PDF SOLUTIONS INC 10-K

Item 8. Financial Statements and Supplementary Data ​ ​ ​ REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of PDF Solutions, Inc. Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of PDF Solutions, Inc. (a Delaware corporation) and its subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of comprehensive loss, stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated March 1, 2022, expressed an unqualified opinion. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. ​ Revenue Recognition As described in Note 2 to the consolidated financial statements, the Company derives revenue from Analytics and Integrated Yield Ramp Revenue. Contracts with customers can include various combinations of licenses, subscriptions, products and services, some of which are distinct and are accounted for as separate performance obligations. Significant judgment is exercised by the Company in determining revenue recognition for customer agreements, including determining whether licenses, subscriptions, and services are distinct performance obligations, determining the standalone selling price (or SSP) attributed to each performance obligation, establishing the pattern of delivery for each distinct performance 47 Table of Contents obligation, and estimating variable consideration when determining the amount of revenue to recognize. In addition, for revenue under project-based contracts for fixed-price services, revenue is recognized as services are performed using a percentage-of-completion (or POC) method based on costs or labor-hours input method. Estimated costs to complete each contract are based on i) future labor and product costs and ii) expected productivity efficiencies. Changes in these estimates can have a material effect on revenue recognized and/or related cost. Finally, the Company recognized Gainshare royalty revenue in the same period in which the usage occurs. The Company accrues the related revenue based on estimates of customers’ underlying sales achievements. These estimates are based on historical data, trends, seasonality, changes in contract rate, knowledge of changes in the industry and changes in the customer’s manufacturing environment learned through discussions with customers and sales personnel. The principal audit considerations for our determination that performing procedures related to the Company’s revenue recognition for customer agreements is a critical audit matter are the significant amount of judgment required by management in this process. Significant judgment is required in determining SSP as the Company rarely licenses software on a standalone basis, so the Company is required to estimate the range of SSPs for each performance obligation, which in turn led to significant auditor judgment, subjectivity and effort in performing audit procedures in assessing the allocation of SSPs to performance obligations. In addition, significant judgment is required in determining the total estimated contract costs for fixed-price contracts, which in turn led to significant auditor judgment, subjectivity, and effort in performing audit procedures and in evaluating audit evidence relating the total estimated contract costs. Significant judgment is also required in recording Gainshare royalty revenue in the same period in which the usage occurs. The Company generally does not receive the acknowledgment reports from customers during a given quarter, so the Company is required to accrue the related revenue based on estimates of customers underlying sales achievement, which in turn led to significant auditor judgment, subjectivity, and effort in evaluating the reasonableness of these estimates based on historical data, trends, seasonality and other factors. ​ Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of internal controls relating to the revenue recognition process, including internal controls related to (1) the identification of distinct performance obligations and data used to establish SSP for licenses, subscriptions, products and services, (2) project estimates to completion for fixed fee arrangements accounted for under POC and (3) estimates of Gainshare royalty revenue accrual and subsequent true-ups. These procedures also included, among others, evaluating management’s significant accounting policies related to these customer agreements for reasonableness. In addition, for a sample of customer agreements, we obtained and read contract source documents, including master agreements and other documents that were part of the agreement, tested management’s identification of significant terms for completeness, including the identification of distinct performance obligations and variable consideration, assessed the terms in the customer agreements and evaluated the appropriateness of management’s application of their accounting policies, along with their use of estimates, in the determination of revenue recognition conclusions, and tested the mathematical accuracy of management’s calculations of revenue and the associated timing of revenue recognized in the consolidated financial statements. In addition, we evaluated the reasonableness of management’s estimates of SSP for projects and services that are not sold separately, where applicable, costs to complete for project-based contracts for fixed-price services and customers’ underlying achievements for royalty revenue. /s/ BPM LLP ​ We have served as the Company’s auditor since 2018. ​ San Jose, CA March 1, 2022 ​ 48 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of PDF Solutions, Inc. Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of PDF Solutions, Inc. (a Delaware corporation) and its subsidiaries (the “Company”) as of December 31, 2021, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control—Integrated Framework (2013) issued by COSO. ​ We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets as of December 31, 2021 and 2020 and the related consolidated statements of comprehensive loss, stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2021 and the related notes (collectively referred to as the “consolidated financial statements”) of the Company, and our report dated March 1, 2022, expressed an unqualified opinion on those consolidated financial statements. Basis for Opinion ​ The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Assessment of Internal Controls Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. ​ We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. ​ Definition and Limitations of Internal Control over Financial Reporting ​ A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. ​ Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. ​ /s/ BPM LLP ​ San Jose, California March 1, 2022 ​ 49 Table of Contents PDF SOLUTIONS, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except par values) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2021 2020 ​ ​ ​ ​ ​ ​ ​ ASSETS ​ ​ Current assets: ​ ​ Cash and cash equivalents ​ $ 27,684 ​ $ 30,315 Short-term investments ​ 112,542 ​ 114,981 Accounts receivable, net of allowance for doubtful accounts of $ 890 and $ 963 in 2021 and 2020, respectively ​ 40,087 ​ 34,140 Prepaid expenses and other current assets ​ 8,194 ​ 13,944 Total current assets ​ 188,507 ​ 193,380 Property and equipment, net ​ 35,295 ​ 39,242 Operating lease right-of-use assets, net ​ 5,408 ​ 6,672 Goodwill ​ 14,123 ​ 15,774 Intangible assets, net ​ 21,239 ​ 24,573 Deferred tax assets, net ​ 75 ​ 249 Other non-current assets ​ 9,121 ​ 7,690 Total assets ​ $ 273,768 ​ $ 287,580 ​ ​ ​ ​ ​ ​ ​ LIABILITIES AND STOCKHOLDERS’ EQUITY ​ ​ Current liabilities: ​ ​ Accounts payable ​ $ 5,554 ​ $ 4,399 Accrued compensation and related benefits ​ 9,495 ​ 8,339 Accrued and other current liabilities ​ 3,328 ​ 6,309 Operating lease liabilities – current portion ​ 1,758 ​ 1,926 Deferred revenues – current portion ​ 23,691 ​ 19,895 Billings in excess of recognized revenues ​ — ​ 1,337 Total current liabilities ​ 43,826 ​ 42,205 Long-term income taxes payable ​ 2,656 ​ 2,956 Non-current operating lease liabilities ​ 5,258 ​ 6,516 Other non-current liabilities ​ 2,443 ​ 1,397 Total liabilities ​ 54,183 ​ 53,074 Commitments and contingencies (Note 8) ​ ​ Stockholders’ equity: ​ ​ Preferred stock, $ 0.00015 par value, 5,000 shares authorized, no shares issued and outstanding ​ ​ — ​ ​ — Common stock, $ 0.00015 par value, 70,000 shares authorized; shares issued 47,414 and 46,400 , respectively; shares outstanding 37,411 and 36,850 , respectively ​ 6 ​ 6 Additional paid-in-capital ​ 423,069 ​ 407,173 Treasury stock at cost, 10,003 and 9,550 shares, respectively ​ ( 104,705 ) ​ ( 96,215 ) Accumulated deficit ​ ( 97,721 ) ​ ( 76,233 ) Accumulated other comprehensive loss ​ ( 1,064 ) ​ ( 225 ) Total stockholders’ equity ​ 219,585 ​ 234,506 Total liabilities and stockholders’ equity ​ $ 273,768 ​ $ 287,580 ​ See accompanying notes to consolidated financial statements. ​ 50 Table of Contents PDF SOLUTIONS, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (in thousands, except per share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2021 2020 Revenues: ​ ​ Analytics ​ $ 93,415 ​ $ 57,232 Integrated Yield Ramp ​ 17,645 ​ 30,814 Total revenues ​ 111,060 ​ 88,046 ​ ​ ​ ​ ​ ​ ​ Costs and Expenses: ​ ​ Costs of revenues ​ 44,193 ​ 36,765 Research and development ​ 43,780 ​ 34,654 Selling, general and administrative ​ 37,649 ​ 32,677 Amortization of acquired intangible assets ​ 1,255 ​ 741 Write-down in value of property and equipment ​ ​ 3,183 ​ ​ — Interest and other expense (income), net ​ ( 683 ) ​ 1,269 Loss before income taxes ​ ( 18,317 ) ​ ( 18,060 ) Income tax expense ​ 3,171 ​ 22,303 Net loss ​ $ ( 21,488 ) ​ $ ( 40,363 ) ​ ​ ​ ​ ​ ​ ​ Other comprehensive income (loss): ​ ​ Foreign currency translation adjustments, net of tax ​ ​ ( 825 ) ​ ​ 1,253 Change in unrealized losses related to available-for-sale debt securities, net of tax ​ ( 14 ) ​ 2 Total other comprehensive income (loss) ​ ​ ( 839 ) ​ ​ 1,255 Comprehensive loss ​ $ ( 22,327 ) ​ $ ( 39,108 ) ​ ​ ​ ​ ​ ​ ​ Net loss per share, basic and diluted ​ $ ( 0.58 ) ​ $ ( 1.17 ) ​ ​ ​ ​ ​ ​ ​ Weighted average common shares used to calculate net loss per share, basic and diluted ​ 37,138 ​ 34,458 ​ See accompanying notes to consolidated financial statements. ​ 51 Table of Contents PDF SOLUTIONS, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ ​ ​ ​ ​ ​ Other ​ Total ​ ​ Common Stock ​ Paid-In ​ Treasury Stock ​ Accumulated ​ Comprehensive ​ Stockholders’ ​ Shares Amount Capital Shares Amount Deficit Loss Equity Balances, January 1, 2020 ​ 32,503 ​ $ 5 ​ $ 325,197 ​ 9,294 ​ $ ( 91,695 ) ​ $ ( 35,870 ) ​ $ ( 1,480 ) ​ $ 196,157 Issuance of common stock, net of issuance of $ 0.1 million 3,307 ​ 1 ​ 65,077 — ​ — ​ — ​ — ​ 65,078 Issuance of common stock in connection with employee stock purchase plan 183 ​ — ​ 1,670 — ​ — ​ — ​ — ​ 1,670 Issuance of common stock in connection with exercise of options 246 ​ — ​ 2,570 — ​ — ​ — ​ — ​ 2,570 Vesting of restricted stock units 611 ​ — ​ — — ​ — ​ — ​ — ​ — Purchases of treasury stock in connection with tax withholdings on restricted stock grants — ​ — ​ — 256 ​ ( 4,520 ) ​ — ​ — ​ ( 4,520 ) Stock-based compensation expense — ​ — ​ 12,659 — ​ — ​ — ​ — ​ 12,659 Comprehensive income (loss) — ​ — ​ — — ​ — ​ ( 40,363 ) ​ 1,255 ​ ( 39,108 ) Balances, December 31, 2020 36,850 ​ 6 ​ 407,173 9,550 ​ ( 96,215 ) ​ ( 76,233 ) ​ ( 225 ) ​ 234,506 Repurchase of common stock ( 251 ) ​ — ​ — 251 ​ ( 4,523 ) ​ — ​ — ​ ( 4,523 ) Issuance of common stock in connection with employee stock purchase plan 109 ​ — ​ 1,035 — ​ — ​ — ​ — ​ 1,035 Issuance of common stock in connection with exercise of options 216 ​ — ​ 1,930 — ​ — ​ — ​ — ​ 1,930 Vesting of restricted stock units 487 ​ — ​ — — ​ — ​ — ​ — ​ — Purchases of treasury stock in connection with tax withholdings on restricted stock grants — ​ — ​ — 202 ​ ( 3,967 ) ​ — ​ — ​ ( 3,967 ) Stock-based compensation expense — ​ — ​ 12,931 — ​ — ​ — ​ — ​ 12,931 Comprehensive loss — ​ — ​ — — ​ — ​ ( 21,488 ) ​ ( 839 ) ​ ( 22,327 ) Balances, December 31, 2021 37,411 ​ $ 6 ​ $ 423,069 10,003 ​ $ ( 104,705 ) ​ $ ( 97,721 ) ​ $ ( 1,064 ) ​ $ 219,585 ​ See accompanying notes to consolidated financial statements. ​ 52 Table of Contents PDF SOLUTIONS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2021 2020 Cash flows from operating activities: ​ ​ ​ ​ ​ ​ Net loss ​ $ ( 21,488 ) ​ $ ( 40,363 ) Adjustments to reconcile net loss to net cash provided by operating activities: ​ ​ ​ Depreciation and amortization ​ 6,218 ​ 6,725 Stock-based compensation expense ​ 12,931 ​ 12,463 Amortization of acquired intangible assets ​ 3,334 ​ 1,446 Amortization of costs capitalized to obtain revenue contracts ​ 674 ​ 549 Loss on disposal and write-down in value of property and equipment ​ ​ 3,183 ​ ​ 500 Deferred taxes ​ 1,373 ​ 21,007 Other ​ 147 ​ ( 25 ) Changes in operating assets and liabilities: ​ ​ ​ ​ Accounts receivable ​ ( 5,980 ) ​ 8,101 Prepaid expenses and other current assets ​ 1,136 ​ ( 433 ) Operating lease right-of-use assets ​ 1,414 ​ 1,193 Other non-current assets ​ ( 1,336 ) ​ 2,069 Accounts payable ​ ( 86 ) ​ ( 918 ) Accrued compensation and related benefits ​ 1,264 ​ 1,926 Accrued and other liabilities ​ ( 648 ) ​ 928 Deferred revenues ​ 5,028 ​ 7,755 Billings in excess of recognized revenues ​ ( 1,337 ) ​ 220 Operating lease liabilities ​ ( 1,584 ) ​ ( 1,360 ) Net cash provided by operating activities ​ 4,243 ​ 21,783 ​ ​ ​ ​ ​ ​ ​ Cash flows from investing activities: ​ ​ ​ ​ ​ ​ Proceeds from maturities of short-term investments ​ 171,000 ​ 16,500 Purchases of short-term investments ​ ​ ( 168,560 ) ​ ​ ( 131,454 ) Purchases of property and equipment ​ ​ ( 3,672 ) ​ ​ ( 6,005 ) Prepayment for the purchase of property and equipment ​ ​ ( 381 ) ​ ​ ( 963 ) Payment for business acquisition, net of cash acquired ​ ( 3,054 ) ​ ( 28,580 ) Net cash used in investing activities ​ ( 4,667 ) ​ ( 150,502 ) ​ ​ ​ ​ ​ ​ ​ Cash flows from financing activities: ​ ​ ​ Proceeds from exercise of stock options ​ 1,930 ​ 2,570 Proceeds from employee stock purchase plan ​ 1,035 ​ 1,670 Payments for taxes related to net share settlement of equity awards ​ ( 3,967 ) ​ ( 4,520 ) Repurchases of common stock ​ ( 4,523 ) ​ — Proceeds from issuance of common stock, net of issuance costs paid ​ ​ — ​ ​ 65,078 Net cash provided by (used in) financing activities ​ ( 5,525 ) ​ 64,798 ​ ​ ​ ​ ​ ​ ​ Effect of exchange rate changes on cash and cash equivalents ​ ( 182 ) ​ 131 Net decrease in cash, cash equivalents, and restricted cash ​ ( 6,131 ) ​ ( 63,790 ) Cash, cash equivalents, and restricted cash at beginning of year ​ 33,815 ​ 97,605 Cash, cash equivalents, and restricted cash at end of year ​ $ 27,684 ​ $ 33,815 ​ ​ ​ ​ ​ ​ ​ Reconciliation of cash, cash equivalents, and restricted cash to the balance sheets: ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 27,684 ​ $ 30,315 Restricted cash ​ ​ — ​ ​ 3,500 Total cash, cash equivalents, and restricted cash ​ $ 27,684 ​ $ 33,815 ​ Continued on next page. ​ 53 Table of Contents PDF SOLUTIONS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS — CONTINUED (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2021 2020 Supplemental disclosure of cash flow information: ​ ​ Cash paid during the period for taxes ​ $ 1,873 ​ $ 2,707 Cash paid for amounts included in the measurement of operating lease liabilities ​ $ 1,947 ​ $ 2,022 ​ ​ ​ ​ ​ ​ ​ Supplemental disclosure of noncash information: ​ ​ ​ Property and equipment received and accrued in accounts payable and accrued and other liabilities ​ $ 1,359 ​ $ 133 Advances for purchase of fixed assets transferred from prepaid assets to property and equipment ​ $ 963 ​ $ — Operating lease liabilities arising from obtaining right-of-use assets ​ $ 161 ​ $ 286 Stock-based compensation capitalized as software development costs ​ $ — ​ $ 190 ​ See accompanying notes to consolidated financial statements. ​ 54 Table of Contents PDF SOLUTIONS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ​ 1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Description of Business PDF Solutions, Inc. (the “Company” or “PDF”), provides products and services designed to empower engineers and data scientists across the semiconductor ecosystem to connect, collect, manage, and analyze data about design, equipment, manufacturing, and test to improve the yield and quality of their products and operational efficiency. The Company’s products, services, and solutions include proprietary software, physical intellectual property (or IP) for integrated circuit (or IC) designs, electrical measurement hardware tools, proven methodologies, and professional services. Basis of Presentation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries after the elimination of all significant intercompany balances and transactions. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles in the United States (“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 financial statements include revenue recognition, the estimated useful lives of property and equipment and intangible assets, assumptions made in analysis of allowance for doubtful accounts, fair values of assets acquired and liabilities assumed in business combinations, impairment of goodwill and long-lived assets, valuation for deferred tax assets, and accounting for lease obligations, stock-based compensation expense, and income tax uncertainties and contingencies. Actual results could differ from those estimates and may result in material effects on the Company’s operating results and financial position. The global COVID-19 pandemic has impacted the operations and purchasing decisions of companies worldwide. As of the date of issuance of the 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 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. Concentration of Credit Risk Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents, short -term investments, and accounts receivable. The Company maintains its cash and cash equivalents and short-term investments with what it considers high credit quality financial institutions. The Company primarily sells its products and services to companies in Asia, Europe and North America within the semiconductor industry. As of December 31, 2021, two customers accounted for 44 % of the Company’s gross accounts receivable and two customers accounted for 27 % of the Company’s total revenues for 2021. As of December 31, 2020, two customers accounted for 27 % of the Company’s gross accounts receivable and one customer accounted for 23 % of the Company’s revenues for 2020. See Note 13 for further details. The Company does not require collateral or other security to support accounts receivable. To reduce credit risk, management performs ongoing credit evaluations of its customers’ financial condition. The Company maintains allowances for potential credit losses. The allowance for doubtful accounts, which was based on management’s best estimates, could be adjusted in the near term from current estimates depending on actual experience. Such adjustments could be material to the consolidated financial statements. 55 Table of Contents Cash and Cash Equivalents, Short-term Investments, and Restricted Cash The Company considers all highly liquid investments with an original maturity of 90 days or less or investments with a remaining maturity of 90 days or less at the purchase to be cash equivalents and investments with original maturities greater than 90 days but less than one year to be short-term investments. The Company classifies securities with readily determinable market values as available-for-sale. Short-term investments include available-for-sale securities and are carried at estimated fair value, with the unrealized gains and losses deemed temporary in nature, net of tax, reported as a component of accumulated other comprehensive loss in stockholders’ equity. Realized gains and losses and declines in value determined to be other than temporary are based on the specific identification method and are included as a component of other expense, net in the Consolidated Statements of Comprehensive Loss. The Company periodically reviews short-term investments for impairment. In the event a decline in value is determined to be other-than-temporary, an impairment loss is recognized. When determining if a decline in value is other-than-temporary, the Company takes into consideration the current market conditions, the duration and severity of and the reason for the decline, and the likelihood that it would need to sell the security prior to a recovery of par value. As of December 31, 2021 and 2020, short-term investments consisted solely of U.S. Treasury bills. The cost of these securities approximated fair value and there was no material gross realized or unrealized gains or losses as of December 31, 2021. There were also no impairments in the investments’ value in the year ended December 31, 2021. Refer to Note 14 “Fair Value Measurements” for further discussion on the Company’s investments. Restricted cash of $ 3.5 million included in the “Prepaid expenses and other current assets” in the Company’s Consolidated Balance Sheet as of December 31, 2020 pertains to the amount, subject to adjustments, specifically designated to pay for the Holdback amount related to the Company’s acquisition of Cimetrix Incorporated (“Cimetrix”). Refer to Note 4, “Business Combination” for further discussion about the payment of Holdback Amount in fiscal 2021. Accounts Receivable 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 is determined on an individual contract basis. Unbilled accounts receivable, included in accounts receivable, totaled $ 11.8 million and $ 7.2 million as of December 31, 2021 and 2020, 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 $ 1.3 million and $ 2.0 million as of December 31, 2021 and 2020, respectively. The Company performs ongoing credit evaluations of its customers’ financial condition. An allowance for doubtful accounts is maintained for probable credit losses based upon the Company’s assessment of the expected collectability of the accounts receivable. The allowance for doubtful accounts is reviewed on a quarterly basis to assess the adequacy of the allowance. Accounts receivable reserves are summarized below (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Deductions/ ​ ​ ​ ​ Balance at ​ ​ ​ ​ Charged ​ Write-offs ​ Balance at ​ ​ Beginning ​ Charged to ​ Against ​ of Accounts ​ End of ​ of Period Expense (1) Revenue (1) Receivable (1) Period 2021 ​ $ 963 ​ $ — ​ $ — ​ $ ( 73 ) ​ $ 890 2020 ​ $ 213 ​ $ — ​ $ 800 ​ $ ( 50 ) ​ $ 963 (1) Additions to the accounts receivable reserve for doubtful accounts are charged to bad debt expense. Additions to the receivable reserve for billing adjustments are charged against revenue. 56 Table of Contents Property and Equipment Property and equipment are stated at cost and are depreciated using the straight-line method over the estimated useful lives (in years) of the related asset as follows: ​ ​ ​ ​ Computer equipment 3 Software 3 Furniture, fixtures, and equipment 3 - 10 Laboratory and test equipment 3 - 10 Leasehold improvements ​ Shorter of estimated ​ ​ useful life or term of ​ lease ​ Intangible Assets Intangible assets consist of acquired technology, certain contract rights, customer relationships, trademarks and trade names, and in-process research and development (IPR&D). These intangible assets may be acquired through business combinations or direct purchases. Intangible assets are amortized on a straight-line basis over their estimated useful lives which range from one to ten years , except for IPR&D projects. Acquired IPR&D is initially accounted for as indefinite-lived intangible asset and tested annually for impairment. Once the IPR&D asset becomes available for use, it will be amortized over the estimated useful life or will be written off upon abandonment. The Company continually monitors events and changes in circumstances that could indicate carrying amounts of long-lived assets, including property and equipment and intangible assets, may not be recoverable. When such events or changes in circumstances occur, the Company assesses the recoverability of long-lived assets. Recoverability of an asset group is measured by comparison of its carrying amount to the expected future undiscounted cash flows that the asset group is expected to generate. If it is determined that an asset group is not recoverable, an impairment loss is recorded in the amount by which the carrying amount of the asset group exceeds its fair value. Goodwill The Company records goodwill when the purchase consideration of an acquisition exceeds the fair value of the net tangible and identified intangible assets as of the date of acquisition. The Company has one operating segment and one operating unit. The Company performs a qualitative analysis when testing a reporting unit’s goodwill for impairment. The Company performs an annual impairment assessment of goodwill during the fourth quarter of each calendar year or more frequently, if required to determine if any events or circumstances exist, such as an adverse change in business climate or a decline in the overall industry demand, that would indicate that it would more likely than not reduce the fair value of a reporting unit below its carrying amount, including goodwill. If events or circumstances do not indicate that the fair value of a reporting unit is below its carrying amount, then goodwill is not considered to be impaired and no further testing is required. If the carrying amount exceeds its fair value, an impairment loss would be recognized equal to the amount of excess, limited to the amount of total goodwill. Leases The Company has operating leases for administrative and sales offices, research and development laboratory and clean room. The Company recognizes long-term operating lease rights and commitments as operating lease right-of-use assets (ROU), operating lease liabilities and operating lease liabilities, non-current, respectively, in the Consolidated Balance Sheets. The Company also elected the transition package of three practical expedients which allow companies not to reassess (i) whether agreements contain leases, (ii) the classification of leases, and (iii) the capitalization of initial direct costs. Further, the Company elected to not separate lease and non-lease components for all of its leases. The Company determines if an arrangement is, or contains, a lease at inception. Operating lease right-of-use assets, and operating lease liabilities are initially recorded based on the present value of lease payments over the lease term. Lease terms include the minimum unconditional term of the lease, and may include options to extend or terminate the lease when it is reasonably certain at the commencement date that such options will be exercised. The decision to include these options 57 Table of Contents involves consideration of our overall future business plans and other relevant business economic factors that may affect our business. Since the determination of the lease term requires an application of judgment, lease terms that differ in reality from our initial judgment may potentially have a material impact on the Company’s Consolidated Balance Sheets. In addition, the Company’s leases do not provide an implicit rate. In determining the present value of the Company’s expected lease payments, the discount rate is calculated using the Company’s incremental borrowing rate determined based on the information available, which requires additional judgment. Software Development Costs Internally developed software is software developed to meet our internal needs to provide certain services to the customers. The Company’s capitalized software development costs consist of internal compensation related costs and external direct costs incurred during the application development stage and are amortized over their useful lives, generally five to six years . The costs to develop software that is marketed externally have not been capitalized as we believe our current software development process is essentially completed concurrent with the establishment of technological feasibility. As such, all related software development costs are expensed as incurred and included in research and development expense in our Consolidated Statements of Comprehensive Loss. Cost of Revenues Costs of revenues consist primarily of costs incurred to provide and support our services, costs recognized in connection with licensing our software, and amortization of acquired technology. Services costs include material, employee compensation and related benefits, subcontractor costs, overhead costs, travel, and allocated facilities-related costs. Software license costs consist of costs associated with cloud-delivery related expenses and licensing third-party software used by us in providing services to the Company’s customers in solution engagements or sold in conjunction with the Company’s software products. Research and Development Expenses Research and development expenses consist primarily of personnel-related costs to support product development activities, including compensation and benefits, outside development services, travel, facilities cost allocations, and stock-based compensation charges. Research and development expenses are charged to operations as incurred. Selling, General and Administrative Expenses Selling, general and administrative expenses consist primarily of compensation and benefits for sales, marketing and general and administrative personnel, legal and accounting services, marketing communications, travel and facilities cost allocations, and stock-based compensation charges. Stock-Based Compensation The Company accounts for stock-based compensation using the fair value method, which requires the Company to measure stock-based compensation based on the grant-date fair value of the awards and recognize the compensation expense over the requisite service period. As stock-based compensation expense recognized is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The fair value of the Company’s restricted stock units (“RSUs”) is equal to the market value of the Company’s common stock on the date of the grant. These awards are subject to time-based vesting which generally occurs over a period of four years . The fair value of the Company’s stock options is estimated using the Black-Scholes-Merton option-pricing model, which incorporates various assumptions including volatility, expected life and interest rates. The expected volatility is based on the historical volatility of the Company’s common stock over the most recent period commensurate with the estimated expected life of the Company’s stock options. The expected life is based on historical experience and on the 58 Table of Contents terms and conditions of the stock options granted. The interest rate assumption is based upon observed Treasury yield curve rates appropriate for the expected life of the Company’s stock options. Income Taxes The Company’s provision for income tax comprises its current tax liability and change in deferred tax assets and liabilities. Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities. The measurement of current and deferred tax assets and liabilities is based on provisions of enacted tax laws; the effect of future changes in tax laws or rates are not anticipated. Valuation allowances are provided to reduce deferred tax assets to an amount that in management’s judgment is more likely than not to be recoverable against future taxable income. No U.S. taxes are provided on earnings of non-U.S. subsidiaries, to the extent such earnings are deemed to be permanently invested. The Company’s income tax calculations are based on application of applicable U.S. federal and state or foreign tax laws. The Company’s tax filings, however, are subject to audit by the respective tax authorities. Accordingly, the Company recognizes tax liabilities based upon its estimate of whether, and the extent to which, additional taxes will be due when such estimates are more-likely-than-not to be sustained. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. To the extent the final tax liabilities are different from the amounts originally accrued, the increases or decreases are recorded as income tax expense or benefit in the Consolidated Statements of Comprehensive Loss. Net Income (Loss) Per Share Basic net income (loss) per share is computed by dividing net income by weighted average number of common shares outstanding for the period (excluding outstanding stock options 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. Dilutive potential common shares consist of incremental common shares issuable upon exercise of stock options, upon vesting of RSUs, contingently issuable shares for all periods and assumed issuance of shares under the Company’s employee stock purchase plan. No dilutive potential common shares are included in the computation of any diluted per share amount when a loss from continuing operations was reported by the Company. Foreign Currency Translation The functional currency of the Company’s foreign subsidiaries is the local currency for the respective subsidiary. The assets and liabilities are translated at the period-end exchange rate, and statements of comprehensive loss are translated at the average exchange rate during the year. Gains and losses resulting from foreign currency translations are included as a component of other comprehensive loss. Gains and losses resulting from foreign currency transactions are included in the Consolidated Statements of Comprehensive Loss. Derivative Financial Instruments The Company operates internationally and is exposed to potentially adverse movements in foreign currency exchange rates. From time to time, the Company enters into foreign currency forward contracts to reduce the exposure to foreign currency exchange rate fluctuations on certain foreign currency denominated monetary assets and liabilities. The Company does not use foreign currency contracts for speculative or trading purposes. The Company records these forward contracts at fair value. The counterparty to these foreign currency forward contracts is a financial institution that the Company believes is creditworthy, and therefore, we believe the credit risk of counterparty non-performance is not significant. These foreign currency forward contracts are not designated for hedge accounting treatment. Therefore, the change in fair value of these derivatives is recorded into earnings as a component of interest and other income (expense), net and offsets the change in fair value of the foreign currency denominated monetary assets and liabilities, which are also recorded in interest and other income (expense), net. The duration of these forward contracts is usually three months. 59 Table of Contents Business Combinations The Company allocates the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair values at the date of the business combination. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, estimated replacement costs and future expected cash flows from acquired customers, acquired technology, acquired patents, and trade names from a market participant perspective, useful lives and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Allocation of purchase consideration to identifiable assets and liabilities affects the Company’s amortization expense, as acquired finite-lived intangible assets are amortized over the useful life, whereas any indefinite lived intangible assets, including IPR&D and goodwill, are not amortized but tested annually for impairment. During the measurement period, which is not to exceed one year from the acquisition date, the Company records adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings. Litigation 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 Financial Accounting Standards Board (FASB) requirements. See Note 8, Commitments and Contingencies. Recently Adopted Accounting Standards In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes, related to simplifying the accounting for income taxes. The guidance eliminates certain exceptions from Accounting Standards Codification (“ASC”) 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The guidance also clarifies and simplifies other aspects of the accounting for income taxes. 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 consolidated financial statements or the related disclosures In January 2020, the FASB issued ASU No. 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)-Clarifying the Interactions between Topic 321, Topic 323, and Topic 815. This ASU clarifies the interaction between accounting standards related to equity securities (ASC 321), equity method investments (ASC 323), and certain derivatives (ASC 815). The amendments in this ASU are effective for fiscal years beginning after December 15, 2020. The Company adopted this standard on January 1, 2021, and it did not have a material impact on the Company’s consolidated financial statements or the related disclosures. Management has reviewed other recently issued accounting pronouncements and has determined there are not any that would have a material impact on the consolidated financial statements. Accounting Standards Not Yet Effective In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13), which requires measurement and recognition of expected credit losses for financial assets held at the reporting date based on internal information, external information, or a combination of both relating to past events, current conditions, and reasonable and supportable forecasts. ASU No. 2016-13 replaces the existing incurred loss impairment model with a forward-looking expected credit loss model, which will result in earlier recognition of credit losses. Subsequent to the issuance of ASU No. 2016-13, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, ASU No. 2019-04, 60 Table of Contents Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instrument, ASU No. 2019-05, Financial Instruments – Credit Losses (Topic 326) Targeted Transition Relief, ASU No. 2016-13, ASU No. 2019-10 Financial Instruments-Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842), and ASU No. 2019-11 Codification Improvements to Topic 326, Financial Instruments-Credit Losses. The subsequent ASUs do not change the core principle of the guidance in ASU No. 2016-13. Instead, these amendments are intended to clarify and improve operability of certain topics included within ASU No. 2016-13. Additionally, ASU No. 2019-10 defers the effective date for the adoption of the new standard on credit losses for public filers that are considered small reporting companies (“SRC”) as defined by the SEC to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, which will be fiscal 2023 for the Company if it continues to be classified as an SRC. In February 2020, the FASB issued ASU 2020-02, which provides guidance regarding methodologies, documentation, and internal controls related to expected credit losses. The subsequent amendments will have the same effective date and transition requirements as ASU No. 2016-13. Early adoption is permitted. Topic 326 requires a modified retrospective approach by recording a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. While the Company is currently evaluating the impact of Topic 326, the Company does not expect the adoption of this ASU to have a material impact on its consolidated financial statements or the related disclosure. 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 consolidated financial statements. 2. REVENUE The Company derives revenue from two sources: Analytics revenue and Integrated Yield Ramp revenue. 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. Revenue is recognized when control of products or services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those promised products or services. The Company determines revenue recognition through the following five steps: ● Identification of the contract, or contracts, with a customer ● Identification of the performance obligations in the contract ● Determination of the transaction price ● Allocation of the transaction price to the performance obligations in the contract ● Recognition of revenue when, or as, performance obligations are satisfied 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 collectability 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”). 61 Table of Contents Analytics Revenue Analytics revenue is derived from the following primary offerings: licenses and services for standalone software (which is primarily Exensio ® and Cimetrix ® products), SaaS (which is primarily Exensio products), and DFI™ systems and CV ® systems (including Characterization services) that do not include performance incentives based on customers’ yield achievement. 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. 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, we allocate the transaction price of the contract to each performance obligation on a relative basis using the SSP attributed to each performance obligation. Revenue from SaaS arrangements, which allow for the use of a cloud-based software product or service over a contractually determined period of time without the customer having to take possession of software, 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. For contracts with multiple performance obligations, we allocate the transaction price of the contract to each performance obligation on a relative basis using SSP attributed to each performance obligation. 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 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. The estimation of percentage of completion method is complex and subject to many variables that require significant judgement. Please refer to “Significant Judgments” section of this Note for further discussion. Integrated Yield Ramp Revenue Integrated Yield Ramp revenue is derived from the Company’s fixed-fee engagements that include performance incentives based on customers’ yield achievement (which consists primarily of Gainshare royalties) typically based on customer’s wafer shipments, pertaining to these fixed-price contracts, which royalties are variable. Revenue under these project–based contracts, which are delivered over a specific period of time, typically for a fixed fee component paid on a set schedule, is recognized as services are performed using a percentage of completion method based on costs or labor-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 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 judgement. Please refer to “Significant Judgments” section of this Note for further discussion. 62 Table of Contents The Gainshare royalty contained in IYR contracts is a variable fee related to continued usage of the Company’s intellectual property after the fixed-fee service period ends, based on a customer’s yield achievement. Revenue derived from Gainshare is contingent upon the Company’s customers reaching certain defined production yield levels. Gainshare royalty periods are generally subsequent to the delivery of all contractual services and performance obligations. The Company records Gainshare as a usage-based royalty derived from customers’ usage of intellectual property and records it in the same period in which the usage occurs. 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 by timing of revenue: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2021 2020 ​ Over time ​ 65 ​ 63 % Point-in-time 35 ​ 37 % Total 100 % 100 % ​ International revenues accounted for approximately 55 % and 58 % of total revenues for the year ended December 31, 2021 and 2020, respectively. See Note 13, Customer and Geographic Information. Significant Judgments Judgments and estimates are required under ASC 606. Due to the complexity of certain contracts, the actual revenue recognition treatment required under ASC 606 for the Company’s arrangements may be dependent on contract-specific terms and may vary in some instances. For revenue under project-based contracts for fixed-price implementation services, revenue is recognized as services are performed using a percentage-of-completion method based on costs or labor-hours input method, whichever is the most appropriate measure of the progress towards completion of the contract. Due to the nature of the work performed in these arrangements, the estimation of percentage of completion method is complex, subject to many variables and requires significant judgment. Key factors reviewed by the Company to estimate costs to complete each contract are future labor and product costs and expected productivity efficiencies. If circumstances arise that change the original estimates of revenues, costs, or extent of progress toward completion, revisions to the estimates are made. These revisions may result in increases or decreases in estimated revenues or costs, and such revisions are reflected in revenue on a cumulative catch-up basis in the period in which the circumstances that gave rise to the revision become known. The Company’s contracts with customers often include promises to transfer products, licenses software and provide services, including professional services, technical support services, and rights to unspecified updates to a customer. Determining whether licenses and services are distinct performance obligations that should be accounted for separately, or not distinct and thus accounted for together, requires significant judgment. 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 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 record Gainshare royalty 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. The Company’s 63 Table of Contents estimation process can be based on historical data, trends, seasonality, changes in the contract rate, knowledge of the changes in the industry and changes in the customer’s manufacturing environment learned through discussions with customers and sales personnel. As a result of accruing revenue for the quarter based on such estimates, adjustments will be required in the following quarter to true-up revenue to the actual amounts reported. Contract Balances 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. The Company classifies the right to consideration in exchange for software or services transferred to a customer as either a receivable or a contract asset. A receivable is a right to consideration that is unconditional, as compared to a contract asset, which is a right to consideration that is conditional upon factors other than the passage of time. 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 generally classified as current and are recorded on a net basis with deferred revenue (i.e. contract liabilities) at the contract level. At December 31, 2021 and 2020, contract assets of $ 0.4 million and $ 3.7 million, respectively, are included in prepaid expenses and other current assets in the Consolidated Balance Sheets. The Company did not record any asset impairment charges related to contract assets during fiscal year 2021 and 2020. Deferred revenues consist substantially of amounts invoiced in advance of revenue recognition and are recognized as the revenue recognition criteria are met. Deferred revenues that will be recognized during the succeeding twelve-month period are recorded as current deferred revenues and the remaining portion is recorded as non-current deferred revenues. The non-current portion of deferred revenue included in other non-current liabilities as of December 31, 2021 and 2020 was $ 2.4 million and $ 1.2 million, respectively. Revenue recognized for the years ended December 31, 2021 and 2020, that was included in the deferred revenues and billings in excess of recognized revenues balances at the beginning of each reporting period was $ 16.9 million and $ 10.7 million, respectively. At December 31, 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 $ 179.5 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 . 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 intellectual property, 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 in the years ended December 31, 2021 and 2020 from performance obligations satisfied (or partially satisfied) in previous periods was a decrease of $ 0.4 million and an increase $ 0.1 million, respectively. These amounts primarily represent changes in estimated percentage-of-completion based contracts and changes in actual versus estimated Gainshare royalty. 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. 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 Consolidated Balance Sheets as of December 31, 2021 and 2020 was $ 0.6 million and $ 0.8 million, respectively. Total capitalized direct sales commission costs included in other non-current assets in the accompanying Consolidated Balance Sheets as of December 31, 2021 and 2020 was $ 2.1 million and $ 0.9 million, respectively. Amortization of these assets for each of 64 Table of Contents the years ended December 31, 2021 and 2020 was $ 0.7 million and $ 0.5 million, 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. Deferred costs balance included in prepaid expenses and other current assets and other non-current assets in the accompanying Consolidated Balance Sheets was immaterial as of December 31, 2021 and 2020. The Company recognizes impairment deferred costs when it is determined that the costs no longer have future benefits and are no longer recoverable. There was no impairment loss in relation to the costs capitalized for the periods presented. Practical Expedients 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 for the years ended December 31, 2021 and 2020. 3. STRATEGIC PARTNERSHIP AGREEMENT WITH ADVANTEST AND RELATED PARTY TRANSACTIONS On July 29, 2020, the Company entered into a long-term strategic partnership with Advantest Corporation through its wholly-owned subsidiary, Advantest America, Inc. (collectively referred to herein as “Advantest”) that included the following agreements. ● A Securities Purchase Agreement for the purchase by Advantest of an aggregate of 3,306,924 shares of its common stock for aggregate gross proceeds of $ 65.2 million and a related Stockholder Agreement. ● An Amendment #1 to that certain Software License and Related Services Agreement, dated as of March 25, 2020, for an exclusive commercial arrangement in which the Company and Advantest will collaborate on, and the Company will initially host, develop and maintain, an Advantest-specific cloud layer on the Exensio platform. ● 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 year ended December 31, 2021 and 2020. ● 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. No material costs and expenses incurred related to the Commercial Agreement with Advantest have no t been significant for the year ended December 31, 2021 and 2020. Analytics revenue recognized from Advantest during the year ended December 31, 2021 and 2020 was $ 10.6 million and $ 3.4 million, respectively. There was no outstanding accounts receivable from Advantest at December 31, 2021. Accounts receivable from Advantest amounted to $ 0.3 million at December 31, 2020. Deferred revenue amounted to $ 6.8 million and $ 5.9 million as of December 31, 2021 and 2020, respectively. There was no occurrence of any termination events under these agreements as of the issuance of these consolidated financial statements. 65 Table of Contents The Company carries out transactions with Advantest on arm’s length commercial customary terms. 4. BUSINESS COMBINATION On December 1, 2020 (the “Acquisition Date”), the Company acquired all the stock of Cimetrix Incorporated (“Cimetrix”). Cimetrix a global provider of equipment connectivity products for smart manufacturing and Industry 4.0 that enable factory equipment to communicate to increase productivity, reduce costs, and improve quality. The combination of Cimetrix connectivity products and platforms with the Company’s Exensio analytics platform powered by machine learning, is intended to enable IC, assembly, and electronics manufacturer customers to extract more intelligence from their tools, not just data, to build more reliable chips and systems at lower manufacturing costs. The gross purchase price was approximately $ 37.5 million ($ 31.6 million net of cash acquired) for all of the outstanding equity of Cimetrix. The net cash payment for this acquisition which also include the payment of adjusted Holdback Amount, as discussed below, was funded from the available cash of the Company. At the Acquisition Date, the Company held back $ 3.5 million of the purchase price (the “Holdback Amount”) to satisfy adjustments and claims for indemnity arising out of breaches of certain representations, warranties and covenants, and certain other enumerated items in the merger agreement. The Holdback Amount was recorded under accrued and other current liabilities account and the corresponding restricted cash was included in the “Prepaid expenses and other current assets” account in the 2020 Consolidated Balance Sheet. In fiscal 2021, the Company recorded a measurement period adjustment which reduced the Holdback Amount to $ 3.1 million. The measurement period adjustment did not have an impact on the Company’s Consolidated Statement of Comprehensive Loss during the year ended December 31, 2021. The adjusted Holdback Amount of $ 3.1 million was paid to the participating equity holders in December 2021. The Company accounted for this acquisition as a business combination in accordance with FASB ASC Topic 805, Business Combinations. This method requires that assets acquired and liabilities assumed in a business combination be recognized at their respective estimated fair values as of the Acquisition Date. The excess of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired was recorded as goodwill. The goodwill recorded from this acquisition represents business benefits the Company anticipates from the acquired workforce and expectation for expanded sales opportunities to foster further business growth. Due to the nature of the transaction, the goodwill associated with the acquisition is not deductible for tax purposes. The final purchase price allocation, completed in the fourth quarter of 2021, resulted in adjustments to certain assets and liabilities primarily related to Holdback amount, as discussed above, and a reduction to net deferred tax liabilities of approximately $ 1.3 million. The corresponding offset of measurement period acquisition adjustments to goodwill aggregated $ 1.7 million. 66 Table of Contents ​ The following summarizes the final allocation of the purchase price for this acquisition, as of the date of the acquisition, is as follows (in thousands, except amortization period): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amortization ​ Amount Period (Years) Allocation of Purchase Price: ​ Assets ​ Fair value of tangible assets (including cash of $ 5,900 ) ​ $ 8,298 Fair value of intangible assets: ​ Developed technology ​ 12,541 8 In-process R&D ​ 3,635 N/A Customer relationships ​ 1,967 10 Noncompetition agreements ​ 848 3 Tradenames and trademarks ​ 808 10 Goodwill ​ 11,830 N/A Total assets acquired ​ $ 39,927 Liabilities ​ Accounts payable and accrued expenses ​ $ 1,447 Deferred revenue ​ 375 Operating lease liabilities ​ 132 Deferred tax liabilities ​ 439 Total liabilities assumed ​ $ 2,393 Total purchase price allocation ​ $ 37,534 ​ The estimated fair value of accounts receivable acquired approximates the contractual value of $ 1.6 million. Pursuant to the merger agreement, the Company will also make payments to certain employees, subject to their continued employment with Cimetrix, through the second quarter of 2024. The estimated total cash payout is about $ 1.4 million at Acquisition Date and will be paid at various scheduled payout dates. This amount will be recognized as compensation expense over the period as services are rendered. As of December 31, 2021 and 2020, such accrued compensation recorded under “Accrued compensation and related benefits” in the Consolidated Balance Sheets amounted to $ 0.5 million and $ 0.3 million, respectively. Acquisition-Related Transaction Costs – Transaction expenses related to the acquisition of Cimetrix aggregated $ 1.6 million for the year ended December 31, 2020. These costs consist of professional fees and administrative costs and were expensed as incurred in the Company’s Consolidated Statement of Comprehensive Loss for the year ended December 31, 2020. ​ ​ 67 Table of Contents 5. PROPERTY AND EQUIPMENT Property and equipment consist of (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2021 2020 Computer equipment ​ $ 11,924 ​ $ 11,585 Software ​ 5,419 ​ 5,451 Furniture, fixtures and equipment ​ 2,506 ​ 2,507 Leasehold improvements ​ 6,272 ​ 6,255 Laboratory and other equipment ​ 3,981 ​ 3,451 Test equipment ​ 24,452 ​ 26,010 Construction-in-progress ​ 22,158 ​ 20,278 ​ ​ 76,712 ​ 75,537 Less: accumulated depreciation and amortization ​ ( 41,417 ) ​ ( 36,295 ) Total ​ $ 35,295 ​ $ 39,242 ​ Test equipment includes DFI™ assets at customer sites that are contributing to Analytics revenue from DFI systems. The construction-in-progress balance related to construction of DFI™ assets totaled $ 20.0 million and $ 18.9 million as of December 31, 2021 and 2020 , respectively. Depreciation and amortization expense for years ended December 31, 2021 and 2020 was $ 6.2 million and $ 6.7 million, respectively. In 2021, the Company wrote down the value of its property and equipment by $ 3.2 million related to its first-generation of e-beam tools for DFI™ systems wherein carrying values may not be fully recoverable due to lack of market demand and future needs of our customers for these tools. ​ 6. GOODWILL AND INTANGIBLE ASSETS The Company completed the acquisition of Cimetrix in the year ended December 31, 2020. Refer to Note 4 for additional information related to the goodwill and intangible assets added from this acquisition. As of December 31, 2021 and 2020, the carrying amounts of goodwill were $ 14.1 million and $ 15.8 million, respectively. The following table summarizes goodwill transaction for the year ended December 31, 2021 and 2020 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2021 2020 Balance at beginning of year ​ $ 15,774 ​ $ 2,293 Addition ​ ​ — ​ ​ 13,481 Measurement period acquisition adjustment (1) ​ 1,651 ​ — Balance at end of year ​ $ 14,123 ​ $ 15,774 ​ (1) Goodwill adjustment was recorded within the measurement period with a corresponding reduction in the Holdback Amount and reduction to net deferred tax liabilities. See Note 4, Business Combination . ​ 68 Table of Contents Intangible assets balance was $ 21.2 million and $ 24.6 million as of December 31, 2021 and 2020, respectively. Intangible assets as of December 31, 2021 and 2020, consist of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ December 31, 2020 ​ ​ Amortization ​ Gross ​ ​ ​ ​ Net ​ Gross ​ ​ ​ ​ Net ​ ​ Period ​ Carrying ​ Accumulated ​ Carrying ​ Carrying ​ Accumulated ​ Carrying ​ ​ (Years) Amount Amortization Amount Amount Amortization Amount Acquired identifiable intangibles: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Customer relationships 1 - 10 ​ $ 9,407 ​ $ ( 6,041 ) ​ $ 3,366 ​ $ 9,407 ​ $ ( 5,398 ) ​ $ 4,009 Developed technology 4 - 9 ​ 33,635 ​ ( 17,250 ) ​ 16,385 ​ 30,000 ​ ( 14,987 ) ​ 15,013 Tradename and trademarks 2 - 10 ​ 1,598 ​ ( 812 ) ​ 786 ​ 1,598 ​ ( 706 ) ​ 892 Patent 7 - 10 ​ 1,800 ​ ( 1,640 ) ​ 160 ​ 1,800 ​ ( 1,600 ) ​ 200 Noncompetition agreements 3 ​ 848 ​ ( 306 ) ​ 542 ​ 848 ​ ( 24 ) ​ 824 In-process R&D * ​ — ​ — ​ — ​ 3,635 ​ N/A ​ 3,635 Total ​ ​ ​ $ 47,288 ​ $ ( 26,049 ) ​ $ 21,239 ​ $ 47,288 ​ $ ( 22,715 ) ​ $ 24,573 ​ * Non-amortizing intangible asset Developed technology includes reclassified In-process R&D asset related to Cimetrix’s Smart Manufacturing Solutions acquired in fiscal 2020 and reclassified in fiscal 2021 upon it becoming available for us. The weighted average amortization period for acquired identifiable intangible assets was 6.8 years as of December 31, 2021. The following table summarizes intangible assets amortization expense in the Consolidated Statements of Comprehensive Loss (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ ​ 2021 2020 Amortization of acquired technology included under Costs of Revenues ​ $ 2,079 ​ $ 705 Amortization of acquired intangible assets presented separately under Costs and Expenses ​ 1,255 ​ 741 Balance at end of year ​ $ 3,334 ​ $ 1,446 ​ The Company expects annual amortization of acquired identifiable intangible assets to be as follows (in thousands): ​ ​ ​ ​ ​ Year Ending December 31, Amount 2022 ​ $ 3,468 2023 ​ 3,444 2024 ​ 3,046 2025 ​ 2,882 2026 ​ 2,712 2027 and thereafter ​ 5,687 Total future amortization expense ​ $ 21,239 ​ There were no impairment charges for goodwill and intangible assets for the year ended December 31, 2021 and 2020. 69 Table of Contents 7. LEASES Lease expense was comprised of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2021 2020 Operating lease expense ​ $ 1,860 ​ $ 1,828 Short-term lease and variable lease expense (1) ​ 822 ​ 545 Total lease expense ​ $ 2,682 ​ $ 2,373 ​ (1) Leases with an initial term of 12 months or less are not recorded on the 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 balance sheets information related to leases was as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2021 2020 Weighted average remaining lease term under operating ROU leases (in years) ​ ​ 5.7 ​ ​ 6.4 ​ Weighted average discount rate for operating lease liabilities ​ 5.25 % ​ 5.24 % ​ Maturity of operating lease liabilities as of December 31, 2021, are as follows (in thousands): ​ ​ ​ ​ ​ Year Ending December 31, Amount (1) 2022 ​ $ 1,825 2023 ​ 1,459 2024 ​ 1,071 2025 ​ 1,087 2026 ​ 1,053 2027 and thereafter ​ ​ 1,649 Total future minimum lease payments ​ $ 8,144 Less: Interest (2) ​ ( 1,128 ) Present value of future minimum lease payments under operating lease liabilities (3) ​ $ 7,016 ​ (1) As of December 31, 2021, the total operating lease liability includes $ 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 December 31, 2021. ​ 8. COMMITMENTS AND CONTINGENCIES Strategic Partnership with Advantest See Note 3 for the discussion about the Company’s commitments under the strategic partnership with Advantest. Operating Leases Refer to Note 7, Leases, for the discussion about the Company’s lease commitments. 70 Table of Contents Indemnifications The Company generally provides a warranty to its customers that its software will perform substantially in accordance with documented specifications typically for a period of 90 days following delivery of its products. The Company also indemnifies certain customers from third-party claims of intellectual property infringement relating to the use of its products. Historically, costs related to these guarantees have not been significant. The Company is unable to estimate the maximum potential impact of these guarantees on its future results of operations. 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 December 31, 2021, total outstanding purchase obligations were $ 8.9 million, the majority of which due within the next 12 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. In addition, the Bylaws of the Company provide that the Company is required to indemnify its officers and directors even when indemnification would otherwise be discretionary, and the Company is required to advance expenses to its officers and directors as incurred in connection with proceedings against them for which they may be indemnified. The Company has entered into indemnification agreements with its officers and directors containing provisions that are in some respects broader than the specific indemnification provisions contained in the Delaware general corporation law. The indemnification agreements require the Company to indemnify its officers and directors against liabilities that may arise by reason of their status or service as officers and directors other than for liabilities arising from willful misconduct of a culpable nature, to advance their expenses incurred as a result of any proceeding against them as to which they could be indemnified, and to obtain directors’ and officers’ insurance if available on reasonable terms. The Company has obtained directors’ and officers’ liability insurance in amounts comparable to other companies of the Company’s size and in the Company’s industry. Since a maximum obligation of the Company is not explicitly stated in the Company’s Bylaws or in its indemnification agreements and will depend on the facts and circumstances that arise out of any future claims, the overall maximum amount of the obligations cannot be reasonably estimated. Litigation 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 December 31, 2021, except as disclosed below, the Company was not party to any material legal proceedings, thus no loss was probable and 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. The Company seeks to recover the unpaid fees, a declaration requiring SMIC to pay fees under the contracts in the future, and costs associated with bringing the arbitration proceeding. The arbitration is on-going. 9. STOCKHOLDERS’ EQUITY Issuance of Common Stock On July 30, 2020, the Company issued 3,306,924 shares of common stock, at a purchase price of $ 19.7085 per share, for aggregate gross proceeds of $ 65.2 million pursuant to a Securities Purchase Agreement with Advantest dated July 29, 71 Table of Contents 2020. Issuance costs related to this private placement aggregated $ 0.1 million. See Note 3, Securities Purchase Agreement with Advantest, for further details. Stock Repurchase Program On May 28, 2020, the Company’s 2018 stock repurchase program (the “2018 Program”) that was originally adopted on May 29, 2018, expired. As of May 28, 2020, approximately 786,000 shares had been repurchased at an average price of $ 12.43 per share, for a total price of $ 9.8 million under the 2018 Program. 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 year ended December 31, 2021, 251,212 shares were repurchased under the 2020 at average price of $ 18.01 per share for an aggregate total price of $ 4.5 million under the 2020 Program. 10. EMPLOYEE BENEFIT PLANS On December 31, 2021, the Company had the following stock-based compensation plans: Employee Stock Purchase Plans In July 2001, the Company’s stockholders initially approved the 2001 Employee Stock Purchase Plan, which was subsequently amended and restated in 2010 (as amended, the “2010 Purchase Plan”) to extend the term of the plan through May 17, 2020. Under the 2010 Purchase Plan, eligible employees can contribute up to 10 % of their compensation, as defined in the 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 2010 Purchase Plan provided for twenty-four-month offering periods with four six-month purchase periods in each offering period. The 2010 Purchase Plan expired on May 17, 2020. Existing offering periods under the 2010 Plan continued through the applicable expiration date and the final offering period expired on January 31, 2022. 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. 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 2021 and 2010 Purchase Plans (collectively, the “Stock 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 ​ ​ ​ Year Ended December 31, ​ Year Ended December 31, ​ ​ 2021 ​ ​ 2021 2020 ​ Expected life (in years) ​ ​ 1.25 ​ ​ 1.25 ​ 1.25 ​ Volatility ​ ​ 48.00 % ​ ​ 34.25 % ​ 34.25 % Risk-free interest rate ​ ​ 0.11 % ​ ​ 1.43 % ​ 1.43 % Expected dividend ​ ​ — ​ ​ — ​ — ​ Weighted average fair value of purchase rights granted during the period ​ $ 6.71 ​ ​ $ 4.83 ​ $ 4.83 ​ ​ During the year ended December 31, 2021 and 2020, a total of approximately 109,000 and 183,000 shares, respectively, were issued at a weighted-average purchase price of $ 9.53 and $ 9.12 per share, respectively. As of December 31, 2021, the estimated unrecognized compensation cost related to the 2021 Purchase Plan was $ 1.9 million and there was a negligible amount of unrecognized compensation cost related to the 2010 Purchase Plan. These estimated unrecognized compensation costs are expected to be recognized over a weighted average period of 1.6 years. As of December 31, 2021, 1.0 million shares were available for future issuance under the 2021 Purchase Plan, and shares 72 Table of Contents available for future issuance under the 2010 Purchase Plan was 5.6 million but shares to be issued will be limited only to the final offering period on January 31, 2022. Stock Incentive Plans On November 16, 2011, the Company’s stockholders initially approved the 2011 Stock Incentive Plan, which has been amended and restated and approved by the Company’s stockholders a number of times since then (as amended, 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 this plan is 11,550,000 shares, plus up to 3,500,000 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. Stock options granted under the 2001 Plan generally expire ten years from the date of grant and become vested and exercisable over a four -year period. 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 December 31, 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. 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 December 31, 2021. As of December 31, 2021, there were no outstanding awards that had been granted outside of the 2011 or 2001 Plans (collectively, the “Stock Plans”) The Company has elected to use the Black-Scholes-Merton option-pricing model, which incorporates various assumptions including volatility, expected life, interest rate and expected dividend. The expected volatility is based on the historical volatility of the Company’s common stock over the most recent period commensurate with the estimated expected life of the Company’s stock options. The expected life of an award is based on historical experience and on the terms and conditions of the stock awards granted to employees. The interest rate assumption is based upon observed Treasury yield curve rates appropriate for the expected life of the Company’s stock options. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2021 2020 Expected life (in years) ​ ​ — ​ ​ 4.45 ​ Volatility ​ — % ​ 40.90 % Risk-free interest rate ​ — % ​ 0.60 % Expected dividend ​ — ​ — ​ Weighted average fair value per share of options granted during the period ​ $ — ​ $ 5.75 ​ ​ No stock options were granted during the year ended December 31, 2021. 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. As stock-based compensation expense recognized is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. 73 Table of Contents Stock-based compensation expenses related to the Company’s stock plans and employee stock purchase plans were allocated as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2021 2020 Costs of revenues ​ $ 2,563 ​ $ 3,454 Research and development ​ 5,515 ​ 4,800 Selling, general and administrative ​ 4,853 ​ 4,209 Stock-based compensation expenses ​ $ 12,931 ​ $ 12,463 ​ The stock-based compensation expense in the table above 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. SARs were fully exercised in the third quarter of 2020. Stock-based compensation capitalized in the capitalized software development costs included in property and equipment, net, was nil and approximately $ 0.2 million for the years ended December 31, 2021 and 2020, respectively. Additional information with respect to options under the Plans is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Outstanding Options ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ ​ ​ Weighted ​ Average ​ ​ ​ ​ ​ ​ ​ Average ​ Remaining ​ Aggregate ​ ​ Number of ​ Exercise ​ Contractual ​ Intrinsic ​ ​ Options ​ Price ​ Term ​ Value ​ (in thousands) per Share (Years) (in thousands) Outstanding, January 1, 2020 745 ​ $ 10.64 ​ Granted (weighted average fair value of $ 5.75 per share) 24 ​ $ 16.72 ​ Exercised ( 246 ) ​ $ 10.46 ​ Canceled ( 57 ) ​ $ 11.65 ​ Expired ( 10 ) ​ $ 10.06 ​ Outstanding, January 1, 2021 456 ​ $ 10.95 ​ Granted — ​ ​ — ​ Exercised ( 216 ) ​ ​ 8.90 ​ Canceled ( 10 ) ​ ​ 15.56 ​ Expired ( 4 ) ​ ​ 6.90 ​ Outstanding, December 31, 2021 226 ​ $ 12.78 3.20 ​ $ 4,288 Vested and expected to vest, December 31, 2021 223 ​ $ 12.75 3.15 ​ $ 4,250 Exercisable, December 31, 2021 190 ​ $ 12.40 2.36 ​ $ 3,684 ​ The aggregate intrinsic value in the table above represents the total intrinsic value based on the Company’s closing stock price of $ 31.79 as of December 31, 2021, which would have been received by the option holders had all option holders exercised their options as of that date. The total intrinsic value of options exercised during the years ended December 31, 2021 and 2020 was $ 3.0 million and $ 2.2 million, respectively. As of December 31, 2021, there was $ 0.2 million of total unrecognized compensation cost, net of forfeitures, related to unvested stock options. That cost is expected to be recognized over a weighted average period of 1.7 years. The total fair value of options vested during the year ended December 31, 2021, was $ 0.2 million. 74 Table of Contents Nonvested shares (restricted stock units) were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ Average Grant ​ ​ Shares ​ Date Fair Value ​ (in thousands) Per Share Nonvested, January 1, 2020 1,887 ​ $ 12.30 Granted 890 ​ $ 21.31 Vested ( 867 ) ​ $ 13.25 Forfeited ( 163 ) ​ $ 13.23 Nonvested, December 31, 2021 1,747 ​ $ 16.33 Granted 977 ​ $ 19.43 Vested ( 689 ) ​ $ 15.23 Forfeited ( 163 ) ​ $ 17.63 Non-vested, December 31, 2021 1,872 ​ $ 16.33 ​ As of December 31, 2021, there was $ 25.4 million of total unrecognized compensation cost related to restricted stock units. That cost is expected to be recognized over a weighted average period of 2.6 years. Restricted stock units do not have rights to dividends prior to vesting. 401(k) Savings Plan In 1999, the Company established a 401(k) tax-deferred savings plan, whereby eligible employees may elect to defer up to 60 % of their eligible compensation but not to exceed the statutorily prescribed limit to the 401(k) plan. The 401(k) plan also has a catch-up contribution feature for employees aged 50 or older who can defer up to 100% of their eligible compensation but not to exceed the statutorily prescribed limit to the 401(k) plan. Company contributions to this plan are discretionary; no such Company contributions have been made since the inception of this plan. ​ 11. INCOME TAXES During the years ended December 31, 2021 and 2020, loss before taxes from U.S. operations was ($ 19.7 ) million and ($ 18.4 ) million, respectively, and income before taxes from foreign operations was $ 1.4 million and $ 0.3 million, respectively. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2021 2020 ​ ​ (In thousands) U.S. ​ ​ ​ ​ ​ Current ​ $ ( 67 ) ​ $ ( 1,325 ) Deferred ​ 1,318 ​ 21,056 Foreign ​ ​ Current ​ 237 ​ 238 Withholding ​ 1,591 ​ 2,392 Deferred ​ 92 ​ ( 58 ) Total income tax expense ​ $ 3,171 ​ $ 22,303 ​ 75 Table of Contents The income tax expense differs from the amount estimated by applying the statutory federal income tax rate ( 21 % for 2021 and 2020) for the following reasons (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2021 2020 Federal statutory tax expense ​ $ ( 3,847 ) ​ $ ( 3,793 ) State tax provision ​ 239 ​ 703 Stock compensation expense ​ ( 499 ) ​ ( 602 ) Tax credits ​ ( 2,676 ) ​ ( 3,488 ) Foreign tax, net ​ 1,653 ​ 2,443 Change in valuation allowance ​ 8,099 ​ 29,034 Unrealized tax benefit reserve changes ​ ​ ( 151 ) ​ ​ — Business combination costs ​ ​ — ​ ​ 356 Tax law changes ​ — ​ ( 2,237 ) Other ​ 353 ​ ( 113 ) Total income tax expense ​ $ 3,171 ​ $ 22,303 ​ As of December 31, 2021, the Company had Federal and California net operating loss carry-forwards (“NOLs”) of approximately $ 51.6 million and $ 13.1 million, respectively. Some of the Federal NOLs, acquired as part of a past acquisition, have expirations at the end of 2021 and onwards, and the California NOLs begin expiring in 2028 onwards. As of December 31, 2021, the Company had federal and state research and experimental and other tax credit (“R&D credits”) carry-forwards of approximately $ 21.0 million and $ 21.6 million, respectively. The federal credits begin to expire after 2022, while the California credits have no expiration. The extent to which the federal and state credit carry forwards can be used to offset future tax liabilities, respectively, may be limited, depending on the extent of ownership changes within any three-year period as provided in the Tax Reform Act of 1986 and the California Conformity Act of 1987. The Company assesses its deferred tax assets for recoverability on a regular basis, and where applicable, a valuation allowance is recorded to reduce the total deferred tax asset to an amount that will, more likely than not, be realized in the future. Based on all available evidence, both positive and negative, the Company determined a full valuation allowance was still appropriate for its federal and state net deferred tax assets (DTAs) at December 31, 2021, primarily driven by a cumulative loss incurred over the 12-quarter period ended December 31, 2021 and the likelihood that the Company will not utilize tax attributes before they begin to expire at the end of 2022. The valuation allowance was approximately $ 51.6 million and $ 41.9 million as of December 31, 2021 and 2020, respectively. The increase in the valuation allowance from December 31, 2020 to December 31, 2021 was primarily driven by net operating losses (NOLs) and credits generated in the current year which require a valuation allowance. Management will continue to evaluate the need for a valuation allowance and may change its conclusion in a future period based on any change in facts (e.g. 12-quarter cumulative profit, significant new revenue, and other relevant factors). If the Company concludes that it is more likely than not to utilize some or all of its US DTAs, it will release some or all of its valuation allowance and our tax provision will decrease in the period in which we make such determination. Net deferred tax assets, after the US valuation allowance, was immaterial as of December 31, 2021 and $ 0.2 million as of December 31, 2020. 76 Table of Contents The components of the net deferred tax assets are comprised of (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2021 2020 Deferred tax assets ​ ​ Net operating loss carry forward ​ $ 13,149 ​ $ 8,085 Research and development and other credit carry forward ​ 26,591 ​ 24,723 Foreign tax credit carry forward ​ 11,010 ​ 9,435 Accruals deductible in different periods ​ 3,362 ​ 3,471 Leases ​ 1,472 ​ 1,669 Stock-based compensation ​ 1,442 ​ 1,220 Total deferred tax assets ​ 57,026 ​ 48,603 Less: valuation allowance ​ ( 51,586 ) ​ ( 41,859 ) Deferred tax assets, net of valuation allowance ​ $ 5,440 ​ $ 6,744 ​ ​ ​ ​ ​ ​ ​ Deferred tax liabilities ​ ​ Property and equipment, net ​ 178 ​ ( 629 ) Operating lease right-of-use assets ​ ( 1,472 ) ​ ( 1,669 ) Intangible assets ​ ( 4,129 ) ​ ( 4,218 ) Deferred tax liabilities ​ $ ( 5,423 ) ​ $ ( 6,516 ) ​ ​ ​ ​ ​ ​ ​ Net deferred tax assets ​ $ 17 ​ $ 228 ​ In accordance with the accounting standard relating to accounting for uncertain tax positions, the Company classifies its liabilities for income tax exposures as long-term. The Company includes interest and penalties related to unrecognized tax benefits within the Company’s income tax provision. As of December 31, 2021 and 2020, the Company had accrued interest and penalties related to unrecognized tax benefits of $ 0.7 million and of $ 0.8 million, respectively. In the years ended December 31, 2021 and 2020, the Company recognized (reversal of) charges for interest and penalties related to unrecognized tax benefits of ($ 89,000 ) and $ 33,000 respectively, in the Consolidated Statements of Comprehensive Loss. The Company’s total amount of unrecognized tax benefits, excluding interest and penalties, as of December 31, 2021 was $ 14.7 million, of which $ 2.0 million, if recognized, would impact the Company’s effective tax rate. As of December 31, 2021, the Company has recorded unrecognized tax benefits of $ 2.6 million, including interest and penalties of $ 0.7 million, as long-term income taxes payable in its Consolidated Balance Sheet. The remaining $ 12.9 million has been recorded within our deferred tax assets, which is subject to a full valuation allowance. The Company does not expect the change in unrecognized tax benefits over the next twelve months to materially impact its results of operations and financial position. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands): ​ ​ ​ ​ ​ ​ Amount Gross unrecognized tax benefits, January 1, 2020 ​ 13,615 Increases in tax positions for current year ​ 1,024 Increases in tax positions for prior years ​ 71 Lapse in statute of limitations ​ ( 410 ) Gross unrecognized tax benefits, December 31, 2020 ​ 14,300 Increases in tax positions for current year ​ 853 Increases in tax positions for prior years ​ 1 Lapse in statute of limitations ​ ( 411 ) Gross unrecognized tax benefits, December 31, 2021 ​ $ 14,743 ​ The Company does not provide deferred taxes on undistributed earnings of its foreign subsidiaries as it intends to indefinitely reinvest those earnings. 77 Table of Contents The Company conducts business globally and, as a result, files numerous consolidated and separate income tax returns in the U.S. federal, various state and foreign jurisdictions. For U.S. federal and California income tax purposes, the statute of limitations currently remains open for the years ended 2018 to present and 2017 to present, respectively. In addition, due to NOL carryback claims, the tax years 2013 through 2015 may be subject to federal examination and 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. The Company is not currently under income tax examinations in the US or in any other of its major foreign subsidiaries’ jurisdictions. Valuation allowance for deferred tax assets is summarized (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at ​ Charged to ​ Deductions/ ​ Balance at ​ ​ Beginning ​ Costs and ​ Write-offs of ​ End of ​ of Period Expenses Accounts Period Valuation allowance for deferred tax assets ​ ​ ​ ​ 2021 ​ $ 41,859 ​ $ 9,727 ​ $ — ​ $ 51,586 2020 ​ $ 10,486 ​ $ 31,373 ​ $ — ​ $ 41,859 ​ ​ ​ ​ 12. NET LOSS PER SHARE Basic net loss per share is computed by dividing net loss by weighted average number of common shares outstanding for the period (excluding outstanding stock options and shares subject to repurchase). Diluted net 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): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2021 2020 Numerator: ​ ​ Net loss ​ $ ( 21,488 ) ​ $ ( 40,363 ) Denominator: ​ ​ Basic weighted-average shares outstanding ​ 37,138 ​ 34,458 Effect of dilutive options and restricted stock units ​ — ​ — Diluted weighted-average shares outstanding ​ 37,138 ​ 34,458 ​ ​ ​ ​ ​ ​ ​ Net loss per share, basic and diluted ​ $ ( 0.58 ) ​ $ ( 1.17 ) ​ For the years ended December 31, 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 are 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): ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2021 2020 Outstanding options 170 332 Non-vested restricted stock units 968 921 Employee Stock Purchase Plans 33 160 Total 1,171 1,413 ​ ​ 78 Table of Contents 13. CUSTOMER AND GEOGRAPHIC INFORMATION Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or group, in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker, the chief executive officer, reviews discrete financial information presented on a consolidated basis for purposes of regularly making operating decisions, allocation of resources, and assessing financial performance. Accordingly, the Company considers itself to be in one operating and reporting segment, specifically the provision of services for differentiated data and analytics solutions to the semiconductor and electronics industries. Revenues from individual customers that are approximately 10% or more of the Company’s consolidated total revenues are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, Customer 2021 ​ 2020 A ​ * % ​ 23 % D ​ 17 % ​ * % E ​ 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 are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, Customer 2021 ​ 2020 ​ A * % ​ 16 % B 15 % ​ * % C ​ * % ​ 11 % D 29 % ​ * % * represents less than 10% Revenues from customers by geographic area based on the location of the customers’ work sites are as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2021 ​ 2020 ​ ​ ​ ​ ​ Percentage ​ ​ ​ ​ Percentage ​ Revenues of Revenues Revenues of Revenues United States ​ $ 50,374 45 % $ 36,723 ​ 42 % China ​ ​ 14,267 ​ 13 ​ ​ 13,776 ​ 16 ​ Japan ​ 11,097 10 ​ 4,762 ​ 5 ​ Taiwan ​ 6,387 6 ​ 8,038 ​ 9 ​ Rest of the world ​ 28,935 26 ​ 24,747 ​ 28 ​ Total revenue ​ $ 111,060 100 % $ 88,046 100 % ​ ​ 79 Table of Contents Long-lived assets, net by geographic area is as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2021 2020 United States (1) ​ $ 39,158 ​ $ 43,663 Rest of the world ​ 1,545 ​ 2,251 Total long-lived assets, net ​ $ 40,703 ​ $ 45,914 ​ ​ ​ ​ ​ ​ (1) Includes assets deployed at customer sites which could be outside the U.S. ​ 14. 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. ​ Level 1 - Inputs are quoted prices in active markets for identical assets or liabilities. Level 2 - 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. Level 3 - 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 December 31, 2021 and the basis for that measurement (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements Using ​ ​ ​ ​ ​ Quoted ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Prices in ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Active ​ Significant ​ ​ ​ ​ ​ ​ ​ ​ Markets for ​ Other ​ ​ ​ ​ ​ ​ ​ ​ Identical ​ Observable ​ Significant ​ ​ December 31, ​ Assets ​ Inputs ​ Unobservable Assets 2021 (Level 1) (Level 2) Inputs (Level 3) Cash equivalents ​ ​ ​ ​ Money market mutual funds ​ $ 12,474 ​ $ 12,474 ​ $ — ​ $ — Short-term investments (available-for-sale debt securities) ​ ​ ​ ​ U.S. Government securities ​ 112,542 ​ 112,542 ​ — ​ — Total ​ $ 125,016 ​ $ 125,016 ​ $ — ​ $ — ​ ​ ​ 80 Table of Contents The following table represents the Company’s assets measured at fair value on a recurring basis as of December 31, 2020 and the basis for that measurement (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements Using ​ ​ ​ ​ ​ Quoted ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Prices in ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Active ​ Significant ​ ​ ​ ​ ​ ​ ​ ​ Markets for ​ Other ​ Significant ​ ​ ​ ​ ​ Identical ​ Observable ​ Unobservable ​ ​ December 31, ​ Assets ​ Inputs ​ Inputs Assets 2020 (Level 1) (Level 2) (Level 3) Cash equivalents ​ ​ ​ ​ Money market mutual funds ​ $ 18,012 ​ $ 18,012 ​ $ — ​ $ — Short-term investments (available-for-sale debt securities) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. Treasury bills ​ ​ 114,981 ​ ​ 114,981 ​ ​ — ​ ​ — Total ​ $ 132,993 ​ $ 132,993 ​ $ — ​ $ — (1) The carrying amount of the Company’s investments in U.S. Treasury bills approximate 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 at December 31, 2021 and 2020. From time to time, the Company enters into foreign currency forward contracts to reduce the exposure to foreign currency exchange rate fluctuations on certain foreign currency denominated monetary assets and liabilities, primarily on third-party accounts payables and intercompany balances. The primary objective of the Company’s hedging program is to reduce volatility of earnings related to foreign currency exchange rate fluctuations. The counterparty to these foreign currency forward contracts is a financial institution that the Company believes is creditworthy, and therefore, the Company believes the credit risk of counterparty nonperformance is not significant. 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 Consolidated Statements of Comprehensive Loss. There was no realized gain or loss from foreign currency forward contracts during the year ended December 31, 2021. For the year ended December 31, 2020, the Company recognized a realized loss of $ 0.2 million on the contracts, which is recorded in interest and other expense (income), net in the Company’s Consolidated Statement of Comprehensive Loss. As of December 31, 2021 and 2020, the Company had no outstanding forward contracts. 15. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) The following is a summary of the Company’s quarterly consolidated results of operations (unaudited) for the fiscal years ended December 31, 2021 and 2020. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, 2021 ​ Q1 Q2 Q3 Q4 ​ ​ (In thousands, except for per share amounts) Total revenues ​ $ 24,200 ​ $ 27,419 ​ $ 29,555 ​ $ 29,886 Costs of revenues ​ $ 10,663 ​ $ 10,785 ​ $ 11,070 ​ $ 11,675 Net loss ​ $ ( 7,597 ) ​ $ ( 4,484 ) ​ $ ( 2,407 ) ​ $ ( 7,000 ) Net loss per share: ​ ​ ​ ​ Basic and diluted ​ $ ( 0.21 ) ​ $ ( 0.12 ) ​ $ ( 0.06 ) ​ $ ( 0.19 ) ​ 81 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, 2020 ​ Q1 Q2 Q3 Q4 ​ ​ (In thousands, except for per share amounts) Total revenues ​ $ 21,158 ​ $ 21,409 ​ $ 23,112 ​ $ 22,367 Costs of revenues ​ $ 8,487 ​ $ 8,946 ​ $ 9,493 ​ $ 9,839 Net loss ​ $ ( 528 ) ​ $ ( 3,652 ) ​ $ ( 2,734 ) ​ $ ( 33,449 ) Net loss per share: ​ ​ ​ ​ Basic and diluted ​ $ ( 0.02 ) ​ $ ( 0.11 ) ​ $ ( 0.08 ) ​ $ ( 0.91 ) ​ ​ ​ 82 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.