PDF Solutions(PDFS) - 2024 Q4 - Earnings Call Transcript

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] 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 showed strong momentum, with successful conversions from evaluations to sales for leading-edge customers [21] - Exensio modules, including process control and ML ops, are expected to drive most bookings in 2025 [15] 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] Company Strategy and Development Direction - The company aims to expand applications for the eProbe in advanced logic and DRAM, anticipating shipment of over four machines in 2025 [14][28] - The strategy includes a shift towards a model where customers can purchase machines and optionally subscribe to application services and software [66] - The company is committed to achieving 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] - The outlook for 2025 reflects both short-term weaknesses in the semiconductor industry and a strong pipeline driven by macro trends such as distributed manufacturing and AI [27][28] - Management noted that while some customers are cautious, others are accelerating investments, indicating a diverse customer base [73] 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 is confident in collections [60][62] Q&A Session Summary Question: Can you provide more color 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] 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 machine sales model [34][39] Question: How has customer receptivity to model ops been? - Customer receptivity has been high, with ongoing pilots and increased sales and marketing efforts related to model ops and guided analytics [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 no significant concerns regarding collections [60][62] Question: How will the new sales model for DFI work? - The new model allows customers to take title of the machine while subscribing to software and application services, impacting accounts receivable [66][67] Question: Are management changes at key customers affecting business? - There is no significant impact from management changes; the business remains diverse, reducing dependency on any single customer [73][79] Question: Is there increased activity in advanced packaging? - Yes, there has been increased activity in advanced packaging, driven by the complexity of new assembly technologies [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 opened new opportunities [87][89]