2019 Annual Report + 2020 Proxy DEAR SHAREHOLDERS The semiconductor industry plays an increasingly larger role in many of today’s most exciting megatrends. Technological breakthroughs are happening all around us as machine learning is being facilitated by high-power computing combined with high-bandwidth memory. Massive amounts of data are being generated and uploaded to data centers with cloud computing consuming additional processors and memory. In parallel, the anticipated 5G communication channels are increasing data transfer speeds to satisfy the needs of infrastructure, industrial, commercial and consumer systems that will all require more processing power, memory, and wireless (RF systems. The increasing complexity and smaller sizes of all these devices requires inclusive, factory-wide manufacturing controls to achieve higher yields and the long-term reliability that is needed today. With this exciting backdrop, this past June, Nanometrics and Rudolph Technologies announced our intention to merge as equal companies. We recognized that our complementary technologies and teams would accelerate our ability to serve our markets as well as expand our opportunities with strategic customers. Our customers now require a more collaborative and inventive supply chain to maintain their rapid pace of innovation. As our name suggests, Onto Innovation is advancing manufacturing innovation by providing comprehensive solutions to emerging process challenges across the semiconductor value chain. Complementary Products: Throughout the Entire Semiconductor Process ENDTOEND PROCESS CONTROL SOFTWARE Etch Ingot Clean Dicing Slicing Molding Stacking Lithography Lithography Photo Resist Photo Etch, Plating Electrical Test Electrical Lap, Etch, Polish NANOMETRICS PRODUCTS Deposition, Implant Deposition, Outgoing Quality Assurance Quality Outgoing Assurance Quality Outgoing Test, Outgoing Quality Assurance Bumping, Through Silicon Via’s RUDOLPH PRODUCTS In-Line Quality Assurance Quality In-Line Assurance Quality In-Line Chemical Mechanical Planarization Mechanical Chemical Reconstituted Wafer-Panel Reconstituted BOTH PRODUCTS WAFER WAFER FAB ADVANCED PACKAGING MANUFACTURING Since the merger completed in late October, our integration has been progressing very well. We have already identified and implemented $14 million in annualized cost synergies and we are confident in ending the year with $20 million in annualized synergies two years ahead of our initial estimate. More importantly, by combining our core competencies in software and optics we are now able to accelerate our pace of innovation and expand our served available markets. As a result, our new product pipeline is currently expanding, and we expect to see several exciting new product releases in 2020. Looking forward, we expect to significantly increase the total available markets we will be able to address. Given the more important role semiconductors are playing in helping to create a smarter, greener, and more sustainable planet, we are also focused on our social responsibility and sustainability. We have formed an environmental team to focus on raising awareness and implementing sustainable practices and measures at each of our offices. Onto Innovation has already increased our human resources team and our focus on employees, with employee benefits extending above the level of the two legacy companies. The result has been an incredible amount of employee enthusiasm and inter-company collaboration as the two legacy teams begin creating “best sustainable and responsible business practices” for Onto Innovation. Amid the global pandemic of COVID19, our primary focus is ensuring our worldwide employee base and their families are safe. Since the beginning of the year, we have implemented a number of global policies and initiated a team to anticipate and react to the evolving situation. We have a strong customer-focused, innovative team supported by a balance sheet of over $300 million in cash, which provides us with many options to manage through this and position ourselves for continued growth both organically and inorganically. Lastly, a sincere thank you and appreciation to our loyal shareholders, customers, employees, suppliers and all who contributed to Onto Innovation’s success as we look forward to continued growth in 2020. Sincerely, Michael P. Plisinski Christopher A. Seams Chief Executive Officer Chairman of the Board SAFE HARBOR STATEMENT This Annual Report contains forward-looking statements, including those regarding anticipated growth and trends in our businesses and markets, industry outlooks, market share, technology transitions, our business, strategies and financial performance, our development of new products, technologies and capabilities, and other statements that are not historical fact, and actual results could differ materially. Risk factors that could cause actual results to differ are set forth in the “Risk Factors” section of, and elsewhere in, our 2019 Annual Report on Form 10K included in this report and other filings with the Securities and Exchange Commission. All forward-looking statements are based on management’s estimates, projections and assumptions as of the date hereof, and Onto Innovation undertakes no obligation to update any such statements. 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 2019 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 (I.R.S. Employer incorporation or organization) 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 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 $811,997,653 based on the closing price of the Common Stock on the Nasdaq Global Select Market on June 28, 2019. The number of shares of the registrant’s Common Stock outstanding as of February 6, 2020 was 50,282,160. 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 12, 2020. TABLE OF CONTENTS Item No. Page PART I 1. Business.............................................................................................................................................. 2 1A. Risk Factors........................................................................................................................................ 11 1B. Unresolved Staff Comments............................................................................................................... 24 2. Properties............................................................................................................................................ 25 3. Legal Proceedings .............................................................................................................................. 25 4. Mine Safety Disclosures....................................................................................................................