0001558370-24-014875 | 10-Q | XBRL Viewer

Nine Months Ended September 30,

Intrinsic value of options exercised

CUSTOMER AND GEOGRAPHIC INFORMATION

9 Months Ended

Sep. 30, 2024

CUSTOMER AND GEOGRAPHIC INFORMATION:

9. CUSTOMER AND GEOGRAPHIC INFORMATION

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

The Company’s chief operating decision maker, the chief executive officer, reviews discrete financial information presented on a consolidated basis for purposes of regularly making operating decisions, allocation of resources, and assessing financial performance. Accordingly, the Company considers itself to be in one operating and reporting segment, specifically the provision of services for differentiated data and analytics solutions to the semiconductor and electronics industries.

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


	Three Months Ended September 30,				Nine Months Ended September 30,
Customer	2024		2023		2024		2023
A	19	%	38	%	21	%	36	%
B	*	%	*	%	12	%	*	%
D	13	%	*	%	*	%	*	%

* represents less than 10%

Gross accounts receivable balances (including amounts that are unbilled) from individual customers that are approximately 10% or more of the Company’s gross accounts receivable balance are as follows:


	September 30,		December 31,
Customer	2024		2023
A	29	%	39	%
D	16	%	11	%

Revenues from customers by geographic area based on the location of the customers’ work sites are as follows (amounts in thousands):


	Three Months Ended September 30,
	2024				2023
			Percentage				Percentage
	Revenues		of Revenues		Revenues		of Revenues
United States	$	21,065	45	%	$	24,477	58	%
Japan		6,275	14	%		3,135	7	%
Taiwan		6,273	14	%		1,296	3	%
China		5,673	12	%		7,549	18	%
Rest of the world		7,123	15	%		5,893	14	%
Total revenue	$	46,409	100	%	$	42,350	100	%


	Nine Months Ended September 30,
	2024				2023
			Percentage				Percentage
	Revenues		of Revenues		Revenues		of Revenues
United States	$	58,021	45	%	$	70,090	56	%
Japan		25,495	20	%		8,005	6	%
China		17,526	14	%		21,927	18	%
Taiwan		8,107	6	%		4,660	4	%
Rest of the world		20,231	15	%		20,028	16	%
Total revenue	$	129,380	100	%	$	124,710	100	%

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


	September 30,		December 31,
	2024		2023
United States (1)	$	56,216	$	45,619
Rest of the world		1,688		1,362
Total long-lived assets, net	$	57,904	$	46,981

(1) Includes assets deployed at customer sites which could be outside the U.S.

- Definition

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

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+ Details

LEASES (Tables)

9 Months Ended

Sep. 30, 2024

LEASES:

Schedule of Lease Expense (in Thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Operating lease expense	$	401	$	382	$	1,161	$	1,153
Short-term lease and variable lease expense (1)		268		239		754		673
Total lease expense	$	669	$	621	$	1,915	$	1,826

(1)

Leases with an initial term of 12 months or less are not recorded on the accompanying condensed consolidated balance sheets, and the Company recognizes lease expense for these leases on a straight-line basis over the lease term. Variable lease expense for the periods presented primarily included common area maintenance charges.

Schedule of Supplemental Condensed Consolidated Balance Sheets Information Related to Operating Leases:


	September 30,			December 31,
	2024			2023
Weighted average remaining lease term under operating leases (in years)		3.5			4.4
Weighted average discount rate for operating lease liabilities		5.98	%		4.96	%

Schedule of Maturities of Operating Lease Liabilities (in Thousands):


Year Ending December 31,	Amount
2024 (remaining three months)	$	492
2025		1,850
2026		1,551
2027		1,490
2028		847
Total future minimum lease payments		6,230
Less: Interest (1)		(654)
Present value of future minimum lease payments under operating lease liabilities (2)	$	5,576

(1)

Calculated using incremental borrowing interest rate for each lease.

(2)

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

CUSTOMER AND GEOGRAPHIC INFORMATION - Other (Details)	9 Months Ended
CUSTOMER AND GEOGRAPHIC INFORMATION - Other (Details)	Sep. 30, 2024
CUSTOMER AND GEOGRAPHIC INFORMATION:
Number of operating segments	1
Number of Reportable Segments	1

COMMITMENTS AND CONTINGENCIES (Details) $ in Thousands	9 Months Ended
COMMITMENTS AND CONTINGENCIES (Details) $ in Thousands	Sep. 30, 2024 USD ($)
Future Lease payments	$ 6,230
Indemnifications
Term of Product Warranty	90 days
Purchase Obligations
Purchase Obligation, Total	$ 34,100
Period over which the majority of purchase obligations become due	9 months

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023
Net Cash Provided by (Used in) Operating Activities [Abstract]
Net income	$ 3,518	$ 2,218
Adjustments, Noncash Items, to Reconcile Net Income (Loss) to Cash Provided by (Used in) Operating Activities [Abstract]
Depreciation and amortization	2,895	3,778
Stock-based compensation expense	18,540	15,561
Amortization of acquired intangible assets	2,466	2,659
Amortization of costs capitalized to obtain revenue contracts	1,941	1,494
Net accretion of discounts on short-term investments	(1,239)	(734)
Accretion of unguaranteed residual assets	(488)	(51)
Deferred taxes	(35)	43
Other	(68)	(55)
Increase (Decrease) in Other Operating Assets and Liabilities, Net [Abstract]
Accounts receivable	(1,743)	1,185
Prepaid expenses and other current assets	(8,831)	(7,038)
Operating lease right-of-use assets	1,241	904
Other non-current assets	(11,478)	(928)
Accounts payable	2,995	(2,697)
Accrued compensation and related benefits	(1,608)	(5,342)
Accrued and other liabilities	(16)	393
Deferred revenues	2,771	3,681
Billings in excess of recognized revenues	(1,479)	(1,612)
Operating lease liabilities	(1,285)	(888)
Net cash provided by (used in) operating activities	8,097	12,571
Net Cash Provided by (Used in) Investing Activities [Abstract]
Proceeds from maturities and sales of short-term investments	57,125	28,800
Purchases of short-term investments	(43,054)	(32,250)
Purchase of convertible promissory note	(2,000)
Proceeds from sale of property and equipment	55	105
Purchases of property and equipment	(11,573)	(8,574)
Prepayment for the purchase of property and equipment	(365)	(343)
Purchases of intangible assets		(150)
Payment for business acquisition, net of cash acquired		(1,823)
Net cash provided by (used in) investing activities	188	(14,235)
Net Cash Provided by (Used in) Financing Activities [Abstract]
Proceeds from exercise of stock options	114	469
Proceeds from employee stock purchase plan	4,073	3,832
Payments for taxes related to net share settlement of equity awards	(8,196)	(9,135)
Repurchases of common stock	(6,899)	(743)
Net cash used in financing activities	(10,908)	(5,577)
Effect of exchange rate changes on cash and cash equivalents	73	(763)
Net change in cash and cash equivalents	(2,550)	(8,004)
Cash and cash equivalents at beginning of period	98,978	119,624
Cash and cash equivalents at end of period	96,428	111,620
Supplemental Cash Flow Information [Abstract]
Cash paid during the year for income taxes	2,064	3,568
Cash paid for amounts included in the measurement of operating lease liabilities	1,290	1,160
Noncash Investing and Financing Items [Abstract]
Property and equipment received and accrued in accounts payable and accrued and other liabilities	4,774	697
Advances for purchase of fixed assets transferred from prepaid assets to property and equipment	89	66
Operating lease liabilities arising from obtaining right-of-use assets	679
Property and equipment transferred to sales-type lease	4,021	$ 6,002
Stock-based compensation capitalized as a part of the cost of property and equipment	$ 233

SIGNIFICANT ACCOUNTING POLICIES (Policies)

9 Months Ended

Sep. 30, 2024

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Basis of Presentation, Policy

Basis of Presentation

The interim unaudited condensed consolidated financial statements included herein have been prepared by PDF Solutions, Inc. (the “Company”) pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), including the instructions to the Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. The interim unaudited condensed consolidated financial statements reflect, in the opinion of management, all adjustments necessary (consisting only of normal recurring adjustments) to present a fair statement of results for the interim periods presented. The operating results for any interim period are not necessarily indicative of the results that may be expected for other interim periods or the full fiscal year. The accompanying interim unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 27, 2024.

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

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

Revenue Recognition, Policy

The Company derives revenue from two sources: Analytics and Integrated Yield Ramp.

The Company recognizes revenue in accordance with FASB Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers, and its related amendments (collectively known as “ASC 606”). ASC 606 outlines a single comprehensive model to use in accounting for revenue arising from contracts with customers. Revenue is recognized when control of products or services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those promised products or services.

The Company determines revenue recognition through the following five steps:

●

Identification of the contract, or contracts, with a customer

●

Identification of the performance obligations in the contract

●

Determination of the transaction price

●

Allocation of the transaction price to the performance obligations in the contract

●

Recognition of revenue when, or as, performance obligations are satisfied

The Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance, and collectibility of consideration is probable.

Contracts with Multiple Performance Obligations

The Company enters into contracts that can include various combinations of licenses, products and services, some of which are distinct and are accounted for as separate performance obligations. For contracts with multiple performance obligations, the Company allocates the transaction price of the contract to each performance obligation on a relative basis using the standalone selling price (“SSP”).

Analytics Revenue

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

Revenue from standalone software is recognized depending on whether the license is perpetual or time-based. Perpetual (one-time charge) license software is recognized at the time of the inception of the arrangement when control transfers to the customers if the software license is considered as a separate performance obligation from the services offered by the Company. Revenue from post-contract support is recognized over the contract term on a straight-line basis, because the Company is providing (i) support and (ii) unspecified software updates on a when-and-if available basis over the contract term. Revenue from time-based-licensed software is allocated to each performance obligation and is recognized either at a point in time or over time as follows. The license component is recognized at the time when control transfers to customers, with the post-contract support component recognized ratably over the committed term of the contract. For contracts with any combination of licenses, support, and other services, distinct performance obligations are accounted for separately. For contracts with multiple performance obligations, the Company allocates the transaction price of the contract to each performance obligation on a relative basis using the SSP attributed to each performance obligation.

Revenue from SaaS arrangements, which allow for the use of a cloud-based software product or service over a contractually determined period of time without the customer having to take possession of the software, is accounted for as a subscription and is recognized as revenue ratably, on a straight-line basis, over the subscription period beginning on the date the service is first made available to customers. For contracts with any combination of SaaS and related services, distinct performance obligations are accounted for separately. For contracts with multiple performance obligations, the Company allocates the transaction price of the contract to each performance obligation on a relative basis using the SSP attributed to each performance obligation.

Revenue from DFI systems and CV systems (including Characterization services) that do not include performance incentives based on customers’ yield achievement is recognized primarily as services are performed. Where there are distinct performance obligations, the Company allocates revenue to all deliverables based on their SSPs. For those contracts with multiple performance obligations, the Company allocates the transaction price of the contract to each performance obligation on a relative basis using the SSP attributed to each performance obligation. 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. Please refer to the “Significant Judgments” section of this Note for further discussion.

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. A lease is classified as a sales-type lease if it meets certain criteria under 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. Sales-type lease revenue and corresponding lease receivables are recognized at lease commencement based on the present value of the future lease payments, and related interest income on lease receivable is recognized over the lease term and are recorded under Analytics revenue in the accompanying unaudited condensed consolidated statements of comprehensive income (loss). Payments under sales-type leases are discounted using the interest rate implicit in the lease. 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. Assets subject to operating leases remain in property and equipment and continue to be depreciated. Assets subject to sales-type leases are derecognized from property and equipment, net at lease commencement and a net investment in the lease asset is recognized in prepaid expenses and other current assets and other non-current assets in the accompanying unaudited condensed consolidated balance sheets.

Integrated Yield Ramp Revenue

Integrated Yield Ramp revenue is derived from the Company’s fixed-fee engagements that include performance incentives based on customers’ yield achievement (which consists primarily of Gainshare royalties) typically based on customer’s wafer shipments, pertaining to these fixed-price contracts, which royalties are variable.

Revenue under these project-based contracts, which are delivered over a specific period of time, typically for a fixed-fee component paid on a set schedule, is recognized as services are performed using a percentage of completion method based on costs or labor-hours inputs, whichever is the most appropriate measure of the progress towards completion of the contract. Where there are distinct performance obligations, the Company allocates revenue to all deliverables based on their SSPs and allocates the transaction price of the contract to each performance obligation on a relative basis using the SSP. Similar to the services provided in connection with DFI systems and CV systems that are contributing to Analytics revenue, due to the nature of the work performed in these arrangements, the estimation of percentage of completion method is complex and subject to many variables that require significant judgment. Please refer to the “Significant Judgments” section of this Note for further discussion.

The Gainshare contained in Integrated Yield Ramp contracts is a variable fee related to continued usage of the Company’s intellectual property after the fixed-fee service period ends, based on a customer’s yield achievement. Revenue derived from Gainshare is contingent upon the Company’s customers reaching certain defined production yield levels. Gainshare periods are generally subsequent to the delivery of all contractual services and performance obligations. The Company records Gainshare as a usage-based royalty derived from customers’ usage of intellectual property and records it in the same period in which the usage occurs.

Disaggregation of Revenue, Policy

Disaggregation of Revenue

The Company disaggregates revenue from contracts with customers into the timing of the transfer of goods and services and the geographical regions. The Company determined that disaggregating revenue into these categories achieves the disclosure objective to depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors.

The Company’s performance obligations are satisfied either over time or at a point-in-time. The following table represents a disaggregation of revenue percentage by timing of revenue:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Over time	64	%	68	%	67	%	74	%
Point-in-time	36	%	32	%	33	%	26	%
Total	100	%	100	%	100	%	100	%

International revenues accounted for approximately 55% and 42% of the Company’s total revenues during the three months ended September 30, 2024 and 2023, respectively, and approximately 55% and 44% of the Company’s total revenues during the nine months ended September 30, 2024 and 2023, respectively. See Note 9, Customer and Geographic Information.

Contract Balances, Policy

Contract Balances

The Company performs its obligations under a contract with a customer primarily by licensing software or providing services in exchange for consideration from the customer. The timing of the Company’s performance often differs from the timing of the customer’s payment, which results in the recognition of a receivable, a contract asset or a contract liability.

The Company classifies the right to consideration in exchange for software or services transferred to a customer as either a receivable or a contract asset. A receivable is a right to consideration that is unconditional, as compared to a contract asset, which is a right to consideration that is conditional upon factors other than the passage of time. The majority of the Company’s contract assets represent unbilled amounts related to fixed-price service contracts when the revenue recognized exceeds the amount billed to the customer.

The contract assets are recorded on a net basis with deferred revenue (i.e., contract liabilities) at the contract level. The contract assets consist of the following (in thousands):


	September 30,		December 31,
	2024		2023
Current portion included in prepaid expenses and other current assets	$	9,193	$	6,787
Non-current portion included in other non-current assets		611		933
Total contract assets	$	9,804	$	7,720

The Company did not record any asset impairment charges related to contract assets for the periods presented.

Deferred revenues and billings in excess of recognized revenues consist substantially of amounts invoiced in advance of revenue recognition and are recognized as the revenue recognition criteria are met. Deferred revenues that will be recognized during the succeeding twelve-month period are recorded as current deferred revenues and the remaining portion is recorded in other non-current liabilities in the accompanying condensed consolidated balance sheets.

Deferred revenues were the following (in thousands):


	September 30,		December 31,
	2024		2023
Current portion	$	28,728	$	25,750
Non-current portion (1)		1,599		1,802
Total deferred revenues	$	30,327	$	27,552

(1)

Included in other non-current liabilities.

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Revenue recognized that was included in the deferred revenues and billings in excess of recognized revenues balances at the beginning of each period	$	12,040	$	13,129	$	24,669	$	23,836

As of September 30, 2024, the aggregate amount of the transaction price allocated to the remaining performance obligations related to customer contracts that were unsatisfied or partially unsatisfied was approximately $239.2 million. Given the applicable contract terms with customers, more than half of this amount is expected to be recognized as revenue over the next two years with the remainder to be recognized thereafter. This amount does not include insignificant contracts to which the customer is not committed, nor significant contracts for which the Company recognizes revenue equal to the amount the Company has the right to invoice for services performed, or future sales-based or usage-based royalty payments in exchange for a license of intellectual property. This amount is subject to change due to future revaluations of variable consideration, terminations, other contract modifications, or currency adjustments. The estimated timing of the recognition of remaining unsatisfied performance obligations is subject to change and is affected by changes to the scope, change in timing of delivery of products and services, or contract modifications.

The adjustment to revenue recognized from performance obligations satisfied (or partially satisfied) in previous periods was a decrease of $0.7 million and a decrease of $0.6 million during the three months ended September 30, 2024 and 2023, respectively, and a decrease of $1.4 million and an increase of $4.3 million during the nine months ended September 30, 2024 and 2023, respectively. These amounts primarily represent changes in estimated percentage-of-completion based contracts and changes in actual versus estimated Gainshare.

Costs to Obtain or Fulfill a Contract, Policy

Costs to Obtain or Fulfill a Contract

The Company capitalizes the incremental costs to obtain or fulfill a contract with a customer, including direct sales commissions and related fees, when it expects to recover those costs. Amortization expense related to these capitalized costs is recognized over the period associated with the revenue from which the cost was incurred.

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


	September 30,		December 31,
	2024		2023
Current portion included in prepaid expenses and other current assets	$	2,566	$	1,954
Non-current portion included in other non-current assets		3,059		2,587
Total capitalized direct sales commission costs	$	5,625	$	4,541

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Amortization of capitalized direct sales commission costs	$	667	$	532	$	1,941	$	1,494

There was no impairment loss in relation to the costs capitalized for the periods presented.

Significant Judgments

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

For revenue under project-based contracts for fixed-price services, revenue is recognized as services are performed using a percentage-of-completion method based on costs or labor-hours input method, whichever is the most appropriate measure of the progress towards completion of the contract. Due to the nature of the work performed in these arrangements, the estimation of percentage of completion method is complex, subject to many variables and requires significant judgment. Key factors reviewed by the Company to estimate costs to complete each contract are future labor and product costs and expected productivity efficiencies. If circumstances arise that change the original estimates of revenues, costs, or extent of progress toward completion, revisions to the estimates are made. These revisions may result in increases or decreases in estimated revenues or costs, and such revisions are reflected in revenue on a cumulative catch-up basis in the period in which the circumstances that gave rise to the revision become known.

The Company’s contracts with customers often include promises to transfer products, software licenses and provide services, including professional services, technical support services, and rights to unspecified updates to a customer. Determining whether licenses and services are distinct performance obligations that should be accounted for separately, or not distinct and thus accounted for together, requires significant judgment. The Company rarely licenses software on a standalone basis, so the Company is required to estimate the range of the SSPs for each performance obligation. In instances where the SSP is not directly observable because the Company does not license the software or sell the service separately, the Company determines the SSP using information that may include market conditions and other observable inputs.

The Company is required to record Gainshare revenue in the same period in which the usage occurs. Because the Company generally does not receive the acknowledgment reports from its customers during a given quarter within the time frame necessary to adequately review the reports and include the actual amounts in quarterly results for such quarter, the Company accrues the related revenue based on estimates of customers underlying sales achievement. The Company’s estimation process can be based on historical data, trends, seasonality, changes in the contract rate, knowledge of the changes in the industry and changes in the customer’s manufacturing environment learned through discussions with customers and sales personnel. As a result of accruing revenue for the quarter based on such estimates, adjustments will be required in the following quarter to true-up revenue to the actual amounts reported.

Practical Expedient, Policy

Practical Expedient

The Company does not adjust the transaction price for the effects of a significant financing component when the period between the transfers of the promised good or service to the customer and payment for that good or service by the customer is expected to be one year or less. The Company assessed each of its revenue generating arrangements in order to determine whether a significant financing component exists, and determined its contracts did not include a material significant financing component during the three and nine months ended September 30, 2024 and 2023.

Accounts Receivable, Policy

Accounts Receivable

Accounts receivable include amounts that are unbilled at the end of the period that are expected to be billed and collected within a 12-month period. Unbilled accounts receivable, included in accounts receivable, totaled $20.7 million and $16.4 million as of September 30, 2024, and December 31, 2023, respectively. Unbilled accounts receivable that are not expected to be billed and collected during the succeeding 12-month period are recorded in other non-current assets and totaled $10.2 million and $1.1 million as of September 30, 2024, and December 31, 2023, respectively.

Stock-Based Compensation, Policy

Stock-based compensation is estimated at the grant date based on the award’s fair value and is recognized on a straight-line basis over the vesting periods, generally four years. Stock-based compensation expense before taxes related to the Company’s stock plan and employee stock purchase plan was allocated as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Costs of revenues	$	1,366	$	1,120	$	3,751	$	3,022
Research and development		2,375		2,196		6,640		5,609
Selling, general, and administrative		2,989		2,683		8,149		6,930
Stock-based compensation expense	$	6,730	$	5,999	$	18,540	$	15,561

Stock Incentive Plan, Policy

The Company estimated the fair value of share-based awards granted under the 2011 Stock Plan during the period using the Black-Scholes-Merton option-pricing model. There were no stock options granted during the three and nine months ended September 30, 2024 and 2023.

Employee Stock Purchase Plan, Policy

The Company estimated the fair value of purchase rights granted under the 2021 Purchase Plan during the period using the Black-Scholes-Merton option-pricing model with the following weighted average assumptions, resulting in the following weighted average fair values:


	Nine Months Ended September 30,
	2024			2023
Expected life (in years)		1.25			1.25
Volatility		40.97	%		43.66	%
Risk-free interest rate		4.61	%		5.15	%
Expected dividend		—			—
Weighted average fair value of purchase rights granted during the period	$	10.91		$	15.71

Earnings Per Share, Policy

Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period (excluding outstanding stock options, nonvested restricted stock units and shares subject to repurchase). Diluted net income (loss) per share is computed using the weighted average number of common shares outstanding for the period plus the potential effect of dilutive securities which are convertible into common shares (using the treasury stock method), except in cases in which the effect would be anti-dilutive.

Fair Value Measurements, Policy

Fair value is the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The multiple assumptions used to value financial instruments are referred to as inputs, and a hierarchy for inputs used in measuring fair value is established, that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources while unobservable inputs reflect a reporting entity’s pricing based upon its own market assumptions. These inputs are ranked according to a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels.


Level 1 -	Inputs are quoted prices in active markets for identical assets or liabilities.

Level 2 -	Inputs are quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable and market-corroborated inputs which are derived principally from or corroborated by observable market data.

Level 3 -	Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable.

Recent Accounting Standards, Policy

Recent Accounting Standards

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires disclosure of incremental segment information on an annual and interim basis. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and requires retrospective application to all prior periods presented in the financial statements. Early adoption is permitted. The Company is currently evaluating the impact of the new standard on the consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU is intended to improve the transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures. The ASU’s amendments are effective for public business entities for annual periods beginning after December 15, 2024. Entities are permitted to early adopt the standard for “annual financial statements that have not yet been issued or made available for issuance.” Adoption is either prospectively or retrospectively, the Company will adopt this ASU on a prospective basis. The Company is currently evaluating the impact of the new standard on the consolidated financial statements and related disclosures.

Management has reviewed other recently issued accounting pronouncements issued or proposed by the FASB and does not believe any of these accounting pronouncements has had or will have a material impact on the condensed unaudited consolidated financial statements.

CUSTOMER AND GEOGRAPHIC INFORMATION - Revenue Percentage by Major Customers (Details) - Customer Concentration Risk	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023	Dec. 31, 2023
Revenue Benchmark \| Customer A
Revenues from External Customers and Long-Lived Assets [Line Items]
Significant customer concentration (percentage)	19.00%	38.00%	21.00%	36.00%
Revenue Benchmark \| Customer B
Revenues from External Customers and Long-Lived Assets [Line Items]
Significant customer concentration (percentage)			12.00%
Revenue Benchmark \| Customer D
Revenues from External Customers and Long-Lived Assets [Line Items]
Significant customer concentration (percentage)	13.00%
Accounts Receivable \| Customer A
Revenues from External Customers and Long-Lived Assets [Line Items]
Significant customer concentration (percentage)			29.00%		39.00%
Accounts Receivable \| Customer D
Revenues from External Customers and Long-Lived Assets [Line Items]
Significant customer concentration (percentage)			16.00%		11.00%

REVENUE FROM CONTRACTS WITH CUSTOMERS - Additional Information (Details) - Software License and Related Services Agreement - Advantest America, Inc. - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Revenue performance obligations satisfied in previous period	$ (0.7)	$ (0.6)	$ (1.4)	$ 4.3
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-09-30
Revenue, remaining performance obligation	$ 239.2		$ 239.2
More than half of the remaining performance obligations	2 years		2 years

STRATEGIC PARTNERSHIP AGREEMENT WITH ADVANTEST AND RELATED PARTY TRANSACTIONS

9 Months Ended

Sep. 30, 2024

STRATEGIC PARTNERSHIP AGREEMENT WITH ADVANTEST AND RELATED PARTY TRANSACTIONS:

STRATEGIC PARTNERSHIP AGREEMENT WITH ADVANTEST AND RELATED PARTY TRANSACTIONS

12. STRATEGIC PARTNERSHIP AGREEMENT WITH ADVANTEST AND RELATED PARTY TRANSACTIONS

In July 2020, the Company entered into a long-term strategic partnership with Advantest Corporation through its wholly-owned subsidiary, Advantest America, Inc. (collectively referred to herein as “Advantest”), which includes: (i) a Securities Purchase Agreement wherein the Company issued and sold to Advantest America, Inc., an aggregate of 3,306,924 shares of its common stock, for aggregate gross proceeds of $65.2 million; (ii) a significant agreement for its assistance in development of cloud-based applications for Advantest tools that leverages our Exensio analytics software; (iii) a commercial agreement providing for the license to third parties of solutions that result from the development work that combine Advantest’s testing applications and our Exensio platform; and (iv) a 5-year cloud-based subscription for Exensio analytics software and related services.

Analytics revenue recognized from Advantest was $3.3 million and $2.6 million during the three months ended September 30, 2024 and 2023, respectively, and $9.2 million and $6.2 million during the nine months ended September 30, 2024 and 2023, respectively. There were no accounts receivable from Advantest as of September 30, 2024. Accounts receivable from Advantest were not material as of December 31, 2023. Deferred revenue amounted to $11.8 million and $9.4 million as of September 30, 2024, and December 31, 2023, respectively.

- Definition

The entire disclosure for related party transactions. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147480990/946-20-50-2

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 5
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147480990/946-20-50-5

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 6
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147480990/946-20-50-6

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 235
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (c)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147477968/946-235-50-2

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 235
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (e)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147477968/946-235-50-2

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 850
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 1
-Subparagraph (d)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147483326/850-10-50-1

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 220
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SX 210.6-07(2)(g)(3))
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147479134/946-220-S99-1

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 220
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SX 210.6-07(2)(c))
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147479134/946-220-S99-1

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 220
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SX 210.6-07(2)(e))
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147479134/946-220-S99-1

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Topic 850
-Name Accounting Standards Codification
-Publisher FASB
-URI https://asc.fasb.org/850/tableOfContent

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Topic 850
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 6
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147483326/850-10-50-6

Reference 12: http://www.xbrl.org/2003/role/disclosureRef
-Topic 850
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 1
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147483326/850-10-50-1

Reference 13: http://www.xbrl.org/2003/role/disclosureRef
-Topic 850
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 1
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147483326/850-10-50-1

+ Details

BALANCE SHEET COMPONENTS - Maturities of Lease Payments Under Sales-type Leases (Details) - USD ($) $ in Thousands	Sep. 30, 2024	Dec. 31, 2023
BALANCE SHEET COMPONENTS
2024 (remaining three months)	$ 1,541
2025	8,048
2026	7,672
2027	2,718
2028	68
Total future sales-type lease payments	20,047
Less: Present value adjustment (1)	(3,592)
Present value of lease receivables	$ 16,455	$ 9,460

NET INCOME (LOSS) PER SHARE

9 Months Ended

Sep. 30, 2024

NET INCOME (LOSS) PER SHARE:

NET INCOME (LOSS) PER SHARE

8. NET INCOME (LOSS) PER SHARE

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Numerator:
Net income (loss)	$	2,206	$	(4,972)	$	3,518	$	2,218
Denominator:
Basic weighted average shares outstanding		38,710		38,187		38,542		37,930
Effect of dilutive stock options, unvested restricted stock units, and shares of common stock expected to be issued under employee stock purchase plan		395		—		486		1,047
Diluted weighted average shares outstanding		39,105		38,187		39,028		38,977

Net income (loss) per share:
Basic	$	0.06	$	(0.13)	$	0.09	$	0.06
Diluted	$	0.06	$	(0.13)	$	0.09	$	0.06

For the three months ended September 30, 2023, because the Company was in a loss position, diluted net loss per share is the same as basic net loss per share as the inclusion of the potential common shares would have been anti-dilutive.

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


	Three Months Ended September 30,		Nine Months Ended September 30,
	2024	2023	2024	2023
Outstanding options	—	23	—	—
Non-vested restricted stock units	1,078	1,391	740	223
Employee Stock Purchase Plan	—	38	—	—
Total	1,078	1,452	740	223

NET INCOME (LOSS) PER SHARE - Anti-dilutive Securities (Details) - shares shares in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Antidilutive securities excluded from EPS	1,078	1,452	740	223
Outstanding Options
Antidilutive securities excluded from EPS		23
Non-vested Restricted Stock Units
Antidilutive securities excluded from EPS	1,078	1,391	740	223
Employee Stock Purchase Plan
Antidilutive securities excluded from EPS		38

REVENUE FROM CONTRACTS WITH CUSTOMERS - Disaggregation of Revenue (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Performance obligations, percentage of revenues	100.00%	100.00%	100.00%	100.00%
Over Time
Performance obligations, percentage of revenues	64.00%	68.00%	67.00%	74.00%
Point-in-time
Performance obligations, percentage of revenues	36.00%	32.00%	33.00%	26.00%

CUSTOMER AND GEOGRAPHIC INFORMATION (Tables)

9 Months Ended

Sep. 30, 2024

CUSTOMER AND GEOGRAPHIC INFORMATION:

Schedule of Revenues from Customers by Geographic Area Based on the Location of the Customers' Work Sites (in Thousands):


	Three Months Ended September 30,
	2024				2023
			Percentage				Percentage
	Revenues		of Revenues		Revenues		of Revenues
United States	$	21,065	45	%	$	24,477	58	%
Japan		6,275	14	%		3,135	7	%
Taiwan		6,273	14	%		1,296	3	%
China		5,673	12	%		7,549	18	%
Rest of the world		7,123	15	%		5,893	14	%
Total revenue	$	46,409	100	%	$	42,350	100	%


	Nine Months Ended September 30,
	2024				2023
			Percentage				Percentage
	Revenues		of Revenues		Revenues		of Revenues
United States	$	58,021	45	%	$	70,090	56	%
Japan		25,495	20	%		8,005	6	%
China		17,526	14	%		21,927	18	%
Taiwan		8,107	6	%		4,660	4	%
Rest of the world		20,231	15	%		20,028	16	%
Total revenue	$	129,380	100	%	$	124,710	100	%

Schedule of Long-Lived Assets, Net by Geographic Area (in Thousands):


	September 30,		December 31,
	2024		2023
United States (1)	$	56,216	$	45,619
Rest of the world		1,688		1,362
Total long-lived assets, net	$	57,904	$	46,981

(1) Includes assets deployed at customer sites which could be outside the U.S.

BALANCE SHEET COMPONENTS

9 Months Ended

Sep. 30, 2024

BALANCE SHEET COMPONENTS

BALANCE SHEET COMPONENTS

3. BALANCE SHEET COMPONENTS

Accounts Receivable

The Company performs ongoing credit evaluations of its customers’ financial condition. An allowance for credit losses is maintained for probable credit losses based upon the Company’s assessment of the expected

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

Property and Equipment

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


	September 30,		December 31,
	2024		2023
Computer equipment	$	11,919	$	12,515
Software		5,647		5,596
Furniture, fixtures, and equipment		2,543		2,501
Leasehold improvements		6,705		6,475
Laboratory and other equipment		5,621		4,891
Test equipment		26,286		25,044
Property and equipment in progress:
DFI™ system assets		27,991		22,864
CV® system and other assets		7,324		6,977
		94,036		86,863
Less: Accumulated depreciation and amortization		(48,017)		(49,525)
Total	$	46,019	$	37,338

Test equipment mainly includes DFI™ system and CV^® system assets at customer sites that are contributing to revenue. Property and equipment in progress represent the development or construction of property and equipment that have not yet been placed in service for the Company’s intended use and are not depreciated.

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

Goodwill and Intangible Assets, Net

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

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


		September 30, 2024						December 31, 2023
	Amortization	Gross				Net		Gross				Net
	Period	Carrying		Accumulated		Carrying		Carrying		Accumulated		Carrying
	(Years)	Amount		Amortization		Amount		Amount		Amortization		Amount
Acquired identifiable intangibles:
Customer relationships	1-10	$	9,506	$	(7,772)	$	1,734	$	9,508	$	(7,335)	$	2,173
Developed technology	4-9		34,631		(23,983)		10,648		34,650		(22,094)		12,556
Tradename and trademarks	2-10		1,598		(1,100)		498		1,598		(1,025)		573
Patent	6-10		2,100		(1,847)		253		2,100		(1,782)		318
Noncompetition agreements	3		848		(848)		—		848		(848)		—
Total		$	48,683	$	(35,550)	$	13,133	$	48,704	$	(33,084)	$	15,620

The weighted average amortization period for acquired identifiable intangible assets was 4.6 years as of September 30, 2024. The following table summarizes intangible assets amortization expense in the accompanying condensed consolidated statements of comprehensive income (loss) (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Amortization of acquired technology included under costs of revenues	$	584	$	574	$	1,752	$	1,680
Amortization of acquired intangible assets presented separately under costs and expenses		196		328		714		979
Total amortization of acquired intangible assets	$	780	$	902	$	2,466	$	2,659

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


Year Ending December 31,	Amount
2024 (remaining three months)	$	767
2025		3,069
2026		2,900
2027		2,747
2028		2,442
2029 and thereafter		1,208
Total future amortization expense	$	13,133

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

Other Non-current Assets

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


	September 30,		December 31,
	2024		2023
Costs capitalized to obtain revenue contracts – non-current (1)	$	3,059	$	2,587
Unbilled accounts receivable – non-current (2)		10,216		1,069
Contract assets – non-current (1)		611		933
Net investments in sales-type leases – non-current (3)		18,778		12,196
Other		4,596		2,433
Total other non-current assets	$	37,260	$	19,218

(1)

See Note 2, Revenue from Contracts with Customers.

(2)

See Note 3, Balance Sheet Components – Accounts Receivable.

(3)

The Company had net investments in sales-type leases for its DFI™ system and CV® system assets. The following table summarizes the components of the Company’s net investments in sales-type leases in the accompanying condensed consolidated balance sheets (in thousands):


	September 30,		December 31,
	2024		2023
Lease receivables	$	16,455	$	9,460
Unguaranteed residual assets		7,525		4,717
Net investments in sales-type leases		23,980		14,177
Less: Current portion of lease receivables under prepaid expenses and other current assets		(5,202)		(1,981)
Net investments in sales-type leases – non-current	$	18,778	$	12,196

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


Year Ending December 31,	Amount
2024 (remaining three months)	$	1,541
2025		8,048
2026		7,672
2027		2,718
2028		68
Total future sales-type lease payments		20,047
Less: Present value adjustment (a)		(3,592)
Present value of lease receivables	$	16,455

(a)

Calculated using the rate implicit in the lease determined for each lease.

There was no allowance for credit losses on lease receivables as of September 30, 2024, and December 31, 2023. The Company’s ongoing risk management strategy for residual assets includes performing regular reviews of estimated residual values.

LEASES - Maturity of Operating Lease Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2024	Dec. 31, 2023
LEASES:
2024 (remaining three months)	$ 492
2025	1,850
2026	1,551
2027	1,490
2028	847
Total future minimum lease payments	6,230
Less: Interest (1)	(654)
Present value of future minimum lease payments under operating lease liabilities (2)	5,576
Operating lease liability - current portion	$ 1,706	$ 1,529

STRATEGIC PARTNERSHIP AGREEMENT WITH ADVANTEST AND RELATED PARTY TRANSACTIONS (Details) - Advantest America, Inc. - USD ($) $ in Millions	1 Months Ended	3 Months Ended		9 Months Ended
	Jul. 31, 2020	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023	Dec. 31, 2023
Analytics
Related party revenue		$ 3.3	$ 2.6	$ 9.2	$ 6.2
Related party deferred revenue		$ 11.8		$ 11.8		$ 9.4
Securities Purchase Agreement
Common stock shares issued	3,306,924
Proceeds from Issuance of Common Stock	$ 65.2
Term of cloud-based subscription for Extension analytics software	5 years

BALANCE SHEET COMPONENTS (Details) - USD ($)	3 Months Ended		9 Months Ended
BALANCE SHEET COMPONENTS (Details) - USD ($)	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023	Dec. 31, 2023
Unbilled receivables - non-current	$ 10,216,000		$ 10,216,000		$ 1,069,000
Depreciation and amortization	800,000	$ 1,200,000	2,900,000	$ 3,800,000
Goodwill, carrying amount	15,011,000		$ 15,011,000		15,029,000
Intangible assets, amortization period			4 years 7 months 6 days
Impairment of goodwill	0	$ 0	$ 0	$ 0
Allowance for credit loss on sales-type lease receivables	0		0		0
Accounts Receivable
Unbilled receivables	20,700,000		20,700,000		16,400,000
Other Non-current Assets
Unbilled receivables - non-current	$ 10,200,000		$ 10,200,000		$ 1,100,000

- Definition

Amount, after accumulated impairment loss, of asset representing future economic benefit arising from other asset acquired in business combination or from joint venture formation or both, that is not individually identified and separately recognized.

+ References

Reference 1: http://www.xbrl.org/2003/role/exampleRef
-Topic 280
-SubTopic 10
-Name Accounting Standards Codification
-Section 55
-Paragraph 49
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482785/280-10-55-49

Reference 2: http://www.xbrl.org/2003/role/exampleRef
-Topic 350
-SubTopic 20
-Name Accounting Standards Codification
-Section 55
-Paragraph 24
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482548/350-20-55-24

Reference 3: http://www.xbrl.org/2003/role/exampleRef
-Topic 820
-SubTopic 10
-Name Accounting Standards Codification
-Section 55
-Paragraph 100
-Subparagraph (d)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482078/820-10-55-100

Reference 4: http://www.xbrl.org/2003/role/exampleRef
-Topic 852
-SubTopic 10
-Name Accounting Standards Codification
-Section 55
-Paragraph 10
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147481372/852-10-55-10

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 210
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SX 210.5-02(15))
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147480566/210-10-S99-1

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 350
-SubTopic 20
-Name Accounting Standards Codification
-Section 45
-Paragraph 1
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482598/350-20-45-1

Reference 7: http://www.xbrl.org/2009/role/commonPracticeRef
-Topic 350
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482573/350-20-50-1

Reference 8: http://www.xbrl.org/2009/role/commonPracticeRef
-Topic 350
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1
-Subparagraph (h)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482573/350-20-50-1

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 942
-SubTopic 210
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SX 210.9-03(10)(1))
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147478546/942-210-S99-1

+ Details

LEASES (Details)	9 Months Ended
LEASES (Details)	Sep. 30, 2024	Dec. 31, 2023
Number of finance leases	0	0
Weighted average remaining lease term under operating leases (in years)	3 years 6 months	4 years 4 months 24 days
Weighted average discount rate for operating lease liabilities	5.98%	4.96%
Minimum
Initial lease term, threshold to be recorded in accompanying condensed consolidated balance sheets	12 months

FAIR VALUE MEASUREMENTS (Tables)

9 Months Ended

Sep. 30, 2024

FAIR VALUE MEASUREMENTS:

Schedule of Assets Measured at Fair Value on a Recurring Basis (in Thousands):


	Fair Value Measurements Using
			Quoted
			Prices in
			Active		Significant
			Markets for		Other
			Identical		Observable		Significant
	September 30,		Assets		Inputs		Unobservable
Assets	2024		(Level 1)		(Level 2)		Inputs (Level 3)
Cash equivalents
Money market mutual funds	$	80,830	$	80,830	$	—	$	—
Short-term investments (available-for-sale debt securities)
U.S. Government securities (1)		23,724		23,724		—		—
Non-current assets
Convertible note receivable (available-for-sale debt security) (2)		2,013		—		—		2,013
Total	$	106,567	$	104,554	$	—	$	2,013


	Fair Value Measurements Using
			Quoted
			Prices in
			Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
	December 31,		Assets		Inputs		Inputs
Assets	2023		(Level 1)		(Level 2)		(Level 3)
Cash equivalents
Money market mutual funds	$	83,810	$	83,810	$	—	$	—
Short-term investments (available-for-sale debt securities)
U.S. Government securities (1)		36,544		36,544		—		—
Total	$	120,354	$	120,354	$	—	$	—

(1)

As of September 30, 2024, and December 31, 2023, the amortized cost of the Company’s investments in U.S. Government securities approximated their fair value due to their short-term maturities, and there have been no events or changes in circumstances that would have had a significant effect on the fair value of these securities in the periods presented. For the three and nine months ended September 30, 2024, there were no material realized or unrealized gains or losses, either individually or in the aggregate.

(2)

In August 2024, the Company purchased a $2.0 million non-marketable convertible promissory note from an unrelated third party (the “convertible note”). The convertible note bears a 5% interest rate annually and will mature in August 2026 and is included in other non-current assets in the accompanying condensed consolidated balance sheet as of September 30, 2024. As of September 30, 2024, the cost of the convertible note approximated its fair value as there have been no events or changes in circumstances that would have had a significant effect on its fair value from its issuance date to reporting period end.

EMPLOYEE BENEFIT PLANS

9 Months Ended

Sep. 30, 2024

EMPLOYEE BENEFIT PLANS:

EMPLOYEE BENEFIT PLANS

6. EMPLOYEE BENEFIT PLANS

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

Employee Stock Purchase Plan

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

Under the 2021 Purchase Plan, eligible employees can contribute up to 10% of their compensation, as defined in the 2021 Purchase Plan, towards the purchase of shares of PDF common stock at a price of 85% of the lower of the fair market value at the beginning of the offering period or the end of the purchase period. The 2021 Purchase Plan commenced on August 1, 2021, and provided for twenty-four-month offering periods with four six-month purchase periods in each offering period.


	Nine Months Ended September 30,
	2024			2023
Expected life (in years)		1.25			1.25
Volatility		40.97	%		43.66	%
Risk-free interest rate		4.61	%		5.15	%
Expected dividend		—			—
Weighted average fair value of purchase rights granted during the period	$	10.91		$	15.71

During the three months ended September 30, 2024, a total of 81,974 shares were issued under the 2021 Purchase Plan, at a weighted average purchase price of $26.31 per share. During the three months ended September 30, 2023, a total of 125,392 shares were issued under the 2021 Purchase Plan, at a weighted average purchase price of $17.30 per share. During the nine months ended September 30, 2024, a total of 155,828 shares were issued

under the 2021 Purchase Plan, at a weighted average purchase price of $26.14 per share. During the nine months ended September 30, 2023, a total of 223,608 shares were issued under the 2021 Purchase Plan, at a weighted average purchase price of $17.14 per share. As of September 30, 2024, unrecognized compensation cost related to the 2021 Purchase Plan was $2.5 million. This estimated unrecognized cost is expected to be recognized over a weighted average period of 1.4 years.

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

Stock Incentive Plans

On November 16, 2011, the Company’s stockholders initially approved the 2011 Stock Incentive Plan, which has been amended and restated by the Board of Directors and approved by the Company’s stockholders a number of times since then (as amended through the date of this report, the “2011 Plan”). Under the 2011 Plan, the Company may award stock options, stock appreciation rights (“SARs”), stock grants or stock units covering shares of the Company’s common stock to employees, directors, non-employee directors and contractors. The aggregate number of shares reserved for awards under the 2011 Plan is 14.6 million shares, plus up to 3.5 million shares previously issued under the 2001 Stock Plan adopted by the Company in 2001, which expired in 2011 (the “2001 Plan”) that are either (i) forfeited or (ii) repurchased by the Company or are shares subject to awards previously issued under the 2001 Plan that expire or that terminate without having been exercised or settled in full on or after November 16, 2011. In case of awards other than options or SARs, the aggregate number of shares reserved under the 2011 Plan will be decreased at a rate of 1.33 shares issued pursuant to such awards. The exercise price for stock options must generally be at prices no less than the fair market value at the date of grant. Stock options generally expire ten years from the date of grant and become vested and exercisable over a four-year period.

As of September 30, 2024, 15.1 million shares of common stock were reserved to cover stock-based awards under the 2011 Plan, of which 3.6 million shares were available for future grant. The number of shares reserved and available under the 2011 Plan includes 0.5 million shares that were subject to awards previously made under the 2001 Plan and were forfeited, expired, or repurchased by the Company after the adoption of the 2011 Plan through September 30, 2024. As of September 30, 2024, there were no outstanding awards that had been granted outside of the 2011 Plan.

Stock-Based Compensation


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Costs of revenues	$	1,366	$	1,120	$	3,751	$	3,022
Research and development		2,375		2,196		6,640		5,609
Selling, general, and administrative		2,989		2,683		8,149		6,930
Stock-based compensation expense	$	6,730	$	5,999	$	18,540	$	15,561

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


	Outstanding Options
				Weighted
		Weighted		Average
		Average		Remaining	Aggregate
	Number of	Exercise		Contractual	Intrinsic
	Options	Price		Term	Value
	(in thousands)	per Share		(Years)	(in thousands)
Outstanding, January 1, 2024	38	$	15.92
Granted	—		—
Exercised	(7)		16.20
Canceled	—		—
Expired	—		—
Outstanding, September 30, 2024	31	$	15.85	3.53	$	493
Vested and expected to vest, September 30, 2024	31	$	15.85	3.53	$	493
Exercisable, September 30, 2024	31	$	15.85	3.53	$	493

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

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

Total fair value of shares vested during the nine months ended September 30, 2024, was immaterial. As of September 30, 2024, there was no remaining unrecognized compensation cost related to unvested stock options.

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


		Weighted
		Average Grant
	Shares	Date Fair Value
	(in thousands)	Per Share
Nonvested, January 1, 2024	1,995	$	30.03
Granted	734		35.42
Vested	(756)		27.37
Forfeited	(42)		30.64
Nonvested, September 30, 2024	1,931	$	33.11

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

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

As of September 30, 2024, there was $52.3 million of total unrecognized compensation cost related RSUs. That cost is expected to be recognized over a weighted average period of 2.6 years. RSUs do not have rights to dividends prior to vesting.

REVENUE FROM CONTRACTS WITH CUSTOMERS - Contract Balances (Details) - USD ($) $ in Thousands	Sep. 30, 2024	Dec. 31, 2023
Non-current portion included in other non-current assets	$ 611	$ 933
Total contract assets	9,804	7,720
Prepaid Expenses and Other Current Assets
Current portion included in prepaid expenses and other current assets	9,193	6,787
Other Non-current Assets
Non-current portion included in other non-current assets	$ 611	$ 933

EMPLOYEE BENEFIT PLANS - Allocation of Recognized Period Costs (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Share-Based Payment Arrangement, Expense	$ 6,730	$ 5,999	$ 18,540	$ 15,561
Costs of Revenues
Share-Based Payment Arrangement, Expense	1,366	1,120	3,751	3,022
Research and Development
Share-Based Payment Arrangement, Expense	2,375	2,196	6,640	5,609
Selling, General, and Administrative
Share-Based Payment Arrangement, Expense	$ 2,989	$ 2,683	$ 8,149	$ 6,930

FAIR VALUE MEASUREMENTS - Other (Details) $ in Millions	9 Months Ended
FAIR VALUE MEASUREMENTS - Other (Details) $ in Millions	Sep. 30, 2024 USD ($)
Convertible note interest rate	5.00%
Other Non-current Assets
Convertible note receivable	$ 2.0

REVENUE FROM CONTRACTS WITH CUSTOMERS (Tables)

9 Months Ended

Sep. 30, 2024

REVENUE FROM CONTRACTS WITH CUSTOMERS:

Schedule of Disaggregation of Revenue Percentage by Timing of Revenue:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Over time	64	%	68	%	67	%	74	%
Point-in-time	36	%	32	%	33	%	26	%
Total	100	%	100	%	100	%	100	%

Schedule of Contract Assets (Liabilities) Recorded on a Net Basis with Deferred Revenue (in Thousands):


	September 30,		December 31,
	2024		2023
Current portion included in prepaid expenses and other current assets	$	9,193	$	6,787
Non-current portion included in other non-current assets		611		933
Total contract assets	$	9,804	$	7,720

Schedule of Deferred Revenues (in Thousands):


	September 30,		December 31,
	2024		2023
Current portion	$	28,728	$	25,750
Non-current portion (1)		1,599		1,802
Total deferred revenues	$	30,327	$	27,552

(1)

Included in other non-current liabilities.

Schedule of Recognized Revenue Included in Deferred Revenues and Billings in Excess of Recognized Revenues at the Beginning of Each Reporting Period (in Thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Revenue recognized that was included in the deferred revenues and billings in excess of recognized revenues balances at the beginning of each period	$	12,040	$	13,129	$	24,669	$	23,836

Schedule of Capitalized Direct Sales Commission Costs (in Thousands):


	September 30,		December 31,
	2024		2023
Current portion included in prepaid expenses and other current assets	$	2,566	$	1,954
Non-current portion included in other non-current assets		3,059		2,587
Total capitalized direct sales commission costs	$	5,625	$	4,541

Schedule of Amortization of Capitalized Direct Sales Commission Costs (in Thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Amortization of capitalized direct sales commission costs	$	667	$	532	$	1,941	$	1,494

CONDENSED CONSOLIDATED BALANCE SHEETS (Parentheticals) - USD ($) shares in Thousands, $ in Thousands	Sep. 30, 2024	Dec. 31, 2023
CONDENSED CONSOLIDATED BALANCE SHEETS
Accounts receivable, allowance for credit losses	$ 890	$ 890
Preferred stock, par value	$ 0.00015	$ 0.00015
Preferred stock, shares authorized	5,000	5,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.00015	$ 0.00015
Common stock, shares authorized	70,000	70,000
Common stock, shares issued	50,668	49,749
Common stock, shares outstanding	38,763	38,289
Treasury stock, common shares	11,905	11,460

INCOME TAXES - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
INCOME TAXES - Narrative (Details) - USD ($) $ in Thousands	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023	Dec. 31, 2023
INCOME TAXES:
Increase (Decrease) in Income Taxes			$ (900)
Income Tax Expense (Benefit)	$ 1,424	$ 6,006	$ 1,587	$ 2,508
Effective Income Tax Rate Reconciliation, Percent			31.10%	53.10%
Unrecognized tax benefits, excluding interest and penalties	16,600		$ 16,600		$ 15,900
Unrecognized tax benefits that would impact effective tax rate	2,000		2,000		2,000
Unrecognized tax benefits including income tax penalties and interest accrued in long term liabilities	2,600		2,600
Unrecognized tax benefits, interest accrued	600		600
Unrecognized Tax Benefits In Deferred Tax Assets	14,600		14,600
Deferred Tax Assets, Valuation Allowance	$ 64,200		$ 64,200		$ 64,200

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Revenues [Abstract]
Total revenues	$ 46,409	$ 42,350	$ 129,380	$ 124,710
Costs and Expenses [Abstract]
Costs of revenues	12,484	14,282	38,243	38,555
Research and development	13,516	13,113	39,149	38,428
Selling, general, and administrative	18,094	15,611	50,851	46,022
Amortization of acquired intangible assets	196	328	714	979
Interest and other expense (income), net	(1,511)	(2,018)	(4,682)	(4,000)
Income (loss) before income tax benefit (expense)	3,630	1,034	5,105	4,726
Income tax benefit (expense)	(1,424)	(6,006)	(1,587)	(2,508)
Net income (loss)	2,206	(4,972)	3,518	2,218
Other Comprehensive Income (Loss), Net of Tax, Portion Attributable to Parent, Alternative [Abstract]
Foreign currency translation adjustments, net of tax	975	(552)	123	(679)
Change in unrealized gain (loss) related to available-for-sale debt securities, net of tax	28	(5)	12	2
Total other comprehensive loss	1,003	(557)	135	(677)
Comprehensive income	$ 3,209	$ (5,529)	$ 3,653	$ 1,541
Net income per share:
Basic	$ 0.06	$ (0.13)	$ 0.09	$ 0.06
Diluted	$ 0.06	$ (0.13)	$ 0.09	$ 0.06
Weighted average common shares used to calculate net income per share:
Basic	38,710	38,187	38,542	37,930
Diluted	39,105	38,187	39,028	38,977
Analytics
Revenues [Abstract]
Total revenues	$ 44,750	$ 39,497	$ 121,327	$ 112,957
Integrated Yield Ramp
Revenues [Abstract]
Total revenues	$ 1,659	$ 2,853	$ 8,053	$ 11,753

EMPLOYEE BENEFIT PLANS - Valuation Assumptions for ESPP (Details) - 2021 Employee Stock Purchase Plan - $ / shares	9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023
Expected life (in years)	1 year 3 months	1 year 3 months
Volatility	40.97%	43.66%
Risk-free interest rate	4.61%	5.15%
Expected dividend	0.00%	0.00%
Weighted average fair value of purchase rights granted during the period	$ 10.91	$ 15.71

REVENUE FROM CONTRACTS WITH CUSTOMERS - Deferred Revenues (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023	Dec. 31, 2023
REVENUE FROM CONTRACTS WITH CUSTOMERS:
Deferred revenues - current portion	$ 28,728		$ 28,728		$ 25,750
Non-current portion (1)	1,599		1,599		1,802
Total deferred revenues	30,327		30,327		$ 27,552
Revenue recognized that was included in the deferred revenues and billings in excess of deferred revenues balances at beginning of period	$ 12,040	$ 13,129	$ 24,669	$ 23,836

BALANCE SHEET COMPONENTS - Intangible Assets (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023	Dec. 31, 2023
Intangible assets, amortization period			4 years 7 months 6 days
Intangible assets, gross carrying amount, total	$ 48,683		$ 48,683		$ 48,704
Intangible assets, accumulated amortization, total	(35,550)		(35,550)		(33,084)
Intangible assets, net carrying amount, total	13,133		13,133		15,620
Total amortization of acquired intangible assets	780	$ 902	2,466	$ 2,659
Customer Relationships
Intangible assets, gross carrying amount, total	9,506		9,506		9,508
Intangible assets, accumulated amortization, total	(7,772)		(7,772)		(7,335)
Intangible assets, net carrying amount, total	1,734		$ 1,734		2,173
Customer Relationships \| Minimum
Amortization Period (Year)			1 year
Customer Relationships \| Maximum
Amortization Period (Year)			10 years
Developed Technology
Intangible assets, gross carrying amount, total	34,631		$ 34,631		34,650
Intangible assets, accumulated amortization, total	(23,983)		(23,983)		(22,094)
Intangible assets, net carrying amount, total	10,648		$ 10,648		12,556
Developed Technology \| Minimum
Amortization Period (Year)			4 years
Developed Technology \| Maximum
Amortization Period (Year)			9 years
Tradename and Trademarks
Intangible assets, gross carrying amount, total	1,598		$ 1,598		1,598
Intangible assets, accumulated amortization, total	(1,100)		(1,100)		(1,025)
Intangible assets, net carrying amount, total	498		$ 498		573
Tradename and Trademarks \| Minimum
Amortization Period (Year)			2 years
Tradename and Trademarks \| Maximum
Amortization Period (Year)			10 years
Patent
Intangible assets, gross carrying amount, total	2,100		$ 2,100		2,100
Intangible assets, accumulated amortization, total	(1,847)		(1,847)		(1,782)
Intangible assets, net carrying amount, total	253		$ 253		318
Patent \| Minimum
Amortization Period (Year)			6 years
Patent \| Maximum
Amortization Period (Year)			10 years
Noncompetition Agreements
Amortization Period (Year)			3 years
Intangible assets, gross carrying amount, total	848		$ 848		848
Intangible assets, accumulated amortization, total	(848)		(848)		$ (848)
Costs of Revenues
Amortization of acquired technology included under Costs of revenues	584	574	1,752	1,680
Costs and Expenses
Amortization of acquired intangible assets presented separately under costs and expenses	$ 196	$ 328	$ 714	$ 979

EMPLOYEE BENEFIT PLANS - Nonvested Restricted Stock Units Activity (Details) - Restricted Stock Units (RSUs) - $ / shares shares in Thousands	9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023
Non-vested RSUs, Opening Balance	1,995
RSUs Granted	734
RSUs Vested	(756)
RSUs Forfeited	(42)
Non-vested RSUs, Ending Balance	1,931
Non-vested RSUs Opening, Weighted Average Grant Date Fair Value	$ 30.03
RSUs Granted, Weighted Average Grant Date Fair Value	35.42	$ 43.92
RSUs Vested, Weighted Average Grant Date Fair Value	27.37
RSUs Forfeited, Weighted Average Grant Date Fair Value	30.64
Non-vested RSUs Ending, Weighted Average Grant Date Fair Value	$ 33.11

Document And Entity Information - shares	9 Months Ended
Document And Entity Information - shares	Sep. 30, 2024	Nov. 01, 2024
Document and Entity Information
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2024
Document Transition Report	false
Securities Act File Number	000-31311
Entity Registrant Name	PDF SOLUTIONS, INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	25-1701361
Entity Address, Address Line One	2858 De La Cruz Blvd.
Entity Address, City or Town	Santa Clara
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	95050
City Area Code	408
Local Phone Number	280-7900
Title of 12(b) Security	Common Stock, $0.00015 par value
Trading Symbol	PDFS
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		38,772,864
Entity Central Index Key	0001120914
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2024

Insider Trading Arrangements	9 Months Ended
Insider Trading Arrangements	Sep. 30, 2024
Trading Arrangements, by Individual
Rule 10b5-1 Arrangement Adopted	false
Non-Rule 10b5-1 Arrangement Adopted	false
Rule 10b5-1 Arrangement Terminated	false
Non-Rule 10b5-1 Arrangement Terminated	false

FAIR VALUE MEASUREMENTS

9 Months Ended

Sep. 30, 2024

FAIR VALUE MEASUREMENTS:

FAIR VALUE MEASUREMENTS

10. FAIR VALUE MEASUREMENTS


Level 1 -	Inputs are quoted prices in active markets for identical assets or liabilities.

Level 2 -	Inputs are quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable and market-corroborated inputs which are derived principally from or corroborated by observable market data.

Level 3 -	Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable.

The following table represents the Company’s assets measured at fair value on a recurring basis as of September 30, 2024, and December 31, 2023, and the basis for those measurements (in thousands):


	Fair Value Measurements Using
			Quoted
			Prices in
			Active		Significant
			Markets for		Other
			Identical		Observable		Significant
	September 30,		Assets		Inputs		Unobservable
Assets	2024		(Level 1)		(Level 2)		Inputs (Level 3)
Cash equivalents
Money market mutual funds	$	80,830	$	80,830	$	—	$	—
Short-term investments (available-for-sale debt securities)
U.S. Government securities (1)		23,724		23,724		—		—
Non-current assets
Convertible note receivable (available-for-sale debt security) (2)		2,013		—		—		2,013
Total	$	106,567	$	104,554	$	—	$	2,013


	Fair Value Measurements Using
			Quoted
			Prices in
			Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
	December 31,		Assets		Inputs		Inputs
Assets	2023		(Level 1)		(Level 2)		(Level 3)
Cash equivalents
Money market mutual funds	$	83,810	$	83,810	$	—	$	—
Short-term investments (available-for-sale debt securities)
U.S. Government securities (1)		36,544		36,544		—		—
Total	$	120,354	$	120,354	$	—	$	—

(1)

(2)

BALANCE SHEET COMPONENTS (Tables)

9 Months Ended

Sep. 30, 2024

BALANCE SHEET COMPONENTS

Schedule of Property and Equipment, Net (in Thousands):


	September 30,		December 31,
	2024		2023
Computer equipment	$	11,919	$	12,515
Software		5,647		5,596
Furniture, fixtures, and equipment		2,543		2,501
Leasehold improvements		6,705		6,475
Laboratory and other equipment		5,621		4,891
Test equipment		26,286		25,044
Property and equipment in progress:
DFI™ system assets		27,991		22,864
CV® system and other assets		7,324		6,977
		94,036		86,863
Less: Accumulated depreciation and amortization		(48,017)		(49,525)
Total	$	46,019	$	37,338

Schedule of Intangible Assets, Net (in Thousands):


		September 30, 2024						December 31, 2023
	Amortization	Gross				Net		Gross				Net
	Period	Carrying		Accumulated		Carrying		Carrying		Accumulated		Carrying
	(Years)	Amount		Amortization		Amount		Amount		Amortization		Amount
Acquired identifiable intangibles:
Customer relationships	1-10	$	9,506	$	(7,772)	$	1,734	$	9,508	$	(7,335)	$	2,173
Developed technology	4-9		34,631		(23,983)		10,648		34,650		(22,094)		12,556
Tradename and trademarks	2-10		1,598		(1,100)		498		1,598		(1,025)		573
Patent	6-10		2,100		(1,847)		253		2,100		(1,782)		318
Noncompetition agreements	3		848		(848)		—		848		(848)		—
Total		$	48,683	$	(35,550)	$	13,133	$	48,704	$	(33,084)	$	15,620

Schedule of Intangible Asset Amortization Expense (in Thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Amortization of acquired technology included under costs of revenues	$	584	$	574	$	1,752	$	1,680
Amortization of acquired intangible assets presented separately under costs and expenses		196		328		714		979
Total amortization of acquired intangible assets	$	780	$	902	$	2,466	$	2,659

Schedule of Annual Amortization Expense of Acquired Identifiable Intangible Assets (in Thousands):


Year Ending December 31,	Amount
2024 (remaining three months)	$	767
2025		3,069
2026		2,900
2027		2,747
2028		2,442
2029 and thereafter		1,208
Total future amortization expense	$	13,133

Schedule of Other Non-Current Assets (in Thousands):


	September 30,		December 31,
	2024		2023
Costs capitalized to obtain revenue contracts – non-current (1)	$	3,059	$	2,587
Unbilled accounts receivable – non-current (2)		10,216		1,069
Contract assets – non-current (1)		611		933
Net investments in sales-type leases – non-current (3)		18,778		12,196
Other		4,596		2,433
Total other non-current assets	$	37,260	$	19,218

(1)

See Note 2, Revenue from Contracts with Customers.

(2)

See Note 3, Balance Sheet Components – Accounts Receivable.

(3)


	September 30,		December 31,
	2024		2023
Lease receivables	$	16,455	$	9,460
Unguaranteed residual assets		7,525		4,717
Net investments in sales-type leases		23,980		14,177
Less: Current portion of lease receivables under prepaid expenses and other current assets		(5,202)		(1,981)
Net investments in sales-type leases – non-current	$	18,778	$	12,196

Schedule of Maturities of Lease Payments Under Sales-type Leases (in Thousands):


Year Ending December 31,	Amount
2024 (remaining three months)	$	1,541
2025		8,048
2026		7,672
2027		2,718
2028		68
Total future sales-type lease payments		20,047
Less: Present value adjustment (a)		(3,592)
Present value of lease receivables	$	16,455

(a)

Calculated using the rate implicit in the lease determined for each lease.

CUSTOMER AND GEOGRAPHIC INFORMATION - Revenues by Geographic Area (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues	$ 46,409	$ 42,350	$ 129,380	$ 124,710
Geographic Concentration Risk \| Revenue Benchmark
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues	$ 46,409	$ 42,350	$ 129,380	$ 124,710
Percentage of Revenues	100.00%	100.00%	100.00%	100.00%
Geographic Concentration Risk \| Revenue Benchmark \| United States
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues	$ 21,065	$ 24,477	$ 58,021	$ 70,090
Percentage of Revenues	45.00%	58.00%	45.00%	56.00%
Geographic Concentration Risk \| Revenue Benchmark \| China
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues	$ 5,673	$ 7,549	$ 17,526	$ 21,927
Percentage of Revenues	12.00%	18.00%	14.00%	18.00%
Geographic Concentration Risk \| Revenue Benchmark \| Taiwan
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues	$ 6,273	$ 1,296	$ 8,107	$ 4,660
Percentage of Revenues	14.00%	3.00%	6.00%	4.00%
Geographic Concentration Risk \| Revenue Benchmark \| JAPAN
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues	$ 6,275	$ 3,135	$ 25,495	$ 8,005
Percentage of Revenues	14.00%	7.00%	20.00%	6.00%
Geographic Concentration Risk \| Revenue Benchmark \| Rest of the World
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues	$ 7,123	$ 5,893	$ 20,231	$ 20,028
Percentage of Revenues	15.00%	14.00%	15.00%	16.00%

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2024

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates in these condensed consolidated financial statements include revenue recognition, the estimated useful lives of property and equipment and intangible assets, fair value of convertible note receivable, assumptions made in analysis of allowance for credit losses, impairment of goodwill and long-lived assets, realization of deferred tax assets (“DTAs”), and accounting for lease obligations, stock-based compensation expense, and income tax uncertainties and contingencies. Actual results could differ from those estimates and may result in material effects on the Company’s operating results and financial position.

Recent Accounting Standards

EMPLOYEE BENEFIT PLANS - Stock Options Activity (Details) - Employee Benefit Plans $ / shares in Units, shares in Thousands, $ in Thousands	9 Months Ended
	Sep. 30, 2024 USD ($) $ / shares shares	Sep. 30, 2023 USD ($)
Options Outstanding, Beginning Balance \| shares	38
Options Exercised \| shares	(7)
Options Outstanding, Ending Balance \| shares	31
Options Vested and Expected to Vest \| shares	31
Options Exercisable \| shares	31
Options Outstanding, Weighted Average Exercise Price, Beginning Balance \| $ / shares	$ 15.92
Options Exercised, Weighted Average Exercise Price \| $ / shares	16.20
Options Outstanding, Weighted Average Exercise Price, Ending Balance \| $ / shares	15.85
Options Vested and Expected to Vest, Weighted Average Exercise Price \| $ / shares	15.85
Options Exercisable, Weighted Average Exercise Price \| $ / shares	$ 15.85
Options Outstanding, Weighted Average Remaining Contractual Term	3 years 6 months 10 days
Options Vested and Expected to Vest, Weighted Average Remaining Contractual Term	3 years 6 months 10 days
Options Exercisable, Weighted Average Remaining Contractual Term	3 years 6 months 10 days
Options Outstanding, Aggregate Intrinsic Value \| $	$ 493
Options Vested and Expected to Vest, Aggregate Intrinsic Value \| $	493
Options Exercisable, Aggregate Intrinsic Value \| $	493
Intrinsic value of options exercised \| $	$ 124	$ 608

CUSTOMER AND GEOGRAPHIC INFORMATION - Long-lived Assets by Geographic Area (Details) - USD ($) $ in Thousands	Sep. 30, 2024	Dec. 31, 2023
Revenues from External Customers and Long-Lived Assets [Line Items]
Long-lived assets, net	$ 57,904	$ 46,981
United States
Revenues from External Customers and Long-Lived Assets [Line Items]
Long-lived assets, net	56,216	45,619
Rest of the World
Revenues from External Customers and Long-Lived Assets [Line Items]
Long-lived assets, net	$ 1,688	$ 1,362

STOCKHOLDERS EQUITY (Details) - USD ($) $ / shares in Units, $ in Millions			9 Months Ended	30 Months Ended
	Apr. 15, 2024	Apr. 11, 2022	Sep. 30, 2024	Sep. 30, 2024
2022 Stock Repurchase Program
Stock Repurchase Program, Authorized Amount		$ 35.0
Stock Repurchase Program, Period in Force (Year)		2 years
Repurchase of common stock (shares)			201,561	937,501
Repurchase of common stock, weighted-average price per share			$ 34.23	$ 25.96
Repurchases of common stock, cost			$ 6.9	$ 24.3
2024 Stock Repurchase Program
Stock Repurchase Program, Authorized Amount	$ 40.0
Stock Repurchase Program, Period in Force (Year)	2 years

- Definition

Number of shares that have been repurchased during the period and have not been retired and are not held in treasury. Some state laws may govern the circumstances under which an entity may acquire its own stock and prescribe the accounting treatment therefore. This element is used when state law does not recognize treasury stock.

+ References + Details

BALANCE SHEET COMPONENTS - Property and Equipment (Details) - USD ($) $ in Thousands	Sep. 30, 2024	Dec. 31, 2023
Property, Plant and Equipment, Gross	$ 94,036	$ 86,863
Less: accumulated depreciation and amortization	(48,017)	(49,525)
Total property and equipment	46,019	37,338
Computer Equipment
Property, Plant and Equipment, Gross	11,919	12,515
Software
Property, Plant and Equipment, Gross	5,647	5,596
Furniture, Fixtures, and Equipment
Property, Plant and Equipment, Gross	2,543	2,501
Leasehold Improvements
Property, Plant and Equipment, Gross	6,705	6,475
Laboratory and Other Equipment
Property, Plant and Equipment, Gross	5,621	4,891
Test Equipment
Property, Plant and Equipment, Gross	26,286	25,044
DFI System Assets
Property, Plant and Equipment, Gross	27,991	22,864
CV System and Other Assets
Property, Plant and Equipment, Gross	$ 7,324	$ 6,977

REVENUE FROM CONTRACTS WITH CUSTOMERS - Costs to Obtain or Fulfill a Contract (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023	Dec. 31, 2023
Non-current portion included in other non-current assets	$ 3,059,000		$ 3,059,000		$ 2,587,000
Total capitalized direct sales commission costs	5,625,000		5,625,000		4,541,000
Amortization of capitalized direct sales commission costs	667,000	$ 532,000	1,941,000	$ 1,494,000
Impairment losses related to capitalized contract costs			0	$ 0
Prepaid Expenses and Other Current Assets
Current portion included in prepaid expenses and other current assets	2,566,000		2,566,000		1,954,000
Other Non-current Assets
Non-current portion included in other non-current assets	$ 3,059,000		$ 3,059,000		$ 2,587,000

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 30, 2024	Dec. 31, 2023
Assets, Current [Abstract]
Cash and cash equivalents	$ 96,428	$ 98,978
Short-term investments	23,724	36,544
Accounts receivable, net of allowance for credit losses of $890 as of September 30, 2024 and December 31, 2023	46,668	44,904
Prepaid expenses and other current assets	24,575	17,422
Total current assets	191,395	197,848
Property and equipment, net	46,019	37,338
Operating lease right-of-use assets, net	4,360	4,926
Goodwill	15,011	15,029
Intangible assets, net	13,133	15,620
Deferred tax assets, net	173	157
Total other non-current assets	37,260	19,218
Total assets	307,351	290,136
Liabilities, Current [Abstract]
Accounts payable	7,504	2,561
Accrued compensation and related benefits	13,191	14,800
Accrued and other current liabilities	6,510	4,633
Operating lease liabilities - current portion	1,706	1,529
Deferred revenues - current portion	28,728	25,750
Billings in excess of recognized revenues	91	1,570
Total current liabilities	57,730	50,843
Long-term income taxes	2,883	2,972
Non-current portion of operating lease liabilities	3,870	4,657
Other non-current liabilities	2,404	2,718
Total liabilities	66,887	61,190
Stockholders' Equity, Number of Shares, Par Value and Other Disclosure [Abstract]
Preferred stock, $0.00015 par value, 5,000 shares authorized, no shares issued and outstanding
Common stock, $0.00015 par value, 70,000 shares authorized; shares issued 50,668 and 49,749, respectively; shares outstanding 38,763 and 38,289, respectively	6	6
Additional Paid in Capital	496,255	473,295
Treasury stock at cost, 11,905 and 11,460 shares, respectively	(159,018)	(143,923)
Accumulated deficit	(94,527)	(98,045)
Accumulated other comprehensive loss	(2,252)	(2,387)
Total stockholders' equity	240,464	228,946
Total liabilities and stockholders' equity	$ 307,351	$ 290,136

LEASES - Components of Operating Lease Expense (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
LEASES:
Operating lease expense	$ 401	$ 382	$ 1,161	$ 1,153
Short-term lease and variable lease expense (1)	268	239	754	673
Total lease expense	$ 669	$ 621	$ 1,915	$ 1,826

BALANCE SHEET COMPONENTS - Annual Amortization of Identifiable Intangible Assets (Details) $ in Thousands	Sep. 30, 2024 USD ($)
BALANCE SHEET COMPONENTS
2024 (remaining three months)	$ 767
2025	3,069
2026	2,900
2027	2,747
2028	2,442
2029 and thereafter	1,208
Total future amortization expense	$ 13,133

EMPLOYEE BENEFIT PLANS - Narrative (Details) - USD ($) $ / shares in Units, $ in Thousands		3 Months Ended		9 Months Ended		38 Months Ended
	Nov. 16, 2011	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024
Stock option vesting period				4 years
Common Stock, Closing Share Price		$ 31.68		$ 31.68		$ 31.68
Restricted Stock Units (RSUs)
Unrecognized Compensation		$ 52,300		$ 52,300		$ 52,300
Unrecognized Compensation Recognition Period				2 years 7 months 6 days
Fair value of restricted stock units vested				$ 25,483	$ 31,162
Expired Stock Incentive Plans \| Maximum
Stock Incentive Plans, Common Shares Reserved for Future Issuance	3,500,000
2011 Stock Incentive Plan
Stock Incentive Plans, Common Shares Reserved for Future Issuance		14,600,000		14,600,000		14,600,000
Stock Incentive Plans, Common Shares Reserved for Future Issuance from Expired Incentive Plans		500,000		500,000		500,000
Aggregate Common Shares Reserved to Cover Stock-based Awards Under the 2011 Plan		15,100,000		15,100,000		15,100,000
Stock Incentive Plans, Shares Available for Future Grant		3,600,000		3,600,000		3,600,000
Stock Incentive Plans, Stock Options and Awards Granted				0	0
2011 Stock Incentive Plan \| Employee Stock Option
Stock Incentive Plans, Rate Decrease in Reserved Plan-Shares Pursuant to Awards Other Than Options or SARs	1.33
Stock Option Expiration Period	10 years
Stock option vesting period	4 years
2021 Employee Stock Purchase Plan
Eligible Employee Contribution Rate, Percentage of Compensation		10.00%		10.00%		10.00%
Eligible Employee Share Purchase Price, Percentage of Fair Market Value						85.00%
ESPP, Share Offering Period Duration						24 months
ESPP, Share Purchase Periods Within Each Offering Period						4
ESPP, Share Purchase Period Duration						6 months
Shares Issued During Period		81,974	125,392	155,828	223,608
Weighted Average Purchase Price		$ 26.31	$ 17.30	$ 26.14	$ 17.14
Unrecognized Compensation		$ 2,500		$ 2,500		$ 2,500
Unrecognized Compensation Recognition Period				1 year 4 months 24 days
Capital Shares Reserved for Future Issuance		638,481		638,481		638,481

INCOME TAXES

9 Months Ended

Sep. 30, 2024

INCOME TAXES:

INCOME TAXES

7. INCOME TAXES

Income tax expense decreased by $0.9 million for the nine months ended September 30, 2024, to $1.6 million as compared to $2.5 million for the nine months ended September 30, 2023. The Company’s effective tax rate was 31.1% and 53.1% for the nine months ended September 30, 2024 and 2023, respectively. The Company’s effective tax rate decreased in the nine months ended September 30, 2024, as compared to the same period in 2023, primarily due to changes in the foreign and state taxes and year-to-date recognition of worldwide pre-tax income in relation to their forecasted amounts for full years. The Company’s provision for income taxes for the nine months ended September 30, 2024, was primarily attributable to foreign and state taxes.

The Company’s total amount of unrecognized tax benefits, excluding interest, as of September 30, 2024, was $16.6 million, of which $2.0 million, if recognized, would affect the Company’s effective tax rate. The Company’s total amount of unrecognized tax benefits, excluding interest, as of December 31, 2023, was $15.9 million, of which $2.0 million, if recognized, would affect the Company’s effective tax rate. As of September 30, 2024, the Company has recorded unrecognized tax benefits of $2.6 million, including interest of $0.6 million, as long-term taxes payable in the accompanying condensed consolidated balance sheet. The remaining $14.6 million has been recorded within the Company’s DTAs, which is subject to a full valuation allowance.

The valuation allowance was approximately $64.2 million as of September 30, 2024, and December 31, 2023, which was related to U.S. net federal and state DTAs. The worldwide net DTAs balance as of September 30, 2024, and December 31, 2023, were not significant.

The Company conducts business globally and, as a result, files numerous consolidated and separate income tax returns in the U.S. federal and various state and foreign jurisdictions. For U.S. federal and California income tax purposes, the statute of limitations currently remains open for the tax years ended 2020 to present and 2019 to present, respectively. In addition, due to net operating loss carryback claims, the tax years 2013 through 2015 may be subject to federal examination and all of the net operating loss and research and development credit carryforwards that may be utilized in future years may be subject to federal and state examination. The Company is not currently under income tax examinations in the U.S. or any other of its major foreign subsidiaries’ jurisdictions.

- Definition

The entire disclosure for income tax.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 12
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482685/740-10-50-12

Reference 2: http://www.xbrl.org/2003/role/exampleRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section 55
-Paragraph 231
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482663/740-10-55-231

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 12C
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482685/740-10-50-12C

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 12B
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482685/740-10-50-12B

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 270
-Name Accounting Standards Codification
-Section 50
-Paragraph 1
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147477891/740-270-50-1

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SAB Topic 6.I.5.Q1)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147479360/740-10-S99-1

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 13
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147480990/946-20-50-13

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 235
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(h)(2))
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+ Details

NET INCOME (LOSS) PER SHARE - Calculation of Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
NET INCOME (LOSS) PER SHARE:
Net income (loss)	$ 2,206	$ (4,972)	$ 3,518	$ 2,218
Basic weighted average shares outstanding	38,710	38,187	38,542	37,930
Effect of dilutive stock options, unvested restricted stock units, and shares of common stock expected to be issued under Employee Purchase Plan	395		486	1,047
Diluted weighted average shares outstanding	39,105	38,187	39,028	38,977
Basic	$ 0.06	$ (0.13)	$ 0.09	$ 0.06
Diluted	$ 0.06	$ (0.13)	$ 0.09	$ 0.06

- Definition

The amount of net income (loss) for the period per each share of common stock or unit outstanding during the reporting period.

+ References

+ Details

- Definition

The amount of net income (loss) for the period available to each share of common stock or common unit outstanding during the reporting period and to each share or unit that would have been outstanding assuming the issuance of common shares or units for all dilutive potential common shares or units outstanding during the reporting period.

+ References

+ Details

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References

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+ Details

FAIR VALUE MEASUREMENTS - Assets Measured on a Recurring Basis (Details) - USD ($) $ in Thousands	Sep. 30, 2024	Dec. 31, 2023
U.S. Government securities (1)	$ 23,724	$ 36,544
Convertible note receivable (available-for-sale debt security) (2)	2,013
Assets measured at fair value, total	106,567	120,354
Quoted Prices in Active Markets for Identical Assets (level 1)
U.S. Government securities (1)	23,724	36,544
Assets measured at fair value, total	104,554	120,354
Significant Unobservable Inputs (level 3)
Convertible note receivable (available-for-sale debt security) (2)	2,013
Assets measured at fair value, total	2,013
Money Market Mutual Funds
Cash equivalents	80,830	83,810
Money Market Mutual Funds \| Quoted Prices in Active Markets for Identical Assets (level 1)
Cash equivalents	$ 80,830	$ 83,810

- Definition

Amount of investment in debt security measured at fair value with change in fair value recognized in other comprehensive income (available-for-sale).

+ References

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+ Details

NET INCOME (LOSS) PER SHARE (Tables)

9 Months Ended

Sep. 30, 2024

NET INCOME (LOSS) PER SHARE:

Schedule of Basic and Diluted Earnings Per Share (in Thousands Except Per Share Amounts):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Numerator:
Net income (loss)	$	2,206	$	(4,972)	$	3,518	$	2,218
Denominator:
Basic weighted average shares outstanding		38,710		38,187		38,542		37,930
Effect of dilutive stock options, unvested restricted stock units, and shares of common stock expected to be issued under employee stock purchase plan		395		—		486		1,047
Diluted weighted average shares outstanding		39,105		38,187		39,028		38,977

Net income (loss) per share:
Basic	$	0.06	$	(0.13)	$	0.09	$	0.06
Diluted	$	0.06	$	(0.13)	$	0.09	$	0.06

Schedule of Anti-Dilutive Shares Excluded from Computation of Earnings Per Share (in Thousands):


	Three Months Ended September 30,		Nine Months Ended September 30,
	2024	2023	2024	2023
Outstanding options	—	23	—	—
Non-vested restricted stock units	1,078	1,391	740	223
Employee Stock Purchase Plan	—	38	—	—
Total	1,078	1,452	740	223

BALANCE SHEET COMPONENTS - Other Non-current Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2024	Dec. 31, 2023
BALANCE SHEET COMPONENTS
Costs capitalized to obtain revenue contracts - non-current (1)	$ 3,059	$ 2,587
Unbilled accounts receivable - non-current (2)	10,216	1,069
Contract assets - non-current (1)	611	933
Net investment in sales-type leases - non-current (3)	18,778	12,196
Other	4,596	2,433
Total other non-current assets	$ 37,260	$ 19,218

BALANCE SHEET COMPONENTS - Net Investment in Sales-type Leases (Details) - USD ($) $ in Thousands	Sep. 30, 2024	Dec. 31, 2023
BALANCE SHEET COMPONENTS
Lease receivables	$ 16,455	$ 9,460
Unguaranteed residual assets	7,525	4,717
Net investment in sales-type leases	23,980	14,177
Less: Current portion of lease receivables under prepaid expenses and other current assets	(5,202)	(1,981)
Net investment in sales-type leases, non-current	$ 18,778	$ 12,196

REVENUE FROM CONTRACTS WITH CUSTOMERS

9 Months Ended

Sep. 30, 2024

REVENUE FROM CONTRACTS WITH CUSTOMERS:

REVENUE FROM CONTRACTS WITH CUSTOMERS

2. REVENUE FROM CONTRACTS WITH CUSTOMERS

The Company derives revenue from two sources: Analytics and Integrated Yield Ramp.

The Company determines revenue recognition through the following five steps:

●

Identification of the contract, or contracts, with a customer

●

Identification of the performance obligations in the contract

●

Determination of the transaction price

●

Allocation of the transaction price to the performance obligations in the contract

●

Recognition of revenue when, or as, performance obligations are satisfied

Contracts with Multiple Performance Obligations

Analytics Revenue

Integrated Yield Ramp Revenue

Disaggregation of Revenue

The Company’s performance obligations are satisfied either over time or at a point-in-time. The following table represents a disaggregation of revenue percentage by timing of revenue:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Over time	64	%	68	%	67	%	74	%
Point-in-time	36	%	32	%	33	%	26	%
Total	100	%	100	%	100	%	100	%

Significant Judgments

Contract Balances

The contract assets are recorded on a net basis with deferred revenue (i.e., contract liabilities) at the contract level. The contract assets consist of the following (in thousands):


	September 30,		December 31,
	2024		2023
Current portion included in prepaid expenses and other current assets	$	9,193	$	6,787
Non-current portion included in other non-current assets		611		933
Total contract assets	$	9,804	$	7,720

The Company did not record any asset impairment charges related to contract assets for the periods presented.

Deferred revenues were the following (in thousands):


	September 30,		December 31,
	2024		2023
Current portion	$	28,728	$	25,750
Non-current portion (1)		1,599		1,802
Total deferred revenues	$	30,327	$	27,552

(1)

Included in other non-current liabilities.

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Revenue recognized that was included in the deferred revenues and billings in excess of recognized revenues balances at the beginning of each period	$	12,040	$	13,129	$	24,669	$	23,836

Costs to Obtain or Fulfill a Contract

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


	September 30,		December 31,
	2024		2023
Current portion included in prepaid expenses and other current assets	$	2,566	$	1,954
Non-current portion included in other non-current assets		3,059		2,587
Total capitalized direct sales commission costs	$	5,625	$	4,541

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Amortization of capitalized direct sales commission costs	$	667	$	532	$	1,941	$	1,494

There was no impairment loss in relation to the costs capitalized for the periods presented.

Practical Expedient

- Definition

The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts.

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+ Details

EMPLOYEE BENEFIT PLANS (Tables)

9 Months Ended

Sep. 30, 2024

EMPLOYEE BENEFIT PLANS:

Schedule Fair Value Estimates of Purchase Rights Granted Under the 2021 Purchase Plan Using the Black-Scholes-Merton Option-Pricing Model:


	Nine Months Ended September 30,
	2024			2023
Expected life (in years)		1.25			1.25
Volatility		40.97	%		43.66	%
Risk-free interest rate		4.61	%		5.15	%
Expected dividend		—			—
Weighted average fair value of purchase rights granted during the period	$	10.91		$	15.71

Schedule of Stock Plan and Employee Stock Purchase Plan Expense Allocation (in Thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Costs of revenues	$	1,366	$	1,120	$	3,751	$	3,022
Research and development		2,375		2,196		6,640		5,609
Selling, general, and administrative		2,989		2,683		8,149		6,930
Stock-based compensation expense	$	6,730	$	5,999	$	18,540	$	15,561

Schedule of Additional Information With Respect to Options Under the 2011 Plan:


	Outstanding Options
				Weighted
		Weighted		Average
		Average		Remaining	Aggregate
	Number of	Exercise		Contractual	Intrinsic
	Options	Price		Term	Value
	(in thousands)	per Share		(Years)	(in thousands)
Outstanding, January 1, 2024	38	$	15.92
Granted	—		—
Exercised	(7)		16.20
Canceled	—		—
Expired	—		—
Outstanding, September 30, 2024	31	$	15.85	3.53	$	493
Vested and expected to vest, September 30, 2024	31	$	15.85	3.53	$	493
Exercisable, September 30, 2024	31	$	15.85	3.53	$	493

Schedule of Total Intrinsic Value of Options Exercised (in Thousands):

Schedule of Nonvested Restricted Stock Unit ("RSU") Activities:


		Weighted
		Average Grant
	Shares	Date Fair Value
	(in thousands)	Per Share
Nonvested, January 1, 2024	1,995	$	30.03
Granted	734		35.42
Vested	(756)		27.37
Forfeited	(42)		30.64
Nonvested, September 30, 2024	1,931	$	33.11

Schedule of Total Fair Value Restricted Stock Units Vested (in Thousands):

Pay vs Performance Disclosure - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
Pay vs Performance Disclosure - USD ($) $ in Thousands	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Pay vs Performance Disclosure
Net Income (Loss)	$ 2,206	$ (4,972)	$ 3,518	$ 2,218

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References

+ Details

REVENUE FROM CONTRACTS WITH CUSTOMERS (Details)	3 Months Ended		9 Months Ended
REVENUE FROM CONTRACTS WITH CUSTOMERS (Details)	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Number of revenue sources	2	2	2	2
Geographic Concentration Risk \| Revenue Benchmark
Significant customer concentration (percentage)	100.00%	100.00%	100.00%	100.00%
Geographic Concentration Risk \| Revenue Benchmark \| Non-US
Significant customer concentration (percentage)	55.00%	42.00%	55.00%	44.00%

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY - USD ($) shares in Thousands, $ in Thousands	Common Stock	Additional Paid-in Capital	Treasury Stock	Accumulated Deficit	Accumulated Other Comprehensive Loss	Total
Beginning Balances at Dec. 31, 2022	$ 6	$ 447,415	$ (133,709)	$ (101,150)	$ (2,550)	$ 210,012
Beginning Balances (shares) at Dec. 31, 2022	37,431		11,182
Issuance of common stock in connection with employee stock purchase plan		1,663				1,663
Issuance of common stock in connection with employee stock purchase plan (shares)	98
Issuance of common stock in connection with exercise of options		345				345
Issuance of common stock in connection with exercise of options (shares)	21
Vesting of restricted stock units (shares)	286
Purchases of treasury stock in connection with tax withholdings on vesting of restricted stock awards			$ (4,101)			(4,101)
Purchases of treasury stock in connection with tax withholdings on vesting of restricted stock awards (shares)			133
Stock-based compensation expense		4,884				4,884
Comprehensive income (loss)				355	267	622
Ending Balances at Mar. 31, 2023	$ 6	454,307	$ (137,810)	(100,795)	(2,283)	213,425
Ending Balances (shares) at Mar. 31, 2023	37,836		11,315
Beginning Balances at Dec. 31, 2022	$ 6	447,415	$ (133,709)	(101,150)	(2,550)	210,012
Beginning Balances (shares) at Dec. 31, 2022	37,431		11,182
Comprehensive income (loss)						1,541
Ending Balances at Sep. 30, 2023	$ 6	467,304	$ (143,587)	(98,932)	(3,227)	221,564
Ending Balances (shares) at Sep. 30, 2023	38,245		11,449
Beginning Balances at Mar. 31, 2023	$ 6	454,307	$ (137,810)	(100,795)	(2,283)	213,425
Beginning Balances (shares) at Mar. 31, 2023	37,836		11,315
Issuance of common stock in connection with exercise of options		87				87
Issuance of common stock in connection with exercise of options (shares)	6
Vesting of restricted stock units (shares)	37
Purchases of treasury stock in connection with tax withholdings on vesting of restricted stock awards			$ (468)			(468)
Purchases of treasury stock in connection with tax withholdings on vesting of restricted stock awards (shares)			11
Stock-based compensation expense		4,678				4,678
Comprehensive income (loss)				6,835	(387)	6,448
Ending Balances at Jun. 30, 2023	$ 6	459,072	$ (138,278)	(93,960)	(2,670)	224,170
Ending Balances (shares) at Jun. 30, 2023	37,879		11,326
Repurchase of common stock			$ (743)			(743)
Repurchase of common stock (shares)	(21)		21
Issuance of common stock in connection with employee stock purchase plan		2,169				2,169
Issuance of common stock in connection with employee stock purchase plan (shares)	125
Issuance of common stock in connection with exercise of options		37				37
Issuance of common stock in connection with exercise of options (shares)	2
Vesting of restricted stock units (shares)	260
Purchases of treasury stock in connection with tax withholdings on vesting of restricted stock awards			$ (4,566)			(4,566)
Purchases of treasury stock in connection with tax withholdings on vesting of restricted stock awards (shares)			102
Stock-based compensation expense		6,026				6,026
Comprehensive income (loss)				(4,972)	(557)	(5,529)
Ending Balances at Sep. 30, 2023	$ 6	467,304	$ (143,587)	(98,932)	(3,227)	221,564
Ending Balances (shares) at Sep. 30, 2023	38,245		11,449
Beginning Balances at Dec. 31, 2023	$ 6	473,295	$ (143,923)	(98,045)	(2,387)	228,946
Beginning Balances (shares) at Dec. 31, 2023	38,289		11,460
Repurchase of common stock			$ (6,899)			(6,899)
Repurchase of common stock (shares)	(202)		202
Issuance of common stock in connection with employee stock purchase plan		1,916				1,916
Issuance of common stock in connection with employee stock purchase plan (shares)	74
Issuance of common stock in connection with exercise of options		25				25
Issuance of common stock in connection with exercise of options (shares)	1
Vesting of restricted stock units (shares)	231
Purchases of treasury stock in connection with tax withholdings on vesting of restricted stock awards			$ (3,794)			(3,794)
Purchases of treasury stock in connection with tax withholdings on vesting of restricted stock awards (shares)			118
Stock-based compensation expense		6,154				6,154
Comprehensive income (loss)				(393)	(542)	(935)
Ending Balances at Mar. 31, 2024	$ 6	481,390	$ (154,616)	(98,438)	(2,929)	225,413
Ending Balances (shares) at Mar. 31, 2024	38,393		11,780
Beginning Balances at Dec. 31, 2023	$ 6	473,295	$ (143,923)	(98,045)	(2,387)	228,946
Beginning Balances (shares) at Dec. 31, 2023	38,289		11,460
Comprehensive income (loss)						3,653
Ending Balances at Sep. 30, 2024	$ 6	496,255	$ (159,018)	(94,527)	(2,252)	240,464
Ending Balances (shares) at Sep. 30, 2024	38,763		11,905
Beginning Balances at Mar. 31, 2024	$ 6	481,390	$ (154,616)	(98,438)	(2,929)	225,413
Beginning Balances (shares) at Mar. 31, 2024	38,393		11,780
Issuance of common stock in connection with exercise of options		67				67
Issuance of common stock in connection with exercise of options (shares)	4
Vesting of restricted stock units (shares)	34
Purchases of treasury stock in connection with tax withholdings on vesting of restricted stock awards			$ (468)			(468)
Purchases of treasury stock in connection with tax withholdings on vesting of restricted stock awards (shares)			13
Stock-based compensation expense		5,762				5,762
Comprehensive income (loss)				1,705	(326)	1,379
Ending Balances at Jun. 30, 2024	$ 6	487,219	$ (155,084)	(96,733)	(3,255)	232,153
Ending Balances (shares) at Jun. 30, 2024	38,431		11,793
Issuance of common stock in connection with employee stock purchase plan		2,157				2,157
Issuance of common stock in connection with employee stock purchase plan (shares)	82
Issuance of common stock in connection with exercise of options		22				22
Issuance of common stock in connection with exercise of options (shares)	2
Vesting of restricted stock units (shares)	248
Purchases of treasury stock in connection with tax withholdings on vesting of restricted stock awards			$ (3,934)			(3,934)
Purchases of treasury stock in connection with tax withholdings on vesting of restricted stock awards (shares)			112
Stock-based compensation expense		6,857				6,857
Comprehensive income (loss)				2,206	1,003	3,209
Ending Balances at Sep. 30, 2024	$ 6	$ 496,255	$ (159,018)	$ (94,527)	$ (2,252)	$ 240,464
Ending Balances (shares) at Sep. 30, 2024	38,763		11,905

LEASES

9 Months Ended

Sep. 30, 2024

LEASES:

LEASES

4. LEASES

The Company leases administrative and sales offices and certain equipment under non-cancellable operating leases, which contain various renewal or termination options and, in some cases, require payment of common area costs, taxes and utilities. These operating leases expire at various dates through 2028. The Company had no leases that were classified as a financing lease as of September 30, 2024, and December 31, 2023.

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Operating lease expense	$	401	$	382	$	1,161	$	1,153
Short-term lease and variable lease expense (1)		268		239		754		673
Total lease expense	$	669	$	621	$	1,915	$	1,826

(1)

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


	September 30,			December 31,
	2024			2023
Weighted average remaining lease term under operating leases (in years)		3.5			4.4
Weighted average discount rate for operating lease liabilities		5.98	%		4.96	%

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


Year Ending December 31,	Amount
2024 (remaining three months)	$	492
2025		1,850
2026		1,551
2027		1,490
2028		847
Total future minimum lease payments		6,230
Less: Interest (1)		(654)
Present value of future minimum lease payments under operating lease liabilities (2)	$	5,576

(1)

Calculated using incremental borrowing interest rate for each lease.

(2)

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

COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2024

COMMITMENTS AND CONTINGENCIES:

COMMITMENTS AND CONTINGENCIES

11. COMMITMENTS AND CONTINGENCIES

Strategic Partnership with Advantest — See Note 12, Strategic Partnership Agreement with Advantest and Related Party Transactions, for the discussion about the Company’s commitments under the strategic partnership with Advantest.

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

Indemnifications — The Company generally provides a warranty to its customers that its software will perform substantially in accordance with documented specifications typically for a period of 90 days following initial delivery of its products. The Company also indemnifies certain customers from third-party claims of intellectual property infringement relating to the use of its products. Historically, costs related to these guarantees have not been significant. The Company is unable to estimate the maximum potential impact of these guarantees on its future results of operations.

Purchase Obligations — The Company has purchase obligations with certain suppliers for the purchase of goods and services entered into in the ordinary course of business. As of September 30, 2024, total outstanding purchase obligations were $34.1 million, the majority of which is due within the next 9 months.

Indemnification of Officers and Directors — As permitted by the Delaware general corporation law, the Company has included a provision in its certificate of incorporation to eliminate the personal liability of its officers and directors for monetary damages for breach or alleged breach of their fiduciary duties as officers or directors, other than in cases of fraud or other willful misconduct.

In addition, the Bylaws of the Company provide that the Company is required to indemnify its officers and directors even when indemnification would otherwise be discretionary, and the Company is required to advance expenses to its officers and directors as incurred in connection with proceedings against them for which they may be indemnified. The Company has entered into indemnification agreements with its officers and directors containing provisions that are in some respects broader than the specific indemnification provisions contained in the Delaware general corporation law. The indemnification agreements require the Company to indemnify its officers and directors against liabilities that may arise by reason of their status or service as officers and directors other than for liabilities arising from willful misconduct of a culpable nature, to advance their expenses incurred as a result of any proceeding against them as to which they could be indemnified, and to obtain directors’ and officers’ insurance if available on reasonable terms. The Company has obtained directors’ and officers’ liability insurance in amounts comparable to other companies of the Company’s size and in the Company’s industry. Since a maximum obligation of the Company is not explicitly stated in the Company’s Bylaws or in its indemnification agreements and will depend on the facts and circumstances that arise out of any future claims, the overall maximum amount of the obligations cannot be reasonably estimated.

Legal Proceedings — From time to time, the Company is subject to various claims and legal proceedings that arise in the ordinary course of business. The Company accrues for losses related to litigation when a potential loss is probable, and the loss can be reasonably estimated in accordance with FASB requirements. As of September 30, 2024, the Company was not party to any material legal proceedings for which a loss was probable or an amount was accrued. From time to time, the Company may enter into contingent fee arrangements with external legal firms that may represent the Company in legal proceedings related to disputes. Contingent legal fees are accrued by the Company when they are probable and reasonably estimable.

On May 6, 2020, the Company initiated an arbitration proceeding with the Hong Kong International Arbitration Center against SMIC New Technology Research & Development (Shanghai) Corporation (“SMIC”) due to SMIC’s failure to pay fees due to the Company under a series of contracts. The Company seeks to recover the unpaid fees, a declaration requiring SMIC to pay fees under the contracts in the future (or a lump sum payment

to end the contract), and costs associated with bringing the arbitration proceeding. SMIC denies liability and an arbitration hearing was held in February 2023. Final written submissions were submitted by the parties at the end of August 2023, and the parties submitted answers to the Tribunal’s final questions on August 2, 2024.

STOCKHOLDERS' EQUITY

9 Months Ended

Sep. 30, 2024

STOCKHOLDERS EQUITY:

STOCKHOLDERS' EQUITY

5. STOCKHOLDERS’ EQUITY

Stock Repurchase Program

On April 11, 2022, the Board of Directors adopted a stock repurchase program (the “2022 Program”) to repurchase up to $35.0 million of the Company’s common stock both on the open market and in privately negotiated transactions, including through Rule 10b5-1 plans, from time to time, over the next two years. During the nine months ended September 30, 2024, 201,561 shares were repurchased by the Company under the 2022 Program at an average price of $34.23 per share for an aggregate total price of $6.9 million. In total, the Company repurchased 937,501 shares under the 2022 Program at an average price of $25.96 per share for an aggregate total price of $24.3 million.

The 2022 Program expired on April 11, 2024, and on April 15, 2024, the Board of Directors adopted a new program (the “2024 Program”) to repurchase up to $40.0 million of the Company’s common stock both on the open market and in privately negotiated transactions, including through Rule 10b5-1 plans, from time to time, over the next two years. The Company has not repurchased any shares under the 2024 Program.

- Definition

The entire disclosure for equity.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 13
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-Publisher FASB
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Reference 2: http://www.xbrl.org/2003/role/disclosureRef
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Reference 3: http://www.xbrl.org/2003/role/disclosureRef
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Reference 4: http://www.xbrl.org/2003/role/disclosureRef
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+ Details