Q4 2020 PDF Solutions Inc Earnings Call
Okay.
And gentlemen, and welcome to the PDF Solutions, Inc Conference call to discuss the company's financial results for the fourth quarter and the year ended December 31st two pilots in training as a reminder of this country in the way.
I will now turn the call of exit co deals of Liza.
On the part right.
No.
Thank you Laurie and thanks, all of you for joining us on today's call. We appreciate your time and your ongoing interest in PDF solutions.
The operator indicated my name is Joe Diaz I'm, a managing partner of Lytham partners. We are the Investor relations consulting firm for Pds.
Not yet have a copy of today's press release.
The favorable on the Companys website at Www Dot PDF dot com some of the statements made during the course of this conference call will be forward looking within the meaning of the private Securities Litigation Reform Act of 1995, including statements regarding Pdf's future financial results.
Performance.
Growth rates and demand for its solutions.
Actual results could differ materially you should refer to the section entitled risk factors on the key.
Companies and the annual report on form 10-K for the fiscal year ended December 31, 2020, and similar disclosures in subsequent SEC filings.
We're looking statements and risks stated on this conference call are based on information available to PDF today, The company assumes no obligation to update them.
With that said I'd like to introduce John to Varian, PDF solutions, President and Chief Executive Officer, who will be followed by odd non Roswell Executive Vice President and Chief Financial Officer. Upon the conclusion of management's remarks, we will open the call for your questions. Let me now I'll turn the call over to John Barry.
President and CEO of PDF solutions John.
Yeah.
Thank you for joining us on today's call. If you have not already seen our earnings press release and management report from the fourth quarter and full of the full year. Please go to the investors section of our website, where each has been posted.
As we head into 'twenty and 'twenty, one we have established the components, enabling the next step of the evolution of PDF solutions with.
With the continued to expand extends to you our real time analytics platform that connects Fabless and system companies with the foundry test and assembly suppliers to enable the industry to maximize the yield quality and manufacturing productivity.
Today I will summarize the progress we made in Q4 and all of 'twenty 'twenty.
One of the perspective of the environment is and our expectations for 2021.
We went into the year of continuing our multiyear transition of the business just a few years ago. The majority of our revenue and profit were derived from providing our integrated yield ramp solutions to foundries, who were ramping the next node.
In 2020 of business was primarily providing an analytics platform to community of customers that enable them to optimize yields of the liabilities and operations.
Get the manufacturing lifecycle.
Entering the year pre Covid, we anticipated continued adoption of our solutions for leading edge customers and measured growth from the adoption of our big data version of that makes sense here of via the cloud.
The only with the benefit of hindsight on our 2020 performance, we see that the transition to analytics, particularly on the cloud accelerates beyond our expectations last year, but the leading edge characterization of why our solutions underperformed.
Our 2020 bookings were up.
Over two and a half times 2019.
Jim.
The fastest growing component of bookings was extensive via the cloud.
Which represented the majority of the seven and eight figure essentially of contracts signed in the year.
Given the large size of those contracts well over half of the extensive bookings on the dollar basis with the customers who chose <unk> via the cloud.
Our business on the leading edge for yield ramps characterization, and DSI was lumpy and smaller than we anticipated for the year.
With D of probably we continue to work on customer workflows that required features in the product to conclude this year on the broader applications of the business opportunity.
In Q4, the two largest deals in the quarter with again for accent sales via the cloud.
As was the case in the first three quarters of the year contracts associated with delivering characterization solution on the leading edge where weaker slipped.
Overall for 2020, our bookings exceeded our targets for the year due to strong incentive sales.
Other than offset weaker characterization of the cells.
Cynthia L, particularly via the Claude tended to have three to five year contract durations or characterization contracts tended to be shorter in duration.
Net the revenue did not grow as fast in 2020 as the bookings.
That said PDF is positioned for significant business growth in 'twenty and 'twenty one as we benefited from the strong bookings 2020 bookings expected in.
We expect to convert a number of successful customer demos and pilots undertaken in last year.
In 2020 Recompete of two we completed two important strategic initiatives to expand extends the L from being a tool that companies use to analyze data to being a platform that a lot of companies to share their knowledge and capability.
The first of these initiatives was a partnership with other tests.
The second was just the matrix acquisition that enabled us to instantly reach of broad number of equipment companies.
Many of whom of similar desires of the advent test to share their domain knowledge with the customer base.
The combination is more than additive as a relationship with these companies is enhancing extend sales value for our foundry install the system and wholesale customers.
The other benches partnership was announced in Q3.
By licensing expenses had been test was able to accelerate and announce the semiconductor semi con Japan. This past December products combined the detailed knowledge of test with the expense is machine learning.
As I had been tested in Tds had been meeting with customers. The frequent feedback we get is that customers were happy Adventist was using an industry accepted platform to deliver the capability rather than providing of proprietary solutions.
Building on our success with the advent test in the fourth quarter, we announced our acquisition of some metrics.
A leader in the tool connectivity and communications.
One strength of ex Censeo is our direct connection to the tools and wafer Fabs test and assembly facilities.
We support over 400 tool types from hundreds of vendors. This.
This is possible because the majority of tool.
<unk> support industry standard communications, such as Jim Gen 300, and NSA SA.
So the metrics is a leading is the leader in defining the standards as well as providing implementation software to their equipment customers.
With close to two other companies licensing their solutions.
So much of its business model is to provide the software development kit to the equipment vendor on the license basis, and then charge of one time license for each equipment that ships with the software.
Now integrated with PDF, we will continue this business model.
We acquired the metrics. So we can bring to their large equipment base.
The ability for them like out of interest to provide machine intelligence to their customer base.
We believe that essentially of analytics and symmetric connectivity combined can be an important platform for the equipment companies to deliver their knowledge embedded in software and for them to collaborate with thoughts many of whom also use ex Huntsville.
We completed the acquisition on December 1st.
As the results of matrix contribution for revenue in the fourth quarter and for 'twenty 'twenty was small.
But we already have received positive feedback from the customers. We believe the integration of symmetric cynics Huntsville will be an important factor for our future growth.
In summary, Q4 in 'twenty 'twenty overall with transformative for PDF accelerating our cloud business as we move to be of platform for the industry its analytics and machine learning.
As we begin 2021, the semiconductor environment remains robust and demand for integrated circuits is broad base.
'twenty 'twenty, we anticipate continued demand for our analytics platform, particularly on the cloud from a broad base cross section of customers, including equipment companies Fabs Fabless system companies and tier one auto suppliers.
Governments carmakers tier one suppliers and system companies are realizing are all of realizing the importance of semiconductors.
And the supply chain.
This is driving interest in pdfs products and services.
Given the tail of industry tailwind, so I just summarized.
We anticipate accelerated.
The acceleration of revenue growth.
As we stated in our 2019 analyst day, we expect the analytics $2, 20% compound annual growth rate in.
In 2020, while bookings were well above that growth rate revenue growth was below target.
In 'twenty and 'twenty, one we anticipate analytics revenue growth to be above that level in part due to our private bookings continued momentum and the addition of of full year of symmetric and eyes on trust.
For 'twenty and 'twenty one.
We also anticipate lower gain share levels as contracts time, all of which will dampen the impact of strong analytics growth.
As we continue to deemphasize our <unk> solutions.
Our long term model anticipates, the company's total revenue growth rate approaching the target analytics growth rate of 20%.
Overall, we expect 2021 to be a transformative year on all of our total revenue growth, making significant progress to realize our long.
Long term growth targets.
Finally, I want to thank all of the PDF employees and contractors for the efforts during what has been an exceptional year.
We managed to work in tight concert executing the two largest extensive cloud contracts ever.
Closing, our largest acquisition in years and providing our customers with stellar service.
Now I'll turn the call over to odd non who will review the financials and provide his perspective on our business.
Thank you John Good afternoon, everyone and great to be speaking with you today I hope all of you are keeping safe and the current environment.
We're excited about sharing our quarterly and full year results with you today and how the progress we have made positions us well for 'twenty and 'twenty one.
We posted our earnings release Animatic, who report in the Investor Relations section of our website. Our form 10-K will be filed with the SEC in March.
Please note that all of the financial results, we discuss on today's call will the on a non-GAAP basis and the reconciliation to GAAP financials is provided in the materials on our website.
To start with the business update we're excited about a very good and significant year for PDF solutions on both the organic as well as the inorganic from.
Overall, we had very strong bookings growth of more than two and a half times 2019 bookings signed multiple large cloud deals, including Adventist contract and the strategic investment grew the accents here and overall analytics revenues and closed on a great M&A edition to our analytics portfolio with the.
One of the metrics.
Now turning to the analytics revenues, we continue to move forward on our strategic transition to an analytics company.
Analytics is a percentage of our total revenues has steadily increased from 45 per cent for 2018 to 58 per cent for 2019 to 65 per cent for full year 2020.
We expect this trend to continue in 'twenty and 'twenty one.
I will now share with you our Q4 results and full year results by each category.
First on bookings.
For the fourth quarter of 'twenty 'twenty, our total bookings were similar to total bookings for the same period last year. However, the extensive bookings grew year over year and continue to become a larger portion of our total bookings.
For the full year of 2020, our bookings like I mentioned before grew by more than two and a half times year over year. If you look at the 'twenty 'twenty performance on a book to Bill basis, we achieved a healthy level of well above 1.5 ex ratio.
Within analytics, and specifically ex Censeo, we're pleased to see increasing cloud deals and extent of your bookings, becoming a larger portion of our total bookings.
To give you a sense of the progress we've made during 2020, our extensive cloud bookings were up a few hundred percent, whereas 2019, both in number of contract and dollar value basis.
Even excluding the Adventist deal.
Now turning to Q4 revenue results.
Analytics revenue of $14 5 million was up 7% versus Q4 of prior year and up 1%, whereas the Q3 of this year.
Primarily driven by strong growth in Accenture revenues offset by declines in D of Phi and characterization, our cloud business with an accent Hill continues to be strong.
With the metrics acquisition closing in December the benefit from a benefited from a month of revenue. However that was offset by purchase accounting haircut on deferred revenue.
I've I, our revenue of $7 9 million was down 13%, whereas the Q4 of prior year and down 10% versus the prior quarter due to the lumpy nature of a small number of contracts.
Total revenue of $22 4 million was down 1% versus Q4 of prior year and down 3% versus the prior quarter, our shift to analytics business continues with analytics now.
Now accounting for 65% of our Q4 revenue compared to 60 per cent for the same quarter of last year and 62% versus the prior quarter.
Now turning to full year 'twenty 'twenty revenue results.
Analytics revenue of $57 2 million for 'twenty 'twenty was up 15% on a year over year basis, which is below our target growth rate for analytics of 20% due in part the bookings mix, which were richer and cloud contracts, which were also long term in nature with slower revenue ramps compared to a <unk>.
Model for the year, which had a higher mix of time based license characterization and EFI contract.
While this impacted our 2020 growth rate it leaves more powder to support revenue growth in 2021 and beyond.
Turning to quarterly gross margin.
On the cost of sales and gross margins consistent of what we mentioned on our last call. We continue to make investments to support the growth of our business.
The increased cost of sales spend of <unk> 6 million, whereas the same quarter of last year and point 1 million versus the prior quarter was driven by the addition of some metrics of cloud expenses and annual merit increases offset by a reduction in travel expenses.
Our non-GAAP gross margin for the quarter came in at 61%, whereas the <unk> 64 per cent for the same quarter last year and 63 per cent for the prior quarter of.
Our investments were driven by spend in cloud head count and the metrics all of which we view is positioning us well for future growth in analytics.
Our annual cost of sale.
And we had $32 6 million of expenses, 10% higher versus prior year, primarily driven by cloud expenses to support our growing ex sense your analytics cloud contracts and personnel related costs offset by reduced travel expenses.
Our non-GAAP gross margin for the full year was 63% versus prior year of 65%.
If you zoom out and think back to takeaways from the cost of sales category. This quarter and year have been a story about positioning us to be the skilled analytics provider were becoming we have investments in three categories. The metrics are people and cloud infrastructure.
We intentionally made investments in cloud infrastructure in the latter half of 'twenty 'twenty as we continue to win cloud bookings, which will support our future revenue growth as a result, we remain confident in our ability to achieve our target financial model gross margin of 70 per cent.
Now, let's look at our quarterly operating expenses, which were up $2 2 million or 17% versus the same quarter of prior year, and up $1 2 million or 9% versus prior quarter.
The increases this quarter were primarily driven by some metrics expenses in both categories of R&D and SG&A from accent.
<unk> R&D head count increases annual merit increases and cloud software demo costs offset by reduction in travel expenses and the non-GAAP treatment of some metrics related legal expenses.
Our annual operating costs were up $5 2 million or 10% on a year over year basis.
The increased R&D costs from symmetric and annual merit increases were offset by reductions in crop.
The majority of the Opex increase was from increased SG&A expenses, driven by the symmetric acquisition subcontractor costs legal expenses for this metric acquisition and some head count increases offset by a reduction again and travel expenses.
Now to taxes, and a GAAP related item.
In the fourth quarter of 2020 as part of our annual review process. We recognized a full valuation allowance of $21 1 million on a GAAP basis against our U S. Net deferred tax assets pursuant to <unk> at the 740 on income taxes, the valuation allowance can be released.
Against future GAAP income tax profitability.
Turning back to non-GAAP, and a summary of net income and our EPS.
In summary, we posted a non-GAAP net loss of $1 3 million or three cents per share for the quarter compared to a net profit of $1 1 billion or three cents per share for the same quarter prior year and a net profit of <unk> 1 million or zero cents per share from prior quarter.
On a full year 'twenty 'twenty basis, we posted of non-GAAP net loss of <unk> 8 million or two cents per share compared to net profit of $4 5 million or 14 cents per share during 2019.
As we have ramped up ex sense here, we other cloud at an accelerated rate. This year, we grew costs in line with bookings growth, but ahead of recognized revenue Bds strong balance sheet affords us the ability to book a strong infrastructure in place, which our customers expect.
Regarding further details on the balance sheet side cash cash equivalents and short term investments.
True to $145 3 million in 2020 from $97 6 million in 2019.
The increase during the year 'twenty 'twenty was driven by $65 2 million from advent test strategic investment $21 8 million of operating cash flows offset by cash used force the matrix acquisition.
Our accounts receivable balance remains at strong levels.
Our short term deferred revenues have nearly doubled year over year, giving us increased confidence.
Our strong balance sheet with no debt and $145 million of cash and short term investments and our track record of generating cash provides us with the liquidity, we need to expand our analytics platform, both organically such as cloud investments and inorganically such as the symmetric acquisition.
To drive our strategic direction.
Like many companies experienced the COVID-19 situation accelerated trends that had begun before for PDF as well in particular 2020 drove an acceleration in our cloud business with industry players like Adventist realizing the value of analytics for the platform like PDF ex Cynthia.
As we look forward to 2021, we anticipate growing our analytics revenue greater than of our 20% target driven by the strength of our 2020 cloud bookings full ear of some metrics in the Adventist revenue and the macro trends John highlighted.
However, some of the analytics growth will be offset by declines in <unk>.
As a result, we expect our total revenues to start moving towards our target growth rates.
While our gross margin for 2020 were compressed due to cloud investments to support our bookings in 'twenty and 'twenty, one we expect to improve our gross margins as we start achieving scale.
In summary, while 2020 carried many challenges limiting the way we operated the business the team embraced the environment and accelerated our long term objective of a cloud based analytics platform broadly.
Broadly supporting the semiconductor electronics industry.
We're excited about entering 2021 and building on the momentum we created.
At this time, let's open the call for your questions. Operator, please begin the Q&A portion of the call.
And ladies and gentlemen.
A reminder of our eye to ask.
A question you will need to press star one on your telephone to withdraw your question press the pound key.
And I'll get to ask a question. Please press star one on your telephone.
The first question comes from the line of Tom Mccaffrey of D. A Davidson your line is open.
Yes. Good afternoon. Thanks for the question.
First of all of the dig into a little bit more on some metrics.
What do you think the revenue impact and the cost impact will be in the first quarter and is that the regular revenue run rate or is it still a bit of deferred revenue haircut in there.
Yeah sure. So yes that along with the purchase accounting, we do expect some deferred revenue that they had on the opening balance sheet of December.
December one 2020 to reflect during the rest of the during the rest of the year.
That all of their margins continued to be strong well above our margins and we expect the growth momentum to continue on a total level of.
Similar in line to our analytics growth rate.
Okay, but what are what level of restarting that here was it the 15 billion dollar run rate 10 per dollar run rate.
Yeah.
We're not disclosing the specific numbers, but if you go back to the announcement that we did the oven. We did the transaction. It was about $10 six ish million. So I think you can use out of the starting point and think about what 20% revenue growth rate would imply for all of.
The last year as well as 'twenty 'twenty, one offset by some deferred revenue haircut, Okay. And then similar question on the cost side.
They had one month of the.
The costs in the <unk>.
Business in the fourth quarter.
So just take the delta going from the third the fourth and multiple by here by two to get to the first quarter increase in cost.
Well look I mean, I think on the gross margin side.
About.
The metrics itself, we had shared that there you know kind of in the mid 80% so with the haircut because it's taking a haircut on the revenue, but not quite on the cost probably still in the 80 per cent range. I think is the way to think about the the metrics.
Okay, and then John you mentioned that there are a few custom demos of the pilots going on how meaningful could those be over the next year or two from a revenue point of view.
Yes.
Zero greatly the pulse of referred to of greatly accenture on the cloud with multiple elements of multiple modules. The ex until they would drive customers to run rates that are in the multi $100 million per year.
And.
Really establishing sensor issue.
Jacob.
The answer from being a tool that they use inside the company broadly in the organization and making the platform.
Four of them, we have the number of those ongoing with customers right now on some of the finished.
2020 of that were in negotiation with now and some of it we anticipate finishing up over the next couple of few months of me, we expect them to find mostly in the first half of the share.
Okay, and then you talked about the full year.
You know, what the analytics being above 20%.
If you strip out the metrics, though are you at your 20% growth rate are you still being impacted by the fact your transition to these longer term models of the longer term contracts.
<unk>.
Yeah, I think look you're right. The metrics are obviously helped but you know I get it's the business that we wanted to expand and grow in the direction of eye and we still believe even without the metrics just given the growth rate that we would have from advent test as well as growth of it in our own business, we should be able to achieve.
The 20% of analytics growth rate.
Okay, great and finally.
What do you view as the.
The rate of eyewear, our decline over the next few years and maybe the linearity of that decline over the next few years.
Yeah.
Yeah, we do expect with the exception of the.
The stuff that we have going on in China by and large contracts to roll off there'll be some rollout from the second half of 2021.
That will mean that there'll be a meaningful decline in <unk> 'twenty anticipated in 2020 versus 'twenty 'twenty, one versus 2020, and then as we look out.
It'll start reaching.
Something in 2022, and 2023, where it really is dependent primarily on those newer contracts that are directly dependent on what goes on in the production in China and other parts of the world.
So the then it gets down to kind of more of a steady state level.
Okay, Great I'll jump back in the queue I appreciate your time.
Thank you John.
And your next question is from Christian Schwab of Craig Hallum. Your line is open.
Yes.
Hi, guys the patent on it.
On behalf of Christian Thanks for a lot of Thats the question.
So first question a little bit of a follow up I guess, you guys outlined the metrics and kind of the size of youre expecting that to be in 2021. I was wondering if you can quantify I guess what percent of it.
Analytics business you'd attribute to or connect to the partnership of the band test.
You know.
The minimums on the event.
Sales contract.
Our about $10 million per year.
Obviously, we had a very a portion of that in 2020 do you expect to get a full year of the minimum says also things we're doing with advantest that would grow that and this year beyond that level you know the exact number I don't really know Tyler.
We expect it will be above the minimum.
Okay.
Perfect very helpful and then.
I guess any any help or color you know what the strong book and go into your I would imagine there's some level of visibility you know is.
Is there anything you can imagine more second half drop off in highway are but anything else seasonally quarter of course of the degree to call. It maybe besides just kind of steady state sequential growth.
Yes, I think the way to think about it it's kind of what we said during the script itself you're spot on that the analytics of the CRO pretty strong and that towards the second half of the year IOR starts to decline I think we made the comment that if you looked at total company revenue as you would you would see them approaching the 20 per cent.
The growth rate target that we had set for analytics.
Alright perfect.
We can do that math and then the.
All of them up on Tom's question, a little bit the.
Opex line.
Up here in Q4 of little over 15 million, there's only a portion of a partial quarter of the metrics. The ball net so whats the whats the baseline opex level, we should be thinking about what the moving pieces going into Q1 of the visit 16 17 million, what's a good baseline quarterly Opex from Nike Inc.
Yeah, I think look I mean, we're constantly trying to manage our business and spend and evaluate where we want to optimize the resources as well.
I think I think from a spend perspective.
We feel pretty good at the levels, where Q4 came in at least.
To start off the year.
Yes through the year, we will be investing some more into the R&D side, but we expect that we can monetize some of the savings from the SG&A side as we're getting advantages of scale of being a bigger company.
That's perfect. Thank you very helpful.
Well for us.
And again, ladies and gentlemen, if you would like to ask a question at this time. Please press Star then the number one on your telephone keypad.
Your next question is from John that kind of one day.
Of C. J S Securities. Your line is open.
Hey, guys. Thanks for taking my question My first one John if I look at what advent test, they're going to add in 2021, plus the metrics.
That number of approaches 40%.
Already so I'm just trying to figure out what your bogie is for everything outside of that.
In the analytics business, Yes, we gave ourselves some cushion with that obviously.
John.
That's why we said we thought we could.
We were very disappointed that we did not meet our analytics growth rate in 2020.
But when we looked at the the nature of what we went into with backlog and what we've added into the business. The felt very good that when you start looking over them.
Average this year of next year, you're still going to beat the 2020.
20% growth rate when you take an average over the over the couple of years and so you obviously outside the US also a fair amount of headroom there.
Got it that's helpful.
I wanted to touch on the semiconductor shortage situation. That's going on is there any direct impact of you guys number one of the positive or negative net number two as you look.
Looking to the long term and companies start thinking strategically about issues like this what role do you have to play in helping people get get around this kind of thing that's going on I see that people are building more foundries.
The more capacity, but just wondering if you had an opinion of high level, what yeah, just make it so yeah the.
The opinions of your products.
Thanks, John Yeah, we do see that we've had a number of dialogues with customers on the operations side from some of the interest in some of the extent of your control applications of the test applications of all around the OE and operational effectiveness and I was on the call of the customer and.
Few days, where they say, yes, we were able to get.
Improvement in operational effectiveness because of what we're able to do with the extent to your test and we do anticipate.
And we see interest in demand in the products four of those operational elements.
It used to be about yield and quality, that's factored into the customers buy decision centers of the good thing for for PDF overall on the overall, we do see on the.
Equipment side, more and more demand for connectivity and we've gotten off to a very strong start in this first quarter on connectivity.
The equipment are shipments driving the.
One time licenses on our connectivity solutions and we anticipate that as you say you build out of the factories happens that will drive.
Very it gives us confidence in our ex.
Just connectivity products and then when we look at kind of of the ramping of the leading edge capability, we do see some signs there.
The very lumpy in 2020, and obviously, we were disappointed about that didn't deliver what we wanted it to as you look into 2021, we do see the inklings of people wanting to make investments.
And you know I.
I think.
The other analyst reports right, there's the government factor in the two that we're trying to.
Or some piece of mail, we adult none of our plans assuming any of that happens because of all of the Chinese government investment all of the U S. Government, that's it's really opaque for us.
That said I think the everyone's coming to a realization of how important these technologies are in GBS.
T D.
One was I think very critical for folks that are kind of go make significant investments in those areas. So we think of something materializes, there that would be of bluebird, but not really baked into our 2021 plants.
Primarily it's great operational effectiveness on ex Unsealing, the sort of metrics one time licenses.
Got it thanks, John and then just last last question.
Can you give us a little more color on what happened the tsi towards the end of the year and kind of what your expectations are for 'twenty one.
Yeah. Thanks for the question John So when you look at <unk>, we've been working with the it felt the suddenly foundry on the applications. We think we understand the applications from a technical standpoint and are executing on some features in the product.
Make them more efficient this is around helping that's all of this foundry interface.
Critical design issues, which but do you find lets you do because you really can scan design feature by design feature billions per wafer and meaningful reasonable times and you can't do anything like that in any of this.
The thing close to what this machine can do and the way the whole software and the integration with Accenture goes on we believe theres some.
Work, we need to do with the lead Fabless and the foundry to drive that to be kind of of standard operating procedure right. Now. This is really been of one off thing and we feel like.
And I think.
We've been showing what you can do technically.
From all of.
R&D standpoint, but we've not turned the corner of it made us into something that is done in every product bring up for example are done on a regular basis as they go through process changes in the fab and the sort of things we've got to figure out how to solve and what kind of giving ourselves this year to solve that because if we can't solve that we can't make this into a business we need to be able to prove that.
The <unk> the technical.
Technical stopped when we can find the effects and here's how you apply it.
As you bring up the new products and as you.
Bring up process labs.
I think we understand those things but.
The proof is in the pudding.
Got it and just to be clear are your expectations for that business to grow this year or is it going to be a little bit flattish. So you can figure that out.
We think it will grow more like in the second half of the year in the first half of the year to be more flat in the first half of the year.
Got it thanks John.
And I can ask a question you will need to press star one on your telephone keypad.
Do we have a question from Gus Richard of Northland. Your line is open.
Yes, thanks for taking the question.
John I just want to make sure I have described could you tell me what.
It goes into iwai are and what goes into.
You know your analytics revenue I'm, not sure where it goes and I'm not sure where gained share goes.
This adventure goes in and out of my arm.
Anything we saw on the subscription basis it.
It goes into.
Analytics, so DSI, which has been on the subscription based on sort of you pay for an annual subscription it's been of subscription and the analytics business.
Got it and then.
I've been in the business back selling tools right.
Right.
And then I've been jumping back and forth between calls how much of.
<unk> revenue was deferred versus things that you can recognize moving forward, but what's the mix.
Yes actually yes.
Not giving out specific numbers, but let me give you some directional comments that might help.
I'm very proud of what the business. The metrics team has built so you know obviously the portion of their revenue that relates to this deferred revenue treatment is what's coming from the support and maintenance on the non support and maintenance side. There revenue is very well structured and that customers place be OHS customers buy the software development kits of John mentioned and as that.
Order comes in you know it gets shipped out of the revenue gets recognized so it's a it's a it's a relatively smaller portion than perhaps in the other software deals that you might have been used to thinking about four of the deferred revenue as a percentage of total.
Got it kind of sorry to make you repeat that and then.
The last laugh.
Last quarter, you guys signed an <unk> contract with.
The Chinese company and and it sounds like.
The.
That business the <unk> business is going to be down with that new contract I would have expected to at least the b flat are holding up a little bit better or is it just the decline in gain share. That's the problem or can you just talk a little bit of what's going on.
So as we look into 'twenty and 'twenty, one forecast, we do expect with a small number of.
The customer we expect some additional out of our business as we get into 2021, but as we said in the prepared remarks, we do anticipate some gain share contracts falling off as we got in the second half of the year and that will drive down the gain share numbers until the second half of the year.
Okay.
Can you just give us a sense of what process nodes that would relate to the 28.
14.
Any color on what's going on yes, yes, it's primarily you know things that are in those notes.
The primary reason.
The U S and Europe some of the some of the older contracts contracts that started performing the 2016 timeframe that are coming to the end of their life.
Okay got it got it alright very helpful.
Thanks, so much.
Thanks, guys.
Thank you.
And there are no further questions at this time of turning the call of the back to John.
Thank you for participating in our Q4 call. We look forward to talking with you again soon have a great day and stay safe.
Okay.
And the French call. Thank you for participating you may now disconnect.
[music].
John.
[music].
All of it.
[music] zone.
Net.
[music].
Yeah.
Yeah.
Yes.
Yeah.
Yeah.
Yeah.
Yes.
Uh huh.
Yeah.
Okay.
[music].
Yes.
Okay.
Good morning.
[music] zone.
Yes.
[music].
John.
Yeah.
Okay.
John.
Yeah.
Yeah.
John.
Okay.
Okay.
[music].
Okay.
[music].
John.
John.
Yes.
[music].