Q2 2021 PDF Solutions Inc Earnings Call

August 10, 2021

And then.

[music].

Good day, and thank you for standing by welcome to the PDF solutions second quarter. So any tried 1 conference call. At this time all participants lines are in a listen only mode. After the speaker's presentation. There will be a question and answer session for which instructions will be given at that time I would now like to hand.

The call over to Joseph P. S of Veeva Lytham partners. Please go ahead Sir.

Thank you Donna and thanks to all of you for joining us today.

This call and we appreciate your time and your ongoing interest and PDF solutions.

As the operator indicated my name is Joe Diaz and I'm, a managing partner and Lytham partners. We are the Investor relations consulting firm for PDF.

If you do not yet have a copy of today's press release its available on the company's 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 secret financial results.

Formats growth rates and demand for its solutions pdf's actual results could differ materially.

You should refer to the section entitled Risk factors on the company's annual report on form 10-K for the fiscal year ended December 31, and 2020 and similar disclosures and subsequent SEC filings. The forward looking statements and risks stated on this conference call are based on information.

Payable to PDF today, the company has no obligation to update them.

With that said I'd like to introduce John <unk>, PDF solutions, President and Chief Executive Officer, who will be followed by our non Rosa Executive Vice President and Chief Financial Officer.

Inclusion of managements prepared remarks, we will.

Open the call for your questions. Let me now turn the call over to John <unk>, President and CEO of PDF solutions John.

Thank you for joining us on our call today, if you have not already seen our earnings press release management report and 10-Q for the second quarter. Please go to the investors section of our website, where each has been posted.

We appreciate your taking time to join US today I will start with the start the discussion by providing commentary on our Q2 highlights.

From there will provide our impressions of the semi conductor industry and conclude with our expectations for PDF business and the second half of the year before handing it over to odd non for more detailed financial update.

Highlights for the second quarter show progress towards our long term objective of being the go to manufacturing data analytics platform for the semiconductor and electronics industry.

Moving on Q1 business activity and the second quarter was very strong for.

For the first half of the year bookings are up 60% more compared with the first half of 2020 and total backlog as of June 32021 has more than doubled compared to June 32020.

As we have said before we believe that a successful manufacturing analytics platform requires the right data data quality and analytics at the equipment edge increasingly customers are requiring the platform to be on the cloud where they can benefit from both SaaS model and supply chain.

<unk> wide use of analytics platform, which fosters collaboration between them and their suppliers.

And the second quarter, we demonstrate our ability to bring the customers the right data with strong bookings for leading edge solutions applied to customers developing and ramping processes from 28 nanometer to 3.

And in particular, there were 2 contracts of note. The first is a multi year multi node integrated yield ramp contract for an existing Chinese customer.

And as a quick start agreement with the customer to begin deployment of <unk> infrastructure and a <unk> system on a subscription basis.

This already multimillion dollar agreement enabled us to quickly start the deployment of these systems, while the larger multiyear subscription contract for those first for the first noticed completed.

The industry has increased interest in having and electrical equipment and reflected in part by another strong quarter for the symmetric connectivity products.

And this quarter included orders from some of the most complex front and fab equipment as well as custom assembly tools.

This is what the equipment customer starts with licensing our software development kit or SDK to enable integration of our software with their equipment.

And then pay us for runtime licenses for each tool and which the software is included for.

For the first half of the year, we experienced record revenue from runtime licenses and we also had strong design wins on new equipment platforms that bodes well for future runtime licenses.

Our SaaS bookings continue to grow in the quarter as extensive customers adopt our cloud and the second quarter 1 of the largest U S. Based <unk> companies signed a contract with us to move their on premise deployment to the cloud enabled by our big data solutions.

We've found like most companies, who benchmark that the performance and cost advantages of moving to extensive cloud are quite meaningful give.

And given the growth of extensive cloud and we anticipate having a month multiple petabytes of data under management over the next few years.

And the second quarter, we recognized revenue from the first sales by ebb and test of our first integrated product that leverages their know, how and test and expense capabilities and adaptive test.

This revenue is over and above the $10 million per year minimum commitment that advent test and PDF agreed to when the partnership was initiated.

The sale of its integrated product and less than a year from our side and the partnership agreement demonstrates the advantage of collaboration between the companies and importantly provide dive and test with a unique and differentiated capabilities and the marketplace.

Looking at the first half of the year. We are very pleased with the progress achieved to date on a year over year basis, We grew analytics revenue, 37% from the first half of the year and 29% for Q2.

I would now like to turn to what we're seeing and the industry.

Overall semiconductor and electronic companies continued elevated investments and process control and new.

And I'd bring up which bodes well for our business.

We believe that we will see continued strong interest and our products and the second half of the year.

As we discussed earlier this year, we do anticipate legacy gain share contracts rolling off and the third quarter 2 results and gained share and the second half of the year below the first half.

That said due to the strong backlog and anticipated bookings for the remainder of the year. We believe Q3 revenue should exceed Q2 revenue and we anticipate this growth to be broad base led by continued strong bookings of our analytic solutions for leading edge customers and our cloud offering from more broadly.

We are pleased with the progress we've made and the first half of the year, and making PDF solutions and manufacturing data and analytics platform for the industry, which helps us build recurring revenue streams to provide greater visibility and predictability of our financial results.

Finally, I want to thank our employees for nimbly, supporting our customers and continuing to innovate and the COVID-19 environment.

Now I'd like to turn the call over to other non for a review of the financials after which we'll open the call up to your questions.

John.

Thank you John Good afternoon, everyone. Good to speak with you all again today and I Hope all of you and your families are keeping safe.

I'm pleased to review the financial results of the second quarter and to bring you up to date and the progress of the business. Our form 10-Q has also been filed with the SEC today.

Please note that all of the financial results are discussed in today's call will be on a non-GAAP basis and a reconciliation to GAAP financials is provided and the materials on our website.

Financial results for the second quarter of 2021 continued to be strong coming after a solid first quarter.

Q2, total revenue was $27.4 million up 28% from the comparable quarter last year.

Analytics revenue was up 29% to $19.6 million and Q2 of 2021 versus $15.2 million and the second quarter of 2020 and represented 71% of total revenue this quarter.

On a dollar basis as well as a percentage basis, we except that we expect analytics revenue to grow further in the coming quarters.

And we're making great progress towards our goal to be the largest manufacturing data analytics platform for the global semiconductor and electronics industry.

During the second quarter revenue contribution from integrated yield ramp was $7.8 million compared to $6.2 million and last year's second quarter and increase of 26%, we saw strength and <unk> revenue from fixed fee services as a result of a large booking from a Chinese customer with John spoke.

<unk>.

Overall, our business is gaining momentum.

You may recall that full year 2020 bookings increased by 2.5 times that of 2019.

And the first half of 2021 total bookings increased by more than 60% from the comparable high growth period last year.

And so bookings continued to be very strong which sets the stage for future revenue growth.

Given the strength and bookings and backlog, we believe analytics were more than offset any decline and our revenue and the coming quarters.

Yeah.

And our backlog is very strong and continues to grow at the end of Q2.2021, our backlog was $138.6 million compared to $63.5 million and Q2 of 2020 and increase of 118%.

While we do not expect this triple digit percentage growth to continue going forward, we believe the momentum building and the backlog and continue in the coming quarters as our bookings continue to be strong.

During the quarter, we continued to make progress toward our non-GAAP gross margin goal of 70%.

Favorable product mix got us to 65% gross margin in Q2.2021.

The transition to software continues to increase gross margin, which is especially important given lower anticipated gain share revenues.

The growth and bookings and backlog provides us confidence that we can continue to progress towards our gross margin goal.

On the spending side compared to Q2 of prior year, our cost of sales were up $1.8 million, primarily due to personnel related costs from our symmetric acquisition and also due to investments and cloud hardware and software infrastructure to deliver on customer contracts.

Within operating expenses R&D increased by $3.3 million compared to Q2 of prior year, primarily due to personnel and subcontractor related costs from symmetric and PDF side.

Our SG&A increase of $1.6 million compared to Q2 of prior year was driven by the symmetric acquisition.

As John mentioned with regards to <unk> TV systems. Some of our customers are increasingly looking at <unk> <unk> and CV as a combined analytics solutions for leading edge technology nodes.

On the cash flows we generated $8.1 million and cash flow from operations and we expect to generate cash from operations for the year consistent with our history.

We ended the quarter with cash and cash equivalents of approximately $139 million compared to $145 million at December 2020. During the first half of the year, we used cash for stock buybacks of approximately $4.5 million payments related to the symmetric acquisition and continued cloud infrastructure and investments for future growth.

Believe that the strength of our balance sheet positions us well to consider strategic acquisition opportunities as they become available.

Looking forward, given our backlog and anticipated strong bookings, we are gaining confidence with the expected results for the remainder of 2021 and now expect full year calendar year 2021, total revenues to grow between 20% to 25% on a year over year basis.

We also expect full year 2021 analytics revenues to grow more than 30% on a year over year basis.

With that I'll turn the call over to the operator to commence the Q&A session operator.

And ladies and gentlemen to ask a question. Please fast star 1 on your phone's keypad again.

<unk> line on your phone's keypad, we will pause for just a moment to compile the Q&A last day.

And your first question comes from the line of John and Mike Peak from Rosenblatt Securities. Your line is now open Sir.

Hello, John.

Hello, Mr.

Mr. John Mcpeak. Your line is now open.

Oh, I'm, sorry, I have viewed it as non zoom and I still had mute.

Okay.

What I was saying when I was on mute.

Nice job guys.

And I'm going to kick the call off with a somewhat dull question, but in the maintenance and.

And my calculations right here, it looks like Dsos, which you've been.

And kind of a thorn here have come down nicely is that right.

Yes.

Our balance is yes, we.

And we did really well with cash collections this quarter.

Compared to the last quarter, we had and work to do and to be honest with you we put into new processes. This quarter and the team did a fantastic job collecting cash from some of our customers this quarter.

Yes, I mean, I'm not doing the exact days.

So the day of the quarter using 90 days it looks like it went from 102009 to 99 can it stay down here do you think Kevin.

I think yeah look I mean, we will continue to stay focused on this metric obviously, it's important for us to continue building cash.

And depending on the customer and the region, where they're located and sometimes that might skew the resolved 1 way or the other but I can tell you that over the last few quarters. We have increased focus on this and and hope to continue this momentum.

And nice.

Nice work on that and I guess.

I'll ask kind of an open ended question a little bit you know, there's been and increased focus on domestic.

Production, particularly trying to get.

Leading edge production in the United States not.

Just a couple of hundred miles from.

Nuclear missiles, and adversary potential adversary cars and if that is that affecting your.

Your bid business at all.

Guys, let's just kind of a and <unk>.

And open ended question, but I'd love to hear what Youre, saying.

Sure, Yes, I'll take that 1 John.

I think specifically there is I know that the act that the U S government's policy, which is about 52 billion.

<unk>.

Should that pass and we anticipated what it would probably create additional.

The opportunities for us we do have customers that are locating factories, and the United States and offer customers that are expanding.

Development across multiple nodes, not just the leading edge and the U S and that is impacting and partly why in my prepared remarks.

That is happening almost irrespective of the government activity, but it probably being enhanced by the government activity.

That is impacting as we said in my prepared remarks anticipated continued strong bookings on the leading edge.

Because we do see customers.

And since that and Im not prepared remarks, who like the integration of the characterization vehicles and <unk> for bringing up these very complex 3 D technologies.

And.

Well it has worked for.

And the leader there so I'll pass it along and get back in the queue.

And the another question thanks, guys.

Yes.

Thank you and your next question comes from the line of Tom deeply.

And da da da Davidson. Your line is now open share.

Yes, good afternoon.

John I was hoping to get a little more color I think you made a comment about how the customers are looking at EFI.

With more of and analytic solutions bend to it than before and then just a little color on what youre, seeing and DSI and what that opportunity looks like.

Yeah sure.

Sure Tom.

About a year ago customers and that was customers came to us with a series of issues. They were seeing and manufacturing from 1 particular and our team figured out ways of using the system to inspect the product.

By using a combination of our part of Accenture called fire that analyzes product layouts.

Just going to get a little technical and policy catalog and how deep I go but.

And identifying what looks like a DSI fell solidly given point and the process. Even if it was just part of the active circuit and then analyze all of that what you find is and there's tremendous amount of.

Data you create literally youre measuring tens of billions of these things on a wafer and you are seeing lots of different dependencies, and the layout, which they can go back and used to tune how they do design and it will turn out to be very helpful for our characterizing from the key issues on designs and bring up and.

And kind of get to the question that John.

As to we are seeing as customers are trying to bring up these complex 3 day processes this capability of combining.

The ability to analyze the product layout with the <unk>.

And our capability drive the machine to all of those spots to take that data and really have a huge machine learning problem of all the different layout styles that were in and then their failure rate because you're collecting tremendous statistics and you really can't see any other way and.

It's a very unique capability and 1 that helps learn a lot of these process design and interactions very efficiently.

Okay. So is the thought there that they would use you are from service going forward to do the big day analysis or would they want to keep that data internally and tried to calculate it.

No it.

The typical the machines always got will end up being onsite that machine plus the cloud deployment of expense here would all be part of and overall subscription.

And and.

There is a big advantage of using extent here and the cloud for this because you need to scale up and down the computing quite quite substantially to look at these dependencies and thats why its and overall bundle of basically hardware and software.

And as.

Cloud deployment is also a hardware software combination.

Okay. That's helpful. Thank you.

And then when you look at the mix of business and the second half with gain share coming down but the.

Analytics is doing quite well does that meaningfully impact the margin structure do you think over the next couple of quarters.

Yes, I think it's early to say I think.

What we've said and our prepared remarks is we feel confident about heading towards our 70%.

How many quarters it takes we're not being precise on.

To your point it will depend a little bit on the mix between those deals as well obviously larger deals we hope it will come with a little bit better margin.

I think for the rest of the year, it's fair to say that it stays flat to maybe incrementally up at best.

Okay, and then you also mentioned that.

Obviously, the biggest adder to the costs over the last year than personnel.

And they are expected and increases in personnel expenses over the next couple of quarters as well.

Yes.

Great question.

Yes, so similar to our revenue.

Thoughts as well.

We will be doing gas will be investing a little bit more but I think our goal is going to be that we are spending at a slower rate than the revenue is growing so and on a combined spend basis. When you look at cost of sales plus opex together.

We should be spending less and the revenue growth, which should hopefully trickle Olympic more to the bottom line.

Okay, and then finally for the backlog, obviously, a nice impressive backlog could.

Could you give us and sense of what's the duration of what the average length of the backlog is.

Yeah majority of the contracts.

Within the next 2 years majority of the realization of that backlog.

And the rest with them over and are kind of up to the 5 year timeframe, but the majority or the next 2 years.

Okay, and then maybe just 1 more for you John when you look at your customer interactions recently and they changed much over the last 2.3 quarters.

Are you still and a position where it is.

And so it a little harder to close some of the deals that are traditionally been done and person.

Yes.

And it's funny you asked that question Tom.

Tom I had a number of calls last week with <unk>.

Customers and I did 1 in person visit and.

Our calls.

And now becoming very natural and while the executive said, Hey, John we're used to doing business. This way analysis the way to go and so.

I think that.

And we're figuring out how to work and this way better and better.

Our confidence and the second half of the year is greatly because I do see us making great progress working this way and I anticipate that.

And even larger complex.

Contracts are starting to close.

1 we did in China last quarter was pretty amazing to me.

And <unk> contract with gain share that goes out over 10 years past the deployment data. This will carry us into some time into the middle of 2000 and <unk> for.

And for a customer who are already generating gain share from and we're seeing their gain share.

Trickle up on the notes that they've already deployed so the customer that we had some confidence and and yet we're able to close that contract remotely.

And I think.

That was probably the most difficult right just from a.

Language barriers and many other things so.

Yes, we do feel good about our ability to close more complex contracts and the second half of this year.

Remotely and great that's good to hear and thanks for your time today.

Okay.

Thank you.

Thank you and again to ask a question. Please press star 1 on your Keypad. Your next question comes from the line of Mr. Christian Schwab from Craig Hallum Capital. Your line is now open.

Good quarter guys.

Back to the Chinese large customer that you.

Ramped.

Drove strength and <unk> and it sounds like you have a 10 year contract can you kind of give us an idea of you know.

<unk>, a potentially how big that customer could get over that timeframe.

And secondly, how many other.

And new potential Chinese manufacturers are you talking to about using your products.

Okay sure.

I'll take it in reverse order Christian so theres been a number of customers and China generally we don't take them on a gain share basis, because we have.

And we deploy them and us.

And basically on a system basis, the gain share means we're going to provide teams with the technology and help them ramp yields and that's a big invest on our part to so we've been very selective on where we've taken those and places where we've seen good potential as customers. We've been working with for a number of years and the early notes I did take longer to get to a game.

And then we would have liked but we did start seeing their gained share numbers trickle up towards.

Towards the second half of last year and into this year and.

That gave us some confidence.

They would be.

A good partner and a gain share basis this contract.

Solutions part of that the booking is.

And the 8 figure range.

And there.

And Theres, a deployment period, which as you know on the order of a few years and then there was a gain share periods, which is 10 years from a total length of the contract is actually longer than 10 years.

And so it's quite a substantial activity in terms of how much.

The contract is eventually work Christian that's still hard for us to estimate that we have very little history with our Chinese customers in terms of how much volume they got too historically, they've been very very slow to ramp volumes, but we are seeing some improvements there I think of.

The technology as they had started advancing their ability to manufacture.

And more advanced semiconductor technologies, and they have and the past.

Okay and.

Is there.

And I guess my second question is could you give us an update on any other potential meaningful.

New customers and where you say that theres anything you could share either with.

Other manufacturers and partnering with the likes of another advantest or.

You know any type of update.

Anything that can happen.

And large manufacturers out there who decided that they were going to get.

And get more efficient manufacturing and kind of make the fab foundry switch.

Any update there would be great.

Yeah of course Thats Super.

It's like the old running joke of consulting for a large catch up manufacturer and the greater Pittsburgh area, everyone pretty much knows you mean, when you say that so we're always super careful about how we talk about customers and potential customers, Chris and I know that you understand why.

Hi.

That said.

We both with existing customers and customers that have historically not been big customers of PDF from the past, we have a tremendous level of activity the bookings and the first quarter or the first half of the year already reflect some of.

Those opportunities and as I said in my prepared remarks, we expect.

Both companies that have been historically PDF customers as well as ones that have not.

Tab and increased bookings with the broader community and the second half of the year.

Great no other questions.

Thank you and again to ask a question. Please press star 1 on your phone's Keybanc.

Okay.

Your next question comes from the line of pounds from the line of from Sandra Capital. Your line is now open.

Hi, good afternoon John.

It went by pretty quickly I, just wanted to make sure I heard it correctly.

Is the Chinese multi node deal and does that include a <unk> tool.

Hi.

Other contracts revenue that customer does have the DSI tool onsite and that's it.

Has the right to use some of that and part of this contract as well.

Okay and then you also referenced a quick start contracting.

And that I think you said with DSI and <unk>, so is that and track that and characterization vehicles as well.

And character, so that contract contemplates the shipping of the DSI tool to that customer.

That's correct.

And in fact.

Actually get that machine.

Shipped up there while we negotiate.

In terms of and I said in my prepared remarks.

Okay, and so again, if I heard that correctly, yes. The quick start contract had meaningful revenues associated with it but you are in discussions about a more much more significant contract that.

And would be a broader deployment of your technology.

Alright.

Correct Okay.

Okay.

Sure.

Secondarily.

I just wanted to talk you didn't mention it on this call, but you've talked in the past about your decks networks.

Maybe you could talk about.

And how that how the deployment of that is going how dex networks.

And it in and around some of the industry issues about sort of supply chain transparency and reliability and.

And maybe some goals you set for this year as far as driving either commercial deployments are driving broader adoption that would ultimately lead to commercial revenues.

Sure Yes.

Yes, so just.

And we're always we always have 3 letter acronyms here a PDF so let me.

Index is data exchange network.

Our.

Similar these are outputs that we put out.

Factories, primarily right now and with that.

Test facilities.

And they run a series of things communications with our software lines resident on the equipment and the facilities.

Our cash database you can think of that as like a short term database and then enel and element to run business logic for evaluating rules for quality screening on.

And.

Chips that they produced.

Disproportionate and this has been done for Fabless customers.

They want to be able to get to the ultimate product quality running more and more advanced models and screening.

But they don't actually run the testers and those are run by third party suppliers for them.

2 of those assets.

And we've got under 10 of those out.

And it's now growing number and we Havent, we expect to grow that substantially as we get to the second half of this year.

As we have more and more fabless customers, who like the ability to see their production and real time be able to.

Established more complex models and rules some of the edge compute.

Alright.

With that and this is also very much involved with our activity with Adventist, who have and edge compute box that they are shipping on the equipment and now communicating between that edge compute element and the cloud is becoming important as that kind of application is being accepted and the tests community.

So thats and.

Our goal for this year I think is too over double our deployments.

And that we have already and sort of under 10, now and we'd like to see that about double.

Okay and then.

Are you generating meaningful revenue from that today or do you need to get to assert and scale and.

And what sort of transition needs to be a commercial driver of.

<unk> sales.

Great question, Andrew and then.

Yes.

Not as communicated and many of his prepared remarks over the past quarters, a lot of our rollout has been deploying these decks notes, it's a relatively meaningful fixed cost to deploy the notes out there and they are owned and operated by PDF and they are multi tenant and the way that they shift data around for multiple fabless customers. So yes, as you get more.

More and more to scale more customers that there is some incremental.

Capacity build out we have to do at each other and set up there to grow quite substantially but its kind of Hawaii, <unk> comp and fixed cost of deploying that system, there and thats.

A big piece of the cost so yes, as we get to scale that becomes more and more important part of our overall.

Makes sense to your cloud offering.

It is generating revenue for us to day, and we anticipated generating more.

And the coming years.

Okay great.

Terrific. Thank you.

Yes.

Thank you.

Your next question is comes from the line of Mr. Gatti, Garish and email from me whereby your line is now open and so.

Hey, guys.

And I don't want that.

A follow up on the Tsi and and.

It looks like Youre, CV and <unk> revenue was down.

As you said.

So I think it was $4.6 million year over year.

Can you.

But that and.

Context of how big that is today.

And.

It also sounds like the DSI and the probes is.

Business is moving positively.

Kind of explain those 2 issues and give a little bit more color on where you are on the <unk> equipment that you were talking about a minute ago.

Sure, Yes, so I'll try to handle that so.

These are very large lumpy contracts that has and the past.

And.

And relatively short duration. This quick start isn't part to deploy.

And those systems and the second half of this year the value of the quick start from a booking standpoint with substantially larger than the revenue rec and the quarter and as a result, you can see that.

Revenue and the first half of the year was lower than the bookings would.

Give you.

And when we look at our model for the year, we anticipate DIY and characterization revenues.

And to be up substantially and the second half of the year versus the first half of the year and overall as we look out over a kind of a 4 quarter rolling time period, we expect that to be a meaningful part of the.

And analytics revenue as well.

Described and.

<unk> prepared remarks, this is really a bundle of <unk> characterized.

Characterization vehicles.

Characterization vehicle infrastructure, which includes interest capable hardware test capabilities as well as the <unk> infrastructure, which is also a combination of software.

And.

IP and hardware capability.

I think when you look back out lets say this time next year youre going to see quite a substantial growth and that piece of the revenue stream. We anticipate over the first half of the year and this is a little bit just timing.

Contract bookings.

Very nascent business at this point.

Okay, great and.

On the IR and <unk>.

And it <unk>.

And like you had.

Bump to that in the quarter from a fixed fee business that.

Was weighed down by a continued.

Decline and gain share.

At the same time, you expect the <unk> line to be lower and the second half of the year than the first half.

So is that just.

Is the way to think of that that the fixed fee business is pretty consistent at this point and the gain share continues to drop drop off.

Yes, roughly that's a reasonable way to think about it it's the building up of from.

Unique opportunities, we see in China, We think there's real there's real opportunity there while some legacy older contracts that have been around for many many years are starting to come to their end of life.

Got it Okay makes sense and so if I look at why are that way and <unk>.

<unk> said it by continued growth and analytics to get to your annual guidance.

It seems if I'm doing the math right it seems that analytics.

Should be comfortably greater than 30% growth.

And by doing that right and you must have been a high and that the SAP.

Okay.

And and.

And whatever the growth rate is for analytics and this year given the recurring nature and the fact that bookings and billings are so much higher than revenue growth.

Okay.

I assume it's fair to fair to say that analytics growth next year should be.

If not accelerating from this year at least relatively consistent with this year.

Yes.

I think and when you do that first net amount you'd asked that question too.

And I think from our perspective right now we're kind of got our head down on executing this year as we as we get through the second half of the year.

We're going to refine our models a little bit more and understand how we're going to go in and and forecast because you've gotten asked this question a number of times.

How are we going to go and forecast 2022.

And then we'll come back with where we feel the long term growth numbers look like for analytics and overall business, we've been very happy with the growth this year.

To always make it better and.

And we're still tuning to try to make it better so as we get through this high this year will come back to you with some more thoughts around that for next year.

Okay sounds great. Thanks, so much from the time.

John.

Again to ask a question. Please press star 1 on your phone's keypad.

Have a follow up question comes from the line of Mr. John Mcpeak from Rosenblatt Securities. Your line is now open sales.

Hi.

Hi, John.

Sorry, I'm planning to mute thing back and forth again.

Yes.

A lot of these calls.

And dominated by component constraints.

No.

We would have had this revenue number or we could have this revenue number, but we werent able to get components you guys only have.

And relatively small percentage of your revenues coming from that but I just wanted to get on the record.

And the customer base, that's taking delivery of and in some cases.

Equipment that.

Maybe running some metrics or connecting into the infrastructure that connects index censeo youre not seeing that as any kind of a risk.

You are pretty much divorced from that particularly and the analytics part of your business right.

<unk> on the DIY side from most part we are divorced from all of that on some metrics of course every time and our equipment companies shifts equipment and that generate the run time of licensing and both companies were to be short of components and they could not ship then that would impact.

And it could impact us the metrics, we've not seen that so far.

And our run time license revenue, we do watch it and I think greatly and I've had a number of dialogues with our partners that are in the test equipment business and and the cemetery to capital equipment business and a day.

And they sell.

So equipment to chip companies also provide them critical pieces of chips and so I think everybody and I was meeting with our SVP of operations and 1 of the larger chip manufacturers and a customer of ours and said, yes, we know very fully well that we need to ship chips to our test equipment.

Providers and otherwise that we can't get the equipment, we need to test our chips. So I think there is and understanding within the industry. So far.

And make sure that we don't EPS seed corn and that has not and so we haven't seen that impact on the symmetric business yet that will be the 1 place. We may see it on runtime licenses are frankly, its been up very very substantial year over year, and we don't expect it to impact us and the second half of the year.

And that all makes sense. Thank you.

Thank you.

And no questions on queue, I would like to clinical over to Mr. John Keybank and for closing remarks.

Thank you for participating on our Q2 call. We look forward to talking with you again soon have stay safe and have a great day.

Goodbye.

Today's conference call you may now disconnect.

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Good day, and thank you for standing by and welcome to PDF solutions second quarter, Jamie to add 1 conference call. At this time all participants line are in a listen only mode. After the speaker's presentation, there will be a question and answer session, which.

Instructions will be given at that time I would now like to hand, the call over to Joseph <unk> of Lytham partners. Please go ahead Sir.

Thank you Donna and thanks to all of you for joining us today.

And this call. We appreciate your time and your ongoing interest and PDF solutions.

As the operator indicated my name is Joe Diaz, and managing partner and Lytham partners. We are the Investor relations consultant firm with PDF.

And if you do not yet have a copy of today's press release.

<unk> on the company's 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 $19.95, including statements regarding Pdf's future financial results.

<unk> growth rates and demand for its solutions PDF.

Actual results could differ materially.

Share repurchase section entitled Risk factors on the company's annual report on form 10-K for the fiscal year ended December 31, 2020, and similar disclosures and subsequent SEC filings. The forward looking statements and risks stated on this conference call are based on information available.

And to PDF today, the company has no obligation to update them.

With that said I'd like to introduce John <unk>, PDF solutions, President and Chief Executive Officer, who will be followed by our non Rosa Executive Vice President and Chief Financial Officer.

Conclusion of management's prepared remarks, we will.

Open the call for your questions. Let me now turn the call over to John <unk>, President and CEO of PDF solutions John.

We appreciate your taking time to join US today I will start with the start the discussion by providing commentary on our Q2 highlights.

From there I'll provide our impressions of the semi conductor industry and conclude with our expectations for PDF business and the second half of the year before handing it over to <unk> for more detailed financial update.

Highlights for the second quarter show progress towards our long term objective of being the go to manufacturing data analytics platform for the semiconductor and electronics industry.

Moving on Q1 business activity and our second quarter was very strong for.

And for the first half of the year bookings are up 60% more compared with the first half of 2020 and total backlog as of June 32021 has more than doubled compared to June 32020.

As we have said before we believe that a successful manufacturing analytics platform requires the right data data quality and analytics at the equipment etch increasingly customers are requiring the platform to be on the cloud where they can benefit from both SaaS model and supply chain.

<unk> wide use of the analytics platform, which fosters collaboration between them and their suppliers.

And in particular, there were 2 contracts of note. The first is a multiyear multi node integrated yield ramp contract for an existing Chinese customer the <unk>.

And as a quick start agreement with the customer to begin deployment of <unk> infrastructure and a <unk> system on a subscription basis.

This already multimillion dollar agreement enabled us to quickly start the deployment of these systems, while the larger multiyear subscription contracts for those first for the first noticed completed.

The industry has increased interest and having and electrical equipment, just and reflected in part by another strong quarter for the symmetric connectivity products.

And this quarter included orders from some of the most complex front and fab equipment as well as test and assembly tools.

Our business with equipment customer starts with licensing our software development kit or SDK to enable integration of our software with their equipment.

And then pay us for runtime licenses for each tool and which the software is included for.

For the first half of the year, we experienced record revenue from runtime licenses and we also had strong design wins on new equipment platforms that bodes well for future runtime licenses.

Our SaaS bookings continue to grow and the quarter as extensive customers adopt our cloud and the second quarter 1 of the largest U S. Based fabless companies signed a contract with us to move their on premise deployment to the cloud enabled by our big data solutions.

We've found like most companies, who benchmark that the performance and cost advantages of moving to extensive cloud are quite meaningful give.

Given the growth of extensive cloud, we anticipate having a month multiple petabytes of data under management over the next few years.

And the second quarter, we recognized revenue from the first sales by ebb and test of our first integrated product that leverages their know, how and test and expense CNS capabilities and adaptive test.

This revenue is over and above the $10 million per year minimum commitment that advent and test and PDF agreed to when the partnership was initiated.

The sale of its integrated product and less than a year from our side and the partnership agreement demonstrates the advantage of collaboration between the companies and importantly provides I've been tested with unique and differentiated capabilities and the marketplace.

Looking at the first half of the year. We are very pleased with the progress achieved to date on a year over year basis, We grew analytics revenue, 37% from the first half of the year and 29% for Q2.

I would now like to turn to what we're seeing and the industry.

Overall semiconductor and electronic companies continued elevated investments and process control and new.

And bring up which bodes well for our business we.

We believe that we will see continued strong interest and our products and the second half of the year as.

As we discussed earlier this year, we do anticipate legacy gain share contracts rolling off and the third quarter..2 result, and gained share and the second half of the year below the first half.

We are pleased with the progress we've made and the first half of the year and making PDF solutions, the manufacturing data and analytics platform for the industry, which helps us build recurring revenue streams to provide greater visibility and predictability of our financial results.

Finally, I want to thank our.

Floyd for Nimbly, supporting our customers and continuing to innovate and the COVID-19 environment.

Now I'd like to turn the call over to odd non for a review of the financials after which we'll open the call up to your questions.

John Thank you John Good afternoon, everyone. Good to speak with you all again today and I Hope all of you and your families are keeping safe.

We're pleased to review the financial results of the second quarter and to bring you up to date and the progress of the business. Our form 10-Q has also been filed with the SEC today.

Please note that all of the financial results are discussed in today's call will be on a non-GAAP basis and a reconciliation to GAAP financials is provided and the materials on our website.

Financial results for the second quarter of 2021 continued to be strong coming after a solid first quarter.

Q2, total revenue was $27.4 million up 28% from the comparable quarter last year.

Analytics revenue was up 29% to $19.6 million and Q2 of 2021 versus $15.2 million and the second quarter of 2020 and represented 71% of total revenues this quarter.

On a dollar basis as well as a percentage basis.

Except that we expect analytics revenue to grow further in the coming quarters.

And we're making great progress towards our goal to be the largest manufacturing data analytics platform for the global semiconductor and electronics industry.

<unk>.

Overall, our business is gaining momentum.

You may recall that full year 2020 bookings increased by 2.5 times that of 2019.

And the first half of 2021 total bookings increased by more than 60% from that comparable high growth period last year.

And so bookings continued to be very strong which sets the stage for future revenue growth.

Given the strength and bookings and backlog, we believe analytics were more than offset any decline and our revenue and the coming quarters.

Our backlog is very strong and continues to grow at the end of Q2.2021, our backlog was $138.6 million compared to $63.5 million and Q2 of 2020 and increase of 118%.

During the quarter, we continued to make progress toward our non-GAAP gross margin goal of 70%.

Favorable product mix got us to 65% gross margin in Q2.2021.

And the transition to software continues to increase gross margin, which is especially important given lower anticipated gain share revenues.

The growth and bookings and backlog provides us confidence that we can continue to progress towards our gross margin goal.

Within operating expenses R&D increased by $3.3 million compared to Q2 of prior year, primarily due to personnel and subcontractor related costs from symmetric and PDF side.

Our SG&A increase of $1.6 million compared to Q2 of prior year was driven by the symmetric acquisition.

As John mentioned with regards to <unk> and CV systems. Some of our customers are increasingly looking at <unk> <unk> and CV as a combined analytics solutions for leading edge technology nodes.

On the cash flows we generated $8.1 million and cash flow from operations and we expect to generate cash from operations for the year consistent with our history.

We ended the quarter with cash and cash equivalents of approximately $139 million compared to $145 million at December 2020. During the first half of the year, we used cash for stock buybacks of approximately $4.5 million payments related to the <unk> metrics acquisition and continued cloud infrastructure and investments for future growth.

Believe that the strength of our balance sheet positions us well to consider strategic acquisition opportunities as they become available.

We also expect full year 2021 analytics revenues to grow more than 30% on a year over year basis.

With that I'll turn the call over to the operator to commence the Q&A session operator.

Ladies and gentlemen to ask a question. Please press star 1 on your phone's keypad again that's.

1 on your phone's keypad, we will pause for just a moment to compile the Q&A roster.

And your first question comes from the line of John Mike Peak from Rosenblatt Securities. Your line is now open share.

Hello, John.

Hello, Mr. John Mcpeak. Your line is now open.

Oh, I'm, sorry, I view, it as non zoom and I still had mute.

Okay.

Saying when I was on mute.

Nice job guys.

And I'm going to kick the call off with a somewhat dull question.

And my calculations right here, it looks like Dsos, which you've been.

Kind of a thorn here have come down nicely is that right.

Yes.

<unk>, yes.

And we did really well with cash collections this quarter.

Compared to the last quarter, we had some work to do and to be honest with you we put into new process and this quarter and the team did a fantastic job collecting cash from some of our customers this quarter.

Yes, I mean, I'm not doing the exact days.

So the day of the quarter using 90 days it looks like it from went from 129% to 99 can it stay down here do you think Kevin.

I think yeah look I mean, we will continue to stay focused on this metric obviously, it's important for us to continue building cash.

And depending on the customer and the region, where they're located and sometimes that might skew the results 1 way or the other but I can tell you that over the last few quarters. We have increased focus on this and hope to continue this momentum.

And nice.

Nice work on that and then I guess.

And I'll ask kind of an open ended question a little bit you know, there's been and increased focus on domestic.

Production, particularly trying to get.

Leading edge production in the United States not.

Just a couple of hundred miles from <unk>.

Nuclear missiles, and adversary potential adversary of ours, and if that is that affecting your.

Your bid business at all.

Guys I was just kind of AR and AR.

And open ended question, but I'd love to hear what Youre seeing.

Sure Yeah, I'll take that 1 John.

I think specifically there is I know that the act that the U S government deposits, which is about 52 billion.

<unk>.

Should that pass and we anticipated it would probably create additional.

And opportunities for us we do have customers that are locating factories, and the United States and offer customers that are expanding.

Development across multiple nodes, not just the leading edge and the U S and that is impacting and.

Partly why in my prepared remarks.

That is happening almost irrespective of the government activity, but it probably being enhanced by the government activity.

That is impacting as we said in my prepared remarks anticipated continued strong bookings on the leading edge.

Because we do see customers.

And since that and im not prepared remarks, we'd like the integration of the characterization vehicles and <unk> for bringing up these very complex technologies.

And.

Well it has worked for us.

And the leader there so I'll pass it along and get back in the queue.

And the another question thanks, guys.

Yes.

Thank you and your next question comes from the line of Tom deeply from.

And the D. A Davidson your line is now open share.

Yes, good afternoon.

John I was hoping to get a little more color I think you made a comment about how the customers are looking at EFI.

With more of and analytic solutions bend to it and before I'll give me just a little color on what youre, seeing and DSI and what that opportunity looks like.

Yeah sure sure sure.

About a year ago our customers.

And as customers came to us with a series of issues that we're seeing in manufacturing from 1 particular and our team figured out ways of using the system to inspect product.

And by using a combination of our part of Accenture called fire that analyzes product layouts.

And just going to get a little technical and policy capital hub and how deep I go.

But identifying what looks like a DSI fill sell at a given point and the process. Even if it was just part of the active circuit and then analyze all of that what you find is and there's tremendous amount of.

And some of the key issues on designs and bring up and.

And kind of get to the question that John.

As to we are seeing as customers are trying to bring up these complex 3 day processes this capability of combining.

And the ability to analyze the product layout with the.

<unk> capability drive the machine to all of those spots to take that data and really have a huge machine learning problem of all the different layout styles that were in and then theyre failure rates, because youre collecting tremendous statistics and you really can't see any other way and.

And.

It's a very unique capability and 1 that helps learn a lot of these process design and interactions very efficiently.

Okay. So is the thought though that they would use your word from service going forward to do the big day analysis or would they want to keep that data internally and tried to related.

And the typical the machines always go will end up being onsite that machine plus the cloud deployment of expense here would all be part of and overall subscription.

And and.

There is a big advantage of using extent hit and the cloud for this because you need to scale up and down the computing quite quite substantially to look at these dependencies and thats why its and overall bundle of basically hardware and software.

And as.

Cloud deployment is also a hardware software combination.

Okay. That's helpful. Thank you.

And then when you look at the mix of business and the second half with gain share coming down but.

The analytics doing quite well does that meaningfully impact the margin structure do you think over the next couple of quarters.

Yes, I think it's early to say I think.

Look what we've said and our prepared remarks is we feel confident about heading towards our 70%.

How many quarters it takes we're not being precise on.

And to your point it will depend a little bit on the mix between those deals as well obviously larger deals we hope it will come with a little bit better margin.

I think for the rest of the year, it's fair to say that it stays flat to maybe incrementally up at best.

Okay, and then you also mentioned that.

And obviously the biggest adder to the costs over the last year than personnel.

They are expected increases in personnel expenses over the next couple of quarters as well.

Yes.

Great question.

Yeah, so similar to our revenue.

As well we.

We will be doing yes, there'll be investing a little bit more but I think our goal is going to be that we are spending at a slower rate than the revenue is growing so and on a combined spend basis. When you look at cost of sales plus opex together.

You should be spending less and the revenue growth, which should hopefully trickle and little bit more to the bottom line.

Okay, and then finally for the backlog, obviously, a nice impressive backlog.

Could you give us some sense of what's the duration of what the average length of the backlog is.

Yeah majority of the contracts.

Within the next 2 years majority of the realization of that backlog.

And the rest with them over and are kind of up to 5 year timeframe, but the majority or the next 2 years.

Okay, and then maybe just 1 more for you John when you look at your customer interactions recently and they changed much over the last 2.3 quarters.

Are you still and a position where it is.

And so it a little harder to close some of the deals that are traditionally been done and person.

Yes.

It's funny you asked that question Tom.

Tom I had a number of calls last week with.

Customers and I did 1 in person visit and.

The calls.

And now becoming very natural and 1 of the executive said, Hey, John we're used to doing business. This way analysis and the way to go and so.

I think that.

And we're figuring out how to work and this way better and better.

Our confidence on the second half of the year, it's clearly because I do see us, making great progress working this way and I anticipate that.

And even larger complex contracts are starting to close when.

And when we did in China last quarter was pretty amazing to me because it's a very sizable contract with gain share that goes out over 10 years past. The deployment dates. So this will carry us into some time into the middle of 2000 and <unk>.

And for a customer who are already generating gain share from and we're seeing their gain share trick trickle up on the notes that they've already deployed so the customer that we had some confidence and and yet we're able to close that contract remotely.

And I think.

That was probably the most difficult right just from a.

Language barriers and many other things so.

Yes, we do feel good about our ability to close more complex contracts and the second half of this year.

Remotely and great let's.

And that's good to hear and thanks for your time today.

Yes.

Thank you.

Thank you and again to ask a question. Please press star 1 on your keypad.

Our next question comes from the line of Mr. Christian Schwab from Craig Hallum Capital. Your line is now open.

Good quarter guys.

And the Chinese large customer that you you know.

Ramped and <unk>.

<unk> strength and <unk> and it sounds like you have a 10 year contract can you kind of give us an idea of.

And a potentially how big that customer could get over that timeframe.

And secondly, how many other and no.

And new potential Chinese manufacturers are you talking to about using your products.

Okay sure.

And I'll try to think and reverse order Christian so theres been a number of customers and China, John when we don't take them on a gain share basis, because we have.

Redeploy them and us.

And basically on a system basis, the gain share means we're going to provide teams with the technology and help them ramp yields and that's a big invest and our part too. So we've been very selective on where we've taken those and places where we've seen good potential. This customers we've been working with for a number of years and the early nodes and to take longer to get to.

And then we would have liked but we did start seeing their gained share numbers trickle up towards.

Towards the second half of last year and into this year and.

That gave us some confidence.

They would be.

A good partner and a gain share basis this contract.

Solutions part of it the booking is.

And the 8 figure range.

And Theres.

And Theres, a deployment period, which as you know on the order of a few years and then there is against your peers, which is 10 years from a total length of the contract is actually longer than 10 years.

And so it's quite a substantial activity in terms of how much the.

And the contract is eventually work Christian that's still hard for us to estimate that we had very little history with our Chinese customers in terms of how much volume they get too historically, they've been very very slow to ramp volumes, but we are seeing some improvements there I think of.

The technology as they had started advancing their ability to manufacture.

And more than semiconductor technologies, and they have and the past.

Okay and.

Is there.

And I guess my second question is could you give us an update on any other potential meaningful.

New customers and where you said if theres anything you could share either with.

Other manufacturers and partnering with the likes of another advantest or.

We know any type of update.

Anything that can happen.

Some large manufacturers out there who decided that they were going to get more efficient manufacturing them and kind of make the fab foundry switch.

Any update there would be great.

Yeah of course Thats Super.

And.

It's like the old running joke of consulting for a large catch up manufacturer and the greater Pittsburgh area, everyone pretty much knows you mean, when you say that so we're always super careful about how we talk about customers potential customers Christian I know that you understand.

Why.

That said.

We both with existing customers and customers that have historically not been big customers of PDF from the past, we have a tremendous level of activity the bookings and the first quarter. The first half of the year already reflect some of.

Those opportunities and as I said in my prepared remarks, we expect.

Both companies that have been historically PDF customers as well as ones that have not.

Tab and increased bookings with the broader community and the second half of the year.

Great no other questions.

Thank you and again to ask a question. Please press star 1 on your phone's Keybanc.

Your next question comes from the line of cash from the line of from Sandro cap with all your line is now open.

Hi, good afternoon John.

And when 5 pretty quickly I, just wanted to make sure I heard it correctly.

Is the Chinese multi node deal does that include a <unk> tool.

Hi.

Other contracts revenue that customer does have the DIY tool onsite and that's it.

<unk> has the right to use some of that and part of this contract as well.

Okay and then you also referenced a quick start contracting.

And that I think you said with DSI and <unk>, so is that a contract that and characterization vehicles as well.

And character, so that contract contemplates the shipping of the DSI tool to that customer.

That's correct.

And in fact.

And you actually get that machine.

Shipped up there while we negotiate.

And in terms of and I said in my prepared remarks.

Okay, and so again, if I heard that correctly. The quick start contract had meaningful revenues associated with it but you are in discussions about a more much more significant contract that.

And would be a broader deployment of your technology.

And that's.

Correct Okay.

Okay.

Sure.

Secondarily.

I just wanted to talk you didn't mention it on this call, but you've talked in the past about your decks networks.

Maybe you can talk about.

How that how the deployment of that is going how dex networks.

And in and around some of the industry issues about sort of supply chain transparency and reliability and maybe some goals you set for this year as far as driving either commercial deployments are driving broader adoption that would ultimately lead to commercial revenues.

Sure Yes.

Yes, so just.

And we're always we always have 3 letter acronyms here a PDF so let me.

Index as debt exchange network.

Our.

Similar these are outposts that we put out.

Factories, primarily right now is that test facilities.

They run a series of things communications with our <unk>.

Software that lives resident on the equipment and the facilities are cash.

Cash database, you can think of that as like a short term database, and then and al and element to run business logic for evaluating rules for quality screening on.

Chips that they produced.

Unfortunately, this has been done for Fabless customers.

They want to be able to get to the ultimate product quality running more and more advanced models and screening.

But they don't actually.

Ron the testers those are run by third party suppliers for them.

Refer towards those assets.

And we've got under 10 of those out of the assets now growing number and we haven't and we expect to grow that substantially as we get to the second half of this year.

We have more and more fabless customers, who like the ability to see their production and real time be able to establish.

Established more complex models and rules some of the edge compute.

Alright.

And our goal for this year I think is too over double our deployments.

And that we have already I said it was under 10, now and we'd like to see that about double.

Okay and then.

And are you generating meaningful revenue from that today or do you need to get to assert and scale and what what sort of transition needs to be a commercial drive around.

And sales house.

That's a great question, Andrew and then.

And not as communicated and many of his prepared remarks from past quarters, a lot of our rollout has been deploying these decks notes, it's a relatively meaningful fixed cost to deploy the notes out there and they are owned and operated by PDF and they are multi tenant and the way that they shift data around for multiple fabless customers. So yes.

As you get more and more to scale I E more customers that there is some incremental.

And capacity build out we have to do at each ozone if they were to grow quite substantially but its kind of Hawaii equals index, plus b and the B, it's kind of a fixed cost of deploying that system, there and thats.

A big piece of the cost so yes, as we get to scale that becomes more and more important part of our overall.

Makes sense to your cloud offering.

It is generating revenue for us to day, and we anticipated generating more.

And the coming years.

Okay great.

Terrific. Thank you.

Yes.

Thank you.

Your next question is comes from the line of Mr. Gatti Garik <unk> from Robert Baird. Your line is now open and so.

Hey, guys.

I wanted to.

A follow up on the Tsi and and.

It looks like Youre, CV and <unk> revenue was down.

And as you said.

And so I think it was $4.6 million and year over year.

Can you.

Put that in context of how big that is today and.

It also sounds like the DSI and the probes is.

Business is moving positively and so kind of explain those 2 issues and give a little bit more color on where you are on the on the <unk> equipment that you were talking about.

No.

Sure, Yes, so I'll try to handle that so.

And we've.

These are very large lumpy contracts that has and the past.

<unk> been.

And relatively short duration.

And quick start isn't part to deploy.

Revenue and the first half of the year was lower than the bookings would.

Give you.

And when we look at our model for the year, we anticipate DIY and characterization revenues.

And analytics revenue as well.

Described and.

<unk> prepared remarks, this is really a bundle of expense.

Characterization vehicles, and our characterization vehicle infrastructure, which include some tough capable hardware test capabilities as well as the <unk> infrastructure, which is also a combination of software.

And IP and hardware capability.

I think when you look back out lets say this time next year youre going to see quite a substantial growth from that piece of the revenue stream. We anticipate over the first half of the year and this is a little bit just timing on.

Contract bookings on what's a very nascent business at this point.

Okay, great and.

On the IR.

And <unk>.

And like you had.

Bump to that in the quarter from a fixed fee business.

<unk>.

Was weighed down by a continued.

Decline and gain share.

Okay.

At the same time, you expect the <unk> line to be lower and the second half of the year than the first half.

So is that just.

Is the way to think of that that the fixed fee business is pretty consistent at this point and the gain share continues to drop drop off.

Yes, roughly that's a reasonable way to think about it it's the building up of.

Some unique opportunities we see in China, We think there's real there's real opportunity there while some legacy older contracts that have been around for many many years are starting to come to their end of life.

Got it Okay makes sense and so if I look at why are that way and <unk>.

Offsetting by continued growth and analytics to get to your annual guidance.

It seems if I'm doing the math right it seems that analytics.

Should be comfortably greater than 30% growth.

Am I doing that right you must have been a hi, Matt.

Okay.

And and.

And whatever the growth rate is for analytics and this year given the recurring nature and the fact that bookings and billings are so much higher than revenue growth.

<unk>.

I assume it's fair to fair to say that analytics growth next year should be.

If not accelerating from this year at least relatively consistent with this year.

Yes.

I think that when you do that first net amount you'd asked that question too.

And I think from our perspective right now we're kind of got our head down on executing this year as we get through the second half of the year.

We're going to refine our models a little bit more and understand how we're going to go and and forecast because you've gotten asked this question a number of times.

How are we going to go and forecast 2022.

And then we'll come back with where we feel the long term growth numbers look like for analytics and overall business, we've been very happy with the growth this year.

I always make it better and.

And we're still tuning to try to make it better so as we get through this high this year will come back to you with some more thoughts around that for next year.

Okay sounds great. Thanks, so much from the time.

John.

Again to ask a question. Please press star 1 on your phone's keypad.

Have a follow up question comes from the line of Mr. John Mcpeak from Rosenblatt Securities. Your line is now open sales.

Hi.

Hi, John.

Sorry, I'm, playing the mute thing back and forth again.

Yes.

A lot of these calls are dominated by component constraints.

No.

We would have had this revenue number or we could have this revenue number, but we werent able to get components you guys only have.

A relatively small percentage of your revenue is coming from that but I just wanted to get on the record.

And the customer base, that's taking delivery of and some cases.

Equipment that maybe running some metrics or connecting into the infrastructure that connects index since youre, not seeing riders and he kind of a risk.

And you are pretty much divorced from that particularly and the analytics part of your business right all the analytics and even on the DIY side from loans.

We are divorced from all of that on some metrics of course every time, our equipment companies shifts equipment and that generate the run time of licensing and both companies were to be short of components and they could not ship then that would impact.

And it could impact us symmetric we've not seen that so far.

And our run time license revenue, we do watch it and I think greatly and I've had a number of dialogues with our partners that are and the test equipment business and and the cemetery to capital equipment business and a.

They sell.

So equipment to chip companies also provide them critical pieces of chips.

And so I think everybody and I was meeting with our SVP of operations, 1 of the largest chip manufacturers and a customer of ours.

Yes, we know very fully well that we need to ship chips to our test equipment.

Providers, otherwise that we can't get the equipment, we need to test our chips. So I think there is and understanding within the industry. So far.

To make sure that we we don't EPS seed corn and.

And that has not and so we haven't seen that impact on the symmetric business yet that would be the 1 place we may see it on runtime licenses frankly, its been up very very substantial year over year, and we don't expect it to impact us and the second half of the year.

And that makes sense. Thank you.

Thank you and no questions on queue, I would like to clinical over to Mr. John Keybank and for closing remarks, okay.

Thank you for participating on our Q2 call. We look forward to talking with you again soon have stay safe and have a great day.

Goodbye. This concludes today's conference call you may now disconnect.

Q2 2021 PDF Solutions Inc Earnings Call

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