PS
PDF SOLUTIONS INC (PDFS)·Q2 2025 Earnings Summary
Executive Summary
- Record Q2 revenue of $51.7M (+24% YoY, +8% QoQ) and non-GAAP EPS of $0.19; both slightly beat S&P Global consensus: revenue $51.58M* and EPS $0.19* (beat rounded by ~$0.15M on revenue; EPS inline-to-slight beat). Backlog increased to $232.6M, indicating sustained demand . Q2 consensus figures from S&P Global*.
- Mix tailwind from Analytics (94% of revenue) drove strength; Integrated Yield Ramp declined as a large engagement transitioned from fixed-fee to gainshare .
- Management reaffirmed FY25 revenue growth guidance of 21–23% and indicated 2H growth above 20% YoY given bookings momentum, supporting estimate stability/upward bias .
- Strategic catalysts: SecureWise adoption at a large IDM and integration into the broader PDF Platform (Sapience, Exensio, DEX) to orchestrate data and AI across fabs/OSATs; DFI eProbe pipeline justified elevated capex and supports medium-term growth .
What Went Well and What Went Wrong
What Went Well
- Broad-based top-line strength: total revenue $51.7M (+24% YoY), Analytics $48.8M (+28% YoY); record bookings in Sapience Manufacturing Hub and SecureWise support multi-quarter visibility .
- Platform momentum and guidance confidence: “We reaffirm our 21–23% annual revenue growth prior guidance range for this year,” with bookings/backlog growth and AI-driven digitization cited as drivers .
- Customer validation and strategic wins: CEO highlighted SecureWise enterprise deployment at a large IDM and platform positioning with Intel Foundry ecosystem, enabling secure remote access and cross-enterprise AI orchestration .
What Went Wrong
- Gross margin ticked down QoQ: GAAP GM 71% (vs 73% Q1); non-GAAP GM 76% (vs 77% Q1), reflecting mix/cost dynamics even as margins remain above long-term targets .
- Negative operating cash flow (-$5.2M) and elevated capex ($8.5M) for eProbe build weigh on near-term FCF; management expects capex to run at “this level or slightly below” in 2H .
- Integrated Yield Ramp revenue fell to $2.9M (vs $5.3M Q1) as an engagement moved from fixed fees to gainshare, creating near-term revenue headwind before royalties/gainshare accrue .
Financial Results
Revenue and EPS vs Prior Periods and Estimates
*Values retrieved from S&P Global.
Margins
Segment Revenue
KPIs and Balance Sheet Highlights
Guidance Changes
Earnings Call Themes & Trends
Management Commentary
- “We reaffirm our 21–23% annual revenue growth prior guidance range for this year.” — John Kibarian, CEO .
- “We again grew our backlog and ended the quarter with $233,000,000 of backlog.” — Adnan Raza, CFO .
- On SecureWise: “A large IDM entered into a contract to deploy SecureWise across the majority of their tools… enabling secure remote operations.” — CEO .
- On platform strategy: “To deploy AI, you need automated connectivity between data, tools, and enterprise software systems… we are well positioned to deliver this.” — CEO .
- On 2H cadence: “We expect the second half of the year to grow higher than 20% versus a strong comparable period.” — CFO .
Q&A Highlights
- Sapience traction and SAP pull-through: First product-side IDM win; orchestration between engineering and ERP/MES is key for AI at scale; SAP often involved in deals .
- SecureWise integration: Carve-out integration on track; cross-training sales; integrating SecureWise with DEX for more secure data movement across OSATs .
- Capex run rate: Elevated for eProbe builds; expect 2H capex at “this level or slightly below,” balanced against new opportunities .
- China dynamics: Q2 strength driven by volume shipments and CV/Exensio deployments; management expects moderation; gainshare/royalty streams provide durability .
- Intel relationship: Customer importance increasing as Intel opens foundry; PDF’s tech grows in relevance for yields/operations .
Estimates Context
- Q2’25 vs S&P Global consensus: Revenue $51.73M vs $51.58M*; Primary/Non-GAAP EPS $0.19 vs $0.19* — a slight beat, consistent with guidance momentum . Q2 consensus figures from S&P Global*.
- Forward consensus (context): Q3’25 revenue $56.69M*, EPS $0.22*; Q4’25 revenue $62.35M*, EPS $0.24*. Reaffirmed 21–23% FY growth plus commentary for >20% 2H YoY suggests estimates are broadly aligned, with upside levered to bookings conversion and SecureWise cross-sell . Forward consensus figures from S&P Global*.
*Values retrieved from S&P Global.
Key Takeaways for Investors
- Durable growth with visibility: Record Q2 and higher backlog ($232.6M) underpin reaffirmed 21–23% FY25 growth; 2H expected >20% YoY, supporting sustained estimate confidence .
- Platform flywheel: SecureWise + Sapience + Exensio + DEX position PDFS as the orchestration layer for AI-enabled, cross-enterprise semiconductor manufacturing—driving larger, enterprise-wide bookings .
- Mix quality: Analytics at 94% of revenue and record level enhances margin durability; IYR headwinds reflect transition to gainshare, which should accrue over time .
- Investment phase for DFI: Elevated capex to meet eProbe demand suggests near-term FCF pressure but medium-term revenue expansion as tools ship and monetize .
- Margins remain strong: Non-GAAP GM 76% sits above 75% long-term target; CFO reiterates path to 20% operating margin, aided by scale and disciplined opex .
- China: Q2 spike likely moderates near term; bifurcated operations and royalty/gainshare streams mitigate geopolitical/volume volatility risk .
- Watch catalysts: Incremental SecureWise enterprise wins, Exensio renewals/expansions (AI guide analytics), DFI tool shipments, and any large foundry/fab platform adoptions could drive estimate revisions and multiple expansion .