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PDF Solutions® Reports First Quarter 2020 Results

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Business Highlights

  • Total revenues of $21.2 million, up 3% over last year's comparable quarter
  • Analytics revenues of $13.2 million, up 16% over last year's comparable quarter
  • Analytics accounted for 63% of first quarter revenues
  • GAAP Gross Margin of 60% for the first quarter of 2020
  • Non-GAAP Gross Margin of 65% for the first quarter of 2020
  • Operating activities generated $5.4 million in cash during the first quarter of 2020
  • Cash and cash equivalents of $100.4 million at the end of first quarter of 2020

SANTA CLARA, Calif., May 07, 2020 (GLOBE NEWSWIRE) -- PDF Solutions, Inc. ("PDF Solutions" or the "Company") (NASDAQ:PDFS), a leading provider of differentiated data and analytics solutions to the semiconductor and electronics industries, today announced financial results for its first quarter ended March 31, 2020.

Highlights of First Quarter 2020 Financial Results

Total revenues for the first quarter of 2020 were $21.2 million, compared to $22.6 million for the fourth quarter of 2019 and $20.5 million for the first quarter of 2019. Analytics revenue for the first quarter of 2020 was $13.2 million, compared to $13.5 million for the fourth quarter of 2019 and $11.4 million for the first quarter of 2019.  Integrated Yield Ramp revenue for the first quarter of 2020 was $7.9 million, compared to $9.1 million for the first and fourth quarters of 2019.

GAAP gross margin for the first quarter of 2020 of 60%, compared to 60% for the fourth quarter of 2019 and 62% for the first quarter of 2019.

Non-GAAP gross margin for the first quarter of 2020 of 65%, compared to 64% for the fourth quarter of 2019 and 67% for the first quarter of 2019.

On a GAAP basis, net loss for the first quarter of 2020 was $0.5 million, or ($0.02) per basic and diluted share, compared to net loss of $1.3 million, or ($0.04) per basic and diluted share, for the fourth quarter of 2019, and compared to net loss of $2.7 million, or ($0.08) per basic and diluted share, for the first quarter of 2019.

Non-GAAP net loss for the first quarter of 2020 was $0.1 million, or ($0.00) per diluted share, compared to net income of $1.1 million, or $0.03 per diluted share, for the fourth quarter of 2019, and compared to net income of $0.8 million, or $0.03 per diluted share, for the first quarter of 2019.

Cash and cash equivalents at March 31, 2020 were $100.4 million, compared to $97.6 million at December 31, 2019, an increase of $2.8 million. Operating activities generated $5.4 million in cash during the quarter ended March 31, 2020.

Additional Financial Information:

The Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"), enacted on March 27, 2020, included certain tax provisions for corporations, one of which is the temporary carry back of tax losses. Accordingly, for the first quarter of 2020, the Company recognized a $2.3 million tax benefit related to its tax loss carryback on its GAAP Income Tax Benefit. As a result, the Company expects tax refunds of approximately $1.1 million once the refund requests are processed.

Conference Call

As previously announced, PDF Solutions will discuss these results on a live conference call beginning at 2:00 p.m. Pacific Time/5:00 p.m. Eastern Time today. The call will be simultaneously webcast on PDF Solutions' website at http://ir.pdf.com/webcasts. A replay of the webcast will be available at the same website address beginning approximately two hours after completion of the live call. A copy of this press release, including the disclosure and reconciliation of certain non-GAAP financial measures to the comparable GAAP measures, which non-GAAP measures may be used periodically by PDF Solutions' management when discussing financial results with investors and analysts, will also be available on PDF Solutions' website at http://www.pdf.com/press-releases following the date of this release.

First Quarter 2020 Financial Commentary Available Online

A Management Report reviewing the Company's first quarter of 2020 financial results will be furnished to the SEC on Form 8-K and published on the Company's website at http://ir.pdf.com/financial-reports. Analysts and investors are encouraged to review this commentary prior to participating in the conference call webcast. 

Information Regarding Use of Non-GAAP Financial Measures
In addition to providing results that are determined in accordance with Generally Accepted Accounting Principles in the United States of America (GAAP), PDF Solutions also provides certain non-GAAP financial measures. Non-GAAP net income (loss) excludes the effects of non-recurring items (including adjustment to contingent consideration related to acquisition, restructuring charges and severance payments, and expenses related to an arbitration proceeding for a disputed contract with a customer), stock-based compensation expense, amortization of acquired technology and other acquired intangible assets, and their related income tax effects, as applicable, as well as adjustments for the non-cash portion of income taxes and tax impact of the CARES Act. These non-GAAP financial measures are used by management internally to measure the Company's profitability and performance. PDF Solutions' management believes that these non-GAAP measures provide useful supplemental information to investors regarding the Company's ongoing operations in light of the fact that none of these categories of expense has a current effect on the future uses of cash (with the exception of certain non-recurring items) nor do they impact the generation of current or future revenues. These non-GAAP results should not be considered an alternative to, or a substitute for, GAAP financial information, and may differ from similarly titled non-GAAP measures used by other companies. In particular, these non-GAAP financial measures are not a substitute for GAAP measures of income or loss as a measure of performance, or to cash flows from operating, investing and financing activities as a measure of liquidity. Since management uses these non-GAAP financial measures internally to measure profitability and performance, PDF Solutions has included these non-GAAP measures to give investors an opportunity to see the Company's financial results as viewed by management. A reconciliation of the comparable GAAP financial measures to the non-GAAP financial measures is provided at the end of the Company's financial statements presented below.   

Forward-Looking Statements
The statements planned to be made on the planned conference call regarding the Company's future expected business performance and financial results are forward looking and are subject to future events and circumstances. Actual results could differ materially from those expressed in these forward-looking statements. Risks and uncertainties that could cause results to differ materially include risks associated with: customers' production volumes under contracts that provide Gainshare royalties, cost and schedule of new product development; continued adoption of the Company's solutions by new and existing customers; project milestones or delays and performance criteria achieved; the provision of technology and services prior to the execution of a final contract, the potential impact of the coronavirus (COVID-19) on the semiconductor industry and on our operations or demand for our products; and other risks set forth in PDF Solutions' periodic public filings with the Securities and Exchange Commission, including, without limitation, its Annual Reports on Form 10-K, most recently filed for the year ended December 31, 2019, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K and amendments to such reports. The forward-looking statements made in the conference call are made as of the date hereof, and PDF Solutions does not assume any obligation to update such statements nor the reasons why actual results could differ materially from those projected in such statements.

About PDF Solutions
PDF Solutions (NASDAQ:PDFS) offers an end-to-end analytics platform that empowers engineers and data scientists across the semiconductor ecosystem to rapidly improve the yield, quality, and profitability of their products. By combining industry-leading data analytics and professional services with exclusive, differentiated product data generated during the manufacturing process, PDF Solutions is delivering on the promise of Industry 4.0 today by transforming how the ecosystem collects, analyzes, and shares data. Key Fortune 500 organizations around the world rely on PDF Solutions to remove the data barriers that encumber and constrain new product introductions and to deliver the machine learning insights that drive efficient and profitable high-volume manufacturing.

Headquartered in Santa Clara, California, PDF Solutions also operates worldwide in Canada, China, France, Germany, Italy, Japan, Korea, and Taiwan. For the Company's latest news and information, visit http://www.pdf.com/.

Characterization Vehicle, Design-for-Inspection, DFI, Exensio, PDF Solutions, and the PDF Solutions logo are trademarks or registered trademarks of PDF Solutions, Inc. or its subsidiaries. 

Company Contacts:    
Adnan Raza Sonia Segovia Joe Diaz, Robert Blum, Joe Dorame
Chief Financial Officer IR Coordinator Lytham Partners, LLC
Tel: (408) 516-0237 Tel: (408) 938-6491 Tel: (602) 889-9700
Email: adnan.raza@pdf.com
Email: sonia.segovia@pdf.com
Email: pdfs@lythampartners.com


PDF SOLUTIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands)
 
    March 31,
2020
    December 31,
2019
 
 

ASSETS
               
Current assets:                
Cash and cash equivalents   $ 100,385     $ 97,605  
Accounts receivable, net     37,363       40,651  
Prepaid expenses and other current assets     11,628       9,320  
Total current assets     149,376       147,576  
Property and equipment, net     41,009       40,798  
Operating lease right-of-use assets, net     7,368       7,609  
Goodwill     2,293       2,293  
Intangible assets, net     5,904       6,221  
Deferred tax assets     25,085       25,327  
Other non-current assets     8,322       9,720  
Total assets   $ 239,357     $ 239,544  
 

LIABILITIES AND STOCKHOLDERS' EQUITY
               
Current liabilities:                
Accounts payable   $ 4,828     $ 7,636  
Accrued compensation and related benefits     4,754       5,072  
Accrued and other current liabilities     1,406       1,665  
Operating lease liabilities ‒ current portion     1,954       1,867  
Deferred revenues ‒ current portion     12,326       10,639  
Billings in excess of recognized revenues     1,796       1,117  
Total current liabilities     27,064       27,996  
Long-term income taxes payable     4,884       5,368  
Non-current operating lease liabilities     7,310       7,677  
Deferred revenues ‒ non-current portion     1,630       2,346  
Total liabilities     40,888       43,387  
                 
Stockholders' equity:                
Common stock and additional paid-in-capital     329,686       325,202  
Treasury stock at cost     (93,173 )     (91,695 )
Accumulated deficit     (36,398 )     (35,870 )
Accumulated other comprehensive loss     (1,646 )     (1,480 )
Total stockholders' equity     198,469       196,157  
Total liabilities and stockholders' equity   $ 239,357     $ 239,544  
 


PDF SOLUTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) 
(In thousands, except per share amounts)
 
    Three months ended  
    March 31,     December 31,     March 31,  
    2020     2019     2019 (1)  
                         
Revenues:                        
Analytics   $ 13,248     $ 13,527     $ 11,434  
Integrated yield ramp     7,910       9,035       9,107  
Total revenues     21,158       22,562       20,541  
                         
Costs and Expenses:                        
Costs of revenues     8,487       9,059       7,867  
Research and development     8,590       8,754       8,246  
Selling, general and administrative     7,895       6,359       7,011  
Amortization of other acquired intangible assets     173       173       108  
Restructuring charges                 92  
Interest and other expense (income), net     20       31       6  
Loss before income taxes     (4,007 )     (1,814 )     (2,789 )
Income tax benefit     (3,479 )     (484 )     (98 )
Net loss   $ (528 )   $ (1,330 )   $ (2,691
                         
Net loss per share:                        
Basic   $ (0.02 )   $ (0.04 )   $ (0.08
Diluted   $ (0.02 )   $ (0.04 )   $ (0.08
                         
Weighted average common shares:                        
Basic     32,703       32,429       32,485  
Diluted     32,703       32,429       32,485  


     
(1) In the fourth quarter of fiscal 2019, in order to improve the transparency of our revenue reporting, the Company updated its Condensed Consolidated Statements of Comprehensive Loss to change its historical presentation of revenue categories. Previously, the Company presented revenue on two lines: Solutions and Gainshare performance incentives.  Included within Solutions, was revenue from software and related revenue, SaaS solutions, Design-for-Inspection (DFI™) licenses, and fixed-price project-based solution implementation services. The previous Gainshare performance incentive category included only revenue from performance incentive programs. The Company now presents revenue in the following categories: Analytics and Integrated Yield Ramp.  Integrated Yield Ramp revenue is comprised of all revenue from the Company's IYR services engagements that include performance incentives based on customers' yield achievement, i.e. both fixed-fees and Gainshare royalty from such engagements. Analytics comprises all other revenue, including from the Company's licenses and services for Exensio Software, Exensio SaaS, DFI™ and Characterization Vehicle (CV) systems that do not include performance incentives based on customers' yield achievement. This prior period presentation had been reclassified to conform to the new revenue presentation.


PDF SOLUTIONS, INC.
RECONCILIATION OF GAAP TO NON-GAAP GROSS MARGIN (UNAUDITED)
(In thousands)
 
    Three months ended  
    March 31,     December 31,     March 31,  
    2020     2019     2019  
GAAP                        
Total revenues   $ 21,158     $ 22,562     $ 20,541  
Costs of revenues     8,487       9,059       7,867  
GAAP gross profit   $ 12,671     $ 13,503     $ 12,674  
GAAP gross margin     60 %     60 %     62 %
                         
Non-GAAP                        
GAAP gross profit   $ 12,671     $ 13,503     $ 12,674  
Adjustments to reconcile GAAP to non-GAAP gross margin:                        
Stock-based compensation expense     909       782       860  
Amortization of acquired technology     144       143       144  
Non-GAAP gross profit   $ 13,724     $ 14,428     $ 13,678  
Non-GAAP gross margin     65 %     64 %     67 %
                         


RECONCILIATION OF GAAP TO NON-GAAP NET INCOME (LOSS) (UNAUDITED)
(In thousands, except per share amounts)
 
    Three months ended  
    March 31,     December 31,     March 31,  
    2020     2019     2019  
GAAP net loss   $ (528 )   $ (1,330 )   $ (2,691
Adjustments to reconcile GAAP net loss to non-GAAP net income (loss):                        
Stock-based compensation expense     3,368       2,782       3,476  
Amortization of acquired technology     144       143       144  
Amortization of other acquired intangible assets     173       173       108  
Expenses of arbitration (1)     101              
Restructuring charges and severance payments                 92  
Tax impact of adjustments     (1,143 )     (700 )     (287 )
Tax impact of the CARES Act (2)     (2,261 )            
Non-GAAP net income (loss)   $ (146   $ 1,068     $ 842  
                         
GAAP net loss per diluted share   $ (0.02 )   $ (0.04 )   $ (0.08
Non-GAAP net income (loss) per diluted share   $ (0.00   $ 0.03     $ 0.03  
                         
Shares used in diluted shares calculation     32,703       33,414       33,022  


     
(1) Represents the expenses related to an arbitration proceeding over a disputed contract with a customer, which expenses are expected to continue until the arbitration is resolved.
(2) Represents the discrete tax benefit recognized from the carryback of net operating losses (NOLs) under the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") enacted in March 2020. The Company does not have any NOLs on a non-GAAP basis and, therefore, it did not recognize this discrete tax benefit in calculating its non-GAAP tax expense and net income (loss).

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