What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-11-07 compared with 2024-08-08 · 161 added, 122 removed, 483 unchanged (37% 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 credit losses of $ 890 as of June 30, 2024 and December 31, 2023

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

Prepaid expenses and other current assets

32 unchanged sentences

PDF SOLUTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

6 unchanged sentences

Interest and other expense (income), net

Income before income tax benefit (expense)

Income tax benefit (expense)

Income before income tax expense

Income tax expense

Net income (loss)

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 loss

Comprehensive income

Net income per share:

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

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:

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)

2 unchanged sentences

(in thousands)

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

Three-Month Periods in the Nine Months Ended September 30, 2024

Treasury Stock

16 unchanged sentences

Balances, June 30, 2024

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

Balances, September 30, 2024

Continued on next page.

2 unchanged sentences

(in thousands)

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

Three-Month Periods in the Nine Months Ended September 30, 2023

Treasury Stock

15 unchanged sentences

Balances, June 30, 2023

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

Repurchase of common stock

Stock-based compensation expense

Comprehensive loss

Balances, September 30, 2023

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 income to net cash used in operating activities:

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

Depreciation and amortization

3 unchanged sentences

Net accretion of discounts on short-term investments

Accretion of unguaranteed residual assets

Deferred taxes

10 unchanged sentences

Operating lease liabilities

Net cash used in operating activities

Net cash provided by operating activities

Cash flows from investing activities:

1 unchanged sentence

Purchases of short-term investments

Purchase of convertible promissory note

Proceeds from sale of property and equipment

Purchases of property and equipment

Prepayment for the purchase of property and equipment

Purchases of intangible assets

Payment for business acquisition, net of cash acquired

Net cash provided by (used in) investing activities

13 unchanged sentences

(in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Supplemental disclosure of cash flow information:

Cash paid during the year for taxes

Cash paid during the year for income taxes

Cash paid for amounts included in the measurement of operating lease liabilities

20 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 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, realization of deferred tax assets (“DTAs”), 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, fair value of c onvertible note receivable , assumptions made in analysis of allowance for credit losses, impairment of goodwill and long-lived assets, realization of deferred tax assets (“DTAs”), 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.

14 unchanged sentences

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

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 unaudited consolidated financial statements.

REVENUE FROM CONTRACTS WITH CUSTOMERS

38 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.

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 unaudited condensed consolidated statements of comprehensive income (loss).

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

1 unchanged sentence

Assets subject to operating leases remain in property and equipment and continue to be depreciated.

Assets subject to sales-type leases are derecognized from property and equipment, net at lease commencement and a net investment in the lease asset is recognized in prepaid expenses and other current assets and other non-current assets in the accompanying condensed consolidated balance sheets.

Integrated Yield Ramp Revenue

13 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 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.

International revenues accounted for approximately 55 % and 42 % of the Company’s total revenues during the three months ended September 30, 2024 and 2023, respectively, and approximately 55 % and 44 % of the Company’s total revenues during the nine months ended September 30, 2024 and 2023, respectively.

See Note 9, Customer and Geographic Information .

23 unchanged sentences

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

September 30,

Current portion included in prepaid expenses and other current assets

5 unchanged sentences

Deferred revenues were the following (in thousands):

September 30,

Current portion

3 unchanged sentences

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.

Three Months Ended September 30,

Nine Months Ended September 30,

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

As of September 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 $ 239.2 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 $ 0.3 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.

The adjustment to revenue recognized from performance obligations satisfied (or partially satisfied) in previous periods was a decrease of $ 0.7 million and a decrease of $ 0.6 million during the three months ended September 30, 2024 and 2023, respectively, and a decrease of $ 1.4 million and an increase of $ 4.3 million during the nine months ended September 30, 2024 and 2023, respectively.

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

3 unchanged sentences

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

September 30,

Current portion included in prepaid expenses and other current assets

2 unchanged sentences

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Amortization of capitalized direct sales commission costs

2 unchanged sentences

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, 2024 and 2023.

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 material significant financing component during the three and nine months ended September 30, 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 $ 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.

Unbilled accounts receivable, included in accounts receivable, totaled $ 20.7 million and $ 16.4 million as of September 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 $ 10.2 million and $ 1.1 million as of September 30, 2024, and December 31, 2023, respectively.

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

4 unchanged sentences

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

September 30,

Computer equipment

9 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 $ 1.2 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.

Depreciation and amortization expense was $ 0.8 million and $ 1.2 million for the three months ended September 30, 2024 and 2023, respectively, and $ 2.9 million and $ 3.8 million for the nine months ended September 30, 2024 and 2023, respectively.

Goodwill and Intangible Assets, Net

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

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

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

June 30, 2024

September 30, 2024

December 31, 2023

4 unchanged sentences

Noncompetition agreements

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,

The weighted average amortization period for acquired identifiable intangible assets was 4.6 years as of September 30, 2024.

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,

2024 (remaining six months)

2024 (remaining three months)

2029 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, 2024 and 2023.

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

Other Non-current Assets

Other non-current assets consisted of the following (in thousands):

September 30,

Costs capitalized to obtain revenue contracts – non-current (1)

2 unchanged sentences

Net investments in sales-type leases – non-current (3)

Deposits and other non-current prepaid expenses

Total other non-current assets

2 unchanged sentences

(3) The Company had net investments in sales-type leases for its DFI™ system and CV® system assets.

The following table summarizes the components of the Company’s net investments in sales-type leases in the condensed consolidated balance sheets (in thousands):

The following table summarizes the components of the Company’s net investments in sales-type leases in the accompanying condensed consolidated balance sheets (in thousands):

September 30,

Lease receivables

3 unchanged sentences

Net investments in sales-type leases – non-current

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

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

Year Ending December 31,

2024 (remaining six months)

2024 (remaining three 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 June 30, 2024, and December 31, 2023.

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

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

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.

The Company leases administrative and sales offices and certain equipment under non-cancellable operating leases, which contain various renewal or termination 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, 2024, and December 31, 2023.

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

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

4 unchanged sentences

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

September 30,

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

Weighted average discount rate for operating lease liabilities

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

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

Year Ending December 31,

2024 (remaining six months)

2024 (remaining three months)

Total future minimum lease payments

Present value of future minimum lease payments under operating lease liabilities (2)

(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.

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

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

(2) Includes the current portion of operating lease liabilities of $ 1.7 million as of September 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 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.

During the nine months ended September 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.

The 2022 Program expired on April 11, 2024, and on April 15, 2024, the Board of Directors adopted a new program (the “2024 Program”) to repurchase up to $ 40.0 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 .

The Company has not repurchased any shares under the 2024 Program.

EMPLOYEE BENEFIT PLANS

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

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

Employee Stock Purchase Plan

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:

Six Months Ended June 30,

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, 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.

During the three months ended September 30, 2024, a total of 81,974 shares were issued under the 2021 Purchase Plan, at a weighted average purchase price of $ 26.31 per share.

During the three months ended September 30, 2023, a total of 125,392 shares were issued under the 2021 Purchase Plan, at a weighted average purchase price of $ 17.30 per share.

During the nine months ended September 30, 2024, a total of 155,828 shares were issued

under the 2021 Purchase Plan, at a weighted average purchase price of $ 26.14 per share.

During the nine months ended September 30, 2023, a total of 223,608 shares were issued under the 2021 Purchase Plan, at a weighted average purchase price of $ 17.14 per share.

As of September 30, 2024, unrecognized compensation cost related to the 2021 Purchase Plan was $ 2.5 million.

This estimated unrecognized cost is expected to be recognized over a weighted average period of 1.4 years.

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

As of September 30, 2024, 638,481 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, 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.

As of September 30, 2024, 15.1 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 September 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 and six months ended June 30, 2024 and 2023.

There were no stock options granted during the three and nine months ended September 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 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 expense

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

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

Outstanding Options

2 unchanged sentences

Outstanding, January 1, 2024

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,

Outstanding, September 30, 2024

Vested and expected to vest, September 30, 2024

Exercisable, September 30, 2024

The aggregate intrinsic value in the table above represents the total intrinsic value based on the Company’s closing stock price of $ 31.68 per share as of September 30, 2024.

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

Nine Months Ended September 30,

Intrinsic value of options exercised

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:

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

As of September 30, 2024, there was no remaining unrecognized compensation cost related to unvested stock options.

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

Average Grant

2 unchanged sentences

Nonvested, January 1, 2024

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,

Nonvested, September 30, 2024

The weighted average grant date fair values of RSUs granted during the nine months ended September 30, 2024 and 2023 were $ 35.42 and $ 43.92 , respectively.

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

Nine Months Ended September 30,

Fair value of restricted stock units vested

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

As of September 30, 2024, there was $ 52.3 million of total unrecognized compensation cost related RSUs.

That cost is expected to be recognized over a weighted average period of 2.6 years.

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.

Income tax expense decreased by $ 0.9 million for the nine months ended September 30, 2024, to $ 1.6 million as compared to $ 2.5 million for the nine months ended September 30, 2023.

The Company’s effective tax rate was 31.1 % and 53.1 % for the nine months ended September 30, 2024 and 2023, respectively.

The Company’s effective tax rate decreased in the nine months ended September 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 in relation to their forecasted amounts for full years.

The Company’s provision for income taxes for the nine months ended September 30, 2024, was primarily attributable to foreign and state taxes.

The Company’s total amount of unrecognized tax benefits, excluding interest, as of September 30, 2024, was $ 16.6 million, of which $ 2.0 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 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.

As of September 30, 2024, the Company has recorded unrecognized tax benefits of $ 2.6 million, including interest of $ 0.6 million, as long-term taxes payable in the accompanying condensed consolidated balance sheet.

The remaining $ 14.6 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 June 30, 2024, and December 31, 2023, which was related to U.S.

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

net federal and state DTAs.

The worldwide net DTAs balance as of June 30, 2024, and December 31, 2023, were not significant.

The worldwide net DTAs balance as of September 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.

2 unchanged sentences

In addition, due to net operating loss carryback claims, the tax years 2013 through 2015 may be subject to federal examination and all of the net operating loss and research and development credit carryforwards that may be utilized in future years may be subject to federal and state examination.

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

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,

The Company is not currently under income tax examinations in the U.S.

or 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, nonvested restricted stock units 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 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,

Net income (loss) per share:

For the three months ended September 30, 2023, 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 September 30,

Nine Months Ended September 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 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 are as follows:

* represents less than 10%

September 30,

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)

10 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, 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 September 30, 2024, and December 31, 2023, and the basis for those measurements (in thousands):

Fair Value Measurements Using

September 30,

Inputs (Level 3)

3 unchanged sentences

Government securities (1)

Non-current assets

Convertible note receivable (available-for-sale debt security) (2)

Fair Value Measurements Using

3 unchanged sentences

Government securities (1)

(1) As of June 30, 2024, and December 31, 2023, the amortized cost of the Company’s investments in U.S.

(1) As of September 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 and six months ended June 30, 2024, there were no material realized or unrealized gains or losses, either individually or in the aggregate.

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

(2) In August 2024, the Company purchased a $ 2.0 million non-marketable convertible promissory note from an unrelated third party (the “convertible note”).

The convertible note bears a 5 % interest rate annually and will mature in August 2026 and is included in other non-current assets in the accompanying condensed consolidated balance sheet as of September 30, 2024.

As of September 30, 2024, the cost of the convertible note approximated its fair value as there have been no events or changes in circumstances that would have had a significant effect on its fair value from its issuance date to reporting period end.

COMMITMENTS AND CONTINGENCIES

6 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 June 30, 2024, total outstanding purchase obligations were $ 24.5 million, the majority of which is due within the next 12 months.

As of September 30, 2024, total outstanding purchase obligations were $ 34.1 million, the majority of which is due within the next 9 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.

1 unchanged sentence

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 June 30, 2024, the Company was not party to any material legal proceedings for which a loss was probable or an amount was accrued.

As of September 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.

1 unchanged sentence

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.

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.

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.

STRATEGIC PARTNERSHIP AGREEMENT WITH ADVANTEST AND RELATED PARTY TRANSACTIONS

5 unchanged sentences

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

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.

Analytics revenue recognized from Advantest was $ 3.3 million and $ 2.6 million during the three months ended September 30, 2024 and 2023, respectively, and $ 9.2 million and $ 6.2 million during the nine months ended September 30, 2024 and 2023, respectively.

There were no accounts receivable from Advantest as of September 30, 2024.

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

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

Deferred revenue amounted to $ 11.8 million and $ 9.4 million as of September 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