Q3 2023 PDF Solutions Inc Earnings Call

November 8, 2023

Speaker 1: Good day, everyone, and welcome to the PDF Solutions Inc. conference call to discuss its financial results for the third quarter, ending Saturday, September 30, 2023. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. As a reminder, this conference is being recorded.

Good day, everyone and welcome to the PDF Solutions, Inc Conference call to discuss its financial results for the third quarter ending Saturday September 32023 at this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.

To ask a question during the session you will need to press star one on your telephone as a reminder, this conference is being recorded if you have not yet received a copy of the course bonding press release. It has been posted to Pdf's website at Www Dot PDF dot com. Some of the statements that will be made in the course of this conference are forward looking.

Speaker 1: If you have not yet received a copy of the course pending press release, it has been posted to PDF's website at www.PDF.com.

Speaker 1: Some of the statements that will be made in the course of this conference are forward looking, including statements regarding PDF's future financial results and performance, growth rates, and demand for its solutions. PDF's actual results could differ materially. You should refer to the section entitled Risk Factors on pages 15 through 29 of PDF's annual report on form 10K for the fiscal year ended December 31st, 2022.

Including statements regarding Pdf's future financial results and performance growth rates and demand for its solutions Pdf's actual results could differ materially you should refer to the section entitled risk factors on pages 15 through 29.

<unk> annual report on Form 10-K for the fiscal year ended December 31 2022.

Speaker 1: and similar disclosures in subsequent SEC filings. The forward-looking statements and risks.

And similar disclosures in subsequent SEC filings the forward looking statements and risks stated in this conference call are based on information available to PDF today PDF assumes no obligation to update them now I'd like to introduce John <unk>.

Speaker 1: stated in this conference call are based on information available to PDF today. PDF assumes no obligation to update them. Now I'd like to introduce John Cabarian, PDF's president and chief executive officer and Adnan Raza, PDF's chief financial officer. Mr. Cabarian, please go ahead.

President and Chief Executive Officer, and Adnan Raza, Pdf's, Chief Financial Officer. Mr. Kaverin. Please go ahead.

Speaker 2: Thank you for joining us on today's call. If you've not already seen our press earnings press release and miniature report for the third quarter, please go to the investor section of our website where each has been posted.

Thank you for joining us on today's call if you've not already seen our press earnings press release and management report for the third quarter. Please go to the investors section of our website, where each has been posted before.

Speaker 2: Before I'd nondiscuses the financials in detail, I have some comments about our observations from the third quarter, or summary of our user's conference, and our perceptions on the market for the remainder of the year.

Before discussing the financials in detail I have some comments about our observations from the third quarter, a summary of our users conference and our perceptions on the market for the remainder of the year.

Speaker 2: The third quarter was very similar to the first two quarters of the year. Revenue was strong as the experience continued adoption of our enter and analytics by our customers.

The third quarter was very similar to the first two quarters of the year revenue was strong as we experienced continued adoption of our end to end analytics by our customers.

Speaker 2: Bookings the third quarter of the week, even while we continue to experience a high level of presale activities, particularly for larger contracts.

Bookings for the third quarter remained weak even while we continue to experience a high level of pre sales activities, particularly for larger contracts.

Speaker 2: Significant contracts that close in the quarter include a cloud provider multiple existing in new customers to pulling extensive analytics on the cloud for their own production. And.

Significant contracts that closed in the quarter include a cloud provider multiple existing and new customers deploying extensive analytics on the card for their own production and.

Speaker 2: deployment of our characterization infrastructure from a turn note in Asia.

Deployment of our characterization infrastructure from a churn out in Asia.

Speaker 2: Bookings for Symmetra's connectivity run time licenses continue to show modest improvements in Q3 versus Q2 as our customers' equipment shipments increase.

Bookings for symmetric connectivity runtime licenses continue to show modest improvement in Q3 versus Q2, as our customers' equipment shipments increased.

Speaker 2: A yield ramp revenue decreased meaningfully as the buying of an Asia declined and reduced gainshare. Analytics revenue accelerated in the quarter because of the success of the second E-Prope installed at the lead customer and increased applications deployed.

Our yield ramp revenue decreased meaningfully as volumes in Asia declined and reduced gained share.

Analytics revenue accelerated in the quarter because of the success of the second E installed that the lead customer and increased applications deployed.

Speaker 2: We're very excited about the progress we are making with DFI and expect to ship our third tool to a new customer beginning a manufacturing evaluation of this course.

We're very excited about the progress, we're making with DSI and expect to ship our third tool to a new customer beginning of manufacturing evaluation this quarter.

Speaker 2: Overall, given our strong backlog of business model, where most of the revenue is typically readily recognized, we continue to love the strong results in revenue in our...

Overall, given our strong backlog and business model, where most of the revenue is typically ratably recognized we continue to deliver strong results in revenue and earnings.

On October 24th through the 26, we held our user conference and analyst day.

Speaker 2: On October 24th through the 26th, we held our user conference in the analyst day. Registration from over 100 companies was twice the level of our last user's conference and included engineers and executives from all aspects of the semiconductor supply chain.

Registration from over 100 companies was twice the level of our last user conference and included engineers and executives from all aspects of the semiconductor supply chain.

Speaker 2: We use this opportunity to reintroduce PDS and our end-to-end platform with its machine learning capabilities to our community.

We use this opportunity to reintroduce Pds and our end to end platform with its machine learning capabilities to our community.

Speaker 2: A customer space three challenges, reaching up increasingly complex process technologies, achieving cost-effective use of 3D packaging, and working with the global supply.

Our customers' phase III challenges, bringing up increasingly complex process technologies, achieving cost effective use of <unk> packaging.

And working with our global supply chain.

Speaker 2: With the PDF platform that integrates equipment, measurement data, and extensive analytics, customers came diagnosed complex yield issues, improved the control and efficiency of production, and achieved higher yield and reliability.

With the PDF platform that integrates equipment measurement data and Accenture analytics customers, Kim diagnose complex yield issues improve the control and efficiency of production and achieve higher yields and reliability.

With our.

Speaker 2: Integrated platform is machine learning or what we call model ops. Customers can use AI to improve control and production.

Integrated platform its machine learning or what we call model ops customers can use AI to improve control and production.

Speaker 2: Customers presenting included Intel, GF, analog devices, Renisus, ST microelectronics, and multibuses.

Customers presenting included Intel Geos analog devices, Renesys, SD microelectronics and multi beam.

Speaker 2: They spoke about how they rely on PDFs platform to drive transformations in their R&D and production, achieving tremendous acceleration and technology development, yield improvement and operations.

Spoke about how they rely on Pts platform to drive transformation in their R&D and production.

<unk> tremendous acceleration in technology development yield improvement and operations excellence.

We were also fortunate that many of our partners presented including Advantest, Teradyne, SAP, Siemens AWS IBM and others.

Speaker 2: We were also fortunate that many of our partners presented, including Adventist, TeraDine, SAP, Siemens, AWS, IBM, and others.

Speaker 2: They demonstrate how the integration of our platform with their products enables our mutual customer success.

They demonstrate how the integration of our platform with their products enables our mutual customer success.

Finally in the analyst meeting, we announced updated long term operating targets for the company.

Speaker 2: Finally, in the analyst meeting we announced updated long-term operating targets for the company.

Speaker 2: We moved our long-term revenue growth target, which had been 20% growth for just the analytics portion of our business to over 20% for the overall company.

We moved our long term revenue growth target, which had been 20% growth for just the analytics portion of our business to over 20% for the overall company growth. We also increased our long term gross margin target from 70% to 75% as we get scale in our cloud solutions and operations.

Speaker 2: We also increased our long-term growth margin target from 70% to 75% as we get scale in our cloud solutions and operations.

Speaker 2: We kept our long-term operating margin target at 20% as we continue to invest, particularly in sales, applications, and marketing to enable further growth.

We kept our long term operating margin target of 20% as we continue to invest particularly in sales applications and marketing to enable further growth.

Speaker 2: Based on the follow-up meetings we had with our customers, our message was received loud and clear. Customer interest in our new solutions after the conference has been very high.

Based on the follow up meetings, we've had with our customers. Our message was received loud and clear customer interest in our new solutions. After the conference has been very high.

Now, let me turn to discuss our view of the environment and our perspective on the last quarter of the year.

Speaker 2: Now, let me turn to discuss our view of the environment and our perspective on the last quarter of the year.

And our second quarter call, we express confidence in low double digit growth for the year as the anticipated second half 2023 recovery in the chip industry did not seem to be occurring.

Speaker 2: In our second quarter call, we expressed confidence in low double digit growth for the year, as the anticipated second half 2023 recovery in the chip industry did not seem to be occurring.

Speaker 2: Now, with the third quarter behind us, we continue to have the same expectation. Namely, we anticipate year-over-year growth achieve low double digits on a percentage base.

Now with the third quarter behind US we continue to have the same expectation, namely we anticipate year over year growth achieved low double digits on a percentage basis.

Speaker 2: The contributions to this outlook are consistent with what we saw last quarter. Our gainshare customers in China are reporting decreased wafer volumes, which we believe will continue to result in reduced gainshare through the second half of the year.

The contributions to this outlook are consistent with what we saw last quarter against your customers in China are reporting decreased wafer volumes, which we believe will continue to result in reduced gains here through the second half of the year.

Speaker 2: We anticipate continued increase in Symmetrics runtime licenses, but at a muted rate of improvement.

We anticipate continued increase in symmetric runtime licenses, but at a muted rate of improvement.

Speaker 2: Finally, for Accentio and our characterization solution customers, we continue to have many significant pilots and sales discussions ongoing, but believe closing contracts will continue to move slowly during the remainder of the year.

Finally for <unk> in our characterization solution customers. We continue to have many significant pilots in sales discussions ongoing but believe closing contracts will continue to move slowly during the remainder of the year.

Speaker 2: While the short-term environment is unsettled, the longer-term drivers for our customers, which include increased use of AIML, cloud, smart devices, and the electrification of the energy economy remain in place.

While the short term environment is unsettled the longer term drivers for our customers, which include increased use of AI ml cloud smart devices and the electrification of the energy economy remained in place.

Speaker 2: These drivers are being amplified by the various government investments in semiconductors we are seeing around the world and the increased diversification of the supply chains that many of our customers are embracing.

These drivers are being amplified by the various government investments in semiconductors, we are seeing around the world and the increased diversification of the supply chain that many of our customers are embracing.

Speaker 2: This is evident in our strong business pipeline, and we remain confident in our continued success in long-term growth.

This is evident in our strong business pipeline.

And confident in our continued success and long term growth.

Speaker 2: I want to thank all of the PF employees and contractors for their efforts during the quarter.

I want to thank all of the PDF employees and contractors for their efforts during the quarter.

Speaker 2: Now I'll turn the call over to Adnan, who will review the financials and provide his perspective on our results.

Now I will turn the call over <unk>, who will review the financials and provide his perspective on our results.

Speaker 3: Thank you John . Good afternoon everyone. Good to speak with you again today and I hope all of you and your families are well.

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

Speaker 3: We are pleased to review the financial results of the third quarter and to bring you up to date on the progress of the business.

We're pleased to review the financial results of the third quarter and to bring you up to date on the progress of the business.

Speaker 3: We posted our earnings release and management report on the investor relations section of our website. Our Form 10-Q has also been filed at the SEC today.

We posted our earnings release and management report on the Investor Relations section of our website. Our Form 10-Q has also been filed with the SEC today.

Speaker 3: Please note that all of the financial results we discussed in today's call will be on a non-GAAP basis, and a reconciliation to GAAP financials is provided in the materials on our website.

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 in the materials on our website.

Speaker 3: Financial results for the third quarter of 2023 came in strong with record revenues and strong bottom line EPS.

Financial results for the third quarter of 2023 came in strong with record revenues and strong bottom line EPS.

Speaker 3: We are pleased with the increasing platform-level engagement we are seeing with our customers utilizing the various product offerings from PDF Solutions.

We are pleased with the increasing platform level of engagement, we're seeing with our customers utilizing the various product offerings from PDF solutions.

Speaker 3: Third quarter total revenue was $42.4 million, up 6% from the comparable quarter last year, and incrementally up 2% versus the prior quarter of this year.

Third quarter total revenue was $42 4 million up 6% from the comparable quarter last year and incrementally up 2% versus the prior quarter of this year.

Speaker 3: Our Q3 performance demonstrates the continued business shift towards analytics revenue, which accounted for 93% of the total revenue this quarter.

Our Q3 performance demonstrates the continued business shift towards analytics revenue, which accounted for 93% of the total revenue this quarter.

Speaker 3: Analytics revenue grew at 20% for Q3 compared to the same quarter of prior year.

Analytics revenue grew at 20% for Q3 compared to the same quarter of prior year.

Speaker 3: On a year-to-date basis, our analytics revenue also grew a similar 20% compared to the similar period of last year.

On a year to date basis, our analytics revenue also grew a similar 20% compared to the similar period of last year.

Speaker 3: Within analytics, during the quarter, we closed multiple Accenture deals greater than $1 million, mostly for cloud deployments, which helped grow our ratable revenues.

Within analytics during the quarter, we closed multiple accenture deals greater than $1 million, mostly for cloud deployment, which helped grow our ratable revenue stream.

Speaker 3: For Leading Edge, we're happy with the engagement we're seeing with a key customer and the installation of a second E-Probe machine during this quarter with the same customer.

Our leading edge, we're happy with the engagement, we're seeing with a key customer and the installation of a second E probe machine during this quarter with the same customer as.

Speaker 3: As John mentioned, we're also preparing to ship an EPIRB machine within this calendar year to second leading edge customer for on-site evaluation.

As John mentioned, we're also preparing to ship an <unk> machine within this calendar year, the second leading edge customer for onsite evaluation.

Speaker 3: We believe one customer taking a second machine and another leading edge customer taking their first machine demonstrates the unique value our platform approach and solutions bring for our customers.

We believe one customer taking a second machine and another leading edge customer taking their first machine demonstrates the unique value of our platform approach and solutions bring for our customers.

Speaker 3: For our Symmetrics connectivity business, while we saw a slight improvement in runtime licenses during Q3 compared to the prior quarter, we remain cautious about the growth rates of capital equipment purchases.

First the metrics connectivity business, while we saw a slight improvement in runtime licenses during Q3 compared to the prior quarter, we remain cautious about the growth rates of capital equipment purchases.

Speaker 3: Overall, we are pleased with the 20% growth rate of analytics revenues for this quarter and year to date, compared to similar periods of last year.

Overall, we are pleased with the 20% growth rate of analytics revenues for this quarter and year to date compared to similar periods of last year.

Speaker 3: IYR revenue for the quarter was $2.9 million, down compared to the prior quarter of this year and the same quarter of last year as we shared earlier.

<unk> revenue for the quarter was $2 9 million down compared to the prior quarter of this year and the same quarter of last year as we shared earlier.

Speaker 3: We saw weakness in the gainshare contribution to IYR revenue this quarter, as John discussed.

We saw weakness in the <unk> contribution to <unk> revenue this quarter as John discussed despite.

Speaker 3: Despite the weakness in IYR, given the strength in our analytics business, we were able to deliver a record revenue Q3 quarter.

Despite the weakness in <unk>, given the strength in our analytics business, we were able to deliver a record revenue in Q3 quarter.

On gross margins, we reported 70% gross margin for Q3, driven by a few factors this quarter versus prior quarter.

Speaker 3: On gross margins, we reported a 70% gross margin for Q3, driven by a few factors this quarter.

Speaker 3: Lower gain share revenues, which carry higher gross margins. A one-time sales site lease treatment on the DFI hardware as a result of extended use by the customer. And ASC 842 accounting rules apply to this transaction. And lastly, headcount growth to support the increasing customer engagement we're seeing.

Lower gain share revenues, which carry higher gross margins.

A onetime sales type lease treatment on the DIY hardware as a result of extended used by the customer and ASC 842, accounting rules apply to this transaction and lastly headcount growth to support the increasing customer engagement we're seeing.

Speaker 3: As announced at our analyst day in October , we remain committed to our long-term close margin target of 75%, and making progress towards that target

As announced at our Analyst day in October we remain committed to our long term gross margin target of 75% and.

And making progress towards that target over the coming quarters.

Speaker 3: Our operating expenses grew 3% for the quarter compared to the prior quarter, with a similar percentage expense growth of 3% for each of R&D and SG&A.

Our operating expenses grew 3% for the quarter compared to the prior quarter.

7% expense growth of 3% for each of R&D and SG&A.

Speaker 3: Overall, the increases were to support increased headcount primarily for R&D and pre-sales activities, as we see increased opportunities to enhance the PDF platform and develop it in conjunction with customers to meet their future needs.

Overall, the increases were to support increased head count primarily for R&D and pre sales activities as we see increased opportunities to enhance the pega platform and develop it in conjunction with customers to meet their future needs.

Speaker 3: On EPS, we were able to deliver $0.20 per share for the quarter, incrementally ahead of our prior quarters this year.

On EPS, we were able to deliver <unk> <unk> per share for the quarter incrementally ahead of our prior quarters. This year.

Speaker 3: It is worthwhile highlighting that on a year-to-date basis for the 9 months, our EPS of 58 cents is 42% ahead of EPS for the similar period of the prior year.

It is worthwhile highlighting that our year to date basis for the nine months, our EPS of <unk> 58 is 42% ahead of EPS for the similar period of the prior year.

Speaker 3: Turning to the balance sheet, we ended up quarter with cash equivalents and short term investments of approximately 135 million or 11 million dollars higher than last quarter, primarily driven by strong collect.

Turning to the balance sheet, we ended the quarter with cash cash equivalents and short term investments of approximately $135 million or $11 million higher than last quarter, primarily driven by strong collections.

Speaker 3: During the quarter, we also repurchased shares for $0.7 million, spent $2.9 million on CapEx, and $1.8 million on the acquisition of Lantern Machinery Analytics.

During the quarter, we also repurchased shares for $7 million spent $2 9 million on Capex and $1 $8 million on the acquisition of long term machinery analytics.

Now turning to our outlook.

Speaker 3: As stated during our Q2 earnings call, at our analyst day in October , and with our press release today, we continue to expect that our full year 2023 revenue growth rate will be in the lower double digits on a year-over-year percentage basis.

As stated during our Q2 earnings call at our Analyst day in October and with our press release today, we continue to expect that our full year 2020 revenue growth rate will be in the lower double digits on a year over year percentage basis.

We believe that against the backdrop backdrop of the macro environment that John has spoken about where semiconductor growth has not been as strong. This year as last few years. We at PDF can continue to grow ahead of the market.

Speaker 3: We believe that against the backdrop of the macro environment that John has spoken about, where semiconductor growth has not been as strong this year as last few years, we at PDF can continue to grow ahead of the market.

Speaker 3: Our confidence stems from the strength of our platform approach and increasing customer engagement we see in our sales pipeline.

Our confidence stems from the strength of our platform approach and increasing customer engagements, we see in our sales pipeline.

Speaker 3: Additionally, we remain committed to the total company long-term growth rate of greater than 20% announced at our analysis.

Additionally, we remain committed to the total company and long term growth rate of greater than 20% announced at our analyst day.

In closing for Q3, we're excited about the strong revenue we delivered the cloud deals we signed the leading engage the edge engagements, we expanded all with strong EPS and balance sheet to close the quarter.

Speaker 3: In closing, for Q3, we're excited about the strong revenue we delivered, the cloud deals we signed, the leading edge engagements we expanded, all with strong EPS and balance sheet to close the quarter.

Speaker 3: We are also thankful to our customers and partners for their resounding support of the PDF platform at our analyst day and to allow us to share a new look at how PDF solutions has become a platform company since our last analyst day a few years ago.

We're also thankful to our customers and partners for their resounding support of the PDF platform at our analyst day and to allow us to share a new look at hub PDF solutions has become a platform company since our last analyst day, a few years ago.

Speaker 3: With that, I'll turn the call over to the operator to commence the questions and answer session operator.

With that I'll turn the call over to the operator to commence the question and answer session operator.

Thank you Mr. Roger Ladies and gentlemen, if you have a question at this time. Please press star one on your telephone if youre using a speaker phone. Please lift the handset before asking your question. Please wait one moment for our first question.

Speaker 1: Thank you, Mr. Raza. Ladies and gentlemen, if you have a question at this time, please press star one one on your telephone. If you're using a speakerphone, please lift the handset before asking a question. Please wait one moment for our first question.

Our first question comes from Blair Abernethy with Rosenblatt Securities You May proceed.

Speaker 1: Our first question comes from Blair Abernethy with Rosenblatt Securities, you may proceed.

Hi, guys nice quarter.

Speaker 4: Hi guys, nice quarter. Just want to ask you a little bit. A couple things. First is Symetrics. I looked in your 10-Q . It sort of says it was a little lower year over year. Is that right? But sequentially it was a little stronger.

Just wanted to ask you a little bit a couple of things first is the same metrics.

I looked in your 10-Q, it sort of says it's.

A little lower year over year is that right, but sequentially. It was a little stronger.

Yeah.

Speaker 3: Sequentially, it is a little bit stronger, both on the total revenue as well as we're starting to see strength throughout the year, frankly, even in the runtime licenses. On year-over-year basis, symmetrics, yes. Just given the CapEx purchase cycles and the equipment shipments that we have seen, we have seen that come down, as alluded to in our prior calls, particularly the last Q2 call when we spoke about the restaurant.

Sequentially. It is a little bit stronger both on the total revenue as well as we're starting to see strength throughout the year frankly, even in the runtime licenses on year over year basis.

<unk>, yes.

Just given the capex purchase cycles by shipments that we have seen we have seen that come down as alluded to in our prior call, particularly the last with the ball and we spoke about the rest of the year.

Okay. Okay, great. So it sounds like is that as that business bottoming out here then.

Speaker 1: So it sounds like then is that business bottoming out here?

Speaker 2: Yeah, we believe so, we checked the backlog. In other words, the run time licenses that the customer takes from us, but they have not shipped the equipment. And that bottomed out in Q1 is the backlog has been slowly building up. In other words, customers expect to be shipping more equipment back out in the subsequent quarters. We still remain a little bit cautious about Q4. We don't know that it will improve all that much Q4 over Q3, but as we look into a 2024, we do anticipate it building.

Yes.

Beliefs, we track the backlog in other words.

License runtime licenses that the customer takes from us, but they have not shipped the equipment and that bottomed out in Q1 has been the backlog has been slowly building up in other words customers expect to be shipping more equipment back out in the subsequent quarters, we still remain a little bit cautious about Q4, we don't know that it will improve all that much Q4 over Q3, but as.

As we look into 2024, we do anticipated building.

Okay great.

Speaker 4: Great. And just shifting to end markets, John , just with the increased U.S.

Just shifting to end markets John just with.

The increase U S export controls.

Shipping into China in various shapes and forms over the last year or so is there is there any direct or indirect impact on you guys. This year.

Speaker 4: in various shapes and forms over the last year or so. Is there any director, indirect impact on you guys?

Yes.

Speaker 2: Yeah, I mean so far we've been kind of in that beneficiary of that as we see a lot of activity in China. We see the runtime licenses.

So far we've been kind of a net beneficiary of that as we see a lot of activity in China, we see the runtime licenses for some metrics a lot of it is going into China Chinese equipment companies that use our software that are shipping in that country.

Speaker 2: For Symmetrics, a lot of it is going into China, Chinese equipment companies that use our software that are shipping in that country. So there's been benefits there. We've also had a fair number of fabulous customers in China that use Accentio and found in manufacturers as well, factories that attempted to deploy Accentio. So so far, that investment, kind of the accelerated investment in China has been beneficial for our business in China. We did not,

So theres been benefits there.

Also had a fair number of Fabless customers in China that use <unk> sent to you.

And found and manufacturers as well factories that have tended to deploy <unk>.

So so far that investment the kind of the accelerated rate of investment in China has been beneficial for our business in China, We did not.

Speaker 2: You know, see much impact for us, you know, on the leading edge, because most of us are just trying to ban on the trailing edge to be candid with you.

See much impact for us.

On the leading edge because most of our business in China had been on the trailing edge to be candid with you.

Speaker 2: We are waiting for that same effect happening in the United States and in Europe as folks are starting to get access to their chipset money. We start to see some behavior from customers, maybe a little bit more positive reactions, but we haven't seen that kind of government stimulus as being as big a factor in the West as we've seen it in China today so far.

We are waiting for that same effect up in the United States and in Europe as folks are starting to get access to their chips that money and we start to see some behavior from customers, maybe a little bit more positive reactions, but we haven't seen that kind of government stimulus.

Being as big a factor in the west as we've seen it in.

China.

So far.

Okay, great. Thanks, guys.

Speaker 1: Thank you, and as a reminder to ask a question, please press star 1-1 on your telephone. One.

Thank you and as a reminder to ask a question. Please press star one on your telephone.

One moment for questions.

Speaker 1: And at this time, there are no more questions. Ladies and gentlemen, this concludes the program. Thank you for joining us on today's call.

And at this time there are no more questions ladies and gentlemen. This concludes the program. Thank you for joining us on today's call.

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Speaker 1: Good day everyone and welcome to the PDF Solutions in conference call to discuss its financial results for the third quarter ending Saturday, September 30.

Speaker 1: 2023 at this time all participants are in a listen only mode after the speakers presentation. There will be a question and answer session

Patients there will be a question and answer session to ask a question. During the session you will need to press star one on your telephone as a reminder, this conference is being recorded if you have not yet received a copy of the course spent bonding press release. It has been posted to Pdf's website at Www Dot PDF dot com some of the statements that will be made.

Speaker 1: To ask a question during the session, you will need to press star 1-1 on your telephone. As a reminder, this conference is being recorded.

Speaker 1: If you have not yet received a copy of the course funding press release, it has been posted to PDFs website at www.pdf.com.

In the course of this conference are forward looking including statements regarding pdf's future financial results and performance growth rates and demand for its solutions Pdf's actual results could differ materially you should refer to the section entitled risk factors on pages 15 through 29.

Pdf's annual report on Form 10-K for the fiscal year ended December 31, 2022, and similar disclosures.

Speaker 1: and similar disclosures in subsequent SEC filings. The forward-looking statements and risks.

Closures in subsequent SEC filings the forward looking statements and risks stated in this conference call are based on information available to PDF today PDF assumes no obligation to update them now I'd like to introduce John <unk>, Pdf's, President and Chief Executive Officer, and Adnan Raza.

Pdf's Chief Financial Officer, Mr. Kaverin. Please go ahead.

Speaker 2: Before I'd nondiscuses the financials in detail, I have some comments about our observations from the third quarter, or summary of our users' conference, and our perceptions on the market for the remainder of the year.

Before discussing the financials in detail I have some comments about our observations from the third quarter.

Many of our users conference.

Our perceptions on the market for the remainder of the year.

Speaker 2: The third quarter was very similar to the first two quarters of the year. Revenue was strong as the experience continued adoption of our end-to-end analytics by our customers.

The third quarter was very similar to the first two quarters of the year revenue was strong as we experienced continued adoption of our end to end analytics by our customers.

Speaker 2: Bookings on the third quarter of the week, even while we continue to experience a high level of presale activities, particularly for larger contrast.

Bookings in the third quarter remained weak even while we continue to experience a high level of pre sales activities, particularly for larger contracts.

Speaker 2: Significant contracts that close in the quarter include a cloud provider multiple existing in new customers to point Accency analytics on the cloud for their own production and

Significant contracts that closed in the quarter include a cloud provider multiple existing and new customers deploying extensive analytics on the card for their own production.

And.

Speaker 2: the deployment of our characterization infrastructure for mature node and Asia.

The appointment of our characterization.

Infrastructure from mature note in Asia.

Bookings for symmetric connectivity runtime licenses continue to show modest improvement in Q3 versus Q2, as our customers' equipment shipments increased.

Speaker 2: Looking for symmetric connectivity, run time licenses, continue to show modest improvements in Q3 versus Q2 as our customers' equipment shipments increase.

Speaker 2: A yield ramp revenue decreased meaningfully as the buying of an Asia declined and reduced gain share. Analytics revenue accelerated in the quarter because of the success of the second E-PROP installed at the lead customer and increased applications deployed.

Our yield ramp revenue decreased meaningfully as volumes in Asia declined.

And reduced gained share.

Analytics revenue accelerated in the quarter because of the success of the second E installed that the lead customer and increased applications deployed.

Speaker 2: We're very excited about the progress we are making with DFI and expect to ship our third tool to a new customer beginning a manufacturing evaluation this quarter.

We're very excited about the progress, we're making with DSI and expect to ship our third tool to a new customer beginning of manufacturing evaluation this quarter.

Yes.

Speaker 2: Overall, given our strong backlog of business model, where most of the revenue is typically readily recognized, we continue to deliver strong results in revenue in our...

Overall, given our strong backlog of business model, where most of the revenue is typically ratably recognized we continue to deliver strong results in revenue and earnings.

Speaker 2: On October 24th through the 26th, we held our user conference in Analyst Day. Registration from over 100 companies was twice the level of our last user's conference and included engineers and executives from all aspects of the semiconductor supply chain.

On October 24th through the 26, we held our user conference and analyst day.

Registration from over 100 companies was twice the level of our last user conference and included engineers and executives from all aspects of the semiconductor supply chain.

We use this opportunity to reintroduce Pds and our end to end platform with its machine learning capabilities to our community.

Speaker 2: We use this opportunity to reintroduce PDFs and our end-to-end platform with this machine learning capabilities to our community.

Speaker 2: A customer space, three challenges, reaching up increasingly complex process technologies, achieving cost-effective use of 3D packaging, and working with the global supply.

Our customers' phase III challenges, bringing up increasingly complex process technologies, achieving cost effective use of three D packaging and working with the global supply chain.

With our.

Speaker 2: Integrated platform is machine learning or what we call model ops. Customers can use AI to improve control and production.

Integrated platform its machine learning or what we call model ops customers can use AI to improve control and production.

Speaker 2: Customers presenting included Intel, GF, analog devices, Renisus, ST-Michael Electronics, and Multibus.

Customers presenting included Intel GF analog devices, Renesys SD micro electronics and multi beam.

I spoke about how they rely on Pts platform to drive transformation in their R&D and production.

Cheating tremendous acceleration in technology development yield improvement and operational excellence.

Speaker 2: We were also fortunate that many of our partners presented, including Adventist, TeraDine, SAP, Siemens, AWS, IBM, and others.

We were also fortunate that many of our partners presented including advent tests Teradyne, SAP, Siemens AWS IBM and others.

Speaker 2: They demonstrate how the integration of our platform with their products enables our mutual customer success.

They've demonstrated how the integration of our platform with their products enables our mutual customer success.