PDF Solutions(PDFS) - 2021 Q1 - Quarterly Report

PART I Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for PDF Solutions, Inc. as of March 31, 2021, and for the three months then ended, including balance sheets, statements of comprehensive loss, stockholders' equity, and cash flows, with accompanying notes on accounting policies and financial data Condensed Consolidated Balance Sheets Total assets decreased to $271.1 million from $287.6 million at year-end 2020, primarily due to reduced short-term investments, while total liabilities also decreased to $45.9 million from $53.1 million, leading to a decline in total stockholders' equity to $225.3 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Total current assets | $178,446 | $193,380 | | Total assets | $271,131 | $287,580 | | Total current liabilities | $35,101 | $42,205 | | Total liabilities | $45,878 | $53,074 | | Total stockholders' equity | $225,253 | $234,506 | - Cash and cash equivalents increased significantly to $74.3 million from $30.3 million, while short-term investments decreased from $115.0 million to $58.0 million[9] Condensed Consolidated Statements of Comprehensive Loss Total revenues for the three months ended March 31, 2021, increased to $24.2 million from $21.2 million year-over-year, driven by Analytics revenue growth, despite a net loss of $7.6 million, or ($0.21) per share, primarily due to higher costs and a shift from an income tax benefit to an expense Q1 2021 vs Q1 2020 Performance (in thousands, except per share amounts) | Metric | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Total revenues | $24,200 | $21,158 | | Analytics Revenue | $19,393 | $13,248 | | Integrated Yield Ramp Revenue | $4,807 | $7,910 | | Costs of revenues | $10,663 | $8,487 | | Loss before income taxes | $(6,641) | $(4,007) | | Net loss | $(7,597) | $(528) | | Net loss per share, basic and diluted | $(0.21) | $(0.02) | Condensed Consolidated Statements of Stockholders' Equity Stockholders' equity decreased from $234.5 million at year-end 2020 to $225.3 million at March 31, 2021, primarily due to an $8.1 million comprehensive loss and $4.5 million in common stock repurchases, partially offset by employee stock plans and stock-based compensation - The company repurchased $4.5 million of its common stock during the first quarter of 2021[11] - Comprehensive loss for Q1 2021 was $8.1 million, which included a net loss of $7.6 million and other comprehensive loss of $0.5 million[11] Condensed Consolidated Statements of Cash Flows Net cash used in operating activities was $8.3 million for Q1 2021, a shift from $5.4 million provided in the prior-year, while investing activities provided $56.4 million, and financing activities used $4.5 million, resulting in a $43.5 million increase in cash and cash equivalents Cash Flow Summary (in thousands) | Activity | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $(8,325) | $5,380 | | Net cash provided by (used in) investing activities | $56,417 | $(2,068) | | Net cash used in financing activities | $(4,497) | $(507) | | Net change in cash, cash equivalents, and restricted cash | $43,491 | $2,780 | Notes to Condensed Consolidated Financial Statements The notes detail the company's accounting policies and provide further information on financial statement items, including revenue recognition, the Advantest partnership, Cimetrix acquisition, goodwill, intangible assets, stock-based compensation, and income tax matters, notably a full valuation allowance against U.S. deferred tax assets - Revenue is derived from two sources: Analytics and Integrated Yield Ramp. For Q1 2021, 50% of revenue was recognized over time and 50% at a point-in-time[27][39] - The company recognized $2.6 million in Analytics revenue from its strategic partner Advantest during Q1 2021[56] - A measurement period adjustment for the Cimetrix acquisition reduced goodwill by $0.5 million in Q1 2021[59][65] - The company maintains a full valuation allowance of approximately $41.9 million against its U.S. net federal and state deferred tax assets as of March 31, 2021[87] Management's Discussion and Analysis of Financial Condition and Results of Operations Management's discussion analyzes Q1 2021 financial results, noting a 14.4% revenue increase to $24.2 million, driven by 46% Analytics revenue growth, offset by a 39% decline in Integrated Yield Ramp revenue, with the net loss widening to $7.6 million due to increased operating expenses, higher costs, and a shift in income tax Q1 2021 Financial Highlights | Metric | Q1 2021 | Change vs Q1 2020 | | :--- | :--- | :--- | | Total Revenues | $24.2M | +14.4% | | Analytics Revenue | $19.4M | +$6.1M | | Integrated Yield Ramp Revenue | $4.8M | -$3.1M | | Net Loss | $7.6M | Increased from $0.5M | | Cash, cash equivalents and short-term investments | $132.3M | -$13.0M from Dec 31, 2020 | - The company believes the lack of in-person meetings due to COVID-19 may have made it harder to sell complex or new technologies to customers during 2020 and Q1 2021[112] - The company is focusing resources and investments in products, services, and solutions for analytics due to market developments in the logic foundry market[114] Results of Operations Total revenues for Q1 2021 increased by $3.0 million (14%) year-over-year to $24.2 million, driven by 46% Analytics revenue growth, despite a 39% decline in Integrated Yield Ramp revenue, with gross margin decreasing to 56% and operating expenses rising due to higher personnel costs from the Cimetrix acquisition Revenue Breakdown (in thousands) | Revenue Stream | Q1 2021 | Q1 2020 | Change $ | Change % | | :--- | :--- | :--- | :--- | :--- | | Analytics | $19,393 | $13,248 | $6,145 | 46% | | Integrated Yield Ramp | $4,807 | $7,910 | $(3,103) | (39)% | | Total revenues | $24,200 | $21,158 | $3,042 | 14% | - The increase in Analytics revenue was primarily driven by an $8.2 million increase from analytics and connectivity products[142] - Research and development expenses increased by $2.3 million (26%) year-over-year, mainly due to higher headcount from the Cimetrix acquisition and increased subcontractor expenses[150][151] - Selling, general and administrative expenses increased by $1.6 million (20%) year-over-year, also primarily due to higher personnel costs from the Cimetrix acquisition, as well as increased facilities, legal, and accounting fees[153][154] Liquidity and Capital Resources As of March 31, 2021, the company held $132.3 million in cash, cash equivalents, and short-term investments, a decrease from year-end 2020, with working capital at $143.3 million, and used $8.3 million in cash from operations, while repurchasing $4.5 million of common stock, with management confident in sufficient liquidity for the next twelve months Cash Flow Summary (in thousands) | Activity | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Net cash from Operating activities | $(8,325) | $5,380 | | Net cash from Investing activities | $56,417 | $(2,068) | | Net cash from Financing activities | $(4,497) | $(507) | - The company repurchased 251,212 shares for a total of $4.5 million during Q1 2021 under its 2020 stock repurchase program[165] Quantitative and Qualitative Disclosures About Market Risk The company faces interest rate, credit, and foreign currency exchange rate risks, with its investment portfolio minimizing interest rate exposure, credit risk managed through investments with creditworthy institutions, and foreign currency risk from international payables occasionally hedged with forward contracts, none outstanding as of March 31, 2021 - As of March 31, 2021, the company had cash, cash equivalents, and short-term investments of $132.3 million, primarily in cash and U.S. Treasury bills, minimizing interest rate risk[174] - The company uses foreign currency forward contracts to hedge exposure but had no outstanding contracts as of March 31, 2021[176] Controls and Procedures As of March 31, 2021, management, including the principal executive and financial officers, concluded that the company's disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the first quarter - Management concluded that disclosure controls and procedures were effective as of the end of the period[177] - No material changes to internal control over financial reporting occurred during the quarter ended March 31, 2021[178] PART II OTHER INFORMATION Legal Proceedings The company was not a party to any material legal proceedings during the period, except for an ongoing arbitration initiated on May 6, 2020, against SMIC New Technology Research & Development (Shanghai) Corporation for failure to pay contractual fees - The company initiated an arbitration proceeding against SMIC for failure to pay fees, which is on-going[181] Risk Factors No material changes have occurred to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2020 - No material changes from the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2020[182] Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's stock repurchase activity under its $25.0 million program adopted in June 2020, with 251,212 shares repurchased for $4.5 million during Q1 2021, leaving $20.5 million available for future repurchases as of March 31, 2021 Share Repurchases in Q1 2021 | Period | Total Shares Purchased (thousands) | Average Price Paid Per Share | Total Value (thousands) | | :--- | :--- | :--- | :--- | | Jan 2021 | — | $— | $— | | Feb 2021 | 69 | $18.18 | $1,253 | | Mar 2021 | 182 | $17.94 | $3,270 | | Total | 251 | $18.01 | $4,523 | - As of March 31, 2021, approximately $20.5 million remained available for repurchase under the 2020 Program[185] Defaults Upon Senior Securities No defaults upon senior securities were reported - No defaults upon senior securities were reported[187] Mine Safety Disclosures No mine safety disclosures were reported - No mine safety disclosures were reported[188] Other Information No other information was reported - No other information was reported[189] Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications by the principal executive and financial officers pursuant to the Sarbanes-Oxley Act of 2002, and financial statements formatted in Inline XBRL - Exhibits filed include CEO and CFO certifications (Exhibits 31.01, 31.02, 32.01, 32.02) and Inline XBRL financial data (Exhibits 101, 104)[191][193]