) software. When a difference is detected, its image is broken down
into mathematical vectors that allow rapid and accurate comparison with a library of known classified defects stored in the
tool’s database. Patented and proprietary enhancements of this approach enable very fast and highly repeatable image
classification. The system is pre-programmed with an extensive library of local, global, and color defects and can also store a
virtually unlimited amount of new defect classes. This allows customers to define defects based on their existing defect
classification system, provides more reliable automated rework decisions and enables more accurate statistical process control
data. Reviewing defects using ADC enables automated inspection systems to maintain their utilization for high throughput
inspection. Using defect image files captured by automated inspection systems, operators are able to view high-resolution defect
images to determine defects that cause catastrophic failure of a device, known as killer defects. Combining the review process
with classifying defects enables faster analysis by grouping defects found together as one larger defect, a scratch for example,
and defects of similar types across a wafer lot to be grouped based on size, repeating defects, and other user-defined
specifications.
Yield Analysis. Using wafer maps, charts and graphs, the massive amounts of data gathered through automated inspection
can be analyzed to determine trends across bumps, die, wafers and lots. This analysis may determine where a process variation
or deviation has occurred, allowing process engineers to make corrections or enhancements to increase yields. Defect data
analysis is performed to identify, analyze and locate the source of defects and other manufacturing process excursions. Using
either a single wafer map or a composite map created from multiple wafer maps, this analysis enables identification of defect
patterns and distribution. When combined with inspection data from inspection points placed strategically, this analysis may
pinpoint the source of the defects so corrective action can be taken.
Opaque Film Metrology. The MetaPULSE® and EchoTM systems allow customers to simultaneously measure the
thickness and other properties of up to six metal or non-metallic opaque film layers without physically contacting product
wafers. PULSETM technology uses an ultra-fast laser to generate acoustic waves that pass down through a stack of opaque films
such as those used in copper or aluminum interconnect processes, as well as the hard mask layer in 3D-NAND chips, sending
back to the surface a reflected signal (echo) that indicates film thickness, density, and other process critical parameters. We
believe we are a leader in providing systems that can measure opaque thin-film stacks non-destructively with the speed and
accuracy semiconductor device manufacturers demand in order to achieve high yields with the latest fabrication processes. The
technology is ideal for characterizing copper interconnect structures. The MetaPULSE and Echo systems, used for fast and
accurate measurements of metal interconnect in front-end wafer fabs, have now been chosen by back-end manufacturers to
perform system measurements in new process applications such as RF filters and modules, driven by the need for on-product
metrology as feature sizes decrease and pattern densities increase.
Industrial, Scientific, and Research Markets ― 4D Technology®. The 4D business offers a line of interferometry
systems for the measurement and inspection of high precision surfaces. End markets include high precision optics surfaces and
6
components, aerospace and defense components, and unique research and scientific instrumentation that requires the unique
high-speed results of the 4D systems.
Advanced Packaging Lithography. Our lithography steppers use projection optics to expose circuit patterns from a mask
or reticle onto a substrate to expose images with optimal fidelity. These systems employ a bright light that is transmitted through
a mask or reticle containing display circuit patterns. Substrates are aligned on the system and the mask is imaged through a
projection lens onto photoresist material coated on the substrate. The substrate is then moved, or “stepped,” to a second position
to expose an adjacent area. The system repeats the step and exposure process until the entire substrate is patterned. Once the
exposure process has been completed, the substrate is developed with an alkali solution to reveal the underlying material. The
imaged photoresist serves as a stencil barrier that allows for the processing of the underlying metal or insulating layers. The
substrates then continue through the etching, stripping and deposition processes until multi-layer circuits are completed.
In order to deal with increased input/output (“I/O”) resulting from devices with enhanced functionality, increased power
distribution efficiency, and higher frequency, IDMs and outsourced semiconductor assembly and test (“OSATs”) facilities must
incorporate lithography capabilities to create RDLs for their advanced packaging technologies. However, the associated
substrates and processes are significantly different than those used in front-end wafer processing. For advanced packaging, the
lithography system must perform in a completely different application, with significantly different operating parameters. For
example, most packaging is an additive process, while wafer processing is subtractive, and thick films, rather than thin films,
are used to enable the creation of features. In order for equipment to effectively function in this environment, it must overcome
these challenges. Our JetStep® systems have been specifically designed to meet these challenges head on. The new JetStep
X500 System is designed for rectangular substrates (panels), which when combined with user-selectable wavelength options,
maximizes throughput while not limiting resolution when needed. High-fidelity optics are able to image the fine features
required while at the same time achieving superior depth of field to minimize non-flatness that is typical for advanced packaging
applications. On-the-fly auto focus and an innovative reticle management system improve yield and utilization. These features
result in a revolutionary lithography system specifically designed to meet advanced packaging challenges.
Process Control Software. We provide a wide range of advanced process control solutions, which are designed to
improve factory profitability, including run-to-run control, fault detection, classification and tool automation. We are a leading
provider of process control software in the semiconductor industry. Advanced process control (“APC”) employs software to
automatically detect or predict tool failure (fault detection) as well as calculate recipe settings for a process that will drive the
yielded output to meet and exceed the target, despite variations in the incoming material and minor instabilities within the
process equipment. Process control software enables the factory to increase capacity and yield while decreasing rework and
scrap. It enables reduced production costs by lowering consumables, process engineering time and manufacturing cycle time.
Yield Management Software. Semiconductor manufacturers use yield management software (“YMS”) to obtain valuable
process yield and equipment productivity information. The data necessary to generate productivity information comes from
many different sources throughout the wafer fab: inspection and metrology systems, tool sensors, tool recipes, electrical tests
and the fab environment. As the complexity and cost of manufacturing processes increase, the value of faster, better analysis
to support critical manufacturing decisions grows. As a result, customers are demanding robust yield management systems that
can analyze large, complex data sets quickly and effectively. Our fully integrated YMS is designed to analyze data from
disparate sources and multiple sites to maximize productivity across the entire value chain.
Customers
Over 240 customers purchased Onto Innovation tools or software in 2024. We support a diverse customer base in terms
of both geographic location and type of device manufactured. Our customers are located in over 24 countries. The following
table shows the revenue concentration at our top customers for the respective fiscal years:
Year Ended
Customer
December 28,
2024
December 30,
2023
December 31,
2022
Customer A .................................................................................
*
*
*
Customer B..................................................................................
*
*
*
Customer C..................................................................................
*
^
*
* Total customer revenue was 10% or more of total revenue.
^ Total customer revenue was less than 10% of total revenue.
7
Sales, Customer Service and Application Support
We believe that the capability for direct sales and support is beneficial for developing and maintaining close customer
relationships and for rapidly responding to changing customer requirements. We provide local direct sales, service and
application support through our worldwide offices located in the United States, South Korea, Japan, Taiwan, China, Vietnam
Singapore and Europe, and work with selected dealers and sales representatives on a more limited basis in various countries.
Our applications team is composed of technically experienced sales engineers who are knowledgeable in the use of metrology
systems generally and the unique features and advantages of our specific products. Supported by our technical applications
team, our sales and support teams work closely with our customers to offer cost-effective solutions to complex measurement
and process problems.
We believe that customer service and technical support for our systems are crucial factors that distinguish us from our
competitors and are essential to building and maintaining close, long-term relationships with our customers. We generally
provide a warranty for our products that ranges from twelve to fourteen months to cover defects in material and workmanship.
We provide system support to our customers through factory technical support and globally deployed field service personnel.
The factory technical support operations provide customers with telephonic technical support access, direct training programs,
operating manuals and other technical support information to enable effective use of our metrology and measurement
instruments and systems. We have field service operations based in various locations throughout the United States, South Korea,
Taiwan, China, Japan, Vietnam, Malaysia, Singapore, Israel, and Europe.
Competition
The global semiconductor equipment industry is intensely competitive and we have multiple established and potential
competitors in the markets in which we participate. Our industry is driven by rapid technological adoption cycles, with new
entrants from overseas and domestic sources competing for our customers’ business. Our ability to compete effectively depends
upon our ability to continuously improve our existing products, applications and services, and our ability to develop new
products, applications and services that meet constantly evolving customer requirements. In order to continuously improve and
develop new products and maintain customer service and support centers worldwide, we believe that we will require significant
resources; however, some of our competitors may have greater financial, research, engineering, manufacturing and marketing
resources than we have.
In automated systems for the semiconductor industry, our principal competitors are KLA Corporation (“KLA”) and Nova
Ltd. (formerly Nova Measuring Instruments Ltd.) (“Nova”) for thin film and critical dimension OCD metrology. Our principal
competitors for advanced packaging inspection are KLA and Camtek Ltd. (“Camtek”). While the advanced packaging
lithography market is served by various competitors, our primary competitors are Ushio, Inc. (“Ushio”) and Canon, Inc.
(“Canon”). Our primary competitor for inspection in the panel market is GigaVis Co. Ltd. The primary competitor for our
software products is PDF Solutions, Inc. (“PDF Solutions”) and our primary competitor for integrated metrology systems for
the semiconductor industry is Nova. The opto-electronics, discrete device and industrial and scientific markets are addressed
primarily by our material characterization and 4D systems, served by numerous competitors, of which no single competitor or
group of competitors has established a majority position.
We believe that our competitive position in each of our markets is based on the ability of our products and services to
address customer requirements related to numerous competitive factors. Competitive selections are based on many factors
involving technological innovation, productivity, total cost of ownership of the system, including impact on end of line yield,
price, product performance and throughput capability, quality, reliability and customer support.
Manufacturing
Our manufacturing operations are in: Milpitas, California; Tucson, Arizona; Wilmington, Massachusetts; Bloomington,
Minnesota; and at various contract manufacturers around the world. It is our strategy to outsource the assemblies that do not
contain elements that we believe lead to a direct competitive advantage. Most of our automated and integrated products are
currently manufactured at our Milpitas and Bloomington facilities. We currently do not expect our manufacturing operations
to require additional major investments in capital equipment in the near term.
We manufacture key modular assemblies and integrated tools and make reasonable efforts to ensure that externally
purchased parts or raw materials are available from multiple suppliers, if possible. Certain components, subassemblies and
services necessary for the manufacture of our systems are obtained either from a sole supplier or limited group of suppliers.
We also have long-term supply agreements with strategic suppliers for the supply of key assemblies for use in our products.
For more information, please see “Part I, Item IA - Risk Factors - If we do not manage our supply chain effectively, our
8
operating results may be adversely affected, and any increases in material, labor, supplier, logistics and other operating costs,
or supply chain delays and shortages, could lower our margins or result in lost sales”.
Research and Development
We continue to invest in research and development to provide our customers with products that add value to their
manufacturing processes and that provide a better and differentiated solution than our competitors so that our products stay in
the forefront of current and future market demands. Whether it is for an advancement of current technology, yield and
manufacturing improvement, enabling new end device technology, or the development of a new application in our core or
emerging markets, we are committed to product excellence and longevity.
The markets for equipment and systems for manufacturing semiconductor devices and for performing OCD metrology,
macro-defect inspection, advanced packaging lithography and thin film transparent and opaque process control metrology are
characterized by continuous technological development and product innovations. We believe that the rapid and ongoing
development of new products and enhancements to existing products are critical to our success. Accordingly, we devote a
significant portion of our technical, management and financial resources to research and development programs.
Intellectual Property
We believe that our success will depend to a great degree upon innovation, technological expertise and our ability to
adapt our products to new technology. As a result, we have a policy of seeking patents on inventions governing new products
or technologies as part of our ongoing research, development, and manufacturing activities. As of December 28, 2024, we have
been granted, or hold exclusive licenses to, 408 U.S. and foreign patents. The patents we own, jointly own or exclusively license
have expiration dates ranging from 2025 to 2043. We also have 240 pending patent applications in the United States and other
countries. Our patents and patent applications principally cover various aspects of metrology, macro-defect detection and
classification, altered material characterization, lithography techniques, automation, artificial intelligence, and machine
learning.
To protect our intellectual property, we rely on a combination of patents, copyrights, trademarks, trade secret laws,
contractual provisions and licenses and non-disclosure agreements. There can be no assurance that our intellectual property
will provide us competitive advantage or that we will be able to fully protect our intellectual property. For more information,
please see “Part I, Item IA - We may fail to adequately protect our intellectual property and, therefore, lose our competitive
advantage.” Additionally, others may obtain patents or trademarks and assert them against us. We may find it necessary to
engage in litigation regarding intellectual property rights or contractual rights, which will be costly and time consuming without
guarantee that it will yield the result we seek. For more information, please see “Part I, Item IA - Protection of our intellectual
property rights, or the efforts of third parties to enforce their own intellectual property rights against us, may result in costly
and time-consuming litigation, substantial damages, lost product sales and/or the loss of important intellectual property rights.”
Human Capital and Talent
As of December 28, 2024, we had approximately 1,551 staff globally, 370 in research and development, 266 in operations,
209 in administration and 706 in sales, applications and service support. A large percentage of our employees have technical
backgrounds and undergraduate and/or advanced degrees. Many of our employees have specialized skills and experience that
are of value to our business, products and services. Our future success will depend, in large part, upon our ability to attract,
motivate and retain our highly skilled, technical, operational and managerial team members, who are in great demand in our
industry and business communities.
Approximately 56% of our employees are located in the United States, 39% in Asia Pacific and 5% in Europe. None of
our employees are represented by a union and we have never experienced a work stoppage because of union actions. We
consider our employee relations to be favorable.
Purpose and Culture. All of our employees are expected to uphold the following core values which are foundational to
our culture:
•
Passion – ownership, pride and caring in our work
•
Integrity – honesty, dependability, ethicality and accountability
•
Collaboration – working together toward a common goal
•
Results – meeting and exceeding goals, focusing on innovation and growth
9
These core values define the way we do business in our everyday actions and choices. We strive to create a respectful
work environment characterized by mutual trust and the absence of intimidation, oppression, discrimination and exploitation.
Talent Development and Acquisition. Successful execution of our strategy is dependent on attracting, developing and
retaining key employees and members of our management and leadership teams. The skills, experience and industry knowledge
of our employees significantly benefit our operations and performance. We continuously evaluate, modify, and enhance our
internal processes, tools and technologies to increase employee engagement, productivity, quality and efficiency. We offer
employees access to internal and external training and development courses to support individual development. We review
succession plans and focus on promoting internal talent to help grow our employees, both professionally and personally.
We strive to promote and cultivate an inclusive and diverse culture that welcomes and celebrates everyone without bias.
In addition, we look to actively engage within our communities to foster and attain social equity.
Compensation Philosophy. Our compensation philosophy creates the framework and building blocks for our rewards
and recognition programs. We have a pay-for-performance culture that ties compensation to the performance of the individual
and the Company. We provide balanced compensation programs that focus on the following five key elements:
•
Pay-for-performance - Reward those who achieve or exceed set goals and objectives, while also recognizing those
making significant, impactful contributions;
•
External market based - Pay levels that are competitive with respect to the labor market in which we compete for
talent;
•
Internal equity - Providing fair compensation programs within the Company;
•
Fiscal responsibility - Providing programs which can be responsibly supported by our operations; and
•
Legal compliance - Ensure compliance with the applicable laws of the states and countries in which we operate in
all material respects.
Safety, Health and Wellness. We strive to provide an environment which is safe and where our employees can be
productive. We have rigorous health and safety programs focused on awareness, recognition, risk assessment and management,
as well as teamwork.
Our benefit plans are competitive and comprehensive. We provide each of our employees educational programs and
initiatives focused on holistic wellness supporting nutritional, physical, emotional, mental and financial wellbeing.
Corporate Social Responsibility
Our stakeholders are essential to our business – shareholders, customers, suppliers, employees, communities as well as
the environment and society. We are working to make our workforce more inclusive, our business more sustainable, and our
communities more engaged by maintaining strong sustainability practices. Actions we have taken in pursuit of these
commitments include the following environmental and social programs:
•
Demanded excellence in our environmental performance.
•
Demanded excellence in our quality performance, as demonstrated through our product and process qualification
commitments, including ISO 9001 Quality Management;
•
Set goals to reduce our environmental impact, including an increase in our use of renewable energy, a decrease in
hazardous waste landfill, an increase in recycling materials and beneficial reuse, and a reduction in our freshwater
usage;
•
Committed to Responsible Business Alliance (RBA) Code of Conduct and humane treatment of all at Onto
Innovation both upstream and downstream. We have established policies and practices to ensure that: working
conditions are safe; workers are treated with respect and dignity; and manufacturing processes are environmentally
responsible.
•
Produced systems responsibly by offering tool trade-in, refurbishment and technology upgrade programs;
•
Provided corporate matching for employee donations to qualified nonprofit organizations; and
•
Engaged in community service projects in our communities globally.
10
Compliance with Governmental Regulations
We are subject to international, federal, state and local regulations that are customary to businesses in the semiconductor
capital equipment manufacturing industry. Such regulations include, but are not limited to:
•
The Restriction of Hazardous Substances Directive (“RoHS”), which restricts the use of certain hazardous
substances in electrical and electronic equipment;
•
General Data Protection Regulation (“GDPR”), which provides guidelines for the collection and processing of
personal information from individuals who live in the European Union, and similar laws and regulations in other
jurisdictions in which we operate;
•
The U.S. Foreign Corrupt Practices Act (“FCPA”), which prohibits companies and their individual officers from
influencing foreign officials with any personal payments or rewards;
•
Conflict minerals reporting, which imposes disclosure requirements regarding the use of “conflict” minerals mined
from the Democratic Republic of Congo and adjoining countries in products; and
•
Export regulations.
Our compliance with export regulations has negatively impacted our ability to compete for the business of domestic
customers in China, which has adversely affected our results of operations. For additional discussion of the impact of trade
policies and export regulations on our competitive position, see “Part I, Item IA - Risk Factors - Tariffs, export regulations, and
other market barriers have impacted and may continue to impact our ability to compete for the business of domestic customers
in China and other jurisdictions, and our results of operations.” We expect that the new U.S. presidential administration will
seek to implement a regulatory reform agenda that is significantly different than that of the prior administration, which may
impact agency rulemaking and enforcement priorities, which could, in turn, have a material effect on our business.
Available Information
Our Internet website address is http://www.ontoinnovation.com. The information on our website is not incorporated into
this Form 10-K. Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K (and
any amendments to those reports) are made available free of charge, on or through our Internet website, as soon as reasonably
practicable after such material is electronically filed with or furnished to the United States Securities and Exchange
Commission (the “SEC”). All filings we make with the SEC are also available free of charge via EDGAR through the SEC’s
website at http://www.sec.gov. These filings may also be obtained through the SEC’s website. Documents that are not available
through the SEC’s website may also be obtained by submitting an online request to the SEC at http://www.sec.gov.
We also make available, free of charge, through our investor relations website at https://investors.ontoinnovation.com,
our corporate governance guidelines, Code of Business Conduct and Ethics, charters of the committees of our Board of
Directors, and other information and materials, including information about how to contact our Board of Directors.
Investors and others should also note that we announce material financial information to our investors using our investor
relations website, SEC filings, press releases, public conference calls and webcasts. We use these channels as well as social
media to communicate with the public about the Company, our products and services and other matters. It is possible that the
information we post on social media could be deemed to be material information. Therefore, we encourage investors, the media,
and others interested in the Company to review the information we post on the social media channels listed on our investor
relations website.
11
Item 1A. Risk Factors.
Below is a summary of the principal factors and uncertainties that make investing in our company risky. You should
read this summary together with the more detailed description of each risk factor contained further below.
Risks Related to Our Operations
•
If we do not manage our supply chain effectively, our operating results may be adversely affected, and any increases
in material, labor, supplier, logistics and other operating costs, or supply chain delays and shortages, could lower
our margins or result in lost sales.
•
Variations in the amount of time it takes for us to sell our systems may cause fluctuations in our operating results,
which could cause our stock price to decline.
•
We are subject to order and shipment uncertainties. Our profitability will decline if we fail to accurately forecast
customer demand when managing inventory.
•
If we deliver systems with defects, our credibility will be harmed, and the sales and market acceptance of our
systems will decrease.
•
Our integrated metrology systems are integrated with systems sold independently by wafer fabrication equipment
suppliers, and a decrease in sales by these suppliers, or the development of competing systems by these suppliers,
could harm our business.
•
We must attract and retain experienced senior executives and other key personnel with knowledge of semiconductor
device manufacturing and inspection, metrology or lithography equipment and related software to help support our
future growth, and competition for such personnel in our industry is high.
•
Any prolonged disruption in the operations of our manufacturing facilities could have a material adverse effect on
our revenue.
•
We outsource select manufacturing activities to third-party service providers, which decreases our control over the
performance of these functions, may result in lower quality and functionality of our products, and exposes us to
additional supply chain risks.
•
Our ability to fulfill our backlog may have an effect on our long-term ability to procure contracts and fulfill current
contracts.
•
We are implementing a new enterprise resource planning system. Our failure to implement it successfully, on time
and on budget could have a material adverse effect on us.
Risks Related to Our Customers
•
Our largest customers account for a substantial portion of our revenue, and our revenue and cash flows could
decline considerably if one or more of these customers were to purchase significantly fewer of our systems or delay
or cancel a large order.
Risks Related to Product Development
•
If we are not successful in developing new and enhanced products for the semiconductor device manufacturing
industry, we will lose sales and market share to our competitors.
•
If new products developed by us do not gain general market acceptance, we will be unable to generate revenue and
recover our investments, which may result in a write down of inventory.
•
Even if we are able to develop new products that gain market acceptance, sales of these new products could impair
our ability to sell existing products.
•
If our relationships with our large customers deteriorate, our product development activities could be adversely
affected.
Risks Related to Intellectual Property and Data Security
•
We may fail to adequately protect our intellectual property and, therefore, lose our competitive advantage.
12
•
Protection of our intellectual property rights, or the efforts of third parties to enforce their own intellectual property
rights against us, may result in costly and time-consuming litigation, substantial damages, lost product sales and/or
the loss of important intellectual property rights.
•
If our network security measures are breached and unauthorized access is obtained to a customer’s data, to our
data, or to our information technology systems, we may incur significant legal and financial exposure and liabilities
and may experience disruptions in our operations.
•
Compliance with data protection laws may be costly and may impede development of new products, and any failure
to comply with, or inquiries under, these laws could have a material adverse effect on our business, results of
operations and financial condition.
Risks Related to Competition
•
Some of our current and potential competitors have significantly greater resources than we do, and increased
competition could impair sales of our products or cause us to reduce our prices.
•
Because of the high cost of switching equipment vendors in our markets, it is sometimes difficult for us to win new
customers from our competitors even if our systems are superior to theirs.
Risks Related to Our International Operations
•
Tariffs, export regulations, and other market barriers have impacted and may continue to impact our ability to
compete for the business of domestic customers in China and other jurisdictions which has adversely affected and
may continue to adversely affect our, business, financial condition and results of operations.
•
We are subject to compliance with domestic and foreign laws and regulations, and the burden of complying with
such laws and regulations, or any failure to comply, has adversely affected and may continue to adversely affect
our business, financial condition and results of operations.
•
Political and economic instability may result in reduced demand for our products.
•
Natural disasters, changes in climate, public health crises, and geo-political conflicts could materially adversely
affect our worldwide operations (or those of our business partners).
•
We may face difficulties in staffing and managing foreign branch operations due to political tensions or cultural
differences.
•
Currency fluctuations may impact our international sales or expose us to exchange rate risk.
•
Our internal controls with respect to anti-corruption laws may not be effective, and any failure to comply with such
laws may result in severe sanctions and liabilities, which may negatively affect our business, operating results and
financial condition.
Risks Related to Laws, Legal Proceedings, Financial Markets and the Environment
•
Changes in tax rates or tax liabilities could affect results.
•
Turmoil or fluctuations in the credit markets and the financial services industry may negatively impact our business,
results of operations, financial condition or liquidity, and our factoring arrangements may expose us to additional
risks.
•
We are subject to various environmental laws and regulations that could impose substantial costs upon us, and
failure to comply with such laws and regulations may harm our business, operating results and financial condition.
•
Legal proceedings, claims and investigations may expose us to increased costs and may negatively affect our
business and results of operations.
Risks Related to Growth and Acquisitions
•
We may choose to acquire new and complementary businesses, products or technologies instead of developing
them ourselves, and we may be unable to complete these acquisitions or may not be able to successfully integrate
an acquired business in a cost-effective and non-disruptive manner.
•
If we cannot effectively manage growth, our business may suffer.
13
Risks Related to the Global Economy and the Semiconductor Industry
•
Cyclicality in the semiconductor device industry has led to substantial decreases in demand for our systems in the
past and may, from time to time, continue to do so.
•
Our future rate of growth is highly dependent on the development and growth of the market for microelectronic
device inspection, lithography and metrology equipment.
General Risk Factors
•
Provisions of our charter documents and of Delaware law could discourage potential acquisition proposals and/or
delay, deter or prevent a change in control of our company.
•
Our stock price is volatile.
Risks Related to Our Operations
If we do not manage our supply chain effectively, our operating results may be adversely affected, and any increases in
material, labor, supplier, logistics and other operating costs, or supply chain delays and shortages, could lower our
margins or result in lost sales.
We need to continually evaluate our global supply chains and assess opportunities to reduce costs. We must also enhance
quality, speed and flexibility to meet changing demand for our products and product mix and uncertain market conditions. Our
success also depends in part on refining our cost structure and supply chains so that we have flexibility and can maintain and
improve profitability. Deterioration in the tariff environment such as discussed herein under the heading “Tariffs, export
regulations, and other market barriers have impacted and may continue to impact our ability to compete for the business of
domestic customers in China and other jurisdictions, which has adversely affected and may continue to adversely affect our,
business, financial condition and results of operations,” political instability or changes in suppliers may cause our costs to
increase and, if we are not able to offset the increased costs by charging higher sales prices, will cause a decline in our margins.
To improve margins on our products, we would need to negotiate price reductions with our vendors. But we cannot be certain
that we will be able to do so in a timely manner, or at all. Failure to achieve the desired level of cost reductions could adversely
affect our financial results. Despite our efforts to control costs and increase efficiency in our facilities, changes in demand could
still cause us to realize lower operating margins and profitability.
Further, our gross margins and financial performance may be adversely affected by increases in our operating costs, such
as material, labor, supplier costs, logistics and energy costs, all of which have been and may continue to be subject to
inflationary pressures. Operating costs have increased and may continue to increase further as a result of supply chain
disruptions in connection with the sourcing of components, materials, equipment, engineering support, and services, labor
shortages, high inflation rates, and cost increases attributable to the effects of geopolitical events, such as the Russia-Ukraine
conflict. In addition, we source components for certain of our tools from a supplier in Israel. If the conflict in Israel and Gaza
and the surrounding area escalates, it could disrupt our supply chain, resulting in a material adverse impact on our business.
These risks may be heightened because we obtain some of the components and subassemblies included in our systems
from a limited group of suppliers and do not have long-term contracts with many of our suppliers. Our dependence on limited-
source suppliers of components and our lack of long-term contracts with certain of our suppliers expose us to several risks,
including a potential inability to obtain an adequate supply of components, price increases, late deliveries and poor component
quality. A significant number of our suppliers are the sole source or single source for certain components or subassemblies. If
such a supplier is unable or unwilling to manufacture and deliver components to us on the time schedule and of the quality or
quantity that we require, we may be forced to seek to engage an additional or replacement supplier or redesign our product to
use alternative components, which could result in additional expenses and delays in product development or shipment of
product to our customers. Disruption or termination of the supply of components has delayed and could in the future delay
shipments of some of our systems. Such delays may damage our customer relationships and reduce our sales. The lead time
required for shipments of some of our components can be greater than six months. In addition, the lead time required to qualify
new suppliers for lasers and certain optics could be as long as a year, and the lead time required to qualify new suppliers of
other components could be as long as nine months. In some cases, we may need to purchase components in advance of receiving
customer orders for product. If we are unable to accurately predict our component needs, or if our component supply is
disrupted, we may miss market opportunities by not being able to meet the demand for our systems. Further, a significant
increase in the price of one or more of these components or subassemblies could seriously harm our results of operations and
cash flows.
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Our efforts to mitigate any cost increases, labor impacts and supply chain delays and shortages may not be successful,
and we cannot predict the duration of these current trends or other future increases in operating costs. We may not be able to
pass cost increases through to our customers fully (or at all), and if supply chain delays and shortages delay delivery of our
products, our customers may seek to purchase from our competitors. Any such occurrence may have a material adverse impact
on our gross margins and business, financial position, results of operations and cash flows.
Variations in the amount of time it takes for us to sell our systems may cause fluctuations in our operating results, which
could cause our stock price to decline.
Variations in the length of our sales cycles could cause our revenue and cash flows, and consequently, our business,
financial condition, operating results and cash flows to fluctuate widely from period to period. This variation could cause our
stock price to decline. Our customers generally take a long time to evaluate our inspection and/or film metrology systems and
many people are involved in the evaluation process. We expend significant resources educating and providing information to
our prospective customers regarding the uses and benefits of our systems in the semiconductor fabrication process. The length
of time it takes for us to make a sale depends upon many factors, including, but not limited to:
•
the efforts of our sales force;
•
the complexity of the customer’s fabrication processes;
•
the internal technical capabilities and sophistication of the customer;
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the customer’s budgetary constraints; and
•
the quality and sophistication of the customer’s current metrology, inspection or lithography equipment.
Because of the number of factors influencing the sales process, the period between our initial contact with a customer
and the time when we recognize revenue from that customer and receive payment, if ever, varies widely in length. Our sales
cycles, including the time it takes for us to build a product to customer specifications after receiving an order to the time we
recognize revenue, typically range from three to twenty-four months. Sometimes our sales cycles can be much longer,
particularly with customers in Asia. During these cycles, we commit substantial resources to our sales efforts in advance of
receiving any revenue, and we may never receive any revenue from a customer despite our sales efforts. If we do make a sale,
our customers often purchase only one of our systems, the performance of which they then evaluate for a lengthy period before
purchasing any more of our systems. The number of additional products a customer purchases, if any, depends on many factors,
including the customer’s capacity requirements. The period between a customer’s initial purchase and any subsequent purchases
can vary from three months to a year or longer, and variations in the length of this period could cause further fluctuations in
our operating results and, possibly, in our stock price.
We are subject to order and shipment uncertainties. Our profitability will decline if we fail to accurately forecast
customer demand when managing inventory.
We typically plan production and inventory levels based on internal forecasts of customer demand, which can be highly
unpredictable and can fluctuate substantially, which could lead to excess inventory write-downs and result in negative impacts
on gross margin and net income. We have limited visibility into our customers’ inventories, future customer demand and the
product mix that our customers will require, which could adversely affect our production forecasts and operating margins. In
addition, innovation in our industry could render significant portions of our inventory obsolete. If we overestimate our
customers’ requirements, we may have excess inventory, which could lead to obsolete inventory and unexpected costs.
Conversely, if we underestimate our customers’ requirements, or if we experience sustained disruptions to our supply chain or
shipping delays, we may have inadequate inventory, which could lead to foregone revenue opportunities, loss of potential
market share and damage to customer relationships as product deliveries may not be made on a timely basis, disrupting our
customers’ production schedules. In response to anticipated long lead times to obtain inventory and materials from outside
suppliers and foundries, we periodically order materials in advance of customer demand. This advance ordering has in the past
and may in the future result in excess inventory levels or unanticipated inventory write-downs if expected orders fail to
materialize, or other factors make our products less saleable. In addition, any significant future cancellation or deferral of
product orders could adversely affect our revenue and margins, increase inventory write-downs due to obsolete inventory, and
adversely affect our operating results and stock price.
Our earnings could be negatively affected, and our inventory levels could materially increase, if we are unable to predict
our inventory needs in an accurate and timely manner and adjust our orders for parts and subcomponents in the event that our
needs increase or decrease materially due to unexpected increases or decreases in demand for our products. Any material
increase in our inventories could result in an adverse effect on our financial position, while any material decrease in our ability
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to procure needed inventories could result in an inability to supply customer demand for our products, thus adversely affecting
our revenue.
If we deliver systems with defects, our credibility will be harmed, and the sales and market acceptance of our systems
will decrease.
Our systems are complex and have occasionally contained errors, defects and bugs when introduced. Defects may be
created during probing, bumping, dicing or general handling, and can have a major impact on device and process quality. When
this occurs, our credibility and the market acceptance and sales of our systems could be harmed. Further, if our systems contain
errors, defects or bugs, computer viruses or malicious code as a result of cyber-attacks to our computer networks, we may be
required to expend significant capital and resources to alleviate these problems. Defects could also lead to product liability as
a result of product liability lawsuits against us or against our customers. We have agreed to indemnify our customers under
certain circumstances against liability arising from defects in our systems provided that we also include a cap on our liability
in the related sales agreements. Our product liability insurance policy currently provides both aggregate coverage as well as an
overall umbrella coverage. In the event of a successful product liability claim, we could be obligated to pay damages
significantly in excess of our product liability insurance limits.
Our integrated metrology systems are integrated with systems sold independently by wafer fabrication equipment
suppliers, and a decrease in sales by these suppliers, or the development of competing systems by these suppliers, could
harm our business.
We believe that sales of integrated metrology systems will continue to be an important source of our net revenues. Sales
of our integrated metrology systems depend upon the ability of a small number of wafer fabrication equipment suppliers to sell
semiconductor manufacturing equipment products that are compatible with our metrology systems as components. If these
suppliers are unable to sell such products, if they choose to focus their attention on products that do not integrate with our
systems, or if they choose to develop competing systems, our business could suffer.
We must attract and retain experienced senior executives and other key personnel with knowledge of semiconductor
device manufacturing and inspection, metrology or lithography equipment and related software to help support our
future growth, and competition for such personnel in our industry is high.
Our success depends, to a significant degree, upon the continued contributions of our key executive management,
engineering, sales and marketing, customer support, finance and manufacturing personnel. The loss of any of these key
personnel, each of whom would be extremely difficult to replace, through resignations, retirement or other circumstances, could
harm our business and operating results. Despite our employment and noncompetition agreements with key members of our
senior management team, these individuals or other key employees may still leave us, which could have a material adverse
effect on our business. We do not have key person life insurance on any of our executives. In addition, to support our future
growth, we will need to attract and retain additional qualified employees. Competition for such personnel in our industry is
intense, and we may not be successful in attracting and retaining qualified employees.
The expansion of high technology companies worldwide and growth in the demand for semiconductors have increased
demand and competition for qualified personnel. Competition for engineering and other technical personnel in some of the
markets in which we operate is especially intense due to continued increases in the number of technology companies
worldwide. In order to attract and retain executives and other key employees, we must provide a competitive compensation
package, including cash and share-based compensation. If the anticipated value of our share-based incentive awards does not
materialize so that they cease to be viewed as valuable, if our profits decrease, or if our total compensation package is not
viewed as competitive, our ability to attract, retain and motivate executives and key employees could be weakened.
Any prolonged disruption in the operations of our manufacturing facilities could have a material adverse effect on our
revenue.
We produce the majority of our systems in our manufacturing facilities in the following locations: Wilmington,
Massachusetts; Milpitas, California; Tucson, Arizona; and Bloomington, Minnesota. We also use contract manufacturers in
China, Japan and the United States. Our manufacturing processes are highly complex and require sophisticated and costly
equipment and a specially designed facility. As a result, any prolonged disruption in the operations of our manufacturing
facilities could seriously harm our ability to satisfy our customer order deadlines. Restrictions on our access to or operation of
manufacturing facilities or on our support operations or workforce, or similar limitations for our vendors and suppliers, may
impact our ability to meet customer demand and could have a material adverse effect on our financial condition and results of
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operations. If we cannot timely deliver our systems, our results from operations and cash flows could be materially and
adversely affected.
We outsource select manufacturing activities to third-party service providers, which decreases our control over the
performance of these functions, may result in lower quality and functionality of our products, and exposes us to
additional supply chain risks.
We outsource select product manufacturing to third-party service providers. Outsourcing reduces our control over the
performance of the outsourced functions. Dependence on outsourcing may also adversely affect our ability to bring new
products to market. If we do not effectively manage our outsourcing strategy or if third-party service providers do not perform
as anticipated, we may experience operational difficulties, increased costs, manufacturing interruptions or inefficiencies in the
operation of our supply chain, any or all of which could delay our delivery of products to our customers, and materially and
adversely affect our business, financial condition, and results of operations.
Our third-party service providers could also be, and certain of our service providers have been, subject to cybersecurity
incidents or other events that negatively impact their operations and their ability to perform services for us in a timely manner
or at all. Such disruptions could impact our ability to manufacture products in a timely manner or force us to work with another
service provider at a higher cost. Any such event could materially and adversely affect our business, financial condition, and
results of operations. In addition, some of our third-party party services providers also have product designs, know-how, data
files and other important confidential information regarding our products. If a third-party service provider experiences a
cybersecurity event in which such confidential information is publicly exposed or shared with bad actors, it could materially
and adversely impact our competitive position in the market.
Our ability to fulfill our backlog may have an effect on our long-term ability to procure contracts and fulfill current
contracts.
Our ability to fulfill our backlog may be limited by our ability to devote sufficient financial and human capital resources
and may be limited by available material supplies and our suppliers’ own supply chain issues. If we do not fulfill our backlog
in a timely manner, we may experience delays in product delivery, which would postpone receipt of revenue from those delayed
deliveries. Delayed fulfillment also increases the risk that a customer may change or cancel an order due to evolution of the
customer’s technological, production or market needs, which would result in a loss of revenue. Additionally, if we are
consistently unable to fulfill our backlog, this may be a disincentive to customers to award large contracts to us in the future
until they are comfortable that we can effectively manage our backlog.
We are implementing a new enterprise resource planning system. Our failure to implement it successfully, on time and
on budget could have a material adverse effect on us.
We are in the process of completing a multi-year implementation of a complex new enterprise resource planning (“ERP”)
system. ERP implementations are complex, time-consuming, labor intensive, and involve substantial expenditures on system
software and implementation activities. The ERP system is critical to our ability to provide important information to our
management, obtain and deliver products, provide services and customer support, send invoices and track payments, fulfill
contractual obligations, accurately maintain books and records, provide accurate, timely and reliable reports on our financial
and operating results, and otherwise operate our business. ERP implementations also require transformation of business and
financial processes in order to reap the benefits of the ERP system. Any such implementation involves risks inherent in the
conversion to a new computer system, including loss of information and potential disruption to our normal operations. The
implementation and maintenance of the new ERP system has required, and will continue to require, the investment of significant
financial and human resources and the implementation may be subject to delays and cost overruns. In addition, we may not be
able to successfully complete the implementation of the new ERP system without experiencing difficulties. Any disruptions,
delays or deficiencies in the design and implementation or the ongoing maintenance of the new ERP system could adversely
affect our ability to process orders, ship products, provide services and customer support, send invoices and track payments,
fulfill contractual obligations, accurately maintain books and records, provide accurate, timely and reliable reports on our
financial and operating results, including reports required by the SEC such as the evaluation of our internal control over financial
reporting pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, and otherwise operate our business. Additionally, if we
do not effectively implement the ERP system as planned or the system does not operate as intended, the effectiveness of our
internal control over financial reporting could be adversely affected or our ability to assess it adequately could be delayed.
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Risks Related to Our Customers
Our largest customers account for a substantial portion of our revenue, and our revenue and cash flows could decline
considerably if one or more of these customers were to purchase significantly fewer of our systems or delay or cancel a
large order.
Sales to end user customers that individually represent at least ten percent of our revenue typically account for, in the
aggregate, a considerable amount of our revenue. We operate in the highly concentrated, capital-intensive semiconductor device
manufacturing industry. Historically, a substantial portion of our revenue in each quarter and year has been derived from sales
to relatively few customers, and this trend is expected to continue. If any of our key customers were to purchase significantly
fewer of our systems in the future, or if they delay or cancel a large order, our revenue and cash flows could meaningfully
decline. We expect that we will continue to depend on a small number of large customers for a sizable portion of our revenue.
In addition, as large semiconductor device manufacturers seek to establish closer relationships with their suppliers, we expect
that our customer base will become even more concentrated.
Risks Related to Product Development
If we are not successful in developing new and enhanced products for the semiconductor device manufacturing industry,
we will lose sales and market share to our competitors.
We operate in an industry that is highly competitive and subject to evolving industry standards, rapid technological
changes, rapid changes in consumer demands and the rapid introduction of new, higher performance systems with shorter
product life cycles. To be competitive in our demanding market, we must continually design, develop and introduce in a timely
manner new lithography, inspection and metrology process control systems that meet the performance and price demands of
semiconductor device manufacturers. We must also continue to refine our current systems so that they remain competitive. We
expect to continue to make significant investments in our research and development activities and at times may make inventory
investments prior to commercialization. We may experience difficulties or delays in our development efforts with respect to
new systems, and we may not ultimately be successful in our product enhancement efforts to improve and advance products or
in responding effectively to technological change, as not all research and development activities result in viable commercial
products. In addition, we cannot provide assurance that we will be able to develop new products for the most opportunistic new
markets and applications. Any significant delay in releasing new systems could cause our products to become obsolete,
adversely affect our reputation, give a competitor a first-to-market advantage or cause a competitor to achieve greater market
share. Our competitors may also develop products, including through the use of artificial intelligence, that may have
performance advantages over systems we currently offer or may offer in the future, which could similarly weaken our
competitive position.
Further, customers that may otherwise desire to purchase our products from us and purchase other products from our
competitors may nevertheless purchase competing products from our competitors rather than purchase our products due to a
variety of reasons, including to gain favorable or volume pricing from our competitors.
If new products developed by us do not gain general market acceptance, we will be unable to generate revenue and
recover our investments, which may result in a write down of inventory.
Inspection, lithography and metrology product development is inherently risky because it is difficult to foresee
developments in semiconductor device manufacturing technology, coordinate technical personnel, and identify and eliminate
system design flaws. Further, our products are leading edge and complex, and often the applications to our customers’
businesses are unique. Any new systems we introduce may not achieve or sustain a significant degree of market acceptance
and sales.
We expect to spend a significant amount of time and resources developing new systems and refining our existing systems.
In light of the long product development cycles inherent in our industry, these expenditures will be made well in advance of
the prospect of deriving revenue from the sale of those systems. The long lead times for some components may also require us
to place orders for components and accumulate inventory in advance of market acceptance of our products.
Our ability to commercially introduce and successfully market new systems is subject to a wide variety of challenges
during the development cycle, including start-up bugs, design defects, and other matters that could delay introduction of these
systems. Since our customers are not obligated by long-term contracts to purchase our systems, our anticipated product orders
may not materialize, or orders that are placed may be canceled.
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If we do not achieve market acceptance of new products, we may be unable to generate sufficient revenue and cash flow
to recover our research and development costs and may experience a write down of our investments in inventory. As a result,
our market share, revenue, operating results or stock price could be negatively impacted.
Even if we are able to develop new products that gain market acceptance, sales of these new products could impair our
ability to sell existing products.
Competition from our new systems could have a negative effect on sales of our existing systems and the prices that we
could charge for these systems. We may also divert sales and marketing resources from our current systems in order to
successfully launch and promote our new or next generation systems. This diversion of resources could have a further negative
effect on sales of our current systems and the value of inventory.
If our relationships with our large customers deteriorate, our product development activities could be adversely
affected.
The success of our product development efforts depends on our ability to anticipate market trends and the price,
performance and functionality requirements of semiconductor device manufacturers. In order to anticipate these trends and
ensure that critical development projects proceed in a coordinated manner, we must continue to collaborate closely with our
largest customers. Our relationships with these and other customers provide us with access to valuable information regarding
trends in the semiconductor device industry, which enables us to better plan our product development activities. If our current
relationships with our large customers are impaired, or if we are unable to develop similar collaborative relationships with
important customers in the future, our product development activities could be adversely affected.
Risks Related to Intellectual Property and Data Security
We may fail to adequately protect our intellectual property and, therefore, lose our competitive advantage.
Our future success and competitive position depend in part upon our ability to obtain and maintain proprietary technology
for our principal product families. If we fail to adequately protect our intellectual property, it will give our competitors a
significant advantage. We own or have licensed a number of patents relating to our metrology, lithography, wafer and defect
inspection systems, as well as artificial intelligence and machine learning systems, and software, including both embedded and
application software, and have filed applications for additional patents. Any of our pending patent applications may be rejected,
however, and we may be unable to develop additional proprietary technology that is patentable in the future. In addition, the
patents that we do own or that have been issued or licensed to us may not provide us with competitive advantages and/or may
be invalidated, rendered unenforceable and/or challenged by third parties. Third parties may also design around our patents or
copy our patented inventions without our knowledge.
In addition to patent protection, we rely upon copyrights for protection of our proprietary software and documentation,
trademarks for protection of our brand and source of goods, and trade secret law and confidentiality and non-compete
agreements for protection of our confidential and proprietary information and technology. These measures do not guarantee
protection of our intellectual property, however. We can give no assurance that our copyrights will be upheld or will
successfully deter infringement by third parties. There can be no assurances that our confidentiality agreements with employees
and other third parties will be sufficient to protect our trade secrets and proprietary information or that such information will
not be disclosed, that others will not independently develop substantially equivalent proprietary information and techniques or
otherwise gain access to our trade secrets, or that we can fully protect our trade secrets and proprietary information. Violations
by others of our confidentiality agreements and the loss of employees who have specialized knowledge and expertise could
harm our competitive position and cause our sales and operating results to decline as a result of increased competition. It is
also possible that third parties will misappropriate our trade secrets or other confidential information. We may be subject to
cybersecurity breaches in which a third party obtains our confidential information. Third parties may also reverse engineer our
products to copy our technology. Failure to protect our trademarks can lead to other companies selling products using confusing
similar names, thereby damaging our brand. In some countries, it can be difficult to register trademarks because of the strict
examination process or blocking trademarks for other goods. Costly and time-consuming litigation might be necessary to
enforce and determine the scope of our intellectual property rights, and failure to obtain or maintain trade secret protection
might adversely affect our ability to continue our research or bring products to market. Any of these circumstances could result
in harm to our competitive position in the market.
Monitoring and preventing unauthorized use are also difficult and the measures we take to protect our intellectual property
rights may not be adequate. There is a risk that we may be unable to adequately protect our intellectual property rights in certain
foreign countries. For example, our competitors may independently develop similar technology or duplicate our products. If
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this occurs, it could be easier for our competitors to develop and sell competing products in these countries. Accordingly,
infringement of our intellectual property rights poses a serious risk to our ability to conduct business.
Protection of our intellectual property rights, or the efforts of third parties to enforce their own intellectual property
rights against us, may result in costly and time-consuming litigation, substantial damages, lost product sales and/or the
loss of important intellectual property rights.
From time to time, we may be required to initiate litigation in order to enforce our intellectual property rights or to
determine the noninfringement, scope or validity of a third party’s intellectual property rights. Any litigation, regardless of
outcome, could be expensive and time consuming and could subject us to significant liabilities or require us to re-engineer our
products or obtain expensive licenses from third parties. There can be no assurance that any patents, copyrights or other
intellectual property rights issued to or licensed by us will not be challenged, invalidated or circumvented, or that the rights
granted thereunder will provide us with a competitive advantage. Furthermore, there is no assurance that any litigation we are
involved in will yield the result that we seek as (i) the lawsuit may be dismissed or there could be an adverse finding, (ii) we
may not be able to pursue the lawsuit due to the laws of the applicable country or (iii) there may be a subsequent unfavorable
change in law that limits our ability to pursue the lawsuit. For example, litigation discovery practice in China, Japan, South
Korea, continental Europe and Taiwan is not as robust as in the United States, so it can be more difficult to determine if a
company is infringing on our patents and more challenging to bring a lawsuit.
In addition, our commercial success depends in part on our ability to avoid infringing or misappropriating patents or other
intellectual property rights owned by third parties. From time to time, we receive communications from third parties asserting
that our products or systems infringe, or may infringe, on the intellectual property rights of these third parties. These claims of
infringement may lead to protracted and costly litigation, which could require us to pay substantial damages or have the sale of
our products or systems stopped by an injunction. Infringement claims could also cause product or system delays or require us
to redesign our products or systems, and these delays could result in the loss of substantial revenue. We may also be required
to obtain a license from the third party or cease activities utilizing the third party’s intellectual property rights. We may not be
able to enter into such a license or such a license may not be available on commercially reasonable terms. Accordingly, the loss
of an intellectual property dispute could hinder our ability to sell our products or systems or make the sale of our products or
systems more expensive, which could lead to reduced revenue or lower margins, respectively.
If our network security measures are breached and unauthorized access is obtained to a customer’s data, to our data,
or to our information technology systems, we may incur significant legal and financial exposure and liabilities and may
experience disruptions in our operations.
As part of our business, we store our data and certain data about our customers, vendors and employees in our information
technology system. We also rely on our information technology system for business operations. If there is a breach as a result
of third-party action, including through the use of artificial intelligence, employee error, malfeasance, break-ins or otherwise,
of our security measures designed to protect this information and prevent data loss and other security breaches, and someone
obtains unauthorized access to our customers’, vendors’ or employees’ data or disrupts our access to our own data and systems,
we could face loss of business, regulatory investigations or court orders or damage to our reputation, and we could be required
to expend significant capital and other resources to alleviate the problem, as well as incur significant costs and liabilities,
including due to litigation, indemnity obligations, damages for contract breach, penalties for violation of applicable laws or
regulations, and costs for remediation and other incentives offered to customers.
Cyber-attacks and other malicious internet-based activities continue to increase. As the techniques used to obtain
unauthorized access or sabotage systems change frequently and generally are not identified until they are launched against a
target, our ability to anticipate these techniques or to implement adequate preventative measures is reduced. In addition, third
parties have made attempts to fraudulently induce employees or users to disclose information to gain access to our data or our
customers’ data. As a result of any of these events, our or our customers’ and vendors’ information could be accessed or
disclosed improperly. In addition, cybersecurity incidents affecting our customers could result in substantial delays in our ability
to ship to those customers or install our products, which could result in delays in revenue recognition or the cancellation of
orders. As discussed herein under the heading “We outsource select manufacturing activities to third-party service providers,
which decreases our control over the performance of these functions and may result in lower quality and functionality of our
products,” cybersecurity incidents affecting our service providers could negatively impact our ability to timely and cost-
effectively produce products and/or negatively impact our competitive position in the market. Likewise, cybersecurity events
impacting our suppliers could result in substantial delays in our ability to obtain necessary components for our products from
those suppliers, which could hamper our ability to ship our products to our customers, harming our results of operations and
our customer relationships. Any or all of the above issues could negatively affect our ability to attract new customers, cause
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existing customers to choose to purchase from our competitors, result in reputational damage or subject us to third-party
lawsuits, regulatory fines or other action or liability, which could adversely affect our operating results.
Compliance with data protection laws may be costly and may impede development of new products, and any failure to
comply with, or inquiries under, these laws could have a material adverse effect on our business, results of operations,
and financial condition.
The General Data Protection Regulation (“GDPR”) is a regulation in European Union (“EU”) law on data protection and
privacy for the individuals within the EU and the European Economic Area (“EEA”). It also addresses the export of personal
data outside the EU and EEA areas. The United Kingdom has adopted legislation that substantially implements the GDPR and
provides for a similar penalty structure. We are also subject to the California Consumer Privacy Act of 2018 (“CCPA”) and
the California Privacy Rights Act (“CPRA”), an amendment and expansion of the CCPA. We may also be subject to other data
privacy laws in the United States and the other countries in which we operate. In many cases, these laws apply not only to
third-party transactions, but also to transfers of information between us and our subsidiaries, and among the subsidiaries and
other parties with which we have commercial relations. The introduction of new products or expansion of our activities in
certain jurisdictions may subject us to additional laws and regulations. These U.S. federal and state and foreign laws and
regulations, including GDPR which can be enforced by private parties or government entities, are constantly evolving and can
be subject to significant change. In addition, the application and interpretation of these laws and regulations, including GDPR,
are often uncertain, particularly in our evolving industry, and may be interpreted and applied differently from country to
country. Appropriate technical and organizational measures are necessary to implement these data protection principles. These
laws and regulations can be costly to comply with and may delay or impede the development of new products, result in negative
publicity, increase our operating costs, require significant management time and attention, or subject us to inquiries or
investigations, claims or other remedies, including fines, which may be significant, or demands that we modify or cease existing
business practices. A failure by us, our suppliers, or other parties with whom we do business to comply with posted privacy
policies or with other federal, state, or international privacy-related or data protection laws and regulations, including GDPR,
CCPA, CPRA and other new or changing privacy laws and regulations, could result in proceedings against us by governmental
entities or others, which could have a material adverse effect on our business, results of operations, and financial condition.
Risks Related to Competition
Some of our current and potential competitors have significantly greater resources than we do, and increased
competition could impair sales of our products or cause us to reduce our prices.
The market for semiconductor capital equipment is highly competitive. We face substantial competition from established
companies in each of the markets we serve. We principally compete with KLA, Nova, Camtek, Ushio, Canon, GigaVis Co.
Ltd. and PDF Solutions. Each of our products also competes with products that use different metrology, inspection or
lithography techniques. Some of our competitors have greater financial, engineering, manufacturing and marketing resources,
broader product offerings and service capabilities and larger installed customer bases than we do. As a result, these competitors
may be able to respond more quickly to new or emerging technologies or market developments by devoting greater resources
to the development, promotion and sale of products, which, in turn, could impair sales of our products. Further, there may be
significant merger and acquisition activity among our competitors and potential competitors, which, in turn, may provide them
with a competitive advantage over us by enabling them to rapidly expand their product offerings and service capabilities to
meet a broader range of customer needs.
Many of our existing and potential customers in the semiconductor device manufacturing industry are large companies
that require global support and service for their semiconductor capital equipment. Some of our competitors have more extensive
support and service infrastructures than we do, which could place us at a disadvantage when competing for the business of
global semiconductor device manufacturers. Many of our competitors are investing heavily in the development of new systems
that will compete directly with our systems. We have, from time to time, selectively reduced prices on our systems in order to
protect our market share, and competitive pressures may necessitate further price reductions. We expect our competitors in
each product area to continue to improve the design and performance of their products and to introduce new products with
competitive prices and performance characteristics. These product introductions would likely require us to decrease the prices
of our systems and increase the level of discounts that we grant our customers. Price reductions or lost sales as a result of these
competitive pressures would reduce our total revenue and could adversely impact our financial results.
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Because of the high cost of switching equipment vendors in our markets, it is sometimes difficult for us to win new
customers from our competitors even if our systems are superior to theirs.
We believe that once a semiconductor device manufacturer has selected one vendor’s capital equipment for a production-
line application, the manufacturer generally relies upon that capital equipment and, to the extent possible, subsequent
generations of the same vendor’s equipment for the life of the application. Once a vendor’s equipment has been installed in a
production line application, a semiconductor device manufacturer must often make substantial technical modifications and may
experience production-line downtime in order to switch to another vendor’s equipment. Accordingly, unless our systems offer
performance or cost advantages that outweigh a customer’s expense of switching to our systems, it will be difficult for us to
achieve significant sales to that manufacturer once it has selected another vendor’s capital equipment for an application.
Risks Related to Our International Operations
Tariffs, export regulations, and other market barriers have impacted and may continue to impact our ability to compete
for the business of domestic customers in China and other jurisdictions, which has adversely affected and may continue
to adversely affect our, business, financial condition and results of operations.
The semiconductor device industry is a high-visibility industry in many of the European and Asian countries in which
we sell our products. Because the governments of these countries have provided extensive financial support to our
semiconductor device manufacturing customers in these countries, we believe that our customers could be disproportionately
affected by any trade embargoes, excise taxes, tariffs, trade retaliation, or other restrictions imposed by their governments on
trade with U.S. companies such as ourselves, particularly with respect to the ongoing tensions between the United States and
China.
Additionally, over the last several years, the U.S. government has significantly expanded export controls on certain
technologies and commodities to certain markets, particularly with respect to semiconductor and other high technology exports
to China. For example, the U.S. Department of Commerce (“DoC”) has imposed export controls on the transfer of certain U.S.
products and technologies to “military end users” in China, as well as restrictions on the transfer of U.S. products to certain
companies, including Huawei Technologies Co., Ltd., and its affiliates. Most recently, in 2022, the DoC imposed new export
controls related to the Chinese semiconductor manufacturing, advanced computing, and supercomputer industries. In 2022,
the DoC also added a number of companies in China to the Unverified List and Entity List of the Export Administration
Regulations (“EAR”), including Yangtze Memory Technologies Co., Ltd (YMTC). In October 2023, as well as 2024 and early
2025, the DoC revised and expanded the 2022 export controls.
The effect of these changes, among others, is that Onto Innovation is required to conduct additional end-use diligence
and in some instances obtain export licenses before providing products to certain customers. There can be no assurance that
export licenses applied for by us or our customers will be granted in a timely manner or at all. We have experienced and may
continue to experience a temporary loss of revenues while we are obtaining licenses with certain customers affected by export
controls. Failure to obtain any required license could result in a reduction of anticipated revenues until we are able to replace
unlicensed orders with other customer orders for which a license has been obtained or is not required, and there can be no
assurance that replacement orders will be obtained on favorable terms, in a timely manner, or at all. In addition, any licenses
that are granted to us or to our customers may have a short duration or require us to satisfy various conditions, and it is possible
that licenses that have been granted may be revoked or we may not be successful in obtaining reissuance of such licenses upon
their expiration or in the event modifications are required to a previously issued license. Any of these occurrences could have
a material adverse effect on our revenues, business, financial condition and results of operations. Further, we hold inventory of
products that may be affected by these recent U.S. government actions, including potential order cancellations. If the sale of
these products is delayed or we are unable to return or dispose of our inventory on favorable economic terms, we may incur
additional carrying costs for the inventory or otherwise record charges associated with this inventory.
The administrative processing, attendant delays and risk of ultimately not obtaining required export approvals also put us
at a disadvantage relative to our non-U.S. competitors who may not be required to comply with U.S. export controls. This
difficulty and uncertainty has adversely affected our ability to compete for and win business from domestic customers in China.
It is possible that the U.S. government will impose additional export controls on our products or systems, which could
lead to further revenue losses. For example, it remains uncertain what changes, if any, the new U.S. presidential administration
will make with respect to U.S. export control policy. Any such changes could result in additional restrictions on our ability to
sell products to customers in China and other jurisdictions. Foreign customers affected by current or future U.S. government
sanctions, controls or threats of sanctions or controls may respond by developing their own solutions to replace our products or
by utilizing our foreign competitors’ products (who are not subject to the same export controls and can fulfill the orders). In
addition, these export controls may also reduce overall global demand for our customers’ products or for other products
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produced or manufactured in the U.S. or based on U.S. technology, in turn reducing demand for our products, which could
have a material adverse effect on our business, financial condition and results of operations. Increased restrictions on China
exports may also lead to regulatory retaliation by the Chinese government, which may adversely impact our
business. International trade disputes could result in increases in tariffs and other trade restrictions and protectionist measures
that could adversely impact our operations and reduce the competitiveness of our products relative to local and global
competitors.
We are subject to compliance with domestic and foreign laws and regulations, and the burden of complying with such
laws and regulations, or any failure to comply, has adversely affected and may continue to adversely affect our business,
financial condition and results of operations.
Our business is subject to risks inherent in doing business internationally, including compliance with, inconsistencies
among, and unexpected changes in, a wide variety of foreign laws and regulatory environments, including, among other issues,
with respect to employees, protection of our intellectual property, and a wide variety of operational regulations and trade and
export controls under domestic, foreign, and international law.
We are faced with various risks that may be associated with our compliance with existing, new, different, inconsistent or
conflicting laws, regulations and rules enacted by governments and/or their regulatory agencies in the countries in which we
operate as well as rules and policies implemented at our customer sites. These laws, regulations, rules and policies could relate
to any of an array of issues including, but not limited to, environmental, tax, intellectual property, trade secrets, product liability,
contracts, antitrust, employment, securities, import/export and unfair competition. The cost of maintaining compliance under
multiple and changing regulatory regimes may adversely affect our business, financial condition and results of operations, and,
in the case of export controls, has adversely affected and may continue to adversely affect our results of operations. As
discussed herein under the heading “Tariffs, export regulations, and other market barriers have impacted and may continue to
impact our ability to compete for the business of domestic customers in China and other jurisdictions, which has adversely
affected and may continue to adversely affect our, business, financial condition and results of operations,” the U.S. government
issued new export control rules between 2022 and 2025 aimed at restricting China’s access to semiconductor equipment and
advanced computing technology, among other things. To comply with the new rules, Onto Innovation has had to expend time
and resources that might otherwise have been used for revenue generating activities. Further regulatory changes could require
additional diversion of resources to compliance efforts. In addition, in the event that we fail to comply with or violate U.S. or
foreign laws or regulations or customer policies, we could be subject to civil or criminal claims or proceedings that may result
in monetary fines, penalties or other costs against us or our employees, which may adversely affect our operating results,
financial condition, customer relations and ability to conduct our business.
Political and economic instability may result in reduced demand for our products.
We are subject to various global risks related to political and economic instabilities in countries in which we derive sales.
If terrorist activities, armed conflict, civil or military unrest or political instability occurs outside of the United States, these
events may result in reduced demand for our products or adversely affect our supply chain. For example, the Ukraine–Russia
geographic region is a major source of critical raw materials used for semiconductor manufacturing (such as neon and
palladium), and any supply chain disruptions or shortages of such materials due to the ongoing conflict in that region could
impact our customers in a manner that reduces demand for our products. Similarly, if the conflict in Israel and Gaza and the
surrounding area escalates, it could result in disruptions to our supply chain and/or the operations of our customers in a manner
that reduces demand for our products.
In addition, due to the complex relationships among China, Hong Kong, Taiwan, and the United States, there is risk that
political, diplomatic, and national security influences might lead to trade, technology, or capital disputes, or disruptions
affecting the semiconductor industry. In particular, the escalation of geopolitical tensions between China and Taiwan may
cause disruptions in the markets in which we operate and lead to a decreased demand for our products, which could adversely
affect our business in Asia or have a negative impact on the regional or global economy.
Furthermore, an outbreak of hostilities or other political upheaval in China, Taiwan, Japan, or South Korea, or an
economic downturn in Asia or globally, would likely harm the operations of our customers in these countries. The effect of
these types of events on our revenue and cash flows could be material because we derive substantial revenue from sales to
semiconductor device foundries in Taiwan such as Taiwan Semiconductor Manufacturing Company Ltd., from memory chip
manufacturers in South Korea such as Samsung Electronics Co., Ltd., and from semiconductor device manufacturers in Japan
such as Toshiba Corporation.
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Natural disasters, changes in climate, public health crises, and geo-political conflicts could materially adversely affect
our worldwide operations (or those of our business partners).
The occurrence of one or more natural disasters, such as hurricanes, tropical storms, fires, cyclones, earthquakes,
tsunamis, flooding, typhoons, volcanic eruptions and weather conditions such as major or extended winter storms, droughts
and tornadoes, whether as a result of climate change or otherwise, may disrupt manufacturing or other operations. For example,
our Milpitas operations are located near major earthquake fault lines in California. We cannot provide any assurance that
alternate means of conducting our operations (whether through alternate production capacity or service providers or otherwise)
would be available if a major disruption were to occur or that, if such alternate means were available, they could be obtained
on favorable terms.
Our business may also be affected by public health issues (for example, an outbreak of a contagious disease such as
COVID-19, avian influenza, measles or Ebola). The effects of a public health crisis may affect our operations and those of our
suppliers, third-party service providers, and customers. The extent to which the economic effects of a public health crisis could
impact our business, results of operations, and financial conditions are difficult to predict, and depend on numerous evolving
factors including any future resurgences of the public health crisis and the intensity and duration of any resulting adverse
macroeconomic conditions. A public health crisis could expose our business, results of operations, and financial condition to
the following adverse impacts: disruptions to our supply chain in connection with the sourcing of materials, support, and
services; disruption of operations due to unavailability of employees as a result of illness, travel restrictions and other factors;
and a decrease in demand for our products; Additional sustained or prolonged public health crises, or any ongoing, worsening
or recurring supply chain disruptions or macroeconomic effects of such crises could have a material adverse effect on our
business, results of operations, legal exposure, or financial condition and may also heighten many of the other risks described
in this “Risk Factors” section.
There may also be conflict or uncertainty in the countries in which we operate, including safety issues, , disruptions of
service from utilities, nuclear power plant accidents or general economic or political unrest, including war, civil unrest or
terrorist attacks. We have no material operations in Russia, Belarus, Ukraine, or Israel. Consequently, to date, our operations
have not been materially adversely affected by Russia’s invasion of Ukraine, or the Israel-Hamas conflict. However, if the
Russia-Ukraine conflict and/or the conflicts in Israel and Gaza and the surrounding area escalate further, and/or the U.S. or
other jurisdictions impose additional sanctions on the governments or entities involved, this could result in disruptions to the
global economy and/or supply chains that could adversely affect our business.
We may face difficulties in staffing and managing foreign branch operations due to political tensions or cultural
differences.
During periods of tension between the governments of the United States and certain other countries, it is often difficult
for U.S. companies such as ours to staff and manage operations in such countries. Language and other cultural differences may
also inhibit our sales and marketing efforts and create internal communication problems among our U.S. and foreign research
and development teams, increasing the difficulty of managing multiple remote locations performing various development,
quality assurance, and yield ramp analysis projects.
Currency fluctuations may impact our international sales or expose us to exchange rate risk.
A substantial portion of our international sales are denominated in U.S. dollars. As a result, if the dollar rises in value in
relation to foreign currencies, our systems will become more expensive to customers outside the United States and may be less
competitive with systems produced by competitors outside the United States. These conditions could negatively impact our
international sales. Foreign sales also expose us to collection risk in the event it becomes more expensive for our foreign
customers to convert their local currencies into U.S. dollars. Additionally, in the event a larger portion of our revenue becomes
denominated in foreign currencies, we would be subject to a potentially significant exchange rate risk, and any failure to
sufficiently hedge or otherwise manage these risks could materially and adversely affect our financial condition, results of
operations, and liquidity.
Our internal controls with respect to anti-corruption laws may not be effective, and any failure to comply with such
laws may result in severe sanctions and liabilities, which may negatively affect our business, operating results and
financial condition.
We are subject to the Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”), and other laws that prohibit
improper payments or offers of payments to foreign governments and their officials and political parties by U.S. persons and
issuers as defined by the statute, for the purpose of obtaining or retaining business. Also, similar worldwide anti-bribery laws,
such as the U.K. Bribery Act and Chinese anti-corruption laws, generally prohibit companies and their intermediaries from
24
making improper payments to non-U.S. officials for the purpose of obtaining or retaining business. Some of our distribution
partners are located in parts of the world that have experienced governmental corruption to some degree and, in certain
circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices. The policies and
procedures we have implemented to discourage these practices by our employees, our existing safeguards and any future
improvements may prove to be ineffective, and our employees, consultants, sales agents or distributors may engage in conduct
for which we might be held responsible. Violations of the FCPA or international anti-corruption laws may result in severe
criminal or civil sanctions, and we may be subject to other liabilities, which could negatively affect our business, operating
results and financial condition. In addition, the U.S. government may seek to hold us liable for successor liability FCPA
violations committed by companies in which we invest or that we acquire. We cannot assure you that our internal control
policies and procedures will protect us from reckless or negligent acts committed by our employees, distributors, partners,
consultants or agents.
Risks Related to Laws, Legal Proceedings, Financial Markets and the Environment
Changes in tax rates or tax liabilities could affect results.
As a global company, we are subject to taxation in the United States and various other countries. Significant judgment is
required to determine and estimate worldwide tax liabilities. Our future annual and quarterly tax rates could be affected by
numerous factors, including changes in the (1) applicable tax laws; (2) composition of earnings in countries with differing tax
rates; or (3) recoverability of our deferred tax assets and liabilities. Due to the pace of legislative changes and the scale of our
business activities, any substantial changes in tax policies or legislative initiatives may materially and adversely affect our
business, the taxes we are required to pay, our financial position, and results of operations. For example, beginning in 2022,
the U.S. Tax Cuts and Jobs Act of 2017 (“TCJA”) eliminated the existing option to deduct research and development
expenditures and requires taxpayers to amortize them over five years pursuant to IRC Section 174. The requirement reduced
our cash flows for 2022, 2023 and 2024, and may continue to reduce our cash flows. In addition, any changes to U.S. and
global corporate income tax laws, including increasing U.S. taxation of international business operations and imposing a global
minimum tax could have a negative impact on our tax position in the future. Many countries and organizations, such as the
Organization for Economic Cooperation and Development (“OECD”), which is discussed further below, are also actively
considering changes to existing tax laws or have proposed or enacted new laws that could increase our tax obligations in
countries where we do business or cause us to change the way we operate our business. Any of these developments or changes
in federal, state, or international tax laws or tax rulings could adversely affect our effective tax rate and our results of operations.
The OECD has released guidance covering various topics, including country-by-country reporting, definitional changes
to permanent establishment and Base Erosion and Profit Shifting (“BEPS”), an initiative that aims to standardize and modernize
global tax policy. The guidance also established a global minimum tax of 15%. This guidance has been implemented by several
jurisdictions, including jurisdictions in which we operate, and many other jurisdictions are in the process of implementing it.
Depending on the final form of legislation ultimately enacted, there may be significant consequences for us due to our
international business activities, including, but not limited to, an increase in our tax uncertainty and adverse effects on our
provision for income taxes. The U.S. presidential administration has directed the U.S. Department of Treasury to develop
options for “protective measures” in response to tax rules imposed by non-U.S. countries that are extraterritorial or
disproportionately affect U.S. companies (which may include taxes imposed under the OECD guidance) and legislation has
been introduced that would increase U.S. tax rates on non-U.S. companies and investors if their home jurisdictions impose
discriminatory or extraterritorial taxes on U.S. companies, but we cannot predict whether such protective measures or legislation
will be adopted or what, if any, responsive measures will be adopted by non-U.S. countries.
In addition, we are subject to regular examination of our income tax returns by the Internal Revenue Service and other
tax authorities. We regularly assess the likelihood of favorable or unfavorable outcomes resulting from these examinations to
determine the adequacy of our provision for income taxes. Although we believe our tax estimates are reasonable, there can be
no assurance that any final determination will not be materially different from the treatment reflected in our historical income
tax provisions and accruals, which could materially and adversely affect our results of operations.
Turmoil or fluctuations in the credit markets and the financial services industry may negatively impact our business,
results of operations, financial condition or liquidity, and our factoring arrangements may expose us to additional risks.
In the past, global credit markets and the financial services industry have experienced periods of turmoil and upheaval
characterized by the tightening of the credit markets, the weakening of the global economy and an unprecedented level of
intervention from the United States and other governments. Adverse economic conditions, such as sustained periods of
economic uncertainty or a crisis in the financial markets may have a material adverse effect on our liquidity and financial
condition if our ability to obtain credit from the capital financial markets, or from trade creditors is impaired. If banks and
25
financial institutions with whom we have banking relationships enter receivership or become insolvent in the future, we may
be unable to access, and we may lose, some or all of our existing cash, cash equivalents and investments to the extent those
funds are not insured or otherwise protected by the FDIC. In addition, a worsening economy or an economic crisis could also
adversely impact our customers’ ability to finance the purchase of systems from us or our suppliers’ ability to provide us with
product, either of which may negatively impact our business and results of operations.
We are subject to various environmental laws and regulations that could impose substantial costs upon us, and failure
to comply with such laws and regulations may harm our business, operating results and financial condition.
Some of our operations use substances regulated under various federal, state, local, and international laws governing the
environment, including those relating to the storage, use, discharge, disposal, labeling, and human exposure to hazardous and
toxic materials. We could incur costs, fines and civil or criminal sanctions, third-party property damage or personal injury
claims, or could be required to incur substantial investigation or remediation costs, if we were to violate or become liable under
environmental laws. Liability under environmental laws can be joint and several and without regard to comparative fault.
Compliance with current or future environmental laws and regulations could restrict our ability to expand our facilities or
require us to acquire additional expensive equipment, modify our manufacturing processes, or incur other significant expenses.
For example, we are, or may become subject to various new or proposed climate-related and other sustainability laws and
regulations, including, for example, the state of California’s new climate change disclosure requirements, the EU’s new
Corporate Sustainability Reporting Directive and proposed climate-change disclosure requirements from the SEC. Compliance
with such laws and regulations, as well as any increased focus or scrutiny from the SEC and other regulators, investors,
customers, vendors, employees, and other stakeholders concerning sustainability and climate matters, could impose additional
costs on us. We may unintentionally violate environmental laws or regulations in the future as a result of human error,
equipment failure or other causes. In addition to the potential adverse effects on our business operations of such an event, we
are committed to maintaining safe working conditions for our employees and sourcing, manufacturing, and distributing our
products in a responsible and environmentally friendly manner, and any failure on our part to do so may cause reputational
harm for the Company.
Legal proceedings, claims and investigations may expose us to increased costs and may negatively affect our business
and results of operations.
We have been from time to time, and in the future may be, involved in legal proceedings or claims regarding any number
of matters, including intellectual property infringement, contract disputes, trade compliance, antitrust, environmental
regulations, privacy and data protection, securities, product performance, product liability, employment and workplace safety,
and other matters. In addition, we may receive, and have received, inquiries, warrants, subpoenas, and other requests for
information in connection with government investigations of potential or suspected violations of law by our company and/or
other companies that we work with. We have also received, and may receive in the future, claims from customers who believe
we owe them product warranty protection, indemnification or other obligations.
Legal proceedings, claims, and government investigations, whether with or without merit, may be time-consuming and
expensive to respond to and defend. They may also divert management’s attention and our other resources from day-to-day
operational matters; constrain our ability to sell products and services; result in adverse judgments for damages, injunctive
relief, penalties and fines; and negatively affect our business and results of operations. We cannot predict the outcome of current
or future legal proceedings, claims or investigations.
Risks Related to Growth and Acquisitions
We may choose to acquire new and complementary businesses, products or technologies instead of developing them
ourselves, and we may be unable to complete these acquisitions or may not be able to successfully integrate an acquired
business in a cost-effective and non-disruptive manner.
Our success depends on our ability to continually enhance and broaden our product offerings in response to customer-
anticipated process changes, strategic opportunities for growth, and industry technology trends. To this end, we have, from time
to time, engaged in the process of identifying, analyzing and negotiating possible acquisition transactions, and, from time to
time, acquiring one or more businesses, and we expect to continue to do so in the future. We may choose to acquire new and
complementary businesses, products, technologies and/or services instead of developing them ourselves. We may, however,
face competition for acquisition targets from larger and more established companies with greater financial resources, making
it more difficult for us to complete acquisitions. We cannot provide any assurance that we will be successful in consummating
future acquisitions on favorable terms or that we will realize the benefits that we anticipate from one or more acquisitions that
we consummate. Integrating any business, product, technology or service into our current operations could be expensive and
26
time-consuming and/or disrupt our ongoing business. Further, there are numerous risks associated with acquisitions and
potential acquisitions, including, but not limited to:
•
diversion of management’s attention from day-to-day operational matters and current products and customers;
•
lack of synergy or the inability to successfully integrate the new business or to realize expected synergies;
•
integration of acquired businesses and their operations, including enterprise resource planning systems, may be
costly and time-consuming and divert resources away from other projects;
•
failure to commercialize the new technology or business;
•
failure to meet the expected performance of the new technology or business;
•
failure to retain key employees and customer or supplier relationships;
•
lower-than-expected market opportunities or market acceptance of any new products; and
•
unexpected reduction of sales of existing products as a result of the introduction of new products.
Our inability to consummate one or more acquisitions on favorable terms, or our failure to realize the intended benefits
from one or more acquisitions, could have a material adverse effect on our business, liquidity, financial position and/or results
of operations, including as a result of our incurrence of indebtedness and related interest expense and our assumption of
unforeseen contingent liabilities. We might need to raise additional funds through public or private equity or debt financings to
finance any acquisition. In that event, we could be forced to obtain financing on terms that are not favorable to us and, in the
case of equity financing, that result in dilution to our stockholders. In addition, any impairment of goodwill or other intangible
assets, amortization of intangible assets, write-down of other assets or charges resulting from the costs of acquisitions and
purchase accounting could harm our business and operating results.
If we cannot effectively manage growth, our business may suffer.
Over the long-term, we intend to grow our business by increasing our sales efforts and completing strategic acquisitions. To
effectively manage growth, we must, among other things:
•
engage, train and manage a larger sales force and additional service personnel;
•
expand the geographic coverage of our sales force;
•
expand our information systems;
•
identify and successfully integrate acquired businesses into our operations; and
•
administer appropriate financial and administrative control procedures.
Growth of our business will likely challenge our management, financial, operational, technical, sales, administrative, and
other resources. Any failure to effectively manage our growth may cause our business to suffer and our stock price to decline.
Risks Related to the Global Economy and the Semiconductor Industry
Cyclicality in the semiconductor device industry has led to substantial decreases in demand for our systems in the past
and may, from time to time, continue to do so.
Our operating results are subject to significant variation due to global economic conditions and the cyclical nature of the
semiconductor device industry. Our business depends upon the capital expenditures of semiconductor device manufacturers,
which, in turn, depend upon the current and anticipated market demand for semiconductors and products using semiconductors.
The timing, length and severity of the up-and-down cycles in the semiconductor equipment industry are difficult to predict. In
recent history, the industry has experienced significant downturns, generally in connection with declines in economic
conditions. This cyclical nature of the industry in which we operate affects our ability to accurately predict future revenue and,
thus, future expense levels. When cyclical fluctuations result in lower-than-expected revenue levels, operating results may be
adversely affected, and cost reduction measures may be necessary in order for us to remain competitive and financially sound.
During a down cycle, we must be in a position to adjust our cost and expense structure to prevailing market conditions and to
continue to motivate and retain our key employees. In addition, during periods of rapid growth, we must be able to increase
manufacturing capacity and personnel to meet customer demand. We can provide no assurance that these objectives can be met
in a timely manner in response to industry cycles, and we cannot predict when and to what extent sales may normalize, or when
27
and to what extent gross margins may improve, following any such occurrence. If we fail to respond to industry cycles, our
business could be seriously harmed.
We may also experience supplier or customer issues as a result of adverse macroeconomic conditions. If our customers
have difficulties in obtaining capital or financing, this could result in lower sales. Customers with liquidity issues could also
result in an increase in bad debt expense. These conditions could also affect our key suppliers, which could affect their ability
to supply parts and result in delays of our customer shipments.
Our future rate of growth is highly dependent on the development and growth of the market for microelectronic device
inspection, lithography and metrology equipment.
We target our products to address the needs of microelectronic device manufacturers for defect inspection, metrology and
lithography. If for any reason the market for microelectronic device inspection, lithography or metrology equipment fails to
grow in the long term, we may be unable to maintain current revenue levels in the short term and maintain our historical growth
in the long term. Growth in the inspection market is dependent to a large extent upon microelectronic manufacturers replacing
manual inspection with automated inspection technology. Growth in the metrology market is dependent to a large extent upon
new chip designs and capacity expansion of microelectronic manufacturers. Growth in the lithography market is dependent on
the development of cost-effective packaging with high fine pitch RDLs, ultimately migrating to multi-die, large, form-factor
packages. There can be no assurance that manufacturers will undertake these actions at the rate we expect.
General Risk Factors
Provisions of our charter documents and of Delaware law could discourage potential acquisition proposals and/or delay,
deter or prevent a change in control of our company.
Provisions of our certificate of incorporation and by-laws may inhibit changes in control of our company not approved
by our Board of Directors. These provisions also limit the circumstances in which a premium can be paid for our common stock
and in which a proxy contest for control of our board may be initiated. These provisions provide for:
•
a prohibition on stockholder actions through written consent;
•
a requirement that special meetings of stockholders be called only by the chairperson of our Board of Directors or
majority of our directors;
•
advance notice requirements for stockholder proposals and director nominations by stockholders;
•
the authority of our Board of Directors to issue, without stockholder approval, preferred stock with such terms as
the Board may determine; and
•
the authority of our board, without stockholder approval, to adopt a stockholder rights plan.
We are also entitled to avail ourselves of the protections of Section 203 of the Delaware General Corporation Law, which
could inhibit changes in control of the Company.
Our stock price is volatile.
The market price of our common stock has fluctuated widely. Consequently, the current market price of our common
stock may not be indicative of future market prices, and we may be unable to sustain or increase the value of an investment in
our common stock. Factors affecting our stock price may include:
•
variations in operating results from quarter to quarter;
•
changes in earnings estimates by analysts or our failure to meet analysts’ expectations;
•
changes in the market price per share of our public company customers;
•
market conditions in the semiconductor and other industries into which we sell products;
•
general economic conditions;
•
political changes, hostilities or natural disasters such as hurricanes and floods;
•
the impact of infectious disease pandemics, on the global economy and on our customers, suppliers, employees,
and business;
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•
low trading volume of our common stock; and
•
the number of firms making a market in our common stock.
In addition, the stock market has experienced periods of significant price and volume fluctuations. These fluctuations
have particularly affected the market prices of the securities of high technology companies like ours. Any such market
fluctuations in the future could adversely affect the market price of our common stock.
Item 1B. Unresolved Staff Comments.
None.
Item 1C. Cybersecurity
Cybersecurity Risk Management and Strategy
We rely heavily on information technology (IT) systems in all aspects of our operations, and data security plays an
important role in the protection of our proprietary information and that of our customers and suppliers. For these reasons, we
take a number of steps to protect Onto Innovation’s IT systems from internal and external cybersecurity threats.
Identifying and assessing cybersecurity risk is integrated into our overall risk management systems and processes.
Cybersecurity risks related to our business, technical operations, and privacy and compliance issues are identified and addressed
through a multi-faceted approach including third-party assessments, IT security, governance, risk and compliance reviews. To
defend, detect and respond to cybersecurity incidents, we, among other things: conduct proactive cybersecurity reviews of
systems and applications, perform penetration testing using external third-party tools and techniques to test security controls,
conduct employee training, utilize an expert third party to continuously monitor and respond to possible threats, monitor
emerging laws and regulations related to data protection and information security and implement appropriate changes. We
regularly collaborate with leading security providers, industry groups, and industry peers to exchange information on trends
and best practices to address new and evolving cybersecurity risks.
We have implemented incident response processes which have four overarching and interconnected stages: 1) preparation
for a cybersecurity incident, 2) detection and review of an incident, 3) containment and remediation, and 4) post-incident review
and analysis. Cybersecurity incident responses are managed by our Corporate Incident Response Team and overseen by our
Vice President of IT.
Security events and data incidents are evaluated, ranked by severity and prioritized for response and remediation.
Incidents are evaluated to determine materiality as well as operational and business impact, and reviewed for privacy impact.
We also conduct tabletop exercises to simulate responses to cybersecurity incidents. Our team of cybersecurity
professionals then collaborates with technical and business stakeholders across our business units to further analyze the risk to
the Company, and form detection, mitigation and remediation strategies.
As part of the above processes, we regularly engage external auditors and subject matter experts to assess our internal
cybersecurity programs and compliance with applicable practices and standards. Since 2021, our Information Security
Management System has been certified to conform to the requirements of ISO/IEC 27001:2013.
Our cybersecurity program also includes third-party assessments to identify and mitigate risks from third parties such as
vendors, suppliers, and other business partners associated with our use of third-party service providers. Cybersecurity risks are
evaluated when determining the selection and oversight of applicable third-party service providers and potential risks when
handling and/or processing our employee, business or customer data. In addition to new vendor onboarding, we perform risk
assessments during third-party cybersecurity compromise incidents to identify and mitigate risks to us from third-party
incidents.
Our individual employees also play an important role in our information security systems. All employees are required to
familiarize themselves with the Company’s information security policies and, at least annually, employees are required to
participate in an information security training program, which is designed to help employees identify potentially threats and
train them on how to respond. Throughout the year, the IT department conducts phishing campaigns and other simulated
hacking attacks with employees as a way of reminding them of their security obligations and ensuing that our SETA (security
education and training awareness) has been effective.
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As of the date of this Form 10-K, no risks from cybersecurity threats, including as a result of any previous cybersecurity
incidents, have materially affected or are reasonably likely to materially affect us, including our business strategy, results of
operations, or financial condition.
For more information on the cybersecurity risks we face that could adversely impact us, please see “Part I, Item IA - Risk
Factors - If our network security measures are breached and unauthorized access is obtained to a customer’s data, to our data,
or to our information technology systems, we may incur significant legal and financial exposure and liabilities and may
experience disruptions in our operations”.
Cybersecurity Governance
The Company’s Board of Directors has oversight of information security matters at the Company, including reviewing
the Company’s cybersecurity practices. At least annually, the Vice President of IT presents the Company’s information security
policies and programs to the Board. Our Audit Committee is tasked with overseeing risks from cybersecurity threats. Members
of the Audit Committee receive updates on cybersecurity matters on a quarterly basis from one or more representatives from the
Company’s Cyber Security Council (“CSC”), which is composed of our business unit general managers, other members of
senior management, our Vice President of IT and our IT Security Manager. These updates include a discussion of existing and
new cybersecurity risks (if any), updates on how management is addressing and/or mitigating those risks, and the status of
information security initiatives. Other Board members also engage in conversations with management on cybersecurity-related
news events and discuss any updates to our cybersecurity risk management and strategy programs outside of the scheduled
meetings.
The CSC is also responsible for the executive level supervision of the Company’s cybersecurity risk, information security,
and technology risk, as well as the IT department’s actions to identify, assess, mitigate, and remediate cyber related issues. The
CSC receives regular quarterly reports from the Vice President of IT on the Company’s cybersecurity risk profile and enterprise
cybersecurity program.
We have also established a process whereby potentially material cybersecurity incidents are escalated to a Cybersecurity
Disclosure Committee (“CDC”) consisting of our CEO, CFO, Vice President and General Counsel, Vice President of IT and
Corporate Controller. The CDC is tasked with evaluating whether such incidents have material impact on the Company, and
thus require disclosure, as well as any other actions that may be appropriate in response to the incident. The CDC promptly
notifies the Audit Committee if it determines that an incident is likely to have a material impact on the Company and updates
the Audit Committee on a quarterly basis of any incidents that it has evaluated and determined were not material.
The Vice President of IT acts as our head of information security in leading our information security organization. Our
Vice President of IT has over 25 years of industry experience leading large technology organizations, including, most recently,
as the leader of the IT organization at a large privately held company. Team members who support our information security
program have relevant educational and industry experience, including holding similar positions at other technology companies.
30
Item 2. Properties.
Our principal executive office building is located at 16 Jonspin Road in Wilmington, Massachusetts. We own our
Milpitas facility and lease facilities for corporate, engineering, manufacturing, sales and service-related purposes in the United
States and seven other countries - China, Japan, South Korea, Singapore, Taiwan, Malaysia and Vietnam. The following table
indicates the location, the general purpose and the square footage of our material facilities. Our leases expire at various times
through July 1, 2029.
Location
Facility Purpose
Approximate
Square
Footage
Wilmington, Massachusetts..............
Corporate Headquarters, Engineering, Manufacturing and Service
77,500
Milpitas, California ..........................
Engineering, Manufacturing, Service and Administration ..............
134,600
Budd Lake, New Jersey....................
Engineering, Service and Administration ........................................
48,900
Bloomington, Minnesota..................
Engineering, Manufacturing, Service and Administration ..............
98,700
Bend, Oregon....................................
Engineering and Service ..................................................................
12,700
Hillsboro, Oregon.............................
Engineering and Service ..................................................................
10,000
Snoqualmie, Washington..................
Engineering and Service ..................................................................
20,300
Tucson, Arizona ...............................
Engineering, Manufacturing and Service.........................................
18,900
Taiwan..............................................
Sales and Service..............................................................................
38,600
China ................................................
Sales, Service and Engineering........................................................
26,700
South Korea......................................
Sales and Service..............................................................................
29,200
Japan.................................................
Sales and Service..............................................................................
13,300
Singapore..........................................
Sales and Service..............................................................................
9,800
We also lease office space for other smaller sales and service offices in several locations throughout the world.
We believe that our existing facilities and capital equipment are adequate to meet our current requirements and that
suitable additional or substitute space is available on commercially reasonable terms if needed.
Item 3. Legal Proceedings.
The information set forth under the heading “Legal Matters” in Note 9, “Commitments and Contingencies” to the
Consolidated Financial Statements is incorporated herein by reference.
Item 4. Mine Safety Disclosures.
None.
31
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities.
Our common stock, $0.01 par value per share, is quoted on the New York Stock Exchange (“NYSE”) under the symbol
“ONTO.” As of February 3, 2024, there were approximately 88 stockholders of record. Set forth below is a line graph
comparing the annual percentage change in the cumulative return to the stockholders of the Company’s common stock with
the cumulative return of the NYSE Composite Index and an industry specific index, the PHLX Semiconductor Index, for the
period commencing on December 31, 2019 and ending on December 31, 2024.
The information contained in the performance graph shall not be deemed to be “soliciting material” or to be “filed” with
the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act or the Exchange
Act, except to the extent that the Company specifically incorporates it by reference into such filing.
The graph assumes that $100 was invested on December 31, 2019 in the Company’s common stock and in each index.
Stockholder returns over the indicated period should not be considered indicative of future stockholder returns.
Prepared by Zacks Investment Research, Inc. Used with permission. All rights reserved. Copyright 1980-2024.
12/19
12/20
12/21
12/22
12/23
12/24
Onto Innovation Inc. ...........................................
100.0
130.1
277.0
186.3
418.2
455.8
NYSE Composite................................................
100.0
107.0
129.1
117.0
133.2
154.2
PHLX Semiconductor.........................................
100.0
153.7
219.5
142.9
238.7
287.3
We have never declared or paid a cash dividend on our common stock and we currently do not intend to do so. The
declaration of any future dividends by us is within the discretion of our Board of Directors and will be dependent on our
earnings, financial condition and capital requirements as well as any other factors deemed relevant by our Board of Directors.
In February 2024, the Onto Innovation Board of Directors approved a share repurchase authorization, which allows us to
repurchase up to $200 million worth of shares of our common stock. Repurchases may be made through both public market
and private transactions from time to time with shares purchased being subsequently retired. During the three and twelve
months ended December 28, 2024, we repurchased 157 thousand shares of our common stock under this repurchase
authorization. The amount paid to repurchase the shares in excess of par value, including transaction costs, is recorded directly
as a decrease to additional paid-in capital and accumulated earnings. At December 28, 2024, there was $174.9 million available
for future share repurchases under the share repurchase authorization.
32
For further information, see Note 17 in the accompanying Notes to the Consolidated Financial Statements included in
this Form 10-K.
In addition to our share repurchase program, we withhold common stock shares associated with net share settlements to
cover tax withholding obligations upon the vesting of restricted stock unit awards under the Company’s equity incentive
program. During the three and twelve months ended December 28, 2024, we withheld 3 thousand and 102 thousand shares
through net share settlements, respectively. For the three and twelve month periods ended December 28, 2024, net share
settlements cost $0.6 million and $19.1 million, respectively. Please refer to Note 11 of the Notes to the Consolidated Financial
Statements included in this Form 10-K for further discussion regarding our equity incentive plan.
The following table provides details of common stock purchased during the three-month period ended December 28,
2024:
Period
Total Number
of Shares
Purchased (1)
Average
Price
Paid per
Share
Total Number
of Shares
Purchased as
Part of Publicly
Announced
Program
Maximum
Approximate Dollar
Value of
Shares that
May Yet Be
Purchased Under
the Program
(in thousands, except for per share data)
September 29, 2024 - October 28, 2024..................
2
$
205.36
—
$
200,000
October 29, 2024 - November 28, 2024..................
158
$
159.21
157
$
174,935
November 29, 2024 - December 28, 2024 ..............
1
$
166.29
—
$
174,935
Three Months Ended December 28, 2024...............
161
157
1 Includes shares withheld through net share
settlements.
Item 6. [Reserved]
33
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Executive Summary
We are a worldwide leader in the design, development, manufacture and support of process control tools that perform
macro-defect inspection and metrology, lithography systems, and process control analytical software used by semiconductor
and advanced packaging device manufacturers. We deliver comprehensive solutions throughout the semiconductor fabrication
process with our families of proprietary products that provide critical yield-enhancing information, enabling microelectronic
device manufacturers to drive down costs and time to market of their devices. We provide process and yield management
solutions used in both wafer processing facilities, often referred to as “front-end” manufacturing, and in device packaging and
test facilities, commonly referred to as “back-end” manufacturing. Our advanced process control software portfolio includes
powerful solutions for standalone tools, groups of tools, or factory-wide suites to enhance productivity and achieve significant
cost savings.
Our principal market is semiconductor capital equipment. Semiconductors packaged as ICs, or “chips,” are used in
consumer electronics, server and enterprise systems, mobile computing (including smart phones and tablets), data storage
devices, and embedded automotive and control systems. Our core focus is the measurement and control of the structure,
composition, and geometry of semiconductor devices as they are fabricated on silicon wafers to improve device performance
and manufacturing yields.
Our products and services are used by our customers who manufacture many types of ICs for a multitude of applications,
each having unique manufacturing challenges. This includes ICs to enable information processing and management (logic ICs),
memory storage (NAND, 3D-NAND, NOR, and DRAM), analog devices (e.g., Wi-Fi and 5G radio ICs, power devices), MEMS
sensor devices (accelerometers, pressure sensors, microphones), image sensors, and other end markets including components
for artificial intelligence, hard disk drives, LEDs, and power management.
The semiconductor and electronics industries have also been characterized by constant technological innovation. We
believe that, over the long term, our customers will continue to invest in advanced technologies and new materials to enable
smaller design rules and higher density applications that fuel demand for process control equipment.
The following table summarizes certain key financial information for the periods indicated below:
Year Ended
December 28,
December 30,
2024
2023
(in thousands, except for percentages
and per share data)
Revenue ...........................................................................................................$
987,321
$
815,868
Gross profit ......................................................................................................$
515,308
$
420,254
Gross profit as a percent of revenue ................................................................
52.2%
51.5%
Total operating expenses .................................................................................$
328,205
$
304,176
Net income.......................................................................................................$
201,670
$
121,159
Diluted earnings per share ...............................................................................$
4.06
$
2.46
•
In fiscal 2024, revenue increased 21% compared to fiscal 2023, primarily due to an increase in sales in our
inspection business of Dragonfly systems and other products in support of advanced packaging needs for chips used
in Artificial Intelligence (AI) applications.
•
Gross profit as a percentage of revenue increased to 52.2% for fiscal 2024 compared to 51.5% for fiscal 2023. This
was primarily driven by an increase in volume and change in product mix, partially offset by write-downs related
to the impairment and exit of certain lithography inventory in fiscal 2024.
•
The increase in operating expenses in fiscal 2024 compared to fiscal 2023 was primarily due to increases in research
and development, and sales and marketing expenses related to increased headcount and compensation costs, project
costs, travel expenses and write-off of purchased in process research and development assets.
Our cash, cash equivalents and marketable securities balance increased to $852.3 million at the end of fiscal 2024 from
$697.8 million at the end of fiscal 2023. This increase was primarily the result of $245.7 million of cash generated from
operating activities, partially offset by cash used for capital expenditures of $31.9 million, acquisitions of $26.8 million,
purchases of common stock of $25.1 million and $19.0 million of cash used for tax payments related to net share settlement of
employee stock-based compensation plans.
34
In recent years, the U.S. government implemented additional export regulations for U.S. semiconductor technology sold
in China. We have applied for export licenses to continue doing business with our customers that are affected by the new
export rules. However, the new export controls have resulted in lower net sales in China for fiscal 2024 compared to the prior
fiscal years.
For a discussion of the risks related to our business and operations, see Part I, Item 1A – Risk Factors of this Annual
Report on Form 10-K.
Results of Operations
The following table sets forth, for the periods indicated, our results of operations as percentages of our revenue. Our
results of operations are reported as one business segment.
Year Ended
December 28,
2024
December 30,
2023
December 31,
2022
Revenue......................................................................................
100.0 %
100.0 %
100.0 %
Cost of revenue ..........................................................................
47.8 %
48.5 %
46.4 %
Gross profit ............................................................................
52.2 %
51.5 %
53.6 %
Operating expenses:
Research and development.....................................................
11.8 %
12.7 %
11.2 %
Sales and marketing ...............................................................
7.7 %
7.6 %
6.5 %
General and administrative ....................................................
8.7 %
10.2 %
6.9 %
Amortization ..........................................................................
5.0 %
6.7 %
5.5 %
Total operating expenses....................................................
33.2 %
37.2 %
30.1 %
Operating income.......................................................................
19.0 %
14.3 %
23.5 %
Interest income, net....................................................................
3.4 %
2.5 %
0.5 %
Other expense, net......................................................................
—%
(0.5)%
—%
Income before provision for income taxes.............................
22.4 %
16.3 %
24.0 %
Provision for income taxes.........................................................
1.9 %
1.4 %
1.8 %
Net income .................................................................................
20.5 %
14.9 %
22.2 %
Results of Operations for 2024, 2023 and 2022
Revenue. Our revenue is derived from the sale of our systems and software, spare parts, and services. Our revenue was
$987.3 million, $815.9 million and $1,005.2 million for the years ended December 28, 2024, December 30, 2023 and December
31, 2022, respectively. This represents an increase of 21.0% from 2023 to 2024 and a decrease of 18.8% from 2022 to 2023.
The following table lists, for the periods indicated, the different sources of our revenue in dollars (thousands) and as
percentages of our total revenue:
Year Ended
December 28,
2024
December 30,
2023
December 31,
2022
(in thousands, except for percentages)
Systems and software............................. $
850,443
86 %
$ 683,316
84 %
$
865,707
86 %
Parts........................................................
76,584
8 %
74,604
9 %
84,266
8 %
Services ..................................................
60,294
6 %
57,948
7 %
55,210
6 %
Total revenue.................................. $
987,321
100 %
$ 815,868
100 %
$ 1,005,183
100 %
Total systems and software revenue increased $167.1 million for the year ended December 28, 2024, as compared to the
year ended December 30, 2023, primarily due to an increase in units shipped of our inspection product line to customers in
support of advanced packaging needs for chips used in AI applications. Parts and services revenue is generated from part sales,
maintenance service contracts, and system upgrades, as well as time and material billable service calls. During fiscal 2024, the
increase in total parts and services revenue was primarily due to increased spending by our customers on system upgrades and
repairs of existing systems.
Total systems and software revenue decreased $182.4 million for the year ended December 30, 2023, as compared to the
year ended December 31, 2022, primarily due to a decrease in units shipped of our metrology product lines to customers in
advanced nodes applications. This decline was partially offset by an increase in units shipped of our inspection and lithography
35
product lines to customers in specialty devices and advanced packaging applications. Parts and services revenue is generated
from part sales, maintenance service contracts, and system upgrades, as well as time and material billable service calls. During
fiscal 2023, the decrease in total parts and services revenue was primarily due to lower factory utilization by several of our
customers resulting in a decline in their spare parts requirements.
The following table sets forth, for the periods indicated, our revenue by geographic region as percentages of our revenue.
Year Ended
December 28,
2024
December 30,
2023
December 31,
2022
(in thousands, except for percentages)
Revenue...................................................................................... $
987,321
$
815,868
$
1,005,183
Taiwan....................................................................................
31 %
17 %
20 %
South Korea............................................................................
29 %
21 %
22 %
China ......................................................................................
12 %
17 %
25 %
United States ..........................................................................
11 %
16 %
12 %
Japan.......................................................................................
6 %
11 %
6 %
Southeast Asia........................................................................
6 %
11 %
7 %
Europe ....................................................................................
5 %
7 %
8 %
Total revenue......................................................................
100 %
100 %
100 %
The overall Asia region continues to account for a majority of our revenues as a substantial amount of the worldwide
capacity investments for semiconductor manufacturing continue to occur in this region and we expect that trend to continue.
Gross Profit. Our gross profit has been and will likely continue to be affected by a variety of factors, including
manufacturing efficiencies, provision for excess and obsolete inventory, pricing by competitors or suppliers, new product
introductions, production volume, inventory step-up from purchase accounting, customization and reconfiguration of systems,
international and domestic sales mix, system and software product mix, and parts and services margins. Our gross profit was
$515.3 million, $420.3 million and $539.2 million for the years ended December 28, 2024, December 30, 2023, and December
31, 2022, respectively. Our gross profit represented 52.2%, 51.5% and 53.6% of our revenue for the years ended December
28, 2024, December 30, 2023, and December 31, 2022, respectively. The increase in gross profit as a percentage of revenue
from 2023 to 2024 was primarily due to an increase in revenue volume and change in product mix, partially offset by write-
downs related to the impairment and exit of certain lithography inventory. The decrease in gross profit as a percentage of
revenue from 2022 to 2023 was primarily due to decreased revenue volume, unfavorable product mix, and increased
manufacturing costs due to inflationary pressures during the 2023 fiscal period.
Operating Expenses.
Our operating expenses consist of:
•
Research and Development. We believe that it is critical to continue to make substantial investments in research and
development to ensure the availability of innovative technology that meets the current and projected requirements of
our customers’ most advanced designs. We have maintained, and intend to continue, our commitment to investing in
research and development in order to continue to offer new products and technologies. Accordingly, we devote a
significant portion of our technical, management and financial resources to research and development programs.
Research and development expenditures consist primarily of salaries and related expenses of employees engaged in
research, design and development activities. They also include consulting fees, the cost of related supplies and legal
costs to defend our intellectual property. Our research and development expenses were $116.8 million, $104.4 million
and $112.0 million in fiscal years 2024, 2023 and 2022, respectively. The year-over-year dollar increase from 2023
through 2024 was primarily due to write-off of acquired in-process research and development of $4.0 million and
increased compensation costs of $1.6 million, outside services costs of $3.3 million, product development costs of
$1.9 million, travel costs of $0.6 million, research and development project costs of $0.5 million, freight and duty
costs of $0.2 million and depreciation expenses of $0.2 million. The year-over-year dollar decrease from 2022 through
2023 was primarily due to decreases of $4.6 million for the write-off of acquired in-process research and development
assets and cost containment initiatives of $3.3 million, partially offset by increases in depreciation expenses of $0.6
million and travel expenses of $0.3 million. We continue to maintain our commitment to investing in new product
development and enhancement to existing products.
36
•
Sales and Marketing. Sales and marketing expenses are primarily comprised of salaries and related costs for sales and
marketing personnel, as well as commissions and other non-personnel related expenses. Our sales and marketing
expenses were $76.2 million, $61.8 million and $65.7 million in fiscal years 2024, 2023 and 2022, respectively. The
year-over-year dollar increase from 2023 through 2024 was primarily due to increases in total compensation costs of
$13.0 million, travel costs of $0.7 million, outside services costs of $0.3 million, sales and marketing costs of $0.3
million and production expenses of $0.1 million. The year-over-year dollar decrease from 2022 through 2023 was
primarily due to a decrease in total compensation costs of $1.5 million on lower headcount and variable compensation
plan elements, a decrease in outside service expenses of $0.8 million and a decrease in depreciation expense of $0.7
million, partially offset by an increase in travel expenses of $0.3 million.
•
General and Administrative. General and administrative expenses are primarily comprised of salaries and related
costs for general administrative personnel, as well as other non-personnel related expenses. Our general and
administrative expenses were $85.8 million, $83.1 million and $69.6 million in fiscal years 2024, 2023 and 2022,
respectively. The year-over-year dollar increase from 2023 through 2024 was primarily due to increases in
depreciation expense of $1.8 million and facilities expense of $1.4 million, partially offset by a decrease in freight
and duty costs of $0.5 million. The year-over-year dollar increase from 2022 through 2023 was primarily due
increased litigation expenses of $7.4 million, restructuring charges of $3.6 million for employee severance costs
during the 2023 period, an increase in depreciation expense of $1.9 million and an increase in facilities expenses of
$0.4 million.
•
Amortization of Identifiable Intangible Assets. Amortization of identifiable intangible assets, primarily purchased
technology, was $49.4 million, $54.8 million and $55.3 million in fiscal years 2024, 2023 and 2022, respectively.
The consecutive year-over-year dollar decreases from 2022 through 2024 were primarily due to certain assets
becoming fully amortized.
Interest income, net. In fiscal years 2024, 2023 and 2022, net interest income was $33.5 million, $20.4 million and $5.0
million, respectively. The increases in net interest income from 2023 to 2024 and from 2022 to 2023 were due to higher average
balances and higher interest rates during both the 2024 and 2023 periods, respectively.
Income taxes. The following table provides details of income tax:
Year Ended
December 28,
2024
December 30,
2023
December 31,
2022
(in thousands, except for percentages)
Income before provision for income taxes ...................................
$
220,447
$
132,582
$
241,584
Provision for income taxes ...........................................................
$
18,777
$
11,423
$
18,250
Effective tax rate...........................................................................
8.5%
8.6%
7.6%
The income tax provision differs from the federal statutory income tax rate of 21% for 2024 primarily due to a benefit
related to the Foreign Derived Intangible Income Deduction (“FDII”) of $17.0 million, tax effect of share-based compensation
of $6.9 million, tax benefits for research and development credits of $6.6 million, a decrease to the Company’s valuation
allowance of $1.8 million, and a one-time benefit of $3.2 million related to the recognition of a tax benefit associated with the
lapse of a statute of limitations. These benefits were partially offset by non-deductible officer’s compensation of $3.4 million.
The income tax provision differs from the federal statutory income tax rate of 21% for 2023 primarily due to a benefit
related to the FDII of $13.0 million, excess benefits related to stock compensation of $3.4 million, tax benefits for research and
development credits of $6.4 million, and a one-time benefit of $1.6 million related to the recognition of a tax benefit associated
with the lapse of a statute of limitations. These benefits were partially offset by the inclusion of U.S. tax on foreign source
income of $0.5 million and non-deductible officer’s compensation of $2.3 million, and an increase to the Company’s valuation
allowance of $2.9 million.
The income tax provision differs from the federal statutory income tax rate of 21% for 2022 primarily due to a benefit
related to the FDII of $25.4 million, excess benefits related to stock compensation of $3.5 million, tax benefits for research and
development credits of $7.1 million, and a one-time benefit of $1.5 million related to the recognition of a tax benefit associated
with the lapse of a statute of limitations. These benefits were partially offset by the inclusion of U.S. tax on foreign source
income of $1.4 million and non-deductible officer’s compensation of $1.9 million.
37
Our future effective income tax rate depends on various factors, such as tax legislation, the geographic composition of
our pre-tax income, the amount of our pre-tax income as business activities fluctuate, non-deductible expenses incurred in
connection with acquisitions and research and development credits as a percentage of aggregate pre-tax income.
Liquidity and Capital Resources
Our cash, cash equivalents and marketable securities consist of the following:
Year Ended
December 28,
December 30,
2024
2023
(in thousands)
Cash and cash equivalents ...............................................................................$
212,945
$
233,508
Marketable securities.......................................................................................
639,383
464,303
Total cash, cash equivalents and marketable securities................................$
852,328
$
697,811
Sources and Uses of Cash
A summary of cash provided by (used in) operating, investing, and financing activities is as follows:
Year Ended
December 28,
December 30,
December 31,
2024
2023
2022
(in thousands)
Cash provided by operating activities ...........................................$
245,676
$
171,973
$
136,703
Cash used in investing activities....................................................$
(226,547) $
(103,387)
$
(55,691)
Cash used in financing activities ...................................................$
(35,673) $
(9,475)
$
(68,350)
Operating Activities
Cash provided by operating activities during fiscal 2024 was $245.7 million, which reflects net income, adjusted to
exclude the effect of non-cash operating charges, of $290.2 million. Significant non-cash operating charges included
depreciation, amortization, share-based compensation, provision for inventory valuation, deferred income taxes and write off
of acquired in-process research and development. Cash provided by operating activities in fiscal 2024 increased compared to
fiscal 2023 primarily due to higher net income and continued improvements in inventory management.
Cash provided by operating activities during fiscal 2023 was $172.0 million, which reflects net income, adjusted to
exclude the effect of non-cash operating charges, of $204.5 million. Significant non-cash operating charges included
depreciation, amortization, share-based compensation, provision for inventory valuation and deferred income taxes. Cash
provided by operating activities in fiscal 2023 increased compared to fiscal 2022 primarily due to improved inventory
management and lower income tax payments.
Our working capital was $1,307.4 million at December 28, 2024 and $1,135.5 million at December 30, 2023.
Investing Activities
We used $226.5 million, $103.4 million and $55.7 million of cash in investing activities in fiscal 2024, 2023 and 2022,
respectively. Capital expenditures, net of proceeds in fiscal 2024, 2023 and 2022 were $31.9 million, $19.8 million and $18.4
million. Capital expenditures were primarily for enterprise resource planning systems implementation, investments in facility
improvements, demonstration and testing equipment, manufacturing and network equipment. Purchases of marketable
securities, net of proceeds from sales and maturities of marketable securities, for fiscal 2024, 2023 and 2022 was $167.9 million,
$83.6 million and $4.6 million, respectively. Net cash paid for acquisitions in fiscal 2024 and 2022 was $26.8 million and $4.6
million, respectively. There were no acquisitions in fiscal 2023.
From time to time, we evaluate whether to acquire new or complementary businesses, products or technologies. We may
fund all of or a portion of the price of these investments or acquisitions in cash, stock, or a combination of cash and stock.
38
Financing Activities
We used $35.7 million, $9.5 million and $68.4 million of cash in financing activities for fiscal 2024, 2023 and 2022,
respectively. Purchases of our common stock were $25.1 million, $3.2 million and $65.3 million in fiscal 2024, 2023 and 2022,
respectively. Tax withholding payments for vested equity awards, partially offset by proceeds from sales of shares through
share-based compensation plans were $9.9 million, $5.5 million and $0.8 million for fiscal 2024, 2023 and 2022, respectively.
Payments for contingent consideration for acquired business were $0.7 million, $0.8 million and $2.3 million in fiscal 2024,
2023 and 2022.
We have a credit agreement with a bank that provides for a variable-rate line of credit that is secured by the marketable
securities we have with the bank. We are 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 million. As of December 28, 2024, the available line of credit was
approximately $100.0 million with an available interest rate of 6.2%. The credit agreement is available to us until such time
that either party terminates the arrangement at its discretion. As of the date of this filing, we have not utilized the line of credit.
Our future capital requirements will depend on many factors, including the timing and amount of our revenue and our
investment decisions, which will affect our ability to generate additional cash. We expect that our existing cash, cash
equivalents, marketable securities and availability under our line of credit will be sufficient to meet our anticipated cash
requirements for working capital, capital expenditures and other cash needs for the next 12 months following the filing of this
Form 10-Q. Thereafter, if cash generated from operations and financing activities is insufficient to satisfy our working capital
requirements, we may seek additional funding through bank borrowings, sales of securities or other means. In addition, a
reduction in or volatility with respect to our stock price or a general market downturn could materially impact our ability to sell
securities on favorable terms or at all. There can be no assurance that we will be able to raise any such capital on terms
acceptable to us or at all.
Contractual Obligations
The following table summarizes our significant contractual obligations at December 28, 2024, and the effect such
obligations are expected to have on our liquidity and cash flows in future periods. We are currently unable to provide a
reasonably reliable estimate of the amount or periods when cash settlement of this liability may occur.
Payments due by period
Total
Less than 1
year
1-3
years
3-5
years
More than
5 years
(in thousands)
Operating lease obligations ............................................. $
16,842
$
6,095
$
7,177
$
3,570
$
—
Purchase obligations (1)....................................................
438,193
243,932
194,261
—
—
Total............................................................................. $ 455,035
$ 250,027
$ 201,438
$
3,570
$
—
(1)
Represents our agreements to purchase goods and services consisting of outstanding purchase orders for goods and
services.
Critical Accounting Estimates
Management’s discussion and analysis of our financial condition and results of operations are based upon our
Consolidated Financial Statements included in this Form 10-K, which have been prepared in accordance with accounting
principles generally accepted in the United States. Note 2 of Notes to Consolidated Financial Statements describes the
significant accounting policies used in the preparation of the consolidated financial statements. Certain of these significant
accounting policies are considered to be critical accounting policies and involve critical accounting estimates. We review the
accounting policies we use in reporting our financial results on a regular basis. The preparation of the financial statements
requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and
related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related
to revenue recognition, accounts receivable, inventories, business acquisitions, intangible assets, share-based payments, income
taxes and warranty obligations. We base our estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying
value of assets and liabilities that are not readily apparent from other sources. Results may differ from these estimates due to
actual outcomes being different from those on which we based our assumptions. These estimates and judgments are regularly
reviewed by management on an ongoing basis at the end of each quarter prior to the public release of our financial results.
39
Management believes that the following are critical accounting estimates:
Revenue Recognition. Revenue is recognized when control of the promised goods or services are transferred to our
customers in an amount that reflects the consideration we expect to be entitled to receive in exchange for those goods or
services. We account for a contract when it has approval and commitment from both parties, the rights of the parties and
payment terms are identified, the contract has commercial substance and collectability of consideration is probable.
Contracts with customers may include multiple performance obligations. For such arrangements, we allocate revenue to
each performance obligation based on its relative standalone selling price. We generally determine standalone selling prices
based on the prices charged to customers or the expected cost-plus margin.
Revenue from systems is recognized when we transfer control of the product to our customer. To indicate transfer of
control, we must have a present right to payment, legal title must have passed to the customer and the customer must have the
significant risks and rewards of ownership. We generally transfer control for system sales when the customer or the customer’s
agent picks up the system at our facility. We provide an assurance warranty on our systems for a period of twelve to fourteen
months against defects in material and workmanship. We provide for the estimated cost of product warranties at the time
revenue is recognized.
Depending on the terms of the systems arrangement, we may also defer the recognition of a portion of the consideration
expected to be received because we have to satisfy a future obligation (e.g., installation and extended warranties). We use an
observable price to determine the standalone selling price for separate performance obligations or a cost-plus margin approach
when one is not available.
Revenue from software licenses, which is primarily sold without systems, is recognized upfront at the point in time when
the software is made available to the customer. Software licenses provide the customer with limited rights to use the software.
Revenue from licensing support and maintenance is recognized as the support and maintenance are provided, which is over the
contract period.
Revenue from parts is recognized when we transfer control of the product, which typically occurs when we ship the
product from our facilities to the customer.
Revenue from services primarily consists of service contracts, which provide additional maintenance coverage beyond
our assurance warranty on our products, service labor, consulting and training. Revenue from service contracts is recognized
ratably over the term of the service contract. Revenue from service labor and consulting is recognized as services are performed.
We record contract liabilities when the customer has been billed in advance of completing our performance obligations.
These amounts are recorded as deferred revenue in the Consolidated Balance Sheets.
Business combinations. We account for business combinations under the acquisition method of accounting, which
requires us to recognize separately from goodwill the assets acquired, and the liabilities assumed at their acquisition date fair
values. While we use our best estimates and assumptions to accurately value assets acquired and liabilities assumed at the
acquisition date as well as contingent consideration, where applicable, our estimates are inherently uncertain and subject to
refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we record
adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of
the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first,
any subsequent adjustments are recognized in our consolidated statements of operations. Accounting for business combinations
requires our management to make significant estimates and assumptions, especially at the acquisition date including our
estimates for intangible assets, contractual obligations assumed, restructuring liabilities, pre-acquisition contingencies, and
contingent consideration, where applicable. Although we believe the assumptions and estimates we have made in the past have
been reasonable and appropriate, they are based, in part, on historical experience and information obtained from the
management of the acquired companies and are inherently uncertain. Estimates in valuing certain acquired intangible assets
under the income approach include growth in future expected cash flows from product sales, acquired technologies, technology
obsolescence rates, estimated cash flows from the projects when completed and discount rates. Unanticipated events and
circumstances may occur that may affect the accuracy or validity of such assumptions, estimates or actual results.
Inventory Valuation. Inventories are stated at the lower of cost or net realizable value. Net realizable value is the estimated
selling prices in the ordinary course of business, less predictable costs of completion, disposal and transportation. Cost is
generally determined on a first-in, first-out basis, and includes material, labor and manufacturing overhead costs. We review
and set standard costs as needed, but at a minimum, on an annual basis, at current manufacturing costs in order to approximate
actual costs. We maintain reserves for our excess and obsolete inventory equal to the difference between the cost of inventory
and the estimated market value based upon assumptions about future product lifecycles, product demand and market conditions.
40
If actual product lifecycles, product demand and market conditions are less favorable than those originally projected by
management, additional inventory write-downs may be required.
Indefinite-Lived and Long-Lived Assets. Goodwill is tested for impairment during the fourth quarter, or whenever events
or circumstances indicate that its carrying value may not be recoverable. Goodwill impairment is tested at the reporting unit
level, which is defined as an operating segment or one level below the operating segment. Goodwill is reviewed for impairment
using either a qualitative assessment or a quantitative goodwill impairment test. If the Company chooses to perform a qualitative
assessment and determine the fair value more likely than not exceeds the carrying value, no further evaluation is necessary.
When the Company performs the quantitative goodwill impairment test, it compares fair value to carrying value, which includes
goodwill. If fair value exceeds carrying value, the goodwill is not considered impaired. If the carrying value is higher than the
fair value, the difference would be recognized as an impairment loss.
For other long-lived assets, we periodically review long-lived assets, other than goodwill, for impairment whenever
changes in events or circumstances indicate that the carrying amount of an asset may not be recoverable. Assumptions and
estimates used in the determination of impairment losses, such as future cash flows and disposition costs, may affect the carrying
value of long-lived assets and the impairment of such long-lived assets, if any, could have a material effect on our consolidated
financial statements.
Income Taxes. As part of the process of preparing our consolidated financial statements, we are required to estimate our
current tax exposure together with our temporary differences resulting from differing treatment of items for tax and accounting
purposes. These temporary differences result in deferred tax assets and liabilities, which are included within our consolidated
balance sheet. We must assess the likelihood that our deferred tax assets will be recovered from future taxable income and to
the extent we believe that recovery is not likely, we must establish a valuation allowance. Management judgment is required in
determining our provision for income taxes and any valuation allowance recorded against our deferred tax assets. The need for
a valuation allowance is based on our estimates of taxable income by jurisdiction in which we operate and the period over
which our deferred taxes will be recoverable. In the event that actual results differ from these estimates or we adjust these
estimates in future periods, we may need to adjust the valuation allowance, which could materially impact our financial position
and results of operations.
We recognize liabilities for uncertain tax positions based on a two-step process. The first step requires us to determine if
the weight of available evidence indicates that the tax position has met the threshold for recognition; therefore, we must evaluate
whether it is more likely than not that the position will be sustained on audit, including resolution of any related appeals or
litigation processes. The second step requires us to measure the tax benefit of the tax position taken, or expected to be taken, in
an income tax return as the largest amount that is more than 50% likely of being realized when effectively settled. This
measurement step is inherently difficult and requires subjective estimations of such amounts to determine the probability of
various possible outcomes. We reevaluate the uncertain tax positions each quarter based on factors including, but not limited
to, changes in facts or circumstances, changes in tax law, effectively settled issues, and new audit activity. Such a change in
recognition or measurement could result in the recognition of a tax benefit or an additional charge to the tax provision in the
period.
41
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Interest Rate and Credit Market Risk
We are exposed to changes in interest rates and market liquidity including our investments in certain available-for-sale
securities. Our available-for-sale securities consist of fixed and variable rate income investments, such as municipal notes,
municipal bonds and corporate bonds. We continually monitor our exposure to changes in interest rates, market liquidity and
credit ratings of issuers for our available-for-sale securities. It is possible that we are at risk if interest rates, market liquidity or
credit ratings of issuers change in an unfavorable direction. The magnitude of any gain or loss will be a function of the difference
between the fixed or variable rate of the financial instrument and the market rate, and our financial condition and results of
operations could be materially affected. Based on a sensitivity analysis performed on our financial investments held as of
December 28, 2024, a hypothetical increase of 100 basis points in interest rates would result in a decrease of $3.4 million in
the fair value of our available-for-sale debt securities and would not have a material impact on our consolidated financial
position, results of operations or cash flows.
Foreign Currency Risk
We enter into foreign currency forward contracts to minimize the short-term impact of exchange rate fluctuations on
certain foreign currency denominated monetary assets and liabilities, primarily cash and intercompany receivables and
payables. In addition, we hedge certain anticipated foreign currency cash flows, primarily on revenues denominated in Japanese
yen. These forward contracts are not designated as accounting hedges, so the change in fair value of the forward exchange
contracts is recognized under the caption “Other expense, net” in the Consolidated Statements of Operations for each reporting
period. As of December 28, 2024, and December 30, 2023, we had fifty-six and thirty-eight outstanding forward contracts,
respectively, with a total notional contract value of $45.9 million and $51.6 million, respectively. We do not use derivative
financial instruments for trading or speculative purposes.
Item 8. Financial Statements and Supplementary Data.
The consolidated financial statements and related information required by this Item are set forth on the pages indicated
in Item 15(a) of this Form 10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information we are required to disclose
in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time period
specified in SEC rules and forms. These controls and procedures are also designed to ensure that such information is
accumulated and communicated to our management, including our principal executive officer and principal financial officer,
as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating disclosure controls and
procedures, we have recognized that any controls and procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives. Management is required to apply judgment in evaluating its
controls and procedures.
We performed an evaluation under the supervision and with the participation of our management, including our principal
executive officer and principal financial officer, to assess the effectiveness of the design and operation of our disclosure controls
and procedures under the Exchange Act as of December 28, 2024. Based on that evaluation, our management, including our
principal executive officer and principal financial officer, concluded that our disclosure controls and procedures were effective
as of December 28, 2024 at the reasonable assurance level.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as
such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Internal control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with accounting principles generally accepted in the United States of America.
Under the supervision and with the participation of our management, including our principal executive officer and principal
42
financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the
framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (2013 framework). Based on our evaluation, our management concluded that our internal control over financial
reporting was effective as of December 28, 2024.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may be circumvented or
deteriorate.
Attestation Report of the Registered Public Accounting Firm
Our consolidated financial statements as of and for the year ended December 28, 2024 have been audited by Ernst &
Young LLP, our independent registered public accounting firm, in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Ernst & Young LLP has also audited our internal control over financial reporting
as of December 28, 2024, as stated in its attestation report included elsewhere in this Form 10-K.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the
Exchange Act) that occurred during our fiscal quarter ended December 28, 2024 that have materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information.
Rule 10b5-1 Plan Elections
During the fiscal quarter ended December 28, 2024, none of our directors or officers (as defined in Rule 16a-1 under the
Exchange Act) adopted, modified or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 105b-1 trading
arrangement” (as those terms are defined in Item 408 of Regulation S-K).
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
43
PART III
Certain information required by Part III is omitted from this Form 10-K because we expect to file a definitive proxy
statement within one hundred twenty (120) days after the end of our fiscal year pursuant to Regulation 14A (the “Proxy
Statement”) for our Annual Meeting of Stockholders currently scheduled for May 21, 2025, and such information included in
the Proxy Statement is incorporated herein by reference, as specified below.
Item 10. Directors, Executive Officers and Corporate Governance.
The information required by this Item with respect to directors and executive officers is incorporated by reference to the
information under the headings “Proposal 1: Election of Directors,” “Executive Officer Biographies” and “Corporate
Governance Principles and Practices” in the Proxy Statement. Information regarding compliance with Section 16 of the
Exchange Act is incorporated by reference to the information under the heading “Delinquent Section 16(a) Reports” in the
Proxy Statement, if any.
Code of Business Conduct and Ethics. We have adopted a code of business conduct and ethics that applies to our principal
executive officer, principal financial officer and controller. This code of business conduct and ethics is posted on our internet
website address at http://investors.ontoinnovation.com. We will post on our website any amendment to or waiver from a
provision of our code of business conduct and ethics as may be required, and within the time period specified, by applicable
SEC rules.
We have adopted an insider trading policy governing the purchase, sale and other dispositions of our securities by our
directors, officers and employees that we believe is reasonably designed to promote compliance with insider trading laws, rules
and regulations, and any applicable listing standards.
Item 11. Executive Compensation.
The information required by this Item is incorporated by reference to the information under the headings “Executive
Officer Compensation,” “Compensation of Directors,” “Executive Officer Compensation Tables,” “Compensation Committee
Report on Executive Officer Compensation,” “Stock Ownership/Retention Guidelines for Directors” and “Compensation
Committee Interlocks and Insider Participation” in the Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information required by this Item is incorporated by reference to the information under the headings “Security
Ownership of Certain Beneficial Owners” and “Equity Compensation Plan Information” in the Proxy Statement.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by this Item is incorporated by reference to the information under the headings “Related Persons
Transaction Policy” and “Board Independence” in the Proxy Statement.
Item 14. Principal Accountant Fees and Services.
The information required by this Item is incorporated by reference to the information under the heading “Proposal 3:
Ratification of Appointment of Independent Registered Public Accounting Firm” in the Proxy Statement.
44
PART IV
Item 15. Exhibits and Financial Statement Schedules.
(a)
The following documents are filed as part of this Form 10-K:
1.
Financial Statements
The consolidated financial statements and consolidated financial statement information required by
this Item are included on pages F-1 through F-9 of this report. The Reports of Independent Registered Public
Accounting Firm appear on pages F-1 through F-3 of this report.
2.
Financial Statement Schedule
See Index to financial statements on page 47 of this report.
3.
Exhibits
Exhibits are as set forth in the “Exhibit Index”, provided below. Where so indicated, exhibits, which
were previously filed, are incorporated by reference.
45
Exhibit No.
Exhibit Description
Form
File Number
Date of First Filing
Exhibit
No./Appendix
Reference
3.1
Amended and Restated Certificate of
Incorporation of Onto Innovation Inc.
8-K
001-39110
October 28, 2019
3.2
3.2
Amended and Restated Bylaws of Onto
Innovation Inc.
8-K
001-39110
January 27, 2020
3.1
4.1
Form of Common Stock Certificate
10-K
001-39110 February 25, 2020
4.2
4.2
Description of Securities
10-K
001-39110 February 25, 2020
4.1
10.1*
Onto Innovation Inc. 2020 Stock Plan, as
amended and restated
10-Q
001-39110
August 8, 2024
10.1
10.2*+
Form of Employee Stock Option Agreement
for usage under the Onto Innovation Inc. 2020
Stock Plan, as amended and restated
-
-
-
-
10.3*+
Form of Director Stock Option Agreement for
usage under the Onto Innovation Inc. 2020
Stock Plan, as amended and restated
-
-
-
-
10.4*+
Form of Executive Restricted Stock Unit Grant
Agreement for usage under the Onto
Innovation Inc. 2020 Stock Plan, as amended
and restated
-
-
-
-
10.5*+
Form of Executive Performance Stock Unit
Grant Agreement for usage under the Onto
Innovation Inc. 2020 Stock Plan, as amended
and restated
-
-
-
-
10.6*
Form of Employee Restricted Stock Unit
Agreement for usage under the Onto
Innovation Inc. 2020 Stock Plan, as amended
and restated
10-K
001-39110 February 26, 2024
10.6
10.7*
Form of Director Restricted Stock Unit
Purchase Agreement for usage under the Onto
Innovation Inc. 2020 Stock Plan, as amended
and restated
10-K
001-39110 February 26, 2024
10.7
10.8*
Form of Employee Performance Stock Unit
Purchase Agreement for usage under the Onto
Innovation Inc. 2020 Stock Plan, as amended
and restated
10-Q
001-39110
August 5, 2021
10.1
10.9*
Form of Employee Incentive Restricted Stock
Unit Purchase Agreement for usage under the
Onto Innovation Inc. 2020 Stock Plan, as
amended and restated
10-Q
001-39110 November 4, 2021
10.1
46
Exhibit No.
Exhibit Description
Form
File Number
Date of First Filing
Exhibit
No./Appendix
Reference
10.10*
Onto Innovation Inc. 2020 Employee Stock
Purchase Plan
S-8
333-238492
May 19, 2020
10.2
10.11*
Form of Onto Innovation Inc. Indemnification
Agreement
8-K
001-39110
September 13,
2021
10.1
10.12*
Employment Agreement, dated as of
September 15, 2023, by and between Onto
Innovation Inc. and Michael P. Plisinski*
incorporated by reference to Exhibit 10.1 to the
Company’s Form 8-K filed with the SEC on
September 15, 2023 (File No. 001-39110).
8-K
001-39110
September 15,
2023
10.1
10.13*
Offer Letter to Yoon Ah E. Oh, dated October
4, 2021, by and between Yoon Ah E. Oh and
Onto Innovation Inc.
10-Q
001-39110
May 3, 2022
10.1
10.14*
Offer Letter to Mark Slicer, dated April 1,
2022, by and between Mark Slicer and Onto
Innovation Inc.
8-K
001-39110
May 17, 2022
10.1
10.15*+
Offer Letter to Ramil Yaldaei, dated April 25,
2023, by and between Ramil Yaldaei and Onto
Innovation Inc.
-
-
-
-
10.16*+
Offer Letter to Srinivas Vedula, dated August
30, 2021
-
-
-
-
10.17*
Form of Executive Change in Control
Agreement
10-K
001-39110 February 24, 2023
10.13
19+
Onto Innovation Inc. Insider Trading Policy
-
-
-
-
21.1+
Subsidiaries.
-
-
-
-
23.1+
Consent of Ernst & Young LLP, Independent
Registered Public Accounting Firm.
-
-
-
-
31.1+
Rule 13a-14(a) Certification of Chief
Executive Officer of the Registrant pursuant to
Section 302 of the Sarbanes-Oxley Act of
2002.
-
-
-
-
31.2+
Rule 13a-14(a) Certification of Chief Financial
Officer of the Registrant pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
-
-
-
-
32.1+
Certification of the Chief Executive Officer
pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
-
-
-
-
32.2+
Certification of the Chief Financial Officer
pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
-
-
-
-
97
Onto Innovation Inc. Incentive Compensation
Recovery Policy
10-K
001-39110 February 26, 2024
97
101.INS
Inline XBRL Instance Document
101.SCH Inline XBRL Taxonomy Extension Schema Document
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
104
Cover Page Interactive Data File (formatted in inline XBRL and contained in Exhibit 101)
*
Management contract, compensatory plan or arrangement.
+
Filed herewith
47
ONTO INNOVATION INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULE
Page
Consolidated Financial Statements:
Reports of Independent Registered Public Accounting Firm (PCAOB ID Number 42)......................................
F-1
Consolidated Statements of Operations for the years ended December 28, 2024, December 30, 2023 and
December 31, 2022 ..............................................................................................................................................
F-4
Consolidated Statements of Comprehensive Income for the years ended December 28, 2024, December 30,
2023 and December 31, 2022............................................................................................................................
F-5
Consolidated Balance Sheets as of December 28, 2024 and December 30, 2023................................................
F-6
Consolidated Statements of Cash Flows for the years ended December 28, 2024, December 30, 2023 and
December 31, 2022...............................................................................................................................................
F-7
Consolidated Statements of Stockholders’ Equity for the years ended December 28, 2024, December 30,
2023 and December 31, 2022............................................................................................................................
F-8
Notes to the Consolidated Financial Statements...................................................................................................
F-9
Consolidated Financial Statement Schedule:
Schedule of Valuation and Qualifying Accounts .................................................................................................
F-32
Item 16. Form 10-K Summary.
None
F-1
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Onto Innovation Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Onto Innovation Inc. (the Company) as of December 28,
2024 and December 30, 2023, the related consolidated statements of operations, comprehensive income, stockholders’ equity
and cash flows for each of the three years in the period ended December 28, 2024, and the related notes and financial statement
schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion,
the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December
28, 2024 and December 30, 2023, and the results of its operations and its cash flows for each of the three years in the period
ended December 28, 2024, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company's internal control over financial reporting as of December 28, 2024, based on criteria established in
Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(2013 framework), and our report dated February 25, 2025 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due
to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that
was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that
are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The
communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken
as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit
matter or on the accounts or disclosure to which it relates.
Reserve for Excess and Obsolete Inventory
Description of
the Matter
As described in Notes 2 and 8 to the consolidated financial statements, the Company records inventory net
of a reserve for excess and obsolete inventory resulting in net inventories of $287.0 million as of December
28, 2024. The valuation of certain of the Company's inventory is subject to risks associated with supply
and demand. As described in Note 2 to the consolidated financial statements, the Company maintains
reserves for excess and obsolete inventory equal to the difference between the cost of inventory and its
estimated net realizable value based upon assumptions about historical and future demand for the
Company’s products and market conditions.
Auditing management’s estimate of the excess and obsolete inventory reserve was subjective and required
significant judgment as the excess and obsolete inventory reserve is sensitive to changes in the Company’s
F-2
operations and assumptions used to estimate the reserve including management’s assumptions with regards
to product life-cycles, product demand and market conditions, which includes historical usage, expected
future usage, on-hand quantities of individual materials, and anticipated engineering design changes or
advancements.
How We
Addressed the
Matter in Our
Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over
the Company’s excess and obsolete inventory reserve process, including those over the validity and
reasonableness of the data and assumptions used in estimating the excess and obsolete inventory reserve.
To test the adequacy of the Company’s excess and obsolete inventory reserve, we performed audit
procedures that included, among others, assessing methodologies and assumptions used, testing the
completeness and accuracy of the underlying data used by management in its analysis including the usage
of historical materials, considering potential product obsolescence, observing physical inventory on-hand
and inspecting historical gross margins to assess whether any items are being sold at a loss or lower margins
that may need to be included in the reserve. We assessed the historical accuracy of management’s estimated
excess and obsolete inventory reserve and performed sensitivity analyses to evaluate changes in the
estimate that result from changes in the Company’s significant assumptions.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2008.
Iselin, New Jersey
February 25, 2025
F-3
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Onto Innovation Inc.
Opinion on Internal Control Over Financial Reporting
We have audited Onto Innovation Inc.’s internal control over financial reporting as of December 28, 2024, based on criteria
established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (2013 framework) (the COSO criteria). In our opinion, Onto Innovation Inc. (the Company) maintained, in all
material respects, effective internal control over financial reporting as of December 28, 2024, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated balance sheets of the Company as of December 28, 2024 and December 30, 2023, the related
consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years
in the period ended December 28, 2024, and the related notes and financial statement schedule listed in the Index at Item 15(a)
and our report dated February 25, 2025 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report
on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control
over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk,
and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Iselin, New Jersey
February 25, 2025
F-4
ONTO INNOVATION INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Year Ended
December 28,
2024
December 30,
2023
December 31,
2022
Revenue.....................................................................................................
$
987,321
$
815,868
$
1,005,183
Cost of revenue .........................................................................................
472,013
395,614
465,962
Gross profit............................................................................................
515,308
420,254
539,221
Operating expenses:
Research and development....................................................................
116,767
104,442
111,953
Sales and marketing ..............................................................................
76,155
61,765
65,688
General and administrative ...................................................................
85,846
83,147
69,582
Amortization .........................................................................................
49,437
54,822
55,284
Total operating expenses...................................................................
328,205
304,176
302,507
Operating income......................................................................................
187,103
116,078
236,714
Interest income, net ...................................................................................
33,489
20,356
5,011
Other expense, net.....................................................................................
(145)
(3,852)
(141)
Income before provision for income taxes............................................
220,447
132,582
241,584
Provision for income taxes........................................................................
18,777
11,423
18,250
Net income ................................................................................................
$
201,670
$
121,159
$
223,334
Earnings per share:
Basic......................................................................................................
$
4.09
$
2.47
$
4.52
Diluted...................................................................................................
$
4.06
$
2.46
$
4.49
Weighted average number of shares outstanding:
Basic......................................................................................................
49,343
48,971
49,424
Diluted...................................................................................................
49,660
49,318
49,764
The accompanying notes are an integral part of these consolidated financial statements.
F-5
ONTO INNOVATION INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
Year Ended
December 28,
2024
December 30,
2023
December 31,
2022
Net income ................................................................................................
$
201,670
$
121,159
$
223,334
Other comprehensive income (loss), net of tax:
Change in net unrealized gains (losses) on available-for-sale
marketable securities.............................................................................
(137)
3,660
(2,447)
Change in currency translation adjustments .........................................
(5,827)
(1,549)
(8,879)
Total other comprehensive income (loss), net of tax ............................
(5,964)
2,111
(11,326)
Total comprehensive income ....................................................................
$
195,706
$
123,270
$
212,008
The accompanying notes are an integral part of these consolidated financial statements.
F-6
ONTO INNOVATION INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
December 28,
2024
December 30,
2023
ASSETS
Current Assets:
Cash and cash equivalents ........................................................................................
$
212,945
$
233,508
Marketable securities ................................................................................................
639,383
464,303
Accounts receivable, less allowance of $2,585 at December 28, 2024 and
$2,659 at December 30, 2023 ..............................................................................
308,142
226,556
Inventories ................................................................................................................
286,979
327,773
Prepaid expenses and other current assets ................................................................
30,073
31,127
Total current assets ...............................................................................................
1,477,522
1,283,267
Property, plant and equipment, net ...............................................................................
123,868
103,611
Goodwill .......................................................................................................................
329,980
315,811
Identifiable intangible assets, net..................................................................................
127,457
167,375
Deferred income taxes ..................................................................................................
42,811
18,836
Other assets...................................................................................................................
15,453
20,812
Total assets............................................................................................................
$
2,117,091
$
1,909,712
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable......................................................................................................
$
56,261
$
49,869
Accrued liabilities.....................................................................................................
49,974
42,062
Deferred revenue.......................................................................................................
33,828
24,763
Other current liabilities .............................................................................................
30,026
31,032
Total current liabilities..........................................................................................
170,089
147,726
Deferred and other tax liabilities ..................................................................................
4
—
Other non-current liabilities..........................................................................................
21,116
25,451
Total liabilities ......................................................................................................
191,209
173,177
Commitments and contingencies (Note 9)
Stockholders’ equity:
Preferred stock, $0.001 par value, 3,000 shares authorized, no shares
issued and outstanding...........................................................................................
—
—
Common stock, $0.001 par value, 97,000 shares authorized, 49,238 and
49,086 issued and outstanding at December 28, 2024 and December 30, 2023,
respectively. ...........................................................................................................
49
49
Additional paid-in capital .........................................................................................
1,275,146
1,262,029
Accumulated other comprehensive loss ...................................................................
(13,863)
(7,899)
Accumulated earnings...............................................................................................
664,550
482,356
Total stockholders’ equity ....................................................................................
1,925,882
1,736,535
Total liabilities and stockholders’ equity..............................................................
$
2,117,091
$
1,909,712
The accompanying notes are an integral part of these consolidated financial statements.
F-7
ONTO INNOVATION INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended
December 28,
2024
December 30,
2023
December 31,
2022
Cash flows from operating activities:
Net income............................................................................................................ $
201,670
$
121,159
$
223,334
Adjustments to reconcile net income to net cash and cash equivalents provided
by operating activities:
Depreciation..........................................................................................................
12,872
12,390
9,378
Amortization of intangibles ...................................................................................
49,437
54,822
55,284
Share-based compensation.....................................................................................
28,577
25,513
24,426
Write-off of acquired in-process research and development....................................
4,168
—
5,652
Provision for inventory valuation...........................................................................
19,187
10,015
9,313
Deferred income taxes...........................................................................................
(26,476)
(22,429)
(33,601)
Other, net ..............................................................................................................
722
2,991
(563)
Change in operating assets and liabilities, net of effects of business acquired:
Accounts receivable ..........................................................................................
(83,685)
12,151
(65,140)
Income taxes .....................................................................................................
3,109
1,798
(5,006)
Inventories ........................................................................................................
19,943
(16,462)
(93,905)
Prepaid expenses and other assets......................................................................
2,093
(14,013)
(4,954)
Accounts payable ..............................................................................................
6,225
(4,681)
1,181
Accrued and other liabilities ..............................................................................
7,834
(11,281)
11,304
Net cash and cash equivalents provided by operating activities.......................
245,676
171,973
136,703
Cash flows from investing activities:
Purchases of marketable securities.........................................................................
(708,707)
(480,458)
(371,287)
Proceeds from maturities and sales of marketable securities...................................
540,824
396,844
338,645
Purchases of property, plant and equipment ...........................................................
(31,903)
(22,573)
(18,405)
Proceeds from sale of property, plant and equipment..............................................
—
2,800
—
Acquisitions, net of cash acquired..........................................................................
(26,761)
—
(4,644)
Net cash and cash equivalents used in investing activities ..............................
(226,547)
(103,387)
(55,691)
Cash flows from financing activities:
Purchases of common stock.................................................................................
(25,069)
(3,197)
(65,257)
Tax payments related to shares withheld for share-based compensation plans.......
(19,045)
(10,762)
(8,874)
Payment of contingent consideration for acquired business ..................................
(737)
(801)
(2,287)
Issuance of shares through share-based compensation plans.................................
9,178
5,285
8,068
Net cash and cash equivalents used in financing activities..............................
(35,673)
(9,475)
(68,350)
Effect of exchange rate changes on cash and cash equivalents....................................
(4,019)
(1,476)
(6,391)
Net increase in cash and cash equivalents ..................................................................
(20,563)
57,635
6,270
Cash and cash equivalents at beginning of year..........................................................
233,508
175,872
169,602
Cash and cash equivalents at end of year.................................................................... $
212,945
$
233,508
$
175,872
Supplemental disclosure of cash flow information:
Income taxes paid, net ........................................................................................... $
35,505
$
34,104
$
58,687
The accompanying notes are an integral part of these consolidated financial statements.
F-8
ONTO INNOVATION INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
For the years ended December 28, 2024,
December 30, 2023 and December 31, 2022
(In thousands)
Common Stock
Additional
Paid-in
Accumulated
Other
Comprehensive
Accumulated
Shares
Amount
Capital
Income / (Loss)
Earnings
Total
Balance at January 1, 2022...............
49,300
$
49
$ 1,256,179
$
1,316
$
168,511
$ 1,426,055
Issuance of shares through share-
based compensation plans, net ..
509
1
8,067
—
—
8,068
Repurchase of common stock.......
(1,018)
(1)
(36,167)
—
(29,089)
(65,257)
Net income ...................................
—
—
—
—
223,334
223,334
Share-based compensation ...........
—
—
24,426
—
—
24,426
Share-based compensation plan
withholdings .............................
(107)
—
(8,874)
—
—
(8,874)
Currency translation .....................
—
—
—
(8,879)
—
(8,879)
Unrealized loss on investments ....
—
—
—
(2,447)
—
(2,447)
Balance at December 31, 2022.........
48,684
$
49
$ 1,243,631
$
(10,010)
$
362,756
$ 1,596,426
Issuance of shares through share-
based compensation plans, net ..
573
—
5,285
—
—
5,285
Repurchase of common stock.......
(46)
—
(1,638)
—
(1,559)
(3,197)
Net income ...................................
—
—
—
—
121,159
121,159
Share-based compensation ...........
—
—
25,513
—
—
25,513
Share-based compensation plan
withholdings .............................
(125)
—
(10,762)
—
—
(10,762)
Currency translation .....................
—
—
—
(1,549)
—
(1,549)
Unrealized gain on investments ...
—
—
—
3,660
—
3,660
Balance at December 30, 2023.........
49,086
$
49
$ 1,262,029
$
(7,899)
$
482,356
$ 1,736,535
Issuance of shares through share-
based compensation plans, net ..
411
—
9,178
—
—
9,178
Repurchase of common stock.......
(157)
—
(5,593)
—
(19,476)
(25,069)
Net income ...................................
—
—
—
—
201,670
201,670
Share-based compensation ...........
—
—
28,577
—
—
28,577
Share-based compensation plan
withholdings .............................
(102)
—
(19,045)
—
—
(19,045)
Currency translation .....................
—
—
—
(5,827)
—
(5,827)
Unrealized loss on investments ....
—
—
—
(137)
—
(137)
Balance at December 28, 2024.........
49,238
$
49
$ 1,275,146
$
(13,863)
$
664,550
$ 1,925,882
The accompanying notes are an integral part of these consolidated financial statements
ONTO INNOVATION INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
F-9
1.
Organization and Nature of Operations:
Onto Innovation Inc. (“Onto Innovation” or the “Company”) is a worldwide leader in the design, development,
manufacture and support of process control tools that perform macro-defect inspection and metrology, lithography systems,
and process control analytical software used by semiconductor and advanced packaging device manufacturers. The Company
delivers comprehensive solutions throughout the semiconductor fabrication process with our families of proprietary products
that provide critical yield-enhancing information, enabling microelectronic device manufacturers to drive down costs and time
to market of their devices. The Company provides process and yield management solutions used in both wafer processing
facilities, often referred to as “front-end” manufacturing, and in device packaging and test facilities, commonly referred to as
“back-end” manufacturing. The Company’s advanced process control software portfolio includes powerful solutions for
standalone tools, groups of tools, or factory-wide suites to enhance productivity and achieve significant cost savings. Onto
Innovation’s systems are backed by worldwide customer service and applications support. The Company has branch sales and
service offices or subsidiaries in Korea, Japan, China, Taiwan, Singapore, Malaysia, Vietnam and in several countries in
Europe. The Company operates in a single reportable segment and is a provider of process characterization equipment and
software for wafer fabs and advanced packaging facilities.
2.
Summary of Significant Accounting Policies:
Consolidation. The consolidated financial statements reflect the accounts of the Company and its wholly-owned subsidiaries.
All intercompany accounts and transactions have been eliminated.
Fiscal Year. The Company operates on a 52- or 53-week fiscal year ending on the Saturday closest to December 31. The fiscal
year of 2024 was a 52-week fiscal year that began on December 31, 2023 and ended December 28, 2024. The fiscal year of
2023 was a 52-week fiscal year that began on January 1, 2023 and ended December 30, 2023. The fiscal year of 2022 was a
52-week fiscal year that began on January 2, 2022 and ended December 31, 2022.
Segment Reporting. The Company is organized and operates as one 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. The Company’s chief operating decision maker, the Chief Executive Officer, reviews
financial information presented on a consolidated basis for purposes of making operating decisions and assessing financial
performance.
For additional information on the Company’s segment reporting, see Note 15 of Notes to the Consolidated Financial
Statements.
Revenue Recognition. Revenue is recognized when control of the promised goods or services is transferred to the Company’s
customers in an amount that reflects the consideration the Company expects to be entitled to receive in exchange for those
goods or services. The Company accounts for a contract when it has approval and commitment from both parties, the rights of
the parties and payment terms are identified, the contract has commercial substance and collectability of consideration is
probable.
The Company accounts for shipping and handling activities as the fulfillment of a promise to transfer goods to the
customer and therefore records these activities under the caption “Cost of revenue.” Sales tax and any other taxes collected
concurrent with revenue producing activities are excluded from revenue. Incidental items that are immaterial in the context of
the contract are recognized as expense.
Contracts with customers may include multiple performance obligations. For such arrangements, the Company allocates
revenue to each performance obligation based on its relative standalone selling price. The Company generally determines
standalone selling prices based on the prices charged to customers or the expected cost-plus margin.
Systems and Software Revenue
Revenue from systems is recognized when the Company transfers control of the product to the customer. To indicate
transfer of control, the Company must have a present right to payment, legal title must have passed to the customer and the
customer must have the significant risks and rewards of ownership. The Company generally transfers control for system sales
when the customer or the customer’s agent picks up the system at the Company’s facility. The Company provides an assurance
ONTO INNOVATION INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
F-10
warranty on its systems for a period of twelve to fourteen months against defects in material and workmanship. The Company
provides for the estimated cost of product warranties at the time revenue is recognized.
Depending on the terms of the systems arrangement, the Company may also defer the recognition of a portion of the
consideration expected to be received because the Company has to satisfy a future obligation (e.g., installation and extended
warranties). The Company uses an observable price to determine the standalone selling price for separate performance
obligations or a cost-plus margin approach when one is not available.
Revenue from software licenses provides the customer with a right to use the software as it exists when made available
to the customer. Revenue from software licenses, which is primarily sold with our systems, is recognized upfront at the point
in time when the software is made available to the customer. Revenue from licensing support and maintenance is recognized
as the support and maintenance are provided, which is over the contract period.
Parts Revenue
Revenue from parts is recognized when the Company transfers control of the product, which typically occurs when the
Company ships the product from its facilities to the customer.
Services Revenue
Revenue from services primarily consists of service contracts, which provide additional maintenance coverage beyond
the Company’s assurance warranty on its products, service labor, consulting and training. Revenue from service contracts is
recognized ratably over the term of the service contract. Revenue from service labor and consulting is recognized as services
are performed. Revenue from installation services is recognized at a point in time when installation is complete.
Practical Expedients
The Company generally expenses sales commissions when incurred because the amortization period is one year or less.
These costs are recorded within selling, general and administrative expenses.
The Company does not adjust the amount of consideration for the effects of a significant financing components, if any,
as the payment terms are one year or less.
The Company does not disclose the value of remaining performance obligations for contracts with an original expected
length of one year or less and contracts for which the Company recognizes revenue in the amount to which it has the right to
invoice.
For additional information on the Company’s revenue recognition, see Note 10 of Notes to the Consolidated Financial
Statements.
Business Combinations. The Company accounts for business combinations under the acquisition method of accounting, which
requires us to recognize separately from goodwill the assets acquired, and the liabilities assumed at their acquisition date fair
values. While the Company uses its best estimates and assumptions to accurately value assets acquired and liabilities assumed
at the acquisition date as well as contingent consideration, where applicable, the Company’s estimates are inherently uncertain
and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date,
the Company records adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon
the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed,
whichever comes first, any subsequent adjustments are recognized in its consolidated statements of operations. Accounting for
business combinations requires the Company’s management to make significant estimates and assumptions, especially at the
acquisition date including its estimates for intangible assets, contractual obligations assumed, restructuring liabilities, pre-
acquisition contingencies, and contingent consideration, where applicable. Although the Company believes the assumptions
and estimates it has made in the past have been reasonable and appropriate, they are based, in part, on historical experience and
information obtained from the management of the acquired companies and are inherently uncertain. Estimates in valuing certain
acquired intangible assets under the income approach include growth in future expected cash flows from product sales, acquired
technologies, technology obsolescence rates, estimated cash flows from the projects when completed and discount rates.
Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates or
actual results.
ONTO INNOVATION INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
F-11
For additional information on the Company’s business combinations, see Note 3 of these Notes to the Consolidated
Financial Statements.
Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the
United States of America 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. Significant estimates made by management include the allowance
for credit losses, 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, liabilities for product warranty, contingencies, including litigation reserves and 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, goodwill and identifiable intangible assets. 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.
Cash and Cash Equivalents. Cash and cash equivalents include cash and highly liquid debt instruments with original
maturities of three months or less when purchased.
Marketable Securities. The Company determined that its investment securities are to be classified as available-for-sale.
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.” Realized gains and losses and, interest and dividends on available-
for-sale securities are included in interest income and other, net. Available-for-sale securities are classified as current assets
regardless of their maturity date if they are available for use in current operations. The Company reviews its investment portfolio
to identify and evaluate investments that have indications of possible impairment. Factors considered in determining whether
a loss is other-than-temporary 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 investment for a period of time sufficient to allow for any anticipated
recovery in market value. When a decline in fair value is determined to be other-than-temporary, unrealized losses on available-
for-sale securities are charged against earnings. The specific identification method is used to determine the gains and losses on
marketable securities.
For additional information on the Company’s marketable securities, see Note 5 of Notes to the Consolidated Financial
Statements.
Allowance for Credit Losses. The Company maintains an allowance for credit losses that is estimated based on a combination
of factors including write-off history, aging analysis, forecast of future economic conditions and any specific known troubled
accounts. The Company believes the allowance is adequate to cover expected losses on trade receivables. Provisions for
expected credit losses are classified as selling, general and administrative expense in the Consolidated Statements of Operations.
If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make
payments, additional allowances may be required.
Inventories. Inventories are stated at the lower of cost or net realizable value. Net realizable value is the estimated selling
prices in the ordinary course of business, less predictable costs of completion, disposal and transportation. Cost is generally
determined on a first-in, first-out basis, and includes material, labor and manufacturing overhead costs. The Company reviews
and sets standard costs as needed, but at a minimum, on an annual basis, at current manufacturing costs in order to approximate
actual costs.
The Company evaluates inventories for excess quantities and obsolescence. The Company establishes inventory reserves
when conditions exist that suggest that inventory may be in excess of anticipated demand or is obsolete based upon assumptions
about historical and future demand for the Company’s products and market conditions. In addition, inventories are evaluated
for potential obsolescence due to the effect of known and anticipated engineering design changes. Once a reserve has been
established, it is maintained until the item to which it relates is scrapped or sold. The Company regularly evaluates its ability
ONTO INNOVATION INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
F-12
to realize the value of inventory based on a combination of factors including the following: historical usage rates, forecasted
sales, product end-of-life dates, estimated current and future market values and new product introductions. When recorded,
reserves are intended to reduce the carrying value of the Company’s inventory to its net realizable value. If actual demand for
the Company’s products deteriorates, or market conditions are less favorable than those that the Company projects, additional
reserves may be required.
Property, Plant and Equipment. Property, plant and equipment are stated at cost. Depreciation of property, plant and
equipment is computed using the straight-line method over the estimated useful lives of the assets, which are five to twenty-
two years for buildings, three to ten years for machinery and equipment, three to ten years for furniture and fixtures, three years
for computer equipment, and three to seven years for software. Leasehold improvements are amortized using the straight-line
method over the lesser of the lease term or the estimated useful life of the related asset. Repairs and maintenance costs are
expensed as incurred and major renewals and betterments are capitalized.
Long-Lived Assets and Finite-Lived Acquired Intangible Assets. Long-lived assets, such as property, plant, and equipment,
and identifiable acquired intangible assets with finite useful lives, are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and
used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to
be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is
recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset, which is generally based
on discounted cash flows.
Goodwill and Indefinite Lived Intangible Assets. Goodwill and indefinite lived intangible assets are tested for impairment
on an annual basis or when an event or changes in circumstances indicate that its carrying value may not be recoverable.
Goodwill impairment is tested at the reporting unit level, which is defined as an operating segment or one level below the
operating segment. The Company has three reporting units and one operating segment. No goodwill impairment occurred in
fiscal years 2024, 2023, or 2022. Goodwill is reviewed for impairment using either a qualitative assessment or a quantitative
goodwill impairment test. If the Company chooses to perform a qualitative assessment and determine the fair value more likely
than not exceeds the carrying value, no further evaluation is necessary. When the Company performs the quantitative goodwill
impairment test, it compares fair value to carrying value, which includes goodwill. If fair value exceeds carrying value, the
goodwill is not considered impaired. If the carrying value is higher than the fair value, the difference would be recognized as
an impairment loss.
Intangible assets with indefinite lives, including in-process research and development (“IPR&D”), are tested for
impairment if impairment indicators arise and, at a minimum, annually. However, the Company is permitted to first assess
qualitative factors to determine if a quantitative impairment test is necessary. Further testing is only required if the entity
determines, based on the qualitative assessment, that it is more likely than not that an indefinite-lived intangible asset’s fair
value is less than its carrying amount. Otherwise, no further impairment testing is required. The indefinite-lived intangible asset
impairment test consists of a one-step analysis that compares the fair value of the intangible asset with its carrying amount. If
the carrying amount of an intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that
excess. We consider many factors in evaluating whether the value of intangible assets with indefinite lives may not be
recoverable, including, but not limited to estimates of future cash flows, the discount rate, terminal growth rates, general
economic conditions, our outlook and market performance of our industry and recent and forecasted financial performance.
For additional information on the Company’s goodwill and purchased intangible assets, see Note 6 of Notes to the
Consolidated Financial Statements.
Concentration of Credit Risk. Financial instruments, which potentially subject the Company to concentrations of credit risk,
consist primarily of accounts receivable, cash and cash equivalents and marketable securities.
The Company maintains cash and cash equivalents and marketable securities with higher credit quality issuers and
monitors the amount of credit exposure to any one issuer. The Company’s investment policy provides guidelines and limits
regarding credit quality, investment concentration, investment type, and maturity that the Company believes will provide
liquidity while reducing risk of loss of capital. Investments are of a short-term nature and include investments in commercial
paper, corporate debt securities, asset-backed securities, U.S. Treasury, U.S. Government, and U.S. Agency debt.
ONTO INNOVATION INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
F-13
The Company’s accounts receivable result primarily from the sale of semiconductor equipment, related accessories and
replacement parts. The Company’s customer base is highly concentrated and historically, a relatively small number of
customers have accounted for a significant portion of its revenues. Write-offs of uncollectible accounts have historically not
been material. The Company actively monitors its customers’ financial strength to reduce the risk of loss.
Warranties. The Company generally provides a warranty on its products for a period of twelve to fourteen months against
defects in material and workmanship. The Company provides for the estimated cost of product warranties at the time revenue
is recognized. The estimated future warranty obligations are affected by the warranty periods, sales volumes, product failure
rates, material usage and labor and replacement costs incurred in correcting a product failure. If actual product failure rates,
material usage, labor or replacement costs differ from the Company’s estimates, revisions to the estimated warranty obligations
would be required. The warranty accrual represents the best estimate of the amount necessary to settle future and existing claims
on products sold as of the balance sheet date. The Company periodically assesses the adequacy of its recorded warranty reserve
and adjusts the amounts in accordance with changes in these factors.
Income Taxes. The Company accounts for income taxes using the asset and liability approach for deferred taxes which requires
the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized
in the Company’s consolidated financial statements or tax returns. A valuation allowance is recorded to reduce a deferred tax
asset to that portion which more likely than not will be realized.
For additional information on the Company’s income taxes, see Note 13 of Notes to the Consolidated Financial
Statements.
Translation of Foreign Currencies. The Company’s international branches and subsidiaries primarily generate and expend
cash in their local functional currency. Accordingly, all balance sheet accounts of these local functional currency branches and
subsidiaries are translated into U.S. dollars at the fiscal period-end exchange rate, and income and expense accounts are
translated into U.S. dollars using average rates in effect for the period. The resulting translation adjustments are recorded as
cumulative translation adjustments and are recorded directly as a separate component of stockholders’ equity under the caption,
“Accumulated other comprehensive loss.” The Company had accumulated exchange losses resulting from the translation of
foreign operation financial statements of $14.5 million and $8.7 million as of December 28, 2024 and December 30, 2023,
respectively.
Share-based Compensation. The Company measures the cost of employee services received in exchange for the award of
equity instruments based on the fair value of the award at the date of grant. Compensation expense is recognized using the
straight-line attribution method to recognize share-based compensation over the service period of the award, with adjustments
recorded for forfeitures as they occur.
For additional information on the Company’s share-based compensation plans, see Note 11 of Notes to the Consolidated
Financial Statements.
Research and Development Costs. Expenditures for research and development are expensed as incurred.
Derivative Instruments and Hedging Activities. The Company’s policy is to mitigate the effect of exchange rate fluctuations
on certain foreign currency denominated business exposures. The Company has a policy that allows for the use of derivative
financial instruments to hedge foreign currency exchange rate fluctuations on forecasted revenue and net monetary assets or
liabilities denominated in various foreign currencies. The Company carries derivative financial instruments (derivatives) on the
balance sheet at their fair values, in either prepaid expenses and other current assets or other current liabilities in the
Consolidated Balance Sheets. The Company does not use derivatives for trading or speculative purposes. The Company does
not believe that it is exposed to more than a nominal amount of credit risk in its foreign currency hedges, as counterparties are
large, global and well-capitalized financial institutions. The Company’s exposures are in liquid currencies (Japanese yen, euros,
Korean won, Taiwanese dollars, Chinese renminbi and Singapore dollars), so there is minimal risk that appropriate derivatives
to maintain the Company’s hedging program would not be available in the future.
To hedge foreign currency risks, the Company uses foreign currency exchange forward contracts, where possible and
prudent. These hedge contracts are valued using standard valuation formulas with assumptions about future foreign currency
exchange rates derived from existing exchange rates, interest rates, and other market factors.
ONTO INNOVATION INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
F-14
The dollar equivalent of the U.S. dollar forward contracts and related fair values as of December 28, 2024 and December
30, 2023 were as follows:
December 28,
December 30,
2024
2023
(in thousands)
Notional amount...........................................................................................................
$
45,883
$
51,551
Fair value of (asset) liability........................................................................................
(61)
1,370
During the years ended December 28, 2024 and December 31, 2022, the Company recognized losses of $1.1 million and
$3.5 million on maturities of forward contracts, respectively. During the year ended December 30, 2023, the Company
recognized a gain of $0.3 million on maturities of forward contracts. The aggregate notional amounts of matured contracts
were $423.4 million, $319.4 million and $366.0 million for 2024, 2023 and 2022, respectively.
Contingencies and Litigation. The Company is subject to the possibility of losses from various contingencies, including
certain legal proceedings, lawsuits and other claims. The Company accrues for a loss contingency when it concludes that the
likelihood of a loss is probable and the amount of the loss can be reasonably estimated. If the Company concludes that loss
contingencies that could be material to any one of its financial statements are not probable, but are reasonably possible, or are
probable, but cannot be estimated, then the Company discloses the nature of the loss contingencies, together with an estimate
of the range of possible loss or a statement that such loss is not reasonably estimable. The Company expenses as incurred the
costs of defending legal claims against the Company. The Company does not recognize gain contingencies until realized. See
Note 9 of the Notes to the Consolidated Financial Statements, “Commitments and Contingencies” for a detailed description.
Recent Accounting Pronouncements.
Recently Adopted or Effective
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” which expands disclosures
about a public entity’s reportable segments and requires more enhanced information about a reportable segment’s expenses,
interim segment profit or loss, and how a public entity’s chief operating decision maker uses reported segment profit or loss
information in assessing segment performance and allocating resources. The guidance is effective for financial statements
issued for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December
15, 2024, with early adoption permitted. The Company is required to adopt this standard in the fiscal year 2024 for the annual
reporting period ending December 28, 2024, with retrospective disclosure of prior periods presented. The Company adopted
the new standard in fiscal year 2024 for annual and retrospective reporting periods with all interim disclosures to begin in the
first quarter of fiscal year 2025. Refer to Note 15 for additional discussion regarding the Company’s segment reporting.
Updates Not Yet Effective
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax
Disclosures,” which requires public entities to disclose consistent categories and greater disaggregation of information in the
rate reconciliation and for income taxes paid. It also includes certain other amendments to improve the effectiveness of income
tax disclosures. The guidance is effective for financial statements issued for annual periods beginning after December 15, 2024,
with early adoption permitted. The Company is required to adopt this standard prospectively in fiscal year 2025 for the annual
reporting period ending January 3, 2026. The Company does not expect the amendment to have a material impact on its
Consolidated Financial Statements upon adoption.
In November 2024, the FASB issued ASU 2024-03, “Income Statement – Reporting Comprehensive Income – Expense
Disaggregation Disclosures” (Subtopic 220-40) which requires additional disclosure of certain costs and expenses, including
inventory purchases, employee compensation, selling expense and depreciation expense within the notes to financial
statements. The guidance is effective for annual periods beginning after December 15, 2026, and interim periods within fiscal
years beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact that
the updated standard will have on its financial statements and related disclosures.
ONTO INNOVATION INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
F-15
3.
Business Combination:
Lumina Instruments Inc.
During the fourth quarter of 2024, the Company acquired Lumina Instruments Inc. (“Lumina”), to strengthen Onto
Innovation’s inspection portfolio through the addition of Lumina’s highly differentiated laser based optical defect inspection
technology. The Company paid $25.0 million in cash to acquire Lumina.
The acquisition has been accounted for using the acquisition method of accounting in accordance with FASB Accounting
Standards Codification (“ASC”) Topic 805, “Business Combinations.” Under the acquisition method of accounting, the total
purchase consideration of the acquisition is allocated to the tangible assets and identifiable intangible assets acquired based on
their relative fair values. The excess of the purchase consideration over the net tangible and identifiable intangible assets is
recorded as goodwill, the amount of which represents the expected benefits to the Company of future technology and the
knowledgeable and experienced employees who joined the Company.
The following table summarizes the purchase consideration and estimated fair values of the assets acquired and liabilities
assumed:
At Acquisition Date
(in thousands)
Cash and cash equivalents .............................................................................................................................$
1,566
Accounts receivable.......................................................................................................................................
333
Inventories......................................................................................................................................................
908
Prepaid expenses and other current assets .....................................................................................................
14
Identifiable intangible assets..........................................................................................................................
9,420
Total assets acquired...................................................................................................................................
12,241
Accounts payable...........................................................................................................................................
(26)
Accrued liabilities ..........................................................................................................................................
(77)
Deferred tax liabilities....................................................................................................................................
(1,307)
Net assets acquired......................................................................................................................................
10,831
Goodwill ........................................................................................................................................................
14,169
Total purchase consideration ...................................................................................................................$
25,000
4.
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.
ONTO INNOVATION INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
F-16
The following table provides the assets and liabilities carried at fair value measured on a recurring basis at December 28,
2024 and December 30, 2023:
Fair Value Measurements Using
Significant Other Observable
Inputs (Level 2)
December 28,
2024
December 30,
2023
(in thousands)
Assets:
Available-for-sale debt securities:
Government notes and bonds.............................................
$
284,863
$
195,800
Certificates of deposit........................................................
73,421
67,467
Commercial paper..............................................................
136,557
99,635
Corporate bonds.................................................................
144,542
101,401
Foreign currency forward contracts.......................................
61
—
Total assets.....................................................................
$
639,444
$
464,303
Liabilities:
Foreign currency forward contracts.......................................
—
$
1,370
Total liabilities...............................................................
$
—
$
1,370
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 5 for additional discussion regarding the fair value of the Company’s marketable securities.
5.
Marketable Securities:
At December 28, 2024 and December 30, 2023, marketable securities are categorized as follows:
Amortized
Cost
Gross
Unrealized
Holding Gains
Gross
Unrealized
Holding Losses
Fair
Value
(in thousands)
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
December 30, 2023
Government notes and bonds ..................................................... $
195,733
$
393
$
326
$
195,800
Certificates of deposit.................................................................
67,377
93
3
67,467
Commercial paper.......................................................................
99,591
54
10
99,635
Corporate bonds..........................................................................
101,146
391
136
101,401
Total marketable securities..................................................... $
463,847
$
931
$
475
$
464,303
ONTO INNOVATION INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
F-17
The amortized cost and estimated fair value of marketable securities classified by the maturity date listed on the security,
regardless of the Consolidated Balance Sheet classification, is as follows at December 28, 2024 and December 30, 2023:
December 28, 2024
December 30, 2023
Amortized
Cost
Fair
Value
Amortized
Cost
Fair
Value
(in thousands)
Due within one year.................................................................... $
432,088
$
432,616
$
331,136
$
330,937
Due after one through five years ................................................
140,917
140,792
132,711
133,366
Due after five through ten years .................................................
235
235
—
—
Due after ten years......................................................................
65,740
65,740
—
—
Total marketable securities..................................................... $
638,980
$
639,383
$
463,847
$
464,303
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 December 28, 2024 and December
30, 2023.
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)
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 marketable securities..................................................... $
77,473
$
418
$
3,200
$
1
December 30, 2023
Government notes and bonds ..................................................... $
82,776
$
325
$
180
$
1
Certificates of deposit.................................................................
11,839
3
—
—
Commercial paper.......................................................................
20,121
10
—
—
Corporate bonds..........................................................................
20,268
103
5,999
33
Total marketable securities..................................................... $
135,004
$
441
$
6,179
$
34
See Note 4 for additional discussion regarding the fair value of the Company’s marketable securities.
6.
Goodwill and Purchased Intangible Assets:
Goodwill and purchased intangible assets with indefinite useful lives are not amortized but are reviewed for impairment
annually during the fourth quarter of each fiscal year and whenever events or changes in circumstances indicate that the carrying
value of an asset may not be recoverable. The process of evaluating the potential impairment of goodwill and intangible assets
requires significant judgment. The Company regularly monitors current business conditions and considers other factors
including, but not limited to, adverse industry or economic trends, restructuring actions and lower projections of profitability
that may impact future operating results. The Company performed its annual assessment in the fourth quarter of fiscal 2024
and concluded that no impairment charge was required.
ONTO INNOVATION INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
F-18
Goodwill
The changes in the carrying amount of goodwill are as follows:
Year Ended
December 28,
2024
December 30,
2023
(in thousands)
Balance, beginning of the period..................................................................................
$
315,811
$
315,811
Acquired business ....................................................................................................
14,169
—
Balance, end of the period............................................................................................
$
329,980
$
315,811
The $14.2 million of goodwill acquired in 2024 resulted from the purchase of Lumina Instruments, Inc. See Note 3,
“Business Combination,” for further details.
Purchased Intangible Assets
Purchased intangible assets as of December 28, 2024 and December 30, 2023 are as follows:
Gross Carrying
Amount
Accumulated
Amortization
Net
(in thousands)
December 28, 2024
Finite-lived intangible assets:
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
December 30, 2023
Finite-lived intangible assets:
Developed technology...........................................................................
$
378,197
$
254,350
$
123,847
Customer and distributor relationships .................................................
73,321
34,782
38,539
Trademarks and trade names.................................................................
14,171
9,182
4,989
Total identifiable intangible assets....................................................
$
465,689
$
298,314
$
167,375
Intangible asset amortization expense amounted to $49.4 million, $54.8 million and $55.3 million for the years ended
December 28, 2024, December 30, 2023 and December 31, 2022, respectively. Assuming no change in the gross carrying value
of identifiable intangible assets and estimated lives, estimated amortization expenses are $33.8 million for 2025, $32.6 million
for 2026, $24.4 million for 2027, $13.5 million for 2028, and $6.2 million for 2029.
7.
Leasing Arrangements:
The Company determines if an arrangement is a lease at its inception. Operating lease arrangements are comprised
primarily of real estate and equipment agreements for which the right-of-use assets are included in “Other assets” and the
corresponding lease liabilities, depending on their maturity, are included in “Other current liabilities” or “Other non-current
liabilities” in the Consolidated Balance Sheets.
Right-of-use assets represent the right to use an underlying asset for the lease term and lease liabilities represent the
obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at the lease
commencement date based on the estimated present value of lease payments over the lease term. The lease term includes options
to extend the lease when it is reasonably certain that the option will be exercised. Lease agreements frequently require the
Company to pay real estate taxes, insurance and maintenance costs. Leases with a term of one year or less are not recorded on
the Consolidated Balance Sheets and lease expense for these leases is recognized on a straight-line basis over the lease term.
ONTO INNOVATION INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
F-19
Lease costs for operating leases were $6.4 million and $6.5 million for the years ended December 28, 2024 and December 30,
2023, respectively. Operating lease costs are generally recognized over the lease term.
The Company uses its estimated incremental borrowing rate in determining the present value of lease payments
considering the term of the lease, which is derived from information available at the lease commencement date, giving
consideration to publicly available data for instruments with similar characteristics. The Company accounts for the lease and
non-lease components as a single lease component.
December 28,
December 30,
Lease term and discount rate
2024
2023
Weighted average remaining lease term in years........................................................
3.5
4.2
Weighted average discount rate ..................................................................................
5.1%
4.7%
Supplemental cash flows information related to leases was as follows:
Year Ended
December 28,
2024
December 30,
2023
(in thousands)
Cash paid for operating lease liabilities....................................................................... $
6,372
$
6,527
Right-of-use assets obtained in exchange for operating lease liabilities ..................... $
1,334
$
3,678
As of December 28, 2024, there was an insignificant amount of commitments for operating leases that have not yet
commenced. The reconciliation of the maturities of operating leases to the lease liabilities recorded on the Consolidated
Balance Sheet as of December 28, 2024 is as follows:
Operating Lease
(in thousands)
2025............................................................................................................................................... $
6,095
2026...............................................................................................................................................
4,308
2027...............................................................................................................................................
2,869
2028...............................................................................................................................................
2,447
2029...............................................................................................................................................
1,123
Total undiscounted operating lease payments ...........................................................................
16,842
Less: imputed interest ...................................................................................................................
1,683
Present value of operating lease liabilities................................................................................. $
15,159
8.
Balance Sheet Components:
Inventories
Inventories are comprised of the following:
December 28,
December 30,
2024
2023
(in thousands)
Materials ......................................................................................................................
$
176,814
$
234,471
Work-in-process ..........................................................................................................
91,672
67,816
Finished goods.............................................................................................................
18,493
25,486
Total inventories......................................................................................................
$
286,979
$
327,773
ONTO INNOVATION INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
F-20
Property, Plant and Equipment
Property, plant and equipment, net, is comprised of the following:
December 28,
December 30,
2024
2023
(in thousands)
Land and building........................................................................................................
$
46,583
$
47,889
Machinery and equipment ...........................................................................................
86,317
69,828
Furniture and fixtures ..................................................................................................
4,081
3,921
Computer equipment and software..............................................................................
32,755
17,790
Leasehold improvements.............................................................................................
20,405
22,089
Total property, plant and equipment, gross .............................................................
190,141
161,517
Accumulated depreciation ...........................................................................................
(66,273)
(57,906)
Total property, plant and equipment, net.................................................................
$
123,868
$
103,611
Other assets
Other assets is comprised of the following:
December 28,
December 30,
2024
2023
(in thousands)
Operating lease right-of-use assets..............................................................................
$
13,939
$
18,360
Other............................................................................................................................
1,514
2,452
Total other assets .....................................................................................................
$
15,453
$
20,812
Accrued liabilities
Accrued liabilities is comprised of the following:
December 28,
December 30,
2024
2023
(in thousands)
Payroll and related expenses........................................................................................
$
39,850
$
33,052
Warranty ......................................................................................................................
10,075
8,934
Other............................................................................................................................
49
76
Total accrued liabilities ...........................................................................................
$
49,974
$
42,062
Other current liabilities
Other current liabilities is comprised of the following:
December 28,
December 30,
2024
2023
(in thousands)
Customer deposits........................................................................................................
$
10,700
$
9,972
Current operating lease obligations .............................................................................
5,416
5,494
Income tax payable......................................................................................................
8,492
3,210
Accrued professional fees............................................................................................
618
1,751
Other accrued taxes .....................................................................................................
839
3,570
Other............................................................................................................................
3,961
7,035
Total other current liabilities ...................................................................................
$
30,026
$
31,032
ONTO INNOVATION INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
F-21
Other non-current liabilities
Other non-current liabilities is comprised of the following:
December 28,
December 30,
2024
2023
(in thousands)
Non-current operating lease obligations......................................................................
$
9,743
$
14,027
Unrecognized tax benefits (including interest)............................................................
5,489
7,358
Deferred revenue .........................................................................................................
4,009
2,462
Other............................................................................................................................
1,875
1,604
Total non-current liabilities .....................................................................................
$
21,116
$
25,451
9.
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 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.
Settlements of warranty reserves are generally associated with sales that occurred during the 12 to 14 months prior to the year-
end and warranty accruals are related to sales during the same year.
Changes in the Company’s warranty reserves are as follows:
Year Ended
December 28,
2024
December 30,
2023
(in thousands)
Balance, beginning of the period ................................................................
$
9,380
$
11,830
Accruals ..................................................................................................
12,348
9,505
Usage.......................................................................................................
(10,870)
(11,955)
Balance, end of the period...........................................................................
$
10,858
$
9,380
Warranty reserves are reported in the 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. We do not
believe that any current legal matters will have a material adverse effect on our financial position, results of operations or cash
flows.
Open and Committed Purchase Orders
As of December 28, 2024, the Company has open and committed purchase orders of $438.2 million, of which $243.9
million is for less than one year.
ONTO INNOVATION INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
F-22
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 million. The available line of credit as of
December 28, 2024 was approximately $100 million with an available interest rate of 6.2%. The credit agreement is available
to the Company until such time that either party terminates the arrangement at their discretion. As of the date of this filing, the
Company has not utilized the line of credit.
10.
Revenue
The following table represents a disaggregation of revenue by timing of revenue:
Year Ended
December 28,
2024
December 30,
2023
December 31,
2022
(in thousands)
Point-in-time..................................................................... $
927,368
$
761,797
$
958,409
Over-time..........................................................................
59,953
54,071
46,773
Total revenue ............................................................ $
987,321
$
815,868
$
1,005,183
See Note 15 of the Notes to the Consolidated Financial Statements 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 Consolidated Balance Sheets. As of
December 28, 2024 and December 30, 2023, the Company had contract assets of $10.1 million and $8.0 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 Consolidated Balance Sheets. For
contracts with a duration longer than one year, these amounts are recorded in “Other non-current liabilities” in the Consolidated
Balance Sheets. As of December 28, 2024 and December 30, 2023, the Company carried a long-term deferred revenue balance
of $4.0 million and $2.5 million, respectively.
Changes in deferred revenue were as follows:
Year Ended
December 28,
2024
December 30,
2023
(in thousands)
Balance, beginning of the period..........................................................
$
27,225
$
33,014
Deferral of revenue...........................................................................
76,584
75,602
Recognition of current year deferred revenue ..................................
(48,711)
(55,825)
Recognition of prior period deferred revenue ..................................
(17,262)
(25,566)
Balance, ending of the period...............................................................
$
37,836
$
27,225
ONTO INNOVATION INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
F-23
11.
Share-Based Compensation and Employee Benefit Plans:
Share-Based Compensation Plans
The Company’s share-based compensation plans are intended to attract and retain employees and to provide an incentive
for them to assist the Company to achieve long-range performance goals and to enable them to participate in long-term growth
of the Company. The Company settles restricted stock unit awards, employee stock purchase option exercises and stock option
exercises with newly issued common shares.
Onto Innovation Inc. 2020 Stock Plan, as amended and restated (the “2020 Plan”). The 2020 Plan provides for the grant
of 3.7 million stock options and other stock awards to employees, directors and consultants at an exercise price equal to the fair
market value of the common stock on the date of grant. Options granted under the 2020 Plan typically grade vest over a three-
year period and expire ten years from the date of grant. Restricted stock units granted under the 2020 Plan typically vest over
a three-year period for employees and one year for directors; however, other vesting periods are allowable under the 2020 Plan.
Restricted stock units (“RSUs”) granted to employees have time based or performance-based vesting. As of December 28,
2024, there were 2.7 million shares of common stock available for issuance pursuant to future grants under the 2020 Plan.
Onto Innovation Inc. 2020 Employee Stock Purchase Plan (the “2020 ESPP”). Under the terms of the 2020 ESPP,
eligible employees may have up to 10% of eligible compensation deducted from their pay and applied to the purchase of shares
of Company common stock. The price the employee pays for each share of stock is 85% of the lesser of the fair market value
of Company common stock at the beginning or the end of the applicable six-month purchase period. The 2020 ESPP is intended
to qualify under Section 423 of the Internal Revenue Code and is a compensatory plan as defined by FASB ASC Topic 718,
“Stock Compensation.” Through the Company’s employee stock purchase plans, employees purchased 83 thousand, 91
thousand and 142 thousand shares during the twelve months ended December 28, 2024, December 30, 2023 and December 31,
2022, respectively. As of December 28, 2024 and December 30, 2023, there were 0.9 million and 1.0 million, shares available
for issuance under the Company’s employee stock purchase plan, respectively.
Share-based compensation was allocated in the Company’s Consolidated Statement of Operations as follows:
Year Ended
December 28,
2024
December 30,
2023
December 31,
2022
(in thousands)
Cost of revenue .............................................................................. $
4,771
$
4,405
$
4,271
Research and development.............................................................
5,499
6,072
6,068
Sales and marketing .......................................................................
5,606
4,859
4,233
General and administrative ............................................................
12,702
10,176
9,854
Total share-based compensation expense before income taxes .........
28,577
25,513
24,426
Income tax benefit..........................................................................
6,209
5,497
5,237
Total share-based compensation expense, net of income taxes ......... $
22,368
$
20,016
$
19,189
Restricted Stock Units
During fiscal years 2024, 2023 and 2022, the Company issued both service-based RSUs and market-based performance
RSUs (“PRSUs”). Service-based RSUs typically vest over a period of 3 years or less. Market-based PRSUs generally vest three
years from the grant date if certain performance criteria are achieved and require continued employment. Based upon the terms
of such awards, the number of shares that can be earned over the performance periods is based on the Company’s common
stock price performance compared to the market price performance of a designated benchmark index, ranging from 0% to 200%
of target. The designated benchmark index was the Philadelphia Semiconductor Sector Index for market-based PRSUs issued
in 2024, 2023 and 2022. The stock price performance or market price performance is measured using the closing price for the
20-trading days prior to the dates the performance period begins and ends.
ONTO INNOVATION INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
F-24
The following table summarizes the Company’s combined service-based RSUs and market-based PRSUs:
Number
of Shares
(in thousands)
Weighted
Average
Grant Date
Fair Value
Nonvested at January 1, 2022 .............................................................................
765
$
48.25
Granted............................................................................................................
410
$
82.48
Vested..............................................................................................................
(373)
$
42.87
Forfeited..........................................................................................................
(59)
$
58.98
Nonvested at December 31, 2022 .......................................................................
743
$
69.01
Granted............................................................................................................
319
$
89.23
Vested..............................................................................................................
(415)
$
59.20
Forfeited..........................................................................................................
(63)
$
84.11
Nonvested at December 30, 2023 .......................................................................
584
$
85.41
Granted............................................................................................................
171
$
191.25
Vested..............................................................................................................
(329)
$
81.10
Forfeited..........................................................................................................
(17)
$
105.31
Nonvested at December 28, 2024 .......................................................................
409
$
132.39
Of the 409 thousand shares outstanding at December 28, 2024, 327 thousand are service-based RSUs and 82 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 stock at the date of grant. The fair value of the Company’s market-based PRSUs granted during fiscal years
2024, 2023, and 2022 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 $251.51, $100.79, and $85.49, respectively.
As of December 28, 2024, there was $29.2 million of total unrecognized compensation cost related to RSUs granted
under the plans. That cost is expected to be recognized over a weighted average period of 1.3 years.
401(k) Savings Plan
The Company has a 401(k) savings plan that allows employees to contribute up to 100% of their annual compensation to
the Plan on a pre-tax or after-tax basis, limited to a maximum annual amount as set periodically by the Internal Revenue Service.
The plan provides a 50% match of all employee contributions up to 6 percent of the employee’s salary. Matching contributions
to the plan totaled $3.2 million, $3.1 million and $3.0 million for the years ended December 28, 2024, December 30, 2023 and
December 31, 2022, respectively.
12.
Other Expense, Net:
Other expense, net is comprised of the following:
Year Ended
December 28,
2024
December 30,
2023
December 31,
2022
(in thousands)
Foreign currency exchange losses, net.........................................$
(276)
$
(4,091)
$
(73)
Other.............................................................................................
131
239
(68)
Total other expense, net ...........................................................$
(145)
$
(3,852)
$
(141)
ONTO INNOVATION INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
F-25
13.
Income Taxes:
The components of income tax expense are as follows:
Year Ended
December 28,
2024
December 30,
2023
December 31,
2022
(in thousands)
Current:
Federal................................................................................................... $
40,688
$
28,326
$
47,963
State.......................................................................................................
1,156
879
987
Foreign...................................................................................................
3,409
4,647
2,901
...................................................................................................................
45,253
33,852
51,851
Deferred:
Federal...................................................................................................
(25,287)
(22,429)
(31,622)
State.......................................................................................................
(871)
242
(1,506)
Foreign...................................................................................................
(318)
(242)
(473)
...................................................................................................................
(26,476)
(22,429)
(33,601)
Total income tax expense.................................................................. $
18,777
$
11,423
$
18,250
The income before tax is comprised of the following:
Year Ended
December 28,
2024
December 30,
2023
December 31,
2022
(in thousands)
Domestic operations..................................................................................
$
207,747
$
107,640
$
239,527
Foreign operations.....................................................................................
$
12,700
$
24,942
$
2,057
ONTO INNOVATION INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
F-26
The provision for income taxes differs from the amount of income tax determined by applying the applicable U.S. federal
income tax rate of 21% for the years ended December 28, 2024, December 30, 2023 and December 31, 2022, to income before
provision for income taxes as follows:
Year Ended
December 28,
2024
December 30,
2023
December 31,
2022
(in thousands, except for percentages)
Federal income tax provision at statutory rate..........................................
$
46,294
$
27,842
$
50,732
State taxes, net of federal effect................................................................
2,171
1,389
467
Foreign taxes, net of federal effect............................................................
854
(2,000)
(481)
Foreign Derived Intangible Income (“FDII”) Deduction..........................
(16,960)
(12,662)
(25,445)
US tax on foreign source income..............................................................
(207)
184
1,423
Tax effect of share-based compensation...................................................
(6,883)
(2,288)
(2,497)
Non-deductible officer's compensation.....................................................
3,412
2,301
1,910
Research and development tax credit........................................................
(6,640)
(6,410)
(7,146)
Change in tax reserves ..............................................................................
(2,648)
(1,133)
(1,084)
Change in valuation allowance .................................................................
(1,790)
2,180
(276)
Withholding taxes .....................................................................................
785
640
937
Other..........................................................................................................
389
1,380
(290)
Provision for income taxes....................................................................
$
18,777
$
11,423
$
18,250
Effective tax rate ...................................................................................
9 %
9 %
8 %
Prior year amounts were reclassified to conform to current year classification requirements for comparability purposes.
The total tax provision amounts remained unchanged.
Deferred tax assets and liabilities are comprised of the following:
December 28,
2024
December 30,
2023
(in thousands)
Deferred tax assets:
Reserves and accruals.................................................................................................
$
20,315
$
16,658
Deferred revenue........................................................................................................
4,677
4,082
Share-based compensation.........................................................................................
3,792
3,495
Tax credit carryforward..............................................................................................
12,170
13,960
Net operating losses ...................................................................................................
1,618
1,088
Depreciation and amortization ...................................................................................
162
156
Capitalized research and development.......................................................................
48,943
34,165
Operating lease liabilities...........................................................................................
2,968
3,744
Other...........................................................................................................................
1,162
2,875
Gross deferred tax assets............................................................................................
95,807
80,223
Less: valuation allowance ..........................................................................................
(12,170)
(13,960)
Total deferred tax assets after valuation allowance ...................................................
83,637
66,263
Deferred tax liabilities:
Depreciation and amortization ...................................................................................
(38,144)
(43,908)
Operating lease right of use assets .............................................................................
(2,682)
(3,519)
Other...........................................................................................................................
(4)
—
Gross deferred tax liabilities ......................................................................................
(40,830)
(47,427)
Net deferred tax assets..................................................................................................
$
42,807
$
18,836
ONTO INNOVATION INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
F-27
At December 28, 2024 and December 30, 2023, the Company had recorded valuation allowances of $12.2 million and
$14.0 million, respectively, on a certain portion of the Company’s deferred tax assets to reflect the deferred tax assets at the net
amount that is more likely than not to be realized. The Company maintains a valuation allowance against its federal foreign
tax credit carryforwards of $0.3 million and state research and development credits of $11.9 million.
In assessing the realizability of deferred tax assets, the Company uses a more likely than not standard. If it is determined
that it is more-likely-than-not that deferred tax assets will not be realized, a valuation allowance must be established against
the deferred tax assets. The ultimate realization of the assets is dependent on the generation of future taxable income during the
periods in which the associated temporary differences become deductible. Management considers the scheduled reversal of
deferred income tax liabilities, projected future taxable income and tax planning strategies when making this assessment. In
making the determination that it is more likely than not that the Company’s deferred tax assets will be realized as of December
28, 2024, the Company relied primarily on the reversal of deferred tax liabilities as well as projected future taxable income.
At December 28, 2024, the Company had tax effected federal, state, and foreign net operating loss carryforwards of $0.5
million, $0.9 million and $0.2 million, respectively. The federal, state and foreign net operating loss carryforwards expire on
various dates beginning in 2033 through 2049.
At December 28, 2024, the Company had foreign tax credit carryforwards and state research & development credits of
$0.3 million, and $16.8 million, respectively. The foreign tax credit carryforwards are set to expire at various dates beginning
December 31, 2032. The state research & development credit carryforwards are set to expire at various dates beginning
December 31, 2028.
As of December 28, 2024, the Company has not provided U.S. income taxes on all its foreign earnings. The Company
continues to permanently reinvest the cash held offshore to support its working capital needs. The Company has accrued $0.5
million for additional foreign withholding taxes from an expected liquidating distribution from its Israel entity.
The total amount of unrecognized tax benefits are as follows:
Year Ended
December 28,
2024
December 30,
2023
December 31,
2022
(in thousands)
Balance, beginning of the period ..............................................................
$
13,142
$
13,010
$
12,373
Gross increases—tax positions in prior period .....................................
1,416
29
456
Gross decreases—tax positions in prior period.....................................
(33)
(100)
—
Gross increases—current-period tax positions .....................................
1,761
1,785
1,729
Closure of audit/statute limitation.........................................................
(3,291)
(1,582)
(1,548)
Balance, end of the period.........................................................................
$
12,995
$
13,142
$
13,010
The unrecognized tax benefits at December 28, 2024 and December 30, 2023 were $13.0 million and $13.1 million,
respectively, of which $6.7 million and $7.2 million, respectively, would be reflected as an adjustment to income tax expense
if recognized. The year over year decrease from 2023 to 2024 is primarily due to expiring tax statutes, offset by additional
unrecognized tax benefits related to foreign net operating losses. It is reasonably possible that certain amounts of unrecognized
tax benefits may reverse in the next 12 months; however, the Company does not expect such reversals to have a significant
impact on its results of operations or financial position.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense.
During the years ended December 28, 2024, December 30, 2023 and December 31, 2022, the Company recognized
approximately $(223) thousand, $146 thousand and $149 thousand, respectively, in interest and penalties (benefit) expense
associated with uncertain tax positions. As of December 28, 2024 and December 30, 2023, the Company had accrued interest
and penalties expense included in the table of unrecognized tax benefits of $564 thousand and $823 thousand, respectively.
The Company is subject to U.S. federal income tax as well as income tax in multiple state and foreign jurisdictions. The
Company is subject to ordinary statute of limitation rules of three and four years for federal and state returns, respectively.
However, due to tax attribute carryforwards, the Company is subject to examination for tax years 2015 forward for U.S. federal
tax purposes with respect to carryforward amounts. The Company is also subject to examination in various states for tax years
2003 forward with respect to carryforward amounts. The Company is subject to examination for tax years 2016 forward for
ONTO INNOVATION INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
F-28
various foreign jurisdictions. The Company believes that adequate amounts have been reserved for any adjustments that may
ultimately result from any future examinations of these years.
In the normal course of business, the Company is subject to tax audits in various jurisdictions, and such jurisdictions may
assess additional income taxes or other taxes against it. Although the Company believes its tax estimates are reasonable, the
final determination of tax audits and any related litigation could be materially different from the Company’s historical income
tax provisions and accruals. The results of an audit or litigation could have a material adverse effect on the Company’s results
of operations or cash flows in the period or periods for which that determination is made.
14.
Accumulated Other Comprehensive Income (Loss):
Comprehensive income includes net income, foreign currency translation adjustments, and net unrealized gains and losses
on available-for-sale debt securities. See the Consolidated Statements of Comprehensive Income for the effect of the
components of comprehensive income on the Company’s net income.
The components of accumulated other comprehensive income (loss), net of tax, are as follows:
Foreign currency
translation
adjustments
Net unrealized
gains (losses) on
marketable
securities
Accumulated
other
comprehensive
income (loss)
(in thousands)
Balance at January 1, 2022 ...............................................................
$
1,764
$
(448)
$
1,316
Net current period other comprehensive loss................................
(8,879)
(2,447)
(11,326)
Balance at December 31, 2022 .........................................................
(7,115)
(2,895)
(10,010)
Net current period other comprehensive income (loss) ................
(1,549)
3,660
2,111
Balance at December 30, 2023 .........................................................
(8,664)
765
(7,899)
Net current period other comprehensive loss................................
(5,827)
(137)
(5,964)
Balance at December 28, 2024 .........................................................
$
(14,491)
$
628
$
(13,863)
For the twelve months ended December 28, 2024, December 30, 2023 and December 31, 2022, tax effects on net income
of amounts recorded in other comprehensive income (loss) were $(36.8) thousand, $0.9 million and $(0.7) million, respectively.
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.
ONTO INNOVATION INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
F-29
The table below presents the Company’s consolidated operating results including significant segment expenses:
Year Ended
December 28,
2024
December 30,
2023
December 31,
2022
(in thousands)
Revenue...................................................................................... $
987,321
$
815,868
$
1,005,183
Less:
Restructuring expenses (1).....................................................
23,077
10,599
—
Merger and acquisitions related expenses (2) ........................
7,652
2,607
5,761
Litigation expenses (3)...........................................................
27
11,337
3,935
Cost of revenue (excluding 1 & 2).........................................
457,855
388,429
465,883
Research and development (excluding 1 & 2) .......................
109,572
103,656
105,648
Sales and marketing (excluding 1 & 2)..................................
75,911
61,604
65,558
General and administrative (excluding 1, 2 & 3)...................
76,687
66,736
66,400
Amortization ..........................................................................
49,437
54,822
55,284
Operating income.......................................................................
187,103
116,078
236,714
Interest income, net ....................................................................
33,489
20,356
5,011
Other expense, net......................................................................
(145)
(3,852)
(141)
Provision for income taxes.........................................................
18,777
11,423
18,250
Net income ......................................................................... $
201,670
$
121,159
$
223,334
The following table lists the different sources of revenue:
Year Ended
December 28,
2024
December 30,
2023
December 31,
2022
(in thousands, except for percentages)
Systems and software ................................... $ 850,443
86 %
$ 683,316
84 %
$
865,707
86 %
Parts ..............................................................
76,584
8 %
74,604
9 %
84,266
8 %
Services.........................................................
60,294
6 %
57,948
7 %
55,210
6 %
Total revenue ........................................ $ 987,321
100 %
$ 815,868
100 %
$ 1,005,183
100 %
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:
Year Ended
December 28,
2024
December 30,
2023
December 31,
2022
(in thousands)
Revenue from third parties:
Taiwan.................................................................................... $
307,538
$
141,915
$
199,104
South Korea............................................................................
285,695
169,323
224,172
China ......................................................................................
116,387
136,940
250,968
United States ..........................................................................
104,109
130,292
121,487
Southeast Asia........................................................................
64,912
87,585
71,062
Japan.......................................................................................
56,999
93,831
58,133
Europe ....................................................................................
51,681
55,982
80,256
Total revenue...................................................................... $
987,321
$
815,868
$
1,005,183
ONTO INNOVATION INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
F-30
The following customers represented 10% or more of the Company’s total revenue for the respective years:
Year Ended
Customer
December 28,
2024
December 30,
2023
December 31,
2022
Customer A .................................................................................
23%
14 %
15 %
Customer B..................................................................................
17%
19 %
13 %
Customer C..................................................................................
12%
^
11 %
^ Total customer revenue was less than 10% of total revenue.
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.
Two customers’ net accounts receivable balances were individually greater than 10% of net accounts receivable at
December 30, 2023, representing, in the aggregate approximately 29% 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.
16.
Earnings Per Share:
Basic income per share is calculated using the weighted average number of shares of common stock outstanding during
the period. Restricted stock units and stock options are included in the calculation of diluted earnings per share, except when
their effect would be anti-dilutive.
The Company’s basic and diluted earnings per share amounts are as follows:
Year Ended
December 28,
2024
December 30,
2023
December 31,
2022
(in thousands, except for per share data)
Numerator:
Net income ............................................................................................
$
201,670
$
121,159
$
223,334
Denominator:
Basic earnings per share - weighted average shares
outstanding.........................................................................................
49,343
48,971
49,424
Effect of potential dilutive securities:
Restricted stock units, employee stock purchase grants and stock
options - dilutive shares .....................................................................
317
347
340
Diluted earnings per share - weighted average shares
outstanding.........................................................................................
49,660
49,318
49,764
Earnings per share:
Basic......................................................................................................
$
4.09
$
2.47
$
4.52
Diluted...................................................................................................
$
4.06
$
2.46
$
4.49
17.
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 with shares purchased being subsequently retired. During the twelve
months ended December 28, 2024, the Company repurchased and retired 157 thousand shares of its common stock under this
repurchase authorization. At December 28, 2024, there was $174.9 million available for future share repurchases under this
share repurchase authorization.
ONTO INNOVATION INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
F-31
The following table summarizes the Company’s stock repurchases:
Year Ended
December 28,
2024
December 30,
2023
December 31,
2022
(in thousands, except for per share data)
Shares of common stock repurchased..........................................
157
46
1,018
Cost of stock repurchased ............................................................
$
25,065
$
3,197
$
65,257
Average price paid per share........................................................
$
159.16
$
69.29
$
64.09
18.
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
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:
Year Ended
December 28,
December 30,
December 31,
2024
2023
2022
(in thousands)
Cost of goods sold...................................................................................
$
14,068
$
7,027
$
-
Operating expenses .................................................................................
9,009
3,572
-
Total restructuring expenses ..............................................................
$
23,077
$
10,599
$
-
F-32
ONTO INNOVATION INC. AND SUBSIDIARIES
SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
Column A
Column B
Column C
Column D
Column E
Description
Balance at
Beginning of
Period
Charged to (Recovery
of) Costs and Expense
Charged to Other
Accounts (net)
Deductions
Balance at
End of Period
Fiscal Year 2024:
Allowance for credit losses.... $
2,659
$
100
$
—
$
174
$
2,585
Deferred tax valuation
allowance ...........................
13,960
—
—
1,790
12,170
Fiscal Year 2023:
Allowance for credit losses.... $
1,572
$
245
$
1,200
$
358
$
2,659
Deferred tax valuation
allowance ...........................
11,772
2,188
—
—
13,960
Fiscal Year 2022:
Allowance for credit losses.... $
1,303
$
356
$
—
$
87
$
1,572
Deferred tax valuation
allowance ...........................
10,948
824
—
—
11,772
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
Onto Innovation Inc.
(Registrant)
By:
/s/ Michael P. Plisinski
Michael P. Plisinski
Chief Executive Officer
Date:
February 25, 2025
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT
HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN
THE CAPACITIES AND ON THE DATES INDICATED.
Signature
Title
Date
/s/ Michael P. Plisinski
Chief Executive Officer (Principal
Executive Officer)
February 25, 2025
Michael P. Plisinski
/s/ Mark R. Slicer
February 25, 2025
Mark R. Slicer
Senior Vice President, Chief Financial
Officer (Principal Financial Officer and
Principal Accounting Officer)
/s/ Leo Berlinghieri
Director
February 25, 2025
Leo Berlinghieri
/s/ Stephen D. Kelley
Director
February 25, 2025
Stephen D. Kelley
/s/ Susan D. Lynch
Director
February 25, 2025
Susan D. Lynch
/s/ David B. Miller
Director
February 25, 2025
David B. Miller
/s/ Stephen S. Schwartz
Director
February 25, 2025
Stephen S. Schwartz
/s/ Christopher A. Seams
Director
February 25, 2025
Christopher A. Seams
/s/ May Su
Director
February 25, 2025
May Su
/s/ Christine A. Tsingos
Director
February 25, 2025
Christine A. Tsingos
Exhibit 21.1
SUBSIDIARIES
Name
Jurisdiction
Rudolph Technologies, Inc.
U.S.A.
4D Technology Corporation
U.S.A.
Inspectrology LLC
U.S.A.
Onto Innovation Japan Co. Ltd.
Japan
Onto Innovation (Shanghai) Trading Co., Ltd.
China
Onto Innovation Germany GmbH
Germany
Onto Innovation Hong Kong Limited
Hong Kong
Onto Innovation Europe, B.V.
Netherlands
Onto Innovation Switzerland GmBH
Switzerland
Onto Innovation Korea Ltd.
Korea
Onto Innovation Southeast Asia Pte. Limited
Singapore
Onto Innovation Ireland Limited
Ireland
Onto Innovation Malaysia Sdn. Bhd.
Malaysia
Onto Innovation Vietnam PTE Company Limited
Vietnam
Neta SAS
France
Liteq B.V.
Netherlands
Lumina Instruments Inc.
U.S.A.
Exhibit 31.1
Rule 13a-14(a) Certification of Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Michael P. Plisinski, certify that:
1. I have reviewed this annual report on Form 10-K of Onto Innovation Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons
performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report
financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: February 25, 2025
By:/s/ Michael P. Plisinski
Michael P. Plisinski
Chief Executive Officer
Exhibit 31.2
Rule 13a-14(a) Certification of Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Mark R. Slicer, certify that:
1. I have reviewed this annual report on Form 10-K of Onto Innovation Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons
performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report
financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: February 25, 2025
By:/s/ Mark R. Slicer
Mark R. Slicer
Chief Financial Officer
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Michael P. Plisinski, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that the Annual Report of Onto Innovation Inc. on Form 10-K for the year ended December 28, 2024 fully
complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that the
information contained in the Annual Report on Form 10-K fairly presents in all material respects the financial condition and
results of operations of Onto Innovation Inc.
Date: February 25, 2025
By:/s/ Michael P. Plisinski
Michael P. Plisinski
Chief Executive Officer
Exhibit 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Mark R. Slicer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, that the Annual Report of Onto Innovation Inc. on Form 10-K for the year ended December 28, 2024 fully complies
with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that the information
contained in the Annual Report on Form 10-K fairly presents in all material respects the financial condition and results of
operations of Onto Innovation Inc.
Date: February 25, 2025
By:/s/ Mark R. Slicer
Mark R. Slicer
Chief Financial Officer
page intentionally left blank
2025 PROXY STATEMENT
NOTICE OF 2025 ANNUAL MEETING OF STOCKHOLDERS
Date:
Wednesday, May 21, 2025
Time:
8:00 a.m., Pacific Time
Place:
The Company’s offices located at 1550 Buckeye Drive, Milpitas, CA 95035
Record Date:
Only stockholders of record at the close of business on March 25, 2025 are entitled to vote at the
meeting and any adjournment or postponement thereof for which no new record date is set.
Items of Business:
1.
To elect the Board’s seven nominees for director to serve until the next Annual Meeting and
until their successors are duly elected and qualified;
2.
To approve, on an advisory (non-binding) basis, the compensation of our named executive
officers as disclosed in this proxy statement;
3.
To ratify the appointment of Ernst & Young LLP as our independent registered public
accounting firm for the fiscal year ending January 3, 2026; and
4.
To transact such other business as may properly come before the meeting and any
adjournment or postponement thereof.
These items of business are described more fully below in this proxy statement. This year we will be providing access
to our proxy materials via the Internet in accordance with the Securities and Exchange Commission’s “Notice and
Access” rules. On or about April 9, 2025, we will be mailing to our stockholders our Notice of Internet Availability of
Proxy Materials, which contains instructions for accessing our 2025 proxy statement and 2024 annual report to
stockholders and how to vote online. In addition, the Notice of Internet Availability of Proxy Materials will contain
instructions on how to request a paper copy of the 2025 proxy statement and 2024 annual report to stockholders.
Your vote is important. As always, we encourage you to vote your shares as soon as possible and prior to the Annual
Meeting even if you plan to attend the Annual Meeting. Voting early will ensure your shares are represented at the
Annual Meeting, regardless of whether you attend the Annual Meeting. You may cast your vote via the Internet, by
telephone, or during the Annual Meeting. If you receive a paper copy of the proxy card by mail, you may also mark,
sign, date, and return the proxy card in the accompanying postage-prepaid envelope.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 21, 2025:
This notice, the proxy statement, and the 2024 annual report to stockholders are available at:
https://www.ontoinnovation.com/ar-proxy
FOR THE BOARD OF DIRECTORS
Yoon Ah E. Oh
Corporate Secretary
Wilmington, Massachusetts
April 9, 2025
PROXY STATEMENT
TABLE OF CONTENTS
Page
Forward Looking Statements
1
Proxy Summary
2
Onto Innovation Proxy Statement
5
Proposal 1 – Election of Directors
6
Nominees For Director
6
Corporate Governance Principles and Practices
13
Proposal 2 – Advisory Vote to Approve Named Executive Officer Compensation
26
Executive Officer Compensation
27
Compensation Committee Report on Executive Officer Compensation
48
Executive Officer Compensation Tables
49
CEO Pay Ratio
64
Proposal 3 – Ratification of Appointment of Independent Registered Public Accounting Firm
65
Audit Committee Report
68
Executive Officer Biographies
69
Security Ownership of Certain Beneficial Owners
72
Equity Compensation Plan Information
73
Other Matters
73
Questions and Answers About the Annual Meeting
74
Additional Information
79
PROXY STATEMENT
1
Forward Looking Statements
Certain statements in this proxy statement of Onto Innovation Inc. (referred to in this proxy statement, together with its
consolidated subsidiaries, unless otherwise specified or suggested by the context, as the “Company,” “Onto
Innovation,” “we,” “our,” or “us”) are “forward-looking statements” or are based on “forward-looking statements,”
including, but not limited to, those concerning: our business momentum and future growth; technology development,
product introduction and acceptance of our products and services; our manufacturing practices and ability to deliver
both products and services consistent with our customers’ demands and expectations and to strengthen our market
position; our expectations of the semiconductor market outlook; and future revenue, gross profits, research and
development and engineering expenses, selling, general and administrative expenses, and cash requirements.
Statements contained or incorporated by reference in this proxy statement that are not purely historical are forward-
looking statements and are subject to safe harbors created under Section 27A of the Securities Act of 1933, as
amended, Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private
Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by words such as, but not
limited to, “anticipate,” “believe,” “continue,” “estimate,” “expect,” “intend,” “plan,” “should,” “may,” “could,” “will,”
“would,” “forecast,” “project” and words or phrases of similar meaning, as they relate to our management or us. Forward-
looking statements contained herein reflect our current expectations, assumptions and projections with respect to
future events and are subject to certain risks, uncertainties and assumptions, including, but not limited to, the following:
our ability to leverage our resources to improve our position in core markets; our ability to weather difficult economic
environments; our ability to open new market opportunities and target high-margin markets; the strength/weakness of
the back-end and/or front-end semiconductor market segments; fluctuations in customer capital spending; our ability
to effectively manage our supply chain and adequately source components from suppliers to meet customer demand;
the effects of political, economic, legal, and regulatory changes or conflicts on our global operations; the effects of
natural disasters or public health emergencies on the global economy and on our customers, suppliers, employees, and
business; our dependence on certain significant customers and anticipated trends and developments in and
management plans for our business and the markets in which we operate; our ability to be successful in managing our
cost structure and cash expenditures and results of litigation; and those identified in Part I, Item 1A. “Risk Factors” of
our Form 10-K for the fiscal year ended December 28, 2024. Actual results may differ materially and adversely from
those included in the forward-looking statements. Forward-looking statements reflect our position as of the date of
this proxy statement and we undertake no obligation to update any forward-looking statements, whether as a result of
new information, future events or otherwise, except as required by law.
PROXY STATEMENT
2
PROXY SUMMARY
This summary highlights information contained elsewhere in the proxy statement. This summary does not contain all of
the information that you should consider, and you should read the entire proxy statement carefully before voting.
Stockholder Voting Matters
Voting Matter
Board Vote
Recommendation
Page Reference for More
Information
Proposal 1: Election of Directors
FOR ALL
6
Proposal 2: Advisory Vote to Approve Named Executive
Officer Compensation
FOR
26
Proposal 3: Ratification of Appointment of Independent
Registered Public Accounting Firm for the Fiscal Year
Ending January 3, 2026
FOR
65
CORPORATE GOVERNANCE HIGHLIGHTS
Snapshot of Board Composition
The following table presents a snapshot of the expected composition of the Onto Innovation Board of Directors (the
“Board” or “Board of Directors”) immediately following the 2025 Annual Meeting, assuming the election of all nominees
named in the proxy statement.
Board Characteristic
Onto Innovation
Total Number of Directors
7
Percentage of Independent Directors
86%
Average Age of Directors (years)
63.4
Average Tenure of Directors (years)
5
Separate Chairperson and CEO roles
Yes
Independent Chairperson
Yes
Audit Committee Financial Experts
1
Female Director Representation
29%
Race/Ethnicity Diversity Representation
14%
PROXY STATEMENT
3
Snapshot Of Board Governance And Compensation Policies
The following table presents a snapshot of the Onto Innovation Board governance and compensation policies currently
in effect.
Policy
Onto Innovation
Majority Voting for All Directors
Yes
Regular Executive Sessions of Independent Directors
Yes
Annual Board, Committee, and Director Evaluations
Yes
Risk Oversight by Full Board and Committees
Yes
Independent Audit, Compensation, and Nominating & Governance Committees
Yes
Code of Business Conduct and Ethics for Employees and Directors
Yes
Financial Information Integrity Policy
Yes
Stock Ownership Requirement for Directors
3x annual retainer
Stock Ownership Requirement for CEO
3x base salary
Stock Ownership Requirement for other NEOs
1x base salary
Stock-Based Award Grant Date Policy
Yes
Anti-Hedging, Anti-Short Sale & Anti-Pledging Policies
Yes
Incentive Compensation Recovery Policy
Yes
No Tax Gross-Up Provisions
Yes
No Poison Pill
Yes
Stock Buyback Program
Yes
Double Trigger Change-in-Control Provisions for Executive Officers
Yes
Annual Environmental, Social, and Governance Report
Yes
PROXY STATEMENT
4
Snapshot Of Board Governance And Compensation Policies Newly Implemented Or Adjusted In Past
Year
The following presents a snapshot of the Onto Innovation Board governance and compensation policies that were newly
implemented or adjusted in the past year.
•
After the 2024 Annual Meeting of Stockholders, the following actions were taken with regard to the
composition and leadership structure of the Board and standing committees of the Board:
As previously disclosed, in July 2024, the Board elected Stephen S. Schwartz to the Board and
appointed him to the Audit Committee. With this election, the Board increased the size of the Board
from eight members to nine members.
The Audit Committee was increased to five members with Dr. Schwartz’s appointment. Christine A.
Tsingos stepped down as chairperson but remained a member of the Committee and Susan D. Lynch was
appointed as chairperson in her place. Leo Berlinghieri and Stephen D. Kelley remained as members of
the Committee.
Mr. Berlinghieri stepped down as chairperson of the Nominating & Governance Committee but remained
a member of the Committee and David B. Miller was appointed as chairperson in his place. Christopher A.
Seams and May Su also remained members of the Committee.
Mr. Miller stepped down as chairperson of the M&A Committee but remained a member of the Committee
and Christopher A. Seams was appointed as chairperson in his place. Ms. Lynch also remained a member
of the Committee.
No changes were made to the Compensation Committee composition or leadership.
•
The annual review of the charters for the Audit, Compensation, M&A and Nominating & Governance Committees
was performed and completed. The Board also reviewed and approved updates to the Company’s Code of
Business Conduct and Ethics, Stock-Based Award Grant Date Policy, Foreign Corrupt Practices Act Policy,
Stock Ownership Policy, Stockholder & Interested Party Communications Policy, Insider Trading Policy, and
Corporate Governance Guidelines.
PROXY STATEMENT
5
__________________________________________
PROXY STATEMENT
__________________________________________
The proxy detailed herein is solicited on behalf of the Board of Directors of Onto Innovation for use at the 2025 Annual
Meeting of Stockholders to be held May 21, 2025 at 8:00 a.m. Pacific Time (the “Annual Meeting”), or at any adjournment
or postponement thereof, for the purposes set forth herein and in the accompanying Notice of Annual Meeting of
Stockholders. The Annual Meeting will be held at the Company’s offices located at 1550 Buckeye Drive, Milpitas, CA
95035. Directions to the Annual Meeting may be found on our website (www.ontoinnovation.com) by clicking on
“Company,” “Locations,” “California” and then accessing the interactive map. The Company’s telephone number is (978)
253-6200.
On or about April 9, 2025, we will furnish a Notice of Internet Availability of Proxy Materials (“Notice”) to our stockholders
containing instructions on how to access the proxy materials online at:
https://www.ontoinnovation.com/ar-proxy
Instructions on how to vote online and to request a printed copy of the proxy materials may be found in the Notice. If
you receive a Notice by mail, you will not receive a paper copy of the proxy materials unless you request such materials
by following the instructions contained in the Notice. Your vote is important, regardless of the extent of your holdings.
Our principal executive offices are located at 16 Jonspin Road, Wilmington, Massachusetts 01887.
PROXY STATEMENT
6
PROPOSAL 1
ELECTION OF DIRECTORS
Nominees
The Company’s Amended and Restated Certificate of Incorporation (“Charter”) provides that directors shall be elected
at each Annual Meeting of Stockholders, and that each director of the Company shall serve until the expiration of the
term for which he or she is elected and until his or her successor is duly elected and qualified, or until his or her earlier
death, resignation, disqualification or removal.
Based on the recommendation of the Nominating & Governance Committee, the seven director nominees approved by
the Board for inclusion in this proxy statement and for election at the Annual Meeting are:
Stephen D. Kelley
Susan D. Lynch
David B. Miller
Michael P. Plisinski Stephen S. Schwartz Christopher A. Seams May Su
Each nominee is currently serving as a director of Onto Innovation. In making its recommendations, the Nominating &
Governance Committee considered a number of factors, including its criteria for Board membership, which include the
qualifications that must be possessed by a director candidate in order to be nominated for a position on our Board.
Each nominee has indicated that he or she will serve if elected. Unless otherwise instructed, the proxy holders will vote
the proxies received by them for the Company’s seven nominees. In the event that any nominee of the Company
becomes unable or unavailable to serve as a director at the time of the Annual Meeting (which we do not anticipate) the
proxy holders will vote the proxies for any substitute nominee who is designated by the current Board to fill the vacancy.
Alternatively, the Board, in its discretion, may elect not to nominate a substitute and to reduce the size of the Board.
We do not have any reason to believe that any of the nominees will be unable or will decline to serve as a director.
Board Composition and Refreshment
A priority of the Nominating & Governance Committee and the Board as a whole is making certain that the composition
of the Board reflects the desired professional experience, skills, and backgrounds in order to present an array of
viewpoints and perspectives, help develop and execute strategy for the future, and effectively represent the long-term
interests of stockholders. Further, the Board recognizes the importance of Board refreshment in order to continue to
achieve an appropriate balance of tenure, turnover, diversity, and skills on the Board.
Vote Required
Pursuant to the Company’s Amended and Restated Bylaws (“Bylaws”), our directors are elected by the affirmative vote
of the majority of the votes cast (provided, however, that if the number of nominees exceeds the number of directors
to be elected, directors will be elected by a plurality voting standard). In order for a director in an uncontested election
to be elected, the number of votes cast “for” his/her election must exceed the number of votes cast “against” his/her
election (with “abstentions” and “broker non-votes” not counted as a vote cast either “for” or “against” that director’s
election). If a nominee who is an incumbent director receives a greater number of “against” votes for election than “for”
votes in an uncontested election and is not elected, our Corporate Governance Guidelines provide that such director
must promptly tender a resignation to the Board. Our Nominating & Governance Committee would then make a
recommendation to the Board on whether to accept or reject the tendered resignation, or whether other action should
be taken. Within 90 days after the date of the certification of the election results, our Board will act on any such
tendered resignation and publicly disclose (in a press release, a filing with the SEC, or other broadly disseminated means
of communication) its decision regarding the tendered resignation and the rationale behind the decision.
PROXY STATEMENT
7
Information about the Nominees and Continuing Directors
Our Board and its Nominating & Governance Committee believe that all of the director nominees are highly qualified,
have demonstrated leadership skills, and have the requisite experience and judgment in areas that are relevant to our
business. We believe that their ability to challenge and stimulate management and their dedication to the affairs of the
Company collectively serve the interests of the Company and its stockholders. The Company is unaware of any
arrangements or understandings between any director or nominee and any other person(s) pursuant to which any
director or nominee was or is to be selected.
The seven nominees for director are set forth below. All information is as of the record date.
Name
Principal Occupation
Board Tenure(1)
Stephen D. Kelley
President and Chief Executive Officer of Advanced Energy Industries, Inc.
2.2 years
Susan D. Lynch
Former Senior Vice President and Chief Financial Officer of V2X, Inc.
1 year
David B. Miller
Former President of DuPont Electronics & Communications
9.7 years
Michael P. Plisinski
Chief Executive Officer of Onto Innovation Inc.
9.4 years
Stephen S. Schwartz
Former Chief Executive Officer of Azenta, Inc.
0.7 years
Christopher A. Seams
Former Chief Executive Officer of Deca Technologies Inc.
9.7 years
May Su
Former Chief Executive Officer of Kateeva, Inc.
3.1 years
(1) On October 25, 2019 (the “Merger Date”), Rudolph Technologies, Inc. merged with and into Nanometrics
Incorporated, which was then renamed Onto Innovation Inc. (the “2019 Merger”). Unless otherwise indicated or
context otherwise requires, as used herein “Nanometrics” refers to Nanometrics Incorporated and its subsidiaries
prior to the Merger Date and “Rudolph” refers to Rudolph Technologies, Inc. and its subsidiaries prior to the Merger
Date. Board tenure includes time served on the Rudolph Board of Directors or the Nanometrics Board of Directors,
as applicable, prior to the Merger Date.
There are no family relationships between any directors or executive officers of the Company. The Nominating &
Governance Committee considered the professional experience, skills, and backgrounds of the nominees and
recommended the nominees to the full Board.
PROXY STATEMENT
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The following reflects additional information regarding the background and qualifications of our director nominees,
including the experience and skills that support the Board’s determination that each director nominee should serve on
our Board.
The director nominees for 2025 voluntarily self-identified with the following diversity characteristics:
•
Gender Self-Identification:
71% Male / 29% Female
•
Race/Ethnicity Identification:
86% White / 14% Asian
•
LGBTQ+ Identification:
None
PROXY STATEMENT
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NOMINEES FOR DIRECTOR
Stephen D. Kelley
Director Since:
January 2023
Age:
62
Independent Status:
Independent Director
Board Committee(s):
Audit, Compensation
Other Public Company Boards:
Advanced Energy Industries, Inc. (since March 2021)
Amkor Technology, Inc. (2013-2020)
Mr. Kelley has served as President & Chief Executive Officer of Advanced Energy Industries, Inc., which designs and
manufactures power delivery systems for semiconductor wafer fabrication equipment and other applications, since
March 2021. Previously, Mr. Kelley served as President and Chief Executive Officer of Amkor Technology, Inc., a leading
semiconductor packaging and test company, from May 2013 to June 2020. Prior to joining Amkor, Mr. Kelley served as
Senior Advisor to Advanced Technology Investment Company, the Abu Dhabi-sponsored investment company that
owned GlobalFoundries Inc. at the time, from June through November 2012. Mr. Kelley served as Executive Vice
President and Chief Operating Officer of Cree, Inc. from 2008 to 2011. Prior to joining Cree, Mr. Kelley held executive
leadership roles at Texas Instruments Inc. and Philips Semiconductors. Mr. Kelley holds a B.S. in Chemical Engineering
from the Massachusetts Institute of Technology and a J.D. from Santa Clara University.
Key Qualifications, Attributes, Skills and Experience
With over 30 years of leadership experience in the semiconductor industry, Mr. Kelley has a comprehensive
understanding of our industry and extensive management experience. Mr. Kelley also possesses first-hand knowledge
of our customer base and has in-depth experience in strategic planning, business development, technology,
manufacturing, and operations relevant to our business.
Susan D. Lynch
Director Since:
March 2024
Age:
63
Independent Status:
Independent Director
Board Committee(s):
Audit (Chairperson), M&A
Other Public Company Boards:
Allegro Microsystems, Inc. (since November 2021); Crane
Company (since August 2024)
Ms. Lynch served as the Senior Vice President and Chief Financial Officer at V2X (formerly Vectrus, Inc.) from August
2019 to September 2023. From April 2016 to July 2019, Ms. Lynch was the Executive Vice President and Chief Financial
Officer for Sungard Availability Services. Before joining Sungard, from 2007 to 2015, Ms. Lynch was the Executive Vice
President and Chief Financial Officer for Hitachi Vantara (formerly Hitachi Data Systems). From 2005 to 2007, Ms.
Lynch was Vice President and Chief Financial Officer of Raytheon Technical Services. Before joining Raytheon, Ms.
Lynch held a number of roles of increasing financial responsibility with Honeywell International Inc. from 1984 to 2005.
Ms. Lynch received her B.A. in Accounting and Business Administration from MidAmerica Nazarene University. In 2023,
Ms. Lynch was awarded the prestigious Greater Washington Technology Public Company CFO of the Year Award by
the Northern Virginia Technology Council. Ms. Lynch is a Certified Public Accountant and a member of the National
Association of Corporate Directors (NACD).
Key Qualifications, Attributes, Skills and Experience
Ms. Lynch has more than 35 years of executive and financial management experience through senior leadership roles
in the technology, aerospace and defense, and industrial manufacturing industries, making her well qualified to serve
as a member of our Board.
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David B. Miller
Director Since:
July 2015
Age:
68
Independent Status:
Independent Director
Board Committee(s):
Compensation, Nominating & Governance (Chairperson),
M&A
Other Public Company Boards:
Merrimac Industries, Inc. (2002-2008)
Mr. Miller served as Rudolph’s non-executive Chairperson from August 2018 through the Merger Date. From June 1981
to November 2015, Mr. Miller served in various positions, most recently as President, at DuPont Electronics &
Communications, an electronic materials company. Mr. Miller previously served as the President of the University of
Virginia School of Engineering & Applied Science Foundation from 2016 to 2018. Mr. Miller also served on the board of
directors of Semiconductor Equipment and Materials International (SEMI) from 2011 to 2015 and on the board of the
North Carolina Chamber of Commerce from 2010 to 2015. He has also served on several electronics joint venture
boards in the U.S. and Asia. Mr. Miller holds a B.S. in Electrical Engineering from the University of Virginia.
Specific Qualifications, Attributes, Skills and Experience
Mr. Miller has over 40 years of experience in the electronics industry. In his prior roles, including as President of DuPont
Electronics & Communications, he had oversight of technology advancement, complex financial transactions, profit and
loss responsibility and investor relations, and brings substantial management and market expertise to the Board. Mr.
Miller also has substantial international experience, having served on several electronics joint venture boards in the U.S.
and Asia as well as on the board of SEMI International.
Michael P. Plisinski
Director Since:
November 2015
Age:
55
Independent Status:
Non-Independent Director
Board Committee(s):
None
Other Public Company Boards:
None
Mr. Plisinski has served as the Company’s Chief Executive Officer since the Merger Date and was previously Chief
Executive Officer of Rudolph from November 2015 through the Merger Date. Prior to his appointment as Rudolph’s CEO,
Mr. Plisinski served as Rudolph’s Executive Vice President and Chief Operating Officer from October 2014 to November
2015 and as Vice President and General Manager of its Data Analysis and Review Business Unit from February 2006
until October 2014. From February 2004 to February 2006, Mr. Plisinski served as Vice President of Engineering at
August Technology, which was acquired by Rudolph. Mr. Plisinski joined August Technology in connection with its
acquisition of Counterpoint Solutions, a supplier of optical review and automated metrology equipment, where he was
the sole founder and President from June 1999 to July 2003. Mr. Plisinski has served on the board of directors of
Cognizer.AI, a software company that specializes in deep-learning powered natural language intelligence, since August
2020, and on the board of directors of the Massachusetts High Technology Council, Inc. since May 2022. Mr. Plisinski
has a B.S. in Computer Science from the University of Massachusetts and has completed the Advanced Management
Program from Harvard Business School.
Key Qualifications, Attributes, Skills and Experience
Mr. Plisinski brings to our Board of Directors insights based on his leadership roles at the Company and his deep
knowledge of our products, markets, customers, culture, and organization.
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Stephen S. Schwartz
Director Since:
July 2024
Age:
65
Independent Status:
Independent Director
Board Committee(s):
Audit
Other Public Company Boards:
Azenta, Inc. (2010-2024)
Spire Inc. (2018-2024)
Dr. Schwartz served as President and Chief Executive Officer of Azenta, Inc., formerly Brooks Automation, Inc. from
October 2010 to September 2024. Brooks Automation was a leading provider of manufacturing automation solutions
for the semiconductor industry and life science sample-based services and solutions for the life sciences market. In
February 2022, under Dr. Schwartz’s leadership, Brooks Automation separated its business into two different
companies, Azenta, which operates in the life sciences market, and Brooks Automation, which operates in the
semiconductor industry. Prior to Brooks Automation, Dr. Schwartz served as the President, Chief Executive Officer
and Chairman of Asyst Technologies from 2002 until 2009, and as Executive Vice President, Product Groups and
Operations from 2001 to 2002. Prior to joining Asyst Technologies, Dr. Schwartz served as the President of Consilium
Inc., an Applied Materials, Inc. company, from 1999 to 2001. Dr. Schwartz began his career at Applied Materials. Dr.
Schwartz received his B.S., M.S. and Ph.D. in Electrical Engineering from Purdue University and received his M.B.A.
from the University of Chicago.
Key Qualifications, Attributes, Skills and Experience
With over 25 years of leadership experience at high technology companies, Dr. Schwartz brings a strong background
in technical leadership to Onto Innovation’s Board of Directors. Dr. Schwartz also possesses extensive knowledge of
our industry and customer base and has in-depth experience in strategic planning, business development,
technology, manufacturing, and operations relevant to our business.
Christopher A. Seams
Director Since:
August 2015
Age:
62
Independent Status:
Independent Director
Board Committee(s):
Nominating & Governance, M&A (Chairperson)
Other Public Company Boards:
Xperi Inc. (since October 2013)
Mr. Seams served as Chief Executive Officer of Deca Technologies Inc., a wafer-level electronic interconnect solutions
provider to the semiconductor industry, from June 2013 to August 2016. Prior to Deca Technologies, Mr. Seams served
as Executive Vice President of Sales and Marketing at Cypress Semiconductor Corporation, a semiconductor design
and manufacturing company, and held various technical and operational management positions in its manufacturing,
development, and operations departments. Prior to joining Cypress in 1990, Mr. Seams worked in process development
for Advanced Micro Devices, Inc. and Philips Research Laboratories. Mr. Seams holds a B.S. in Electrical Engineering
from Texas A&M University and an M.S. in Electrical and Computer Engineering from the University of Texas at Austin.
Mr. Seams also has a Professional Certificate in Advanced Computer Security from Stanford University and is a senior
member of the Institute of Electrical and Electronics Engineers. Mr. Seams is a member of the American College of
Corporate Directors (ACCD) as well as a member and Certified Director of the National Association of Corporate
Directors (NACD).
Key Qualifications, Attributes, Skills and Experience
Mr. Seams has over 30 years of experience within the semiconductor industry. During that time he has gained
substantial management, financial and international experience as a senior leader at multiple companies. He also brings
to the Board technology and innovation experience gained through an array of technical and operational management
positions in manufacturing, development, operations, and process development.
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May Su
Director Since:
March 2022
Age:
67
Independent Status:
Independent Director
Board Committee(s):
Compensation (Chairperson), Nominating & Governance
Other Public Company Boards:
Kateeva, Inc. (2020-2022)
Ms. Su served as Chief Executive Officer of Kateeva, Inc., a company that builds inkjet deposition equipment solutions,
from March 2020 to October 2022. Prior to becoming Chief Executive Officer, Ms. Su served as Kateeva’s Chief
Marketing Officer starting in January 2018 and added the role of Senior Vice President of Sales in May 2019. Before
joining Kateeva, Ms. Su was an independent consultant from 2016 to 2018. From 2012 to 2016, Ms. Su served in an
array of senior management roles, including Vice President, Strategic Marketing and Vice President Strategic OEM
Sales, for Brooks Automation, Inc., a provider of automation, vacuum and instrumentation equipment for multiple
markets, including semiconductor manufacturing. From 2009 to 2012, Ms. Su served as Vice President and General
Manager for Crossing Automation Inc., a manufacturer of fabrication and tool automation products, which was acquired
by Brooks Automation in 2012. Before her role at Crossing Automation, Ms. Su was President of U.S. & European Field
Operations for Nova Measuring Instrument, Inc., a provider of metrology devices for advanced process control used in
semiconductor manufacturing, and held other senior management roles with Aviza Technology, Inc., New-Wave
Research, KLA-Tencor Corporation and Lam Research Corporation. Ms. Su holds a B.S. in Mechanical Engineering from
Cornell University, an M.S. in Mechanical Engineering from University of California-Berkeley, and an M.B.A. from Santa
Clara University, Leavey School of Business. Ms. Su also serves on the board of directors of Applied Engineering, Inc.,
a high-tech contract manufacturing company.
Key Qualifications, Attributes, Skills and Experience
Ms. Su has over 40 years of experience within the semiconductor capital equipment industry. During that time she has
gained substantial management, international and financial experience in her role as Chief Executive Officer of Kateeva,
Inc., as well as in other executive and general manager roles.
The Board recommends voting “FOR”
all of the nominees set forth above.
PROXY STATEMENT
13
CORPORATE GOVERNANCE PRINCIPLES AND PRACTICES
Onto Innovation is committed to sound and effective corporate governance practices. Having such practices is essential
to running our business efficiently and maintaining our integrity in the marketplace. The major components of our
corporate governance practices are described below.
Board Leadership Structure
The roles of Chief Executive Officer (“CEO”) and Chairperson of the Board at Onto Innovation are held by separate
individuals. Our Board is led by Christopher A. Seams, who is an independent director and has served as Chairperson
of the Board since the Merger Date. The Board’s primary responsibility is to oversee management of the Company.
Company management is led by Michael P. Plisinski, who has served as our CEO and a director since the Merger Date.
Our Board is currently comprised of one non-independent director, Mr. Plisinski, and eight independent directors, each
of whom has been affirmatively determined by our Board to meet the criteria for independence established by the
Securities and Exchange Commission (“SEC”) and the New York Stock Exchange (“NYSE”). Following our Annual
Meeting, our Board will be composed of one non-independent director and six independent directors. The independent
directors meet periodically in executive session chaired by the Chairperson without the CEO or other management
present. Furthermore, each director is encouraged to suggest items for the Board agenda in advance of any meeting
and to raise at any Board meeting subjects that are not on the agenda for that meeting.
The Board believes that, at the current time, the designation of an independent Chairperson of the Board facilitates the
functioning of the Board, while leaving the CEO with the responsibility for setting the strategic direction for the Company
and for the day-to-day leadership and performance of the Company. The independent Chairperson of the Board:
•
Presides at all meetings of the stockholders and the Board at which he or she is present;
•
Establishes the agenda for each Board and stockholder meeting;
•
Calls and prepares the agenda for and presides over executive sessions of the independent directors;
•
Acts as a liaison between the independent directors and the Company’s management; and
•
Performs such other powers and duties as may from time to time be assigned by the Board or as may be
prescribed by the Company’s Bylaws.
Board Meetings
In 2024, each incumbent director attended at least 93% of the aggregate of the total number of Board meetings and
the total number of meetings of Board committees on which such director served during the time such director served
on the Board. Although the Company does not currently have a formal policy regarding the attendance of directors at
the Annual Meeting of Stockholders, directors are encouraged to attend. All members of the Board who stood for
reelection at the Company’s 2024 Annual Meeting of Stockholders attended the Annual Meeting.
In 2024, the Board held a total of six Board meetings. On four occasions during 2024, the Board met in executive
session in which only the independent Board members were present.
The Board makes an annual determination as to the independence of each of our Board members under the current
standards for “independence” established by the NYSE and the SEC. The Board has determined that the following
nominees for election as directors to our Board are independent under the NYSE Listing Rules and SEC rules: Stephen
D. Kelley, Susan D. Lynch, David B. Miller, Stephen S. Schwartz, Christopher A. Seams, and May Su. Michael P. Plisinski,
due to his position as our CEO, is not considered to be independent.
During 2024, none of the independent members of our Board was a party to any transactions, relationships, or
arrangements that were considered by the Board to impair his or her independence.
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Oversight Of Risk
One of the Board’s primary responsibilities is reviewing the Company’s strategic plans and objectives, including
oversight of the principal risk exposures of the Company. In particular, the Board is responsible for monitoring and
assessing strategic risk exposure, including determining the nature and level of risk appropriate for the Company. The
Board does not have a standing risk management committee, but rather administers this oversight function directly
through the Board as a whole, as well as through the standing Board committees, which address risks inherent in their
respective areas of oversight.
The Audit Committee assists the Board in oversight and monitoring of the financial and legal risks facing the Company,
management’s approach to addressing these risks and strategies for risk mitigation. On at least an annual basis, the
Audit Committee reviews, and discusses with management, policies and systems pursuant to which management
addresses risk, including risks associated with our audit, financial reporting, internal control, disclosure control,
regulatory compliance, and investment policies. Our Audit Committee is also tasked with overseeing risks from
cybersecurity threats. Members of the Audit Committee receive updates on cybersecurity matters on a quarterly basis
from one or more representatives from the Company’s Cyber Security Council (“CSC”), which is composed of our
business unit general managers, other members of senior management, our Vice President of IT, and our IT Security
Manager, and provides executive level supervision of cybersecurity risks. These updates include a discussion of
existing and new cybersecurity risks (if any), updates on how management is addressing and/or mitigating those risks,
and the status of information security initiatives.
Our Nominating & Governance Committee oversees risks related to governance issues, such as succession planning. It
also monitors and oversees legal compliance and compliance with the Company’s Code of Business Conduct and Ethics,
including the investigation and enforcement of the provisions of the Code of Business Conduct and Ethics. In addition,
our Compensation Committee, at least annually, reviews our compensation program to ensure that it does not
encourage excessive risk-taking. Each of our Committees regularly reviews with our Board any issues that arise in
connection with risk matters within the scope of its responsibilities and, in accordance with our Corporate Governance
Guidelines, our full Board regularly engages in discussions of risk management to assess major risks facing our Company
and review options for the mitigation of such risks. As a result of the foregoing, we believe that our CEO, together with
the Chairpersons of our Audit, Compensation and Nominating & Governance Committees and our full Board, provide
effective oversight of Company risk.
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Board Committees
The Board has four standing committees with separate chairpersons: the Audit, Compensation, Nominating &
Governance, and M&A Committees. Each of the Board committees is composed solely of independent directors and
has adopted a written charter that sets forth the specific responsibilities and qualifications for membership on the
committee. The charters of these committees are available on our website at:
https://investors.ontoinnovation.com/governance/governance-documents/
During 2024, the members of and number of meetings held by the Company’s Board committees were as follows:
Committee Chairperson
Committee Members
Number of Meetings
Held in 2024
Audit Committee
Susan D. Lynch (1)(2)
Leo Berlinghieri
10
Stephen D. Kelley
Karen M. Rogge (3)
Stephen S. Schwartz (4)
Christine A. Tsingos (5)
Nominating & Governance Committee
David B. Miller (6)
Leo Berlinghieri (7)
5
Christopher A. Seams
May Su
Compensation Committee
May Su
Stephen D. Kelley
5
David B. Miller
Christine A. Tsingos
M&A Committee
Christopher A. Seams (8)
Susan D. Lynch (1)
5
David B. Miller (9)
Karen M. Rogge(3)
(1)
Committee member effective as of March 2024.
(2) Committee chairperson effective as of August 2024.
(3) Committee member until May 2024.
(4) Committee member effective as of July 2024.
(5) Committee chairperson until August 2024, after which Ms. Tsingos continued serving as a committee
member.
(6) Committee chairperson effective as of May 2024.
(7)
Committee chairperson until May 2024, after which Mr. Berlinghieri continued serving as a committee
member.
(8) Committee chairperson effective as of May 2024.
(9) Committee chairperson until May 2024, after which Mr. Miller continued serving as a committee
member.
PROXY STATEMENT
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Audit Committee
The current members of the Audit Committee are Leo Berlinghieri, Stephen D. Kelley, Susan D. Lynch, who also serves
as chairperson of the committee, Stephen S. Schwartz, and Christine A. Tsingos. The Audit Committee assists the
Board in fulfilling its responsibilities for general oversight of the integrity of our financial statements, our accounting
policies and procedures and our compliance with legal and regulatory requirements. Among its functions, the Audit
Committee is responsible for:
•
The appointment, compensation, performance evaluation, retention, and oversight of the Company’s
independent registered public accounting firm;
•
The approval of services performed by the Company’s independent registered public accounting firm;
•
Reviewing the responsibilities, functions, and performance of the Company’s internal audit function;
•
Reviewing the scope and results of internal audits and ongoing assessments of the Company’s risk
management processes and system of internal control;
•
Reviewing and approving in advance any related party transactions; and
•
Evaluating the Company’s system of internal control over financial reporting and disclosure controls and
procedures.
The report of our Audit Committee is found below under the caption “Audit Committee Report.”
The Board has determined that each of the Audit Committee members meets the Audit Committee membership
requirements set forth by the NYSE and the SEC, including that they be “independent” and financially literate.
Furthermore, the Board has determined that Ms. Tsingos and Ms. Lynch each qualify as an “Audit Committee Financial
Expert” as that term is defined under SEC rules and have “accounting or related financial management expertise” as
contemplated by NYSE rules.
Nominating & Governance Committee
The current members of the Nominating & Governance Committee are Leo Berlinghieri, David B. Miller, who also serves
as chairperson of the committee, Christopher A. Seams, and May Su. The responsibilities of the
Nominating & Governance Committee include:
•
Identifying prospective director nominees and recommending to the Board director nominees for the next
Annual Meeting of Stockholders and replacements of a director in the event of a vacancy on the Board;
•
Recommending to the Board the appointment of directors to Board committees;
•
Developing and recommending to the Board, and monitoring compliance with, the corporate governance
guidelines applicable to the Company;
•
Managing the CEO selection process;
•
Overseeing evaluation of Company management; and
•
Conducting an annual review of management succession planning.
The Nominating & Governance Committee also oversees the annual evaluation of the Board, the committees of the
Board and the individual directors. Among other topics, the evaluation in general assesses:
•
For both the Board and the committees:
Their structure and composition;
The format and content of meetings; and
The effectiveness of the Board and the committees, as applicable.
•
For each individual director:
Their performance and approach to their directorship;
PROXY STATEMENT
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Their understanding of their role as a director;
Their understanding of critical aspects of the Company’s business, products and strategy; and
Their skills, experience and ongoing training.
The goal of the evaluation is to identify and address any performance issues at the Board, committee or individual level,
should they exist, identify potential gaps in the boardroom and to assure the maintenance of an appropriate mix of
director skills and qualifications. Upon completion of the evaluation, the Nominating & Governance Committee provides
feedback to the Board, the committees and the individual directors regarding the results of the evaluation and raises
any issues that have been identified which may need to be addressed.
The Nominating & Governance Committee utilizes a variety of methods for identifying and evaluating potential
candidates for joining the Board. For 2024, the Nominating & Governance Committee engaged ON Partners, an
executive search and leadership consulting firm, to assist with this process. The Nominating & Governance Committee’s
general policy is to assess the appropriate size and needs of the Board and whether any vacancies are expected due
to retirement or otherwise. In addition, candidates for director are typically reviewed in the context of the current
composition of the Board, the operating requirements of the Company, the current needs of the Board, and the long-
term interests of stockholders, with the goal of maintaining a balance of knowledge, experience and capability. In the
event those vacancies are anticipated, or otherwise arise, the Nominating & Governance Committee will consider
recommending various potential candidates to fill such vacancies. Candidates may also come to the attention of the
Nominating & Governance Committee through its current members, stockholders or other persons.
The Board has determined that each of the Nominating & Governance Committee members meets the Nominating &
Governance Committee membership requirements, including the independence requirements of the NYSE and the SEC.
Compensation Committee
The current members of the Compensation Committee are Stephen D. Kelley, David B. Miller, May Su, who also serves
as chairperson of the committee, and Christine A. Tsingos. The Compensation Committee is responsible for, among
other things:
•
Reviewing and approving the compensation of the Company’s officers;
•
Reviewing and recommending to the Board for approval the compensation policy for the Company’s non-
employee directors; and
•
Administering the Company’s equity compensation plans.
The Compensation Committee reviews and approves the various elements of the CEO’s compensation. With respect to
other officers, the Compensation Committee reviews the compensation for such individuals presented to the
Compensation Committee by the CEO and the reasons therefor and, in its discretion, may approve or modify the
compensation packages for such individuals. The Compensation Committee has delegated to the Company’s CEO the
authority, within certain parameters, to approve the grant of restricted stock units (“RSUs”) to employees and
consultants who are not directors, executive officers, or officers reporting to the CEO.
In accordance with its charter, the Compensation Committee may form, and delegate its authority to, subcommittees
when appropriate. Further, the Compensation Committee has the authority to retain independent compensation
consultants and to obtain advice from internal or external legal, accounting, and other advisors to assist in the evaluation
of director, officer, or employee compensation or other matters within the scope of the Compensation Committee’s
responsibilities and is directly responsible for the appointment, compensation, and oversight of such consultants and
other outside advisors, including their fees and other retention terms. From time to time, the Compensation Committee
engages the services of such independent compensation consultants to provide advice on compensation plans and
issues related to the Company’s executive officer and non-executive officer employees. In 2024, the Compensation
Committee engaged Compensia, Inc. (“Compensia”) to provide such assistance to the Compensation Committee.
Each current member of our Compensation Committee is a “non-employee” director within the meaning of Rule 16b-3
under the Exchange Act. The Board has determined that each of the Compensation Committee members meets the
PROXY STATEMENT
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Compensation Committee membership requirements set forth by the NYSE and the SEC, including that they be
“independent.”
For further discussion of the Compensation Committee and its processes and procedures, please refer to the
“Compensation Program Objectives, Design, and Practices” section in the Compensation Discussion and Analysis below.
The Compensation Committee Report is included under the caption “Compensation Committee Report on Executive
Officer Compensation” in this proxy statement.
M&A Committee
The current members of the M&A Committee are Susan D. Lynch, David B. Miller, and Christopher A. Seams, who also
serves as chairperson of the committee. The Board established the M&A Committee as a standing committee in May
2022 to assist the Board in evaluating potential acquisitions, investments, mergers, divestitures, and similar strategic
transactions and to oversee management’s execution of such strategic transactions. The M&A Committee’s
responsibilities include:
•
Reviewing and assessing strategic transactions identified by management, including the valuation,
strategic rationale and integration strategy for any proposed transaction;
•
Approving non-binding term sheets, letters of intent, indications of interest, and other similar documents
for strategic transactions;
•
Overseeing the diligence processes for strategic transactions; and
•
Providing guidance to management as to the desired methodology and processes for identification,
development, and presentation of strategic opportunities.
Other Committees
Our Board may from time to time establish other special or standing committees to facilitate the oversight of
management of the Company or to discharge specific duties delegated to the committee by the full Board.
PROXY STATEMENT
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Compensation Committee Interlocks And Insider Participation
During fiscal year 2024, Stephen D. Kelley, David B. Miller, May Su, and Christine A. Tsingos were each a member of the
Compensation Committee. No member of our Compensation Committee was at any time during fiscal year 2024, or
formerly, an officer or employee of Onto Innovation or any subsidiary of Onto Innovation. No member of our
Compensation Committee had any relationship with the Company during fiscal year 2024 requiring disclosure under
Item 404 of Regulation S-K under the Exchange Act. During fiscal year 2024, none of our executive officers served as
a member of the board of directors or compensation committee (or other committee serving an equivalent function) of
any entity that had one or more executive officers serving as a member of our Board of Directors or Compensation
Committee.
Board Membership Criteria And Nominee Identification
The Nominating & Governance Committee of the Board determines the required selection criteria and qualifications of
director nominees based upon the needs of the Company at the time nominees are considered. While the Nominating
& Governance Committee has no specific minimum qualifications for director candidates, persons considered for
nomination to the Board must demonstrate the following qualifications to be recommended by the Nominating &
Governance Committee for election:
•
The candidate must exhibit proven leadership capabilities, high integrity, and experience with a high level
of responsibilities within his or her chosen field;
•
The candidate must possess the ability to apply good business judgment and be of sound mind and high
moral character;
•
The candidate must have no personal or financial interest that would conflict or appear to conflict with the
interests of the Company;
•
The candidate must be in a position to properly exercise his or her duties of loyalty and care and be willing
and able to commit the necessary time for Board and committee service; and
•
The candidate must have the ability to grasp complex principles of business, finance, international
transactions and semiconductor inspection, metrology, lithography, and related software technologies.
The Nominating & Governance Committee retains the right to modify these qualifications from time to time.
In selecting director nominees, the Nominating & Governance Committee considers, among other factors:
•
The competencies and skills that the candidate possesses and the candidate’s areas of qualification and
expertise that would enhance the composition of the Board and further its ability to offer advice and
guidance to management;
•
How the candidate would contribute to the Board’s overall balance of expertise, perspectives,
backgrounds, and experiences in substantive matters pertaining to the Company’s business; and
•
The candidate’s demonstrated excellence in his or her field and commitment to rigorously representing the
long-term interests of the Company’s stockholders.
When current Board members are considered for nomination for reelection, the Nominating & Governance Committee
also takes into consideration their prior contributions to and performance on the Board and their record of attendance.
The Nominating & Governance Committee considers the above criteria for nominees identified by the Nominating &
Governance Committee itself, by stockholders, or through other sources. The Nominating & Governance Committee
uses the same criteria for evaluating all nominees, regardless of the original source of nomination. The Nominating &
Governance Committee may use the services of a third-party search firm to assist in the identification or evaluation of
Board member candidates.
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Consideration Of Director Nominees
The Nominating & Governance Committee has a formal policy with regard to consideration of director candidates
recommended by the Company’s stockholders, which is contained within the Company’s Director Candidate Policy,
which may be found on our website at:
https://investors.ontoinnovation.com/governance/governance-documents/
In accordance with this policy, the Nominating & Governance Committee will consider recommendations and
nominations for director candidates from stockholders holding no less than 1% of the Company’s securities for at least
12 months prior to the date of the submission of the recommendation or nomination. Stockholders wishing to
recommend persons for consideration by the Nominating & Governance Committee as nominees for election to the
Company’s Board can do so by writing to the Office of the General Counsel of the Company at its principal executive
offices giving:
•
The candidate’s name, age, business address and residence address;
•
The candidate’s detailed biographical data and qualifications including principal occupation and
employment history;
•
The class and number of shares of the Company which are beneficially owned by the candidate;
•
The candidate’s written consent to being named as a nominee and to serving as a director, if elected;
•
Information regarding any relationship between the candidate and the Company in the last three years;
•
Any other information relating to the candidate that is required by law to be disclosed in solicitations of
proxies for election of directors;
•
The name and address of the recommending or nominating stockholder;
•
The class and number of shares of the Company which are beneficially owned by the recommending or
nominating stockholder; and
•
A description of all arrangements or understandings between such stockholder and each nominee and any
other person or persons (naming such person or persons) relating to the nomination.
Stockholders also have the right to directly nominate director candidates, without any action or recommendation on
the part of the Nominating & Governance Committee or the Board, by following the procedures set forth in Section 2.5
of the Company’s Bylaws.
Corporate Governance Guidelines
Our Board has adopted Corporate Governance Guidelines, which, along with the Company’s Charter and Bylaws and
the Board committee charters, provide the framework for the governance of Onto Innovation. The Board follows the
procedures and standards in the Corporate Governance Guidelines to fulfill its responsibilities and discharge its
governance duties. A copy of the Corporate Governance Guidelines is available on our website at:
https://investors.ontoinnovation.com/governance/governance-documents/
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Codes Of Ethics
We have adopted a Code of Business Conduct and Ethics (applicable to all directors, officers, employees, consultants,
and contractors) and a Financial Information Integrity Policy (applicable to our senior financial officers, including our
CEO and Chief Financial Officer (“CFO”) and Controller) that each set forth principles of ethical and legally compliant
conduct and establish procedures for reporting any violations. Copies of the Code of Business Conduct and Ethics and
the Financial Information Integrity Policy may be found on our website at:
https://investors.ontoinnovation.com/governance/governance-documents/
or may be requested (without charge) by writing to:
Onto Innovation Inc.
Attention: Investor Relations
16 Jonspin Road
Wilmington, Massachusetts 01887
The Company will post on its website any amendment or waiver of a provision of our Code of Business Conduct and
Ethics as may be required, and within the time period specified, by applicable SEC rules.
Corporate Social Responsibility
An important part of advancing the semiconductor industry through our innovation is being a socially responsible
company. Our Company’s core values of Passion, Integrity, Collaboration, and Results underpin our commitments to
sustainable growth and to making a positive contribution to people and the planet. We strive to achieve responsible
and sustainable business practices and continuous improvement in our own operations, in our partnerships with our
customers, across our supply chain, and in our engagements with our other stakeholders. Our Company invests in
sustainability initiatives across our business and integrates sustainability principles into our day-to-day operations.
Business and Governance. Our Company has established a cross-functional executive leadership team focused on
sustainability that is responsible for proposing goals, developing and executing strategy, and embedding sustainability
principles into our operations management. This executive leadership team provides regular updates to the Board and
engages them to discuss sustainability strategy, gain alignment on goals, and report on progress. Our Board is actively
engaged in the Company’s sustainability oversight and has the primary responsibility for our sustainability priorities.
Board committees provide further guidance and oversight on relevant sustainability topics including the Compensation
Committee on human capital management, the Audit Committee on information security and the Nominating &
Governance Committee on ethics compliance.
Workplace. As described in the “Social Programs” section in our 2023 ESG Report, our Company strives to provide a
work environment that fosters inclusion and diversity, ensures every voice is heard, and enables employees to achieve
their full potential. Our Company aims to maintain a collaborative, supportive, and opportunity-rich culture that
enhances innovation and employee engagement. We strive to protect the health and safety of our personnel throughout
our entire operation, including our offices, manufacturing sites, research and development (“R&D”) centers, and our field
team working at customer sites.
Community. Our Company believes that positively involving our employees and giving back to our community is central
to our culture and an expression of our core values. The Company has initiated RISE (Reimagining Initiatives for Society
and the Environment) Teams, which have direct oversight from the executive leadership team. These teams are formed
at each location globally in order to promote environmental sustainability, community engagements, local charitable
giving including employee volunteer hours and employee donations. Our RISE Teams’ philanthropy and volunteerism
programs provide financial and human services to improve the quality of life in the communities in which we operate.
We are committed to creating positive impacts in communities around the world by contributing to local, national, and
international organizations that support community needs such as hunger, food and water security, disadvantaged
children and senior citizens, health improvement, and environmental protection.
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Sustainable Operations. We believe that incorporating environmental sustainability into business leads to better
products, more efficient operations, and added value for our customers. As the world tackles climate change and other
critical environmental issues, we seek to do our part by responsibly managing our impact with global goals for renewable
energy use, carbon footprint per person, water conservation, beneficial reuse of electronic waste, and landfill hazardous
waste reduction and elimination. We carefully monitor and manage our environmental impact across our business and
work to implement cost-effective best practices, focusing our efforts where we believe we can have the biggest long-
term impact. Our Company looks at impacts from procurement to manufacturing, during R&D and product design, and
throughout a product’s lifecycle. We carefully manage our environmental impact, set goals, and report progress annually
through our annual ESG Report, which is carefully reviewed and verified by our internal audit function.
Products and Customers. Our Company demands excellence in our quality and environmental performance, as
demonstrated through our product and process qualification commitments, which resulted in our ISO 9001 Quality
Management certification. We continuously strive to develop innovative products and solutions that help our customers
improve their product yields and reduce the amount of scrapped materials. We seek to achieve this through our
monitoring processes and by alerting customers via our software products before specification limits are reached,
thereby helping customers avoid product test failures. In addition, our equipment meets or exceeds safety requirements
and enables higher throughput to reduce the energy required to process customer products on a per unit basis,
benefiting our customers and the environment. Our Company also strives to extend the life of our products and
solutions to enable our customers to realize greater value from our products with a potentially lower environmental
impact.
Responsible Supply Chain. Our Company understands the importance of an ethical, responsible, resilient, and diverse
supply chain, and we engage with our suppliers to address a wide range of issues including human rights, humane
treatment, freely chosen employment, labor, anti-corruption, supplier diversity, environmental impact, and responsible
mineral sourcing. We are a strong proponent of supply-chain-related industry standards and endeavor to uphold the
guidelines published by the Responsible Business Alliance (“RBA”). Since joining in 2021, the Company has been an
affiliate member of the RBA, the world’s largest industry coalition dedicated to corporate responsibility in global supply
chains. Our direct suppliers are expected to adhere to our Global Supplier Code of Conduct, which incorporates the
RBA code of conduct and covers topics such as ethics, integrity, transparency, anti-corruption, conflict minerals, human
trafficking, environmental sustainability, and social responsibility. Acknowledgment of and consent to adhere to our
Global Supplier Code of Conduct is a mandatory requirement of our new supplier onboarding process.
For more information about our corporate social responsibility efforts, please refer to our Annual ESG Report available
in the Company section of our website at https://ontoinnovation.com/company/environmental-social-governance. Our
ESG Report shall not be deemed “filed” with the SEC for purposes of federal securities law, and it shall not be
incorporated by reference into any of the Company’s current, past or future SEC filings unless specifically noted in such
filing. The information contained on our website is not part of this document and the ESG Report shall not be deemed
soliciting material.
Related Person Transactions Policy
There have been no “related person transactions” from December 31, 2023 to the date of this proxy statement, nor are
there any currently proposed “related person transactions,” involving any director, director nominee or executive officer
of the Company, any known 5% stockholder of the Company or any immediate family member of any of the foregoing
persons (which are referred to together as “related persons”). A “related person transaction” generally means a
transaction involving more than $120,000 in which the Company (including any of its subsidiaries) is a participant and
in which one of our executive officers, directors, director nominees or 5% stockholders (or their immediate family
members), each of whom we refer to as a related person, has a direct or indirect material interest.
The Board has adopted written policies and procedures addressing the Company’s procedures with respect to the
review, approval and ratification of “related person transactions” that are required to be disclosed pursuant to Item
404(a) of Regulation S-K. Our related person practices and policies are designed to ensure that our directors, officers,
and employees are proactively screened from any conflicts of interest that may interfere with their obligations to the
Company. Our policies are included in the Company’s Related Parties Transaction Policy.
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Pursuant to the Related Parties Transaction Policy, the Audit Committee, which consists entirely of independent
directors, will review any proposed transaction in which the Company or its subsidiaries are to participate if the
aggregate amount involved in the transaction will or may exceed $120,000 and any related person may have a direct
or indirect material interest in the transaction. The Audit Committee will consider the facts and circumstances and may
approve or ratify a proposed transaction if the Audit Committee determines that the transaction is not inconsistent with
the interests of the Company and its stockholders. The Audit Committee may impose such conditions as it deems
appropriate in connection with its approval.
Communications With The Board Of Directors
We have a formal policy regarding communications with the Board, our Stockholder & Interested Party Communications
Policy, which is found on our website at:
https://investors.ontoinnovation.com/governance/governance-documents/
Stockholders may communicate with the Board, the Audit, Compensation, M&A, or Nominating & Governance
Committees, or any of the Company’s independent directors by writing to:
Onto Innovation Inc.
Office of the General Counsel
16 Jonspin Road
Wilmington, Massachusetts 01887
Such communications will be forwarded to the intended recipient(s) to the extent appropriate. Prior to forwarding any
communication, the General Counsel will review it and, in his or her discretion, will not forward a communication
deemed to be of a commercial nature or otherwise inappropriate.
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Compensation Of Directors
Directors who are employees of the Company receive no compensation for their services as members of the Board.
Director compensation for non-employee members of the Board is a mix of cash and equity-based compensation, which
is meant to align the interests of our directors with the Company’s long-term performance and stockholder interests.
The compensation during 2024 for directors who were not employees of the Company was as follows:
Board Compensation Element
Amount/Value
Annual Retainer
$70,000
(1)
Annual Equity Grant (in RSUs)
$185,000
(2)
Non-executive Chairperson Stipend
$55,000
(1)
Committee Chairperson Stipend
Audit
$25,000
(1)
Compensation
$20,000
(1)
Nominating & Governance
$10,000
(1)
M&A
$5,000
(1)
Committee Member Stipend
Audit
$10,000
(1)
Compensation
$7,500
(1)
Nominating & Governance
$5,000
(1)
M&A
$2,500
(1)
Initial Equity Grant (in RSUs)
$185,000
(3)
(1) Beginning in May 2024, the Company changed its payment schedule for director cash
compensation to payment in four equal installments on a quarterly basis on the following dates:
March 1, June 1, September 1, and December 1.
(2) Granted on or about the date of the Annual Meeting of Stockholders or, if such date is not in
an open trading window under the Company’s Insider Trading Policy, on the first day of the
next open trading window, in a number of shares calculated by dividing the listed amount by
the closing stock price per share of Common Stock of the Company, $0.001 par value per
share (“Common Stock”) on the date of grant.
(3) Granted on or about the date of the first quarterly Board or Compensation Committee meeting
following election or appointment, or, if such date is not in an open trading window under the
Company’s Insider Trading Policy, on the first day of the next open trading window, and
calculated in the same manner as the annual equity grant above but prorated by the number
of fiscal quarters between such first meeting and the date on which the next annual equity
grant is scheduled to be awarded.
Any initial equity grants and/or annual equity grants typically vest on the first anniversary of the grant date. Equity
awards granted to directors are granted under and subject to the terms of the Onto Innovation Inc. 2020 Stock Plan, as
amended and restated (the “2020 Stock Plan”) and the Company’s Stock-Based Award Grant Date Policy.
PROXY STATEMENT
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For the fiscal year ended December 28, 2024, the non-employee directors received total compensation indicated in the
table below. There were no option awards, non-equity incentive plan compensation, or pension and nonqualified
deferred compensation earnings granted to such directors. They did not earn any type of compensation during the
year other than what is disclosed in the following table:
Name
Fees Earned or
Paid in Cash (1)
Stock Awards (2)
All Other Compensation
Total
Leo Berlinghieri
$63,750
$185,156
—
$248,906
Stephen D. Kelley
$65,625
$185,156
—
$250,781
Susan D. Lynch
$65,625
$185,156
—
$250,781
David B. Miller
$67,500
$185,156
—
$252,656
Karen M. Rogge (3)
$20,625
—
—
$20,625
Stephen S. Schwartz (4)
$40,000
$138,843
—
$178,843
Christopher A. Seams
$101,250
$185,156
—
$286,406
May Su
$71,250
$185,156
—
$256,406
Christine A. Tsingos
$73,125
$185,156
—
$258,281
(1) Due to the change in May 2024 to a quarterly payment schedule for director cash compensation, only three
quarterly payments were made in 2024. Consequently the Fees Earned or Paid in Cash are lower than the annual
cash compensation amounts for the Board. In future years, Fees Earned or Paid in Cash will reflect four quarterly
payments.
(2) Represents the grant date fair value for each share-based compensation award granted during the year, calculated
in accordance with FASB ASC Topic 718. The assumptions used in determining the grant date fair value of these
awards are set forth in Note 10 to our consolidated financial statements, which are included in our Annual Report
on Form 10-K for the fiscal year ended December 28, 2024 filed with the SEC. As of December 28, 2024, our
directors had the following stock awards outstanding: Mr. Berlinghieri – 809 RSUs; Mr. Kelley - 809 RSUs; Ms.
Lynch - 809 RSUs; Mr. Miller – 809 RSUs; Dr. Schwartz - 661 RSUs; Mr. Seams – 809 RSUs; Ms. Su - 809 RSUs;
and Ms. Tsingos – 809 RSUs.
(3) Ms. Rogge did not stand for reelection to the Board in 2024.
(4) Dr. Schwartz joined the Board in July 2024.
Stock Ownership/Retention Guidelines For Directors
The Company has established guidelines related to stock ownership and retention for its non-employee directors.
Currently, the guidelines require that each non-employee director of the Company maintain ownership of shares of
Common Stock equal in value to at least three times the amount of the director’s annual cash retainer. For a new
director, the stock holding requirement must be attained within five years of his or her initial election or appointment to
the Board.
Compliance with the Company’s stock ownership and retention guidelines is reviewed annually by the Compensation
Committee. As of their last review in February 2025, the Compensation Committee determined that all directors were
in compliance with the ownership requirements.
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PROPOSAL 2
ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the Dodd-Frank Act, enables our
stockholders to vote to approve, on an advisory (non-binding) basis, the compensation of our named executive officers
as disclosed in this proxy statement in accordance with SEC rules. Consistent with the recommendation of the Board
and the preference of our stockholders as reflected in the non-binding advisory vote on the frequency of future advisory
votes on named executive officer compensation held at the Company’s 2023 Annual Meeting of Stockholders, the
Company currently holds an annual “say on pay” vote. In accordance with this policy, this year we are requesting that
our stockholders approve an advisory resolution to approve the Company’s named executive officer compensation as
reported in this proxy statement.
Our executive officer compensation arrangements are designed, consistent with our compensation philosophy and pay-
for-performance principles, to provide competitive compensation packages that enable the Company to attract and
retain talented executive officers, motivate executive officers to achieve the Company’s short- and long-term business
strategies and objectives, align the interests of executive officers with those of stockholders, and be consistent with
current market practices and good corporate governance principles. Please read the Compensation Discussion and
Analysis beginning on the following page for additional details about our executive officer compensation arrangements,
including information about the fiscal year 2024 compensation of our named executive officers.
We are asking our stockholders to indicate their support for our compensation arrangements as described in this proxy
statement.
For the reasons discussed above, the Board recommends that stockholders vote in favor of the following resolution:
“RESOLVED, that the Company’s stockholders APPROVE, on an advisory basis, the compensation paid
to the Company’s named executive officers, as disclosed in the proxy statement for this meeting
pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis,
compensation tables and narrative discussion and other related tables and disclosures.”
Because your vote is advisory, it will not be binding upon or overrule any decisions of the Board, nor will it create any
additional fiduciary duty on the part of the Board. This advisory vote is not intended to address any specific item of
compensation, but rather the overall compensation of our named executive officers and our compensation philosophy,
policies, and practices described in this proxy statement, and does not seek to have the Board or Compensation
Committee take any specific action. However, the Board and the Compensation Committee value the views expressed
by our stockholders in their vote on this proposal and will take into account the outcome of the vote when considering
executive officer compensation matters in the future.
Vote Required
The affirmative vote, in person or by proxy, of a majority of the shares present or represented at the meeting and entitled
to vote will be required to approve, on an advisory (non-binding) basis, the compensation of our named executive
officers as disclosed in this proxy statement.
The Board recommends a vote “FOR” the approval,
on an advisory basis, of the compensation of the named executive officers
as disclosed in this proxy statement pursuant to Item 402 of Regulation S-K.
PROXY STATEMENT
27
EXECUTIVE OFFICER COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
Introduction
This Compensation Discussion and Analysis (“CD&A”) describes our compensation philosophy, process, plans, and
practices for our executive officers and contains a discussion of the material elements of compensation awarded to,
earned by, or paid to the Company’s named executive officers or “NEOs.” The Company’s NEOs for 2024 were:
Onto Innovation’s Named Executive Officers (NEOs)
NEO Name
Position
Michael P. Plisinski
Chief Executive Officer
Mark R. Slicer
Chief Financial Officer
Yoon Ah E. Oh
Senior Vice President, General Counsel, and Corporate Secretary
Srinivas Vedula
Senior Vice President, Customer Success
Ramil Yaldaei
Chief Operating Officer
EXECUTIVE SUMMARY
2024 Financial Highlights
In 2024, the Company achieved important financial accomplishments. These include, but are not limited to:
•
Total revenue of $987 million grew 21% over fiscal year 2023.
•
Cash generated from operations of $246 million improved by 43% over fiscal year 2023.
•
Full year GAAP diluted earnings per share of $4.06 grew 65% over fiscal year 2023.
The following reflects our revenue and stock price in fiscal year 2024 as compared to fiscal years 2023 and 2022:
PROXY STATEMENT
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2024 Compensation Highlights
Executive compensation is a key component of our corporate governance practices and our plans to drive long-term
profitable growth. We’ve designed our compensation program to both attract and retain best-in-class executive
management and to motivate our executive officers to achieve corporate objectives and create value for
stockholders. In 2024, key features of our compensation program included the following:
•
Competitive base salary increases: base salaries for executive officers were set based on several factors,
including executive officers’ unique qualifications, role, and responsibilities, individual performance, and
measurable contribution to the Company’s profitability and success.
•
Rigorous annual incentive goals: executive officer cash incentive compensation is tied to overall corporate
performance, achievement of individual performance goals, and, for those executive officers associated
with a particular business unit, to individual business unit performance as well.
•
An emphasis on performance-based long-term incentives: a substantial portion of executive officer
compensation is in the form of long-term equity incentives that incentivize both long-term service at the
Company and creating shareholder value.
Results Of The 2024 Stockholder Vote On Executive Officer Compensation
In 2024, stockholders were provided with the opportunity to cast an advisory (non-binding) vote (a “say-on-pay”
proposal) on the compensation of our NEOs for fiscal year 2023. Our stockholders approved this say-on-pay proposal,
with 96.8% of votes cast voting in favor of our executive compensation program. Our Compensation Committee and
Board recognize the fundamental interest our stockholders have in the compensation of our executive officers. Noting
the strong support for our 2023 compensation program, the Compensation Committee maintained a consistent
approach to our executive officer compensation program in 2024, with the addition of a personal performance
coefficient factored into cash incentive compensation.
The Compensation Committee will continue to consider input from our stockholders as reflected in the outcome of our
annual say-on-pay vote when making executive compensation program decisions.
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COMPENSATION PROGRAM OBJECTIVES, DESIGN, AND PRACTICES
Our Compensation Philosophy And Principles
Our compensation philosophy, which serves as the framework for the Company’s executive officer compensation
program, is defined by two key tenets: (1) rewarding continuous improvement in financial and operating results and (2)
creation of stockholder value. The Compensation Committee acts on behalf of the Board and, by extension, on behalf
of our stockholders, to establish, implement, and continually monitor adherence to our compensation philosophy.
Accordingly, the Compensation Committee has developed a set of core objectives and principles that it has used to
develop the executive officer compensation program. The specific objectives of our executive officer compensation
program are to:
•
Attract and retain executive officer talent;
•
Motivate executive officers to achieve the Company’s short- and long-term business strategies and
objectives; and
•
Align the interests of executive officers with those of stockholders.
Consistent with the foregoing, the Compensation Committee believes that the most effective executive officer
compensation program is one that rewards the achievement of specific strategic and operating goals of the Company
on both an annual and a long-term basis, and that incentivizes executive officers to create value for stockholders. The
Compensation Committee evaluates both performance and compensation to ensure that the Company maintains its
ability to attract and retain superior employees in key positions. Based on that evaluation, the Compensation Committee
designs the compensation provided to executive officers to remain competitive with the compensation paid to similarly
situated executive officers at peer group companies. The Compensation Committee believes executive officer
compensation packages provided by the Company to its executive officers, including the NEOs, should include base
salary, annual cash incentive opportunities, and long-term stock-based compensation, including equity incentive
opportunities that reward performance as measured against pre-established goals.
The following principles support the objectives and design of the compensation program:
•
The compensation program is designed to be fair and competitive, from an internal and external
perspective, taking into account each executive officer’s unique qualifications, role, responsibilities,
individual performance, and measurable contribution to the Company’s profitability.
•
A substantial portion of an executive officer’s compensation is designed to be at risk and linked to the
achievement of both corporate and individual financial, management or other performance goals and
changes in stockholder value.
•
All compensation program elements taken as a whole are designed to help focus executive officers on
achieving the Company’s financial and strategic goals while supporting our culture and core values.
To underscore the importance of “pay-for-performance” in our compensation philosophy, the Compensation Committee
has developed incentive arrangements based on performance standards that the Compensation Committee believes,
at target achievement, will incentivize our executive officers to meet or exceed industry performance.
The Company also strives to promote an ownership mentality among its key leadership, in part through the guidelines
described below under the heading “Stock Ownership/Retention Guidelines.” To that end, the CEO is required to
maintain ownership of Common Stock equal in value to at least three times the CEO’s year-end base salary. The other
executive officers are required to maintain a minimum share ownership level equal in value to their current year-end
base salary. In further support of this approach, the Company prohibits pledges of Company securities as collateral, as
well as short sales, derivative and hedging transactions involving Company securities, to ensure that personal interests
relating to the stock holdings of officers and directors do not conflict with their duties to the Company.
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Compensation Program Design
Our executive officer compensation program, which applies to all executive officers including our NEOs, is composed
of three parts, each of which is intended to address different objectives: base salary, annual cash performance
incentives, and long-term equity incentives.
Element
Form
Description
Base Salary
Fixed Cash Compensation
Competitive cash compensation that takes into consideration the
scope and complexity of the role, individual qualifications,
experience, and internal value to the Company.
Annual Cash
Incentive Plan
Annual Variable Cash Bonus
Annual variable cash bonus contingent on meeting performance
criteria related to corporate, business unit/department (as
applicable), and individual performance objectives.
Long-Term Equity
Incentive Program
Long-Term Stock-Based
Compensation
PSUs are earned based on Company TSR performance relative
to a designated peer group. Time-based RSUs vest
incrementally over a fixed period.
Base salaries serve as the foundation of our executive compensation program, providing fixed compensation to
executive officers commensurate with their knowledge and experience and for fulfilling their basic job responsibilities.
The Compensation Committee generally establishes base salary levels for executive officers at or near the start of each
year.
The Company’s annual cash incentive awards are administered through its Management By Objectives (“MBO”) bonus
plan. At its first meeting each year, the Compensation Committee typically determines final bonuses for executive
officers earned in the preceding year based on each individual’s performance, the performance of the Company through
its audited financial statements, business unit performance (as applicable), and the CEO’s recommendations (except
with respect to the CEO's own bonus).
The long-term equity incentive component includes grants of (i) performance-based stock units (“PSUs”), which are
earned based on the Company’s total shareholder return (“TSR”) relative to the other companies in the Philadelphia
Stock Exchange Semiconductor Index (SOX) over two- and three-year performance periods, and (ii) time-based RSUs,
which vest in equal annual increments over time. The Compensation Committee generally approves the grant of annual
equity awards to officers at its first regularly scheduled meeting each year. The Compensation Committee does not
generally grant equity awards at other times during the year, other than in the case of a new hire, promotion or other
exceptional circumstances.
In adopting this design, the Compensation Committee considered a number of parameters, including the advice of its
independent compensation consultant, comparable practices within the industry, and the desire to achieve the goals
underlying the compensation program. The Compensation Committee and Board further believe that each of the
elements as well as the entire compensation package for Company executive officers is appropriate given the
Company’s performance, industry, current challenges, and environment.
Annually, the Compensation Committee reviews the elements of the compensation package as well as the overall
package afforded to the executive officers. At such time, the Compensation Committee, in its discretion, can approve
adjustments to the elements of the program. This review is typically performed coincident with the evaluation of each
executive officer’s performance in relation to his or her cash incentive compensation goals, salary adjustment, and
equity grants, if any, as discussed in more detail in the sections below.
For 2024, the Compensation Committee conducted a review of the compensation program and determined that the
2024 executive compensation plan would retain the same basic elements as the prior year’s plan as these elements
aligned the Company’s program with its current business strategy and included the pay for performance aspect of its
executive compensation program.
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Impact Of Performance On Compensation
The Compensation Committee aligns both the Company’s annual cash incentive plan and long-term equity incentive
program with the Company’s performance relative to pre-established performance goals based on the Company’s
stated financial objectives, historical performance, and anticipated market and economic conditions for the
performance period. The Compensation Committee seeks to structure the equity and cash incentive compensation
program to motivate executive officers to achieve the business goals set by the Company and reward the executive
officers for achieving such goals, which we believe aligns the financial incentives of our executive officers with the
interests of our stockholders.
The performance of the Company and of each executive officer has a direct impact on the compensation received by
such executive officer. On an annual basis, the CEO reviews the performance and compensation for the Company’s
other executive officers to determine any potential salary adjustment for each individual. The CEO then proposes
(except with respect to the CEO’s own compensation) to the Compensation Committee the annual cash incentive payout
to executive officers, including the NEOs, under the MBO bonus plan, the target cash incentive compensation for the
upcoming year, any base salary adjustments, and equity award amounts for the upcoming year. Each of these
recommendations, and the Compensation Committee’s final compensation determination for executive officers, is
based on each executive’s performance and contributions to the Company, as well as overall Company performance.
Under our MBO bonus plan, payout is based upon achievement of corporate, business unit (as applicable), and personal
objectives, with no payout unless the Company meets the threshold level of at least one of the Board-approved
corporate financial targets established as part of the plan. Personal objectives are awarded only upon clear
achievement of the associated goal. Failure to meet the personal objectives thereby has a negative impact on the
ultimate bonus payout, even when the Company achieves its corporate goals. In addition, beginning with the 2024
MBO bonus plan, the bonus for each executive officer, other than the CEO, is qualified by an overarching personal
performance coefficient to enable stronger pay for performance and upside for key performers. The personal
performance coefficient ranges from 0% to 115% based on a comprehensive performance assessment that includes
cultural alignment, alignment with core competencies and behaviors, and overall performance rating.
The CEO recommends to the Compensation Committee individual performance goals for the executive officers
(including the NEOs), other than the CEO, for the current year, which are combined with the corporate and business
unit (as applicable) targets into an annual cash incentive opportunity proposal. The personal targets that are established
are designed to result in additional incremental value to the Company if they are achieved. The target level of the
corporate and business unit components of the bonus goals are set based on the Company’s financial budget
established by the Board at the beginning of the year. The determination of these goals is made annually to meet the
changing nature of the Company’s business.
Upon completion of the prior year’s results and prior to implementation of the current year’s proposed executive
compensation plan, the results for each executive officer are submitted to, and reviewed by, the Compensation
Committee, which considers the CEO’s recommendations for executive officers, other than the CEO, and determines
the final bonus earned by each executive officer based on Company and individual performance. The Compensation
Committee may exercise discretion in adjusting and approving an individual’s award under the bonus plan based upon
its review.
The two elements of the Company’s long-term equity incentive compensation program are also performance-based.
The PSU grants, which are explained in further detail below, measure the Company’s TSR over two- and three-year
periods as compared to that of companies in the Philadelphia Semiconductor Index (SOX) and reward executives for
achieving TSR greater than that of other companies in the Index. In addition, because the value of PSUs and the service-
based RSUs granted to executive officers are tied to the Company’s stock price, their value increases or decreases with
the performance of the Company stock, further incentivizing executives to manage the Company for the benefit of the
Company's stockholders.
Given that a substantial portion of an executive officer’s overall compensation is tied to individual and Company
performance through the annual cash incentive and long-term equity incentive components, we also think the
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structure of our executive compensation program meets the Company's other objectives of motivating executive
officers to achieve the Company’s short- and long-term business strategies and objectives and aligning the interests
of executive officers with those of our stockholders. The pay-for-performance nature of our compensation structure
rewards the achievement of strategic, operational and financial goals, thereby enhancing stockholder value.
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Our Compensation Practices
The Compensation Committee has adopted the following practices and policies with respect to the Company’s
executive officer compensation program:
What We Do
Committee
Independence
The Compensation Committee consists of independent directors and regularly reserves
time at its meetings to meet in executive session without management present.
Independent
Compensation
Consultant
The Compensation Committee has engaged its own independent compensation consultant
and annually assesses the consultant’s performance, independence, and whether any
potential conflicts of interest exist.
Independent Legal
Advisor
The Compensation Committee may engage its own independent legal advisor specializing
in corporate compensation issues, as necessary.
CEO Goal Setting and
Performance Evaluation
The Compensation Committee, with the input of the full Board, engages in formal goal
setting and performance evaluation processes with the CEO.
Peer Group
The Compensation Committee selects a set of peer group companies who operate in
similar markets to the Company’s, and have comparable revenue and market caps, to use
as a competitive reference point with respect to executive officer and director
compensation, program design and practices.
Stock Ownership
Guidelines
The Company maintains rigorous stock ownership guidelines, which apply to executive
officers and directors, and serve as a risk-mitigating feature within our compensation
structure.
Double Trigger Change-
in-Control
The Company has entered into agreements with executive officers, including the CEO, that
contain change-in-control severance protection. Executive officers are entitled to
severance in the event of both a change in control of the Company and a qualifying
termination of employment (“double trigger”).
Clawback Policy
The Company has adopted a policy that provides for mandatory recoupment of certain
excess incentive compensation that would not have been earned based on the specified
accounting restatements.
Grant Date Policy
The Company does not manipulate the timing of grant dates of any stock-based awards or
our release of material nonpublic information with the intent of benefitting an award
recipient, nor do we have any program, plan or practice to do so. In addition, the Board
has adopted a specific written policy regarding grant dates of stock-based awards made
to our directors, officers, and employees. Please see “Equity Award Grant Timing Policies”
below for more information.
What We Do Not Do
No Pledging, Margining,
or Hedging
The Company’s insider trading policy prohibits our directors and employees, including
executive officers, from purchasing Company securities on margin, borrowing against
Company securities held in a margin account, or pledging Company securities as collateral
for a loan. Company directors and employees are also prohibited from engaging in short
sales, derivative transactions, and hedging transactions involving Company securities.
No Tax Gross-Ups on
Perquisites or Severance
The Company does not provide any tax gross-up payments to cover personal income
taxes on perquisites or severance benefits related to a change in control.
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COMPENSATION DECISION-MAKING PROCESS
Determination of Compensation Awards
The Compensation Committee’s goal is to target elements of compensation within a competitive range, using a balanced
approach that does not use rigid percentiles to target pay levels for each compensation element. For 2024, the
Compensation Committee reviewed each element of compensation described below and set the target total direct
compensation opportunities of our executive officers after taking into consideration the following factors:
•
Company profitability;
•
The executive officer’s unique qualifications;
•
The executive officer’s role and responsibilities;
•
The executive officer’s individual performance and measurable contribution to the Company’s profitability
and success;
•
The executive officer’s adherence to Company culture and core competencies; and
•
Compensation levels of similar positions with comparable companies in the industry.
The Compensation Committee does not assign relative weights or rankings to any of these factors and does not solely
use any quantitative formula, target percentile or multiple for establishing compensation among the executive officers
or in relation to the competitive market data.
Role of the Compensation Committee
The Compensation Committee is charged with making all final determinations regarding the compensation of our
executive officers. In the beginning of each year, the Compensation Committee evaluates the CEO’s performance in
light of the goals and objectives established at the beginning of the previous fiscal year for measuring his performance.
The CEO does not participate in the Compensation Committee’s or Board’s deliberations regarding his compensation.
The CEO meets with the Compensation Committee to present the proposed compensation plans for each of the
Company’s executive officers other than the CEO, including the other NEOs. Based on these meetings and internal
deliberations, the Compensation Committee then approves the annual compensation for the Company’s CEO and other
executive officers, including the NEOs, including base salary, cash incentive award opportunity, and equity
compensation.
In the same time period, the Compensation Committee also reviews and recommends for approval by the Board:
•
The Company Compensation Plan for all non-executive employees, including (i) adjustments to base
compensation and profit-sharing, bonus and other cash incentive plans, and (ii) the annual equity award
budget; and
•
The annual compensation program for non-employee directors.
In reviewing and setting the annual compensation for each executive officer, the Compensation Committee considers
the amounts payable under each of the elements of their respective compensation plans, including base salary, annual
cash incentive awards, and equity grants. The Compensation Committee takes into consideration both the Company’s
internal pay equity as well as the competitive environment within which the Company operates. The Compensation
Committee then determines whether the base salary and annual and long-term incentive award opportunities for the
individual executive officers support the Company’s compensation objectives and are both competitive and reasonable
in the context of the Company’s competitive market.
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Role of Management
With regard to compensation for executive officers other than the CEO, the Compensation Committee seeks input from
the CEO and the human resources department. Each year, the CEO is responsible for establishing proposed personal
and corporate objectives for the Company’s other executive officers, including the other NEOs. These objectives,
subject to the approval of the Compensation Committee, are reviewed and agreed upon by the CEO with the applicable
executive officer. In addition, as part of the annual performance review of the Company’s executive officers, the CEO
assesses the performance of his direct reports and recommends any merit increase to be proposed for each individual.
These recommendations are compiled by the CEO into executive officer compensation plans which include any
proposed merit increases, each executive officer’s personal and corporate objectives, proposed annual incentive award
opportunities (expressed as a percentage of their base salary) and equity grant proposals, and are submitted to the
Compensation Committee for review and consideration for approval. At the Compensation Committee meeting during
which the executive officer compensation plans are reviewed, the CEO attends the initial session to present the
proposed plans and to answer questions. Thereafter, the Compensation Committee meets without the CEO present to
review, discuss and approve all executive officer compensation plans, subject to any modifications made by the
Compensation Committee.
Role Of The Compensation Consultant
The Compensation Committee may retain independent compensation consultants to assist the Compensation
Committee in discharging its duties. During 2024, the Compensation Committee engaged Compensia, an independent
executive officer compensation consulting firm, to provide advice on the Company’s executive officer compensation
arrangements. Compensia does not provide any services other than those related to compensation consulting and
does not provide any services to the Company's management. The Compensation Committee determined that
Compensia is independent within the meaning of the NYSE Listing Rules, and that the work performed by Compensia
does not raise any conflicts of interest.
For 2024, the Compensation Committee requested that Compensia:
•
Evaluate the efficacy of the Company’s existing compensation strategy and practices in supporting and
reinforcing the Company’s long-term strategic goals;
•
Assist in refining the Company’s compensation strategy and further implementing the executive officer
compensation program to execute that strategy; and
•
Provide market information to assist the Compensation Committee in establishing 2024 executive officer
compensation.
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Peer Companies
In setting executive officer compensation, the Compensation Committee evaluates compensation levels for executive
officers at other similarly situated companies. For 2024, the Compensation Committee engaged Compensia to provide
peer group data and perform an assessment of compensation levels provided to executive officers. In addition, the
Compensation Committee obtains and evaluates market compensation information using third-party and internal
resources. The Compensation Committee reviews data related to compensation levels and programs of other similar
companies prior to making its decisions, but only considers such information in a general manner in order to obtain a
better understanding of the current compensation practices within our industry.
In the Compensation Committee’s review of executive officer compensation for the 2024 fiscal year, the Compensation
Committee considered publicly available market data from peer company proxy disclosures and industry compensation
surveys for companies that typically include similarly sized semiconductor and semiconductor capital equipment
companies or similar firms for each Company executive officer in a like or similar role.
In July 2023, for compensation decisions for the Company’s 2024 fiscal year, Compensia recommended and the
Compensation Committee approved the Company’s compensation peer group which took into consideration the
following factors:
•
Semiconductor capital equipment and other electronics and hardware technology companies;
•
Revenue between approximately 0.5x and 2x the Company’s revenue run-rate; and
•
Market cap between approximately 0.3x and 3x the Company’s average market cap.
The Company’s compensation peer group used to make decisions regarding 2024 compensation consisted of the
following companies:
Companies Included in the Company's Compensation Peer Group for 2024
Advanced Energy Industries Inc.
Allegro MicroSystems, Inc.
Axcelis Technologies, Inc.
Cognex Corporation
Cohu, Inc.
FormFactor, Inc.
Ichor Holdings, Ltd.
IPG Photonics Corporation
Lattice Semiconductor Corporation
MACOM Technology Solutions
Holdings, Inc.
MaxLinear, Inc.
Novanta Inc.
Photronics, Inc.
Power Integrations, Inc.
Rambus Inc.
Rogers Corporation
Silicon Laboratories Inc.
Synaptics Incorporated
Ultra Clean Holdings, Inc.
Veeco Instruments Inc.
The pay practices of the foregoing Company peer group were analyzed for base salary and annual and long-term
incentives. Periodically, peer groups are used to evaluate other programs such as executive officer retirement,
perquisites and severance policies. Our peer group data is supplemented by broader technology industry data from
compensation surveys to further facilitate the evaluation of compensation levels and design. Compensation levels are
generally developed at the low (25th percentile), middle (50th percentile) and high (75th percentile) end of the market for
each pay element (base salary and short-term and long-term incentives) and for total compensation.
While the Compensation Committee considers market data for each pay element and in total, the Compensation
Committee does not specifically target any particular market compensation level. Instead, the Compensation
Committee uses its discretion in setting the compensation levels as appropriate.
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ELEMENTS OF THE COMPANY’S 2024 COMPENSATION PLAN
For 2024, the Compensation Committee conducted a review of the compensation program and determined that the
2024 executive compensation plan would retain the same basic elements as the prior year’s plan, as these elements
aligned the Company’s program with its current business strategy and included the pay for performance aspect of its
executive compensation program. Taking into account the Company’s 2023 financial performance and outlook for
2024, each executive officer’s performance and responsibilities, and current market compensation rates for each
executive officer position, among other criteria, the Compensation Committee approved the program and compensation
plan structure for the executive officers in 2024 as detailed below.
Base Salary
The Company provides executive officers and other employees with a base salary to compensate them for services
rendered during the fiscal year. The Compensation Committee supports the compensation philosophy of moderation
for elements such as base salary and other executive officer benefits. As noted above under “Impact of Performance
on Compensation,” base salary decisions are made as part of the Company’s formal annual review process and are
influenced by the performance of the Company and the individual.
For 2024, the Compensation Committee reviewed and determined salaries after reviewing salary data supplied by the
independent compensation consultant, including data regarding the peer comparison group, as well as consideration of
the compensation for the executive officers on a company-wide basis, based on their relative duties and responsibilities
and the recommendations of the CEO (other than with respect to his own compensation). The Compensation
Committee did not apply formulas or assign specific mathematical weights to any of these factors, but rather exercised
its business judgment and discretion to make a subjective determination regarding each executive officer’s base salary
for 2024 after considering all of these factors collectively. The CEO’s recommendations for salary adjustments (other
than his own) were reviewed, modified, and approved as deemed appropriate by the Compensation Committee.
The table below shows the increases in NEO base salary for 2024 that were approved by the Compensation Committee.
Ms. Oh’s and Mr. Yaldaei’s base salaries were increased 11% and 18%, respectively, to better align their compensation
with the compensation practices of our peer group for their positions.
Named Executive Officer
2023 Base Salary
2024 Base Salary
% Increase
Michael P. Plisinski
$700,000
$735,000
5%
Mark R. Slicer
$463,500
$463,500
0%
Yoon Ah E. Oh
$371,315
$413,000
11%
Srinivas Vedula
$311,240
$320,578
3%
Ramil Yaldaei
$315,000
$371,700
18%
Annual Cash Incentive Compensation
For 2024, as in prior years, the annual cash incentive plan was structured such that each NEO’s potential cash award
was subject to the achievement of 2024 corporate financial objectives. These corporate financial objectives were
established at levels in excess of the overall industry projections in order to incentivize the Company to outperform the
industry.
For our NEOs the 2024 target annual cash bonus opportunities were set as follows:
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Named Executive Officer
2024 Target Annual Cash Incentive
as a Percentage of Salary
Michael P. Plisinski
110%
Mark R. Slicer
70%
Yoon Ah E. Oh
60%
Srinivas Vedula
75%
Ramil Yaldaei
65%
The 2024 annual cash incentive plan had three core components: corporate goals, business unit goals (if applicable),
and personal performance goals, each of which is described in more detail below.
•
The corporate goals relate to corporate revenue and corporate non-GAAP operating income. For NEOs
who are not aligned with a particular business unit, 70% of their cash bonus potential is based on corporate
goals. For NEOs who are aligned with a particular business unit, 30% of their cash bonus potential is based
on corporate goals. The entirety of each executive officer’s cash bonus payout, however, was contingent
on the Company meeting at least one of the 2024 corporate revenue or corporate non-GAAP operating
income goals thresholds of 80% of target and 70% of target, respectively. Should the Company not have
reached the threshold level for both the 2024 corporate revenue and corporate non-GAAP operating
income goals, then no payout under the plan would have been made to the CEO or the other executive
officers. The performance ranges for each metric included a payout level for threshold performance at
50% of target payout and an established target level to achieve the maximum payout by exceeding the
corporate performance objectives for each of the corporate financial metrics. If the corporate goal target
is exceeded in either or both corporate goal categories, then the cash payout increases as follows:
Corporate Revenue: From 100% to 120% of the corporate goal target, additional cash
compensation is earned linearly up to 200% of the target bonus amount.
Non-GAAP Operating Income: From 100% to 130% of corporate goal target, additional cash
compensation is earned linearly up to 200% of the target bonus amount.
•
For those executive officers who were associated with a particular Company business unit, 40% of their
cash bonus potential was allocated to business unit financial performance goals. In 2024, these goals
included achievement of fiscal year 2024 business unit revenue and non-GAAP operating income
objectives. For an executive officer to earn his or her potential cash award apportioned to the business
unit goals, his or her respective business unit needed to achieve at least 80% of the business unit revenue
target and/or 70% of the business unit non-GAAP operating income target. Additional cash payout of up
to 200% is realized if either of the business unit goals is exceeded, similar to the corporate goal parameters
above. As stated above, the payout of the business unit goal component of the bonus was contingent on
achieving the threshold for at least one of the Company corporate goals.
•
The final component of the cash incentive compensation plan was the inclusion of personal performance
goals that are specific to the individual executive officers. This portion of the plan accounts for 30% of the
cash bonus potential for all executive officers. The NEO personal performance goals in 2024 included
targets related to additional corporate financial measures, operational measures and activities, quality,
product development measures or marketing initiatives and personnel development, depending on the
executive officer involved. As with the business unit goal component of the bonus, payout of the personal
performance goal component of the bonus was contingent on achieving the threshold for at least one of
the Company corporate goals.
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In addition, beginning with the 2024 MBO bonus plan, the bonus for each executive officer, other than the CEO, is
qualified by an overarching personal performance coefficient to enable stronger pay for performance and upside for
key performers. The personal performance coefficient ranges from 0% to 115% based on a comprehensive performance
assessment that includes cultural alignment, alignment with core competencies and behaviors, and overall performance
rating. The performance coefficient is then applied as a multiplier to an executive’s award as calculated in accordance
with the three core components described above.
The following table reflects the structure of the corporate and business unit goal components of the cash incentive
compensation plan. The personal goal payout component is fixed — if achieved, the payout is for the target amount.
Corporate/Business
Unit Goal
Weighting
Threshold
(50% Payout)
Target
(100% Payout)
Max
(200% Payout)
Revenue
50%
80% of target
100% of target
120% of target
Operating Income (Non-GAAP)
50%
70% of target
100% of target
130% of target
The following table reflects the corporate targets, actual results, and percentage payouts for fiscal year 2024 for the
CEO and other executive officers.
Cash Incentive Compensation Plan -
Corporate Target Categories
2024 Target
2024 Actual
2024 Payout
Percentage
Corporate Revenue
$930.0M
$987.3M
133%
Non-GAAP Operating Income
$262.8M
$267.3M(1)
106%
(1) The following table represents an unaudited reconciliation of GAAP to non-GAAP operating income (in thousands):
Year Ended December 28, 2024
Non-GAAP Adjustments
GAAP Operating
Income
Merger &
Acquisition
Related
Expenses
Restructuring
Expenses
Litigation
Expenses
Amortization of
Intangibles
Non-GAAP
Operating Income
$187,103
$7,652
$23,077
$27
$49,437
$267,296
In 2024, none of the NEOs included a business unit goal component as part of his or her cash incentive compensation
plan. Personal goal achievement for the CEO and other NEOs at the time of the incentive award is shown in the table
below.
Name
Personal % Score
Michael P. Plisinski
100.0%
Mark R. Slicer
66.7%
Yoon Ah E. Oh
100.0%
Srinivas Vedula
66.7%
Ramil Yaldaei
83.3%
Actual amounts paid to the CEO and the other NEOs under their respective annual cash incentive plans are reported
below in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table.
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Long-Term Equity Incentive Plan
In 2024, the structure of the long-term equity incentives was set by the Compensation Committee through the
consideration of a number of factors and recommendations from the CEO (except in connection with his own grants).
The following parameters were included in the design of the long-term equity incentive program in 2024:
Performance-Based Stock Units: 50% of each executive officer’s equity grant was comprised of PSUs. The relative
TSR plan design includes the following features:
•
50% of the PSU grant will be assessed at each of two performance periods, at two years and at three years
from the grant date (e.g., for awards granted in early 2024, the performance periods would be 2024
through 2026 and 2027).
•
Performance will be assessed using TSR, which measures growth in stock price, plus any dividends paid,
during the performance period.
•
TSR performance will be compared to that of other companies in the Philadelphia Semiconductor Index
(SOX).
•
The performance and standards to earn the PSU equity awards in 2024 are as follows:
TSR Performance Relative to Peers
PSUs Earned as % of Target
Below 25th Percentile
0%
25th Percentile
50%
55th Percentile
100%
80th Percentile and above
200%
•
The PSU award payout will be calculated on a straight-line basis between the 25th & 55th and the 55th &
80th percentile levels referenced above.
•
A negative TSR cap has been instituted which limits any PSUs earned to target level if the Company’s TSR
is negative over the performance period and our TSR ranks above the target performance level.
•
Earned PSUs are not subject to additional service-based vesting conditions.
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Service-Vesting Restricted Stock Units: 50% of each executive officer’s equity grant is comprised of service-based
RSUs, which vest in equal annual increments over three years.
The following table summarizes the components of the long-term equity incentive program.
Long-Term Equity Incentive Compensation Program Provisions
2024
Performance-based / Service-based grant breakout
50%-50%
Service-based grant vesting period
33.3% annually over 3 years
Performance-based grant evaluation period
50% of grant at 2 and 3 years
Performance-based grant metric(s)
Relative TSR
Performance-based grant vesting period
100% upon earnings
Performance threshold for earning grant
25th TSR percentile
Percent of performance-based grant earned at threshold
50%
Measure at which 100% of performance-based grant is earned
55th TSR percentile
Maximum performance-based grant upside
200%
Measure at which maximum upside of performance-based grant is
earned
80th TSR percentile
In February 2025, the first tranche of the PSUs awarded in 2023 vested. The Company’s TSR performance based on
the 20-day average market value prior to the vesting date was determined and ranked against the participating
companies in the SOX. The Company’s TSR for this assessment period was 146%, which placed the Company at the
90th TSR percentile in the SOX. Therefore, the PSUs earned as a percent of the target number awarded was 200%.
Also in February 2025, the second tranche of the PSUs awarded in 2022 vested. The Company’s TSR performance
based on the 20-day average market value prior to the vesting date was determined and ranked against the
participating companies in the SOX. The Company’s TSR for this assessment period was 121%, which placed the
Company at the 93rd TSR percentile in the SOX. Therefore, the PSUs earned as a percent of the target number awarded
was 200%.
The actual number of PSUs and RSUs granted to the NEOs in 2024 and the related value are reported below in the table
titled Grants Of Plan-Based Awards In 2024.
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Personal Benefits And Perquisites
Benefits
All employees of the Company, including its executive officers, are eligible to participate in the following benefit plans
and programs:
•
Health and dental insurance;
•
Elective vision care program;
•
Life insurance and accidental death and dismemberment coverage;
•
401(k) plan;
•
Short- and long-term disability insurance with supplemental income continuation;
•
Health care and dependent care flexible spending account programs;
•
Employee assistance program (EAP);
•
Employee stock purchase plan;
•
Employee referral bonus program;
•
IP recognition awards; and
•
Matching of charitable donations through the Company-sponsored charitable foundation.
The Company, in its discretion, may offer to reimburse the expenses that an employee incurs as a result of the Company
requiring the individual to relocate their primary residence for employment purposes. The Compensation Committee
believes that these benefits are consistent with industry practice and are important in recruiting and retaining qualified
employees.
Limited Perquisites
The Company does not offer extensive perquisites to our executive officers. For 2024, the Compensation Committee
reviewed the potential perquisites to be offered by the Company to the executive officers and determined that such
perquisites would be limited to Company-paid tax preparation services, Company-paid membership in one airline
executive club, and a financial and identity theft protection program. Executive officers are also eligible to participate
in the Company’s Charitable Match Program, under which the Company will match, dollar for dollar, up to $1,000 in
donations to eligible charitable organizations. The Compensation Committee believes that these benefits are
reasonable and consistent with the Company’s overall compensation program and enable the Company to attract and
retain superior employees for key positions.
Retirement Provision For Equity Awards
All employees, including our NEOs, are also eligible to participate in the Company’s post-retirement equity award vesting
program. Under that program:
•
An employee is “retirement eligible” if they achieve a combination of age plus years of service with the
Company totaling 70, with a base minimum age of 58 years old and a minimum service requirement of five
years.
•
Vice Presidents and above, including the NEOs, also need to provide at least 12 months advance notice of
their intended retirement to be eligible for post-retirement vesting.
•
Upon retirement by the employee, any equity awards granted by the Company shall remain outstanding
and vest based on:
The vesting schedule established for service-based equity awards; or
The actual performance results for performance-based equity awards.
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Employee Stock Purchase Plan
The Company (as successor to Nanometrics) has maintained an Employee Stock Purchase Plan since 1986. The
Company’s 2020 Employee Stock Purchase Plan was approved by stockholders in 2020 and is currently administered
by the Compensation Committee.
Under the terms of our current Employee Stock Purchase Plan, eligible employees may elect to have up to fifteen
percent (15%) of eligible compensation deducted from their base salary and applied to the purchase of shares of
Common Stock. The price the employee pays for each share of Common Stock is eighty-five percent (85%) of the fair
market value of Common Stock at the end of the applicable six-month purchase period. The Employee Stock Purchase
Plan qualifies as a non-compensatory plan under Section 423 of the Internal Revenue Code of 1986, as amended (“IRC”).
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CORPORATE AND GOVERNANCE POLICIES
Employment And Change-In-Control Agreements
Each of the NEOs is entitled to payments upon a qualifying termination of employment following a change-in-control
event. The Compensation Committee believes that providing severance in a change-in-control situation is beneficial to
stockholders so that executive officers may remain objectively neutral when evaluating a transaction that may be
beneficial to stockholders yet could negatively impact the continued employment of the executive officer.
The Company is party to an employment agreement with Mr. Plisinski that provides for certain benefits upon termination
or a change in control of the Company. We have also entered into an Executive Change in Control Agreement with each
of our other current NEOs.
See “Potential Payments Upon Termination Of Employment Or Change In Control” below for a description of these
arrangements and potential payments that the NEOs would have been entitled to receive upon applicable hypothetical
termination scenarios as of December 28, 2024.
Other Elements Of Post-Termination Compensation
The Company does not have a practice of providing retirement benefits, including any supplemental executive officer
retirement plans (SERP), to its executive officers, other than through its 401(k) plan and post-retirement vesting for
equity awards granted by the Company, as described above. The Company retains the discretion to utilize the offer of
severance and/or change-in-control protection as an incentive in its hiring and retention of executive officers.
Non-Solicitation And Non-Competition Policy
The Company maintains a policy of entering into an agreement with each of its new executive officers, which contains
both non-solicitation and non-competition provisions. Each of our NEOs is party to such an agreement. The non-
solicitation provisions apply for one year (or two years in the case of Mr. Plisinski) after termination of the individual’s
employment while the non-competition provisions are in effect during the individual’s employment and generally for one
year thereafter, to the extent permitted by applicable law. In all cases, these covenants have been implemented to
protect the confidential information, goodwill and other assets of the Company. For those individuals with employment
agreements, should a breach of the non-solicitation or non-competition terms of their agreements occur, this could give
rise to the Company declaring a breach under the agreement and terminating all severance payments thereunder.
General Termination Benefits
Upon termination of an executive officer’s employment with the Company, the individual is entitled to receive his or her
base salary earned through the termination date. Thereafter, further cash compensation to the executive officer is
discontinued, except to the extent that severance or change-in-control payments are required to be made in
accordance with individual or Company severance protection arrangements. Pursuant to his employment agreement
with the Company, Mr. Plisinski is entitled to elect to continue group health or other group benefits as allowed by COBRA
with continued Company co-payments for agreed post-termination periods. The Company retains the right to offer
severance and/or payment of COBRA benefits to any individual who is terminated from the Company at its discretion.
See “Potential Payments Upon Termination Of Employment Or Change In Control” below for a further description of
these arrangements.
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45
Stock Ownership Policy
The Company has established a stock ownership policy for its non-employee directors and executive officers subject
to Section 16 reporting requirements, which is designed to align the interests of Company leadership with the interests
of stockholders and give Company leadership a stake in the long-term financial future of the Company.
The stock ownership levels currently in effect under the policy are the following:
Company Role
Common Stock Holding Requirement
Effective Date
Non-Employee Directors
3x value of the annual retainer
Within 5 years of initial election to
Board
CEO
3x value of CEO’s base salary
Within 5 years of hire/promotion
Executive Officers Subject to
Section 16 Reporting
Requirements
1x value of executive officer’s base salary
Within 5 years of hire/promotion
In assessing compliance with the foregoing guidelines, the Company takes into consideration only the ownership of
Common Stock in the Company and unexercised stock options that are vested and “in-the-money.” As a result,
unearned PSUs, unvested service-based RSUs, and unvested stock options do not qualify as shares for purposes of
compliance with the Company’s stock ownership and retention guidelines.
Participants are expected to achieve their ownership guideline target within five years of becoming subject to the policy.
Existing participants were subject to this policy as of the date of the policy and any new participants will be subject to
the policy on their hire, promotion, election, or appointment date, as applicable.
Compliance with the Company’s stock ownership and retention guidelines is reviewed annually by the Compensation
Committee. As of its review in February 2025, the Compensation Committee determined that all executive officers and
directors were in material compliance with the ownership requirements. There are no specific penalties for failure to
achieve the ownership guideline target. However, the Compensation Committee retains the discretion to impose such
other conditions, restrictions, or limitations on any executive officers or directors as such Committee determines to be
necessary or appropriate in order to achieve the purposes of the stock ownership policy.
The Compensation Committee regularly reviews the Company’s stock ownership and retention guidelines. In the course
of its annual review for 2025, the Committee will evaluate the appropriateness of the foregoing stock ownership levels
based in part on the average closing price of a share of the Common Stock during the 30 consecutive trading days
ending on and including the last day of the most recently completed fiscal year, as well as other considerations such as
market conditions and comparable practices within the industry.
Prohibition On Pledging, Margining or Hedging Of Company Stock
Our insider trading policy prohibits Company directors and employees, including our executive officers, from purchasing
Company securities on margin, borrowing against Company securities held in a margin account, or pledging Company
securities as collateral for a loan. Company directors and employees are also prohibited from engaging in short sales,
derivative transactions, and hedging transactions involving Company securities.
Adjustments Or Recovery Of Prior Compensation
The Company has adopted a policy that requires it to recover from its Covered Executives (which includes our NEOs)
certain excess incentive compensation that would not have been earned based on specified accounting restatements
(the “Clawback Policy”). The Clawback Policy covers any compensation that is granted, earned, or vested based wholly
or in part upon the attainment of certain financial reporting measures and received by a Covered Executive during the
last three completed fiscal years immediately preceding the relevant accounting restatement date. The Clawback Policy
is consistent with the requirements of the SEC’s final compensation clawback rules under the Dodd-Frank Act and NYSE
listing standards.
PROXY STATEMENT
46
Equity Award Grant Timing Policies
We have adopted a Stock-Based Award Grant Date Policy (“Grant Date Policy”) governing the timing of grants of options
and other equity awards. We did not award stock options, stock appreciation rights, or similar option-like instruments
in the last fiscal year, and have not made any such awards since the Merger Date. The Grant Date Policy provides as
follows:
•
For new hire, promotional, and other equity award grants for officers and other employees, grants shall be
approved at the regularly scheduled quarterly Compensation Committee meeting following the date of hire
or other triggering event for the grant; provided, however, that the Compensation Committee may,
consistent with the Compensation Committee charter and the 2020 Stock Plan, delegate to one or more
executive officers of the Company the authority to approve equity award grants to any employee of the
Company who is not a director or officer. The grant date of all such equity awards shall be whichever of the
following dates next succeeds the date that the Compensation Committee, or its designee, approved the
grant: March 1st, June 1st, September 1st, and December 1st (or, in each case, if such date is not a business
day that the NYSE is open (a “trading day”), then on the next succeeding trading day).
•
For annual equity award grants for officers and other employees, grants shall be approved at the
Compensation Committee meeting held during the Company’s first fiscal quarter each year. The grant date
of such equity awards shall be on or about March 1st (or if such date is not a trading day, on the next
succeeding trading day). The Compensation Committee shall approve annual equity award grants to all other
employees at the Compensation Committee meeting held during the Company’s second fiscal quarter each
year. The grant date of all such equity awards shall be on or about June 1st (or if such date is not a trading
day, on the next succeeding trading day).
•
For initial RSU awards granted to each newly elected non-employee director who is first elected to the
Board other than at an Annual Meeting of Stockholders, such grants shall be approved at or about the date
of the first quarterly Board or Compensation Committee meeting after such new non-employee director
has been elected. If the date of such approval is during an open window under the Company’s insider
trading policy, the grant date for such award shall be the date of approval (or if such date is not a trading
day, on the next succeeding trading day). If the date of such approval is not during an open trading
window under the Company’s insider trading policy, then the grant date for such award shall be the first
trading day of the next open trading window.
•
For annual RSU awards granted to each non-employee director elected or re-elected at an Annual Meeting
of Stockholders, such grants shall be approved at the Board meeting following the Annual Meeting of
Stockholders. The grant date for annual awards to non-employee directors shall be at or about the date of
the Annual Meeting of Stockholders (or if such date is not a trading day, on the next succeeding trading
day).
The Company will not purposefully accelerate or delay the public release of material information in consideration of a
pending equity award in order to allow the grantee to benefit from a more favorable stock price. The Company
recognizes, however, that a release of information in close proximity to an equity award could create the appearance
of an effort to time the grantee’s equity award to the grantee’s benefit, even if no such benefit was intended.
Accordingly, equity awards are granted based on a predetermined schedule whenever possible.
Compensation Program Risk Assessment
In 2024, the Compensation Committee, with advice and input from Compensia, its independent compensation
consultant, reviewed our compensation program and whether compensation design features may have the potential to
incentivize executive officers to take risks that are reasonably likely to have a material adverse effect on the Company.
Among others, the Committee reviewed the following features of our compensation program: compensation philosophy
and pay mix; performance measures used in incentive plans; goal setting and payout leverage and caps; calculation and
verification of performance outcomes for incentive payments; and mitigating factors built into the program to reduce
risk. Based on this review and the input from Compensia, the Compensation Committee concluded that the Company’s
PROXY STATEMENT
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compensation program does not create risks that are reasonably likely to have a material adverse effect on the
Company.
IRS Limits On Deductibility Of Compensation
Section 162(m) of the IRC limits our ability to deduct for tax purposes compensation in excess of $1,000,000 that is paid
to our principal executive officer, our principal financial officer, or any one of our next three highest paid executive
officers. Although the Compensation Committee considers deductibility issues when approving executive officer
compensation elements, the Compensation Committee believes that the other compensation objectives, such as
attracting, retaining and providing appropriate incentives to executive officers, are important and can supersede the
goal of maintaining deductibility. Consequently, the Compensation Committee generally makes compensation decisions
without regard to deductibility, as the Compensation Committee believes it has appropriately structured its
compensation programs to provide incentives to our executive officers to increase Company return and stockholder
value.
CONCLUSION
In reviewing its compensation programs, the Company has concluded that each element of compensation as well as
the total compensation opportunities for its executive officers, including the NEOs, are reasonable, appropriate and in
the interests of the Company and its stockholders. The Company believes that this compensation program
appropriately satisfies the Company’s goals of establishing a compensation package that attracts and retains a strong,
motivated leadership team, aligns the financial incentives of the executive officers with the interests of the stockholders,
and rewards the achievement of specific annual, long-term, and strategic goals of the Company. The Company believes
that the compensation program, which has been established and is reflected herein has enabled it to recruit and secure
a talented and motivated leadership team by which the Company drives toward the ultimate objective of improving
stockholder value.
PROXY STATEMENT
48
COMPENSATION COMMITTEE REPORT ON
EXECUTIVE OFFICER COMPENSATION
We, the Compensation Committee of the Board, have reviewed and discussed the Compensation Discussion and
Analysis (“CD&A”) within the Executive Officer Compensation section of this proxy statement with the management of
the Company. Based on such review and discussions, we have recommended to the Board that the CD&A be included
as part of this proxy statement.
THE COMPENSATION COMMITTEE
May Su (Chairperson)
Stephen D. Kelley
David B. Miller
Christine A. Tsingos
PROXY STATEMENT
49
Summary Compensation Table
The following table summarizes the compensation earned by our NEOs in the fiscal years noted.
Name and Principal Position
Year
Salary ($)
Bonus ($)
Stock Awards
($)(1)
Non-Equity
Incentive Plan
Compensation
($)(2)
All Other
Compensation
($)(3)
Total ($)
Michael P. Plisinski
2024
$729,615
—
$5,303,695
$920,073
$8,383
$6,961,766
Chief Executive Officer
2023
$692,718
—
$4,327,136
$624,741
$1,433
$5,646,028
2022
$634,751
—
$3,977,905
$697,044
$3,601
$5,313,301
Mark R. Slicer (4)
2024
$463,500
—
$922,402
$336,779
$7,530
$1,730,211
Chief Financial Officer
2023
$461,942
—
$834,971
$237,287
$10,590
$1,544,790
2022
$275,192 $150,000 $1,000,038
$240,334
$5,652
$1,671,216
Yoon Ah E. Oh
2024
$406,587
—
$835,998
$281,996
$10,829
$1,535,410
Senior Vice President,
General Counsel, and
Corporate Secretary
2023
$370,067
—
$1,073,669
$191,900
$10,590
$1,646,226
2022
$359,288
—
$568,303
$206,287
$9,490
$1,143,368
Srinivas Vedula (5)
2024
$319,141
—
$518,907
$249,570
$5,930
$1,093,548
Senior Vice President,
Customer Success
2023
$310,195
—
$500,972
$163,696
$9,996
$984,859
Ramil Yaldaei (5)
2024
$362,977
—
$749,649
$289,153
$11,105
$1,412,884
Chief Operating Officer
2023
$310,961
—
$475,049
$159,982
$10,019
$956,011
(1) Amounts reflect the grant date fair value for each share-based compensation award granted to the NEOs during
the covered year, calculated in accordance with FASB ASC Topic 718. The assumptions used in determining the
grant date fair values of awards are set forth in Note 2 to our consolidated financial statements, which are
included in our Annual Report on Form 10-K filed with the SEC on February 25, 2025. For 2024, the amount
reported for each NEO includes the grant date fair value attributable to the 2024 awards of (i) time-based RSUs
and (ii) PSUs, assuming that the performance conditions were satisfied at target at the time of grant. The grant
date fair value attributable to the 2024 PSU awards, assuming maximum performance achievement, is as
follows: Mr. Plisinski, $6,007,184; Mr. Slicer, $1,044,786; Ms. Oh, $946,702; Dr. Vedula, $587,539 and Mr.
Yaldaei, $849,115. The actual amounts earned will be determined following the end of the two-year performance
period (March 1, 2024 – March 1, 2026) and the three-year performance period (March 1, 2024 – March 1, 2027).
Mr. Yaldaei's stock awards in 2023 were entirely in the form of time-based RSUs.
(2) The amounts for a given year represent the amount earned in respect of that year under the Company’s annual
cash performance incentive plan, as applicable, notwithstanding the year in which it was paid. See
“Compensation Discussion and Analysis – Annual Cash Incentive Compensation” for further information.
(3) Refer to the All Other Compensation table for more detailed information about the 2024 compensation reported
in this column.
(4) Mr. Slicer joined the Company as Chief Financial Officer effective May 17, 2022.
(5) Although employed by Onto Innovation prior to 2023, Dr. Vedula and Mr. Yaldaei were not NEOs prior to 2023.
PROXY STATEMENT
50
All Other Compensation
Name
Year
Matching
Contribution
Towards
401(k) ($)
Insurance ($)(1)
Perquisites and
Other Personal
Benefits ($)(2)
Severance
Compensation ($)
Total ($)
Michael P. Plisinski
2024
$7,633
$750
—
—
$8,383
Mark R. Slicer
2024
$6,780
$750
—
—
$7,530
Yoon Ah E. Oh
2024
$10,079
$750
—
—
$10,829
Srinivas Vedula
2024
$5,180
$750
—
—
$5,930
Ramil Yaldaei
2024
$10,355
$750
—
—
$11,105
(1) Insurance is the premium associated with coverage under the group term life insurance and accidental death
and dismemberment insurance plans. Coverage is equal to the lesser of two (2) times salary or $500,000.
(2) The value of aggregate perquisites and personal benefits for each NEO is less than $10,000, and therefore,
perquisites for these individuals are not required to be disclosed in accordance with SEC rules.
Grants Of Plan-Based Awards In 2024
The following table sets forth information with respect to non-equity and equity incentive plan awards that
were granted during 2024 to the NEOs. No stock option awards were granted to any NEO in 2024.
Name
Grant
Date
Estimated Future Payouts Under
Non-Equity Incentive Plan
Awards ($)(1)
Estimated Future Payouts
Under Equity Incentive Plan
Awards (#)(2)
All other Stock
Awards: Number
of Shares of
Stock or Units
(#)(3)
Grant Date
Fair Value of
Stock and
Option
Awards ($)
Threshold
Target
Maximum Threshold
Target
Maximum
Michael P. Plisinski 3/1/2024
$141,487 $808,500 $1,374,450
3/1/2024
5,971
11,942
23,884
$3,003,592
3/1/2024
11,943
$2,300,102
Mark R. Slicer
3/1/2024
$56,779
$324,450
$551,565
3/1/2024
1,039
2,077
4,154
$522,393
3/1/2024
2,077
$400,009
Yoon Ah E. Oh
3/1/2024
$43,365
$247,800
$421,260
3/1/2024
941
1,882
3,764
$476,351
3/1/2024
1,883
$362,647
Srinivas Vedula
3/1/2024
$39,271
$224,404
$381,487
3/1/2024
584
1,168
2,336
$293,770
3/1/2024
1,169
$225,138
Ramil Yaldaei
3/1/2024
$42,281
$241,605
$410,728
3/1/2024
844
1,688
3,376
$424,557
3/1/2024
1,688
$325,092
(1) The amounts reported in these columns represent the annual cash incentive opportunities under the Company’s
cash incentive compensation plan for each of our NEOs for the 2024 performance period. The metrics against
which performance was measured under this plan, as well as other details regarding the plan, are discussed
PROXY STATEMENT
51
above in the Compensation Discussion and Analysis under “Annual Cash Incentive Compensation.” The amounts
actually earned by our NEOs under the plan are reflected in the “Non-Equity Incentive Plan Compensation”
column of the Summary Compensation Table above.
(2) The amounts reported in these columns represent the award opportunities under the Company’s PSU program.
The metrics against which performance will be measured under this program, as well as other details regarding
the plan, are discussed above in the Compensation Discussion and Analysis under the heading “Long-Term
Equity Incentive Plan.” The performance periods for these awards are two years and three years with the final
determinations of the award ultimately earned being made in 2026 and 2027.
(3) The amounts reported in this column represent the awards of RSUs which are subject to service-based vesting
conditions, as discussed above in the Compensation Discussion and Analysis under the heading “Long-Term
Equity Incentive Plan.” These RSUs vest in 33.3% increments on each of the first three anniversaries of the
grant date.
Outstanding Equity Awards At 2024 Fiscal Year-End
The following table sets forth information with respect to outstanding equity awards held by the NEOs as of December
28, 2024. No stock option awards were outstanding as of December 28, 2024.
Stock Awards
Name
Grant Date (1)
Number of
Shares or Units
of Stock That
Have Not Vested
(#)(2)
Market Value
of Shares or
Units of Stock
That Have Not
Vested ($)(3)
Equity Incentive
Plan Awards:
Number of
Unearned Shares,
Units or Other
Rights That Have
Not Vested (#)(4)
Equity Incentive
Plan Awards:
Market or Payout
Value of Unearned
Shares, Units or
Other Rights That
Have Not Vested
($)(3)
Michael P. Plisinski
2/10/2022
6,349
$1,083,520
9,524
$1,625,366
2/14/2023
15,766
$2,690,626
23,649
$4,035,938
3/4/2024
11,943
$2,038,192
11,942
$2,038,022
Mark R. Slicer
5/17/2022
4,273
$729,230
2/14/2023
3,042
$519,148
4,563
$778,722
3/1/2024
2,077
$354,461
2,077
$354,461
Yoon Ah E. Oh
2/10/2022
907
$154,789
1,360
$232,098
2/14/2023
2,636
$449,860
3,955
$674,960
5/15/2023
2,497
$426,138
3/1/2024
1,883
$321,353
1,882
$321,182
Srinivas Vedula
2/10/2022
544
$92,839
816
$139,259
2/14/2023
1,825
$311,455
2,738
$467,267
3/1/2024
1,169
$199,502
1,168
$199,331
Ramil Yaldaei
10/3/2022
1,218
$207,864
5/15/2023
3,389
$578,367
3/1/2024
1,688
$288,074
1,688
$288,074
(1) For a better understanding of this table, we have included an additional column showing the grant date of each
stock award.
(2) Amount includes service-based RSU awards vesting 1/3rd per year on the anniversary of the grant date.
(3) Based on the Common Stock closing price of $170.66 per share on December 28, 2024.
(4) PSU awards are reported in this table at number of target shares. The actual number of shares earned will be
determined based on performance achievement measured over two (2)- and three (3)-year performance
periods, and any earned shares will vest on the second and third anniversaries, respectively, of the grant date.
PROXY STATEMENT
52
Stock Vested In 2024
The following table sets forth information with respect to the value realized by the NEOs upon vesting of PSUs and
RSUs during 2024, and such values reflect the total pre-tax value realized by each NEO. There were no stock option
exercises by any of the NEOs during 2024.
Stock Awards
Name
Number of Shares
Acquired On Vesting (#)
Value Realized
On Vesting ($)(1)
Michael P. Plisinski
66,396
$11,392,350
Mark R. Slicer
5,796
$1,218,667
Yoon Ah E. Oh
8,878
$1,721,322
Srinivas Vedula
4,240
$778,433
Ramil Yaldaei
2,913
$647,581
(1) The aggregate dollar amount realized is based on the fair market value of the shares upon vesting.
Pay Versus Performance
We are required by SEC rules to disclose the following information regarding compensation paid to our NEOs. The
amounts set forth below under the headings “Compensation Actually Paid to CEO” and “Average Compensation Actually
Paid to NEOs” have been calculated in a manner consistent with Item 402(v) of Regulation S-K. The tables in footnote
(2) below set forth the adjustments from the Total Compensation for each NEO reported in the Summary Compensation
Table above.
The following table sets forth additional compensation information of our Chief Executive Officer (CEO) and our non-
CEO NEOs along with total shareholder return, net income and total revenue performance results for fiscal years
presented:
Value of Initial Fixed $100
Investment Based On:
Year (1)
Summary
Compensation
Table Total For
CEO
Compensation
Actually Paid
to CEO (5)
Average
Summary
Compensation
Table Total
For NEOs
Average
Compensation
Actually Paid
to NEOs (5)(2)
Total
Shareholder
Return (3)
Peer Group
Total
Shareholder
Return (3)
Net
Income (in
thousands)
(4)
Total
Revenue (in
thousands)(4)
2024
$6,961,766
$10,138,733
$1,443,013
$1,896,075
$355.84
$187.31
$201,670
$987,321
2023
$5,646,028
$21,220,183
$1,282,971
$2,783,035
$318.23
$138.72
$121,159
$815,868
2022
$5,313,301
$2,086,925
$1,129,974
$711,974
$86.27
$42.94
$223,334
$1,005,183
2021
$5,134,310
$13,985,674
$1,069,940
$2,149,621
$176.97
$119.51
$142,349
$788,899
2020
$3,763,688
$4,453,187
$934,489
$1,463,581
$30.11
$53.66
$31,025
$556,496
(1) The CEO and NEOs included in the above compensation columns reflect the following:
Year
CEO
NEOs
2024 &
2023
Michael P. Plisinski
Mark R. Slicer, Yoon Ah E. Oh, Srinivas Vedula, Ramil
Yaldaei
2022
Michael P. Plisinski
Mark R. Slicer, James (Cody) Harlow, Robert Fiordalice,
Yoon Ah E. Oh, Steven R. Roth
2021
Michael P. Plisinski
Steven R. Roth, Rollin Kocher, Kevin Heidrich, Robert A.
Koch, Yoon Ah E. Oh
2020
Michael P. Plisinski
Steven R. Roth, Rollin Kocher, Kevin Heidrich, Robert A.
Koch
PROXY STATEMENT
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(2) In 2023, tranches of the TSR-based PSU awards from 2021 and 2020 vested. None of the NEOs, except for the
CEO, was in his or her current role in 2020 or 2021 at the time the PSU awards were granted. Therefore no NEO,
except for the CEO, received Common Stock from the vesting of PSU awards in 2023.
(3) Company and Peer Group TSR reflects the Company’s peer group (PHLX Semiconductor Index) as reflected in
our Annual Report on Form 10-K pursuant to Item 201(e) of Regulation S-K for the fiscal year ended December
28, 2024. Each year reflects what the cumulative value of $100 would be, including the reinvestment of
dividends, if such amount were invested on December 31, 2019.
(4) The dollar amounts reported represent the amount of net income and total revenue reflected in our audited
financial statements for each covered fiscal year.
(5) Fair value or change in fair value, as applicable, of equity awards in the “Compensation Actually Paid” columns
was determined by reference to (1) for RSU awards, closing price on applicable year-end dates or, in the case
of vesting dates, the actual vesting price, (2) for TSR-based PSU awards, the fair value calculated by a Monte
Carlo simulation model as of the applicable year-end date(s) or, in the case of vesting date, the actual vesting
price and probability of achievement. For the portion of “Compensation Actually Paid” that is based on year-
end stock prices, the following prices were used: for 2024: $170.66 (11.6% increase from the prior year) for
2023: $152.90 (124.6% increase from prior year) for 2022: $68.09 (32.7% reduction from prior year), for 2021:
$101.23 (110.8% increase from prior year), and for 2020: $48.02 (1.0% increase from prior year).
“Compensation Actually Paid” to the CEO reflects the following adjustments from Total Compensation reported
in the Summary Compensation Table:
CEO
2024
2023
2022
2021
2020
Total Reported in Summary Compensation
Table (SCT)
$6,961,766
$5,646,028
$5,313,301
$5,134,310
$3,763,688
Less, Value of Stock & Option Awards
Reported in SCT
($5,303,695)
($4,327,136)
($3,977,905)
($3,487,747)
($2,672,777)
Less, Change in Pension Value and
Non-Qualified Deferred Compensation
Earnings in SCT
—
—
—
—
—
Plus, Pension Service Cost and impact of
Pension Plan Amendments
—
—
—
—
—
Plus, Year-End value of Awards Granted in
Fiscal Year that are Unvested and
Outstanding
$4,637,070
$10,231,429
$2,764,863
$6,761,134
$2,941,125
Plus, Change in Fair Value of Prior Year
awards that are Outstanding and
Unvested
$2,143,426
$8,298,325
($2,584,704)
$5,241,435
$318,972
Plus, FMV of Awards Granted this Year
and that Vested this Year
—
—
—
—
—
Plus, Change in Fair Value (from Prior
Year-End) of Prior Year awards that
Vested this year
$1,700,166
$1,371,538
$571,370
$336,542
$102,179
Less, Prior Year Fair Value of Prior Year
awards that failed to vest this year
—
—
—
—
—
Total Adjustments
$3,176,967
$15,574,155
($3,226,376)
$8,851,364
$689,499
"Compensation Actually Paid"
$10,138,733
$21,220,183
$2,086,925
$13,985,674
$4,453,187
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The average “Compensation Actually Paid” to the NEOs reflects the following adjustments from Total
Compensation reported in the Summary Compensation Table:
NEO Average
2024
2023
2022
2021
2020
Total Reported in Summary Compensation
Table (SCT)
$1,443,013
$1,282,971
$1,129,974
$1,069,940
$934,489
Less, Value of Stock & Option Awards
Reported in SCT
($756,739)
($721,165)
($577,372)
($533,902)
($435,715)
Less, Change in Pension Value and
Non-Qualified Deferred Compensation
Earnings in SCT
—
—
—
—
—
Plus, Pension Service Cost and impact of
Pension Plan Amendments
—
—
—
—
—
Plus, Year-End value of Awards Granted in
Fiscal Year that are Unvested and
Outstanding
$661,625
$1,508,382
$436,885
$879,706
$479,458
Plus, Change in Fair Value of Prior Year
awards that are Outstanding and
Unvested
$274,604
$613,125
($143,057)
$665,069
$487,384
Plus, FMV of Awards Granted this Year
and that Vested this Year
—
—
—
—
—
Plus, Change in Fair Value (from Prior
Year-End) of Prior Year awards that
Vested this year
$273,572
$99,722
($134,457)
$68,807
($2,036)
Less, Prior Year Fair Value of Prior Year
awards that failed to vest this year
—
—
—
—
—
Total Adjustments
$453,062
$1,500,064
($418,000)
$1,079,680
$529,092
"Compensation Actually Paid"
$1,896,075
$2,783,035
$711,974
$2,149,621
$1,463,581
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55
Pay versus Performance Descriptive Disclosure
Compensation Actually Paid and Company TSR and Peer Group TSR
Our TSR lagged the TSR for our peer group in 2020 but increased significantly in 2021 both in terms of real dollars and
in relation to our peer group TSR, which our TSR exceeded by approximately 40%. In 2022, the dollar value of our TSR
dropped but was nonetheless over 100% greater than our peer group TSR. From 2022 to 2023 our TSR increased by
over 250% and was more than twice that of our peer group TSR. From 2023 to 2024, our TSR increased less than our
peer group TSR but our TSR nonetheless remained almost double that of our peer group. There is a positive relationship
between TSR and “Compensation Actually Paid” to our CEO and the other NEOs between 2020 and 2021, when both
metrics increased, between 2021 and 2022, when both metrics dropped, despite our TSR equaling approximately twice
our peer group TSR, and between 2022 and 2023, when both metrics increased. There is an inverse relationship
between TSR and “Compensation Actually Paid” to our CEO and the other NEOs between 2023 and 2024 when TSR
increased but “Compensation Actually Paid” decreased. The following chart illustrates the relationship between our
Compensation Actually Paid and TSR:
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Compensation Actually Paid and Net Income
There is a positive relationship between Net Income and “Compensation Actually Paid” to our CEO and the other NEOs
between 2020 and 2021, when both metrics increased. There is an inverse relationship between Net Income and
“Compensation Actually Paid” to our CEO and the other NEOs between 2021 and 2022 when Net Income increased, but
“Compensation Actually Paid” decreased. There is an inverse relationship between Net Income and “Compensation
Actually Paid” to our CEO and other NEOs between 2022 and 2023 when Net Income decreased but “Compensation
Actually Paid” increased. And there is, again, an inverse relationship between Net Income and “Compensation Actually
Paid” to our CEO and other NEOs between 2023 and 2024 when Net Income increased but “Compensation Actually
Paid” decreased. The following chart illustrates the relationship between our Compensation Actually Paid and Net
Income:
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Compensation Actually Paid and Total Revenue
We chose Total Revenue as our Company Selected Measure for evaluating Pay versus Performance because it is a key
metric, along with non-GAAP operating income, in determining the annual cash incentive compensation paid to the CEO
and other NEOs. From 2020 to 2021 there is a positive relationship between Total Revenue and “Compensation Actually
Paid,” when both metrics increased, an inverse relationship between 2021 and 2022 when Total Revenue increased,
but “Compensation Actually Paid” to our CEO and the other NEOs decreased, and an inverse relationship between 2022
and 2023 when Total Revenue decreased, but “Compensation Actually Paid” to our CEO and the other NEOs increased.
Much of the increase in CEO and NEO “Compensation Actually Paid” from 2022 to 2023 is attributable to the significant
increase in the Company’s stock price during 2023. There is also an inverse relationship between Total Revenue and
“Compensation Actually Paid” to our CEO and the other NEOs between 2023 and 2024 when Total Revenue increased
but “Compensation Actually Paid” decreased. The following chart illustrates the relationship between our Compensation
Actually Paid and Total Revenue:
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Pay versus Performance Tabular List
The table below lists our most important performance measures used to link “Compensation Actually Paid” for our NEOs
to Company performance, over the fiscal year ending December 28, 2024. Both Total Revenue and non-GAAP operating
income factor into the annual cash incentive compensation paid to NEOs and Company TSR over two- and three-year
measurement periods determine the ultimate value of PSUs awarded to NEOs. For a further discussion of how each of
these financial measures relates to NEO compensation and for a reconciliation of the non-GAAP measure as compared
to the GAAP measure reflected in our audited financial statements, see our “Compensation Discussion and Analysis”
beginning on page 27 of this proxy statement. The performance measures included in this table are not ranked by
relative importance.
Most Important Financial Measures
Total Revenue
Non-GAAP Operating Income (1)
Total Shareholder Return
(1) Refer to footnote (1) on page 39 of this proxy statement for a reconciliation of non-GAAP
operating income to the most comparable GAAP measure.
Pension And Nonqualified Deferred Compensation
The Company does not have a defined benefit pension program, nor does it offer non-qualified deferred compensation.
Potential Payments Upon Termination Of Employment Or Change In Control
This section (including the following tables) summarizes each NEO’s estimated payments and other benefits that would
be received by the NEO or the NEO’s estate if his or her employment had terminated on December 28, 2024, under the
hypothetical circumstances set forth below.
Certain of our NEOs are entitled to certain termination payments upon his or her death or Disability, his or her involuntary
termination without Cause, or his or her voluntary termination with Good Reason as described below. Although the
definitions of each of these terms is specific to the NEO’s employment agreement or change-in-control agreement with
the Company, the terms generally have the following meanings:
•
“Disability” generally means that the executive officer, due to physical or mental impairment, is unable to
perform his or her duties to the Company for a specified period of time.
•
“Cause” generally means that the executive officer engaged in a crime, willful gross misconduct or other
serious act involving moral turpitude; materially breached an agreement between him or her and the
Company; or otherwise materially breached his or her obligations to the Company.
•
A voluntary termination for “Good Reason” generally means, depending on the particular executive officer’s
agreement, that the executive officer’s duties, responsibilities or status with the Company or its successor
are materially reduced; his or her primary place of work is moved to a location outside a predetermined
radius; in particular cases, certain reductions in compensation; or the Company materially breaches the
terms of his or her agreement with the Company or any successor fails to assume the executive officer’s
change-in-control agreement.
In addition to the payments and other benefits described below, under our 2020 Stock Plan, in the event of a change in
control, unless the Board or Compensation Committee determine that some other treatment is warranted in their
discretion, if the acquirer elects not to assume or substitute an equity award, then upon the effective date of the change
in control all RSUs and PSUs held by any employees of the Company (including NEOs) become fully vested and the
performance goals or other vesting conditions for PSUs shall be deemed achieved at 100% of the target levels.
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NEO Employment and Change in Control Agreements
Mr. Plisinski
Mr. Plisinski’s employment agreement provides for the following:
•
In the event of any termination of Mr. Plisinski’s employment, he is entitled to payment of all base salary due
and owing through the termination date and an amount equal to all earned but unused vacation through the
termination date.
•
In the event Mr. Plisinski’s employment is terminated due to his death, his estate would be entitled to:
Payment of his then-current base salary as if his employment had continued for three months following
his death;
Continued co-payment for a period of six months following his death of amounts due under COBRA for
continuation of the Company’s group health and other group benefits for his covered dependents, if the
covered dependents so elect;
Payment of his annual incentive cash bonus based on actual performance achievement, prorated for the
time employed preceding his death, to be paid out with the Company’s annual incentive plan payouts; and
Immediate vesting of stock options and SARs, and immediate vesting of RSU awards granted after his
appointment as CEO which by their terms would vest within 12 months after death and, if a performance
award, based on actual performance achievement for such performance period completed within 12
months after death.
•
In the event Mr. Plisinski’s employment is terminated due to his Disability, he would be entitled to:
Payment of his then-current base salary through the end of the month of such termination;
Continued co-payment for a maximum period of six months following his Disability of amounts due under
COBRA for continuation of the Company’s group health and other group benefits, if he or his covered
dependents, as appropriate, so elects;
Payment of his annual incentive cash bonus based on actual performance achievement, prorated for the
time employed preceding his termination, to be paid out with the Company’s annual incentive plan
payouts; and
Immediate vesting of stock options and SARs, and immediate vesting of RSU awards granted after his
appointment as CEO which by their terms would vest within 12 months after termination for disability and,
if a performance award, based on actual performance achievement for such performance period
completed within 12 months after termination.
•
In the event Mr. Plisinski’s employment is terminated by the Company without Cause or Mr. Plisinski terminates
his employment for Good Reason, he would be entitled to:
Payment of two times his then-current base salary, paid over 24 months (i.e., salary continuation for two
years);
Continued co-payment for a period of up to 18 months of amounts due under COBRA for continuation of
the Company’s group health and other group benefits, if he so elects; and
Vesting of any equity incentive awards outstanding as of the termination date as follows:
▪
For awards granted after the effective date of Mr. Plisinski’s current employment agreement:
•
Stock options and SARs which would have vested within 12 months following the date of
termination, become immediately and fully vested and exercisable upon termination and
remain exercisable until the first to occur of the second (2nd) anniversary of the termination
date or the original expiration date of such option or stock appreciation right;
▪
For awards granted before the effective date of Mr. Plisinski’s current employment agreement:
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•
Vesting of unvested awards which were earned based on a completed performance period
under a performance-based award granted on or after the employment agreement
effective date and which as of the termination date are then subject to time-based vesting
only, or shares under such an equity incentive award granted on or after the employment
agreement effective date which will be earned under a performance-based award based
on actual achievement under a performance period which has been completed on or prior
to the termination date but as to which performance period the actual number of shares
earned against the award performance goals has not yet been determined by the
Company; and
•
Vesting of unvested awards that would have become vested based solely on the passage
of time within the 12-month period immediately following the termination date had Mr.
Plisinski continued in employment with the Company.
▪
To the extent not vested, all other equity incentive awards outstanding at the time of termination
will expire as of the termination date.
•
If, within 18 months following the occurrence of a Change in Control, Mr. Plisinski’s employment is terminated
for any reason other than for Cause or Mr. Plisinski terminates his employment for Good Reason, he would be
entitled to:
Payment of two times the sum of his then-current base salary and target annual cash bonus, paid over 24
months;
A pro rata incentive compensation payment for the calendar year in which the termination occurred based
on the actual results for the calendar year;
Continued co-payment for a period of up to 18 months of amounts due under COBRA for continuation of
the Company’s group health and other group benefits, if he so elects; and
Immediate vesting of all unvested stock options, SARs and all unvested and outstanding performance-
based (at target) and service-based RSUs and other equity awards.
•
To the extent that Change in Control termination payments made to Mr. Plisinski under his agreement are
subject to the excise tax imposed by Section 4999 of the IRC, Mr. Plisinski would either have to pay the excise
tax or have his benefits reduced so that no portion of his termination payments were subject to the excise tax.
•
In order to receive these termination or Change in Control termination payments, Mr. Plisinski would be required
to sign a general release of all known and unknown claims that he may have against the Company.
•
As part of his employment agreement, Mr. Plisinski is subject to non-solicitation and non-competition
restrictions that limit his ability to compete with the Company during the term of the agreement and survive his
resignation or termination for any reason for periods of two years and one year, respectively.
•
For Mr. Plisinski, a “Change in Control” would generally be considered to have occurred if:
Any person or entity, or multiple persons or entities acting as a group, becomes the beneficial owner of
more than 50% of our outstanding voting shares;
Continuing Directors no longer constitute a majority of the Board, where “Continuing Director” means a
Board member who was a Board member when the Executive Change in Control Agreement was executed
or who was nominated, elected or approved by at least a majority of Board members who were, at that
time, Continuing Directors, but excluding any individual whose initial assumption to office occurred as a
result of any actual or threatened election contest or proxy solicitation, unless such person’s treatment as
a Continuing Director is subsequently approved by a majority of Continuing Directors; or
There is consummation of a merger, consolidation, reorganization, recapitalization or statutory share
exchange involving the Company or a sale or other disposition of all or substantially all of the assets of
the Company in one or a series of transactions (a “Business Combination”), unless, immediately following
such Business Combination, each of the following three conditions is satisfied: (A) all or substantially all
of the individuals and entities who were the beneficial owners of the then-outstanding shares of Common
Stock entitled to vote immediately prior to such Business Combination still beneficially own more than
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61
75% of the outstanding securities of the surviving entity in substantially the same proportions as their
ownership immediately prior to such Business Combination; (B) the individuals who were members of the
Board of Directors of the Company immediately prior to the execution of the agreement providing for such
Business Combination constitute at least 50% of the members of the board of directors or other governing
body of the acquiring entity; and (C) no person beneficially owns, directly or indirectly, securities that
represent immediately after such merger or consolidation more than 50% of the combined voting power
of the then outstanding voting securities of either the Company or the other surviving entity or its ultimate
parent, or of the combined voting power of the then-outstanding securities of such entity entitled to vote
generally in the election of directors or other governing body (except to the extent that such ownership
existed prior to the Business Combination).
The following table reflects the potential payments to Mr. Plisinski in the event of his termination or his termination
following a Change in Control as of December 28, 2024:
Cash Severance
Termination Circumstances as of 12/28/2024
Base Salary
Management
Incentive Bonus
Value of Accelerated
Unvested Equity (1)
Benefits
Continuation
By the Company without Cause
$1,470,000
—
$6,751,651
$53,093
(2x salary)
Executive officer resignation for Good Reason
$1,470,000
—
$6,751,651
$53,093
(2x salary)
Death
$183,750
$920,073
$13,511,664
$17,698
(3 mos.
salary)
(1x bonus)
Disability
—
$920,073
$6,751,651
$17,698
(1x bonus)
Within 18 months following Change in Control:
By the Company without Cause
$1,470,000
$1,617,000
$13,511,664
$53,093
(2x salary)
(2x bonus)
By the executive officer with Good Reason
$1,470,000
$1,617,000
$13,511,664
$53,093
(2x salary)
(2x bonus)
(1)
For RSUs and PSUs the value represents the closing price of our Common Stock on the last trading day of the
fiscal year multiplied by the number of accelerated units. For PSUs, the number of accelerated units assumes
vesting at the target level.
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Ms. Oh, Dr. Vedula and Messrs. Slicer and Yaldaei
The Executive Change in Control Agreements for Ms. Oh, Dr. Vedula and Messrs. Slicer and Yaldaei provide for the
following:
•
Upon cessation of the executive’s employment at the Company for any reason under the Executive Change in
Control Agreement, the executive (or his or her estate) shall be entitled to payment of:
All base salary earned through the executive's termination date but not yet paid;
Any unreimbursed business expenses that are eligible for reimbursement under the Company’s policies;
Any accrued but unused vacation pay or paid time off;
Any amount arising from the executive’s participation in, or benefits, under any employee benefits plans,
programs or arrangements; and
Any amounts earned but not yet paid under any applicable bonus or incentive plan.
•
The executive (or his or her estate) shall also be entitled to any applicable indemnification rights.
•
If, within one year following the occurrence of a Change in Control, or within 60 days prior to the occurrence of
a Change in Control, the executive’s employment is terminated for any reason other than for Cause or the
executive resigns for Good Reason, the executive shall be entitled to the following benefits in exchange for an
unrevoked general release:
Payment of his or her then-current base salary for a period of 12 months;
Accelerated vesting of all unvested stock options, outstanding RSUs and other performance awards;
Any performance award that was assumed, substituted or continued with the Change in Control that had
not already satisfied its performance conditions shall be treated as of the termination date as vested at
the target level and fully vested as to any service conditions;
Payment of 100% of the executive’s target annual bonus for the fiscal year in which the termination date
occurs; and
The executive may elect to maintain the executive’s and his or her dependent’s health care benefit
coverage to the same extent provided for by and with the same Company/Executive officer payment
contribution percentages under the Company’s group plans at the time of termination. Such coverage
shall extend for a term of one year from the termination date unless he or she becomes covered as an
insured under another employer’s or spousal health care plan.
•
Under the Executive Change in Control Agreements, a “Change in Control” would generally be considered to
have occurred if:
Any person or entity, or multiple persons or entities acting as a group, becomes the beneficial owner of
more than 50% of our outstanding voting shares;
Continuing Directors no longer constitute a majority of the Board, where “Continuing Director” means a
Board member who was a Board member when the Executive Change in Control Agreement was executed
or who was nominated, elected or approved by at least a majority of Board members who were, at that
time, Continuing Directors, but excluding any individual whose initial assumption to office occurred as a
result of any actual or threatened election contest or proxy solicitation, unless such person’s treatment as
a Continuing Director is subsequently approved by a majority of Continuing Directors; or
There is consummation of a merger, consolidation, reorganization, recapitalization or statutory share
exchange involving the Company or a sale or other disposition of all or substantially all of the assets of
the Company in one or a series of transactions (a “Business Combination”), unless, immediately following
such Business Combination, each of the following three conditions is satisfied: (A) all or substantially all
of the individuals and entities who were the beneficial owners of the then-outstanding shares of Common
Stock entitled to vote immediately prior to such Business Combination still beneficially own more than
50% of the outstanding securities of the surviving entity in substantially the same proportions as their
ownership immediately prior to such Business Combination; (B) the individuals who were members of the
PROXY STATEMENT
63
Board of Directors immediately prior to the execution of the agreement providing for such Business
Combination constitute at least 50% of the members of the board of directors or other governing body of
the acquiring entity; and (C) no person beneficially owns, directly or indirectly, securities that represent
immediately after such merger or consolidation more than 50% of the combined voting power of the then
outstanding voting securities of either the Company or the other surviving entity or its ultimate parent, or
of the combined voting power of the then-outstanding securities of such entity entitled to vote generally
in the election of directors or other governing body (except to the extent that such ownership existed
prior to the Business Combination).
The following table reflects the potential payments to Ms. Oh, Dr. Vedula and Messrs. Slicer and Yaldaei, in the event
any of them are terminated without cause or resign for good reason within twelve months following a change in control
as of December 28, 2024:
Name
Cash Severance
(Base Salary)
Management
Incentive Bonus
Value of Accelerated
Unvested Equity (1)
Benefits
Continuation
Mark R. Slicer
$463,500
$324,450
$2,736,021
$35,395
Yoon Ah E. Oh
$413,000
$247,800
$2,580,379
$10,368
Srinivas Vedula
$320,578
$224,404
$1,409,652
—
Ramil Yaldaei
$371,700
$241,605
$1,362,379
$35,395
(1) For RSUs and PSUs, the value represents the closing price of our Common Stock on the last trading day of the
fiscal year multiplied by the number of accelerated units. For PSUs, the number of accelerated units assumes
vesting at the target level.
Each of Messrs. Slicer and Yaldaei, Ms. Oh and Dr. Vedula also entered into a separate agreement upon employment
with the Company that subjects him or her to non-competition and non-solicitation restrictions, which limit his or her
ability to compete with the Company during his or her employment and for a period of one year following his or her
resignation or termination for any reason.
Retention Bonus Agreements
No NEO has entered into a Retention Bonus Agreement with the Company.
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CEO Pay Ratio
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of
Regulation S-K, we have elected to identify our median employee every three years unless a significant change in
employee population or employee compensation arrangements has occurred. Because there has been no change in
our employee population or employee compensation arrangements in 2024 that we reasonably believe would result in
a significant change to our pay ratio disclosure for 2024, we are using the same median employee identified in 2022 to
calculate our 2024 CEO pay ratio. For information regarding the process utilized to identify our median employee,
please refer to our proxy statement for the 2022 Annual Meeting of Stockholders. Accordingly, we are providing the
following information about the relationship of our CEO’s compensation to the compensation of all our employees:
•
The annual total compensation of the median employee, as determined in 2024, was $103,605;
•
The annual total compensation of our CEO, Michael P. Plisinski, as reported in the Summary Compensation
Table included in this proxy statement, was $6,961,766; and
•
The ratio of the annual total compensation of our CEO to the median employee’s annual total compensation
was 67 to 1.
This pay ratio is a reasonable estimate calculated in good faith, in a manner consistent with Item 402(u) of Regulation
S-K, based on our payroll and employment records and the methodology described below. The SEC rules for identifying
the “median employee” and calculating the pay ratio based on that employee’s annual total compensation allow
companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and
assumptions that reflect their compensation practices. As such, the pay ratios reported by other companies may not
be comparable to the pay ratio set forth above, as other companies may have different employment and compensation
practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay
ratios.
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PROPOSAL 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
Although ratification by stockholders is not required by law, the Board is submitting the Audit Committee’s selection of
Ernst & Young LLP (“EY”) as the Company’s independent registered public accounting firm for fiscal year 2025 for
ratification as a matter of good corporate governance and recommends that the stockholders vote for ratification of
such appointment. In the event of a negative vote on such ratification, the Board will reconsider its selection. Even if
the selection is ratified, the Audit Committee may appoint a new independent registered public accounting firm at any
time during the year if the Audit Committee believes that such a change would be in the best interests of the Company
and its stockholders. EY has indicated that representatives of EY, the independent registered public accounting firm
presented herein, will be in attendance at the Annual Meeting. Such representatives will have the opportunity to make
a statement, if they desire to do so, and to respond to appropriate questions.
Independent Registered Public Accounting Firm Selection Process
EY served as the independent registered public accounting firm for Rudolph (the accounting acquirer in the merger with
Nanometrics) from 2008 through the Merger Date and has been the Company’s independent registered public
accounting firm since the Merger Date, serving in this role during fiscal year 2024. During this time, the firm has
demonstrated:
•
A high degree of independence and professionalism in their audit engagement with the Company;
•
A solid record of partner and professional staff continuity;
•
A knowledge of current and emerging accounting and auditing issues affecting the Company;
•
A deep and ongoing understanding of the Company’s business model and industry; and
•
A readiness to assist the Company and its audit committee in keeping up to date with the latest accounting
and auditing pronouncements and their application to the Company’s business.
In making its selection of an independent registered public accounting firm, the Audit Committee assesses, among other
factors:
•
The performance of the independent registered public accounting firm in the prior year;
•
The anticipated needs of the Company and ability of the accounting firm to address them in the coming
year;
•
The proposed fees for the coming year; and
•
The potential impact of changing auditors for the coming year.
Ultimately, the selection of the independent registered public accounting firm is made with the best interest of the
Company and its stockholders in mind.
Factors Used To Assess Independent Registered Public Accounting Firm Quality
Members of the Audit Committee have experience in dealing with audits of other public companies as well as experience
with other accounting firms. After the Merger Date, the Audit Committee’s basis for the selection of EY as the Company’s
independent registered public accounting firm included, among other considerations, familiarity with Rudolph’s
accounting practices as the accounting acquirer in the 2019 Merger, EY’s breadth of services and international footprint
as well as expense considerations. On an ongoing basis, EY has been responsive, reliable and professional in their
dealings with the Audit Committee and has appropriately assisted the Audit Committee in its oversight of the Company’s
financial processes and financial statements. In addition, EY makes available to the Company specialists within EY to
assist in the audit when consultation on specific and unique issues is warranted. These processes appear to be effective
in assisting EY with their audit engagement.
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As a part of the Audit Committee’s review of EY’s qualifications, EY provides the Company with the firm-wide comments
from the Public Company Accounting Oversight Board (“PCAOB”) regarding PCAOB’s examinations of EY for the prior
year. EY also updates the Company with the quality improvements that the firm has made as a result of the PCAOB
comments as well as other changes to their quality and risk assessment processes.
Audit Committee’s Involvement In The Lead Partner Selection
In accordance with SEC and PCAOB independence guidelines, EY employs a regular schedule of rotation of both the
lead engagement partner (“Lead Partner”) and the concurring partner. Such a regularly scheduled rotation provides for
sufficient overlap of the new Lead Partner with the outgoing Lead Partner. This process allows the members of the
Audit Committee and Company management to become familiar with the new Lead Partner and new staff and to
introduce them to the Company’s business. Prior to the new Lead Partner’s full engagement, the Audit Committee and
Company management meet with EY to review and offer feedback on the industry experience, financial acumen and
anticipated fit of the new Lead Partner with the Company.
Public Accounting Firm
Pursuant to our Audit Committee charter, our Audit Committee must pre-approve all audit and permissible non-audit
services provided by the Company’s independent registered public accounting firm. These services may include audit
services, audit-related services, tax and other services. Pre-approval is generally provided for up to one year, and any
pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget.
The independent registered public accounting firm and management are required to periodically report to the Audit
Committee regarding the extent of services provided by the independent registered public accounting firm in
accordance with this pre-approval and the fees for the services performed to date. The Audit Committee may also pre-
approve particular services on a case-by-case basis. During fiscal year 2024, all services provided by EY to the
Company were pre-approved by the Audit Committee in accordance with this policy, and the Audit Committee has
concluded that the provision of these services is compatible with the accountants’ independence.
Audit and Non-Audit Fees
The following table sets forth the fees billed for the fiscal year ended December 28, 2024 and the fiscal year ended
December 30, 2023 by EY, the Company’s independent registered public accounting firm.
Fees
2024
2023
Audit
$2,500,000
$2,190,000
Audit Related
$90,000
$48,000
All Other
—
—
Total
$2,590,000
$2,238,000
Audit Fees
Audit fees for the fiscal years ended December 28, 2024 and December 30, 2023 were for the audit of the Company’s
annual financial statements including management’s assessment of internal control over financial reporting, the review
of the Company’s quarterly financial statements and other services. These fees may include services that are normally
provided by the independent registered public accounting firm in connection with regulatory filings or engagements
including any comfort letters and consents for financings and filings made with the SEC.
Audit Related Fees
Audit related fees for the fiscal years ended December 28, 2024 and December 30, 2023 were for assurance and
related services reasonably related to the performance of the audit or review of the Company’s annual financial
statements that are not reported under “Audit Fees,” and consisted primarily of fees for employee benefit plan and
statutory audits.
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67
All Other Fees
All other fees would consist of fees for products and services other than the services described above.
Negotiation of the annual independent registered public accounting firm’s fees is the responsibility of the Audit
Committee with the support of the Company’s CFO. All of the EY fees listed in the chart above for fiscal years 2024
and 2023 were pre-approved by the Audit Committee, which concluded that the provision of such services by EY was
compatible with the maintenance of that firm’s independence in the conduct of its audit functions.
Vote Required
The affirmative vote, in person or by proxy, of a majority of the shares present or represented at the meeting and entitled
to vote will be required to ratify the appointment of Ernst & Young LLP as the Company’s independent registered public
accounting firm for the year ending January 3, 2026.
The Board recommends voting “FOR” the ratification of the appointment of
Ernst & Young LLP as the Company’s independent registered public accounting firm for the year
ending January 3, 2026.
PROXY STATEMENT
68
AUDIT COMMITTEE REPORT
The following is the Audit Committee’s report submitted to the Board for the fiscal year ended December 28, 2024.
As noted in the Audit Committee’s charter, management is responsible for the Company’s internal controls and the
financial reporting process. The independent registered public accounting firm is responsible for performing an
independent audit of the Company’s consolidated financial statements in accordance with the standards of the Public
Company Accounting Oversight Board (United States) and for issuing a report thereon. Additionally, the independent
registered public accounting firm is responsible for performing an independent audit of the Company’s internal control
over financial reporting and for issuing a report thereon. The Committee’s responsibility is to monitor and oversee these
processes.
In this context, the Audit Committee of the Board has:
•
Reviewed and discussed with management and with Ernst & Young LLP, the Company’s independent
registered public accounting firm, together and separately, the Company’s audited consolidated financial
statements contained in its Annual Report on Form 10-K for the fiscal year ended December 28, 2024;
•
Discussed with Ernst & Young LLP the matters required to be discussed by Statement on Auditing
Standards No. 1301, Communications with Audit Committees;
•
Received the written disclosures and the letter from Ernst & Young LLP required by applicable requirements
of the Public Company Accounting Oversight Board regarding the independent registered public
accounting firm’s communications with the Audit Committee concerning independence, and has discussed
with Ernst & Young LLP its independence;
•
Discussed and reviewed with Ernst & Young LLP, with and without management present, the Company’s
work in complying with the requirements of Section 404 under the Sarbanes-Oxley Act of 2002 regarding
internal control over financial reporting; and
•
Discussed Ernst & Young LLP’s audit report on internal controls over financial reporting as of December 28,
2024 with management and Ernst & Young LLP.
Based on the foregoing review and discussions, the Audit Committee recommended to the Board that the audited
financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 28,
2024.
THE AUDIT COMMITTEE
Susan D. Lynch (Chairperson)
Leo Berlinghieri
Stephen D. Kelley
Stephen S. Schwartz
Christine A. Tsingos
PROXY STATEMENT
69
EXECUTIVE OFFICER BIOGRAPHIES
Set forth below is certain information regarding the executive officers of the Company and their ages as of April 9, 2025.
Information relating to Michael P. Plisinski is set forth above under the caption “PROPOSAL 1 - ELECTION OF
DIRECTORS.” The individuals listed reflect the Company’s officers designated by the Board as “Executive Officers” for
the 2025 fiscal year. The Company is unaware of any arrangements or understandings between the executive officers
of the Company and other person(s) pursuant to which an executive officer was or is to be selected, except that Mr.
Plisinski was appointed as CEO of the Company pursuant to the Merger Agreement for the 2019 Merger.
Named Executive Officers (NEOs)
Mark R. Slicer Chief Financial Officer
Age: 54
•
Mr. Slicer has served the Company in his current role since May 2022.
•
Prior Experience:
September 2019 to May 2022: Senior Vice President and Global Operations Controller at Boston Scientific,
a global medical technology manufacturer, where he was responsible for the financial performance of the
global manufacturing and distribution network having a production value of approximately $3 billion.
February 2014 to September 2019: Senior Vice President and Corporate Controller, Boston Scientific, in
which role he oversaw a team of over 500 finance employees across the globe, managing approximately
$10 billion in revenue.
February 2008 to February 2014: Executive roles in finance and internal audit, Boston Scientific.
Preceding Mr. Slicer’s tenure at Boston Scientific, he served in various finance and audit roles at General
Electric and PricewaterhouseCoopers.
•
Mr. Slicer holds a B.S. in Accounting from Providence College and is licensed as a Certified Public Accountant
in the Commonwealth of Massachusetts.
Yoon Ah E. Oh Senior Vice President, General Counsel, and Corporate Secretary
Age: 43
•
Ms. Oh has served the Company in her current role since October 2021.
•
Prior Experience:
June 2023 to January 2024: Vice President, Interim Global Human Resources, Onto Innovation.
June 2020 to September 2021: Associate General Counsel and Corporate Secretary, Analog Devices, Inc.,
a semiconductor company, where she led the team responsible for corporate, M&A, and securities law
matters.
June 2018 to May 2020: Vice President, Associate General Counsel and Corporate Secretary, Endo
International Plc., a specialty pharmaceutical company, where she was responsible for corporate and
securities law matters.
May 2017 to June 2018: Vice President, Associate General Counsel, Endo International Plc.
September 2015 to April 2017: Senior Counsel, Corporate, Endo International Plc.
September 2013 to September 2015: Associate, Dechert LLP, an international law firm.
September 2007 to August 2013: Associate, Cahill Gordon & Reindel LLP, an international law firm.
•
Ms. Oh holds a B.A. in Political Science from Yale University and a J.D. from Harvard Law School. Ms. Oh is
admitted to practice in the Commonwealth of Pennsylvania and the State of New York.
PROXY STATEMENT
70
Ramil Yaldaei Chief Operating Officer
Age: 61
•
Mr. Yaldaei has served the Company in his current role since May 2023.
•
Prior Experience:
October 2022 to May 2023: Vice President, Global Operations, Metrology and Inspection, Onto Innovation.
September 2020 to January 2022: Senior Vice President, Global Supply Chain & Transformation, Visby
Medical, a molecular diagnostics company, where he was responsible for supply chain strategy, including
commodity management, procurement, sales and operations planning, and supplier quality and
engineering.
November 2017 to November 2020: President, RYCC, LLC, a consulting company, where he served as an
advisory member on the boards of directors of two leading semiconductor companies and acted as an
advisor to corporate executives in executing strategic growth plans.
September 2005 to November 2017: Vice President & GM, Global Part Sourcing & Technology, Applied
Materials, a U.S. semiconductor capital equipment manufacturer, where he was responsible for a supply
chain of over $2.2 billion in materials and managed over 550 employees globally.
September 2003 to October 2005: Managing Director, Global Sourcing and Operations, Lam Research, a
U.S. semiconductor capital equipment manufacturer, where he was responsible for the global
commodities supply chain and managed over 500 employees globally.
•
Mr. Yaldaei holds a B.S. and an M.S. in Physics from San Jose State University.
PROXY STATEMENT
71
Other Executive Officers
Ido Dolev Executive Vice President, Product Solutions Group
Age: 45
•
Mr. Dolev has served the Company in his current role since December 2024.
•
Prior Experience:
August 2020 to November 2024: Vice President and General Manager, Optical Metrology Division
Business Unit, KLA Corporation, a U.S. semiconductor capital equipment manufacturer, where he led a
global team of more than 500 employees and was responsible for bottom line financial results of the
Optical Metrology Division.
April 2017 to July 2020: Senior Director of Engineering, Overlay Business Unit, KLA Corporation, where he
led the Measurement Technologies group.
May 2013 to April 2017: Group Manager, Optical Inspection Technology Group, Applied Materials, a U.S.
semiconductor capital equipment manufacturer.
February 2006 to May 2013: Physicist, Optical Inspection Technology Group, Applied Materials.
•
Mr. Dolev holds a B.Sc. in Mathematics and Physics, an M.Sc. in Physics, and a Ph.D. in Electrical Engineering
from Tel-Aviv University.
PROXY STATEMENT
72
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information with respect to beneficial ownership of the Common Stock as of March
25, 2025 (except as otherwise indicated), by (i) each individual or group known by the Company to own beneficially
more than five percent (5%) of the Common Stock; (ii) each of the NEOs; (iii) each of the Company’s directors and
director nominees; and (iv) all directors, director nominees and executive officers as a group. Except as indicated in
the footnotes to this table, the persons named in the table have sole voting and investment power with respect to all
shares of Common Stock shown as beneficially owned by them, subject to community property laws where applicable.
Name and Address of Beneficial Owner
Amount and Nature of
Beneficial Ownership Percent of Class(1)
BlackRock, Inc.(2), 50 Hudson Yards, New York, NY 10001
6,145,448
12.6%
The Vanguard Group(3), 100 Vanguard Boulevard, Malvern, PA 19355
5,188,815
10.6%
Michael P. Plisinski
148,103
*
Mark R. Slicer
9,860
*
Yoon Ah E. Oh
11,842
*
Srinivas Vedula
14,465
*
Ramil Yaldaei
4,811
*
Leo Berlinghieri
20,210
*
Stephen D. Kelley
3,509
*
Susan D. Lynch
809
*
David B. Miller
9,817
*
Stephen S. Schwartz (4)
-
*
Christopher A. Seams
35,638
*
May Su
5,109
*
Christine A. Tsingos
42,918
*
All directors, director nominees and executive
officers as a group (Fourteen (14) persons)(5)
307,091
*
* Less than 1%
(1)
Applicable percentage ownership is based on 48,836,509 shares of Common Stock outstanding as of March 25,
2025. Beneficial ownership of shares is determined in accordance with the rules of the SEC and generally
includes shares as to which a person holds sole or shared voting or investment power. Shares of Common Stock
subject to RSUs which will vest within sixty (60) days of March 25, 2025 are deemed to be beneficially owned by
the person holding such RSUs for the purpose of computing the percentage ownership of such person but are
not treated as outstanding for the purpose of computing the percentage ownership of any other person. Unless
otherwise noted, the address for the executive officers and directors named in this table is c/o Onto Innovation
Inc., 16 Jonspin Road, Wilmington, Massachusetts 01887.
(2) Information provided herein is based on the Schedule 13G/A that was filed by BlackRock, Inc. on January 23,
2024, which reported that BlackRock, Inc. had sole voting power over 6,061,549 shares, shared voting power
over zero shares, sole dispositive power over 6,145,448 shares and shared dispositive power over zero shares.
(3) Information provided herein is based on the Schedule 13G/A that was filed by The Vanguard Group on February
13, 2024, which reported that The Vanguard Group had sole voting power over zero shares, shared voting power
over 82,524 shares, sole dispositive power over 5,054,083 shares and shared dispositive power over 134,732
shares.
(4) Dr. Schwartz did not become a Company director until July 16, 2024.
(5) Includes 12,880 shares subject to restricted stock units vesting within 60 days of March 25, 2025 for all directors,
director nominees, and executive officers as a group.
PROXY STATEMENT
73
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth, as of December 28, 2024, certain information related to our equity compensation plans.
(A)
(B)
(C)
Plan Category
Number of Securities to be
Issued Upon Exercise of
Outstanding Options,
Warrants, and Rights(1)
Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights
Number of Securities Remaining
Available For Future Issuance
Under Equity Compensation Plans
(Excluding Securities Reflected In
Column (A))(2)
Equity compensation plans
approved by security holders
409,300
—
3,655,406
Equity compensation plans not
approved by security holders
n/a
n/a
n/a
Total
409,300
—
3,655,406
(1)
Includes 409,300 shares issuable upon vesting of outstanding restricted stock units under the 2020 Stock Plan.
(2) As of December 28, 2024, 2,713,367 shares were available under the 2020 Stock Plan and 942,039 shares were
available under the ESPP.
OTHER MATTERS
The Company knows of no other matters to be submitted for consideration at the Annual Meeting. If any other matters
properly come before the Annual Meeting, it is the intention of the persons acting as proxies to vote the shares they
represent as the Board may recommend.
PROXY STATEMENT
74
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING
What Is The Purpose Of The Annual Meeting?
At the Annual Meeting, stockholders will be asked to vote upon the matters set forth in the accompanying Notice of
Annual Meeting, including:
•
The election of seven directors;
•
An advisory vote to approve named executive officer compensation; and
•
The ratification of the appointment of our independent registered public accounting firm for fiscal year
2025,
all of which are more fully described herein.
Will Other Matters Be Voted On At The Annual Meeting?
We are not currently aware of any matters to be presented at the Annual Meeting other than those described in this
proxy statement. If any other matters not described in the proxy statement are properly presented at the meeting, any
proxies received by us will be voted in the discretion of the proxy holders.
Who Is Entitled To Vote?
If you were a stockholder of record as of the close of business on March 25, 2025, which is referred to in this proxy
statement as the “record date,” you are entitled to receive notice of the Annual Meeting and to vote the shares of
Common Stock that you held as of the close of business on the record date. Each stockholder is entitled to one vote
for each share of Common Stock held by such stockholder on the record date.
May I Attend The Meeting?
All stockholders of record as of the record date may attend the Annual Meeting, which will be held at the Company’s
offices located at 1550 Buckeye Drive, Milpitas, CA 95035. To obtain directions to attend the Annual Meeting and vote
in person, please visit our website (www.ontoinnovation.com), and click on “Company,” then “Locations,” and then
“California” to access the interactive map. As always, we encourage you to vote your shares prior to the Annual Meeting.
What is Required To Be Admitted To The Annual Meeting?
If you have a stock certificate or hold shares in an account with our transfer agent, you are considered the “stockholder
of record” with respect to those shares. If you are a stockholder of record, you will need valid picture identification and
proof that you are a stockholder of record of the Company as of the record date to gain admission to the Annual Meeting.
If you are a beneficial holder, you will be required to present a valid picture identification and proof from your bank,
broker or other record holder of your shares that you are the beneficial owner of such shares to gain admission to the
Annual Meeting. If you are a beneficial holder and wish to vote your shares at the meeting, you will need a legal proxy
from your bank, broker or other record holder of your shares.
All attendees will be expected to comply with any health and safety protocols in effect at the Company’s facility at the
time of the Annual Meeting.
What Constitutes A Quorum?
The required quorum for the transaction of business at the Annual Meeting is a majority of the issued and outstanding
shares of Common Stock, present in person or by proxy and entitled to vote at the Annual Meeting. On the record date,
48,836,509 shares of the Common Stock were issued and outstanding, each entitled to one vote on each matter to be
acted upon at the Annual Meeting. Your shares will be counted towards the quorum only if you submit a valid proxy (or
one is submitted on your behalf by your broker, bank or other nominee) or if you vote in person at the meeting.
Abstentions and broker non-votes will be counted to determine whether there is a quorum present. If a quorum is not
present, the Annual Meeting may be adjourned or postponed to a later date.
PROXY STATEMENT
75
What Are “Broker Non-Votes”?
A broker non-vote occurs when a bank, broker or other registered holder of record holds shares for a beneficial owner
but is not empowered to vote on a particular proposal on behalf of such beneficial owner because the proposal is
considered “non-routine” and the beneficial owner has not provided voting instructions on that proposal. The election
of directors and the advisory vote to approve named executive officer compensation are treated as “non-routine”
proposals. This means that if a brokerage firm holds your shares on your behalf, those shares will not be voted with
respect to any of these proposals unless you provide instructions to that firm. See below under “What Is the Vote
Required for Election of Directors?” and “What Is the Vote Required for the Approval of Proposals Other Than Director
Elections?” for a discussion of the impact of broker non-votes on each of the proposals that will be presented at the
Annual Meeting. In order to ensure that any shares held on your behalf by a bank, broker or other registered holder of
record are voted in accordance with your wishes, we encourage you to provide instructions to that firm or organization
in accordance with the Notice or voting instruction form provided by the broker, bank or other registered holder or to
contact your broker, bank or other registered holder to request a proxy form.
Who Bears The Cost Of Soliciting Proxies?
The Company will bear the cost of soliciting proxies. In addition, the Company may reimburse brokerage firms and
other persons representing beneficial owners of shares for their expenses in forwarding solicitation material to such
beneficial owners. Solicitation of proxies by mail may be supplemented by telephone, facsimile, e-mail or other
electronic means or personal solicitation by directors, officers or regular employees of the Company. No additional
compensation will be paid to such persons for such services.
Why Did I Receive A “Notice Of Internet Availability Of Proxy Materials” But No Proxy Materials?
We are distributing the Company’s proxy materials to stockholders of record via the Internet in accordance with the
“Notice and Access” approach permitted by rules of the SEC. This approach benefits the environment, while providing
a timely and convenient method of accessing the materials and voting. Accordingly, we have sent you a Notice because
the Board of the Company is soliciting your proxy to vote at the 2025 Annual Meeting of Stockholders, including at any
adjournments or postponements of the meeting. On or about April 9, 2025, the Company will begin mailing the Notice
to all stockholders of record entitled to vote at the Annual Meeting. All stockholders will have the ability to access the
proxy materials on the website referred to in the Notice or request to receive a printed set of the proxy materials.
Instructions on how to access the proxy materials over the Internet or to request a printed copy of the proxy materials
and the Company’s 2024 Annual Report may be found in the Notice.
What Does It Mean If I Received More Than One Notice?
If you receive more than one Notice, your shares may be registered in more than one name or in different accounts.
Please follow the voting instructions on each of the Notices to ensure that all of your shares are voted.
How Do I Go About Voting?
You may vote “For” or “Against” each of the director nominees or you may “Abstain” from voting with respect to any
nominee. For each of the other matters to be voted on, you may vote “For” or “Against” or “Abstain” from voting.
Voting For Shares Registered Directly In The Name Of The Stockholder
If you are a stockholder of record with shares registered in your name, you can vote by one of the following methods:
•
In Person - To vote in person, come to the Annual Meeting and you will receive a ballot when you arrive.
You will be required to show valid picture identification and proof that you are a stockholder of record of
the Company as of the record date to be admitted to the Annual Meeting.
•
Via the Internet - To submit your proxy by Internet, go to www.proxyvote.com and follow the instructions
on the secure website. The deadline for proxy submission via the Internet is 11:59 p.m. (ET) on May 20,
2025.
•
Via Telephone – To submit your proxy by telephone, call toll free 1-800-690-6903 within the United States,
US territories and Canada. The deadline for voting by phone is 11:59 p.m. (ET) on May 20, 2025.
PROXY STATEMENT
76
•
By Mail – Stockholders who receive a paper proxy card may complete, sign and date their proxy card and
mail it in the pre-addressed postage-paid envelope that accompanies the proxy card. Proxy cards
submitted by mail must be received prior to the time of the Annual Meeting in order for your shares to be
voted.
Even if you plan to attend the Annual Meeting, we recommend that you submit your proxy in advance so that your
shares are represented at the Annual Meeting in the event you are unable to attend the meeting. Each stockholder of
record is entitled to one vote for each share of Common Stock owned by such stockholder on all matters presented at
the Annual Meeting. Stockholders do not have the right to cumulate their votes in the election of directors.
If you return a signed and dated proxy card but do not indicate how the shares are to be voted, those shares will be
voted in accordance with Onto Innovation’s Board’s recommendations. A valid proxy card also authorizes the individuals
named therein as proxies to vote your shares in their discretion on any other matters, which, although not described in
the proxy statement, are properly presented for action at the Annual Meeting. If you indicate on your proxy card that
you wish to “abstain” from voting on an item, your shares will not be voted on that item.
While Internet proxy voting is being provided to allow you to submit your proxy online, with procedures designed to
ensure the authenticity and correctness of your proxy vote instructions, please be aware that you must bear any costs
associated with your Internet access, such as usage charges from Internet access providers and telephone companies.
Voting By Proxy For Shares Registered In Street Name
If your shares are held in a stock brokerage account or by a bank or other holder of record, you are considered the
“beneficial owner” of shares held in “street name.” As the beneficial owner, you have the right to direct your broker,
bank or other holder of record on how to vote your shares by submitting voting instructions to such person in
accordance with the directions that the entity provides. In the event you are considered the “beneficial owner” of shares
held in “street name” and you wish to vote in person at the Annual Meeting, you must obtain a legal proxy from your
broker, bank or another agent. Your vote also authorizes the person(s) acting as your proxy to vote your shares in their
discretion. Follow the instructions from your broker or bank included with these proxy materials or contact your broker
or bank to request a legal proxy.
May I Revoke My Proxy Or My Voting Instructions?
If you are a stockholder of record, you may revoke your proxy or change your vote after submitting your proxy at any
time before the polls close at the Annual Meeting by doing any of the following:
•
By delivering a written notice of revocation or a duly executed proxy card bearing a later date to the
Corporate Secretary of the Company at the Company’s principal executive offices prior to the Annual
Meeting;
•
By submitting a timely and valid later proxy online at www.proxyvote.com;
•
By submitting a timely and valid later proxy by telephone call to 1-800-690-6903 within the USA, US
territories and Canada; or
•
By attending the Annual Meeting and voting in person.
If you are a beneficial owner of shares, please contact your bank, broker or other holder of record for specific
instructions on how to change or revoke your voting instructions.
What Happens If I Do Not Vote?
Stockholder Of Record: Shares Registered In Your Name
If you are a stockholder of record and do not submit a proxy by mail, telephone, or the Internet or by attending the
Annual Meeting and voting in person, your shares will not be voted.
Beneficial Owner: Shares Registered In The Name Of Broker Or Bank
If you are a beneficial owner and do not instruct your broker, bank, or other agent how to vote your shares, the question
of whether your broker or nominee will still be able to vote your shares depends on whether the NYSE deems the
particular proposal to be a “routine” matter. Brokers and nominees can use their discretion to vote “uninstructed” shares
PROXY STATEMENT
77
with respect to matters that are considered to be “routine,” but not with respect to “non-routine” matters. Under the
rules and interpretations of the NYSE, “non-routine” matters are matters that may substantially affect the rights or
privileges of stockholders, such as mergers, stockholder proposals, elections of directors (even if not contested),
executive officer compensation (including any advisory stockholder votes on executive officer compensation and on
the frequency of stockholder advisory votes on named executive officer compensation), and certain corporate
governance proposals, even if management supported. Accordingly, your broker or nominee may not vote your shares
on the election of directors or the advisory proposal to approve the named executive officer compensation without your
instructions, but may vote your shares on the proposal to ratify the appointment of Ernst & Young LLP as the Company’s
independent registered public accounting firm for the fiscal year ending January 3, 2026 even in the absence of your
instruction.
What If I Return A Proxy Card Or Otherwise Submit a Proxy But Do Not Make Specific Choices?
If you return a signed and dated proxy card or otherwise submit a proxy without marking voting selections, your shares
will be voted, as applicable, “For” the election of all seven nominees for director, “For” the advisory approval of the
named executive officer compensation, and “For” the ratification of the appointment of Ernst & Young, LLP as the
independent registered public accounting firm of the Company for its fiscal year ending January 3, 2026. If any other
matter is properly presented at the meeting, your proxyholder will vote your shares using his or her best judgment.
What Is The Vote Required For Election Of Directors?
For the election of directors, each director is elected by a majority of the votes cast (except that if the number of
nominees exceeds the number of directors to be elected, directors will be elected by a plurality voting standard). This
means that for a director nominee to be elected to our Board, the number of votes cast “for” a director’s election must
exceed the number of votes cast “against” that director’s election (with “abstentions” and “broker non-votes” not
counted as a vote cast either “for” or “against” that director’s election, although abstentions and broker non-votes count
for the purpose of determining a quorum). Our Bylaws provide for election of directors by a majority of votes cast in
uncontested elections, and our Corporate Governance Guidelines provides that any incumbent director nominee in an
uncontested election who does not receive an affirmative majority of votes cast must promptly tender such director’s
resignation to our Board. Further information regarding the process that will be followed if such an event occurs can
be located under the heading “Proposal 1 - Election of Directors.”
What Is The Vote Required For The Approval Of Proposals Other Than Director Elections?
The proposal to approve, on an advisory basis, the compensation of our named executive officers and the proposal to
ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year
ending January 3, 2026 each requires the affirmative vote, in person or by proxy, of a majority of the shares present in
person or represented by proxy at the meeting and entitled to vote on the matter to be approved. For each of these
two proposals, abstentions in effect count as negative votes, because they are shares represented in person or by
proxy that are entitled to vote on the matter and not voted in the affirmative. Broker non-votes are not counted as part
of the vote total (because they are not considered “entitled to vote” on the matter) and have no effect on the outcome.
What Is Householding?
The Company has adopted a procedure approved by the SEC called “householding.” Under this procedure, when
multiple stockholders of record share the same address, we may deliver only one (1) Notice or set of householding
materials to that address unless we have received contrary instructions from one or more of those stockholders. The
same procedure may be followed by brokers and other nominees holding shares of our stock in “street name” for more
than one beneficial owner with the same address.
If a stockholder holds shares of stock in multiple accounts (e.g., with our transfer agent and/or banks, brokers or other
registered stockholders), we may be unable to use the householding procedures and, therefore, that stockholder may
receive multiple copies of the Notice. You should follow the instructions on each Notice that you receive in order to
vote the shares you hold in different accounts.
PROXY STATEMENT
78
A stockholder that shares an address with another stockholder if such household has received only one Notice, may
write or call us as specified below:
•
To request a separate copy of such materials, which will be promptly mailed without charge; and
•
To request that separate copies of these materials be sent to his or her home for future meetings.
Conversely, a stockholder of record who shares the same address with another stockholder of record may write or call
us as specified below to request that a single set of proxy materials be delivered to that address. Such stockholder
requests may be made to our Investor Relations Department either via phone at 978-253-6200 or by mail directed to:
Onto Innovation Inc.
Attention: Investor Relations
16 Jonspin Road
Wilmington, Massachusetts 01887
If you are a beneficial owner of shares held in street name, please contact your bank, broker or other holder of record
regarding such requests.
How Can I Find Out the Results Of The Voting At The Annual Meeting?
Preliminary voting results will be announced at the Annual Meeting. Final voting results will be published in a Current
Report on Form 8-K that we expect to file within four business days after the Annual Meeting. If final voting results are
not available to us in time to file a Form 8-K within four business days after the meeting, we intend to file a Form 8-K to
publish preliminary results and, within four business days after the final results are known to us, file an additional Form
8-K to publish the final results.
What Are The Deadlines For Submission Of Stockholder Proposals For The 2025 Annual Meeting?
Stockholders of the Company are entitled to present proposals for consideration at forthcoming stockholder meetings
provided that they comply with the proxy rules promulgated by the SEC, if applicable, and the Bylaws of the Company.
Stockholders wishing to present a proposal at the Company’s 2026 Annual Meeting of Stockholders must submit such
proposal in writing to the Corporate Secretary at Onto Innovation Inc., 16 Jonspin Road, Wilmington, Massachusetts
01887 no later than December 10, 2025 in accordance with Rule 14a-8 under the Exchange Act, if they wish for it to be
eligible for inclusion in the proxy statement and form of proxy relating to that meeting. In addition, under the Company’s
Bylaws, a stockholder wishing to nominate a director or make a proposal at the 2026 Annual Meeting of Stockholders
outside of Exchange Act Rule 14a-8 must submit such nomination or proposal in writing to the Corporate Secretary at
the above address no earlier than January 21, 2026 and no later than February 20, 2026. In addition, to comply with
the universal proxy, stockholders who intend to solicit proxies in support of director nominees other than the Company
nominees in connection with the 2026 Annual Meeting of Stockholders must provide notice that sets forth the
information required by Rule 14a-19 under the Exchange Act, postmarked or submitted electronically to the Company
at its principal executive office no later than March 23, 2026.
The Nominating & Governance Committee will also consider qualified director nominees recommended by stockholders.
Our process for receiving and evaluating Board member nominations from our stockholders is described above under
the caption “Consideration Of Director Nominees.”
You are also advised to review the Company’s Bylaws, which contain additional requirements about advance notice of
stockholder proposals and director nominations.
PROXY STATEMENT
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ADDITIONAL INFORMATION
Stockholders may obtain a copy of the Company’s Annual Report on Form 10-K for the fiscal year ended December 28,
2024, including financial statements and schedules included in the Annual Report on Form 10-K, without charge, by
visiting the Company’s website at https://investors.ontoinnovation.com/ or by writing to:
Onto Innovation Inc.
Attention: Investor Relations
16 Jonspin Road
Wilmington, Massachusetts 01887
Upon written request to the Company, at the above address for Investor Relations, the exhibits set forth on the exhibit
index of the Company’s Annual Report on Form 10-K will be made available at reasonable charge (which will be limited
to our reasonable expenses in furnishing such exhibits).
BY ORDER OF THE BOARD OF DIRECTORS
Yoon Ah E. Oh
Corporate Secretary
Dated: April 9, 2025
Christopher A. Seams
Chairman of the Board
Former Chief Executive Officer
Deca Technologies
Leo Berlinghieri
Former Chief Executive Officer and President
MKS Instruments, Inc.
Stephen D. Kelley
President and Chief Executive Officer
Advanced Energy Industries, Inc.
Susan D. Lynch
Former Senior Vice President and Chief
Financial Officer
V2X, Inc.
David B. Miller
Former President
DuPont Electronics & Communications
Michael P. Plisinski
Chief Executive Officer
Stephen S. Schwartz
Former President and Chief Executive Officer
Azenta, Inc.
May Su
Former Chief Executive Officer
Kateeva, Inc.
Christine A. Tsingos
Former Executive Vice President and Chief
Financial Officer
Bio-Rad Laboratories
Michael P. Plisinski
Chief Executive Officer
Ido Dolev
Executive Vice President,
Product Solutions Group
Mark R. Slicer
Senior Vice President and
Chief Financial Officer
Ramil Yaldaei
Senior Vice President and
Chief Operating Officer
Yoon Ah Oh
Senior Vice President,
General Counsel and Corporate Secretary