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PDF SOLUTIONS INC (PDFS)·Q3 2025 Earnings Summary

Executive Summary

  • Record quarterly revenue of $57.1M (+23% YoY, +10% QoQ) with non-GAAP diluted EPS of $0.25; GAAP diluted EPS was $0.03. Results modestly beat Wall Street consensus on both revenue and EPS (non-GAAP) in Q3 2025.*
  • Backlog surged to $292.0M (+25% QoQ, +22% YoY), supported by over $100M in bookings across Exensio and Cimetrix; management reaffirmed FY25 revenue growth guidance of 21–23% and expects sequential revenue growth again in Q4.
  • Strategic momentum: eight-figure contracts in Exensio and secureWISE; integration of Intel’s Tiber AI Studio into Exensio (“Exensio Studio AI”) targeted for release by end of Q4 for early-access customers; eProbe shipments under subscription model progressing through qualification.
  • Near-term watch items: integrated yield ramp (IYR) down QoQ, elevated effective tax rate, continued legal and acquisition-related costs, and higher interest expense from new debt, partially offset by stronger margins and operating discipline.

What Went Well and What Went Wrong

What Went Well

  • Record total revenues ($57.1M) and analytics revenues ($54.7M) driven by leading-edge customers and equipment software; non-GAAP gross margin remained above the 75% long-term target at 76%. “Our bookings for this quarter totaled over $100 million... we ended Q3 with a backlog of $292 million... 25% higher than last quarter.”
  • Strategic wins: “We signed an eight-figure contract with a large IC manufacturer... and an eight-figure contract for secureWISE with one of the largest equipment OEMs.”
  • Market position: “More equipment is now shipped with our [Cimetrix] software installed on it than internally developed software of any single equipment vendor,” strengthening runtime license momentum.

What Went Wrong

  • GAAP profitability muted: GAAP net income $1.3M and diluted EPS $0.03 vs $2.2M and $0.06 in Q3’24, reflecting interest expense ($1.24M), tax expense and non-recurring costs; effective tax rate appeared elevated.
  • IYR softness: Integrated yield ramp revenue fell QoQ to $2.453M (from $2.906M), though up YoY; management attributed analytics growth vs IYR decline to mix.
  • Cash headwinds: cash, equivalents, and ST investments decreased to ~$35.9M (from ~$40.4M QoQ) amid CapEx for eProbe builds and acquisition integration; debt outstanding ~$67.6M.

Financial Results

Revenue, EPS, and Margins vs Prior Periods and Consensus

MetricQ3 2024Q2 2025Q3 2025
Total Revenue ($USD Millions)$46.409 $51.728 $57.115
GAAP Gross Margin (%)73% 71% 72%
Non-GAAP Gross Margin (%)77% 76% 76%
GAAP Operating Margin (%)5% 2% 8%
Non-GAAP Operating Margin (%)21% 19% 23%
GAAP Diluted EPS ($)$0.06 $0.03 $0.03
Non-GAAP Diluted EPS ($)$0.25 $0.19 $0.25
Consensus vs Actual (Q3 2025)ConsensusActual
Revenue ($USD)$56,691,250.0*$57,115,000.0
Primary EPS (non-GAAP proxy)$0.2225*$0.25
# of Estimates (Revenue / EPS)4 / 4*—

Values retrieved from S&P Global.*

Segment Revenue Breakdown

Segment ($USD Millions)Q3 2024Q2 2025Q3 2025
Analytics$44.750 $48.822 $54.662
Integrated Yield Ramp$1.659 $2.906 $2.453
Total Revenues$46.409 $51.728 $57.115

KPIs and Operating Metrics

KPIQ2 2025Q3 2025
Backlog ($USD Millions)$232.6 $292.0
Bookings (Quarter)—>$100.0
Operating Cash Flow ($USD Millions)($5.215) $3.287
CAPEX ($USD Millions)$8.526 $6.325
Ending Cash & ST Investments ($USD Millions)~$40.402 ~$35.880
Outstanding Debt ($USD Millions)$68.117 $67.558

Geographic Revenue (Quarter)

Geography ($USD Thousands)Q3 2024Q2 2025Q3 2025
United States$21,065 $19,954 $30,143
Japan$6,275 $9,304 $10,091
China$5,673 $12,190 $5,842
Taiwan$6,273 $1,503 $1,238
Rest of World$7,123 $8,777 $9,801
Total Revenues$46,409 $51,728 $57,115

Non-GAAP Adjustments (Q3 2025)

Adjustment ($USD Thousands)Amount
Stock-based compensation$6,264
Amortization of acquired intangibles$2,067
Legal proceedings$170
Acquisition/integration costs$22
Tax impact of valuation allowance & reconciling items$(66)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Revenue GrowthFY 2025+21–23% YoY +21–23% YoY reaffirmed Maintained
Sequential RevenueQ4 2025Not providedExpect sequential growth vs Q3 New qualitative
Long-term Gross Margin TargetLT~75% Reiterated (~75%) Maintained
Long-term Operating Margin TargetLT~20% Reiterated (~20%) Maintained

No explicit EPS, OpEx, OI&E, or tax rate numerical guidance was provided; management reiterated qualitative expectations and long-term targets.

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2 2025)Current Period (Q3 2025)Trend
AI/model ops (Exensio Studio AI)Emphasis on MLOps and AI for test; pilots ongoing; partnership momentum (SAP) Licensed Tiber AI Studio from Intel; integration into Exensio targeted end-Q4; early access customers Expanding capabilities; near-term release
secureWISE (connectivity)Acquisition closed; early wins; integration plans with DEX and Cimetrix; fab/OSAT collaboration Eight-figure OEM contract; broader fab adoption; Intel standardizing secureWISE across tools Accelerating go-to-market and adoption
eProbe/DFIPlan to ship ≥4 tools in 2025; Q1 shipped 2; revenue recognition depends on qualification Two additional machines shipped; qualification expected Q4/Q1; pipeline strong across 5–10 customers Building installed base; 2026 revenue tailwind
Advanced packaging & test (feed-forward)Growing pilots; SAP-linked orchestration need Multiple pilots; majority revenue impact expected in 2026 Medium-term growth vector
Customer mix & concentrationFab/fabless/equipment split; China bifurcation strategy Customer A concentration increased (19%→38% YoY); platform sales across segments Larger deals driving concentration
Macro/tariffs/regulatoryLimited tariff impact; industry adjusts to regulatory shifts AI build-out broadening; stronger outlook for 2026 across advanced nodes/DRAM; mixed in autos/industrial Improving sentiment
SAP/SapienceEnterprise hub bookings; ERP-MES-analytics orchestration Expect Q4 Sapience-related announcements; continued pipeline Sustained momentum

Management Commentary

  • “With a strong portfolio and momentum, we reaffirm our 21–23% annual revenue growth prior guidance range for this year.” — John Kibarian, CEO
  • “Our bookings for this quarter totaled over $100 million... we ended Q3 with a backlog of $292 million... 25% higher than last quarter and 22% higher than the same period a year ago.” — Adnan Raza, CFO
  • “We licensed Tiber AI Studio from Intel... integrating directly into Exensio... to enable engineers to use Exensio to both train models as well as deploy them.” — John Kibarian
  • “More equipment is now shipped with our [Cimetrix] software installed on it than internally developed software of any single equipment vendor.” — John Kibarian
  • “We expect the profits generated from these investments in 2025 will enrich our balance sheet in 2026 and beyond.” — John Kibarian

Q&A Highlights

  • DFI revenue timing: two eProbe machines shipped under subscription; qualification typically one quarter ±; initial revenue could begin in Q4 or Q1; guidance does not rely solely on these timing outcomes.
  • secureWISE go-to-market: expanded to fabs and OSATs; Intel standardizing secureWISE across front-end, back-end and test; goal is broader factory coverage enabling secure collaboration and AI workflows.
  • Customer concentration: “Customer A... went from 19% to 38%” YoY; management framed platform breadth across fab, fabless, and equipment vendors as strategic rationale.
  • Runtime licenses visibility: significant Q3 runtime revenues; limited quarter-to-quarter visibility as revenue recognized upon equipment shipment; annual trend positive with broader equipment adoption.
  • Advanced test feed-forward: multiple pilots and some production deployments; majority revenue impact expected in 2026.
  • Outlook: sequential revenue growth expected in Q4; FY25 revenue growth reaffirmed at 21–23%.

Estimates Context

  • Q3 2025 actuals vs S&P Global consensus: revenue $57.115M vs $56.691M* (beat); non-GAAP EPS $0.25 vs $0.2225* (beat). Values retrieved from S&P Global.*
  • Given the modest beats and backlog strength (+25% QoQ), near-term estimate revisions may focus on Q4 sequential growth and sustaining margins at or above long-term targets (75% non-GAAP GM), consistent with management commentary.

Key Takeaways for Investors

  • Modest beat on both revenue and non-GAAP EPS with record quarterly revenues and strong analytics mix; margins remain above long-term targets, supporting thesis durability.
  • Backlog and bookings strength (>$100M bookings; $292M backlog) improve revenue visibility into Q4 and 2026, particularly across Exensio, secureWISE, and Cimetrix.
  • Near-term catalysts: Exensio Studio AI (Tiber AI integration) targeted by end-Q4; secureWISE standardization at key accounts; additional eProbe qualifications could add subscription revenue.
  • Watch IYR trajectory and customer concentration risk; revenue mix suggests continued reliance on large strategic deals.
  • Cash and CapEx dynamics should inflect as integration costs ebb and eProbe subscriptions ramp; management expects cash growth over the next year.
  • Medium-term: advanced packaging/test feed-forward and broader AI-first analytics deployments are likely 2026 revenue drivers; monitor user conference/analyst day disclosures.
  • Trading lens: Strong bookings/backlog and Q4 sequential growth commentary provide positive near-term sentiment; incremental validation of AI/model ops roadmap and secure connectivity could be stock catalysts, while GAAP earnings, tax rate volatility, and debt/interest expense are offsetting considerations.