PDF Solutions(PDFS) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported record total revenues of $219.0 million for the full year 2025, a 22% increase from $179.5 million in 2024, and Q4 total revenues of $62.4 million, up 25% year-over-year from $50.1 million [15][18] - Gross margin for Q4 was 77%, and operating margin was 24%, with full-year gross margin at 76% and operating margin at 21%, exceeding prior long-term targets [19][23] - Earnings per share (EPS) for the full year was $0.94, reflecting a 12% growth from $0.84 in the previous year [20] Business Line Data and Key Metrics Changes - Platform revenue for Q4 was $52.5 million, up 20% year-over-year, while volume-based revenue was $9.9 million, up 58% [16] - For the full year, platform revenue was $181.0 million, a 15% increase, and volume-based revenue was $38 million, up 70% [17] - Recurring revenue for Q4 was $61.1 million, up 62% year-over-year, and for the full year, it was $205.1 million, a 41% increase [17] Market Data and Key Metrics Changes - The semiconductor industry is projected to exceed $1 trillion in revenue, with increasing complexity in manufacturing processes driving demand for AI-driven collaboration [4][11] - The company anticipates continued growth in 2026, consistent with a long-term target of 20% CAGR, driven by increased customer activity and demand for AI solutions [12][23] Company Strategy and Development Direction - The company is transitioning from an analytics platform provider to an AI-driven collaboration platform, focusing on orchestration systems that align operational processes and data sharing [5][6] - The acquisition of secureWISE and the development of Exensio Studio AI are key components of the company's strategy to enhance its product offerings and market position [18][21] - The company aims to expand its platform across the industry, leveraging its secureWISE and Symmetrics products for equipment control and connectivity [12][23] Management's Comments on Operating Environment and Future Outlook - Management highlighted the accelerating need for AI-driven collaboration in the semiconductor industry, with expectations for increased customer activity in 2026 [11][12] - The company is optimistic about opportunities in advanced memory and characterization systems, anticipating nearly doubling the number of eProbe machines in the field [11][12] - Management expressed confidence in achieving revenue growth consistent with long-term targets, even without inorganic growth contributions [12][23] Other Important Information - The company ended 2025 with a backlog of $254 million and positive operating cash flow of approximately $24 million [18][21] - Capital expenditures for 2025 were approximately $33 million, primarily related to DirectScan systems, with expectations for similar spending in 2026 [21][23] Q&A Session Summary Question: DirectScan systems shipment and future expectations - The company confirmed that four DirectScan systems were shipped in 2025, with a total of six currently in the field, and plans to nearly double that number in the coming year [30][31] Question: Capital expenditure outlook - The company plans to manage capital expenditures evenly throughout 2026, with a focus on maintaining subscription models for machines [36][38] Question: SAP relationship and expectations - The partnership with SAP is progressing well, with increased needs for orchestration and automation, and the company expects to build on its installed base through this collaboration [40][42] Question: Balance sheet and debt management - The company is comfortable with its current debt levels and plans to prioritize cash generation and balance sheet health before significant debt repayment [45][49] Question: Revenue methodology and growth expectations - The company has broken down revenue into recurring and upfront categories to provide better visibility, with expectations for continued growth in volume-based revenue driven by secureWISE and other products [52][54]