What changed in this filing

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Item 1A. Risk Factors

2026-02-24 compared with 2025-02-27 · 44 added, 47 removed, 302 unchanged (23% of the section changed)

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Our significant research and development investment may nonetheless fail to keep pace with technological changes or ensure that our offerings meet market needs, which would adversely impact our business, financial condition, or results of operations.

As part of the evolution of our business, we have made and continue to make substantial investments in research and development of our products and services, including, in particular, our DFI system and Exensio and Sapience software.

New competitors, changes to existing contracts with licensed technology, any companies, products, or services that we may acquire, technological advances in the semiconductor industry and adjacent markets, and other competitive factors have required us and may continue to require us to invest significantly greater resources than we anticipated.

For example, following our acquisition in July 2023 of Lantern Machinery Analytics, Inc., an early-stage battery solutions provider, we invested in research and development to expand the application of our existing products and services to battery manufacturers.

If we do not anticipate and address technological changes in our industry or our offerings fail to meet market demand, the corresponding additional revenue we anticipate may not materialize, we may not recoup our investment or capture the market share we anticipate, we may lose our competitive position, and our products may become obsolete, which would adversely impact our business, financial condition and results of operations.

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Further, if we were to incur significant costs and then fail to enter into a final contract, we would have to write-off such deferred costs in the period in which the negotiations ended, which would increase our costs and expenses and could result in significant operating losses.

We rely on sole-source providers for certain software as well as for specialized parts for our eProbe hardware and supply-chain delays or disruptions could increase our costs or impact our ability to provide complete software solutions or to build additional hardware tools or meet customer expectations or deadlines, which could result in lost sales and lower earnings.

We provide some enabling technology under license and support from sole-source providers and some of our vendors provide highly specialized, differentiated products and services related to our eProbe system.

We rely on sole-source providers for certain software as well as for specialized parts for our DirectScan system and supply-chain delays or disruptions could increase our costs or impact our ability to provide complete software solutions or to build additional hardware tools or meet customer expectations or deadlines, which could result in lost sales and lower earnings.

In the event these licensors or vendors delay or discontinue providing such products and services to us, it may be difficult and costly or impossible for us to replace such suppliers or parts.

In the case of licensed software, this could impact our ability to grow our sales or to meet the support expectations of our customers and we may need to resort to legal action, which could limit our future sales, harm our reputation, increase our costs, and harm our earnings.

For example, in November 2023, a provider of enabling technology abruptly stopped providing maintenance and support of their software product to us.

As a result, we resorted to legal action, which caused us to incur increased legal expenses beginning in the fourth quarter of 2023.

The matter is ongoing, and the long-term impact of this provider’s actions on our business and our customers is unknown at this time.

In the case of vendors related to our eProbe tool, such disruptions or delays could delay or stop our ability to complete and deliver our DFI systems as currently designed to our customers, which would negatively impact our bookings and revenue related to such systems.

In the case of vendors related to our eProbe tool, such disruptions or delays could delay or stop our ability to complete and deliver our DirectScan systems as currently designed to our customers, which would negatively impact our bookings and revenue related to such systems.

In addition, such delays or disruptions to our supply chain could significantly increase our component costs, or personnel-related costs if we need to build a replacement solution in the case of certain software elements, and could impact our ability to build future generations or models of our eProbe tools, any of which would decrease or delay our sales, earnings, and liquidity and could otherwise adversely affect our business and result in increased costs.

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Once our products are integrated within our customers’ hardware and software systems, our customers may depend on our support organization to resolve any issues relating to our products.

Further, in connection with delivering our SaaS Services, which requires us to maintain adequate server hardware and internet infrastructure, including system

redundancies, we are required to meet contractual uptime obligations.

Further, in connection with delivering our SaaS Services, which requires us to maintain adequate server hardware and internet infrastructure, including system redundancies, we are required to meet contractual uptime obligations.

A high level of system and support is critical for the successful marketing and sale of our products.

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Historically, we have had a small number of large customers that contribute significant revenues.

In the year ended December 31, 2024, two customers accounted for 31% of our total revenues.

In the year ended December 31, 2025, three customers accounted for 53% of our total revenues.

We have in the past and could in the future lose a customer due to its decision not to develop or produce its own future process node or not to engage us on future process nodes.

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Further, if any of our key customers default, declare bankruptcy or otherwise delay or fail to pay amounts owed, or we otherwise have a dispute with any of these customers, our results of operations would be negatively affected in the short term and possibly the long term.

For example, excluding contingent fee arrangements, we incurred substantial expenses related to the arbitration with SMIC New Technology Research & Development (Shanghai) Corporation due to SMIC’s failure to pay fees due to us under a series of contracts.

In 2025, if we are awarded any contract fees under the arbitration, we will incur additional expenses related to legal fees that are contingent on such a favorable result, which may be substantial depending on the size of any award.

The loss of revenue from any of our key customers would cause significant fluctuations in results of operations because our expenses are fixed in the short term and it takes us a long time to replace customers or reassign resources.

If we do not continuously meet our development milestones of key research and development projects or market adoption of our DFI system fails to meet our expectations, our future market opportunity and revenues will suffer, and our costs may not be recouped.

For example, in 2019, SMIC New Technology Research & Development (Shanghai) Corporation stopped paying fees due to us under a series of contracts.

In addition to the loss of contract revenue under these contracts after that time, we incurred significant expenses related to pursuing our legal rights under these contracts, including $2.5 million of attorneys’ fees incurred in the fourth quarter of 2025.

The loss of significant expected revenue from any of our key customers would cause significant fluctuations in results of operations because our expenses are fixed in the short term and it takes us a long time to replace customers or reassign resources.

If we do not continuously meet our development milestones of key research and development projects or market adoption of our DirectScan system fails to meet our expectations, our future market opportunity and revenues will suffer, and our costs may not be recouped.

We have invested significantly in the design and development of our eProbe tool and related IP.

Key customers failing to purchase, renew, or expand the number or use of such systems on our expected timeline or at all will cause our results to miss expectations.

Also, if customers are not able to achieve the results they expect using our DFI system, including new applications, customers may not continue to adopt this system or such applications as we expect, or at all, and we may miss the market opportunity and not recoup our investment.

Also, if customers are not able to achieve the results they expect using our DirectScan system, including new applications, customers may not continue to adopt this system or such applications as we expect, or at all, and we may miss the market opportunity and not recoup our investment.

Further, our eProbe tool could cause unexpected damage to wafers or delay processing wafers, which we could be liable for, or which could make customers unwilling to use the tool.

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Export Administration Regulations (“EAR”) or other U.S.

export or economic sanctions laws and regulations (collectively, “Export Regulations”), we

could be subject to substantial civil and criminal penalties, including fines for the Company and the possible loss of the ability to engage in exporting and other international transactions.

export or economic sanctions laws and regulations (collectively, “Export Regulations”), we could be subject to substantial civil and criminal penalties, including fines for the Company and the possible loss of the ability to engage in exporting and other international transactions.

Due to the nature of our business and technology, Export Regulations may also subject us to governmental inquiries regarding transactions between us and certain foreign entities.

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Also, BIS has placed certain entities on and frequently adds entities to its entity list (the “Entity List”), which restricts supply of items to or in connection with the named entities and impacts our ability to transact business with certain customers.

BIS has issued a rule extending Entity List restriction to non-listed foreign companies owned at least 50% by parties on the Entity List, and suspended this rule until November 2026.

Further, in some circumstances Export Regulations require a license to export an item if the recipient will use the item to design or produce an item for a Huawei-affiliated company or certain other organizations on the Entity List.

These regulations can also require licenses for exports that involve Chinese military or intelligence-related end users or end uses.

Future changes in Export Regulations, including changes in the enforcement and scope of such regulations, may create delays in the introduction of our products or services in international markets or could prevent our customers with international operations from deploying our products or services globally.

Future changes in Export Regulations, including changes in processing requests, enforcement, and the scope of such regulations, may create delays in the introduction of our products or services in international markets or could prevent our customers with international operations from deploying our products or services globally.

In some cases, such changes could prevent the export of our products or services to certain countries, governments, entities or individuals altogether.

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“Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Decreases in wafer volumes at our customers’ manufacturing sites or the volume of ICs that some of our customers are able to sell to their customers would cause our Integrated Yield Ramp revenue to suffer.

Our Integrated Yield Ramp revenue includes amounts largely determined by variable wafer volumes at manufacturing sites covered by our contracts and, in some cases, determined by the volume of an IC product that our customer is able to sell to its customers.

Decreases in wafer volumes at our customers ’ manufacturing sites or the volume of ICs that some of our customers are able to sell to their customers would cause our Volume-based revenue to suffer.

Our Volume-based revenue includes amounts largely determined by variable wafer volumes at manufacturing sites covered by our contracts and, in some cases, determined by the volume of an IC product that our customer is able to sell to its customers.

Both of these factors are outside of our control.

In recent years, we saw significant reduction in our Integrated Yield Ramp revenue due to these trends.

In recent years, we saw significant reduction in our Volume-based revenue due to these trends.

Further, some of our manufacturing customers’ business is largely dependent on customers that use our manufacturing customer as a second or third source.

If those customers consolidate and/or otherwise move the orders to manufacturing facilities not covered by our contracts, or suspend their manufacturing at covered facilities for any reason, including consolidation, our Integrated Yield Ramp revenue will continue to decrease, which could negatively affect our financial results.

Further, reduced demand for semiconductor products or protectionist policies like those stemming from the complex relationships among China, Hong Kong, Taiwan, and the United States has from time to time decreased and may continue to decrease the volume of wafers and, in some cases, products our customers are able to make or sell, which would also decrease our Integrated Yield Ramp revenue.

Also, our customers may unilaterally decide to implement changes to their manufacturing processes during the period that volume is covered by royalty contracts, which could negatively affect yield results and, thus, our Integrated Yield Ramp revenue.

If those customers consolidate and/or otherwise move the orders to manufacturing facilities not covered by our contracts, or suspend their manufacturing at covered facilities for any reason, including consolidation, our Volume-based revenue will continue to decrease, which could negatively affect our financial results.

Since we currently work on a small number of large projects at specified manufacturing sites and, in some cases, on specific IC products, our results of operations have been and may continue to be adversely affected by negative changes at those sites or in those products, including slowdowns in manufacturing due to external factors, such as U.S.

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Also, if wafer orders from sites covered by our contracts are not secured by our customers, if an end product does not achieve commercial viability, if a process line or, in some cases, a specific product, does not achieve significant increases in yield or sustain significant volume manufacturing during the time we receive royalties, revenues associated with such volumes or products would be negatively impacted.

This could significantly reduce our Integrated Yield Ramp revenue and our results of operations could fail to meet expectations.

This could significantly reduce our Volume-based revenue and our results of operations could fail to meet expectations.

In addition, if we work with two directly competitive manufacturing facilities or products, volume in one may offset volume, and thus any of our related revenue, in the other facility or product.

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Current global economic conditions and uncertainty about future conditions including war, terrorism, geopolitical uncertainties and other business interruptions could result in damage to, disruption, postponement or cancellation of sales of our products or services on a global or regional basis.

Several nations have recently conducted or threatened military or hybrid-warfare operations tied to or affecting operational regions of the semiconductor industry.

In the future such conflict could damage participants, disrupt international business, and reduce supply and demand in our industry, including for our products and services.

Furthermore, tariffs, trade controls, export and import regulations, tighter credit, higher interest rates, inflationary concerns, large-scale unemployment, negative financial news and/or declines in income or asset values and other macroeconomic factors could have a material adverse effect on demand for our products and services and, accordingly, on our business, results of operations or financial condition and/or vendors with which we do business.

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imposed additional tariffs on imports from China and announced and subsequently paused implementation of tariffs on imports from Canada and Mexico.

government has changed policy by imposing or threatening to impose certain additional tariffs expressly in pursuit of foreign policy goals.

Some possible tariffs could significantly increase cost of imported goods.

These additional tariffs, as well as a government’s adoption of “buy national” policies or retaliation by another government against such tariffs or policies, have introduced significant uncertainty into the market and may affect the prices of and demand for our and our customers’ products.

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Since certain of our current software requires commercially-available, third-party programs to run as intended and some of our contracts with licensors limit the industry in which we can resell such third-party programs, we face challenges to provide a comprehensive solution to battery manufacturers.

If we or our customers are unable to procure

required third-party programs that can be used in connection with our products for battery manufacturing, or the cost to do so is higher than expected, we may miss the market opportunity, which would mean lower sales than expected, or our costs may be higher, which would mean lower earnings than expected.

Further, if we are unable to develop a suitable product that is not limited by such third-party restrictions and meets the market’s needs or the costs to do so is higher, or the time required to do so, is longer than expected, we may lose future business opportunities and our results of operations will suffer.

If we or our customers are unable to procure required third-party programs that can be used in connection with our products for battery manufacturing, or the cost to do so is higher than expected, we may miss the market opportunity, which would mean lower sales than expected, or our costs may be higher, which would mean lower earnings than expected.

Further, if we are unable to develop a suitable product that is not limited by such third-party restrictions and meets the market’s needs or the costs to do so are higher, or the time required to do so, is longer than expected, we may lose future business opportunities and our results of operations will suffer.

Risks Related to Our Technology

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We rely on third-party service providers to enable key services to our customers, including for cloud services, enterprise software, customer support portal software, and co-location computing facilities.

We have experienced in the

past, and may experience in the future, interruptions in our IT Systems on which our global operations depend or unplanned downtime of the infrastructure that delivers our SaaS.

We have experienced in the past, and may experience in the future, interruptions in our IT Systems on which our global operations depend or unplanned downtime of the infrastructure that delivers our SaaS.

Such an unplanned interruption, even if temporary, could stop SaaS customers from accessing their hosted data or on-premise customers from downloading licensed software or critical security patches, or from accessing our support portal, which could mean that we may not meet our contractual commitments for such services to customers, which could reduce our revenue, incur liability, or result in damage to our reputation and negatively impact future sales.

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We have invested, and continue to invest, human and technology resources in our efforts to comply with such requirements that are time-intensive and costly.

The application and interpretation of such requirements are constantly

evolving and are subject to change, creating a complex compliance environment.

The application and interpretation of such requirements are constantly evolving and are subject to change, creating a complex compliance environment.

In some cases, these requirements may be either unclear in their interpretation and application or they may have inconsistent or conflicting requirements with each other.

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Uncertainty around new and emerging AI technologies such as generative AI technology content creation may require additional investment to protect our proprietary datasets, ML models, and systems to test for accuracy, bias and other variables, which may be costly and could impact our profit margin if we decide to expand generative AI into our product offerings.

Acquiring licenses to programs to check programs written with the help of AI technologies, including

determining whether such programs are secure and reliable, may also increase the cost profile of our offerings.

Acquiring licenses to programs to check programs written with the help of AI technologies, including determining whether such programs are secure and reliable, may also increase the cost profile of our offerings.

Additionally, we could be liable for any inaccuracies or errors in software that we release that causes downtime or other damage to our customers’ facilities or production lines, which could greatly increase our expenses and decrease our earnings.

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economic or political actions, policies, or instability, and the resulting restrictions and disruption to economic activity and business operations in such areas, which could potentially (i) interrupt our customers’ ability in such locations to make use of our products or services, or for our employees or contractors to provide services, (ii) impact our customers’ desire to buy local, or (iii) limit our ability to supply products, services and technologies to affected entities and countries, any of which may negatively impact our financial results.

Measurement of our variable consideration sometimes require data collection and customers’ use of estimates and are contingent upon customers’ consent and may be later offset if actual data differ from customers’ estimates, which can result in uncertainty and cause quarterly results to fluctuate.

Measurement of our variable consideration sometimes requires data collection and customers ’ use of estimates and are contingent upon customers ’ consent and may be later offset if actual data differ from customers ’ estimates, which can result in uncertainty and cause quarterly results to fluctuate.

We can only recognize volume- or average selling price- (“ASP”) based royalties once we have reached agreement with our customers on their level of yield performance improvements or ASP and quarterly agreements are sometimes based on estimates of volume results or ASP for each quarter.

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Therefore, we may have to estimate revenue related to contingent variable fees or usage- or sales-based royalties prior to the receipt of performance reports, such as royalty acknowledgements, or other related information from customers.

These estimates are subject to judgment to evaluate whether it is probable that a significant revenue reversal will not occur in future periods, which could result in our recognition of less Integrated Yield Ramp revenue than expected that may later be offset when actual results become available if such results differ from estimates.

Errors affecting our proprietary hardware and software systems located in customers’ or third-parties’ facilities could lead to liability for us, and any objection from such customers or third-parties or delay in providing us physical or logical access to such systems may adversely impact our ability to timely perform our contract obligations or lead to confidentiality, integrity, availability, security, or privacy controls exceptions.

These estimates are subject to judgment to evaluate whether it is probable that a significant revenue reversal will not occur in future periods, which could result in our recognition of less Volume-based revenue than expected that may later be offset when actual results become available if such results differ from estimates.

Errors affecting our proprietary hardware and software systems located in customers ’ or third-parties ’ facilities could lead to liability for us, and any objection from such customers or third-parties or delay in providing us with physical or logical access to such systems may adversely impact our ability to timely perform our contract obligations or lead to confidentiality, integrity, availability, security, or privacy controls exceptions.

In connection with our data services offerings, we rely on installing, configuring, and operating proprietary configurations of hardware and/or software systems in facilities owned and operated by customers and third parties around the world.

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Also, any intentional or unintentional disruption of the operation of these proprietary systems may lead to customer or third-party facility owner/operator dissatisfaction, which could cause us to lose such site as a connected site or lose future bookings, which would reduce revenue and negatively impact our earnings.

Additionally, any potential or actual malicious cybersecurity incident or accidental misconfiguration

resulting in a data security incident involving these proprietary systems may require complex diagnosis and mitigation because they are located at customers’ and third-parties’ facilities and this may lead to delays, errors, lack of system availability, loss of our customers’ data integrity, or further unauthorized disclosure of customer or third-party confidential or personal data.

Additionally, any potential or actual malicious cybersecurity incident or accidental misconfiguration resulting in a data security incident involving these proprietary systems may require complex diagnosis and mitigation because they are located at customers’ and third-parties’ facilities and this may lead to delays, errors, lack of system availability, loss of our customers’ data integrity, or further unauthorized disclosure of customer or third-party confidential or personal data.

Further, if our system causes downtime or other disruption or loss to such customer or third-party facility, we could be liable for damages associated with such event, which could increase our expenses and distract management, and cause other customers or third-party facilities to not want to work with us.

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Unbilled accounts receivable that are not expected to be billed and collected during the succeeding twelve-month period are recorded in other non-current assets and totaled $8.7 million and $9.0 million as of December 31, 2025 and 2024, respectively.

Four customers accounted for 57% of our gross accounts receivable as of December 31, 2024, and two customers accounted for 50% of our gross accounts receivable as of December 31, 2023.

Two customers accounted for 64% of our gross accounts receivable as of December 31, 2025, and four customers accounted for 57% of our gross accounts receivable as of December 31, 2024.

The total allowance for credit losses was $0.9 million as of December 31, 2025 and 2024.

Changes in tax laws, both within the United States and outside of the United States, could change our tax burden and adversely affect our business and financial condition.

Changes in tax laws, both within the United States and outside of the United States, could change our tax burden and adversely affect our business, financial condition and results of operations.

We conduct our business globally and, as a result, are subject to taxation in the United States and foreign countries.

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Therefore, no benefit has been recognized for the net operating loss carryforwards, tax credit carryforwards, and other deferred tax assets.

A portion of our net operating

loss and tax credits could expire unused and be unavailable to reduce future income tax liabilities.

A portion of our net operating loss and tax credits could expire unused and be unavailable to reduce future income tax liabilities.

We intend to continue maintaining a full valuation allowance on these deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances.

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Risks Related to Our Strategic Transactions

If we do not realize the benefits of our strategic relationships after we have devote significant time and resources to developing them, it could have an adverse effect on our business and results of operations.

If we do not realize the benefits of our strategic relationships after we have devoted significant time and resources to developing them, it could have an adverse effect on our business and results of operations.

We have in the past devoted, and plan in the future to devote, time and resources to identifying, developing, and promoting strategic relationships with other suppliers to provide combined, integrated, or interoperable solutions to the semiconductor, electronics, and automotive industries.

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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.

For example, we acquired SecureWise LLC (“SecureWise”) in March 2025 for a gross purchase price of approximately $130 million.

We may, however, face competition for acquisition targets from larger or more established companies with greater financial resources, making it more difficult or more expensive for us to complete acquisitions.

We may not be successful in completing and closing announced acquisitions, such as our planned acquisition of SecureWise LLC announced in February 2025, or in entering into future acquisitions on favorable terms, and we may not realize the benefits that we anticipate from one or more acquisitions that we do close.

We may not be successful in consummating future acquisitions on favorable terms and we may not realize the benefits that we anticipate from one or more acquisitions that we do close.

Integrating any business, product, technology, or service into our current operations could be expensive and time-consuming and/or disrupt our ongoing business.

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Achieving this objective may be difficult due to many factors, including fluctuations in global economic and industry conditions, changes in our management or leadership, the hiring practices at our competitors or customers, cost reduction activities, and the effectiveness of our recruiting and compensation programs, including equity-based programs.

Further, we have had, and expect to continue to have, difficulty in obtaining visas permitting entry for some of our employees that are foreign nationals into the United States, and delays in obtaining visas permitting entry into other key countries, for several of our key personnel, which disrupts our ability to strategically locate our personnel.

The aging semiconductor workforce creates risks as our experienced employees retire and accelerates the loss of critical knowledge.

At the same time, educational programs and the needed work experience may not produce the critical talent in time to meet the growing technical demands we require in a workforce.

In the past the United States has and, in the future, the United States may again increase the level of scrutiny in granting H-1(b), L-1, and other business visas.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors