PDFS PDF Solutions Inc

PDF Solutions, Inc. (Nasdaq: PDFS), a leading provider of comprehensive data solutions for the semiconductor ecosystem, today announced financial results for its fourth quarter and year ended December 31, 2023.

Financial Highlights of Fourth Quarter 2023

• Analytics revenues of $39.1 million, up 9% over last year’s comparable quarter
• Quarterly revenues of $41.1 million, up slightly over last year’s comparable quarter
• GAAP gross margin of 68% and Non-GAAP gross margin of 72%
• GAAP diluted earnings per share of $0.02 and non-GAAP diluted earnings per share of $0.15

Financial Highlights of Full Year 2023

• Analytics revenues of $152.1 million, up 17% over last year
• Record total full year revenues of $165.8 million, up 12% over last year
• GAAP gross margin of 69% and Non-GAAP gross margin of 73%
• GAAP diluted earnings per share of $0.08 and non-GAAP diluted earnings per share of $0.73
• Cash, cash equivalents and short-term investments of $135.5 million

Total revenues for the fourth quarter of 2023 were $41.1 million, compared to $42.4 million for the third quarter of 2023 and $40.5 million for the fourth quarter of 2022. Analytics revenue for the fourth quarter of 2023 was $39.1 million, compared to $39.5 million for the third quarter of 2023 and $36.1 million for the fourth quarter of 2022. Integrated Yield Ramp revenue for the fourth quarter of 2023 was $2.0 million, compared to $2.9 million for the third quarter of 2023 and $4.5 million for the fourth quarter of 2022. Total revenues for the full year 2023 and 2022 were $165.8 million and $148.5 million, respectively.

GAAP gross margin for the fourth quarter of 2023 was 68%, compared to 66% for the third quarter of 2023 and 71% for the fourth quarter of 2022. GAAP gross margin for the full year 2023 and 2022 was 69% and 68%, respectively.

Non-GAAP gross margin for the fourth quarter of 2023 was 72%, compared to 70% for the third quarter of 2023 and 74% for the fourth quarter of 2022. Non-GAAP gross margin for the full year 2023 and 2022 was 73% and 71%, respectively.

On a GAAP basis, net income for the fourth quarter of 2023 was $0.9 million, or $0.02 per diluted share, compared to a net loss of $5.0 million, or ($0.13) per diluted share, for the third quarter of 2023, and a net income of $0.5 million, or $0.01 per diluted share, for the fourth quarter of 2022. On a GAAP basis, net income for the full year 2023 was $3.1 million, or $0.08 per diluted share, compared to a net loss of $3.4 million, or ($0.09) per diluted share, for the full year 2022.

Non-GAAP net income for the fourth quarter of 2023 was $5.7 million, or $0.15 per diluted share, compared to a non-GAAP net income of $8.0 million, or $0.20 per diluted share, for the third quarter of 2023, and non-GAAP net income of $7.4 million, or $0.19 per diluted share, for the fourth quarter of 2022. Non-GAAP net income for the full year 2023 was $28.5 million, or $0.73 per diluted share, compared to a non-GAAP net income of $22.9 million, or $0.60 per diluted share, for the full year 2022.

Cash, cash equivalents and short-term investments as of December 31, 2023 were $135.5 million.

Financial Outlook

The Company’s outlook for the year reflects both the short-term weakness in the semiconductor industry and the strength of our pipeline, bolstered by the macro trends of distributed manufacturing, energy electrification, and AI, which can drive significant growth. As a result, management expects revenue for the first half of 2024 to be flat over the comparable period of the prior year and for revenue for the second half of the year to grow by 20% over the comparable period of the prior year.

“Thanks to all our employees, contractors, and customers for the strong 2023 performance. Despite the macroenvironment, we are pleased with how we are positioned for 2024 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/BI866d4f79f40f459e872fa6cec8a6dc7a. Registrants will receive dial-in information and a unique passcode to access the call. We encourage participants to dial into the call ten minutes ahead of the 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.

Fourth Quarter and Full Year 2023 Financial Commentary Available Online

A Management Report reviewing the Company’s fourth quarter and full year 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 MeasuresIn addition to providing results that are determined in accordance with Generally Accepted Accounting Principles 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 stock-based compensation expense, amortization of acquired technology and other acquired intangible assets, and the effects of certain non-recurring items, such as expenses related to an arbitration proceeding for a disputed contract with a customer, acquisition-related costs, proceeds from the sale of previously written-off property and equipment, 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 StatementsThe 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 for 2024, 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 and integration concerns 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; supply chain disruptions; the success of the Company’s strategic growth opportunities and partnerships; customers’ production volumes under contracts that provide Gainshare royalties; possible impacts from the evolving trade regulatory environment and geopolitical tensions; 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. The Company has not filed its Form 10-K for the year ended December 31, 2023. As a result, all financial results described in this earnings release should be considered preliminary, and are subject to change to reflect any necessary adjustments or changes in accounting estimates, that are identified prior to the time the Company files its Form 10-K.

About PDF SolutionsPDF Solutions (NASDAQ: PDFS) provides comprehensive data solutions designed to empower organizations across the semiconductor and electronics 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 and electronics 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)

		December 31,
		2023				2022
ASSETS
Current assets:
Cash and cash equivalents		$	98,978			$	119,624
Short-term investments			36,544				19,557
Accounts receivable, net			44,904				42,164
Prepaid expenses and other current assets			17,422				12,063
Total current assets			197,848				193,408
Property and equipment, net			37,338				40,174
Operating lease right-of-use assets, net			4,926				6,002
Goodwill			15,029				14,123
Intangible assets, net			15,620				18,055
Deferred tax assets, net			157				64
Other non-current assets			19,218				6,845
Total assets		$	290,136			$	278,671
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	2,561			$	6,388
Accrued compensation and related benefits			14,800				16,948
Accrued and other current liabilities			4,633				5,581
Operating lease liabilities ‒ current portion			1,529				1,412
Deferred revenues ‒ current portion			25,750				26,019
Billings in excess of recognized revenues			1,570				1,852
Total current liabilities			50,843				58,200
Long-term income taxes			2,972				2,622
Non-current operating lease liabilities			4,657				5,932
Other non-current liabilities			2,718				1,905
Total liabilities			61,190				68,659
Stockholders’ equity:
Common stock and additional paid-in capital			473,301				447,421
Treasury stock at cost			(143,923	)			(133,709	)
Accumulated deficit			(98,045	)			(101,150	)
Accumulated other comprehensive loss			(2,387	)			(2,550	)
Total stockholders’ equity			228,946				210,012
Total liabilities and stockholders’ equity		$	290,136			$	278,671

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

		Three months ended												Year ended
		December 31,				September 30,				December 31,				December 31,				December 31,
		2023				2023				2022				2023				2022
Revenues:
Analytics		$	39,128			$	39,497			$	36,058			$	152,085			$	130,480
Integrated yield ramp			1,997				2,853				4,465				13,750				18,069
Total revenues			41,125				42,350				40,523				165,835				148,549
Costs and Expenses:
Costs of revenues			13,194				14,282				11,791				51,749				47,907
Research and development			12,308				13,113				14,360				50,736				56,126
Selling, general, and administrative			16,194				15,611				12,724				62,216				45,338
Amortization of acquired intangible assets			306				328				324				1,285				1,270
Interest and other expense (income), net			(1,020	)			(2,018	)			250				(5,020	)			(2,562	)
Income before income taxes			143				1,034				1,074				4,869				470
Income tax benefit (expense)			744				(6,006	)			(591	)			(1,764	)			(3,899	)
Net income (loss)		$	887			$	(4,972	)		$	483			$	3,105			$	(3,429	)
Net income (loss) per share:
Basic		$	0.02			$	(0.13	)		$	0.01			$	0.08			$	(0.09	)
Diluted		$	0.02			$	(0.13	)		$	0.01			$	0.08			$	(0.09	)
Weighted average common shares used to calculate net income (loss) per share:
Basic			38,269				38,187				37,379				38,015				37,309
Diluted			38,814				38,187				38,276				38,937				37,309

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

		Three months ended												Year ended
		December 31,				September 30,				December 31,				December 31,				December 31,
		2023				2023				2022				2023				2022
GAAP
Total revenues		$	41,125			$	42,350			$	40,523			$	165,835			$	148,549
Costs of revenues			13,194				14,282				11,791				51,749				47,907
GAAP gross profit		$	27,931			$	28,068			$	28,732			$	114,086			$	100,642
GAAP gross margin			68	%			66	%			71	%			69	%			68	%
Non-GAAP
GAAP gross profit		$	27,931			$	28,068			$	28,732			$	114,086			$	100,642
Adjustments to reconcile GAAP to non-GAAP gross margin:
Stock-based compensation expense			1,147				1,120				737				4,169				2,974
Amortization of acquired technology			586				574				553				2,266				2,213
Non-GAAP gross profit		$	29,664			$	29,762			$	30,022			$	120,521			$	105,829
Non-GAAP gross margin			72	%			70	%			74	%			73	%			71	%

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

		Three months ended											Year ended
		December 31,				September 30,				December 31,			December 31,				December 31,
		2023				2023				2022			2023				2022
GAAP net income (loss)		$	887			$	(4,972	)		$	483		$	3,105			$	(3,429	)
Adjustments to reconcile GAAP net income (loss) to non-GAAP net income:
Stock-based compensation expense			5,923				5,999				5,088			21,484				19,649
Amortization of acquired technology under costs of revenues			586				574				553			2,266				2,213
Amortization of other acquired intangible assets			306				328				325			1,285				1,270
Expenses of arbitration (1)			75				226				852			2,600				1,895
Acquisition-related costs (2)			—				33				—			209				—
Proceeds from the sale of previously written-off property and equipment			—				(105	)			—			(105	)			—
Tax impact of valuation allowance for deferred tax assets and reconciling items (3)			(2,060	)			5,904				98			(2,374	)			1,326
Non-GAAP net income		$	5,717			$	7,987			$	7,399		$	28,470			$	22,924
GAAP net income (loss) per diluted share		$	0.02			$	(0.13	)		$	0.01		$	0.08			$	(0.09	)
Non-GAAP net income per diluted share		$	0.15			$	0.20			$	0.19		$	0.73			$	0.60
Weighted average common shares used in GAAP net income (loss) per diluted share calculation			38,814				38,187				38,276			38,937				37,309
Weighted average common shares used in non-GAAP net income per diluted share calculation			38,814				38,992				38,276			38,937				38,130

________________(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) Acquisition-related costs are incremental expenses related to business or asset acquisition transaction(s). These expenses may include consulting, legal and other fees. For the year ended December 31, 2023, the charges were related to the acquisition of Lantern Machinery Analytics, Inc.(3) 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 research and development credits after the 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 U.S. 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