The following discussion of our financial condition and results of operations contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact may be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “could,” “projected,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “target” or “continue,” the negative effect of terms like these or other similar expressions. These statements include, but are not limited to, statements related to: the Company’s business strategy and objectives; the Company’s intellectual property and proprietary software, information and technology; the Company’s sales and marketing strategy, expectations regarding strategic alliances and relationships; investments in research and development; industry trends; macroeconomic factors, inventories, and demand; changing export controls and sanctions; U.S. administrative initiatives; investments in semiconductor manufacturing; geopolitical tensions and conflicts; fluctuations in the Company’s quarterly results; and other statements identified by words such as “could,” “expects,” “intends,” “may,” “plans,” “potential,” “should,” “will,” “would,” or similar expressions and the negatives of those terms. These statements are subject to future events, circumstances, uncertainties, and risks that could cause results to differ materially, including risks associated with: the effectiveness of the Company’s business and technology strategies; semiconductor industry trends and competition; rates of adoption of the Company’s solutions by new and existing customers; project milestones or delays and performance criteria achieved; cost and schedule of new product development and investments in research and development; the continuing impact of macroeconomic conditions, including inflation, changing interest rates and tariffs, energy prices, the evolving trade regulatory environment and geopolitical tensions, and other trends impacting the semiconductor industry, the Company’s customers, operations, and supply and demand for its products; supply chain disruptions; changes in laws and regulations, including recent tax and data privacy laws and regulations, or the interpretation or enforcement thereof; the success of the Company’s strategic growth opportunities and partnerships; recent and future acquisitions, strategic alliances and relationships and the Company’s ability to successfully integrate acquired businesses and technologies; whether the Company can successfully convert backlog into revenue; customers’ production volumes under contracts that provide Gainshare; the sufficiency of the Company’s cash resources and anticipated funds from operations; the Company’s ability to obtain additional financing if needed; the Company’s ability to use support and updates for certain open-source software; and other risks and uncertainties discussed in the Company’s filings with the Securities and Exchange Commission (“SEC”). These forward-looking statements are only predictions. Forward-looking statements are based on current expectations and projections about future events and are inherently subject to a variety of risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from those anticipated or projected. All forward-looking statements and other information included in this document are based on information available to us on the date of filing and we further caution investors that our business and financial performance are subject to substantial risks and uncertainties. We assume no obligation to update publicly any such forward-looking statements. In evaluating these statements, you should specifically consider various factors, including the risk factors set forth in Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on February 24, 2026 (the “Annual Report”). All references to “we,” “us,” “our,” “PDF,” “PDF Solutions” or “the Company” refer to PDF Solutions, Inc.
Cimetrix, CV, DirectScan, Exensio, PDF Solutions, Sapience, secureWISE, and logos for the same, are trademarks or registered trademarks of PDF Solutions, Inc. or its subsidiaries.
Overview
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. Volume-based revenue is derived from Cimetrix runtime licenses, secureWISE data, and variable/royalty fees associated with CV systems (sometimes referred to as Gainshare). Our products and services have been sold to integrated device manufacturers (“IDMs”), fabless semiconductor companies, foundries, out-sourced semiconductor assembly and test (“OSATs”), capital equipment manufacturers, and system houses.
We are headquartered in Santa Clara, California and operate worldwide with offices in Canada, China, France, Germany, Italy, Japan, Korea, and Taiwan.
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, increased energy prices, and increased fears of a global recession. Inventories of semiconductor devices remain elevated in some instances. With high inventories and soft demand for some product segments, some semiconductor fab utilization rates are also low and semiconductor capital equipment orders have been impacted for some vendors and market segments. As a result, some purchase cycles, especially for enterprise software and capital equipment and particularly with respect to larger deals, have lengthened in recent years and may continue to do so. Also, we have contractors located in the West Bank and in Israel, who are providing software development and customer technical support services. We have developed contingency plans to use alternative resources to continue serving customers, if needed. Any escalations in these areas could lead to disruptions or reductions in international trade, deter or prevent purchasing activity of customers, and negatively impact our development timelines and customer support (with respect to the conflicts in the Middle East) or China sales (with respect to U.S.-P.R.C. tensions) and financial results in general (with respect to global tensions).
The logic foundry market at the leading-edge nodes, such as 7nm, 5nm, and smaller, underwent significant change over the past few years. The leading foundry continues to dominate market share. This trend will likely continue to impact our Characterization services business on these nodes. We expect most logic foundries to invest in derivatives of older process nodes, such as 28nm and 14nm, to extract additional value as many of their customers will not move to advanced nodes due to either technological barriers or restrictive economics. Foundries that participate at leading edge nodes are expected to continue to invest in new technologies such as memory, packaging, and multi-patterned and extreme ultraviolet lithography, as well as new innovations in process control and variability management. We expect China’s investment in semiconductors to continue. Compliance with changing U.S. export restrictions limit our possible business with Chinese semiconductor manufacturers on advanced nodes. Further, trade conflict through exchange of tariffs and other retaliatory actions are expected to impact worldwide supply chains, increase prices and put downward pressure on economic activity, and could negatively affect our future sales in various geographic markets. The uncertainty caused by these regulations and the potential for additional future restrictions could negatively affect our future sales, including in but not limited to the People’s Republic of China (“P.R.C.”) market. Some customers in the P.R.C. have expressed concern about the potential for supply chain disruption due to the U.S. government’s changing export controls impacting their purchase, or in some case restricting their ability to purchase, certain U.S. goods. Based on our current assessments, we expect the near-term impact of these evolving trade restrictions on our business to be limited.
Secondary Offering
In May 2026, we completed a registered offering of an aggregate of 5,253,554 shares of our common stock at a price of $44.00 per share. The shares sold consisted of 3,306,924 shares held by a selling stockholder and 1,946,630 shares newly issued by us. The net proceeds to us from the sale of shares of our common stock were approximately $81.8 million, after deducting $3.9 million of underwriting discounts and commissions. We did not receive any proceeds from the sale of shares by the selling stockholder.
Financial Highlights
Financial highlights for the three months ended June 30, 2026, are as follows:
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Total revenues were $61.5 million, an increase of $9.8 million, or 19%, compared to the three months ended June 30, 2025. Platform revenue was $49.1 million, an increase of $5.9 million, or 14%, compared to the three months ended June 30, 2025. The increase in Platform revenue was due to higher revenue from DirectScan systems, partially offset by decreases in revenue from CV systems, Exensio software and services, and secureWISE systems. Volume-based revenue was $12.4 million, an increase of $3.9 million, or 45%, compared to the three months ended June 30, 2025, primarily due to an increase in revenue from Gainshare and Cimetrix runtime licenses.
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Costs of revenues increased by $4.2 million, compared to the three months ended June 30, 2025, primarily due to increases in hardware costs (including cost of leased asset under sales-type leases), facilities and IT-related costs (including depreciation and amortization expense of property and equipment), personnel-related costs, and software license and maintenance costs, partially offset by a decrease in subcontractor costs.
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Net income was $4.3 million, compared to a net income of $1.1 million for the three months ended June 30, 2025. The increase in net income was primarily attributable to an increase in total revenues and a net favorable fluctuation in foreign currency exchange rates, partially offset by increases in costs of revenues, operating expenses, and income taxes, and a decrease in other income. The increase in overall costs and operating expenses was primarily due to increases in hardware costs (including cost of leased asset under sales-type leases), facilities and IT-related costs (including depreciation and amortization of property and equipment), personnel-related expenses, software licenses and maintenance costs, and legal fees related to the arbitration proceeding over a disputed customer contract, partially offset by an increase in capitalized software development costs.
Financial highlights for the six months ended June 30, 2026, are as follows:
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Total revenues were $121.7 million, an increase of $22.2 million, or 22%, compared to the six months ended June 30, 2025. Platform revenue was $100.1 million, an increase of $19.5 million, or 24%, compared to the six months ended June 30, 2025. The increase in Platform revenue was primarily due to higher revenue from DirectScan, CV, and secureWISE systems. Volume-based revenue was $21.6 million, an increase of $2.6 million, or 14%, compared to the six months ended June 30, 2025, primarily due to an increase in revenue from Cimetrix runtime licenses and secureWISE data usage.
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Costs of revenues increased by $8.2 million, compared to the six months ended June 30, 2025, primarily due to increases in hardware costs (including cost of leased assets under sales-type leases), personnel-related costs, facilities and IT-related costs (including depreciation and amortization expense of property and equipment), software license and maintenance costs, and amortization of acquired technology.
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Net income was $9.1 million, compared to a net loss of $1.9 million for the six months ended June 30, 2025. The increase in net income was primarily attributable to an increase in total revenues and a net favorable fluctuation in foreign currency exchange rates, partially offset by increases in costs of revenues, operating expenses, interest expense from our long-term debt, and income tax expense, and decreases in interest income from cash and cash equivalents and other income. The increase in overall costs and operating expenses was primarily driven by increases in personnel-related expenses, hardware costs (including cost of leased assets under sales-type leases), facilities and IT-related costs (including depreciation and amortization of property and equipment), software licenses and maintenance costs, amortization of acquired intangible assets, travel expenses, subcontractor fees, and costs and expenses related to the operation of SecureWise, partially offset by a decrease in acquisition-related and integration costs and an increase in capitalized software development costs.
Critical Accounting Policies
Our discussion and analysis of our financial conditions, results of operations and cash flows are based on our condensed consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States of America. Our preparation of these unaudited condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. The most significant estimates and assumptions relate to revenue recognition, valuation of long-lived assets including goodwill and intangible assets, stock-based compensation and the realization of deferred tax assets (“DTAs”). Actual amounts may differ from such estimates under different assumptions or conditions.
For additional information about our critical accounting policies, see Note 1, Basis of Presentation and Summary of Significant Accounting Policies, and Note 2, Revenue from Contracts with Customers to our unaudited condensed consolidated financial statements in this Quarterly Report on Form 10‑Q and Part II Item 7**,**Management’s Discussion and Analysis of Financial Condition and Results of Operation, under the heading of “Critical Accounting Estimates” in our Annual Report. There were no material changes during the six months ended June 30, 2026, to the items that we disclosed as our critical accounting policies and estimates in Part II, Item 7 of the Annual Report.
Recent Accounting Pronouncements and Accounting Changes
See Note 1, Basis of Presentation and Summary of Significant Accounting Policies, to our unaudited condensed consolidated financial statements in this Quarterly Report on Form 10‑Q, for a description of recent accounting pronouncements and accounting changes, including the expected dates of adoption and estimated effects, if any, on our condensed consolidated financial statements.
Results of Operations
Discussion of Financial Data for the Three and Six Months ended June 30, 2026 and 2025
Revenues, Costs of Revenues, and Gross Margin
Beginning with our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on February 24, 2026, we updated our presentation of revenue categories. 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):
| (Dollars in thousands) | Three Months Ended June 30, 2026 | Three Months Ended June 30, 2025 | Change$ | Change% | Six Months Ended June 30, 2026 | Six Months Ended June 30, 2025 | Change$ | Change% |
|---|---|---|---|---|---|---|---|---|
| Revenues: | ||||||||
| Platform | $49,130 | $43,200 | $5,930 | 14% | $100,066 | $80,521 | $19,545 | 24% |
| Volume-based | 12,399 | 8,528 | 3,871 | 45% | 21,593 | 18,985 | 2,608 | 14% |
| Total revenues | 61,529 | 51,728 | 9,801 | 19% | 121,659 | 99,506 | 22,153 | 22% |
| Costs of revenues | 19,107 | 14,886 | 4,221 | 28% | 36,045 | 27,841 | 8,204 | 29% |
| Gross profit | $42,422 | $36,842 | $5,580 | 15% | $85,614 | $71,665 | $13,949 | 19% |
| Gross margin | 69% | 71% | 70% | 72% | ||||
| Platform revenue as a percentage of total revenues | 80% | 84% | 82% | 81% | ||||
| Volume-based revenue as a percentage of total revenues | 20% | 16% | 18% | 19% |
Platform Revenue
Platform revenue increased $5.9 million for the three months ended June 30, 2026, compared to the same period in 2025. The increase in Platform revenue was primarily due to higher revenue from DirectScan systems, partially offset by decreases in revenue from CV systems, Exensio software and services, and secureWISE systems.
Platform revenue increased $19.5 million for the six months ended June 30, 2026, compared to the same period in 2025. The increase in Platform revenue was primarily due to higher revenue from DirectScan, CV, and secureWISE systems.
Volume-based Revenue
Volume-based revenue increased $3.9 million for the three months ended June 30, 2026, compared to the same period in 2025, primarily due to an increase in revenue from Gainshare and Cimetrix runtime licenses.
Volume-based revenue increased $2.6 million for the six months ended June 30, 2026, compared to the same period in 2025, primarily due to an increase in revenue from Cimetrix runtime licenses and secureWISE data usage.
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 lease), 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.
Costs of revenues increased $4.2 million for the three months ended June 30, 2026, compared to the same period in 2025, primarily due to (i) a $2.8 million increase in hardware costs (including cost of leased assets under sales-type leases), (ii) a $0.9 million increase in facilities and IT-related costs (including depreciation and amortization expense of property and equipment), (iii) a $0.5 million increase in personnel-related costs due to increased headcount, employee benefits expense, and higher bonus expense, and (iv) a $0.4 million increase in software license and maintenance costs, partially offset by a $0.5 million decrease in subcontractor costs.
Costs of revenues increased $8.2 million for the six months ended June 30, 2026, compared to the same period in 2025, primarily due to (i) a $2.8 million increase in hardware costs (including cost of leased assets under sales-type leases), (ii) a $2.3 million increase in personnel-related costs due to increased headcount and higher bonus expense, (iii) a $1.4 million increase in facilities and IT-related costs (including depreciation and amortization expense of property and equipment), (iv) a $1.3 million increase in software license and maintenance costs, (v) a $0.3 million increase in amortization of acquired technology, and (vi) a $0.2 million increase in travel expense, partially offset by a $0.4 million decrease in subcontractor costs.
Gross Margin
Gross margin for the three months ended June 30, 2026, decreased two percentage points to 69%, compared to 71% for the same period in 2025, primarily driven by higher costs of revenues compared to the increase in revenues.
Gross margin for the six months ended June 30, 2026, decreased two percentage points to 70%, compared to 72% for the same period in 2025, primarily driven by higher costs of revenues compared to the increase in revenues.
Operating Expenses:
Research and Development
| (Dollars in thousands) | Three Months Ended June 30, 2026 | Three Months Ended June 30, 2025 | Change$ | Change% | Six Months Ended June 30, 2026 | Six Months Ended June 30, 2025 | Change$ | Change% |
|---|---|---|---|---|---|---|---|---|
| Research and development | $17,316 | $14,913 | $2,403 | 16% | $35,644 | $29,541 | $6,103 | 21% |
| As a percentage of total revenues | 28% | 29% | 29% | 30% |
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 $2.4 million for the three months ended June 30, 2026, compared to the same period in 2025, primarily due to (i) a $1.2 million increase in personnel-related costs due to increased headcount, higher bonus expense, and employee benefits expense, partially offset by an increase in capitalized software development costs, (ii) a $0.8 million increase in facilities and IT-related costs (including depreciation and amortization expense of property and equipment), and (iii) a $0.3 million increase in software license and maintenance costs.
Research and development expenses increased $6.1 million for the six months ended June 30, 2026, compared to the same period in 2025, primarily due to (i) a $3.7 million increase in personnel-related costs due to increased headcount, higher bonus expense, and employee benefits expense, partially offset by an increase in capitalized software development costs, (ii) a $1.3 million increase in facilities and IT-related costs (including depreciation and amortization expense of property and equipment), (iii) a $0.6 million increase in subcontractor costs, and (iv) a $0.4 million increase in software license and maintenance costs.
We anticipate our expenses in research and development will fluctuate in absolute dollars from period to period as a result of the size and the timing of product development projects.
Selling, General, and Administrative
| (Dollars in thousands) | Three Months Ended June 30, 2026 | Three Months Ended June 30, 2025 | Change$ | Six Months Ended June 30, 2026 | Six Months Ended June 30, 2025 | Change$ | ||
|---|---|---|---|---|---|---|---|---|
| Selling, general, and administrative | $18,984 | $19,744 | $(760) | )% | $36,476 | $43,116 | $(6,640) | )% |
| As a percentage of total revenues | 31% | 38% | 30% | 43% |
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 decreased $0.8 million for the three months ended June 30, 2026, compared to the same period in 2025, primarily due to (i) a $1.2 million decrease in personnel-related costs mainly due to lower compensation expense allocated to selling and marketing activities, and (ii) a $0.3 million decrease in facilities and IT-related costs (including depreciation and amortization expense of property and equipment), partially offset by (i) a $0.4 million increase in legal expenses related to the arbitration proceeding over a disputed customer contract, and (ii) a $0.2 million increase in software licenses and maintenance costs.
Selling, general, and administrative expenses decreased $6.6 million for the six months ended June 30, 2026, compared to the same period in 2025, primarily due to (i) a $4.5 million decrease in acquisition-related and integration costs related to the acquisition of SecureWise, (ii) a $2.6 million decrease in personnel-related costs mainly due to lower compensation expense allocated to selling and marketing activities, and stock-based compensation expense, and (iii) a $0.9 million decrease in facilities and IT-related costs, including shipping costs and third-party cloud-services related costs, partially offset by (i) a $0.5 million increase in legal expenses related to the arbitration proceeding over a disputed customer contract, (ii) a $0.3 million increase in software licenses and maintenance costs, (iii) a $0.3 million increase in travel expenses, and (iv) a $0.3 million increase in subcontractor expenses.
We anticipate our selling, general, and administrative expenses will fluctuate in absolute dollars from period to period as a result of cost control initiatives and to support increased selling efforts in the future.
Amortization of Acquired Intangible Assets
| (Dollars in thousands) | Three Months Ended June 30, 2026 | Three Months Ended June 30, 2025 | Change$ | Six Months Ended June 30, 2026 | Six Months Ended June 30, 2025 | Change$ | Change% | |
|---|---|---|---|---|---|---|---|---|
| Amortization of acquired intangible assets | $1,058 | $1,068 | $(10) | )% | $2,117 | $1,446 | $671 | 46% |
Amortization of acquired intangible assets represents amortization expense on intangibles assets acquired from business combinations in prior years.
The amortization expense for the three months ended June 30, 2026, was flat compared to the same period in 2025.
The increase in amortization expense for the six months ended June 30, 2026, compared to the same period in 2025, was a result of the amortization of intangible assets acquired in the SecureWise acquisition in March 2025.
Interest Expense
| (Dollars in thousands) | Three Months Ended June 30, 2026 | Three Months Ended June 30, 2025 | Change$ | Six Months Ended June 30, 2026 | Six Months Ended June 30, 2025 | Change$ | Change% | |
|---|---|---|---|---|---|---|---|---|
| Interest expense | $(1,106) | $(1,242) | $(136) | )% | $(2,195) | $(1,553) | $642 | 41% |
Interest expense is from our long-term debt that was used in financing the acquisition of SecureWise in March 2025, and the related amortization of debt discount and issuance costs.
Interest expense slightly decreased by $0.1 million for the three months ended June 30, 2026, compared to the same period in 2025, primarily due to slightly lower interest rates on our long-term debt and lower outstanding debt balance.
Interest expense increased $0.6 million for the six months ended June 30, 2026, compared to the same period in 2025, was driven by a full two quarters of interest on long-term debt in 2026, compared to approximately four months of interest in 2025 following the drawdown of long-term debt in March 2025.
Interest Income and Other, Net
| (Dollars in thousands) | Three Months Ended June 30, 2026 | Three Months Ended June 30, 2025 | Change$ | Change% | Six Months Ended June 30, 2026 | Six Months Ended June 30, 2025 | Change$ | Change% |
|---|---|---|---|---|---|---|---|---|
| Interest income and other, net | $666 | $196 | $470 | 240% | $1,258 | $1,066 | $192 | 18% |
Interest income and other, net, primarily consists of interest income and foreign currency transaction exchange gains and losses.
Interest income and other, net increased $0.5 million for the three months ended June 30, 2026, compared to the same period in 2025, primarily due to a $1.1 million net favorable fluctuations in foreign currency exchange rates, and a $0.2 million increase in interest income from cash and cash equivalents, partially offset by a $0.6 million decrease in other income due to a one-time recovery from previously written-off property and equipment in the second quarter of 2025.
Interest income and other, net increased $0.2 million for the six months ended June 30, 2026, compared to the same period in 2025, primarily due to a $1.7 million net favorable fluctuations in foreign currency exchange rates, partially offset by a $0.7 million decrease in interest income primarily due to a lower average balance of cash and cash equivalents during the first half of 2026, and $0.6 million decrease in other income due to a one-time recovery from previously written-off property and equipment in the second quarter of 2025.
Income Tax Benefit (Expense)
| (Dollars in thousands) | Three Months Ended June 30, 2026 | Three Months Ended June 30, 2025 | Change$ | Change% | Six Months Ended June 30, 2026 | Six Months Ended June 30, 2025 | Change$ | Change% |
|---|---|---|---|---|---|---|---|---|
| Income tax benefit (expense) | $(353) | $1,075 | $1,428 | 133% | $(1,378) | $1,039 | $2,417 | 233% |
We had an income tax expense for three and six months ended June 30, 2026 and income tax benefit for comparative prior year periods. Income tax expense increased for the three and six months ended June 30, 2026, compared to the same periods in 2025, primarily due to the impact of enacted U.S. federal tax legislation, changes in the foreign, federal and state taxes and year-to-date recognition of worldwide pre-tax income in relation to their forecasted amounts for the full year.
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 accounting principles generally accepted in the United States of America and the effectiveness of our tax planning strategies.
We have historically maintained a full valuation allowance against all the domestic DTAs because it was more likely than not that the DTAs will not be realized. The valuation allowance was approximately $69.9 million as of June 30, 2026, and December 31, 2025, which was related to U.S. net federal and state DTAs. The worldwide net DTA balances were immaterial as of June 30, 2026, and December 31, 2025. We intend to continue maintaining a full valuation allowance on the DTAs until sufficient evidence indicates its DTAs will be realized. However, considering our current assessment of the probability of maintaining profitability, there is a reasonable possibility that in the short term, a portion, or all, of the valuation allowance would no longer be prudent. As such, we may release a portion, or all, of the valuation allowance against DTAs within the next 12 months. This release, if any, would result in the recognition of certain DTAs and a decrease to income tax expense for the period such release is recorded. We are currently evaluating both quantitative and qualitative factors that may impact the valuation allowance assessment. Therefore, the exact timing and amount of the valuation allowance release are subject to our profitability and projected ability to utilize our tax attributes, among other factors.
Liquidity and Capital Resources
As of June 30, 2026, our working capital, defined as total current assets less total current liabilities, was $179.3 million, compared to $92.0 million as of December 31, 2025. Total cash and cash equivalents were $114.9 million as of June 30, 2026, compared to $42.2 million as of December 31, 2025. As of June 30, 2026, and December 31, 2025, cash and cash equivalents held by our foreign subsidiaries were $12.3 million and $6.7 million, respectively.
Our material cash requirements include payments for capital expenditures, principal and interest payments on our debt, cash needed to fund our operating activities, operating lease payments, and purchase obligations to support our operations. Additionally, we also use our available cash to pay for employees withholding tax obligations related to net share settlement of equity awards issued under the Company’s equity plan. Refer to Part I, Item 1, Financial Statements, Note 4, Leases, Note 5, Debt, Note 7, Employee Benefit Plans, and Note 12, Commitments and Contingencies for details relating to our material cash requirements for leasing arrangements, including future maturities of operating lease liabilities, debt, taxes related to net share settlement of equity awards, and purchase obligations, respectively. As we continuously grow our DirectScan systems business, we will also continuously invest in our DirectScan systems assets and our capital expenditures for the foreseeable future will be mainly related to the construction of these assets.
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.
Secondary Offering
In May 2026, we completed a registered offering of an aggregate of 5,253,554 shares of the Company's common stock at a price of $44.00 per share. The shares sold consisted of 3,306,924 shares held by a selling stockholder and 1,946,630 shares newly issued by us. The net proceeds to us from the sale of shares of our common stock were approximately $81.8 million, after deducting $3.9 million of underwriting discounts and commissions. We did not receive any proceeds from the sale of shares by the selling stockholder.
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 $45.0 million (the “Revolving Credit Facility”) and (b) a term loan facility in an aggregate principal amount of $25.0 million (the “Term Loan” and together with the Revolving Credit Facility, the “Credit Facilities”). The principal of the Revolving Credit Facility is due asaballoon 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.
On April 23, 2026, we entered into a First Amendment to Credit Agreement (the “Amendment”) with the Lenders and the Agent to amend the Credit Agreement which increased the Revolving Credit Facility to an aggregate principal amount of $75.0 million. Under this facility, $30.0 million is available to us for drawdown as of June 30, 2026.
As of June 30, 2026, our outstanding total debt, net of debt discounts and issuance costs, was $66.5 million, compared to $67.0 million as of December 31, 2025. We believe we have operating flexibility, cash flow, and access to capital markets to meet scheduled payments of our debt.
As of June 30, 2026, we were in compliance with all of the terms and conditions of the Credit Agreement, and management believes, based on its current financial projections, that we will be in compliance with our covenants over the next twelve months. See Note 6, Debt to our unaudited condensed consolidated financial statements in this Quarterly Report on Form 10‑Q.
Repurchase of Company’s Common Stock
In May 2026, the Board Directors adopted a new stock repurchase program (the “2026 Program”) to repurchase up to $50.0 million of the Company’s common stock both on the open market and in privately negotiated transactions, including through Rule 10b5-1 plans, from time to time, over the next two years from the adoption date. As of June 30, 2026, $50.0 million remained available under the 2026 Program. See details of our stock repurchase program in Note 6, Stockholders’ Equity to our condensed consolidated financial statements in this Quarterly Report on Form 10‑Q.
Cash Flow Data
The following table summarizes our cash flows for the periods presented:
| (In thousands) | Six Months Ended June 30, 2026 | Six Months Ended June 30, 2025 | $ Change |
|---|---|---|---|
| Net cash flows provided by (used in): | |||
| Operating activities | $18,075 | $3,425 | $14,650 |
| Investing activities | (24,582) | (124,246) | 99,664 |
| Financing activities | 79,190 | 66,645 | 12,545 |
| Effect of exchange rate changes on cash and cash equivalents | (20) | 997 | (1,017) |
| Net change in cash and cash equivalents | $72,663 | $(53,179) | $125,842 |
Net Cash Flows Provided by Operating Activities
Net cash flows provided by operating activities were $18.1 million for the six months ended June 30, 2026, compared to $3.4 million for the same period in 2025. The increase in net cash flows provided by operating activities between the periods was primarily driven by (i) higher collections from customers, (ii) the timing of payments under the Company’s bonus and incentive plans between the comparative periods, and (iii) a decrease in payments for business acquisition-related costs and income taxes, partially offset by an increase in payments of interest related to bank loans and decrease in interest income.
Net Cash Flows Used in Investing Activities
For the six months ended June 30, 2026, net cash flows used in investing activities were $24.6 million related to purchases and prepayments of property and equipment, mainly related to our DirectScan systems assets and capitalized software development costs related to the next generation of Exensio Analytics Platform and Sapience Manufacturing Hub.
For the six months ended June 30, 2025, net cash flows used in investing activities were $124.2 million, which were primarily related to $129.7 million payments for the acquisition of SecureWise, net of cash acquired, and $16.7 million purchases and prepayments of property and equipment primarily related to our DirectScan systems assets, partially offset by $21.6 million proceeds from maturities and sales, net of purchases of short-term investments, and $0.6 million recovery from previously written-off property and equipment.
Net Cash Flows Provided by Financing Activities
For the six months ended June 30, 2026, net cash flows provided by financing activities were $79.2 million, which primarily consisted of $81.8 million proceeds from shares issued under secondary offering, net of underwriting discounts and commissions of $3.9 million, and $2.3 million proceeds from shares issued under our equity plans, partially offset by $4.1 million in payments for taxes related to net share settlement of equity awards, and $0.6 million repayment of long-term debt.
For the six months ended June 30, 2025, net cash provided by financing activities were $66.6 million, which primarily consisted of $69.6 million proceeds from long-term debt, net of debt discount, that was used in financing the acquisition of SecureWise, and $2.2 million proceeds from shares issued under our equity plans, partially offset by (i) $3.5 million in payments for taxes related to net share settlement of equity awards, (ii) $0.9 million payments of debt issuance costs, and (iii) $0.6 million repayment of long-term debt.
Related Party Transactions
Refer to Note 13, Related Party Transactions, to our condensed consolidated financial statements in this Quarterly Report on Form 10‑Q, for the discussion about related party transactions between the Company and Advantest (as defined therein).
Off-Balance Sheet Agreements
As of June 30, 2026, we do not have any off-balance sheet arrangements, investments in special purpose entities or undisclosed borrowings or debt.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
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 June 30, 2026, we had cash and cash equivalents of $114.9 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 rates on our portfolio. A hypothetical increase in market interest rates of 100 basis points from the market rates in effect as of June 30, 2026, would cause the fair value of these investments to decrease by an immaterial amount which would not have significantly impacted our financial position or results of operations.
As of June 30, 2026, 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 June 30, 2026, we had $67.5 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 5 – Debt for details relating to the debt. If the rates were to increase by 100 basis points from the rates in effect as of June 30, 2026, 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. To date, 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.
Item 4. Controls and Procedures
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 June 30, 2026, in connection with the filing of this Quarterly Report on Form 10‑Q. Based on that evaluation as of June 30, 2026, 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.
Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal control over financial reporting during the quarter ended June 30, 2026, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Refer to Note 12, Commitments and Contingencies to our condensed consolidated financial statements in this Quarterly Report on Form 10-Q, for information regarding our legal proceedings.
As of the date of this Quarterly Report on Form 10-Q, there have been no material changes from the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on February 24, 2026. Any of such factors could result in a significant or material adverse effect on our results of operations or financial conditions. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Repurchase of Shares of Company Equity Securities
There was no stock repurchase during the second quarter of 2026.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Insider Adoption or Termination of Trading Arrangements
During the quarter ended June 30, 2026, none of our directors or officers adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as those terms are defined in Regulation S-K, Item 408.
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| Exhibit Number | Exhibit Description | Incorporated by ReferenceForm | Incorporated by ReferenceFiling Date | Incorporated by ReferenceExhibit Number | SEC File No. | Provided Herewith |
|---|---|---|---|---|---|---|
| 3.01 | Third Amended and Restated Certificate of Incorporation of PDF Solutions, Inc., and Certificate of Amendment to Third Amended and Restated Certificate of Incorporation of PDF Solutions, Inc. | 10-Q | 8/8/2024 | 3.01 | 000-31311 | |
| 3.02 | Amended and Restated Bylaws of PDF Solutions, Inc. | 8-K | 5/1/2019 | 3.1 | 000-31311 | |
| 10.01 | PDF Solutions, Inc.’s Eleventh Amended and Restated 2011 Stock Incentive Plan | 8-K | 6/18/2026 | 10.1 | 000-31311 | |
| 10.02 | PDF Solutions, Inc.’s Third Amended and Restated 2021 Employee Stock Purchase Plan | 8-K | 6/18/2026 | 10.2 | 000-31311 | |
| 10.03 | Form of Stock Unit Agreement under PDF Solutions, Inc.’s 2011 Stock Incentive Plan† | X | ||||
| 31.01 | Certification of the principal executive officer pursuant to Exchange Act Rules 13a‑14(a) and 15d‑14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | X | ||||
| 31.02 | Certification of the principal financial and accounting officer pursuant to Exchange Act Rules 13a‑14(a) and 15d‑14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | X | ||||
| 32.01 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* | X | ||||
| 32.02 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* | X | ||||
| 101 | The following financial statements from the Company’s Quarterly Report on Form 10‑Q for the quarter ended June 30, 2026, formatted in Inline XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations and Comprehensive Income, (iii) Condensed Consolidated Statements of Stockholders’ Equity, (iv) Condensed Consolidated Statements of Cash Flows and (v) Notes to Condensed Consolidated Financial Statements, tagged as blocks of text and including detailed tags. ** | X | ||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
† Indicates management contract or compensatory plan or arrangement.
- Furnished, and not filed.
** Submitted electronically herewith.
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