PDF Solutions, Inc. Q2 FY2025 earnings call

• Achieved record revenue in Q2 and reaffirmed 21%-23% revenue growth guidance for the year. - Significant bookings in enterprise-wide solutions (secureWISE, Sapience, Exensio) and characterization infrastructure. - DFI: Installed and qualified Q1 shipped tools as subscription upgrades, anticipate shipping another 2 tools for additional revenue. - SecureWISE showed strong bookings, positioned as foundation layer of supply chain orchestration. - Analytics benefited from characterization deal, first full quarter of secureWISE revenues, new secureWISE deal, Sapience Manufacturing Hub booking, and Exensio renewals. - Gross margin at 76% in Q2, higher than long-term target; operating margin at 19% in Q2, expanding from prior periods.

Total revenues for Q2 were a record $51.7 million, up 24% year-over-year and 8% sequentially. Analytics revenue was a record $48.8 million, up 28% year-over-year. Revenue contribution from Integrated Yield Ramp was $2.9 million compared to $3.5 million in the same quarter last year, driven by reduction in fixed fee. Backlog ended the quarter at $233 million. Gross margins for Q2 were 76%, and operating margin was 19%.

• Reaffirmed revenue growth guidance of 21%-23% for the year. - Backlog grew during the quarter, ending at $233 million. - Gross margin for Q2 was 76%, and year-to-date gross margin is 76%, both higher than long-term targets. - Operating margin for Q2 was 19%, expanding from prior periods, with aim to reach 20% operating margin long-term.

• Forward-looking statements made, actual results could differ materially. Reference to Risk Factors section in PDF's annual report on Form 10-K for fiscal year ended December 31, 2024, and subsequent SEC filings for detailed risks.

Q: Give more color on Sapience, including if it's a new customer and SAP connection.

A: It's an existing customer, first contracts with factory operations/IDMs. SAP was involved in initial discussions.

Q: Update on secureWISE acquisition integration and products.

A: Moving over systems, expect completion in September, training sales teams, integrating secureWISE with DEX for more secure data transmission.

Q: China exposure and disruption risk.

A: China is important, operations bifurcated since 2017, relatively insulated from short-term shocks by royalty/gain share payments from past deployments.

Q: Intel partnership status and outlook.

A: Intel is an important customer, outlook improving, technology provided by PDF increasingly important for Intel's manufacturing.

Q: SAP partnerships vs other partnerships.

A: Need to orchestrate enterprise for AI deployment, secureWISE and DEX important for data orchestration, partnership with Advantest continues.

Q: China revenue details and sustainability.

A: China revenue up due to volume shipments and CV deployments, expected to remain significant for trailing edge nodes.

Q: Exensio renewal landscape and expansion.

A: Anticipate expansions in second half with additional modules, guided analytics and AI for test as drivers.

Q: MLOps update.

A: Significant announcements on MLOps coming in next month, MLOps is a big piece of AI for test.