PDF SOLUTIONS INC

Previous wording

The following discussion of our financial condition and results of operations contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact may be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “could,” “projected,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “target” or “continue,” the negative effect of terms like these or other similar expressions. These statements include, but are not limited to, statements concerning: expectations about the effectiveness of our business and technology strategies; expectations regarding global economic trends; the impact of rising global inflation and increased interest rates, expectations regarding recent and future acquisitions; current semiconductor industry trends; expectations of continued adoption of our solutions by new and existing customers; project milestones or delays and performance criteria achieved; cost and schedule of new product development; the provision of technology and services prior to the execution of a final contract; the continuing impact of macroeconomic conditions and other trends on the semiconductor industry and our operations or supply and demand for our products; supply chain disruptions; the success of the Company’s strategic growth opportunities and partnerships; the Company’s ability to successfully integrate acquired businesses and technologies; whether the Company can successfully convert backlog into revenue; customers’ production volumes under contracts that provide Gainshare; possible impacts from the evolving trade regulatory environment and geopolitical tensions; our assessment of the sufficiency of our cash resources and anticipated funds from operations; our ability to obtain additional financing if needed and our ability to use support and updates for certain open-source software. These forward-looking statements are only predictions. Forward-looking statements are based on current expectations and projections about future events and are inherently subject to a variety of risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from those anticipated or projected. All forward-looking statements and other information included in this document are based on information available to us on the date of filing and we further caution investors that our business and financial performance are subject to substantial risks and uncertainties. We assume no obligation to update publicly any such forward-looking statements. In evaluating these statements, you should specifically consider various factors, including the risk factors set forth in Item 1. “Business” and Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in…

Excerpt shortened here; the source contains the full paragraph.

Current wording

The following discussion of our financial condition and results of operations contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact may be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “could,” “projected,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “target” or “continue,” the negative effect of terms like these or other similar expressions. These statements include, but are not limited to, statements concerning: expectations about the effectiveness of our business and technology strategies; expectations regarding global economic trends; the impact of global inflation and changed interest rates, expectations regarding recent and future acquisitions; current semiconductor industry trends; expectations of continued adoption of our solutions by new and existing customers; project milestones or delays and performance criteria achieved; cost and schedule of new product development; the provision of technology and services prior to the execution of a final contract; the continuing impact of macroeconomic conditions and other trends on the semiconductor industry, our customers, our operations, and supply and demand for our products; supply chain disruptions; the success of the Company’s strategic growth opportunities and partnerships; the Company’s ability to successfully integrate acquired businesses and technologies; whether the Company can successfully convert backlog into revenue; customers’ production volumes under contracts that provide Gainshare; possible impacts from the evolving trade regulatory environment and geopolitical tensions; our assessment of the sufficiency of our cash resources and anticipated funds from operations; our ability to obtain additional financing if needed and our ability to obtain support and updates for certain open-source software. These forward-looking statements are only predictions. Forward-looking statements are based on current expectations and projections about future events and are inherently subject to a variety of risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from those anticipated or projected. All forward-looking statements and other information included in this document are based on information available to us on the date of filing and we further caution investors that our business and financial performance are subject to substantial risks and uncertainties. We assume no obligation to update publicly any such forward-looking statements. In evaluating these statements, you should specifically consider various factors, including the risk factors set forth in Item 1. “Business” and Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operat…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

Other trends may continue to affect our Characterization services business and Integrated Yield Ramp revenue specifically. For example, semiconductor manufacturers may experience lower wafer shipments due to weakness in the global economy, which would negatively impact the gainshare component of our Integrated Yield Ramp revenue. 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. As a result of these market developments, we have chosen to focus our resources and investments in products, services, and solutions for analytics.

Current wording

Other trends may continue to affect our Characterization services business and Integrated Yield Ramp revenue specifically. For example, semiconductor manufacturers may experience lower wafer shipments due to weakness in the global economy, which would negatively impact the gainshare component of our Integrated Yield Ramp revenue. 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. As a result of these market developments, we have chosen to focus our resources and investments in products (including differentiated data), services, and solutions for analytics.

Previous wording

Financial highlights for the six months ended June 30, 2024, are as follows:

Current wording

Financial highlights for the nine months ended September 30, 2024, are as follows:

Previous wording

There were no material changes during the three and six months ended June 30, 2024, to the items that we disclosed as our critical accounting policies and estimates in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 27, 2024.

Current wording

There were no material changes during the three and nine months ended September 30, 2024, to the items that we disclosed as our critical accounting policies and estimates in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 27, 2024.

Previous wording

The following is a brief discussion of the more significant accounting policies and methods that we use.

Current wording

The following is a brief discussion of the most significant accounting policies and methods that we use.

Previous wording

Our discussion and analysis of our financial conditions, results of operations and cash flows are based on our condensed consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States of America. Our preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. The most significant estimates and assumptions relate to revenue recognition, valuation of long-lived assets including goodwill and intangible assets, stock-based compensation and the realization of deferred tax assets (“DTAs”). Actual amounts may differ from such estimates under different assumptions or conditions.

Current wording

Our discussion and analysis of our financial conditions, results of operations and cash flows are based on our condensed consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States of America. Our preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. The most significant estimates

Previous wording

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 condensed consolidated statements of comprehensive income. Payments under sales-type leases are discounted using the interest rate implicit in the

Current wording

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

Previous wording

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 condensed consolidated balance sheets.

Current wording

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 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 condensed consolidated balance sheets.

Previous wording

Our income tax calculations are based on the application of applicable U.S. federal, state, and/or foreign tax law. Our tax filings, however, are subject to audit by the respective tax authorities. Accordingly, we recognize tax liabilities based upon our estimate of whether, and the extent to which, additional taxes will be due when such estimates are more-likely-than-not to be sustained. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. To the extent the final tax liabilities are different than the amounts originally accrued, the increases or decreases are recorded as income tax expense or benefit in the condensed consolidated statements of comprehensive income (loss). As of June 30, 2024, no deferred taxes have been provided on undistributed earnings from our international subsidiaries. We intend to reinvest the earnings of

Current wording

Our income tax calculations are based on the application of applicable U.S. federal, state, and/or foreign tax law. Our tax filings, however, are subject to audit by the respective tax authorities. Accordingly, we recognize tax liabilities based upon our estimate of whether, and the extent to which, additional taxes will be due when such estimates are more-likely-than-not to be sustained. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. To the extent the final tax liabilities are different than the amounts originally accrued, the increases or decreases are recorded as income tax expense or benefit in the condensed consolidated statements of comprehensive income (loss). As of September 30, 2024, no deferred taxes have been provided on undistributed earnings from our international subsidiaries. We intend to reinvest the

Previous wording

our non-U.S. subsidiaries in those operations indefinitely. As such, we have not provided for any foreign withholding taxes on the earnings of foreign subsidiaries as of June 30, 2024. The earnings of our foreign subsidiaries are taxable in the U.S. in the year earned under the Global Intangible Low-Taxed Income rules implemented under 2017 Tax Cuts and Jobs Act.

Current wording

earnings of our non-U.S. subsidiaries in those operations indefinitely. As such, we have not provided for any foreign withholding taxes on the earnings of foreign subsidiaries as of September 30, 2024. The earnings of our foreign subsidiaries are taxable in the U.S. in the year earned under the Global Intangible Low-Taxed Income rules implemented under 2017 Tax Cuts and Jobs Act.

Previous wording

The CHIPS Act was signed into U.S. law on August 9, 2022. The CHIPS Act is intended to increase domestic competitiveness in semiconductor manufacturing capacity, increase research and development in computing, artificial intelligence, clean energy, and nanotechnology through federal government programs and incentives over the next ten years. The CHIPS Act includes an advanced manufacturing tax credit equal to 25% of qualified investments in property purchased for an advanced manufacturing facility. We have begun to see some benefit from the CHIPS Act to our business, but the extent of future benefit is still unknown.

Current wording

The CHIPS Act was signed into U.S. law on August 9, 2022. The CHIPS Act is intended to increase domestic competitiveness in semiconductor manufacturing capacity, increase research and development in computing, AI, clean energy, and nanotechnology through federal government programs and incentives over the next ten years. The CHIPS Act includes an advanced manufacturing tax credit equal to 25% of qualified investments in property purchased for an advanced manufacturing facility. We have begun to see some benefit from the CHIPS Act to our business, but the extent of future benefit is still unknown.

Previous wording

We record goodwill when the purchase consideration of an acquisition exceeds the fair value of the net tangible and identified intangible assets as of the date of acquisition. We have one operating segment and one operating unit. We perform an annual impairment assessment of goodwill during the fourth quarter of each calendar year or more frequently, if required, to determine if any events or circumstances exist, such as an adverse change in business climate or a decline in the overall industry demand, that would indicate that it would more likely than not reduce the fair value of a reporting unit below its carrying amount, including goodwill. If events or circumstances do not indicate that the fair value of a reporting unit is below its carrying amount, then goodwill is not considered to be impaired and no further testing is required. If the carrying amount exceeds its fair value, an impairment loss would be recognized equal to the amount of excess, limited to the amount of total goodwill. There was no impairment of goodwill for the three and six months ended June 30, 2024 and 2023.

Current wording

We record goodwill when the purchase consideration of an acquisition exceeds the fair value of the net tangible and identified intangible assets as of the date of acquisition. We have one operating segment and one operating unit. We perform an annual impairment assessment of goodwill during the fourth quarter of each calendar year or more frequently, if required, to determine if any events or circumstances exist, such as an adverse change in business climate or a decline in the overall industry demand, that would indicate that it would more likely than not reduce the fair value of a reporting unit below its carrying amount, including goodwill. If events or circumstances do not indicate that the fair value of a reporting unit is below its carrying amount, then goodwill is not considered to be impaired and no further testing is required. If the carrying amount exceeds its fair value, an impairment loss would be recognized equal to the amount of excess, limited to the amount of total goodwill. There was no impairment of goodwill for the three and nine months ended September 30, 2024 and 2023.

Previous wording

recorded in the amount by which the carrying amount of the asset group exceeds its fair value. There was no impairment of long-lived assets for the three and six months ended June 30, 2024 and 2023.

Current wording

recorded in the amount by which the carrying amount of the asset group exceeds its fair value. There was no impairment of long-lived assets for the three and nine months ended September 30, 2024 and 2023.

Previous wording

Discussion of Financial Data for the Three and Six Months ended June 30, 2024 and 2023

Current wording

Discussion of Financial Data for the Three and Nine months ended September 30, 2024 and 2023

Previous wording

Analytics revenue increased $1.0 million for the three months ended June 30, 2024, compared to the three months ended June 30, 2023. The increase in Analytics revenue was driven by increases in revenues from Exensio and Cimetrix software licenses, partially offset by decreases in revenues from DFI and CV systems.

Current wording

Analytics revenue increased $5.3 million for the three months ended September 30, 2024, compared to the three months ended September 30, 2023. The increase in Analytics revenue was driven by increases in revenues from Exensio and Cimetrix software licenses and CV systems, partially offset by a decrease in revenues from DFI systems.

Previous wording

Analytics revenue increased $3.1 million for the six months ended June 30, 2024, compared to the six months ended June 30, 2023. The increase in Analytics revenue was driven by increases in revenues from Exensio and Cimetrix software licenses, partially offset by decreases in revenues from DFI and CV systems.

Current wording

Analytics revenue increased $8.4 million for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023. The increase in Analytics revenue was driven by increases in revenues from Exensio and Cimetrix software licenses, partially offset by a decrease in revenues from CV and DFI systems.

Previous wording

Integrated Yield Ramp revenue decreased $0.9 million for the three months ended June 30, 2024, compared to the three months ended June 30, 2023, primarily due to a decrease in Gainshare from decreased customer wafer shipments at non-leading-edge nodes, partially offset by an increase in hours worked on fixed-fees engagements.

Current wording

Integrated Yield Ramp revenue decreased $1.2 million for the three months ended September 30, 2024, compared to the three months ended September 30, 2023, primarily due to a decrease in hours worked on fixed-fees engagements, partially offset by higher Gainshare from increased customer wafer shipments at non-leading-edge nodes.

Previous wording

Integrated Yield Ramp revenue decreased $2.5 million for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, primarily due to decreases in Gainshare from decreased customer wafer shipments at non-leading-edge nodes and hours worked on fixed-fees engagements.

Current wording

Integrated Yield Ramp revenue decreased $3.7 million for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, primarily due to lower hours worked on fixed-fees engagements and Gainshare from decreased customer wafer shipments at non-leading-edge nodes.

Previous wording

The increase in costs of revenues of $1.5 million for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, was primarily due to (i) a $1.4 million increase in hardware costs, (ii) a $0.2 million increase in third-party cloud-delivery costs and (iii) a $0.2 million increase in subcontractor costs. These increases were partially offset by a $0.3 million decrease in facilities and IT-related costs including depreciation expense.

Current wording

The decrease in costs of revenues of $1.8 million for the three months ended September 30, 2024, compared to the three months ended September 30, 2023, was primarily due to (i) a $2.0 million decrease in hardware costs and (ii) a $0.5 million decrease in facilities and IT-related costs including depreciation and amortization expense. These decreases were partially offset by (a) a $0.3 million increase in subcontractor costs, (b) a $0.3 million increase in third-party cloud-delivery costs, and (c) a $0.2 million increase in personnel-related costs mostly resulting from higher stock-based compensation expenses.

Previous wording

The decrease in costs of revenues of $0.1 million for the three months ended June 30, 2024, compared to the three months ended June 30, 2023, was primarily due to (i) a $0.3 million decrease in hardware costs and (ii) a $0.2 million decrease in facilities and IT-related costs including depreciation expense. These decreases were partially offset by (a) a $0.2 million increase in personnel-related costs due to higher stock-based compensation expenses, increased headcount, and worldwide salary increases, partially offset by lower bonus expense, and (b) a $0.1 million increase in third-party cloud-delivery costs.

Current wording

The decrease in costs of revenues of $0.3 million for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, was primarily due to (i) a $0.8 million decrease in facilities and IT-related costs including depreciation and amortization expense, and (ii) a $0.6 million decrease in hardware costs. These decreases were partially offset by (a) a $0.5 million increase in third-party cloud-delivery costs, (b) a $0.4 million increase in subcontractor costs, and (c) a $0.2 million increase in personnel-related costs mostly resulting from higher stock-based compensation expenses, higher other compensation expenses (including employee benefit costs), increased headcount, and worldwide salary increases, partially offset by lower bonus expense.

Previous wording

Gross margin increased one percentage point for the three months ended June 30, 2024, to 71%, compared to 70% for the three months ended June 30, 2023. The higher gross margin during the three months ended June 30, 2024, was primarily due to lower cost of revenues.

Current wording

Gross margin increased seven percentage points for the three months ended September 30, 2024, to 73%, compared to 66% for the three months ended September 30, 2023. The higher gross margin during the three months ended September 30, 2024, was primarily due to higher Analytics revenue and lower cost of revenues for the three months ended September 30, 2024.

Previous wording

Research and development expenses consist primarily of personnel-related costs (including compensation, employee benefits, bonus, and stock-based compensation expense), outside development services, travel expenses, third-party cloud-services related costs, IT and facilities cost allocations to support product development activities.

Current wording

Research and development expenses consist primarily of personnel-related costs (including compensation, employee benefits, bonus, and stock-based compensation expense), outside development services, travel expenses, third-party cloud-services related costs, laboratory supplies, IT and facilities cost allocations to support product development activities.

Previous wording

Research and development expenses increased $0.4 million for the three months ended June 30, 2024, compared to the three months ended June 30, 2023, primarily due to (i) a $0.3 million increase in personnel-related costs mostly resulting from higher stock-based compensation expenses, higher other compensation expenses (including employee benefit costs), increased headcount, and worldwide salary increases, partially offset by lower bonus expense, and (ii) a $0.1 million increase in travel expenses.

Current wording

Research and development expenses increased $0.4 million for the three months ended September 30, 2024, compared to the three months ended September 30, 2023, primarily due to (i) a $0.3 million increase in subcontractor fees primarily related to Cimetrix and Exensio software and (ii) a $0.2 million increase in personnel-related costs mostly resulting from higher stock-based compensation expenses, higher other compensation expenses (including employee benefit costs and bonuses), increased headcount, and worldwide salary increases.

Previous wording

Selling, general, and administrative expenses increased $2.3 million for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, primarily due to (i) a $3.2 million increase in personnel-related costs mainly resulting from higher stock-based compensation expenses, higher other compensation expenses (including commissions and employee benefit costs), increased headcount, and worldwide salary increases, partially offset by lower bonus expense, and (ii) a $1.6 million increase in legal expenses (excluding arbitration-related expenses). These increases were partially offset by (a) a $2.3 million decrease in legal fees related to the arbitration proceeding over a disputed customer contract and (b) a $0.2 million decrease in business acquisition costs.

Current wording

Selling, general, and administrative expenses increased $2.5 million for the three months ended September 30, 2024, compared to the three months ended September 30, 2023, primarily due to (i) a $1.6 million increase in personnel-related costs mainly resulting from higher stock-based compensation expenses, higher other compensation expenses (including commissions, employee benefit costs and bonuses), increased headcount, and worldwide salary increases, (ii) a $0.6 million increase in legal expenses (excluding arbitration-related expenses), (iii) a $0.3 million increase in facilities and IT-related costs including depreciation expense, (iv) a $0.1 million increase in subcontractor fees, and (v) a $0.1 million increase in trade conference-related expenses. These increases were partially offset by a $0.2 million decrease in legal fees related to the arbitration proceeding over a disputed customer contract.

Previous wording

Interest and other expense (income), net increased $1.2 million for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, primarily due to higher interest income resulting from higher interest rates and sales-type leases, and net favorable fluctuations in foreign currency exchange rates.

Current wording

Interest and other expense (income), net decreased $0.5 million for the three months ended September 30, 2024, compared to the three months ended September 30, 2023, primarily due to net unfavorable fluctuations in foreign currency exchange rates.

Previous wording

Interest and other expense (income), net increased $0.4 million for the three months ended June 30, 2024, compared to the three months ended June 30, 2023, primarily due to higher interest income resulting from higher interest rates and sales-type leases, and net favorable fluctuations in foreign currency exchange rates.

Current wording

Interest and other expense (income), net increased $0.7 million for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, primarily due to higher interest income resulting from higher interest rates and sales-type leases.

Previous wording

Income tax expense increased for the three and six months ended June 30, 2024, compared to the three and six months ended June 30, 2023, primarily due to changes in the foreign and state taxes and year-to-date recognition of worldwide pre-tax income (loss) in relation to their forecasted amounts for full years.

Current wording

Income tax expense decreased for the three and nine months ended September 30, 2024, compared to the three and nine months ended September 30, 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.

Previous wording

As of June 30, 2024, our working capital, defined as total current assets less total current liabilities, was $137.8 million, compared to $147.0 million as of December 31, 2023. Total cash, cash equivalents, and short-term investments were $117.9 million as of June 30, 2024, compared to cash, cash equivalents, and short-term investments of $135.5 million as of December 31, 2023. As of June 30, 2024, and December 31, 2023, cash and cash equivalents held by our foreign subsidiaries were $9.8 million and $10.0 million, respectively. We believe that our existing cash resources and anticipated funds from operations will satisfy our cash requirements to fund our operating activities, capital expenditures, other obligations for at least the next twelve months, and thereafter for the foreseeable future; however, we will continue to evaluate if we require additional funding to meet our longer-term needs.

Current wording

As of September 30, 2024, our working capital, defined as total current assets less total current liabilities, was $133.7 million, compared to $147.0 million as of December 31, 2023. Total cash, cash equivalents, and short-term investments were $120.2 million as of September 30, 2024, compared to cash, cash equivalents, and short-term investments of $135.5 million as of December 31, 2023. As of September 30, 2024, and December 31, 2023, cash and cash equivalents held by our foreign subsidiaries were $12.2 million and $10.0 million, respectively. We believe that our existing cash resources and anticipated funds from operations will satisfy our cash requirements to fund our operating activities, capital expenditures, other obligations for at least the next twelve months, and thereafter for the foreseeable future; however, we will continue to evaluate if we require additional funding to meet our longer-term needs.

Previous wording

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 six months ended June 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.

Current wording

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.

Previous wording

The 2022 Program expired on April 11, 2024, and on April 15, 2024, the Board of Directors adopted a new 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.

Current wording

The 2022 Program expired on April 11, 2024, and on April 15, 2024, the Board of Directors adopted a new 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.

Previous wording

Cash flows used in operating activities during the six months ended June 30, 2024, consisted of net income, adjusted for certain non-cash items which primarily consisted of depreciation and amortization, stock-based compensation expense, amortization of acquired intangible expense, amortization of costs capitalized to obtain revenue contracts, net accretion of discounts on short-term investments, and net change in operating assets and liabilities.

Current wording

Cash flows provided by operating activities during the nine months ended September 30, 2024, consisted of net income, adjusted for certain non-cash items which primarily consisted of depreciation and amortization, stock-based compensation expense, amortization of acquired intangible expense, amortization of costs capitalized to obtain revenue contracts, net accretion of discounts on short-term investments, accretion of unguaranteed residual assets and net change in operating assets and liabilities.

Previous wording

Net cash flows used in operating activities was $1.2 million for the six months ended June 30, 2024, compared to net cash flows used in operating activities of $6.6 million for the six months ended June 30, 2023. The decrease in cash used in operating activities between the periods was driven primarily by (i) a decrease in bonus payments under the Company’s bonus plan, (ii) a decrease in payments of vendor invoices, and (iii) an increase in interest income, partially offset by lower collections from customers and net income between comparable periods. Net income was $1.3 million for the six months ended June 30, 2024, compared to a net income of $7.2 million for the six months ended June 30, 2023.

Current wording

Net cash flows provided by operating activities was $8.1 million for the nine months ended September 30, 2024, compared to $12.6 million for the nine months ended September 30, 2023. The decrease in cash provided by operating activities between the periods was driven primarily by lower collections from customers, partially offset by (i) a decrease in bonus payments under the Company’s bonus plan, (ii) a decrease in payments of vendor invoices, (iii) an increase in interest income, and (iv) an increase in net income between comparable periods. Net income was $3.5 million for the nine months ended September 30, 2024, compared to $2.2 million for the nine months ended September 30, 2023.

Previous wording

The major contributors to the net change in operating assets and liabilities for the six months ended June 30, 2024, were as follows:

Current wording

The major contributors to the net change in operating assets and liabilities for the nine months ended September 30, 2024, were as follows:

Previous wording

Net cash provided by investing activities was $4.2 million for the six months ended June 30, 2024, compared to net cash used in investing activities of $9.7 million for the six months ended June 30, 2023.

Current wording

Net cash provided by investing activities was $0.2 million for the nine months ended September 30, 2024, compared to net cash used in investing activities of $14.2 million for the nine months ended September 30, 2023.

Previous wording

For the six months ended June 30, 2024, cash provided by investing activities primarily related to proceeds from maturities and sales of short-term investments of $37.0 million, partially offset by purchases of short-term investments of $25.5 million and purchases of property and equipment of $7.3 million primarily related to our DFI systems.

Current wording

For the nine months ended September 30, 2024, cash provided by investing activities primarily related to proceeds from maturities and sales of short-term investments of $57.1 million, partially offset by purchases of short-term investments of $43.1 million, purchases of and prepayments for property and equipment of $11.9 million primarily related to our DFI systems, and purchase of a convertible promissory note of $2.0 million.

Previous wording

For the six months ended June 30, 2023, cash used in investing activities primarily related to purchases of short-term investments of $23.5 million and purchases of and prepayments for property and equipment of $6.0 million primarily related to our DFI and CV systems, partially offset by proceeds from maturities and sales of short-term investments of $19.8 million.

Current wording

For the nine months ended September 30, 2023, cash used in investing activities primarily related to purchases of short-term investments of $32.3 million, purchases of and prepayments for property and equipment of $8.9 million primarily related to our DFI and CV systems, payment for business acquisition, net of cash acquired, of $1.8 million, partially offset by proceeds from maturities and sales of short-term investments of $28.8 million.

Previous wording

For the six months ended June 30, 2024, net cash used in financing activities primarily consisted of repurchases of common stock of $6.9 million, and $4.3 million in cash payments for taxes related to net share settlement of equity awards, partially offset by $2.0 million of proceeds from our employee stock purchase plan and exercise of stock options.

Current wording

For the nine months ended September 30, 2024, net cash used in financing activities primarily consisted of $8.2 million in cash payments for taxes related to net share settlement of equity awards, repurchases of common stock of $6.9 million, partially offset by $4.2 million of proceeds from our employee stock purchase plans and exercise of stock options.

Previous wording

For the six months ended June 30, 2023, net cash used in financing activities primarily consisted of $4.6 million in cash payments for taxes related to net share settlement of equity awards, partially offset by $2.1 million of proceeds from our employee stock purchase plan and exercise of stock options.

Current wording

For the nine months ended September 30, 2023, net cash used in financing activities primarily consisted of $9.1 million in cash payments for taxes related to net share settlement of equity awards, repurchases of common stock of $0.7 million, partially offset by $4.3 million of proceeds from our employee stock purchase plans and exercise of stock options.