Q2 2023 PDF Solutions Inc Earnings Call
Alright.
Good day, everyone and welcome to the PDF Siliceous a conference call to discuss its financial results for the second quarter and year and 2023 Conference call and then Friday June 30th 2023 at this time all participants are a listen only mode. After this presentation there'll be a question and answer session to ask a question.
Sure during the session, you'll need depressed or one one on your telephone as a reminder, this conference is being recorded if you have not yet received a copy of the corresponding press release. It has been posted to <unk> website at Www Dot P. D F Dot com.
Some of the statements that will be made in the course of this conference are forward looking including statements regarding P. D fs for future financial results and performance growth rates and demand for it solutions.
<unk> actual results could differ materially you should refer to the section entitled risk factors on page 15 to 29th.
P D S annual report on Form 10-K for the fiscal year ended.
<unk>, 31st 2022, and similarly disclosures.
And subsequent S <unk> the.
Forward looking statements and <unk> and this conference call are based on information available to P. D. F. Today P. D. F assumes no obligation to update them now I'd like to introduce John <unk>.
D S President and Chief Executive Officer in Atlanta, Raza, <unk>, Chief Financial Officer Mister <unk>. Please go ahead.
Thank you for joining us on today's call.
If you're not already seen our earnings press release announcing report from the first quarter. Please go to the investors section of our website, where each has been posted.
The second quarter was very similar to our first car robbery remains strong.
<unk> continued adoption of our entwined analytics by our customers.
Before I discuss it with a financial adviser.
Some detail I have some comments about observations from the second quarter perceptions of the market for the remainder of the year.
Working from the second quarter was similar to the first corner.
Significant contracts that close in the quarter included customers deploying process control and <unk>.
Ah cloud customer deploying analytics for internal set design team.
And a chip company deploying athletics a complex three D packaging.
We've continued strength in Asia gangster, improving Q2 verses Q1 shipments improved.
Finally, looking for symmetric connectivity run time license. So modest improvements in Q2 versus Q1 is that customers equipment shipments, particularly in China started to increase.
Overall, given a strong backlog in business model, where most of our revenue is typically rather be recognized we continue to fill out a strong resolved in revenue and earnings.
Beyond the business that we booked we have experienced significant customer interest in our analytics and a number of pilots are under way with customers.
We were pleased with the business, we saw from the corner as it demonstrates the strength of our business model.
Subsequent to the second quarter, we announced an acquisition of Atlanta machinery antibiotics.
Over the past year and a half we've been evaluating with some battery manufacturers the ability to apply pdf's analytics platform.
M I a battery manufacturing.
Today lithium ion battery manufacturing is under $100 billion in revenue.
Over the next 12 years is forecasted to be over 400 billion.
So there's going to be a tremendous increasing capacity.
Moreover, controlling variability of manufacturing to improve yields and product quality is becoming of interest.
Throwing work with manufacturers, we recognize that there is a need to collect and process images.
This data when combined with upstream equipment sensitive data has the potential to be used to improve yields and product quality.
Machinery analytics had developed an ml pipeline for battery image processing.
This capability May also have applications for icy customers as well, particularly in the assembly processes, where many images are collected.
Machinery analytics had some small revenue with early customers, but for the most part was a pre revenue company.
We will incorporate their M L pipeline and all products as we develop applications for battery and icy manufacturing.
We're excited to have them joining the team.
I'm trying to D F I N R E publishing the customer we previously talked about it.
Has qualified our new <unk> 350, and now has two machines running at the facility.
After a lengthy evaluation and not that we anticipate shipping another April 350 by the end of the year for onsite evaluation with a different customer.
We're very excited about the progress, we're making with the Dia Fi program.
As our customers developed three D processes like gay all around and backside power, we believe electrical inspection will increasingly be important too rapid control yields.
Now, let me turn to discuss our view of the environment and our perspective of the second half of the year.
Mid way into 2023, we are more cautious in our <unk>.
Date your customers in China, Ah reporting decreased wafer volumes, which will reduce gainshare in the second half of the year.
We anticipate continued increases in symmetric runtime licenses.
A lower rate of growth.
Right of improvement than we anticipated initially anticipated his equipment suppliers, particularly outside of China remained conservative on the increase in the equipment shipments.
Finally for accent to you and can you talk too we saw customers delay some expected bookings to the second half of the year, although some of those bookings already closed in July remained cautious about the timing of others.
Early this year, we anticipated revenue growth for the euro approaching mid teens.
Especially our expectation now is year over year growth will be in a low double digit percentage.
The core analytics growth is expected to exceed the overall growth, but it'll be all set partially by year over year decline and integrate deal Ram.
While the short term environment is unsettled the longterm drivers for our customers which include increased use at a I M. L cloud smart devices and the electrification of the energy economy remain in place. These.
These drivers are being amplified by the various government investments and stomach conductors, we're seeing around the world and the increase diversification the supply chain that many of our customers are embracing.
As a result, our pipeline of business is strong and remain confident on our customers continued success and growth.
We would also like to remind everyone that on October 24th at the 26th we will have the PDF uses conference meeting at the Santa Clara Marriott.
US with our pre Covid event, we will combine one of those days with an analyst day.
Which will be on October 24th.
This gives our customers strategic partners analysts and stockholders a chance to see the latest capabilities. So P D F and to learn from each other.
The theme this year is applying a I M L to transform manufacturing and technology R&D.
The list of speakers is turning out to be the strongest we've ever assembled.
Sanjay not origin, SVP and co G. M of the Intelogic technology development will talk about the transformation day housemaid, which has enabled them to deliver five notes in four years.
Other speakers include executives from S. A P. Siemens Adventists globalfoundries an analog devices.
We also expect additional exact some engineers will commit to speak at the at bat.
Our attendees usually include executives and engineers from system companies tablets, I B M O sat foundries and equipment companies, who all share a passion for analytics in N out that drive already in manufacturing.
We are looking forward to the event this year after a multiyear hiatus up to come in.
I want to thank all PDF employees and contractors for the reference during the first half of the year now I'll turn the call up with the unknown, who will review the financials and provide his perspective on our results.
No. Thank you job good afternoon, everyone. It good to speak with you all again today, you're pleased to review the financial results of the second quarter and to bring you up to date on the progress of the business.
Our Form 10-Q has also been filed with the SEC today. Please.
Please note that all of the financial results are discussing today's call will be on a non-GAAP basis and a reconciliation to GAAP financials is provided in the materials on our website.
But actually results for the second quarter of 2023 continued to be strong coming after a solid first quarter Q2, total revenue was $41.6 million up 20% versus the comparable last year.
Analytics revenue was up 19% to $37.1 million and Q2 of this year worth it $31.1 billion in the second quarter of 2022.
And represented 89 per cent of total revenue this quarter.
The growth in our analytics revenues came from growth and <unk> and leading edge products all set by decline in the matrix runtime licenses.
On a quarter over quarter basis, our analytics revenue was up point $8 million.
During the second quarter revenue contribution from integrated you'll ramp was $4.5 million up 26% from last year's comparable quarter, primarily due to increased level of gains here from higher volumes that some of our agent customers.
We are very pleased with the various engagements. We have currently ongoing the deal sizes of bookings were working to close and the strategic conversations were involved in with our customers strategic partners and major stomach conduct a governmental initiatives around the world.
All of these factors evidence progress towards a goal to be the go to manufacturing data analytics platform for the global semiconductor and electronic ecosystems.
Are ending backlog at the end of Q2 of <unk> of this year was $244 $9 million, which is 33% higher than our prior your cue to ending backlog.
We reported gross margins of 74% for the quarter up meaningfully versus 69% for Q do have prior year <unk>.
As we had that before on a quarter over quarter basis, We may see some variations on this metric as demodulate to spend for a customer engagement and wrote a cloud and people spent to support the growth of recurring revenues <unk>.
We remain committed to our non-GAAP gross margin target model upgraded and 70 per cent.
On the operating expense spending side are R&D spend was down $6 million versus the prior quarter as he continued to take advantage of our leverage and shift our resources for pre sales and new business initiatives.
R. S. T N E was up point $9 million worth of the prior quarter, primarily driven by increased spend it pre sales and marketing efforts.
Overall within SG&A, we have invested factor into sales and marketing, while ensuring that on the G. N. A side, we can take advantage of our scale and have brought down TNA as a percentage of our revenue slightly worse as both prior quota as well as a cue to acquire.
Four E P S and reported a profit of 19 test for the order similar to last for a level, but meaningfully higher than 11 cents for the same quarter a year ago.
We are pleased about a year over year eight cent positive thing in EPS compared to the same quarter of last year.
We ended the quarter with cash and cash equivalents of $134 million compared to $117 million at the end of the same for a year ago and $134 million in the prior quarter with the change versus the prior quarter, primarily driven by an increase in our accounts receivables at the end of the quarter due to timing of buildings.
Since the end of the quarter through today, we have already collected the majority of our quarter and filled receivables.
During the quarter. We also spent approximately $1.9 million of cash.
The acquisition of machinery analytics, John mentioned with an excellent team based out of Canada in Poland to expand our analytics platform for E B battery manufacturing.
We continue to believe that the strength of our balance sheet <unk> physicians as well to consider strategic investments and acquisitions as they become available.
Like John mentioned as we look forward, we expected roar revenue for this year on a year over year basis at Lord double digit percentage level instead of the approaching mid teens level, we had previously guided.
We're being careful based on three key observations off the rest of the year.
First our gainshare from some agent customers is expected to slow down for the rest of the year as a faith or on economic and demand challenges and volumes decreased.
Second are symmetric <unk> what upwards. This prior quarter are still facing a mix of increased demand from some regions coupled with muted demand from other reasons.
Third consistent with John Thomas the timing of bookings is less clear given the industry dynamics <unk>.
<unk> strategically important for our customers and partners the size of our bookings is growing with many approaching the high single digit or double digit millions of dollars.
Overall, when we look at the longer term, we feel emboldened by two factors the demand for our products that we can see in our sales pipeline and the strategic relevance of our analytics platform, which is taking hold with all three constituent customers strategic partners at the various government initiatives.
We also believe that at our analytic platform do you have three strong element that complement each other the extent to your analytics platform. The unique data collection capabilities of our leading edge products and are symmetric connectivity products.
We're excited about the future and the growth of head for P. D F.
With that I'll turn the call over to the operator domestic question and answer session.
Right.
Thank you Mr. Rozzer, ladies and gentlemen does she have a question at this time. Please press star one one your telephone if you're using a speaker phone. Please lift the handset before asking a question. Please.
Please wait one moment for our first question.
Our first question comes from the lineup Blair Abernethy from Rosenblatt Securities. Your line is open.
Thanks, Good afternoon gentlemen.
Yeah.
Just wanted to ask you about the acquisition of <unk> I'm sure you just just give a sense of what what needs to be done to.
Take this I guess package this product and get take it to market and sort of what what sort of <unk> are you thinking in terms of timelines.
Sure. Thanks for the question Blair So.
A lot of the work early on in R&D is done with.
Images scanning electron microscope images, we wanted to use optical images. The pilot we did with them before acquisition was to test that pipeline, an optical images coming from.
Some of the.
Manufacturers, we had been working with we feel very good about that we expect about six months of development Ah to package. This appropriately and then began pilots with customers. So probably in early 2024, we expect to start seeing pilots begin with customers and revenue to fall from there.
Sure.
Okay, great and and it looks like from your 10-Q U paid just under $2 million for it how much do you have any sense of how much money will be required to get it to to Margaret just sort of what we see that in the.
R&D.
Or capex, how how are you housing investment Gonna show up sure. Good question. So there's really two elements to that one is that people spend of course.
The team is just under 10 people and like I mentioned in my prepared remarks, it's based in Canada is rather than full and so it is a bit of a balancing what the costs were able to do there as well the second piece of the cough is of course, what we spend to your point on system improvements. We will of course go through the appropriate accounting treatment as far as being outwards, capitalizing, but given the small nature. It <unk>.
Probably will hit our P&L, it's going to be small to keep it manages a couple of hundred K is kind of what we're thinking.
On this acquisition when you look at for this year. So we will continue to keep it manageable, it's kind of our perspective.
Give me one other contact the machines themselves the equipment that you used.
It's basically off the shelf camera and then the structure that's used with it. So it's a lot of the value is in the AI ml pipeline and the software that there will be a coupla with it. So hopefully once you get to the point that John is mentioning the reason for the acquisition is it hopefully is very appreciative to our margins.
Okay, great. Thank you and then just shifting over.
Can you just highlight of couples things on the partnership side that stand out in queue to whether it's with a blood test or some of the other partner she'd been working with.
Sure Yeah, I think I would prepare previous remarks on cue too.
Had already talked about anticipating the advertise user confidence we presented there had tremendous turnout jointly with customers.
A number of new product capabilities in partnership with thousand test.
At semi con.
We were in the AWS booth.
To highlight extensive cloud on AWS.
Think that generated quite a few leaves as I saw the statistics.
I think somewhere between 50, and 100 leads generated off of that that activity.
And then.
Also with the.
We continued a number of selling activity an early demonstrations with our customers beyond the first customer on the PD.
PDF S&P pilot and I think I described from a booking standpoint, there, but again I think we find that they are a very effective way of reaching out at a lot of our customer base.
Same company that we already knew at a different entry point in the company typically through the finance organization our C sweet.
Oh, I would say the customer.
Partnership activity with those partners was quite heavy throughout the quarter. We do anticipate you might've noticed at.
Semicon that we did we were quoted in the Teradyne press release of support their edge box with extensive applications and we've had a longstanding relationship with teradyne and supported their testers for close.
Close to a decade now but.
Enhances our ability to provide the same machine learning capability on there. It's box that we can provide on others and then also kicked off a whole set of customer dialogues as well as as many customers on the teradyne platform.
We do believe that's important and come out of a relationship.
That's great that's great. Thanks, Sir.
[noise] Hello, It for next question.
And our next question will come from the line of Christian Schwab from credit Sheila capital.
Your line is open.
Hey, guys. Thanks for taking my question so given.
Given the substantial backlog and kind of a lot of long-term positive growth drivers. Despite you know bringing guidance down for the back half of the year.
What what should we be paying close.
Close attention to you know as we think about what's your revenue prospects for 24 and beyond Dart.
What what what would have happened to return to you know the 20 per cent plus growth rate and what would have to occur to kind of remain you know.
Here in the low double digits.
Yeah. So I think that's a great question question. So you know continued weakness on the equipment.
A headwind for us I mean, if you if you take out as I said at my prepare Bucks, if you take out the equipment weakness and <unk>.
Our weakness.
<unk> analytics business actually the remaining pieces that are in control continues to grow pretty reasonably and so we'd like that and that headwind ending that had one would get us back up pretty close to the 20 per cent range. Then I think it comes down to bookings momentum encore analytics, I think that would get you.
Back over we've been growing more than 30 plus range for a while that would get us back into that range I think.
We have Ah I've I've not said in his prepared remarks, we have an awful lot of pilots going on I think a large number of things that are in a double.
Millions and in terms of bookings value in the past, it's been a small number that drove.
Along with a group attended the breath of them as increase quite substantially I think with those bookings you start seeing obviously returned to morrow.
<unk> robust growth and and of course, that's on top of a larger base than it was in the past right. Obviously 30 per cent of the small number as part of it.
Much harder to 30% of a large number when we do see that we do see that activity out there that that that customer interest activity out there.
So.
I kind of went on a rambles, let me see if I can summarize that for Ya well Christian.
Get rid of the headwinds.
Start declining on those things growth on the on the equipment shipments again would really help in terms of not creating a headwind and then the bookings activity on the larger.
Figure deals both on the leading edge N on <unk>.
So just a quick follow up on that thank you for that color live, let's just say that you know.
No wait for Friday and equipment is you know see the you know a muted recovery next year do we have enough double digit million pilot businesses to to take us.
No 215 to 20 per cent growth and and a black W. At free market.
Yeah.
Excellent great no other questions. Thank you.
Just a moment for next question.
Our next question comes from the line of Tom <unk> definitely from gay Davidson. Your line is open.
Alright, Thank you <unk> for letting us ask questions. This is Linda on behalf of some deeply first of all congratulations on a good coder. So I guess my first question is I would love to better understand the transfer seemed across different customer types, maybe you could walk us through what you're observing and customer.
Behavior occurs memory automotive data center and my kids.
Yeah sure. Thanks for the question. So I would say we continue to see if you look at kind of be double clicked, where we saw the bookings happen in the quarter. The two strong areas silicon carbide in a high voltage related area.
That was some of the process control bookings that we saw somebody analytics bookings that we saw in actually just usage statistics coming off our cloud sites for customers within our customers we track within our customers what part of the organizations are driving the most definitely continues to be a strong part of of the market. The.
Cloud site for the.
The extensive analytics department for a cloud customer obviously this data center related and.
Analytics for.
C Company that does complex system package again high performance computing and data center related so the second area that we've seen quite a bit of strength and it's been in the data Center area, That's definitely where you see the second thing.
We started seeing bookings for customers and talk about it in my prepared remarks that were on the test floor for.
Alright escalated customers that we were encouraged about that because that tends to drive to be driven by.
Mobile cellular yes, they did see we did see.
Positive results for in that area. So I think those customers are starting to feel a little bit more confident they had been I think a week or in the past and then lastly on the memory side.
When we look at our pre sales activity, we do see a fair amount of activity on the memory piece that was a little bit larger than we have in the past and so I feel like that they are also starting to see the end of the tunnel for them.
When you look geographically as I said in my prepared remarks, we saw a pretty steep falloff in the third quarter on away for volumes because we measure.
The amount of waivers we test for our iwai, our customers and we did see that drop off from the royalties. That's why I became cautious on the Gainshare royalties out of China, we saw that drop off and and July relatively meaningfully compared to the previous months.
And when you look at a runtime licenses, though we see factory activity new equipment shipments for companies shipping into China Chinese equipment companies as well as Ah companies that are primarily in Europe puts ship into China also being very strong.
And when you look at what category of technologies, they tend to be more mature notes with an emphasis on high voltage again silicon carbide at night G B T and things like that.
So you know overall, but what we see I think it's very consistent with what you see reported in the market. When we look at the segments that we track.
Equipment shipments wafer volumes and buying characteristics from our customers.
Thank you that's very helpful. And then with respect to the Ford pipeline to what degree has it been influenced <unk> by the announcement of your seven Sega SMP booking last quarter and can you see it any <unk> effect on the developing interest of I bet from other customers.
Yeah, there's a number you know the <unk>.
Partners continue to be a meaningful part of our.
Pre sales activity with customers, it's very hard when did they say, okay, well they come in faster than the others. We have found that they're selling cycles are different than ours. Some are are are are able to give us.
Pretty strong predictability, so we do anticipate them impacting our second half of the year, but the bulk of the selling and the second half of the year will come off pilots that are run directly in a two way relationship between and then customer in P. D. F. With most of the book is being driven by <unk>.
<unk> and leading edge.
Substantial contracts Rec center on leading edge.
Let's see and then that's all I've put that have you seen have you noticed any I'll take me being conversations with other partners like S. A P where you can <unk> with other platforms and drive them more of those top floor to shop swelling <unk>.
Yeah. That's it. Thank you for that question too I've mentioned, the new the new relationship with Teradyne that was one that.
Ounce during Sunday cause they announced during 71.
We are also working on other things somewhere engineering related and some are more software related engineering software related we're not in a position to announce them yet Linda but I think you know.
Obviously, we have a user conference coming up so you can anticipate us being in a position to make more announcements.
At our user conference around things that we're working on.
Hopefully you're looking forward to that and then my last question <unk> at nine nine year by year basis, gross migraines has improved and they continue to progress nicely.
So aside from volume leverage on revenue curl up what other drivers a contributing to that improvement from this level.
Yeah sure. So I think a bunch of things I think we're just as a business skills were being able to focus a little bit more to all of the different debentures right to where it was it was done this a metric side, taking a look at our prices and where they are positioned on the plus side. Okay. How do we charge versus mark up on the AWS, what do we pay actually ourselves with our scale getting bigger Ah Kam.
Foundation of all of those things and then I'm, leaving guys. We've talked about the enterprise level deals that we have done. So a combination of those factors is what has allowed us frankly to be above the longterm margin of 70 per cent and we hope to maintain that even in the face of some of these revenue comments as you discussed on the call today for the next few quarters and the rest of the year.
I appreciate that thank you for your time today.
Thank you Sir thank you.
One moment for next question.
<unk> <unk> Gus Richard from Northland Capital July Your line is open.
Yeah. Thanks for taking my question good afternoon gone in at night.
Hi, I think you said you shipped our system in the corner and expect to ship. Another one in the fourth quarter. How many would you have in the fields at this point.
Yeah, when I when I set up my prepared remarks, we actually set in our last call that we had we were shipping should we had shipped in discussion quarter. A machine that was qualified actually in the third quarter recently.
An existing customer.
And then we would shift we anticipate being able to ship again in the fourth quarter.
That wouldn't put three in the fields a few days.
Just.
Okay, and then the the new system that are going into the field are you know, they're gonna be used in lab or you know or people sort of thinking about trying them out for <unk>.
Yeah, that's a great a great question you know.
If you look at how an evening shortly been used conventionally it'd be reached section 12, most of the customers tell us once you kind of John with R&D.
The number of.
<unk> you can see in a two hour rush isn't enough to continue to run the.
The machine. So they typically are not you too many frustrating I think a good customer base overall came into evaluating the eprom, assuming it with a similar situation and what they are fine.
With the 350.
Given.
The machines ability to <unk>.
A few billion features per hour soda to a recipe measuring pretty close to 10 billion features.
It's actually finding.
<unk>, even as the email you some insurance and.
And so I you know I think people are just starting to scratch their heads, saying well maybe this can actually be used in manufacturing that would be a first and as you know for things like three G D effects via voice.
Schwartz and gate all around structures.
There's really no inspection technique all of that and an electrical test I can see them. So usually eventually people hip hop on instruction and just try to control things with mythology.
We believe that <unk> has the potential of giving them a way of controlling it with an inspection technique.
The roadmap will continue to improve the throughput of the machine over the next year.
And so we believe we can keep up with improving defect to introduce that our customers.
Uhm a customers are encouraged by that.
Got it and the revenue model here is equipment at the service.
As of today, yes.
Yeah, Okay, I got it and then switching over to the acquisition.
I just want to make sure I understand what you're doing here it sounds like you've got to.
Looking at batteries and if you're looking at the battery you're looking at it well and if you're gonna move it into the back and maybe it's wire bonding and you're gonna collect massive amounts of images and just use M. L. I L.
Hey, I'd, rather against those images to to you know stuff out you know kill failures.
So yeah. So the the assembly in the backyard, we took <unk> for the iced tea production, there's a number of them yeah.
Captured and.
In the back and not just bombed but.
Chip, finishing and other things like that so there's many places to apply a pattern image recognition pipeline and assembly for the battery area. The information is really about the green.
Great information on the cathode and anode two different materials are applied.
The customers want it takes very high speed.
Images because these things are on a rolling I've moved that you know many meters per second and I wanted to capture images of those graves that predicts the spacious and the grains and different things gives you a prediction about you know as as battery battery life like gonna be like how stable is the salary if you're going to perform comes back.
So you know we have a partnership with bold task. They at the end of line extraction of electrical behavior.
This gives you an in line measurement and then our process control products gives you the ability to collect data on you know the equipment, that's rolling the material the rollers the pressure being present when you apply the pace.
The alignment of the film as it's running overrode et cetera that data.
<unk>. So it's really kind of three pieces together to create an end to end like situation for battery I switched on for I see manufacturing and you can think of the image is kind of like you're in line inspection data collection point [noise].
Got it alright.
Yeah go ahead.
What we're focusing on their Diana.
<unk>.
Right now I I, absolutely makes sense and then just.
Back to deify for a second <unk>.
Are you.
Have you kept one in house for demos in general where you're building a couple more you know what's at pipeline of of assembly with like.
Yeah, we we look to have a few machines in the house even after this.
To be able to do demos incremental software and Harvard development. We have play some purchase orders for long lead items on Friday machines, and we've been doing that over the first half of the year.
Increased dark confidence she probably spelled out in a capital spending in the first half of the year.
We do feel like.
The industry has wanted a way to three boys.
Sure it's for as long as I've been in the industry and it's only exacerbated by the fact that you have the structure is now.
We feel like it's a very useful capability. If we can prove you can do this and very high.
Which account you can be measuring 20 billion.
Some time, you can see very small deviations meal.
Got it alright Super helpful. Thanks, so much.
Thank you.
Thank you.
N as a reminder, that star one one for questions <unk> 111 moment for next question.
Our next question was so fine of Andrew here from San Jos Capital. Your line is open.
Hi, good afternoon.
Hi, Andrew.
Hey, I just wanted to follow up on D F I and just.
You did say that.
Third tool that you're hoping to ship by year end is a new T F I customer correct.
Correct.
And is that it for an advanced logic application as well.
Correct.
Okay, and maybe you could if we look out into 24, you know how you're thinking about you know <unk> express some inquiries.
Increased optimism around D. A pie without it had been waiting for awhile for this to become a.
A real commercial opportunity. So you now have to with your lead customer you know you're adding a second customer sounds like you know <unk>.
Ordering some more advanced parts.
How do you look at the growth opportunity I should get out into next year Whoopi what has to happen and it's around penetrating these too.
<unk> customers.
Deeper or are there other.
Yeah, what do you want to call them pilots, where you're running way first in house, where you think there's an opportunity to ship new tools to new additional customers and 24.
Yeah. So I think it's a great. It makes it a great way to frame. The question. Let me see if I can give you as well organised answer so first.
You know cause I've said this many times to me the single most important thing was to get a second tool internally customers leave customer first because every.
Every company on the leading edge will always try something to see if it does something when you can get to that means you filled up the capacity of one and now they need to have a second and so this was a really super big milestone for us that I think is the first important thing that in bold enough along the way we started doing.
Some pilot says you refer to them with customer sending us wafers onsite, we did have only with one other customer at the time again, because we we felt like 80 per cent of our effort should be.
I'm wishing that the customer would need to right. There's no point in going and spreading yourself thinly across many companies just keep on doing the same thing we've got to prove that we have a winning solution. We we feel much more emboldened after the lead customer <unk>.
Just a second now.
Now we're in a position that we feel like okay. We can shipper third machine to that new customer with that lets US also demonstrate is you know the uptime utilizations I've been really remarkable for an evening tool on the first machines I think people were quite surprised by our house.
<unk>, we want to be able to demonstrate that that really does work broadly across a couple of customers. While also increasingly aperture of taking on pilots from other customers and potentially other parts of the chip market. So we haven't really done much with memory, yet we will go back and look at that there are audition.
No opportunities that we see so in 2024, we would like to start seeing more success at the first customer to the most important thing secondly, starting to drive revenue at that second customer and getting more girls there and then increasing the aperture on onsite pilots.
On our site I'm, sorry in our lab pilots for additional customers some of that will expand the arbitrary outside of leading edge logic.
Okay.
Maybe then switching gears for a second you called out silicon carbide as an area of strength.
I think historically talked about it as.
A significant opportunity longer term, but given the volumes relative to other parts of the semiconductor industry.
Despite the excitement around it you know it was not material.
Are you starting to see that the comedy material and we've seen obviously some very large commitment Smith made to sort of traditional X N C. O P. D F customers, who are in this provide silicon carbide solutions yeah.
Would you expect that you know to grow materially as you look out into 24, and 25 and how would you think about that trajectory relative to sort out the trajectory of silicon carbide industry is hall.
Yeah. Thanks for yes, a couple of data.
Data points of it for you Andrew So when I was meeting with some of our early clubs like customers and reviewing with them cloud statistics that you know I do occasionally as a.
Like dropping on some of our customer meetings the customers have been telling me not.
They are a lot of the <unk> the driving driver for the existing cloud sides has been their silicon carbide business. So we are seeing that we started seeing customers in the process control side start to deploy for these new silicon carbide and other I G. B T like technologies for our capability.
In the first half of the ear Q2 in particular so.
So we do anticipate silicon carbide being a driver for our business as we look out into 2000 2425 and part of that is because a number of the companies that are in the silicon carbide business happened to be historic PDF customers. So they're already natural it's natural for them to extend their accent to deployment into these new facilities.
As I stand them up and start tooling them up we do anticipate that and we do also anticipate this gives us an opportunity to go to companies that have not historically been a P. D F customer who are making a big investment in silicon carbide because in comparison to.
<unk> and other high voltage.
Transistors.
The manufacturing challenges are very substantial and has it been reported in the press and so you know I'm using and analytics platform and all the way down to the equipment controlling equipment connectivity is more important for these customers that it has been for the conventional high voltage transistor.
Production it is a much much more complex production now.
Now becoming realized we expect there to be for meaningful <unk>.
Processing elements to this to these to these broken flows as opposed to really just wafer flow package and test you have to grow that you get you need to use something like the soy Texmart technology.
The front end processing and then you have packaging and system packaging. So it's quite an antenna analytics, we believe will be important for that customer base and.
So yeah, we do anticipate that being in a growing part of our business in 2024 2025.
So John and me I don't want it sort of Trump, maybe something that you're gonna present at the analyst day, but if I think about like a dollar a can of gasoline in the ground or a dollar invested in that capacity expansion across let's say like a dance logic silicon carbide, and then maybe either like mixed signal or mature knows how.
Do you think about what the revenue opportunity for P. D F is across those.
Different pockets and.
Mmm, Yeah wait one that cheating quantifiable and to sort of maybe even on a relative basis.
Yeah, that's a super Great question, Andrew we've been trying to understand that a little bit ourselves, it's hard because some of our customers are multi <unk>.
And marketed customer. So for example, you know.
You have IBM customers they make some car by transistors. They also do embedded controllers, they do mixed signal analog parts.
Do a lot of different things and so for some of the enterprise class customer, sometimes it's hard to Peel that out unless we know what sites, they're logging in from specific sites and which sites. Those are data is getting loaded from certain sites. So we can kind of get some understanding of kind of how they are using the system and what parts of their business are driving growth. So we don't have a real.
Easy way to quantify it just yet you know what I.
Can tell you is for.
For accents here, we've always found the.
There's as much business on the trailing edge and high voltage in silicon carbide as the rhythm of leading edge in other words, you know a company like <unk> are in a D. I R.
And S D. They drive as much analytics as our high are leaving its customers drive.
That's in part because the number of products tend to be a lot more so law, leading edge company may have.
100, or a couple of hundred different products or maybe maybe up to a thousand our customers not trailing edge may have 70000 products they need to keep track of an accent too.
So you know the characteristics are different we haven't figured out a way to kind of model the way, you're describing I find it intriguing the way you've broken it out but it's not what we've done so far we've looked at kind of just wallet sure and customers and say okay. How much are they spending on manufacturing what should you know analytic spend beyond that and frankly it's.
<unk> you know 10th of a percent how we modeled it that may be a little conservative.
Okay, and then maybe last I just wanted to follow up on Christians question and put up like a little bit more of a fine point on it.
You know you made comments about the ability to grow the analytics business.
And yes, that's putting a highlight are aside I think you talked about even the potential to return to sort out the 30 per.
Per cent growth rates that you had experienced over you have.
A number of years, if one with wait for equipment sales were to return to your class modestly growing when you're saying that the pipeline is robust enough that if you guys can execute against closing yep closing deals.
That you see a path to returning to that sort of 30 ish percent growth in analytics, you know offer sort of you know a couple of your period.
Yeah, I I think you may be stealing the Thunder for what we'll talk about on the user conference. So and we're still I think working that through but I mean in general what we feel with the following Andrew.
We do believe there is a very significant universe for our customer base, you know that that is a big opportunity for extensive and our overall platform for analytics.
With <unk> as I said to the Christian if we can get a ton of.
Equipment sales.
Growing a little bit at least not decrease in like it had it's starting to grow a little bit more meaningfully getting back to the levels. They were before and have having the iwai are returned to the volumes. They were at before we do believe we can achieve over the 20 per cent called to get back to the 30 per cent growth, we're going to go back and do you know a sharper on <unk>.
<unk> what is the <unk> you know what needs to return on the overall environment because as I said in my prepared remarks, we did see a couple of things slide out from Q too you know what a majority call. It a coupla, which already closed purely part of Q3.
We wanted to see that that robustness and and bookings return on the overall analytics business and I think you know there's I as I said, there's an awful lot of activity out there. So we do believe that demand is there, we'll just see how customer confidence happens in the second half of the year.
And my last question apologize.
Yeah, both you and add on called out you know as one of the constituents, where you're seeing yelps strong interest or activity is obviously around government subsidized.
[noise] subsidize or sponsored investment you know and.
New semiconductor capacity and sort of enhance supply chains.
I you see direct.
<unk> is there or is that all.
<unk> gonna be interact and if that's shown up in pipeline, yet or is that more still on the account.
Yeah, that's starting to show up in the pipeline Andrew it's mostly through the companies. The governments are funding some of which are existing companies some of which are new companies, but you can also imagine.
Given P D F.
Pretty unique perspective in the industry, our footprint across the world and our experienced with everybody else that's tried to get into this industry.
Located or so.
The governments themselves from time to time to reach out to us and we do have dialogues with them to understand.
What they should be thoughtful about we have not really put in our pipeline business directly with them and we really don't focus on it but it does help us understand what their intentions and motivations are and since in effect. It may have these cases they are the owners right. They're the ones writing checks, it's good to understand what ownership once.
So we we do see those as an opportunity for us to be educated on their vision and their drive and then for them to understand our perspective on you know what it's taken in the past to be effective at introducing creating a new entrant in semiconductors, it's not an easy activity at all.
Okay, Okay great.
Great. Thank you.
Thank you once again as a reminder, that star 114 questions start one one.
One moment, while components Kunai roster.
And at this time there are no more questions ladies and gentlemen. This concludes the program. Thank you for doing on today's call. So you wanted to have a great day.
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