Release Date: February 13, 2025

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

Positive Points

• PDF Solutions Inc (NASDAQ:PDFS) reported a 22% year-over-year revenue growth for Q4 2024, surpassing their long-term growth rate target.
• The company experienced strong growth in analytics revenue, which increased by 22% in Q4 and 11% for the full year 2024.
• PDF Solutions Inc (NASDAQ:PDFS) successfully converted an evaluation of their DFI Eprobe system into a completed sale, marking a significant milestone.
• The company hosted a successful AI executive workshop with positive feedback from 140 attendees, showcasing their leadership in AI applications.
• PDF Solutions Inc (NASDAQ:PDFS) anticipates a 15% year-over-year growth in total revenues for 2025, driven by strong customer interest and a diverse product portfolio.

Negative Points

• The company's integrated yield ramp (IYR) revenue has declined over the past few years, although it is expected to recover in 2025.
• There is potential for revenue lumpiness quarter to quarter due to the timing of Eprobe machine purchases and conversions.
• Operating expenses increased, with R&D spending up by 4% and sales and marketing expenses rising by 16% year-over-year.
• The accounts receivable balance was elevated at the end of the quarter, impacting cash flow, although the company expects to resolve this issue.
• PDF Solutions Inc (NASDAQ:PDFS) faces challenges in aligning customer data for AI applications, which may impact the adoption of their AI-related products.

Q & A Highlights

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Q: Can you provide more details on the ePro pipeline and whether you expect to add new customers this year? A: John Kerberian, CEO: We anticipate a combination of repeat sales to existing customers and new sales to new customers, focusing on advanced logic and DRAM applications. We expect to ship over four machines, but not all may convert to revenue this year due to the learning curve associated with the new sales model.

Q: What is the current receptivity to the Model Ops product, and how important is it to the growth outlook for this year? A: John Kerberian, CEO: The receptivity has been high, with several customers converted in 2024 and ongoing pilots. Model Ops, along with Guide Analytics, will be important for our business in 2025. These products help customers utilize AI to analyze data more effectively, impacting both direct AI-related products and indirectly through increased demand for our other solutions.

Q: The accounts receivable balance was elevated at the end of the quarter. Is there anything affecting collections? A: Adnan Raza, CFO: The elevated accounts receivable is primarily due to timing and billing, including the conversion of the ePro sale. We are making good progress on collections and expect to report positive cash flow numbers.

Q: Can you explain the revenue recognition model for DFI sales, and will this be the model going forward? A: John Kerberian, CEO: We will continue to offer both subscription and title transfer models. When title transfers, the machine revenue is recognized upfront, and customers can optionally subscribe to software and services. This model may lead to higher revenue and terms rates in the future.

Q: Are management changes at key customers affecting your ability to close business? A: John Kerberian, CEO: We haven't seen significant impacts from leadership changes at customer companies. Our business is now more diverse, reducing dependency on any single customer. While some customers are cautious, others are accelerating investments, reflecting a mixed industry outlook.

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