What changed in this filing

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Item 1. Financial Statements

2025-05-08 compared with 2024-11-07 · 287 added, 254 removed, 390 unchanged (58% 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 September 30, 2024, and December 31, 2023

Accounts receivable, net of allowance for credit losses

Prepaid expenses and other current assets

12 unchanged sentences

Deferred revenues – current portion

Billings in excess of recognized revenues

Current portion of long-term debt, net

Total current liabilities

1 unchanged sentence

Non-current portion of operating lease liabilities

Long-term debt, net

Other non-current liabilities

14 unchanged sentences

PDF SOLUTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands, except per share amounts)

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Integrated Yield Ramp

5 unchanged sentences

Amortization of acquired intangible assets

Interest and other expense (income), net

Income before income tax expense

Loss from operations

Interest expense

Other income (expense), net

Loss before income tax expense

Income tax expense

Net income (loss)

Other comprehensive income (loss):

Other comprehensive loss:

Foreign currency translation adjustments, net of tax

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

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

Total other comprehensive income (loss)

Comprehensive income (loss)

Net income (loss) per share:

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

Comprehensive loss

Net loss per share:

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

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)

2 unchanged sentences

(in thousands)

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

Three Months Ended March 31, 2025

Treasury Stock

2 unchanged sentences

Balances, December 31, 2024

Repurchase of common stock

Issuance of common stock in connection with employee stock purchase plan

3 unchanged sentences

Stock-based compensation expense

Comprehensive loss

Balances, March 31, 2024

Issuance of common stock in connection with exercise of options

Vesting of restricted stock units

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

Stock-based compensation expense

Comprehensive income (loss)

Balances, June 30, 2024

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.

PDF SOLUTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY - CONTINUED

(in thousands)

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

Balances, March 31, 2025

Three Months Ended March 31, 2024

Treasury Stock

2 unchanged sentences

Balances, December 31, 2023

Repurchase of common stock

Issuance of common stock in connection with employee stock purchase plan

3 unchanged sentences

Stock-based compensation expense

Comprehensive income

Balances, March 31, 2023

Issuance of common stock in connection with exercise of options

Vesting of restricted stock units

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

Stock-based compensation expense

Comprehensive income (loss)

Balances, June 30, 2023

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

Balances, March 31, 2024

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)

2 unchanged sentences

(in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

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

Depreciation and amortization

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

Stock-based compensation expense

Depreciation and amortization

Amortization of acquired intangible assets

1 unchanged sentence

Net accretion of discounts on short-term investments

Accretion of unguaranteed residual assets

Deferred taxes

8 unchanged sentences

Deferred revenues

Billings in excess of recognized revenues

Operating lease liabilities

Net cash provided by operating activities

Net cash provided by (used in) 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

Net cash used in investing activities

Cash flows from financing activities:

Proceeds from long-term debt, net of payment of debt financing costs

Proceeds from exercise of stock options

2 unchanged sentences

Repurchases of common stock

Net cash used in financing activities

Net cash provided by (used in) financing activities

Effect of exchange rate changes on cash and cash equivalents

6 unchanged sentences

(in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Supplemental disclosure of cash flow information:

2 unchanged sentences

Supplemental disclosure of noncash information:

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

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

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

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

Stock-based compensation capitalized as property and equipment

Property and equipment transferred to sales-type leases

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

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

Debt financing costs included in accounts payable

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)

8 unchanged sentences

The operating results for any interim period are not necessarily indicative of the results that may be expected for other interim periods or the full fiscal year.

The accompanying interim unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 27, 2024.

The condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 27, 2025.

The interim unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries after the elimination of all intercompany balances and transactions.

The accompanying interim unaudited condensed consolidated balance sheet as of December 31, 2023, has been derived from the audited consolidated financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America.

The condensed consolidated balance sheet as of December 31, 2024 has been derived from the audited consolidated financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America.

Use of Estimates

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, 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.

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 convertible 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.

Reclassification of Prior Period Amount

Certain immaterial prior period amounts on the condensed consolidated balance sheet and condensed consolidated statements of cash flows have been reclassified to conform with current period presentation.

Recent Accounting Standards

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, which requires disclosure of incremental segment information on an annual and interim basis.

This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and requires retrospective application to all prior periods presented in the financial statements.

Early adoption is permitted.

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

In December 2023, the FASB issued ASU No.

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2023-09, Income Taxes (Topic 740):

3 unchanged sentences

The ASU’s amendments are effective for public business entities for annual periods beginning after December 15, 2024.

Entities are permitted to early adopt the standard for “annual financial statements that have not yet been issued or made available for issuance.” Adoption is either prospectively or retrospectively, the Company will adopt this ASU on a prospective basis.

Entities are permitted to early adopt the standard for “annual financial statements that have not yet been issued or made available for issuance.” This ASU may be applied either prospectively or retrospectively.

The Company will adopt this ASU on a prospective basis.

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 unaudited consolidated financial statements.

In November 2024, the FASB issued ASU No.

2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses .

This ASU requires the disaggregation of certain expenses in the notes to the consolidated financial statements, to provide enhanced transparency into the expense captions presented on the face of the income statement.

This ASU is effective on a prospective basis for fiscal years beginning after December 15, 2026 and for interim periods beginning after December 15, 2027, with early adoption permitted.

This ASU may be applied either prospectively or retrospectively.

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

REVENUE FROM CONTRACTS WITH CUSTOMERS

16 unchanged sentences

Analytics revenue is derived from the following primary offerings:

licenses and services for standalone software (which is primarily Exensio ® and Cimetrix ® products), software-as-a-service (“SaaS”) (which is primarily Exensio ® products), and Design-for-Inspection™ (“DFI™”) systems and Characterization Vehicle ® (“CV ® ”) systems that do not include performance incentives based on customers’ yield achievement.

licenses and services for standalone software (which is primarily Exensio ® and Cimetrix ® products), software-as-a-service (“SaaS”) (which is primarily Exensio ® products and includes secureWISE ® products and services), and Design-for-Inspection™ (“DFI™”) systems and Characterization Vehicle ® (“CV ® ”) systems that do not include performance incentives based on customers’ yield achievement.

Revenue from standalone software is recognized depending on whether the license is perpetual or time-based.

2 unchanged sentences

Revenue from time-based-licensed software is allocated to each performance obligation and is recognized either at a point in time or over time as follows.

The license component is recognized at the time when control transfers to customers, with the post-contract support component recognized ratably over the committed term of the contract.

The license component is recognized at the time when control transfers to customers, with the post-

contract support component recognized ratably over the committed term of the contract.

For contracts with any combination of licenses, support, and other services, distinct performance obligations are accounted for separately.

For contracts with multiple performance obligations, the Company allocates the transaction price of the contract to each performance obligation on a relative basis using the SSP attributed to each performance obligation.

Revenue from SaaS arrangements, which allow for the use of a cloud-based software product or service over a contractually determined period of time without the customer having to take possession of the software, is accounted for as a subscription and is recognized as revenue ratably, on a straight-line basis, over the subscription period beginning on the date the service is first made available to customers.

Revenue from SaaS arrangements, which allow for the use of a software product or service over a contractually determined period of time without the customer having to take possession of the software, e.g., cloud-based or via a network of secureWISE servers, is accounted for as a subscription and is recognized as revenue ratably, on a straight-line basis, over the subscription period beginning on the date the service is first made available to customers.

For contracts with any combination of SaaS and related services, distinct performance obligations are accounted for separately.

11 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 unaudited condensed consolidated statements of comprehensive income (loss).

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 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 unaudited condensed consolidated balance sheets.

The Company generates revenue from the sale of DFI system products.

Revenue is recognized at a point in time when the Company’s performance obligations have been completed, and the customer has accepted the product.

Integrated Yield Ramp Revenue

13 unchanged sentences

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Point-in-time

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.

International revenues accounted for approximately 62 % and 57 % of the Company’s total revenues during the three months ended March 31, 2025 and 2024, respectively.

See Note 9, Customer and Geographic Information .

9 unchanged sentences

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

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

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

The Company is required to estimate the range of the SSPs for each performance obligation and in instances where the SSP is not directly observable because the Company does not license the software or sell the service separately, the Company determines the SSP using information that may include market conditions and other observable inputs.

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

10 unchanged sentences

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

September 30,

Current portion included in prepaid expenses and other current assets

Non-current portion included in other non-current assets

Current (included in Prepaid expenses and other current assets)

Non-current (included in Other non-current assets)

Total contract assets

1 unchanged sentence

Deferred revenues and billings in excess of recognized revenues consist substantially of amounts invoiced in advance of revenue recognition and are recognized as the revenue recognition criteria are met.

Deferred revenues that will be recognized during the succeeding twelve-month period are recorded as current deferred revenues and the remaining portion is recorded in other non-current liabilities in the accompanying condensed consolidated balance sheets.

Deferred revenues were the following (in thousands):

September 30,

Current portion

Non-current portion (1)

Non-current (included in Other non-current liabilities)

Total deferred revenues

(1) Included in other non-current liabilities.

Revenue recognized that was included in the deferred revenues and billings in excess of recognized revenues balances at the beginning of each reporting period was the following (in thousands):

Three Months Ended 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.

Additional information related to deferred revenue were as follows (in thousands):

Three Months Ended March 31,

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

As of March 31, 2025, 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 $ 226.7 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 $ 0.7 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.

The adjustment to revenue recognized from performance obligations satisfied (or partially satisfied) in previous periods was an increase of $ 0.2 million and a decrease of $ 0.6 million during the three months ended March 31, 2025 and 2024, respectively.

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

2 unchanged sentences

Amortization expense related to these capitalized costs is recognized over the period associated with the revenue from which the cost was incurred.

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

September 30,

Current portion included in prepaid expenses and other current assets

Non-current portion included in other non-current assets

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

Current (included in Prepaid expenses and other current assets)

Non-current (included in Other non-current assets)

Total capitalized direct sales commission costs

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

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 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 $ 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.

Unbilled accounts receivable, included in accounts receivable, totaled $ 27.0 million and $ 23.0 million as of March 31, 2025, and December 31, 2024, 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 $ 8.6 million and $ 9.0 million as of March 31, 2025, and December 31, 2024, respectively.

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

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

collectibility of the accounts receivable.

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

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

The allowance for credit losses was $ 0.9 million as of March 31, 2025 and December 31, 2024.

Prepaid expenses and other current assets

Prepaid expenses and other current assets consist of the following (in thousands):

Prepaid expense

Contract assets

Costs capitalized to obtain revenue contracts

Net investments in sales-type leases - current portion

Income tax receivable

Total prepaid expenses and other current assets

Property and Equipment

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

September 30,

Computer equipment

Software and capitalized software development cost

Furniture, fixtures, and equipment

5 unchanged sentences

CV system and other assets

Total property and equipment

Accumulated depreciation and amortization

Total property and equipment, net

Test equipment mainly includes DFI™ system and CV ® system assets at customer sites that are contributing to revenue.

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 $ 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.

Depreciation and amortization expense was $ 0.7 million and $ 1.1 million for the three months ended March 31, 2025 and 2024, respectively.

Goodwill and Intangible Assets, Net

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

The following table summarizes goodwill transactions for the periods presented (in thousands):

Three Months Ended March 31,

Balance at beginning of the period

Foreign currency translation adjustment

Balance at end of the period

The Company completed the acquisition of SecureWise LLC (“SecureWise”) on March 7, 2025.

See Note 14, “Business Combination” for additional information related to the goodwill and intangible assets added from this acquisition.

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

September 30, 2024

March 31, 2025

December 31, 2024

Acquired identifiable intangibles:

Acquired intangible assets:

Customer relationships

2 unchanged sentences

Noncompetition agreements

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

The weighted average amortization period for acquired identifiable intangible assets was 9.1 years as of March 31, 2025.

The amortization expense related to intangible assets were as follows (in thousands):

Three Months Ended March 31,

Amortization of acquired technology (included in costs of revenues)

Amortization of acquired intangible assets (presented separately under costs and expenses)

Total amortization of acquired intangible assets

The Company expects annual amortization of acquired identifiable intangible assets to be as follows (in thousands):

The estimated future amortization of acquired identifiable intangible assets as follows (in thousands):

Year Ending December 31,

2024 (remaining three months)

2025 (remaining nine months)

2030 and thereafter

Total future amortization expense

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

There was no impairment charges for goodwill and intangible assets during the three months ended March 31, 2025 and 2024.

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)

Unbilled accounts receivable – non-current (2)

Contract assets – non-current (1)

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

Net investments in sales-type leases (3)

Unbilled accounts receivable (2)

Costs capitalized to obtain revenue contracts (1)

Contract assets (1)

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 accompanying condensed consolidated balance sheets (in thousands):

September 30,

Lease receivables

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

Present value of lease receivables

Contract liability

Net lease receivables

Unguaranteed residual assets

Net investments in sales-type leases

Current portion of lease receivables under prepaid expenses and other current assets

Net investments in sales-type leases – non-current

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

Total net investments in sales-type leases

Current (included in Prepaid expenses and other current assets)

Non-current (included in Other non-current assets)

Total net investments in sales-type leases

Maturities of leases payments under sales-type leases as of March 31, 2025, were as follows (in thousands):

Year Ending December 31,

2024 (remaining three months)

2025 (remaining nine 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 September 30, 2024, and December 31, 2023.

There was no allowance for credit losses on lease receivables as of March 31, 2025, and December 31, 2024.

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

1 unchanged sentence

These operating leases expire at various dates through 2028.

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

The Company had no leases that were classified as a financing lease as of March 31, 2025, and December 31, 2024.

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Operating lease expense

1 unchanged sentence

Total lease expense

(1) Leases with an initial term of 12 months or less are not recorded on the accompanying condensed consolidated balance sheets, and the Company recognizes lease expense for these leases on a straight-line basis over the lease term.

(1) Leases with an initial term of 12 months or less are not recorded on the condensed consolidated balance sheets, and the Company recognizes lease expense for these leases on a straight-line basis over the lease term.

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

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 September 30, 2024, were as follows (in thousands):

Maturities of operating lease liabilities as of March 31, 2025 were as follows (in thousands):

Year Ending December 31,

2024 (remaining three months)

2025 (remaining nine months)

Total future minimum lease payments

Present value of future minimum lease payments under operating lease liabilities

Reported as of March 31, 2025:

Operating lease liabilities – current

Operating lease liabilities – non-current

Total operating lease liabilities

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

(2) Includes the current portion of operating lease liabilities of $ 1.7 million as of September 30, 2024.

As of March 31, 2025, the Company had additional undiscounted future minimum payments of $ 0.4 million relating to an operating lease for an office space that had been signed but had not yet commenced.

This operating lease will commence during the second quarter of 2025 and will have a lease term of approximately 6.2 years.

STOCKHOLDERS’ EQUITY

Stock Repurchase Program

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 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.

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

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.

The 2022 Program expired on April 11, 2024.

On April 15, 2024, the Board of Directors adopted a new stock repurchase 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 from the adoption date .

The Company has no t repurchased any shares under the 2024 Program as of March 31, 2025.

EMPLOYEE BENEFIT 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:

Nine Months Ended September 30,

Three Months Ended March 31,

Expected life (in years)

1 unchanged sentence

Expected dividend

Weighted average fair value of purchase rights granted during the period

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 September 30, 2024, 638,481 shares were available for future issuance under the 2021 Purchase Plan.

Stock Incentive Plans

Weighted average fair value of purchase rights granted during the year

During the three months ended March 31, 2025 and 2024, a total of 89,508 shares and 73,854 shares, respectively, were issued under the 2021 Purchase Plan, at a weighted average purchase price of $ 23.68 per share and $ 25.94 per share, respectively.

As of March 31, 2025, unrecognized compensation cost related to the 2021 Purchase Plan was $ 6.6 million, which is expected to be recognized over a weighted average period of 1.8 years.

As of March 31, 2025, 548,973 shares were available for future issuance under the 2021 Purchase Plan.

Subsequently, on April 28, 2025, the Company’s Board of Directors approved an amendment and restatement of the 2021 Purchase Plan, which is subject to stockholder approval at the 2025 annual meeting of stockholders, to, among other things, increase the number of shares reserved for issuance for an additional 0.2 million shares to a total of 1.4 million shares.

Stock Incentive Plan

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

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

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.

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 September 30, 2024.

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

As of March 31, 2025, 15.1 million shares of common stock were reserved to cover stock-based awards under the 2011 Plan, of which 3.5 million shares were available for future grant.

As of March 31, 2025, there were no outstanding awards that had been granted outside of the 2011 Plan.

Subsequently, on April 28, 2025, the Company’s Board of Directors approved an amendment and restatement of the 2011 Plan, which is subject to stockholder approval at the 2025 annual meeting of stockholders, to, among other things, increase the number of shares reserved for issuance for an additional 0.8 million shares to a total of 15.9 million shares.

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 nine months ended September 30, 2024 and 2023.

There were no stock options granted during the three months ended March 31, 2025 and 2024.

Stock-Based Compensation

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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 September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Costs of revenues

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Selling, general, and administrative

Stock-based compensation expense

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

Outstanding Options

(in thousands)

Outstanding, January 1, 2024

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 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:

Total stock-based compensation expense

Stock Award Activities

Restricted stock unit (“RSU”)

Nonvested RSU activities were as follows:

Average Grant

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Nonvested, January 1, 2025

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,

Nonvested, March 31, 2025

The weighted average grant date fair values of RSUs granted during the three months ended March 31, 2025 and 2024 were $ 24.90 and $ 33.17 , respectively.

The total fair value of RSUs vested were as follows (in thousands):

Three Months Ended March 31,

Fair value of restricted stock units vested

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.

As of March 31, 2025, there was $ 43.7 million of total unrecognized compensation cost related RSUs which is expected to be recognized over a weighted average period of 2.4 years.

RSUs do not have rights to dividends prior to vesting.

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.

Stock Options

As of March 31, 2025, the outstanding stock options totaled 26,679 shares.

Total fair value of shares vested during the three months ended March 31, 2025 was immaterial.

As of March 31, 2025, there was no remaining unrecognized compensation cost related to unvested stock options.

Income tax expense decreased by $ 0.1 million for the three months ended March 31, 2025 to $ 36 thousand as compared to $ 0.1 million for the three months ended March 31, 2024.

The Company’s effective tax rate was ( 1.2 %) for the three months ended March 31, 2025 compared to ( 47 %) for the three months ended March 31, 2024.

The increase was primarily due to changes in the foreign, federal 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 three months ended March 31, 2025, was primarily attributable to federal, state and foreign taxes.

The Company’s total amount of unrecognized tax benefits, excluding interest, as of March 31, 2025, was $ 16.9 million, of which $ 2.3 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, 2024 was $ 16.6 million, of which $ 2.1 million, if recognized, would affect the Company’s effective tax rate.

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.

As of March 31, 2025, the Company has recorded unrecognized tax benefits of $ 2.9 million, including interest of $ 0.7 million, as long-term taxes payable in the condensed consolidated balance sheets.

The remaining $ 14.7 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 September 30, 2024, and December 31, 2023, which was related to U.S.

The valuation allowance was approximately $ 67.9 million as of March 31, 2025, and December 31, 2024, which was related to U.S.

net federal and state DTAs.

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

The worldwide net DTAs balance were immaterial as of March 31, 2025 and December 31, 2024.

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

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federal and California income tax purposes, the statute of limitations currently remains open for the tax years ended 2021 to present and 2020 to present, respectively.

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 the U.S.

In addition, 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 known 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

NET LOSS PER SHARE

Basic net loss per share is computed by dividing net 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 loss per share is computed using the weighted average number of common shares outstanding for the period plus the potential effect of dilutive securities which are convertible into common shares (using the treasury stock method), except in cases in which the effect would be anti-dilutive.

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

Three Months Ended March 31,

Basic weighted average common shares outstanding

Effect of dilutive stock options, unvested restricted stock units, and shares of common stock expected to be issued under employee stock purchase plan

Diluted weighted average shares outstanding

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

Diluted weighted average common shares outstanding

Net loss per share:

For the three months ended March 31, 2025 and 2024, because the Company was in a loss position, diluted net loss per share is the same as basic net loss per share as the inclusion of the potential common shares would have been anti-dilutive.

The following table summarizes the potential shares of common stock that were not included in the diluted net loss per share calculation above because to do so would be anti-dilutive for the periods indicated (in thousands):

Three Months Ended March 31,

Non-vested restricted stock units

Employee Stock Purchase Plan

Outstanding stock options

Shares issuable under employee stock purchase plan

CUSTOMER AND GEOGRAPHIC INFORMATION

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or group, in deciding how to allocate resources and in assessing performance.

The Company’s chief operating decision maker, the chief executive officer, reviews discrete financial information presented on a consolidated basis for purposes of regularly making operating decisions, allocation of resources, and assessing financial performance.

Accordingly, the Company considers itself to be in one operating and reporting segment, specifically the provision of services for differentiated data and analytics solutions to the semiconductor and electronics industries.

The Company’s chief operating decision maker (“CODM”), the Chief Executive Officer, reviews discrete financial information including total revenues, gross profit, and net income (loss) presented on a consolidated basis for purposes of regularly making operating decisions about allocation of resources and financial performance assessment.

Further, the CODM reviews and utilizes functional expenses (costs of revenues, research and development, and selling, general and administrative) at the consolidated level to manage the Company’s operations.

Other segment items included in the condensed consolidated net income (loss) are amortization of acquired intangible assets, interest expense, other income (expense), net and income tax expense, which are reflected in the condensed consolidated statements of comprehensive income (loss).

Accordingly, the Company considers itself as one operating and reporting segment because it does not distinguish between markets, specifically the provision of services for differentiated data and analytics solutions to the semiconductor and electronics industries.

The following table presents segment total revenues, costs of revenues, gross profit, and net loss for the periods presented (in thousands):

Three Months Ended March 31,

Total revenues

Costs of revenues

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

* 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:

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 September 30,

United States

Rest of the world

Total revenue

Nine Months Ended September 30,

Three Months Ended March 31,

United States

Rest of the world

Total revenue

Total revenues

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

September 30,

United States (1)

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

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

Fair Value Measurements Using

September 30,

Inputs (Level 3)

Cash equivalents

Balance Sheet

Classification

Money market mutual funds

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

Cash equivalents

Available-for-sale debt securities:

Government securities (1)

Non-current assets

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

Short-term investments

Convertible note receivable (2)

Other non-current assets

Fair Value Measurements Using

Cash equivalents

Balance Sheet

Classification

Money market mutual funds

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

Cash equivalents

Available-for-sale debt securities:

Government securities (1)

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

Short-term investments

Convertible note receivable (2)

Other non-current assets

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

For the three months ended March 31, 2025 and 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.

The convertible note bears a 5 % interest rate annually and will mature in August 2026.

COMMITMENTS AND CONTINGENCIES

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The Company is unable to estimate the maximum potential impact of these guarantees on its future results of operations.

The Company’s standard product warranty terms for the sale of its DFI system product generally include post-sales support and repairs or replacement of a product at no additional charge for a contractually agreed period of time.

The standard warranty reserve is based on estimated total expected costs to fulfill our warranty obligation based on best available information as of the reporting date.

The standard warranty reserve was immaterial as of March 31, 2025 and December 31, 2024.

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 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.

As of March 31, 2025, total outstanding purchase obligations were $ 37.6 million, the majority of which is due within the next 12 months.

Indemnification of Officers and Directors — As permitted by the Delaware General Corporation Law, the Company has included a provision in its certificate of incorporation to eliminate the personal liability of its officers and directors for monetary damages for breach or alleged breach of their fiduciary duties as officers or directors.

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

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

As of September 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 March 31, 2025, the Company was not party to any material legal proceedings for which a loss was probable or an amount was accrued.

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

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

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

The Company seeks to recover the unpaid fees, a declaration requiring SMIC to pay fees under the contracts in the future (or a lump sum payment

to end the contract), and costs associated with bringing the arbitration proceeding.

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

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

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

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.

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 in August 2024.

The Company is awaiting the Tribunal’s decision on a judgment.

STRATEGIC PARTNERSHIP AGREEMENT WITH ADVANTEST AND RELATED PARTY TRANSACTIONS

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

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 $ 11.8 million and $ 9.4 million as of September 30, 2024, and December 31, 2023, respectively.

Analytics revenue recognized from Advantest was $ 3.6 million and $ 2.9 million during the three months ended March 31, 2025 and 2024, respectively.

Accounts receivable from Advantest were not material as of March 31, 2025 and December 31, 2024.

Deferred revenue amounted to $ 5.8 million and $ 8.3 million as of March 31,2025, and December 31, 2024, respectively.

Debt as of March 31, 2025 consisted of (in thousands):

Revolving credit facility

Total debt (principal amount)

Unamortized debt discount and financing costs

Total debt, net of unamortized debt discount and financing costs

Current portion of long-term debt, net

Long-term debt, net

Total debt, net

On March 7, 2025, the Company entered into a Credit Agreement (the “Credit Agreement”) with the lenders who are party to the Credit Agreement and the lenders who may become a party to the Credit Agreement pursuant to the terms thereof (the “Lenders”) and Wells Fargo Bank, National Association, as administrative agent to the Lenders (the “Agent”).

The Credit Agreement provides for (a) a revolving credit facility in an aggregate principal amount of $ 45.0 million (the “Revolving Credit Facility”) and (b) a term loan facility in an aggregate principal amount of $ 25.0 million (the “Term Loan” and together with the Revolving Credit Facility, the “Credit Facilities”).

Borrowings under the Credit Facilities will accrue interest at rates equal, at the Company’s election, to (i) the alternate base rate, which is defined as the highest of (a) the federal funds effective rate in effect from time to time plus 0.50 %, (b) the prime commercial lending rate in effect from time to time, and (c) the daily simple secured overnight financing rate (“SOFR”) plus 1.00 % or (ii) SOFR, plus, in each case, the applicable margin.

The applicable margin for the Revolving Credit Facility borrowings bearing interest at the alternate base rate ranges from 1.00 % to 1.75 %, and the applicable margin for Revolving Credit Facility borrowings bearing interest based on the SOFR ranges from 2.00 % to 2.75 %, in each case, based on the Company’s consolidated total net leverage ratio as of the most recently ended fiscal quarter.

The applicable margin for Term Loan borrowings bearing interest at the alternate base rate ranges from 1.00 % to 1.75 %, and the applicable margin for Term Loan borrowings bearing interest based on the SOFR ranges from 2.00 % to 2.75 %, in each case, based on the Company’s consolidated total net leverage ratio as of the most recently ended fiscal quarter.

The Company will pay an annual commitment fee during the term of the Credit Agreement at a rate per annum equal to 0.50 % for any undrawn portion of the Revolving Credit Facility.

The Credit Agreement contains customary representations and warranties, as well as customary affirmative and negative covenants.

Negative covenants include, among others, restrictions on the incurrence of debt, the incurrence of liens, the making of investments and distributions, dividends and stock buy-backs.

In addition, the Credit Agreement requires that the Company maintain a consolidated total net leverage ratio of not greater than 3.00 to 1.00, and a consolidated fixed charge coverage ratio of not less than 1.25 to 1.00.

As of March 31, 2025, the Company was in compliance with the covenants contained in the Credit Agreement.

The Credit Agreement contains customary events of default.

Upon the occurrence and during the continuance of an event of default, the Agent may declare the outstanding advances and all other obligations under the Credit Agreement immediately due and payable.

The obligations under the Credit Agreement are guaranteed by all present and future material domestic subsidiaries of the Company (collectively with the Company referred to herein as the “Credit Parties”), subject to customary exceptions, and are secured by the equity interests of the Credit Parties (other than the Company) and substantially all of the personal property owned by the Credit Parties, including 65% of the equity interests of certain foreign subsidiaries owned by the Credit Parties.

The Company used the amounts borrowed under the Credit Facilities to finance, in part, the purchase price paid for the acquisition of SecureWise (see Note 14, Business Combination ).

Future Payments on Total Debt

As of March 31, 2025, the estimated future principal payments of the total long-term debt were as follows (in thousands):

Year Ending December 31,

2025 (remaining nine months)

Total future principal payments of long-term debt

BUSINESS COMBINATION

On February 19, 2025, the Company entered into an Equity Purchase Agreement (the “Purchase Agreement”) with Telit IOT Solutions Inc., a Delaware corporation (the “Seller”), and SecureWise, pursuant to which the Company agreed to acquire the Seller’s SecureWise business (the “Business”) by means of a purchase of all of the outstanding equity interests of SecureWise held by the Seller (the “Transaction”).

On March 7, 2025, the Company completed the acquisition of the Business from the Seller pursuant to the Purchase Agreement for a cash purchase price of $ 130.0 million, subject to customary adjustments in respect of indebtedness, transaction expenses, cash and working capital of the Business, in each case, in accordance with the terms of the Purchase Agreement.

The Company financed the Transaction using a combination of cash on hand and borrowings under the Credit Facilities.

The Company expects the Transaction to accelerate equipment makers’ ability to derive value from equipment data by enabling them to leverage the Company’s Exensio analytics software and to expand the capability of the Company’s secure data exchange (“DEX”) outsourced semiconductor assembly and test (“OSAT”) network by allowing equipment makers, fab operators, and fabless companies to collaborate to optimize chip manufacturing and test.

The Company accounted for the Transaction as a business combination in accordance with FASB ASC Topic 805, Business Combinations .

This method requires that assets acquired and liabilities assumed in a business combination be recognized at their respective estimated fair values as of the acquisition date.

The Company allocated the purchase price to identifiable assets acquired based on their estimated fair values.

The fair value of the consideration transferred and the assets acquired and liabilities assumed was determined by the Company and in doing so management engaged a third-party valuation specialist to assist with the measurement of the fair value of identifiable intangible assets.

The estimated fair value of the identifiable assets acquired and liabilities assumed was based on management’s best estimates.

The fair value of the customer relationships was determined using the multi-period excess earnings income approach or cost approach.

The fair value of trade names and developed technology was determined using the relief-from-royalty method.

The fair value of acquired technology was determined using the cost approach.

The excess of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired was recorded as goodwill.

The goodwill recorded from this acquisition represents business benefits the Company anticipates from the acquired workforce and expectation for expanded sales opportunities to foster further business growth.

The goodwill associated with the acquisition is deductible for tax purposes.

The Company expensed all transaction costs in the period in which they were incurred.

The total non-recurring legal, finance, integration and other costs related to the acquisition of SecureWise amounted to $ 5.3 million, of which $ 4.4 million was recorded in the first quarter of 2025 and $ 0.9 million in the fourth quarter of 2024.

The preliminary allocation of the purchase price for the acquisition of SecureWise, as of the date of the completion of the Transaction, is as follows (in thousands, except amortization period):

Period (Years)

Allocation of Purchase Price:

Fair value estimates of assets acquired and liabilities assumed

Accounts receivable

Prepaid and other assets

Fair value of intangible assets:

Customer relationships

Developed technology

Accounts payable and other current liabilities

Total purchase price allocation

The estimated fair value of the accounts receivable acquired approximates the contractual value of $ 3.0 million.

The Company is still finalizing the allocation of the purchase price to the individual assets acquired.

Accordingly, these preliminary estimates are subject to change during the measurement period, which is the period subsequent to the acquisition date during which the acquirer may adjust the provisional amounts recognized for a business combination, not to exceed one year from the acquisition date.

The final purchase price allocation, which may include changes in the allocations within intangible assets and between intangible assets and goodwill, as well as changes in the estimated useful lives of the intangible assets, will be determined when the Company has completed the detailed review of underlying inputs and assumptions used in its preliminary purchase price allocation.

Pro forma information reflecting the impact of the Transaction has not been presented as the Transaction was not material to the Company’s financial results.

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