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What changed in PDF SOLUTIONS INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of PDF SOLUTIONS INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+403 added−425 removedSource: 10-K (2025-02-27) vs 10-K (2024-02-27)

Top changes in PDF SOLUTIONS INC's 2024 10-K

403 paragraphs added · 425 removed · 294 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

71 edited+19 added−29 removed60 unchanged
Biggest changeWe 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. (“Onto”), and Synopsys, Inc.
Biggest changeWe 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.; and 12 Table of Contents ● direct competition from providers of: o yield management and/or prediction systems, such as KLA Corporation (“KLA”), Onto Innovation, Inc.
Raza holds an M.B.A. from The Wharton School at the University of Pennsylvania, a M. Eng. in Electrical Engineering from Cornell University, and a B.S. in Electrical Engineering from Valparaiso University. Kimon W.
Raza holds a B.S. in Electrical Engineering from Valparaiso University, an M. Eng. in Electrical Engineering from Cornell University, and an M.B.A. from The Wharton School at the University of Pennsylvania. Kimon W.
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. Technology and Intellectual Property Protection Our success is largely dependent upon our proprietary software.
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 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. ● Drive Tool-Level Software Installations to Create an Infrastructure of Connected Equipment and Enable Smart Factories .
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 .
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.
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.
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. Dr. Michaels served as Vice President, Design for Manufacturability from June 2007 through June 2010. Prior to that, Dr.
Michaels, Ph.D. , 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. Dr. Michaels served as Vice President, Design for Manufacturability from June 2007 through June 2010. Prior to that, Dr.
Further, we 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.
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.
Further, we believe that the 4 Table of Contents 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.
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. 4 Table of Contents ● Create Differentiated Data Sources for Better Analytics . Historically, companies used data that was generated from their manufacturing and test process to drive improvements.
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.
We have common law rights to additional trademarks, including ALPS, 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.
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.
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.
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.
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. 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.
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.
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. 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.
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.
We charge a one-time fee per equipment product type for the SDK license and a one-time fee for each piece of equipment shipped that includes the Cimetrix runtime license. ● Equipment Factory Connectivity – Our products for equipment factory connectivity primarily include the following: ◾ Cimetrix CIMConnect ™ is a SEMI SECS/GEM interface to the factory host for automated control and data collection.
We charge a one-time fee per equipment product type for the SDK license and a one-time fee for each piece of equipment shipped that includes the Cimetrix runtime license. 8 Table of Contents ● Equipment Factory Connectivity – Our products for equipment factory connectivity primarily include the following: ◾ Cimetrix CIMConnect ™ is a SEMI SECS/GEM interface to the factory host for automated control and data collection.
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.
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.
Test Operations is also designed to provide predictive insights based on proprietary analytics during test, assembly and packaging to maximize the efficiency of test operations, productivity improvements and yield reclamation. 7 Table of Contents ● Assembly Operations – This module provides the capability to link assembly and packaging data with other product lifecycle data, including fabrication and characterization data, across the product life cycle.
Test Operations is also designed to provide predictive insights based on proprietary analytics during test, assembly and packaging to maximize the efficiency of test operations, productivity improvements and yield reclamation. ● Assembly Operations – This module provides the capability to link assembly and packaging data with other product lifecycle data, including fabrication and characterization data, across the product life cycle.
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.
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.
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. 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.
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.
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.
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.
To support the multi-dimensional product requirements of our customers, the powerful, interactive visualization and analysis capabilities in this product are highly flexible and user-configurable. ● Process Control – This module provides failure detection and classification (“FDC”) capabilities for monitoring, alarming, and control of manufacturing tool sets.
To support the multi-dimensional product requirements of our customers, the powerful, interactive visualization and analysis capabilities in this product are highly flexible and user-configurable. 6 Table of Contents ● Process Control – This module provides failure detection and classification (“FDC”) capabilities for monitoring, alarming, and control of manufacturing tool sets.
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 8 Table of Contents understand root causes.
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.
Cimetrix 9 Table of Contents 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. The EDA standards are E120, E125, E132, E134, E138, E147, and E164.
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. The EDA standards are E120, E125, E132, E134, E138, E147, and E164.
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.
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 11 Table of Contents and CV and new applications targeted to inter-operate with strategic partner products.
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.
Health and Safety 13 Table of Contents 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.
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.
We strive to continually enhance our core technologies through the codification of knowledge that we gain in the use of our products and delivery of services. 6 Table of Contents Products and Services Products The primary software products and software and hardware systems of our platform include the following: Exensio Software .
We strive to continually enhance our core technologies through the codification of knowledge that we gain in the use of our products and delivery of services. Products and Services Products The primary software products and software and hardware systems of our platform include the following: Exensio Software .
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.
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.
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.
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.
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. ​ 15 Table of Contents ​ ​ ​
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. ​ ​ ​ 15 Table of Contents
In addition to our efforts to address employee engagement, we are committed to supporting our employees and creating an engaged workforce by prioritizing the items below: • personal growth through training and development; • recognizing and rewarding our people for their commitment to our values and our organization; • flexible work locations and schedules; and • providing a sense of organizational community by hosting online as well as in-person events where our people can gather and connect.
In addition to our efforts to address employee engagement, we are committed to supporting our employees and creating an engaged workforce by prioritizing the items below: • personal growth through training and development; • recognizing and rewarding our people for their commitment to our values and our organization; 13 Table of Contents • flexible work locations and schedules; and • providing a sense of organizational community by hosting in-person events where our people can gather and connect.
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.
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.
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.
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.
See the discussions in “Risk Factors” under Item 1A for more information about risks associated with our competition. 12 Table of Contents Human Capital Management We believe that our future success will depend, in part, on our continued ability to hire and retain qualified management, sales, and technical employees.
Ltd. See the discussions in “Risk Factors” under Item 1A for more information about risks associated with our competition. Human Capital Management We believe that our future success will depend, in part, on our continued ability to hire and retain qualified management, sales, and technical employees.
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. ​ ​ ​ ​ ​ ​ Name Age Position John K.
Information about our Executive Officers 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. ​ ​ ​ ​ ​ ​ Name Age Position John K.
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. Differentiated applications that make use of this shared data are designed to provide unique insights to help customers achieve sustained profitability in their manufacturing.
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.
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 rely primarily on trade secret rights, copyright laws, and nondisclosure and other contractual agreements to protect our 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 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.
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. ● 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.
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.
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.
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.
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.
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.
As part of the system offering, we generally provide design services to create these instruments.
When part of the system offering, we generally provide design services to create these instruments.
In 2023, we conducted a survey of all our employees to assess overall employee engagement.
In 2024, we conducted a survey of all our employees to assess overall employee engagement.
Dr. Michaels received a B.S. in Electrical Engineering, and M.S. E.C.E. and a Ph.D. E.C.E. from Carnegie Mellon University. 14 Table of Contents Andrzej Strojwas, Ph.D. , served as a technical advisor to the Company from our founding until 2021 and as chief technologist from 1997 to 2021.
Dr. Michaels received a B.S. in Electrical Engineering, an M.S. E.C.E. and a Ph.D. E.C.E. from Carnegie Mellon University. Andrzej Strojwas, Ph.D. , served as a technical advisor to the Company from our founding until 2021 and as chief technologist from 1997 to 2021.
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.
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.
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.
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.
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.
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 employment practices.
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.
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.
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.
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.
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. No other customers accounted for 10% or more of our revenues in 2023, 2022 and 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.
Of these employees, 285 are located in the United States, 172 in Asia, and 36 in Europe. None of our employees are represented by a labor union. Our employees in France and Italy are subject to collective bargaining agreements in those countries.
Of these employees, 321 are located in the United States, 180 in Asia, and 38 in Europe. None of our employees are represented by a labor union. Our employees in France and Italy are subject to collective bargaining agreements in those countries.
Some products and market segments, however, are content to utilize older process nodes.
Some products and market segments, however, may be content to utilize older process nodes.
Some of the technology we protect by patent includes elements of our CV and DFI systems and inventions related to AI/ML. 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 intend to prepare additional patent applications when we feel it is beneficial. Some of the technology we protect by patent includes elements of our CV and DFI systems and inventions related to AI/ML. 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 expect to continue to establish strategic alliances with process licensors, vendors in the electronic design automation software, capital equipment for IC production, and test silicon IP and mask-making software segments to create and take advantage of sales channel and co-marketing opportunities.
From time-to-time, we use sales representatives/agents in various locations to augment direct sales in certain territories. We expect to continue to establish strategic alliances with process licensors, vendors in the electronic design automation software, capital equipment for IC production, and test silicon IP and mask-making software segments to create and take advantage of sales channel and co-marketing opportunities.
Kibarian, Ph.D. ​ 59 ​ President, Chief Executive Officer, and Director ​ Adnan Raza ​ 51 ​ Executive Vice President, Finance and Chief Financial Officer ​ Kimon W. Michaels, Ph.D. ​ 57 ​ Executive Vice President, Products and Solutions and Director ​ Andrzej Strojwas, Ph.D. ​ 71 ​ Chief Technology Officer ​ John K.
Kibarian, Ph.D. ​ 60 ​ President, Chief Executive Officer, and Director ​ Adnan Raza ​ 52 ​ Executive Vice President, Finance and Chief Financial Officer ​ Kimon W. Michaels, Ph.D. ​ 58 ​ Executive Vice President, Products and Solutions and Director ​ Andrzej Strojwas, Ph.D. ​ 72 ​ Chief Technology Officer ​ John K.
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.
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.
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.
Industry Background 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.
In addition, our success is dependent on various inventions we have made and we seek to protect certain of our IP under patent laws. As of December 31, 2023, we held 115 U.S. patents, with expiration dates on issued patents ranging from 2024 through 2042. We intend to prepare additional patent applications when we feel it is beneficial.
In addition, our success is dependent on various inventions we have made and we seek to protect certain of our IP under patent laws. As of December 31, 2024, we held 128 U.S. patents, with expiration dates on issued patents ranging 5 Table of Contents from 2025 through 2044.
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. Employee Engagement Employee engagement is crucial for the overall health of the organization.
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 Employee engagement is crucial for the overall health of the organization.
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 10 Table of Contents incentives based on the customers’ yield achievement.
After the initial warranty period, the availability of engineering support and parts cost depends on the service package level a customer purchases. 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.
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.
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.
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.
Software Related Services – We provide software maintenance and support (“M&S”), data management services, various value-added services (“VAS”) to install, configure, or create analysis templates, and other professional services to achieve customers’ specific outcomes using our software.
These services include environment set-up and configuration, system health monitoring, data integration maintenance, integration monitoring, system updates, security, and data upload/download, and license administration. 9 Table of Contents Software Related Services – We provide software maintenance and support (“M&S”), data management services, various value-added services (“VAS”) to install, configure, or create analysis templates, and other professional services to achieve customers’ specific outcomes using our software.
After we are engaged by a customer and early in the services process, our engineers seek to establish relationships in the organization and gain an understanding of our customers’ business issues. Our direct sales and service teams combine their efforts to deepen our customer relationships by expanding our penetration across customers’ products, processes, and technologies.
Sales and Marketing Our sales strategy is primarily to pursue targeted accounts through a combination of our direct sales force, our service teams, and strategic alliances. After we are engaged by a customer and early in the services process, our engineers seek to establish relationships in the organization and gain an understanding of our customers’ business issues.
Available Information We file or furnish various reports, such as registration statements, periodic and current reports, proxy statements and other materials with the SEC. Our Internet website address is www.pdf.com.
He holds an M.S. in Electronic Engineering from Warsaw Technical University and a Ph.D. in Electrical Engineering from Carnegie Mellon University. 14 Table of Contents Available Information We file or furnish various reports, such as registration statements, periodic and current reports, proxy statements and other materials with the SEC. Our Internet website address is www.pdf.com.
As part of these services, we also typically provide hosted management services for the software and the customer’s data stored in our cloud. These services include environment set-up and configuration, system health monitoring, data integration maintenance, integration monitoring, system updates, security, and data upload/download, and license administration.
As part of these services, we also typically provide hosted management services for the software and the customer’s data stored in our cloud.
(“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. Ltd.
(“Synopsys”); 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.; and, 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.
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.
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 10 Table of Contents development efforts.
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.
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.” Competition 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.
Strojwas has held senior technical positions at Harris Semiconductor Co., AT&T Bell Labs, Texas Instruments, NEC, Hitachi, SEMATECH, and KLA. He holds an M.S. in Electronic Engineering from Warsaw Technical University and a Ph.D. in Electrical Engineering from Carnegie Mellon University.
Strojwas has held senior technical positions at Harris Semiconductor Co., AT&T Bell Labs, Texas Instruments, NEC, Hitachi, SEMATECH, and KLA.
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.
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.
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.
Talent Development 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.
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.
See the discussion in “Risk Factors” under Item 1A for more information about risks associated with customer concentration and contractual provisions. 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. Financial Statements and Supplementary Data for additional geographic information.
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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”.
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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). 7 Table of Contents Characterization Vehicle System (also branded as our CV™ System) .
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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.
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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.
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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.
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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.
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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.
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We also utilize a variety of skilled independent contractors for specialized development. 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.
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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.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

111 edited+49 added−79 removed72 unchanged
Biggest changeShould circumstances change such that the level of investments is substantially reduced, our future growth potential may be limited; ● some of our key engineers and other personnel are foreign nationals and they may not be permitted access to certain technical information under U.S. export laws or by certain of our customers and may have difficulty gaining access to the United States and other countries in which our customers or our offices may be located, and it may be difficult for us to recruit and retain qualified technical and managerial employees in foreign offices; ● ineffective or inadequate protection or enforcement of our IP in foreign jurisdictions; ● greater difficulty in collecting account receivables resulting in longer collection periods, credit losses, and increased costs to collect; ● language and other cultural differences may inhibit our sales and marketing efforts and create internal communication problems between our U.S. and foreign teams, increasing the difficulty of managing multiple, remote locations and negatively impacting sales and revenue; ● compliance with, inconsistencies among, and unexpected changes in, a wide variety of foreign laws and regulatory environments with which we are not familiar including, among others, issues related to human resources, personal data, tax, protection of our IP, and a wide variety of operational regulations and trade and export controls under domestic, foreign, and international law; ● currency risk due to certain of our payables and our international offices’ payables are denominated in foreign currencies, including the Euro, Yen, and RMB, while predominantly all of our revenues is denominated in U.S. dollars, or in the event a larger portion of our revenues becomes denominated in foreign currencies, we would be subject to a potentially significant exchange rate risk; ● inadequate local infrastructure that could result in business disruptions; 29 Table of Contents ● additional taxes, interest, and potential penalties, and uncertainty around changes in tax laws of various countries; ● geopolitical instability or changes in government, including in the United States of America, could disrupt our operations or our customers’ purchases or operations or those of related supply chain participants; ● quarantine, travel restrictions, or business disruptions in regions affecting our operations, stemming from actual, imminent or perceived outbreaks of contagious diseases, including COVID-19; or ● economic or political instability, including but not limited to armed conflict, terrorism, interference with information or communication of networks or systems, including strained or worsening relations between the United States and China, occupation or war involving Russia and Ukraine and most recently between Israel and Hamas, and the resulting disruption to economic activity and business operations.
Biggest changeAny of the following could disrupt or limit our business opportunities, the work our international employees and contractors perform, negatively affect the range of services we are able to provide from anywhere, or increase our cost for such services: ● changing circumstances in China regarding investments in the semiconductor industry by both private and public entities within China, which if the level of investments is substantially reduced could limit our future growth potential; ● limits on access (i) by some of our key engineers and other personnel that are foreign nationals to certain technical information under U.S. export laws or by certain of our customers, or (ii) by such individuals to the United States and other countries in which our customers or our offices may be located; ● difficulties recruiting, training, and retaining qualified technical and managerial employees in non-U.S. offices, and actions taken by our local dealers and partners, for which we may be liable and incur penalties, legal expenses, or have to pay damages, which would negatively impact our results of operations; 25 Table of Contents ● greater difficulty in collecting accounts receivable from non-U.S. customers, resulting in longer collection periods, credit losses, and increased costs to collect; ● inconsistencies among, and unexpected changes in, non-U.S. laws and regulatory environments, including, among others, those related to human resources, personal data, tax, protection of IP, corporate governance, and U.S laws and regulations related to anti-corruption, imports and exports, and trade and export controls, which could result in (i) substantial expense to us as we attempt to comply and resolve inconsistencies, (ii) liability for inadvertent or intentional breach, for example through fraudulent or negligent behavior of individual employees, and (iii) a requirement to make significant changes in our business operations or forego international business opportunities for a period of time or altogether, any of which could adversely affect our revenues or our overall business; ● currency risk (i) due to certain of our payables and our international offices’ payables denominated in foreign currencies, including the Euro, Yen, and RMB, while predominantly all of our revenues is denominated in U.S. dollars, or (ii) in the event a larger portion of our revenues becomes denominated in foreign currencies, in either case, which could increase the cost in U.S. dollars to us or decrease the expected amount of revenues in U.S. dollars by the time of payment; or, ● economic or political actions, policies, or instability, and the resulting restrictions and disruption to economic activity and business operations in such areas, which could potentially (i) interrupt our customers’ ability in such locations to make use of our products or services, or for our employees or contractors to provide services, (ii) impact our customers’ desire to buy local, or (iii) limit our ability to supply products, services and technologies to affected entities and countries, any of which may negatively impact our financial results.
If our software, hardware, or proprietary technologies contain errors or defects, it could require us to expend significant resources to remedy these problems or defend/indemnify claims, which could reduce margins and result in the diversion of technical and other resources from our other customer implementations and development efforts.
If our software, hardware, or other proprietary technologies contain errors or defects, it could require us to expend significant resources to remedy these problems and defend/indemnify claims, which could reduce margins and result in the diversion of technical and other resources from our other customer implementations and development efforts.
We generate a significant portion of our revenues from a limited number of customers, and a large percentage of our revenues from one customer, so defaults or decreased business with, or the loss of, any one of these customers, or pricing pressure, or customer consolidation could significantly reduce our revenues or margins and negatively impact results of operations.
We generate a significant portion of our revenues from a limited number of customers, and a large percentage of our revenues from one customer, so defaults or decreased business with, or the loss of, any one of these customers, or pricing pressure, or customer consolidation could significantly reduce our revenues or margins and negatively impact our results of operations.
Congress and regulators continue to consider significant changes in laws and regulations. For example, the U.S. government is reportedly considering whether and/or how to impose restrictions directly on cloud-hosted services and further restrictions directly on U.S. person activity. We cannot predict the impact that additional legal changes may have on our business in the future.
Congress and regulators continue to consider significant changes in laws and regulations. For example, the U.S. government is reportedly considering whether and/or how to impose restrictions directly on cloud-hosted services and further restrictions directly on U.S. person activity. We cannot predict the impact that additional legal changes may have on our business in the future. For example, the U.S.
As a result of increased regulatory and customer scrutiny of all data processing activities, as well as increasing and evolving regulation of such practices, we have security obligations on how we collect, transfer and use data (including personal data), which could require us to expend money and resources to comply with those requirements, and if compromised again, could have a material adverse effect on our business, financial condition, and results of operations, including the potential for regulatory investigations, enforcement actions, lawsuits, and a loss of business and a degradation of our reputation.
As a result of increased regulatory and customer scrutiny of all data processing activities, as well as increasing and evolving regulation of such practices, we have security obligations on how we collect, transfer and use data (including personal data), which could require us to expend money and resources to comply with those requirements, and if compromised, could have a material adverse effect on our business, financial condition, and results of operations, including the potential for regulatory investigations, enforcement actions, lawsuits, and a loss of business and a degradation of our reputation.
Since we currently work on a small number of large projects at specified manufacturing sites and, in some cases, on specific IC products, our results of operations have been and may continue to be adversely affected by negative changes at those sites or in those products, including slowdowns in manufacturing due to external factors, such as U.S. trade restrictions, rising inflation and global interest rates, or continued or worsening supply chain disruptions.
Since we currently work on a small number of large projects at specified manufacturing sites and, in some cases, on specific IC products, our results of operations have been and may continue to be adversely affected by negative changes at those sites or in those products, including slowdowns in manufacturing due to external factors, such as U.S. trade restrictions, tariffs, rising inflation and global interest rates, or continued or worsening supply chain disruptions.
If the software, hardware, or proprietary technologies we provide to customers contain defects that negatively impact customers’ ability to use our systems or software, increase our customers’ cost of goods sold or time-to-market, or damage our customers’ property, such defects could significantly decrease the market acceptance of our products and services or could result in warranty or other claims.
If the software, hardware, or other proprietary technologies we provide to customers contain defects that negatively impact customers’ ability to use our products and services, increase our customers’ cost of goods sold or time-to-market, or damage our customers’ property, such defects could significantly decrease the market acceptance of our products and services and could result in warranty or other claims.
In the ordinary course of providing SaaS or other services engagements, we may collect customers’ product, process, and test information, personally-identifiable data about their employees needed to administer licenses, and other confidential information.
In the course of providing SaaS or other services engagements, we may collect customers’ product, process, and test information, personally-identifiable data about their employees needed to administer licenses, and other confidential information.
Ransomware attacks are becoming increasingly prevalent and severe, and can lead to significant interruptions in our operations, loss of data and income, reputational loss, diversion of funds, and may result in fines, litigation and unwanted media attention.
In addition, ransomware attacks are becoming increasingly prevalent and severe, and can lead to significant interruptions in our operations, loss of data and income, reputational loss, diversion of funds, and may result in fines, litigation and unwanted media attention.
Further, new business may be delayed or prevented if a key customer uses its leverage to push for terms that are worse for us and we delay entering into the contract to negotiate for better terms or decide not to enter into the contract at all, in which case revenue in any particular quarter or year may fail to meet expectations and our reliance on our remaining customers could increase.
Further, new business may be delayed or prevented if a key customer uses its leverage to insist on terms that are worse for us and we delay entering into the contract to negotiate for better terms or decide not to enter into the contract at all, in which case revenue in any particular quarter or year may fail to meet expectations and our reliance on our remaining customers could increase.
Any actual or perceived defects with our software, hardware, or proprietary technologies may also hinder our ability to attract or retain industry partners or customers, leading to a decrease in our revenue.
Any actual or perceived defects with our software, hardware, or other proprietary technologies may also hinder our ability to attract or retain industry partners or customers, leading to a decrease in our revenue.
Our fixed-fee services, including for Characterization, require a team of engineers to collaborate with our customers to address complex issues by using our software and other technologies, and the installation and configuration of our software into our customers’ fabrication and test/assembly facilities requires experienced engineers working with our customers on active foundry and test/assembly equipment.
Our fixed-fee services, including for Characterization and enterprise software deployments, require a team of engineers to collaborate with our customers to address complex issues by using our software and other technologies, and the installation and configuration of our software into our customers’ fabrication and test/assembly facilities requires experienced engineers working with our customers on active foundry and test/assembly equipment.
Objectionable disclosure of our customers’ confidential information or our failure to comply with our customers’ security rules, including for those related to SaaS access, AI use, or our on-site access, could result in costly litigation, cause us to lose existing and potential customers, or negatively impact on-going business with existing customers.
Objectionable disclosure of our customers’ confidential information or our failure to comply with our customers’ security rules, including for those related to SaaS access, AI Technology use, or our on-site access, could result in costly litigation, cause us to lose existing and potential customers, or otherwise negatively impact on-going business with existing customers.
Further, if our system causes downtime or other disruption or loss to such third-party facility, we could be liable for damages associated with such event, which could increase our expenses and distract management, and cause other third-party facilities to not want to work with us.
Further, if our system causes downtime or other disruption or loss to such customer or third-party facility, we could be liable for damages associated with such event, which could increase our expenses and distract management, and cause other customers or third-party facilities to not want to work with us.
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. Generative AI and the user other advanced AI technologies for software development may subject us to claims of misappropriation of others’ IP, bugs/errors, and ambiguous ownership of created content.
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. Use of generative AI and other advanced AI Technologies for software development may subject us to claims of misappropriation of others’ IP, bugs/errors, and ambiguous ownership of created content.
Uncertainty about global economic conditions including war, terrorism, geopolitical uncertainties and other business interruptions could result in damage to, disruption, postponement or cancellation of sales of our products or services on a global or regional basis.
Current global economic conditions and uncertainty about future conditions including war, terrorism, geopolitical uncertainties and other business interruptions could result in damage to, disruption, postponement or cancellation of sales of our products or services on a global or regional basis.
If the content, analyses, recommendations, or other output that AI applications assist in producing are or are alleged to be deficient, inaccurate, or imprecise, our business, financial condition, and results of operations may be adversely affected.
If the content, analyses, recommendations, or other output that AI Technologies assist in producing are or are alleged to be deficient, inaccurate, or imprecise, our business, financial condition, and results of operations may be adversely affected.
The full extent of the future impact of these strategic relationships on our financial condition and results of operations is currently unknown and the failure to reap the anticipated benefits of these companies’ financial resources, technology, customer relationships, and global footprint and/or to successfully develop combined, 32 Table of Contents integrated, or interoperable solutions with such companies could have an adverse effect on our business and results of operations.
The full extent of the future impact of these strategic relationships on our financial condition and results of operations is currently unknown and the failure to reap the anticipated benefits of these companies’ financial resources, technology, customer relationships, and global footprint and/or to successfully develop combined, integrated, or interoperable solutions with such companies could have an adverse effect on our business and results of operations.
We would be liable for any inaccuracies or errors in software that we release that causes downtime or other damage to our customers’ facilities or production lines, which could greatly increase our expenses and decrease our earnings.
Additionally, we could be liable for any inaccuracies or errors in software that we release that causes downtime or other damage to our customers’ facilities or production lines, which could greatly increase our expenses and decrease our earnings.
In connection with our data services offerings, we rely on installing, configuring, and operating proprietary configurations of hardware and software systems in facilities owned and operated by third parties around the world.
In connection with our data services offerings, we rely on installing, configuring, and operating proprietary configurations of hardware and/or software systems in facilities owned and operated by customers and third parties around the world.
Uncertainty around new and emerging AI applications such as generative AI content creation may require additional investment to protect our proprietary datasets, ML models, and systems to test for accuracy, bias and other variables, which may be costly and could impact our profit margin if we decide to expand generative AI into our product offerings.
Uncertainty around new and emerging AI technologies such as generative AI technology content creation may require additional investment to protect our proprietary datasets, ML models, and systems to test for accuracy, bias and other variables, which may be costly and could impact our profit margin if we decide to expand generative AI into our product offerings.
The third-party AI/ML system may also provide outputs that appear to be correct but are incomplete, inaccurate, or otherwise flawed and may lead us to make erroneous decisions or recommendations to customers, which could result in harm to our reputation and competitive position, customer loss, and legal liability.
The third-party AI technologies may also provide outputs that appear to be correct but are incomplete, inaccurate, or otherwise flawed and may lead us to make erroneous decisions or recommendations to customers, which could result in harm to our reputation and competitive position, customer loss, and legal liability.
Export Administration Regulations (“EAR”) or other U.S. or non-U.S. export or economic sanctions laws and regulations (collectively, “Export Regulations”), we could be subject to substantial civil and criminal penalties, including fines for the Company and the possible loss of the ability to engage in exporting and other international transactions.
Export Administration Regulations (“EAR”) or other U.S. or non-U.S. export or economic sanctions laws and regulations (collectively, “Export Regulations”), we 19 Table of Contents could be subject to substantial civil and criminal penalties, including fines for the Company and the possible loss of the ability to engage in exporting and other international transactions.
Further, we have had, and 33 Table of Contents expect to continue to have, difficulty in obtaining visas permitting entry for some of our employees that are foreign nationals into the United States, and delays in obtaining visas permitting entry into other key countries, for several of our key personnel, which disrupts our ability to strategically locate our personnel.
Further, we have had, and expect to continue to have, difficulty in obtaining visas permitting entry for some of our employees that are foreign nationals into the United States, and delays in obtaining visas permitting entry into other key countries, for several of our key personnel, which disrupts our ability to strategically locate our personnel.
Such a delay or disruption could occur as a result of any number of events, including, but not limited to: failure to comply with existing contracts, higher priority alternative buyers, inflation and global interest rates increasing component costs, a closure or slowdown at our suppliers’ plants or shipping delays including, for example, those made to combat the spread of COVID-19, market shortages for critical components, increases in prices, the imposition of regulations, quotas, embargoes or tariffs on components or our products, labor stoppages or shortages, our suppliers’ supply chain disruptions, third-party interference, cyberattacks, severe weather conditions including the adverse effects of climate change-related events, geopolitical developments, war or terrorism, and disruptions in utilities and other services.
Such a delay or disruption could occur as a result of any number of events, including, but not limited to: failure to comply with existing contracts, higher priority alternative buyers, inflation and global interest rates increasing component costs, a closure or slowdown at our suppliers’ plants or shipping delays, market shortages for critical components, increases in prices, the imposition of regulations, quotas, embargoes or tariffs on components or our products, labor stoppages or shortages, our suppliers’ supply chain disruptions, third-party interference, cyberattacks, severe weather conditions including the adverse effects of climate change-related events, geopolitical developments, war or terrorism, and disruptions in utilities and other services.
Since our software requires certain third-party programs to run as intended and some of our contracts with licensors limit the industry in which we can resell such third-party programs, we face challenges to provide a comprehensive solution to battery manufacturers.
Since certain of our current software requires commercially-available, third-party programs to run as intended and some of our contracts with licensors limit the industry in which we can resell such third-party programs, we face challenges to provide a comprehensive solution to battery manufacturers.
Risks Related to Our Operations Measurement of our variable consideration sometimes require data collection and customers’ use of estimates and are contingent upon customers’ consent and may be later offset if actual data differ from customers’ estimates, which can result in uncertainty and cause quarterly results to fluctuate.
Measurement of our variable consideration sometimes require data collection and customers’ use of estimates and are contingent upon customers’ consent and may be later offset if actual data differ from customers’ estimates, which can result in uncertainty and cause quarterly results to fluctuate.
If we or our customers are unable to procure required third-party programs that can be used in connection with our products for battery manufacturing, or the cost to do so is higher than expected, we may miss the market opportunity, which would mean lower sales than expected, or our costs may be higher, which would mean lower earnings than expected.
If we or our customers are unable to procure 21 Table of Contents required third-party programs that can be used in connection with our products for battery manufacturing, or the cost to do so is higher than expected, we may miss the market opportunity, which would mean lower sales than expected, or our costs may be higher, which would mean lower earnings than expected.
The net operating loss and tax credits could expire unused and be unavailable to reduce future income tax liabilities. We intend to continue maintaining a full valuation allowance on these deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances.
A portion of our net operating 27 Table of Contents loss and tax credits could expire unused and be unavailable to reduce future income tax liabilities. We intend to continue maintaining a full valuation allowance on these deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances.
If we fail to maintain high-quality support and services or fail to adequately address our customers’ support needs, our customers may choose our competitors’ products instead of ours in the future, which would negatively affect our revenues and results of operations.
If we fail to maintain high-quality support and services or fail to adequately address our customers’ support needs, our customers may choose our competitors’ products instead of ours, which would negatively affect our revenues and results of operations.
Defects in our proprietary technologies, hardware and software tools, and failure to effectively remedy any such defects could decrease our revenue and our competitive market share.
Defects in our software, hardware and other proprietary technologies, and failure to effectively remedy any such defects could decrease our revenue and our competitive market share.
If those 22 Table of Contents customers consolidate and/or otherwise move the orders to manufacturing facilities not covered by our contracts, or suspend their manufacturing at covered facilities for any reason, including consolidation, our Integrated Yield Ramp revenue will continue to decrease, which could negatively affect our financial results.
If those customers consolidate and/or otherwise move the orders to manufacturing facilities not covered by our contracts, or suspend their manufacturing at covered facilities for any reason, including consolidation, our Integrated Yield Ramp revenue will continue to decrease, which could negatively affect our financial results.
In addition, the 19 Table of Contents development, licensing, or acquisition of new products in the future may increase the complexity of supply chain management. Failure to effectively manage our supply of components and products could adversely affect our business.
In addition, the development, licensing, or acquisition of new products in the future may increase the complexity of supply chain management. Failure to effectively manage our supply of components and products could adversely affect our business.
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.
Also, our current and potential customers may choose to develop their own solutions internally or through another source, particularly if we are slow in deploying our solutions or improving them to meet market needs.
Unbilled accounts receivable that are not expected to be billed and collected during the succeeding twelve-month period are recorded in other non-current assets and totaled $1.1 million and $0.8 million as of December 31, 2023 and 2022, respectively.
Unbilled accounts receivable that are not expected to be billed and collected during the succeeding twelve-month period are recorded in other non-current assets and totaled $9.0 million and $1.1 million as of December 31, 2024 and 2023, respectively.
Additionally, any potential or actual malicious cybersecurity incident or accidental misconfiguration resulting in a data security incident involving these proprietary systems may require complex diagnosis and mitigation because they are located at third-party facilities and this may lead to delays, errors, lack of system availability, loss or our customers’ data integrity, or further unauthorized disclosure of customer confidential or privacy data.
Additionally, any potential or actual malicious cybersecurity incident or accidental misconfiguration 26 Table of Contents resulting in a data security incident involving these proprietary systems may require complex diagnosis and mitigation because they are located at customers’ and third-parties’ facilities and this may lead to delays, errors, lack of system availability, loss of our customers’ data integrity, or further unauthorized disclosure of customer or third-party confidential or personal data.
For example, if the information we input into a third-party AI/ML system is used to train the underlying AI/ML models, such inputs could be revealed to others.
For example, if the information input into a third-party AI technology system is used to train the underlying AI models, such inputs could be revealed to others.
We and our third-party service providers, with whom we may share data, may be unable to anticipate these techniques or may not implement adequate preventative measures to prevent either unauthorized access to our systems or services that could compromise customer data or other confidential information or result in a disruption of our services.
As a result, we and our third-party service providers, with whom we share data, may be unable to anticipate these techniques or attacks or may not implement adequate preventative measures to prevent either unauthorized access to our IT Systems that could compromise Confidential Information or result in a disruption of our services.
The demand for solutions that address the need for better integration between the silicon design and manufacturing processes may encourage new direct competitors to enter our market. Increased competition could lead to increased pricing pressure, negatively impacting our revenues, or a decreased ability to grow or execute our strategy.
The demand for solutions that address the need for better integration between the silicon design and manufacturing processes and the need for insight into performance of those manufacturing processes may encourage new direct competitors to enter our market. Increased competition could lead to increased pricing pressure, negatively impacting our revenues, or a decreased ability to grow or execute our strategy.
If the third-party facility owner/operator does not allow us to install, access and maintain, or otherwise operate as intended these systems, we may not timely fulfill our contractual obligations to, or expectations of, our customers.
If the customer or third-party facility owner/operator does not allow us to install, access and maintain, or otherwise operate our systems as intended, we may fail to timely fulfill our contractual obligations to, or expectations of, our customers or such third-party facility owner/operator.
Furthermore, tighter credit, higher interest rates, inflationary concerns, large-scale unemployment, negative financial news and/or declines in income or asset values and other macroeconomic factors could have a material adverse effect on demand for our products and services and, accordingly, on our business, results of operations or financial condition and/or vendors with which we do business.
Furthermore, tariffs, trade controls, export and import regulations, tighter credit, higher interest rates, inflationary concerns, large-scale unemployment, negative financial news and/or declines in income or asset values and other macroeconomic factors could have a material adverse effect on demand for our products and services and, accordingly, on our business, results of operations or financial condition and/or vendors with which we do business.
If we fail to meet a customer’s expectations, the customer could terminate their contract with us or claim that we breached our obligations, which could negatively affect our financial and operating results.
If we fail to meet a customer’s expectations or fixed milestones or delivery timelines, the customer could terminate their contract with us or claim that we breached our obligations, which could negatively affect our financial and operating results.
Further, our customers sometimes delay starting negotiations until they begin developing a new process, have a need for a new product, or experience specific yield issues. This means that, on occasion we have, and may continue to provide technology and services under preliminary documentation before executing the final contract.
Further, our customers sometimes delay starting negotiations until they begin developing a new process, have a need for a new product, or experience specific yield issues. This means that, in certain instances we have continued, and may continue to provide technology and services under preliminary documentation before executing the final contract.
Our fixed-fee services for product or system installations/configurations may take longer than budgeted, which could slow our revenue recognition and may result in a lost contract or a claim of breach by our customers, which would negatively affect our financial and operating results.
Our fixed-fee services for product or system installations/configurations or specified upgrades may take longer than budgeted or need to be rescoped, which could slow our revenue recognition and may result in a lost contract or a claim of breach by our customers, which would negatively affect our financial and operating results.
In the United States, we are subject to numerous federal, state and local data privacy and security laws and regulations governing the processing of information about individuals, including federal laws (e.g., FTC Act) and state privacy laws (e.g., the California Privacy rights Act and the Virginia Consumer Data Protection Act), marketing and communications laws, laws regarding credit reports, data breach notification laws, and consumer protection laws, many of which carry significant potential for active enforcement and penalties.
In the United States, we are subject to numerous federal, state and local data privacy and security laws and regulations governing the processing of information about individuals, including federal laws and state privacy laws, marketing and communications laws, laws regarding credit reports, data breach notification laws, and consumer protection laws, many of which carry significant potential for active enforcement and penalties.
These defects are frequently found during the period following introduction of new software, hardware, or proprietary technologies or enhancements to existing software, 20 Table of Contents hardware, or proprietary technologies, which means that we may not discover the errors or defects until after customer implementation.
These defects are frequently found during the period following introduction of new software, hardware, or proprietary technologies or enhancements to existing software, hardware, or proprietary technologies, which means that we may not discover the errors or defects until after customer implementation, if at all.
The expense to purchase, update, and configure security information systems to detect and/or neutralize increasingly complex and sophisticated attacks may increase our costs and, failure to acquire the right expertise or systems may leave us vulnerable to attacks, which could expose our confidential or competitive information or that of our customers, which could expose us to liability and have a negative impact on our reputation and business opportunity.
The expense to purchase, update, and configure security information systems to detect and/or neutralize increasingly complex and sophisticated attacks increases our costs and, failure to acquire the right expertise or systems may leave us vulnerable to attacks, which could expose Confidential Information, result in liability and have a negative impact on our reputation and business opportunity.
Any of these events could negatively affect our revenues and make it challenging or impossible for us to deliver products and services to our customers forecast our operating results, make business decisions, and identify the risks that may affect our business, financial condition and results of operations.
Any of these events could negatively affect our revenues and make it challenging or impossible for us to deliver products and services to our customers forecast our operating results, make business decisions, and identify the risks that may affect our business, financial condition and results of operations. Customers with liquidity issues may also lead to additional credit losses.
We are required to comply with export controls and economic sanctions laws and regulations that restrict selling, shipping, or transmitting our products and services and transferring our technology outside the United States. These requirements also restrict domestic release of software and technology to foreign nationals.
We are required to comply with export controls and economic sanctions laws and regulations that restrict selling, shipping, or transmitting our products and services, transferring our technology outside the United States, or certain U.S. person activities regarding certain end-users or end-uses. These requirements also restrict domestic release of software and technology to foreign nationals.
Any failure or perceived failure by us to comply with such obligations may result in governmental enforcement actions, fines, litigation, or public statements against us by consumer advocacy groups or others and could cause our customers to lose trust in us, which could have an adverse effect on our reputation and business.
Any failure or perceived failure by us to comply with such obligations may result in governmental investigations or enforcement actions, fines, litigation or legal proceedings (including class actions), or public statements against us by consumer advocacy groups or others and could cause our customers to lose trust in us, which could have an adverse effect on our reputation, results of operations, financial condition, and business.
Historically, we have had a small number of large customers that contribute significant revenues. In the year ended December 31, 2023, one customer accounted for 35% of our total revenues.
Historically, we have had a small number of large customers that contribute significant revenues. In the year ended December 31, 2024, two customers accounted for 31% of our total revenues.
Further, the information technology and infrastructure that stores and processes our and our customers’ data is susceptible to continually evolving cybersecurity threats that become more 25 Table of Contents complex over time, especially with the rapid evolution of AI technologies, and may not be recognized until launched against a target, all of which could result in unauthorized access to, or acquisition of, our data, and interruption or disruption of our business.
Further, the IT Systems that store and process our and our customers’ Confidential Information is susceptible to continually evolving cybersecurity threats that become more complex over time, especially with the rapid evolution of AI technologies, and may not be recognized until launched against a target, all of which could result in unauthorized access to, or acquisition of, our data, and interruption or disruption of our business.
“Business” section for more information about our current competitors. There may be other competitors of which we are not aware, and we may compete with the products or offerings of our existing competitor companies or additional companies if we expand our offerings through acquisitions or development.
There may be other competitors of which we are not aware, and we may compete with the products or offerings of our existing competitor companies or additional companies if we expand our offerings through acquisitions or development.
Further, the cost of support resources required to remedy any defects in our technologies, hardware, or software tools could exceed our expectations. We have and may further incorporate AI solutions and related technologies for use in product development, or into our platform, offerings, services and features, and these applications may become important in our operations over time.
Further, the cost of support resources required to remedy any defects in our software, hardware and other proprietary technologies could exceed our expectations. We have and may further incorporate ML, AI and related technologies (“AI Technologies”) in product development, or into our platform, offerings, services and features, and these technologies may become more important in our operations over time.
If we experience a security event, we may have to conduct an investigation and notify individuals, customers, partners, service providers and state, federal and local governmental authorities and regulators in the U.S. and elsewhere around the globe.
When we experience a security incident, we have to conduct an investigation and may need to notify individuals, customers, partners, service providers and state, federal or local governmental authorities and regulators in the U.S. or elsewhere around the world.
Any claim, even if without merit, could be time consuming to defend, result in costly litigation, require us to enter into royalty or licensing agreements, which may not be available to us on acceptable terms, or at all, subject us to damages or injunctions restricting our sale of products, invalidate a patent or family of patents, require us to refund license fees to our customers or to forgo future payments or require us to redesign certain of our products, any one of which could adversely affect our sales opportunities, expenses, and revenues. 27 Table of Contents Competition in the market for data analytics and related systems and services may intensify in the future, which could impede our ability to grow or execute our strategy.
Any claim, even if without merit, could be time consuming to defend, result in costly litigation, require us to enter into royalty or licensing agreements, which may not be available to us on acceptable terms, or at all, subject us to damages or injunctions restricting our sale of products, invalidate a patent or family of patents, require us to refund license fees to our customers or to forgo future payments or require us to redesign certain of our products, any one of which could adversely affect our sales opportunities, expenses, and revenues.
Customers with liquidity issues may also lead to additional credit losses. ​ 24 Table of Contents We face challenges in providing a comprehensive solution outside of the semiconductor industry due to limitations on the business areas in which we can use current third-party licensed technology, which may make it prohibitively expensive to sell our solution for applications outside of our traditional industry.
We face challenges in providing a comprehensive solution outside of the semiconductor industry due to limitations on the business areas in which we can use current third-party licensed technology, which may make it prohibitively expensive to sell our solution for applications outside of our traditional industry.
We have seen a significant reduction in our Integrated Yield Ramp revenue in recent years and expect this trend to continue. Further, some of our manufacturing customers’ business is largely dependent on customers that use our manufacturing customer as a second or third source.
In recent years, we saw significant reduction in our Integrated Yield Ramp revenue due to these trends. Further, some of our manufacturing customers’ business is largely dependent on customers that use our manufacturing customer as a second or third source.
In connection with certain acquisitions, we have in the past and may in the future issue common stock, or assume equity awards, that dilute the ownership of our current stockholders, use a substantial portion of our cash resources, assume liabilities (both known and unknown), record goodwill and amortizable intangible assets that will be subject to impairment testing on a regular basis and potential periodic impairment charges, incur amortization expenses related to certain intangible assets, and incur large and immediate write-offs and restructuring and other related expenses, all of which could harm our financial condition and results of operations.
In connection with certain acquisitions, we have in the past and may in the future issue common stock, or assume equity awards, that dilute the ownership of our current stockholders, use a substantial portion of our cash resources, assume liabilities (both known and unknown), record goodwill and amortizable intangible assets that will be subject to impairment testing on a regular basis and potential periodic impairment charges, incur amortization expenses related to certain intangible assets, incur large and immediate write-offs and restructuring and other related expenses, or incur substantial amounts of debt, all of which could harm our financial condition and results of operations. 28 Table of Contents General Risk Factors If we are not able to retain, attract, motivate, and strategically locate talented employees, including some key executives, our business may suffer.
Also, any intentional or unintentional disruption of the operation of these proprietary systems may lead to customer dissatisfaction, which could cause us to lose future bookings and reduce revenue and negatively impact our earnings.
Also, any intentional or unintentional disruption of the operation of these proprietary systems may lead to customer or third-party facility owner/operator dissatisfaction, which could cause us to lose such site as a connected site or lose future bookings, which would reduce revenue and negatively impact our earnings.
Risks Related to Our Strategic Transactions We may devote significant time and resources to developing strategic relationships but we may not realize the benefits of such efforts, which could have an adverse effect on our business and results of operations.
Risks Related to Our Strategic Transactions If we do not realize the benefits of our strategic relationships after we have devote significant time and resources to developing them, it could have an adverse effect on our business and results of operations.
Also, BIS has placed certain entities on its entity list (the “Entity List”), which restricts supply of items to or in connection with the named entities.
Also, BIS has placed certain entities on and frequently adds entities to its entity list (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.
These attacks could come from either Advanced Persistent Threat actors or other individual organized or unorganized malicious actors.
These attacks could come from either advanced persistent threat actors, state-sponsored organizations, opportunistic hackers, hacktivists, or other individual organized or unorganized malicious actors.
If we are unable to exclude others from using our proprietary technologies and methods without compensation to us, through litigation or otherwise, it could impede our ability to grow our business and our revenues may suffer. We are exposed to risks related to information technology infrastructure, information management and protection, cybersecurity threats, and cyber incidents.
If we are unable to exclude others from using our proprietary technologies and methods without compensation to us, through litigation or otherwise, it could impede our ability to grow our business and our revenues may suffer.
Also, if the results of our DFI system, including new applications, are not as we expect, we may not be able to successfully commercialize this system or such applications on schedule, or at all, and we may miss the market opportunity and not recoup our investment.
Also, if customers are not able to achieve the results they expect using our DFI system, including new applications, customers may not continue to adopt this system or such applications as we expect, or at all, and we may miss the market opportunity and not recoup our investment.
To this end, we have, from time to time, engaged in the process of identifying, analyzing, and negotiating possible acquisition transactions, and, from time to time, acquiring one or more businesses, and we expect to continue to do so in the future. We may choose to acquire new and complementary businesses, products, technologies and/or services instead of developing them ourselves.
To this end, we have, from time to time, engaged in the process of identifying, analyzing, and negotiating possible acquisition transactions, and, from time to time, acquiring one or more businesses, and we expect to continue to do so in the future.
The cost and complexity of obtaining support, installing updated security patches, and addressing any other critical vulnerabilities in each individual physical system may lead to exceptions in controls of confidentiality, availability, integrity, security, and privacy, which could negatively impact the availability of our data services to customers, damage our reputation, or lead to lower bookings or sales. 31 Table of Contents Tax Risks U.S. federal tax reform and changes in foreign tax laws could change our tax burden and adversely affect our business and financial condition.
The cost and complexity of obtaining support, installing updated security patches, and addressing any other critical vulnerabilities in each individual physical system may lead to exceptions in controls of confidentiality, availability, integrity, security, and privacy, which could negatively impact the availability of our data services to customers, damage our reputation, or lead to lower bookings or sales.
General Risk Factors If we are not able to retain, attract, motivate, and strategically locate talented employees, including some key executives, our business may suffer. Our success and competitiveness depend on our ability to retain, attract, motivate, and strategically locate in our offices around the globe, talented employees, including some of our key executives.
Our success and competitiveness depend on our ability to retain, attract, motivate, and strategically locate in our offices around the globe, talented employees, including some of our key executives.
Provision of certain of our data services relies on installing, configuring, and operating proprietary configuration of hardware and software systems located in third-party facilities and errors affecting such facilities’ operations could lead to liability for us, and any objection from such third-party facility or delay in providing us physical or logical access to our systems may adversely impact our ability to timely perform our contract obligations or lead to confidentiality, integrity, availability, security, or privacy controls exceptions.
Errors affecting our proprietary hardware and software systems located in customers’ or third-parties’ facilities could lead to liability for us, and any objection from such customers or third-parties or delay in providing us physical or logical access to such systems may adversely impact our ability to timely perform our contract obligations or lead to confidentiality, integrity, availability, security, or privacy controls exceptions.
Our insurance policies may not cover losses incurred in the event our systems or data are comprised, and they are subject to retention amounts that could be substantial.
Any or all of the foregoing could materially adversely affect our business, results of operations, and financial condition. Our insurance policies may not cover losses incurred in the event our systems or data are comprised, and they are subject to retention amounts that could be substantial.
We have invested significantly in the design and development of our eProbe tool and related IP. Key customers failing to purchase, renew, or expand the number or use of such systems on our expected timeline or at all will cause our results to miss expectations.
Key customers failing to purchase, renew, or expand the number or use of such systems on our expected timeline or at all will cause our results to miss expectations.
Our accounts receivable balance, net of allowance for credit losses, was $44.9 million and $42.2 million as of December 31, 2023 and 2022, respectively. Unbilled accounts receivable, included in 28 Table of Contents accounts receivable, totaled $16.4 million and $13.5 million as of December 31, 2023 and 2022, respectively.
Our accounts receivable balance, net of allowance for credit losses, was $73.6 million and $44.9 million as of December 31, 2024 and 2023, respectively. Unbilled accounts receivable, included in accounts receivable, totaled $23.0 million and $16.4 million as of December 31, 2024 and 2023, respectively.
Also, significant volatility in our stock price could be followed by a securities class action lawsuit, which could result in substantial costs and a diversion of our management’s attention and resources. Our business could be negatively affected as a result of actions of activist shareholders, and such activism could impact the trading value of our securities.
Also, significant volatility in our stock price could be followed by a securities class action lawsuit, which could result in substantial costs and a diversion of our management’s attention and resources.
Future events may impact our deferred tax asset position, including the utilization of net operating loss and tax credit carryforwards. Realization of our deferred tax assets is dependent primarily upon future taxable income in the applicable jurisdiction.
We could lose the benefit of all or part of our deferred tax asset position, including the utilization of net operating loss and tax credit carryforwards, if we do not earn future taxable income in the applicable jurisdiction. Realization of our deferred tax assets is dependent primarily upon future taxable income in the applicable jurisdiction.
If our DFI system and Exensio software do not anticipate technological changes in our industry or fail to meet market demand, we may not capture the market share we anticipate, we may lose our competitive position, our products may become obsolete, and our business, financial condition or results of operations could be adversely affected.
If we do not anticipate and address technological changes in our industry or our offerings fail to meet market demand, the corresponding additional revenue we anticipate may not materialize, we may not recoup our investment or capture the market share we anticipate, we may lose our competitive position, and our products may become obsolete, which would adversely impact our business, financial condition and results of operations.
We are heavily reliant on our technology and infrastructure, as well as the public cloud to an increasing degree, to provide our products and services to our customers. Additionally, we must frequently expand our internal information system to meet increasing demand in storage, computing and communication, which may result in increased costs.
We are heavily reliant on our systems, hardware, software, technology infrastructure, online sites, networks, and the public cloud to an increasing degree, to provide our products and services to our customers (collectively, “IT Systems”). Additionally, we must frequently expand our IT Systems to meet increasing demand in storage, computing and communication, which results in increased costs.
Our filings are subject to reviews or audit by the Internal Revenue Service and state, local and foreign taxing authorities. We cannot be sure that any final determination in an audit would not be materially different than the treatment reflected in our historical income tax provisions and accruals.
We cannot be sure that any final determination in an audit would not be materially different than the treatment reflected in our historical income tax provisions and accruals.
In July 2023, we acquired Lantern Machinery Analytics, Inc., an early-stage company providing products and services for battery manufacturers, which is beyond our traditional semiconductor focus. We have also invested in research and development to expand the application of our existing products and services to battery manufacturers.
For example, following our acquisition in July 2023 of Lantern Machinery Analytics, Inc., an early-stage battery solutions provider, we invested in research and development to expand the application of our existing products and services to battery manufacturers.
Global economic conditions or semiconductor market conditions could materially adversely impact demand for our products and services, decrease our sales, or delay our sales cycle. Our customers are global semiconductor companies, which means that our operations and performance depend significantly on worldwide economic conditions as well as semiconductor market specific changes.
Our customers are global semiconductor companies, which means that our operations and performance depend significantly on worldwide economic and geopolitical conditions as well as semiconductor market specific changes.
For example, in 2023, 2022 and 2021, we incurred expenses in the amount of $2.6 million, $1.9 million and $2.0 million, respectively, related to the arbitration with SMIC New Technology Research & Development (Shanghai) Corporation due to SMIC’s failure to pay fees due to us under a series of contracts.
For example, excluding contingent fee arrangements, we incurred substantial expenses related to the arbitration with SMIC New Technology Research & Development (Shanghai) Corporation due to SMIC’s failure to pay fees due to us under a series of contracts.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

8 edited+3 added−0 removed16 unchanged
Biggest changeAs part of this process, and our processes to provide for the availability of critical data and systems, maintain regulatory compliance, identify and manage our risks from cybersecurity threats, and to protect against, detect, and respond to cybersecurity incidents, as such term is defined in Item 106(a) of Regulation S-K, we undertake the below listed activities, among others: ● maintain a risk register and risk assessment process based on The National Institute of Standards and Technology (“NIST”) Cybersecurity Framework; ● use various third-party software testing products and services designed to test and assess the security of our software; ● closely monitor emerging data protection laws and implement changes to our processes designed to comply with such laws; ● undertake an annual review of our policies and statements related to cybersecurity; ● proactively inform our customers of substantive changes related to customer data handling through disclosures in our SOC 2 Type 2 report or other contractually mandated disclosures; ● conduct annual cybersecurity training for employees and contractors with access to PDF systems and sensitive data; ● conduct incident management training and practice for individuals with responsibilities responding to a cyber incident; ● conduct regular phishing email simulations for employees and contractors with access to corporate email systems to enhance awareness and responsiveness to such possible threats; ● use findings and root cause analysis of cybersecurity incidents to improve our cybersecurity processes and technologies; ● maintain technologies designed to provide network and endpoint monitoring, regular vulnerability assessments, and annual penetration testing to improve our information systems, as such term is defined in Item 106(a) of Regulation S-K; ● carry information security risk insurance that provides protection against the potential losses arising from a cybersecurity incident; ● maintain an employee handbook, Code of Conduct, and Acceptable Use policy that makes clear the importance of cybersecurity and protection of PDF and customer intellectual property; and ● our incident response policy and plan specify the activities we take to prepare for, detect, respond to and recover from cybersecurity incidents, which include processes to triage, assess severity for, escalate, contain, investigate, and remediate the incident, as well as to comply with potentially applicable legal and reporting obligations and mitigate brand and reputational damage.
Biggest changeAs part of this process, and our processes aimed at providing for the availability of critical data and systems, maintaining regulatory compliance, identifying and managing our risks from cybersecurity threats, and protecting against, detecting, and responding to cybersecurity incidents, as such term is defined in Item 106(a) of Regulation S-K, we undertake the below listed activities, among others: ● maintain a risk register and risk assessment process based on The National Institute of Standards and Technology (“NIST”) Cybersecurity Framework (however, this does not imply that we meet any particular technical standards, specifications, or requirements, only that we use the NIST Cybersecurity Framework as a guide to help us identify, assess, and manage cybersecurity risks relevant to our business); ● use various third-party software testing products and services designed to test and assess the security of our software; ● closely monitor emerging data protection laws and implement changes to our processes designed to comply with such laws; ● undertake an annual review of our policies and statements related to cybersecurity; ● proactively inform our customers of substantive changes related to customer data handling through disclosures in our SOC 2 Type 2 report or other contractually mandated disclosures; ● conduct annual cybersecurity training for employees and contractors with access to PDF systems and sensitive data; ● conduct incident management training and practice for individuals with responsibilities responding to a cyber incident; 30 Table of Contents ● conduct regular phishing email simulations for employees and contractors with access to corporate email systems to enhance awareness and responsiveness to such possible threats; ● use findings and root cause analysis of cybersecurity incidents to improve our cybersecurity processes and technologies; ● maintain technologies designed to provide network and endpoint monitoring, regular vulnerability assessments, and annual penetration testing to improve our information systems, as such term is defined in Item 106(a) of Regulation S-K; ● carry information security risk insurance that provides protection against the potential losses arising from a cybersecurity incident; ● maintain an employee handbook, Code of Conduct, and Acceptable Use policy that makes clear the importance of cybersecurity and protection of PDF and customer intellectual property; and ● our incident response policy and plan specify the activities we take to prepare for, detect, respond to and recover from cybersecurity incidents, which include processes to triage, assess severity for, escalate, contain, investigate, and remediate the incident, as well as to comply with potentially applicable legal and reporting obligations and mitigate brand and reputational damage.
Our Incident Response Policy is reviewed annually and documents the controls and procedures for timely and accurate reporting of material cybersecurity incidents to the relevant parties, including the Audit Committee when applicable. Our Incident Response Team leads the response to any reported cybersecurity event and comprises experts from Engineering, Information Technology, Legal, Cloud Operations, and Data Security.
Our Incident Response Policy is reviewed annually and documents the controls and procedures for timely and accurate reporting of material cybersecurity incidents to the relevant parties, including the Audit Committee when applicable. Our Incident Response Team leads the response to any reported cybersecurity event and comprises experts from Engineering, Information Technology, Legal, Cloud Operations, and Network Security.
We describe whether and how risks from identified cybersecurity threats, including as a result of any previous cybersecurity incidents, have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations, or financial condition, under the headings “We are exposed to risks related to information technology infrastructure, information management and protection, cybersecurity threats, and cyber incidents.” and “Our business is subject to evolving corporate governance and public disclosure regulations and expectations, including with respect to environmental, social and governance matters that could expose us to numerous risks.” included as part of our risk factor disclosures at Item 1A of this Annual Report on Form 10-K.
We describe whether and how risks from identified cybersecurity threats, including as a result of any previous cybersecurity incidents, are reasonably likely to materially affect us, including our business strategy, results of operations, or financial condition, under the headings “We, and our third-party service providers, are exposed to risks related to information technology infrastructure, information management and protection, cybersecurity threats, and cyber incident; if we or our third-party providers fail to protect confidential information and/or experience a cyber incident, there may be damage to our brand and reputation, material financial penalties, and legal liability.” and “Our business is subject to evolving corporate governance and public disclosure regulations and expectations, including with respect to environmental, social and governance matters that could expose us to numerous risks.” included as part of our risk factor disclosures at Item 1A of this Annual Report on Form 10-K.
We regularly exercise and update the plan after actual incident responses or simulated incident response scenarios. 35 Table of Contents We subscribe to several external independent monitoring services to score and assess our externally facing network and information services and we engage a third-party security firm at least annually to conduct external and web penetration testing exercises on our corporate network and our commercial SaaS service platform.
We subscribe to several external independent monitoring services to score and assess our externally facing network and information services and we engage a third-party security firm at least annually to conduct external and web penetration testing exercises on our corporate network and our commercial SaaS service platform.
For more than 5 years, we have not experienced any material cybersecurity incidents and the expenses we have incurred from cybersecurity incidents were immaterial. This includes penalties and settlements, of which there were none.
For more than 5 years, we have not identified any known cybersecurity threats including as a result of any prior cybersecurity incidents, that have materially impacted us, including the expenses we have incurred from cybersecurity incidents that were immaterial. This includes penalties and settlements, of which there were none.
Our Vice President of Operations reports directly to our executive management team and advises the company on cybersecurity risks and assesses the effectiveness of information technology and data security processes and business policies impacting our overall cybersecurity risk. 36 Table of Contents Our cybersecurity risk management and strategy processes, which are discussed in greater detail above, are led by our Vice President of Operations and a cross section of subject matter experts from Information Technology, Exensio Cloud Operations and Corporate Legal and team.
Our cybersecurity risk management and strategy processes, which are discussed in greater detail above, are led by our Vice President of Operations and a cross section of subject matter experts from Information Technology, Exensio Cloud Operations and Corporate Legal and team.
These risks include, among other things, operational risks, intellectual property theft, fraud, extortion, harm to employees or customers, violation of privacy or security laws and other litigation and legal risk, and reputational risks.
These risks include, among other things, operational risks, intellectual property theft, fraud, extortion, harm to employees or customers, violation of privacy or security laws and other litigation and legal risk, and reputational risks. We have implemented several cybersecurity processes, technologies, and controls in an effort to assess, identify, and manage such material risks.
We have implemented several cybersecurity processes, technologies, and controls to aid in our efforts to assess, identify, and manage such material risks. 34 Table of Contents Our process for identifying and assessing material risks from cybersecurity threats operates alongside our broader overall risk assessment process, covering all company risks.
Our process for identifying and assessing material risks from cybersecurity threats operates alongside our broader overall risk assessment process, covering all company risks.
Added
We regularly exercise and update the plan after actual incident responses or simulated incident response scenarios.
Added
We face risks from 31 Table of Contents cybersecurity threats that, if realized, are reasonably likely to materially affect us, including our operations, business strategy, results of operations, or financial condition.
Added
Our Vice President of Operations reports directly to our executive management team and advises the company on cybersecurity risks and assesses the effectiveness of information technology and information security processes and business policies impacting our overall cybersecurity risk.

Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−0 removed3 unchanged
Biggest changeWe consistently look for opportunities to minimize costs related to office space through improved efficiencies and intend to make changes to leased facilities in the future as appropriate to reflect changes in worldwide operations and headcount.
Biggest changeWe consistently look for opportunities to minimize costs related to office 32 Table of Contents space through improved efficiencies and intend to make changes to leased facilities in the future as appropriate to reflect changes in worldwide operations and headcount.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

2 edited+0 added−1 removed2 unchanged
Biggest changeFinal written submissions were submitted by the parties at the end of August 2023. A decision is currently expected in 2024. Item 4. Mine Safety Disclosures Not applicable. ​ 37 Table of Contents ​ PART II
Biggest changeFinal 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. Item 4. Mine Safety Disclosures Not applicable. ​ 33 Table of Contents PART II
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.
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.
Removed
As of December 31, 2023, the Company was not party to any material legal proceedings for which a loss was probable or an amount was accrued.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

7 edited+4 added−2 removed3 unchanged
Biggest changeThe stock price performance on the following graph and tables is not necessarily indicative of future stock price performance. 38 Table of Contents Unregistered Sales of Equity Securities None.
Biggest changeThe stock price performance on the following graph and tables is not necessarily indicative of future stock price performance. COMPARISON OF CUMULATIVE TOTAL RETURN* Among PDF Solutions, Inc., the NASDAQ Composite Index and the S&P 600 Information Technology (Sector) TR 34 Table of Contents Unregistered Sales of Equity Securities None.
The following graph and tables compare the cumulative total stockholder return data for our stock since December 31, 2018, to the cumulative return over such period of (i) The Nasdaq Composite Index and (ii) The S&P 600 Information Technology (Sector) (TR) Index. The graph assumes that $100 was invested on December 31, 2018.
The following graph and tables compare the cumulative total stockholder return data for our stock since December 31, 2019, to the cumulative return over such period of (i) The Nasdaq Composite Index and (ii) The S&P 600 Information Technology (Sector) (TR) Index. The graph assumes that $100 was invested on December 31, 2019.
There were no purchases made by or on behalf of the Company or any “affiliated purchaser” (as the term is defined in Rule 10b-18(a)(3) under the Exchange Act) of the Company’s common stock during the fourth quarter ended December 31, 2023. ​ Item 6. Reserved
There were no purchases made by or on behalf of the Company or any “affiliated purchaser” (as the term is defined in Rule 10b-18(a)(3) under the Exchange Act) of the Company’s common stock during the fourth quarter ended December 31, 2024. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Item 6. Reserved
The number of stockholders of record does not include individuals whose stock is in nominee or “street name” accounts through brokers. Dividend Policy No cash dividends were declared or paid in 2023, 2022 and 2021.
The number of stockholders of record does not include individuals whose stock is in nominee or “street name” accounts through brokers. Dividend Policy No cash dividends were declared or paid in 2024, 2023 and 2022.
Item 5. Market For Registrant’s Common Equity, and Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock trades on the Nasdaq Global Market under the symbol “PDFS.” As of February 23, 2024, we had approximately 24 stockholders of record.
Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock trades on the Nasdaq Global Market under the symbol “PDFS.” As of February 21, 2025, we had approximately 24 stockholders of record.
The graph and tables further assume that such amount was initially invested in the Common Stock of the Company at a per share price of $8.43 (closing price on December 31, 2018) and that any dividends were reinvested.
The graph and tables further assume that such amount was initially invested in the Common Stock of the Company at a per share price of $16.89 (closing price on December 31, 2019) and that any dividends were reinvested.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers On April 11, 2022, the Board of Directors adopted a new 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, from time to time, over the next two years.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers 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 from the adoption date.
Removed
During the year ended December 31, 2023, the Company repurchased 21,340 shares under the 2022 Program at an average price of $34.81 per share for an aggregate total price of $0.7 million.
Added
No shares were repurchased by the Company in the fourth quarter of 2024.
Removed
During the year ended December 31, 2022, the Company repurchased 714,600 shares under the 2022 Program at an average price of $23.36 per share for an aggregate total price of $16.7 million. In total, the Company has repurchased 735,940 shares under the 2022 Program at an average price of $23.69 per share for an aggregate total price of $17.4 million.
Added
The 2022 Program expired on April 11, 2024, and on April 15, 2024, the Board of Directors adopted a new 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.
Added
The actual timing and amount of repurchases are subject to business and market conditions, corporate and regulatory requirements, stock price, acquisition opportunities and other factors. The 2024 Program does not obligate the Company to acquire a minimum amount of shares and may be modified, suspended or terminated without prior notice.
Added
The Company has not repurchased any shares under the 2024 Program.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

90 edited+31 added−16 removed36 unchanged
Biggest changeInterest and other expense (income), net increased $2.5 million for the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily due to an increase in interest income of $4.0 million from cash, cash equivalents and short-term investments resulting from higher interest rates, partially offset by net unfavorable fluctuations in foreign currency exchange rates. 48 Table of Contents Income Tax Expense ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ % ​ ​ ​ ​ ​ ​ Year Ended December 31, % $ Change % % Change % $ Change % % Change ​ (Dollars in thousands) 2023 2022 2021 2022 to 2023 2021 to 2022 Income tax expense ​ $ (1,764) ​ $ (3,899) ​ $ (3,171) ​ $ (2,135) (55) % $ 728 ​ 23 % Income tax expense decreased $2.1 million for the year ended December 31 , 2023, compared to the year ended December 31 , 2022, primarily due to decreases in state tax expense, foreign withholding taxes and changes in the geographic mix of worldwide income, which is subject to taxation at different statutory tax rates.
Biggest changeInterest and Other Expense (Income), Net ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ $ Change % % Change $ Change % % Change ​ (Dollars in thousands) 2024 2023 2022 2023 to 2024 2022 to 2023 Interest and other expense (income), net ​ $ (5,644) ​ $ (5,020) ​ $ (2,562) ​ $ 624 ​ 12 % $ 2,458 ​ 96 % Interest and other expense (income), net primarily consists of interest income, and foreign currency transaction exchange gains and losses. 44 Table of Contents Interest and other expense (income), net increased $0.6 million for the year ended December 31, 2024, compared to the year ended December 31, 2023, primarily due to increase in interest income from cash, cash equivalents and short-term investments resulting from higher interest rates and sales-type leases, and net favorable fluctuations in foreign currency exchange rates, partially offset by loss on damaged equipment in-transit.
We have contractors located in the West Bank and in Israel, who are providing software development and customer technical support services, and have developed contingency plans to use alternative resources to continue serving customers, if needed.
We have contractors located in the West Bank and in Israel, who are providing software development and customer technical support services, and we have developed contingency plans to use alternative resources to continue serving customers, if needed.
Notes 1 and 2 of Notes to the Consolidated Financial Statements describe the significant accounting policies and methods used in the preparation of the Consolidated Financial Statements. We consider the accounting policies described below to be our critical accounting policies.
Notes 1 and 2 of the Notes to Consolidated Financial Statements describe the significant accounting policies and methods used in the preparation of the Consolidated Financial Statements. We consider the accounting policies described below to be our critical accounting policies.
For these contracts with multiple performance obligations, we allocate the transaction price of the contract to each performance obligation on a relative basis using SSP attributed to each performance obligation.
For these contracts with multiple performance obligations, we allocate the transaction price of the contract to each performance obligation on a relative basis using the SSP attributed to each performance obligation.
Where there are distinct performance obligations, we allocate revenue to all deliverables based on their SSPs and allocate the transaction price of the contract to each performance obligation on a relative basis using SSP.
Where there are distinct performance obligations, we allocate revenue to all deliverables based on their SSPs and allocate the transaction price of the contract to each performance obligation on a relative basis using the SSP.
Gainshare royalty periods are generally subsequent to the delivery of all contractual services and performance obligations. We record Gainshare as a usage-based royalty derived from customers’ usage of IP and record it in the same period in which the usage occurs.
Gainshare periods are generally subsequent to the delivery of all contractual services and performance obligations. We record Gainshare as a usage-based royalty derived from customers’ usage of IP and record it in the same period in which the usage occurs.
For the year ended December 31, 2023, net cash used in financing activities primarily consisted of $9.5 million in cash payments for taxes related to net share settlement of equity awards and $0.7 million for the repurchase of shares of our common stock and, partially offset by $4.3 million of proceeds from our employee stock purchase plan and exercise of stock options.
For the year ended December 31, 2023, net cash used in financing activities primarily consisted of $9.5 million in cash payments for taxes related to net share settlement of equity awards and $0.7 million for the repurchase of shares of our common stock, partially offset by $4.3 million of proceeds from our employee stock purchase plan and exercise of stock options.
Revenue under these project–based contracts, which are delivered over a specific period of time typically for a fixed fee component paid on a set schedule, is recognized as services are performed using a percentage of completion method based on costs or labor-inputs, whichever is the most appropriate measure of the progress towards completion of the contract.
Revenue under these project-based contracts, which are delivered over a specific period of time typically for a fixed fee component paid on a set schedule, is recognized as services are performed using a percentage of completion method based on costs or labor-hour inputs, whichever is the most appropriate measure of the progress towards completion of the contract.
Some customers in the P.R.C., in particular, have nonetheless expressed concerns to us that continued action by the U.S. government could potentially interrupt their ability to make use of our products or services, which has in some cases, and could in the future, negatively impact the demand for our products and services by these customers.
Some customers in the P.R.C., in particular, have expressed concerns to us that continued action by the U.S. government could potentially interrupt their ability to make use of our products or services, which has in some cases, and could in the future, negatively impact the demand for our products and services by these customers.
First, the ubiquity of wireless connectivity and sensor technology enables any manufacturing company to augment its factories and visualize its entire production line. In parallel, the cost per terabyte of data storage has generally decreases over time. The combination of these two trends means that more data is collected and stored than ever before.
First, the ubiquity of wireless connectivity and sensor technology enables any manufacturing company to augment its factories and visualize its entire production line. In parallel, the cost per terabyte of data storage has generally decreased over time. The combination of these two trends means that more data is collected and stored than ever before.
As of December 31, 2023, no deferred taxes have been provided on undistributed earnings from our international subsidiaries. We intend to reinvest the earnings of our non-U.S. subsidiaries in those operations indefinitely. As such, we have not provided for any foreign withholding taxes on the earnings of foreign subsidiaries as of December 31, 2023.
As of December 31, 2024, no deferred taxes have been provided on undistributed earnings from our international subsidiaries. We intend to reinvest the earnings of our non-U.S. subsidiaries in those operations indefinitely. As such, we have not provided for any foreign withholding taxes on the earnings of foreign subsidiaries as of December 31, 2024.
The expected life is based on historical experience and on the terms and conditions of the options granted and purchase rights granted under employee stock purchase plans. The interest rate assumption is based upon observed Treasury yield curve rates appropriate for the expected life of our stock options and purchase rights granted under employee stock purchase plans.
The expected life is based on historical experience and on the terms and conditions of the options granted and purchase rights granted under employee stock purchase plan. The interest rate assumption is based upon observed Treasury yield curve rates appropriate for the expected life of our stock options and purchase rights granted under employee stock purchase plan.
During the measurement period, which is not to exceed one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed, 44 Table of Contents with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings in the Consolidated Statements of Comprehensive Income (Loss).
During the measurement period, which is not to exceed one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings in the Consolidated Statements of Comprehensive Income (Loss).
The expected volatility is based on the historical volatility of our common stock over the most recent period commensurate with the estimated expected life of our stock options and purchase rights granted under employee stock purchase plans.
The expected volatility is based on the historical volatility of our common stock over the most recent period commensurate with the estimated expected life of our stock options and purchase rights granted under employee stock purchase plan.
Compliance with changing U.S. export restrictions limit our possible business with Chinese semiconductor manufacturers on advanced nodes. As a result of these market developments, we have chosen to focus our resources and investments in products, services, and solutions for analytics.
Compliance with changing U.S. export restrictions limit our possible business with Chinese semiconductor manufacturers on advanced nodes. As a result of these market developments, we have chosen to focus our resources and investments in products (including differentiated data), services, and solutions for analytics.
Sales-type lease revenue and corresponding lease receivables are 42 Table of Contents 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 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 Consolidated Statements of Comprehensive Income (Loss).
If we conclude that we are more likely than not to utilize some or all of our U.S. DTAs, we will release some or all of our valuation allowance and our tax provision will decrease in the period in which we make such determination.
If we conclude that we are more likely than not to utilize some or all of our U.S. DTAs, we will release some or all of our valuation allowance and our income tax expense will decrease in the period in which we make such determination.
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 taking possession of software, is accounted for as subscriptions 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 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 subscriptions 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.
Service costs include material costs, hardware costs (including cost of leased assets under sales-type leases), personnel-related costs (including compensation, employee benefits, bonus and stock-based compensation expense), subcontractor costs, 46 Table of Contents overhead costs, travel expenses, and allocated facilities-related costs.
Service costs include material costs, hardware costs (including cost of leased assets under sales-type leases), personnel-related costs (including compensation, employee benefits, bonus and stock-based compensation expense), subcontractor costs, overhead costs, travel expenses, and allocated facilities-related costs.
(2) Purchase obligations consist of agreements to purchase goods and services entered in the ordinary course of business. 51 Table of Contents (3) The contractual obligation table above excludes liabilities for uncertain tax positions of $2.6 million, which are not practicable to assign to any particular years due to the inherent uncertainty of the tax positions.
(2) Purchase obligations consist of agreements to purchase goods and services entered in the ordinary course of business. (3) The contractual obligation table above excludes liabilities for uncertain tax positions of $2.8 million, which are not practicable to assign to any particular years due to the inherent uncertainty of the tax positions.
The Gainshare royalty contained in yield ramp contracts is a variable fee related to continued usage of our IP after the fixed-fee service period ends, based on the customers’ yield achievement. Revenue derived from Gainshare is contingent upon our customers reaching certain defined production yield levels.
The Gainshare contained in integrated Yield Ramp contracts is a variable fee related to continued usage of our IP after the fixed-fee service period ends, based on a customer’s yield achievement. Revenue derived from Gainshare is contingent upon our customers reaching certain defined production yield levels.
The valuation allowance was approximately $64.2 million and $59.2 million as of December 31, 2023 and 2022, respectively. We will continue to evaluate the need for a valuation allowance and may change our conclusion in a future period based on changes in facts (e.g., 12-quarter cumulative profit, significant new revenue, etc.).
The valuation allowance was approximately $67.9 million and $64.2 million as of December 31, 2024 and 2023, respectively. We will continue to evaluate the need for a valuation allowance and may change our conclusion in a future period based on changes in facts (e.g., 12-quarter cumulative profit, significant new revenue, etc.).
Based on all available evidence, both positive and negative, we determined a full valuation allowance was still appropriate for our U.S. federal and state net deferred tax assets (“DTAs”), primarily driven by a cumulative loss incurred over the 12-quarter period ended December 31, 2023, and the likelihood that we may not utilize tax attributes before they expire.
Based on all available evidence, both positive and negative, we determined a full valuation allowance was still appropriate for our U.S. federal and state net DTAs, primarily driven by a cumulative loss incurred over the 12-quarter period ended December 31, 2024, and the likelihood that we may not utilize tax attributes before they expire.
Changes in the net DTAs, less offsetting valuation allowance, in a period are recorded through the income tax provision and could have a material impact on the Consolidated Statements of Comprehensive Income (Loss). 43 Table of Contents Our income tax calculations are based on the application of applicable U.S. federal, state, and/or foreign tax law.
Changes in the net DTAs, less offsetting valuation allowance, in a period are recorded through the income tax expense and could have a material impact on the Consolidated Statements of Comprehensive Income (Loss). Our income tax calculations are based on the application of applicable U.S. federal, state, and/or foreign tax law.
Based on our current assessments, we expect the near-term impact of these expanded trade restrictions on our business to be limited, but revisions, clarifications, and proposals that are still in government development and open questions of interpretation leave much unknown.
Based on our current assessments, we expect the near-term impact of these expanded trade restrictions on our business to be limited, but revisions, clarifications, and proposals that are still in government development and open questions of interpretation leave much unknown. ● Presidential Initiatives. The new U.S.
For example, the P.R.C. has imposed restrictions on imports of certain memory ICs offered by U.S. companies and has been developing its legal authorities to counter foreign sanctions.
For example, the P.R.C. has imposed restrictions on imports of certain memory integrated circuits (“ICs”) offered by U.S. companies and has been developing its legal authorities to counter foreign sanctions.
A lease is classified as a sales-type lease if it meets certain criteria under Topic 842, Leases; otherwise, it is classified as an operating lease. Operating lease revenue is recognized on a straight-line basis over the lease term.
A lease is classified as a sales-type lease if it meets certain criteria under Accounting Standards Codification (“ASC”) Topic 842, Leases; otherwise, it is classified as an operating lease. Operating lease revenue is recognized on a straight-line basis over the lease term.
On April 11, 2022, the Board of Directors terminated the 2020 Program, and adopted a new 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.
Repurchase of Company’s Common Stock On April 11, 2022, our 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 from the adoption date.
Any escalations could lead to disruptions or reductions in international trade, deter or prevent purchasing activity of customers, and negatively impact our development timelines and customer support (with respect to the Israel-Hamas conflict) or China sales (with respect to U.S.-P.R.C. tensions) and financial results in general (with respect to global tensions).
Any escalations could lead to disruptions or reductions in international trade, deter or prevent purchasing activity of customers, and negatively impact our development timelines and customer support (with respect to the conflicts in the Middle East) or China sales (with respect to U.S.-P.R.C. tensions) and financial results in general (with respect to global tensions).
The combination of these latter two trends means that cloud-based, analytic programs that effectively manage identity management, physical security, and data protection are increasingly in demand for insights and efficiencies across the organizations of these companies.
The combination of these latter two trends means that cloud-based, analytics programs that effectively manage identity management, physical security, and 35 Table of Contents data protection are increasingly in demand for insights and efficiencies across the organizations of these companies.
Our Integrated Yield Ramp revenue may continue to fluctuate from period to period primarily due to the contribution of Gainshare royalty, which is dependent on many factors that are outside our control, including among others, continued production of ICs by our customers at facilities at which we generate Gainshare, sustained yield improvements by our customers, and whether we enter into new contracts containing Gainshare.
Our Integrated Yield Ramp revenue may continue to fluctuate from period to period primarily due to fluctuations in customers’ wafer production under Gainshare, which is dependent on many factors that are outside our control, including among others, continued production of ICs by our customers at facilities at which we generate Gainshare, sustained yield improvements by our customers, and whether we enter into new contracts containing Gainshare.
The higher gross margin during the year ended December 31, 2023, was primarily due to higher total revenue when compared to the year ended December 31, 2022.
The higher gross margin during the year ended December 31, 2024, was primarily due to higher total revenue compared to the year ended December 31, 2023.
Net Cash Provided by (Used in) Investing Activities Net cash used in investing activities was $29.0 million for the year ended December 31, 2023, compared to net cash provided by investing activities of $84.6 million for the year ended December 31, 2022. 50 Table of Contents For the year ended December 31, 2023, cash used in investing activities primarily related to purchases of short-term investments of $59.6 million, purchases of and prepayments for property and equipment of $11.3 million primarily related to our DFI and CV systems, payment for a business acquisition, net of cash acquired, of $1.8 million, partially offset by proceeds from maturities and sales of short-term investments of $43.8 million.
For the year ended December 31, 2023, cash used in investing activities primarily related to purchases of short-term investments of $59.6 million, purchases of and prepayments for property and equipment of $11.3 million primarily related to our DFI and CV systems, and the payment for a business acquisition, net of cash acquired, of $1.8 million, partially offset by proceeds from maturities and sales of short-term investments of $43.8 million.
Discussion of Financial Data for the years ended December 31, 2022 and 2021 For a discussion of our results of operations for the years ended December 31, 2022 and 2021, please see our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 1, 2023.
Discussion of Financial Data for the years ended December 31, 2023 and 2022 For a discussion of our results of operations for the years ended December 31, 2023 and 2022, please see our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 27, 2024.
Selling, General, and Administrative ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, % $ Change % % Change % $ Change % % Change ​ (Dollars in thousands) 2023 2022 2021 2022 to 2023 2021 to 2022 Selling, general, and administrative ​ $ 62,216 ​ $ 45,338 ​ $ 37,649 ​ $ 16,878 ​ 37 % $ 7,689 ​ 20 % As a percentage of total revenues ​ 38 % 31 % 34 % ​ ​ ​ ​ Selling, general, and administrative expenses consist primarily of personnel-related costs (including compensation, employee benefits, bonus, commission and stock-based compensation expense for sales, marketing, and general and 47 Table of Contents administrative personnel), legal, tax and accounting services, marketing communications and trade conference-related expenses, third-party cloud-services related costs, travel, IT, and facilities cost allocations.
Selling, General, and Administrative ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, % $ Change % % Change % $ Change % % Change ​ (Dollars in thousands) 2024 2023 2022 2023 to 2024 2022 to 2023 Selling, general, and administrative ​ $ 69,924 ​ $ 62,216 ​ $ 45,338 ​ $ 7,708 ​ 12 % $ 16,878 ​ 37 % As a percentage of total revenues ​ 39 % 38 % 31 % ​ ​ ​ ​ Selling, general, and administrative expenses consist primarily of personnel-related costs (including compensation, employee benefits, bonus, commission and stock-based compensation expense for sales, marketing, and general and administrative personnel), legal, tax and accounting services, marketing communications and trade conference-related expenses, third-party cloud-services related costs, travel, IT and facilities cost allocations.
Congress passed into law funding programs from the bipartisan CHIPS Act, authorizing the Department of Commerce, Department of Defense, and Department of State to develop onshore domestic manufacturing of semiconductors considered critical to U.S. competitiveness 40 Table of Contents and national security.
Congress passed into law funding programs from the bipartisan CHIPS and Science Act of 2022 (the “CHIPS Act”), authorizing the Department of Commerce, Department of Defense, and Department of State to develop onshore domestic manufacturing of semiconductors considered critical to U.S. competitiveness and national security.
Related Party Transactions Refer to Note 13, “Strategic Partnership Agreement with Advantest and Related Party Transactions” of the Notes to Consolidated Financial Statements (Item 8 of Part II of this Annual Report) for a discussion on related party transactions between the Company and Advantest.
Related Party Transactions See Note 14, “Strategic Partnership Agreement with Advantest and Related Party Transactions” of the Notes to Consolidated Financial Statements (Item 8 of Part II of this Annual Report on Form 10-K) for a discussion on related party transactions between the Company and Advantest.
Liquidity and Capital Resources As of December 31, 2023, our working capital, defined as total current assets less total current liabilities, was $147.0 million, compared to $135.2 million as of December 31, 2022. Cash, cash equivalents and short-term investments, on a consolidated basis, were $135.5 million as of December 31, 2023, compared to $139.2 million as of December 31, 2022.
Liquidity and Capital Resources As of December 31, 2024, our working capital, defined as total current assets less total current liabilities, was $145.4 million, compared to $147.0 million as of December 31, 2023. Cash, cash equivalents and short-term investments, on a consolidated basis, were $114.9 million as of December 31, 2024, compared to $135.5 million as of December 31, 2023.
The U.S. government is renewing and amplifying its caution that visitors to the P.R.C. are subject to arbitrary enforcement of local laws and wrongful detention, a risk that could deter or hinder certain business activities.
On November 27, 2024, the U.S. government renewed its caution that visitors to the P.R.C. are subject to arbitrary enforcement of local laws and wrongful detention, a risk that could deter or hinder certain business activities.
For the year ended December 31, 2022, net cash used in financing activities primarily consisted of $22.5 million for the repurchase of shares of our common stock and $6.5 million in cash payments for taxes related to net share settlement of equity awards, partially offset by $4.7 million of proceeds from our employee stock purchase plans and exercise of stock options.
For the year ended December 31, 2024, net cash used in financing activities primarily consisted of $8.5 million in cash payments for taxes related to net share settlement of equity awards and $6.9 million for the repurchase of shares of 46 Table of Contents our common stock, partially offset by $4.2 million of proceeds from our employee stock purchase plan and exercise of stock options.
We believe that all these trends will continue for the next few years, and the challenges involved in adopting Industry 4.0 and secure cloud computing will create opportunities for our combination of advanced analytics capabilities, proven and established supporting infrastructure, and professional services to configure our products to meet customers’ specialized needs. 39 Table of Contents Other trends may continue to affect our Characterization services business and Integrated Yield Ramp revenue specifically.
We believe that all these trends will continue for the next few years, and the challenges involved in adopting Industry 4.0 and secure cloud computing will create opportunities for our combination of advanced analytics capabilities, proven and established supporting infrastructure, and professional services to configure our products to meet customers’ specialized needs.
Net Cash Used in Financing Activities Net cash used in financing activities was $5.9 million for the year ended December 31, 2023, compared to net cash used in financing activities of $24.3 million for the year ended December 31, 2022.
Net Cash Used in Financing Activities Net cash used in financing activities was $11.2 million for the year ended December 31, 2024, compared to net cash used in financing activities of $5.9 million for the year ended December 31, 2023.
Where there are not discrete performance obligations, historically, revenue is primarily recognized as services are performed using a percentage of completion method based on costs or labor-hours inputs, whichever is the most appropriate measure of the progress towards completion of the contract. The estimation of percentage of completion method is complex and subject to many variables that require significant judgment.
Where there are not discrete performance obligations, historically, revenue is primarily recognized as services are performed using a percentage of completion method based on costs or labor-hours inputs, whichever is the most appropriate measure of the progress towards completion of the contract.
This trend will likely continue to impact our Characterization services business on these nodes. We expect most logic foundries to invest in derivatives of older process nodes, such as 28nm and 14nm, to extract additional value as many of their customers will not move to advanced nodes due to either technological barriers or restrictive economics.
We expect most logic foundries to invest in derivatives of older process nodes, such as 28nm and 14nm, to extract additional value as many of their customers will not move to advanced nodes due to either technological barriers or restrictive economics.
Integrated Yield Ramp revenue decreased $4.3 million, or 24%, compared to the year ended December 31, 2022, primarily due to a decrease in hours worked on fixed fee engagements and a decrease in Gainshare from decreased customer wafer shipments at non-leading-edge nodes. ● Costs of revenues increased $3.8 million for the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily due to increases in hardware costs, travel expenses, subcontractor fees and software licenses and maintenance costs.
Integrated Yield Ramp revenue decreased $3.5 million, or 26%, compared to the year ended December 31, 2023, primarily due to a decrease in hours worked on fixed fee engagements and a decrease in Gainshare from decreased customer wafer shipments at non-leading-edge nodes. ● Costs of revenues increased $2.4 million for the year ended December 31, 2024, compared to the year ended December 31, 2023, primarily due to increases in hardware costs, subcontractor fees and third-party cloud-delivery costs.
The earnings of our foreign subsidiaries are taxable in the U.S. in the year earned under the Global Intangible Low-Taxed Income rules implemented under 2017 Tax Cuts and Jobs Act. The CHIPS Act was signed into U.S. law on August 9, 2022.
The earnings of our foreign subsidiaries are taxable in the U.S. in the year earned under the Global Intangible Low-Taxed Income rules implemented under 2017 Tax Cuts and Jobs Act.
Leases We have operating leases for our administrative and sales offices, research and development laboratory and clean room. We recognize our long-term operating lease rights and commitments as operating lease right-of-use assets, operating lease liabilities and operating lease liabilities, non-current, respectively, on our Consolidated Balance Sheets. We determine if an arrangement is, or contains, a lease at inception.
We recognize our long-term operating lease rights and commitments as operating lease right-of-use assets, operating lease liabilities and operating lease liabilities, non-current, respectively, on our Consolidated Balance Sheets. We determine if an arrangement is, or contains, a lease at inception.
If the carrying amount exceeds its fair value, an impairment loss would be recognized equal to the amount of excess, limited to the amount of total goodwill. There was no impairment of goodwill for the years ended December 31, 2023, 2022 and 2021. Our long-lived assets, excluding goodwill, consist of property, equipment, and intangible assets.
If the carrying amount exceeds its fair value, an impairment loss would be recognized equal to the amount of excess, limited to the amount of total goodwill. There was no impairment of goodwill for the years ended December 31, 2024, 2023 and 2022.
Geopolitical tensions and conflicts in various locations around the world continue to increase, including on the issue of Taiwan in Asia, Ukraine and Russia, and most recently between Israel and Hamas.
Geopolitical tensions and conflicts in various locations around the world continue to increase, including on the issue of Taiwan in Asia, Ukraine and Russia, and armed conflicts in the Middle East.
These increases were partially offset by decreases in personnel-related costs. ● Net income was $3.1 million for the year ended December 31, 2023, compared to a net loss of $3.4 million for the year ended December 31, 2022.
These increases were partially offset by decreases in facilities and IT-related costs including depreciation and amortization expense. ● Net income was $4.1 million for the year ended December 31, 2024, compared to a net income of $3.1 million for the year ended December 31, 2023.
These increases were partially offset by a $0.4 million decrease in subcontractor expenses. We anticipate our selling, general and administrative expenses will fluctuate in absolute dollars from period to period as a result of cost control initiatives and to support increased selling efforts in the future.
We anticipate our selling, general and administrative expenses will fluctuate in absolute dollars from period to period as a result of cost control initiatives and to support increased selling efforts in the future.
Amortization of acquired intangible assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, % $ Change % % Change % $ Change % % Change ​ (Dollars in thousands) 2023 2022 2021 ​ 2022 to 2023 2021 to 2022 Amortization of acquired intangible assets ​ $ 1,285 ​ $ 1,270 ​ $ 1,255 $ 15 1 % $ 15 1 % Amortization of acquired intangible assets primarily consists of amortization of intangibles acquired as a result of certain business combinations and was consistent for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Amortization of acquired intangible assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, % $ Change % % Change % $ Change % % Change ​ (Dollars in thousands) 2024 2023 2022 ​ 2023 to 2024 2022 to 2023 Amortization of acquired intangible assets ​ $ 896 ​ $ 1,285 ​ $ 1,270 $ (389) (30) % $ 15 1 % Amortization of acquired intangible assets primarily consists of amortization of intangibles acquired as a result of certain business combinations.
Recoverability of an asset group is measured by comparison of its carrying amount to the expected future undiscounted cash flows that the asset group is expected to generate. If it is determined that an asset group is not recoverable, an impairment loss is recorded in the amount by which the carrying amount of the asset group exceeds its fair value.
If it is determined that an asset group is not recoverable, an impairment loss is recorded in the amount by which the carrying amount of the asset group exceeds its fair value.
During the year ended December 31, 2022, 714,600 shares were repurchased by the Company under the 2022 Program at an average price of $23.36 per share for an aggregate total price of $16.7 million.
During the year ended December 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.
Payments under sales-type leases are discounted using the interest rate implicit in the lease. When the Company’s leases are embedded in contracts with customers that include non-lease performance obligations, the Company allocates consideration in the contract between lease and non-lease components based on their relative SSPs.
Payments under sales-type leases are discounted using the interest rate implicit in the lease. When leases are embedded in contracts with customers that include non-lease performance obligations, we allocate consideration in the contract between lease and non-lease components based on their relative SSPs. Assets subject to operating leases remain in Property and equipment and continue to be depreciated.
The Company also leases some of its DFI system and CV system assets to some customers. The Company determines the existence of a lease when the customer controls the use of these identified assets for a period of time defined in the lease agreement and classifies such leases as operating leases or sales-type leases.
We determine the existence of a lease when the customer controls the use of these identified assets for a period of time defined in the lease agreement and classifies such leases as operating leases or sales-type leases.
Financial Highlights The following are our financial highlights for the year ended December 31, 2023: ● Total revenues were $165.8 million, an increase of $17.3 million, or 12%, compared to the year ended December 31, 2022. Analytics revenue was $152.1 million, an increase of $21.6 million, or 17%, compared to the year ended December 31, 2022.
Financial Highlights The following are our financial highlights for the year ended December 31, 2024: ● Total revenues were $179.5 million, an increase of $13.6 million, or 8%, compared to the year ended December 31, 2023. Analytics revenue was $169.3 million, an increase of $17.2 million, or 11%, compared to the year ended December 31, 2023.
Assets subject to operating leases remain in Property and equipment, net and continue to be depreciated. Assets subject to sales-type leases are derecognized from Property and equipment 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 Consolidated Balance Sheets.
Assets subject to sales-type leases are derecognized from Property and equipment 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 Consolidated Balance Sheets. We generate revenue from the sale of our DFI system products.
We periodically review our long-lived assets for impairment . For assets to be held and used, we initiate our review whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset group may not be recoverable.
For assets to be held and used, we initiate our review whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset group may not be recoverable. Recoverability of an asset group is measured by comparison of its carrying amount to the expected future undiscounted cash flows that the asset group is expected to generate.
Income Taxes We are required to assess whether it is “more likely than not” that we will realize our deferred tax assets. If we believe that they are not likely to be fully realizable before the expiration dates applicable to such assets, then to the extent we believe that recovery is not likely, we must establish a valuation allowance.
If we believe that they are not likely to be fully realizable before the expiration dates applicable to such assets, then to the extent we believe that recovery is not likely, we must establish a valuation allowance.
Repurchase of Company’s Common Stock On June 4, 2020, the Company’s Board of Directors adopted a stock repurchase program (the “2020 Program”) to repurchase up to $25.0 million of the Company’s common stock both on the open market and in privately negotiated transactions, including through Rule 10b5-1 plans, over the next two years.
The 2022 Program expired on April 11, 2024, and on April 15, 2024, the Board of Directors adopted a new 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.
These awards are subject to time-based vesting which generally occurs over a period of four years. The fair value of our stock options and purchase rights granted under employee stock purchase plans is estimated using the Black-Scholes-Merton option-pricing model, which incorporates various assumptions including volatility, expected life and interest rates.
The fair value of our stock options and purchase rights granted under employee stock purchase plan is estimated using the Black-Scholes-Merton option-pricing model, which incorporates various assumptions including volatility, expected life and interest rates.
We believe the government will issue these revisions in 2024, along with additional restrictions. U.S. government policy and regulation remain fluid and uncertain. Other countries and jurisdictions with important roles in our industry are updating some of their export control regulations to further align with those of the U.S. government and, in some cases, to counter U.S. regulations.
Other countries and jurisdictions with important roles in our industry are updating some of their export control regulations to further align with those of the U.S. government and, in some cases, to counter U.S. regulations.
Stock-Based Compensation We account for stock-based compensation using the fair value method, which requires us to measure stock-based compensation based on the grant-date fair value of the awards and recognize the compensation expense over the requisite service period. As stock-based compensation expense recognized is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures.
Stock-Based Compensation We account for stock-based compensation using the fair value method, which requires us to measure stock-based compensation based on the grant-date fair value of the awards and recognize the compensation expense over the requisite 40 Table of Contents service period.
These increases were partially offset by a $0.4 million decrease in personnel-related costs due to lower compensation expenses, partially offset by an increase in stock-based compensation expense. Gross Margin Gross margin for the year ended December 31, 2023, was 69% compared to 68% for the year ended December 31, 2022, or an increase of 1 percentage point.
These increases were partially offset by a $1.2 million decrease in facilities and IT-related costs including depreciation and amortization expense. Gross Margin Gross margin for the year ended December 31, 2024, was 70% compared to 69% for the year ended December 31, 2023, or an increase of 1 percentage point.
We will continue to monitor for any further trade restrictions, other regulatory or policy changes by the U.S. or foreign governments and any actions in response. The uncertainty caused by these recent regulations and the potential for additional future restrictions could negatively affect our future sales in the P.R.C. market. ● Investments in semiconductor manufacturing . In 2022, the U.S.
The uncertainty caused by these recent regulations and the potential for additional future restrictions could negatively affect our future sales, including in but not limited to the P.R.C. market . ● Investments in semiconductor manufacturing . In 2022, the U.S.
For the year ended December 31, 2022, cash provided by investing activities primarily related to proceeds from maturities and sales of short-term investments of $151.5 million, partially offset by purchases of short-term investments of $58.3 million, and purchases of and prepayments for property and equipment of $8.4 million primarily related to our DFI systems and CV systems.
For the year ended December 31, 2024, cash used in investing activities primarily related to purchases of short-term investments of $54.3 million, purchases of and prepayments for property and equipment of $17.8 million primarily related to our DFI system, and the purchase of a convertible promissory note of $2.0 million, partially offset by proceeds from maturities and sales of short-term investments of $68.1 million.
The increase in Analytics revenue was driven by increases in revenue from DFI and CV systems, including sales-type leases of DFI assets, and an increase in revenue from Exensio software licenses, partially offset by a decrease in revenues from Cimetrix software licenses due to a decrease in orders for runtime licenses.
The increase in Analytics revenue was driven by higher revenue from Exensio and Cimetrix software licenses and DFI systems, partially offset by a decrease in revenue from CV systems.
The U.S. government continues to expand and intensify export controls and sanctions, with a major focus on the destinations of the People’s Republic of China (“P.R.C.”), Russian Federation, and Belarus. After an internal evaluation, we determined that a large percentage of our software products are not of U.S. origin and are, thus, not subject to the EAR.
The U.S. government continues to expand and intensify export controls and sanctions, with a major focus on the destinations of and/or entities in the People’s Republic of China (“P.R.C.”), Russian Federation, and Belarus.
Selling, general, and administrative expenses increased $16.9 million for the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily due to (i) a $14.5 million increase in personnel-related costs mainly resulting from increases in stock-based and other compensation expense, commission, employee benefit costs, headcount and worldwide salary increases, (ii) a $0.8 million increase in travel expenses, (iii) a $0.7 million increase in legal fees related to the arbitration proceeding over a disputed customer contract, (iv) a $0.4 million increase in third-party cloud-services related costs, (v) a $0.3 million increase in property tax expense, (vi) a $0.3 million increase in general legal expenses, (vii) a $0.3 million increase in trade conference-related expenses, and (viii) a $0.2 million increase in business acquisition costs.
Selling, general, and administrative expenses increased $7.7 million for the year ended December 31, 2024, compared to the year ended December 31, 2023, primarily due to (i) a $7.1 million increase in personnel-related costs mainly due to higher stock-based, sales commission, other compensation expense and employee benefits-related costs as a result of increase in headcount, worldwide salary increases and higher health insurance costs, (ii) a $1.5 million increase in general legal expenses, (iii) a $0.7 million increase in non-recurring legal, tax and accounting service-related costs, (iv) a $0.4 million increase in marketing and trade conference-related expenses, and (v) a $0.3 million increase in facilities and IT-related costs including depreciation expense, partially offset by a $2.5 million decrease in legal fees related to the arbitration proceeding over a disputed customer contract.
The increase in costs of revenues of $3.8 million for the year ended December 31, 2023, compared to the year ended December 31, 2022, was primarily due to (i) a $3.5 million increase in hardware costs, (ii) a $0.4 million increase in travel expenses, (iii) a $0.2 million increase in subcontractor fees, and (iv) a $0.2 million increase in software licenses and maintenance costs.
The increase in costs of revenues of $2.4 million for the year ended December 31, 2024, compared to the year ended December 31, 2023, was primarily due to (i) a $1.6 million increase in hardware-related costs, (ii) a $0.9 million increase in subcontractor fees, (iii) a $0.9 million increase in third-party cloud-delivery costs, and (iv) a $0.2 million increase in personnel-related costs mostly due to higher stock-based compensation expenses.
Integrated Yield Ramp Revenue Integrated Yield Ramp revenue was $13.8 million for the year ended December 31, 2023, a decrease of $4.3 million, or 24%, compared to the year ended December 31, 2022, primarily due to a decrease in hours worked on fixed fee engagements and a decrease in Gainshare from decreased customer wafer shipments at non-leading-edge nodes.
The increase in Analytics revenue was driven by increases in revenue from Exensio and Cimetrix software licenses and DFI systems, partially offset by a decrease in revenue from CV systems. 42 Table of Contents Integrated Yield Ramp Revenue Integrated Yield Ramp revenue was $10.2 million for the year ended December 31, 2024, a decrease of $3.5 million, or 26%, compared to the year ended December 31, 2023, primarily due to a decrease in hours worked on fixed fee engagements and a decrease in customer wafer shipments at non-leading-edge nodes.
See Note 9 of “Notes to Consolidated Financial Statements” (Item 8 of Part II of this Annual Report) for further discussion.
See Note 10, “Income Taxes” of the Notes to Consolidated Financial Statements (Item 8 of Part II of this Annual Report on Form 10-K) for further discussion.
The strength of demand for semiconductor products has varied by region and product segment. For example, demand for graphical processing unit products is strong, while demand for smart phones is weak. With high inventories and soft demand, semiconductor fab utilization rates are also low and semiconductor capital equipment orders have been impacted for some vendors and market segments.
With high inventories and soft demand for some product segments, some semiconductor fab utilization rates are also low and semiconductor capital equipment orders have been impacted for some vendors and market segments.
Operating Expenses: Research and Development ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, % $ Change % % Change % $ Change % % Change ​ (Dollars in thousands) 2023 2022 2021 2022 to 2023 2021 to 2022 Research and development ​ $ 50,736 ​ $ 56,126 ​ $ 43,780 ​ $ (5,390) (10) % $ 12,346 28 % As a percentage of total revenues ​ 31 % 38 % 39 % ​ ​ Research and development expenses consist primarily of personnel-related costs (including compensation, employee benefits, bonus and stock-based compensation expense), outside development services, travel expenses, third-party cloud-services related costs, IT and facilities cost allocations to support product development activities.
Operating Expenses: Research and Development ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, % $ Change % % Change % $ Change % % Change ​ (Dollars in thousands) 2024 2023 2022 2023 to 2024 2022 to 2023 Research and development ​ $ 53,566 ​ $ 50,736 ​ $ 56,126 ​ $ 2,830 6 % $ (5,390) (10) % As a percentage of total revenues ​ 30 % 31 % 38 % ​ ​ Research and development expenses consist primarily of personnel-related costs (including compensation, employee benefits, bonus and stock-based compensation expense), outside development services, travel expenses, third-party cloud-services related costs, IT and facilities cost allocations to support product development activities. 43 Table of Contents Research and development expenses increased $2.8 million for the year ended December 31, 2024, compared to the year ended December 31, 2023, primarily due to (i) a $1.6 million increase in personnel-related costs mostly due to higher stock-based compensation expenses, higher other compensation expenses (including employee benefit costs) resulting from increased headcount and worldwide salary increases, (ii) a $0.7 million increase in subcontractor expenses primarily related to Cimetrix and Exensio software, and (iii) a $0.4 million increase in third-party cloud-services related costs.
There are other global or business trends that may affect our business opportunities generally as follows: ● Macroeconomy, inventories, and demand . The worldwide economy did not recover as strongly or quickly as expected after the COVID-19 pandemic, and recession fears persist. As a result of the slow recovery, inventories of semiconductor devices remain elevated in many instances.
There are other global or business trends that may affect our business opportunities generally as follows: ● Macroeconomy, inventories, and demand . The worldwide economic performance is uneven, and the possibility of a recession persists, leading to uneven demand. Inventories of semiconductor devices remain elevated in some instances.
Net cash flows provided by operating activities was $14.6 million for the year ended December 31, 2023, compared to net cash flows provided by operating activities of $32.3 million for the year ended December 31, 2022.
Net Cash Provided by (Used in) Investing Activities Net cash used in investing activities was $5.9 million for the year ended December 31, 2024, compared to net cash used in investing activities of $29.0 million for the year ended December 31, 2023.
If our customers engage us for projects funded by these programs, we will evaluate all restrictions, and their impact on our existing business, before entering into any contracts associated with these programs. ● Geopolitical tensions/conflicts .
Recipients of funding under such programs, may be required to agree to separate restrictions on certain commercial activity in the P.R.C., where we currently commercially operate. If our customers engage us for projects funded by these programs, we will evaluate all restrictions, and their impact on our existing business, before entering into any contracts associated with these programs.
In total, the Company has repurchased 735,940 shares under the 2022 Program at an average price of $23.69 per share for an aggregate total price of $17.4 million. 49 Table of Contents Consolidated Statements of Cash Flows Data ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, % $ Change (In thousands) 2023 2022 2021 % 2022 to 2023 % 2021 to 2022 Net cash flows provided by (used in): ​ ​ ​ ​ ​ ​ Operating activities ​ $ 14,600 ​ $ 32,298 ​ $ 4,243 ​ $ (17,698) ​ $ 28,055 Investing activities ​ (28,991) ​ 84,599 ​ (4,667) ​ (113,590) ​ 89,266 Financing activities ​ (5,890) ​ (24,307) ​ (5,525) ​ 18,417 ​ (18,782) Effect of exchange rate changes on cash and cash equivalents ​ (365) ​ (650) ​ (182) ​ 285 ​ (468) Net change in cash and cash equivalents ​ $ (20,646) ​ $ 91,940 ​ $ (6,131) ​ $ (112,586) ​ $ 98,071 Net Cash Provided by Operating Activities Cash flows provided by operating activities during the year ended December 31, 2023, consisted of net income, adjusted for certain non-cash items which primarily consisted of depreciation and amortization, stock-based compensation expense, amortization of acquired intangible expense, amortization of costs capitalized to obtain revenue contracts, net accretion of discounts on short-term investments and net change in operating assets and liabilities.
Consolidated Statements of Cash Flows Data ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ (In thousands) 2024 2023 $ Change Net cash flows provided by (used in): ​ ​ ​ Operating activities ​ $ 9,703 ​ $ 14,600 ​ $ (4,897) Investing activities ​ (5,936) ​ (28,991) ​ 23,055 Financing activities ​ (11,233) ​ (5,890) ​ (5,343) Effect of exchange rate changes on cash and cash equivalents ​ (918) ​ (365) ​ (553) Net change in cash and cash equivalents ​ $ (8,384) ​ $ (20,646) ​ $ 12,262 Net Cash Provided by Operating Activities Cash flows provided by operating activities during the years ended December 31, 2024 and 2023, consisted of net income, adjusted for certain non-cash items which primarily consisted of depreciation and amortization, stock-based compensation expense, amortization of acquired intangible expense, amortization of costs capitalized to obtain revenue contracts, net accretion of discounts on short-term investments and net change in operating assets and liabilities.
Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The fair value of our restricted stock units is equal to the market value of our common stock on the date of the grant.
As stock-based compensation expense recognized is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

4 edited+3 added−4 removed2 unchanged
Biggest changeAs of December 31, 2023, and periodically throughout the year, we have maintained cash balances in various operating accounts in excess of federally insured limits. We limit the amount of credit exposure to any financial institution by evaluating the creditworthiness of the financial institutions with which we invest and investing through more than one financial institution.
Biggest changeAs of December 31, 2024, and periodically throughout the year, we have maintained cash balances in various operating accounts in excess of federally insured limits.
A hypothetical increase in market interest rates of 100 basis points from the market rates in effect at December 31, 2023, would cause the fair value of short-term investments to decrease by an immaterial amount which would not have significantly impacted our financial position or results of operations.
A hypothetical increase in market interest rates of 100 basis points from the market rates in effect at December 31, 2024, would cause the fair value of short-term investments to decrease by an immaterial amount which would not have significantly impacted our financial position or results of operations.
Actual results could vary materially as a result of a number of factors. Interest Rate Risk. As of December 31, 2023, we had cash and cash equivalents and short-term investments of $135.5 million. Cash and cash equivalents consisted of cash and highly liquid money market instruments. Short-term investments consisted of U.S. Government securities.
Actual results could vary materially as a result of a number of factors. Interest Rate Risk. As of December 31, 2024, we had cash and cash equivalents and short-term investments of $114.9 million. Cash and cash equivalents consisted of cash and highly liquid money market instruments. Short-term investments consisted of U.S. Government securities.
Foreign Currency and Exchange Risk. Certain of our receivables and payables for our international offices are denominated in the local currency, including the Euro, Yen and RMB. Therefore, a portion of our revenues and operating expenditures are subject to foreign currency risks.
Certain of our cash balances, receivables and payables for our international offices are denominated in the local currency, including the Euro, Yen, Chinese Yuan, New Taiwan Dollar and Canadian Dollar. Therefore, some of our activities including a portion of our revenues and operating expenditures are subject to foreign currency risks.
Removed
From time to time, we enter into foreign currency forward contracts to reduce the exposure to foreign currency exchange rate fluctuations on certain foreign currency denominated monetary assets and liabilities. We do not use foreign currency forward contracts for speculative or trading purposes. We record these forward contracts at fair value.
Added
We limit the amount of credit exposure to any financial institution by evaluating the creditworthiness of the financial institutions with which we invest and investing through more than one financial institution. 47 Table of Contents Foreign Currency and Exchange Risk.
Removed
The counterparty to these foreign currency forward contracts is a financial institution that we believe is creditworthy, and therefore, we believe the credit risk of counterparty non-performance is not significant.
Added
We also have intercompany transactions with and between certain of our subsidiaries of differing functional currencies, resulting in foreign transaction gains or losses based on our period-end exchange rates. Due to potential volatility of currency exchange rates, we cannot predict the effect of exchange fluctuations on our business.
Removed
The change in fair value of these contracts is recorded in earnings as a component of other income (expense), net and offsets the change in fair value of foreign currency denominated monetary assets and liabilities, which is also recorded in other income (expense), net.
Added
During the years ended December 31, 2024, 2023 and 2022, we did not enter into any foreign currency derivative financial instruments. 48 Table of Contents
Removed
As of December 31, 2023, we had no outstanding forward contracts. ​ 52 Table of Contents ​

Other PDFS 10-K year-over-year comparisons