What changed in this filing

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Item 1. Financial Statements

2022-11-10 compared with 2022-08-11 · 149 added, 131 removed, 446 unchanged (39% of the section changed)

3 unchanged sentences

(in thousands, except par value)

September 30,

Current assets:

1 unchanged sentence

Short-term investments

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

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

Prepaid expenses and other current assets

32 unchanged sentences

PDF SOLUTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands, except per share amounts)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Integrated Yield Ramp

8 unchanged sentences

Income tax expense

Other comprehensive loss:

Net income (loss)

Other comprehensive income (loss):

Foreign currency translation adjustments, net of tax

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

Total other comprehensive income (loss)

Comprehensive loss

Net loss per share, basic and diluted

Weighted average common shares used to calculate net loss per share, basic and diluted

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

Total other comprehensive loss

Comprehensive income (loss)

Net income (loss) per share:

Weighted average common shares used to calculate net income (loss) per share:

See accompanying Notes to Condensed Consolidated Financial Statements (unaudited)

2 unchanged sentences

(in thousands)

Three and Six Months Ended June 30, 2022

Three and Nine Months Ended September 30, 2022

Treasury Stock

2 unchanged sentences

Balances, December 31, 2021

Issuance of common stock in connection with employee stock purchase plan

Issuance of common stock in connection with employee stock purchase plans

Issuance of common stock in connection with exercise of options

12 unchanged sentences

Balances, June 30, 2022

Three and Six Months Ended June 30, 2021

Issuance of common stock in connection with employee stock purchase plan

Issuance of common stock in connection with exercise of options

Vesting of restricted stock units

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

Stock-based compensation expense

Comprehensive income (loss)

Balances, September 30, 2022

See accompanying Notes to Condensed Consolidated Financial Statements (unaudited)

PDF SOLUTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY – CONTINUED

(in thousands)

Three and Nine Months Ended September 30, 2021

Treasury Stock

16 unchanged sentences

Balances, June 30, 2021

Issuance of common stock in connection with employee stock purchase plan

Issuance of common stock in connection with exercise of options

Vesting of restricted stock units

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

Stock-based compensation expense

Comprehensive loss

Balances, September 30, 2021

See accompanying Notes to Condensed Consolidated Financial Statements (unaudited)

2 unchanged sentences

(in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities:

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

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

Depreciation and amortization

14 unchanged sentences

Operating lease liabilities

Net cash provided by (used in) operating activities

Net cash provided by operating activities

Cash flows from investing activities:

3 unchanged sentences

Prepayment for the purchase of property and equipment

Purchases of intangible assets

Net cash provided by investing activities

17 unchanged sentences

(in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Supplemental disclosure of cash flow information:

2 unchanged sentences

Supplemental disclosure of noncash information:

Property and equipment received and accrued in accounts payable and accrued and other liabilities

Property and equipment, and intangible assets received and accrued in accounts payable and accrued and other liabilities

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

13 unchanged sentences

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.

The condensed consolidated balance sheet at December 31, 2021, has been derived from the audited consolidated financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America.

The accompanying Condensed Consolidated Balance Sheet at December 31, 2021, has been derived from the audited consolidated financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America.

Use of Estimates

24 unchanged sentences

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.

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 condensed consolidated financial statements or the related disclosure.

In August 2020, the FASB issued ASU No.

2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-20):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which is intended to simplify the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity.

The guidance allows for either full retrospective adoption or modified retrospective adoption.

Additionally, the ASU will require entities to use the “if-converted” method when calculating diluted earnings per share for convertible instruments.

The ASU will be effective for annual reporting periods beginning after December 15, 2023 for SRCs and interim periods within those annual periods.

Early adoption is permitted.

The Company does not anticipate that the adoption of this ASU will have a significant impact on its condensed consolidated financial statements or the related disclosures.

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

32 unchanged sentences

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.

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.

3 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 judgment.

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.

8 unchanged sentences

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Point-in-time

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.

International revenues accounted for approximately 54 % and 51 % of our total revenues during the three and nine months ended September 30, 2022, respectively, compared to 53 % and 57 % of our total revenues during the three and nine months ended September 30, 2021, respectively.

See Note 10, Customer and Geographic Information .

22 unchanged sentences

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.

At September 30, 2022 and December 31, 2021, the total contract assets included in prepaid expenses and other current assets in the accompanying Condensed Consolidated Balance Sheets were $ 1.9 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 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.

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 $ 10.6 million and $ 7.0 million during the three months ended September 30, 2022 and 2021, respectively, and $ 16.3 million and $ 13.8 million during the nine months ended September 30, 2022 and 2021, respectively.

At September 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 $ 185.4 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 .

2 unchanged sentences

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

The adjustment to revenue recognized from performance obligations satisfied (or partially satisfied) in previous periods was 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.

The adjustment to revenue recognized from performance obligations satisfied (or partially satisfied) in previous periods was an increase of $ 1.9 million and a decrease of $ 0.2 million during the three months ended September 30, 2022 and 2021, respectively, and an increase of $ 0.4 million and $ 34,000 during the nine months ended September 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 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.

Total capitalized direct sales commission costs included in prepaid expenses and other current assets in the accompanying Condensed Consolidated Balance Sheets as of September 30, 2022, and December 31, 2021, were $ 1.4 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 September 30, 2022, and December 31, 2021, were $ 1.7 million and $ 2.1 million, respectively.

Amortization of these assets were $ 0.4 million and $ 0.2 million during the three months ended September 30, 2022 and 2021, respectively, and $ 1.1 million and $ 0.5 million during the nine months ended September 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 and six months ended June 30, 2022 and 2021.

STRATEGIC PARTNERSHIP AGREEMENT WITH ADVANTEST AND RELATED PARTY TRANSACTIONS

3 unchanged sentences

● 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 collaborate on, and the Company initially hosts, develops and maintains, an Advantest-specific cloud layer on the Exensio platform.

On June 5, 2022, the parties amended Amendment #1 to provide another approved DEX Site (as defined therein).

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

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

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

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

Analytics revenue recognized from Advantest was $ 2.8 million and $ 8.1 million during the three and nine months ended September 30, 2022, respectively, compared to $ 2.7 million and $ 7.9 million during the three and nine months ended September 30, 2021, respectively.

Accounts receivable from Advantest amounted to $ 10.4 million as of September 30, 2022, and nil as of December 31, 2021, and deferred revenue amounted to $ 9.1 million and $ 6.8 million as of September 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 $ 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.

Unbilled accounts receivable, included in accounts receivable, totaled $ 9.8 million and $ 11.8 million as of September 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 $ 1.0 million and $ 1.3 million as of September 30, 2022, and December 31, 2021, respectively.

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

3 unchanged sentences

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

September 30,

Computer equipment

6 unchanged sentences

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.

Among assets under construction, the construction-in-progress balance related to construction of DFI™ systems assets amounted to $ 20.1 million and $ 20.0 million as of September 30, 2022, and December 31, 2021, respectively.

Depreciation and amortization expense was $ 1.4 million and $ 1.5 million during the three months ended September 30, 2022 and 2021, respectively, and $ 4.2 million and $ 4.8 million during the nine months ended September 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 June 30, 2022, and December 31, 2021, the carrying amount of goodwill was $ 14.1 million.

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

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

June 30, 2022

September 30, 2022

December 31, 2021

4 unchanged sentences

Noncompetition agreements

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 June 30,

Six Months Ended June 30,

The weighted average amortization period for acquired identifiable intangible assets was 6.1 years as of September 30, 2022.

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

Three Months Ended September 30,

Nine Months Ended September 30,

Amortization of acquired technology included under Costs of Revenues

3 unchanged sentences

Year Ending December 31,

2022 (remaining six months)

2022 (remaining three months)

2027 and thereafter

Total future amortization expense

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

There were no impairment charges for goodwill and intangible assets during the three and nine months ended September 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 June 30, 2022, and December 31, 2021.

The Company had no leases that were classified as a financing lease as of September 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 reduced 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 six months ended June 30, 2022.

The gain from the lease termination of approximately $ 0.1 million was recorded under selling, general and administrative expense in the accompanying Condensed Consolidated Statement of Comprehensive Income (Loss) for the nine months ended September 30, 2022.

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Operating lease expense (1)

1 unchanged sentence

Total lease expense

(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.

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

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

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

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

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

September 30,

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

Weighted average discount rate for operating lease liabilities

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

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

Year Ending December 31,

2022 (remaining six months)

2022 (remaining three months)

2027 and thereafter

1 unchanged sentence

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

(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.

(1) As of September 30, 2022, the total operating lease liability includes approximately $ 0.9 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 $ 1.5 million as of June 30, 2022.

(3) Includes the current portion of operating lease liabilities of $ 1.4 million as of September 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 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.

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

During the nine months ended September 30, 2021, the Company repurchased 251,212 shares 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.

During the nine months ended September 30, 2022, the Company repurchased 714,600 shares 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 June 30, 2022, the Company had the following stock-based compensation plans:

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

Employee Stock Purchase Plan

7 unchanged sentences

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

The Company estimated the fair value of purchase rights granted under the 2010 and the 2021 Purchase Plans during the period using the Black-Scholes-Merton option-pricing model with the following weighted average assumptions, resulting in the following weighted average fair values:

2021 Purchase Plan

2010 Purchase Plan

Six Months Ended June 30,

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

Nine Months Ended September 30,

Expected life (in years)

2 unchanged sentences

Weighted average fair value of purchase rights granted during the period

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.

During the three months ended September 30, 2022, a total of 92,043 shares were issued under the 2021 Purchase Plan, at a weighted-average purchase price of $ 16.40 per share.

During the nine months ended September 30, 2022, a total of 182,083 shares were issued under the 2021 Purchase Plan, at a weighted-average purchase price of $ 16.15 per share.

During the nine months ended September 30, 2022 and 2021, a total of 5,203 and 108,623 shares, respectively, were issued under the 2010 Purchase Plan, at a weighted-average purchase price of $13.40 per share and $ 9.53 per share, respectively.

As of September 30, 2022, unrecognized compensation cost related to the 2021 Purchase Plan was $ 1.6 million.

This estimated unrecognized cost is expected to be recognized over a weighted average period of 1.2 years.

There was no unrecognized compensation cost related to the 2010 Purchase Plan as of September 30, 2022.

As of September 30, 2022, 817,917 shares were available for future issuance under the 2021 Purchase Plan.

Stock Incentive Plans

5 unchanged sentences

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

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.

The number of shares reserved and available under the 2011 Plan includes 0.5 million shares that were subject to awards previously made under the 2001 Plan and were forfeited, expired or repurchased by the Company after the adoption of the 2011 Plan through June 30, 2022.

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”).

As of September 30, 2022, 13.3 million shares of common stock were reserved to cover stock-based awards under the 2011 Plan, of which 3.5 million shares were available for future grant.

As of September 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 and six months ended June 30, 2022 and 2021.

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

Stock-Based Compensation

1 unchanged sentence

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,

Three Months Ended September 30,

Nine Months Ended September 30,

Costs of revenues

2 unchanged sentences

Stock-based compensation expenses

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

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

(in thousands)

1 unchanged sentence

Outstanding, January 1, 2022

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:

Outstanding, September 30, 2022

Vested and expected to vest, September 30, 2022

Exercisable, September 30, 2022

The aggregate intrinsic value in the table above represents the total intrinsic value based on the Company’s closing stock price of $ 24.53 per share as of September 30, 2022.

The total intrinsic value of options exercised was $ 1.8 million during the nine months ended September 30, 2022.

As of September 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 1.2 years.

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

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

Average Grant

2 unchanged sentences

Nonvested, January 1, 2022

Nonvested, June 30, 2022

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

Nonvested, September 30, 2022

As of September 30, 2022, there was $ 35.0 million of total unrecognized compensation cost related to restricted stock units.

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

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

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.

Income tax expense increased by $ 1.8 million for the nine months ended September 30, 2022, to a $ 3.3 million income tax expense as compared to $ 1.5 million for the nine months ended September 30, 2021.

The Company’s effective tax rate expense was ( 547.7 %) and ( 12.0 %) for the nine months ended September 30, 2022 and 2021, respectively.

The Company’s effective tax rate expense increased in the nine months ended September 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 September 30, 2022, was $ 15.2 million, of which $ 1.8 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 $ 2.0 million, if recognized, would affect the Company’s effective tax rate.

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.

As of September 30, 2022, the Company has recorded unrecognized tax benefits of $ 2.3 million, including interest and penalties of $ 0.6 million, as long-term taxes payable in the accompanying Condensed Consolidated Balance Sheet.

The remaining $ 13.5 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.

The valuation allowance was approximately $ 51.6 million as of September 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 June 30, 2022, and December 31, 2021 were not significant.

The worldwide net deferred tax assets balance as of September 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.

3 unchanged sentences

The Company is not subject to income tax examinations in any other of its major foreign subsidiaries’ jurisdictions.

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):

Three Months Ended June 30,

Six Months Ended June 30,

NET INCOME (LOSS) PER SHARE

Basic net income (loss) per share is computed by dividing net income (loss) 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.

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

Three Months Ended September 30,

Nine Months Ended September 30,

Net income (loss)

Basic weighted-average shares outstanding

1 unchanged sentence

Diluted weighted-average shares outstanding

Net loss per share, basic and diluted

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 June 30,

Six Months Ended June 30,

Net income (loss) per share – Basic

Net income (loss) per share – Diluted

For the nine months ended September 30, 2022 and for the three and nine months ended 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 income (loss) per share calculation above because to do so would be anti-dilutive for the periods indicated (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

Outstanding options

6 unchanged sentences

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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

* represents less than 10%

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

September 30,

* represents less than 10%

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

Three Months Ended June 30,

Three Months Ended September 30,

United States

1 unchanged sentence

Total revenue

Six Months Ended June 30,

Nine Months Ended September 30,

United States

2 unchanged sentences

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

September 30,

United States (1)

5 unchanged sentences

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.

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.

2 unchanged sentences

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

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

Fair Value Measurements Using

September 30,

Inputs (Level 3)

1 unchanged sentence

Money market mutual funds

Government securities (1)

Short-term investments (available-for-sale debt securities)

5 unchanged sentences

Government securities (1)

(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.

(1) As of September 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.

7 unchanged sentences

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

As of June 30, 2022, total outstanding purchase obligations were $ 14.0 million, the majority of which is due within the next 12 months .

As of September 30, 2022, total outstanding purchase obligations were $ 13.7 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.

6 unchanged sentences

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

As of June 30, 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 September 30, 2022, except as disclosed below, the Company was not party to any material legal proceedings for which a loss was probable or an amount was accrued.

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

2 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements