What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2025-02-27 compared with 2024-02-27 · 110 added, 121 removed, 220 unchanged (51% of the section changed)

1 unchanged sentence

We derive revenues from two sources, Analytics and Integrated Yield Ramp.

Our offerings contribute to Analytics revenue through contract fees for on-premise software and hardware system licenses, software-as-a-service (“SaaS”), and other professional services.

Our offerings contribute to Analytics revenue through contract fees for on-premise software, hardware systems, software-as-a-service (“SaaS”), and other professional services.

Certain of our Characterization services engagements contribute to Integrated Yield Ramp revenue through contract fees and a value-based, variable fee or royalty, which we call Gainshare.

2 unchanged sentences

Our customers include Fortune 500 companies across the semiconductor and electronics ecosystem.

These companies use our products and services to achieve various goals depending on whether they are integrated device manufacturers (“IDMs”), fabless semiconductor companies, foundries, equipment manufacturers, electronics manufacturing suppliers (“EMS”), original device manufacturers (“ODMs”), outsourced semiconductor assembly and test (“OSATs”), or system houses.

For example, our foundry customers generate and analyze key manufacturing data using our solutions to shorten the time necessary for technology development and to provide their fabless customers with a higher yielding process with improved electrical performance, which are both critical metrics for market success.

Higher yields in less time can also mean less total raw materials and process runs, which help lower customers’ total cost and minimize environmental impact.

Also, equipment manufacturers and factories use our connectivity products to implement evolving industry standards for their equipment or operations, respectively, with required quality and stability.

By way of further example, our IDM and fabless customers use our solutions to generate unique, differentiated data that can be analyzed with our machine learning (“ML”) and artificial intelligence (“AI”) algorithms to predict downstream manufacturing issues, resulting in shorter time for designs to meet performance requirements with fewer iterations and faster time-to-market.

For final example, our foundry and OSAT customers use the AI and ML applications of our software to optimize for process control, assembly, and/or test.

These companies use our products and services with the objective of achieving various goals depending on whether they are integrated device manufacturers (“IDMs”), fabless semiconductor companies, foundries, equipment manufacturers, electronics manufacturing suppliers (“EMS”), original device manufacturers (“ODMs”), outsourced semiconductor assembly and test (“OSATs”), or system houses.

For example, our foundry customers generate and analyze key manufacturing data using our solutions, which are designed to shorten the time necessary for technology development and provide their fabless customers with a higher yielding process with improved electrical performance, which are both critical metrics for market success.

Higher yields in less time can also mean less total raw materials and process runs, which can help lower customers’ total cost and minimize environmental impact.

Also, equipment manufacturers and factories use our connectivity products to implement evolving industry standards which require quality and stability for their equipment or operations, respectively.

By way of further example, our IDM and fabless customers use our solutions to generate unique, differentiated data that can be analyzed with our machine learning (“ML”) and artificial intelligence (“AI”) algorithms, which are designed to predict downstream manufacturing issues and result in shorter time for designs to meet performance requirements with fewer iterations and faster time-to-market.

For final example, our foundry and OSAT customers use the AI and ML applications of our software to help optimize for process control, assembly, and/or testing.

Our mission is to provide innovative solutions to create, access, and organize data to enable analysis and control for semiconductor and electronics companies to achieve better time-to-market, yields, quality, and operational efficiencies.

1 unchanged sentence

● Offer a Common, Flexible Platform for a Broad Group of Customers Across the Supply Chain .

As semiconductor and electronics products are made with the efforts of equipment manufacturers, front-end foundries, chip and system designers, design automation, intellectual property (“IP”) providers, and OSATs, there is a need to analyze data across this whole chain to optimize yields, operational efficiencies, time to market, quality, and reliability.

As semiconductor and electronics products are made with the efforts of equipment manufacturers, front-end foundries, chip and system designers, design automation, intellectual property (“IP”) providers, and OSATs, there is a need to analyze data across this entire chain to optimize yields, operational efficiencies, time to market, quality, and reliability.

Our comprehensive platform is designed based on industry standards and integrated with leading solutions providers to enable these different participants to analyze the relevant end-to-end data in near real-time, with cloud or on-premise data stores from 10s to 100s of terabytes (“TBs”) and flexible configurations for IDM, foundry, fabless, and OSAT specific needs.

Our ML solutions combine professional services with our Exensio software to further enable our customers to push their analytics “to the edge” of their global supply chains and shift the analysis and decision-making processes closer to where their data is being generated.

We believe enabling edge analytics will further increase our customers’ ability to improve product yield, quality, performance, and profitability, and therefore, should drive the market for our products and services.

We believe enabling edge analytics will further increase our customers’ ability to improve product yield, quality, performance, and profitability, and therefore, drive the market for our products and services.

● Drive Tool-Level Software Installations to Create an Infrastructure of Connected Equipment and Enable Smart Factories .

We believe that driving installation of our Exensio and Cimetrix software products at the tool level will help provide an infrastructure of connected equipment and help to enable smart factories.

Our Cimetrix products are based on open standards for equipment control and connectivity to equipment manufacturers and factories, which we believe will be more in demand in the smart manufacturing era.

Further, we believe that the

benefits from integration between analytics on equipment, the factory, and in the cloud will provide synergies with our existing end-to-end analytics offerings.

Our Cimetrix products are based on open standards for equipment control and connectivity to equipment manufacturers and factories, which we believe will continue to be in demand in the smart manufacturing era.

Further, we believe that the benefits from integration between analytics on equipment, the factory, and in the cloud will provide synergies with our existing end-to-end analytics offerings.

● Create Differentiated Data Sources for Better Analytics .

Historically, companies have only used data that was generated from their manufacturing and test process to drive improvements.

We offer unique IP (such as Characterization Vehicle® test chips, also branded CV® test chips) that is not part of an integrated circuit’s (“IC”) functionality, but significantly improves the manufacturing process by improving yield learning and reducing time to market.

Also, our Design-for-Inspection™ system (also branded DFI™ system) identifies blockers that impact product yield and quality up to months earlier than any other hardware- or software-based methodology from proprietary e-beam measurement of product layout or provided on-chip instrumentation.

Historically, companies used data that was generated from their manufacturing and test process to drive improvements.

We offer unique IP (such as Characterization Vehicle® test chips, also branded CV® test chips) that is not part of an integrated circuit’s (“IC”) functionality, but designed to significantly improve the manufacturing process by improving yield learning and reducing time to market.

Also, our Design-for-Inspection™ system (also branded DFI™ system) is designed to identify blockers that impact product yield and quality up to months earlier than other hardware- or software-based methodologies from proprietary e-beam measurement of product layout or provided on-chip instrumentation.

We believe that in the More-than-Moore (“MtM”) era, the differentiated data we provide can play an important role in enabling our customers to bring new products to market faster and with higher quality and performance, and, ultimately, more profitability.

1 unchanged sentence

We believe that the value we bring to semiconductor manufacturing can be leveraged with additional data and through differentiated applications.

For example, in 2023, we started offering an enterprise application integration module called Sapience™ Manufacturing Hub, which is designed to collect and unify data from enterprise applications, such as manufacturing execution systems (“MES”), enterprise resource planning systems (“ERP”) like SAP S/4HANA®, and our Exensio software, and make such data available through a central interface.

Also in 2023, working with Siemens Digital Industries Software, we started offering two new Exensio modules, Exensio AIM Scan Analytics and Exensio AIM Scan Systematics Diagnostics, which are designed to enable diagnostic accuracy and efficiency of fail mode to help our customers that also use Siemens’s Tessent software determine the electrical and physical failing locations for product and process improvements.

Building relationships with other industry leaders is intended to provide more ways for mutual customers to leverage their process and product data as part of their Industry 4.0 initiatives.

For example, we offer an enterprise application integration module called Sapience™ Manufacturing Hub enterprise (“SMHe”), which is designed to collect and unify data from enterprise applications, such as manufacturing execution systems (“MES”), enterprise resource planning systems (“ERP”) like SAP S/4HANA®, and our Exensio software, and make such data available through a central interface.

In addition, working with Siemens Digital Industries Software, we offer two other Exensio modules, Exensio AIM Scan Analytics and Exensio AIM Scan Systematics Diagnostics, which are designed to enable diagnostic accuracy and efficiency of fail mode to help our customers that also use Siemens’s Tessent software determine the electrical and physical failing locations for product and process improvements.

Building relationships with other industry leaders is intended to provide more ways for mutual customers to leverage their process and product data.

Differentiated applications that make use of this shared data are designed to provide unique insights to help customers achieve sustained profitability in their manufacturing.

Brief History

PDF Solutions was incorporated in Pennsylvania in November 1992, and we reincorporated in California in November 1995.

In July 2000, we reincorporated in Delaware, and in July 2001, we completed an initial public offering.

Our shares of common stock are currently traded on the Nasdaq Global Market under the symbol “PDFS”.

From 2000 through 2009, we expanded our technology footprint and our operations in various countries through acquisitions.

From 2009 to 2019, we primarily focused on the pervasive application of our technology to leading edge logic manufacturing and achieving yield targets with our clients that maximized Gainshare royalties.

In 2013, we leveraged our extensive experience in yield simulation software and CV® test chip development and started research and development on an e-beam solution for non-contact, inline electrical inspection and process control for wafer inspection.

In a parallel effort, starting in 2014, we re-architected our point-solution software tools into a new generation, highly-integrated data analytics Exensio software, which resulted in accelerated growth in revenues from software through 2019.

Starting in 2020, after our acquisition of Cimetrix Incorporated (“Cimetrix”), we began providing software products based on open standards for equipment control and connectivity to equipment manufacturers and factories.

We released our first eProbe tool in 2015, the second generation in 2019, and the third generation in late 2022.

The improvements in the third generation included:

● higher resolution and improved beam vector targeting, enabling use for leading-edge, middle-of-line applications;

● higher throughput;

● better manufacturability and repeatable column performance.

Industry Background

Rapid technological innovation with increasingly shorter product life cycles has fueled the economic growth of the semiconductor industry since the days of the PC revolution.

Rapid technological innovation with increasingly shorter product life cycles has fueled the economic growth of the semiconductor industry.

IC companies have historically ramped production slowly, produced at high volume once a product gained market acceptance, and slowly reduced production volume when price and demand started to decrease near the end of the product’s life cycle.

1 unchanged sentence

products that follow the traditional life cycle just described, products targeted towards fast-moving market segments like Internet of Things – which utilize mature process nodes and require a fast ramp to volume with a relatively short life cycle, and products focused on long term market segments like automotive and industrial where product life cycles can last a decade or longer.

There is a lot of variation across these business models depending on the level of design complexity and the maturity of the process node used for product implementation.

There is considerable variation across these business models depending on the level of design complexity and the maturity of the process node used for product implementation.

Processors, memory and field-programmable gate arrays (“FPGA”) continue to leverage the most advanced process nodes and experience significant challenges to achieve competitive initial yields and optimized performance.

Some products and market segments, however, are content to utilize older process nodes.

Regardless of the process node used for implementation or how long the product will be sold in the market, success for every semiconductor company is predicated, among other things, on fast product yield ramp and the ability to optimize manufacturing and test metrics, such as yield reclamation, product quality, and test efficiency, throughout a product’s life cycle.

Thus, technologies or capabilities that can accelerate yield ramp, improve product quality, and optimize production efficiencies are highly sought after because they typically lead to cost reduction and revenue generation concurrently, causing a leveraged effect on profitability.

Some products and market segments, however, may be content to utilize older process nodes.

Regardless of the process node used for implementation or how long the product will be sold in the market, success for semiconductor companies is predicated, among other things, on fast product yield ramp and the ability to optimize manufacturing and test metrics, such as yield reclamation, product quality, and test efficiency, throughout a product’s life cycle.

Thus, technologies or capabilities that can accelerate yield ramp, improve product quality, and optimize production efficiencies are highly sought after because they can lead to cost reduction and revenue generation concurrently, causing a leveraged effect on profitability.

Technology and Intellectual Property Protection

Our success is largely dependent upon our proprietary software.

We believe the creative skills and technological ability of our personnel, product enhancements, and new product development are necessary to maintaining our position as a leading provider.

We believe the creative skills and technological ability of our personnel, product enhancements, and new product development are necessary to maintaining our position as a leading provider of comprehensive data solutions to the semiconductor industry.

We rely primarily on trade secret rights, copyright laws, and nondisclosure and other contractual agreements to protect our software.

1 unchanged sentence

As of December 31, 2024, we held 128 U.S.

patents, with expiration dates on issued patents ranging from 2024 through 2042.

patents, with expiration dates on issued patents ranging

from 2025 through 2044.

We intend to prepare additional patent applications when we feel it is beneficial.

1 unchanged sentence

We protect our trademarks with registration of marks, including Characterization Vehicle, Cimetrix, CV, eProbe, Exensio, pdFasTest, PDF Solutions, and the PDF Solutions and Cimetrix logos.

We have common law rights to additional trademarks, including ALPS, DFI, DirectProbe, DirectScan, Fire, and Sapience.

We have common law rights to additional trademarks, including ALPS, D ∑∑ P, DFI, DirectProbe, DirectScan, Fire, and Sapience.

We enter into confidentiality and inventions assignment agreements with our employees and confidentiality and license agreements with our customers and the various parties we partner with to resell, distribute, and, in some cases, integrate our products.

Further, we limit access to and distribution of our software, documentation and other proprietary information.

Further, we work to limit access to and distribution of our software, documentation and other proprietary information.

Third parties could in any case develop competing technologies that include similar functionality or features, or otherwise are substantially equivalent or superior to our technologies.

12 unchanged sentences

Exensio products are designed to enable real-time rapid diagnosis and understanding of key manufacturing and test metrics during both inline and end-of-line wafer processing, helping customers reduce product variability and cost simultaneously.

By integrating silos of data and applying AI and ML, Exensio products resolve the limitation of local optimization and provide better visibility across the entire production process, reducing the time it takes to make critical decisions that can drive higher product yield, quality and reliability.

Our collaboration with strategic partners is intended to also integrate data from those partners’ products to make it available in Exensio and also to develop new applications to inter-operate with those products and enhance the value to mutual customers.

For example, in 2023, we started offering Sapience™ Manufacturing Hub, which provides a single, common connectivity platform between enterprise applications, such as MES, ERP, and our Exensio software.

Sapience Manufacturing Hub enables advanced applications – including those for top management – that benefit from more real-time and detailed insight into manufacturing.

Our Exensio Foundry Product Costing module, which leverages Sapience Manufacturing Hub, provides more accurate insight into the gap between plan costs and actual costs, enabling actions to improve profitability.

Exensio Foundry Product Costing module integrates with SAP S4/HANA due to our collaboration with SAP SE to enable this capability.

By integrating silos of data and applying AI and ML, Exensio products are designed to resolve the limitations of local optimization and provide better visibility across the entire production process, reducing the time it takes to make critical decisions that can drive higher product yield, quality and reliability.

Our collaborations with strategic partners are intended to also integrate data from those partners’ products to make it available in Exensio and also to develop new applications to inter-operate with those products and enhance the value to mutual customers.

Exensio software is available as either an on-premise license or SaaS and is offered in four main, separately-offered Exensio products targeting the needs of the customer’s business model:

15 unchanged sentences

This capability is becoming an essential requirement for safety-critical market segments such as automotive and military-aerospace.

Sapience™ Manufacturing Hub enterprise .

SMHe provides a single, common connectivity platform between enterprise applications, such as MES, ERP, and our Exensio software.

SMHe enables advanced applications – including those for top management – that benefit from more real-time and detailed insight into manufacturing.

Our Exensio Foundry Product Costing module, which leverages SMHe, is designed to provide more accurate insights into the gap between plan costs and actual costs, enabling actions to improve profitability.

Exensio Foundry Product Costing module integrates with SAP S4/HANA due to our collaboration with SAP SE to enable this capability.

Design-for-Inspection System.

Our DFI™ system, which we have provided under a lease arrangement to some customers, leverages our production-proven design and analysis infrastructure and is designed to enable customers to achieve non-contact, inline electrical inspection of either our proprietary on-chip instruments or their product chip layout structures.

Our DFI system, which we have provided under a lease arrangement or hardware sale to different customers, leverages our production-proven design and analysis infrastructure and is designed to enable customers to achieve non-contact, inline electrical inspection of either our proprietary on-chip instruments or their product chip layout structures.

The electrical measurements augment and enhance existing inline defect inspection and metrology methods for more effective process control and inline, direct inspection of product wafers.

The DirectScan application of the DFI system includes our proprietary Exensio Characterization and Fire™ layout analysis software and the eProbe® non-contact e-beam tool.

The original application of the DFI system also included our on-chip instruments.

These elements are described as follows:

3 unchanged sentences

● DFI On-Chip Instruments – Our on-chip measurement instruments are tuned to capture key features of our customers’ product layouts, including those identified using the Fire module.

As part of the system offering, we generally provide design services to create these instruments.

These DFI instruments are designed to be placed in test chips, scribe lines, or in product die without any area penalty, and to exhibit specific electrical responses.

When part of the system offering, we generally provide design services to create these instruments.

These DFI instruments are designed to be placed in test chips or scribe lines and to exhibit specific electrical responses.

● eProbe® Non-Contact E-Beam Tool – Our eProbe e-beam tools are designed for contactless measurement of the electrical response of the DFI instruments and suitable product layout structures.

As part of the system offering, we generally provide tool support services to customers to operate this tool.

The third generation tool includes advances in accuracy and sensitivity and, in addition to enabling DFI on-chip instruments to be used for inline control for leading-edge semiconductor process nodes, is designed to enable customers to see defects in product wafers inline within acceptable queue time and much higher throughput.

The fourth generation tool, the 450, includes advances in beam vector targeting and higher signal-to-noise (SNR) for enhanced defect sensitivity, higher throughput, enhanced tool matching, and better inspection control for more stable performance necessary for high-volume manufacturing (HVM).

Characterization Vehicle System (also branded as our CV™ System) .

7 unchanged sentences

Types of CV test chips include:

◾ Our full-reticle and shared-reticle CV test chips are designed to provide a fast-learning cycle and are fully integrated with third-party failure analysis and inspection tools for a complete diagnosis to

understand root causes.

Our full-reticle CV test chips use a shortened process flow to provide a faster learning cycle for specific process modules.

11 unchanged sentences

Our Cimetrix products are designed to fully support these industry standards to enable equipment manufacturers to implement robust, turnkey support for these connectivity and control standards without needing to invest engineering resources to develop their own interfaces to these standards.

Factories that purchase manufacturing equipment enabled with Cimetrix-supported interfaces, benefit from consistent and robust implementations of industry standards, enabling faster and more efficient implementation of smart manufacturing initiatives that depend on the collection and analysis of manufacturing and product data.

Manufacturing equipment enabled with Cimetrix-supported interfaces allow for faster and more efficient implementation of smart manufacturing initiatives that depend on the collection and analysis of manufacturing and product data in keeping with industry standards.

Cimetrix products are sold via perpetual licenses and typically sold as part of a software development kit (“SDK”) that helps equipment manufacturers implement them quickly.

9 unchanged sentences

These GEM300 standards are required for full automation in manufacturing of 300mm wafers.

CIM300 works with Cimetrix CIMConnect to implement the GEM300 and the original GEM suite of standards.

Cimetrix CIM300 works with Cimetrix CIMConnect to implement the GEM300 and the original GEM suite of standards.

◾ Cimetrix CIMPortal ™ Plus is an interface for EDA, also known as Interface A.

22 unchanged sentences

One requirement of big data analytics is to have clean, harmonized data to analyze.

This service offering outsources the data wrangling and management effort to free the customer to focus their efforts on analysis, which has a greater ROI to the company than data management.

Characterization Services – These services are designed to characterize key product and/or process elements, primarily into CV test structures or DFI on-chip measurement instruments, and typically do not include performance

incentives based on the customers’ yield achievement.

This service offering outsources the data wrangling and management effort to free the customer to focus their efforts on analysis, which has a greater return on investment to the company than data management.

DFI System Related Services – We provide application engineering services to design and build recipes for our tool, which involves configuring the tool for the type of product wafer, die size and location, target inspection sites within die, which can include specific DUTs to inspect and their location, as well as the parameters to flag a DUT as an outlier.

We also provide engineering services to customers of the eProbe tool to maintain and repair or replace parts on the tool during the warranty period and any contractual service period.

When part of a system offering, we provide tool support services to customers to operate the tool.

These services are primarily provided at the facility where the tool is installed.

After the initial warranty period, the availability of engineering support and parts cost depends on the service package level a customer purchases.

We provide these services, typically together with all elements of our CV system, to foundry customers in connection with new process technology development and/or yield ramp.

6 unchanged sentences

In general, our customer contracts are non-cancellable.

One customer accounted for 35% of our revenues for 2023, two customers accounted for 41% of our revenues for 2022 and two customers accounted for 27% of our revenues for 2021.

Two customers accounted for 31% of our revenues for 2024, one customer accounted for 35% of our revenues for 2023 and two customers accounted for 41% of our revenues for 2022.

No other customers accounted for 10% or more of our revenues in 2024, 2023 and 2022.

Also, two customers accounted for 50% of our gross accounts receivable as of December 31, 2023, and three customers accounted for 53% of our gross accounts receivable as of December 31, 2022.

We generally do not require collateral or other security to support accounts receivable.

See the discussion in “Risk Factors” under Item 1A for more information about risks associated with customer concentration and contractual provisions.

International revenues accounted for approximately 44%, 50% and 55% of our total revenues for 2023, 2022 and 2021, respectively.

We base these calculations on the geographic location of where the work is performed or where the customer is located.

Revenues from customers by geographic area based on the location of the customers’ work sites for the last three fiscal years can be found in Note 11, “Customer and Geographic Information” to the consolidated financial statements.

Additional discussion regarding the risks associated with international operations can be found under Item 1A, “Risk Factors”.

See Note 12, “Customer and Geographic Information” to the consolidated financial statements.

See our Notes to Consolidated Financial Statements included under Part II, Item 8.

4 unchanged sentences

Our direct sales and service teams combine their efforts to deepen our customer relationships by expanding our penetration across customers’ products, processes, and technologies.

This close working relationship with each customer has the added benefit of helping us to identify new product areas and technologies in which we should next focus our research and development efforts.

This close working relationship with each customer has the added benefit of helping us to identify new product areas and technologies in which we should next focus our research and

development efforts.

From time-to-time, we use sales representatives/agents in various locations to augment direct sales in certain territories.

2 unchanged sentences

Research and Development

Our research and development focuses on developing and introducing new proprietary technologies for our comprehensive platform, including our Exensio software, Cimetrix connectivity and control products, and DFI and CV systems, as well as other software products and enhancements to our existing solutions, such as field applications for DFI

and CV and new applications targeted to inter-operate with strategic partner products.

We use a rapid-prototyping paradigm in the context of the customer engagement to achieve these goals.

6 unchanged sentences

We also utilize a variety of skilled independent contractors for specialized development.

The semiconductor industry is highly competitive and driven by rapidly changing design and process technologies, evolving standards, short product life cycles, and decreasing prices.

We expect market competition to continue to develop and increase as the market for data and analytics continues to evolve.

We believe IC companies benefit from a combination of big data management infrastructure, AI/ML-based analytics engines, and products that generate and collect differentiated data that enrich the analytics process.

Currently, we are a leading provider of comprehensive commercial hardware, software and IP solutions for optimizing and improving design, manufacturing and test operations processes through the application of differentiated data and advanced analytics.

As a result, we face competition from three primary groups:

internal customer development or design programs, equipment solutions providers, and providers of analytical and design software.

We face indirect competition from internal groups at IC companies that offer tools with varying degrees of optimization to accelerate process-design integration or test operations.

Some providers of semiconductor manufacturing software, inspection equipment, electronic design automation, or design IP may seek to broaden their product offerings and compete with us.

In addition, companies providing general ML and analytics software may focus on semiconductor companies and compete with us.

In each of the market segments we compete in, we face competition from established and potential competitors, some of whom may have greater financial, research, engineering, manufacturing and marketing resources than we have.

We currently face indirect competition from the internal groups at IC companies and direct competition from providers of (i) yield management and/or prediction systems, such as KLA Corporation (“KLA”), Siemens AG (“Siemens”), Onto Innovation, Inc.

Governmental Regulations

We are subject to a variety of federal, state, local and foreign laws and regulations relating to our business and operations, including those related to trade controls, anti-corruption, anti-bribery, data privacy, data protection, use of AI, antitrust, competition, employment, income taxes, and the environment.

A large percentage of our software products are not of U.S.

origin and not generally subject to the U.S.

Export Administration Regulations (“EAR”) when not located in the U.S.

Our standard operations include development, distribution processes, software download sites, and professional service centers and processes located in various geographies around the world to better serve our customers.

We are subject to laws and regulations in the United States and other jurisdictions concerning these operations with respect to certain of our products and services outside the United States and to foreign nationals, including the EAR, tariffs, trade protection measures, sanctions, and other trade regulations.

The Bureau of Industry and Security (“BIS”) of the U.S.

Department of Commerce has placed certain entities on and frequently adds entities to the “Entity List,” which restricts supply of items to or in connection with the named entities and impacts our ability to transact business with certain customers.

BIS recently extended controls to renewal licenses for certain lawfully delivered products that would have changed status under new regulations and designations, causing us to decline certain renewals.

Trade regulations limiting or banning sales into certain countries or to certain companies, including economic and financial sanctions and trade embargoes administered and enforced by the U.S.

Department of the Treasury’s Office of Foreign Assets Control (“OFAC”), have impacted our ability to transact business in certain countries and with certain customers.

Future trade regulations may also impact our ability to transact business with certain customers and in certain countries and may restrict certain non-U.S.

person employees from performing their duties at PDF without first obtaining appropriate authorization if their duties involve an export, reexport, or transfer of export-controlled technology.

Anti-corruption and anti-bribery

We are subject to laws and regulations in the United States and other jurisdictions concerning anti-corruption and anti-bribery, including the U.S.

Foreign Corrupt Practices Act and the U.K.

Bribery Act, which prohibit corrupt payments to governmental officials and bribes to other persons.

Data privacy and data protection

We are subject to laws and regulations in the United States and other jurisdictions governing data privacy and data protection, including laws in Japan, China, and the EU/UK, which regulate our collection, handling, and use of personal information.

The laws and regulations to which we are subject are complex and may change or develop over time, sometimes with limited or no advance notice.

Developments or other changes in laws or regulations or how they are interpreted or enforced have had, and may continue to have, a negative impact on our business and increase our compliance-related expenditures.

Artificial intelligence

The regulatory framework governing the use of AI, machine learning and automated decision-making technologies (“AI Technologies”) is rapidly evolving.

Many federal, state and foreign government bodies and agencies have introduced or are currently considering additional laws and regulations.

Already, certain existing legal regimes (e.g., relating to data privacy) regulate certain aspects of AI Technologies, and new laws regulating AI Technologies have been enacted in China, the United States, and the European Union.

In the United States, the Trump administration has rescinded an executive order relating to AI Technologies that was previously implemented by the Biden administration and may continue to rescind other existing federal orders and/or administrative policies relating to AI Technologies, or may implement new executive orders and/or other rule-making relating to AI Technologies in the future.

legislation is also advancing at the state level.

For example, the California Privacy Protection Agency is currently in the process of finalizing regulations under the California Consumer Privacy Act regarding the use of automated decision-making.

The EU Artificial Intelligence Act (the “EU AI Act”) applies to companies that develop, use and/or provide AI in the EU and – depending on the AI use case - includes requirements around transparency, conformity assessments and monitoring, risk assessments, human oversight, security, accuracy, general purpose AI and foundation models, and fines for breach of up to 7% of worldwide annual revenues.

Such additional regulations may impact our ability to develop, use and commercialize AI Technologies in the future.

For additional information regarding risks related to laws and regulations, including existing restrictions imposed by BIS, as well as international operations, see Item 1A, “Risk Factors.”

We believe that our solutions compare favorably with respect to competition because we have demonstrated results and reputation, strong core technology, ability to create innovative technology, and ability to implement solutions for new technology and product generations.

Further, we believe IC companies benefit from our combination of big data management infrastructure, AI/ML-based analytics engines, and products that generate and collect differentiated data that enrich the analytics process.

We face competition regarding different elements of our products and services portfolio from the following sources and companies:

● indirect competition from internal groups at IC companies that may choose to develop their own test chips or software analytics solutions internally typically by using various commercially-available, general-purpose software, including for example, Tableau from Salesforce, Inc., TIBCO from Cloud Software Group, Snowflake, Inc., Databricks, Inc.;

● direct competition from providers of:

o yield management and/or prediction systems, such as KLA Corporation (“KLA”), Onto Innovation, Inc.

(“Onto”), and Synopsys, Inc.

(“Synopsys”);

(ii) semiconductor manufacturing software, such as Applied Materials, Inc (“Applied Materials”), Synopsys, Invantest, Inc., Emerson Electric Co., Onto, and Siemens;

(iii) inline inspection, metrology and electrical test equipment providers, such as ASML Holding N.V.

(“ASML”), Applied Materials, KLA, and Keysight Technologies, Inc.;

and, (iv) connectivity software or integration products/services supporting factory equipment connectivity or control needs of customers, such as PEER Group, Inc., Kontron AIS, GmbH, Yokogawa Electric Corp., Advantest, and Kornic Automation Co.

There may be other providers of competitive commercial solutions of which we are not aware, and we may compete with the products or offerings of these named companies or additional companies if we expand our offerings through acquisitions or development.

For example, since our acquisition of Cimetrix in late 2020, we now face competition in the products/services supporting the connectivity, control and integration of factory equipment.

The demand for solutions that address the need for better integration between the silicon design and manufacturing processes may encourage direct competitors to enter our market.

For example, in 2020, two of our competitors were acquired by larger entities, Synopsys acquired Qualtera and NI, Inc.

acquired Optimal+, and each has increased marketing or pricing competition with us.

For example, in 2023, Emerson Electric Co.

acquired NI, Inc.

This competition in our market may intensify in the future, which could lead to increased pricing pressure, negatively impacting our revenues, and slow our ability to grow or execute our strategy.

Also, our current and potential customers may choose to develop their own solutions internally, particularly if we are slow in deploying our solutions or improving them to meet market needs.

These and other competitors may be able to operate with a lower cost structure than our engineering organization, which would give any such competitor’s products a competitive advantage over our solutions.

o semiconductor manufacturing software, such as Applied Materials, Inc (“Applied Materials”), Synopsys, Invantest, Inc., Emerson Electric Co., Onto, and Siemens AG;

o inline inspection, metrology and electrical test equipment providers, such as ASML Holding N.V., Applied Materials, KLA, and Keysight Technologies, Inc.;

o connectivity software or integration products/services supporting factory equipment connectivity or control needs of customers, such as PEER Group, Inc., Kontron AIS, GmbH, Yokogawa Electric Corp., Advantest Corporation, and Kornic Automation Co.

See the discussions in “Risk Factors” under Item 1A for more information about risks associated with our competition.

1 unchanged sentence

We believe that our future success will depend, in part, on our continued ability to hire and retain qualified management, sales, and technical employees.

Consequently, we seek to engage in sound ethical and organizational governance, promote business ethics and integrity, and embrace equality, diversity, and inclusion throughout our organization.

As of December 31, 2023, we had 493 employees worldwide, including 171 field application engineers and consultants, 155 in research and development, 106 in sales and marketing, and 61 in general and administrative functions.

Consequently, we seek to engage in sound ethical and organizational governance, and promote business ethics and integrity.

As of December 31, 2024, we had 539 employees worldwide, including 174 field application engineers, 189 in research and development, 113 in sales and marketing, and 63 in general and administrative functions.

Of these employees, 321 are located in the United States, 180 in Asia, and 38 in Europe.

1 unchanged sentence

Our employees in France and Italy are subject to collective bargaining agreements in those countries.

Our commitment to human capital management is embedded in our governance structure

At the Board level, our Compensation and Human Capital Management Committee is tasked with oversight of the development, implementation and effectiveness of our policies and strategies relating to human capital management, including strategies regarding recruiting, selection, career development and progression, and diversity and employment practices.

Further, our Nominating and Corporate Governance Committee is tasked with primary oversight for governance and ESG issues.

Talent Development

We are committed to the development and growth of our employees because we believe this is crucial for our long-term success.

This includes offering training, mentorship, and other development opportunities to further enhance the talent we have today, but also entails having the right skill sets for our future.

To this end, we are working to implement a planned set of actions around increasing formal programs to achieve these goals.

We believe that our team of engineers will continue to advance our market and technological leadership.

We conduct in-house training for our engineers in certain technical areas.

We also fund attendance at continuing education courses, symposia, and participation in professional organizations.

We believe the development and growth of our employees is crucial to further enhance the talent we have today and to foster the right skill sets for our future for our long-term success.

As such, we encourage mentorship and engaging in development opportunities.

We also conduct in-house training for our engineers in certain technical areas and provide access to an online training platform for all of our employees.

Further, we fund attendance at continuing education courses, symposia, and participation in professional organizations.

Employee Engagement

5 unchanged sentences

• flexible work locations and schedules;

• providing a sense of organizational community by hosting online as well as in-person events where our people can gather and connect.

• providing a sense of organizational community by hosting in-person events where our people can gather and connect.

Health and Safety

We are committed to ensuring that proper working conditions exist for the safety of our employees, such as developing, implementing, and improving health and safety systems and conditions, and providing appropriate preparation, education, reporting, and controls.

Diversity, Equity, and Inclusion

We work to ensure that our business practices support diversity and inclusion to build an innovative workforce and to strive toward having our organization reflect the complexion of our customers and suppliers.

In February 2024, after considering the recommendation of the Nominating and Corporate Governance Committee, the Compensation and Human Capital Management Committee approved, and then our Board adopted, a Human Rights policy and a Diversity, Equity, and Inclusion (“DEI”) Policy to better implement our core values and relevant standards into our governance structure.

We are strengthening our diversity and inclusion programs with actions around organizational training, on-going education and focus on our company values, and a revitalized recruitment strategy.

We value a range of diverse perspectives with reference to our business model and specific needs, including, but not limited to, gender, age, race, language, cultural background, educational background, industry experience, professional experience, and veteran and active armed service status or other similar characteristics.

Information about our Executive Officers

The following table and notes set forth information about our current executive officers as of the date of this Form 10-K.

The following table and notes set forth information about our current executive officers as of the date of this Annual Report on Form 10-K.

Kibarian, Ph.D.

19 unchanged sentences

Raza also served as a board member at FIDO Alliance, an alliance of leading technology companies to enhance user security and authentication.

Raza holds an M.B.A.

from The Wharton School at the University of Pennsylvania, a M.

in Electrical Engineering from Cornell University, and a B.S.

in Electrical Engineering from Valparaiso University.

Raza holds a B.S.

in Electrical Engineering from Valparaiso University, an M.

in Electrical Engineering from Cornell University, and an M.B.A.

from The Wharton School at the University of Pennsylvania.

Michaels, Ph.D.

, one of our founders, has served as Vice President, Products and Solutions since July 2010 and was designated as an Executive VP in February 2019.

, one of our founders, has served as Vice President, Products and Solutions since July 2010 and was designated as an Executive Vice President in February 2019.

Michaels served as Vice President, Design for Manufacturability from June 2007 through June 2010.

4 unchanged sentences

Michaels received a B.S.

in Electrical Engineering, and M.S.

in Electrical Engineering, an M.S.

from Carnegie Mellon University.

14 unchanged sentences

The Company’s website address provided is not intended to function as a hyperlink, and the information on the Company’s website is not, and should not be considered, part of this Annual Report on Form 10-K and is not incorporated by reference herein.

The SEC maintains a Web site (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers, such as us, that file electronically with the SEC.

The SEC maintains a website (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers, such as us, that file electronically with the SEC.

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-K

Item 1. Business