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PDF Solutions® Reports Second Quarter 2020 Results

Business Highlights

  • Total revenues of $21.4 million, up 4% over last year’s comparable quarter
  • Analytics revenue of $15.2 million, up 27% over last year’s comparable quarter
  • Analytics accounted for 71% of second quarter revenues
  • GAAP Gross Margin of 58% for the second quarter of 2020
  • Non-GAAP Gross Margin of 63% for the second quarter of 2020
  • Operating activities generated $5.2 million in cash during the second quarter of 2020
  • Cash and cash equivalents of $103.4 million at the end of second quarter of 2020

SANTA CLARA, Calif., Aug. 06, 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 second quarter ended June 30, 2020.

Highlights of Second Quarter 2020 Financial Results

Total revenues for the second quarter of 2020 were $21.4 million, compared to $21.2 million for the first quarter of 2020 and $20.6 million for the second quarter of 2019. Analytics revenue for the second quarter of 2020 was $15.2 million, compared to $13.2 million for the first quarter of 2020 and $12.0 million for the second quarter of 2019.  Integrated Yield Ramp revenue for the second quarter of 2020 was $6.2 million, compared to $7.9 million for the first quarter of 2020 and $8.6 million for the second quarter of 2019.

GAAP gross margin for the second quarter of 2020 was 58%, compared to 60% for the first quarter of 2020 and 62% for the second quarter of 2019.

Non-GAAP gross margin for the second quarter of 2020 was 63%, compared to 65% for the first quarter of 2020 and 67% for the second quarter of 2019.

On a GAAP basis, net loss for the second quarter of 2020 was $3.7 million, or ($0.11) per basic and diluted share, compared to a net loss of $0.5 million, or ($0.02) per basic and diluted share, for the first quarter of 2020, and compared to a net loss of $0.7 million, or ($0.02) per basic and diluted share, for the second quarter of 2019.

Non-GAAP net income for the second quarter of 2020 was $0.5 million, or $0.01 per diluted share, compared to a net loss of $0.1 million, or ($0.00) per diluted share, for the first quarter of 2020, and compared to net income of $1.0 million, or $0.03 per diluted share, for the second quarter of 2019.

Cash and cash equivalents at June 30, 2020, were $103.4 million, compared to $97.6 million at December 31, 2019, an increase of $5.8 million. Operating activities generated $5.2 million in cash during the second quarter of 2020.

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.

Second Quarter 2020 Financial Commentary Available Online

A Management Report reviewing the Company’s second 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. 

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 restructuring charges and severance payments, and expenses related to an arbitration proceeding for a disputed contract with a customer), write-down in value of property and equipment, 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 and the Company’s recent strategic agreement with Advantest 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 the Company’s operations or demand for the Company’s products; the Company’s strategic partnerships; 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.

   
PDF SOLUTIONS, INC.  
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)  
(In thousands)  
   
    June 30,
2020
    December 31, 2019  
 

ASSETS

               
Current assets:                
Cash and cash equivalents   $ 103,441     $ 97,605  
Accounts receivable, net     28,666       40,651  
Prepaid expenses and other current assets     8,627       9,320  
Total current assets     140,734       147,576  
Property and equipment, net     40,412       40,798  
Operating lease right-of-use assets, net     7,056       7,609  
Goodwill     2,293       2,293  
Intangible assets, net     5,586       6,221  
Deferred tax assets, net     29,522       25,327  
Other non-current assets     8,093       9,720  
Total assets   $ 233,696     $ 239,544  
 

LIABILITIES AND STOCKHOLDERS’ EQUITY

               
Current liabilities:                
Accounts payable   $ 2,763     $ 7,636  
Accrued compensation and related benefits     5,285       5,072  
Accrued and other current liabilities     1,368       1,665  
Operating lease liabilities ‒ current portion     1,880       1,867  
Deferred revenues ‒ current portion     10,087       10,639  
Billings in excess of recognized revenues     497       1,117  
Total current liabilities     21,880       27,996  
Long-term income taxes payable     5,264       5,368  
Non-current operating lease liabilities     7,033       7,677  
Other non-current liabilities     1,814       2,346  
Total liabilities     35,991       43,387  
                 
Stockholders’ equity:                
Common stock and additional paid-in-capital   $ 333,162     $ 325,202  
Treasury stock at cost     (93,968 )     (91,695 )
Accumulated deficit     (40,050 )     (35,870 )
Accumulated other comprehensive loss     (1,439 )     (1,480 )
Total stockholders’ equity     197,705       196,157  
Total liabilities and stockholders’ equity   $ 233,696     $ 239,544  
                 

PDF SOLUTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except per share amounts)

    Three months ended     Six months ended  
    June 30,     March 31,     June 30,     June 30,     June 30,  
    2020     2020     2019 (1)     2020     2019 (1)  
                                         
Revenues:                                        
Analytics   $ 15,172     $ 13,248     $ 11,974     $ 28,420     $ 23,408  
Integrated yield ramp     6,237       7,910       8,594       14,147       17,701  
Total revenues     21,409       21,158       20,568       42,567       41,109  
                                         
Costs and Expenses:                                        
Costs of revenues     8,946       8,487       7,832       17,433       15,700  
Research and development     7,754       8,590       7,312       16,344       15,558  
Selling, general and administrative     7,737       7,895       6,940       15,632       13,950  
Amortization of other acquired intangible assets     174       173       154       347       262  
Restructuring charges                             92  
Interest and other expense (income), net     150       20       (111 )     170       (105 )
Loss before income taxes     (3,352 )     (4,007 )     (1,559 )     (7,359 )     (4,348 )
Income tax expense (benefit)     300       (3,479 )     (849 )     (3,179 )     (947 )
Net loss   $ (3,652 )   $ (528 )   $ (710 )   $ (4,180 )   $ (3,401 )
                                         
Net loss per share:                                        
Basic   $ (0.11 )   $ (0.02 )   $ (0.02 )   $ (0.13 )   $ (0.10 )
Diluted   $ (0.11 )   $ (0.02 )   $ (0.02 )   $ (0.13 )   $ (0.10 )
                                         
Weighted average common shares:                                        
Basic     32,886       32,703       32,339       32,795       32,412  
Diluted     32,886       32,703       32,339       32,795       32,412  

_______________________

(1)  In the fourth quarter of 2019, in order to improve the transparency of the Company’s 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 Integrated Yield Ramp 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 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     Six months ended  
    June 30,     March 31,     June 30,     June 30,     June 30,  
    2020     2020     2019     2020     2019  
GAAP                                        
Total revenues   $ 21,409     $ 21,158     $ 20,568     $ 42,567     $ 41,109  
Costs of revenues     8,946       8,487       7,832       17,433       15,700  
GAAP gross profit   $ 12,463     $ 12,671     $ 12,736     $ 25,134     $ 25,409  
GAAP gross margin     58 %     60 %     62 %     59 %     62 %
                                         
                                         
Non-GAAP                                        
GAAP gross profit   $ 12,463     $ 12,671     $ 12,736     $ 25,134     $ 25,409  
Adjustments to reconcile GAAP to non-GAAP gross margin:                                        
Stock-based compensation expense     883       909       799       1,792       1,659  
Amortization of acquired technology     143       144       143       287       287  
Non-GAAP gross profit   $ 13,489     $ 13,724     $ 13,678     $ 27,213     $ 27,355  
Non-GAAP gross margin     63 %     65 %     67 %     64 %     67 %
                                         

PDF SOLUTIONS, INC.
RECONCILIATION OF GAAP TO NON-GAAP NET INCOME (LOSS) (UNAUDITED)
(In thousands, except per share amounts)

    Three months ended     Six months ended  
    June 30,     March 31,     June 30,     June 30,     June 30,  
    2020     2020     2019     2020     2019  
GAAP net loss   $ (3,652 )   $ (528 )   $ (710   $ (4,180 )   $ (3,401
Adjustments to reconcile GAAP net loss to non-GAAP net income (loss):                                        
Stock-based compensation expense     2,978       3,368       2,434       6,346       5,910  
Amortization of acquired technology     143       144       143       287       287  
Amortization of other acquired intangible assets     174       173       154       347       262  
Expenses of arbitration (1)     363       101             464        
Write-down in value of property and equipment     311                   311        
Restructuring charges and severance payments                             92  
Tax impact of adjustments     167       (1,143     (993 )     (976     (1,280 )
Tax impact of the CARES Act (2)           (2,261 )           (2,261 )      
Non-GAAP net income (loss)   $ 484     $ (146   $ 1,028     $ 338     $ 1,870  
                                         
GAAP net loss per diluted share   $ (0.11 )   $ (0.02 )   $ (0.02   $ (0.13 )   $ (0.10
Non-GAAP net income (loss) per diluted share   $ 0.01     $ (0.00   $ 0.03     $ 0.01     $ 0.06  
                                         
Shares used in diluted shares calculation     33,874       32,703       33,055       33,718       33,038  

______________________

(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).

     
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: [email protected]  Email: [email protected]  Email: [email protected]

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