EMPLOYEE BENEFIT PLANS

9 Months Ended

Sep. 30, 2024

EMPLOYEE BENEFIT PLANS:

EMPLOYEE BENEFIT PLANS

6. EMPLOYEE BENEFIT PLANS

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

Employee Stock Purchase Plan

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

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

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

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

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

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

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

Stock Incentive Plans

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

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

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

Stock-Based Compensation

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

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

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

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

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

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

	Nine Months Ended September 30,
	2024		2023
Intrinsic value of options exercised	$	124	$	608

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

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

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

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

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

	Nine Months Ended September 30,
	2024		2023
Fair value of restricted stock units vested	$	25,483	$	31,162

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