PDFS PDF Solutions Inc

 PDF Solutions, Inc. (Nasdaq: PDFS), a leading provider of unified data and cloud analytics for the semiconductor ecosystem, today announced financial results for its first quarter ended March 31, 2023.

Highlights of First Quarter 2023 Financial Results

• Record quarterly revenues of $40.8 million for the first quarter of 2023, up 22% over last year’s comparable quarter
• GAAP gross margin of 71% and Non-GAAP gross margin of 75% for the first quarter of 2023
• GAAP diluted earnings per share (EPS) of $0.01 and non-GAAP diluted EPS of $0.19 for the first quarter of 2023

Total revenues for the first quarter of 2023 were $40.8 million, compared to $40.5 million for the fourth quarter of 2022 and $33.5 million for the first quarter of 2022. Analytics revenue for the first quarter of 2023 was $36.3 million, compared to $36.0 million for the fourth quarter of 2022 and $30.4 million for the first quarter of 2022. Integrated Yield Ramp revenue for the first quarter of 2023 was $4.4 million, compared to $4.5 million for the fourth quarter of 2022 and $3.1 million for the first quarter of 2022.

GAAP gross margin for the first quarter of 2023 was 71%, compared to 71% for the fourth quarter of 2022 and 66% for the first quarter of 2022.

Non-GAAP gross margin for the first quarter of 2023 was 75%, compared to 74% for the fourth quarter of 2022 and 69% for the first quarter of 2022.

On a GAAP basis, net income for the first quarter of 2023 was $0.4 million, or $0.01 per diluted share, compared to a net income of $0.5 million, or $0.01 per diluted share, for the fourth quarter of 2022, and net loss of $4.2 million, or ($0.11) per diluted share, for the first quarter of 2022.

Non-GAAP net income for the first quarter of 2023 was $7.3 million, or $0.19 per diluted share, compared to a non-GAAP net income of $7.4 million, or $0.19 per diluted share, for the fourth quarter of 2022, and non-GAAP net income of $3.7 million, or $0.09 per diluted share, for the first quarter of 2022.

Cash, cash equivalents and short-term investments at March 31, 2023 were $133.5 million.

Financial Outlook and Recent Accomplishments

In spite of macroenvironment headwinds and a high revenue base from the strong performance in 2022, we expect 2023 revenue growth rate to approach mid-teens percent on a year-over-year basis.

“Thanks to all our employees, contractors, and customers for our continued performance. We are pleased with how we are positioned for 2023 and look forward to serving our customers,” said John Kibarian, CEO and President.

Conference Call

As previously announced, PDF Solutions will discuss these results on a live conference call beginning at 2:00 p.m. Pacific Time / 5:00 p.m. Eastern Time today. To participate on the live call, analysts and investors should pre-register at: https://register.vevent.com/register/BId7bcb15025e048339c411669c6a1c0e1. Registrants will receive dial-in information and a unique passcode to access the call. We encourage participants to dial-in into the call ten minutes ahead of scheduled time. The teleconference will also be webcast simultaneously on the Company’s website at https://ir.pdf.com/webcasts. A replay of the conference call webcast will be available after the call on the Company’s investor relations website. A copy of this press release, including the disclosure and reconciliation of certain non-GAAP financial measures to the comparable GAAP measures, which non-GAAP measures may be used periodically by PDF Solutions’ management when discussing financial results with investors and analysts, will also be available on PDF Solutions’ website at http://www.pdf.com/press-releases following the date of this release.

First Quarter 2023 Financial Commentary Available Online

A Management Report reviewing the Company’s first quarter 2023 financial results will be furnished to the Securities and Exchange Commission on Form 8-K and published on the Company’s website at http://ir.pdf.com/financial-reports. Analysts and investors are encouraged to review this commentary prior to participating in the conference call.

Information Regarding Use of Non-GAAP Financial Measures

In addition to providing results that are determined in accordance with Accounting Principles Generally Accepted in the United States of America (GAAP), PDF Solutions also provides certain non-GAAP financial measures. Non-GAAP gross profit and margin exclude stock-based compensation expense and the amortization of acquired technology. Non-GAAP net income excludes the effects of certain non-recurring items, expenses related to an arbitration proceeding for a disputed contract with a customer, stock-based compensation expense, amortization of acquired technology and other acquired intangible assets, and their related income tax effects, as applicable, as well as adjustments for the valuation allowance for deferred tax assets. These non-GAAP financial measures are used by management internally to measure the Company’s profitability and performance. PDF Solutions’ management believes that these non-GAAP measures provide useful supplemental information to investors regarding the Company’s ongoing operations in light of the fact that none of these categories of expense has a current effect on the future uses of cash (with the exception of expenses related to an arbitration proceeding for a disputed contract with a customer and acquisition-related costs) nor do they impact the generation of current or future revenues. These non-GAAP results should not be considered an alternative to, or a substitute for, GAAP financial information, and may differ from similarly titled non-GAAP measures used by other companies. In particular, these non-GAAP financial measures are not a substitute for GAAP measures of income or loss as a measure of performance, or to cash flows from operating, investing and financing activities as a measure of liquidity. Since management uses these non-GAAP financial measures internally to measure profitability and performance, PDF Solutions has included these non-GAAP measures to give investors an opportunity to see the Company’s financial results as viewed by management. A reconciliation of the comparable GAAP financial measures to the non-GAAP financial measures is provided at the end of the Company’s condensed consolidated financial statements presented below.

Forward-Looking Statements

The press release and the planned conference call include forward-looking statements regarding the Company’s future expected business performance and financial results, including expectations about total revenue growth that are subject to future events and circumstances. Actual results could differ materially from those expressed in these forward-looking statements. Risks and uncertainties that could cause results to differ materially include, but are not limited to, risks associated with: expectations about the effectiveness of our business and technology strategies; expectations regarding recent and future acquisitions; current semiconductor industry trends; expectations of continued 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; the impact of global economic trends and rising inflation and interest rates; the provision of technology and services prior to the execution of a final contract; the continuing impact of the coronavirus (COVID-19) on the semiconductor industry and on the Company’s operations or supply and demand for the Company’s products; supply chain disruptions; the success of the Company’s strategic growth opportunities and partnerships; the Company’s ability to successfully integrate acquired businesses and technologies; whether the Company can successfully convert backlog into revenue; customers’ production volumes under contracts that provide Gainshare royalties; possible impacts from the evolving trade regulatory environment and geopolitical tensions; our ability to obtain additional financing if needed; and other risks set forth in PDF Solutions’ periodic public filings with the Securities and Exchange Commission, including, without limitation, its Annual Report on Form 10-K for the year ended December 31, 2022, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K and amendments to such reports. The forward-looking statements made in the conference call are made as of the date hereof, and PDF Solutions does not assume any obligation to update such statements nor the reasons why actual results could differ materially from those projected in such statements.

About PDF Solutions

PDF Solutions (NASDAQ: PDFS) provides comprehensive data solutions designed to empower organizations across the semiconductor ecosystem to improve the yield and quality of their products and operational efficiency for increased profitability. The Company’s products and services are used by Fortune 500 companies across the semiconductor ecosystem to achieve smart manufacturing goals by connecting and controlling equipment, collecting data generated during manufacturing and test operations, and performing advanced analytics and machine learning to enable profitable, high-volume manufacturing.

Founded in 1991, PDF Solutions is headquartered in Santa Clara, California, with operations across North America, Europe, and Asia. The Company (directly or through one or more subsidiaries) is an active member of SEMI, INEMI, TPCA, IPC, the OPC Foundation, and DMDII. For the latest news and information about PDF Solutions or to find office locations, visit https://www.pdf.com.

PDF Solutions and the PDF Solutions logo are trademarks or registered trademarks of PDF Solutions, Inc. or its subsidiaries.

PDF SOLUTIONS, INC.CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)(In thousands)

		March 31,				December 31,
		2023				2022
ASSETS
Current assets:
Cash and cash equivalents		$	114,382			$	119,624
Short-term investments			19,146				19,557
Accounts receivable, net			47,048				42,164
Prepaid expenses and other current assets			12,565				12,063
Total current assets			193,141				193,408
Property and equipment, net			41,723				40,174
Operating lease right-of-use assets, net			5,712				6,002
Goodwill			14,123				14,123
Intangible assets, net			17,177				18,055
Deferred tax assets, net			90				64
Other non-current assets			7,322				6,845
Total assets		$	279,288			$	278,671
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	6,289			$	6,388
Accrued compensation and related benefits			13,869				16,948
Accrued and other current liabilities			5,868				5,581
Operating lease liabilities ‒ current portion			1,572				1,412
Deferred revenues ‒ current portion			26,322				26,019
Billings in excess of recognized revenues			342				1,852
Total current liabilities			54,262				58,200
Long-term income taxes payable			2,637				2,622
Non-current operating lease liabilities			5,597				5,932
Other non-current liabilities			3,367				1,905
Total liabilities			65,863				68,659
Stockholders’ equity:
Common stock and additional paid-in-capital			454,313				447,421
Treasury stock at cost			(137,810	)			(133,709	)
Accumulated deficit			(100,795	)			(101,150	)
Accumulated other comprehensive loss			(2,283	)			(2,550	)
Total stockholders’ equity			213,425				210,012
Total liabilities and stockholders’ equity		$	279,288			$	278,671

PDF SOLUTIONS, INC.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)(In thousands, except per share amounts)

		Three months ended
		March 31,				December 31,			March 31,
		2023				2022			2022
Revenues:
Analytics		$	36,326			$	36,058		$	30,426
Integrated yield ramp			4,433				4,465			3,072
Total revenues			40,759				40,523			33,498
Costs and Expenses:
Costs of revenues			11,904				11,791			11,529
Research and development			13,051				14,360			14,089
Selling, general, and administrative			15,645				12,724			10,839
Amortization of acquired intangible assets			325				324			314
Interest and other expense (income), net			(911	)			250			(310	)
Income (loss) before income tax expense			745				1,074			(2,963	)
Income tax expense			390				591			1,187
Net income (loss)		$	355			$	483		$	(4,150	)
Net income (loss) per share:
Basic		$	0.01			$	0.01		$	(0.11	)
Diluted		$	0.01			$	0.01		$	(0.11	)
Weighted average common shares used to calculate net income (loss) per share:
Basic			37,737				37,379			37,606
Diluted			38,859				38,276			37,606

PDF SOLUTIONS, INC.RECONCILIATION OF GAAP GROSS MARGIN TO NON-GAAP GROSS MARGIN (UNAUDITED)(In thousands)

		Three months ended
		March 31,			December 31,			March 31,
		2023			2022			2022
GAAP
Total revenues		$	40,759		$	40,523		$	33,498
Costs of revenues			11,904			11,791			11,529
GAAP gross profit		$	28,855		$	28,732		$	21,969
GAAP gross margin			71	%		71	%		66	%
Non-GAAP
GAAP gross profit		$	28,855		$	28,732		$	21,969
Adjustments to reconcile GAAP to non-GAAP gross margin:
Stock-based compensation expense			964			737			728
Amortization of acquired technology			553			553			553
Non-GAAP gross profit		$	30,372		$	30,022		$	23,250
Non-GAAP gross margin			75	%		74	%		69	%

PDF SOLUTIONS, INC.RECONCILIATION OF GAAP NET INCOME (LOSS) TO NON-GAAP NET INCOME (UNAUDITED)(In thousands, except per share amounts)

		Three months ended
		March 31,				December 31,			March 31,
		2023				2022			2022
GAAP net income (loss)		$	355			$	483		$	(4,150	)
Adjustments to reconcile GAAP net income (loss) to non-GAAP net income:
Stock-based compensation expense			4,884				5,088			5,553
Amortization of acquired technology under costs of revenues			553				553			553
Amortization of other acquired intangible assets			325				324			314
Expenses of arbitration (1)			2,133				852			451
Tax impact of valuation allowance for deferred tax assets and reconciling items (2)			(980	)			98			937
Non-GAAP net income		$	7,270			$	7,398		$	3,658
GAAP net income (loss) per diluted share		$	0.01			$	0.01		$	(0.11	)
Non-GAAP net income per diluted share		$	0.19			$	0.19		$	0.09
Weighted average common shares used in GAAP net income (loss) per diluted share calculation			38,859				38,276			38,580
Weighted average common shares used in non-GAAP net income per diluted share calculation			38,859				38,276			38,580

(1)   Represents expenses related to an arbitration proceeding over a disputed customer contract, which expenses are expected to continue until the arbitration is resolved.

(2)   The difference between the GAAP and non-GAAP income tax provisions is primarily due to the valuation allowance on a GAAP basis and non-GAAP adjustments. For example, on a GAAP basis, the Company does not receive a deferred tax benefit for foreign tax credits or R&D credits after valuation allowance. The Company’s non-GAAP tax rate and resulting non-GAAP tax expense is not calculated with a full U.S. federal or state valuation allowance due to the Company’s cumulative non-GAAP income and management’s conclusion that it is more likely than not to utilize its net deferred tax assets (DTAs). Each reporting period, management evaluates the need for a valuation allowance and may place a valuation allowance against its U.S. net DTAs on a non-GAAP basis if it concludes it is more likely than not that it will not be able to utilize some or all of its US DTAs on a non-GAAP basis. 

Company Contacts:
Adnan Raza		Sonia Segovia
Chief Financial Officer		Investor Relations
Tel: (408) 516-0237		Tel: (408) 938-6491
Email: adnan.raza@pdf.com		Email: sonia.segovia@pdf.com