Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period ended March 31, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to ______________ Commission File Number 000-31311 PDF SOLUTIONS, INC. (Exact name of Registrant as Specified in its Charter) Delaware ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 000-31311 (Commission file number) 2858 De La Cruz Blvd. 95050 Santa Clara, California (Zip Code) (Address of Registrant's principal executive of ices) (408) 280-7900 (Registrant' ...

PDF Solutions, Inc. (NASDAQ:PDFS) Q4 2021 Earnings Conference Call February 15, 2022 5:00 PM ET Company Participants John Kibarian – President, Chief Executive Officer, Director and Co–Founder Adnan Raza – Executive Vice President of Finance and Chief Financial Officer Joseph Diaz – Lytham Partners, LLC Conference Call Participants Tyler Burmeister – Craig-Hallum Capital Group Tom Diffely – D.A. Davidson & Co. Gus Richard – Northland Capital Markets Andrew Weiner – Samjo Capital Operator Good day and thank ...

© 2021 PDF Solutions, All Rights Reserved 1 Investor Presentation November 2021 John Kibarian, President & CEO, Co-Founder Kimon Michaels, Executive VP, Products and Solutions, Co-Founder Adnan Raza, Executive VP, Finance & CFO | --- | --- | |----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- ...

Financial Data and Key Metrics Changes - Total revenue for Q3 2021 was $29.6 million, representing a 28% increase year-over-year and an 8% increase sequentially from Q2 2021 [24] - Analytics revenue surged by 90% to $27.2 million compared to $14.3 million in Q3 2020, and increased by 39% sequentially from the previous quarter [24] - Gross margins expanded to 66%, moving towards a target of 70% [29] - Non-GAAP EPS reported was $0.09, with operating income of $2.4 million compared to nearly breakeven in the prior quarter [29] Business Line Data and Key Metrics Changes - Analytics accounted for 92% of total revenue in Q3 2021, while IYR revenue fell to $2.4 million from $8.8 million in the same quarter last year [25] - Strong bookings in Analytics were highlighted, with significant contributions from cloud migrations and new contracts [14][24] Market Data and Key Metrics Changes - Backlog at the end of Q3 totaled $181 million, a 30% increase from the previous quarter and a 60% increase year-over-year [27] - The semiconductor industry remains robust, with high levels of manufacturing and R&D activity driving demand for PDF's products [21] Company Strategy and Development Direction - The company is transitioning to become the leading analytics software provider for the global semiconductor supply chain, focusing on building recurring revenue streams [25][31] - Partnerships are emphasized as a key strategy for growth, with ongoing efforts to enhance cloud capabilities and customer engagement [33] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continued growth, expecting full-year 2021 total revenues to grow near the top end of the 20% to 25% range [31] - The company anticipates that Analytics revenue will grow more than 50% year-over-year for 2021, with strong bookings momentum expected to carry into 2022 [31] Other Important Information - The company ended Q3 with cash and cash equivalents of approximately $141 million and no debt, with positive cash flow from operations of $4 million for the quarter [30] - The transition to cloud solutions is seen as a significant opportunity for enhancing customer productivity and expanding the user base [33] Q&A Session Summary Question: What are the plans for the growth of the Analytics business? - Management highlighted the importance of partnerships and cloud migration to enhance customer productivity and expand the user base [33] Question: Can you provide details on the size and timing of the new multiyear contract? - The contract is substantial, encompassing multiple components of technology and is expected to provide significant value over its duration [38] Question: Will the Analytics business continue to grow ahead of the 20% CAGR target? - Management indicated that they are optimistic about growth exceeding previous expectations, with a robust industry environment supporting this outlook [40] Question: What is the split between different components of the large contract? - The contract is a bundled subscription, with all components being recurring [45] Question: Are there any fixed fee contracts left in the IYR business? - There is a multiyear fixed fee contract that extends over four years, contributing to the IYR revenue [48] Question: What is driving the increased demand for analytics in the automotive sector? - The electrification of vehicles is creating a need for high-quality manufacturing processes, making analytics critical for operational effectiveness and yield [72]

PART I FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis for the company [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements, offering a snapshot of the company's financial position and performance [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This statement provides a summary of the company's assets, liabilities, and stockholders' equity at specific points in time Condensed Consolidated Balance Sheets (in thousands) | ASSETS (in thousands) | Sep 30, 2021 | Dec 31, 2020 | | :---------------------- | :----------- | :----------- | | Cash and cash equivalents | $71,238 | $30,315 | | Short-term investments | $69,992 | $114,981 | | Accounts receivable, net | $33,681 | $34,140 | | Total current assets | $185,209 | $193,380 | | Total assets | $275,224 | $287,580 | | LIABILITIES AND STOCKHOLDERS' EQUITY (in thousands) | Sep 30, 2021 | Dec 31, 2020 | | :-------------------------------------------------- | :----------- | :----------- | | Total current liabilities | $41,139 | $42,205 | | Total liabilities | $51,769 | $53,074 | | Total stockholders' equity | $223,455 | $234,506 | | Total liabilities and stockholders' equity | $275,224 | $287,580 | [Condensed Consolidated Statements of Comprehensive Loss](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) This statement details the company's revenues, expenses, and net loss over specific reporting periods Condensed Consolidated Statements of Comprehensive Loss (in thousands, except per share amounts) | Metric (in thousands) | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Analytics Revenues | $27,194 | $14,346 | $66,165 | $42,766 | | Integrated Yield Ramp Revenues | $2,361 | $8,766 | $15,009 | $22,912 | | Total Revenues | $29,555 | $23,112 | $81,174 | $65,678 | | Costs of Revenues | $11,070 | $9,493 | $32,518 | $26,926 | | Research and development | $10,657 | $8,328 | $32,562 | $24,672 | | Selling, general and administrative | $9,609 | $8,420 | $28,482 | $24,052 | | Net Loss | $(2,407) | $(2,734) | $(14,488) | $(6,914) | | Comprehensive Loss | $(2,632) | $(2,197) | $(15,031) | $(6,336) | | Net Loss Per Share (Basic and Diluted) | $(0.06) | $(0.08) | $(0.39) | $(0.21) | [Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) This statement outlines changes in the company's equity accounts, including net loss and stock transactions - **Total stockholders' equity decreased** from **$234,506 thousand** at December 31, 2020, to **$223,455 thousand** at September 30, 2021, primarily due to comprehensive loss and treasury stock repurchases, partially offset by additional paid-in capital from stock issuances and stock-based compensation[11](index=11&type=chunk)[12](index=12&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement summarizes the cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (Nine Months Ended September 30, in thousands) | Cash Flow Activity (in thousands) | 2021 | 2020 | | :-------------------------------- | :---------- | :---------- | | Net cash provided by operating activities | $3,827 | $10,876 | | Net cash provided by (used in) investing activities | $42,302 | $(55,348) | | Net cash provided by (used in) financing activities | $(5,494) | $65,202 | | Net change in cash, cash equivalents, and restricted cash | $40,442 | $20,781 | | Cash, cash equivalents, and restricted cash at end of period | $74,257 | $118,386 | - Cash paid for taxes **decreased** from **$2,188 thousand** in 2020 to **$1,543 thousand** in 2021 for the nine months ended September 30[15](index=15&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes provide additional information and explanations for the figures presented in the financial statements [1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=11&type=section&id=1.%20BASIS%20OF%20PRESENTATION%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines the basis for preparing interim financial statements, including accounting policies and the impact of new accounting standards - The Company adopted ASU No 2019-12 (Income Taxes) and ASU No 2020-01 (Investments-Equity Securities) on January 1, 2021, with **no material impact** on financial statements[22](index=22&type=chunk)[23](index=23&type=chunk) - The Company, as a small reporting company (SRC), will adopt ASU No 2016-13 (Credit Losses) for fiscal years beginning after December 15, 2022 (fiscal 2023), and does **not expect a material impact**[25](index=25&type=chunk) - ASU No 2020-06 (Convertible Instruments) will be **effective** for SRCs for annual reporting periods beginning after December 15, 2023, and is **not anticipated to have a significant impact**[26](index=26&type=chunk) [2. REVENUE FROM CONTRACTS WITH CUSTOMERS](index=13&type=section&id=2.%20REVENUE%20FROM%20CONTRACTS%20WITH%20CUSTOMERS) This note details the company's revenue recognition policies, disaggregating revenue by source, timing, and geographical region - The Company derives revenue from two primary sources: Analytics (standalone software, SaaS, DFI/CV systems without yield incentives) and Integrated Yield Ramp (fixed-fee engagements with performance incentives like Gainshare royalties)[29](index=29&type=chunk)[33](index=33&type=chunk)[39](index=39&type=chunk) - Revenue recognition for project-based contracts (including Integrated Yield Ramp and some DFI/CV systems) uses a percentage-of-completion method based on costs or labor-hours, requiring significant judgment[38](index=38&type=chunk)[40](index=40&type=chunk)[45](index=45&type=chunk) - Gainshare royalty revenue is recognized in the period of usage, with estimates based on historical data and industry knowledge, leading to potential adjustments in subsequent quarters[41](index=41&type=chunk)[47](index=47&type=chunk) Disaggregation of Revenue by Timing of Transfer | Timing of Revenue | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :---------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Over time | 72% | 55% | 60% | 56% | | Point-in-time | 28% | 45% | 40% | 44% | | Total | 100% | 100% | 100% | 100% | - International revenues accounted for approximately **53%** and **57%** of total revenues during the three and nine months ended September 30, 2021, respectively, a **decrease** from **67%** and **60%** in the prior year periods[43](index=43&type=chunk) - The aggregate amount of transaction price allocated to remaining performance obligations was approximately **$180.9 million** as of September 30, 2021, with the majority expected to be recognized over the next two years[52](index=52&type=chunk) [3. STRATEGIC PARTNERSHIP AGREEMENT WITH ADVANTEST AND RELATED PARTY TRANSACTIONS](index=21&type=section&id=3.%20STRATEGIC%20PARTNERSHIP%20AGREEMENT%20WITH%20ADVANTEST%20AND%20RELATED%20PARTY%20TRANSACTIONS) This note describes the strategic partnership with Advantest, including a stock purchase and exclusive commercial arrangements, and related revenue impacts - On July 29, 2020, PDF Solutions entered into a strategic partnership with Advantest, including a **$65.2 million** common stock purchase by Advantest and an exclusive commercial arrangement for an Advantest-specific cloud layer on the Exensio platform[56](index=56&type=chunk) Analytics Revenue from Advantest (in thousands) | Period | 2021 (in thousands) | 2020 (in thousands) | | :---------------------- | :------------------ | :------------------ | | Three Months Ended Sep 30 | $2,700 | $1,000 | | Nine Months Ended Sep 30 | $7,900 | $1,000 | - Deferred revenue from Advantest amounted to **$9.6 million** as of September 30, 2021, compared to nil at December 31, 2020[58](index=58&type=chunk) [4. BUSINESS COMBINATION](index=23&type=section&id=4.%20BUSINESS%20COMBINATION) This note details the acquisition of Cimetrix Incorporated, outlining the purchase price allocation and subsequent adjustments to goodwill - On December 1, 2020, PDF Solutions acquired Cimetrix Incorporated for **$28.6 million**, net of cash acquired[60](index=60&type=chunk) - A holdback amount of **$3.5 million** was initially retained, later **reduced** to **$3.0 million** due to a measurement period adjustment in Q1 2021, with a corresponding reduction in goodwill[60](index=60&type=chunk)[62](index=62&type=chunk) Cimetrix Acquisition Purchase Price Allocation (as of Sep 30, 2021, in thousands) | Category (in thousands) | Amount | | :---------------------- | :----- | | Fair value of tangible assets | $8,403 | | Fair value of intangible assets | $19,799 | | Goodwill | $13,012 | | Total assets acquired | $41,214 | | Total liabilities assumed | $3,703 | | Total purchase price allocation | $37,511 | [5. BALANCE SHEET COMPONENTS](index=24&type=section&id=5.%20BALANCE%20SHEET%20COMPONENTS) This note provides detailed breakdowns of key balance sheet components, including accounts receivable, property, equipment, goodwill, and intangible assets Accounts Receivable (in thousands) | Category (in thousands) | Sep 30, 2021 | Dec 31, 2020 | | :---------------------- | :----------- | :----------- | | Unbilled accounts receivable (current) | $8,600 | $7,200 | | Unbilled accounts receivable (non-current) | $1,600 | $2,000 | Property and Equipment, Net (in thousands) | Category (in thousands) | Sep 30, 2021 | Dec 31, 2020 | | :---------------------- | :----------- | :----------- | | Computer equipment | $11,715 | $11,585 | | Test equipment | $24,865 | $26,010 | | Construction-in-progress | $23,432 | $20,278 | | Total | $77,870 | $75,537 | | Less: accumulated depreciation and amortization | $(40,049) | $(36,295) | | Total, net | $37,821 | $39,242 | - Goodwill **decreased** from **$15,774 thousand** at January 1, 2021, to **$15,305 thousand** at September 30, 2021, due to a **$469 thousand** measurement period acquisition adjustment[69](index=69&type=chunk) Intangible Assets, Net (in thousands) | Category (in thousands) | Sep 30, 2021 Net | Dec 31, 2020 Net | | :---------------------- | :--------------- | :--------------- | | Customer relationships | $3,527 | $4,009 | | Developed technology | $13,348 | $15,013 | | In-process R&D | $3,635 | $3,635 | | Total Intangible Assets, Net | $22,106 | $24,573 | Expected Annual Amortization of Acquired Identifiable Intangible Assets (in thousands) | Year Ending December 31, | Amount (in thousands) | | :----------------------- | :-------------------- | | 2021 (remaining) | $754 | | 2022 | $3,013 | | 2023 | $2,990 | | 2024 | $2,592 | | 2025 | $2,427 | | 2026 and thereafter | $6,695 | | Total | $18,471 | [6. LEASES](index=26&type=section&id=6.%20LEASES) This note details the company's operating leases, including lease expense, weighted-average terms, discount rates, and future payment schedules Total Lease Expense (in thousands) | Period | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :---------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Operating lease expense | $448 | $455 | $1,417 | $1,362 | | Short-term and variable lease expense | $196 | $127 | $602 | $401 | | Total lease expense | $644 | $582 | $2,019 | $1,763 | - The weighted average remaining lease term for operating ROU leases was **6.0 years** as of September 30, 2021, with a weighted average discount rate of **5.25%**[75](index=75&type=chunk) Maturities of Operating Lease Liabilities (as of Sep 30, 2021, in thousands) | Year Ending December 31, | Amount (in thousands) | | :----------------------- | :-------------------- | | 2021 (remaining) | $477 | | 2022 | $1,707 | | 2023 | $1,389 | | 2024 | $1,073 | | 2025 | $1,088 | | 2026 and thereafter | $2,703 | | Total future minimum lease payments | $8,437 | | Present value of future minimum lease payments | $7,241 | [7. STOCKHOLDERS' EQUITY](index=28&type=section&id=7.%20STOCKHOLDERS'%20EQUITY) This note details changes in stockholders' equity, including common stock issuances and the company's stock repurchase programs - On July 30, 2020, the Company issued **3,306,924 shares** of common stock to Advantest for **$65.2 million**[78](index=78&type=chunk) - The Company's 2020 stock repurchase program authorized up to **$25.0 million** in repurchases over two years. During the nine months ended September 30, 2021, **251,212 shares** were repurchased for **$4.5 million** at an average price of **$18.01** per share[80](index=80&type=chunk) [8. EMPLOYEE BENEFIT PLANS](index=28&type=section&id=8.%20EMPLOYEE%20BENEFIT%20PLANS) This note describes the company's employee benefit plans, including ESPP and Stock Incentive Plans, detailing stock-based compensation expense and activity - The 2021 Employee Stock Purchase Plan was approved on June 15, 2021, with terms similar to the expired 2010 Purchase Plan. Unrecognized compensation cost for the 2021 Purchase Plan was **$2.0 million** as of September 30, 2021[82](index=82&type=chunk)[83](index=83&type=chunk) Stock-Based Compensation Expense (in thousands) | Expense Category (in thousands) | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Costs of revenues | $670 | $790 | $1,860 | $2,582 | | Research and development | $1,299 | $1,148 | $4,013 | $3,613 | | Selling, general and administrative | $1,394 | $1,192 | $3,601 | $3,281 | | Total Stock-based compensation expenses | $3,363 | $3,130 | $9,474 | $9,476 | - As of September 30, 2021, there was **$0.2 million** of unrecognized compensation expense related to unvested stock options, expected to be recognized over **2.0 years**[94](index=94&type=chunk) - As of September 30, 2021, there was **$27.1 million** of unrecognized compensation cost related to non-vested restricted stock units, expected to be recognized over **2.7 years**[94](index=94&type=chunk) [9. INCOME TAXES](index=33&type=section&id=9.%20INCOME%20TAXES) This note discusses income tax expense, effective tax rate, unrecognized tax benefits, and the impact of valuation allowances and tax legislation - Income tax expense **increased** by **$5.7 million** for the nine months ended September 30, 2021, resulting in a **$1.5 million** expense compared to a **$4.1 million** benefit in 2020[95](index=95&type=chunk) - The **effective** tax rate was **(12%)** for the nine months ended September 30, 2021, compared to **37%** in 2020, primarily due to a full valuation allowance against U.S net deferred tax assets in Q4 2020 and the absence of CARES Act benefits[95](index=95&type=chunk) - The total amount of unrecognized tax benefits was **$14.7 million** as of September 30, 2021, with **$1.9 million** potentially affecting the **effective** tax rate if recognized[96](index=96&type=chunk) - A valuation allowance of approximately **$41.9 million** was maintained against U.S net federal and state deferred tax assets as of September 30, 2021[97](index=97&type=chunk) [10. NET LOSS PER SHARE](index=35&type=section&id=10.%20NET%20LOSS%20PER%20SHARE) This note provides the calculation of basic and diluted net loss per share, which are identical due to the company's net loss position Net Loss Per Share (in thousands, except per share amount) | Metric (in thousands) | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net loss | $(2,407) | $(2,734) | $(14,488) | $(6,914) | | Basic weighted-average shares outstanding | 37,221 | 35,479 | 37,067 | 33,696 | | Net loss per share, basic and diluted | $(0.06) | $(0.08) | $(0.39) | $(0.21) | - For both the three and nine months ended September 30, 2021 and 2020, basic and diluted net loss per share were the same because the Company was in a loss position, making the inclusion of potential common shares anti-dilutive[102](index=102&type=chunk) Anti-Dilutive Potential Common Shares (in thousands) | Potential Shares (in thousands) | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Outstanding options | 128 | 310 | 182 | 362 | | Non-vested restricted stock units | 915 | 1,084 | 997 | 820 | | Employee Stock Purchase Plan | 30 | 190 | 14 | 146 | | Total | 1,073 | 1,584 | 1,193 | 1,328 | [11. CUSTOMER AND GEOGRAPHIC INFORMATION](index=37&type=section&id=11.%20CUSTOMER%20AND%20GEOGRAPHIC%20INFORMATION) This note clarifies the company's single operating segment and disaggregates revenue and long-lived assets by customer and geographic region - The Company operates as a single operating and reporting segment, focusing on differentiated data and analytics solutions for the semiconductor and electronics industries[104](index=104&type=chunk) Revenues by Geographic Area (in thousands) | Geographic Area (in thousands) | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :----------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | United States | $13,983 (47%) | $7,710 (33%) | $34,634 (43%) | $26,242 (40%) | | China | $4,038 (14%) | $6,747 (29%) | $10,065 (12%) | $10,200 (16%) | | Rest of the world | $11,534 (39%) | $8,655 (38%) | $22,521 (28%) | $17,784 (27%) | | Total revenue | $29,555 (100%) | $23,112 (100%) | $81,174 (100%) | $65,678 (100%) | Long-Lived Assets, Net by Geographic Area (in thousands) | Geographic Area (in thousands) | Sep 30, 2021 | Dec 31, 2020 | | :----------------------------- | :----------- | :----------- | | United States | $41,811 | $43,663 | | Rest of the world | $1,624 | $2,251 | | Total long-lived assets, net | $43,435 | $45,914 | [12. FAIR VALUE MEASUREMENTS](index=38&type=section&id=12.%20FAIR%20VALUE%20MEASUREMENTS) This note outlines fair value measurements for financial assets and the use of foreign currency forward contracts to mitigate exchange rate risk Assets Measured at Fair Value (in thousands) | Assets (in thousands) | Sep 30, 2021 Total | Sep 30, 2021 Level 1 | Dec 31, 2020 Total | Dec 31, 2020 Level 1 | | :-------------------- | :----------------- | :------------------- | :----------------- | :------------------- | | Money market mutual funds | $55,039 | $55,039 | $18,012 | $18,012 | | U.S. Treasury bills | $69,992 | $69,992 | $114,981 | $114,981 | | Total | $125,031 | $125,031 | $132,993 | $132,993 | - The Company uses foreign currency forward contracts to reduce exposure to foreign currency exchange rate fluctuations, primarily on third-party accounts payables and intercompany balances. These contracts are not designated for hedge accounting[111](index=111&type=chunk) - There was **no realized gain or loss** from foreign currency forward contracts during the three and nine months ended September 30, 2021, and **no outstanding contracts** as of September 30, 2021[112](index=112&type=chunk)[115](index=115&type=chunk) [13. COMMITMENTS AND CONTINGENCIES](index=42&type=section&id=13.%20COMMITMENTS%20AND%20CONTINGENCIES) This note outlines the company's commitments and contingencies, including strategic partnerships, operating leases, indemnifications, and ongoing legal proceedings - The Company provides warranties for software performance and indemnifies customers against third-party intellectual property infringement claims, with historically insignificant related costs[117](index=117&type=chunk) - Total outstanding purchase obligations were **$11.3 million** as of September 30, 2021, with the majority due within the next **24 months**[118](index=118&type=chunk) - The Company is engaged in an ongoing arbitration proceeding against SMIC New Technology Research & Development (Shanghai) Corporation since May 2020, seeking recovery of unpaid fees and future payments[122](index=122&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=44&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition, results of operations, and cash flows for the reported periods [Overview](index=44&type=section&id=Overview) This section provides an overview of the company's business, offerings, and revenue generation models - PDF Solutions provides comprehensive data solutions to the semiconductor ecosystem to improve yield, quality, and operational efficiency, deriving revenue from Analytics and Integrated Yield Ramp offerings[126](index=126&type=chunk) - Offerings include proprietary software (Exensio®, Cimetrix®), physical IP, electrical measurement hardware, and professional services, monetized through license fees, contract revenue, SaaS fees, and Gainshare royalties[126](index=126&type=chunk) [Industry Trends](index=44&type=section&id=Industry%20Trends) This section discusses the impact of the COVID-19 pandemic, Industry 4.0 trends, shifts in the logic foundry market, and U.S.-China trade tensions - The COVID-19 pandemic has limited in-person meetings, making it harder to sell complex technologies, though the Company has maintained uninterrupted access to products/services due to its distributed workforce[127](index=127&type=chunk)[128](index=128&type=chunk) - Industry 4.0 and cloud computing trends are **increasing** demand for cloud-based analytics programs that manage large datasets securely, creating opportunities for PDF Solutions' advanced analytics capabilities[130](index=130&type=chunk) - The Company is shifting resources and investments towards analytics products and services due to changes in the logic foundry market, particularly at leading-edge nodes, and expects continued investment in derivatives of older process nodes[131](index=131&type=chunk) - U.S.-China trade tensions and export controls, despite PDF Solutions' software not being primarily U.S origin, could disrupt international trade, deter customer purchasing, and negatively impact China sales[135](index=135&type=chunk) [Cimetrix Acquisition](index=48&type=section&id=Cimetrix%20Acquisition) This section reiterates the Cimetrix acquisition and its strategic importance in enhancing intelligence extraction from manufacturing tools - The acquisition of Cimetrix Incorporated on December 1, 2020, aims to combine its connectivity products with the Exensio platform to enable IC, assembly, and equipment manufacturers to extract more intelligence from their tools[136](index=136&type=chunk) [Financial Highlights](index=48&type=section&id=Financial%20Highlights) This section summarizes key financial performance indicators, including revenues, net loss, and changes in cash and investments Financial Highlights (Three Months Ended September 30, in millions) | Metric (in millions) | 2021 | 2020 | Change ($) | Change (%) | | :------------------- | :---- | :---- | :--------- | :--------- | | Total Revenues | $29.6 | $23.1 | $6.4 | 28% | | Analytics Revenue | $27.2 | $14.3 | $12.8 | 90% |\ | Integrated Yield Ramp Revenue | $2.4 | $8.8 | $(6.4) | (73)% | | Net Loss | $(2.4)| $(2.7)| $0.3 | (11)% | Financial Highlights (Nine Months Ended September 30, in millions) | Metric (in millions) | 2021 | 2020 | Change ($) | Change (%) | | :------------------- | :---- | :---- | :--------- | :--------- | | Total Revenues | $81.2 | $65.7 | $15.5 | 24% | | Analytics Revenue | $66.2 | $42.8 | $23.4 | 55% | | Integrated Yield Ramp Revenue | $15.0 | $22.9 | $(7.9) | (34)% | | Net Loss | $(14.5)| $(6.9)| $(7.6) | 110% | - Cash, cash equivalents, and short-term investments **decreased** by **$4.1 million** to **$141.2 million** at September 30, 2021, from **$145.3 million** at December 31, 2020, primarily due to cash used for property and equipment, stock repurchases, and tax payments related to equity awards[139](index=139&type=chunk) [Critical Accounting Policies and Estimates](index=50&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section discusses critical accounting policies and estimates, including revenue recognition, income taxes, and asset valuation, noting no material changes - **No material changes** occurred in critical accounting policies and estimates during the nine months ended September 30, 2021[141](index=141&type=chunk) - Significant estimates and assumptions relate to revenue recognition, valuation of long-lived assets (including goodwill and intangible assets), and the realization of deferred tax assets[145](index=145&type=chunk) - A full valuation allowance was deemed appropriate for federal and state net deferred tax assets in Q4 2020 due to cumulative losses and the likelihood of not utilizing tax attributes before expiration[155](index=155&type=chunk) - Goodwill impairment assessments are performed annually in the fourth quarter or more frequently if circumstances indicate a potential reduction in fair value below carrying amount; **no impairment** was recorded for the periods presented[158](index=158&type=chunk) [Results of Operations](index=56&type=section&id=Results%20of%20Operations) This section provides a detailed analysis of the company's revenues, costs, gross margin, and operating expenses for the reported periods Revenues, Costs of Revenues, and Gross Margin (in thousands) | Metric (in thousands) | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Change ($) | Change (%) | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :-------------------- | :------------------------------ | :------------------------------ | :--------- | :--------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Analytics Revenues | $27,194 | $14,346 | $12,848 | 90% | $66,165 | $42,766 | $23,399 | 55% | | Integrated Yield Ramp Revenues | $2,361 | $8,766 | $(6,405) | (73)% | $15,009 | $22,912 | $(7,903) | (34)% | | Total Revenues | $29,555 | $23,112 | $6,443 | 28% | $81,174 | $65,678 | $15,496 | 24% | | Costs of Revenues | $11,070 | $9,493 | $1,577 | 17% | $32,518 | $26,926 | $5,592 | 21% | | Gross Profit | $18,485 | $13,619 | $4,866 | 36% | $48,656 | $38,752 | $9,904 | 26% | | Gross Margin | 63% | 59% | | | 60% | 59% | | | - Analytics revenue **increased significantly** due to higher demand for Cimetrix and Exensio software licenses and **increased** hours worked on CV and DFI systems[163](index=163&type=chunk)[164](index=164&type=chunk) - Integrated Yield Ramp revenue **decreased** due to lower Gainshare royalties from the end of certain periods and reduced hours on fixed-fee engagements[165](index=165&type=chunk) - Costs of revenues **increased** primarily due to higher personnel-related costs from the Cimetrix acquisition, cloud-delivery costs, software royalties, and amortization of acquired intangibles[168](index=168&type=chunk)[169](index=169&type=chunk) Operating Expenses (in thousands) | Expense Category (in thousands) | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Change ($) | Change (%) | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :------------------------------ | :------------------------------ | :------------------------------ | :--------- | :--------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Research and Development | $10,657 | $8,328 | $2,329 | 28% | $32,562 | $24,672 | $7,890 | 32% | | Selling, General, and Administrative | $9,609 | $8,420 | $1,189 | 14% | $28,482 | $24,052 | $4,430 | 18% | | Amortization of Other Acquired Intangible Assets | $314 | $174 | $140 | 80% | $942 | $521 | $421 | 81% | | Interest and Other Expense (Income), Net | $(194) | $361 | $(555) | (154)% | $(391) | $530 | $(921) | (174)% | | Income Tax Expense (Benefit) | $506 | $(930) | $1,436 | (154)% | $1,549 | $(4,109) | $5,658 | (138)% | - R&D expenses **increased** due to higher personnel costs from the Cimetrix acquisition, subcontractor expenses, and cloud-services costs[172](index=172&type=chunk)[173](index=173&type=chunk) - SG&A expenses **rose** due to **increased** personnel costs from the Cimetrix acquisition, facilities and IT costs, and legal fees for arbitration, partially offset by a **decrease** in general legal expenses[176](index=176&type=chunk)[178](index=178&type=chunk) - Interest and other expense (income), net, **decreased significantly** due to favorable foreign exchange rate fluctuations and a **decrease** in loss from foreign currency forward contracts[182](index=182&type=chunk)[183](index=183&type=chunk) - Income tax expense **increased** due to the full valuation allowance against U.S deferred tax assets and the absence of one-time CARES Act benefits from the prior year[184](index=184&type=chunk)[185](index=185&type=chunk) [Liquidity and Capital Resources](index=61&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's working capital, cash position, and cash flow activities from operating, investing, and financing - Working capital was **$144.1 million** as of September 30, 2021, **down** from **$151.2 million** at December 31, 2020[186](index=186&type=chunk) - Total cash, cash equivalents, and short-term investments were **$141.2 million** as of September 30, 2021, a **decrease** from **$145.3 million** at December 31, 2020[186](index=186&type=chunk) - The Company believes existing cash resources and anticipated funds from operations will satisfy cash requirements for at least the next twelve months[186](index=186&type=chunk) Summary of Cash Flows (Nine Months Ended September 30, in thousands) | Cash Flow Activity (in thousands) | 2021 | 2020 | Change ($) | | :-------------------------------- | :---------- | :---------- | :--------- | | Net cash provided by operating activities | $3,827 | $10,876 | $(7,049) | | Net cash provided by (used in) investing activities | $42,302 | $(55,348) | $97,650 | | Net cash provided by (used in) financing activities | $(5,495) | $65,202 | $(70,697) | | Net increase in cash and cash equivalents | $40,442 | $20,781 | $19,661 | - Net cash from operating activities **decreased** by **$7.0 million**, primarily due to a **$6.1 million** **decrease** in net change from operating assets and liabilities and a **$7.6 million** **increase** in net loss, partially offset by a **$6.7 million** **increase** in non-cash adjustments[191](index=191&type=chunk) - Net cash provided by investing activities **increased** by **$97.7 million**, driven by proceeds from maturities of short-term investments (**$136.0 million**) offset by purchases of short-term investments (**$91.0 million**) and property and equipment (**$2.7 million**)[192](index=192&type=chunk)[193](index=193&type=chunk) - Net cash used in financing activities **increased** by **$70.7 million**, primarily due to **$4.5 million** in common stock repurchases and **$3.3 million** in tax payments for equity awards, contrasting with **$65.0 million** in proceeds from common stock issuance in the prior year[195](index=195&type=chunk)[196](index=196&type=chunk)[197](index=197&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=65&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section identifies the company's primary market risks, including credit, counterparty, foreign currency, and interest rate risks - The Company is exposed to credit risk, counterparty risk, foreign currency exchange rate risk, and interest rate risk[200](index=200&type=chunk) - A hypothetical **100 basis point increase** in market interest rates would have an immaterial impact on the fair value of the Company's cash, cash equivalents, and short-term investments[201](index=201&type=chunk) - The Company uses foreign currency forward contracts to reduce exposure to foreign currency exchange rate fluctuations on certain foreign currency denominated monetary assets and liabilities, but had **no outstanding contracts** as of September 30, 2021[203](index=203&type=chunk) [Item 4. Controls and Procedures](index=67&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of disclosure controls and procedures and reports no material changes in internal control over financial reporting - The Company's disclosure controls and procedures were evaluated as **effective** as of September 30, 2021[205](index=205&type=chunk) - **No material changes** in internal control over financial reporting occurred during the nine months ended September 30, 2021[206](index=206&type=chunk) PART II OTHER INFORMATION This section provides additional information not covered in the financial statements, including legal proceedings and risk factors [Item 1. Legal Proceedings](index=67&type=section&id=Item%201.%20Legal%20Proceedings) This section confirms no material legal proceedings with probable loss, noting an ongoing arbitration against SMIC for unpaid fees - The Company was **not a party to any material legal proceedings** with a probable and estimable loss as of September 30, 2021[207](index=207&type=chunk) - An arbitration proceeding against SMIC New Technology Research & Development (Shanghai) Corporation, initiated in May 2020, is ongoing to recover unpaid fees[208](index=208&type=chunk) [Item 1A. Risk Factors](index=67&type=section&id=Item%201A.%20Risk%20Factors) This section states no material changes to previously disclosed risk factors, which could still significantly impact operations - **No material changes** to risk factors have occurred since the Annual Report on Form 10-K for the year ended December 31, 2020[209](index=209&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=67&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports no stock repurchases during the third quarter of 2021 - **No stock repurchases** were made during the third quarter of 2021[210](index=210&type=chunk) [Item 3. Defaults Upon Senior Securities](index=67&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section confirms no defaults upon senior securities - There were **no defaults** upon senior securities[211](index=211&type=chunk) [Item 4. Mine Safety Disclosures](index=69&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section indicates no applicable mine safety disclosures - **No mine safety disclosures are applicable**[213](index=213&type=chunk) [Item 5. Other Information](index=69&type=section&id=Item%205.%20Other%20Information) This section reports no other information to disclose - **No other information is reported** in this section[214](index=214&type=chunk) [Item 6. Exhibits](index=70&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including certifications and financial statements - Exhibits include certifications (31.01, 31.02, 32.01, 32.02) and financial statements formatted in Inline XBRL (101, 104)[216](index=216&type=chunk)

© 2021 PDF Solutions, All Rights Reserved1 Investor Presentation August 2021 John Kibarian, President & CEO, Co-Founder Kimon Michaels, Executive VP, Products and Solutions, Co-Founder Adnan Raza, Executive VP, Finance & CFO | --- | --- | |-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- ...

PDF Solutions, Inc. (NASDAQ:PDFS) Q2 2021 Results Conference Call August 10, 2021 5:00 PM ET Company Participants Joseph Diaz - Investor Relations John Kibarian - President and Chief Executive Officer Adnan Raza - Executive Vice President and Chief Financial Officer Conference Call Participants John McPeake - Rosenblatt Securities Thomas Diffely - DA Davidson & Co Christian Schwab - Craig-Hallum Andrew Wiener - Samjo Management, LLC Gary Schnierow - RiverPark Funds Operator Good day and thank you for standi ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period ended June 30, 2021 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to ______________ Commission File Number 000-31311 PDF SOLUTIONS, INC. (Exact name of Registrant as Specified in its Charter) Delaware 25-1701361 (State o ...

PDF Solutions, Inc. (NASDAQ:PDFS) Q1 2021 Earnings Conference Call May 6, 2021 5:00 PM ET Company Participants Joseph Diaz - Lytham Partners, LLC John Kibarian - President, Chief Executive Officer, Director and Co-Founder Adnan Raza - Executive Vice President, Finance and Chief Financial Officer Conference Call Participants Christian Schwab - Craig Hallum Gus Richard - Northland Capital Markets Andrew Wiener - Samjo Capital Tom Diffely - DA Davidson Gary Schnierow - RiverPark Funds Orin Hirschman - AIGH Cap ...