PART I [Item 1. Business](index=4&type=section&id=Item%201.%20Business) PDF Solutions provides data solutions to the semiconductor industry, generating revenue from Analytics and Integrated Yield Ramp services - The company derives revenues from two sources: **Analytics** (contract fees for on-premise software, hardware systems, SaaS, and professional services) and **Integrated Yield Ramp** (contract fees and value-based royalties called Gainshare)[28](index=28&type=chunk) - As of December 31, 2024, the company held **128 U.S. patents** with expiration dates ranging from 2025 through 2044, protecting technologies such as its CV and DFI systems and AI/ML inventions[36](index=36&type=chunk)[37](index=37&type=chunk) Customer Revenue Concentration | Year | Customer Concentration | Percentage of Revenue | | :--- | :--- | :--- | | 2024 | Two Customers | 31% | | 2023 | One Customer | 35% | | 2022 | Two Customers | 41% | Employee Distribution as of December 31, 2024 | Department | Number of Employees | | :--- | :--- | | Field Application Engineers | 174 | | Research and Development | 189 | | Sales and Marketing | 113 | | General and Administrative | 63 | | **Total** | **539** | | **Region** | **Number of Employees** | | :--- | :--- | | United States | 321 | | Asia | 180 | | Europe | 38 | [Item 1A. Risk Factors](index=27&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks including R&D challenges, sole-source provider reliance, customer concentration, and evolving export controls - The company relies on **sole-source providers** for specialized parts for its eProbe hardware and for some enabling software[102](index=102&type=chunk) - A significant portion of revenue comes from a limited number of customers, with **two customers accounting for 31% of total revenues** in 2024[112](index=112&type=chunk) - The company is subject to **complex and changing U.S. export regulations** (EAR) and economic sanctions (OFAC), which have restricted business with certain customers and in certain countries[115](index=115&type=chunk)[118](index=118&type=chunk) - The company and its third-party service providers face **evolving cybersecurity risks**, including hacking, ransomware, and phishing[129](index=129&type=chunk)[130](index=130&type=chunk)[133](index=133&type=chunk) - The planned **acquisition of SecureWise LLC**, announced in February 2025, and other potential acquisitions carry risks related to integration, unanticipated costs, and diversion of management's attention[160](index=160&type=chunk) [Item 1B. Unresolved Staff Comments](index=55&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company has no unresolved staff comments from the SEC - None[168](index=168&type=chunk) [Item 1C. Cybersecurity](index=55&type=section&id=Item%201C.%20Cybersecurity) The company manages cybersecurity risks through a NIST-guided framework, with Board oversight and no material incidents in over five years - The company's cybersecurity risk management process is guided by The National Institute of Standards and Technology (**NIST Cybersecurity Framework**)[171](index=171&type=chunk) - The **Audit Committee of the Board of Directors** is tasked with oversight of cybersecurity risk[181](index=181&type=chunk)[182](index=182&type=chunk) - For more than five years, the company has identified **no material cybersecurity incidents** that have materially impacted its business, operations, or financial condition[177](index=177&type=chunk) [Item 2. Properties](index=59&type=section&id=Item%202.%20Properties) The company leases its principal executive offices in Santa Clara, California, and maintains additional global office spaces - The principal executive offices are leased in Santa Clara, California, covering approximately **20,800 square feet** under a lease agreement that expires in August 2028[186](index=186&type=chunk) - Additional facilities are leased in various locations including Milpitas, CA; Pittsburgh, PA; Richardson, TX; Salt Lake City, UT; Shanghai, China; Canada; France; Germany; Italy; Japan; South Korea; and Taiwan[186](index=186&type=chunk) [Item 3. Legal Proceedings](index=61&type=section&id=Item%203.%20Legal%20Proceedings) The company is awaiting a decision in an arbitration proceeding initiated in 2020 against SMIC for unpaid fees - On May 6, 2020, the Company initiated **arbitration** with the Hong Kong International Arbitration Center against SMIC New Technology Research & Development (Shanghai) Corporation for failure to pay fees[191](index=191&type=chunk) - The Company seeks to recover unpaid fees and costs associated with the proceeding and is **awaiting a decision** from the Tribunal after submitting final arguments in August 2024[191](index=191&type=chunk) [Item 4. Mine Safety Disclosures](index=61&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations - Not applicable[192](index=192&type=chunk) PART II [Item 5. Market For Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=62&type=section&id=Item%205.%20Market%20For%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on Nasdaq, has not paid dividends, and initiated a new **$40.0 million** stock repurchase program in April 2024 - The company's common stock trades on the Nasdaq Global Market under the symbol "**PDFS**"[195](index=195&type=chunk) - **No cash dividends** were paid in 2024, 2023, or 2022, and the company does not anticipate paying any in the foreseeable future[196](index=196&type=chunk) - On April 15, 2024, the Board of Directors adopted a new stock repurchase program authorizing the repurchase of up to **$40.0 million** of common stock over two years[203](index=203&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=63&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Total revenues increased **8%** to **$179.5 million** in 2024, driven by Analytics growth, with **$4.1 million** net income and **$114.9 million** in cash Financial Highlights for Fiscal Year 2024 (in millions) | Metric | 2024 | 2023 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $179.5 | $165.8 | +$13.6 | +8% | | Analytics Revenue | $169.3 | $152.1 | +$17.2 | +11% | | Integrated Yield Ramp Revenue | $10.2 | $13.8 | -$3.5 | -26% | | Net Income | $4.1 | $3.1 | +$1.0 | +32% | - The company identifies **significant judgments in its revenue recognition process**, including determining standalone selling prices (SSP), estimating progress for percentage-of-completion contracts, and estimating variable Gainshare royalties[228](index=228&type=chunk)[229](index=229&type=chunk)[231](index=231&type=chunk)[232](index=232&type=chunk) - A full valuation allowance of **$67.9 million** was maintained against U.S. federal and state net deferred tax assets as of December 31, 2024[233](index=233&type=chunk) Cash Flow Summary (Year Ended Dec 31, in thousands) | | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $9,703 | $14,600 | | Net cash used in investing activities | ($5,936) | ($28,991) | | Net cash used in financing activities | ($11,233) | ($5,890) | - As of December 31, 2024, the company had contractual purchase obligations of **$30.8 million**, majority due within the next 12 months[291](index=291&type=chunk)[419](index=419&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=87&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from interest rate fluctuations on its **$114.9 million** cash portfolio and foreign currency exposure, without using derivatives - The company has interest rate risk related to its cash, cash equivalents, and short-term investments portfolio, which totaled **$114.9 million** as of December 31, 2024[293](index=293&type=chunk) - **Foreign currency exchange risk** exists as certain balances are denominated in local currencies, but the company did not use any foreign currency derivative instruments in 2022, 2023, or 2024[297](index=297&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=90&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) The audited financial statements show **$315.3 million** in total assets for 2024, with Revenue Recognition noted as a Critical Audit Matter, and a **$130 million** acquisition announced post-year-end - The independent auditor, BPM LLP, identified **Revenue Recognition** as a Critical Audit Matter due to significant management judgments[303](index=303&type=chunk)[308](index=308&type=chunk) Consolidated Balance Sheet Data (in thousands) | | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total current assets | $205,979 | $197,848 | | Total assets | $315,289 | $290,136 | | Total current liabilities | $60,542 | $50,843 | | Total liabilities | $69,252 | $61,190 | | Total stockholders' equity | $246,037 | $228,946 | Consolidated Income Statement Data (in thousands, except per share) | | Year Ended Dec 31, 2024 | Year Ended Dec 31, 2023 | | :--- | :--- | :--- | | Total revenues | $179,465 | $165,835 | | Gross profit | $125,321 | $114,086 | | Income before income tax | $6,579 | $4,869 | | Net income | $4,057 | $3,105 | | Diluted EPS | $0.10 | $0.08 | - As of December 31, 2024, the company had **$221.4 million** in remaining performance obligations from customer contracts, mostly expected to be recognized over the next two years[397](index=397&type=chunk) - On February 19, 2025, the company agreed to acquire SecureWise LLC for a cash purchase price of **$130 million**, expected to close in Q1 2025[472](index=472&type=chunk)[475](index=475&type=chunk)[476](index=476&type=chunk) [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=145&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes or disagreements with its accountants regarding financial disclosure - None[478](index=478&type=chunk) [Item 9A. Controls and Procedures](index=145&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2024 - Management concluded that the company's **disclosure controls and procedures were effective** as of December 31, 2024[479](index=479&type=chunk) - Management's assessment concluded that **internal control over financial reporting was effective** as of December 31, 2024, based on the COSO framework, and was affirmed by BPM LLP[480](index=480&type=chunk)[481](index=481&type=chunk) [Item 9B. Other Information](index=145&type=section&id=Item%209B.%20Other%20Information) No directors or officers adopted or terminated Rule 10b5-1 trading arrangements during Q4 2024 - **No directors or officers adopted or terminated a Rule 10b5-1 trading arrangement** or non-Rule 10b5-1 trading arrangement during the quarter ended December 31, 2024[483](index=483&type=chunk) [Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=145&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable to the company - None[484](index=484&type=chunk) PART III [Item 10. Directors, Executive Officers and Corporate Governance](index=146&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the definitive Proxy Statement [Item 11. Executive Compensation](index=146&type=section&id=Item%2011.%20Executive%20Compensation) Executive compensation details are incorporated by reference from the definitive Proxy Statement [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=146&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Security ownership and equity compensation plan information is incorporated by reference from the definitive Proxy Statement [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=146&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Related party transactions and director independence information is incorporated by reference from the definitive Proxy Statement [Item 14. Principal Accountant Fees and Services](index=146&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Principal accountant fees and services information is incorporated by reference from the definitive Proxy Statement PART IV [Item 15. Exhibits and Financial Statement Schedules](index=148&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists financial statements, schedules, and exhibits, including key agreements like the SecureWise acquisition [Item 16. Form 10-K Summary](index=155&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item is not applicable - Not applicable[512](index=512&type=chunk)

Core Viewpoint - PDF Solutions, Inc. has announced the acquisition of secureWISE, LLC, a leading secure remote connectivity solution in the semiconductor manufacturing equipment industry, for $130 million, which is expected to enhance its data analytics capabilities and collaboration within the semiconductor ecosystem [1][7][9]. Company Overview - PDF Solutions provides comprehensive data solutions aimed at improving yield, quality, and operational efficiency in the semiconductor and electronics industry [13]. - The company has a global presence with operations in North America, Europe, and Asia, and serves Fortune 500 companies [14][15]. Acquisition Details - The acquisition of secureWISE is valued at $130 million, funded through cash on hand and $70 million in new bank debt, and is expected to close in the first quarter of 2025 [7][9]. - secureWISE is widely used in the semiconductor industry, with applications built on its network to deliver equipment analytics [2][5]. Industry Context - The semiconductor industry is increasingly distributed, necessitating secure collaboration and integration among various stakeholders [4]. - secureWISE is installed in over 90% of the world's 300mm semiconductor fabs, highlighting its significance in the industry [17]. Expected Benefits - The acquisition is anticipated to accelerate the ability of equipment manufacturers to derive value from equipment data by integrating with PDF Solutions' Exensio analytics software [5][6]. - It will enhance the capabilities of PDF Solutions' secure DEX OSAT network, facilitating collaboration among equipment makers, fab operators, and fabless companies [6]. Financial Outlook - Assuming the acquisition closes as planned, PDF Solutions expects a revenue growth rate of 21% to 23% year-over-year for 2025, with a target operating margin of 20% [9].

Financial Data and Key Metrics Changes - For Q4 2024, total revenues reached $50.1 million, representing a 22% year-over-year growth, exceeding the long-term growth target [20] - Full-year 2024 total revenues were $179.5 million, an 8% increase from $165.8 million in 2023, with significant growth occurring in the second half of the year [20][21] - Gross margin for Q4 was 72%, while the full-year gross margin was 74%, moving closer to the target model of 75% [24][27] Business Line Data and Key Metrics Changes - Analytics revenue grew 22% in Q4 compared to the same period last year and accounted for 96% of total revenue for the quarter [20][22] - The DFI eProbe systems saw strong momentum, with successful conversions from evaluations to sales for major semiconductor companies [21][22] - Exensio modules, including process control and ML ops, are expected to drive most bookings in 2025 [15][28] Market Data and Key Metrics Changes - Customers in advanced logic, high bandwidth memory, and advanced packaging are investing, while other sectors exhibit a more cautious outlook [12][13] - The semiconductor industry is projected to experience mixed growth, with total revenues expected to grow at a rate approaching 15% year-over-year [17][27] Company Strategy and Development Direction - The company aims to build upon accomplishments in 2024, expanding applications for the eProbe in advanced logic and DRAM [13][28] - The strategy includes a shift towards a model where customers can purchase machines and optionally subscribe to application services and software [14][66] - The company remains committed to a long-term target model of 20% year-over-year revenue growth, 75% gross margin, and 20% operating margin [27] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about growth returning in the second half of 2024 and highlighted customer interest in products and solutions [12][21] - The outlook for 2025 reflects both short-term weaknesses in the semiconductor industry and strengths in the company's pipeline, driven by macro trends such as distributed manufacturing and AI [27][28] Other Important Information - The company reported positive operating cash flow of approximately $10 million and spent about $18 million on CapEx related to the DFI ecosystem [26] - The accounts receivable balance was elevated due to timing and billing, but management expressed confidence in collections [60][62] Q&A Session Summary Question: Can you provide more details on the eProbe pipeline? - The eProbe sales will include both repeat sales to existing customers and new sales to new customers, with a focus on advanced logic and DRAM applications [35][36] Question: What is the status of the backlog? - The backlog decreased from $239 million in Q3 to $221 million, attributed to the nature of the new sales model [34][39] Question: How is customer adoption of model ops impacting growth? - Customer receptivity to model ops has been high, with ongoing pilots expected to contribute to business growth in 2025 [52][53] Question: What is the impact of elevated accounts receivable on cash flow? - The elevated accounts receivable is a matter of timing and billing, with management confident in the progress of collections [60][62] Question: How are management changes at key customers affecting business? - Management changes at customers have not significantly impacted business, as the company has diversified its customer base [72][76] Question: Is there increased activity in advanced packaging due to market conditions? - The company is seeing increased activity in advanced packaging, particularly from leading-edge customers who are relying more on OSAT partners [80][82] Question: Are there opportunities in HBM DRAM with Exensio? - The company is starting to penetrate HBM DRAM accounts, particularly through the eProbe, which has reintroduced the company to this market segment [87][89]

PDF Solutions, Inc. (NASDAQ:PDFS) Q4 2024 Earnings Conference Call February 13, 2025 5:00 PM ET Company Participants John Kibarian - President and CEO Adnan Raza - CFO Conference Call Participants Blair Abernethy - Rosenblatt Securities William Jellison - D.A. Davidson & Company Gus Richard - Northland Capital Markets Operator Good day, everyone, and welcome to the PDF Solutions, Inc. Conference call to discuss its financial results for the fourth quarter and year-end 2024, ending Tuesday, December 31, 2024 ...

PDF Solutions (PDFS) came out with quarterly earnings of $0.25 per share, beating the Zacks Consensus Estimate of $0.24 per share. This compares to earnings of $0.15 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 4.17%. A quarter ago, it was expected that this provider of software and services for semiconductor makers would post earnings of $0.21 per share when it actually produced earnings of $0.25, delivering a surprise of ...

SANTA CLARA, Calif., Feb. 13, 2025 (GLOBE NEWSWIRE) -- PDF Solutions, Inc. (Nasdaq: PDFS), a leading provider of comprehensive data solutions for the semiconductor and electronics ecosystem, today announced financial results for its fourth quarter and year ended December 31, 2024. Financial Highlights of Fourth Quarter 2024 Record quarterly total revenues of $50.1 million, up 22% over last year’s comparable quarterRecord quarterly analytics revenue of $47.9 million, up 22% over last year’s comparable quarte ...

Exhibit 99.2 Q4 2024 and Full Year 2024 Management Report February 13, 2025 1 a Contents ■ Related Information The following commentary is provided by management and should be referenced in conjunction with PDF Solutions' Fourth Quarter and Full Year 2024 financial results press release available on its Investor Relations website at http://www.pdf.com/financial-news. These remarks represent management's current views of the Company's financial and operational performance and are provided to give investors a ...

Core Viewpoint - Wall Street anticipates a year-over-year increase in earnings for PDF Solutions, driven by higher revenues, with a focus on how actual results compare to estimates impacting stock price [1][2]. Earnings Expectations - The earnings report is expected on February 13, 2025, with an anticipated EPS of $0.24, reflecting a +60% year-over-year change, and revenues projected at $49.4 million, up 20.1% from the previous year [3]. Estimate Revisions - The consensus EPS estimate has remained unchanged over the last 30 days, indicating a stable outlook from covering analysts [4]. Earnings Surprise Prediction - The Zacks Earnings ESP model suggests that the Most Accurate Estimate for PDF Solutions is lower than the consensus estimate, resulting in an Earnings ESP of -2.13%, indicating a bearish sentiment among analysts [10]. Historical Performance - In the last reported quarter, PDF Solutions exceeded the expected EPS of $0.21 by delivering $0.25, resulting in a +19.05% surprise. Over the last four quarters, the company has beaten consensus EPS estimates twice [12][13]. Overall Assessment - Given the current Zacks Rank of 4, the combination of a negative Earnings ESP and lower rank suggests that PDF Solutions may not be a strong candidate for an earnings beat [11][16].

Core Viewpoint - PDF Solutions, Inc. will announce its fourth quarter and fiscal year 2024 financial results on February 13, 2025, with a live teleconference hosted by the CEO and CFO to discuss the results [1]. Group 1: Financial Results Announcement - The financial results will be released after market close on February 13, 2025 [1]. - A live teleconference will take place at 2:00 p.m. Pacific Time / 5:00 p.m. Eastern Time on the same day [1]. Group 2: Participation Details - Analysts and investors are encouraged to pre-register for the live call to receive dial-in information and a unique passcode [2]. - Participants are advised to join the call ten minutes early [2]. Group 3: Webcast Information - The teleconference will be available via webcast on the company's website [3]. - A replay of the conference call will be accessible on the investor relations website after the call [3]. Group 4: Company Overview - PDF Solutions provides data solutions aimed at improving yield, quality, and operational efficiency in the semiconductor and electronics industries [4]. - The company's products are utilized by Fortune 500 companies to achieve smart manufacturing goals through data collection and advanced analytics [4]. - Founded in 1991, PDF Solutions is headquartered in Santa Clara, California, with operations in North America, Europe, and Asia [5].

SANTA CLARA, Calif., Dec. 02, 2024 (GLOBE NEWSWIRE) -- PDF Solutions, Inc. (Nasdaq: PDFS), a leading provider of comprehensive data solutions for the semiconductor ecosystem, today announces the list of industry leaders speaking at its AI Executive Conference to be held on December 12th, 2024, in San Francisco, CA. This event features keynotes, presentations, panels and demonstrations offering insights into the power of AI to transform semiconductor design and manufacturing. It includes talks on the state o ...