PDFS - Earnings call transcript Q3 2020

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Operator

Good day, ladies and gentlemen, and welcome to the PDF Solutions Incorporated Conference Call to discuss the Company's Financial Results for the third quarter ended September 30, 2020. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded. I will now turn the call over to Joe Diaz of Lytham Partners. Thank you.

begin. may You

Joe Diaz

and on operator your all you of interest Thank call. thanks We participating today's PDF and appreciate for in you, solutions. to your ongoing time

indicated, I'm operator As Joe name of Partners. Partner Diaz. the Lytham a my Managing is

Consulting Relations for PDF. Investor the are Firm We

it www.pdf.com. If do release, have at the of today's a you available copy company's yet press not is website at

Reform be the during growth the course its of results Litigation will statements Private could call results of meaning made financial the PDF's materially. of solutions. statements forward-looking of rates including the Some conference within future for XXXX, regarding Act Securities this differ actual and PDF's demand performance, and

the to You and XX, on today. entitled December call The company Annual in fiscal XXXX update available the and Factors no on similar for to on PDF SEC stated Risk are statements year section them. forward-looking should based filings. The information obligation disclosures ended Report refer conference PDF's this subsequent risks XX-K on assumes Form to

is to will introduce, who President Chief Officer. Solutions' and John Chief Executive the PDF President Kibarian, Officer, Financial John, floor like Adnan and followed Executive Vice by be I'd Raza, yours. Now,

John Kibarian

for joining you today's call. us on Thank

semiconductor marketing long-term with After staying engineering more before for use on update. handing over posted. our will and been Adnan already third We our not the some where Advantest a commentary detail section validate partnership. results. with hope financial and of about Investors activities I in quarter for have it the join summarizing our please you about appreciate third today time you safe, If us go the we will time has quarter to the strategy. for the quarter, impressions quarter, to our the earnings that for highlight management your conclude I industry Highlights press seen our the release to the report to the quarter, business your provide website and our in are today families third of financial each taking and our

for one Exensio the there cloud IDMs, was in foundries, MOSFETs on they provided Contracts interest strong We quarter, a entities. the of had the but China, in foundry, everything end the system insights making everyone quarter yield novel renewed as ramp whom China. more We effectively. supplier, switches. did continued closed quarter effects the from fables, advanced in at equipment contracts ADAS our of activity customers to first high all manufacture includes pandemic, The slow quarter. customer continued chips and included a building business see the with the From with most power to activity strong bookings starting due list some cloud, increasing for start need solution. The perspective, and Exensio more in quarter, particularly and to them the found in the of product third automotive level as year even second a Exensio our well of for we China fabless for in the for in solution as companies' did a the Tier companies Analytics frequently in strength with

is with choice see instead the of contract for the perspective, and foundries additional We applications largely which due because that We been made From to a possible anticipated. our taking building trust license. E-probe. we Yield market PDF applications to can As the long-term than recognize continue the dampening to revenue growth capability our longer did potential. subscription slightly but for in time, long larger is Closing additional believe customers measurement as this negotiate and targets, for for for has fabless milestones DFI in effect of complete expand year-over-year, the these third although up servable Despite over return a work foundry a the tool. it period is we choice with investment Ramp, DFI, We analytics that QX XXXX. and as need quarter, unique term. the the we this we closely analytics down on in expand the by that was revenue to we an slightly expect this quarter-over-quarter, believe opportunity to the revenue Integrated E-beam grew

contract PDF company on July significant joint may Included is that test level, $XX Advantest additional Exensio Advantest to million a potential equipment you announced This term last over to cloud As on five-year partnership level this Analytics the million with build Solutions partnership understanding its Exensio sheet. at more and PDF a the and from for agents the at and associated applications, use Analytics our and deep basis a Agreements that result our Exensio of Solutions Solutions, our cloud five-year believe optimize development to will is leveraging data as for and tester platform our Exensio's XX, Advantest's remember A of call, $XX specifically. is than in for now investment we reflected step quarterly learning. balance Advantest in programs PDF. agreement. PDF and offering to a machine

initiate had and off we schedule milestones we the monetize quarter the have communicated our deployment the met During of last performance to ability of kicked quarter, the of by the the start Cloud on that our contract, call. the Exensio to ahead end third

with only believe important is third reason, the quarter, we the a to companies just provides quarters. from While and in data partial same chain partnership revenue Advantest get intelligence. many whom applications want on using capital variety hear anticipate many a the over also We it can platform, solve with them. customers available the partnership Advantest challenges the are of their believe equipment expressed contribution semiconductor the They our opportunity are By so we supply Exensio Exensio already that, able companies was Advantest methods. by their customers. and for of in XXX choices the accessing Over they tools. mutual is manufacturing the Exensio pleasure meaningful will One increase more to Exensio Customers next by Advantest from theme of the customers. platform. quarter use wide we get -- for Exensio, just the than analytics conversations analysis have Users more of to files want that the

we companies would opportunity Of continues course, represents. with There PDF us reaching all now independent that the work turn report to in of high the Exensio and remain Overall, Most that pleased manufacturing to types. to they Advantest continued equipment I is Advantest partnership economy. to with like are volumes. seeing foundries we're despite the levels in the are investment impact industry, on industry. what general COVID-XX and

fabs and China products quarter. report the the shortages. reporting and in our of On some in seeing are we interest wafer higher that fourth industry footing, analytics customers broad-based example, Exensio in utilizations we For anticipate

Finally, product from employees for home. to I even customers' while want thank servicing innovation working our and continued complex requirements,

Adnan to call I'd a will call which, financials, over after the of questions. to turn Now, review for like Adnan? the for the we your open

Adnan Raza

you of I in with nice current be safe speaking are Good all you to Thank afternoon, the and keeping hope you environment. again. John. everyone

call, the other employees apart quarter from connected we last offices spirit mentioned the to home. of our PDF globe reopening some while continue work operate with while at of I around in As continue the to in this

in the thrive and to learning are business. environment, this closing growing deals We

in of provided share you GAAP results that call to will that we be non-GAAP We the reconciliation today. on website. with of discuss all the today's some is on financials the our note progress and a Please on financial will basis materials

last Investor Analytics the as of an We our to company the Day communicated report website. XX-month company section year. earnings business revenue Investor our have year. with continue of gone to transition posted as the our a release in in start we has percentage Relations XX% on to make management total To update, XX% in analytics of and basis last through QX XX% XXXX XXXX a this during from to our a strategic

revenues revenues company. was to itself, the period. XX% year-to-date ongoing of We're transition delighted analytics XXXX and an analytics XX% PDF of for QX of For with

as quarter year for interestingly XXXX. first level six to the itself, bookings XXXX the in XXXX total QX bookings QX the came the the for the for was the of more came which were a XXXX, XXXX XXXX. of bookings at bookings quarterly in of comfortably of without third exceeding year strong strongest even Compared bookings full Advantest bookings XXXX Our our the well this quarter very months already with record full quarter that for bookings our of Recall for our deal. than

our our our momentum go segment full to as year. leading growing of focus solutions. strong momentum QX investments is a name through has more QX believe the gives including of XXXX a the and provider Solutions PDF business future deal quarter business. Strong us in also to year and that doubled of left with XXXX a make the differentiated our XXXX Therefore, carries Now of Advantest grow to continued analytics a the exceeded validates result bookings our data have our recognition growth alone investment bookings for we than We the ability and bookings. and

up and Turning the to prior last year. up were for $XX.X million, revenues. versus same versus X% quarter quarter QX revenues X% Total the

as to with during basis that QX we for and noting which grew For long-term annual Analytics revenue and of IYR target an subscription was Integrated PDF Ramp comfort engagement grew validating strategic a rate continues better due the revenue customer evolution QX, in million. a year-to-date million prior capture and XX% analytics decided revenue analytics to XX% be was down is of year-over-year, contract the on basis, as long-term Analytics our X% growth a analytics instead economics. to XXXX quarter, new quarter, $X.X It worthwhile XX% Day. our a our to to on was discussed for the license primarily year-over-year Investor $XX.X Yield focus a compared business Solutions. close

revenue successfully performance the as within a booked quarter us achieved QX to that this anticipated. for contract milestones same John was earlier quarter, from Advantest allowing some also which this quarter than mentioned, the begin deal, originally During recognition we we

ramp expect million the Advantest $XX a rate of middle to We continue year. per run next to by year revenue to

As interest to equipment opportunities Furthermore portfolio own powered customers to customer of Exensio both by benefiting relationship PDF chain Cloud seeing add via via Advantest Exensio. from desiring conversations John of mentioned, power we companies supply further the their analytics our to are the this can other from tools. that we we are about bring

the of our QX growth analytics are business of XXXX particularly from performance line. We during the our product Exensio pleased with

products analytics believe Exensio of services we our and the a offering With to portfolio differentiated platform, are we customers. firmly

towards a an primarily analytics and for earlier mentioned evolution consistent of XXX due of of year-over-year was For the was revenues. total on down which from on quarter remained revenue sequential represented QX. Integrated reflect on Yield XX% was revenues in revenues IYR basis was XXXX, based quarter-to-quarter analytics to $X.X million, contract basis our continued up X% new on Ramp, a fluctuations the Again ASC our basis, and our may third our business. XX% Ramp our focus XX% analytics total with the the strong Integrated growth revenues while Overall, a and year-to-date accounting Yield through impact our of of

what the our spend with year increased to mentioned of the quarter cost was such investments this a consistent On support infrastructure million of These is Advantest, of prior support revenue. we to announced partnership versus due our to business. we in third the of investments growth continue which our increased call, our as investments sales with margins on make last as sales $X.X gross servicing our to cloud and now contributing quarter spend and in The result primarily wins cost customers. cloud customer we of significant

for quarter the Our and prior margins came for for same the at quarter year. non-GAAP XX% versus gross XX% last the XX% in quarter

XX% our during expect gross long-term discussed our Day. XXXX of We continue model Investor to target financial to we margin achieve that

at on due of let's personnel-related primarily look were to which our $X.X was basis. $X.X period year, operating R&D the Now a versus costs. up the prior down same million year-over-year quarterly expenses, approximately million

primarily was up Our the quarter $X.X which services increased same million in versus prior same prior SG&A increase versus the of by $X.X to partnership. of legal an primarily legal driven due of fee Advantest year, was million year, including quarter the

meaningful to for due increased and business costs SG&A addition, in the increases analytics headcount subcontractor quarter. sales In

landscape. and our with the booking and create a continue As for product we X.X the map differentiated a In million net to our posted will we expenses to position and earnings align non-GAAP operating mentioned, road non-GAAP resources sales of per summary momentum in profit share $X.X of Industry $X.XX. and John P&L,

common of end increase short-term on and investments sheet a million at third million the of a of quarter. same bills, Advantest during $XX in million cash portion an quarter $XXX the invested year-over-year to for On year, grew by we note, of U.S. cash quarter. or driven million private side of approximately from the our treasury a proceeds the to of prior primarily cash the quarter third stock placement balance the that short-term $XX of $XXX versus during increase Kindly the the the third investments basis, of

million million will in investments, of total you $XXX sheet cash $XXX of of in items, up on see our equivalents two cash So show our cash line short-term investments. short-term $XX and balance million and

of very variety sheet products balance million $XXX strong of us with no short-term to invest, to our and provides and we customers. opportunity in of initiatives broaden Our and portfolio investments deepen a a debt cash offer the strong to

have as provide provider call. a strength of potential platform of call for your to data pleased leading software long-term We please make balance such the the Q&A the and have Cloud the provider to do And for these marketplace summary, of the that value enhance value. in PDF for Exensio, points a data strength differentiated let's choice We the the time, we differentiated for leading quarter bookings analytics, portfolio expand today. revenue strength validation products sheet momentum are as be, and we In of long-term our market balance to platform. we investments to the this of year, are which us Operator, as of growth believe the make continued At the the the started solutions investments, to is in broad analytics analytics of right data open this goal excited selection new offerings enhance this sheet. and our shareholder transition the our portion stockholders. see PDF, with serve and about a And begin and to of questions. achieved services. Advantest and our Our the

Operator

Your Instructions] Davidson. the of [Operator D.A. first Tom comes question line from Diffely from

open. now is line Your

Tom Diffely

my to like, of company. with turn kind about so decided of contract, that a the what afternoon. of talked opposite about, been Yes. deal to seeing over Thanks year of to curious long-term Good question. an for plan the taking seems subscription. that we've you counter IYR and first John, instead you that's the I'm last do the or It

John Kibarian

did say, volumes. would at It's contracts we When still if looked XX-nanometer finally yield Yeah. from ramp made we the time-to-time plan, up ticking economics we be the we felt, do to good. that a started customer

And for the we As there, I economics economics the that were be long-term a entity. it actually projections said, would over was it's better Chinese us felt looked their the and XX a deal larger. we at return when on

China silicon for focus picked a we has feel contract, because about the up that on situation, do users some better in Chinese As last feel we or challenges horizon time of And manufacturing gain that, quarters, standpoint. this share of gone sized have on we the from the of the on over suppliers Chinese couple these up.

ago, If on negative you go we a back were volumes year materializing pretty there.

over has let's greatly I three six change customer. say, think hence last to this changed months and our this with the

volumes are would We small will than do we more, We set this places. customer in of are whom, in think share in for There not gain customers contract. other a general, the very take a base. short the

Tom Diffely

service with Chinese changed months, and customers, couple SMIC with the Okay. of to Has arrive? your then ability to started over when all Huawei at last restrictions

John Kibarian

Yeah.

yield government. quite vehicles in But a the closely, we there. in Europe. one ramp about of States, very have operate watch be an our in careful around well. engineering of the And to in expenses to United rules some From wanted legal we We primarily but origin some machine, people the the often to the technologies. are DFI Ramp we non-U.S. for restrictions for there elements what team have have edge, our it's most in world solution. primarily to now, within software of U.S. We U.S. fewer right? which also limitations do we leading eProbe the very relevant as Exensio, are we the do So on Yield ability outside our due and And standpoint, are and in a is designed the Taiwan operating legal law, manufactured, of and have states. the modules our the because non-U.S. really lot The content would

Tom Diffely

a the sense. model, first, to rise see evolve? Okay. And the That makes about expect you spending the with questions with in couple COGS continues more to a as contract Adnan, cloud of Advantest would then,

Adnan Raza

Yeah.

of and look than as a I mean legal other number you cost we special purposes, you I that R&D of down. I and at total we contract-related of little region-specific, higher mean alluded, to think some can it think for if flat had contracts the drove think as modeling the expected. other and expenses slightly I SG&A bit John sales, expenses that

think I slight a the would little is just flat from a I a down Net-net tapering and perspective bit QX. OpEx slightly probably bit there's tapering So up. net-net say on side modeling down little probably what a for –

Tom Diffely

Okay. big the onetime legal the in quarter-over-quarter? legal SG&A services How services the was jump –

Adnan Raza

Yes.

a all deal that increase don't did one mean legal know it Advantest call also I'd well. the just There region. I we we let and were were that some this current working during So was in customers that time expense way. variety million me quarter $X.X put contracts of but it this I was for things. the if it as Recognize

a be total down probably factors it for of look is going was quarter is when the bit. combination little next of to that that why a a thought led at is as higher that So which legal expense to it's a combination you OpEx –

Tom Diffely

Advantest you that finally million that? do? from or of thought of And drove $XX or need for to acquisitions look earmarked the of Great. what John, Okay. kind was build-out when specific it at investment And kind you infrastructure then any

John Kibarian

are things. I couple of a think there

On their side their company are backbone right is basing they had on their asked which – Exensio. cloud they

to – equipment our been Advantest. things we was some for share, that success bring about is that intelligence that think two, platform. drove business also Exensio felt be opportunity if that have to with their there an are from are continue And you we felt they or similar so chain. platform to And participate use of a grow I investment they the that driving building use PDF a wanted there minority across a believe would that machines. PDF know and have I business for they the foundries they you to and broader felt could quite we ability as and your you Advantest they are in and That the to asked that. Exensio do now to make market good Number So equipment company need fabless effective it. your that overall of standpoint have the some to lot really suppliers are that being system supply would in Customers partner it, good

it that at also would as us alternatives. thought latitude give we So flexibility bit strategic a looked little we and more

we of that us how would flexibility we how they as giving think at as looked more in the upside; at I it – looked So looked participating bit alternatives. little a in probably at be

Tom Diffely

sense Okay. today. That I time the and appreciate makes

John Kibarian

you. Thank

Operator

from CJS comes Securities. Tanwanteng line from of question next Jon Your Instructions] [Operator the

now open. Your line is

Jon Tanwanteng

IYR that if for been and analytics it stayed have contract subscription? you have in the analytics one. Thank profitability, guys. wondering wondering looked terms just in it would what in quarter my question. an had I'm was taking that revenue would of Hi, like I

John Kibarian

Yes.

of good – The looking have an to been gone we slightly contract. ahead on that But a our into invested that much a some as have There on design a that one candid been which be dollars, as that revenue. maybe period the have lot we a duration we with that this margins the – you time basis. but it and higher put would that different that put have would not contract driven resources gross with If time taken have to analytics in not the bit quarter, little cost It was wouldn't less it's in its different. signing at sure a the into more we put customer would period ratable revenue costs we it upfront but first we John, case. them. haven't put So much of I'm the quite program. have that question. have would we we recognized been would lot different of would And the alternatives how have second had with were would and

So probably slightly maybe have would been gross revenue. higher margin less

Jon Tanwanteng

a in in I – you then Understood. just you the of the on case customer. you're I system. analytics either how more a over of the mentioned terms was traditional it – time yourself volumes nature dependent much of over wondering certain the And cushion comparison was period. did contract gave production seems like it's just wondering guess their where you I or

John Kibarian

Yes. a Jon. Yes. point, great That's

of XX-year the That's period. one So it's gain that a we did. things share

So Let's the little wafer learning Because geographies China longer. minimums much XXXX than used And of completed getting in start on the about obviously XXXX, make and is not the the XX-nanometer in some is later gains volume are cases ramps we world. to and a in think. yield we some we're XXXX right? as different they what horizon crossed they've in in what we're time customers' the other than sure

the period So bit. quite we a lengthened

of production performance actual extent lot actual market come yield out being is to like. it to some that also the than the sensitivity more important in We a to seems we've that took in because recognize cost-effective yield being

is to starting we this environment felt definitely that market were that the So it – being where are we with picked there changed derisked the we've that ourselves in We that winners by – are from which government. well aligning was and there. recognize think we're ourselves going as

Jon Tanwanteng

do longer-term potentials like this better Got where it. That's this more in helpful. the look any to or... pipeline there And over the are economics then the

John Kibarian

China mean, you ones less need don't can the probably It count And there's – it. Outside and of then three on leading count edge the maybe do this there or not. few. maybe in would with. market you I to a we only would really two be that players would very in handful the that than Very, few. one other on we very consider

Jon Tanwanteng

they then the going and – attracted to companies doing with or number similar you've kind that equipment deal all attracting of Advantest the and versus long-term partnership? that same change them or rate size just of Advantest And manufacturers it. scope I'm And thing. the in deal growth explore mentioned the other Are and path near-term wondering, you're in other companies on if Got does significant there's that a Okay. to medium-term pipeline target? your the your

John Kibarian

Yes.

working we early -- of There we're But doing three other a the started back the partnership. we -- XXXX started kind of stages. three early say, Advantest think we're development the much equipment into some in companies Advantest XXXX, relationship wouldn't piece first it's the then think means and are let's product not, years that do you're something actual XXXX, at Probably is understand we're is the we I basis formula. So work. a on investment obviously regular anchor probably to very right? years seeing beginning late starting I way and in is work what joint with So

So that it's bit in special regard. a little

but just -- in the semiconductor software a In particularly in of them just the of number newer I'm them, equipment, many coming is the significant sure And overall, of see terms quite into electronics smaller. we sizes terms analytics really parts out where industry, or play. will opportunity the of of of start

system significant So there. there's we in and your advanced think advanced packaging manufacturing, opportunities your

Jon Tanwanteng

longer mentioned hoped. DFI when wondering might couple than for just then expectations finally, a And the any you I ship and was taking of revenue. start had if had it. little Got everyone bit you machines next

John Kibarian

think taking this piece as Yes. shipped Yes. it longer us my in it's something prepared gotten have said would would have I liked. that liked of we We than is, remarks, have year. to I -- It's

partly probably around the reasons, flying wafers of it's it's we working. even fly lot number for At into a -- part a than for to COVID the the first think around fly even or to slipping to our situation, have Maybe same standpoint XXXX. I easy wafers machines. been of around engineers easier time, due

customers of are viable and And in wafers having believe the why to paid on it's send of we say, to the But revenue and -- prepared been as my very and been remarks, capabilities. way of them number pilots and number significant said increasing DFI on, in the us we've applications many generating So we customer I've that's a shipped on confident one demonstrating that platform ability about get for the potential. we let's base, which behind is remain its installed. have

Jon Tanwanteng

you Thank it. very Got much.

Operator

the Gus [Operator Instructions] Richard. Your line next question comes from of

Thank you. is line open. From Your Northland. now

Gus Richard

Yes. taking question. Thanks for the

the that On IYR is contract, for XX-nanometer development?

John Kibarian

Gus. That's correct,

Gus Richard

in the customer Okay. moved off? that IYR And that ratable that of then, decline took Is it it the fact Or rolling customer stream analytics revenue it... was is down out off? ratable. Is of sequentially big a chunk and and kind this of you is a

John Kibarian

Correct.

Gus Richard

Okay.

terms how So an big impact was of in -- and of that percentage? that was

John Kibarian

Yes. probably meaningful, Gus, over It would XX%. be

Gus Richard

if Can thinking about what give you us sort last relative year the just so help Advantest at And business, you look been -- can of back we year? you a the bookings. Okay. bookings everyday out us then, could sense the have to of regular this

John Kibarian

or to it If it of you to very depends that Xx Yes. add QX Xx that same QX close half year. first works where without that -- we we out pace the number year, was Advantest for that than said, greater. would the XXXX. already yes, but year if after number of on already would even with it on suggest bookings -- When be, be the the portion But greater anyway. Relative at in not the QX total of the range non-Advantest to bookings last all

Gus Richard

so XX-month value contract? when Or basis? a bookings that just of is you I'm that the total clear, is And Okay. say the

John Kibarian

Total bookings value. Total contract value.

Gus Richard

Got it, much. okay. Thanks Very so good.

John Kibarian

Gus. Thanks,

Operator

closing No questions on call Kibarian John the to for would turn to over remarks. I back like queue.

John Kibarian

you with participating call. in Thank soon. to a day. you QX talking again and We have our for forward Stay great safe look

Operator

today's concludes call. This conference

may now disconnect. You

PDF Solutions (PDFS) 8 Nov 202020 Q3 Earnings call transcript