PDF SOLUTIONS INC 10-K

Item 5. Market For Registrant ’ s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock trades on the Nasdaq Global Market under the symbol “PDFS.” As of February 20, 2026, we had approximately 23 stockholders of record. The number of stockholders of record does not include individuals whose stock is in nominee or “street name” accounts through brokers. Dividend Policy No cash dividends were declared or paid in 2025, 2024 and 2023. We currently intend to retain all available funds to finance future growth, product development, and stock repurchases and, therefore, do not anticipate paying any cash dividends on our common stock for the foreseeable future. Stock Performance Graph The performance graph shall not be deemed “ filed ” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any filing of PDF Solutions under the Securities Act or the Exchange Act. The following graph and tables compare the cumulative total stockholder return data for our stock since December 31, 2020, to the cumulative return over such period of (i) The Nasdaq Composite Index and (ii) The S&P 600 Information Technology (Sector) (TR) Index. The graph assumes that $100 was invested on December 31, 2020. The graph and tables further assume that such amount was initially invested in the Common Stock of the Company at a per share price of $21.60 (closing price on December 31, 2020) and that any dividends were reinvested. This performance graph and the corresponding tables are not “soliciting material,” are not deemed filed with the SEC and are not to be incorporated by reference in any filing by us under the Securities Act or the Exchange Act whether made before or after the date hereof and irrespective of any general incorporation language in any such filing. The stock price performance on the following graph and tables is not necessarily indicative of future stock price performance. 34 Table of Contents Unregistered Sales of Equity Securities None. Purchases of Equity Securities by the Issuer and Affiliated Purchasers On April 11, 2022, the Board of Directors adopted a stock repurchase program (the “2022 Program”) to repurchase up to $35.0 million of our common stock both on the open market and in privately negotiated transactions, including through Rule 10b5-1 plans, from time to time, over the next two years from the adoption date. During the year ended December 31, 2024, we repurchased 201,561 shares under the 2022 Program at an average price of $34.23 per share for an aggregate total price of $6.9 million. In total, we repurchased 937,501 shares under the 2022 Program at an average price of $25.96 per share for an aggregate total price of $24.3 million. The 2022 Program expired on April 11, 2024. On April 15, 2024, the Board of Directors adopted a new repurchase program (the “2024 Program”) to repurchase up to $40.0 million of our common stock both on the open market and in privately negotiated transactions, including through Rule 10b5-1 plans, from time to time, over the next two years from the adoption date. The actual timing and amount of repurchases are subject to business and market conditions, corporate and regulatory requirements, stock price, acquisition opportunities and other factors. The 2024 Program does not obligate us to acquire a minimum amount of shares and may be modified, suspended or terminated without prior notice. During the year ended December 31, 2025, we repurchased 12,500 shares under the 2024 Program at an average price of $19.55 per share for an aggregate total price of $0.2 million. As of December 31, 2025, approximately $39.8 million remained available under the 2024 Program authorization. There were no purchases made by or on behalf of the Company or any “affiliated purchaser” (as the term is defined in Rule 10b‑18(a)(3) under the Exchange Act) of the Company’s common stock during the fourth quarter ended December 31, 2025. Item 6. Reserved Item 7. Management ’ s Discussion and Analysis of Financial Condition and Results of Operations Overview We offer products and services designed to empower organizations across the semiconductor and electronics ecosystems to connect, collect, manage, and analyze data about design, equipment, manufacturing, and test to improve the yield and quality of their products. We derive revenues from two categories: Platform and Volume-based Revenue. Our offerings combine proprietary software, professional services using proven methodologies and third-party cloud-hosting platforms for SaaS, electrical measurement hardware tools, and physical IP for IC designs. We primarily monetize our offerings through license fees and contract fees for professional services and SaaS. In some cases, we also receive a Volume-based fee such as Cimetrix runtime licenses and secureWISE data usage, and a value-based variable fee or royalty, which we call Gainshare. Our products, services, and solutions have been sold to IDMs, fabless semiconductor companies, foundries, OSATs, capital equipment manufacturers and system houses. Acquisition of SecureWise LLC On March 7, 2025, we completed the acquisition of SecureWise, a Delaware limited liability company (see Note 16, “Business Combinations,” of the Notes to Consolidated Financial Statements included under Part II, Item 8 of this Annual Report on Form 10‑K), and added the widely-used, secure, remote secureWISE connectivity solution to our products and services portfolio. We expect this acquisition to also accelerate equipment makers’ ability to derive value from equipment data by enabling them to leverage our Exensio analytics software and to expand the capability of our secure data exchange (“DEX”) OSAT network by allowing equipment makers, fab operators, and fabless companies to collaborate to optimize chip manufacturing and test. 35 Table of Contents Industry Trends The confluence of Industry 4.0 (i.e. the fourth industrial revolution, or the automation and data exchange in manufacturing technologies and processes) and cloud computing (i.e. the on-demand availability of computing resources and data storage without direct active management by the user) is driving increased innovation in semiconductor and electronics manufacturing and analytics, as well as in the organization of information technology (“IT”) networks and computing at semiconductor and electronics companies across the ecosystem. First, the ubiquity of wireless connectivity and sensor technology enables any manufacturing company to augment its factories and visualize its entire production line. In parallel, the cost per terabyte of data storage has generally decreased over time. The combination of these two trends means that more data is collected and stored than ever before. Further, semiconductor companies are striving to analyze these very large data sets in real-time to make rapid decisions that measurably improve manufacturing efficiency and quality. In parallel, the traditional practice of on-site data storage, even for highly sensitive data, is changing. The ability to cost-effectively and securely store, analyze, and retrieve massive quantities of data from the cloud versus on-premise enables data to be utilized across a much broader population of users, frequently resulting in greater demands on analytics programs. The combination of these latter two trends means that cloud-based, analytics programs that effectively manage identity management, physical security, and data protection are increasingly in demand for insights and efficiencies across the organizations of these companies. We believe that all these trends will continue for the next few years, and the challenges involved in adopting Industry 4.0 and secure cloud computing will create opportunities for our combination of advanced analytics capabilities, proven and established supporting infrastructure, and professional services to configure our products to meet customers’ specialized needs. Worldwide economic performance is uneven, and the possibility of a recession persists, leading to uneven demand. Geopolitical tensions and conflicts in various locations around the world have created volatility in the global financial markets and may have further global economic consequences, including potential disruptions of the global supply chain, heightened volatility of commodity and raw material prices, and increased fears of a global recession. Inventories of semiconductor devices remain elevated in some instances. With high inventories and soft demand for some product segments, some semiconductor fab utilization rates are also low and semiconductor capital equipment orders have been impacted for some vendors and market segments. As a result, some purchase cycles, especially for enterprise software and capital equipment and particularly with respect to larger deals, have lengthened in recent years and may continue to do so. Also, we have contractors located in the West Bank and in Israel, who are providing software development and customer technical support services. We have developed contingency plans to use alternative resources to continue serving customers, if needed. Any escalations in these areas could lead to disruptions or reductions in international trade, deter or prevent purchasing activity of customers, and negatively impact our development timelines and customer support (with respect to the conflicts in the Middle East) or China sales (with respect to U.S.-P.R.C. tensions) and financial results in general (with respect to global tensions). The logic foundry market at the leading-edge nodes, such as 7nm, 5nm, and smaller, underwent significant change over the past few years. The leading foundry continues to dominate market share. This trend will likely continue to impact our Characterization services business on these nodes. We expect most logic foundries to invest in derivatives of older process nodes, such as 28nm and 14nm, to extract additional value as many of their customers will not move to advanced nodes due to either technological barriers or restrictive economics. Foundries that participate at leading edge nodes are expected to continue to invest in new technologies such as memory, packaging, and multi-patterned and extreme ultraviolet lithography, as well as new innovations in process control and variability management. We expect China’s investment in semiconductors to continue. Compliance with changing U.S. export restrictions limit our possible business with Chinese semiconductor manufacturers on advanced nodes. Further, trade conflict through exchange of tariffs and other retaliatory actions are expected to impact worldwide supply chains, increase prices and put downward pressure on economic activity, and could negatively affect our future sales in various geographic markets. The uncertainty caused by these regulations and the potential for additional future restrictions could negatively affect our future sales, including in but not limited to the Republic of China (“P.R.C.”) market. Some customers in the P.R.C. have expressed concern about the potential for supply chain disruption due to the U.S. government’s changing export controls impacting their purchase, or in some case restricting their ability to purchase, certain U.S. goods. Based on our current assessments, we expect the near-term impact of these evolving trade restrictions on our business to be limited. 36 Table of Contents Financial Highlights The following are our financial highlights for the year ended December 31, 2025: ● Total revenues were $219.0 million for the year ended December 31, 2025, an increase of $39.6 million, or 22%, compared to prior year. Platform revenue was $181.0 million for the year ended December 31, 2025, an increase of $23.9 million, or 15%, compared to prior year. The increase in Platform revenue was driven by higher revenue from fixed fees associated with CV systems and the addition of revenues related to secureWISE systems, partially offset by decreases in revenue from perpetual licenses and DirectScan systems. Volume-based revenue was $38.0 million for the year ended December 31, 2025, an increase of $15.7 million, or 70%, compared to prior year, primarily due to an increase in revenue from Gainshare, secureWISE data usage, and Cimetrix runtime licenses. ● Costs of revenues increased $6.5 million for the year ended December 31, 2025, compared to prior year, primarily due to increases in personnel-related costs, subcontractor fees, software license and maintenance costs, third-party cloud-delivery costs, amortization of acquired technology, facilities and IT-related costs, including depreciation and amortization expense, and travel expense, partially offset by decrease in hardware-related costs. ● Net loss was $0.6 million for the year ended December 31, 2025, compared to a net income of $4.1 million for the year ended December 31, 2024. The decrease was primarily attributable to (i) an increase in overall costs and expenses mainly due to increase in personnel-related expenses, costs related to the acquisition and operation of SecureWise, increase in subcontractor fees, amortization of acquired intangible assets, travel expenses, third-party cloud-services related costs, facilities and IT-related costs, software license and maintenance costs, and legal fees related the arbitration proceeding over a disputed customer contract, (ii) an increase in interest expense from our long-term debt, (iii) a decrease in interest income, (iv) net unfavorable fluctuations in foreign currency exchange rates, and (v) an increase in income tax expense, partially offset by an increase in total revenues, a decrease in hardware costs, and recovery from previously written-off property and equipment. Critical Accounting Estimates The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires us to make judgments, assumptions, and estimates that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. Notes 1 and 2 of the Notes to Consolidated Financial Statements (Item 8 of Part II of this Annual Report on Form 10‑K) describe the significant accounting policies and methods used in the preparation of the Consolidated Financial Statements. We consider the accounting policies described below to be our critical accounting policies. These critical accounting policies are impacted significantly by judgments, assumptions, and estimates used in the preparation of the Consolidated Financial Statements and actual results could differ materially from the amounts reported based on these policies. Revenue Recognition Platform Revenue Platform revenue is derived from the following primary offerings: licenses for software (other than Cimetrix runtime licenses) and related software maintenance and technical support services; SaaS; engineering services; fixed fees associated with CV systems; and licenses and purchase contracts for DirectScan systems. Revenue from licenses for software, other than Cimetrix runtime licenses, is recognized depending on whether the license is perpetual or time-based. Perpetual (one-time charge) license software is recognized at the time of the inception of the arrangement when control transfers to the customers as the software license is considered as a separate performance obligation from the services offered by us. Revenue from time-based-licensed software is allocated to each performance obligation and is recognized either at a point in time or over time as follows. The license component is recognized at the time when control transfers to customers. Revenue from related software maintenance and technical support services, or post-contract support, is recognized over the contract term on a straight-line basis because we generally provide (i) support and (ii) certain software updates on a when-and-if available basis over the contract term. 37 Table of Contents Revenue from SaaS arrangements, which allow for the use of a software product or service over a contractually determined period of time without the customer taking possession of the software, e.g., cloud-based or via a network of secureWISE servers, is accounted for as a subscription and is recognized as revenue ratably, on a straight-line basis, over the subscription period beginning on the date the service is first made available to customers. Revenue from engineering services and fixed fees associated with CV systems (including Characterization services) is recognized primarily as services are performed, using a percentage of completion method based on costs or labor-hours inputs, whichever is the most appropriate measure of the progress towards completion of the contract. The estimation of percentage of completion method is complex and subject to many variables that require significant judgment. Please refer to the “Significant Judgments” section of this Note for further discussion. When a CV system engagement includes CV test chip designs that were previously developed by us and reused with only minimal rework or were previously developed by us and adapted to different customer applications with limited rework, the revenue allocated to these CV test chip designs is recognized when the rework is completed at a point in time upon delivery or contract signature, whichever is later. All revenue associated with other CV test chip designs are recognized over time using a percentage of completion method. Revenue from purchase contracts for DirectScan systems is recognized at a point in time when our performance obligations have been completed, and the customer has accepted the product. Revenue from licenses for hardware is recognized depending on whether we classify the contract as an operating or a sales-type lease. Where the customer controls the use of identified assets for a period of time defined in a contract, it will be classified as a sales-type lease if it meets certain criteria under FASB Accounting Standards Codification (“ASC”) Topic 842, Leases , otherwise, it will be classified as an operating lease. Operating lease revenue is recognized on a straight-line basis over the lease term. Sales-type lease revenue and corresponding lease receivables are recognized at lease commencement based on the present value of the future lease payments, and related interest income on lease receivable is recognized over the lease term and recorded under Platform revenue in the Consolidated Statements of Operations and Comprehensive Income (Loss). Payments under sales-type leases are discounted using the interest rate implicit in the lease. When our leases are embedded in contracts with customers that include non-lease performance obligations, we allocate consideration in the contract between lease and non-lease components based on their relative SSPs. Assets subject to operating leases are included in property and equipment and subject to depreciation. Assets subject to sales-type leases are derecognized from property and equipment, net at lease commencement and a net investment in the lease asset is recognized in prepaid expenses and other current assets and other non-current assets in the Consolidated Balance Sheets. Volume-based Revenue Volume-based revenue is derived from Cimetrix runtime licenses, secureWISE data, and Gainshare. Accordingly, this revenue typically fluctuates based on customers’ production tool shipments and deployment cycles, data transferred through the secureWISE network, and wafer manufacturing volume, as applicable. Revenue from Cimetrix runtime licenses is recognized at a point in time when the software is delivered via issuance of a license file. Revenue from secureWISE data is recognized over the period the data transfer is incurred. Revenue from Gainshare is typically recognized at a point in time based on customers’ wafer manufacturing volumes. Please refer to the “Significant Judgments” section below for discussion about our judgments and estimates pertaining to Gainshare revenue. Significant Judgments Judgments and estimates are required under ASC Topic 606, Revenue from Contracts with Customers , and its related amendments (collectively known as “ASC 606”). Due to the complexity of certain contracts, the actual revenue recognition treatment required under ASC 606 for our arrangements may be dependent on contract-specific terms and may vary in some instances. For revenue under project-based contracts for fixed-price services, revenue is recognized as services are performed using a percentage-of-completion method based on costs or labor-hours input method, whichever is the most appropriate measure of the progress towards completion of the contract. Due to the nature of the work performed in these arrangements, the estimation of percentage of completion method is complex, subject to many variables and requires significant judgment. Key factors reviewed by us to estimate costs to complete each contract are future labor and product costs and expected productivity efficiencies. If circumstances arise that change the original estimates of revenues, costs, or extent of progress toward completion, revisions to the estimates are made. These revisions may result in increases or decreases in estimated revenues or costs, and such revisions are reflected in revenue on a cumulative catch-up basis in the period in which the circumstances that gave rise to the revision become known. 38 Table of Contents Our contracts with customers often include promises to transfer products, software licenses and provide services, including professional services, technical support services, and rights to unspecified updates to a customer. Determining whether licenses and services are distinct performance obligations that should be accounted for separately, or not distinct and thus accounted for together, requires significant judgment. We rarely license software on a standalone basis, so we are required to estimate the range of SSPs for each performance obligation. In instances where the SSP is not directly observable because we do not license the software or sell the service separately, we determine the SSP using information that may include market conditions and other observable inputs. We typically recognize Gainshare revenue in the same period in which the usage occurs. Because we generally do not receive the acknowledgment reports from its customers during a given quarter within the time frame necessary to adequately review the reports and include the actual amounts in quarterly results for such quarter, we accrue the related revenue based on estimates of customers underlying sales achievement. Our estimation process can be based on historical data, trends, seasonality, changes in the contract rate, knowledge of the changes in the industry and changes in the customer’s manufacturing environment learned through discussions with customers and sales personnel. As a result of accruing revenue for the quarter based on such estimates, adjustments will be required in the following quarter to true-up revenue to the actual amounts reported. Income Taxes We are required to assess whether it is “more likely than not” that we will realize our deferred tax assets (“DTAs”). If we believe that they are not likely to be fully realizable before the expiration dates applicable to such assets, then to the extent we believe that recovery is not likely, we must establish a valuation allowance. Based on all available evidence, both positive and negative, we determined a full valuation allowance was still appropriate for our U.S. federal and state net DTAs December 31, 2025. The valuation allowance was approximately $69.9 million and $67.9 million as of December 31, 2025 and 2024, respectively. We will continue to evaluate the need for a valuation allowance and may change our conclusion in a future period based on changes in facts (e.g., significant new revenue and other relevant factors). If we conclude that we are more likely than not to utilize some or all of our U.S. DTAs, we will release some or all of our valuation allowance and our income tax expense will decrease in the period in which we make such determination. We evaluate our DTAs for realizability considering both positive and negative evidence, including our historical financial performance, projections of future taxable income, future reversals of existing taxable temporary differences, tax planning strategies and any carryback availability. In evaluating the need for a valuation allowance, we estimate future taxable income based on management approved business plans. This process involves significant management judgment about assumptions that are subject to change from period to period based on changes in tax laws or variances between future projected operating performance and actual results. Changes in the net DTAs, less offsetting valuation allowance, in a period are recorded through the income tax expense and could have a material impact on the Consolidated Statements of Operations and Comprehensive Income (Loss). Our income tax calculations are based on the application of applicable U.S. federal, state, and/or foreign tax law. Our tax filings, however, are subject to audit by the respective tax authorities. Accordingly, we recognize tax liabilities based upon our estimate of whether, and the extent to which, additional taxes will be due when such estimates are more-likely-than-not to be sustained. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. To the extent the final tax liabilities are different than the amounts originally accrued, the increases or decreases are recorded as income tax expense or benefit in the Consolidated Statements of Operations and Comprehensive Income (Loss). As of December 31, 2025, no deferred taxes have been provided on undistributed earnings from our international subsidiaries. We intend to reinvest the earnings of our non-U.S. subsidiaries in those operations indefinitely. As such, we have not provided for any foreign withholding taxes on the earnings of foreign subsidiaries as of December 31, 2025. The earnings of our foreign subsidiaries are taxable in the U.S. in the year earned under the Global Intangible Low-Taxed Income rules implemented under 2017 Tax Cuts and Jobs Act. 39 Table of Contents Stock-Based Compensation We account for stock-based compensation using the fair value method, which requires us to measure stock-based compensation based on the grant-date fair value of the awards and recognize the compensation expense over the requisite service period. As stock-based compensation expense recognized is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The fair value of our restricted stock units is equal to the market value of our common stock on the date of the grant. These awards are subject to time-based vesting which generally occurs over a period of four years. The fair value of our stock options and purchase rights granted under employee stock purchase plan is estimated using the Black-Scholes-Merton option-pricing model, which incorporates various assumptions including volatility, expected life and interest rates. The expected volatility is based on the historical volatility of our common stock over the most recent period commensurate with the estimated expected life of our stock options and purchase rights granted under employee stock purchase plan. The expected life is based on historical experience and on the terms and conditions of the stock options granted and purchase rights granted under employee stock purchase plan. The interest rate assumption is based upon observed Treasury yield curve rates appropriate for the expected life of our stock options and purchase rights granted under employee stock purchase plan. Business Combinations We allocate the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair values at the date of the business combination. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require us to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, estimated replacement costs and future expected cash flows from acquired customers, acquired technology, acquired patents, and trade names from a market participant perspective, useful lives and discount rates. The estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Allocation of purchase consideration to identifiable assets and liabilities affects our amortization expense, as acquired finite-lived intangible assets are amortized over their useful life, whereas any indefinite lived intangible assets, including in-process research and development and goodwill, are not amortized but tested annually for impairment. During the measurement period, which is not to exceed 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, any subsequent adjustments are recorded to earnings in the Consolidated Statements of Operations and Comprehensive Income (Loss). Valuation of Long-lived Assets including Goodwill and Intangible Assets We record goodwill when the purchase consideration of an acquisition exceeds the fair value of the net tangible and identified intangible assets as of the date of acquisition. We have one operating segment and one operating unit. We perform a qualitative analysis when testing a reporting unit’s goodwill for impairment. We perform an annual impairment assessment of goodwill during the fourth quarter of each calendar year or more frequently, if required to determine if any events or circumstances exist, such as an adverse change in business climate or a decline in the overall industry demand, that would indicate that it would more likely than not reduce the fair value of a reporting unit below its carrying amount, including goodwill. If events or circumstances do not indicate that the fair value of a reporting unit is below its carrying amount, then goodwill is not considered to be impaired and no further testing is required. If the carrying amount exceeds its fair value, an impairment loss would be recognized equal to the amount of excess, limited to the amount of total goodwill. There was no impairment of goodwill for the years ended December 31, 2025, 2024 and 2023. Our long-lived assets, excluding goodwill, consist of property, equipment, intangible assets and unguaranteed residual assets under net investments in sales-type leases. We periodically review our long-lived assets for impairment . For assets to be held and used, we initiate our review whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset group may not be recoverable. Recoverability of an asset group is measured by comparison of its carrying amount to the expected future undiscounted cash flows that the asset group is expected to generate. If it is determined that an asset group is not recoverable, an impairment loss is recorded in the amount by which the carrying amount of the asset group exceeds its fair value. There was no impairment of long-lived assets for the years ended December 31, 2025, 2024 and 2023. 40 Table of Contents Leases We have operating leases for our administrative and sales offices, research and development laboratory and clean room. We recognize our long-term operating lease rights and commitments as operating lease right-of-use assets and operating lease liabilities, respectively, on our Consolidated Balance Sheets. We elected to not separate lease and non-lease components for all of our leases. We determine if an arrangement is, or contains, a lease at inception. Operating lease right-of-use assets, and operating lease liabilities are initially recorded based on the present value of lease payments over the lease term. Lease terms include the minimum unconditional term of the lease, and may include options to extend or terminate the lease when it is reasonably certain at the commencement date that such options will be exercised. The decision to include these options involves consideration of our overall future business plans and other relevant business economic factors that may affect our business. Since the determination of the lease term requires an application of judgment, lease terms that differ in reality from our initial judgment may potentially have a material impact on our Consolidated Balance Sheets. In addition, our leases do not provide an implicit rate. In determining the present value of our expected lease payments, the discount rate is calculated using our incremental borrowing rate determined based on the information available, which requires additional judgment. Recent Accounting Pronouncements and Accounting Changes See Note 1, “Description of Business and Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statements included under Part II, Item 8 of this Annual Report on Form 10‑K for a description of recent accounting pronouncements and accounting changes, including the dates of adoption and estimated effects, if any, on our Consolidated Financial Statements. Results of Operations Change in Presentation of Revenues As our business evolved to include revenue from a broader portfolio of products and services, as a result of organic and inorganic expansion, beginning with this Annual Report on Form 10-K, we updated our presentation of revenue categories. Previously, we presented revenue in two categories: Analytics and Integrated Yield Ramp. Analytics revenue was derived from the following offerings: licenses and services for on-premise software, SaaS, licenses and purchase contracts for DirectScan systems, and Characterization Vehicle systems that did not include performance incentives based on customers’ yield achievement. Integrated Yield Ramp revenue was comprised of all fees from our contracts that included any performance incentives based on customers’ yield achievement. We now present revenues in the following categories: Platform and Volume-based. Platform revenue is derived from the following offerings: licenses for software (other than Cimetrix runtime licenses) and related software maintenance and technical support services; SaaS; engineering services; fixed fees associated with CV systems; and licenses and purchase contracts for DirectScan systems. Volume-based revenue is derived from Cimetrix runtime licenses, secureWISE data, and Gainshare. See Note 2, “Revenue from Contracts with Customers” of the Notes to Consolidated Financial Statements included under Part II, Item 8 of this Annual Report on Form 10‑K. The change in presentation of revenues does not change our total revenues or total costs of revenues. The following table presents reclassified historical amounts to conform to the current period’s presentation (in thousands): Year Ended December 31, 2024 2023 Previously Reported Change in Presentation Reclassification Current Presentation Previously Reported Change in Presentation Reclassification Current Presentation Revenues: Analytics $ 169,253 $ (169,253 ) $ — $ 152,085 $ (152,085 ) $ — Integrated Yield Ramp 10,212 (10,212 ) — 13,750 (13,750 ) — Platform N/A 157,166 157,166 N/A 147,509 147,509 Volume-based N/A 22,299 22,299 N/A 18,326 18,326 $ 179,465 $ — $ 179,465 $ 165,835 $ — $ 165,835 41 Table of Contents Discussion of Financial Data for the years ended December 31, 2025 and 2024 Revenues, Costs of Revenues, and Gross Margin Year Ended December 31, $ Change % Change $ Change % Change (Dollars in thousands) 2025 2024 2023 2024 to 2025 2023 to 2024 Revenues: Platform $ 181,025 $ 157,166 $ 147,509 $ 23,859 15 % $ 9,657 7 % Volume-based 37,999 22,299 18,326 15,700 70 % 3,973 22 % Total revenues 219,024 179,465 165,835 39,559 22 % 13,630 8 % Costs of revenues 60,623 54,144 51,749 6,479 12 % 2,395 5 % Gross profit $ 158,401 $ 125,321 $ 114,086 $ 33,080 26 % $ 11,235 10 % Gross margin 72 % 70 % 69 % Platform revenue as a percentage of total revenues 83 % 88 % 89 % Volume-based revenue as a percentage of total revenues 17 % 12 % 11 % Platform Revenue Platform revenue was $181.0 million for the year ended December 31, 2025, an increase of $23.9 million, or 15%, compared to the year ended December 31, 2024. The increase in Platform revenue was primarily driven by increases in revenue from fixed fees associated with CV systems and the addition of revenues related to SecureWISE systems, partially offset by decreases in revenue from perpetual license and DirectScan systems. Volume-based Revenue Volume-based revenue was $38.0 million for the year ended December 31, 2025, an increase of $15.7 million, or 70%, compared to the year ended December 31, 2024. The increase in Volume-based revenue was due to increases in revenue from Gainshare, secureWISE data usage, and Cimetrix runtime license. Our revenues may also fluctuate in the future due to other factors, including the semiconductor industry’s continued acceptance of our products, services and solutions, the timing of purchases by existing and new customers, cancellations by existing customers, our ability to attract new customers and penetrate new markets, supply chain challenges and further penetration of our current customer base. Fluctuations in future results may also occur if any of our significant customers renegotiate pre-existing contractual commitments, including due to adverse changes in their own business. Costs of Revenues Costs of revenues consist primarily of costs incurred to provide and support our services, costs recognized in connection with licensing our software, IT and facilities-related costs and amortization of acquired technology. Service costs include material costs, hardware costs (including cost of leased assets under sales-type leases), personnel-related costs (including compensation, employee benefits, bonus and stock-based compensation expense), subcontractor costs, overhead costs, travel expenses, and allocated facilities-related costs. Software license costs consist of costs associated with third-party cloud-delivery related expenses and licensing third-party software used by us in providing services to our customers in solution engagements or sold in conjunction with our software products. The increase in costs of revenues of $6.5 million for the year ended December 31, 2025, compared to the year ended December 31, 2024, was primarily due to (i) a $4.0 million increase in personnel-related costs due to increased headcount, worldwide salary increases, increase in employee benefit costs, higher bonus and stock-based compensation expenses, (ii) a $2.1 million increase in subcontractor fees, (iii) a $1.6 million increase in software license and maintenance costs, (iv) a $1.3 million increase in amortization of acquired technology, (v) a $1.0 million increase in third-party cloud-delivery costs, (vi) a $0.7 million increase in facilities and IT-related costs, including depreciation and amortization expense, and (vii) a $0.2 million increase in travel expense. These increases were partially offset by a $4.4 million decrease in hardware-related costs. 42 Table of Contents Gross Margin Gross margin for the year ended December 31, 2025, was 72% compared to 70% for the year ended December 31, 2024, or an increase of 2 percentage points. The increase in gross margin during the year ended December 31, 2025, compared to prior year was primarily driven by higher total revenues. Operating Expenses: Research and Development Year Ended December 31, $ Change % Change $ Change % Change (Dollars in thousands) 2025 2024 2023 2024 to 2025 2023 to 2024 Research and development $ 64,234 $ 53,566 $ 50,736 $ 10,668 20 % $ 2,830 6 % As a percentage of total revenues 29 % 30 % 31 % Research and development expenses consist primarily of personnel-related costs (including compensation, employee benefits, bonus and stock-based compensation expense), outside development services, travel expenses, third-party cloud-services related costs, IT and facilities cost allocations to support product development activities. Research and development expenses increased by $10.7 million for the year ended December 31, 2025, compared to the year ended December 31, 2024, primarily due to (i) a $5.4 million increase in personnel-related costs due to increased headcount, worldwide salary increases, increased employee benefit costs, higher bonus, and stock-based compensation expense, (ii) a $2.4 million increase in subcontractor expenses primarily related to secureWISE systems and Exensio software, (iii) a $ 2.0 million increase in facilities and IT-related costs, including depreciation and amortization expense, and (iv) a $0.7 million increase in travel expenses. We anticipate our expenses in research and development will fluctuate in absolute dollars from period to period as a result of the size and the timing of product development projects. Selling, General, and Administrative Year Ended December 31, $ Change % Change $ Change % Change (Dollars in thousands) 2025 2024 2023 2024 to 2025 2023 to 2024 Selling, general, and administrative $ 84,736 $ 69,924 $ 62,216 $ 14,812 21 % $ 7,708 12 % As a percentage of total revenues 39 % 39 % 38 % Selling, general, and administrative expenses consist primarily of personnel-related costs (including compensation, employee benefits, bonus, commission and stock-based compensation expense for sales, marketing, and general and administrative personnel), legal, tax and accounting services, marketing communications and trade conference-related expenses, third-party cloud-services related costs, travel, business acquisition and integration costs, IT and facilities cost allocations. Selling, general, and administrative expenses increased by $14.8 million for the year ended December 31, 2025, compared to the year ended December 31, 2024, primarily due to (i) a $6.9 million increase in personnel-related costs mainly driven by increased headcount, worldwide salary increases, increased employee benefit costs, higher bonus expense, and stock-based compensation expense, (ii) a $3.6 million increase in acquisition and integration costs related to the acquisition of SecureWise, (iii) a $2.7 million increase in legal fees related to the arbitration proceeding over a disputed customer contract, (iv) a $2.1 million increase in subcontractor fees, (v) a $1.0 million increase in travel expenses, (vi) a $0.2 million increase in audit, accounting and tax professional fees, and (vii) a $0.2 million increase in third-party cloud-services related costs, partially offset by a $2.4 million decrease in and general legal and professional fees. We anticipate our selling, general and administrative expenses will fluctuate in absolute dollars from period to period as a result of cost control initiatives and to support increased selling efforts in the future. 43 Table of Contents Amortization of Acquired Intangible Assets Year Ended December 31, $ Change % Change $ Change % Change (Dollars in thousands) 2025 2024 2023 2024 to 2025 2023 to 2024 Amortization of acquired intangible assets $ 3,584 $ 896 $ 1,285 $ 2,688 300 % $ (389 ) (30 )% Amortization of acquired intangible assets represents amortization expense on intangibles assets acquired from prior and current year business combinations. T he increase in amortization expense during 2025 was a result of the amortization of intangible assets acquired in the SecureWise acquisition. Interest Expense Year Ended December 31, $ Change % Change $ Change % Change (Dollars in thousands) 2025 2024 2023 2024 to 2025 2023 to 2024 Interest expense $ (3,955 ) $ — $ — $ 3,955 100 % $ — — % Interest expense is from our long-term debt that was used in financing the acquisition of SecureWise in 2025, and amortization of debt discount and issuance costs. Interest Income and Other, Net Year Ended December 31, $ Change % Change $ Change % Change (Dollars in thousands) 2025 2024 2023 2024 to 2025 2023 to 2024 Interest income and other, net $ 1,309 $ 5,644 $ 5,020 $ (4,335 ) (77 )% $ 624 12 % Interest income and other, net primarily consists of interest income, and foreign currency transaction exchange gains and losses. Interest income and other, net decreased by $4.3 million for the year ended December 31, 2025, compared to the year ended December 31, 2024, primarily due to (i) a $4.6 million decrease in interest income from cash, cash equivalents and short-term investments, and (ii) $1.1 million net unfavorable fluctuations in foreign currency exchange rates, partially offset by a $0.6 million recovery from a loss on damaged equipment in-transit in 2025, compared to a write-off of this asset for $0.6 million in 2024. Income Tax Expense Year Ended December 31, $ Change % Change $ Change % Change (Dollars in thousands) 2025 2024 2023 2024 to 2025 2023 to 2024 Income tax expense $ (3,841 ) $ (2,522 ) $ (1,764 ) $ 1,319 52 % $ 758 43 % Income tax expense increased $1.3 million for the year ended December 31, 2025, compared to the year ended December 31, 2024, primarily due to the impact of enacted U.S. federal tax legislation, changes in the foreign, federal and state taxes, and change in deferred taxes related to indefinite lived deferred tax liabilities. Any significant change in our future effective tax rates could adversely impact our consolidated financial position, results of operations, and cash flows. Our future tax rates may be adversely affected by a number of factors including increase in expenses not deductible for tax purposes, new or changing tax legislation in the United States and in foreign countries where we are subject to tax jurisdictions, the geographic composition of our pre-tax income, the amount of our pre-tax income as business activities fluctuate, our ability to use tax attributes such as research and development tax credits and net operation losses, the tax effects of employee stock activity, audit examinations with adverse outcomes, changes in general accepted accounting principles and the effectiveness of our tax planning strategies. 44 Table of Contents On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S. The OBBBA makes permanent key elements of the Tax Cuts and Jobs Act, including 100% bonus depreciation, domestic research cost expensing, and the business interest expense limitation. ASC 740, Income Taxes, requires the effects of changes in tax rates and laws on deferred tax balances to be recognized in the period in which the legislation is enacted. OBBBA contained U.S. corporate tax provisions under which the Company elected to expense U.S. incurred research or experimental expenditures immediately. As a result of this election, we recognized a favorable cash tax benefit of approximately $1.3 million and reduction of our effective tax rate by approximately 40% in 2025. The OBBBA includes multiple effective dates, with certain provisions effective in 2025 and others phased in through 2027. We will continue to assess the impact on the effective tax rate for future periods. The Organization for Economic Co-operation and Development (“OECD”) has a framework to implement a global minimum corporate tax of 15% for companies with global revenue and profits above certain thresholds (referred to as Pillar 2). Although the U.S. has not enacted legislation to implement Pillar 2, certain countries in which we operate have adopted legislation, and other countries are in the process of introducing legislation to implement Pillar 2. The OECD issued new administrative guidance on January 5, 2026, with respect to Pillar 2 which modifies key aspects of the framework for countries to enact in their own laws. Pillar 2 did not have an impact on our 2025 consolidated financial statements because we do not currently meet the 750 million Euro sales threshold. Discussion of Financial Data for the years ended December 31, 2024 and 2023 For a discussion of our results of operations for the years ended December 31, 2024 and 2023, please see our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 27, 2025. Liquidity and Capital Resources As of December 31, 2025, our working capital, defined as total current assets less total current liabilities, was $92.0 million, compared to $145.4 million as of December 31, 2024. On a consolidated basis, cash and cash equivalents were $42.2 million as of December 31, 2025, compared to cash, cash equivalents and short-term investments of $114.9 million as of December 31, 2024. As of December 31, 2025 and 2024, cash and cash equivalents held by our foreign subsidiaries were $6.7 million and $13.3 million, respectively. Our material cash requirements include payments for capital expenditures, principal and interest payments on our debt, cash needed to fund our operating activities, and other purchase obligations to support our operations. Refer to Part II, Item 8 of this Annual Report on Form 10‑K, Note 6, “Leases,” Note 7, “Debt,” and Note 8, “Commitments and Contingencies,” for details relating to our material cash requirements for leasing arrangements, including future maturities of operating lease liabilities, debt, and purchase obligations, respectively. We believe that our existing cash resources and anticipated funds from operations will satisfy our cash requirements to fund our operating activities, capital expenditures, other obligations including repayment of long-term debt and corresponding interest for at least the next twelve months, and thereafter for the foreseeable future. Term Loan and Revolving Credit Facility On March 7, 2025, we entered into a Credit Agreement (the “Credit Agreement”) with the lenders who are party to the Credit Agreement and the lenders who may become a party to the Credit Agreement pursuant to the terms thereof (the “Lenders”) and Wells Fargo Bank, National Association, as administrative agent to the Lenders (the “Agent”). The Credit Agreement provides for (a) a revolving credit facility in an aggregate principal amount of $45 million (the “Revolving Credit Facility”) and (b) a term loan facility in an aggregate principal amount of $25 million (the “Term Loan” and together with the Revolving Credit Facility, the “Credit Facilities”). The principal of the Revolving Credit facility is due as a balloon payment of $45.0 million in March 2030. The principal of the Term Loan is due in the amount of $0.6 million quarterly and a balloon payment of $13.1 million in March 2030. 45 Table of Contents Borrowings under the Credit Facilities will accrue interest at rates equal, at our election, to (i) the alternate base rate, which is defined as the highest of (a) the federal funds effective rate in effect from time to time plus 0.50%, (b) the prime commercial lending rate in effect from time to time, and (c) the daily simple secured overnight financing rate (“SOFR”) plus 1.00% or (ii) SOFR, plus, in each case, the applicable margin. The applicable margin for the Revolving Credit Facility borrowings bearing interest at the alternate base rate ranges from 1.00% to 1.75%, and the applicable margin for Revolving Credit Facility borrowings bearing interest based on the SOFR ranges from 2.00% to 2.75%, in each case, based on our consolidated total net leverage ratio as of the most recently ended fiscal quarter. The applicable margin for Term Loan borrowings bearing interest at the alternate base rate ranges from 1.00% to 1.75%, and the applicable margin for Term Loan borrowings bearing interest based on the SOFR ranges from 2.00% to 2.75%, in each case, based on our consolidated total net leverage ratio as of the most recently ended fiscal quarter. We will pay an annual commitment fee during the term of the Credit Agreement at a rate per annum equal to 0.50% for any undrawn portion of the Revolving Credit Facility. The weighted average annual interest rate on our outstanding debt was 6.47% for the year ended December 31, 2025. The Credit Agreement contains customary representations and warranties, as well as customary affirmative and negative covenants. Negative covenants include, among others, restrictions on the incurrence of debt, the incurrence of liens, the making of investments and distributions, dividends, and stock buy-backs. In addition, the Credit Agreement requires that we maintain a consolidated total net leverage ratio of not greater than 3.00 to 1.00, and a consolidated fixed charge coverage ratio of not less than 1.25 to 1.00. As of December 31, 2025, we were in compliance with the covenants contained in the Credit Agreement. The Credit Agreement contains customary events of default. Upon the occurrence and during the continuance of an event of default, the Agent may declare the outstanding advances and all other obligations under the Credit Agreement immediately due and payable. The obligations under the Credit Agreement are guaranteed by all present and future material domestic subsidiaries of the Company (collectively with the Company referred to herein as the “Credit Parties”), subject to customary exceptions, and are secured by the equity interests of the Credit Parties (other than the Company) and substantially all of the personal property owned by the Credit Parties, including 65% of the equity interests of certain foreign subsidiaries owned by the Credit Parties. The Company used the amounts borrowed under the Credit Facilities to finance, in part, the purchase price paid for the acquisition of SecureWise. Repurchase of Company ’ s Common Stock On April 11, 2022, our Board of Directors adopted a stock repurchase program (the “2022 Program”) to repurchase up to $35.0 million of our common stock both on the open market and in privately negotiated transactions, including through Rule 10b5-1 plans, from time to time, over the next two years from the adoption date. During the year ended December 31, 2024, we repurchased 201,561 shares under the 2022 Program at an average price of $34.23 per share for an aggregate total price of $6.9 million. In total, we repurchased 937,501 shares under the 2022 Program at an average price of $25.96 per share for an aggregate total price of $24.3 million. The 2022 Program expired on April 11, 2024. On April 15, 2024, our Board of Directors adopted a new repurchase program (the “2024 Program”) to repurchase up to $40.0 million of our common stock both on the open market and in privately negotiated transactions, including through Rule 10b5-1 plans, from time to time, over the next two years from the adoption date. The actual timing and amount of repurchases are subject to business and market conditions, corporate and regulatory requirements, stock price, acquisition opportunities and other factors. The 2024 Program does not obligate us to acquire a minimum amount of shares and may be modified, suspended or terminated without prior notice. During the year ended December 31, 2025, we repurchased 12,500 shares under the 2024 Program at an average price of $19.55 per share for an aggregate total price of $0.2 million. As of December 31, 2025, approximately $39.8 million remained available under the 2024 Program authorization. Consolidated Statements of Cash Flows Data Year Ended December 31, $ Change (In thousands) 2025 2024 2023 2024 to 2025 2023 to 2024 Net cash flows provided by (used in): Operating activities $ 24,053 $ 9,703 $ 14,600 $ 14,350 $ (4,897 ) Investing activities (137,361 ) (5,936 ) (28,991 ) (131,425 ) 23,055 Financing activities 64,563 (11,233 ) (5,890 ) 75,796 (5,343 ) Effect of exchange rate changes on cash and cash equivalents 371 (918 ) (365 ) 1,289 (553 ) Net change in cash and cash equivalents $ (48,374 ) $ (8,384 ) $ (20,646 ) $ (39,990 ) $ 12,262 46 Table of Contents Net Cash Provided by Operating Activities Cash flows provided by operating activities consisted of net income, adjusted for certain non-cash items which primarily consisted of depreciation and amortization, stock-based compensation expense, amortization of acquired intangible expense, amortization of costs capitalized to obtain revenue contracts, net accretion of discounts on short-term investments, and net change in operating assets and liabilities. We expect cash from our operating activities to fluctuate due to the level of our business activities, the timing of billings and payments terms as set forth in our agreements with our customers, the timing of cash disbursements to our vendors and settlement of other liabilities. Net cash flows provided by operating activities were $24.1 million for the year ended December 31, 2025, compared to $9.7 million for the year ended December 31, 2024. The increase in cash flows provided by operating activities between the periods was driven primarily by higher cash collections from customers driven by revenue growth, partially offset by (i) an increase in bonus payments under the Company’s bonus plan, (ii) increases in payments of personnel-related costs and vendor invoices, including business acquisition-related costs, and (iii) payments of interest related to bank loans. Net Cash Used in Investing Activities Net cash used in investing activities was $137.4 million for the year ended December 31, 2025, compared to $5.9 million for the year ended December 31, 2024. For the year ended December 31, 2025, net cash used in investing activities primarily related to (i) $129.7 million payments for the acquisition of SecureWise, net of cash acquired, (ii) $32.8 million purchases and prepayments of property and equipment primarily related to our DirectScan systems, and (iii) $2.9 million purchases of short-term investments, partially offset by $27.5 million proceeds from maturities and sales of short-term investments, and $0.6 million recovery from previously written-off property and equipment. For the year ended December 31, 2024, cash used in investing activities primarily related to purchases of short-term investments of $54.3 million, purchases of and prepayments for property and equipment of $17.8 million primarily related to our DirectScan systems, and the purchase of a convertible promissory note of $2.0 million, partially offset by proceeds from maturities and sales of short-term investments of $68.1 million. Net Cash Provided by (Used in) Financing Activities Net cash provided by financing activities was $64.6 million for the year ended December 31, 2025, compared to net cash used in financing activities of $11.2 million for the year ended December 31, 2024. For the year ended December 31, 2025, net cash provided by financing activities primarily consisted of $69.6 million proceeds from long-term debt, net of debt discount, that was used in financing the acquisition of SecureWise, and $4.2 million proceeds from our employee stock purchase plan and exercise of stock options, partially offset by (i) $6.2 million in cash payments for taxes related to net share settlement of equity awards, (ii) $1.9 million repayment of long-term debt, (iii) $0.9 million payments of debt issuance costs, and (iv) $0.2 million repurchases of our common stock. For the year ended December 31, 2024, net cash used in financing activities primarily consisted of $8.5 million in cash payments for taxes related to net share settlement of equity awards and $6.9 million for the repurchase of shares of our common stock, partially offset by $4.2 million of proceeds from our employee stock purchase plan and exercise of stock options. 47 Table of Contents Off-Balance Sheet Agreements As of December 31, 2025, we do not have any off-balance sheet arrangements, investments in special purpose entities or undisclosed borrowings or debt. Related Party Transactions See Note 15, “Strategic Partnership Agreement with Advantest and Related Party Transactions” of the Notes to Consolidated Financial Statements (Item 8 of Part II of this Annual Report on Form 10‑K) for a discussion on related party transactions between the Company and Advantest. Contractual Obligations The following table summarizes the total amounts due in future periods under our debt agreements at nominal value, operating lease obligations and other known contractual obligations as of December 31, 2025 (in thousands): Payments Due by Period 2031 and 2026 2027 2028 2029 2030 Thereafter Total Debt obligations (1) $ 2,500 $ 2,500 $ 2,500 $ 2,500 $ 58,125 $ — $ 68,125 Interest on debt obligations 4,043 3,893 3,753 3,592 633 — 15,914 Operating lease obligations (1) 2,218 2,126 1,357 357 283 95 6,436 Purchase obligations (2) 41,402 13,298 10,527 82 — — 65,309 Total (3) $ 50,163 $ 21,817 $ 18,137 $ 6,531 $ 59,041 $ 95 $ 155,784 (1) See Note 6, “Leases” and Note 7, “Debt” of the Notes to Consolidated Financial Statements (Item 8 of Part II of this Annual Report on Form 10‑K) for further discussion. (2) Purchase obligations consist of agreements to purchase goods and services entered in the ordinary course of business. (3) The contractual obligation table above excludes liabilities for uncertain tax positions of $3.2 million, which are not practicable to assign to any particular years due to the inherent uncertainty of the tax positions. See Note 11, “Income Taxes” of the Notes to Consolidated Financial Statements (Item 8 of Part II of this Annual Report on Form 10‑K) for further discussion.