• Total Revenue: $46.4 million, 11% higher than the previous quarter and 10% higher than the same quarter last year.
• Analytics Revenue: $44.8 million, 17% higher than the previous quarter and 13% higher than the same quarter last year, comprising 96% of total revenue.
• Gross Margin: 77%, benefited from one-time perpetual software license deals.
• EPS (Earnings Per Share): $0.25 per share, the strongest quarter for the year.
• Cash and Cash Equivalents: Approximately $120 million, slightly higher than the previous quarter's $118 million.
• Backlog: Approximately $240 million, essentially flat from the last quarter.
• Integrated Yield Ramp Revenue: 4% of total revenues, decreased by $1.9 million compared to the prior quarter and $1.2 million compared to the same quarter last year.

• Warning! GuruFocus has detected 3 Warning Sign with PDFS.

Release Date: November 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• PDF Solutions Inc (NASDAQ:PDFS) reported strong financial results for Q3 2024, with total revenue of $46.4 million, marking an 11% increase from the previous quarter and a 10% increase year-over-year.
• The company saw significant growth in its analytics revenue, which was up 17% from the prior quarter and 13% from the same quarter last year, comprising 96% of total revenue.
• PDF Solutions Inc (NASDAQ:PDFS) achieved an unusually high gross margin of 77% for Q3, benefiting from one-time perpetual software license deals.
• The company anticipates robust growth in Q4 and beyond, driven by advanced logic processes, AI-augmented test control software, and digital transformation initiatives.
• PDF Solutions Inc (NASDAQ:PDFS) is making progress with its eProbe manufacturing evaluation, which is expected to be completed ahead of schedule, indicating strong potential for future revenue growth.

Negative Points

• The integrated yield ramp business was weak in Q3 due to low wafer volumes and slower contract signings, impacting overall revenue.
• Despite strong analytics revenue, the integrated yield ramp revenue was only 4% of total revenues in Q3, showing a decline compared to previous quarters.
• The company expects gross margins to revert to lower levels in the next quarter due to a shift in the mix of product offerings.
• PDF Solutions Inc (NASDAQ:PDFS) experienced weakness in the China market, with reduced wafer fees and volume impacting revenue from that region.
• Increased operating expenses in Q3, primarily due to investments in sales, marketing, and R&D, could pressure future profitability if not managed carefully.

Q & A Highlights

Q: Can you provide an update on the pipeline of opportunities for the DFI platform beyond the first couple of customers? A: John Kibarian, President and CEO, explained that they have a third customer as part of an integrated package and are seeing promising results in memory applications. They expect more applications within logic and are starting to see applications within memory, driven by the unique capabilities of their machine in handling 3D integration and yield problems.

Q: What should we expect in terms of CapEx levels going forward? A: Adnan Raza, CFO, stated that they anticipate increased levels of CapEx due to the progress of the DFI platform and eProbe engagements. They are confident in serving customer needs and will be careful with long and short lead times, expecting continued growth.

Q: Could you discuss the perpetual license deal and its impact on gross margins? A: John Kibarian noted that the largest bookings were related to cloud renewals, but perpetual licenses from legacy contracts on process control drove the gross margin improvement. These are typically linked with capital purchases and advanced logic and packaging, contributing to high gross margins.

Q: How do you view the macro environment, particularly in the China market? A: John Kibarian mentioned a mixed environment, with strength in advanced packaging and logic outside China, while seeing weakness in wafer volumes in China. However, they expect recovery with new factories and nodes coming online, anticipating consolidation within the customer base.

Q: Can you provide an update on the partnership with SAP? A: John Kibarian highlighted ongoing critical deployments and collaborations with SAP, focusing on operationalizing AI for customers by integrating product knowledge with shop floor activities. This partnership is expected to drive AI deployments and enhance customer engagements.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.