PDF SOLUTIONS INC

Previous wording

The confluence of Industry 4.0 (i.e. the fourth industrial revolution, or the automation and data exchange in manufacturing technologies and processes) and cloud computing (i.e. the on-demand availability of computing resources and data storage without direct active management by the user) is driving increased innovation in semiconductor and electronics manufacturing and analytics, as well as in the organization of information technology (“IT”) networks and computing at semiconductor and electronics companies across the ecosystem. First, the ubiquity of wireless connectivity and sensor technology enables any manufacturing company to augment its factories and visualize its entire production line. In parallel, the cost per terabyte of data storage has generally decreased over time. The combination of these two trends means that more data is collected and stored than ever before. Further, semiconductor companies are striving to analyze these very large data sets in real-time to make rapid decisions that measurably improve manufacturing efficiency and quality. In parallel, the traditional practice of on-site data storage, even for highly sensitive data, is changing. The ability to cost-effectively and securely store, analyze, and retrieve massive quantities of data from the cloud versus on-premise enables data to be utilized across a much broader population of users, frequently resulting in greater demands on analytics programs. The combination of these latter two trends means that cloud-based, analytics programs that effectively manage identity management, physical security, and data protection are increasingly in demand for insights and efficiencies across the organizations of these companies. We believe that all these trends will continue for the next few years, and the challenges involved in adopting Industry 4.0 and secure cloud computing will create opportunities for our combination of advanced analytics capabilities, proven and established supporting infrastructure, and professional services to configure our products to meet customers’ specialized needs.

Current wording

The confluence of Industry 4.0 (i.e. the fourth industrial revolution, or the automation and data exchange in manufacturing technologies and processes) and cloud computing (i.e. the on-demand availability of computing resources and data storage without direct active management by the user) is driving increased innovation in semiconductor and electronics manufacturing and analytics, as well as in the organization of information technology (“IT”) networks and computing at semiconductor and electronics companies across the ecosystem. First, the ubiquity sensor technology enables any manufacturing company to augment its factories and visualize its entire production line. In parallel, the cost per terabyte of data storage has generally decreased over time. The combination of these two trends means that more data is collected and stored than ever before. Further, semiconductor companies are striving to analyze these very large data sets in real-time to make rapid decisions that measurably improve manufacturing efficiency and quality. Further, the advancements in and adoption of artificial intelligence (AI) are accelerating the analysis of these very large data sets. In parallel, the traditional practice of on-site data storage, even for highly sensitive data, is changing. The ability to cost-effectively and securely store, analyze, and retrieve massive quantities of data from the cloud versus on-premise enables data to be utilized across a much broader population of users, frequently resulting in greater demands on analytics programs. The combination of these latter two trends means that cloud-based, analytics programs that effectively manage identity management, physical security, and data protection are increasingly in demand for insights and efficiencies across the organizations of these companies. We believe that all these trends will continue for the next few years, and the challenges involved in adopting Industry 4.0 and secure cloud computing will create opportunities for our combination of advanced analytics capabilities, proven and established supporting infrastructure, and professional services to configure our products to meet customers’ specialized needs.

Previous wording

Worldwide economic performance is uneven, and the possibility of a recession persists, leading to uneven demand. Geopolitical tensions and conflicts in various locations around the world have created volatility in the global financial markets and may have further global economic consequences, including potential disruptions of the global supply chain, heightened volatility of commodity and raw material prices, increased energy prices, and increased fears of a global recession. Inventories of semiconductor devices remain elevated in some instances. With high inventories and soft demand for some product segments, some semiconductor fab utilization rates are also low and semiconductor capital equipment orders have been impacted for some vendors and market segments. As a result, some purchase cycles, especially for enterprise software and capital equipment and particularly with respect to larger deals, have lengthened in recent years and may continue to do so. Also, we have contractors located in the West Bank and in Israel, who are providing software development and customer technical support services. We have developed contingency plans to use alternative resources to continue serving customers, if needed. Any escalations in these areas could lead to disruptions or reductions in international trade, deter or prevent purchasing activity of customers, and negatively impact our development timelines and customer support (with respect to the conflicts in the Middle East) or China sales (with respect to U.S.-P.R.C. tensions) and financial results in general (with respect to global tensions).

Current wording

Worldwide economic performance is uneven leading to uneven demand. Geopolitical tensions and conflicts in various locations around the world have created volatility in the global financial markets and may have further global economic consequences, including potential disruptions of the global supply chain, heightened volatility of commodity and raw material prices, increased energy prices, and increased fears of a global recession. Inventories of semiconductor devices remain elevated in some instances. Some purchase cycles, especially for enterprise software and particularly with respect to larger deals, have lengthened in recent years and may continue to do so. Also, we have contractors located in the West Bank and in Israel, who are providing software development and customer technical support services. We have developed contingency plans to use alternative resources to continue serving customers, if needed. Any escalations in these areas could lead to disruptions or reductions in international trade, deter or prevent purchasing activity of customers, and negatively impact our development timelines and customer support (with respect to the conflicts in the Middle East) or China sales (with respect to U.S.-P.R.C. tensions) and financial results in general (with respect to global tensions).

Previous wording

The logic foundry market at the leading-edge nodes, such as 7nm, 5nm, and smaller, underwent significant change over the past few years. The leading foundry continues to dominate market share. This trend will likely continue to impact our Characterization services business on these nodes. We expect most logic foundries to invest in derivatives of older process nodes, such as 28nm and 14nm, to extract additional value as many of their customers will not move to advanced nodes due to either technological barriers or restrictive economics. Foundries that participate at leading edge nodes are expected to continue to invest in new technologies such as memory, packaging, and multi-patterned and extreme ultraviolet lithography, as well as new innovations in process control and variability management. We expect China’s investment in semiconductors to continue. Compliance with changing U.S. export restrictions limit our possible business with Chinese semiconductor manufacturers on advanced nodes. Further, trade conflict through exchange of tariffs and other retaliatory actions are expected to impact worldwide supply chains, increase prices and put downward pressure on economic activity, and could negatively affect our future sales in various geographic markets. The uncertainty caused by these regulations and the potential for additional future restrictions could negatively affect our future sales, including in but not limited to the People’s Republic of China (“P.R.C.”) market. Some customers in the P.R.C. have expressed concern about the potential for supply chain disruption due to the U.S. government’s changing export controls impacting their purchase, or in some case restricting their ability to purchase, certain U.S. goods. Based on our current assessments, we expect the near-term impact of these evolving trade restrictions on our business to be limited.

Current wording

The leading foundry continues to dominate market share. This trend will likely continue to impact our Characterization services business on these nodes. We expect most logic foundries to invest in derivatives of older process nodes, such as 28nm and 14nm, to extract additional value as many of their customers will not move to advanced nodes due to either technological barriers or restrictive economics. Foundries that participate at leading edge nodes are expected to continue to invest in new technologies such as memory, packaging, and multi-patterned and extreme ultraviolet lithography, as well as new innovations in process control and variability management. We expect China’s investment in semiconductors to continue. Compliance with changing U.S. export restrictions limit our possible business with Chinese semiconductor manufacturers on advanced nodes. Further, trade conflict through exchange of tariffs and other retaliatory actions are expected to impact worldwide supply chains, increase prices and put downward pressure on economic activity, and could negatively affect our future sales in various geographic markets. The uncertainty caused by these regulations and the potential for additional future restrictions could negatively affect our future sales, including in but not limited to the People’s Republic of China (“P.R.C.”) market. Some customers in the P.R.C. have expressed concern about the potential for supply chain disruption due to the U.S. government’s changing export controls impacting their purchase, or in some case restricting their ability to purchase, certain U.S. goods. Based on our current assessments, we expect the near-term impact of these evolving trade restrictions on our business to be limited.

Previous wording

Financial highlights for the six months ended June 30, 2026, are as follows:

Current wording

Financial highlights for the nine months ended September 30, 2026, are as follows:

Previous wording

For additional information about our critical accounting policies, see Note 1,Basis of Presentation and Summary of Significant Accounting Policies, and Note 2,Revenue from Contracts with Customers to our unaudited condensed consolidated financial statements in this Quarterly Report on Form 10‑Q and Part II Item 7**,***** **Management’s Discussion and Analysis of Financial Condition and Results of Operation, under the heading of“Critical Accounting Estimates” *in our Annual Report. There were no material changes during the six months ended June 30, 2026, to the items that we disclosed as our critical accounting policies and estimates in Part II, Item 7 of the Annual Report.

Current wording

For additional information about our critical accounting policies, see Note 1,Basis of Presentation and Summary of Significant Accounting Policies, and Note 2,Revenue from Contracts with Customers to our unaudited condensed consolidated financial statements in this Quarterly Report on Form 10‑Q and Part II Item 7**,***** **Management’s Discussion and Analysis of Financial Condition and Results of Operation, under the heading of“Critical Accounting Estimates” *in our Annual Report. There were no material changes during the nine months ended September 30, 2026, to the items that we disclosed as our critical accounting policies and estimates in Part II, Item 7 of the Annual Report.

Previous wording

Discussion of Financial Data for the Three and Six Months ended June 30, 2026 and 2025

Current wording

Discussion of Financial Data for the Three and Nine Months ended September 30, 2026 and 2025

Previous wording

Platform revenue increased $5.9 million for the three months ended June 30, 2026, compared to the same period in 2025. The increase in Platform revenue was primarily due to higher revenue from DirectScan systems, partially offset by decreases in revenue from CV systems, Exensio software and services, and secureWISE systems.

Current wording

Platform revenue increased $10.3 million for the three months ended September 30, 2026, compared to the same period in 2025. The increase in Platform revenue was primarily due to higher revenues from CV and DirectScan, and secureWISE systems, partially offset by slightly lower revenues from Cimetrix and Exensio software and services.

Previous wording

Platform revenue increased $19.5 million for the six months ended June 30, 2026, compared to the same period in 2025. The increase in Platform revenue was primarily due to higher revenue from DirectScan, CV, and secureWISE systems.

Current wording

Platform revenue increased $29.9 million for the nine months ended September 30, 2026, compared to the same period in 2025. The increase in Platform revenue was primarily due to higher revenues from CV and DirectScan, and secureWISE systems, partially offset by a decrease in revenue from Cimetrix software licenses.

Previous wording

Volume-based revenue increased $2.6 million for the six months ended June 30, 2026, compared to the same period in 2025, primarily due to an increase in revenue from Cimetrix runtime licenses and secureWISE data usage.

Current wording

Volume-based revenue increased $0.9 million for the three months ended September 30, 2026, compared to the same period in 2025, primarily due to an increase in revenue from Cimetrix runtime licenses, partially offset by a decrease in revenue from secureWISE data usage.

Previous wording

Volume-based revenue increased $3.9 million for the three months ended June 30, 2026, compared to the same period in 2025, primarily due to an increase in revenue from Gainshare and Cimetrix runtime licenses.

Current wording

Volume-based revenue increased $3.5 million for the nine months ended September 30, 2026, compared to the same period in 2025, primarily due to an increase in revenue from Cimetrix runtime licenses.

Previous wording

Costs of revenues increased $4.2 million for the three months ended June 30, 2026, compared to the same period in 2025, primarily due to (i) a $2.8 million increase in hardware costs (including cost of leased assets under sales-type leases), (ii) a $0.9 million increase in facilities and IT-related costs (including depreciation and amortization expense of property and equipment), (iii) a $0.5 million increase in personnel-related costs due to increased headcount, employee benefits expense, and higher bonus expense, and (iv) a $0.4 million increase in software license and maintenance costs, partially offset by a $0.5 million decrease in subcontractor costs.

Current wording

Costs of revenues increased $2.8 million for the three months ended September 30, 2026, compared to the same period in 2025, primarily due to (i) a $1.0 million increase in hardware costs (including cost of leased assets under sales-type leases), (ii) a $0.9 million increase in personnel-related costs due to increased headcount, employee benefits expense, higher bonus expense, and stock-based compensation, (iii) a $0.8 million increase in facilities and IT-related costs (including depreciation and amortization expense of property and equipment), and (iv) a $0.6 million increase in software license and maintenance costs, partially offset by a $0.5 million decrease in subcontractor costs.

Previous wording

Costs of revenues increased $8.2 million for the six months ended June 30, 2026, compared to the same period in 2025, primarily due to (i) a $2.8 million increase in hardware costs (including cost of leased assets under sales-type leases), (ii) a $2.3 million increase in personnel-related costs due to increased headcount and higher bonus expense, (iii) a $1.4 million increase in facilities and IT-related costs (including depreciation and amortization expense of property and equipment), (iv) a $1.3 million increase in software license and maintenance costs, (v) a $0.3 million increase in amortization of acquired technology, and (vi) a $0.2 million increase in travel expense, partially offset by a $0.4 million decrease in subcontractor costs.

Current wording

Costs of revenues increased $11.0 million for the nine months ended September 30, 2026, compared to the same period in 2025, primarily due to (i) a $3.8 million increase in hardware costs (including cost of leased assets under sales-type leases), (ii) a $3.2 million increase in personnel-related costs due to increased headcount, employee benefits expense, higher bonus expense, and stock-based compensation, (iii) a $2.5 million increase in facilities and IT-related costs (including depreciation and amortization expense of property and equipment), (iv) a $1.7 million increase in software license and maintenance costs, (v) a $0.3 million increase in amortization of acquired technology, and (vi) a $0.3 million increase in travel expense, partially offset by a $1.1 million decrease in subcontractor costs.

Previous wording

Gross margin for the six months ended June 30, 2026, decreased two percentage points to 70%, compared to 72% for the same period in 2025, primarily driven by higher costs of revenues compared to the increase in revenues.

Current wording

Gross margin for the three months ended September 30, 2026, increased one percentage point to 73%, compared to 72% for the same period in 2025, primarily driven by higher revenue growth compared to the increase in costs of revenues.

Previous wording

Gross margin for the three months ended June 30, 2026, decreased two percentage points to 69%, compared to 71% for the same period in 2025, primarily driven by higher costs of revenues compared to the increase in revenues.

Current wording

Gross margin for the nine months ended September 30, 2026, decreased one percentage point to 71%, compared to 72% for the same period in 2025, primarily driven by higher costs of revenues compared to the increase in revenues.

Previous wording

Research and development expenses increased $2.4 million for the three months ended June 30, 2026, compared to the same period in 2025, primarily due to (i) a $1.2 million increase in personnel-related costs due to increased headcount, higher bonus expense, and employee benefits expense, partially offset by an increase in capitalized software development costs, (ii) a $0.8 million increase in facilities and IT-related costs (including depreciation and amortization expense of property and equipment), and (iii) a $0.3 million increase in software license and maintenance costs.

Current wording

Research and development expenses increased $4.0 million for the three months ended September 30, 2026, compared to the same period in 2025, primarily due to (i) a $3.2 million increase in personnel-related costs due to increased headcount, higher bonus expense, employee benefits expense and stock-based compensation, partially offset by an increase in capitalized software development costs, (ii) a $0.5 million increase in facilities and IT-related costs (including depreciation and amortization expense of property and equipment), and (iii) a $0.4 million increase in software license and maintenance costs.

Previous wording

Research and development expenses increased $6.1 million for the six months ended June 30, 2026, compared to the same period in 2025, primarily due to (i) a $3.7 million increase in personnel-related costs due to increased headcount, higher bonus expense, and employee benefits expense, partially offset by an increase in capitalized software development costs, (ii) a $1.3 million increase in facilities and IT-related costs (including depreciation and amortization expense of property and equipment), (iii) a $0.6 million increase in subcontractor costs, and (iv) a $0.4 million increase in software license and maintenance costs.

Current wording

Research and development expenses increased $10.1 million for the nine months ended September 30, 2026, compared to the same period in 2025, primarily due to (i) a $6.9 million increase in personnel-related costs due to increased headcount, higher bonus expense, employee benefits expense, and stock-based compensation, partially offset by an increase in capitalized software development costs, (ii) a $1.7 million increase in facilities and IT-related costs (including depreciation and amortization expense of property and equipment), (iii) a $0.8 million increase in software license and maintenance costs, and (iv) a $0.7 million increase in subcontractor costs.

Previous wording

Selling, general, and administrative expenses decreased $0.8 million for the three months ended June 30, 2026, compared to the same period in 2025, primarily due to (i) a $1.2 million decrease in personnel-related costs mainly due to lower compensation expense allocated to selling and marketing activities, and (ii) a $0.3 million decrease in facilities and IT-related costs (including depreciation and amortization expense of property and equipment), partially offset by (i) a $0.4 million increase in legal expenses related to the arbitration proceeding over a disputed customer contract, and (ii) a $0.2 million increase in software licenses and maintenance costs.

Current wording

Selling, general, and administrative expenses increased $1.0 million for the three months ended September 30, 2026, compared to the same period in 2025, primarily due to (i) a $0.4 million increase in personnel-related costs mainly due to increased stock-based compensation, increased headcount, higher bonus expense, and employee benefits expense, partially offset by a lower compensation expense allocated to selling and marketing activities, (ii) a $0.3 million increase in legal expenses related to the arbitration proceeding over a disputed customer contract, (iii) a $0.2 million increase in software license and maintenance costs, and (iv) a $0.2 million increase in subcontractor expenses, partially offset by a $0.3 million decrease in facilities and IT-related costs due to a lower IT and facilities costs allocated to selling and marketing activities.

Previous wording

Selling, general, and administrative expenses decreased $6.6 million for the six months ended June 30, 2026, compared to the same period in 2025, primarily due to (i) a $4.5 million decrease in acquisition-related and integration costs related to the acquisition of SecureWise, (ii) a $2.6 million decrease in personnel-related costs mainly due to lower compensation expense allocated to selling and marketing activities, and stock-based compensation expense, and (iii) a $0.9 million decrease in facilities and IT-related costs, including shipping costs and third-party cloud-services related costs, partially offset by (i) a $0.5 million increase in legal expenses related to the arbitration proceeding over a disputed customer contract, (ii) a $0.3 million increase in software licenses and maintenance costs, (iii) a $0.3 million increase in travel expenses, and (iv) a $0.3 million increase in subcontractor expenses.

Current wording

Selling, general, and administrative expenses decreased $5.6 million for the nine months ended September 30, 2026, compared to the same period in 2025, primarily due to (i) a $4.5 million decrease in acquisition-related and integration costs related to the acquisition of SecureWise, (ii) a $2.2 million decrease in personnel-related costs mainly due to a lower compensation expense allocated to selling and marketing activities, partially offset by increased stock-based compensation, compensation expense due to increased headcount, higher bonus expense and employee benefits expense, and (iii) a $1.2 million decrease in facilities and IT-related costs, including shipping costs and third-party cloud-services related costs, partially offset by (i) a $0.7 million increase in legal expenses related to the arbitration proceeding over a disputed customer contract, (ii) a $0.6 million increase in software licenses and maintenance costs, (iii) a $0.5 million increase in subcontractor expenses, and (iv) a $0.2 million increase in travel expenses.

Previous wording

The increase in amortization expense for the six months ended June 30, 2026, compared to the same period in 2025, was a result of the amortization of intangible assets acquired in the SecureWise acquisition in March 2025.

Current wording

The increase in amortization expense for the nine months ended September 30, 2026, compared to the same period in 2025, was a result of the amortization of intangible assets acquired in the SecureWise acquisition in March 2025.

Previous wording

Interest expense slightly decreased by $0.1 million for the three months ended June 30, 2026, compared to the same period in 2025, primarily due to slightly lower interest rates on our long-term debt and lower outstanding debt balance.

Current wording

Interest expense slightly decreased by $0.1 million for the three months ended September 30, 2026, compared to the same period in 2025, primarily due to lower interest rates on our long-term debt and lower outstanding debt balance.

Previous wording

Interest expense increased $0.6 million for the six months ended June 30, 2026, compared to the same period in 2025, was driven by a full two quarters of interest on long-term debt in 2026, compared to approximately four months of interest in 2025 following the drawdown of long-term debt in March 2025.

Current wording

Interest expense increased $0.5 million for the nine months ended September 30, 2026, compared to the same period in 2025, was driven by a full three quarters of interest on long-term debt in 2026, compared to approximately two quarters of interest in 2025 following the drawdown of long-term debt in March 2025.

Previous wording

Interest income and other, net, primarily consists of interest income and foreign currency transaction exchange gains and losses.

Current wording

Interest income and other, net, primarily consists of interest income from cash and cash equivalents and accretion of net investment in lease, and foreign currency transaction exchange gains and losses.

Previous wording

Interest income and other, net increased $0.5 million for the three months ended June 30, 2026, compared to the same period in 2025, primarily due to a $1.1 million net favorable fluctuations in foreign currency exchange rates, and a $0.2 million increase in interest income from cash and cash equivalents, partially offset by a $0.6 million decrease in other income due to a one-time recovery from previously written-off property and equipment in the second quarter of 2025.

Current wording

Interest income and other, net increased $1.5 million for the nine months ended September 30, 2026, compared to the same period in 2025, primarily due to a $1.8 million net favorable fluctuations in foreign currency exchange rates, and a $0.5 million increase in interest income from cash and cash equivalents and accretion of net investment in lease, partially offset by a $0.7 million decrease in other income due to a one-time recovery from previously written-off property and equipment in the second quarter of 2025.

Previous wording

We had an income tax expense for three and six months ended June 30, 2026 and income tax benefit for comparative prior year periods. Income tax expense increased for the three and six months ended June 30, 2026, compared to the same periods in 2025, primarily due to the impact of enacted U.S. federal tax legislation, changes in the foreign, federal and state taxes and year-to-date recognition of worldwide pre-tax income in relation to their forecasted amounts for the full year.

Current wording

Income tax expense decreased $0.7 million for the three months ended September 30, 2026, and increased $1.7 million for the nine months ended September 30, 2026, compared to the same periods in 2025. The changes were primarily due to the impact of enacted U.S. federal tax legislation, changes in the foreign, federal and state taxes and year-to-date recognition of worldwide pre-tax income in relation to their forecasted amounts for the full year.

Previous wording

We have historically maintained a full valuation allowance against all the domestic DTAs because it was more likely than not that the DTAs will not be realized. The valuation allowance was approximately $69.9 million as of June 30, 2026, and December 31, 2025, which was related to U.S. net federal and state DTAs. The worldwide net DTA balances were immaterial as of June 30, 2026, and December 31, 2025. We intend to continue maintaining a full valuation allowance on the DTAs until sufficient evidence indicates its DTAs will be realized. However, considering our current assessment of the probability of maintaining profitability, there is a reasonable possibility that in the short term, a portion, or all, of the valuation allowance would no longer be prudent. As such, we may release a portion, or all, of the valuation allowance against DTAs within the next 12 months. This release, if any, would result in the recognition of certain DTAs and a decrease to income tax expense for the period such release is recorded. We are currently evaluating both quantitative and qualitative factors that may impact the valuation allowance assessment. Therefore, the exact timing and amount of the valuation allowance release are subject to our profitability and projected ability to utilize our tax attributes, among other factors.

Current wording

We have historically maintained a full valuation allowance against all the domestic DTAs because it was more likely than not that the DTAs will not be realized. The valuation allowance was approximately $69.9 million as of September 30, 2026, and December 31, 2025, which was related to U.S. net federal and state DTAs. The worldwide net DTA balances were immaterial as of September 30, 2026, and December 31, 2025. We intend to continue maintaining a full valuation allowance on the DTAs until sufficient evidence indicates its DTAs will be realized. However, considering our current assessment of the probability of maintaining profitability, there is a reasonable possibility that in the short term, a portion, or all, of the valuation allowance will no longer be prudent. As such, we may release a portion, or all, of the valuation allowance against DTAs within the next 12 months. This release, if any, will result in the recognition of certain DTAs and a decrease to income tax expense for the period such release is recorded. We are currently evaluating both quantitative and qualitative factors that may impact the valuation allowance assessment. Therefore, the exact timing and amount of the valuation allowance release are subject to our profitability and projected ability to utilize our tax attributes, among other factors.

Previous wording

As of June 30, 2026, our working capital, defined as total current assets less total current liabilities, was $179.3 million, compared to $92.0 million as of December 31, 2025. Total cash and cash equivalents were $114.9 million as of June 30, 2026, compared to $42.2 million as of December 31, 2025. As of June 30, 2026, and December 31, 2025, cash and cash equivalents held by our foreign subsidiaries were $12.3 million and $6.7 million, respectively.

Current wording

As of September 30, 2026, our working capital, defined as total current assets less total current liabilities, was $179.1 million, compared to $92.0 million as of December 31, 2025. Total cash and cash equivalents were $107.1 million as of September 30, 2026, compared to $42.2 million as of December 31, 2025. As of September 30, 2026, and December 31, 2025, cash and cash equivalents held by our foreign subsidiaries were $13.3 million and $6.7 million, respectively.

Previous wording

As of June 30, 2026, our outstanding total debt, net of debt discounts and issuance costs, was $66.5 million, compared to $67.0 million as of December 31, 2025. We believe we have operating flexibility, cash flow, and access to capital markets to meet scheduled payments of our debt.

Current wording

As of September 30, 2026, our outstanding total debt, net of debt discounts and issuance costs, was $65.3 million, compared to $67.0 million as of December 31, 2025. We believe we have operating flexibility, cash flow, and access to capital markets to meet scheduled payments of our debt.

Previous wording

In May 2026, the Board Directors adopted a new stock repurchase program (the “2026 Program”) to repurchase up to $50.0 million of the Company’s common stock both on the open market and in privately negotiated transactions, including through Rule 10b5-1 plans, from time to time, over the next two years from the adoption date. As of June 30, 2026, $50.0 million remained available under the 2026 Program. See details of our stock repurchase program in Note 6,Stockholders’* Equity*to our condensed consolidated financial statements in this Quarterly Report on Form 10‑Q.

Current wording

In May 2026, the Board of Directors adopted a new stock repurchase program (the “2026 Program”) to repurchase up to $50.0 million of the Company’s common stock both on the open market and in privately negotiated transactions, including through Rule 10b5-1 plans, from time to time, over the next two years from the adoption date. As of September 30, 2026, $50.0 million remained available under the 2026 Program. See details of our stock repurchase program in Note 6,Stockholders’* Equity*to our condensed consolidated financial statements in this Quarterly Report on Form 10‑Q.

Previous wording

Net cash flows provided by operating activities were $18.1 million for the six months ended June 30, 2026, compared to $3.4 million for the same period in 2025. The increase in net cash flows provided by operating activities between the periods was primarily driven by (i) higher collections from customers, (ii) the timing of payments under the Company’s bonus and incentive plans between the comparative periods, and (iii) a decrease in payments for business acquisition-related costs and income taxes, partially offset by an increase in payments of interest related to bank loans and decrease in interest income.

Current wording

Net cash flows provided by operating activities were $31.8 million for the nine months ended September 30, 2026, compared to $6.7 million for the same period in 2025. The increase in net cash flows provided by operating activities between the periods was primarily driven by higher collections from customers, and a decrease in payments for business acquisition-related costs and income taxes, partially offset by an increase in payments of interest related to bank loans, and bonus and incentive plans.

Previous wording

For the six months ended June 30, 2026, net cash flows used in investing activities were $24.6 million related to purchases and prepayments of property and equipment, mainly related to our DirectScan systems assets and capitalized software development costs related to the next generation of Exensio Analytics Platform and Sapience Manufacturing Hub.

Current wording

For the nine months ended September 30, 2026, net cash flows used in investing activities were $39.7 million related to purchases and prepayments of property and equipment, mainly related to our DirectScan systems assets and capitalized software development costs related to the next generation of Exensio Analytics Platform and Sapience Manufacturing Hub.

Previous wording

For the six months ended June 30, 2025, net cash flows used in investing activities were $124.2 million, which were primarily related to $129.7 million payments for the acquisition of SecureWise, net of cash acquired, and $16.7 million purchases and prepayments of property and equipment primarily related to our DirectScan systems assets, partially offset by $21.6 million proceeds from maturities and sales, net of purchases of short-term investments, and $0.6 million recovery from previously written-off property and equipment.

Current wording

For the nine months ended September 30, 2025, net cash flows used in investing activities were $127.6 million, which were primarily related to $129.7 million payments for the acquisition of SecureWise, net of cash acquired and $23.1 million purchases and prepayments of property and equipment primarily related to our DirectScan systems assets, partially offset by $24.6 million proceeds from maturities and sales, net of purchases of short-term investments, and $0.6 million recovery from previously written-off property and equipment.

Previous wording

For the six months ended June 30, 2026, net cash flows provided by financing activities were $79.2 million, which primarily consisted of $81.8 million proceeds from shares issued under secondary offering, net of underwriting discounts and commissions of $3.9 million, and $2.3 million proceeds from shares issued under our equity plans, partially offset by $4.1 million in payments for taxes related to net share settlement of equity awards, and $0.6 million repayment of long-term debt.

Current wording

For the nine months ended September 30, 2026, net cash flows provided by financing activities were $72.6 million, which primarily consisted of $81.8 million proceeds from shares issued under secondary offering, net of underwriting discounts and commissions of $3.9 million, and $4.4 million proceeds from shares issued under our equity plans, partially offset by (i) $11.6 million in payments for taxes related to net share settlement of equity awards, (ii) $1.9 million repayment of long-term debt, and (iii) $0.1 million payments of debt issuance costs.

Previous wording

For the six months ended June 30, 2025, net cash provided by financing activities were $66.6 million, which primarily consisted of $69.6 million proceeds from long-term debt, net of debt discount, that was used in financing the acquisition of SecureWise, and $2.2 million proceeds from shares issued under our equity plans, partially offset by (i) $3.5 million in payments for taxes related to net share settlement of equity awards, (ii) $0.9 million payments of debt issuance costs, and (iii) $0.6 million repayment of long-term debt.

Current wording

For the nine months ended September 30, 2025, net cash provided by financing activities were $65.5 million, which primarily consisted of $69.6 million proceeds from long-term debt, net of debt discount, that was used in financing the acquisition of SecureWise, and $4.2 million proceeds from our employee stock purchase plan and exercise of stock options, partially offset by (i) $5.9 million in cash payments for taxes related to net share settlement of equity awards, (ii) $1.3 million repayment of long-term debt, (iii) $0.9 million payments of debt issuance costs, and (iv) $0.2 million repurchases of our common stock.