PDF Solutions Inc: Form 10-K for the period ended Dec 31, 2025

We provide comprehensive data solutions designed to empower organizations across the semiconductor and electronics ecosystems to improve the yield and quality of their products and operational efficiency for increased profitability. We derive revenues from two categories, Platform and Volume-based fees. Our offerings that contribute to Platform revenue are licenses for software (other than Cimetrix® runtime licenses) and related software maintenance and technical support services; software-as-a-service (“SaaS”); engineering services; fixed fees associated with Characterization Vehicle® systems; and licenses and purchase contracts for DirectScan™ systems (formerly known as “DFI systems”). Volume-based revenue is derived from Cimetrix runtime licenses, secureWISE® data, and variable/royalty fees associated with CV® systems (sometimes referred to as Gainshare). We are headquartered in Santa Clara, California, and operate worldwide with additional offices in the United States of America, Canada, China, France, Germany, Italy, Japan, South Korea, and Taiwan.

Business Overview

For decades, due to the challenge of timely managing very large amounts of data, manufacturing analytics often functioned as an overlay in the semiconductor industry: though powerful, it was disconnected from direct execution. We are reframing analytics as infrastructure: a shared data backbone that spans characterization, process development, high-volume manufacturing, test, and assembly. We believe that this distinction is critical as data volumes explode and process interactions become increasingly nonlinear. By seeking to standardize how data is ingested, contextualized, and analyzed across domains, the PDF Solutions Platform is designed to reduce reliance on custom integrations and tribal knowledge. The result is intended to be not simply better visibility, but a common analytical language that enables faster root-cause analysis, more consistent decision-making, and shared accountability across teams and partners. Additionally, we believe that valuable, trusted, production-ready applications of AI in an industrial context need to be anchored on that type of robust, scalable, and secure data platform. Our aim is for the PDF Solutions Platform to enable the scaling of AI across the semiconductor ecosystem.

Our customers include Fortune 500 companies that use our products and services with the objective of achieving various goals depending on whether they are integrated device manufacturers (“IDMs”), fabless semiconductor companies, foundries, equipment manufacturers, electronics manufacturing suppliers (“EMS”), original device manufacturers (“ODMs”), outsourced semiconductor assembly and test (“OSATs”), or system houses. For example, our foundry customers generate and analyze key manufacturing data using our solutions, which are designed to shorten the time necessary for technology development and provide their fabless customers with a higher yielding process with improved electrical performance, which are both critical metrics for market success. Higher yields in less time can also mean less total raw materials and process runs, which can help lower customers’ total cost and minimize environmental impact. Foundries also use our products to remotely monitor and control equipment running in disparate locations, which is designed to reduce overhead associated with in person services and result in better equipment uptime and productivity. Foundries, as well as equipment manufacturers, use our connectivity products to implement evolving industry standards which require stability and quality for their operations or equipment, respectively. Equipment manufacturers can also use our products to remotely monitor and support and maintain their equipment located in foundries and OSATs. By way of a further example, our IDM and fabless customers use our solutions to align their data, as well as unique, differentiated data that we help them generate, by means of our industry-standards-based semantic model. Such aligned data can then be analyzed with our machine learning (“ML”) and artificial intelligence (“AI”) algorithms, which are designed to predict downstream manufacturing issues and result in shorter time for designs to meet performance requirements with fewer iterations and faster time-to-market. As a final example, our foundry and OSAT customers use the AI and ML applications of our software to help optimize for process control, assembly, and/or testing.

Our mission is to provide innovative solutions to create, access, and organize data to enable analysis and control for semiconductor and electronics companies to achieve better time-to-market, yields, quality, and operational efficiencies. Our strategy to achieve this mission, which is based on an overall repositioning of analytics in the global manufacturing context, is anchored on four integrated pillars:

• Differentiated Data & Process Characterization. Our DirectScan system combines voltage contrast e-beam inspection with design layout analysis to help identify systematic failures inline before they occur. Our eProbe tool performs inline inspection designed to test over 60 trillion vias per year per tool and catch defects in increasingly three-dimensional structures. We have taken advantage of advances in agentic AI to also help make the tens of thousands of experiments and billions of measurements per wafer of our advanced CV test chips more accessible, including by enabling customers to interpret complex datasets and generate insights quickly on demand.
• AI-Ready Data Platform. Recognizing that current analytics architectures hit fundamental limits around 20,000 parameters, while newer semiconductor devices and chiplet products routinely generate millions, in 2024, we began work to completely reimagine our analytics platform to be able to handle the extremely large data volume typical of the semiconductor industry. The new architecture introduces a scalable, parallel, interactive analytics layer between traditional business intelligence tools and data storage. The end result is being designed to deliver significant improvements in analytics loading and improvements for critical analyses. Our philosophy for the applicability of AI in semiconductor manufacturing centers on “human governance with AI execution,” with an aim to establish rules and guardrails that allow AI to automate up to 90% of analysis while seeking to render visualizations in seconds and mine 100% of data 100% of the time.
• Collaboration and Supply Chain Orchestration. We are tackling the orchestration challenge at two levels. Internal orchestrations through our Sapience Manufacturing Hub solution are designed to enable seamless integration across manufacturing execution system (MES), enterprise resource planning (ERP), product lifecycle management (PLM), and electronic design automation (EDA) tools and eliminate the data wrangling that consumes data scientists’ time. External orchestrations are designed to automate quality assurance, enable real-time work-in-progress tracking, and facilitate data feed-forward applications that allow test parameters from one insertion to optimize subsequent operations.
• Global Secure Connectivity Platform. In 2020, we expanded our portfolio with Cimetrix products via acquisition, which products are a leading software for connectivity and control of semiconductor manufacturing equipment, and in 2025, nearly 8,000 pieces of semiconductor manufacturing equipment shipped with Cimetrix products enabled. In 2025, we again expanded our portfolio with secureWISE products and network via another acquisition. Our secureWISE network connected over 300 manufacturing locations and over 100 equipment OEMs as of December 31, 2025, and is designed to provide end-to-end encryption and follow many of the guiding principles of zero trust architecture and a number of additional region-specific security requirements and industry-specific SEMI standards, and manage the exchange of terabytes of data with reliable uptime across eight regions, and is within the scope of our information security management system, which is ISO 27001:2022 certified.

Industry Background

The semiconductor industry has always been a very capital-intensive industry, which, historically, resulted in a high concentration of manufacturing capacity in a few large localities to best benefit from economies of scale. In recent years, however, some countries' interest in local semiconductor production has led to several large investments in new manufacturing facilities, resulting in a geographically dispersed global semiconductor supply chain. advanced multichip packaging aimed at creating new sources of performance scalability is also impacting the overall semiconductor industry supply chain, including that designs will need to incorporate IP from different sources while the assembly of these multiple components will be done across a network of suppliers, manufacturing, assembly, testing companies that is more complex than for monolithic devices.

Technology and Intellectual Property Protection

Our success is largely dependent upon our proprietary software. We believe the creative skills and technological ability of our personnel, product enhancements, and new product development are necessary to maintain our position as a leading provider of comprehensive data solutions to the semiconductor industry. We rely primarily on trade secret rights, copyright laws, and nondisclosure and other contractual agreements to protect our software.

In addition, our success is dependent on various inventions we have made and we seek to protect certain of our IP under patent laws. As of December 31, 2025, we held 209 U.S. patents, with expiration dates on unexpired patents ranging from 2027 through 2043. We intend to prepare additional patent applications when we feel it is beneficial. Some of the technology we protect by patent includes elements of our CV and DirectScan systems and inventions related to AI/ML.

We protect our trademarks with registration of marks, including Characterization Vehicle, Cimetrix, CV, eProbe, Exensio, pdFasTest, PDF Solutions, secureWISE, and stylized logos therefor. We have common law rights to additional trademarks, including ALPS, DirectScan, Fire, and Sapience.

We further seek to protect our IP by entering into confidentiality and inventions assignment agreements with our employees and confidentiality and license agreements with our customers and the various parties we partner with to resell, distribute, and, in some cases, integrate our products. Further, we work to limit access to and distribution of our software, documentation and other proprietary information.

Third parties could in any case develop competing technologies that include similar functionality or features, or otherwise are substantially equivalent or superior to our technologies. In addition, effective patent, copyright, trademark and trade secret protection may be unavailable or limited in certain foreign countries where we operate. Our business could suffer significantly if we fail to protect our proprietary technology.

In addition, through yield, performance, and reliability improvement services over more than 20 years, we have accumulated a large library of physical IP in the form of test structures. As part of our CV systems, our engineers create designs of experiments (“DOEs”) and layouts for targeted fail modes. We have also developed electrical measurement hardware tools and proprietary extraction, design, and analysis software. In addition, our technology embodies many production-proven and patented algorithms. Further, our IP includes proven methodologies that our implementation teams use as guidelines to drive our customers’ use of our technology. We strive to continually enhance our core technologies through the codification of knowledge that we gain in the use of our products and delivery of services.

Products and Services

Products

The PDF Solutions Platform is comprised of a large number of software and hardware products grouped into six primary brands. Each brand corresponds to a specific way of acquiring, transforming, transferring, or analyzing data from the design, manufacturing, or equipment related to making semiconductors.

Exensio Software. Our Exensio software products address the big data manufacturing challenge of today’s advanced process nodes and highly integrated products, by providing a common environment throughout the supply chain for different data types, including inline and end-of-line metrology, yield, parametric, performance, manufacturing consumables, tool-level sensor data, test floor data, logistical data, as well as custom data types. Exensio products are designed to enable real-time rapid diagnosis and understanding of key manufacturing and test metrics during both inline and end-of-line wafer processing, helping customers reduce product variability and cost simultaneously. By integrating silos of data and applying AI and ML, Exensio products are designed to resolve the limitations of local optimization and provide better visibility across the entire production process, and to reduce the time it takes to make critical decisions that can drive higher product yield, quality and reliability. Our collaborations with strategic partners are intended to also integrate data from those partners’ products to make it available in Exensio, and also to develop new applications to inter-operate with those products and enhance the value to mutual customers. Exensio software is available as either an on-premise license or SaaS and can be configured to the customer’s business model, whether an IDM, a fabless, a foundry, or an OSAT. Common features, functionality, and purpose across the key modules are as follows:

• Manufacturing Analytics – This module provides end-to-end semiconductor manufacturing analytics for yield, performance, quality, and efficiency. It uses our proprietary database schema to store collected data from multiple sources and is designed to align these data elements in a common, unified environment with a consistent view. For example, product engineers use it to identify and analyze production yield, performance, reliability and other issues. Elements of this module are designed to handle very large and complex data sets that are commonplace in the semiconductor industry. To support the multi-dimensional product requirements of our customers, the powerful, interactive visualization and analysis capabilities in this product are highly flexible and user-configurable.
• Process Control – This module provides failure detection and classification (“FDC”) capabilities for monitoring, alarming, and control of manufacturing tool sets. These capabilities include proprietary data collection and analysis of tool sensor trace data and summary indicators designed to rapidly identify sources of process variations and manufacturing excursions. It is designed to enable reduced process variability and excursions at the tool level through sensor data collection and analysis. When used together with Exensio Manufacturing Analytics and related modules, the accretive data mining and correlation capabilities are designed to enable identification of tool level sources of yield loss and process variation and enable predictive and proactive optimization decisions for process control, process adjustments, preventive maintenance scheduling, tool corrective actions, wafer dispatching, and wafer level and final test to impact end of line product yield, performance, and reliability.
• Test Operations – This module provides comprehensive data collection and analysis capabilities for data generated during manufacturing test operations designed to optimize test operations management overall, including improving test productivity, performing part average test, supporting test floor operations, and implementing adaptive test. Exensio Test Operations is also designed to provide predictive insights based on proprietary analytics during test, assembly and packaging to help maximize the efficiency of test operations, productivity improvements, and yield reclamation.
• Assembly Operations – This module provides the capability to link assembly and packaging data with other product lifecycle data, including fabrication and characterization data, across the product life cycle. Data sources could include manufacturing, wafer acceptance test, wafer sort, test and assembly, final test, and field use. The proprietary data linkage enabled by Assembly Operations is also designed to enable device manufacturers to maintain full traceability of their finished products back to the source wafer without the need for Electronic Chip IDs (“ECIDs”). This capability continues to become a requirement for safety-critical market segments such as automotive and military-aerospace.

Sapience Software. Our Sapience software shares a common purpose: capturing and aligning manufacturing data to enable business processes driven by actionable insights. Our Sapience software is designed as a distributed platform to address the challenge of modern manufacturing environments that often combine equipment from different generations, and connect diverse manufacturing equipment through multiple connectivity standards. It is architected to create a high-performance data pipeline that enables streaming analytics, ML applications, and AI solutions requiring direct production equipment data. our Sapience software is designed to enable essential infrastructure for enterprise applications requiring equipment data streams to help empower application developers to innovate rapidly.

• Sapience Data Platform – This software product is a powerful, cloud-native platform designed to unify fragmented data from diverse equipment and protocols across the factory floor, to help enable communication, actionable insights, and enhanced productivity. Our Sapience Data Platform is designed to support a wide range of factory communication protocols and Its advanced messaging and streaming capabilities are intended to enable smooth, real-time data sharing across equipment and systems. Designed with open architecture, it powers our other applications and also empowers third-party developers and customers to create tailored applications for unique operational needs. Our Sapience Data Platform is designed to enable scalability for both small labs and large-scale factories and scale up or down based on demand and handle failures.
• Sapience Manufacturing Hub enterprise – This software product is designed to be used to gather clean data from the factory floor and aggregate it by product, order, lot, and other relevant factors, so that costs and other data can be accounted for at the enterprise level. Our Sapience Manufacturing Hub Enterprise software is designed to scale and provide a single, common connectivity platform between enterprise applications, such as MES, ERP, and our Exensio software. It is a configurable enterprise application integration (EAI) platform that is designed to be used to connect data sources, applications, devices, or tools across locations and operating platforms to transfer data or information between manufacturing, external services, databases, and applications to enable the digital transformation of manufacturing processes, systems, and services. Our Sapience Manufacturing Hub Enterprise software enables advanced applications that benefit from more real-time and detailed insight into manufacturing, such as our Sapience Operational Product Costing module, which is designed to provide more accurate insights into the gap between plan costs and actual costs and enable actions to improve profitability. Sapience Operational Product Costing integrates with SAP S4/HANA and is intended to also integrate with other ERP or legacy costing applications in the future.

DirectScan System. This system combines our proprietary eProbe hardware and various proprietary software to fundamentally reimagine e-beam systems to help identify systematic failures inline before they occur. Conventional e-beam inspectors operate by rastering across regions of interest, capturing complete images, then performing die-to-die comparisons to identify defective pixels. Our eProbe tool instead functions as a contactless electrical tester. It is designed to jump from one device under test (“DUT”) to another, measuring voltage contrast at specific pads of interest, while skipping dielectric regions entirely. Our DirectScan system is provided to customers under a license/lease arrangement or as a hardware sale. The DirectScan system contains the following components.

• Proprietary Software – Our Fire™ software module is designed to analyze IC product layout features to help determine which parts of the product layout to inspect. Our Exensio Characterization module has been designed to analyze the billions of measurements collected using the eProbe tool. As part of the system offering, we generally use the Characterization module to provide analysis services to our customers, which typically includes a summary of our findings and recommendations.
• eProbe Non-Contact E-Beam Tool – Our eProbe e-beam tools are designed for contactless measurement of product layout. The fourth generation tool, the 450, includes advances in beam vector targeting and higher signal-to-noise (SNR) for enhanced defect sensitivity, higher throughput, enhanced tool matching, and better inspection control for more stable performance necessary for deployment in high-volume manufacturing (HVM). Our eProbe tools are designed to use our secureWISE network for us to provide secure remote equipment support and maintenance to customers.

Characterization Vehicle System (also branded as our CV System). Our CV system is a combination of CV test chips, hardware to test such products, software to analyze the test results, and related services. This system is designed to accelerate the efficiency of yield learning by shortening the learning cycle, learning more per cycle, and reducing the number of silicon wafers required in manufacturing processes. This system includes physical IP in the form of test structures and DOEs that are tuned to our customers’ product and/or process specifics, tester hardware, data analysis, and training. The primary software and hardware products included in the CV system are as follows:

• CV Test Chips – Our proprietary test chips are designed by our engineers using our proprietary Fire software. These test chips are run through a customer’s manufacturing process, with intentional process modifications, to provide differentiated data to explore the effects of potential process improvements given natural manufacturing variations. Our custom-designed CV test chips are built for our test hardware and analysis software and include DOEs tuned to each customer’s process. Types of CV test chips include:
• Our full-reticle and shared-reticle CV test chips are designed to provide a fast-learning cycle and are fully integrated with third-party failure analysis and inspection tools for a diagnosis to understand root causes. Our full-reticle CV test chips use a shortened process flow to provide a faster learning cycle for specific process modules.
• Our Scribe CV test chips are inserted directly on customers’ product wafers to collect data about critical layers.
• Our DirectProbe™ CV test chips are designed to enable ultra-fast yield learning for new product designs by allowing our customers to measure components of actual product layout and identify yield issues.
• pdFasTest® Electrical Tester – Our proprietary electrical test hardware is optimized to quickly test our CV test chips, enabling fast defect and parametric characterization of manufacturing processes. As part of the system offering, we provide test programs for each CV test chip that are tuned to the customer’s process. This automated system provides parallel functional testing, thus minimizing the time required to perform millions of electrical measurements to test our CV test chips. We provide services to analyze the differentiated data output of this tester using the Exensio Characterization software to provide actionable insights to our customers.
• Exensio Characterization software – This module, which is designed to integrate with the rest of the Exensio software, collects the data generated from our CV test products, generating models of the performance effects of process variations on these design building blocks. As part of the system offering, we also offer analysis services, if the customer elects not to do such analysis itself.

Cimetrix Software. Our Cimetrix software enables equipment manufacturers in the semiconductor and electronics industries to provide standard interfaces on their products for efficient equipment communication, control, and data collection. This software is designed to deliver the foundational control and connectivity infrastructure that we believe the next generation of smart factories demands. Our Cimetrix software is designed to enable equipment manufacturers to accelerate time-to-market, comply with global standards, and unlock new levels of performance in the evolving landscape of advanced manufacturing. Numerous industry standards have been established for equipment connectivity and control, including the SEMI (Semiconductor Equipment and Materials International) defined SECS (SEMI Equipment Communication Standard), GEM (Generic Equipment Model), GEM300, and EDA (equipment data acquisition) standards. Our Cimetrix software is designed to support these industry standards to enable equipment manufacturers to implement robust, turnkey support for these connectivity and control standards without needing to invest engineering resources to develop their own interfaces to these standards. Manufacturing equipment enabled with Cimetrix-supported interfaces allow for faster and more efficient implementation of smart manufacturing initiatives that depend on the collection and analysis of manufacturing and product data taking into account industry standards. We sell Cimetrix software via perpetual licenses, typically sold as part of a software development kit (“SDK”) that helps equipment manufacturers implement them quickly. We charge a one-time fee per equipment product type for the SDK license and a one-time fee for each piece of equipment shipped that includes the Cimetrix runtime license. We categorize our Cimetrix software into three equipment categories: factory connectivity, factory connectivity testing, and equipment control.

• Equipment Factory Connectivity – Our Cimetrix products for equipment factory connectivity primarily include the following:
• Cimetrix CIMConnect™ is a SEMI SECS/GEM interface to the factory host for automated control and data collection. The Cimetrix CIMConnect module supports multiple-host interfaces simultaneously, which allows customers to support legacy, custom, and GEM interfaces. Cimetrix CIMConnect is used in semiconductor wafer fabrication, semiconductor back-end (test, assembly, and packaging), PV, HB-LED, disk drive, flat panel displays, printed circuit boards and other electronics manufacturing. In addition to enabling the implementation of the SEMI SECS/GEM standards E4, E5, E30, E37, E172, and E173, Cimetrix CIMConnect also supports SEMI PV2 (PVECI), A3 (PCBECI), and HB4 (HB-LED ECI) standards.
• Cimetrix CIM300™ is a GEM interface for 300mm equipment using SEMI standards, including E39, E40, E87, E90, E94, E116, E148, and E157. These SEMI standards allow for the full automation required in manufacturing 300mm wafers. Cimetrix CIM300 manages the interdependencies between the standards and simplifies complex scenarios for easy implementation of the standards. These GEM300 standards are required for full automation in manufacturing of 300mm wafers. Cimetrix CIM300 works with Cimetrix CIMConnect to implement the GEM300 and the original GEM suite of standards.
• Cimetrix CIMPortal™ Plus is an interface for EDA, also known as Interface A. The EDA standards are E120, E125, E132, E134, E138, E147, and E164. Cimetrix CIMPortal Plus implements the EDA standards in a flexible architecture that collects data from multiple sources and routes the data to multiple clients simultaneously. Factories can use the data gathered through EDA interfaces for FDC, run-to-run advanced process control, equipment health monitoring, chamber/tool matching, predictive maintenance, virtual metrology, diagnostics, and many other equipment-related analytical applications.
• Equipment Factory Connectivity Testing – We provide the following Cimetrix software for testing the interfaces developed using our equipment factory connectivity products: Cimetrix EquipmentTest™, for testing and validating compliance with the GEM and GEM300 standards, Cimetrix EDATester™, for testing and validating compliance with the EDA/Interface A standards, and performance testing of the interface, and Cimetrix ECCE Plus™ for quick testing of the EDA/Interface A interface.
• Equipment Control – Our Cimetrix products for equipment control are designed to provide for supervisory control, material handling, operator interface, platform control, and factory automation requirements, to help equipment manufacturers meet the requirements of fabrication facilities. Developers can leverage framework components through configuration and extension or customize the framework when different requirements exist. Our Cimetrix software is architected to allow data generated at various points on the equipment to be quickly and easily accessed by other modules or external applications. In 2025, we released the next generation of our Cimetrix CIMControlFramework™, to support both windows and Linux, and updated the name to be Cimetrix EquipmentControlFramework™. Our Cimetrix equipment control software integrates our Cimetrix CIMConnect, Cimetrix CIM300, and Cimetrix CIMPortal Plus components to support the SEMI GEM, GEM300, and EDA/Interface A standards.

secureWISE System. This system is a remote equipment monitoring and access system designed to provide greater visibility into equipment uptime and utilization to improve health and functionality. Our secureWISE system is architected to deliver secure, end-to-end remote connectivity to equipment over private networks to provide operator visibility into data to drive predictive analytics. Developed in the early 2000s, secureWISE was designed specifically to manage supplier remote connectivity for the semiconductor industry and was built to address the needs of both equipment suppliers and semiconductor manufacturing facilities. Our secureWISE system functions on a “single pane of glass” concept, meaning that potentially dozens of separate connections from different equipment suppliers are replaced with just one connection through secureWISE. This dramatically simplifies network management and security oversight. Similarly, equipment manufacturers benefit by establishing just one connection to secureWISE rather than maintaining separate connections to each client fab. Our secureWISE system consists of proprietary software, dedicated hardware, and a managed network.

• secureWISE Software – Our secureWISE software consists of modules that are on-equipment, SaaS, and on-premise on servers that combine to provide access to such equipment’s performance information and, at customers’ options, remote control of such equipment. Our secureWISE Business Management Portal (BMP) software is designed to provide customer-specific dashboards with views of authorized user activity related to their equipment.
• secureWISE Servers – We deploy server-side software at each manufacturing facility with equipment to be managed by either shipping server appliances that we own that are pre-installed and configured shipped, or providing a complete virtual machine image (“VMI”) of our server software package for digital download and installation by the customer on server hardware owned by them. In either case, we refer to these dedicated servers as secureWISE servers. Our secureWISE servers connect to our secureWISE network through an IPsec virtual private network (“VPN”) tunnel and act as a triple-A (authentication, authorization, and audit) server by verifying user identities, controlling access permissions, and maintaining comprehensive logs of user activities, including timestamps for actions like file transfers. Our secureWISE servers are designed to include numerous security safeguards, including antivirus protection that scans file transfers, whether equipment logs being downloaded for analysis or software updates being deployed to equipment, before transmission, and automatically quarantines any files where malicious code is detected. We maintain our secureWISE servers, providing regular updates to the operating system, application software, and antivirus definitions, with virus definitions typically updated daily.
• secureWISE Network – Our secureWISE network is a self-managed global private network connecting equipment suppliers and fabs through strategically positioned hubs in key industry locations. This closed network operates primarily through IPsec VPN tunnels, creating an encrypted pathway that works to reduce the external threat surface. Only secureWISE subscribers are permitted to access our secureWISE network, filtering out unwanted traffic that might otherwise reach production environments. Data in transit flowing through our secureWISE network enjoys a layered dual-encryption protection: IPsec safeguarding at the network level and TLS (HTTPS) securing communication between endpoints. Customers pay us fees for tools that are connected to the network and the amount of data transferred over it.

Services

Our services are almost always sold together with, or to support, our products. Our experienced professionals have a combination of expertise in our software, hardware, and CV IP products and deep industry knowledge and experience, which enable them to design an appropriate solution, and then deploy and configure it, to address different customer user cases. Our global team of experienced engineers and other technical professionals assist customer organizations in solving their most complex manufacturing and test challenges. Our services can be categorized into the following groups.

Software-as-a-Service. Where a customer wants to take advantage of the lower cost of ownership, centralized data storage, and outsourced physical and software resources, we provide services to make various modules of our software available to our customers via the Internet, using third-party providers, which is generally referred to as SaaS or cloud computing. These services, which we refer to as hosted management services, include set-up and configuration of the cloud environment, system health monitoring, data integration maintenance, integration monitoring, system updates, security, management of the upload/download of our customers’ data stored in the cloud, and license administration. Because our SaaS applications are accessed from a remote server rather than installed on individual machines, it is easier for us to maintain. For example, when we update the remote software, customers’ interfaces are updated. SaaS generally accommodates rapid increases in customers’ usage, while also being designed to provide rapid and largely continuous availability to customers. Our SaaS services can be combined with our other services depending on the customers’ needs, for example, data cleaning and monitoring services.

Software and Hardware Installation and Configuration, System/Data Integration, and Value Realization. Where a customer opts for on-premise deployment of our software or systems, we offer services to assist with installation, configuration, and integration with customers’ existing networks and data sources. Our system integration services can also include data cleaning and monitoring services. One requirement of big data analytics is to have clean, harmonized data to analyze. This service offering outsources the data wrangling and management effort to free the customer to focus their efforts on analysis, enabling a greater return on investment to the company than data management. We also provide services to create CV test chips, pdFastTest and eProbe test programs, analysis templates, and other professional services to help customers achieve specific outcomes using our products. Our CV design services are designed to characterize key product and/or process elements into CV test structures. We provide these services, typically together with all elements of our CV system, to foundry customers in connection with new process technology development and/or yield ramp. In Characterization engagements, which sometimes include our DirectScan system, our services generally also include the analysis of the electrical test results generated by our systems and summary findings and recommendations to the customer. We provide application engineering services to design and build recipes for our tool, which involves configuring the tool for the type of product wafer, die size and location, target inspection sites within die, which can include specific DUTs to inspect and their location, as well as the parameters to flag a DUT as an outlier. Our service professionals bring together experience from semiconductor manufacturing and test operations, big data analytics, and AI/ML algorithms to help customers with designing and implementing unique Characterization Vehicle test chips, supporting new product introductions by rapidly identifying root causes of yield detractors, or integrating and aligning manufacturing data from different sources to drive predictive analytics to improve product yield and quality. Our value realization services aim to deliver on the promise of Industry 4.0 by integrating the data generated from sensor-based machines, and connecting them to a big data analytics and machine learning environment that can visualize entire production lines and help take actions that can improve business results.

Technical Support and Maintenance for Hardware and Software. We provide standard software maintenance and support (“M&S”) services for our software products, as well technical support and maintenance/repair services for our hardware systems. M&S services include reasonable telephone and email access to our service team who can assist with software error corrections, and product updates on a periodic basis. Our service team covers worldwide customers with three time zones: Pacific, European central, and Taipei standard. For our eProbe tool, such services include technical support services to customers to operate the tool and maintenance and repair or replacement parts on the tool during the warranty period and any contractual service period. These services are primarily provided at the facility where the tool is installed. After the initial warranty period, the availability of engineering support and parts cost depends on the service package level a customer purchases.

Customers

Our existing customers include foundries, IDMs, fabless semiconductor design companies, OSATs, equipment manufacturers, EMS, and ODMs, including those that embed and distribute our software modules in their equipment. Our semiconductor customers’ targeted product segments vary significantly, including microprocessors, memory, graphics, image sensor solutions, and communications. We believe that the adoption of our solutions by such companies for usage in a wide range of products supports the application of our solutions to the broader semiconductor market. We often have multiple contracts with a single customer or customer group, with no interdependent performance obligations. In general, our customer contracts are non-cancellable.

Three customers accounted for an aggregate of 53% of our revenues for 2025, two customers accounted for an aggregate of 31% of our revenues for 2024, and one customer accounted for 35% of our revenues for 2023. No other customers accounted for 10% or more of our revenues in 2025, 2024 and 2023. See the discussion in “Risk Factors” under Item 1A for more information about risks associated with customer concentration and contractual provisions. See Note 13, “Customer and Geographic Information” of the Notes to Consolidated Financial Statements included under Part II, Item 8. Financial Statements and Supplementary Data for additional geographic information.

Sales and Marketing

Our sales strategy is primarily to pursue targeted accounts through a combination of our direct sales force, our service teams, and strategic alliances. After we are engaged by a customer and early in the services process, our engineers seek to establish relationships in the organization and gain an understanding of our customers’ business issues. Our direct sales and service teams combine their efforts to deepen our customer relationships by expanding our penetration across customers’ products, processes, and technologies. This working relationship with each customer has the added benefit of helping us to identify new product areas and technologies in which we should next focus our research and development efforts. From time-to-time, we use sales representatives/agents in various locations to augment direct sales in certain territories.

We are focused on continuing to establish strategic alliances with process licensors, vendors in the electronic design automation software, capital equipment for IC production, and test silicon IP and mask-making software segments to create and take advantage of sales channel and co-marketing opportunities. Additionally, we are focused on continuing to form relationships with key value chain participants, including foundries and OSATs, to provide services and value across the manufacturing supply chain.

Research and Development

Our research and development focuses on developing and introducing new proprietary technologies or enhanced capabilities for our comprehensive platform, including our software and hardware, and new applications targeted to inter-operate with strategic partner products. We use a rapid-prototyping paradigm in the context of customer engagements to achieve these goals. We have made, and expect to continue to make, substantial investments in research and development. The complexity of our technologies requires expertise in standards, physical IC design and layout, transistor design and semiconductor physics, semiconductor process integration, numerical algorithms, e-beam technology, hardware, statistics, networking, security, and software development. We are focused on continuing to advance our market and technological leadership. We conduct in-house training for our engineers in certain technical areas. Our training also extends to focusing on ways to enhance customer service skills. Although it fluctuates, we can have up to one quarter of our research and development engineers assigned to one or more projects, partnered with solution services engineers, in a deliberate strategy to provide direct feedback between technology development and customer needs. We also utilize a variety of skilled independent contractors for specialized development.

Governmental Regulations

We are subject to a variety of federal, state, local and foreign laws and regulations relating to our business and operations, including those related to trade controls, anti-corruption, anti-bribery, data privacy, data protection, use of AI, antitrust, competition, employment, income taxes, and the environment. For additional information regarding risks related to laws and regulations, including existing restrictions imposed by BIS, as well as international operations, see Item 1A, “Risk Factors.”

Trade

A large percentage of our software products are not of U.S. origin and not generally subject to the U.S. Export Administration Regulations (“EAR”) when not located in the U.S. Our standard operations include development, distribution processes, software download sites, and professional service centers and processes located in various geographies around the world to better serve our customers. We are subject to laws and regulations of the United States and other jurisdictions as applicable to operations, products, services, and access by certain foreign nationals in the United States and other locations, including the EAR, other export controls, tariffs, trade protection measures, sanctions, U.S. outbound investment controls with respect to certain countries, and other trade regulations.

The Bureau of Industry and Security (“BIS”) of the U.S. Department of Commerce has placed certain entities on and frequently adds entities to the “Entity List,” which restricts supply of items to or in connection with the named entities and impacts our ability to transact business with certain customers. BIS recently extended controls to renewal licenses for certain lawfully delivered products that would have changed status under new regulations and designations, causing us to decline certain renewals. In Fall 2025, BIS extended Entity List restrictions to non-listed foreign companies owned 50% or more by parties subject to the Entity List restrictions. This would extend restrictions to a significant number of companies with respect to items that are subject to the EAR. BIS has suspended this rule until November 2026.

Trade regulations limiting or banning sales into certain countries or to certain companies, including economic and financial sanctions and trade embargoes administered and enforced by the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”), have impacted our ability to transact business in certain countries and with certain customers. Future trade regulations may also impact our ability to transact business with certain customers and in certain countries and may restrict certain non-U.S. person employees from performing their duties for us without first obtaining appropriate authorization, if their duties involve an export, reexport, or transfer of export-controlled technology.

Anti-corruption and anti-bribery

We are subject to laws and regulations in the United States and other jurisdictions as applicable concerning anti-corruption and anti-bribery, including the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act, which prohibit corrupt payments to governmental officials and bribes to other persons.

Data privacy and data protection

We are subject to laws and regulations in the United States and other jurisdictions governing data privacy and data protection. This includes laws in locations where we have operations and customers, such as Japan, China, and the EU/UK, which regulate our collection, handling, and use of personal information. These laws and regulations to which we are subject are complex and may change or develop over time, sometimes with limited or no advance notice. Developments or other changes in laws or regulations or how they are interpreted or enforced have had, and may continue to have, a negative impact on our business and increase our compliance-related expenditures.

Artificial intelligence

The AI, including machine learning and automated decision-making technologies (“AI Technologies”), that we use in our operations or for software development or build into our software products is subject to various state, federal, and international laws and regulations, which continue to evolve. Existing legal regimes (e.g., relating to data privacy) continue to regulate certain aspects of AI Technologies, and new laws regulating AI Technologies continue to be enacted around the world. As of 2025, U.S. federal and state approaches remain fragmented, with varying definitions, scopes, and enforcement mechanisms. While several measures have focused initially on consumer‑facing or public‑sector applications, their underlying concepts—such as accountability, transparency, and human oversight—may have broader implications across commercial and industrial uses of AI. In the EU, the focus during 2025 shifted from legislative adoption to implementation. Other jurisdictions continue to advance AI‑specific regulatory frameworks with varying approaches: from prescriptive, enforceable controls in China, to framework‑level statutes in Japan and Taiwan (with Japan emphasizing voluntary, guidance‑led compliance and Taiwan establishing statutory principles for future measures), alongside more formal statutory oversight emerging in South Korea. In sum, these developments together contribute to a fragmented and evolving global regulatory landscape for artificial intelligence that may impact our ability to use, develop, and commercialize AI Technologies in the future.

Competition

We believe that our solutions compare favorably with respect to competition because we have demonstrated results and reputation, strong core technology, ability to create innovative technology, and ability to implement solutions for new technology and product generations. Further, we believe IC companies benefit from our combination of big data management infrastructure, AI/ML-based analytics engines, and products that generate and collect differentiated data that enrich the analytics process.

We face competition regarding different elements of our products and services portfolio from the following sources and companies:

• indirect competition from internal groups at IC companies that may choose to develop their own test chips or software analytics solutions internally typically by using various commercially-available, general-purpose software, including for example, Tableau from Salesforce, Inc., Spotfire from Cloud Software Group, Snowflake, Inc., Databricks, Inc.; and,
• direct competition from providers of:
• yield management and/or prediction systems, such as KLA Corporation (“KLA”), Onto Innovation, Inc. (“Onto”), and Synopsys, Inc. (“Synopsys”);
• semiconductor manufacturing software, such as Applied Materials, Inc (“Applied Materials”), Synopsys, Invantest, Inc., Emerson Electric Co., Onto, and Siemens AG;
• inline inspection, metrology and electrical test equipment providers, such as ASML Holding N.V., Applied Materials, KLA, and Keysight Technologies, Inc.; and,
• connectivity software or integration products/services supporting factory equipment connectivity or control needs of customers, such as PEER Group, Inc., Kontron AIS, GmbH, Yokogawa Electric Corp., Advantest Corporation, Kornic Automation Co. Ltd., and Tracces by Capgemini SE.

See the discussions in “Risk Factors” under Item 1A for more information about risks associated with our competition.

Human Capital Management

We believe that our future success will depend, in part, on our continued ability to hire and retain qualified management, sales, and technical employees. Consequently, we seek to engage in sound ethical and organizational governance, and promote business ethics and integrity. At the Board of Directors level, our Compensation and Human Capital Management Committee is tasked with oversight of the development, implementation and effectiveness of our policies and strategies relating to human capital management, including strategies regarding recruiting, selection, career development and progression, and employment practices.

As of December 31, 2025, we had 600 employees worldwide, including 180 field application engineers, 225 in research and development, 135 in sales and marketing, and 60 in general and administrative functions. Of these employees, 364 are located in the United States and Canada, 197 in Asia, and 39 in Europe. None of our employees are represented by a labor union. Our employees in France and Italy are subject to collective bargaining agreements in those countries.

Information about our Executive Officers

The following table and notes set forth information about our current executive officers as of the date of this Annual Report on Form 10‑K.

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John K. Kibarian, Ph.D., one of our founders, has served as President since November 1991 and has served as our Chief Executive Officer since July 2000. Dr. Kibarian has served as a director on our Board of Directors since December 1992. Dr. Kibarian received a B.S. in Electrical Engineering, an M.S. E.C.E. and a Ph.D. E.C.E. from Carnegie Mellon University.

Adnan Raza, joined in January 2020 as Executive Vice President, Finance, and was appointed Chief Financial Officer effective in March 2020. Prior to joining the Company, Mr. Raza served as an independent strategy consultant for private and public companies from July 2019 to January 2020. Prior to that, Mr. Raza served in various roles at Synaptics Inc., a developer of human interface technologies, including as Senior Vice President of Corporate Development from August 2017 to June 2019 and Vice President of Corporate Development from February 2015 to August 2017. Prior roles include technology investment banking at Goldman, Sachs & Co. and UBS Investment Bank, strategic advising at Blackreef Capital, engineering and marketing at Azanda Network Devices, and engineering at Lucent Technologies. Mr. Raza also served as a board member at FIDO Alliance, an alliance of leading technology companies to enhance user security and authentication. Mr. Raza holds a B.S. in Electrical Engineering from Valparaiso University, an M. Eng. in Electrical Engineering from Cornell University, and an M.B.A. from The Wharton School at the University of Pennsylvania.

Kimon W. Michaels, Ph.D., one of our founders, has served as Vice President, Products and Solutions since July 2010 and was designated as an Executive Vice President in February 2019. Dr. Michaels served as Vice President, Design for Manufacturability from June 2007 through June 2010. Prior to that, Dr. Michaels served as Vice President, Field Operations for Manufacturing Process Solutions from January 2006 through May 2007, and has served as a director on our Board of Directors since November 1995. From March 1993 through December 2005, he served in various vice presidential capacities. He also served as Chief Financial Officer of the Company from November 1995 to July 1998. Dr. Michaels received a B.S. in Electrical Engineering, an M.S. E.C.E. and a Ph.D. E.C.E. from Carnegie Mellon University.

Andrzej Strojwas, Ph.D., served as a technical advisor to the Company from our founding until 2021 and as chief technologist from 1997 to 2021. He joined the Company as an employee in July 2021 as Vice President and Technical General Manager, and was appointed Chief Technology Officer effective December 2021. From October 1982 to July 2021, Dr. Strojwas was the Keithley Professor of Electrical and Computer Engineering at Carnegie Mellon University. In addition, Dr. Strojwas has held senior technical positions at Harris Semiconductor Co., AT&T Bell Labs, Texas Instruments, NEC, Hitachi, SEMATECH, and KLA. He holds an M.S. in Electronic Engineering from Warsaw Technical University and a Ph.D. in Electrical Engineering from Carnegie Mellon University.

Available Information

We file or furnish various reports, such as registration statements, periodic and current reports, proxy statements and other materials with the SEC. Our Internet website address is www.pdf.com (http://www.pdf.com). You may obtain, free of charge on our website, copies of our Annual Reports on Form 10‑K, quarterly reports on Form 10‑Q, current reports on Form 8‑K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. The Company’s website address provided is not intended to function as a hyperlink, and the information on the Company’s website is not, and should not be considered, part of this Annual Report on Form 10‑K and is not incorporated by reference herein.

The SEC maintains a website (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers, such as us, that file electronically with the SEC.

A description of the risk factors associated with our business is set forth below. Some of these risks are highlighted in the following discussion, and in Management’s Discussion and Analysis of Financial Condition and Results of Operations, Legal Proceedings, and Quantitative and Qualitative Disclosures About Market Risk. The occurrence of any of these risks or additional risks and uncertainties not presently known to us or that we currently believe to be immaterial could materially and adversely affect our business, operating results, financial condition, and stock price. These risks and uncertainties could cause our actual results to differ materially from the results contemplated by the forward-looking statements contained in this report. Investors should carefully consider all relevant risks and uncertainties before investing in our common stock.

Risks Associated with Our Business

Our significant research and development investment may nonetheless fail to keep pace with technological changes or ensure that our offerings meet market needs, which would adversely impact our business, financial condition, or results of operations.

As part of the evolution of our business, we have made and continue to make substantial investments in research and development of our products and services, including, in particular, our DirectScan system and Exensio, Sapience, and secureWISE software. New competitors, changes to existing contracts with licensed technology, any companies, products, or services that we may acquire, technological advances in the semiconductor industry and adjacent markets, and other competitive factors have required us and may continue to require us to invest significantly greater resources than we anticipated. If we do not anticipate and address technological changes in our industry or our offerings fail to meet market demand, the corresponding additional revenue we anticipate may not materialize, we may not recoup our investment or capture the market share we anticipate, we may lose our competitive position, and our products may become obsolete, which would adversely impact our business, financial condition and results of operations. Additionally, our periodic research and development expenses may be independent of our level of revenue, which could negatively impact our financial results.

If we enable access to hosted software or begin performing services ahead of a signed contract or amendment to an existing contract, and the final terms are not as favorable as we expected or the customer delays entering, or decides not to enter, into the contract or amendment, our results of operations could be harmed in the short term or overall and recognition of related revenue could be delayed or not occur at all.

If we are unable to close new engagements or amendments to existing contracts on terms favorable to us, in a timely manner, or at all, including in cases where we have incurred costs or assigned engineering resources in advance of entering into such engagements or amendments, our revenues may fall short of expectations and other revenue opportunities may have been delayed or lost. Further, the timing and length of negotiations required to enter into agreements with our customers and the enforcement of our complex contractual provisions is difficult to predict. If we do not successfully negotiate certain key complex contractual provisions, if there are disputes regarding such provisions, or if they are not enforceable as we intended, our revenues and results of operations would suffer. Further, our customers sometimes delay starting negotiations until they begin developing a new process, have a need for a new product, or experience specific yield issues. This means that, in certain instances, we have continued, and may continue to provide technology and services under preliminary documentation before executing the final contract. In these cases, we would not recognize revenue and may defer associated costs until execution of a final contract, which, if significant, could negatively impact our results of operations in the periods before we execute a final contract. Further, if we were to incur significant costs and then fail to enter into a final contract, we would have to write-off such deferred costs in the period in which the negotiations ended, which would increase our costs and expenses and could result in significant operating losses.

We rely on sole-source providers for certain software as well as for specialized parts for our DirectScan system and supply-chain delays or disruptions could increase our costs or impact our ability to provide complete software solutions or to build additional hardware tools or meet customer expectations or deadlines, which could result in lost sales and lower earnings.

We provide some enabling technology under license and support from sole-source providers and some of our vendors provide highly specialized, differentiated products and services related to our DirectScan system. In the event these licensors or vendors delay or discontinue providing such products and services to us, it may be difficult and costly or impossible for us to replace such suppliers or parts. In the case of licensed software, this could impact our ability to grow our sales or to meet the support expectations of our customers and we may need to resort to legal action, which could limit our future sales, harm our reputation, increase our costs, and harm our earnings. In the case of vendors related to our eProbe tool, such disruptions or delays could delay or stop our ability to complete and deliver our DirectScan systems as currently designed to our customers, which would negatively impact our bookings and revenue related to such systems. In addition, such delays or disruptions to our supply chain could significantly increase our component costs, or personnel-related costs if we need to build a replacement solution in the case of certain software elements, and could impact our ability to build future generations or models of our eProbe tools, any of which would decrease or delay our sales, earnings, and liquidity and could otherwise adversely affect our business and result in increased costs. Such a delay or disruption could occur as a result of any number of events, including, but not limited to: failure to comply with existing contracts, higher priority alternative buyers, inflation and global interest rates increasing component costs, a closure or slowdown at our suppliers’ plants or shipping delays, market shortages for critical components, increases in prices, the imposition of regulations, quotas, embargoes or tariffs on components or our products, labor stoppages or shortages, our suppliers’ supply chain disruptions, third-party interference, cyberattacks, severe weather conditions including the adverse effects of climate change-related events, geopolitical developments, war or terrorism, and disruptions in utilities and other services. In addition, the development, licensing, or acquisition of new products in the future may increase the complexity of supply chain management. Failure to effectively manage our supply of components and products could adversely affect our business.

Our fixed-fee services for product or system installations/configurations or specified upgrades may take longer than budgeted or need to be rescoped, which could slow our revenue recognition and may result in a lost contract or a claim of breach by our customers, which would negatively affect our financial and operating results.

Our fixed-fee services, including for Characterization and enterprise software deployments, require a team of engineers to collaborate with our customers to address complex issues by using our software and other technologies, and the installation and configuration of our software into our customers’ fabrication and test/assembly facilities requires experienced engineers working with our customers on active foundry and test/assembly equipment. We must accurately estimate the amount of time and resources needed to complete these types of services to determine when the engineers will be able to commence their next engagement. In addition, our accounting for contracts with such services, which generate fixed fees, sometimes requires adjustments to profit and loss based on revised estimates during the performance of the contract. These adjustments may have a material effect on our results of operations in the period in which they are made. The estimates giving rise to these risks, which are inherent in fixed-price contracts, include the forecasting of costs and schedules, and contract revenues related to contract performance. Services for system installations/configurations or specified upgrades may take longer than budgeted or need to be rescoped, which could impact our ability to deliver services on schedule. If we fail to meet a customer’s expectations or fixed milestones or delivery timelines, the customer could terminate their contract with us or claim that we breached our obligations, which could negatively affect our financial and operating results.

Our ability to sell our products, systems, and solutions depends in part on the quality of our support and services offerings, and the failure to offer high-quality support and services could negatively affect our sales and results of operations.

Once our products are integrated within our customers’ hardware and software systems, our customers may depend on our support organization to resolve any issues relating to our products. Further, in connection with delivering our SaaS Services, which requires us to maintain adequate server hardware and internet infrastructure, including system redundancies, we are required to meet contractual uptime obligations. A high level of system and support is critical for the successful marketing and sale of our products. If we do not effectively provide subscription access to our SaaS customers, assist our customers in deploying our products, succeed in helping our customers quickly resolve post-deployment issues, and provide effective on-going support and the privacy and data security capabilities required by our customers, we may face contractual penalties or customers may not renew subscriptions or services in the future, which would negatively impact our results of operations. In addition, due to our international operations, our system and support organization faces challenges associated with delivering support, hours that support is available, training, and documentation where the user’s native language may not be English. If we fail to maintain high-quality support and services or fail to adequately address our customers’ support needs, our customers may choose our competitors’ products instead of ours, which would negatively affect our revenues and results of operations.

Defects in our software, hardware and other proprietary technologies, and failure to effectively remedy any such defects could decrease our revenue and our competitive market share.

If the software, hardware, or other proprietary technologies we provide to customers contain defects that negatively impact customers’ ability to use our products and services, increase our customers’ cost of goods sold or time-to-market, or damage our customers’ property, such defects could significantly decrease the market acceptance of our products and services and could result in warranty or other claims. We must adequately train our new personnel, especially our customer service and technical support personnel, to effectively and accurately, respond to and support our customers. If we fail to do this, it could lead to dissatisfaction among our customers, which could slow our growth. Further, the cost of support resources required to remedy any defects in our software, hardware and other proprietary technologies could exceed our expectations.

We have and may further incorporate ML, AI and related technologies (“AI Technologies”) in product development, or into our platform, offerings, services and features, and these technologies may become more important in our operations over time. If the content, analyses, recommendations, or other output that AI Technologies assist in producing are or are alleged to be deficient, inaccurate, or imprecise, our business, financial condition, and results of operations may be adversely affected. Any actual or perceived defects with our software, hardware, or other proprietary technologies may also hinder our ability to attract or retain industry partners or customers, leading to a decrease in our revenue. These defects are frequently found during the period following introduction of new software, hardware, or proprietary technologies or enhancements to existing software, hardware, or proprietary technologies, which means that we may not discover the errors or defects until after customer implementation, if at all. If our software, hardware, or other proprietary technologies contain errors or defects, it could require us to expend significant resources to remedy these problems and defend/indemnify claims, which could reduce margins and result in the diversion of technical and other resources from our other customer implementations and development efforts.

Objectionable disclosure of our customers’ confidential information or our failure to comply with our customers’ security rules, including for those related to SaaS access, AI Technology use, or our on-site access, could result in costly litigation, cause us to lose existing and potential customers, or otherwise negatively impact on-going business with existing customers.

In the course of providing SaaS or other services engagements, we may collect customers’ product, process, and test information, personally-identifiable data about their employees needed to administer licenses, and other confidential information. Our customers consider most of this information to be competitively sensitive and, in some cases, require us to comply with strict protection frameworks, including security rules for on-site or remote access to, hosting of, or transfer of their confidential information. As a result of increased regulatory and customer scrutiny of all data processing activities, as well as increasing and evolving regulation of such practices, we have security obligations on how we collect, transfer and use data (including personal data), which could require us to expend money and resources to comply with those requirements, and if compromised, could have a material adverse effect on our business, financial condition, and results of operations, including the potential for regulatory investigations, enforcement actions, lawsuits, and a loss of business and a degradation of our reputation. If we fail to implement industry standard protections and processing procedures, the growing awareness of our customers and potential customers regarding privacy and data security requirements and/or adverse media coverage or regulatory scrutiny could limit the use and adoption of our services. In addition, to avoid potential disclosure of confidential information to competitors, some of our customers may, in the future, ask us not to work with key products or processes, which could limit our revenue opportunities.

If the third-party AI technologies we use for research and development purposes misuse or fail to properly protect the data we input or if an employee inputs our or our customers’ confidential information into an AI system that is not behind our corporate firewall or with which we do not have terms limiting the use of inputs, it may result in the unauthorized disclosure of sensitive, proprietary, or confidential information belonging to us or our customers. For example, if the information input into a third-party AI technology system is used to train the underlying AI models, such inputs could be revealed to others. The third-party AI technologies may also provide outputs that appear to be correct but are incomplete, inaccurate, or otherwise flawed and may lead us to make erroneous decisions or recommendations to customers, which could result in harm to our reputation and competitive position, customer loss, and legal liability.

We generate a significant portion of our revenues from a limited number of customers, and a large percentage of our revenues from one customer, so defaults or decreased business with, or the loss of, any one of these customers, or pricing pressure, or customer consolidation could significantly reduce our revenues or margins and negatively impact our results of operations.

Historically, we have had a small number of large customers that contribute significant revenues. In the year ended December 31, 2025, three customers accounted for 53% of our total revenues. We have in the past and could in the future lose a customer due to its decision not to develop or produce its own future process node or not to engage us on future process nodes. We could also lose customers as a result of industry factors, including but not limited to reduced manufacturing volume or consolidation. Consolidation among our customers could also lead to increased customer bargaining power, or reduced customer spending on software and services. Further, new business may be delayed or prevented if a key customer uses its leverage to insist on terms that are worse for us and we delay entering into the contract to negotiate for better terms or decide not to enter into the contract at all, in which case revenue in any particular quarter or year may fail to meet expectations and our reliance on our remaining customers could increase.

Further, if any of our key customers default, declare bankruptcy or otherwise delay or fail to pay amounts owed, or we otherwise have a dispute with any of these customers, our results of operations would be negatively affected in the short term and possibly the long term. For example, in 2019, SMIC New Technology Research & Development (Shanghai) Corporation stopped paying fees due to us under a series of contracts. In addition to the loss of contract revenue under these contracts after that time, we incurred significant expenses related to pursuing our legal rights under these contracts, including $2.5 million of attorneys’ fees incurred in the fourth quarter of 2025. The loss of significant expected revenue from any of our key customers would cause significant fluctuations in results of operations because our expenses are fixed in the short term and it takes us a long time to replace customers or reassign resources.

If we do not continuously meet our development milestones of key research and development projects or market adoption of our DirectScan system fails to meet our expectations, our future market opportunity and revenues will suffer, and our costs may not be recouped.

We have invested significantly in the design and development of our eProbe tool and related IP. Key customers failing to purchase, renew, or expand the number or use of such systems on our expected timeline or at all will cause our results to miss expectations. Also, if customers are not able to achieve the results they expect using our DirectScan system, including new applications, customers may not continue to adopt this system or such applications as we expect, or at all, and we may miss the market opportunity and not recoup our investment. Further, our eProbe tool could cause unexpected damage to wafers or delay processing wafers, which we could be liable for, or which could make customers unwilling to use the tool. If we are not able to create significant interest and show reliable and useful results without significant damage to wafers, our investment may not be recouped and our future results may suffer.

We are required to comply with governmental export and import requirements that could subject us to liability and restrict our ability to sell our products and services, which could impair our ability to compete in international markets.

We are required to comply with export controls and economic sanctions laws and regulations that restrict selling, shipping, or transmitting our products and services, transferring our technology outside the United States, or certain U.S. person activities regarding certain end-users or end-uses. These requirements also restrict domestic release of software and technology to foreign nationals. In addition, we are subject to customs and other import requirements that regulate imports that are important for our business. If we fail to comply with the U.S. Export Administration Regulations (“EAR”) or other U.S. or non-U.S. export or economic sanctions laws and regulations (collectively, “Export Regulations”), we could be subject to substantial civil and criminal penalties, including fines for the Company and the possible loss of the ability to engage in exporting and other international transactions. Due to the nature of our business and technology, Export Regulations may also subject us to governmental inquiries regarding transactions between us and certain foreign entities.

Export Regulations are fluid, complex, and uncertain, and there are ongoing efforts throughout the industry in coordination with regulators to revise, clarify, and interpret Export Regulations. The U.S. Congress and regulators continue to consider significant changes in laws and regulations. For example, the U.S. government is reportedly considering whether and/or how to impose restrictions directly on cloud-hosted services and further restrictions directly on U.S. person activity. We cannot predict the impact that additional legal changes may have on our business in the future. For example, the U.S. Bureau of Industry and Security (“BIS”) recently extended controls to renewal licenses for certain lawfully delivered products that would have changed status under new regulations and designations, causing us to decline certain renewals. Also, BIS has placed certain entities on and frequently adds entities to its entity list (the “Entity List”), which restricts supply of items to or in connection with the named entities and impacts our ability to transact business with certain customers. BIS has issued a rule extending Entity List restriction to non-listed foreign companies owned at least 50% by parties on the Entity List, and suspended this rule until November 2026. Further, in some circumstances Export Regulations require a license to export an item if the recipient will use the item to design or produce an item for a Huawei-affiliated company or certain other organizations on the Entity List. These regulations can also require licenses for exports that involve Chinese military or intelligence-related end users or end uses.

Future changes in Export Regulations, including changes in processing requests, enforcement, and the scope of such regulations, may create delays in the introduction of our products or services in international markets or could prevent our customers with international operations from deploying our products or services globally. In some cases, such changes could prevent the export of our products or services to certain countries, governments, entities or individuals altogether. Any such delays or restrictions could adversely affect our business, financial condition and results of operations. For further discussion, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Decreases in wafer volumes at our customers’ manufacturing sites or the volume of ICs that some of our customers are able to sell to their customers would cause our Volume-based revenue to suffer.

Our Volume-based revenue includes amounts largely determined by variable wafer volumes at manufacturing sites covered by our contracts and, in some cases, determined by the volume of an IC product that our customer is able to sell to its customers. Both of these factors are outside of our control. In recent years, we saw significant reduction in our Volume-based revenue due to these trends. Further, some of our manufacturing customers’ business is largely dependent on customers that use our manufacturing customer as a second or third source. If those customers consolidate and/or otherwise move the orders to manufacturing facilities not covered by our contracts, or suspend their manufacturing at covered facilities for any reason, including consolidation, our Volume-based revenue will continue to decrease, which could negatively affect our financial results. Further, reduced demand for semiconductor products or protectionist policies like those stemming from the complex relationships among China, Hong Kong, Taiwan, and the United States has from time to time decreased and may continue to decrease the volume of wafers and, in some cases, products our customers are able to make or sell, which would also decrease our Volume-based revenue. Also, our customers may unilaterally decide to implement changes to their manufacturing processes during the period that volume is covered by royalty contracts, which could negatively affect yield results and, thus, our Volume-based revenue.

Since we currently work on a small number of large projects at specified manufacturing sites and, in some cases, on specific IC products, our results of operations have been and may continue to be adversely affected by negative changes at those sites or in those products, including slowdowns in manufacturing due to external factors, such as U.S. trade restrictions, tariffs, rising inflation and global interest rates, or continued or worsening supply chain disruptions. Also, if wafer orders from sites covered by our contracts are not secured by our customers, if an end product does not achieve commercial viability, if a process line or, in some cases, a specific product, does not achieve significant increases in yield or sustain significant volume manufacturing during the time we receive royalties, revenues associated with such volumes or products would be negatively impacted. This could significantly reduce our Volume-based revenue and our results of operations could fail to meet expectations. In addition, if we work with two directly competitive manufacturing facilities or products, volume in one may offset volume, and thus any of our related revenue, in the other facility or product.

Our success depends upon our ability to effectively plan and manage our resources and restructure our business through rapidly fluctuating economic and market conditions, which actions may have an adverse effect on our financial and operating results.

Our ability to successfully offer our products and services in a rapidly evolving market requires an effective planning, forecasting, and management process to enable us to appropriately scale and adjust our business and business models in response to fluctuating market opportunities and conditions, which has in the past and could in the future continue to require us to increase headcount, acquire new companies or engage in restructurings from time to time. For example, while we have increased investment in our business by increasing headcount, acquiring companies, and increasing our investment in research and development, sales and marketing, and other parts of our business from time to time, at other times we have undertaken restructuring initiatives to reduce expenses and align our operations with our evolving business needs. Some of our expenses related to such efforts are fixed costs that cannot be rapidly or easily adjusted in response to fluctuations in our business or headcount. Rapid changes in the size, alignment or organization of our workforce, including sales account coverage, could adversely affect our ability to develop and deliver products and services as planned or impair our ability to realize our current or future business and financial objectives. Our ability to capitalize on the market opportunity and achieve cost savings and other benefits from restructuring initiatives within the expected time frame requires significant management input and leadership and is subject to many estimates and assumptions, which are subject to significant economic, competitive and other uncertainties, some of which are beyond our control. If these estimates and assumptions are incorrect, and we are unsuccessful at implementing changes, or if other unforeseen events occur, our business and results of operations could be adversely affected.

Global economic or geopolitical conditions or semiconductor market conditions could materially adversely impact demand for our products and services, decrease our sales, or delay our sales cycle.

Our customers are global semiconductor companies, which means that our operations and performance depend significantly on worldwide economic and geopolitical conditions as well as semiconductor market specific changes. Current global economic conditions and uncertainty about future conditions including war, terrorism, geopolitical uncertainties and other business interruptions could result in damage to, disruption, postponement or cancellation of sales of our products or services on a global or regional basis. Several nations have recently conducted or threatened military or hybrid-warfare operations tied to or affecting operational regions of the semiconductor industry. In the future such conflict could damage participants, disrupt international business, and reduce supply and demand in our industry, including for our products and services. Furthermore, tariffs, trade controls, export and import regulations, tighter credit, higher interest rates, inflationary concerns, large-scale unemployment, negative financial news and/or declines in income or asset values and other macroeconomic factors could have a material adverse effect on demand for our products and services and, accordingly, on our business, results of operations or financial condition and/or vendors with which we do business. For example, the timing of the build-out of the semiconductor market in China depends significantly on governmental funding on both local and national levels and a delay in this funding could negatively affect our revenues. Further, the U.S. federal government has recently stated its intention to change U.S. trade policy, including potentially renegotiating or terminating existing trade agreements and leveraging tariffs. In February 2025, the U.S. imposed additional tariffs on imports from China and announced and subsequently paused implementation of tariffs on imports from Canada and Mexico. The U.S. government has changed policy by imposing or threatening to impose certain additional tariffs expressly in pursuit of foreign policy goals. Some possible tariffs could significantly increase cost of imported goods. These additional tariffs, as well as a government’s adoption of “buy national” policies or retaliation by another government against such tariffs or policies, have introduced significant uncertainty into the market and may affect the prices of and demand for our and our customers’ products. Further, the semiconductor industry historically has been volatile with up cycles and down cycles, due to sudden changes in customers’ manufacturing capacity requirements and spending, which depend in part on capacity utilization, demand for customers’ IC products by consumers, inventory levels relative to demand, and access to affordable capital. As a result of the various factors that affect this volatility, the timing and length of any cycles can be difficult to predict and could be longer than anticipated. Any of these events could negatively affect our revenues and make it challenging or impossible for us to deliver products and services to our customers forecast our operating results, make business decisions, and identify the risks that may affect our business, financial condition and results of operations. Customers with liquidity issues may also lead to additional credit losses.

We face challenges in providing a comprehensive solution outside of the semiconductor industry due to limitations on the business areas in which we can use current third-party licensed technology, which may make it prohibitively expensive to sell our solution for applications outside of our traditional industry.

Since certain of our current software requires commercially-available, third-party programs to run as intended and some of our contracts with licensors limit the industry in which we can resell such third-party programs, we face challenges to provide a comprehensive solution to battery manufacturers. If we or our customers are unable to procure required third-party programs that can be used in connection with our products for battery manufacturing, or the cost to do so is higher than expected, we may miss the market opportunity, which would mean lower sales than expected, or our costs may be higher, which would mean lower earnings than expected. Further, if we are unable to develop a suitable product that is not limited by such third-party restrictions and meets the market’s needs or the costs to do so are higher, or the time required to do so, is longer than expected, we may lose future business opportunities and our results of operations will suffer.

Risks Related to Our Technology

If we fail to protect our IP rights, customers or potential competitors may be able to use our technologies to develop their own solutions, which could weaken our competitive position, reduce our revenues, or increase our costs.

Our success depends largely on the protection of our proprietary technology. Our contractual, patent, copyright, trademark, and trade secret protection may not be effective against any particular threat or in any particular location. Our pending patent applications may not result in issued patents, and even if issued, they may not be sufficiently broad to protect our proprietary technologies. Some foreign countries do not currently provide effective legal protection for IP and our ability to prevent the unauthorized use of our products in those countries is therefore limited. Our trade secrets may also be stolen, otherwise become known, or be independently developed by competitors. Litigation may be necessary from time to time to enforce our IP rights. As a result of any such litigation, we could lose our proprietary rights and incur substantial unexpected operating costs. Litigation could also divert our resources, including our managerial and engineering resources. If we are unable to exclude others from using our proprietary technologies and methods without compensation to us, through litigation or otherwise, it could impede our ability to grow our business and our revenues may suffer.

We and our third-party service providers are exposed to risks related to information technology infrastructure, information management and protection, cybersecurity threats, and cyber incidents; if we or our third-party providers fail to protect confidential information and/or experience a cyber incident, there may be damage to our brand and reputation, material financial penalties, and legal liability.

We are heavily reliant on our systems, hardware, software, technology infrastructure, online sites, networks, and the public cloud to an increasing degree, to provide our products and services to our customers (collectively, “IT Systems”). Additionally, we must frequently expand our IT Systems to meet increasing demand in storage, computing and communication, which results in increased costs. Our IT Systems are expensive to expand and must be highly secure due to the sensitive nature of the information that we, and certain of our third-party providers, collect, maintain and process. This includes information about customers, employees, business partners and others, as well as proprietary information belonging to our business or that of our customers such as trade secrets (collectively, “Confidential Information”).

We face numerous and evolving cybersecurity risks that threaten the confidentiality, integrity and availability of our IT Systems and Confidential Information, including denial-of-service attacks or other cyber-attacks, hacking, “phishing” attacks, computer viruses, ransomware, malware, employee or insider error, malfeasance, social engineering, deep-fake impersonations, physical breaches, or other events or developments that we may be unable to anticipate or fail to mitigate. Bad actors use widely available access to generative AI technology for more sophisticated and frequent cyber-attacks or fraudulent impersonations against us. In addition, any integration of AI in our or any service providers’ operations, products or services is expected to pose new or unknown cybersecurity risks and challenges. These attacks could come from either advanced persistent threat actors, state-sponsored organizations, opportunistic hackers, hacktivists, or other individual organized or unorganized malicious actors. The expense to purchase, update, and configure security information systems to detect and/or neutralize increasingly complex and sophisticated attacks increases our costs and, failure to acquire the right expertise or systems may leave us vulnerable to attacks, which could expose Confidential Information, result in liability and have a negative impact on our reputation and business opportunity. In addition, companies that we acquire may have cybersecurity vulnerabilities and/or unsophisticated security measures, which exposes us to significant cybersecurity, operational, and financial risks. We are also subject to risks related to continued support of our employees’ remote or hybrid work environment, which creates additional information security vulnerabilities and/or magnifies the impact of any disruption in our IT Systems.

We rely on third-party service providers to enable key services to our customers, including for cloud services, enterprise software, customer support portal software, and co-location computing facilities. We have experienced in the past, and may experience in the future, interruptions in our IT Systems on which our global operations depend or unplanned downtime of the infrastructure that delivers our SaaS. Such an unplanned interruption, even if temporary, could stop SaaS customers from accessing their hosted data or on-premise customers from downloading licensed software or critical security patches, or from accessing our support portal, which could mean that we may not meet our contractual commitments for such services to customers, which could reduce our revenue, incur liability, or result in damage to our reputation and negatively impact future sales. Further, the IT Systems that store and process our and our customers’ Confidential Information is susceptible to continually evolving cybersecurity threats that become more complex over time, especially with the rapid evolution of AI technologies, and may not be recognized until launched against a target, all of which could result in unauthorized access to, or acquisition of, our data, and interruption or disruption of our business.

Cyberattacks are expected to accelerate on a global basis in frequency and magnitude as bad actors are becoming increasingly sophisticated in using techniques and tools that circumvent security controls, evade detection, and remove forensic evidence. In addition, ransomware attacks are becoming increasingly prevalent and severe, and can lead to significant interruptions in our operations, loss of data and income, reputational loss, diversion of funds, and may result in fines, litigation and unwanted media attention. As a result, we and our third-party service providers, with whom we share data, may be unable to anticipate these techniques or attacks or may not implement adequate preventative measures to prevent either unauthorized access to our IT Systems that could compromise Confidential Information or result in a disruption of our services. In particular, like our peers, we are often the target of cyber-attacks by third parties seeking unauthorized access to Confidential Information, or to disrupt our ability to provide services. There can be no assurance that our cybersecurity risk management program and processes, including our policies, controls or procedures, will be fully implemented, complied with or effective in protecting our IT Systems and Confidential Information. Furthermore, given the nature of complex systems, software and services like ours, and the scanning tools that we deploy across our networks and products, we regularly identify and track security vulnerabilities. We are unable to comprehensively apply patches or confirm that measures are in place to mitigate all such vulnerabilities, or that patches will be applied before vulnerabilities are exploited by a threat actor. When we experience a security incident, we have to conduct an investigation and may need to notify individuals, customers, partners, service providers and state, federal or local governmental authorities and regulators in the U.S. or elsewhere around the world. In addition, any controls issues found during security assessment of our systems required by our customers and technical partners may result in disclosure to customers and potential customers and cause customers to re-evaluate their purchasing or renewal decisions, which could cause us to lose sales. Accordingly, any adverse impact to the availability, integrity or confidentiality of our IT Systems or Confidential Information may lead to significant costs and fees for legal advice, investigation support, remediation, and result in legal risk exposure (such as class actions), regulatory investigations and enforcement actions, fines and penalties, damage and harm to our reputation, and impact on our ability to keep and attract customers. Any or all of the foregoing could materially adversely affect our business, results of operations, and financial condition. Our insurance policies may not cover losses incurred in the event our systems or data are comprised, and they are subject to retention amounts that could be substantial. Moreover, we cannot be certain that such insurance policies will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim.

We and our customers are subject to laws and regulations concerning data privacy, data security, consumer protection, and advertising and these laws and regulations are continually evolving, which exposes us to potential material risks, including significant liability, negative publicity, and/or an erosion of trust, which could materially adversely affect our business, results of operations, and financial condition.

We collect, use, store or disclose (collectively, “process”) information that relates to individuals and/or constitutes “personal data,” “personal information,” “personally identifiable information,” or similar terms under applicable data privacy laws (collectively, “Personal Information”), including from employees and customers, in connection with the operation of our business. The Personal Information we process is subject to an increasing number of federal, state, local and non-U.S. laws, rules, regulations, industry standards, and other requirements regarding privacy and data security, including in some cases the EU General Data Protection Regulation, the UK General Data Protection Regulation and the UK Data Protection Act, as well as contractual commitments with our customers. These laws require us to adhere to certain disclosure restrictions and deletion obligations with respect to Personal Information, and allow for penalties for violations and, in some cases, a private right of action. These laws also impose transparency and other obligations with respect to Personal Information and provide individuals with similar rights with respect to their Personal Information. We have invested, and continue to invest, human and technology resources in our efforts to comply with such requirements that are time-intensive and costly. The application and interpretation of such requirements are constantly evolving and are subject to change, creating a complex compliance environment. In some cases, these requirements may be either unclear in their interpretation and application or they may have inconsistent or conflicting requirements with each other. If we underestimate the cost of compliance, we may have to divert resources and increase spending, which could adversely impact our financial results and any non-compliance could cause us to lose business, which would decrease our revenues. Further, there has been a substantial increase in legislative activity and regulatory focus on data privacy and security in the United States and elsewhere, including in relation to cybersecurity incidents. In addition, some such requirements place restrictions on our ability to process Personal Information across our business or across country borders. Any failure or perceived failure by us to comply with such obligations may result in governmental investigations or enforcement actions, fines, litigation or legal proceedings (including class actions), or public statements against us by consumer advocacy groups or others and could cause our customers to lose trust in us, which could have an adverse effect on our reputation, results of operations, financial condition, and business. We could incur significant costs in investigating and defending such claims and, if found liable, pay significant damages or fines or be required to make changes to our business. These proceedings and any subsequent adverse outcomes may subject us to significant negative publicity and an erosion of trust. In the United States, we are subject to numerous federal, state and local data privacy and security laws and regulations governing the processing of information about individuals, including federal laws and state privacy laws, marketing and communications laws, laws regarding credit reports, data breach notification laws, and consumer protection laws, many of which carry significant potential for active enforcement and penalties. For example, the Federal Trade Commission and state regulators enforce a variety of data privacy issues, such as promises made in privacy policies or failures to appropriately protect information about individuals, as unfair or deceptive acts or practices in or affecting commerce in violation of the Federal Trade Commission Act or similar state laws. We are also subject to a patchwork of overlapping but different state privacy laws.

Our technologies could infringe the IP rights of others, causing costly litigation and the loss of significant rights.

Significant litigation regarding IP rights exists in the semiconductor industry. It is possible that a third party may claim that our technologies infringe their IP rights or misappropriate their trade secrets, which has happened in the past. Any claim, even if without merit, could be time consuming to defend, result in costly litigation, require us to enter into royalty or licensing agreements, which may not be available to us on acceptable terms, or at all, subject us to damages or injunctions restricting our sale of products, invalidate a patent or family of patents, require us to refund license fees to our customers or to forgo future payments or require us to redesign certain of our products, any one of which could adversely affect our sales opportunities, expenses, and revenues.

Competition in the market for data services and analytics and related systems and services may intensify in the future, which could impede our ability to grow or execute our strategy.

Our industry is marked by rapid technological developments and innovations (such as the use of AI and ML) and evolving industry standards. If we are unable to innovate quickly enough to keep pace with our competitors in incorporating such technological developments in our product offerings, our business could be harmed. See the discussion in “Competition” in Part 1, Item 1. “Business” section for more information about our current competitors. There may be other competitors of which we are not aware, and we may compete with the products or offerings of our existing competitor companies or additional companies if we expand our offerings through acquisitions or development. The demand for solutions that address the need for better integration between the silicon design and manufacturing processes and the need for insight into performance of those manufacturing processes may encourage new direct competitors to enter our market. Increased competition could lead to increased pricing pressure, negatively impacting our revenues, or a decreased ability to grow or execute our strategy. Also, our current and potential customers may choose to develop their own solutions internally or through another source, particularly if we are slow in deploying our solutions or improving them to meet market needs. These and other competitors may be able to operate with a lower cost structure than our engineering organization, which would give any such competitor’s products a competitive advantage over our solutions.

Use of generative AI and other advanced AI Technologies for software development may subject us to claims of misappropriation of others’ IP, bugs/errors, and ambiguous ownership of created content.

Uncertainty around new and emerging AI technologies such as generative AI technology content creation may require additional investment to protect our proprietary datasets, ML models, and systems to test for accuracy, bias and other variables, which may be costly and could impact our profit margin if we decide to expand generative AI into our product offerings. Acquiring licenses to programs to check programs written with the help of AI technologies, including determining whether such programs are secure and reliable, may also increase the cost profile of our offerings. Additionally, we could be liable for any inaccuracies or errors in software that we release that causes downtime or other damage to our customers’ facilities or production lines, which could greatly increase our expenses and decrease our earnings.

Use of open-source software (“OSS”) together with our products exposes us to potential legal liability and could negatively affect our ability to protect our intellectual property, and if support and updates for the OSS that we currently use in providing our products and services is not available to us, our financial results could be negatively impacted.

We use open-source software (“OSS”) in delivering products and services to our customers and in some cases are not able to obtain support or updates for some programs. Change of terms for support for OSS, or lack of support or updates for such OSS, could significantly increase our costs to deliver our products and services or cause a temporary or long-term disruption in our ability to use such OSS in our products and services or make it harder or impossible to mitigate vulnerabilities or risks associated with such software. This could negatively impact customers’ perception of our security or quality, cause us to lose business, or adversely impact our financial results.

From time to time, companies that use OSS have faced claims challenging the use of OSS or compliance with open source license terms, and we could be subject to such lawsuits. The terms of many OSS licenses to which we are subject have not been interpreted by U.S. or foreign courts, and there is a risk that open source licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our provision of our products and services. Litigation could be costly for us to defend, harm our business, results of operations or financial condition or require us to devote additional research and development resources to change our platform.

In addition, if we were to combine our proprietary software with OSS in a certain manner, we could, under certain open source licenses, be required to release the source code of our proprietary software. If we inappropriately use OSS, we may be required to re-engineer parts of our platform, extract the OSS at issue or take other remedial actions. In addition to risks related to license requirements, use of certain OSS can lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties, indemnities or controls on the origin of software equivalent to those provided by third-party commercial software providers. Any of the foregoing could adversely impact the value or enforceability of our intellectual property, and materially adversely affect our business, results of operations, and financial condition.

Risks Related to Our Operations

We face operational and financial risks associated with international customers and operations that could negatively impact our revenues.

We have customers globally and our standard operations include development, distribution processes, software download sites, and professional service centers and processes in various geographies around the world, including employees and contractors located in Shanghai, China and Ramallah, Palestine, Israel, and Taiwan. Any of the following could disrupt or limit our business opportunities, the work our international employees and contractors perform, negatively affect the range of services we are able to provide from anywhere, or increase our cost for such services:

• changing circumstances in China regarding investments in the semiconductor industry by both private and public entities within China, which if the level of investments is substantially reduced could limit our future growth potential;
• limits on access (i) by some of our key engineers and other personnel that are foreign nationals to certain technical information under U.S. export laws or by certain of our customers, or (ii) by such individuals to the United States and other countries in which our customers or our offices may be located;
• difficulties recruiting, training, and retaining qualified technical and managerial employees in non-U.S. offices, and actions taken by our local dealers and partners, for which we may be liable and incur penalties, legal expenses, or have to pay damages, which would negatively impact our results of operations;
• greater difficulty in collecting accounts receivable from non-U.S. customers, resulting in longer collection periods, credit losses, and increased costs to collect;
• inconsistencies among, and unexpected changes in, non-U.S. laws and regulatory environments, including, among others, those related to human resources, personal data, tax, protection of IP, corporate governance, and U.S laws and regulations related to anti-corruption, imports and exports, and trade and export controls, which could result in (i) substantial expense to us as we attempt to comply and resolve inconsistencies, (ii) liability for inadvertent or intentional breach, for example through fraudulent or negligent behavior of individual employees, and (iii) a requirement to make significant changes in our business operations or forego international business opportunities for a period of time or altogether, any of which could adversely affect our revenues or our overall business;
• currency risk (i) due to certain of our payables and our international offices’ payables denominated in foreign currencies, including the Euro, Yen, and RMB, while predominantly all of our revenues is denominated in U.S. dollars, or (ii) in the event a larger portion of our revenues becomes denominated in foreign currencies, in either case, which could increase the cost in U.S. dollars to us or decrease the expected amount of revenues in U.S. dollars by the time of payment; or,
• economic or political actions, policies, or instability, and the resulting restrictions and disruption to economic activity and business operations in such areas, which could potentially (i) interrupt our customers’ ability in such locations to make use of our products or services, or for our employees or contractors to provide services, (ii) impact our customers’ desire to buy local, or (iii) limit our ability to supply products, services and technologies to affected entities and countries, any of which may negatively impact our financial results.

Measurement of our variable consideration sometimes requires data collection and customers’ use of estimates and are contingent upon customers’ consent and may be later offset if actual data differ from customers’ estimates, which can result in uncertainty and cause quarterly results to fluctuate.

We can only recognize volume- or average selling price- (“ASP”) based royalties once we have reached agreement with our customers on their level of yield performance improvements or ASP and quarterly agreements are sometimes based on estimates of volume results or ASP for each quarter. Measuring the amount of yield improvement is inherently complicated and dependent on our customers’ internal processes and on certain non-public information that may not be directly available to us. Thus, there may be uncertainty as to some components of measurement or calculation. Also, some variable consideration can be highly susceptible to delays in our customers’ measurement of key factors such as reporting volumes results and level of yield or ASP. Therefore, we may have to estimate revenue related to contingent variable fees or usage- or sales-based royalties prior to the receipt of performance reports, such as royalty acknowledgements, or other related information from customers. These estimates are subject to judgment to evaluate whether it is probable that a significant revenue reversal will not occur in future periods, which could result in our recognition of less Volume-based revenue than expected that may later be offset when actual results become available if such results differ from estimates.

Errors affecting our proprietary hardware and software systems located in customers’ or third-parties’ facilities could lead to liability for us, and any objection from such customers or third-parties or delay in providing us with physical or logical access to such systems may adversely impact our ability to timely perform our contract obligations or lead to confidentiality, integrity, availability, security, or privacy controls exceptions.

In connection with our data services offerings, we rely on installing, configuring, and operating proprietary configurations of hardware and/or software systems in facilities owned and operated by customers and third parties around the world. If the customer or third-party facility owner/operator does not allow us to install, access and maintain, or otherwise operate our systems as intended, we may fail to timely fulfill our contractual obligations to, or expectations of, our customers or such third-party facility owner/operator. Also, any intentional or unintentional disruption of the operation of these proprietary systems may lead to customer or third-party facility owner/operator dissatisfaction, which could cause us to lose such site as a connected site or lose future bookings, which would reduce revenue and negatively impact our earnings. Additionally, any potential or actual malicious cybersecurity incident or accidental misconfiguration resulting in a data security incident involving these proprietary systems may require complex diagnosis and mitigation because they are located at customers’ and third-parties’ facilities and this may lead to delays, errors, lack of system availability, loss of our customers’ data integrity, or further unauthorized disclosure of customer or third-party confidential or personal data. Further, if our system causes downtime or other disruption or loss to such customer or third-party facility, we could be liable for damages associated with such event, which could increase our expenses and distract management, and cause other customers or third-party facilities to not want to work with us.

Installing and maintaining such proprietary systems around the world requires that we manage the complexity of global operations of individual installations at a large number of different third parties in various countries. The cost and complexity of obtaining support, installing updated security patches, and addressing any other critical vulnerabilities in each individual physical system may lead to exceptions in controls of confidentiality, availability, integrity, security, and privacy, which could negatively impact the availability of our data services to customers, damage our reputation, or lead to lower bookings or sales.

Delayed payment terms and unpaid accounts receivable will negatively impact our cash in the short term and if customers fail to pay unsecured accounts receivable for a significant time or at all, we may be required to write-off receivables or increase our expense or allowance for credit losses.

From time to time, we give customers delayed payment terms in connection with reaching final agreement on large contracts. When we do this, and if we continue to do it in the future on equal or larger total amounts, our cash is negatively impacted in the short-term. Since we generally do not require collateral or other security for accounts receivable, if customers fail to pay balances when due, in whole or part, we may incur additional expenses attempting to collect and our business relationship and future business with any such customer could suffer as a result of such collection efforts. We may also experience greater difficulty in collecting accounts receivable from non-U.S. customers, resulting in longer collection periods, credit losses, and increased costs to collect. If customers fail to pay at all, in whole or in part, we may have to write-off a portion or all of such receivables or to increase our expense or allowance for credit losses. Our accounts receivable balance, net of allowance for credit losses, was $82.9 million and $73.6 million as of December 31, 2025 and 2024, respectively. Unbilled accounts receivable, included in accounts receivable, totaled $44.8 million and $23.0 million as of December 31, 2025 and 2024, respectively. Unbilled accounts receivable that are not expected to be billed and collected during the succeeding twelve-month period are recorded in other non-current assets and totaled $8.7 million and $9.0 million as of December 31, 2025 and 2024, respectively. Two customers accounted for 64% of our gross accounts receivable as of December 31, 2025, and four customers accounted for 57% of our gross accounts receivable as of December 31, 2024. The total allowance for credit losses was $0.9 million as of December 31, 2025 and 2024.

Tax Risks

Changes in tax laws, both within the United States and outside of the United States, could change our tax burden and adversely affect our business, financial condition and results of operations.

We conduct our business globally and, as a result, are subject to taxation in the United States and foreign countries. Our future tax rates could be affected by numerous factors, including changes in tax laws or the interpretation of such tax laws, insufficient taxable income to realize deferred tax assets, and changes in accounting policies. Our filings are subject to reviews or audit by the Internal Revenue Service and state, local and foreign taxing authorities. We cannot be sure that any final determination in an audit would not be materially different than the treatment reflected in our historical income tax provisions and accruals. If additional taxes are assessed as a result of an audit, there could be a significant negative effect on our income tax provision and our operating results in the period or periods for which that determination is made. Any changes in our geographical earnings mix in various tax jurisdictions, including those resulting from transfer pricing adjustments, could materially increase our effective tax rate.

We could lose the benefit of all or part of our deferred tax asset position, including the utilization of net operating loss and tax credit carryforwards, if we do not earn future taxable income in the applicable jurisdiction.

Realization of our deferred tax assets is dependent primarily upon future taxable income in the applicable jurisdiction. We previously recorded a full valuation allowance against all of our U.S. federal and state deferred tax assets due to the uncertainty surrounding the future realization of these deferred tax assets. Therefore, no benefit has been recognized for the net operating loss carryforwards, tax credit carryforwards, and other deferred tax assets. A portion of our net operating loss and tax credits could expire unused and be unavailable to reduce future income tax liabilities. We intend to continue maintaining a full valuation allowance on these deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances. We evaluate our deferred tax assets for realizability each reporting period. If we delay or never release such valuation allowance, the corresponding benefit would be delayed or lost.

Risks Related to Our Strategic Transactions

If we do not realize the benefits of our strategic relationships after we have devoted significant time and resources to developing them, it could have an adverse effect on our business and results of operations.

We have in the past devoted, and plan in the future to devote, time and resources to identifying, developing, and promoting strategic relationships with other suppliers to provide combined, integrated, or interoperable solutions to the semiconductor, electronics, and automotive industries. The full extent of the future impact of these strategic relationships on our financial condition and results of operations is currently unknown and the failure to reap the anticipated benefits of these companies’ financial resources, technology, customer relationships, and global footprint and/or to successfully develop combined, integrated, or interoperable solutions with such companies could have an adverse effect on our business and results of operations.

Our acquisitions create special risks and challenges that could adversely affect our financial results.

Our success depends on our ability to continually enhance and broaden our product offerings in response to changing technologies, customer demands, and competitive pressures. To this end, we have, from time to time, engaged in the process of identifying, analyzing, and negotiating possible acquisition transactions, and, from time to time, acquiring one or more businesses, and we expect to continue to do so in the future. We may choose to acquire new and complementary businesses, products, technologies and/or services instead of developing them ourselves. For example, we acquired SecureWise LLC (“SecureWise”) in March 2025 for a gross purchase price of approximately $130 million. We may, however, face competition for acquisition targets from larger or more established companies with greater financial resources, making it more difficult or more expensive for us to complete acquisitions. We may not be successful in consummating future acquisitions on favorable terms and we may not realize the benefits that we anticipate from one or more acquisitions that we do close. Integrating any business, product, technology, or service into our current operations could be expensive and time-consuming and/or disrupt our ongoing business. Further, there are numerous risks associated with acquisitions and potential acquisitions, including, but not limited to, problems combining the purchased operations, technologies or products, unanticipated costs, liabilities, litigation, and diversion of management’s attention from our core businesses, adverse effects on existing business relationships with suppliers and customers, risks associated with entering markets in which we have no or limited prior experience, and where competitors in such markets have stronger market positions, initial dependence on unfamiliar supply chains or relatively small supply partners, failure of our due diligence processes to identify significant problems, liabilities or other challenges of an acquired company or technology, and the potential loss of key employees, customers, distributors, vendors, and other business partners of the companies we acquire.

We may not be able to successfully integrate businesses, products, technologies, or personnel that we might acquire and the transaction may not advance our business strategy. The integration of businesses that we may acquire is likely to be a complex, time-consuming, and expensive process and we may not realize the anticipated revenues or other benefits associated with our acquisitions. If we fail to successfully manage, operate, or integrate any acquired business or if we are unable to efficiently operate as a combined organization, including through the use of common information and communication systems, operating procedures, financial controls, and human resources practices, we could be required to write-down investments and our business, financial condition, and results of operations may be adversely affected. We may also be unable to protect or enforce the IP rights of any target business that we acquire, or such target businesses may become subject to claims of IP infringement. Further, if we become subject to liabilities as a result of an acquisition, the liabilities we incur may be substantial and the amounts of such liabilities may not be covered by and/or may exceed any liability protections.

In connection with certain acquisitions, we have in the past and may in the future issue common stock, or assume equity awards, that dilute the ownership of our current stockholders, use a substantial portion of our cash resources, assume liabilities (both known and unknown), record goodwill and amortizable intangible assets that will be subject to impairment testing on a regular basis and potential periodic impairment charges, incur amortization expenses related to certain intangible assets, incur large and immediate write-offs and restructuring and other related expenses, or incur substantial amounts of debt, all of which could harm our financial condition and results of operations.

General Risk Factors

If we are not able to retain, attract, motivate, and strategically locate talented employees, including some key executives, our business may suffer.

Our success and competitiveness depend on our ability to retain, attract, motivate, and strategically locate in our offices around the globe, talented employees, including some of our key executives. Achieving this objective may be difficult due to many factors, including fluctuations in global economic and industry conditions, changes in our management or leadership, the hiring practices at our competitors or customers, cost reduction activities, and the effectiveness of our recruiting and compensation programs, including equity-based programs. The aging semiconductor workforce creates risks as our experienced employees retire and accelerates the loss of critical knowledge. At the same time, educational programs and the needed work experience may not produce the critical talent in time to meet the growing technical demands we require in a workforce. Further, we have had, and expect to continue to have, difficulty in obtaining visas permitting entry for some of our employees that are foreign nationals into the United States, and delays in obtaining visas permitting entry into other key countries, for several of our key personnel, which disrupts our ability to strategically locate our personnel that exist primarily in foreign locations. In the past the United States has and, in the future, the United States may again increase the level of scrutiny in granting H-1(b), L-1, and other business visas. Compliance with United States immigration and labor laws could require us to incur additional unexpected labor costs and expenses or could restrain our ability to retain skilled professionals. If we lose the services of certain of our key executives or a significant number of our engineers, it could disrupt our ability to implement our business strategy. If we do not successfully attract, retain, and motivate key employees, including key executives, we may be unable to realize our business objectives and our operating results may suffer.

Our operating results vary quarter to quarter, which could result in not meeting investors’ expectations and stock price volatility.

Our stock price has been and may continue to be subject to fluctuations, including as a result of varying operating results, changes in recommendations or earnings estimates by financial analysts, changes in investors’ or analysts’ valuation measures for our stock and other factors beyond our control including macroeconomic factors. Our stock price may be adversely impacted by announcements related to financial results or forecasts that fail to meet or are inconsistent with earlier projections or the expectations of our securities analysts or investors, announcements of new products or acquisitions of new technologies by us, our competitors or our customers, or announcements of acquisitions, major transactions, litigation developments or management changes. Furthermore, speculation in the press or investment community about our strategic position, financial condition, results of operations, business or security of our products, can cause changes in our stock price. Also, significant volatility in our stock price could be followed by a securities class action lawsuit, which could result in substantial costs and a diversion of our management’s attention and resources.

Our business is subject to evolving corporate governance and public disclosure regulations and expectations, which could require significant resources in attempts to comply or expose us to legal liability if we fail to comply.

We are subject to changing rules and regulations promulgated by a number of governmental and self-regulatory organizations, including the SEC, the Nasdaq Stock Market, and the Financial Accounting Standards Board (“FASB”), as well as evolving investor, customer, employee and other stakeholder expectations around corporate governance, executive compensation and environmental and social practices and related disclosures. These rules, regulations and expectations continue to evolve in scope and complexity, and many new requirements have been created in response to laws enacted by U.S. and non-U.S. governments, making compliance more difficult and uncertain. For example, in January 2025, President Trump signed an executive order directing federal agencies to take steps to target diversity, equity and inclusion practices in the private sector, including directing each agency to identify up to nine opportune civil compliance investigations of publicly traded corporations, among others. We may be subject to increased litigation and regulatory scrutiny regarding these practices. We expect that changing rules and laws related to corporate governance, environmental and social matters, as well as increased enforcement actions by various governmental and regulatory agencies, will continue to increase the cost of our compliance and internal risk management programs, which could adversely affect our business, results of operations and financial condition.

Our business could be negatively affected as a result of actions of activist shareholders, and such activism could impact our stock price.

Publicly-traded companies have increasingly become subject to activist investor campaigns. Responding to actions of an activist investor may be a significant distraction for our management and staff and could require us to expend significant time and resources, including legal fees and potential proxy solicitation expenses. Any of these conditions could materially adversely affect our financial performance and stock price.

Cybersecurity Risk Management and Strategy

We recognize the importance of assessing, identifying, and managing material risks associated with cybersecurity threats, as such term is defined in Item 106(a) of Regulation S-K. These risks include, among other things, operational risks, intellectual property theft, fraud, extortion, harm to employees or customers, violation of privacy or security laws and other litigation and legal risk, and reputational risks. We have implemented several cybersecurity processes, technologies, and controls in an effort to assess, identify, and manage such material risks.

Our process for identifying and assessing material risks from cybersecurity threats operates alongside our broader overall risk assessment process, covering all company risks. As part of this process appropriate disclosure personnel will collaborate with subject matter specialists, at least annually and more frequently as necessary due to business changes or external changes, to gather insights for identifying and assessing material cybersecurity threat risks, their severity, and potential mitigations.

We also have a cybersecurity specific risk assessment process, which helps identify our cybersecurity threat risks. As part of this process, and our processes aimed at providing for the availability of critical data and systems, maintaining regulatory compliance, identifying and managing our risks from cybersecurity threats, and protecting against, detecting, and responding to cybersecurity incidents, as such term is defined in Item 106(a) of Regulation S-K, we undertake the below listed activities, among others:

• maintain a risk register and risk assessment process for our Information Security and Management System (“ISMS”) based on the ISO 27001:2022 clauses and controls;
• use various third-party software testing products and services designed to test and assess the security of our software;
• closely monitor emerging data protection laws and implement changes to our processes designed to comply with such laws;
• undertake an annual review of our policies and statements related to cybersecurity;
• proactively inform our customers of substantive changes related to customer data handling through disclosures in our SOC 2 Type 2 report or other contractually mandated disclosures;
• conduct annual cybersecurity training for employees and contractors with access to PDF systems and sensitive data;
• conduct incident management training and practice for individuals with responsibilities responding to a cyber incident;
• conduct regular phishing email simulations for employees and contractors with access to corporate email systems to enhance awareness and responsiveness to such possible threats;
• conduct periodic user account reviews to confirm authorized access to business-critical systems;
• use findings and root cause analysis of cybersecurity incidents to improve our cybersecurity processes and technologies;
• maintain technologies designed to provide network and endpoint monitoring, regular vulnerability assessments, and annual penetration testing to improve our information systems, as such term is defined in Item 106(a) of Regulation S-K;
• carry information security risk insurance that provides protection against the potential losses arising from a cybersecurity incident;
• maintain an employee handbook, Code of Conduct, and Acceptable Use policy that makes clear the importance of cybersecurity and protection of PDF and customer intellectual property; and
• our cybersecurity incident response policy and plan specify the activities we take to prepare for, detect, respond to and recover from cybersecurity incidents, which include processes to triage, assess severity for, escalate, contain, investigate, and remediate the incident, as well as to comply with potentially applicable legal and reporting obligations and mitigate brand and reputational damage. We regularly exercise and update the plan after actual incident responses or simulated incident response scenarios.

We subscribe to several external independent monitoring services to score and assess our externally facing network and information services and we engage a third-party security firm at least annually to conduct external and web penetration testing exercises on our corporate network and our commercial SaaS service platform and other commercial products and services in scope of our ISMS.

Our processes also address cybersecurity threat risks associated with our use of third-party service providers, including those in our supply chain or who have access to our customer and employee data or to our systems. Third-party risks are included within our broader overall risk assessment and management process, as well as our cybersecurity-specific risk identification program, both of which are discussed above. In addition, cybersecurity considerations affect the selection and oversight of our third-party service providers during vendor onboarding and during periodic reviews. We perform diligence on third parties that have access to our systems, data or facilities that house such systems or data, and regularly monitor cybersecurity threat risks identified through such diligence. Additionally, we generally require those third parties that could introduce significant cybersecurity risk to us to agree by contract to manage their cybersecurity risks in specified ways, and to agree to be subject to cybersecurity audits or independent information security assessments or certifications. Additionally, we have processes designed to monitor public and federal government database and other sources for evidence of known and/or exploited vulnerabilities in third-party services including those provided as SaaS and we take action to remediate or establish compensating controls if those systems are determined to be critical to our cybersecurity. We also maintain disaster recovery plans in place for all mission critical parts of the business, although we do not have a business continuity plan developed to account for all continuity risks.

We describe whether and how risks from identified cybersecurity threats, including as a result of any previous cybersecurity incidents, are reasonably likely to materially affect us, including our business strategy, results of operations, or financial condition, under the headings “We, and our third-party service providers, are exposed to risks related to information technology infrastructure, information management and protection, cybersecurity threats, and cyber incident; if we or our third-party providers fail to protect confidential information and/or experience a cyber incident, there may be damage to our brand and reputation, material financial penalties, and legal liability.” and “Our business is subject to evolving corporate governance and public disclosure regulations and expectations, including with respect to environmental, social and governance matters that could expose us to numerous risks.” included as part of our risk factor disclosures at Item 1A of this Annual Report on Form 10-K.

For more than 6 years, we have not identified any known cybersecurity threats including as a result of any prior cybersecurity incidents, that have materially impacted us or our operations, business strategy results of operations, or financial condition, including the expenses we have incurred from cybersecurity incidents that were immaterial. This includes penalties and settlements, of which there were none. We face risks from cybersecurity threats that, if realized, are reasonably likely to materially affect us, including our operations, business strategy, results of operations, or financial condition.

Cybersecurity Governance

Information technology and data security, particularly cybersecurity, is a top area of focus for our Board of Directors, who views our focus in these areas as essential for the success of our company and the broader technology industry in which we operate.

As described in the Audit Committee Charter of the Board of Directors, the Audit Committee is tasked with oversight of certain risk issues, including cybersecurity. The Audit Committee is comprised entirely of independent directors, two of whom have significant work experience related to information security issues or oversight. Management reports high severity security incidents to the Audit Committee after they are discovered. Additionally, management provides a summary four times per year of all security incidents to the Audit Committee. The full Board of Directors is also provided an annual assessment of our security program, our internal response preparedness, and assessments led by outside assessors and auditors.

Our Audit Committee is regularly involved in reviewing cybersecurity risk management. At least quarterly, the Vice President of Operations presents and reviews key security metrics with the Audit Committee including a review of cyber-security events, cybersecurity initiatives and new or developing cybersecurity risks relevant to the business. The Audit Committee, which comprises at least two individuals with experience in cybersecurity and related matters, meets with these members of senior management to review our information technology and data security policies and practices, and to assess current and projected threats, cybersecurity incidents, and related risks. Our Vice President of Operations reports directly to our executive management team and advises us on cybersecurity risks and assesses the effectiveness of information technology and information security processes and business policies impacting our overall cybersecurity risk.

The VP of Operations serves as the senior executive responsible for owning and operating our ISMS. Reporting directly to this role are the Director of Corporate IT and the Director of Network Security, who—under the VP’s leadership—jointly oversee all aspects of security policy management, cybersecurity risk management, vulnerability management, identity and access management, incident response, security training, and disaster recovery across the organization.

The VP of Operations leads our annual information security governance, risk, and compliance assessment in collaboration with the General Counsel, the Chief People Officer, the Chief Financial Officer, and product leadership. Together, they evaluate and refine our risk management strategy and ensure ongoing compliance with the ISMS.

The VP of Operations has over five years of direct experience in this role and more than 25 years of tenure with us, including building and leading engineering and IT organizations.

This institutional and operational expertise enables the VP to guide our security posture, technology adoption strategy, and enterprise-wide risk management efforts.

Our Incident Response Policy is reviewed annually and documents the controls and procedures for timely and accurate reporting of material cybersecurity incidents to the relevant parties, including the Audit Committee when applicable. Our Incident Response Team leads the response to any reported cybersecurity event and comprises experts from Engineering, Information Technology, Legal, Cloud Operations, and Network Security.

The Vice President of Operations and Executive Vice President of Products and Solutions take steps to stay informed about and monitor the prevention, mitigation, detection, and remediation of cybersecurity incidents through their management of, and participation in, the cybersecurity risk management and strategy processes described above including the incident response.

Our principal executive offices are located in Santa Clara, California, where we lease approximately 20,800 square feet of office space under a lease agreement that expires in August 2028. We also lease additional facilities and offices, including in Milpitas, California; Pittsburgh, Pennsylvania; Richardson, Texas; Salt Lake City, Utah; Deer Park, Illinois; Shanghai, China; Canada; France; Germany; Italy; Japan; South Korea; and Taiwan for local sales, product development and technical support.

We believe our existing and planned facilities and offices are adequate to meet our current needs and are being utilized consistently with our past practice. We consistently look for opportunities to minimize costs related to office space through improved efficiencies and intend to make changes to leased facilities in the future as appropriate to reflect changes in worldwide operations and headcount.

From time to time, the Company is subject to various claims and legal proceedings that arise in the ordinary course of business. As of December 31, 2025, except as disclosed below, the Company was not party to any material legal proceedings.

On May 6, 2020, the Company initiated an arbitration proceeding with the Hong Kong International Arbitration Center (the “Tribunal”) against SMIC New Technology Research & Development (Shanghai) Corporation (“SMIC”) due to SMIC’s failure to pay fees due to the Company under a series of contracts. The Company sought 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 denied liability and an arbitration hearing was held in February 2023. On November 12, 2025, the Tribunal issued a confidential arbitration award (the “Award”), which is in favor of the Company. The Company is separately pursuing an award as to costs. No payments under the Award have been received by the Company to date and in February 2026, SMIC filed an application with the High Court of Hong Kong seeking to set the Award aside. The Company believes the set aside application is without merit and intends to defend it, and is pursuing judicial enforcement of the Award. There can be no assurances that the Company will receive all or any part of the Award. Accordingly, no amounts have been recognized in connection with the Award as of December 31, 2025.

Overview

We offer products and services designed to empower organizations across the semiconductor and electronics ecosystems to connect, collect, manage, and analyze data about design, equipment, manufacturing, and test to improve the yield and quality of their products. We derive revenues from two categories: Platform and Volume-based Revenue. Our offerings combine proprietary software, professional services using proven methodologies and third-party cloud-hosting platforms for SaaS, electrical measurement hardware tools, and physical IP for IC designs. We primarily monetize our offerings through license fees and contract fees for professional services and SaaS. In some cases, we also receive a Volume-based fee such as Cimetrix runtime licenses and secureWISE data usage, and a value-based variable fee or royalty, which we call Gainshare. Our products, services, and solutions have been sold to IDMs, fabless semiconductor companies, foundries, OSATs, capital equipment manufacturers and system houses.

Acquisition of SecureWise LLC

On March 7, 2025, we completed the acquisition of SecureWise, a Delaware limited liability company (see Note 16, “Business Combinations,” of the Notes to Consolidated Financial Statements included under Part II, Item 8 of this Annual Report on Form 10‑K), and added the widely-used, secure, remote secureWISE connectivity solution to our products and services portfolio. We expect this acquisition to also accelerate equipment makers’ ability to derive value from equipment data by enabling them to leverage our Exensio analytics software and to expand the capability of our secure data exchange (“DEX”) OSAT network by allowing equipment makers, fab operators, and fabless companies to collaborate to optimize chip manufacturing and test.

Industry Trends

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.

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, 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).

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 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.

Financial Highlights

The following are our financial highlights for the year ended December 31, 2025:

• Total revenues were $219.0 million for the year ended December 31, 2025, an increase of $39.6 million, or 22%, compared to prior year. Platform revenue was $181.0 million for the year ended December 31, 2025, an increase of $23.9 million, or 15%, compared to prior year. The increase in Platform revenue was driven by higher revenue from fixed fees associated with CV systems and the addition of revenues related to secureWISE systems, partially offset by decreases in revenue from perpetual licenses and DirectScan systems. Volume-based revenue was $38.0 million for the year ended December 31, 2025, an increase of $15.7 million, or 70%, compared to prior year, primarily due to an increase in revenue from Gainshare, secureWISE data usage, and Cimetrix runtime licenses.
• Costs of revenues increased $6.5 million for the year ended December 31, 2025, compared to prior year, primarily due to increases in personnel-related costs, subcontractor fees, software license and maintenance costs, third-party cloud-delivery costs, amortization of acquired technology, facilities and IT-related costs, including depreciation and amortization expense, and travel expense, partially offset by decrease in hardware-related costs.
• Net loss was $0.6 million for the year ended December 31, 2025, compared to a net income of $4.1 million for the year ended December 31, 2024. The decrease was primarily attributable to (i) an increase in overall costs and expenses mainly due to increase in personnel-related expenses, costs related to the acquisition and operation of SecureWise, increase in subcontractor fees, amortization of acquired intangible assets, travel expenses, third-party cloud-services related costs, facilities and IT-related costs, software license and maintenance costs, and legal fees related the arbitration proceeding over a disputed customer contract, (ii) an increase in interest expense from our long-term debt, (iii) a decrease in interest income, (iv) net unfavorable fluctuations in foreign currency exchange rates, and (v) an increase in income tax expense, partially offset by an increase in total revenues, a decrease in hardware costs, and recovery from previously written-off property and equipment.

Critical Accounting Estimates

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires us to make judgments, assumptions, and estimates that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. Notes 1 and 2 of the Notes to Consolidated Financial Statements (Item 8 of Part II of this Annual Report on Form 10‑K) describe the significant accounting policies and methods used in the preparation of the Consolidated Financial Statements. We consider the accounting policies described below to be our critical accounting policies. These critical accounting policies are impacted significantly by judgments, assumptions, and estimates used in the preparation of the Consolidated Financial Statements and actual results could differ materially from the amounts reported based on these policies.

Revenue Recognition

Platform Revenue

Platform revenue is derived from the following primary offerings: licenses for software (other than Cimetrix runtime licenses) and related software maintenance and technical support services; SaaS; engineering services; fixed fees associated with CV systems; and licenses and purchase contracts for DirectScan systems.

Revenue from licenses for software, other than Cimetrix runtime licenses, 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 as the software license is considered as a separate performance obligation from the services offered by us. 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. Revenue from related software maintenance and technical support services, or post-contract support, is recognized over the contract term on a straight-line basis because we generally provide (i) support and (ii) certain software updates on a when-and-if available basis over the contract term.

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

Revenue from engineering services and fixed fees associated with CV systems (including Characterization services) is recognized primarily 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. When a CV system engagement includes CV test chip designs that were previously developed by us and reused with only minimal rework or were previously developed by us and adapted to different customer applications with limited rework, the revenue allocated to these CV test chip designs is recognized when the rework is completed at a point in time upon delivery or contract signature, whichever is later. All revenue associated with other CV test chip designs are recognized over time using a percentage of completion method.

Revenue from purchase contracts for DirectScan systems is recognized at a point in time when our performance obligations have been completed, and the customer has accepted the product. Revenue from licenses for hardware is recognized depending on whether we classify the contract as an operating or a sales-type lease. Where the customer controls the use of identified assets for a period of time defined in a contract, it will be classified as a sales-type lease if it meets certain criteria under FASB Accounting Standards Codification (“ASC”) Topic 842, Leases, otherwise, it will be 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 recorded under Platform revenue in the Consolidated Statements of Operations and Comprehensive Income (Loss). Payments under sales-type leases are discounted using the interest rate implicit in the lease. When our leases are embedded in contracts with customers that include non-lease performance obligations, we allocate consideration in the contract between lease and non-lease components based on their relative SSPs. Assets subject to operating leases are included in property and equipment and subject to depreciation. 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 Consolidated Balance Sheets.

Volume-based Revenue

Volume-based revenue is derived from Cimetrix runtime licenses, secureWISE data, and Gainshare. Accordingly, this revenue typically fluctuates based on customers’ production tool shipments and deployment cycles, data transferred through the secureWISE network, and wafer manufacturing volume, as applicable.

Revenue from Cimetrix runtime licenses is recognized at a point in time when the software is delivered via issuance of a license file. Revenue from secureWISE data is recognized over the period the data transfer is incurred. Revenue from Gainshare is typically recognized at a point in time based on customers’ wafer manufacturing volumes. Please refer to the “Significant Judgments” section below for discussion about our judgments and estimates pertaining to Gainshare revenue.

Significant Judgments

Judgments and estimates are required under ASC Topic 606, Revenue from Contracts with Customers, and its related amendments (collectively known as “ASC 606”). Due to the complexity of certain contracts, the actual revenue recognition treatment required under ASC 606 for our 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 us 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.

Our 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. We rarely license software on a standalone basis, so we are required to estimate the range of SSPs for each performance obligation. In instances where the SSP is not directly observable because we do not license the software or sell the service separately, we determine the SSP using information that may include market conditions and other observable inputs.

We typically recognize Gainshare revenue in the same period in which the usage occurs. Because we generally do 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, we accrue the related revenue based on estimates of customers underlying sales achievement. Our 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.

Income Taxes

We are required to assess whether it is “more likely than not” that we will realize our deferred tax assets (“DTAs”). If we believe that they are not likely to be fully realizable before the expiration dates applicable to such assets, then to the extent we believe that recovery is not likely, we must establish a valuation allowance. Based on all available evidence, both positive and negative, we determined a full valuation allowance was still appropriate for our U.S. federal and state net DTAs December 31, 2025. The valuation allowance was approximately $69.9 million and $67.9 million as of December 31, 2025 and 2024, respectively. We will continue to evaluate the need for a valuation allowance and may change our conclusion in a future period based on changes in facts (e.g., significant new revenue and other relevant factors). If we conclude that we are more likely than not to utilize some or all of our U.S. DTAs, we will release some or all of our valuation allowance and our income tax expense will decrease in the period in which we make such determination.

We evaluate our DTAs for realizability considering both positive and negative evidence, including our historical financial performance, projections of future taxable income, future reversals of existing taxable temporary differences, tax planning strategies and any carryback availability. In evaluating the need for a valuation allowance, we estimate future taxable income based on management approved business plans. This process involves significant management judgment about assumptions that are subject to change from period to period based on changes in tax laws or variances between future projected operating performance and actual results. Changes in the net DTAs, less offsetting valuation allowance, in a period are recorded through the income tax expense and could have a material impact on the Consolidated Statements of Operations and Comprehensive Income (Loss).

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 Consolidated Statements of Operations and Comprehensive Income (Loss). As of December 31, 2025, no deferred taxes have been provided on undistributed earnings from our international subsidiaries. We intend to reinvest the earnings of our non-U.S. subsidiaries in those operations indefinitely. As such, we have not provided for any foreign withholding taxes on the earnings of foreign subsidiaries as of December 31, 2025. 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.

Stock-Based Compensation

We account for stock-based compensation using the fair value method, which requires us to measure stock-based compensation based on the grant-date fair value of the awards and recognize the compensation expense over the requisite service period. As stock-based compensation expense recognized is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

The fair value of our restricted stock units is equal to the market value of our common stock on the date of the grant. These awards are subject to time-based vesting which generally occurs over a period of four years.

The fair value of our stock options and purchase rights granted under employee stock purchase plan is estimated using the Black-Scholes-Merton option-pricing model, which incorporates various assumptions including volatility, expected life and interest rates. The expected volatility is based on the historical volatility of our common stock over the most recent period commensurate with the estimated expected life of our stock options and purchase rights granted under employee stock purchase plan. The expected life is based on historical experience and on the terms and conditions of the stock options granted and purchase rights granted under employee stock purchase plan. The interest rate assumption is based upon observed Treasury yield curve rates appropriate for the expected life of our stock options and purchase rights granted under employee stock purchase plan.

Business Combinations

We allocate the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair values at the date of the business combination. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require us to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, estimated replacement costs and future expected cash flows from acquired customers, acquired technology, acquired patents, and trade names from a market participant perspective, useful lives and discount rates. The estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Allocation of purchase consideration to identifiable assets and liabilities affects our amortization expense, as acquired finite-lived intangible assets are amortized over their useful life, whereas any indefinite lived intangible assets, including in-process research and development and goodwill, are not amortized but tested annually for impairment. During the measurement period, which is not to exceed one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings in the Consolidated Statements of Operations and Comprehensive Income (Loss).

Valuation of Long-lived Assets including Goodwill and Intangible Assets

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 a qualitative analysis when testing a reporting unit’s goodwill for impairment. 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 years ended December 31, 2025, 2024 and 2023.

Our long-lived assets, excluding goodwill, consist of property, equipment, intangible assets and unguaranteed residual assets under net investments in sales-type leases. We periodically review our long-lived assets for impairment. For assets to be held and used, we initiate our review whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset group may not be recoverable. Recoverability of an asset group is measured by comparison of its carrying amount to the expected future undiscounted cash flows that the asset group is expected to generate. If it is determined that an asset group is not recoverable, an impairment loss is recorded in the amount by which the carrying amount of the asset group exceeds its fair value. There was no impairment of long-lived assets for the years ended December 31, 2025, 2024 and 2023.

Leases

We have operating leases for our administrative and sales offices, research and development laboratory and clean room. We recognize our long-term operating lease rights and commitments as operating lease right-of-use assets and operating lease liabilities, respectively, on our Consolidated Balance Sheets. We elected to not separate lease and non-lease components for all of our leases.

We determine if an arrangement is, or contains, a lease at inception. Operating lease right-of-use assets, and operating lease liabilities are initially recorded based on the present value of lease payments over the lease term. Lease terms include the minimum unconditional term of the lease, and may include options to extend or terminate the lease when it is reasonably certain at the commencement date that such options will be exercised. The decision to include these options involves consideration of our overall future business plans and other relevant business economic factors that may affect our business. Since the determination of the lease term requires an application of judgment, lease terms that differ in reality from our initial judgment may potentially have a material impact on our Consolidated Balance Sheets. In addition, our leases do not provide an implicit rate. In determining the present value of our expected lease payments, the discount rate is calculated using our incremental borrowing rate determined based on the information available, which requires additional judgment.

Recent Accounting Pronouncements and Accounting Changes

See Note 1, “Description of Business and Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statements included under Part II, Item 8 of this Annual Report on Form 10‑K for a description of recent accounting pronouncements and accounting changes, including the dates of adoption and estimated effects, if any, on our Consolidated Financial Statements.

Results of Operations

Change in Presentation of Revenues

As our business evolved to include revenue from a broader portfolio of products and services, as a result of organic and inorganic expansion, beginning with this Annual Report on Form 10-K, we updated our presentation of revenue categories. Previously, we presented revenue in two categories: Analytics and Integrated Yield Ramp. Analytics revenue was derived from the following offerings: licenses and services for on-premise software, SaaS, licenses and purchase contracts for DirectScan systems, and Characterization Vehicle systems that did not include performance incentives based on customers’ yield achievement. Integrated Yield Ramp revenue was comprised of all fees from our contracts that included any performance incentives based on customers’ yield achievement. We now present revenues in the following categories: Platform and Volume-based. Platform revenue is derived from the following offerings: licenses for software (other than Cimetrix runtime licenses) and related software maintenance and technical support services; SaaS; engineering services; fixed fees associated with CV systems; and licenses and purchase contracts for DirectScan systems. Volume-based revenue is derived from Cimetrix runtime licenses, secureWISE data, and Gainshare. See Note 2, “Revenue from Contracts with Customers” of the Notes to Consolidated Financial Statements included under Part II, Item 8 of this Annual Report on Form 10‑K.

The change in presentation of revenues does not change our total revenues or total costs of revenues. The following table presents reclassified historical amounts to conform to the current period’s presentation (in thousands):

41

Discussion of Financial Data for the years ended December 31, 2025 and 2024

Revenues, Costs of Revenues, and Gross Margin

(Dollars in thousands)

Platform Revenue

Platform revenue was $181.0 million for the year ended December 31, 2025, an increase of $23.9 million, or 15%, compared to the year ended December 31, 2024. The increase in Platform revenue was primarily driven by increases in revenue from fixed fees associated with CV systems and the addition of revenues related to SecureWISE systems, partially offset by decreases in revenue from perpetual license and DirectScan systems.

Volume-based Revenue

Volume-based revenue was $38.0 million for the year ended December 31, 2025, an increase of $15.7 million, or 70%, compared to the year ended December 31, 2024. The increase in Volume-based revenue was due to increases in revenue from Gainshare, secureWISE data usage, and Cimetrix runtime license.

Our revenues may also fluctuate in the future due to other factors, including the semiconductor industry’s continued acceptance of our products, services and solutions, the timing of purchases by existing and new customers, cancellations by existing customers, our ability to attract new customers and penetrate new markets, supply chain challenges and further penetration of our current customer base. Fluctuations in future results may also occur if any of our significant customers renegotiate pre-existing contractual commitments, including due to adverse changes in their own business.

Costs of Revenues

Costs of revenues consist primarily of costs incurred to provide and support our services, costs recognized in connection with licensing our software, IT and facilities-related costs and amortization of acquired technology. Service costs include material costs, hardware costs (including cost of leased assets under sales-type leases), personnel-related costs (including compensation, employee benefits, bonus and stock-based compensation expense), subcontractor costs, overhead costs, travel expenses, and allocated facilities-related costs. Software license costs consist of costs associated with third-party cloud-delivery related expenses and licensing third-party software used by us in providing services to our customers in solution engagements or sold in conjunction with our software products.

The increase in costs of revenues of $6.5 million for the year ended December 31, 2025, compared to the year ended December 31, 2024, was primarily due to (i) a $4.0 million increase in personnel-related costs due to increased headcount, worldwide salary increases, increase in employee benefit costs, higher bonus and stock-based compensation expenses, (ii) a $2.1 million increase in subcontractor fees, (iii) a $1.6 million increase in software license and maintenance costs, (iv) a $1.3 million increase in amortization of acquired technology, (v) a $1.0 million increase in third-party cloud-delivery costs, (vi) a $0.7 million increase in facilities and IT-related costs, including depreciation and amortization expense, and (vii) a $0.2 million increase in travel expense. These increases were partially offset by a $4.4 million decrease in hardware-related costs.

Gross Margin

Gross margin for the year ended December 31, 2025, was 72% compared to 70% for the year ended December 31, 2024, or an increase of 2 percentage points. The increase in gross margin during the year ended December 31, 2025, compared to prior year was primarily driven by higher total revenues.

Operating Expenses:

Research and Development

(Dollars in thousands)

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.

Research and development expenses increased by $10.7 million for the year ended December 31, 2025, compared to the year ended December 31, 2024, primarily due to (i) a $5.4 million increase in personnel-related costs due to increased headcount, worldwide salary increases, increased employee benefit costs, higher bonus, and stock-based compensation expense, (ii) a $2.4 million increase in subcontractor expenses primarily related to secureWISE systems and Exensio software, (iii) a $ 2.0 million increase in facilities and IT-related costs, including depreciation and amortization expense, and (iv) a $0.7 million increase in travel expenses.

We anticipate our expenses in research and development will fluctuate in absolute dollars from period to period as a result of the size and the timing of product development projects.

Selling, General, and Administrative

(Dollars in thousands)

Selling, general, and administrative expenses consist primarily of personnel-related costs (including compensation, employee benefits, bonus, commission and stock-based compensation expense for sales, marketing, and general and administrative personnel), legal, tax and accounting services, marketing communications and trade conference-related expenses, third-party cloud-services related costs, travel, business acquisition and integration costs, IT and facilities cost allocations.

Selling, general, and administrative expenses increased by $14.8 million for the year ended December 31, 2025, compared to the year ended December 31, 2024, primarily due to (i) a $6.9 million increase in personnel-related costs mainly driven by increased headcount, worldwide salary increases, increased employee benefit costs, higher bonus expense, and stock-based compensation expense, (ii) a $3.6 million increase in acquisition and integration costs related to the acquisition of SecureWise, (iii) a $2.7 million increase in legal fees related to the arbitration proceeding over a disputed customer contract, (iv) a $2.1 million increase in subcontractor fees, (v) a $1.0 million increase in travel expenses, (vi) a $0.2 million increase in audit, accounting and tax professional fees, and (vii) a $0.2 million increase in third-party cloud-services related costs, partially offset by a $2.4 million decrease in and general legal and professional fees.

We anticipate our selling, general and administrative expenses will fluctuate in absolute dollars from period to period as a result of cost control initiatives and to support increased selling efforts in the future.

Amortization of Acquired Intangible Assets

(Dollars in thousands)

Amortization of acquired intangible assets represents amortization expense on intangibles assets acquired from prior and current year business combinations. The increase in amortization expense during 2025 was a result of the amortization of intangible assets acquired in the SecureWise acquisition.

Interest Expense

(Dollars in thousands)

Interest expense is from our long-term debt that was used in financing the acquisition of SecureWise in 2025, and amortization of debt discount and issuance costs.

Interest Income and Other, Net

(Dollars in thousands)

Interest income and other, net primarily consists of interest income, and foreign currency transaction exchange gains and losses. Interest income and other, net decreased by $4.3 million for the year ended December 31, 2025, compared to the year ended December 31, 2024, primarily due to (i) a $4.6 million decrease in interest income from cash, cash equivalents and short-term investments, and (ii) $1.1 million net unfavorable fluctuations in foreign currency exchange rates, partially offset by a $0.6 million recovery from a loss on damaged equipment in-transit in 2025, compared to a write-off of this asset for $0.6 million in 2024.

Income Tax Expense

(Dollars in thousands)

Income tax expense increased $1.3 million for the year ended December 31, 2025, compared to the year ended December 31, 2024, primarily due to the impact of enacted U.S. federal tax legislation, changes in the foreign, federal and state taxes, and change in deferred taxes related to indefinite lived deferred tax liabilities.

Any significant change in our future effective tax rates could adversely impact our consolidated financial position, results of operations, and cash flows. Our future tax rates may be adversely affected by a number of factors including increase in expenses not deductible for tax purposes, new or changing tax legislation in the United States and in foreign countries where we are subject to tax jurisdictions, the geographic composition of our pre-tax income, the amount of our pre-tax income as business activities fluctuate, our ability to use tax attributes such as research and development tax credits and net operation losses, the tax effects of employee stock activity, audit examinations with adverse outcomes, changes in general accepted accounting principles and the effectiveness of our tax planning strategies.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S. The OBBBA makes permanent key elements of the Tax Cuts and Jobs Act, including 100% bonus depreciation, domestic research cost expensing, and the business interest expense limitation. ASC 740, Income Taxes, requires the effects of changes in tax rates and laws on deferred tax balances to be recognized in the period in which the legislation is enacted. OBBBA contained U.S. corporate tax provisions under which the Company elected to expense U.S. incurred research or experimental expenditures immediately. As a result of this election, we recognized a favorable cash tax benefit of approximately $1.3 million and reduction of our effective tax rate by approximately 40% in 2025. The OBBBA includes multiple effective dates, with certain provisions effective in 2025 and others phased in through 2027. We will continue to assess the impact on the effective tax rate for future periods.

The Organization for Economic Co-operation and Development (“OECD”) has a framework to implement a global minimum corporate tax of 15% for companies with global revenue and profits above certain thresholds (referred to as Pillar 2). Although the U.S. has not enacted legislation to implement Pillar 2, certain countries in which we operate have adopted legislation, and other countries are in the process of introducing legislation to implement Pillar 2. The OECD issued new administrative guidance on January 5, 2026, with respect to Pillar 2 which modifies key aspects of the framework for countries to enact in their own laws. Pillar 2 did not have an impact on our 2025 consolidated financial statements because we do not currently meet the 750 million Euro sales threshold.

Discussion of Financial Data for the years ended December 31, 2024 and 2023

For a discussion of our results of operations for the years ended December 31, 2024 and 2023, please see our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 27, 2025.

Liquidity and Capital Resources

As of December 31, 2025, our working capital, defined as total current assets less total current liabilities, was $92.0 million, compared to $145.4 million as of December 31, 2024. On a consolidated basis, cash and cash equivalents were $42.2 million as of December 31, 2025, compared to cash, cash equivalents and short-term investments of $114.9 million as of December 31, 2024. As of December 31, 2025 and 2024, cash and cash equivalents held by our foreign subsidiaries were $6.7 million and $13.3 million, respectively.

Our material cash requirements include payments for capital expenditures, principal and interest payments on our debt, cash needed to fund our operating activities, and other purchase obligations to support our operations. Refer to Part II, Item 8 of this Annual Report on Form 10‑K, Note 6, “Leases,” Note 7, “Debt,” and Note 8, “Commitments and Contingencies,” for details relating to our material cash requirements for leasing arrangements, including future maturities of operating lease liabilities, debt, and purchase obligations, 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 including repayment of long-term debt and corresponding interest for at least the next twelve months, and thereafter for the foreseeable future.

Term Loan and Revolving Credit Facility

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

The Credit Agreement provides for (a) a revolving credit facility in an aggregate principal amount of $45 million (the “Revolving Credit Facility”) and (b) a term loan facility in an aggregate principal amount of $25 million (the “Term Loan” and together with the Revolving Credit Facility, the “Credit Facilities”).

The principal of the Revolving Credit facility is due as a balloon payment of $45.0 million in March 2030. The principal of the Term Loan is due in the amount of $0.6 million quarterly and a balloon payment of $13.1 million in March 2030.

Borrowings under the Credit Facilities will accrue interest at rates equal, at our election, to (i) the alternate base rate, which is defined as the highest of (a) the federal funds effective rate in effect from time to time plus 0.50%, (b) the prime commercial lending rate in effect from time to time, and (c) the daily simple secured overnight financing rate (“SOFR”) plus 1.00% or (ii) SOFR, plus, in each case, the applicable margin. The applicable margin for the Revolving Credit Facility borrowings bearing interest at the alternate base rate ranges from 1.00% to 1.75%, and the applicable margin for Revolving Credit Facility borrowings bearing interest based on the SOFR ranges from 2.00% to 2.75%, in each case, based on our consolidated total net leverage ratio as of the most recently ended fiscal quarter. The applicable margin for Term Loan borrowings bearing interest at the alternate base rate ranges from 1.00% to 1.75%, and the applicable margin for Term Loan borrowings bearing interest based on the SOFR ranges from 2.00% to 2.75%, in each case, based on our consolidated total net leverage ratio as of the most recently ended fiscal quarter. We will pay an annual commitment fee during the term of the Credit Agreement at a rate per annum equal to 0.50% for any undrawn portion of the Revolving Credit Facility. The weighted average annual interest rate on our outstanding debt was 6.47% for the year ended December 31, 2025.

The Credit Agreement contains customary representations and warranties, as well as customary affirmative and negative covenants. Negative covenants include, among others, restrictions on the incurrence of debt, the incurrence of liens, the making of investments and distributions, dividends, and stock buy-backs. In addition, the Credit Agreement requires that we maintain a consolidated total net leverage ratio of not greater than 3.00 to 1.00, and a consolidated fixed charge coverage ratio of not less than 1.25 to 1.00. As of December 31, 2025, we were in compliance with the covenants contained in the Credit Agreement.

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

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

The Company used the amounts borrowed under the Credit Facilities to finance, in part, the purchase price paid for the acquisition of SecureWise.

Repurchase of Company’s Common Stock

On April 11, 2022, our Board of Directors adopted a stock repurchase program (the “2022 Program”) to repurchase up to $35.0 million of our 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. During the year ended December 31, 2024, we repurchased 201,561 shares under the 2022 Program at an average price of $34.23 per share for an aggregate total price of $6.9 million. In total, we 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.

On April 15, 2024, our Board of Directors adopted a new repurchase program (the “2024 Program”) to repurchase up to $40.0 million of our common stock both on the open market and in privately negotiated transactions, including through Rule 10b5-1 plans, from time to time, over the next two years from the adoption date. The actual timing and amount of repurchases are subject to business and market conditions, corporate and regulatory requirements, stock price, acquisition opportunities and other factors. The 2024 Program does not obligate us to acquire a minimum amount of shares and may be modified, suspended or terminated without prior notice. During the year ended December 31, 2025, we repurchased 12,500 shares under the 2024 Program at an average price of $19.55 per share for an aggregate total price of $0.2 million. As of December 31, 2025, approximately $39.8 million remained available under the 2024 Program authorization.

Consolidated Statements of Cash Flows Data

(In thousands)

46

Net Cash Provided by Operating Activities

Cash flows provided by operating activities 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.

We expect cash from our operating activities to fluctuate due to the level of our business activities, the timing of billings and payments terms as set forth in our agreements with our customers, the timing of cash disbursements to our vendors and settlement of other liabilities. Net cash flows provided by operating activities were $24.1 million for the year ended December 31, 2025, compared to $9.7 million for the year ended December 31, 2024. The increase in cash flows provided by operating activities between the periods was driven primarily by higher cash collections from customers driven by revenue growth, partially offset by (i) an increase in bonus payments under the Company’s bonus plan, (ii) increases in payments of personnel-related costs and vendor invoices, including business acquisition-related costs, and (iii) payments of interest related to bank loans.

Net Cash Used in Investing Activities

Net cash used in investing activities was $137.4 million for the year ended December 31, 2025, compared to $5.9 million for the year ended December 31, 2024.

For the year ended December 31, 2025, net cash used in investing activities primarily related to (i) $129.7 million payments for the acquisition of SecureWise, net of cash acquired, (ii) $32.8 million purchases and prepayments of property and equipment primarily related to our DirectScan systems, and (iii) $2.9 million purchases of short-term investments, partially offset by $27.5 million proceeds from maturities and sales of short-term investments, and $0.6 million recovery from previously written-off property and equipment.

For the year ended December 31, 2024, cash used in investing activities primarily related to purchases of short-term investments of $54.3 million, purchases of and prepayments for property and equipment of $17.8 million primarily related to our DirectScan systems, and the purchase of a convertible promissory note of $2.0 million, partially offset by proceeds from maturities and sales of short-term investments of $68.1 million.

Net Cash Provided by (Used in) Financing Activities

Net cash provided by financing activities was $64.6 million for the year ended December 31, 2025, compared to net cash used in financing activities of $11.2 million for the year ended December 31, 2024.

For the year ended December 31, 2025, net cash provided by financing activities 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) $6.2 million in cash payments for taxes related to net share settlement of equity awards, (ii) $1.9 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.

For the year ended December 31, 2024, net cash used in financing activities primarily consisted of $8.5 million in cash payments for taxes related to net share settlement of equity awards and $6.9 million for the repurchase of shares of our common stock, partially offset by $4.2 million of proceeds from our employee stock purchase plan and exercise of stock options.

Off-Balance Sheet Agreements

As of December 31, 2025, we do not have any off-balance sheet arrangements, investments in special purpose entities or undisclosed borrowings or debt.

Related Party Transactions

See Note 15, “Strategic Partnership Agreement with Advantest and Related Party Transactions” of the Notes to Consolidated Financial Statements (Item 8 of Part II of this Annual Report on Form 10‑K) for a discussion on related party transactions between the Company and Advantest.

Contractual Obligations

The following table summarizes the total amounts due in future periods under our debt agreements at nominal value, operating lease obligations and other known contractual obligations as of December 31, 2025 (in thousands):

(1) See Note 6, “Leases” and Note 7, “Debt” of the Notes to Consolidated Financial Statements (Item 8 of Part II of this Annual Report on Form 10‑K) for further discussion.

(2) Purchase obligations consist of agreements to purchase goods and services entered in the ordinary course of business.

(3) The contractual obligation table above excludes liabilities for uncertain tax positions of $3.2 million, which are not practicable to assign to any particular years due to the inherent uncertainty of the tax positions. See Note 11, “Income Taxes” of the Notes to Consolidated Financial Statements (Item 8 of Part II of this Annual Report on Form 10‑K) for further discussion.

The following discusses our exposure to market risk related to changes in interest rates and foreign currency exchange rates. We do not currently own any equity investments, nor do we expect to own any in the foreseeable future. This discussion contains forward-looking statements that are subject to risks and uncertainties. Actual results could vary materially as a result of a number of factors.

Interest Rate Risk. Our exposure to market risk for changes in interest rates relates primarily to our investment portfolio and long-term debt as described below.

As of December 31, 2025, we had cash and cash equivalents of $42.2 million. Cash and cash equivalents consisted of cash and highly liquid money market instruments. We would not expect our operating results or cash flows to be affected to any significant degree by the effect of a sudden change in market interest on our portfolio. A hypothetical increase in market interest rates of 100 basis points from the market rates in effect as of December 31, 2025, would cause the fair value of our investments to decrease by an immaterial amount which would not have significantly impacted our financial position or results of operations.

As of December 31, 2025, and periodically throughout the year, we have maintained cash balances in various operating accounts in excess of federally insured limits. We limit the amount of credit exposure to any financial institution by evaluating the creditworthiness of the financial institutions with which we invest and investing through more than one financial institution.

We are exposed to interest rate risk through our variable rate debt. As of December 31, 2025, we had $68.1 million of debt that is subject to variable interest rates that are based on the daily simple secured overnight financing rate (“SOFR”) or an alternate base rate. Refer to Note 7, “Debt” of the Notes to Consolidated Financial Statements (Item 8 of Part II of this Annual Report on Form 10‑K) for details relating to the debt. If the rates were to increase by 100 basis points from the rates in effect as of December 31, 2025, our interest expense on the variable rate debt would increase by an average of $0.4 million annually. There are inherent limitations in the sensitivity analysis presented, primarily due to the assumptions that interest rate changes would be instantaneous, while SOFR changes regularly. We do not currently hedge our interest rate risks but may determine to do so in the future. We will continue to monitor our exposure to interest rate risk.

Foreign Currency and Exchange Risk. Certain of our cash balances, receivables and payables for our international offices are denominated in the local currency, including the Euro, Yen, Chinese Yuan, New Taiwan Dollar and Canadian Dollar. Therefore, some of our activities including a portion of our revenues and operating expenditures are subject to foreign currency risks. We also have intercompany transactions with and between certain of our subsidiaries of differing functional currencies, resulting in foreign transaction gains or losses based on our period-end exchange rates. Due to potential volatility of currency exchange rates, we cannot predict the effect of exchange fluctuations on our business. During the years ended December 31, 2025, 2024 and 2023, we have not entered into any foreign currency exchange contracts and currently do not expect to enter into foreign currency exchange contracts for trading or speculative purposes.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial and accounting officer, evaluated the effectiveness of our “disclosure controls and procedures” as defined in Exchange Act Rules 13a‑15(e) and 15d‑15(e) as of December 31, 2025, in connection with the filing of this Annual Report on Form 10‑K. Based on that evaluation, as of December 31, 2025, our principal executive officer and principal financial and accounting officer concluded that our disclosure controls and procedures were effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and is accumulated and communicated to our management as appropriate to allow timely decisions regarding required disclosure.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a‑15(f) and 15d‑15(f) under the Exchange Act, for the Company. Our management, with the participation of our principal executive officer and principal financial and accounting officer, assessed the effectiveness of our internal control over financial reporting as of December 31, 2025. This evaluation was based on the framework established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on our assessment under the COSO framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2025.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2025, has been audited by BPM LLP, the Company's independent registered public accounting firm, as stated in their report which appears in this Annual Report on Form 10-K.

On March 7, 2025, we completed the acquisition of SecureWise, which is operated under its own set of internal controls. We are currently integrating this acquisition into our control environment. In executing this integration, we are analyzing, evaluating and, where appropriate, making changes in controls and procedures in a manner commensurate with the size, complexity and scale of operations subsequent to the acquisition. We expect to complete the SecureWise integration in fiscal year 2026. SEC guidance permits management to omit an assessment of an acquired business’ internal control over financial reporting from management’s assessment of internal control over financial reporting for a period not to exceed one year from the date of the acquisition. Accordingly, management has not assessed SecureWise internal control over financial reporting as of December 31, 2025.

Changes in Internal Control over Financial Reporting

Other than as described above, there were no changes in internal control over financial reporting during the fourth quarter ended December 31, 2025, which has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.