What changed in this filing

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Item 1. Financial Statements

2023-08-08 compared with 2023-05-09 · 128 added, 112 removed, 425 unchanged (36% of the section changed)

6 unchanged sentences

Short-term investments

Accounts receivable, net of allowance for credit losses of $ 890 as of March 31, 2023 and December 31, 2022

Accounts receivable, net of allowance for credit losses of $ 890 as of June 30, 2023 and December 31, 2022

Prepaid expenses and other current assets

34 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

Income (loss) before income tax expense

Income tax expense

Income (loss) before income tax expense (benefit)

Income tax expense (benefit)

Net income (loss)

2 unchanged sentences

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

Total other comprehensive income (loss)

Total other comprehensive loss

Comprehensive income (loss)

5 unchanged sentences

(in thousands)

Three Months Ended March 31, 2023

Three and Six Months Ended June 30, 2023

Treasury Stock

5 unchanged sentences

Vesting of restricted stock units

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

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

Stock-based compensation expense

1 unchanged sentence

Balances, March 31, 2023

Three Months Ended March 31, 2022

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 awards

Stock-based compensation expense

Comprehensive income (loss)

Balances, June 30, 2023

Three and Six Months Ended June 30, 2022

Treasury Stock

5 unchanged sentences

Vesting of restricted stock units

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

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

Repurchase of common stock

2 unchanged sentences

Balances, March 31, 2022

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 awards

Repurchase of common stock

Stock-based compensation expense

Comprehensive loss

Balances, June 30, 2022

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:

5 unchanged sentences

Amortization of costs capitalized to obtain revenue contracts

Net (accretion of discounts) and amortization of premiums on short-term investments

Deferred taxes

15 unchanged sentences

Purchases of property and equipment

Prepayment for the purchase of property and equipment

Net cash provided by (used in) investing activities

15 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

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)

13 unchanged sentences

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

Significant estimates in these financial statements include revenue recognition, the estimated useful lives of property and equipment and intangible assets, assumptions made in analysis of allowance for credit losses, 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.

Significant estimates in these condensed consolidated financial statements include revenue recognition, the estimated useful lives of property and equipment and intangible assets, assumptions made in analysis of allowance for credit losses, 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.

71 unchanged sentences

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Point-in-time

International revenues accounted for approximately 43 % and 48 % of the Company’s total revenues during the three months ended March 31, 2023 and 2022, respectively.

International revenues accounted for approximately 46 % and 51 % of the Company’s total revenues during the three months ended June 30, 2023 and 2022, respectively.

International revenues accounted for approximately 45 % and 49 % of the Company’s total revenues during the six months ended June 30, 2023 and 2022, respectively.

See Note 9, 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.

As of March 31, 2023 and December 31, 2022, the total contract assets included in prepaid expenses and other current assets in the accompanying condensed consolidated balance sheets were $ 2.9 million and $ 3.3 million, respectively.

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

As of June 30, 2023 and December 31, 2022, the total contract assets included in prepaid expenses and other current assets in the accompanying condensed consolidated balance sheets were $ 4.6 million and $ 3.3 million, respectively.

The Company did not 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 in other non-current liabilities in the accompanying condensed consolidated balance sheets.

As of March 31, 2023, and December 31, 2022, the non-current portion of deferred revenues included in non-current liabilities was $ 2.3 million and $ 1.9 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 $ 11.4 million and $ 6.9 million during the three months ended March 31, 2023 and 2022, respectively.

As of March 31, 2023, 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 $ 261.2 million.

As of June 30, 2023, and December 31, 2022, the non-current portion of deferred revenues included in non-current liabilities was $ 5.4 million and $ 1.9 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 $ 10.8 million and $ 7.2 million during the three months ended June 30, 2023 and 2022, respectively, and $ 16.4 million and $ 11.8 million during the six months ended June 30, 2023 and 2022, respectively.

As of June 30, 2023, 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 $ 244.9 million.

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

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 $ 2.5 million and an increase of $ 0.2 million during the three months ended March 31, 2023, and 2022, respectively.

The adjustment to revenue recognized from performance obligations satisfied (or partially satisfied) in previous periods was an increase of $ 1.3 million and an increase of $ 0.5 million during the three months ended June 30, 2023 and 2022, respectively, and an increase of $ 3.2 million and an increase of $ 0.5 million during the six months ended June 30, 2023 and 2022, respectively.

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

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, 2023, and December 31, 2022, were $ 1.8 million and $ 1.7 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, 2023, and December 31, 2022, were $ 3.2 million and $ 2.1 million, respectively.

Amortization of these assets was $ 0.5 million and $ 0.2 million during the three months ended March 31, 2023 and 2022, 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, 2023, and December 31, 2022, were $ 1.9 million and $ 1.7 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, 2023, and December 31, 2022, were $ 2.9 million and $ 2.1 million, respectively.

Amortization of these assets was $ 0.5 million and $ 0.6 million during the three months ended June 30, 2023 and 2022, respectively, and $ 1.0 million and $ 0.8 million during the six months ended June 30, 2023 and 2022.

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, 2023 and 2022.

STRATEGIC PARTNERSHIP AGREEMENT WITH ADVANTEST AND RELATED PARTY TRANSACTIONS

On July 29, 2020, the Company entered into a long-term strategic partnership with Advantest Corporation through its wholly-owned subsidiary, Advantest America, Inc.

(collectively referred to herein as “Advantest”) that included the following agreements, which were all negotiated on arm’s length basis with commercial customary terms.

● A Securities Purchase Agreement for the purchase by Advantest of an aggregate of 3,306,924 shares of the Company’s common stock for aggregate gross proceeds of $ 65.2 million and a related Stockholder Agreement.

● An Amendment #1 to that certain Software License and Related Services Agreement, dated as of March 25, 2020, for an exclusive commercial arrangement in which the Company and Advantest 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 Data Exchange Network (DEX) Site (as defined therein).

On November 11, 2022, the parties entered into a further amendment to Amendment #1 that provided, effective October 31, 2022:

(i) flexibility for Advantest to spend the remainder of their committed $ 50.0 million over the remainder of the original term on its choice of products and services from a price list, instead of limiting Advantest to the original, fixed bundle of software and services;

(ii) revised exclusivity;

and (iii) the Company with free access/use of certain Advantest software.

● 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 were not significant for the three months ended March 31, 2023 and 2022.

● 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, 2023 and 2022.

Analytics revenue recognized from Advantest was $ 1.8 million and $ 2.6 million during the three months ended March 31, 2023 and 2022, respectively.

There were no outstanding accounts receivable from Advantest as of March 31, 2023.

Accounts receivable from Advantest amounted to $ 0.3 million as of December 31, 2022.

Deferred revenue amounted to $ 5.9 million and $ 7.1 million as of March 31, 2023, and December 31, 2022, respectively.

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

BALANCE SHEET COMPONENTS

1 unchanged sentence

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 $ 16.1 million and $ 13.5 million as of March 31, 2023, and December 31, 2022, 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 $ 0.7 million and $ 0.8 million as of March 31, 2023, and December 31, 2022, respectively.

Unbilled accounts receivable, included in accounts receivable, totaled $ 16.6 million and $ 13.5 million as of June 30, 2023, and December 31, 2022, respectively.

Unbilled accounts receivable that are not expected to be billed and collected during the succeeding 12-month period are recorded in other non-current assets and totaled $ 0.9 million and $ 0.8 million as of June 30, 2023, and December 31, 2022, respectively.

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

14 unchanged sentences

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

Depreciation and amortization expense was $ 1.3 million and $ 1.4 million during the three months ended March 31, 2023 and 2022, respectively.

Depreciation and amortization expense was $ 1.2 million and $ 1.4 million during the three months ended June 30, 2023 and 2022, respectively, and $ 2.5 million and $ 2.8 million during the six months ended June 30, 2023 and 2022, respectively.

Goodwill and Intangible Assets, Net

As of March 31, 2023, and December 31, 2022, the carrying amount of goodwill was $ 14.1 million.

As of June 30, 2023, and December 31, 2022, the carrying amount of goodwill was $ 14.1 million.

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

March 31, 2023

June 30, 2023

December 31, 2022

4 unchanged sentences

Noncompetition agreements

The weighted average amortization period for acquired identifiable intangible assets was 5.7 years as of March 31, 2023.

The weighted average amortization period for acquired identifiable intangible assets was 5.5 years as of June 30, 2023.

The following table summarizes intangible assets amortization expense in the accompanying condensed consolidated statements of comprehensive income (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,

2023 (remaining nine months)

2023 (remaining six months)

2028 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 23 and 2022.

There were no impairment charges for goodwill and intangible assets during the three and six months ended June 30, 2 0 23 and 2022.

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, 2023, and December 31, 2022.

The Company had no leases that were classified as a financing lease as of June 30, 2023, and December 31, 2022.

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 accompanying condensed consolidated statement of comprehensive income (loss) for the three months ended March 31, 2022.

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 the three months 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 accompanying 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, 2023, were as follows (in thousands):

Maturities of operating lease liabilities as of June 30, 2023, were as follows (in thousands):

Year Ending December 31,

2023 (remaining nine months)

2023 (remaining six months)

2028 and thereafter

1 unchanged sentence

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

(1) As of March 31, 2023, 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.

(1) As of June 30, 2023, 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 $ 1.6 million as of March 31, 2023.

(3) Includes the current portion of operating lease liabilities of $ 1.5 million as of June 30, 2023.

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 by the Company 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, 2022, 218,858 shares were repurchased by the Company under the 2020 Program at an average price of $ 26.40 per share for an aggregate total price of $ 5.8 million.

In total, 470,070 shares were repurchased under the 2020 Program at an average price of $ 21.91 per share, for an aggregate total price of $ 10.3 million.

2 unchanged sentences

EMPLOYEE BENEFIT PLANS

On March 31, 2023, the Company had the following stock-based compensation plans:

On June 30, 2023, the Company had the following stock-based compensation plans:

Employee Stock Purchase Plan

2 unchanged sentences

The 2010 Purchase Plan provided for twenty-four-month offering periods with four six -month purchase periods in each offering period.

The 2010 Purchase Plan

expired on May 17, 2020.

The 2010 Purchase Plan expired on May 17, 2020.

Existing offering periods under the 2010 Plan continued through the applicable expiration date and the final offering period expired on January 31, 2022.

3 unchanged sentences

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:

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, 2023, a total of 98,216 shares were issued under the 2021 Purchase Plan, at a weighted average purchase price of $ 16.93 per share.

During the three months ended March 31, 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 three months ended March 31, 2022, a total of 5,203 shares were issued under the 2010 Purchase Plan, at a weighted average purchase price of $ 13.40 per share.

As of March 31, 2023, unrecognized compensation cost related to the 2021 Purchase Plan was $ 1.0 million.

During the three months ended June 30, 2023 and 2022, no shares were issued under the Employee Purchase Plans.

During the six months ended June 30, 2023, a total of 98,216 shares were issued under the 2021 Purchase Plan, at a weighted average purchase price of $ 16.93 per share.

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, a total of 5,203 shares were issued under the 2010 Purchase Plan, at a weighted average purchase price of $ 13.40 per share.

As of June 30, 2023, unrecognized compensation cost related to the 2021 Purchase Plan was $ 0.7 million.

This estimated unrecognized cost is expected to be recognized over a weighted average period of 1.1 years.

As of March 31, 2023, 719,701 shares were available for future issuance under the 2021 Purchase Plan.

As of June 30, 2023, 719,701 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.

On April 24, 2023, the Company’s Board of Directors approved another amendment and restatement of the 2011 Plan, which is subject to stockholder approval at the 2023 annual meeting of stockholders, to, among other things, increase the number of shares reserved for awards under it to a total of 13.8 million shares, which is an increase of an additional 1.0 million shares, and to extend the expiration to 2031.

As of March 31, 2023, 13.3 million shares of common stock were reserved to cover stock-based awards under the 2011 Plan, of which 3.6 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, 2023.

As of March 31, 2023, there were no outstanding awards that had been granted outside of the 2011 or 2001 Plans (collectively, the “Stock Plans”).

As of June 30, 2023, 14.3 million shares of common stock were reserved to cover stock-based awards under the 2011 Plan, of which 3.6 million shares were available for future grant.

As of June 30, 2023, 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, 2023 and 2022.

There were no stock options granted during the three and six months ended June 30, 2023 and 2022.

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 March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Costs of revenues

1 unchanged sentence

Selling, general, and administrative

Stock-based compensation expenses

Additional information with respect to options under the Stock Plans during the three months ended March 31, 2023, is as follows:

Stock-based compensation expense

Additional information with respect to options under the Stock Plans during the six months ended June 30, 2023, is as follows:

Outstanding Options

2 unchanged sentences

Outstanding, December 31, 2022

Outstanding, March 31, 2023

Vested and expected to vest, March 31, 2023

Exercisable, March 31, 2023

The aggregate intrinsic value in the table above represents the total intrinsic value based on the Company’s closing stock price of $ 42.40 per share as of March 31, 2023.

The total intrinsic value of options exercised was $ 0.4 million during the three months ended March 31, 2023.

Total remaining unrecognized compensation cost related to unvested stock options as of March 31, 2023, which is expected to be fully recognized in 2023, and total fair value of shares vested during the three months ended March 31, 2023 were immaterial.

Nonvested restricted stock unit activity during the three months ended March 31, 2023, was as follows:

Outstanding, June 30, 2023

Vested and expected to vest, June 30, 2023

Exercisable, June 30, 2023

The aggregate intrinsic value in the table above represents the total intrinsic value based on the Company’s closing stock price of $ 45.10 per share as of June 30, 2023.

The total intrinsic value of options exercised was $ 0.6 million during the six months ended June 30, 2023.

Total remaining unrecognized compensation cost related to unvested stock options as of June 30, 2023, which is expected to be fully recognized in 2023, and total fair value of shares vested during the six months ended June 30, 2023 were immaterial.

Nonvested restricted stock unit activity during the six months ended June 30 2023, was as follows:

Average Grant

2 unchanged sentences

Nonvested, December 31, 2022

Nonvested, March 31, 2023

As of March 31, 2023, there was $ 30.2 million of total unrecognized compensation cost related to restricted stock units.

Nonvested, June 30, 2023

As of June 30, 2023, there was $ 27.7 million of total unrecognized compensation cost related to restricted stock units.

That cost is expected to be recognized over a weighted average period of 2.4 years.

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

Income tax expense decreased by $ 0.8 million for the three months ended March 31, 2023, to a $ 0.4 million income tax expense as compared to $ 1.2 million for the three months ended March 31, 2022.

The Company’s effective tax rate expense was 52 % and ( 40.0 %) for the three months ended March 31, 2023 and 2022, respectively.

The Company’s effective tax rate increased in the three months ended March 31, 2023, as compared to the same period in 2022, primarily due to increases in foreign taxes and changes in the year-to-date recognition of worldwide income.

The Company’s total amount of unrecognized tax benefits, excluding interest and penalties, as of March 31, 2023, was $ 15.2 million, of which $ 2.0 million, if recognized, would affect the Company’s effective tax rate.

Income tax expense decreased by $ 6.0 million for the six months ended June 30, 2023, to a $ 3.5 million income tax benefit as compared to a $ 2.5 million income tax expense for the six months ended June 30, 2022.

The Company’s effective tax rate expense (benefit) was ( 94.7 %) and 88.9 % for the six months ended June 30, 2023 and 2022, respectively.

The Company’s effective tax rate decreased in the six months ended June 30, 2023, as compared to the same period in 2022, primarily due to changes in the foreign and state taxes and year-to-date recognition of worldwide pre-tax income (loss) in relation to their forecasted amounts for full years.

The Company’s total amount of unrecognized tax benefits, excluding interest and penalties, as of June 30, 2023, was $ 15.4 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, 2022, was $ 15.1 million, of which $ 2.0 million, if recognized, would affect the Company’s effective tax rate.

As of March 31, 2023, 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 the accompanying condensed consolidated balance sheet.

As of June 30, 2023, the Company has recorded unrecognized tax benefits of $ 2.5 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 within the Company’s deferred tax assets (“DTAs”), which is subject to a full valuation allowance.

The valuation allowance was approximately $ 59.2 million as of March 31, 2023, and December 31, 2022, which was related to U.S.

The valuation allowance was approximately $ 59.2 million as of June 30, 2023, and December 31, 2022, which was related to U.S.

net federal and state DTAs.

The worldwide net deferred tax assets balance as of March 31, 2023, and December 31, 2022, were not significant.

The worldwide net DTAs balance as of June 30, 2023, and December 31, 2022, were not significant.

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

5 unchanged sentences

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 March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Net income (loss)

Basic weighted average shares outstanding

Effect of dilutive stock options, unvested restricted stock units, and shares of common stock expected to be issued under Employee Purchase Plans

Effect of dilutive stock options, unvested restricted stock units, and shares of common stock expected to be issued under Employee Purchase Plan

Diluted weighted average shares outstanding

Net income (loss) per share:

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

The following table 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 March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Outstanding options

6 unchanged sentences

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

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

1 unchanged sentence

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

1 unchanged sentence

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):

6 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.

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.

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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, 2023, and December 31, 2022, 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, 2023, and December 31, 2022, and the basis for those measurements (in thousands):

Fair Value Measurements Using

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Money market mutual funds

Government securities (1)

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

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Government securities (1)

(1) As of March 31, 2023, and December 31, 2022, the amortized cost of the Company’s investments in U.S Government securities approximated their fair value due to their short-term maturities, and there have been no events or changes in circumstances that would have had a significant effect on the fair value of these securities in the periods presented.

For the three months ended March 31, 2023, there were no material realized or unrealized gains or losses, either individually or in the aggregate.

(1) As of June 30, 2023, and December 31, 2022, the amortized cost of the Company’s investments in U.S Government securities approximated their fair value due to their short-term maturities, and there have been no events or changes in circumstances that would have had a significant effect on the fair value of these securities in the periods presented.

For the three and six months ended June 30, 2023, there were no material realized or unrealized gains or losses, either individually or in the aggregate.

COMMITMENTS AND CONTINGENCIES

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

As of March 31, 2023, total outstanding purchase obligations were $ 25.7 million, the majority of which is due within the next 24 months .

As of June 30, 2023, total outstanding purchase obligations were $ 24.5 million, the majority of which is due within the next 24 months.

Indemnification of Officers and Directors — As permitted by the Delaware general corporation law, the Company has included a provision in its certificate of incorporation to eliminate the personal liability of its officers and directors for monetary damages for breach or alleged breach of their fiduciary duties as officers or directors, other than in cases of fraud or other willful misconduct.

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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, 2023, the Company was not party to any material legal proceedings for which a loss was probable or an amount was accrued.

As of June 30, 2023, the Company was not party to any material legal proceedings for which a loss was probable or an amount was accrued.

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

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

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 the Company under a series of contracts.

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

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

SMIC denies liability and an arbitration hearing was held in February 2023, with final written submissions due from the parties at the end of August.

A decision is expected within this calendar year, approximately.

SUBSEQUENT EVENTS

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

STRATEGIC PARTNERSHIP AGREEMENT WITH ADVANTEST AND RELATED PARTY TRANSACTIONS

In July 2020, the Company entered into a long-term strategic partnership with Advantest Corporation through its wholly-owned subsidiary, Advantest America, Inc.

(collectively referred to herein as “Advantest”).

Analytics revenue recognized from Advantest was $ 1.8 million and $ 2.6 million during the three months ended June 30, 2023 and 2022, respectively, and $ 3.6 million and $ 5.3 million during the six months ended June 30, 2023 and 2022, respectively.

Accounts receivable from Advantest amounted to $ 10.3 million and $ 0.3 million as of June 30, 2023, and December 31, 2022, respectively.

Deferred revenue amounted to $ 14.4 million and $ 7.1 million as of June 30, 2023, and December 31, 2022, respectively.

SUBSEQUENT EVENT

On July 5, 2023 , the Company acquired 100 % of the equity interest in Lantern Machinery Analytics, Inc.

headquartered in Canada, a privately-held provider of automated image analysis and feature extraction artificial intelligence/machine learning software for critical inspection and metrology steps at battery cell development and manufacturing processes for the electric vehicle industry.

Pursuant to the purchase agreement, the Company paid approximately $ 1.9 million in cash on the closing date.

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