PDFS - Earnings call transcript Q2 2022

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Operator

Good day, ladies and gentlemen, and welcome to PDF Solutions Conference Call to Discuss its Financial Results for the Second Quarter Ending Sunday, June 30, 2022. [Operator Instructions] As a reminder, this conference is being recorded.

If you have not yet received a copy of the corresponding press release, it has been posted to PDF’s website at www.pdf.com.

Some of the statements that will be made in the course of the conference are forward-looking, including statements regarding PDF’s future financial results and performance, growth rates and demand for its solutions. PDF’s actual results could differ materially.

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

Chief turn PDF’s and like to the Officer. PDF’s President Adnan Chief I’d to Kibarian, conference please Now John Kibarian, Officer; and Executive Raza, go Financial Mr. over ahead.

John Kibarian

our Thank joining us you for call on today.

press If our second financial today. I you’ve provide time QX not the website already on seen the go industry data posted. start I’ll our please will has ecosystem. of and to before and our Investors the the taking half by being earnings We Highlights go-to second for second each conclude semiconductor join for of providing you’re commentary our release, highlights. where to XX-Q us to discussion there, for over section quarter platform report From quarter, in been detailed the expectations the our to for financial a Adnan the progress manufacturing objective our update. impressions of analytics long-term electronics more the the for towards PDF’s and year show semiconductor it handing business appreciate

to solutions approximately symmetric renewal connectivity significant at was of Exensio increase ARR new Exensio, quarter U.S. equipment Exensio, yield The include wins renewals XX%. second and customer a bookings quarter for the of renewed the Our in customers deploying ramp an in additional based largest and solutions.

by the improved some were customers quarter our in China business contributed Our lockdowns. when of meaningful portion first the bookings activity as over a impacted

to gain Our revenue increased volumes. due customers reporting wafer quarter-over-quarter higher share

quarter-over-quarter improved be continuing continues new the many our Partnering part equipment this quarter, an an companies to of also achieved our at Cimetrix and other quarter related manufacturers In users accelerated to growth with applications we in extend and solutions due volumes to shipments. equipment to strategy. onetime licenses leading milestones. We saw increase to important second

start early announced Kulicke First, proceeding of Customer our deliver & solutions announced access the at second collaboration quarter, is new program. a smart Soffa and well. interest with the manufacturing to we

voice in release. the run three compute later we quarter, demonstrated as later to Second, other We we at initiate on base Advantest offering to applications apps anticipate Conference, edge that these new this intend them box. high-performance customer to as year applications well their

AWS, us at Third, hosted in West SEMICON July, booth. in Amazon their the or Services Web Conference,

get type, allows SEMICON for equipment that support booth, and the to chip efficient use applications team of Exensio companies view their of more means Exensio changing constantly and collaboration most our tying customer our costing, engineering including high By makers accurate that operations, packaged products. changing responds to a we with our the new strong SAP of Fourth for this base. business in believe mutual announced This and packages. manufacturing streams. critical can analysis data this with data and other and always customers data quality business enable This interest and customer year our manufacturing have demand have from is detailed mutual planning tie dynamically view can demonstrated partners equipment create system Our can we standard, analytics deliver and operations. in manufacturing, static a Also and floor type semi-EXXX of semi-EXXX for of develop July, assembly the finally, does SAP’s we and constraints. for demonstrated in S/XHANA, Cimetrix at to complex which traceability over of through system data SDK view Today, making, result work, often customers of our one marketplace. business not to to the and top their the

website. these resulting about our not more page partners can with material. on our information these are You revenue The on in partnerships partners lead early is customers. new Overall, associated see access programs

We of customers’ in our PDF awareness there over year-over-year the have Exensio the pleased and larger top of impact On year, be of half grew basis, we looking of next progress minds are date. the we and years. benefits at we of few organizations, seeing Overall, are a will increased the our revenue a investments turn to revenue anticipate the would very the to half analytics we achieved the the first continue I with what Moreover, year, Overall the first for new business. in like in we’re support and grew to programs to seeing year-over-year. companies well to now semiconductor bodes U.S. process our XX% now and China, bring control industry. XX% of node EU which the established for revenue to similar in elevated the and total manufacturing. electronics have, and the up,

to first products a of an potential continued bookings there in the the of technology for in of and these year. including potential and Exensio been Across half we second and industry, software. of solutions. to DFI be underinvestment and fought on chip supply programs have the headwinds, a and challenging number sale year years restrictions of constraints. have the these versus characterization, the to the see We manufacturing, geopolitical with interest half there’s in increase the We systems our Cimetrix up strong recession, Despite the are our need anticipate for have signals

the helps made provide platform pleased revenue visibility streams our of have predictability and recurring industry, are and data in the results. financial the making build half we year We greater the first the of and progress us analytics Solutions PDF which manufacturing with for go-to

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

Adnan Raza

everyone, again good all to and Thank you, Good with speak John. afternoon, today. you

the you business. to the quarter second up the are to to progress of financial pleased the on We results of and date review bring

be the solid our in first the be will quarter non-GAAP comparable today. XXXX financials GAAP revenue on of the on with to SEC results total the filed $XX.X strong Please total been our today’s software licenses offset million note the are licenses call growth from up analytics, and million represented edge which of up for also benefited perpetual a had by in continue came XXXX a all has from $XX.X licenses was and year. components a reconciliation and engagements. Exensio of was basis, XXXX, to this revenues growth materials XX-Q Form second on This provided this revenue that XX% $XX.X was basis, Our leading including quarter discussed last is and our the in and XX% leading-edge On up versus in after quarter Financial to last website. quarter. XX% quarter. X%, lower QX Analytics coming QX up $X.X driven revenue million, software were results versus in quarter-over-quarter financial second a and all Cimetrix analytics of revenue our million by quarter, quarter. of or

ecosystem. we for We which goal share with currently go-to the various winning we analytics organizations, manufacturing are business the platform the our be the getting of well engagements are pleased ongoing, the customer analytics electronics have very hierarchy across plays mind we towards semiconductor the and and to global are data customer

half to about up was shipment from which the ended IYR prior from spoken revenue gain at quarter-over-quarter in During customers. contracts second last a million, primarily down calls. the we million, volumes of that ramp revenue integrated primarily quarter, due share last have On basis, yield higher second was year, contribution due our in $X.X $X.X year, to

shareholders. analytics to the starting the transition and growth about We are pleased are we company for revenue deliver our total to

against note, via the have XXXX, prior growth we annual will this as delivered total in find XXXX our release, backdrop the it of for revenue you items. similar already percentage approximately for also full full year year. for growth meaningful revenue quite two growth guided to today XXXX XX% press As annual the We having is

already from XXXX full the year benefited results Cimetrix that acquisition. of our First,

which total not our of that. build the to do share second, year year. need still full for this ended had last year, that And contracts XXXX we So a growth from half top have on revenue year that gain will current of

year-over-year quarters our Our coming ending backlog with can product over key engagements various ongoing our million is basis. on believe was close $XXX.X business. across up a lines of XX% we the customers We grow as multiple backlog we and

in continued We have our announced shop the to collaboration quarter, also connect SAP data. closely expand floor the particular, with on to data this top mentioned, with John partnerships, analysis manufacturing and as floor

and on We the with also customer IBM, the all Advantest, Kulicke various on variations continue basis, announced margins to reported industry. we in markedly XX% for recurring above Soffa for for support of spend gross XX% revenues. may as QX & our year. spend leaders a We and influential quarter cloud last and slight of quarter, our work quarter-over-quarter to similar of Siemens, modulate to prior we prior this metric grow our the On see growth engagements collaborations

We margin committed non-GAAP to of are XX%. our model target gross

and spend timing from merit $X.X On of quarter, during side, worldwide expense the our costs for up million spend due compared costs. personnel-related to primarily was cloud increased to operating last increase R&D QX

occurring $X.X down the was saving onetime quarter. items and SG&A of annual timing Our due during expenses million to some

a for quarter year of profit profit for of the the a $X.XX $X.XX a we EPS, reported loss quarter for prior For a of compared $X.XX to the and ago. quarter

XXXX $X.X quarter quarter the the year, positive $X.XX On to last change million approximately pleased quarter, we same $XXX cash flows, swing cash We generated prior our equivalents of from stock million that have to to $XX.X strategic per consistent shares about the our this million share. an million primarily become the in history. with that or compared now the compared with the ended by end cash the believe us from well We cash are $XXX generate operating of We quarter. operations with acquisition at of EPS the of at balance shares for and operations and in for position price our year expect sheet we cash year. the buyback repurchased we $XX.XX and strength consider Note of they approximately as million average flows during QX, available. of to of cash end approximately driven opportunities positive $XX XXX,XXX through

With Looking our expect that, are commence to year-over-year XX% the the year over anticipated for calendar we basis. session. XXXX remainder revenue gaining approximately and to of now I’ll backlog call results full a XXXX question-and-answer the operator on to the and turn bookings, with given the forward, Operator? confidence total grow year expected

Operator

take question. Instructions] first our [Operator And we’ll

Tom Diffely

D.A. hear Davidson. okay? you me Diffely, Tom Can

John Kibarian

Hi, we Yes, can. Tom.

Tom Diffely

Hi.

some curious of China today? where term? longer talked does And recovery. So nice do goes John, growth business I’m about that your with you think overall represent you China what percent

Adnan Raza

I’ll right year. QX, the pull comment but you you, for For confirm on up it and of was think about number I the can rest XX%. exact the

John Kibarian

it do expect the we been continue about had teens It’s – the outside to and to mid-teens, expect in very rest we don’t bigger around with business. expect not than of that it and range. pace to We of the China, it We’ve stay get expect to much growth grow it on we that. strong

Adnan Raza

And it was XX%.

Tom Diffely

about And talked Okay. half. half at the then Great. bookings look when you being second bigger Helpful. half, you over

So than previous just China it and sounds your actual that board. here expansion across that’s is just more comments that the like recovery,

John Kibarian

Correct. Yes, we have a number.

the couple gotten, business, size number over size up a quite year And in of that the significant has years, have or deals last growth bookings the the year, Our deal would them the year. anticipate average year analytics half a of closing the quarter of of in drive the of the bit. that gone of we we second first the – half second half this of have hopper

Tom Diffely

these And into Will to about the start first years. I’m of to the the last all is Great. create that what you over the of material first do do drive out think partnerships curious, entered think Or do be? new kind you’ve partnerships will revenue? applications? the when do you couple information then Okay. appreciate some the And of revenue what Advantest it group? partnerships you be think of the that

John Kibarian

Yes.

of anticipate, given our We over partner quite the more meaningfully the contributing while a the maybe test contributing or dynamic revenue equipment. has and That meaningfully, ago. is early one. ones, been And It We next year a than now. have anticipate & is X When their we Soffa change it a ship that quarters primatic have to forecast, meaningful first application. we product, a at some limited for more other over now by ability we Kulicke somewhat today. Advantest, significantly released is look

sales. we ramping other with We first end our for sales Advantest dynamic application engage after It’s customer take about able forecast expect ago relationship, if meaningful, with to parametric give substantial it couple and some as drive shows year-ish start really substantially customers, we over grow but the then a first expect a because lead number year not something. that similarly out revenue. these took take to to our is will at additional it us years. for the shows of next up. And interest, quarters it it with be It a partners some this the that first And of they’ll we you look first forecast expect those more after that announced about probably But on to to of this test X we a growth. year them for them us contracts give of – then

Tom Diffely

Curious I the as OpEx over thought to been model. down I then little a ramping quarters view? color to expectations the was next little the of lately. more on for and the see you’ve then maybe of an your expense in several couple surprised a of the Great. behind programs what quarter some drop-off, come Okay. are if point moving And sequential finally, from

Adnan Raza

Yes.

R&D, bit for in to bit merit the the increases. in the We with grow a what estimating during we little So commentary prepared that remarks, little expect line primarily mentioned to we up a lower. was due do are revenue or as

some we during also of there the savings on call, were of SG&A, onetime terms and also items In the year. the mentioned timing expenses from

total exceed cost to see we spend, our same, growth going goal of our OpEx So that that the both the revenue growth sales we to expect grow. Overall, in combined. and that should is stay

Tom Diffely

Okay. thank the questions. Well, for Helpful. both you

John Kibarian

Tom. you, Thank

Operator

on moving to our next And question.

Gus Richard

ability is Yes. a And partnerships does Northland. how cost guys your standard of work of do to impacting Richard with Gus system? How that and on for products? you afternoon. customer with Good questions the is build affect need this to A your integration couple it and to these IBM sort SAP.

John Kibarian

Yes, it’s a question, great Gus.

have different And scripts long to Exensio I whatever. like wow, as – as Exensio with moving we XX the We XX for we this. remember. started MES integrated forever, and could scripts with noticed different we cloud different something MES have can supported standardize systems we systems and once was, we What

have the to piping, be go report don’t to way customers, you going a that and cutting to should but the So the want through, special connections data, they’re always a or different have between systems, of yes, established. the

scheduling which now each for – integration most and S/XHANA, also solution greatly to pipe that customers, customization order undertake works. SAP’s our a is will with effort solution, which now can’t with let’s cloud for yes, and So information. our the formally the be yield that the able with we of cloud be another tuning, Exensio right, but greatly reduces more there, test customer needs in operational customer onetime standardize base do And connect, data planning a to say, to shipment and is already

in to the get order silos systems So between of to undertake these different is it’s more more we organization. the real-time flows the that by burden decrease their enabled be fact to to kind very needed more on think are customers information and of valuable the integrated this within cloud. the And really able

Gus Richard

Okay. on goodness of this for gross And sense sort much any margin? is how

John Kibarian

deployments. for That Yes, do and once cloud up wonderful what would the not ongoing sure, the from buys going. would and just right. the recurring licenses from not we good could customer time-based because yet. as any The margin where deployments Yes, it is that it’s system and revenue ideally, us don’t we only be as are – make you’re

that is why drive they it. to secondary The have impact us. can we’ve benefit and of up with we for usage quantified customer business So we’re hence, the yet, revenue benefit spend Gus, I a that it primary and total is the doing but don’t know the

a at The secondary impact, gross it come margin. of will benefit

Gus Richard

important but the then a to And technology is what is the advanced of push trying for now Clearly, to available. it. passed. realize for is is even money Got capacity, act just more chip process boatload go that going government to

can a as design of for to either for the sort advanced semiconductor more customers I’m your your what there U.S.-based play comes a extent with characterization role the you U.S. in foundry, push of sort manufacturing wondering, to you to IP? help And in internal fruition? vehicles is enablement, create and

John Kibarian

act great about here. were Yes, chips a of and we question. PDF is it’s a a We there’s the the passing, couple excited And industry think very things that overall, event for for significant specifically.

one we the cost when broad, Europe, lot the about machine and you to on of moving very to point you whether I’ll on grunt has touch have like think the the is the areas think that bring engineering quite and analytics very, Gus. when over can to world labor and inside need even industry, work first more the to drive use software been for and up, I down think front-end how United out, fabs learning part impact But a and fabs all we’ve is also labor-intensive high been what you decades. goes what awful manufacturing of about I that States want an

you run in tended in If to at there’s look not West, East a that engineering how goes of invest we, they’re work had that in. lot the in Asia,

data, we AI opportunity replace more are lot automation. these Now learning. a – out can information because with systems analytics, need as wrote We important the here of our the a and fabs engineering it and for industry factory, bring very operational bring advances we detailed a what Exensio as with that’s of of lot for the like to to you in think going of machine equipment analysis

good the model foundry foundry of many Asia manufacturing. model. product a That return really What a investment was factories you right? over integrated point device happened the the just And as when really up groups, decades get says, two many, you the it’s – the is hard to rise last on great is one. Secondly, served an bring in

you in back So the is different past, see on U.S., in a which the number manufacturing putting right, the primarily of companies U.S. built U.S. or whether coming which capacity. U.S., being what’s U.S., factories Samsung, in foundry Intel IDM that see the than in now you capacity, are is and it’s TSMC are as entities to the from or what’s going

you need they to If you to look try open our history, point people at as up. foundry, the exactly up bring

You year, of factors that using follow-on capability, layout, manufacturability. first that design the and how variability announced for this we the was need to PDF’s characterizing step have to build. the the and affects to for is due In hence, It what performance quarter the design the to PDK. due contract way what people anticipating of characterization going a transistor and act really chips for systems first

look the market, and for designs cost-sensitive machine to you it’s use again, using our to capability. our at of a inspection. embedded gone and bring If to new more lot in used is IP learning it’s if because it greatly a that helping how what’s analytics, you which inspection for customers for does varieties design And up aware labor design be you inspection, do the are new and want as want design in

to lot rest overall. for a more design employ a PDF think as of capital, look we at a phenomenal the when inspection, you’re So lot opportunity our I software going less human for and the have think to bring to we world, where you characterization it’s foundry

Gus Richard

And it brings throughput great of are you a my capability the to lead wondering sort that fab. And terms last products in of get to people that from where just might I’m increasing tool so helps question. production. into and and DFI, me Yes. clearly, lab lab

John Kibarian

to demonstrate roof. yield the a explosion we feel wafers quarter, new design we’ve bring applications been demonstrate ways lined inspection individual are there the machine, today second analysis its were XD and from more it’s and up up we good and gate-all-around, able XX was shot where software, And for control the for novel as about feel on system to with road structures, do. running applications. can future becoming the just the utilization these day, In maps of via, to sophisticated capability you much went them an the more of We and a people of able some very for through more wafers It nodes. the whether bonding, really has with well five at we’re to we advanced automated way sensitivities. are improved this the look standard monitoring Yes, for issues really that in wafer being what really power designs as design usage

Gus Richard

that near the sales term, leading Okay. in question, of last this tools? And promise, is is I any DFI my additional

John Kibarian

to the it impact expect year. this half second do in of our business We

Gus Richard

you Thank Great, Okay. great. for your patience.

John Kibarian

Gus. problem, No Sure.

Operator

[Operator Instructions] on Moving caller. next to our

Blair Abernethy

guys. Hi, with It’s Abernethy Blair Rosenblatt.

John Kibarian

Hi, Blair.

Adnan Raza

Hello.

Blair Abernethy

Hi, guys.

you. for one quick one Adnan, Just,

if talk you this about million Just little a bit. like. it little I a quarter, looks bit, your down wonder could $XXX backlog

stage? there – in that I And XXXX your duration is backlog, that visibility this backlog that think Was also, what’s the was at impacts? FX QX around $XXX any million. sort of of any FX into what’s

Adnan Raza

Yes, sure.

So perspective. for business starting no, the an get customer deals. our and larger retention and mean, to I reality engagements But not from look, larger is FX is

confident and respect into longer. larger that bit like with in some little we’re numbers standpoint our year. far in remain the a And half the some predictability did well, as we with where John will have a we the number. XXXX, also than better of on build you mentioned. As looking frankly, first continue of forward And than which dip take the engaging even why go getting current larger, end a business at a our that’s deals half, these that’s booking other that note of deals these of year the a from momentum, these that stronger to the then from but plan organizations, positions current as reason. the we we the It’s second next to these, recurring just the function executive said, growth to be perspective, partnerships the our a are coming broadening year John of Net-net quarter the very with we bit and the engineering deals to also only the going to like little expect as level, be not are better level Overall, is saw and we us year. into where on backlog into closing, to timing can result solid we’re of

Blair Abernethy

Okay. of Great. just color to on product think, out obviously applications? it a already one starting the side, the some new with And to well to wonder first the can so applications, faster? testing. And is do dynamic John, they But I Or new little if go in you you’re a the the or Advantest take parametric do some around year are just going ramp? because product, might you there the give

John Kibarian

we VOICE of box. high-performance applications computing that was their take at Yes, advantage Advantest announced what edge

time. Advantest putting the idea in So next collects real AI the innovated information way tester, right an into computer tester the of wired to the deeply

establish called the very quite efficient. Historically, more do all it’s have you you that in power. rules. it compute neighborhood, now a chip test rules. around reject but I And if these If some available of to mean that. very you is simple tester because bad are good on test, that die, problem, very the the – you be small, chips computing to set you amount is is part tested well, this lot do So simple at when screening were bad, the you

much learning. Advantest to is deep is the up ability do machine what more Now opening

because capability. of this them take ML apps and to first half take second computationally the more intensive of and intensive customers is of and together three advantage chips more performance even that This containerized. marry additional later systems close we’ll So on real-time security applications in more approach and We you – bring PDF’s advantage is characteristics PDF’s want couple very algorithms the intelligent so for entire package. to And more allow in binning, that more important for the right more of which similar will tester, computationally a pipeline year, for do also can in screening and allow algorithms. intensive these and the announce are things, smarter

fabless make machine, – encrypted, down test to a in the all and cloud, the very from work sure to the encrypted way. a customers is of at the So way all information, they that that lot want our the the OSATs, goes the on way

are OSAT, visibility So this chips the very when that’s a may important, is world OSAT know, how screened, the you even within in of supply. as things you little and counterfeit tight have

So what of lot we we it’s the of part hope dynamic Blair. and and with serially systems intended, revenue? test. right? know, in detailed more We’ll in and take think parametric do PDF’s really I see stimulate partnership to many don’t more Advantest’s that taking algorithms, advantage acceleration. kind unique hope, an out. and I of parallel takes by build that of We did long deep a advantage test. drive once, sophisticated their of what announcing knowledge find we to them at ability demand we’re more How able it to for

Blair Abernethy

that. for you Thank Great.

IBM think What now. just an been if update sort bit I year may, maybe progressed And how call. have another the are stage question, you us of things at there? it’s a I earlier side. Just was partner on in give with a the on of almost IBM? mentioned

John Kibarian

it’s Yes, great.

So Exensio they – of us sell us. business and for IBM, an SiView. sell they where as IBM even sell It drive they contract. we continues to when for drove with introduce have also part sometimes integrated Exensio business It SiView,

customer with the and and the IBM from contracts then the turns – and IBM, licenses we customer then is So Exensio us. back around between

We have a number of ongoing selling opportunities.

is a built. to new factory As you know, tend MES sell like systems when SiView

number them. with do of now factories. less a we in us or frequent we they’re than all tester how have together And deployments. affecting work So of is too, SAP, ongoing it some because installations But also Exensio three with them work

of in we’ve ERP three customers talking, so in around MES now started data to us analytics time. together, the with customers some And now real companies, and data available

with many and So and Siemens other, one-on-one bond KMS test, you each doing And that we’re so are partners wire final with partner. bringing interact do the us what with of together these affects between ways more each tightly, There’s test. we partnerships these not just with right? or the actually – on what more

Blair Abernethy

Thanks John. for the That’s great. color,

John Kibarian

Blair. you, Thank

Operator

[Operator Instructions] conference. at And now and you will may there disconnect. are We further your thank no today’s That you this questions conclude participation, for time.

PDF Solutions (PDFS) 13 Aug 222022 Q2 Earnings call transcript