What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-08-08 compared with 2024-05-09 · 167 added, 131 removed, 438 unchanged (40% of the section changed)

6 unchanged sentences

Short-term investments

Accounts receivable, net of allowance for credit losses of $ 890 as of March 31 , 2024 and December 31, 2023

Accounts receivable, net of allowance for credit losses of $ 890 as of June 30, 2024 and December 31, 2023

Prepaid expenses and other current assets

32 unchanged sentences

PDF SOLUTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS )

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(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

Net income (loss)

Income before income tax benefit (expense)

Income tax benefit (expense)

Other comprehensive income (loss):

1 unchanged sentence

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

Total other comprehensive income (loss)

Comprehensive income (loss)

Net income (loss) per share:

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

Total other comprehensive loss

Comprehensive income

Net income per share:

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

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)

2 unchanged sentences

(in thousands)

Three Months Ended March 31, 2024

Three Months Periods in the Six Months Ended June 30, 2024

Treasury Stock

10 unchanged sentences

Balances, March 31, 2024

Three Months Ended March 31, 2023

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, 2024

Continued on next page.

PDF SOLUTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY - CONTINUED

(in thousands)

Three Months Periods in the Six Months Ended June 30, 2023

Treasury Stock

9 unchanged sentences

Balances, March 31, 2023

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

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:

Net income (loss)

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

Adjustments to reconcile net income to net cash used in operating activities:

Depreciation and amortization

20 unchanged sentences

Purchases of property and equipment

Net cash used in investing activities

Prepayment for the purchase of property and equipment

Net cash provided by (used in) investing activities

Cash flows from financing activities:

12 unchanged sentences

(in thousands)

Three Months Ended March 31,

Six Months Ended June 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

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

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

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

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

Property and equipment transferred to sales-type leases

Stock-based compensation capitalized as part of the cost of property and equipment, net

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)

21 unchanged sentences

Early adoption is permitted.

The Company is currently evaluating the impact of the new standard on the consolidated financial statements.

The Company is currently evaluating the impact of the new standard on the consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU No.

9 unchanged sentences

The Company derives revenue from two sources:

Analytics revenue and Integrated Yield Ramp revenue.

Analytics and Integrated Yield Ramp.

The Company recognizes revenue in accordance with FASB Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers, and its related amendments (collectively known as “ASC 606”).

35 unchanged sentences

Operating lease revenue is recognized on a straight-line basis over the lease term.

Sales-type lease revenue and corresponding lease receivables are recognized at lease commencement based on the present value of the future lease payments, and related interest income on lease receivable is recognized over the lease term and are recorded under Analytics revenue in the accompanying condensed consolidated statements of comprehensive income (loss).

Payments under sales-type leases are discounted using the interest rate implicit in the lease.

5 unchanged sentences

Revenue under these project-based contracts, which are delivered over a specific period of time, typically for a fixed-fee component paid on a set schedule, is recognized as services are performed using a percentage of completion method based on costs or labor-hours inputs, whichever is the most appropriate measure of the progress towards completion of the contract.

Where there are distinct performance obligations, the Company allocates revenue to all deliverables based on their SSPs and allocates the transaction price of the contract to each performance obligation on a relative basis using SSP.

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

9 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 57 % and 43 % of the Company’s total revenues during the three months ended March 31, 2024 and 2023, respectively.

International revenues accounted for approximately 54 % and 46 % of the Company’s total revenues during the three months ended June 30, 2024 and 2023, respectively, and approximately 55 % and 45 % of the Company’s total revenues during the six months ended June 30, 2024 and 2023, respectively.

See Note 9, Customer and Geographic Information .

2 unchanged sentences

Due to the complexity of certain contracts, the actual revenue recognition treatment required under ASC 606 for the Company’s arrangements may be dependent on contract-specific terms and may vary in some instances.

For revenue under project-based contracts for fixed-price implementation services, revenue is recognized as services are performed using a percentage-of-completion method based on costs or labor-hours input method, whichever is the most appropriate measure of the progress towards completion of the contract.

For revenue under project-based contracts for fixed-price services, revenue is recognized as services are performed using a percentage-of-completion method based on costs or labor-hours input method, whichever is the most appropriate measure of the progress towards completion of the contract.

Due to the nature of the work performed in these arrangements, the estimation of percentage of completion method is complex, subject to many variables and requires significant judgment.

4 unchanged sentences

Determining whether licenses and services are distinct performance obligations that should be accounted for separately, or not distinct and thus accounted for together, requires significant judgment.

The Company rarely licenses software on a standalone basis, so the Company is required to estimate the range of SSPs for each performance obligation.

In instances where SSP is not directly observable because the Company does not license the software or sell the service separately, the Company determines the SSP using information that may include market conditions and other observable inputs.

The Company rarely licenses software on a standalone basis, so the Company is required to estimate the range of the SSPs for each performance obligation.

In instances where the SSP is not directly observable because the Company does not license the software or sell the service separately, the Company determines the SSP using information that may include market conditions and other observable inputs.

The Company is required to record Gainshare revenue in the same period in which the usage occurs.

3 unchanged sentences

Contract Balances

The Company performs its obligations under a contract with a customer by licensing software or providing services in exchange for consideration from the customer.

The Company performs its obligations under a contract with a customer primarily by licensing software or providing services in exchange for consideration from the customer.

The timing of the Company’s performance often differs from the timing of the customer’s payment, which results in the recognition of a receivable, a contract asset or a contract liability.

3 unchanged sentences

The contract assets are recorded on a net basis with deferred revenue (i.e., contract liabilities) at the contract level.

As of March 31, 2024 and December 31, 2023, the total contract assets included in prepaid expenses and other current assets in the accompanying condensed consolidated balance sheets were $ 4.1 million and $ 6.8 million, respectively.

As of March 31, 2024 and December 31, 2023, contract assets of $ 0.7 million and $ 0.9 million, respectively, are included in other non-current assets in the accompanying condensed consolidated balance sheets.

The contract assets consist of the following (in thousands):

Current portion included in prepaid expenses and other current assets

Non-current portion included in other non-current assets

Total contract assets

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, 2024, and December 31, 2023, the non-current portion of deferred revenues included in non-current liabilities was $ 1.4 million and $ 1.8 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 $ 11.4 million during the three months ended March 31, 2024 and 2023, respectively.

As of March 31, 2024, 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 $ 262.2 million.

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.

Deferred revenues were the following (in thousands):

Current portion

Non-current portion (1)

Total deferred revenues

(1) Included in other non-current liabilities.

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 the following (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Revenue recognized that was included in the deferred revenues and billings in excess of recognized revenues balances at beginning of period

As of June 30, 2024, 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 $ 243.2 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 a decrease of $ 0.6 million and an increase of $ 2.5 million during the three months ended March 31, 2024 and 2023, respectively.

The adjustment to revenue recognized from performance obligations satisfied (or partially satisfied) in previous periods was a decrease of $ 0.3 million and an increase of $ 1.3 million during the three months ended June 30, 2024 and 2023, respectively, and a decrease of $ 1.1 million and an increase of $ 3.2 million during the six months ended June 30, 2024 and 2023, 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, 2024, and December 31, 2023, were $ 2.3 million and $ 2.0 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, 2024, and December 31, 2023, were $ 3.6 million and $ 2.6 million, respectively.

Amortization of these assets was $ 0.6 million and $ 0.5 million during the three months ended March 31, 2024 and 2023, respectively.

Total capitalized direct sales commission costs were the following (in thousands):

Current portion included in prepaid expenses and other current assets

Non-current portion included in other non-current assets

Total capitalized direct sales commission costs

Amortization of capitalized direct sales commission costs was the following (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Amortization of capitalized direct sales commission costs

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, 2024 and 2023.

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 $ 17.4 million and $ 16.4 million as of March 31, 2024, and December 31, 2023, 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 $ 2.2 million and $ 1.1 million as of March 31, 2024, and December 31, 2023, respectively.

Unbilled accounts receivable, included in accounts receivable, totaled $ 18.5 million and $ 16.4 million as of June 30, 2024, and December 31, 2023, 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 $ 3.7 million and $ 1.1 million as of June 30, 2024, and December 31, 2023, respectively.

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

An allowance for credit losses is maintained for probable credit losses based upon the Company’s assessment of the expected collectibility of the accounts receivable.

An allowance for credit losses is maintained for probable credit losses based upon the Company’s assessment of the expected

collectibility of the accounts receivable.

The allowance for credit losses is reviewed on a quarterly basis to assess the adequacy of the allowance.

12 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 $ 1.1 million and $ 1.3 million during the three months ended March 31, 2024 and 2023, respectively.

Depreciation and amortization expense was $ 1.1 million and $ 1.2 million for the three months ended June 30, 2024 and 2023, respectively, and $ 2.1 million and $ 2.5 million for the six months ended June 30, 2024 and 2023, respectively.

Goodwill and Intangible Assets, Net

As of March 31, 2024, and December 31, 2023, the carrying amount of goodwill was $ 15.0 million and $ 15.0 million, respectively.

As of each of June 30, 2024, and December 31, 2023, the carrying amount of goodwill was $ 15.0 million.

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

March 31, 2024

June 30, 2024

December 31, 2023

4 unchanged sentences

Noncompetition agreements

The weighted average amortization period for acquired identifiable intangible assets was 5.0 years as of March 31, 2024.

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,

The weighted average amortization period for acquired identifiable intangible assets was 4.8 years as of June 30, 2024.

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

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,

2024 (remaining nine months)

2024 (remaining six months)

2029 and thereafter

Total future amortization expense

There were no impairment charges for goodwill and intangible assets during the three months ended March 31, 2024 and 2023.

There were no impairment charges for goodwill and intangible assets during the three and six months ended June 30, 2024 and 2023.

Other Non-current Assets

15 unchanged sentences

Net investments in sales-type leases – non-current

Maturities of leases payments under sales-type leases as of March 31, 2024, were as follows (in thousands):

Maturities of leases payments under sales-type leases as of June 30, 2024, were as follows (in thousands):

Year Ending December 31,

2024 (remaining nine months)

2024 (remaining six months)

Total future sales-type lease payments

2 unchanged sentences

(a) Calculated using the rate implicit in the lease determined for each lease.

There was no allowance for credit losses on lease receivables as of March 31, 2024, and December 31, 2023.

There was no allowance for credit losses on lease receivables as of June 30, 2024, and December 31, 2023.

The Company’s ongoing risk management strategy for residual assets includes performing regular reviews of estimated residual values.

1 unchanged sentence

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, 2024, and December 31, 2023.

The Company had no leases that were classified as a financing lease as of June 30, 2024, and December 31, 2023.

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

6 unchanged sentences

Weighted average discount rate for operating lease liabilities

Maturities of operating lease liabilities as of March 31, 2024, were as follows (in thousands):

Maturities of operating lease liabilities as of June 30, 2024, were as follows (in thousands):

Year Ending December 31,

2024 (remaining nine months)

2024 (remaining six months)

Total future minimum lease payments

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

(1) As of March 31, 2024, the total operating lease liability includes approximately $ 1.0 million related to an option to extend a lease term that is reasonably certain to be exercised.

(1) As of June 30, 2024, the total operating lease liabilities include approximately $ 1.0 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, 2024.

(3) Includes the current portion of operating lease liabilities of $ 1.6 million as of June 30, 2024.

STOCKHOLDERS’ EQUITY

1 unchanged sentence

On April 11, 2022, the Board of Directors adopted a stock repurchase 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, including through Rule 10b5-1 plans, from time to time, over the next two years .

During the three months ended March 31, 2024, 201,561 shares were repurchased by the Company under the 2022 Program at an average price of $ 34.23 per share for an aggregate total price of $ 6.9 million.

During the six months ended June 30, 2024, 201,561 shares were repurchased by the Company under the 2022 Program at an average price of $ 34.23 per share for an aggregate total price of $ 6.9 million.

In total, the Company repurchased 937,501 shares under the 2022 Program at an average price of $ 25.96 per share for an aggregate total price of $ 24.3 million.

1 unchanged sentence

EMPLOYEE BENEFIT PLANS

On March 31, 2024, the Company had the following stock-based compensation plans:

On June 30, 2024, the Company had the following stock-based compensation plans:

Employee Stock 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”).

On June 15, 2021, the Company’s stockholders initially approved the 2021 Employee Stock Purchase Plan, which has been amended and restated by the Board of Directors and approved by the Company’s stockholders since then (as amended through the date of this report, the “2021 Purchase Plan”).

Under the 2021 Purchase Plan, eligible employees can contribute up to 10 % of their compensation, as defined in the 2021 Purchase Plan, towards the purchase of shares of PDF common stock at a price of 85 % of the lower of the fair market value at the beginning of the offering period or the end of the purchase period.

The 2021 Purchase Plan commenced on August 1, 2021, and provided for twenty-four-month offering periods with four six-month purchase periods in each offering period.

On April 15, 2024, the Company’s Board of Directors approved another amendment and restatement of the 2021 Purchase Plan, which is subject to stockholder approval at the 2024 annual meeting of stockholders, to, among other things, increase the number of shares reserved for issuance under it to a total of 1.2 million shares, which is an increase of an additional 0.2 million shares, and to eliminate the term of the 2021 Purchase Plan.

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, 2024, a total of 73,854 shares were issued under the 2021 Purchase Plan, at a weighted average purchase price of $ 25.94 per share.

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

As of March 31, 2024, unrecognized compensation cost related to the 2021 Purchase Plan was $ 4.0 million.

During the three months ended June 30, 2024 and 2023, no shares were issued under the 2021 Purchase Plan.

During the six months ended June 30, 2024, a total of 73,854 shares were issued under the 2021 Purchase Plan, at a weighted average purchase price of $ 25.94 per share.

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.

As of June 30, 2024, unrecognized compensation cost related to the 2021 Purchase Plan was $ 2.4 million.

This estimated unrecognized cost is expected to be recognized over a weighted average period of 1.6 years.

As of March 31, 2024, 520,455 shares were available for future issuance under the 2021 Purchase Plan.

As of June 30, 2024, 720,455 shares were available for future issuance under the 2021 Purchase Plan.

Stock Incentive Plans

On November 16, 2011, the Company’s stockholders initially approved the 2011 Stock Incentive Plan, which has been amended and restated and approved by the Company’s stockholders a number of times since then (as approved by the stockholders through the date of this report, the “2011 Plan”) and currently expires in 2033.

On November 16, 2011, the Company’s stockholders initially approved the 2011 Stock Incentive Plan, which has been amended and restated by the Board of Directors and approved by the Company’s stockholders a number of times since then (as amended through the date of this report, the “2011 Plan”).

Under the 2011 Plan, the Company may award stock options, stock appreciation rights (“SARs”), stock grants or stock units covering shares of the Company’s common stock to employees, directors, non-employee directors and contractors.

3 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 15, 2024, the Company’s Board of Directors approved another amendment and restatement of the 2011 Plan, which is subject to stockholder approval at the 2024 annual meeting of stockholders, to, among other things, increase the number of shares reserved for awards under it to a total of 14.6 million shares, which is an increase of an additional 0.8 million shares, and to eliminate the term of the 2011 Plan.

As of March 31, 2024, 14.3 million shares of common stock were reserved to cover stock-based awards under the 2011 Plan, of which 3.7 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, 2024.

As of March 31, 2024, there were no outstanding awards that had been granted outside of the 2011 or 2001 Plans (collectively, the “Stock Plans”).

As of June 30, 2024, 15.1 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, 2024.

As of June 30, 2024, there were no outstanding awards that had been granted outside of the 2011 Plan.

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, 2024 and 2023.

There were no stock options granted during the three and six months ended June 30, 2024 and 2023.

Stock-Based Compensation

1 unchanged sentence

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Costs of revenues

2 unchanged sentences

Stock-based compensation expense

Stock-based compensation capitalized in the capitalized software development costs included in property and equipment, net, was immaterial for the three months ended March 31, 2024.

Additional information with respect to options under the Stock Plans during the three months ended March 31, 2024, is as follows:

Additional information with respect to options under the 2011 Plan during the six months ended June 30, 2024, is as follows:

Outstanding Options

2 unchanged sentences

Outstanding, January 1, 2024

Outstanding, March 31, 2024

Vested and expected to vest, March 31, 2024

Exercisable, March 31, 2024

The aggregate intrinsic value in the table above represents the total intrinsic value based on the Company’s closing stock price of $ 33.67 per share as of March 31, 2024.

The total intrinsic value of options exercised during the three months ended March 31, 2024 and 2023 was as follows (in thousands):

Three Months Ended March 31,

Outstanding, June 30, 2024

Vested and expected to vest, June 30, 2024

Exercisable, June 30, 2024

The aggregate intrinsic value in the table above represents the total intrinsic value based on the Company’s closing stock price of $ 36.38 per share as of June 30, 2024.

The total intrinsic value of options exercised during the six months ended June 30, 2024 and 2023 was as follows (in thousands):

Six Months Ended June 30,

Intrinsic value of options exercised

Total remaining unrecognized compensation cost related to unvested stock options as of March 31, 2024, which is expected to be fully recognized in 2024, and total fair value of shares vested during the three months ended March 31, 2024, were immaterial.

Nonvested restricted stock unit activity during the three months ended March 31, 2024, was as follows:

Total fair value of shares vested during the six months ended June 30, 2024, was immaterial.

As of June 30, 2024, the total remaining unrecognized compensation cost related to unvested stock options was immaterial.

Nonvested restricted stock unit (“RSU”) activities during the six months ended June 30, 2024, were as follows:

Average Grant

2 unchanged sentences

Nonvested, January 1, 2024

Nonvested, March 31, 2024

The weighted average grant date fair values of restricted stock units granted during the three months ended March 31, 2024 and 2023 were $ 33.17 and $ 33.46 , respectively.

The total fair value of restricted stock units vested during the three months ended March 31, 2024 and 2023 was as follows (in thousands):

Three Months Ended March 31,

Nonvested, June 30, 2024

The weighted average grant date fair values of RSUs granted during the six months ended June 30, 2024 and 2023 were $ 33.63 and $ 37.53 , respectively.

The total fair value of RSUs vested during the six months ended June 30, 2024 and 2023 was as follows (in thousands):

Six Months Ended June 30,

Fair value of restricted stock units vested

As of March 31, 2024, there was $ 41.3 million of total unrecognized compensation cost related to restricted stock units.

As of June 30, 2024, there was $ 36.8 million of total unrecognized compensation cost related RSUs.

That cost is expected to be recognized over a weighted average period of 2.2 years.

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

Income tax expense decreased by $ 0.3 million for the three months ended March 31, 2024, to a $ 0.1 million income tax expense as compared to a $ 0.4 million income tax expense for the three months ended March 31, 2023.

The Company’s effective tax rate was ( 47 %) and 52 % for the three months ended March 31, 2024 and 2023, respectively.

The Company’s effective tax rate decreased in the three months ended March 31, 2024, as compared to the same period in 2023, 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.

Our provision for income taxes for the three months ended March 31, 2024, was primarily attributable to foreign and state taxes.

The Company’s total amount of unrecognized tax benefits, excluding interest, as of March 31, 2024, was $ 16.8 million, of which $ 2.7 million, if recognized, would affect the Company’s effective tax rate.

RSUs do not have rights to dividends prior to vesting.

Income tax expense increased by $ 3.7 million for the six months ended June 30, 2024, to a $ 0.2 million income tax expense as compared to a $ 3.5 million income tax benefit for the six months ended June 30, 2023.

The Company’s effective tax rate was 11.1 % and ( 94.7 % ) for the six months ended June 30, 2024 and 2023, respectively.

The Company’s effective tax rate increased in the six months ended June 30, 2024, as compared to the same period in 2023, 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 provision for income taxes for the six months ended June 30, 2024, was primarily attributable to foreign and state taxes.

The Company’s total amount of unrecognized tax benefits, excluding interest, as of June 30, 2024, was $ 15.9 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, as of December 31, 2023, was $ 15.9 million, of which $ 2.0 million, if recognized, would affect the Company’s effective tax rate.

As of March 31, 2024, the Company has recorded unrecognized tax benefits of $ 2.6 million, including interest of $ 0.7 million, as long-term taxes payable in the accompanying condensed consolidated balance sheet.

As of June 30, 2024, the Company has recorded unrecognized tax benefits of $ 2.3 million, including interest of $ 0.5 million, as long-term taxes payable in the accompanying condensed consolidated balance sheet.

The remaining $ 14.1 million has been recorded within the Company’s DTAs, which is subject to a full valuation allowance.

The valuation allowance was approximately $ 64.2 million as of March 31, 2024, and December 31, 2023, which was related to U.S.

The valuation allowance was approximately $ 64.2 million as of June 30, 2024, and December 31, 2023, which was related to U.S.

net federal and state DTAs.

The worldwide net DTAs balance as of March 31, 2024, and December 31, 2023, were not significant.

The worldwide net DTAs balance as of June 30, 2024, and December 31, 2023, 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 currently under income tax examinations in any other of its major foreign subsidiaries’ jurisdictions.

NET INCOME (LOSS) PER SHARE

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

Net income (loss)

NET INCOME PER SHARE

Basic net income per share is computed by dividing net income by the weighted average number of common shares outstanding for the period (excluding outstanding stock options, nonvested restricted stock units and shares subject to repurchase).

Diluted net income 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 per share (in thousands except per share amount):

Three Months Ended June 30,

Six Months Ended June 30,

Basic weighted average shares outstanding

1 unchanged sentence

Diluted weighted average shares outstanding

Net income (loss) per share:

For the three months ended March 31, 2024, 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 the 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,

Net income per share:

The following table sets forth the potential shares of common stock that were not included in the diluted net income 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,

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,

* represents less than 10%

2 unchanged sentences

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):

11 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 March 31, 2024, and December 31, 2023, 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, 2024, and December 31, 2023, and the basis for those measurements (in thousands):

Fair Value Measurements Using

9 unchanged sentences

Government securities (1)

(1) As of March 31, 2024, and December 31, 2023, the amortized cost of the Company’s investments in U.S.

(1) As of June 30, 2024, and December 31, 2023, 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, 2024, there were no material realized or unrealized gains or losses, either individually or in the aggregate.

For the three and six months ended June 30, 2024, there were no material realized or unrealized gains or losses, either individually or in the aggregate.

COMMITMENTS AND CONTINGENCIES

1 unchanged sentence

Operating Leases — Refer to Note 4, Leases , for the discussion about the Company’s lease commitments.

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.

The Company also indemnifies certain customers from third-party claims of intellectual property infringement relating to the use of its products.

2 unchanged sentences

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, 2024, total outstanding purchase obligations were $ 25.5 million, the majority of which is due within the next 15 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 directors for monetary damages for breach or alleged breach of their fiduciary duties as directors, other than in cases of fraud or other willful misconduct.

As of June 30, 2024, total outstanding purchase obligations were $ 24.5 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.

In addition, the Bylaws of the Company provide that the Company is required to indemnify its officers and directors even when indemnification would otherwise be discretionary, and the Company is required to advance expenses to its officers and directors as incurred in connection with proceedings against them for which they may be indemnified.

The Company has entered into indemnification agreements with its officers and directors containing provisions that are in some respects broader than the specific indemnification provisions contained in the Delaware general corporation law.

The indemnification agreements require the Company to indemnify its officers and directors against liabilities that may arise by reason of their status or service as officers and directors other than for liabilities arising from willful misconduct of a culpable nature, to advance their expenses incurred as a result of any proceeding against them as to which they could be indemnified, and to obtain directors’ and officers’ insurance if available on reasonable terms.

The indemnification agreements require the Company to indemnify its

officers and directors against liabilities that may arise by reason of their status or service as officers and directors other than for liabilities arising from willful misconduct of a culpable nature, to advance their expenses incurred as a result of any proceeding against them as to which they could be indemnified, and to obtain directors’ and officers’ insurance if available on reasonable terms.

The Company has obtained directors’ and officers’ liability insurance in amounts comparable to other companies of the Company’s size and in the Company’s industry.

2 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 March 31, 2024, 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, 2024, 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.

3 unchanged sentences

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

Final written submissions were submitted by the parties at the end of August 2023.

Final written submissions were submitted by the parties at the end of August 2023 and the parties submitted answers to the Tribunal’s final questions on August 2, 2024.

A decision is expected this year.

2 unchanged sentences

(collectively referred to herein as “Advantest”), which includes:

(i) a Securities Purchase Agreement wherein the Company issued and sold to Advantest America, Inc.,

an aggregate of 3,306,924 shares of its common stock, for aggregate gross proceeds of $ 65.2 million;

(i) a Securities Purchase Agreement wherein the Company issued and sold to Advantest America, Inc., an aggregate of 3,306,924 shares of its common stock, for aggregate gross proceeds of $ 65.2 million;

(ii) a significant agreement for its assistance in development of cloud-based applications for Advantest tools that leverages our Exensio analytics software;

1 unchanged sentence

and (iv) a 5 -year cloud-based subscription for Exensio analytics software and related services.

Analytics revenue recognized from Advantest was $ 2.9 million and $ 1.8 million during the three months ended March 31, 2024 and 2023, respectively.

Accounts receivable from Advantest were $ 0.1 million as of March 31, 2024.

Analytics revenue recognized from Advantest was $ 3.0 million and $ 1.8 million during the three months ended June 30, 2024 and 2023, respectively, and $ 5.9 million and $ 3.6 million during the six months ended June 30, 2024 and 2023, respectively.

Accounts receivable from Advantest were $ 10.5 million as of June 30, 2024.

Accounts receivable from Advantest were not material as of December 31, 2023.

Deferred revenue amounted to $ 6.6 million and $ 9.4 million as of March 31, 2024, and December 31, 2023, respectively.

SUBSEQUENT EVENTS

Refer to Note 5, Stockholder’s Equity , for the discussion about the adoption of the 2024 Stock Repurchase Program.

Refer to Note 6, Employee Benefit Plans , for the discussion about the amendments to the 2011 Stock Incentive Plan and the 2021 Purchase Plan.

Deferred revenue amounted to $ 14.5 million and $ 9.4 million as of June 30, 2024, and December 31, 2023, respectively.

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