What changed in this filing

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Item 1. Financial Statements

2026-05-07 compared with 2025-11-06 · 394 added, 559 removed, 639 unchanged (60% of the section changed)

3 unchanged sentences

(in thousands, except par value)

September 30,

Current assets:

1 unchanged sentence

$ 31,153 $ 42,220

Short-term investments

Accounts receivable, net of allowance for credit losses

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Long-term income taxes

Non-current portion of operating lease liabilities

Operating lease liabilities – non-current portion

Long-term debt, net

64,214 64,763

Other non-current liabilities

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PDF SOLUTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(in thousands, except per share amounts)

Three Months Ended September 30,

Nine Months Ended September 30,

Integrated Yield Ramp

Three Months Ended March 31,

Total revenues

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Amortization of acquired intangible assets

Income from operations

Income (loss) from operations

Interest expense

Other income (expense), net

Income before income tax expense

Interest income and other, net

Income (loss) before income tax expense

Income tax expense

2 unchanged sentences

Foreign currency translation adjustments, net of tax

Change in unrealized gain (loss) related to available-for-sale debt securities, net of tax

Change in unrealized loss related to available-for-sale debt securities, net of tax

Total other comprehensive income (loss)

Comprehensive income

Comprehensive income (loss)

Net income (loss) per share:

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(in thousands)

Three-Month Periods in the Nine Months Ended September 30, 2025

Three Months Ended March 31, 2026

Treasury Stock

2 unchanged sentences

Balances, December 31, 2025

38,801 $ 6 $ 502,902 11,916 $ ( 159,352 ) $ ( 93,988 ) $ ( 3,531 ) $ 246,037

Shares issued under equity plans

329 — 2,128 — — — — 2,128

Shares withheld for taxes related to shares issued under equity plans

— — — 124 ( 3,320 ) — — ( 3,320 )

Stock-based compensation expense

— — 6,715 — — — — 6,715

Stock-based compensation

Comprehensive income (loss)

— — — — — ( 3,032 ) 452 ( 2,580 )

Balances, March 31, 2026

39,130 6 511,745 12,040 ( 162,672 ) ( 97,020 ) ( 3,079 ) 248,980

Shares issued under equity plans

33 — 27 — — — — 27

Shares withheld for taxes related to shares issued under equity plans

— — — 11 ( 215 ) — — ( 215 )

Stock-based compensation expense

— — 6,283 — — — — 6,283

Comprehensive income

— — — — — 1,146 1,299 2,445

Balances, June 30, 2025

39,163 6 518,055 12,051 ( 162,887 ) ( 95,874 ) ( 1,780 ) 257,520

Shares issued under equity plans

357 — 2,088 — — — — 2,088

Shares withheld for taxes related to shares issued under equity plans

— — — 111 ( 2,411 ) — — ( 2,411 )

Repurchase of common stock

( 13 ) — — 13 ( 244 ) — — ( 244 )

Stock-based compensation expense

— — 6,383 — — — — 6,383

Comprehensive income (loss)

— — — — — 1,294 ( 248 ) 1,046

Balances, September 30, 2025

39,507 $ 6 $ 526,526 12,175 $ ( 165,542 ) $ ( 94,580 ) $ ( 2,028 ) $ 264,382

Three-Month Periods in the Nine Months Ended September 30, 2024

Three Months Ended March 31, 2025

Treasury Stock

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Balances, December 31, 2024

38,289 $ 6 $ 473,295 11,460 $ ( 143,923 ) $ ( 98,045 ) $ ( 2,387 ) $ 228,946

Shares issued under equity plans

306 — 1,941 — — — — 1,941

Shares withheld for taxes related to shares issued under equity plans

— — — 118 ( 3,794 ) — — ( 3,794 )

Repurchase of common stock

( 202 ) — — 202 ( 6,899 ) — — ( 6,899 )

Stock-based compensation expense

— — 6,154 — — — — 6,154

Comprehensive loss

— — — — — ( 393 ) ( 542 ) ( 935 )

Balances, March 31, 2024

38,393 6 481,390 11,780 ( 154,616 ) ( 98,438 ) ( 2,929 ) 225,413

Shares issued under equity plans

38 — 67 — — — — 67

Shares withheld for taxes related to shares issued under equity plans

— — — 13 ( 468 ) — — ( 468 )

Stock-based compensation expense

— — 5,762 — — — — 5,762

Stock-based compensation

Comprehensive income (loss)

— — — — — 1,705 ( 326 ) 1,379

Balances, June 30, 2024

38,431 6 487,219 11,793 ( 155,084 ) ( 96,733 ) ( 3,255 ) 232,153

Shares issued under equity plans

332 — 2,179 — — — — 2,179

Shares withheld for taxes related to shares issued under equity plans

— — — 112 ( 3,934 ) — — ( 3,934 )

Stock-based compensation expense

— — 6,857 — — — — 6,857

Comprehensive income

— — — — — 2,206 1,003 3,209

Balances, September 30, 2024

38,763 $ 6 $ 496,255 11,905 $ ( 159,018 ) $ ( 94,527 ) $ ( 2,252 ) $ 240,464

Balances, March 31, 2025

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)

2 unchanged sentences

(in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

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Net accretion of discounts on short-term investments

Recovery from previously written-off property and equipment

Deferred taxes

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Purchases of short-term investments

Purchase of convertible promissory note

Purchases of property and equipment

Prepayment for the purchase of property and equipment

Recovery from previously written-off property and equipment

Payment for business acquisition, net of cash acquired

Net cash provided by (used in) investing activities

Net cash used in investing activities

Cash flows from financing activities:

Proceeds from long-term debt, net of debt financing costs

Proceeds from long-term debt, net of debt discount

Payments of debt issuance costs

2 unchanged sentences

Payments for taxes related to net share settlement of equity awards

Repurchases of common stock

Net cash provided by (used in) financing activities

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(in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Supplemental disclosure of cash flow information:

Cash paid for income taxes

Cash paid for amounts included in the measurement of operating lease liabilities

Cash paid for interest on long-term debt

Cash payments for:

Amounts included in the measurement of operating lease liabilities

Interest on long-term debt

Supplemental disclosure of noncash information:

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Stock-based compensation capitalized as property and equipment

Property and equipment transferred to sales-type leases and from other non-current assets, net

Operating lease liabilities arising from obtaining right-of-use assets

Debt financing costs included in accounts payable

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)

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The interim unaudited condensed consolidated financial statements included herein have been prepared by PDF Solutions, Inc.

(the “Company”) pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), including the instructions to the Quarterly Report on Form 10‑Q and Article 10 of Regulation S- X.

Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted.

(the “Company”) pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), including the instructions to Quarterly Report on Form 10‑Q and Article 10 of Regulation S- X.

GAAP”) have been condensed or omitted.

The interim unaudited condensed consolidated financial statements reflect, in the opinion of management, all adjustments necessary (consisting only of normal recurring adjustments) to present a fair statement of results for the interim periods presented.

The operating results for any interim period are not necessarily indicative of the results that may be expected for other interim periods or the full fiscal year.

The condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10‑K for the year ended December 31, 2024 , filed with the SEC on February 27, 2025.

The interim unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10‑K for the year ended December 31, 2025 , filed with the SEC on February 24, 2026 ( the “2025 10 -K”).

The interim unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries after the elimination of all intercompany balances and transactions.

The condensed consolidated balance sheet as of December 31, 2024 has been derived from the audited consolidated financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America.

The unaudited condensed consolidated balance sheet as of December 31, 2025 , has been derived from the audited consolidated financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Significant estimates in these condensed consolidated financial statements include revenue recognition, the estimated useful lives of property and equipment and intangible assets, fair value of convertible note receivable, assumptions made in analysis of allowance for credit losses, impairment of goodwill and long-lived assets, realization of deferred tax assets (“DTAs”), and accounting for lease obligations, stock-based compensation expense, and income tax uncertainties and contingencies.

The preparation of financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Significant estimates in these interim unaudited condensed consolidated financial statements include revenue recognition, the estimated useful lives of property and equipment and intangible assets, fair value of convertible note receivable, assumptions made in analysis of allowance for credit losses, impairment of goodwill and long-lived assets, realization of deferred tax assets (“DTAs”), and accounting for lease obligations, stock-based compensation expense, and income tax uncertainties and contingencies.

From time to time, the Company may enter into contingent fee arrangements with external legal firms that may represent the Company in legal proceedings related to disputes.

The Company’s policy is to accrue contingent legal fees when they are probable and reasonably estimable.

Actual results could differ from those estimates and may result in material effects on the Company’s operating results and financial position.

Reclassification of Prior Period Amount

Certain immaterial prior period amounts on the condensed consolidated balance sheet, condensed consolidated statements of stockholders' equity, and condensed consolidated statements of cash flows have been reclassified to conform with current period presentation.

Change in Presentation of Revenues

Beginning with the 2025 10 -K, the Company updated its presentation of revenue categories.

The change in presentation of revenues does not change the Company’s total revenues or total costs of revenues.

The following table presents reclassified historical amounts to conform to the current period’s presentation (in thousands):

Three Months Ended March 31, 2025

Previously Reported

Change in Presentation Reclassification

Current Presentation

$ 42,471 $ ( 42,471 ) $ —

Integrated Yield Ramp

5,307 ( 5,307 ) —

N/A 37,321 37,321

N/A 10,457 10,457

Total revenues

$ 47,778 $ — $ 47,778

Recent Accounting Standards

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2023 - 09, Income Taxes (Topic 740 ):

Improvements to Income Tax Disclosures .

This ASU is intended to improve the transparency of income tax disclosures by requiring ( 1 ) consistent categories and greater disaggregation of information in the rate reconciliation and ( 2 ) income taxes paid disaggregated by jurisdiction.

It also includes certain other amendments to improve the effectiveness of income tax disclosures.

The ASU’s amendments are effective for public business entities for annual periods beginning after December 15, 2024.

Entities are permitted to early adopt the standard for “annual financial statements that have not yet been issued or made available for issuance.” This ASU may be applied either prospectively or retrospectively.

The Company will adopt this ASU on a prospective basis.

The Company is currently evaluating the impact of the new standard on the consolidated financial statements and related disclosures.

Recently Adopted Accounting Pronouncements

In July 2025, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2025 - 05, Financial Instruments-Credit Losses (Topic 326 ):

Measurement of Credit Losses for Accounts Receivable and Contract Assets.

This ASU provides a practical expedient to assume that conditions as of the balance sheet date remain unchanged over the life of the asset when estimating expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers .

The Company adopted this ASU on January 1, 2026, and elected to adopt the provisions of the practical expedient prospectively.

The adoption of this ASU did not have a material effect on the Company’s condensed consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

In November 2024, the FASB issued ASU No.

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This ASU is effective for annual periods beginning after December 15, 2026, and for interim periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted.

The Company is currently evaluating the impact of the new standard on the consolidated financial statements and related disclosures.

In July 2025, the FASB issued ASU 2025 - 05, Measurement of Credit Losses for Accounts Receivable and Contract Assets , which provides a practical expedient to measure credit losses on accounts receivable and contract assets.

The ASU is effective for annual periods beginning after December 15, 2025, and interim periods within those annual reporting periods.

Early adoption is permitted.

The Company is currently evaluating the timing of the adoption and the impact of the new standard on the consolidated financial statements and related disclosures.

The Company is currently evaluating the impact of this ASU on the condensed consolidated financial statements and related disclosures.

In September 2025, the FASB issued ASU 2025 - 06 , Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350 - 40 ), related to accounting for internal-use software costs.

The amendments in this ASU improve the operability of the guidance by removing all references to software development project stages so that the guidance is neutral to different software development methods.

This update is effective for annual periods beginning after December 15, 2027, including interim periods within those fiscal years, though early adoption is permitted.

The Company is currently evaluating the effects of the new standard on the consolidated financial statements and related disclosures.

This ASU is effective for annual periods beginning after December 15, 2027, including interim periods within those fiscal years, and permits prospective, modified prospective or retrospective adoption.

The Company is currently evaluating the impact of this ASU on the condensed consolidated financial statements and related disclosures.

In December 2025, the FASB issued ASU 2025 - 11, Interim Reporting (Topic 270 ):

Narrow-Scope Improvements, which intends to improve the navigability of the guidance in ASC 270, Interim Reporting , and clarify when it applies.

The amendments also provide additional guidance on what disclosures should be provided in interim reporting periods.

This ASU is effective for fiscal years beginning after December 15, 2027, including interim periods within those fiscal years, and permits prospective or full retrospective adoption.

Early adoption is permitted.

The Company is currently evaluating the impact of this ASU on the condensed consolidated financial statements and related disclosures.

In December 2025, the FASB issued ASU 2025 - 12, Codification Improvements , which addresses suggestions received from stakeholders regarding the Accounting Standards Codification and makes other incremental improvements to U.S.

The update represents changes to the Codification that clarify, correct errors in or make other improvements to a variety of topics that are intended to make it easier to understand and apply.

This ASU is effective for fiscal years beginning after December 15, 2026, and interim periods within those fiscal years.

Entities are required to apply the amendments to ASC 260, Earnings Per Share , retrospectively.

All other amendments may be applied prospectively or retrospectively.

Early adoption is permitted.

The Company is currently evaluating the impact of this ASU on the condensed consolidated financial statements and related disclosures.

Management has reviewed other recently issued accounting pronouncements issued or proposed by the FASB and does not believe any of these accounting pronouncements has had or will have a material impact on the condensed consolidated financial statements.

REVENUE FROM CONTRACTS WITH CUSTOMERS

The Company derives revenue from two sources:

Analytics and Integrated Yield Ramp.

The Company recognizes revenue in accordance with FASB Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers, and its related amendments (collectively known as “ASC 606” ).

The Company recognizes revenue in accordance with FASB ASC Topic 606, Revenue from Contracts with Customers, and its related amendments (collectively known as “ASC 606” ).

ASC 606 outlines a single comprehensive model to use in accounting for revenue arising from contracts with customers.

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The Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance, and collectibility of consideration is probable.

Contracts with Multiple Performance Obligations

The Company enters into contracts that can include various combinations of licenses, products and services, some of which are distinct and are accounted for as separate performance obligations.

For contracts with multiple performance obligations, the Company allocates the transaction price of the contract to each performance obligation on a relative basis using the standalone selling price (“SSP”).

Analytics Revenue

Analytics revenue is derived from the following primary offerings:

licenses and services for on-premise software (which is primarily Exensio ® and Cimetrix ® products, and includes some secureWISE ® products), software-as-a-service (“SaaS”) (which is primarily Exensio products, and includes some secureWISE products and services), and Design-for-Inspection™ (or DFI™) systems and Characterization Vehicle ® (or CV ® ) systems that do not include performance incentives based on customers’ yield achievement.

Revenue from on-premise software 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 if the software license is considered as a separate performance obligation from the services offered by the Company.

Revenue from post-contract support is recognized over the contract term on a straight-line basis, because the Company is providing (i) support and (ii) unspecified software updates on a when-and-if available basis over the contract term.

For contracts with any combination of the Company’s products and services, distinct performance obligations are accounted for separately.

For contracts with these multiple performance obligations, the Company allocates the transaction price of the contract to each performance obligation on a relative basis using the standalone selling price (“SSP”) attributed to each performance obligation.

Revenue for each of these components is recognized as described below and reported as either Platform or Volume-based revenue.

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;

software-as-a-service (“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 the Company.

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, with the post-contract support component recognized ratably over the committed term of the contract.

For contracts with any combination of licenses, support, and other services, distinct performance obligations are accounted for separately.

For contracts with multiple performance obligations, the Company allocates the transaction price of the contract to each performance obligation on a relative basis using the SSP attributed to each performance obligation.

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 the Company generally provides (i) support and (ii) certain software updates on a when-and-if available basis over the contract term.

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.

For contracts with any combination of SaaS and related services, distinct performance obligations are accounted for separately.

Revenue from DFI systems and CV systems (including Characterization services) that do not include performance incentives based on customers’ yield achievement is recognized primarily as services are performed.

Where there are distinct performance obligations, the Company allocates revenue to all deliverables based on their SSPs.

For those contracts with multiple performance obligations, the Company allocates the transaction price of the contract to each performance obligation on a relative basis using the SSP attributed to each performance obligation.

Where there are not discrete performance obligations, historically, revenue is primarily recognized 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.

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.

The Company also leases some of its DFI system and CV system assets to some customers.

The Company determines the existence of a lease when the customer controls the use of these identified assets for a period of time defined in the lease agreement and classifies such leases as operating leases or sales-type leases.

A lease is classified as a sales-type lease if it meets certain criteria under ASC Topic 842, Leases;

otherwise, it is classified as an operating lease.

When a CV system engagement includes CV test chip designs that were previously developed by the Company and reused with only minimal rework or were previously developed by the Company 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 the Company’s performance obligations have been completed, and the customer has accepted the product.

Revenue from licenses for hardware is recognized depending on whether the Company classifies 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 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 are recorded under Analytics revenue in the condensed consolidated statements of comprehensive income (loss).

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 Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

Payments under sales-type leases are discounted using the interest rate implicit in the lease.

When the Company’s leases are embedded in contracts with customers that include non-lease performance obligations, the Company allocates consideration in the contract between lease and non-lease components based on their relative SSPs.

Assets subject to operating leases remain in property and equipment and continue to be depreciated.

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 Condensed Consolidated Balance Sheets.

The Company generates revenue from the sale of DFI system products.

Revenue is recognized at a point in time when the Company’s performance obligations have been completed, and the customer has accepted the product.

Integrated Yield Ramp Revenue

Integrated Yield Ramp revenue is comprised of all fees from the Company’s contracts that include any performance incentives based on customers’ yield achievement.

Fixed fees under these project-based contracts, which are delivered over a specific period of time and typically paid on a set schedule, are recognized 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.

Where there are distinct performance obligations, the Company allocates revenue to all deliverables based on their SSPs and allocates the transaction price of the contract to each performance obligation on a relative basis using the SSP.

Similar to the services provided in connection with DFI systems and CV systems that are contributing to Analytics revenue, due to the nature of the work performed in these arrangements, 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.

Variable fees contained in Integrated Yield Ramp contracts that relate to continued usage of the Company’s intellectual property after the fixed-fee service period ends depend on a customer’s yield achievement (which the Company refers to as “Gainshare fees”) and are generally subsequent to the delivery of all contractual services and performance obligations.

The Company typically recognizes Gainshare as a usage-based royalty derived from customers’ usage of intellectual property in the same period in which the usage occurs.

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 of this Note for discussion about the Company’s judgments and estimates pertaining to Gainshare revenue.

Disaggregation of Revenue

The Company disaggregates revenue from contracts with customers into the timing of the transfer of goods and services and the geographical regions.

The Company determined that disaggregating revenue into these categories achieves the disclosure objective to depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors.

The Company’s performance obligations are satisfied either over time or at a point-in-time.

The following table represents a disaggregation of revenue percentage by timing of revenue:

Three Months Ended September 30,

Nine Months Ended September 30,

The Company disaggregates revenue from contracts with customers into categories that depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors, and how it could provide meaningful information to its management and investors.

The following table shows the percentage of total revenue that is classified as recurring and upfront for the periods presented:

Three Months Ended March 31,

Recurring revenue (1)

Upfront revenue (2)

Recurring revenue is comprised of revenue that either recurs on a regular schedule (e.g., SaaS and other services and time-based licenses) or is a type of revenue that generally has often re-occurred in the past (e.g., Cimetrix runtime licenses, secureWISE data, and Gainshare), and that is not Upfront revenue.

Though these types of revenue have re-occurred in the past, past events are not necessarily indicative of future results, and no assurance can be provided that they will occur in the future.

Upfront revenue is comprised of revenue from Exensio perpetual licenses, certain CV test chip designs, and hardware-related sales-type leases or sales.

The following table shows revenues from contracts with customers from geographical regions, based on billing address of the customer (amounts in thousands):

Three Months Ended March 31,

United States

$ 24,507 41 % $ 18,228 38 %

Point-in-time

8,679 14 11,736 25

8,514 14 8,043 17

International revenues accounted for approximately 47 % and 55 % of the Company’s total revenues during the three months ended September 30, 2025 and 2024 , respectively, and approximately 57 % and 55 % of the Company’s total revenues during the nine months ended September 30, 2025 and 2024 , respectively.

See Note 10, Customer and Geographic Information .

Rest of the world

18,430 31 9,771 20

Total revenues

$ 60,130 100 % $ 47,778 100 %

International revenues accounted for approximately 59 % and 62 % of the Company’s total revenues during the three months ended March 31, 2026 and 2025 , respectively.

Significant Judgments

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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.

The Company is required to estimate the range of the SSPs for each performance obligation and in instances where the SSP is not directly observable because the Company does not license the software or sell the service separately, the Company determines the SSP using information that may include market conditions and other observable inputs.

The Company is required to recognize Gainshare revenue in the same period in which the usage occurs.

The Company rarely licenses software on a standalone basis, so the Company is required to estimate the range of SSPs for each performance obligation.

In instances where the SSP is not directly observable because the Company does not license the software or sell the service separately, the Company determines the SSP using information that may include market conditions and other observable inputs.

The Company typically recognizes Gainshare revenue in the same period in which the usage occurs.

Because the Company generally does 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, the Company accrues the related revenue based on estimates of customers’ underlying sales achievement.

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Contract Balances

The Company performs its obligations under a contract with a customer primarily by licensing software or providing services in exchange for consideration from the customer.

The Company performs its obligations under a contract with a customer by licensing software or providing services in exchange for consideration from the customer.

The timing of the Company’s performance often differs from the timing of the customer’s payment, which results in the recognition of a receivable, a contract asset, or a contract liability.

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The majority of the Company’s contract assets represent unbilled amounts related to fixed-price service contracts when the revenue recognized exceeds the amount billed to the customer.

The contract assets are recorded on a net basis with deferred revenue (i.e., contract liabilities) at the contract level.

The contract assets were as follows (in thousands):

September 30,

The $ 5.2 million increase in contract assets during the three months ended March 31, 2026 , was primarily due to revenue recognized in the first quarter of 2026 for which the payment is subject to conditions other than the passage of time.

The contract assets are generally classified as current and are recorded on a net basis with deferred revenues (i.e.

contract liabilities) at the contract level.

The contract assets consisted of the following (in thousands):

Current (included in Prepaid expenses and other current assets)

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Deferred revenues that will be recognized during the succeeding twelve -month period are recorded as current deferred revenues and the remaining portion is recorded in other non-current liabilities in the Condensed Consolidated Balance Sheets.

The $ 3.8 million increase in contract liabilities during the three months ended March 31, 2026 reflected the timing of revenue recognition relative to billings for products and services from which there are unsatisfied performance obligations to customers such that revenue had not yet been recognized as of March 31, 2026 .

Deferred revenues were as follows (in thousands):

September 30,

$ 23,102 $ 19,441

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$ 24,058 $ 20,306

Additional information related to deferred revenue were as follows (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

Revenue recognized that was included in the deferred revenues and billings in excess of recognized revenues balances at the beginning of each period

Additional information related to deferred revenue was as follows (in thousands):

Three Months Ended March 31,

Revenue recognized that was included in the deferred revenues and billings in excess of recognized revenues balances at the beginning of each year

$ 8,567 $ 10,025

As of September 30, 2025 , the aggregate amount of the transaction prices allocated to the remaining performance obligations related to customer contracts that were unsatisfied or partially unsatisfied was approximately $ 292.0 million.

Given the applicable contract terms with customers, more than half of this amount is expected to be recognized as revenue over the next two years with the remainder to be recognized thereafter.

This amount does not include insignificant contracts to which the customer is not committed, nor significant contracts for which the Company recognizes revenue equal to the amount the Company has the right to invoice for services performed, or future sales-based or usage-based royalty payments in exchange for a license of intellectual property.

As of March 31, 2026 , the aggregate amount of the transaction price allocated to the remaining performance obligations related to customer contracts that were unsatisfied or partially unsatisfied was approximately $ 246.4 million.

Given the applicable contract terms with customers, the majority of this amount is expected to be recognized as revenue over the next two years, with the remainder recognized thereafter.

This amount does not include significant contracts to which the customer is not committed, future sales-based or usage-based royalty payments in exchange for a license of IP, and future payments for performance obligations from on-demand arrangements.

This amount is subject to change due to future revaluations of variable consideration, terminations, other contract modifications, or currency adjustments.

The estimated timing of the recognition of remaining unsatisfied performance obligations is subject to change and is affected by changes to the scope, change in timing of delivery of products and services, or contract modifications.

The adjustment to revenue recognized from performance obligations satisfied (or partially satisfied) in previous periods was a decrease of $ 1.0 million and a decrease of $ 0.7 million during the three months ended September 30, 2025 and 2024 , respectively, and an increase of $ 0.2 million and a decrease of $ 1.4 million during the nine months ended September 30, 2025 and 2024 , respectively.

These amounts primarily represent changes in estimated percentage-of-completion based contracts and changes in actual versus estimated Gainshare.

The adjustment to revenue recognized from performance obligations satisfied (or partially satisfied) in previous periods was an increase of $ 6.5 million and $ 0.2 million during the three months ended March 31, 2026 and 2025 , respectively.

These amounts primarily represent changes in estimated percentage-of-completion based contracts and changes in actual versus estimated Gainshare revenue.

Costs to Obtain or Fulfill a Contract

The Company capitalizes the incremental costs to obtain or fulfill a contract with a customer, including direct sales commissions and related fees, when it expects to recover those costs.

The Company determined the period of benefit by taking into consideration the terms of its customer contracts, generally, from one to five years.

Amortization expense related to these capitalized costs is recognized over the period associated with the revenue from which the cost was incurred.

Total capitalized direct sales commission costs and related fees were as follows (in thousands):

September 30,

Current (included in Prepaid expenses and other current assets)

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Amortization of capitalized direct sales commission costs were as follows (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Amortization of capitalized direct sales commission costs

$ 720 $ 667 $ 2,217 $ 1,941

There was no impairment loss in relation to the costs capitalized for the periods presented.

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The Company does not adjust the transaction price for the effects of a significant financing component when the period between the transfers of the promised good or service to the customer and payment for that good or service by the customer is expected to be one year or less.

The Company assessed each of its revenue generating arrangements in order to determine whether a significant financing component exists, and determined its contracts did not include a material significant financing component during the nine months ended September 30, 2025 and 2024 .

BALANCE SHEET COMPONENTS

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Accounts receivable include amounts that are unbilled at the end of the period that are expected to be billed and collected within a 12‑month period.

Unbilled accounts receivable, included in accounts receivable, totaled $ 39.8 million and $ 23.0 million as of September 30, 2025 , and December 31, 2024 , respectively.

Unbilled accounts receivable that are not expected to be billed and collected during the succeeding 12‑month period are recorded in other non-current assets and totaled $ 10.6 million and $ 9.0 million as of September 30, 2025 , and December 31, 2024 , respectively.

Unbilled accounts receivable, included in accounts receivable, totaled $ 48.7 million and $ 44.8 million as of March 31, 2026 , and December 31, 2025 , respectively.

Unbilled accounts receivable that are not expected to be billed and collected during the succeeding 12‑month period are recorded in other non-current assets and totaled $ 9.2 million and $ 8.7 million as of March 31, 2026 , and December 31, 2025 , respectively.

The Company performs ongoing credit evaluations of its customers’ financial condition.

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The allowance for credit losses is reviewed on a quarterly basis to assess the adequacy of the allowance.

The allowance for credit losses was $ 0.9 million as of September 30, 2025 and December 31, 2024 .

The allowance for credit losses was $ 0.9 million as of March 31, 2026 , and December 31, 2025 .

Prepaid expenses and other current assets

Prepaid expenses and other current assets consist of the following (in thousands):

September 30,

Prepaid expense

Net investments in sales-type leases - current portion (1)

$ 18,939 $ 14,248

Contract assets (2)

15,983 11,267

Prepaid expense

Costs capitalized to obtain revenue contracts (3)

Net investments in sales-type leases - current portion

Income tax receivable

Convertible note receivable (1)

Total prepaid expenses and other current assets

$ 48,475 $ 38,735

See Note 11, Fair Value Measurements .

See “Other Non-current Assets” section under Note 3, Balance Sheet Components .

( 2 ) See “Contract Balances” section under Note 2, Revenue from Contracts with Customers .

( 3 ) See “Costs to Obtain or Fulfill a Contract” section under Note 2, Revenue from Contracts with Customers .

Property and Equipment

Property and equipment, net consist of the following (in thousands):

September 30,

Computer equipment

1 unchanged sentence

Software and capitalized software development cost

12,059 10,408

Furniture, fixtures, and equipment

4 unchanged sentences

Property and equipment in progress:

DFI system assets

DirectScan system assets

50,510 49,184

6 unchanged sentences

$ 90,477 $ 81,609

Test equipment mainly includes DFI™ system and CV® system assets at customer sites that are contributing to revenue.

Test equipment mainly includes DirectScan system and CV system assets at customer sites that are contributing to revenue.

Property and equipment in progress represent mainly the development or construction of property and equipment that have not yet been placed in service for the Company’s intended use and are not depreciated.

Depreciation and amortization expense was $ 1.1 million and $ 0.8 million for the three months ended September 30, 2025 and 2024 , respectively, and $ 2.6 million and $ 2.9 million for the nine months ended September 30, 2025 and 2024 , respectively.

Depreciation and amortization expense was $ 1.6 million and $ 0.7 million for the three months ended March 31, 2026 , and 2025, respectively.

Goodwill and Intangible Assets, Net

The changes in goodwill were as follows (in thousands):

Nine Months Ended September 30,

Three Months Ended March 31,

Balance at the beginning of period

$ 95,005 $ 14,953

Measurement period acquisition adjustment

Foreign currency translation adjustment

Balance at the end of period

$ 95,006 $ 96,645

The Company completed the acquisition of SecureWise LLC (“SecureWise”) on March 7, 2025.

See Note 14, Business Combination, for additional information related to the goodwill and intangible assets added from this acquisition.

See Note 14, Business Combination, for additional information related to the goodwill and intangible assets added from this acquisition in 2025.

Intangible assets, net, consisted of the following (in thousands):

September 30, 2025

March 31, 2026

December 31, 2025

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$ 95,751 $ ( 45,624 ) $ 50,127 $ 95,765 $ ( 43,571 ) $ 52,194

The weighted average amortization period for acquired identifiable intangible assets was 8.8 years as of September 30, 2025 .

The weighted average amortization period for acquired identifiable intangible assets was 8.5 years as of March 31, 2026 .

The amortization expense related to intangible assets were as follows (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Amortization of acquired technology (included in costs of revenues)

$ 998 $ 584 $ 2,674 $ 1,752

Amortization of acquired intangible assets (presented separately under costs and expenses)

1,069 196 2,515 714

Total amortization expense

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Year Ending December 31,

2025 (remaining three months)

2026 (remaining nine months)

2031 and thereafter

Total future amortization expense

There was no impairment charges for goodwill and intangible assets during the three and nine months ended September 30, 2025 and 2024 .

There was no impairment charge for goodwill and intangible assets during the three months ended March 31, 2026 and 2025 .

Other Non-current Assets

Other non-current assets consisted of the following (in thousands):

September 30,

Net investments in sales-type leases (3)

$ 15,103 $ 13,226

Other non-current assets were as follows (in thousands):

Unbilled accounts receivable (1)

$ 9,172 $ 8,719

Costs capitalized to obtain revenue contracts (2)

Contract assets (2)

Net investments in sales-type leases (3)

Total other non-current assets

$ 14,674 $ 21,149

See Note 2, Revenue from Contracts with Customers .

See Note 3, Balance Sheet Components – Accounts Receivable .

The Company’s net investments in sales-type leases were for its DFI system and CV system assets.

( 2 ) See “Costs to Obtain or Fulfill a Contract” section under Note 2, Revenue from Contracts with Customers .

( 3 ) The Company’s net investments in sales-type leases were for its DirectScan system and CV system assets.

The components of net investments in sales-type leases were as follows (in thousands):

September 30,

Present value of lease receivables

$ 8,738 $ 10,890

Contract liability

Net lease receivables

13,870 10,003

Unguaranteed residual assets

10,901 10,946

Total net investments in sales-type leases

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Non-current (included in Other non-current assets)

15,103 13,226

Total net investments in sales-type leases

$ 19,639 $ 21,836

Maturities of leases payments under sales-type leases as of September 30, 2025 , were as follows (in thousands):

Maturities of leases payments under sales-type leases as of March 31, 2026 , were as follows (in thousands):

Year Ending December 31,

2025 (remaining three months)

2026 (remaining nine months)

2030 and thereafter

Total future sales-type lease payments

Present value adjustment (1)

Implied interest (1)

Present value of lease receivables

Calculated using the rate implicit in the lease determined for each lease.

There was no allowance for credit losses on lease receivables as of September 30, 2025 , and December 31, 2024 .

There was no allowance for credit losses on lease receivables as of March 31, 2026 , and December 31, 2025 .

The Company’s ongoing risk management strategy for residual assets includes performing regular reviews of estimated residual values.

Accrued and other current liabilities

Accrued and other current liabilities consisted of the following (in thousands):

September 30,

Accrued and other current liabilities were as follows (in thousands):

Accrued expenses

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These operating leases expire at various dates through 2031.

The Company had no leases that were classified as a financing lease as of September 30, 2025 , and December 31, 2024 .

Lease expense was comprised of the following (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

The Company had no leases that were classified as a financing lease as of March 31, 2026 , and December 31, 2025 .

Lease expense comprised of the following (in thousands):

Three Months Ended March 31,

Operating lease expense

$ 458 $ 401 $ 1,307 $ 1,161

Short-term lease and variable lease expense (1)

190 268 590 754

Total lease expense

$ 648 $ 669 $ 1,897 $ 1,915

Leases with an initial term of 12 months or less are not recorded on the condensed consolidated balance sheets, and the Company recognizes lease expense for these leases on a straight-line basis over the lease term.

Variable lease expense for the periods presented primarily included common area maintenance charges.

Supplemental condensed consolidated balance sheets information related to operating leases was as follows:

September 30,

Supplemental information related to operating leases were as follows:

Weighted average remaining lease term under operating leases (in years)

Weighted average discount rate for operating lease liabilities

Maturities of operating lease liabilities as of September 30, 2025 , were as follows (in thousands):

Maturities of operating lease liabilities as of March 31, 2026 , were as follows (in thousands):

Year Ending December 31,

2025 (remaining three months)

2030 and thereafter

2026 (remaining nine months)

Total future minimum lease payments

Present value of future minimum lease payments under operating lease liabilities

Reported as of September 30, 2025:

Operating lease liabilities – current

2 unchanged sentences

Calculated using incremental borrowing interest rate for each lease.

Debt as of September 30, 2025 , consisted of (in thousands):

September 30,

Debt consisted of the following (in thousands):

$ 22,500 $ 23,125

Revolving credit facility

45,000 45,000

Total debt (principal amount)

Unamortized debt discount and financing costs

Total debt, net of unamortized debt discount and financing costs

67,500 68,125

Unamortized debt discount and issuance costs

( 1,048 ) ( 1,126 )

Total debt, net of unamortized debt discount and issuance costs

$ 66,452 $ 66,999

Current portion of long-term debt, net

$ 2,238 $ 2,236

Long-term debt, net

64,214 64,763

Total debt, net

$ 66,452 $ 66,999

On March 7, 2025, the Company 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”).

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The Company 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 Company’s weighted average annual interest rate on its outstanding debt was 5.9 % and 6.5 % for the three months ended March 31, 2026 , and 2025, respectively.

On April 23, 2026, the Company entered into a First Amendment to Credit Agreement with the Lenders and the Agent to increase the Revolving Credit Facility to an aggregate principal amount of $ 75.0 million and make leveraged-based adjustments to the annual Revolving Credit Facility commitment fee during the term of the Credit Agreement (see Note 15, Subsequent Events ).

The Credit Agreement contains customary representations and warranties, as well as customary affirmative and negative covenants.

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In addition, the Credit Agreement requires that the Company 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 September 30, 2025 , the Company was in compliance with the covenants contained in the Credit Agreement.

As of March 31, 2026 , the Company was in compliance with the covenants contained in the Credit Agreement.

The Credit Agreement contains customary events of default.

3 unchanged sentences

Future Payments on Total Debt

As of September 30, 2025 , the estimated future principal payments of the total long-term debt were as follows (in thousands):

As of March 31, 2026 , the estimated future principal payments of the total long-term debt were as follows (in thousands):

Year Ending December 31,

2025 (remaining three months)

2026 (remaining nine months)

Total future principal payments of long-term debt

2 unchanged sentences

On April 15, 2024, the Board of Directors adopted a stock repurchase program (the “2024 Program”) to repurchase up to $ 40.0 million of the Company’s 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 nine months ended September 30, 2024, 201,561 shares were repurchased by the Company under the 2022 Program at an average price of $ 34.23 per share for an aggregate total price of $ 6.9 million.

In total, the Company 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 stock repurchase program (the “2024 Program”) to repurchase up to $ 40.0 million of the Company’s 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 nine months ended September 30, 2025, 12,500 shares were repurchased by the Company under the 2024 Program at an average price of $ 19.55 per share for an aggregate total price of $ 0.2 million.

During the nine months ended September 30, 2024, the Company did not repurchase any shares under the 2024 Program.

As of September 30, 2025 , approximately $ 39.8 million remained available under the 2024 Program authorization.

In 2025, the Company 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.

During the three months ended March 31, 2026 , the Company did not repurchase any shares under the 2024 Program.

As of March 31, 2026 , approximately $ 39.8 million remained available under the 2024 Program.

Subsequently, on April 14, 2026, the 2024 Program expired.

Also, subsequently, in May 2026, the Board Directors adopted a new stock repurchase program (the “2026 Program”) to repurchase up to $ 50.0 million of the Company’s 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.

EMPLOYEE BENEFIT PLANS

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On June 15, 2021, the Company’s stockholders initially approved the 2021 Employee Stock Purchase Plan, which has been amended and restated by the Board of Directors and approved by the Company’s stockholders since then (as amended through the date of this report, the “2021 Purchase Plan”).

Under the 2021 Purchase Plan, eligible employees can contribute up to 10 % of their compensation, as defined in the 2021 Purchase Plan, towards the purchase of shares of PDF common stock at a price of 85 % of the lower of the fair market value at the beginning of the offering period or the end of the purchase period.

The 2021 Purchase Plan commenced on August 1, 2021, and provided for twenty-four -month offering periods with four six -month purchase periods in each offering period.

As of March 31, 2026 , 523,886 shares were available for future issuance under the 2021 Purchase Plan.

Subsequently, on April 23, 2026, the Company’s Board of Directors approved an amendment and restatement of the 2021 Purchase Plan, which is subject to stockholder approval at the 2026 annual meeting of stockholders, to increase the number of shares reserved for issuance under such plan by an additional 0.2 million shares, to a total of 1.6 million shares.

The Company estimated the fair value of purchase rights granted under the 2021 Purchase Plan during the period using the Black-Scholes-Merton option-pricing model with the following weighted average assumptions, resulting in the following weighted average fair values:

Nine Months Ended September 30,

Three Months Ended March 31,

Expected life (in years)

5 unchanged sentences

$ 12.05 $ 9.36

During the nine months ended September 30, 2025 and 2024 , a total of 197,414 shares and 81,974 shares, respectively, were issued under the 2021 Purchase Plan, at a weighted average purchase price of $ 21.08 per share and $ 26.31 per share, respectively.

As of September 30, 2025 , unrecognized compensation cost related to the 2021 Purchase Plan was $ 3.2 million, which is expected to be recognized over a weighted average period of 1.8 years.

As of September 30, 2025 , 641,067 shares were available for future issuance under the 2021 Purchase Plan.

During the three months ended March 31, 2026 and 2025 , a total of 117,181 shares and 89,508 shares, respectively, were issued under the 2021 Purchase Plan, at a weighted average purchase price of $ 18.46 per share and $ 23.68 per share, respectively.

As of March 31, 2026 , the estimated unrecognized compensation cost related to the 2021 Purchase Plan was $ 2.6 million, which is expected to be recognized over a weighted average period of 1.4 years.

Stock Incentive Plan

On November 16, 2011, the Company’s stockholders initially approved the 2011 Stock Incentive Plan, which has been amended and restated by the Board of Directors and approved by the Company’s stockholders a number of times since then (as amended through the date of this report, the “2011 Plan”).

Under the 2011 Plan, the Company may award stock options, stock appreciation rights (“SARs”), stock grants or stock units covering shares of the Company’s common stock to employees, directors, non-employee directors and contractors.

The aggregate number of shares reserved for awards under the 2011 Plan is 15.9 million shares, plus up to 3.5 million shares previously issued under the 2001 Stock Plan adopted by the Company in 2001, which expired in 2011 (the “2001 Plan”) that are either (i) forfeited or (ii) repurchased by the Company or are shares subject to awards previously issued under the 2001 Plan that expire or that terminate without having been exercised or settled in full on or after November 16, 2011.

In case of awards other than options or SARs, the aggregate number of shares reserved under the 2011 Plan will be decreased at a rate of 1.33 shares issued pursuant to such awards.

The exercise price for stock options must generally be at prices no less than the fair market value at the date of grant.

Stock options generally expire ten years from the date of grant and become vested and exercisable over a four -year period.

As of September 30, 2025 , 15.9 million shares of common stock were reserved to cover stock-based awards under the 2011 Plan, of which 3.2 million shares were available for future grant.

The number of shares reserved and available under the 2011 Plan includes 0.5 million shares that were subject to awards previously made under the 2001 Plan and were forfeited, expired, or repurchased by the Company after the adoption of the 2011 Plan through September 30, 2025 .

As of September 30, 2025 , there were no outstanding awards that had been granted outside of the 2011 Plan.

The Company estimated the fair value of share-based awards granted under the 2011 Stock Plan during the period using the Black-Scholes-Merton option-pricing model.

There were no stock options granted during the nine months ended September 30, 2025 and 2024 .

Stock-Based Compensation

Stock-based compensation is estimated at the grant date based on the award’s fair value and is recognized on a straight-line basis over the vesting periods, generally four years .

Stock-based compensation expense before taxes related to the Company’s stock plan and employee stock purchase plan was allocated as follows (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

Costs of revenues

$ 1,274 $ 1,366 $ 3,873 $ 3,751

Research and development

2,204 2,375 6,874 6,640

Selling, general, and administrative

2,786 2,989 8,312 8,149

Total stock-based compensation expense

$ 6,264 $ 6,730 $ 19,059 $ 18,540

As of March 31, 2026 , 15.9 million shares of common stock were reserved to cover stock-based awards under the 2011 Plan, of which 3.2 million shares were available for future grant.

Subsequently, on April 23, 2026, the Company’s Board of Directors approved an amendment and restatement of the 2011 Plan, which is subject to stockholder approval at the 2026 annual meeting of stockholders, to increase the number of shares reserved for issuance under such plan by an additional 0.8 million shares, to a total of 16.7 million shares, and extend the deadline to grant incentive stock options to April 23, 2036.

Stock Award Activities

7 unchanged sentences

( 379 ) 29.42

Nonvested, September 30, 2025

Nonvested, March 31, 2026

1,629 $ 29.04

The weighted average grant date fair values of RSUs granted during the nine months ended September 30, 2025 and 2024 were $ 21.85 and $ 35.42 , respectively.

The total fair value of RSUs vested were as follows (in thousands):

Nine Months Ended September 30,

Fair value of restricted stock units vested

As of March 31, 2026 , there was $ 39.3 million of total unrecognized compensation cost related RSUs which is expected to be recognized over a weighted average period of 2.5 years.

Additional information related to RSUs is as follows:

Three Months Ended March 31,

Total fair value of restricted stock units vested (in thousands)

$ 10,982 $ 9,712

As of September 30, 2025 , there was $ 49.1 million of total unrecognized compensation cost related RSUs which is expected to be recognized over a weighted average period of 2.8 years.

RSUs do not have rights to dividends prior to vesting.

Stock Options

As of September 30, 2025 , the outstanding stock options totaled 20,761 shares.

Total fair value of shares vested during the nine months ended September 30, 2025 was immaterial.

As of September 30, 2025 , there was no remaining unrecognized compensation cost related to unvested stock options.

Income tax expense decreased by $ 0.4 million for the nine months ended September 30, 2025 , to $ 1.2 million as compared to $ 1.6 million income tax expense for the nine months ended September 30, 2024 .

The Company’s effective tax rate was 205 % for the nine months ended September 30, 2025 , compared to 31 % for the nine months ended September 30, 2024 .

There were no stock options granted during the three months ended March 31, 2026 and 2025 .

As of March 31, 2026 , the outstanding stock options totaled 16,302 shares.

Total fair value of shares vested during the three months ended March 31, 2026 , was immaterial.

As of March 31, 2026 , there was no remaining unrecognized compensation cost related to unvested stock options.

Stock-Based Compensation

Stock-based compensation is estimated at the grant date based on the award’s fair value and is recognized on a straight-line basis over the vesting periods, generally four years .

Stock-based compensation expense before taxes related to the Company’s stock plan and employee stock purchase plan was allocated as follows (in thousands):

Three Months Ended March 31,

Costs of revenues

$ 1,279 $ 1,342

Research and development

Selling, general, and administrative

Total stock-based compensation expense

$ 6,396 $ 6,596

Income tax expense increased by $ 1.0 million for the three months ended March 31, 2026 , to $ 1.0 million as compared to $ 36 thousand income tax expense for the three months ended March 31, 2025 .

The Company’s effective tax rate was 18 % for the three months ended March 31, 2026 , compared to ( 1 )% for the three months ended March 31, 2025 .

The increase was primarily due to changes in the foreign, federal and state taxes, and year-to-date recognition of worldwide pre-tax income (loss) in relation to their forecasted amounts for the full year.

The Company’s provision for income taxes for the nine months ended September 30, 2025 , was primarily attributable to state and foreign taxes.

The Company’s total amount of unrecognized tax benefits, excluding interest, as of September 30, 2025 , was $ 17.0 million, of which $ 2.3 million, if recognized, would affect the Company’s effective tax rate.

The Company’s provision for income taxes for the three months ended March 31, 2026 , was primarily attributable to state and foreign taxes.

The Company’s total amount of unrecognized tax benefits, excluding interest, as of March 31, 2026 , was $ 17.3 million, of which $ 2.5 million, if recognized, would affect the Company’s effective tax rate.

The Company’s total amount of unrecognized tax benefits, excluding interest, as of December 31, 2025 , was $ 17.1 million, of which $ 2.5 million, if recognized, would affect the Company’s effective tax rate.

As of September 30, 2025 , the Company has recorded unrecognized tax benefits of $ 2.9 million, including interest of $ 0.6 million, as long-term taxes payable in the condensed consolidated balance sheets.

As of March 31, 2026 , the Company has recorded unrecognized tax benefits of $ 3.3 million, including interest of $ 0.8 million, as long-term taxes payable in the condensed consolidated balance sheets.

The remaining $ 14.8 million has been recorded within the Company’s DTAs, which is subject to a full valuation allowance.

The valuation allowance was approximately $ 67.9 million as of September 30, 2025 , and December 31, 2024 , which was related to U.S.

The valuation allowance was approximately $ 69.9 million as of March 31, 2026 , and December 31, 2025 , which was related to U.S.

net federal and state DTAs.

The worldwide net DTAs balance were immaterial as of September 30, 2025 , and December 31, 2024 .

The worldwide net DTA balances were immaterial as of March 31, 2026 , and December 31, 2025 .

The Company conducts business globally and, as a result, files numerous consolidated and separate income tax returns in the U.S.

2 unchanged sentences

In addition, all of the net operating loss and research and development credit carryforwards that may be utilized in future years may be subject to federal and state examination.

In May 2026, the Company received a notice from the Department of the Treasury Internal Revenue Service that Company’s federal income tax return for 2023 was selected for examination.

The Company is not currently under known income tax examinations in the U.S.

or any other of its major foreign subsidiaries’ jurisdictions.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the United States.

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.

The Company has completed its initial assessment of the OBBBA corporate tax provisions in the third quarter of 2025.

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 the Company’s elections, it anticipates a favorable cash tax benefit of approximately $ 0.9 million and a reduction to its effective tax rate by approximately 19 % in 2025.

for any other periods or in any other of its major foreign subsidiaries’ jurisdictions.

NET INCOME (LOSS) PER SHARE

Basic net income (loss) per share is computed by dividing net loss by the weighted average number of common shares outstanding for the period (excluding outstanding stock options, nonvested restricted stock units and shares subject to repurchase).

Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period (excluding outstanding stock options, nonvested restricted stock units and shares subject to repurchase).

Diluted net income (loss) per share is computed using the weighted average number of common shares outstanding for the period plus the potential effect of dilutive securities which are convertible into common shares (using the treasury stock method), except in cases in which the effect would be anti-dilutive.

The following is a reconciliation of the numerators and denominators used in computing basic and diluted net loss per share (in thousands except per share amount):

Three Months Ended September 30,

Nine Months Ended September 30,

The following is a reconciliation of the numerators and denominators used in computing basic and diluted net income (loss) per share (in thousands except per share amount):

Three Months Ended March 31,

Net income (loss)

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Net income (loss) per share:

For the nine months ended September 30, 2025 , because the Company was in a loss position, diluted net loss per share is the same as basic net loss per share as the inclusion of the potential common shares would have been anti-dilutive.

The following table summarizes the potential shares of common stock that were not included in the diluted net loss per share calculation above because to do so would be anti-dilutive for the periods indicated (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

For the three months ended March 31, 2025, because the Company was in a loss position, diluted net loss per share is the same as basic net loss per share as the inclusion of the potential common shares would have been anti-dilutive.

The following table summarizes the potential shares of common stock that were not included in the diluted net income (loss) per share calculation above because to do so would be anti-dilutive for the periods indicated (in thousands):

Three Months Ended March 31,

Non-vested restricted stock units

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The following table presents segment total revenues, costs of revenues, gross profit, income from operations, and net income (loss) for the periods presented (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Total revenues

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$ 43,192 $ 34,823

Income from operations

$ 4,827 $ 2,119 $ 2,389 $ 423

Net income (loss)

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Revenues from an individual customer that are approximately 10% or more of the Company’s consolidated total revenues were as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

38 % 19 % 24 % 21 %

12 % * % 14 % 12 %

* % * % 11 % * %

* % 13 % * % * %

Three Months Ended March 31,

* represents less than 10%

Gross accounts receivable balances (including amounts that are unbilled) from individual customers that are approximately 10% or more of the Company’s gross accounts receivable balance were as follows:

September 30,

* represents less than 10%

Revenues from customers by geographic area based on the location of the customers’ work sites were as follows (amounts in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

United States

$ 30,143 53 % $ 21,065 45 % $ 68,325 43 % $ 58,021 45 %

10,091 18 6,275 14 31,131 20 25,495 20

5,842 10 5,673 12 26,075 17 17,526 14

1,238 2 6,273 14 4,235 3 8,107 6

Rest of the world

9,801 17 7,123 15 26,855 17 20,231 15

Total revenues

$ 57,115 100 % $ 46,409 100 % $ 156,621 100 % $ 129,380 100 %

Long-lived assets, net by geographic area were as follows (in thousands):

September 30,

United States (1)

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FAIR VALUE MEASUREMENTS

Fair value is the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date.

The multiple assumptions used to value financial instruments are referred to as inputs, and a hierarchy for inputs used in measuring fair value is established, that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available.

Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources while unobservable inputs reflect a reporting entity’s pricing based upon its own market assumptions.

These inputs are ranked according to a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels.

Inputs are quoted prices in active markets for identical assets or liabilities.

Inputs are quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable and market-corroborated inputs which are derived principally from or corroborated by observable market data.

Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable.

The Company’s financial assets measured at fair value on a recurring basis and the basis for those measurements were as follows (in thousands):

Fair Value Measurements Using

The Company's cash equivalents are classified within Level 1 of the fair value hierarchy because their fair values are derived from quoted market prices.

Other current assets are classified within Level 3 because factors used to develop the estimated fair value are unobservable inputs that are not supported by market activity.

The Company’s financial assets measured at fair value on a recurring basis and the classification by level of input within the fair value hierarchy were as follows (in thousands):

March 31, 2026

December 31, 2025

Fair Value Measurements at Reporting Date Using

Balance Sheet

September 30,

Quoted Prices in Active Markets for Identical Assets

Significant Other Observable Inputs

Significant Unobservable Inputs

Quoted Prices in Active Markets for Identical Assets

Significant Other Observable Inputs

Significant Unobservable Inputs

Classification

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$ 14,807 $ 12,645 $ — $ 2,162 $ 16,673 $ 14,535 $ — $ 2,138

Fair Value Measurements Using

Balance Sheet

Classification

Money market mutual funds

Cash equivalents

$ 66,213 $ 66,213 $ — $ —

Available-for-sale debt securities:

Government securities (2)

Short-term investments

24,291 24,291 — —

Convertible note receivable (1)

Other non-current assets

2,038 — — 2,038

$ 92,542 $ 90,504 $ — $ 2,038

In August 2024, the Company purchased a $ 2.0 million non-marketable convertible promissory note from an unrelated third party (the “convertible note”).

The convertible note bears a 5 % interest rate annually and will mature in August 2026.

The amortized cost of the Company’s investments in U.S.

Government securities approximated their fair value due to their short-term maturities, and there have been no events or changes in circumstances that would have had a significant effect on the fair value of these securities in the periods presented.

For the three and nine months ended September 30, 2025 and 2024 , there were no material realized or unrealized gains or losses, either individually or in the aggregate.

COMMITMENTS AND CONTINGENCIES

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The Company is unable to estimate the maximum potential impact of these guarantees on its future results of operations.

The Company’s standard product warranty terms for the sale of its DFI system product generally include post-sales support and repairs or replacement of a product at no additional charge for a contractually agreed period of time.

The Company’s standard product warranty terms for its DirectScan system generally include post-sales support and repairs or replacement of a product at no additional charge for a contractually agreed period of time.

The standard warranty reserve is based on estimated total expected costs to fulfill our warranty obligation based on best available information as of the reporting date.

The standard warranty reserve was immaterial as of September 30, 2025 , and December 31, 2024 .

The standard warranty reserve was immaterial as of March 31, 2026 , and December 31, 2025 .

Purchase Obligations — The Company has purchase obligations with certain suppliers for the purchase of goods and services entered into in the ordinary course of business.

As of September 30, 2025 , total outstanding purchase obligations were $ 39.3 million, the majority of which is due within the next 12 months.

As of March 31, 2026 , total outstanding purchase obligations were $ 64.6 million, the majority of which is due within the next 18 months.

Indemnification of Officers and Directors — As permitted by the Delaware General Corporation Law, the Company has included a provision in its certificate of incorporation to eliminate the personal liability of its officers and directors for monetary damages for breach or alleged breach of their fiduciary duties as officers or directors.

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Legal Proceedings — From time to time, the Company is subject to various claims and legal proceedings that arise in the ordinary course of business.

The Company accrues for losses related to litigation when a potential loss is probable, and the loss can be reasonably estimated in accordance with FASB requirements.

As of September 30, 2025 , the Company was not party to any material legal proceedings for which a loss was probable or an amount was accrued.

From time to time, the Company may enter into contingent fee arrangements with external legal firms that may represent the Company in legal proceedings related to disputes.

Contingent legal fees are accrued by the Company when they are probable and reasonably estimable.

The Company accrues for losses related to litigation when a potential loss is probable, and the loss can be reasonably estimated, and recognizes gains related to litigation at the earlier of when the gain has been realized or when it is realizable in accordance with FASB requirements.

As of March 31, 2026 , the Company was not party to any material legal proceedings for which a loss was probable or an amount was accrued.

On May 6, 2020, the Company initiated an arbitration proceeding with the Hong Kong International Arbitration Center (the “Tribunal”) against SMIC New Technology Research & Development (Shanghai) Corporation (“SMIC”) due to SMIC’s failure to pay fees due to the Company under a series of contracts.

The Company seeks to recover the unpaid fees, a declaration requiring SMIC to pay fees under the contracts in the future (or a lump sum payment to end the contract), and costs associated with bringing the arbitration proceeding.

SMIC denies liability and an arbitration hearing was held in February 2023.

Final written submissions were submitted by the parties at the end of August 2023, and the parties submitted answers to the Tribunal’s final questions in August 2024.

The Company is awaiting the Tribunal’s decision on a judgment.

The Company sought to recover the unpaid fees, a declaration requiring SMIC to pay fees under the contracts in the future (or a lump sum payment to end the contract), and costs associated with bringing the arbitration proceeding.

SMIC denied liability and an arbitration hearing was held in February 2023.

On November 12, 2025, the Tribunal issued a confidential arbitration award (the “Award”), which is in favor of the Company.

The Company is separately pursuing an award as to costs.

No payments under the Award have been received by the Company to date and in February 2026, SMIC filed an application with the High Court of Hong Kong seeking to set the Award aside.

The Company believes the set aside application is without merit and intends to defend it, and is pursuing judicial enforcement of the Award.

There can be no assurances that the Company will receive all or any part of the Award.

Accordingly, no amounts have been recognized in connection with the Award as of March 31, 2026.

STRATEGIC PARTNERSHIP AGREEMENT WITH ADVANTEST AND RELATED PARTY TRANSACTIONS

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and (iv) a 5 -year cloud-based subscription that expired in July 2025 for Exensio analytics software and related services.

Analytics revenue recognized from Advantest was $ 1.4 million and $ 3.3 million during the three months ended September 30, 2025 and 2024 , respectively, and $ 8.5 million and $ 9.2 million during the nine months ended September 30, 2025 and 2024 , respectively.

Accounts receivable from Advantest were not material as of September 30, 2025 , and December 31, 2024 .

Deferred revenue amounted to $ 1.0 million and $ 8.3 million as of September 30, 2025 , and December 31, 2024 , respectively.

Revenue recognized from Advantest was $ 0.5 million and $ 3.6 million during the three months ended March 31, 2026 and 2025 , respectively.

Accounts receivable from Advantest were not material as of March 31, 2026 , and December 31, 2025 .

Deferred revenue amounted to $ 1.3 million and $ 0.7 million as of March 31, 2026 , and December 31, 2025 , respectively.

BUSINESS COMBINATION

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The Company expensed all transaction costs in the period in which they were incurred.

The total acquisition-related and integration costs related to the acquisition of SecureWise amounted to $ 5.5 million, of which $ 4.6 million was recorded in the nine months ended September 30, 2025, and $ 0.9 million in the fourth quarter of 2024.

The preliminary allocation of the purchase price for the acquisition of SecureWise, as of the date of the completion of the Transaction, is as follows (in thousands, except amortization period):

The total acquisition-related and integration costs related to the acquisition of SecureWise amounted to $ 5.4 million, of which the Company recorded $ 4.5 million in 2025 and $ 0.9 million in 2024.

The Company finalized the allocation of the purchase price to the fair values of the identifiable assets acquired and liabilities assumed as of the acquisition date, upon completion of the measurement period.

The following table summarizes the final allocation of the purchase price for the acquisition of SecureWise, as of the date of the completion of the Transaction (in thousands, except amortization period):

Period (Years)

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Prepaid and other assets

Property and equipment

Fair value of intangible assets:

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The estimated fair value of the accounts receivable acquired approximates the contractual value of $ 3.0 million.

The Company is still finalizing the allocation of the purchase price to the individual assets acquired.

Accordingly, these preliminary estimates are subject to change during the measurement period, which is the period subsequent to the acquisition date during which the acquirer may adjust the provisional amounts recognized for a business combination, not to exceed one year from the acquisition date.

The final purchase price allocation, which may include changes in the allocations within intangible assets and between intangible assets and goodwill, as well as changes in the estimated useful lives of the intangible assets, will be determined when the Company has completed the detailed review of underlying inputs and assumptions used in its preliminary purchase price allocation.

Pro forma information reflecting the impact of the Transaction has not been presented as the Transaction was not material to the Company’s financial results.

SUBSEQUENT EVENTS

First Amendment to Credit Agreement

On April 23, 2026, the Company entered into a First Amendment to Credit Agreement (the “Amendment”) with the Lenders and the Agent to amend the Credit Agreement dated as of March 7, 2025 ( see Note 5, Debt ).

The Amendment increases the Revolving Credit Facility to an aggregate principal amount of $ 75 million.

The Amendment introduces leveraged-based adjustments to the annual Revolving Credit Facility commitment fee during the term of the Credit Agreement.

Instead of a flat per annum rate of 0.50 %, the Revolving Credit Facility commitment fee will be 0.50 % when the total debt to EBITDA ratio is greater than or equal to 2.50 to 1.00, 0.35 % when the total debt to EBITDA ratio is less than 2.50 to 1.00 but greater than or equal to 0.50 to 1.00 and 0.20 % when the total debt to EBITDA ratio is less than 0.50 to 1.00.

All other material terms of the Credit Agreement remain unchanged.

Under this facility, $ 30.0 million is available to the Company for drawdown.

Stock Repurchase Programs and Employee Benefit Plans

Refer to Note 6, Stockholders’ Equity , for the discussion about the adoption of the 2026 Stock Repurchase Program in May 2026.

Refer to Note 7, Employee Benefit Plan , for the discussion about the amendments to the 2011 Stock Incentive Plan and the 2021 Purchase Plan in April 2026.

Management ’ s Discussion and Analysis of Financial Condition and Results of Operations

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fluctuations in the Company ’ s quarterly results;

and other statements identified by words such as “ could, ” “ expects, ” “ intends, ” “ may, ” “ plans, ” “ potential, ” “ should, ” “ will, ” “ would, ” or similar expressions and the negatives of those terms, that are subject to future events and circumstances, and uncertainties that could cause results to differ materially include risks associated with:

These statements are subject to future events, circumstances, uncertainties, and risks that could cause results to differ materially, including risks associated with:

the effectiveness of the Company ’ s business and technology strategies;

current semiconductor industry trends and competition;

semiconductor industry trends and competition;

rates of adoption of the Company ’ s solutions by new and existing customers;

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We assume no obligation to update publicly any such forward-looking statements.

In evaluating these statements, you should specifically consider various factors, including the risk factors set forth in Item 1.

“Business” and Item 7.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 27, 2025 (the “Annual Report”).

In evaluating these statements, you should specifically consider various factors, including the risk factors set forth in Item 1A.

“Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on February 24, 2026 (the “Annual Report”).

All references to “we,” “us,” “our,” “PDF,” “PDF Solutions” or “the Company” refer to PDF Solutions, Inc.

Cimetrix, CV, DFI, Exensio, PDF Solutions, secureWISE, and the Cimetrix, Exensio, PDF Solutions, and secureWISE logos, are trademarks or registered trademarks of PDF Solutions, Inc.

Cimetrix, CV, DirectScan, Exensio, PDF Solutions, Sapience, secureWISE, and logos for the same, are trademarks or registered trademarks of PDF Solutions, Inc.

or its subsidiaries.

We offer products and services designed to empower organizations across the semiconductor and electronics ecosystems to connect, collect, manage, transfer, and analyze data about design, equipment, manufacturing, and test to improve the yield and quality of their products.

We derive revenues from two sources:

Analytics and Integrated Yield Ramp.

Our offerings combine proprietary software, professional services using proven methodologies, third-party cloud-hosting platforms for software-as-a-service (“SaaS”), electrical measurement hardware tools, and physical intellectual property (“IP”) for integrated circuit (“IC”) designs.

We primarily monetize our offerings through license fees and contract fees for professional services and SaaS.

In some cases, especially on our historical Integrated Yield Ramp engagements, we also receive a value-based variable fee or royalty, which we call Gainshare.

Our products, services, and solutions have been sold to integrated device manufacturers (“IDMs”), fabless semiconductor companies, foundries, out-sourced semiconductor assembly and test (“OSATs”), capital equipment manufacturers, and system houses.

We are headquartered in Santa Clara, California and also operate worldwide with offices in Canada, China, France, Germany, Italy, Japan, Korea, and Taiwan.

Acquisition of SecureWise LLC

On March 7, 2025, we completed the acquisition of SecureWise LLC (“SecureWise”), a Delaware limited liability company (see Note 14, Business Combinations , in the notes to the condensed consolidated financial statements (unaudited) in Part I, Item 1 of this Quarterly Report on Form 10-Q), 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”) outsourced semiconductor assembly and test (“OSAT”) network by allowing equipment makers, fab operators, and fabless companies to collaborate to optimize chip manufacturing and test.

We provide comprehensive data solutions designed to empower organizations across the semiconductor and electronics ecosystems to improve the yield and quality of their products and operational efficiency for increased profitability.

We derive revenues from two categories, Platform and Volume-based fees.

Our offerings that contribute to Platform revenue are licenses for software (other than Cimetrix runtime licenses) and related software maintenance and technical support services;

software-as-a-service (“SaaS”);

engineering services;

fixed fees associated with Characterization Vehicle systems;

and licenses and purchase contracts for DirectScan systems.

Volume-based revenue is derived from Cimetrix runtime licenses, secureWISE data, and variable/royalty fees associated with CV systems (sometimes referred to as Gainshare).

Our products and services have been sold to integrated device manufacturers (“IDMs”), fabless semiconductor companies, foundries, out-sourced semiconductor assembly and test (“OSATs”), capital equipment manufacturers, and system houses.

We are headquartered in Santa Clara, California and operate worldwide with offices in Canada, China, France, Germany, Italy, Japan, Korea, and Taiwan.

Industry Trends

Certain trends may affect our Analytics revenue specifically.

In particular, the confluence of Industry 4.0 (i.e.

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.

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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.

Other trends may continue to affect our Characterization services business and Integrated Yield Ramp revenue specifically.

For example, semiconductor manufacturers may experience lower wafer shipments due to weakness in the global economy, which would negatively impact the gainshare component of our Integrated Yield Ramp revenue.

The logic foundry market at the leading-edge nodes, such as 5nm and smaller, underwent significant change over the past few years.

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 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, 2.5D and 3D packaging, extreme ultraviolet lithography, and 3D architectures such as backside power and gate-all-around transistors, as well as new innovations in process control and variability management.

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.

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export restrictions limit our possible business with Chinese semiconductor manufacturers on advanced nodes.

As a result of these market developments, we have chosen to focus our resources and investments in products (including differentiated data), services, and solutions for analytics.

There are other global or business trends that may affect our business opportunities generally as follows:

Macroeconomy, inventories, and demand .

The worldwide economic performance is uneven, and the possibility of a recession persists, leading to uneven demand.

Inventories of semiconductor devices remain elevated in some instances.

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.

Changing export controls and sanctions .

government continues intense export controls and sanctions focused on the destinations of and/or entities in the People’s Republic of China (“P.R.C.”), Russian Federation, and Belarus.

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 People’s 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 such regulations.

This has in some cases, and could in the future, negatively impact the demand for our products and services by these customers.

More recently, increased volatility has appeared in controls as economic transactional views compete with traditional national security views in the U.S.

In the third quarter, the U.S.

government issued a new “50% Rule” extending export control restrictions to a large number of unlisted subsidiaries of companies that are named on restricted party lists, a change that impinges on markets for U.S.

items and requires expenditure of additional due diligence resources.

Soon thereafter, the P.R.C.

announced plans to restrict export and foreign re-export of certain P.R.C.-origin or -linked rare earth materials and technologies that are important to many global industries, followed immediately by U.S.

threats to increment tariffs on China-origin goods by another 100%.

In late October, the U.S.

governments were moving toward de-escalation of the trade confrontation, but the episode underscored the salient instability and risk of shocks in global trade at this time.

Other jurisdictions with important roles in our industry continue to update some of their export control regulations to further align with the U.S.

Continued tight restrictions, rapid evolution, and/or unpredictability in regulations each could negatively affect our sales.

Based on our current assessments, we expect the near-term impact of these evolving trade restrictions on our business to be limited but shifting and competing policy directions leave much unknown.

Administrative Initiatives.

Administration has made and is expected to continue to make changes to U.S.

trade policy, including renegotiating or terminating existing trade agreements and leveraging tariffs.

For example, the U.S.

imposed additional tariffs on imports from China, Canada, and Mexico.

We do not import into the U.S.

a significant volume of goods of those countries.

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 P.R.C.

Tax legislation continues to evolve globally with new laws and regulations that create uncertainty in the global economy.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S.

which includes significant provisions regarding corporate taxes, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework, and the restoration of favorable tax treatment for certain business provisions.

The OBBBA has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027.

We completed our initial assessment of the OBBBA corporate tax provisions during the third quarter of 2025.

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 these elections, we anticipate a favorable cash tax benefit of approximately $0.9 million and reduction of effective tax rate by approximately 19% in 2025.

Geopolitical tensions/conflicts .

We have contractors located in the West Bank and in Israel, who are providing software development and customer technical support services, and we have developed contingency plans to use alternative resources to continue serving customers, if needed.

Any escalations 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).

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.

Based on our current assessments, we expect the near-term impact of these evolving trade restrictions on our business to be limited.

Financial Highlights

Financial highlights for the three months ended September 30, 2025, are as follows:

Total revenues were $57.1 million, an increase of $10.7 million, or 23%, compared to the three months ended September 30, 2024.

Analytics revenue was $54.7 million, an increase of $9.9 million, or 22%, compared to the three months ended September 30, 2024.

The increase in Analytics revenue year-over-year was primarily driven by an increase in revenues from CV systems, the addition of revenues related to secureWISE products and services, and an increase in revenues from DFI systems, partially offset by a decrease in revenues from Exensio software licenses.

Integrated Yield Ramp revenue was $2.5 million, an increase of $0.8 million, or 48%, compared to the three months ended September 30, 2024.

The increase in Integrated Yield Ramp revenue year-over-year was primarily due to higher Gainshare from increased customer wafer shipments at non-leading-edge nodes, partially offset by decrease in hours worked on fixed-fees engagements.

Costs of revenues increased by $3.4 million, compared to the three months ended September 30, 2024, primarily due to increases in personnel-related costs, subcontractor costs, facilities and IT-related costs, including depreciation and amortization expense, amortization of acquired technology, third-party cloud delivery costs, and software license and maintenance costs.

Net income was $1.3 million, compared to a net income of $2.2 million for the three months ended September 30, 2024.

The decrease in net income was primarily attributable to (i) an increase in overall costs and expenses mainly due to increase in personnel-related expenses, increased costs related to the operation of SecureWise, increase in amortization of acquired intangible assets, facilities and IT-related costs, travel expenses, subcontractor fees, (ii) an increase in interest expense from our long-term debt, (iii) an increase in income tax expense, and (iv) a decrease in interest income during the quarter, partially offset by an increase in total revenues, and a decrease in legal fees.

Financial highlights for the nine months ended September 30, 2025, are as follows:

Total revenues were $156.6 million, an increase of $27.2 million, or 21%, compared to the nine months ended September 30, 2024.

Analytics revenue was $146.0 million, an increase of $24.6 million, or 20%, compared to the nine months ended September 30, 2024.

The increase in Analytics revenue year-over-year was primarily driven by an increase in revenues from CV systems, the addition of revenues related to secureWISE products and services, and an increase in revenues from Cimetrix software licenses, partially offset by a decrease in revenues from DFI systems.

Integrated Yield Ramp revenue was $10.7 million, an increase of $2.6 million, or 32%, compared to the nine months ended September 30, 2024.

The increase in Integrated Yield Ramp revenue year-over-year was primarily due to higher Gainshare from increased customer wafer shipments at non-leading-edge nodes;

partially offset by a decrease in hours worked on fixed-fees engagements.

Costs of revenues increased by $5.4 million, compared to the nine months ended September 30, 2024, primarily due to increases in personnel-related costs, amortization of acquired technology, software license and maintenance costs, third-party cloud-delivery costs, partially offset by a decrease in hardware costs.

Net loss was $0.6 million, compared to a net income of $3.5 million for the nine months ended September 30, 2024.

The decrease in net income 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, (ii) an increase in interest expense from our long-term debt, (iii) a decrease in interest income, and (iv) net unfavorable fluctuations in foreign currency exchange rates, partially offset by an increase in total revenues, recovery from previously written-off property and equipment, and decrease in legal fees, hardware costs, and income tax expense.

Financial highlights for the three months ended March 31, 2026, are as follows:

Total revenues were $60.1 million, an increase of $12.4 million, or 26%, compared to the same period in 2025.

Platform revenue was $50.9 million, an increase of $13.6 million, or 36%, compared to the same period in 2025.

The increase in Platform revenue was driven by higher revenue from CV and DirectScan systems, the addition of revenues related to secureWISE systems, and increase in revenue from Exensio software and services.

Volume-based revenue was $9.2 million, a decrease of $1.3 million, or 12%, compared to the same period in 2025, primarily due to a decrease in revenue from Gainshare, partially offset by an increase in revenue from secureWISE data usage.

Costs of revenues increased by $4.0 million, compared to the same period in 2025, primarily due to increases in personnel-related costs, software license and maintenance costs, facilities and IT-related costs, including depreciation and amortization expense, amortization of acquired technology, and travel expense.

Net income was $4.8 million, compared to a net loss of $3.0 million for the same period in 2025.

The increase in net income was primarily attributable to (a) an increase in total revenues, (b) a decrease in acquisition-related and integration costs, and (c) a net favorable fluctuation in foreign currency exchange rates, partially offset by (i) an increase in overall costs and expenses mainly due to increases in personnel-related expenses, costs related to the operation of SecureWise, facilities and IT-related costs, including depreciation and amortization, amortization of acquired intangible assets, subcontractor fees, software license and maintenance costs, and travel expenses, (ii) an increase in interest expense from our long-term debt, (iii) a decrease in interest income, and (iv) an increase in income tax expense.

Critical Accounting Policies

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For additional information about our critical accounting policies, see Note 1, Basis of Presentation and Summary of Significant Accounting Policies , and Note 2, Revenue from Contracts with Customers to our unaudited condensed consolidated financial statements in this Quarterly Report on Form 10‑Q and Part II Item 7 , Management ’ s Discussion and Analysis of Financial Condition and Results of Operation, under the heading of “ Critical Accounting Estimates ” in our Annual Report.

There were no material changes during the three and nine months ended September 30, 2025, to the items that we disclosed as our critical accounting policies and estimates in Part II, Item 7 of the Annual Report.

There were no material changes during the three months ended March 31, 2026, to the items that we disclosed as our critical accounting policies and estimates in Part II, Item 7 of the Annual Report.

Recent Accounting Pronouncements and Accounting Changes

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Results of Operations

Discussion of Financial Data for the Three and Nine Months ended September 30, 2025 and 2024

Discussion of Financial Data for the Three Months ended March 31, 2026 and 2025

Revenues, Costs of Revenues, and Gross Margin

Three Months Ended

Nine Months Ended

September 30,

Beginning with our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on February 24, 2026, we updated our presentation of revenue categories.

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):

Three Months Ended March 31,

(Dollars in thousands)

Integrated Yield Ramp

Total revenues

Costs of revenues

Analytics revenue as a percentage of total revenues

Integrated Yield Ramp revenue as a percentage of total revenues

Analytics Revenue

Analytics revenue increased $9.9 million for the three months ended September 30, 2025, compared to the same period in 2024.

The increase in Analytics revenue was primarily driven by an increase in revenues from CV systems, the addition of revenues related to secureWISE products and services, and an increase in revenues from DFI systems, partially offset by a decrease in revenues from Exensio software licenses.

Analytics revenue increased $24.6 million for the nine months ended September 30, 2025, compared to the same period in 2024.

The increase in Analytics revenue was primarily driven by an increase in revenues from CV systems, the addition of revenues related to secureWISE products and services, increase in revenues from DFI systems, and an increase in revenues from Cimetrix software licenses, partially offset by a decrease in revenues from Exensio software licenses.

Integrated Yield Ramp Revenue

Integrated Yield Ramp revenue increased $0.8 million for the three months ended September 30, 2025, compared to the same period in 2024, primarily due to higher Gainshare from increased customer wafer shipments at non-leading-edge nodes, partially offset by decrease in hours worked on fixed fee engagements.

Integrated Yield Ramp revenue increased $2.6 million for the nine months ended September 30, 2025, compared to the same period in 2024, primarily due to higher Gainshare from increased customer wafer shipments at non-leading-edge nodes, partially offset by a decrease in hours worked on fixed-fees engagements.

Our Integrated Yield Ramp revenue may continue to fluctuate from period to period primarily due to the contribution of Gainshare, which is dependent on many factors that are outside our control, including among others, continued production of ICs by our customers at facilities at which we generate Gainshare, sustained yield improvements by our customers, and whether we enter into new contracts containing Gainshare.

Our Analytics and Integrated Yield Ramp revenues may also fluctuate in the future and are dependent on a number of factors, including the semiconductor industry’s continued acceptance of our products, services and solutions, customers’ decisions on whether to purchase or lease DFI systems, the timing of purchases by existing and new customers, cancellations by existing customers, and our ability to attract new customers and penetrate new markets, supply chain challenges and further penetration of our current customer base.

Platform revenue as a percentage of total revenues

Volume-based revenue as a percentage of total revenues

Platform Revenue

Platform revenue increased $13.6 million for the three months ended March 31, 2026, compared to the same period in 2025.

The increase in Platform revenue was primarily driven by higher revenue from CV and DirectScan systems, the addition of revenues related to SecureWISE systems, and increase in revenue from Exensio software and services.

Volume-based Revenue

Volume-based revenue decreased $1.3 million for the three months ended March 31, 2026, compared to the same period in 2025, primarily due to decrease in revenue from Gainshare, partially offset by an increase in secureWISE data usage.

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 from business acquisitions.

Service costs include material costs, hardware costs (including cost of leased assets under sales-type lease), 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 $3.4 million for the three months ended September 30, 2025, compared to the same period in 2024, was primarily due to (i) a $1.0 million increase in personnel-related costs due to worldwide salary increases, increased headcount and bonus expense, (ii) a $0.7 million increase in subcontractor costs, (iii) a $0.4 million increase in facilities and IT-related costs, including depreciation and amortization expense, (iv) a $0.4 million increase in amortization of acquired technology, (v) a $0.3 million increase in third-party cloud-delivery related costs, and (vi) a $0.3 million increase in software license and maintenance costs.

The increase in costs of revenues of $5.4 million for the nine months ended September 30, 2025, compared to the same period in 2024, was primarily due to (i) a $2.0 million increase in subcontractor costs, (ii) a $1.8 million increase in personnel-related costs due to worldwide salary increases, higher fringe benefits expense and bonus expense, (iii) a $0.9 million increase in amortization of acquired technology, (iv) a $0.9 million increase in software license and maintenance costs, and (v) a $0.8 million increase in third-party cloud-delivery related costs, partially offset by a $1.2 million decrease in hardware costs.

Gross margin decreased one percentage point for the three months ended September 30, 2025, to 72% compared to 73% for the same period in 2024, primarily due to higher costs.

Gross margin increased two percentage points for the nine months ended September 30, 2025, to 72% compared to 70% for the same period in 2024.

The higher gross margin during the nine months ended September 30, 2025, was primarily due to higher Analytics revenue and contribution to revenue from Gainshare for the nine months ended September 30, 2025.

The increase in costs of revenues of $4.0 million for the three months ended March 31, 2026, compared to the same period in 2025, was primarily due to (i) a $1.8 million increase in personnel-related costs due to increased headcount and higher bonus expense, (ii) a $0.9 million increase in facilities and IT-related costs, including depreciation and amortization expense, (iii) a $0.7 million increase in software license and maintenance costs, (iv) a $0.3 million increase in amortization of acquired technology, and (v) a $0.2 million increase in travel expense.

Gross margin decreased one percentage point for the three months ended March 31, 2026, to 72% compared to 73% for the same period in 2025, primarily due to decrease in revenue from Gainshare and higher costs.

Operating Expenses:

Research and Development

Three Months Ended

Nine Months Ended

September 30,

Three Months Ended March 31,

(Dollars in thousands)

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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 $1.9 million for the three months ended September 30, 2025, compared to the same period in 2024, primarily due to (i) a $0.6 million increase in personnel-related costs due to increased headcount, worldwide salary increases, and higher bonus expense and stock-based compensation expense, (ii) a $0.6 million increase in subcontractor fees primarily related to secureWISE products and Exensio software, (iii) a $0.5 million increase in facilities and IT-related costs, including depreciation and amortization expense, and (iv) a $0.2 million increase in travel expenses.

Research and development expenses increased $5.8 million for the nine months ended September 30, 2025, compared to the same period in 2024, primarily due to (i) a $2.3 million increase in personnel-related costs due to increased headcount, worldwide salary increases, and higher bonus and stock-based compensation expense, (ii) a $1.7 million increase in subcontractor fees primarily related to secureWISE products and Exensio software, (iii) a $1.3 million increase in facilities and IT-related costs, including depreciation and amortization expense, and (iv) a $0.5 million increase in travel expenses.

Research and development expenses increased $3.7 million for the three months ended March 31, 2026, compared to the same period in 2025, primarily due to (i) a $2.5 million increase in personnel-related costs due to increased headcount, higher bonus expense, and employee benefits expense, (ii) a $0.5 million increase in subcontractor fees primarily related to secureWISE systems and Exensio software, and (iii) a $0.5 million increase in facilities and IT-related costs, including depreciation and amortization expense.

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

Three Months Ended

Nine Months Ended

September 30,

Three Months Ended March 31,

(Dollars in thousands)

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As a percentage of total revenues

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 costs, IT and facilities cost allocations.

Selling, general, and administrative expenses increased $1.9 million for the three months ended September 30, 2025, compared to the same period in 2024, primarily due to (i) a $1.8 million increase in personnel-related costs mainly driven by increased headcount, worldwide salary increases, and higher bonus expense, partially offset by a decrease in stock-based compensation expense, (ii) a $0.4 million increase in travel expense, and (iii) a $0.3 million increase in subcontractor fees, partially offset by a $0.4 million decrease in legal fees, and a $0.2 million decrease in facilities and IT-related costs.

Selling, general, and administrative expenses increased $12.2 million for the nine months ended September 30, 2025, compared to the same period in 2024, primarily due to (i) a $7.0 million increase in personnel-related costs mainly driven by increased headcount, worldwide salary increases, and higher bonus expense and stock-based compensation expense, (ii) a $4.5 million in non-recurring legal, finance, integration, and other costs related to the acquisition of SecureWise, (iii) a $1.3 million increase in subcontractor fees, (iv) a $0.7 million increase in travel expense, (v) $0.3 million increase in facilities and IT-related costs, including shipping costs and depreciation expense, and (vi) a $0.3 million increase in third-party cloud-services related costs, partially offset by a $2.0 million decrease in legal and professional fees.

Selling, general, and administrative expenses decreased $5.9 million for the three months ended March 31, 2026, compared to the same period in 2025, primarily due to (i) a $4.3 million decrease in acquisition and integration costs related to the acquisition of SecureWise, (ii) a $1.4 million decrease in personnel-related costs mainly due to lower compensation expense allocated to selling and marketing activities, and stock-based compensation expense, and (iii) a $0.5 million decrease in facilities and IT-related costs, partially offset by a $0.2 million increase in subcontractor expenses.

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.

Amortization of Acquired Intangible Assets

Three Months Ended

Nine Months Ended

September 30,

Three Months Ended March 31,

(Dollars in thousands)

Amortization of acquired intangible assets

Amortization of acquired intangible assets represents amortization expense on intangibles assets acquired from prior and current year business combinations.

Amortization of acquired intangible assets represents amortization expense on intangibles assets acquired from business combinations in prior years.

The increase in amortization expense for the three months ended March 31, 2026, compared to the same period in 2025, was a result of the amortization of intangible assets acquired in the SecureWise acquisition in March 2025.

Interest Expense

Three Months Ended

Nine Months Ended

September 30,

Three Months Ended March 31,

(Dollars in thousands)

Interest expense

Interest expense is from our long-term debt that was used in financing the acquisition of SecureWise, and amortization of debt discount and financing costs.

Other Income (Expense), Net

Three Months Ended

Nine Months Ended

September 30,

Interest expense is from our long-term debt that was used in financing the acquisition of SecureWise in March 2025, and the related amortization of debt discount and issuance costs.

Interest expense increased $0.8 million for the three months ended March 31, 2026, compared to the same period in 2025, driven by a full quarter of interest on long-term debt and the amortization of debt discount and issuance costs in the first quarter of 2026, compared to approximately one month of interest following the drawdown of long-term debt in March 2025.

Interest Income and Other, Net

Three Months Ended March 31,

(Dollars in thousands)

Other income (expense), net

Other income (expense), net, primarily consists of interest income and foreign currency transaction exchange gains and losses.

Other income (expense), net decreased $1.6 million for the three months ended September 30, 2025, compared to the same period in 2024, primarily due to (i) $1.5 million decrease in interest income from cash, cash equivalents and short-term investments, and (ii) $0.1 million net unfavorable fluctuations in foreign currency exchange rates.

Other income (expense), net decreased $3.7 million for the nine months ended September 30, 2025, compared to the same period in 2024, primarily due to (i) a $3.4 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 previously written-off property and equipment.

Interest income and other, net

Interest income and other, net, primarily consists of interest income and foreign currency transaction exchange gains and losses.

Interest income and other, net decreased $0.3 million for the three months ended March 31, 2026, compared to the same period in 2025, primarily due to $0.9 million decrease in interest income from cash and cash equivalents, partially offset by a $0.6 million net favorable fluctuations in foreign currency exchange rates.

Income Tax Expense

Three Months Ended

Nine Months Ended

September 30,

Three Months Ended March 31,

(Dollars in thousands)

Income tax expense

Income tax expense increased for the three months ended September 30, 2025, and decreased for the nine months ended September 30, 2025, compared to the same period in 2024, primarily due to the impact of enacted U.S.

Income tax expense increased for the three months ended March 31, 2026, compared to the same period in 2025, primarily due to the impact of enacted U.S.

federal tax legislation, changes in the foreign, federal and state taxes and year-to-date recognition of worldwide pre-tax income in relation to their forecasted amounts for the full year.

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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 accounting principles generally accepted in the United States of America and the effectiveness of our tax planning strategies.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the United States.

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.

We completed our initial assessment of the OBBBA corporate tax provisions during the third quarter of 2025.

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 these elections, we anticipate a favorable cash tax benefit of approximately $0.9 million and reduction of effective tax rate by approximately 19% in 2025.

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 condensed consolidated financial statements for the first quarter of 2026 because we do not currently meet the 750 million Euro sales threshold.

Liquidity and Capital Resources

As of September 30, 2025, our working capital, defined as total current assets less total current liabilities, was $80.0 million, compared to $145.4 million as of December 31, 2024.

Total cash, cash equivalents, and short-term investments were $35.9 million as of September 30, 2025, compared to $114.9 million as of December 31, 2024.

As of September 30, 2025, and December 31, 2024, cash and cash equivalents held by our foreign subsidiaries were $4.8 million and $13.3 million, respectively.

Our material cash requirements include principal and interest payments on our debt, operating lease payments, and purchase obligations to support our operations.

Refer to Part I, Item 1, Financial Statements, Note 4, Leases , Note 5, Debt , Note 12, Commitments and Contingencies and Note 14, Business Combination for details relating to our material cash requirements for debt, leasing arrangements, including future maturities of operating lease liabilities, and purchase obligations, respectively.

As of March 31, 2026, our working capital, defined as total current assets less total current liabilities, was $100.7 million, compared to $92.0 million as of December 31, 2025.

Total cash and cash equivalents were $31.2 million as of March 31, 2026, compared to $42.2 million as of December 31, 2025.

As of March 31, 2026, and December 31, 2025, cash and cash equivalents held by our foreign subsidiaries were $8.7 million and $6.7 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, operating lease payments, and purchase obligations to support our operations.

Refer to Part I, Item 1, Financial Statements, Note 4, Leases , Note 5, Debt , and Note 12, Commitments and Contingencies for details relating to our material cash requirements for debt, leasing arrangements, including future maturities of operating lease liabilities, 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.

however, we will continue to evaluate if we require additional funding to meet our longer-term needs.

Term Loan and Revolving Credit Facility

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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 Company’s weighted average annual interest rate on its outstanding debt was 5.9% for the three months ended March 31, 2026.

The Credit Agreement contains customary representations and warranties, as well as customary affirmative and negative covenants.

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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 September 30, 2025, we were in compliance with the covenants contained in the Credit Agreement.

As of March 31, 2026, we were in compliance with the covenants contained in the Credit Agreement.

The Credit Agreement contains customary events of default.

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The Company used the amounts borrowed under the Credit Facilities to finance, in part, the purchase price paid for the acquisition of SecureWise.

First Amendment to Credit Agreement

On April 23, 2026, the Company entered into a First Amendment to Credit Agreement (the “Amendment”) with the Lenders and the Agent to amend the Credit Agreement dated as of March 7, 2025.

The Amendment increases the Revolving Credit Facility to an aggregate principal amount of $75 million.

The Amendment introduces leveraged-based adjustments to the annual Revolving Credit Facility commitment fee during the term of the Credit Agreement.

Instead of a flat per annum rate of 0.50%, the Revolving Credit Facility commitment fee will be 0.50% when the total debt to EBITDA ratio is greater than or equal to 2.50 to 1.00, 0.35% when the total debt to EBITDA ratio is less than 2.50 to 1.00 but greater than or equal to 0.50 to 1.00 and 0.20% when the total debt to EBITDA ratio is less than 0.50 to 1.00.

All other material terms of the Credit Agreement remain unchanged.

Under this facility, $30.0 million is available for the issuance of letters of credit.

Repurchase of Company ’ s Common Stock

On April 15, 2024, the Board of Directors adopted a stock repurchase program (the “2024 Program”) to repurchase up to $40.0 million of the Company’s 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 the Company to acquire a minimum amount of shares and may be modified, suspended or terminated without prior notice.

During the nine months ended September 30, 2025, 12,500 shares were repurchased by the Company under the 2024 Program at an average price of $19.55 per share for an aggregate total price of $0.2 million.

During the nine months ended September 30, 2024, the Company did not repurchase any shares under the 2024 Program.

As of September 30, 2025, approximately $39.8 million remained available under the 2024 Program authorization.

In 2025, the Company 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.

During the three months ended March 31, 2026, the Company did not repurchase any shares under the 2024 Program.

As of March 31, 2026, approximately $39.8 million remained available under the 2024 Program.

Subsequently, on April 14, 2026, the 2024 Program expired.

Also, subsequently, in May 2026, the Board Directors adopted a new stock repurchase program (the “2026 Program”) to repurchase up to $50.0 million of the Company’s 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.

Cash Flow Data

The following table summarizes our cash flows for the periods presented:

Nine Months Ended

September 30,

Three Months Ended March 31,

(In thousands)

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Net Cash Flows Provided by Operating Activities

Cash flows provided by operating activities during the nine months ended September 30, 2025, consisted of a net loss, 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, accretion of unguaranteed residual assets, and net change in operating assets and liabilities.

Net cash flows provided by operating activities were $6.7 million for the nine months ended September 30, 2025, compared to net cash flows provided by operating activities of $8.1 million for the nine months ended September 30, 2024.

The decrease in net cash flows provided by operating activities between the periods was primarily driven 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, partially offset by higher collections from customers.

Net Cash Flows Provided by (Used in) Investing Activities

Net cash flows used in investing activities were $127.6 million for the nine months ended September 30, 2025, compared to net cash flows provided by investing activities of $0.2 million for the nine months ended September 30, 2024.

For the nine months ended September 30, 2025, net cash flows used in investing activities primarily related to $129.7 million payments for the acquisition of SecureWise, net of cash acquired and $23.1 million purchases and prepayments of property and equipment primarily related to our DFI systems, partially offset by $24.6 million proceeds from maturities and sales, net of purchases of short-term investments, and $0.6 million recovery from previously written-off property and equipment.

For the nine months ended September 30, 2024, net cash flows provided by investing activities primarily related to proceeds from maturities and sales of short-term investments of $57.1 million, partially offset by purchases of short-term investments of $43.1 million, purchases of property and equipment of $11.9 million primarily related to our DFI systems, and purchase of a convertible promissory note of $2.0 million.

Net cash flows provided by operating activities were $1.7 million for the three months ended March 31, 2026, compared to $8.6 million for the same period in 2025.

The decrease in net cash flows provided by operating activities between the periods was primarily driven by higher disbursements for operations, including payments related to vendor invoices and income taxes, lower collections from customers, and payments of interest related to bank loans, partially offset by a decrease in bonus payments under the Company’s bonus plan, and decrease in payments for business acquisition-related costs.

Net Cash Flows Used in Investing Activities

For the three months ended March 31, 2026, net cash flows used in investing activities were $10.5 million related to purchases and prepayments of property and equipment, mainly related to our DirectScan systems.

For the three months ended March 31, 2025, net cash flows used in investing activities were $123.9 million, which were primarily related to $129.7 million payments for the acquisition of SecureWise, net of cash acquired, $2.9 million purchases of short-term investments, and $8.2 million purchases and prepayments of property and equipment primarily related to our DirectScan systems, partially offset by $17.0 million proceeds from maturities and sales of short-term investments.

Net Cash Flows Provided by (Used in) Financing Activities

Net cash flows provided by financing activities were $65.5 million for the nine months ended September 30, 2025, compared to net cash flows used in financing activities of $10.9 million for the nine months ended September 30, 2024.

For the nine months ended September 30, 2025, net cash flows 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) $5.9 million in cash payments for taxes related to net share settlement of equity awards, (ii) $1.3 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 nine months ended September 30, 2024, net cash flows used in financing activities primarily consisted of $8.2 million in cash payments for taxes related to net share settlement of equity awards, repurchases of common stock of $6.9 million, partially offset by $4.2 million of proceeds from our employee stock purchase plans and exercise of stock options.

For the three months ended March 31, 2026, net cash flows used in financing activities were $2.1 million, which primarily consisted of $3.7 million in cash payments for taxes related to net share settlement of equity awards, and $0.6 million repayment of long-term debt, partially offset by $2.2 million proceeds from our employee stock purchase plan and exercise of stock options.

For the three months ended March 31, 2025, net cash flows provided by financing activities were $68.0 million, which primarily consisted of $69.2 million proceeds from long-term debt, net of debt discount and issuance costs, that was used in financing the acquisition of SecureWise, and $2.1 million proceeds from our employee stock purchase plan, partially offset by $3.3 million in cash payments for taxes related to net share settlement of equity awards.

Related Party Transactions

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Off-Balance Sheet Agreements

As of September 30, 2025, we do not have any off-balance sheet arrangements, investments in special purpose entities or undisclosed borrowings or debt.

As of March 31, 2026, we do not have any off-balance sheet arrangements, investments in special purpose entities or undisclosed borrowings or debt.

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-Q

Item 1. Financial Statements