PDF SOLUTIONS INC Q1 FY2025 earnings call

John Kibarian noted the first quarter was a strong start, with the second largest revenue quarter in history, significant enterprise-wide bookings for solutions like Sapiens Manufacturing Hub, Exensio, and Symmetric. SecureWise contributed less than one month of revenues. Adnan Raza discussed financial results, mentioning the acquisition of SecureWise, backlog growth, gross margin improvement driven by gainshare, and operating margin at 18%. The company emphasized progress in establishing itself as a leading data analytics platform for the semiconductor industry, with a focus on 3D processing, complex packaging, and AI integration.

Total revenues for the first quarter were $47.8 million, up 16% versus the same quarter of last year. Analytics revenue came in at $42.5 million, an increase of 10% year over year. Q1 IYR revenue was up meaningfully by 86% or $2.5 million. Gross margin for the first quarter came in at 77%. Backlog ending this quarter was approximately $227 million. Analytics revenue, which is a key segment, saw growth driven by various solutions like Sapiens Manufacturing Hub, Exensio, and Symmetric. IYR revenue grew significantly due to new gainshare from customer engagements.

The company reaffirmed its revenue growth estimate for the year to be in the range of 21% to 23% compared with 2024. It shipped two DFI systems in the quarter, with one of those ship systems having potential to contribute incremental revenue growth this year. The company anticipates meeting or exceeding goals for DFI with high demo, install, and engineering activity with customers.

Tariffs could impact the cost of components shipped into the US for EProbe, though the company believes it will have only a modest impact on financial results.

Q: Could you give more detail as to the moving pieces potentially between IYR and analytics or even within analytics?

A: Overall, it's pretty in line with where we started the year. IYR has meaningful growth as it was off a small base, and analytics growth is driven by advanced node capability, enterprise-side efforts, and integrated platform announcements.

Q: In your prepared remarks, you mentioned the step up in sales and marketing expense due to higher presales activity. Could you give more detail about where you're putting that money to work?

A: The money is being put to work across a wide variety of product offerings with customers, leveraging the expanding product portfolio and cross-correlation opportunities.

Q: Can you give more color on the SecureWise integration plan?

A: SecureWise integration involves leveraging its security capabilities in advanced packaging and test flows, enabling collaboration between fabless, foundries, and equipment vendors, with low hanging fruit in technical interaction and business-wise opportunities in additional equipment vendors and foundry/IDM collaboration.

Q: How is the pipeline building for Sapiens?

A: Expect to close additional contracts this year for Sapiens Manufacturing Hub enterprise, with new capability enabling new workflows and expected incremental opportunities beyond this year.

Q: You mentioned you shipped two DFI systems in the quarter. Could you provide color on that?

A: Both are logic customers, existing customers, with potential for DRAM applications in the second half of the year.

Q: What are the challenges to picking up the growth rate of analytics?

A: New innovation takes time to digest, sales and marketing spend needs to evolve for enterprise-wide deployments, and efforts are ongoing to better show value to customers.

Q: How should we think about gross margin and OpEx going forward with the acquisition?

A: The acquisition is expected to be accretive to earnings and operating margins, with ongoing evaluation of spend and alignment with long-term gross margin and operating margin targets.

Q: Could you give an update on partnerships like Advantest?

A: Ongoing relationships with Advantest, including mutual selling and joint selling, with expectations of ongoing collaboration.

Q: How do you think about trailing edge customers and their strength?

A: Merchant semiconductor customers are aggressive in reforming business operations with AI and enterprise solutions, while leading-edge customers have impetus for quick decisions.

Q: On capital allocation, how should we think about over the next couple of years?

A: Prioritization is on debt reduction, with opportunistic share buybacks balanced by maintaining appropriate cash on the balance sheet.

Q: What's the gross margin profile and revenue base of SecureWise?

A: SecureWise is highly recurring, nearly all subscription revenue, with accretive gross margin to the company's overall gross margin.