What changed in this filing

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Item 1. Financial Statements

2021-11-09 compared with 2021-08-10 · 157 added, 145 removed, 527 unchanged (36% of the section changed)

3 unchanged sentences

(in thousands, except par value)

September 30,

Current assets:

38 unchanged sentences

(in thousands, except per share amounts)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Integrated Yield Ramp

8 unchanged sentences

Income tax expense (benefit)

Other comprehensive loss:

Other comprehensive income (loss):

Foreign currency translation adjustments, net of tax

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

Total other comprehensive loss

Total other comprehensive income (loss)

Comprehensive loss

5 unchanged sentences

(in thousands)

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Treasury Stock

16 unchanged sentences

Balances, June 30, 2021

Six Months Ended June 30, 2020

Issuance of common stock in connection with employee stock purchase plan

Issuance of common stock in connection with exercise of options

Vesting of restricted stock units

Purchases of treasury stock in connection with tax withholdings on restricted stock grants

Stock-based compensation expense

Comprehensive loss

Balances, September 30, 2021

See accompanying Notes to Condensed Consolidated Financial Statements (unaudited)

PDF SOLUTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

Nine Months Ended September 30, 2020

Treasury Stock

15 unchanged sentences

Balances, June 30, 2020

Issuance of common stock, net of issuance of $ 0.1 million

Issuance of common stock in connection with employee stock purchase plan

Issuance of common stock in connection with exercise of options

Vesting of restricted stock units

Purchases of treasury stock in connection with tax withholdings on restricted stock grants

Stock-based compensation expense

Comprehensive income (loss)

Balances, September 30, 2020

See accompanying Notes to Condensed Consolidated Financial Statements (unaudited)

2 unchanged sentences

(in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities:

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization

14 unchanged sentences

Operating lease liabilities

Net cash (used in) provided by operating activities

Net cash provided by operating activities

Cash flows from investing activities:

2 unchanged sentences

Purchases of property and equipment

Prepayment for the purchase of property and equipment

Net cash provided by (used in) investing activities

4 unchanged sentences

Repurchases of common stock

Net cash used in financing activities

Proceeds from issuance of common stock, net of issuance costs paid

Net cash provided by (used in) financing activities

Effect of exchange rate changes on cash and cash equivalents

10 unchanged sentences

(in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Supplemental disclosure of cash flow information:

7 unchanged sentences

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

Issuance costs for common stock included in accounts payable and accrued other liabilities

See accompanying Notes to Condensed Consolidated Financial Statements (unaudited)

17 unchanged sentences

The global COVID-19 pandemic has impacted the operations and purchasing decisions of companies worldwide.

It also has created and may continue to create significant uncertainty in the global economy.

The Company has undertaken measures to protect its employees, partners, customers, and vendors.

In addition, the Company’s personnel worldwide are subject to various travel restrictions, which limit the ability of the Company to provide services to customers and its affiliates.

The Company believes the lack of an ability to meet in person in most of 2020 through the first half of 2021 may have made it harder for us to sell complex or new technologies to new customers during 2020 and 2021.

Once the Company can again begin to meet with customers in person, it may improve traction with new customers.

To date, the Company has been able to provide uninterrupted access to its products and services due to its globally distributed workforce, many of whom are working remotely, and its pre-existing infrastructure that supports secure access to the Company’s internal systems.

If, however, the COVID-19 pandemic, including spikes in different regions from time to time, has a substantial impact on the productivity of the Company’s employees, or supplies, or its partners’ or customers’ decision to use the Company’s products and services, the results of the Company’s operations and overall financial performance may be adversely impacted.

The duration and extent of the impact from the COVID-19 pandemic depends on future developments that cannot be accurately predicted at this time.

As of the date of issuance of the condensed consolidated financial statements, the Company is not aware of any specific event or circumstance that would require updates to the Company’s estimates and judgments or revisions to the carrying value of its assets or liabilities.

These estimates may change, as new events occur and additional information is obtained, and are recognized in the condensed

consolidated financial statements as soon as they become known.

As of the date of issuance of the condensed consolidated financial statements, the Company is not aware of any specific event or circumstance relating to COVID-19 that would require updates to the Company’s estimates and judgments or revisions to the carrying value of its assets or liabilities.

These estimates may change, as new events occur and additional information is obtained, and are recognized in the condensed consolidated financial statements as soon as they become known.

Actual results could differ from those estimates and any such differences may be material to the financial statements.

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The guidance also clarifies and simplifies other aspects of the accounting for income taxes.

The guidance is effective for the Company beginning in the first quarter of 2021 on a prospective basis.

The guidance became effective for the Company beginning in the first quarter of 2021 on a

prospective basis.

The Company adopted this standard on January 1, 2021, and it did not have a material impact on the Company’s condensed consolidated financial statements or the related disclosures.

55 unchanged sentences

Revenue from standalone 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 we are providing (i) support and (ii) unspecified software updates on a when-and-if available basis over the contract term.

8 unchanged sentences

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 SSP attributed to each performance obligation.

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 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.

16 unchanged sentences

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

Three Months Ended June 30,

Six Months Ended

Three Months Ended September 30,

Nine Months Ended September 30,

Point-in-time

International revenues accounted for approximately 56 % and 60 % of our total revenues during the three and six months ended June 30, 2021, respectively, compared to 54 % and 56 % of our total revenues during the three and six months ended June 30, 2020, respectively.

International revenues accounted for approximately 53 % and 57 % of our total revenues during the three and nine months ended September 30, 2021, respectively, compared to 67 % and 60 % of our total revenues during the three and nine months ended September 30, 2020, respectively.

See Note 11, Customer and Geographic Information .

23 unchanged sentences

contract liabilities) at the contract level.

At June 30, 2021, and December 31, 2020, contract assets were $ 2.1 million and $ 3.7 million, respectively, and are included in prepaid expenses and other current assets in the Condensed Consolidated Balance Sheets.

The total contract assets included in prepaid expenses and other current assets in the Condensed Consolidated Balance Sheets was immaterial as of September 30, 2021 and $ 3.7 million as of December 31, 2020.

The Company did no t record any asset impairment charges related to contract assets for the periods presented.

1 unchanged sentence

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 the other non-current liabilities in the Condensed Consolidated Balance Sheets.

At June 30, 2021, and December 31, 2020, the non-current portion of deferred revenues included in non-current liabilities was $ 1.7 million and $ 1.2 million, respectively.

Revenue recognized that was included in the deferred revenues and billings in excess of recognized revenues balances at the beginning of each reporting period was $ 6.5 million and $ 5.9 million during the three months ended June 30, 2021 and 2020, respectively, and $ 10.5 million and $ 7.7 million during the six months ended June 30, 2021 and 2020, respectively.

At June 30, 2021, 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 $ 138.6 million.

At September 30, 2021 and December 31, 2020, the non-current portion of deferred revenues included in non-current liabilities was $ 2.5 million and $ 1.2 million, respectively.

Revenue recognized that was included in the deferred revenues and billings in excess of recognized revenues balances at the beginning of each reporting period was $ 7.0 million and $ 4.7 million during the three months ended September 30, 2021 and 2020, respectively, and $ 13.8 million and $ 9.5 million during the nine months ended September 30, 2021 and 2020, respectively.

At September 30, 2021, 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 $ 180.9 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 in the following three years .

2 unchanged sentences

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 ($ 0.4 ) million and ($ 0.5 ) million during the three months ended June 30, 2021 and 2020, respectively, and an increase of $ 0.1 million and $ 0.6 million during the six months ended June 30, 2021 and 2020, respectively.

The adjustment to revenue recognized from performance obligations satisfied (or partially satisfied) in previous periods was a decrease of $ 0.2 million and $ 1.2 million during the three months ended September 30, 2021 and 2020, respectively, and an increase of $ 34,000 and $ 0.4 million during the nine months ended September 30, 2021 and 2020, respectively.

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

2 unchanged sentences

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 included in prepaid expenses and other current assets in the accompanying Condensed Consolidated Balance Sheets as of June 30, 2021, and December 31, 2020 were $ 0.8 million and $ 0.8 million, respectively.

Total capitalized direct sales commission costs included in other non-current assets in the accompanying Condensed Consolidated Balance Sheets as of June 30, 2021, and December 31, 2020 were $ 1.6 million and $ 0.9 million, respectively.

Amortization of these assets were $ 0.2 million and $ 0.1 million during the three months ended June 30, 2021 and 2020, respectively, and $ 0.3 million and $ 0.2 million during the six months ended June 30, 2021 and 2020, respectively.

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

Certain eligible initial project costs are capitalized when the costs relate directly to the contract, the costs generate or enhance resources of the Company that will be used in satisfying the performance obligation in the future, and the costs are expected to be recovered.

These costs primarily consist of transition and set-up costs related to the installation of systems and processes and other deferred fulfillment costs eligible for capitalization.

Capitalized costs are amortized consistent with the transfer to the customer of the services to which the asset relates and recorded as a component of cost of revenues.

The Company also incurs certain direct costs to provide services in relation to the specific anticipated contracts.

The Company recognizes such costs as a component of cost of revenues, the timing of which is dependent upon identification of a contract arrangement.

At the end of the reporting period, the Company evaluates its deferred costs for their probable recoverability.

The deferred costs balance included in prepaid expenses and other current assets and in other non-current assets in the accompanying Condensed Consolidated Balance Sheets was immaterial as of as of June 30, 2021 and December 31, 2020.

The Company recognizes impairment of deferred costs when it has determined that the costs no longer have future benefits and are no longer recoverable.

Total capitalized direct sales commission costs included in prepaid expenses and other current assets in the accompanying Condensed Consolidated Balance Sheets as of September 30, 2021, and December 31, 2020 were $ 0.8 million and $ 0.8 million, respectively.

Total capitalized direct sales commission costs included in other non-current assets in the accompanying Condensed Consolidated Balance Sheets as of September 30, 2021, and December 31, 2020 were $ 1.8 million and $ 0.9 million, respectively.

Amortization of these assets were $ 0.2 million and $ 0.1 million during the three months ended September 30, 2021 and 2020, respectively, and $ 0.5 million and $ 0.4 million during the nine months ended September 30, 2021 and 2020, respectively.

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

The Company does not adjust 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 significant financing component during the three and six months ended June 30, 2021 and 2020.

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.

STRATEGIC PARTNERSHIP AGREEMENT WITH ADVANTEST AND RELATED PARTY TRANSACTIONS

4 unchanged sentences

● An Amended and Restated Master Development Agreement with Advantest, pursuant to which the Company and Advantest agreed to collaborate on extensions to or combinations of both of their existing technology and new technology to address mutual customers’ needs through one or more development phases subject to certain conditions as set forth therein.

Costs and expenses incurred related to this agreement have not been significant for the three and six months ended June 30, 2021.

Costs and expenses incurred related to this agreement have not been significant for the three and nine months ended September 30, 2021.

● A Master Commercial Terms and Support Services Agreement for the commercialization and support of integrated products of the Company and Advantest that are the outcome of the above development agreement.

There were no material costs and expenses were incurred related to the Commercial Agreement with Advantest during the three and six months ended June 30, 2021.

Analytics revenue recognized from Advantest were $ 2.6 million and $ 5.2 million during the three and six months ended June 30, 2021, respectively.

Accounts receivable from Advantest, comprised of billed and unbilled accounts receivable, related to this agreement amounted to $ 0.1 million and nil as of June 30, 2021 and December 31, 2020, respectively, and deferred revenue amounted to $ 0.8 million and nil as of June 30, 2021 and December 31, 2020, respectively.

No material costs and expenses were incurred related to the Commercial Agreement with Advantest during the three and nine months ended September 30, 2021.

Analytics revenue recognized from Advantest were $ 2.7 million and $ 7.9 million during the three and nine months ended September 30, 2021, respectively, and $ 1.0 million during each of the three and nine months ended September 30, 2020.

There was no outstanding accounts receivable from Advantest as of September 30, 2021 and December 31, 2020, and deferred revenue amounted to $ 9.6 million and nil as of September 30, 2021 and December 31, 2020, respectively.

There was no occurrence of any termination events under these agreements as of the issuance of these condensed consolidated financial statements.

The Company carries out transactions with Advantest on arm’s length commercial customary terms.

For more information about these agreements with Advantest, see Note 3, Strategic Partnership Agreement with Advantest and

Related Party Transactions , of Part II, Item 8.

For more information about these agreements with Advantest, see Note 3, Strategic Partnership Agreement with Advantest and Related Party Transactions , of Part II, Item 8.

“Financial Statements and Supplementary Data” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

8 unchanged sentences

The Company is required to maintain cash specifically designated to pay for the Holdback Amount, which the Company has classified as restricted cash.

Restricted cash amounted to $ 3.0 million and $ 3.5 million as of June 30, 2021 and December 31, 2020, respectively, and is included in the “Prepaid expenses and other current assets” account in the Company’s Condensed Consolidated Balance Sheet.

Restricted cash amounted to $ 3.0 million and $ 3.5 million as of September 30, 2021 and December 31, 2020, respectively, and is included in the “Prepaid expenses and other current assets” account in the Company’s Condensed Consolidated Balance Sheets.

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

3 unchanged sentences

During the first quarter of 2021, the Company recorded a measurement period adjustment to the estimated fair values initially recorded in 2020, which resulted in a reduction in Holdback Amount of $ 0.5 million with a corresponding change to goodwill.

The measurement period adjustment did not have an impact on the Company’s Condensed Consolidated Statements of Comprehensive Loss during the three and six months ended June 30, 2021.

As of June 30, 2021, the allocation of the purchase price for this acquisition is as follows (in thousands, except amortization period):

The measurement period adjustment did not have an impact on the Company’s Condensed Consolidated Statements of Comprehensive Loss during the three and nine months ended September 30, 2021.

As of September 30, 2021, the allocation of the purchase price for this acquisition is as follows (in thousands, except amortization period):

Period (Years)

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This amount will be recognized as compensation expense over the period as services are rendered.

As of June 30, 2021, the estimated remaining total cash payout is approximately $ 0.9 million.

The accrued compensation balance included under accrued compensation and related benefits account in the Company’s Condensed Consolidated Balance Sheet was $ 0.1 million and $ 0.3 million as of June 30, 2021 and December 31, 2020, respectively.

As of September 30, 2021, the estimated remaining total cash payout is approximately $ 0.9 million.

The accrued compensation balance included under accrued compensation and related benefits account in the Company’s Condensed Consolidated Balance Sheet was $ 0.4 million and $ 0.3 million as of September 30, 2021 and December 31, 2020, respectively.

Transaction expenses related to the acquisition of Cimetrix amounted to $ 1.6 million in 2020.

These costs consist of professional fees and administrative costs and were expensed as incurred in the Company’s Condensed Consolidated Statement of Comprehensive Loss.

No transaction costs were incurred during the three months ended June 30, 2021.

Transaction costs were immaterial during the six months ended June 30, 2021.

No transaction costs were incurred during the three months ended September 30, 2021.

Transaction costs were immaterial during the nine months ended September 30, 2021.

The financial results of the acquisition of Cimetrix were considered immaterial for purposes of unaudited pro forma financial disclosures.

2 unchanged sentences

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 $ 5.7 million and $ 7.2 million as of June 30, 2021, and December 31, 2020, respectively.

Unbilled accounts receivable that are not expected to be billed and collected during the succeeding 12-month period is recorded in other non-current assets and totaled $ 1.6 million and $ 2.0 million as of June 30, 2021, and December 31, 2020, respectively.

Unbilled accounts receivable, included in accounts receivable, totaled $ 8.6 million and $ 7.2 million as of September 30, 2021, and December 31, 2020, respectively.

Unbilled accounts receivable that are not expected to be billed and collected during the succeeding 12-month period is recorded in other non-current assets and totaled $ 1.6 million and $ 2.0 million as of September 30, 2021, and December 31, 2020, respectively.

Property and equipment

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

September 30,

Computer equipment

6 unchanged sentences

Test equipment includes systems assets at customer sites that are contributing to DFI™ systems revenues.

The construction-in-progress balance related to construction of DFI™ systems assets totaled $ 20.9 million and $ 18.9 million as of June 30, 2021, and December 31, 2020, respectively.

Depreciation and amortization expense was $ 1.6 million and $ 1.7 million during the three months ended June 30, 2021 and 2020, respectively, and $ 3.3 million and $ 3.4 million during the six months ended June 30, 2021 and 2020, respectively.

The construction-in-progress balance related to construction of DFI™ systems assets totaled $ 21.5 million and $ 18.9 million as of September 30, 2021, and December 31, 2020, respectively.

Depreciation and amortization expense was $ 1.5 million and $ 1.7 million during the three months ended September 30, 2021 and 2020, respectively, and $ 4.8 million and $ 5.0 million during the nine months ended September 30, 2021 and 2020, respectively.

Goodwill and Intangible Assets, Net

The change in the carrying amount of goodwill during the six months ended June 30, 2021, was as follows (in thousands):

The change in the carrying amount of goodwill during the nine months ended September 30, 2021, was as follows (in thousands):

Balance at beginning of period, January 1, 2021

Measurement period acquisition adjustment (1)

Balance at end of period, June 30, 2021

Balance at end of period, September 30, 2021

(1) Goodwill adjustment was recorded within the measurement period with a corresponding reduction in the Holdback Amount.

See Note 4, Business Combination .

There were no impairments to goodwill during the six months ended June 30, 2021.

There were no impairments to goodwill during the nine months ended September 30, 2021.

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

June 30, 2021

September 30, 2021

December 31, 2020

8 unchanged sentences

Year Ending December 31,

2021 (remaining six months)

2021 (remaining three months)

2026 and thereafter

1 unchanged sentence

Intangible assets are amortized over their useful lives unless these lives are determined to be indefinite.

The weighted average amortization period for acquired identifiable intangible assets was 7.0 years as of June 30, 2021.

Intangible asset amortization expense included under "Cost of revenues"

and "Amortization of other intangible assets"

account in the Condensed Consolidated Statements of Comprehensive Loss was $ 0.9 million and $ 0.3 million during the three months ended June 30, 2021 and 2020, respectively, and $ 1.7 million and $ 0.6 million during the six months ended June 30, 2021 and 2020, respectively.

The weighted average amortization period for acquired identifiable intangible assets was 5.7 years as of September 30, 2021.

Intangible assets amortization expense included under “Cost of revenues” and “Amortization of other intangible assets” account in the Condensed Consolidated Statements of Comprehensive Loss was $ 0.8 million and $ 0.3 million during the three months ended September 30, 2021 and 2020, respectively, and $ 2.5 million and $ 1.0 million during the nine months ended September 30, 2021 and 2020, respectively.

Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable.

During the three and six months ended June 30, 2021, there were no indicators of impairment related to the Company’s intangible assets.

During the three and nine months ended September 30, 2021, there were no indicators of impairment related to the Company’s intangible assets.

The Company leases administrative and sales offices and certain equipment under non-cancellable operating leases, which contain various renewal options and, in some cases, require payment of common area costs, taxes and utilities.

These operating leases expire at various dates through 2028.

The Company had no leases that were classified as a financing lease as of June 30, 2021, and December 31, 2020.

The Company had no leases that were classified as a financing lease as of September 30, 2021, and December 31, 2020.

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Operating lease expense

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Supplemental information related to operating leases was as follows:

September 30,

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

Weighted average discount rate for operating lease liabilities

Maturities of operating lease liabilities as of June 30, 2021, were as follows (in thousands):

Maturities of operating lease liabilities as of September 30, 2021, were as follows (in thousands):

Year Ending December 31,

2021 (remaining six months)

2021 (remaining three months)

2026 and thereafter

1 unchanged sentence

Present value of future minimum lease payments under operating lease liabilities (3)

(1) As of June 30, 2021, the total operating lease liability includes approximately $ 1.1 million related to an option to extend a lease term that is reasonably certain to be exercised.

(1) As of September 30, 2021, the total operating lease liability includes approximately $ 1.1 million related to an option to extend a lease term that is reasonably certain to be exercised.

(2) Calculated using incremental borrowing interest rate for each lease.

(3) Includes the current portion of operating lease liabilities of $ 1.8 million as of June 30, 2021.

(3) Includes the current portion of operating lease liabilities of $ 1.7 million as of September 30, 2021.

STOCKHOLDERS’ EQUITY

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On June 4, 2020, the Company’s Board of Directors adopted a new stock repurchase program (the “2020 Program”) to repurchase up to $ 25.0 million of the Company’s common stock both on the open market and in privately negotiated transactions, including through Rule 10b5-1 plans, over the next two years .

During the six months ended June 30, 2021 , 251,212 shares were repurchased under the 2020 Program at an average price of $ 18.01 per share for an aggregate total price of $ 4.5 million.

During the nine months ended September 30, 2021 , 251,212 shares were repurchased under the 2020 Program at an average price of $ 18.01 per share for an aggregate total price of $ 4.5 million.

EMPLOYEE BENEFIT PLANS

On June 30, 2021, the Company had the following stock-based compensation plans:

On September 30, 2021, the Company had the following stock-based compensation plans:

Employee Stock Purchase Plan

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The 2010 Purchase Plan expired on May 17, 2020.

Existing offering periods will continue until they expire in accordance with their terms, and participation in such offering periods will continue through the applicable expiration date.

Existing offering periods will continue until they expire in accordance with their terms, and

participation in such offering periods will continue through the applicable expiration date.

The final offering period under the 2010 Purchase Plan expires on January 31, 2022.

On June 15, 2021, the Company’s stockholders approved the 2021 Employee Stock Purchase, which has a ten-year term (the “2021 Purchase Plan”).

On June 15, 2021, the Company’s stockholders approved the 2021 Employee Stock Purchase Plan, which has a ten-year term (the “2021 Purchase Plan”).

The terms of 2021 Purchase Plan are substantially similar to those of the 2010 Purchase Plan.

No offering periods had commenced under the 2021 Purchase Plan as of June 30, 2021.

The Company estimated the fair value of purchase rights granted under the 2010 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:

Six Months Ended June 30,

A twenty-four-month offering period under the 2021 Purchase Plan commenced on August 1, 2021.

The Company estimated the fair value of purchase rights granted under the 2010 and the 2021 Purchase Plans 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:

2021 Purchase Plan

2010 Purchase Plan

Nine Months Ended

September 30,

Nine Months Ended

September 30,

Expected life (in years)

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Weighted average fair value of purchase rights granted during the period

During the three months ended June 30, 2021 and 2020, no shares were issued under the 2010 Purchase Plan.

During the six months ended June 30, 2021 and 2020, a total of approximately 99,674 and 89,000 shares, respectively, were issued under the 2010 Purchase Plan, at a weighted-average purchase price of $ 9.24 per share and $ 9.02 per share, respectively.

As of June 30, 2021, there was a negligible amount of unrecognized compensation cost related to the 2010 Purchase Plan.

That cost is expected to be recognized over a weighted average period of six months .

During the three months ended September 30, 2021 and 2020, a total of approximately 9,000 and 93,000 shares were issued under the 2010 Purchase Plan.

During the nine months ended September 30, 2021 and 2020, a total of approximately 109,000 and 183,000 shares, respectively, were issued under the 2010 Purchase Plan, at a weighted-average purchase price of $ 9.53 per share and $ 9.12 per share, respectively.

As of September 30, 2021, unrecognized compensation cost related to the 2021 Purchase Plan was $ 2.0 million and there was a negligible amount of unrecognized compensation cost related to the 2010 Purchase Plan.

These costs are expected to be recognized over a weighted average period of 1.75 years.

Stock Incentive Plans

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Although no new awards may be granted under the 2001 Plan, awards made under the 2001 Plan that are currently outstanding remain subject to the terms of each such plan.

As of June 30, 2021, 12.1 million shares of common stock were reserved to cover stock-based awards under the 2011 Plan, of which 4.2 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 June 30, 2021.

As of June 30, 2021, there were no outstanding awards that had been granted outside of the 2011 or 2001 Plans (collectively, the “Stock Plans”).

As of September 30, 2021, 12.1 million shares of common stock were reserved to cover stock-based awards under the 2011 Plan, of which 3.4 million shares were available for future grant.

As of September 30, 2021, there were no outstanding awards that had been granted outside of the 2011 or 2001 Plans (collectively, the “Stock Plans”).

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 three and six months ended June 30, 2021.

The fair value of stock options granted during the three and six months ended June 30, 2020, was estimated as of the grant-date using the following assumptions:

Three Months Ended June 30,

Six Months Ended June 30,

There were no stock options granted during the three and nine months ended September 30, 2021.

The fair value of stock options granted during the three and nine months ended September 30, 2020, was estimated as of the grant-date using the following assumptions:

Three Months Ended September 30,

Nine Months Ended September 30,

Expected life (in years)

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

Three Months Ended

Six Months Ended

Three Months Ended September 30,

Nine Months Ended September 30,

Costs of revenues

2 unchanged sentences

Stock-based compensation expenses (1)

(1) The stock-based compensation expense during the three and six months ended June 30, 2020, includes immaterial expense or credit adjustments related to cash-settled SARs granted to certain employees.

(1) The stock-based compensation expense during the three and nine months ended September 30, 2020, includes immaterial expense or credit adjustments related to cash-settled SARs granted to certain employees.

The Company accounted for these awards as liability awards and the amount was included in accrued compensation and related benefits.

All remaining outstanding SARs were fully exercised in the third quarter of 2020.

Stock-based compensation expense that was recorded as capitalized software development costs under property and equipment, net, was nil during the three and six months ended June 30, 2021, and $ 0.1 million and $ 0.2 million during the three and six months ended June 30, 2020, respectively.

Additional information with respect to options under the Stock Plans during the six months ended June 30, 2021, is as follows:

(in thousands)

Stock-based compensation expense that was recorded as capitalized software development costs under property and equipment, net, was nil during the three and nine months ended September 30, 2021, and nil and $ 0.2 million during the three and nine months ended September 30, 2020, respectively.

Additional information with respect to options under the Stock Plans during the nine months ended September 30, 2021, is as follows:

Outstanding, January 1, 2021

Outstanding, June 30, 2021

Vested and expected to vest, June 30, 2021

Exercisable, June 30, 2021

The aggregate intrinsic value in the table above represents the total intrinsic value based on the Company’s closing stock price of $ 18.18 per share as of June 30, 2021.

The total intrinsic value of options exercised was $ 1.4 million during the six months ended June 30, 2021.

As of June 30, 2021, there was $ 0.3 million of total unrecognized compensation expense related to unvested stock options, which is expected to be recognized over a weighted average period of 2.2 years.

The total fair value of shares vested was $ 0.1 million during the six months ended June 30, 2021.

Non-vested restricted stock unit activity during the six months ended June 30, 2021, was as follows:

Outstanding, September 30, 2021

Vested and expected to vest, September 30, 2021

Exercisable, September 30, 2021

The aggregate intrinsic value in the table above represents the total intrinsic value based on the Company’s closing stock price of $ 23.04 per share as of September 30, 2021.

The total intrinsic value of options exercised was $ 1.9 million during the nine months ended September 30, 2021.

As of September 30, 2021, there was $ 0.2 million of total unrecognized compensation expense related to unvested stock options, which is expected to be recognized over a weighted average period of 2.0 years.

The total fair value of shares vested was $ 0.1 million during the nine months ended September 30, 2021.

Non-vested restricted stock unit activity during the nine months ended September 30, 2021, was as follows:

Average Grant

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Non-vested, January 1, 2021

Non-vested, June 30, 2021

As of June 30, 2021, there was $ 19.2 million of total unrecognized compensation cost related to non-vested restricted stock units.

Non-vested, September 30, 2021

As of September 30, 2021, there was $ 27.1 million of total unrecognized compensation cost related to non-vested restricted stock units.

That cost is expected to be recognized over a weighted average period of 2.7 years.

Restricted stock units do not have rights to dividends prior to vesting.

Income tax expense increased $ 4.2 million for the six months ended June 30, 2021, to a $ 1.0 million income tax expense as compared to an income tax benefit of $ 3.2 million for the six months ended June 30, 2020.

The Company’s effective tax rate (expense) benefit was ( 9 %) and 43 % for the six months ended June 30, 2021 and 2020, respectively.

The Company’s effective tax rate increased in the six months ended June 30, 2021, as compared to the same period in 2020, primarily due to a full valuation allowance against U.S.

net deferred tax assets as well as a one-time benefits in the first quarter of 2020 pursuant to the provisions of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) passed on March 27, 2020.

The Company’s total amount of unrecognized tax benefits, excluding interest and penalties, as of June 30, 2021, was $ 14.6 million, of which $ 2.1 million, if recognized, would affect the Company’s effective tax rate.

Income tax expense increased $ 5.7 million for the nine months ended September 30, 2021, to a $ 1.5 million income tax expense as compared to an income tax benefit of $ 4.1 million for the nine months ended September 30, 2020.

The Company’s effective tax rate (expense) benefit was ( 12 %) and 37 % for the nine months ended September 30, 2021 and 2020, respectively.

The Company’s effective tax rate increased in the nine months ended September 30, 2021, as compared to the same period in 2020, primarily due to a full valuation allowance against U.S.

net deferred tax assets in the fourth quarter of 2020 as well as a one-time benefit in the first quarter of 2020 pursuant to the provisions of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) passed on March 27, 2020.

The Company’s total amount of unrecognized tax benefits, excluding interest and penalties, as of September 30, 2021, was $ 14.7 million, of which $ 1.9 million, if recognized, would affect the Company’s effective tax rate.

The Company’s total amount of unrecognized tax benefits, excluding interest and penalties, as of December 31, 2020, was $ 14.3 million, of which $ 2.2 million, if recognized, would affect the Company’s effective tax rate.

As of June 30, 2021, the Company has recorded unrecognized tax benefits of $ 2.7 million, including interest and penalties of $ 0.7 million, as long-term taxes payable in its Condensed Consolidated Balance Sheet.

As of September 30, 2021, the Company has recorded unrecognized tax benefits of $ 2.5 million, including interest and penalties of $ 0.7 million, as long-term taxes payable in its Condensed Consolidated Balance Sheet.

The remaining $ 12.8 million has been recorded net of the Company’s DTAs, which is subject to a full valuation allowance.

The valuation allowance was approximately $ 41.9 million as of June 30, 2021, and December 31, 2020, which was related to U.S.

The valuation allowance was approximately $ 41.9 million as of September 30, 2021, and December 31, 2020, which was related to U.S.

net federal and state DTAs.

The net deferred tax assets balance as of June 30, 2021, and December 31, 2020, was $ 0.2 million and $ 0.2 million, respectively.

The net deferred tax assets balance as of September 30, 2021, and December 31, 2020, was $ 0.2 million and $ 0.2 million, respectively.

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

6 unchanged sentences

Under ASC 740 the effects of new legislation are recognized upon enactment.

Accordingly, the American Rescue Plan became effective beginning in the quarter that includes March 11, 2021.

Accordingly, the American Rescue Plan became effective beginning in the quarter ended March 31, 2021.

Such provisions did not have a material impact on the Company’s condensed consolidated financial statements.

3 unchanged sentences

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 June 30,

Six Months Ended December 31,

Three Months Ended September 30,

Nine Months Ended December 31,

Basic weighted-average shares outstanding

2 unchanged sentences

Net loss per share, basic and diluted

For the three and six months ended June 30, 2021 and 2020, because the Company was in a loss position, basic net loss per share is the same as diluted net loss per share as the inclusion of the potential common shares would have been anti-dilutive.

For the three and nine months ended September 30, 2021 and 2020, because the Company was in a loss position, basic net loss per share is the same as diluted net loss per share as the inclusion of the potential common shares would have been anti-dilutive.

The following table sets forth 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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Outstanding options

6 unchanged sentences

The Company had revenues from individual customers in excess of 10% of total revenues as follows:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

* represents less than 10%

The Company had gross accounts receivable from individual customers in excess of 10% of gross accounts receivable as follows:

September 30,

* represents less than 10%

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

Three Months Ended June 30,

Three Months Ended September 30,

United States

1 unchanged sentence

Total revenue

Six Months Ended June 30,

Nine Months Ended September 30,

United States

2 unchanged sentences

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

September 30,

United States

9 unchanged sentences

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

The following table represents the Company’s assets measured at fair value on a recurring basis as of June 30, 2021, and December 31, 2020, and the basis for those measurements (in thousands):

The following table represents the Company’s assets measured at fair value on a recurring basis as of September 30, 2021, and December 31, 2020, and the basis for those measurements (in thousands):

Fair Value Measurements Using

September 30,

Inputs (Level 3)

3 unchanged sentences

Treasury bills

Fair Value Measurements Using

Cash equivalents

2 unchanged sentences

Treasury bills

As of June 30, 2021, and December 31, 2020, the amortized cost of the Company’s cash equivalents and short-term investments 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.

As of September 30, 2021, and December 31, 2020, the amortized cost of the Company’s cash equivalents and short-term investments 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.

There were no material realized or unrealized gains or losses, either individually or in the aggregate.

3 unchanged sentences

These foreign currency forward contracts are not designated for hedge accounting treatment.

Therefore, the change in fair value of these contracts is recorded into earnings as a component of other expense (income), net, and offsets the change in fair value of the foreign currency denominated assets and liabilities, which is also recorded in other expense (income), net in the Company’s Condensed Consolidated Statements of Comprehensive Loss.There was no realized gain or loss from foreign currency forward contracts during the three and six months ended June 30, 2021.

The Company recognized a net realized gain of $ 0.1 million and a net realized loss of $ 0.2 million from foreign currency forward contracts during the three and six months ended June 30, 2020, respectively.

The Company carries these derivatives financial instruments on its Condensed Consolidated Balance Sheets at their fair values.

The Company’s foreign currency forward contracts are classified as Level 2 because they are not actively traded and the valuation inputs are based on quoted prices and market observable data of similar instruments.

As of June 30, 2021, and December 31, 2020, the Company had no outstanding forward contracts.

The Company recognized a net realized loss of $ 0.2 million from foreign currency forward contracts during the nine months ended September 30, 2020.

As applicable, the Company carries these derivatives financial instruments on its Condensed Consolidated Balance Sheets at their fair values.

The Company’s foreign currency forward contracts are classified as Level 2 because they are not actively

traded and the valuation inputs are based on quoted prices and market observable data of similar instruments.

As of September 30, 2021, and December 31, 2020, the Company had no outstanding forward contracts.

COMMITMENTS AND CONTINGENCIES

6 unchanged sentences

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

As of June 30, 2021, total outstanding purchase obligations were $ 11.2 million, the majority of which due within the next 24 months .

As of September 30, 2021, total outstanding purchase obligations were $ 11.3 million, the majority of which is due within the next 24 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, other than in cases of fraud or other willful misconduct.

6 unchanged sentences

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 June 30, 2021, the Company was not party to any material legal proceedings, thus no loss was probable and no amount was accrued.

As of September 30, 2021, the Company was not a party to any material legal proceedings where a loss was probable, and thus no amount was accrued.

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

2 unchanged sentences

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