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PDF SOLUTIONS INC (PDFS)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered $47.8M revenue (+16% y/y, -5% q/q) and non-GAAP diluted EPS of $0.21; GAAP diluted EPS was -$0.08. Non-GAAP gross margin expanded to 77% (from 72% in Q4 and Q1 last year), aided by stronger Gainshare and lower cost of sales following the Q4 eProbe sale .
  • Results modestly beat S&P Global consensus: EPS $0.21 vs $0.1825 and revenue $47.78M vs $47.52M. Bolded beats reflect estimate outperformance. Values retrieved from S&P Global.*
  • Management reaffirmed full-year 2025 revenue growth guidance of 21–23% y/y, up from “approaching 15%” communicated in February before the SecureWise acquisition; long-term margin targets of 75% gross and 20% operating margin remain intact .
  • Operational catalysts: two eProbe systems shipped (logic customers), record Sapience Manufacturing Hub bookings, and SecureWise integration plans across equipment vendors, foundries, OSATs; tariffs cited as minimal impact to demand or operations to date .

What Went Well and What Went Wrong

What Went Well

  • Non-GAAP gross margin reached 77% on stronger Gainshare and lower cost of sales versus Q4’s eProbe sale; operating margin of ~18% and non-GAAP EPS up ~40% y/y to $0.21 .
  • Platform momentum: “Sapience Manufacturing Hub saw record bookings,” with broad traction across analytics, AI/Model Ops, enterprise connectivity, and supply chain tools; management “reaffirm[ed] our 21–23% annual revenue growth prior guidance range for this year” .
  • Product execution: “we shipped 2 [DFI] eProbe tools” in Q1 and expect to meet or exceed DFI goals for 2025; SecureWise acquisition closed and integration plans with Cimetrix and DEX nodes resonating with customers .

What Went Wrong

  • Sequential revenue fell 5% q/q to $47.8M due largely to the absence of the one-time Q4 eProbe sale; analytics revenue declined q/q (-11%) despite y/y growth (+10%) .
  • GAAP net loss of $3.0M (diluted -$0.08) driven by integration and legal costs, amortization, and debt issuance costs tied to SecureWise; notable non-GAAP adjustments include $4.345M of “non-recurring legal, finance, integration and other costs” .
  • Management acknowledged digestion and sales execution challenges in scaling enterprise analytics (SMH/Exensio) as deployments grow in complexity; spending in sales and marketing stepped up to support presales conversions .

Financial Results

Headline Financials (GAAP and Non-GAAP)

MetricQ1 2024Q3 2024Q4 2024Q1 2025
Total Revenue ($USD Millions)$41.31 $46.41 $50.09 $47.78
GAAP Diluted EPS ($)($0.01) $0.06 $0.01 ($0.08)
Non-GAAP Diluted EPS ($)$0.15 $0.25 $0.25 $0.21
GAAP Gross Margin (%)67% 73% 68% 73%
Non-GAAP Gross Margin (%)72% 77% 72% 77%

Segment Revenue

SegmentQ1 2024 ($M)Q3 2024 ($M)Q4 2024 ($M)Q1 2025 ($M)
Analytics$38.46 $44.75 $47.93 $42.47
Integrated Yield Ramp (IYR)$2.85 $1.66 $2.16 $5.31

Estimates vs Actuals (S&P Global consensus)

MetricQ3 2024Q4 2024Q1 2025
Revenue Actual ($USD)$46.41 $50.09 $47.78
Revenue Consensus Mean ($USD)*$46.20$49.26$47.52
Primary EPS Actual ($)$0.25 $0.25 $0.21
Primary EPS Consensus Mean ($)*$0.195$0.215$0.1825

Values retrieved from S&P Global.*

KPIs and Balance Sheet Indicators

KPIQ3 2024Q4 2024Q1 2025
Backlog ($USD Millions)$239.2 $221.4 $226.7
Operating Cash Flow ($USD Millions)$9.28 $1.61 $8.64
Capital Expenditures ($USD Millions)$4.60 $5.85 $8.20
Cash & Equivalents ($USD Millions)$96.43 $90.59 $43.73
Short-term Investments ($USD Millions)$23.72 $24.29 $10.42
Total Debt Outstanding ($USD Millions)— — $68.66
Effective Tax Rate (%)39% 63% (1%)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue Growth (y/y)FY 2025“Approaching 15%” (pre-acquisition) 21–23% (post-acquisition, reaffirmed) Raised
Gross Margin (LT target)Long-term75% target 75% target (maintained) Maintained
Operating Margin (LT target)Long-term20% target 20% target (maintained) Maintained
EPS (acquisition impact)FY 2025N/ASlightly accretive (SecureWise) New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
AI/Technology (MLOps, Guided Analytics, Exensio)AI workshop; MLOps pilots for complex test flows, guided analytics; cloud renewals up 50% “Platform development… AI-driven digitization”; 77% non-GAAP GM; bookings across Exensio/test/ML Strengthening adoption, broader enterprise deployments
Supply Chain & ConnectivityPartnerships (SAP, Advantest); increasing equipment runtime licenses; OSAT/test workflows SecureWise integration with Cimetrix and DEX to enable secure collaboration, global remote updates Integration accelerating; equipment/fabless/foundry collaboration rising
Tariffs/MacroMixed demand; China weakness impacted wafer volumes/IYR Tariffs “so far” minimal impact; SaaS/software mostly unaffected Watchful but limited impact to date
Product Performance (DFI eProbe)Evaluation converted to revenue in Q4; >4 shipments targeted in 2025; logic + DRAM applications 2 tools shipped (logic); one could contribute incremental revenue; demo/install activity high Ramping shipments; broader applications coming
Regional TrendsUS/Taiwan/Korea strength; China weakness in volumes/IYR Q1 geo mix: US $18.23M (38%), Japan $11.74M (25%), China $8.04M (17%), RoW $8.28M (17%) Japan/China mix improved; Rest-of-world down q/q
Regulatory/LegalArbitration/legal costs; non-recurring items Legal/integration and amortization reflected in non-GAAP recon Non-recurring items elevated near-term
R&D & CapexCapex stepped up for eProbe; R&D investment Capex $8.2M; R&D +1% q/q; SG&A +6% for presales Continued investment to support growth

Management Commentary

  • “Sapience Manufacturing Hub saw record bookings, and we acquired secureWISE to enhance supply chain collaboration… we reaffirm our 21-23% annual revenue growth prior guidance range for this year.” — John Kibarian, CEO .
  • “Gross margin for the first quarter came in at 77%… driven this quarter by increased strength in gains share… operating margin… 18%… net income… $8.1M or $0.21 per share.” — Adnan Raza, CFO (non-GAAP) .
  • “Since the start of April, tariffs have taken center stage… so far, we have not seen any noteworthy change in customer behavior… most of our software business… is generally not impacted.” — John Kibarian .

Q&A Highlights

  • SecureWise strategy: Customers value security/standards, global operability; integration with Cimetrix, DEX, and AI/ML workflows at OSATs targeted; recurring revenue model and accretive gross margin profile .
  • Capital allocation: Priority on debt reduction; opportunistic buybacks balanced with minimum cash needs .
  • DFI eProbe pipeline: Two logic shipments; DRAM applications expected later this year; some configurations delay revenue recognition until new capabilities are demonstrated .
  • Analytics growth: Enterprise-scale deployments require digestion and evolved selling motions; stepped-up S&M to convert pilots (SMH/Exensio/test/ML) .
  • Guidance reaffirmation: Revenue growth 21–23% y/y for 2025 despite macro uncertainty .

Estimates Context

  • Q1 2025 beat: EPS $0.21 vs $0.1825*, revenue $47.78M vs $47.52M*.
  • Q4 2024 beat: EPS $0.25 vs $0.215*, revenue $50.09M vs $49.26M*.
  • Q3 2024 beat: EPS $0.25 vs $0.195*, revenue $46.41M vs $46.20M*.
    Values retrieved from S&P Global.*

Where estimates may need to adjust:

  • Raise 2025 analytics/IYR trajectories given stronger Gainshare and DFI shipping progress; SecureWise recurring revenue suggests higher margin durability; reaffirmed 21–23% y/y revenue growth may drive upward estimate revisions to FY topline and non-GAAP EPS .

Key Takeaways for Investors

  • Non-GAAP beat and margin expansion are driven by Gainshare strength and mix; watch for continued IYR recovery and enterprise analytics conversions through 2025 .
  • Reaffirmed 21–23% y/y revenue growth (raised from ~15% pre-acquisition) is a positive stock catalyst; SecureWise augments connectivity and recurring revenue accretion .
  • DFI eProbe is transitioning from evaluations to shipments across logic and DRAM; expect quarter-to-quarter lumpiness but multi-quarter adoption catalysts .
  • Enterprise analytics (SMH/Exensio/MLOps) deployments are complex but sticky; increased S&M should aid pilot-to-booking conversions and multi-year renewals .
  • Balance sheet levered for SecureWise: $68.7M debt; near-term focus on deleveraging while maintaining opportunistic buybacks .
  • Geographic mix shows diversified demand with Japan/China contributions; monitor China wafer volumes for IYR recovery trajectory .
  • Near-term trading: focus on DFI shipment newsflow, SMH enterprise wins, SecureWise integration updates; medium-term thesis: margin durability (75% GM target), platform-led analytics/AI scale, and recurring revenue growth .