What changed in this filing

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Item 1. Financial Statements

2022-08-11 compared with 2022-05-12 · 142 added, 128 removed, 435 unchanged (38% of the section changed)

6 unchanged sentences

Short-term investments

Accounts receivable, net of allowance for doubtful accounts of $ 902 and $ 890 in 2022 and 2021, respectively

Accounts receivable, net of allowance for doubtful accounts of $ 890 as of June 30, 2022 and December 31, 2021

Prepaid expenses and other current assets

15 unchanged sentences

Long-term income taxes payable

Non-current operating lease liabilities

Other non-current liabilities

Non-current portion of operating lease liabilities

Non-current portion of deferred revenues

Total liabilities

15 unchanged sentences

(in thousands, except per share amounts)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Integrated Yield Ramp

6 unchanged sentences

Interest and other expense (income), net

Loss before income taxes

Income (loss) before income taxes

Income tax expense

10 unchanged sentences

(in thousands)

Three Months Ended March 31, 2022

Three and Six Months Ended June 30, 2022

Treasury Stock

10 unchanged sentences

Balances, March 31, 2022

Three Months Ended March 31, 2021

Issuance of common stock in connection with exercise of options

Vesting of restricted stock units

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

Repurchase of common stock

Stock-based compensation expense

Comprehensive loss

Balances, June 30, 2022

Three and Six Months Ended June 30, 2021

Treasury Stock

10 unchanged sentences

Balances, March 31, 2021

Issuance of common stock in connection with exercise of options

Vesting of restricted stock units

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

Stock-based compensation expense

Comprehensive income (loss)

Balances, June 30, 2021

See accompanying Notes to Condensed Consolidated Financial Statements (unaudited)

2 unchanged sentences

(in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities:

4 unchanged sentences

Amortization of costs capitalized to obtain revenue contracts

Loss on disposal and write-down in value of property and equipment

Deferred taxes

15 unchanged sentences

Purchases of property and equipment

Prepayment for the purchase of property and equipment

Net cash provided by investing activities

9 unchanged sentences

Cash, cash equivalents, and restricted cash at end of period

Reconciliation of cash, cash equivalents, and restricted cash to the balance sheets:

Reconciliation of cash, cash equivalents, and restricted cash to the condensed consolidated balance sheet:

Cash and cash equivalents

5 unchanged sentences

(in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Supplemental disclosure of cash flow information:

4 unchanged sentences

Advances for purchase of fixed assets transferred from prepaid assets to property and equipment

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

Release of restricted cash reducing goodwill due to the acquisition purchase price adjustment

9 unchanged sentences

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

The accompanying interim unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

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

1 unchanged sentence

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.

The preparation of financial statements in conformity with generally accepted accounting principles in the United States 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, 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.

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

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

2 unchanged sentences

Recent Accounting Standards

Accounting Standards Adopted

Management has reviewed recently issued accounting pronouncements and has determined there are not any that would have a material impact on the condensed consolidated financial statements.

Accounting Standards Not Yet Adopted

5 unchanged sentences

2016-13, the FASB issued ASU No.

2018-19, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, ASU No.

2018-19, Codification

Improvements to Topic 326, Financial Instruments – Credit Losses, ASU No.

2019-04, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instrument, ASU No.

39 unchanged sentences

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 that do not include performance incentives based on customers’ yield achievement.

licenses and services for standalone software (which is primarily Exensio ® and Cimetrix ® products), software-as-a-service (“SaaS”) (which is primarily Exensio ® products), and DFI™ systems and CV ® systems 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.

13 unchanged sentences

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.

Please refer to the “Significant Judgments” section of this Note for further discussion.

Integrated Yield Ramp Revenue

2 unchanged sentences

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.

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.

Similar to the services

provided in connection with DFI systems and CV systems that are contributing to Analytics revenue, due to the nature of the work performed in these arrangements, the estimation of percentage of completion method is complex and subject to many variables that require significant judgment.

Please refer to the “Significant Judgments” section of this Note for further discussion.

The Gainshare royalty contained in Integrated Yield Ramp 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.

5 unchanged sentences

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:

Three Months Ended March 31,

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

Three Months Ended June 30,

Six Months Ended June 30,

Point-in-time

International revenues accounted for approximately 48 % and 65 % of our total revenues during the three months ended March 31, 2022 and March 31, 2021, respectively.

International revenues accounted for approximately 51 % and 49 % of our total revenues during the three and six months ended June 30, 2022, respectively, compared to 56 % and 60 % of our total revenues during the three and six months ended June 30, 2021, respectively.

See Note 10, Customer and Geographic Information .

5 unchanged sentences

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.

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.

13 unchanged sentences

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 March 31, 2022 and December 31, 2021, the total contract assets included in prepaid expenses and other current assets in the Condensed Consolidated Balance Sheets $ 0.4 million and $ 0.4 million, respectively.

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 June 30, 2022 and December 31, 2021, the total contract assets included in prepaid expenses and other current assets in the Condensed Consolidated Balance Sheets were $ 2.8 million and $ 0.4 million, respectively.

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

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

At March 31, 2022 and December 31, 2021, the non-current portion of deferred revenues included in non-current liabilities was $ 2.0 million and $ 2.4 million, respectively.

Revenue recognized that was included in the deferred revenues and billings in excess of recognized revenues balances at the beginning of each reporting period was $ 6.9 million and $ 6.3 million during the three months ended March 31, 2022 and 2021, respectively.

At March 31, 2022, 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 $ 196.8 million.

Deferred revenues and billings in excess of recognized 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 in the Condensed Consolidated Balance Sheets.

Revenue recognized that was included in the deferred revenues and billings in excess of recognized revenues balances at the beginning of each reporting period was $ 7.2 million and $ 6.5 million during the three months ended June 30, 2022 and 2021, respectively, and $ 11.8 million and $ 10.5 million during the six months ended June 30, 2022 and 2021, respectively.

At June 30, 2022, 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 $ 184.4 million.

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

1 unchanged sentence

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

The estimated timing of the recognition of remaining unsatisfied performance

obligations is subject to change and is affected by changes to the scope, change in timing of delivery of products and services, or contract modifications.

The adjustment to revenue recognized from performance obligations satisfied (or partially satisfied) in previous periods was an increase of $ 0.2 million and a decrease $ 0.3 million during the three months ended March 31, 2022 and 2021, respectively.

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

The adjustment to revenue recognized from performance obligations satisfied (or partially satisfied) in previous periods was an increase of $ 0.5 million and a decrease $ 0.4 million during the three months ended June 30, 2022 and 2021, respectively, and an increase of $ 0.5 million and an increase of $ 0.1 million during the six months ended June 30, 2022 and 2021, respectively.

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

2 unchanged sentences

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

Total capitalized direct sales commission costs included in prepaid expenses and other current assets in the accompanying Condensed Consolidated Balance Sheets as of March 31, 2022, and December 31, 2021, were $ 0.9 million and $ 0.6 million, respectively.

Total capitalized direct sales commission costs included in other non-current assets in the accompanying Condensed Consolidated Balance Sheets as of March 31, 2022, and December 31, 2021, were $ 2.1 million and $ 2.1 million, respectively.

Amortization of these assets were $ 0.2 million and $ 0.2 million during the three months ended March 31, 2022 and 2021, respectively.

Total capitalized direct sales commission costs included in prepaid expenses and other current assets in the accompanying Condensed Consolidated Balance Sheets as of June 30, 2022, and December 31, 2021, were $ 1.1 million and $ 0.6 million, respectively.

Total capitalized direct sales commission costs included in other non-current assets in the accompanying Condensed Consolidated Balance Sheets as of June 30, 2022, and December 31, 2021, were $ 1.8 million and $ 2.1 million, respectively.

Amortization of these assets were $ 0.6 million and $ 0.2 million during the three months ended June 30, 2022 and 2021, respectively, and $ 0.8 million and $ 0.3 million during the six months ended June 30, 2022 and 2021, respectively.

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

1 unchanged sentence

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

The Company assessed each of its revenue generating arrangements in order to determine whether a significant financing component exists, and determined its contracts did not include a significant financing component during the three months ended March 31, 2022 and 2021.

STRATEGIC PARTNERSHIP AGREEMENT WITH ADVANTEST AND RELATED PARTY TRANSACTIONS

4 unchanged sentences

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

Costs and expenses incurred related to this agreement have not been significant for the three months ended March 31, 2022 and 2021.

Costs and expenses incurred related to this agreement have not been significant for the three and six months ended June 30, 2022 and 2021.

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

No material costs and expenses were incurred related to the Commercial Agreement with Advantest during the three months ended March 31, 2022 and 2021.

Analytics revenue recognized from Advantest was $ 2.6 million during the three months ended March 31, 2022 and $ 2.6 million during the three months ended March 31, 2021.

There were no outstanding accounts receivable from Advantest as of March 31, 2022, and December 31, 2021, and deferred revenue amounted to $ 4.2 million and $ 6.8 million as of March 31, 2022 and December 31, 2021, respectively.

No material costs and expenses were incurred related to the Commercial Agreement with Advantest during the three and six months ended June 30, 2022 and 2021.

Analytics revenue recognized from Advantest was $ 2.6 million and $ 5.3 million during the three and six months ended June 30, 2022, respectively, compared to $ 2.6 million and $ 5.2 million during the three and six months ended June 30, 2021, respectively.

There were no outstanding accounts receivable from Advantest as of June 30, 2022, and December 31, 2021, and deferred revenue amounted to $ 1.6 million and $ 6.8 million as of June 30, 2022 and December 31, 2021, respectively.

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

3 unchanged sentences

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

Unbilled accounts receivable, included in accounts receivable, totaled $ 10.8 million and $ 11.8 million as of March 31, 2022, and December 31, 2021, respectively.

Unbilled accounts receivable that are not expected to be billed and collected during the succeeding 12-month period is recorded in other non-current assets and totaled $ 1.3 million and $ 1.3 million as of March 31, 2022, and December 31, 2021, respectively.

Unbilled accounts receivable, included in accounts receivable, totaled $ 8.9 million and $ 11.8 million as of June 30, 2022, and December 31, 2021, respectively.

Unbilled accounts receivable that are not expected to be billed and collected during the succeeding 12-month period is recorded in other non-current assets and totaled $ 1.1 million and $ 1.3 million as of June 30, 2022, and December 31, 2021, respectively.

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

10 unchanged sentences

accumulated depreciation and amortization

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

The construction-in-progress balance related to construction of DFI™ systems assets totaled $ 18.5 million and $ 20.0 million as of March 31, 2022, and December 31, 2021, respectively.

Depreciation and amortization expense was $ 1.4 million and $ 1.7 million during the three months ended March 31, 2022 and 2021, respectively.

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

Among assets under construction, the construction-in-progress balance related to construction of DFI™ systems assets amounted to $ 19.8 million and $ 20.0 million as of June 30, 2022, and December 31, 2021, respectively.

Depreciation and amortization expense was $ 1.4 million and $ 1.6 million during the three months ended June 30, 2022 and 2021, respectively, and $ 2.8 million and $ 3.3 million during the six months ended June 30, 2022 and 2021, respectively.

In the fourth quarter of 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.

Goodwill and Intangible Assets, Net

As of March 31, 2022, and December 31, 2021, the carrying amount of goodwill was $ 14.1 million.

As of June 30, 2022, and December 31, 2021, the carrying amount of goodwill was $ 14.1 million.

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

March 31, 2022

June 30, 2022

December 31, 2021

4 unchanged sentences

Noncompetition agreements

The weighted average amortization period for acquired identifiable intangible assets was 6.6 years as of March 31, 2022.

The weighted average amortization period for acquired identifiable intangible assets was 6.4 years as of June 30, 2022.

The following table summarizes intangible assets amortization expense in the Condensed Consolidated Statements of Comprehensive Loss (in thousands):

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Amortization of acquired technology included under Costs of Revenues

3 unchanged sentences

Year Ending December 31,

2022 (remaining nine months)

2022 (remaining six months)

2027 and thereafter

Total future amortization expense

There were no impairment charges for goodwill and intangible assets during the three months ended March 31, 2 0 22 or 2021.

There were no impairment charges for goodwill and intangible assets during the three and six months ended June 30, 2 0 22 and 2021.

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

These operating leases expire at various dates through 2028.

The Company had no leases that were classified as a financing lease as of March 31, 2022, and December 31, 2021.

The Company had no leases that were classified as a financing lease as of June 30, 2022, and December 31, 2021.

In the first quarter of 2022, the Company early terminated an office lease contract.

The termination of this lease reduces the Company’s operating lease right-of-use assets and lease liabilities by approximately $ 0.5 million and $ 0.6 million, respectively.

The gain from the lease termination of approximately $ 0.1 million was recorded under selling, general and administrative expense in the Condensed Consolidated Statement of Comprehensive Loss for the three months ended March 31, 2022.

The termination of this lease reduced the Company’s operating lease right-of-use assets and lease liabilities by approximately $ 0.5 million and $ 0.6 million, respectively.

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Operating lease expense (1)

1 unchanged sentence

Total lease expense

(1) Net of gain recognized upon lease termination of $ 0.1 million in three month ended March 31, 2022.

(1) Net of gain recognized upon lease termination of $ 0.1 million in the six months ended June 30, 2022.

(2) Leases with an initial term of 12 months or less are not recorded on the Condensed Consolidated Balance Sheets, and the Company recognizes lease expense for these leases on a straight-line basis over the lease term.

3 unchanged sentences

Weighted average discount rate for operating lease liabilities

Maturities of operating lease liabilities as of March 31, 2022, were as follows (in thousands):

Maturities of operating lease liabilities as of June 30, 2022, were as follows (in thousands):

Year Ending December 31,

2022 (remaining nine months)

2022 (remaining six months)

2027 and thereafter

1 unchanged sentence

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

(1) As of March 31, 2022, the total operating lease liability includes approximately $ 1.1 million related to an option to extend a lease term that is reasonably certain to be exercised.

(1) As of June 30, 2022, the total operating lease liability includes approximately $ 1.1 million related to an option to extend a lease term that is reasonably certain to be exercised.

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

(3) Includes the current portion of operating lease liabilities of $ 1.2 million as of March 31, 2022.

(3) Includes the current portion of operating lease liabilities of $ 1.5 million as of June 30, 2022.

STOCKHOLDERS’ EQUITY

1 unchanged sentence

On June 4, 2020, the Company’s Board of Directors adopted a 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 three months ended March 31, 2022 , 218,858 shares were repurchased under the 2020 Program at an average price of $ 26.40 per share for an aggregate total price of $ 5.8 million.

During the three months ended March 31, 2021, approximately 251,000 shares were repurchased under the 2020 Program at an average price of $ 18.01 per share for an aggregate total price of $ 4.5 million.

Through March 31, 2022, approximately 470,000 shares had been repurchased at an average price of $ 21.91 per share, for a total price of $ 10.3 million under the 2020 Program.

On April 11, 2022, the Board of Directors terminated that 2020 Program, and adopted a new program (the “2022 Program”) to repurchase up to $ 35.0 million of the Company’s common stock both on the open market and in privately negotiated transactions, from time to time, over the next two year s.

During the six months ended June 30, 2022, 218,858 shares were repurchased under the 2020 Program at an average price of $ 26.40 per share for an aggregate total price of $ 5.8 million.

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

Through April 10, 2022, 470,070 shares had been repurchased under the 2020 Program at an average price of $ 21.91 per share, for an aggregate total price of $ 10.3 million.

On April 11, 2022, the Board of Directors terminated the 2020 Program, and adopted a new program (the “2022 Program”) to repurchase up to $ 35.0 million of the Company’s common stock both on the open market and in privately negotiated transactions, from time to time, over the next two year s.

During the three and six months ended June 30, 2022, 714,600 shares were repurchased under the 2022 Program at an average price of $ 23.36 per share for an aggregate total price of $ 16.7 million.

EMPLOYEE BENEFIT PLANS

On March 31, 2022, the Company had the following stock-based compensation plans:

On June 30, 2022, the Company had the following stock-based compensation plans:

Employee Stock Purchase Plan

4 unchanged sentences

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”).

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” and, together with the 2010 Purchase Plan, the “Employee Purchase Plans”).

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

3 unchanged sentences

2010 Purchase Plan

Three Months Ended March 31,

Six Months Ended June 30,

Expected life (in years)

2 unchanged sentences

Weighted average fair value of purchase rights granted during the period

During the three months ended March 31, 2022, a total of approximately 95,243 shares were issued at a weighted-average purchase price of $ 15.77 per share.

During the three months ended March 31, 2021, a total of approximately 99,674 shares were issued at a weighted-average purchase price of $ 9.24 per share.

As of March 31, 2022, unrecognized compensation cost related to the 2021 Purchase Plan was $ 1.9 million.

During the three months ended June 30, 2022 and 2021, no shares were issued under the Employee Purchase Plans.

During the six months ended June 30, 2022, a total of 90,040 shares were issued under the 2021 Purchase Plan, at a weighted-average purchase price of $ 15.90 per share.

During the six months ended June 30, 2022 and 2021, a total of 5,203 and 99,674 shares, respectively, were issued under the 2010 Purchase Plan, at a weighted-average purchase price of $ 13.40 per share and $ 9.24 per share, respectively.

As of June 30, 2022, unrecognized compensation cost related to the 2021 Purchase Plan was $ 1.5 million.

These costs are expected to be recognized over a weighted average period of 1.2 years.

No unrecognized compensation cost related to the 2010 Purchase Plan as of June 30, 2022.

As of June 30, 2022, 909,960 shares were available for future issuance under the 2021 Purchase Plan.

Stock Incentive Plans

1 unchanged sentence

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 aggregate number of shares reserved for awards under the 2011 Plan is 12,800,000 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.

On April 26, 2022, the Company’s Board of Directors amended the 2011 Plan, subject to stockholder approval, to increase the number of shares reserved for awards under it to a total of 12,800,000 shares, which is an increase of an additional 1,250,000 shares.

As of March 31, 2022, 12.1 million shares of common stock were reserved to cover stock-based awards under the 2011 Plan, of which 3.2 million shares were available for future grant.

The number of shares reserved and available under the 2011 Plan includes 0.5 million shares that were subject to awards previously made under the 2001 Plan and were forfeited, expired or repurchased by the Company after the adoption of the 2011 Plan through March 31, 2022.

As of March 31, 2022, there were no outstanding awards that had been granted outside of the 2011 or 2001 Plans (collectively, the “Stock Plans”).

As of June 30, 2022, 13.3 million shares of common stock were reserved to cover stock-based awards under the 2011 Plan, of which 4.5 million shares were available for future grant.

As of June 30, 2022, there were no outstanding awards that had been granted outside of the 2011 or 2001 Plans (collectively, the “Stock Plans”).

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

There were no stock options granted during the three months ended March 31, 2022 and 2021.

There were no stock options granted during the three and six months ended June 30, 2022 and 2021.

Stock-Based Compensation

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

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

Three Months Ended March 31,

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

Three Months Ended June 30,

Six Months Ended June 30,

Costs of revenues

2 unchanged sentences

Stock-based compensation expenses

Additional information with respect to options under the Stock Plans during the three months ended March 31, 2022, is as follows:

Outstanding Options

Additional information with respect to options under the Stock Plans during the six months ended June 30, 2022, is as follows:

(in thousands)

1 unchanged sentence

Outstanding, January 1, 2022

Outstanding, March 31, 2022

Vested and expected to vest, March 31, 2022

Exercisable, March 31, 2022

The aggregate intrinsic value in the table above represents the total intrinsic value based on the Company’s closing stock price of $ 27.87 per share as of March 31, 2022.

The total intrinsic value of options exercised was $ 1.3 million during the three months ended March 31, 2022.

As of March 31, 2022, there was $ 0.1 million of total unrecognized compensation cost, net of forfeiture, related to unvested stock options, which is expected to be recognized over a weighted average period of 1.5 years.

The total fair value of shares vested was immaterial during the three months ended March 31, 2022.

Nonvested restricted stock unit activity during the three months ended March 31, 2022, was as follows:

Outstanding, June 30, 2022

Vested and expected to vest, June 30, 2022

Exercisable, June 30, 2022

The aggregate intrinsic value in the table above represents the total intrinsic value based on the Company’s closing stock price of $ 21.51 per share as of June 30, 2022.

The total intrinsic value of options exercised was $ 1.5 million during the six months ended June 30, 2022.

As of June 30, 2022, there was $ 0.1 million of total unrecognized compensation cost, net of forfeiture, related to unvested stock options, which is expected to be recognized over a weighted average period of 1.3 years.

The total fair value of shares vested was immaterial during the six months ended June 30, 2022.

Nonvested restricted stock unit activity during the six months ended June 30, 2022, was as follows:

Average Grant

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Nonvested, January 1, 2022

Nonvested, March 31, 2022

As of March 31, 2022, there was $ 27.2 million of total unrecognized compensation cost related to restricted stock units.

Nonvested, June 30, 2022

As of June 30, 2022, there was $ 24.8 million of total unrecognized compensation cost related to restricted stock units.

That cost is expected to be recognized over a weighted average period of 2.3 years.

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

Income tax expense increased $ 0.2 million for the three months ended March 31, 2022, to a $ 1.2 million income tax expense as compared to an income tax expense of $ 1.0 million for the three months ended March 31, 2021.

The Company’s effective tax rate expense was ( 40 %) and ( 14 %) for the three months ended March 31, 2022 and 2021, respectively.

The Company’s effective tax rate expense increased in the three months ended March 31, 2022, as compared to the same period in 2021, primarily due to increases in foreign withholding taxes and changes in the geographic mix of worldwide income, which is subject to taxation at different statutory tax rates.

The Company’s total amount of unrecognized tax benefits, excluding interest and penalties, as of March 31, 2022, was $ 15.0 million, of which $ 2.0 million, if recognized, would affect the Company’s effective tax rate.

Income tax expense increased $ 1.5 million for the six months ended June 30, 2022, to a $ 2.5 million income tax expense as compared to an income tax expense of $ 1.0 million for the six months ended June 30, 2021.

The Company’s effective tax rate expense was ( 88.9 %) and ( 9.5 %) for the six months ended June 30, 2022 and 2021, respectively.

The Company’s effective tax rate expense increased in the six months ended June 30, 2022, as compared to the same period in 2021, primarily due to increases in foreign withholding taxes and changes in the geographic mix of worldwide income, which is subject to taxation at different statutory tax rates.

The Company’s total amount of unrecognized tax benefits, excluding interest and penalties, as of June 30, 2022, was $ 15.2 million, of which $ 1.9 million, if recognized, would affect the Company’s effective tax rate.

The Company’s total amount of unrecognized tax benefits, excluding interest and penalties, as of December 31, 2021, was $ 14.7 million, of which $ 1.9 million, if recognized, would affect the Company’s effective tax rate.

As of March 31, 2022, the Company has recorded unrecognized tax benefits of $ 2.6 million, including interest and penalties of $ 0.7 million, as long-term taxes payable in its Condensed Consolidated Balance Sheet.

The remaining $ 13.1 million has been recorded net of the Company’s DTAs, which is subject to a full valuation allowance.

The valuation allowance was approximately $ 51.6 million as of March 31, 2022 and December 31, 2021, which was related to U.S.

As of June 30, 2022, the Company has recorded unrecognized tax benefits of $ 2.4 million, including interest and penalties of $ 0.6 million, as long-term taxes payable in its Condensed Consolidated Balance Sheet.

The remaining $ 13.4 million has been recorded net of the Company’s deferred tax assets (“DTAs”), which is subject to a full valuation allowance.

The valuation allowance was approximately $ 51.6 million as of June 30, 2022, and December 31, 2021, which was related to U.S.

net federal and state DTAs.

The worldwide net deferred tax assets balance as of March 31, 2022 and December 31, 2021 were not significant.

The worldwide net deferred tax assets balance as of June 30, 2022, and December 31, 2021 were not significant.

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

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federal and California income tax purposes, the statute of limitations currently remains open for the tax years ending 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.

In addition, due to net operating loss 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 subject to income tax examinations in any other of its major foreign subsidiaries’ jurisdictions.

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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.

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):

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Basic weighted-average shares outstanding

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Net loss per share, basic and diluted

For the three months ended March 31, 2022 and 2021, because the Company was in a loss position, basic net loss per share is the same as diluted net loss per share as the inclusion of the potential common shares would have been anti-dilutive.

For the three and six months ended June 30, 2022 and 2021, because the Company was in a loss position, basic net loss per share is the same as diluted net loss per share as the inclusion of the potential common shares would have been anti-dilutive.

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Outstanding options

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The Company had revenues from individual customers that are approximately 10% or more of the Company’s consolidated total revenues as follows:

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

* represents less than 10%

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

Three Months Ended March 31,

Three Months Ended June 30,

United States

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Total revenue

Six Months Ended June 30,

United States

Rest of the world

Total revenue

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

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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 March 31, 2022, and December 31, 2021, and the basis for those measurements (in thousands):

The following table represents the Company’s assets measured at fair value on a recurring basis as of June 30, 2022, and December 31, 2021, and the basis for those measurements (in thousands):

Fair Value Measurements Using

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Government securities (1)

(1) As of March 31, 2022, and December 31, 2021, the amortized cost of the Company’s investments in U.S Government Securities approximated their fair value due to their short-term maturities, and there have been no events or changes

in circumstances that would have had a significant effect on the fair value of these securities in the periods presented.

(1) As of June 30, 2022, and December 31, 2021, the amortized cost of the Company’s investments in U.S Government Securities approximated their fair value due to their short-term maturities, and there have been no events or changes in circumstances that would have had a significant effect on the fair value of these securities in the periods presented.

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

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Operating Leases — Refer to Note 5, Leases , for the discussion about the Company’s lease commitments.

The Company entered into lease agreements with total future minimum lease payments of $ 0.7 million over the next three years that will commence subsequent to March 31, 2022.

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 initial delivery of its products.

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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 March 31, 2022, total outstanding purchase obligations were $ 12.8 million, the majority of which is due within the next 12 months .

As of June 30, 2022, total outstanding purchase obligations were $ 14.0 million, the majority of which is 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.

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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 March 31, 2022, except as disclosed below, the Company was not party to any material legal proceedings, thus no loss was probable and no amount was accrued.

As of June 30, 2022, 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.

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SMIC denies liability and the arbitration is on-going.

SUBSEQUENT EVENTS

Refer to Note 7, Employee Benefits Plans , for the discussion about the amendment to the 2011 Stock Incentive Plan.

Refer to Note 6, Stockholder’s Equity , for the discussion about the adoption of the 2022 Stock Repurchase Program.

On April 12, 2022, the Company repurchased approximately 715,000 shares of its common stock in a privately negotiated transaction for $ 16.7 million under the 2022 Stock Repurchase Program.

The stock repurchase was made in a block trade in compliance with Rule 10b-18 under the Securities Exchange Act of 1934, as amended (the Exchange Act).

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

What changed 10-Q

Item 1. Financial Statements