UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

For the quarterly period ended JuneSeptember 30, 2015

OR

For the transition period from                    to                    

Commission File No. 000-51072

CASCADE MICROTECH, INC.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (503) 601-1000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes  ¨    No  x

The number of shares of common stock outstanding as of August 3,October 30, 2015 was 16,633,242.15,855,869.

CASCADE MICROTECH, INC.

INDEX TO FORM 10-Q

PART I - FINANCIAL INFORMATION

Cascade Microtech, Inc.

Condensed Consolidated Balance Sheets

(Unaudited, In thousands, except per share amounts)

See accompanying Notes to Condensed Consolidated Financial Statements.

Cascade Microtech, Inc.

Condensed Consolidated Statements of Operations

(Unaudited, In thousands, except per share amounts)

See accompanying Notes to Condensed Consolidated Financial Statements.

Cascade Microtech, Inc.

Condensed Consolidated Statements of Comprehensive Income

(Unaudited, In thousands)

See accompanying Notes to Condensed Consolidated Financial Statements.

Cascade Microtech, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited, In thousands)

See accompanying Notes to Condensed Consolidated Financial Statements.

CASCADE MICROTECH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Basis of Presentation

The condensed consolidated financial information included herein has been prepared by Cascade Microtech, Inc. without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). However, such information reflects all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods. The financial information as of December 31, 2014 is derived from our 2014 Annual Report on Form 10-K. The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in our 2014 Annual Report on Form 10-K. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the full year.

Note 2. Inventories

Inventories are stated at the lower of cost or market, and include materials, labor and manufacturing overhead. Demonstration goods, which are included as a component of finished goods, represent inventory that is used for customer demonstration purposes. This inventory is typically sold after 12 to 18 months. We analyze the carrying value of our inventory quarterly, considering a combination of factors including, but not limited to, the following: forecasted sales or usage, historical usage rates, estimated service period, product end-of-life dates, estimated current and future market values, service inventory requirements and new product introductions. We estimate market value based on factors including, but not limited to, replacement cost and estimated resale value with declines in value below cost being recorded quarterly as a component of cost of sales, therefore establishing a new cost basis for the inventory.

Inventory charges were as follows (in thousands):

Inventories consisted of the following (in thousands):

Note 3. Net Income Per Share

The following table reconciles the shares used in calculating basic net income per share and diluted net income per share (in thousands):

Note 4. Product Warranty

We estimate a liability for costs to repair or replace products under warranty for periods ranging from 90 days to one year when the related product revenue is recognized. The liability for product warranties is calculated as a percentage of sales. The percentage is based on historical product repair costs. The liability for product warranties is included in Accrued liabilities on our Condensed Consolidated Balance Sheets.

Product warranty activity was as follows (in thousands):

Note 5. Goodwill and Intangible Assets

Goodwill

The change in goodwill was as follows (in thousands):

Intangible Assets

Intangible assets, net included the following (in thousands):

Intangible asset amortization is a component of Selling, general and administrative expense and was as follows (in thousands):

The estimated amortization of intangible assets is as follows over the next five years and thereafter (in thousands):

Note 6. Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):

Note 7. Stock-Based Compensation and Stock-Based Plans

In May 2015, our shareholders approved an increase of 800,000 shares in the number of shares approved for issuance pursuant to our 2010 Stock Incentive Plan (the(as amended, the “2010 Plan”) to a total of 3,669,600 shares. As of JuneSeptember 30, 2015, a total of 1,508,2091,464,634 shares remained available for future issuance pursuant to the 2010 Plan.

Stock-based compensation was included in our Condensed Consolidated Statements of Operations as follows (in thousands):

Stock Incentive Plans

Stock option activity for the first sixnine months of 2015 was as follows:

RSU activity for the first sixnine months of 2015 was as follows:

The performance-based RSUs will vest if new product revenue as a percentage of total revenue meets a certain target for the second half of 2017. If the target is met, the performance-based RSUs will be earned and vested in the first quarter of 2018 at between 50% and 100% of the total granted based upon the target achievement level. Stock-based compensation expense is recognized over the vesting period based on our determination of the probability of the awards being earned. As of JuneSeptember 30, 2015, we determined that the target was not probable of achievement, and accordingly, no expense was recognized.

As of JuneSeptember 30, 2015, total unrecognized stock-based compensation related to outstanding, but unvested, options and RSUs was $5.9$5.8 million, which will be recognized over the weighted average remaining vesting period of 2.52.3 years.

Employee Stock Purchase Plan

During the first sixnine months of 2015, we issued 36,542 shares of our common stock pursuant to our 2013 Employee Share Purchase Plan (the “2013 ESPP”) at a price of $9.13 per share, which represented a discount of $4.13 per share from the fair value of our common stock on the date of issuance. As of JuneSeptember 30, 2015, a total of 892,943 shares remained available for issuance pursuant to the 2013 ESPP.

Note 8. Segment Reporting

The segment data below is presented in the same manner that management currently organizes the segments for assessing certain performance trends. Our Chief Operating Decision Maker monitors the revenue streams and the operating income of our Systems segment and our Probes segment. We do not track our assets on a segment level, and, accordingly, that information is not provided.

Certain financial information by segment was as follows (dollars in thousands):

We had one customer which represented approximately 10% of our revenue for the three-month period ended June 30, 2015. However, noNo customer accounted for 10% or greater of our total revenue in the three-month periodperiods ended JuneSeptember 30, 2015 and 2014, or in the six-monthnine-month periods ended JuneSeptember 30, 2015 and 2014.

Note 9. Fair Value Measurements

Various inputs are used in determining the fair value of our financial assets and liabilities and are summarized into three broad categories:

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

The disclosures related to our financial assets and (liabilities) that are reported at fair value on a recurring basis are as follows (in thousands):

The fair value of our marketable securities is determined based on quoted market prices for similar or identical securities. Any unrealized gain or loss is recorded as a component of Accumulated other comprehensive loss in our Condensed Consolidated Balance Sheets.

The fair value of our forward contracts is based on quoted market prices for similar securities and is used for the purpose of determining any gain or loss on our foreign currency positions. We do not record the full value of the forward contracts on our Condensed Consolidated Balance Sheets. We record the net unrealized gain or loss in our Condensed Consolidated Statements of Operations as a component of Other income (expense).

The carrying values of Cash and cash equivalents, Restricted cash, Accounts receivable, Prepaid expenses and other, Accounts payable and Accrued liabilities approximate fair value due to their short maturities.

No changes were made to our valuation techniques during the first sixnine months of 2015.

Note 10. Stock Repurchase ProgramRepurchases

In November 2012,August 2015, our Board of Directors authorized a stock repurchase program under which we could repurchase up to $2.0$15.0 million of our common stock could be repurchased from time to timestock. This plan replaces, in its entirety, the open market or in privately negotiated transactions. In May 2014, our Board of Directors authorized an increase to theNovember 2012 stock repurchase program, which had approximately $2.5 million of an additional $2.0 million.repurchase authority remaining. We did not repurchase any shares during the first six months of 2015. During the third quarter of 2015, we repurchased a total of 336,429 shares at a weighted-average price of $13.94 per share, for a total purchase price of $4.7 million. As of JuneSeptember 30, 2015, $2.5$10.3 million remained available for stock repurchases under the program. This program authorized in August 2015, which does not have an expiration date.

See Note 14 for a discussion of shares repurchased in October 2015.

Note 11. Restructuring Accrual

Restructuring charges for the first sixnine months of 2015 relate to the consolidation of certain manufacturing, research and development operations, and the reorganization of business operations and the sales channel in Europe.

Restructuring charges for the first sixnine months of 2014 related to adjustments to our lease abandonment reserve.

Restructuring charges were as follows (in thousands):

The following tables summarize the charges, expenditures, and write-offs and adjustments related to our restructuring accruals (in thousands):

We expect to pay all accrued restructuring costs will be paid by the end of 2015.

Note 12. Line of Credit Amendment

In March 2015, we amended our $10.0 million line of credit agreement with JPMorgan Chase Bank, N.A. to extend the maturity date of the agreementour line of credit facility to March 5, 2018. All other terms remain the same. We did not have any amounts outstanding under the line of credit agreementfacility at JuneSeptember 30, 2015.

Note 13. Recent Accounting Guidance

ASU 2015-11

In July 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-11 “Simplifying the Measurement of Inventory (Topic 330).” ASU 2015-11 simplifies the accounting for the valuation of all inventory not accounted for using the last-in, first-out (“LIFO”) method by prescribing inventory be valued at the lower of cost and net realizable value. ASU 2015-11 is effective for public companies’ annual periods, including interim periods within those fiscal years, beginning after December 15, 2016 on a prospective basis. Early adoption is permitted. We do not expect the adoption of ASU 2015-11 to have a material effect on our financial position, results of operations or cash flows.

ASU 2015-05

In April 2015, the FASB issued ASU 2015-05, “Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40).” ASU 2015-05 provides guidance regarding the accounting for a customer’s fees paid in a cloud computing arrangement; specifically about whether a cloud computing arrangement includes a software license, and if so, how to account for the software license. ASU 2015-05 is effective for public companies’ annual periods, including interim periods within those fiscal years, beginning after December 15, 2015 on either a prospective or retrospective basis. Early adoption is permitted. We do not expect the adoption of ASU 2015-05 to have a material effect on our financial position, results of operations or cash flows.

ASU 2015-02

In February 2015, the FASB issued ASU 2015-02, “Consolidation (Topic 810).” ASU 2015-02 amends guidance regarding the consolidation of certain legal entities. ASU 2015-02 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015, with early adoption permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. We do not expect the adoption of ASU 2015-02 to have any effect on our financial position, results of operations or cash flows.

ASU 2015-01

In January 2015, the FASB issued ASU 2015-01, “Income Statement – Extraordinary and Unusual Items (Subtopic 225-20).” ASU 2015-01 simplifies income statement presentation by eliminating the concept of extraordinary items. ASU 2015-01 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015, with early adoption permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The adoption of ASU 2015-01 will not have any effect on our financial position, results of operations or cash flows.

ASU 2014-16

In November 2014, the FASB issued ASU 2014-16, “Derivatives and Hedging (Topic 815).” ASU 2014-16 addresses whether the host contract in a hybrid financial instrument issued in the form of a share should be accounted for as debt or equity. ASU 2014-16 is effective for annual periods and interim periods beginning after December 15, 2015. We do not currently have issued, nor are we investors in, hybrid financial instruments. Accordingly, we do not expect the adoption of ASU 2014-16 to have any effect on our financial position, results of operations or cash flows.

ASU 2014-12

In June 2014, the FASB issued ASU 2014-12, “Compensation – Stock Compensation (Topic 718).” ASU 2014-12 addresses accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period. ASU 2014-12 indicates that, in such situations, the performance target should be treated as a performance condition and, accordingly, the performance target should not be reflected in estimating the grant-date fair value of the award. Instead, compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved. ASU 2014-12 is effective for annual periods and interim periods beginning after December 15, 2015. We do not expect the adoption of ASU 2014-12 to have a material effect on our financial position, results of operations or cash flows.

ASU 2014-09

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606).” ASU 2014-09 clarifies the principles for recognizing revenue and develops a common revenue standard for GAAP and the International Accounting Standards Board. ASU 2014-09, as amended, is effective for annual and interim periods beginning on or after December 15, 2017. The standard permits the use of either the retrospective or cumulative effect transition method. We are evaluating the effect that ASU 2014-09 will have on our consolidated financial statements and related disclosures. We have not yet selected a transition method nor have we determined the effect of the standard on our ongoing financial reporting.

Note 14. Subsequent Events

On October 1, 2015, we paid the remaining $0.4 million of the deferred purchase price related to our acquisition of ATT Systems. Following this payment, we do not owe any additional amounts related to this acquisition.

During October 2015, we repurchased 514,300 shares of our common stock pursuant to our August 2015 stock repurchase program for an average price of $14.55 per share, or a total of $7.5 million. Following these repurchases, $2.8 million remained available for future repurchases under the program.

Forward-Looking Statements and Risk Factors

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact made in this Quarterly Report on Form10-Q are forward-looking including, among others, statements regarding: our future financial position and results of operations, including the estimated revenue for the thirdfourth quarter of 2015; the future impact of any off-balance sheet arrangements; our estimated costs to repair or replace products under warranty; our estimated amortization of intangible assets; our strategies and intentions and potential sources of funds regarding any acquisitions; potential future inventory charges; our accounting and tax policies and the impact of adopting accounting guidance on our financial position, results of operations or cash flows; the anticipated cash required for our fixed asset purchases for 2015; seasonality of our revenues and expected increases in revenue in the last month of each quarter; our ability to meet our cash requirements for the next 12 months and for the foreseeable future and the sources we anticipate using to meet these cash requirements. These statements relate to future events of our future financial performance. In some cases, you can identify forward-looking statements by terminology, including “intend,” “could,” “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “future,” or “continue,” the negative of these terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially from those expressed or implied such forward-looking statements. In evaluating these statements, you should specifically consider various factors, including: changes in demand for our products; changes in product mix; the timing of shipments, customer orders and capital expenditures; constraints on availability of components; excess or shortage of production capacity; potential failure of expected market opportunities to materialize; changes in foreign exchange rates; and other risks included in Item 1A to our Annual Report on Form 10-K for the year ended December 31, 2014 as filed with the Securities and Exchange Commission on March 12, 2015.

General

We design, develop, manufacture and market advanced wafer probing, thermal and reliability solutions for the electrical measurement and testing of high performance semiconductor devices. Our products enable precision on-wafer measurement of integrated circuits and are often used in the early phases of the development of semiconductor processes where the accuracy and repeatability of measurements is critical to achieving yield from advanced process nodes. Many of our products are also used in production applications to test semiconductor devices prior to completion of the manufacturing process. We design, manufacture and assemble our products in Beaverton, Oregon, North St. Paul, Minnesota, Munich, Germany, and Dresden, Germany and maintain global sales, service and support centers in North America, Germany, Japan, Taiwan, China and Singapore.

We operate in two business segments: Systems and Probes. Sales of our probe stations, thermal sub-systems and reliability test systems are included in the Systems segment and sales of our analytical probes and production probe cards are included in the Probes segment.

Our probe stations provide precise and accurate measurement of semiconductor electrical characteristics during device design or when optimizing the chip fabrication process. Our probe stations are highly configurable and are typically sold with various accessories, including our analytical probes, as well as accessories from third parties. In addition, we design and build custom probe stations to address the specific requirements of our customers. We also generate revenue through the sales of service contracts for our stations.

Our thermal sub-systems are designed and produced by ATT Systems, a wholly-owned subsidiary based in Munich, Germany, which we acquired in October 2013. ATT Systems produces thermal chuck systems used in probe stations, as well as specific systems for testing electronic components, hybrids, PCBs or other assemblies at the test site. Designed for thermal and mechanical stability and precision, our thermal sub-systems offer a broad range of modular solutions that can be used in new installations, as well as upgrades to existing equipment.

Ourwe acquired our reliability test products were acquired in July 2013 from Aetrium Incorporated and are designed and

manufactured in St. Paul, Minnesota.Incorporated. The 1164 Reliability Test System is a modular and scalable test platform that can be used in a wide range of reliability test applications, including Electro Migration (“EM”), Stress Migration (“SM”), Time Dependent Dielectric Breakdown (“TDDB”), Stress Induced Leakage Current (“SILC”) and Bias Temperature Instability (“BTI”). In addition to the 1164 Reliability Test System, we also offer the Symphony Wafer Level Reliability (“WLR”) Test System which, when combined with either an automated or semi-automated probe station, and our Conductor software, provides users with the necessary tools for automated and unattended WRL testing to shorten product development cycles and enhance product quality.

Our analytical probes are sold to serve as components of our probe stations, or, less often, to serve as components of test equipment manufactured by third parties. Our production probe cards are designed and sold for high-volume production test applications, ranging from very low current parametric testing to sophisticated, high-speed radio frequency integrated circuit (“RFIC”) testing. These probe cards are used in conjunction with third party equipment from manufacturers such as Advantest, Agilent and Teradyne.

Overview

Revenue and gross margin in the first sixnine months of 2015 increased to $67.8$103.6 million and 54.7%55.3%, respectively, compared to $66.7$99.4 million and 49.9%51.1%, respectively, in the first sixnine months of 2014, reflecting increased sales in the Probes segment and increased gross margins in both the Systems and Probes segments. Net income was $5.0$8.2 million in the first sixnine months of 2015 compared to $3.4$5.6 million in the first sixnine months of 2014.

Outlook

Based on our current backlog, projected bookings and scheduled shipments, we anticipate revenues will be in the range of $35$37 million to $39$40 million for the thirdfourth quarter of 2015.

Critical Accounting Policies and the Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that have become increasingly difficult to make in the current economic environment. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenue and expenses during the reporting period. The estimates we make may change in the future.

We reaffirm the critical accounting policies and estimates as reported in our Annual Report on Form 10-K for the year ended December 31, 2014, which was filed with the Securities and Exchange Commission on March 12, 2015.

Results of Continuing Operations

The following table sets forth our condensed consolidated statement of operations data for the periods indicated as a percentage of revenue.⁽¹⁾