Q4 2024 PDF Solutions Inc Earnings Call
Yeah.
Speaker Change: Good day, everyone and welcome to the PDF Solutions, Inc Conference call to discuss its financial results for the fourth quarter and year end 2024, ending Tuesday December 31st 2024 at.
Speaker Change: At this time all participants are in listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During the session you will need to press star one on your telephone.
Speaker Change: A reminder, this conference is being recorded.
Speaker Change: If you have not yet received a copy of the corresponding press release. It has been posted to Pdf's website at Www Dot PDF dotcom.
Speaker Change: 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 with performance growth rates and demand for it solutions P.
Speaker Change: Pdf's actual results could differ materially.
Speaker Change: You should refer to the section entitled Risk factors on page 17 through 30 of Pdf's Annual report on Form 10-K for the fiscal year ended December 31st 2023.
Speaker Change: And subsequent SEC filings the forward looking statements of risks stated in this conference call are based on information available to PDF today.
Speaker Change: PDF assumes no obligation to update them now.
John: Now I'd like to introduce John <unk>, Pdf's, President and Chief Financial Chief Executive Officer, and Art, non Rosa Pdf's Chief Financial Officer.
Speaker Change: Mr. <unk>. Please go ahead.
Speaker Change: Thank you for joining us on today's call if you've not already seen our earnings press release and management report for the fourth quarter and the full year. Please go to the investors section of our website, where each has been posted.
Speaker Change: Today I will start by reviewing 2024 with a particular focus on Q4.
Speaker Change: I will then provide our perspective on the semiconductor market and conclude with our outlook on PDF solutions prospects for the year and beyond.
I remember will then provide an overview of our financial results and his perspective on the business before we turn the call over for questions.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: A year ago, when we talked about 2024, we anticipated revenue for the first half of the year.
Speaker Change: Being roughly comparable to the previous year and then in the second half of the year, our revenue growth would approach our target growth rate of 20%.
Speaker Change: Revenue for the second half of the year was up about 16% and up 22% for the fourth quarter, each when compared to the same period during the previous year.
Speaker Change: The return to growth in the second half of the year was due to leading edge advanced packaging and advanced packaging companies, making investments in process control and yield improvement.
Speaker Change: This was reflected in our sales of Accenture your process control and he'd probably the second half of the year.
Speaker Change: For Q4, we are happy to announce that the manufacturing evaluation of the E probe converted to revenue in the quarter.
Speaker Change: The customer elected to purchase the machine early student achievement.
Speaker Change: Of the evaluation can terrorists sooner than they had anticipated.
Speaker Change: Similar to.
Speaker Change: To this customer we believe other customers.
Speaker Change: Well elect to purchase the hardware and then subscribe to the software and services on a ratable basis.
Speaker Change: As we discuss our outlook for 2025 and beyond we will discuss the implications of the pro purchases via sale model for the machine to our business.
Speaker Change: Beyond that you purchased in the fourth quarter. The majority of other bookings in the quarter were for accents and runtime licenses are some metrics control and communication software.
Speaker Change: Also in the fourth quarter, we sponsored the AI executive workshop.
Speaker Change: 140 external attendees from more than 75 organizations listened to presentations from executives and engineers from analog devices.
Several bus Intel Qualcomm.
Speaker Change: Tokyo electron as well as partner presentations from advent test S&P Siemens paradigm.
Speaker Change: There were a few clear messages.
Speaker Change: First it is necessary to organize semi structured data using semantic model to align data across the manufacturing flow.
Speaker Change: Second direct connections to the tools and other enterprise systems unnecessarily take actions based on AI.
Speaker Change: Third collaboration across the supply chain as necessary.
Speaker Change: Feedback from the attendees was fantastic.
Speaker Change: Told us that there was a good focus on tangible application. They liked the range of speakers and breath of topics and the panels provided key insights.
Speaker Change: Across the semi critical community. There is an excitement about the impact of AI ml can how long business.
Speaker Change: We are proud that Oregon with a nexus for key members of the industry to discuss this important topic.
Speaker Change: Overall, we were very excited to see growth return to the company in the second half of the year and to experience the customer interest in our products and solutions we are delivering.
Speaker Change: Turning to our view of 2025.
Speaker Change: As we go into this year, we see an industry that is very much in a similar position as 2024.
Customers in advanced logic high bandwidth memory and advanced packaging are investing while other sectors of our customer base have been more cautious outlook.
Speaker Change: From a product perspective, we will build on upon our accomplishments in 2024 for.
Speaker Change: The <unk> probe, we will expand the applications for advanced logic, including gate all around the oxide power contract NBA year loss mechanisms.
Speaker Change: Also expanding applications for advanced DRAM.
Speaker Change: We anticipate being able to ship over four machines.
Speaker Change: From a business perspective, not all the shipments will convert to revenue in the year and timing of the machine purchases could drive some additional lumpiness quarter to quarter.
Speaker Change: Like the <unk> probe sold in Q4 customers expressed to us a desire to buy the machines and then optionally subscribed application services and software.
Speaker Change: <unk> modules, including process control MLR test manufacturing analytics as well so metrics connectivity and surplus manufacturing hub are anticipated to drive most of the bookings this year.
Speaker Change: Well our revenue has declined the past few years. This year, we anticipate it recovering as manufacturing volumes from new factories, particularly in Asia are expected to drive improvements and gain share.
Years ago, our business was mostly dependent on advanced process development at foundries.
Speaker Change: Today, our business is much more balanced spread across equipment makers, foundries, idms and fabless and system companies.
Speaker Change: <unk> advanced logic to high voltage semiconductors from customers using our it systems for analytics of the most advanced packaging two discrete devices.
Speaker Change: So while the industry growth is projected to be mixed we anticipate year over year growth.
Speaker Change: Year over year total revenues to grow at a rate approaching 15%, albeit with some potential lumpiness quarter to quarter associated with the <unk> sales.
Speaker Change: I want to thank the customers employees contractors and shareholders that helped the company achieve its success in 2024.
Speaker Change: And look forward to working with you all in 2025, I will now turn the call over to <unk> for a more detailed comments on our results.
Speaker Change: John.
Speaker Change: Thank you John Good afternoon, everyone. Good to speak with you again today, we are pleased to review the financial results for the full year and the fourth quarter of 2000.
Speaker Change: As John said, we posted our earnings release and management report in the Investor Relations section of our website we.
Speaker Change: We expect to file our annual report on Form 10-K, with the SEC by the end of February after our 2024 audit is complete.
Speaker Change: As a result, all financial results described in this call.
It should be considered preliminary and are subject to change to reflect any necessary adjustments or changes in accounting estimate.
Our identified prior to the time, we filed our 10-K.
Speaker Change: Please note that all the types of 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 Change: We are pleased to again report record quarterly and annual total revenues.
Speaker Change: We finished the year strong with Q4 total revenues of $50 1 million.
We are pleased that our total revenue for the quarter grew 22% year over year ahead of our long term growth rate target model.
Speaker Change: For the full year 2034, we generated record total revenues of $179 5 million versus $65 8 million in 2023.
Speaker Change: At 8% year over year increase where we saw nearly all of the growth during the second half of 2034, which increased 16% over the comparable period of the prior year.
Speaker Change: Our analytics revenue grew 22% in Q4 over the comparable period of the prior year.
Speaker Change: 11% on a year over year basis for the full year 2024.
Speaker Change: During the fourth quarter, we booked multiple extensive renewal.
Speaker Change: Strong growth in symmetric licenses driven by increased run time orders from customers.
Speaker Change: We were particularly pleased with the momentum of our DIY E systems and.
Speaker Change: In the fourth quarter.
Speaker Change: Including importantly, the successful conversion of an evaluation to a completed sale.
Speaker Change: As customer based in Asia.
Speaker Change: This marks three of the major leading edge global semiconductor companies now on <unk> platform.
And validate the success, we believed we would see for the investments we made.
Speaker Change: We're also pleased with the improvement we saw in our integrated yield ramp revenue for the fourth quarter compared to the prior quarter and the same quarter of the previous year.
Speaker Change: Overall for the full year, we are pleased with our revenue growth.
Speaker Change: Part of the <unk> revenue decline, which was more than offset by the analytics revenue growth.
Speaker Change: Our analytics revenue accounted for 96% of the total revenue for the quarter and 94% of the total revenue for the full year.
John: This percentage may vary quarter to quarter, depending on the anticipated increases in gain share in our IR and product portfolio mix and timing of machine sales as John mentioned within analytics.
John: Just as we highlighted for the last few years on our earnings call regarding full year 2022, a pretty great results. It is worth noting for this year 2024, as well that our full year analytics revenue for 2024, it was more than the total company revenue of the prior year 2023.
John: Noteworthy achievement, we felt to repeat for another year in a row.
John: The fourth quarter, our gross margin was 72% and we reported EPS of <unk> <unk> per share.
John: On a full year basis, our gross margin was 74%.
John: We reported EPS of <unk> 84.
John: For full year gross margin of 74% moves us towards our target model gross margin of 75% compared to 73% in the previous year.
John: Despite the fact that gained share which was very high gross margin decreased on a year over year basis, we were able to grow gross margin in part due to overall growth, but also driven by better control of our spending.
John: Turning to operating expenses, we invested in R&D to advance our product roadmap at our analytics platform.
John: Increasing our R&D spend by 4% on a full year over year basis.
John: Our combined sales and marketing and G&A expenses, our SG&A expenses were higher by 16% on a year over year basis, predominantly driven by increased sales and marketing spending to meet increased customer pre sales activity.
John: On the G&A side, we incurred expenses related to ongoing litigation against the vendor, which we expect to decrease overtime.
John: For the full year 2024, we reported EPS of <unk> 84, this year and EPS growth of 15% versus the prior year.
John: During the year, we generated positive operating cash flow of approximately $10 million.
John: <unk> spent approximately $18 million capex related to primarily our <unk> ecosystem at approximately $7 million on share buybacks.
John: We are pleased with another year of positive operating cash flow generation consistent with our history.
John: Turning to the balance sheet, we ended 2034 with cash and equivalents and short term investments of approximately $115 million.
John: Impaired to approximately $136 million at the end of 2023.
John: The decrease was due primarily to the spending that we just discussed.
John: We are proud of our performance in 2034, I guess, the macro environment and over the long term, we remain committed to our target model. We set at our analyst day in October 2023 of 20% year over year total company revenue growth rate, 75% gross margin and 20% operating margin.
John: Now turning to our financial outlook for 2025, we look forward to another year of growth our outlook for the year reflects both the short term weakness in the semiconductor industry and the strength of our pipeline bolstered by the macro trends of distributed manufacturing energy electrification in AI, which we expect to drive growth.
John: We're also pleased with the success of the EFI ecosystem, including in particular, the sale of assistant with other leading edge customer during Q4 hundred 34.
John: Given the customer engagement and activity Youre seeing for DIY in the overall market, we expect to ship multiple machines during 2025.
John: As we see increased customer interest in DFS Epo system, we look at our total business is composed of one <unk>.
John: <unk> base business, driven by a diverse and growing product portfolio mix of excessive offer leading edge software system as the metric connectivity connectivity software.
John: Two as we're just starting to grow the book of business on the April as an equipment sale, we can expect lumpiness quarter over quarter.
John: On an annual basis, we expect this business to grow as we are entering the adoption phase.
John: To reiterate John's comments in our press release for the full year 2025, we expect the growth rate of our core revenue to approach, 15% on a year over year basis.
John: With that I'll turn the call over to the operator to commence the question and answer questions operator.
Speaker Change: Thank you Mr. Rozzer, ladies and gentlemen, if you have a question at this time. Please press star one one of your telephone.
John: Using a speaker phone please lift the handset before asking your question.
Speaker Change: Please wait one moment for our first question.
Speaker Change: And our first question.
Speaker Change: Okay.
Speaker Change: It comes from Blair Abernathy with Rosenblatt Securities. Your line is open.
Alright, thanks, good evening gentlemen.
Speaker Change: Hi.
Speaker Change: John I was wondering if you could just maybe provide us with a little more color on the <unk> probe.
Just particularly on the pipeline so you've talked about maybe several deals potentially this year.
Speaker Change: Are you looking to add additional new customers. This year are these follow on sales and the other question I had was just around the backlog. It came in around $2 21 was $2 39 in Q3.
Speaker Change: Maybe some sense of what's happening in the backlog as well.
Speaker Change: Sure.
As far as the appropriate yes, it will be a combination of.
Speaker Change: <unk> sales in existing customers as well as new sales and new customers from an application space.
Speaker Change: As I said in my prepared remarks will be a combination of advanced logic as well as advanced DRAM, we did some pilot.
Speaker Change: In.
Speaker Change: Hi.
Speaker Change: Q3, and Q4 on DRAM with a couple of customers one in particular and we anticipate a very.
Speaker Change: Very.
Speaker Change: Very positive results for DRAM in this.
Speaker Change: For the <unk> probe.
Speaker Change: The show some things I think are quite impressive to their customer base again, a unique capability.
Its understanding of the design as it looks.
Speaker Change: For yield issues.
Speaker Change: So yes.
Speaker Change: As I said in my prepared remarks, we do believe we will ship.
Speaker Change: Greater than four machines, how many we convert to revenue this year is a little bit.
Speaker Change: Question Botox right. So we're being a little conservative on how we do that in part because as we've learned this first sale right. When you turned over the title of the machine as opposed to subscribing yet there was a lot of other paperwork and things we needed to do and the requirements that they have when they take kind of the machine. So.
Speaker Change: This change I think it is something we are learning we learned it for one customer we anticipate learning it for others.
Speaker Change: That gets to your question on backlog right have these been subscription machines you would've seen.
Speaker Change: With the.
Speaker Change: Where that we would've done it would've probably change the backlog characteristics a little bit this will create a.
Speaker Change: Little bit higher turns percentage of revenue in the year than we've had in the past and this is kind of the nature of the change initially I think we're not seeing that much difference in revenue as we build a book of business. There we will have a higher revenue at a higher turns right.
Speaker Change: Likely as we look out beyond 2025.
Speaker Change: With this model shift.
Speaker Change: Okay, Okay great.
Speaker Change: And in terms of.
Speaker Change: What does the what's the.
Speaker Change: I guess the pipeline of new customers looking at this I mean is it broadening out do you have the capacity to to.
Speaker Change: Keep star.
Speaker Change: Starting the sales process with new customers.
Speaker Change: Yes.
Speaker Change: We like.
Speaker Change: The machine that we shipped.
Speaker Change: <unk>.
Speaker Change: Actually it was installed in the first quarter of last year that we converted to revenue. This year, we have machines that we will ship on a demo basis to customers in this first half of the year.
Speaker Change: We anticipate converting in subsequent quarters potentially in this year and into early next year.
Speaker Change: Basically making sure that as we look across the application space, we're getting enough machines in enough different people's hands. So because if you just kind of think through.
Speaker Change: The business when you make a transition like that you want enough customers going on so that it's not.
Speaker Change: You're not dependent on any one so we are probably.
Speaker Change: Sure.
Speaker Change: Going more forward in the first half of the year, starting a number of new customer engagement and selling.
Speaker Change: Effectively a small number of machine Thats, why we said, we set the lumpiness quarter over quarter.
Speaker Change: To set up for the second half of this year and into next year on a higher number of customers ongoing with the program we had right.
Speaker Change: We've learned a lot about this honestly you got this manufacturing at all the positives that got us that got us a customer really seeing what it could do in manufacturing facility not an R&D facility, which then they came back to us in Q4 with an early Q1 with a whole bunch of additional applications for a number of different process technologies.
Speaker Change: On that I thought the machine it be suited for and we thought okay, we need to figure out how we get.
Speaker Change: <unk> a lot of People's hands, right now that could be very valuable to us and so that's what we're doing in this year.
Got it so sounds like activity levels, certainly picked up from earlier.
Speaker Change: A year ago.
Speaker Change: Yeah, absolutely yeah, Okay, great. Thank you I'll get back in the queue.
Speaker Change: Thank you.
Speaker Change: Our next question comes from William Jellison with D. A Davidson <unk> company. Your line is open.
William Jellison: Hi, good afternoon, thanks for taking the questions John the first one is for you.
Speaker Change: Over the last few months.
Speaker Change: PDF and sometimes yourself, specifically do very active on the publication circuit talking about model ops and curious as you sit here today.
Speaker Change: What has been the rest activity to that product so far and how important is customer adoption of that product to the growth outlook. This year.
Speaker Change: Yes, that's a great question.
Speaker Change: Yes, it's been quite high.
Speaker Change: We converted customers in 2024 onto model ops, we expect we have a number of pilots ongoing model output increase in sales and marketing expenses in part due to model up in part due to other capabilities like guide analytics, which also uses AI.
Speaker Change: I felt like putting out to customers.
Speaker Change: Because we measure data, we can see what percentage of the data and engineer actually looks like.
Speaker Change: So when a customer my store 500 terabytes of data the engineered may when we look at your engineers may only looked at $25 28 or 30 terabytes.
Speaker Change: Terabytes and other was $5.
Speaker Change: 8% of their data so you really.
Speaker Change: Sure.
What.
Speaker Change: AI can look at all the data and then make sure the engineers looking at the 5% or 8% that Hasnt real signal so.
Speaker Change: Manuel.
Speaker Change: For online applications, the offline applications <unk> analytics, both of those things we have a number of pilots ongoing they will be important to.
Speaker Change: Our business in 2025 also as I said in my prepared remarks, what customers are learning as we've gone and put this in place and done pilots they need to have all their data properly aligned so now they're going back and realizing okay. I wasn't doing a very good job in getting other net of fields correctly in my systems one of the speakers that are.
Speaker Change: AI conference talked about that and you really can't apply AI until you do that and they are also learning I need to be able to talk to the other systems, whether that's equipment and.
Speaker Change: Adam intestine, teradyne talked about that on a user.
Speaker Change: The AI conference or just the ERP system I need to know where that wafer is going to go and be tested at wafer sort of final test.
Speaker Change: AI will have direct impact on our business for things like model Arps and got analytics, but it will also have an indirect impact on.
Speaker Change: Sure.
Speaker Change: The accenture cloud deployments and the scale of those.
Speaker Change: Also the scale of the test deployments.
Speaker Change: And the scale or the deployment of.
Speaker Change: Sapiens manufacturing hub and the connection to <unk>.
Speaker Change: ERP Mes systems.
Speaker Change: So.
Speaker Change: There'll be the direct impact on the AI related products and then the indirect impact on the things that customers need to get done in order to apply AI, whether its ours.
Speaker Change: Anybody else's.
Speaker Change: Hey, tuna, I think you'll see more announcements in these next couple of quarters on this stuff.
Speaker Change: Great. Thank you John.
Speaker Change: And then add on for you I wanted to ask it looks like the accounts receivable balance was quite elevated at the end of the quarter, which would have impacted cash flow.
Speaker Change: Is there any anything in particular that is hurting collections on that front.
Speaker Change: Alright, well thanks for the question Noah.
Speaker Change: Fair question, we're actually quite pleased.
That was obviously, our first half when we saw that Duane, it's a matter of timing and billing and of course, the new conversion of the Brookdale that John talked about as well.
Speaker Change: And we've actually looked at how far we are into the collection is already at the point of this earnings call and we feel pretty good about the progress. We've made so nothing concerning there and actually look forward to collecting that cash and then reporting good numbers with those cash collections.
Speaker Change: Great. Thanks, Amit.
Speaker Change: Okay.
Speaker Change: Thank you as a reminder, if you'd like to ask a question. Please press star one one.
Our next question comes from Gus Richard with Northland Capital markets. Your line is open.
Gus Richard: Yes, thanks for letting me ask a few questions.
Gus Richard: I just wanted to understand a little bit better the terms of the contract and the sale. There is theres two elements theres the applications and software licensing which is recurring revenue and then there is.
Gus Richard: The tool itself and I kind of look at the AAR as popping up and I'm, just trying to make sure I understand how how the steelworks and is this going to be the model for for DSI sales going forward.
Gus Richard: Yes so.
Yeah.
Gus Richard: We will still subscribe the entire systems, including the machines for customers that want that we do have customers that prefer that but.
Gus Richard: That want to take title for the machine.
Gus Richard: So what we've moved to is the machine title transfer Thats why.
Gus Richard: And they owe that money upfront, that's the AAR balance increase.
Gus Richard: That you saw.
Gus Richard: And then.
Gus Richard: As subscribed for software.
Gus Richard: Application services.
Gus Richard: Even support services on a machine.
Thereafter, and that is optional to them they can do that or not.
Gus Richard: When you look at the machine compared to.
Gus Richard: Our regular E beam machine it does some things very well, but if you want to scan. If you went to our user conference and stuff, where you can take designs and know exactly where to go look into designs, but the combination with Siemens.
Gus Richard: Being very design of where and the way that.
Yes.
Stuff that you would see.
Gus Richard: Subsequent software sales, sometimes at the same time as equipment, sometimes it's stuff that comes in a quarter or two later.
Gus Richard: Yes.
Gus Richard: And I, just kind of want to understand the <unk>.
Gus Richard: Revenue recognition here.
Gus Richard: Answer title, but is it factory accepted is that.
Gus Richard: Is there.
Gus Richard: Yeah.
Gus Richard: A neat.
Gus Richard: It's a done deal, but or is there any part of the acceptance still to go.
Gus Richard: Eric.
Speaker Change: It was complete.
Speaker Change: The revenue recognized for the machine itself has been done there is some support portions that are not recognized that will be recognized over the next year.
<unk> emphasis on.
Got it and then.
Speaker Change: Then the next question I have is there's been management changes within a couple of your key customers.
Speaker Change: And then and you also talk about.
Speaker Change: Yes.
Speaker Change: Tuning out emails rather than revenue and machines in the first half.
Speaker Change: I'm just wondering if if the management change at these couple of companies is sort of having an impact on your ability to close close business.
Speaker Change: Yes.
Speaker Change: Yes of course, we're always very careful about commenting on any specific customer I don't know that there's any real impact on leadership changes and the customers as I said in my prepared remarks, though.
Speaker Change: This is definitely a dickens period of the best of time and worst of times, when we look across our customer base right.
Speaker Change: So.
Speaker Change: We have some customers we've seen pull in and accelerate.
Speaker Change: We've seen other customers being more cautious if we'd been betting people at the beginning of the year, where we thought we were going to see Q4 come in we probably would've guessed a different set of customers.
Speaker Change: We looked at Q3 and Q4 Q.
Speaker Change: Q3, and Q4, we saw stronger participation from our Asian customers.
Speaker Change: As I said in my prepared remarks on software and control systems for advanced packaging in logic and the April we probably have thought that would go a little bit different than it did if we kind of if you had asked me to be.
Speaker Change: Be a betting person in February.
Speaker Change: 2024 versus with hindsight in 2025.
Speaker Change: But I think that kind of get to the point I put in my prepared remarks, we have a business now that is very diverse.
Speaker Change: <unk> of any single customers come down tremendously the percentage of different parts of the market have come down right a year ago. I was very excited about the silicon carbide market most of our customers and silicon carbide or not doing great right, but it really hasnt impacted much our extensive business because our customers in advanced packaging picked a lot of that up.
Speaker Change: Today.
Speaker Change: We are rapidly moving to a place where our advanced logic business is going to be in that 40% range. There I put the.
Speaker Change: Characterization.
Speaker Change: <unk> business.
Speaker Change: 40 plus percent.
Speaker Change: Fabless idms system companies using.
Speaker Change: Analytics for test product engineering yield engineering, and then a growing percentage of the equipment category as well as they get more and more software where you probably saw that at our conference.
Speaker Change: Demonstrated on digital training and analytics AI for equipment and the equipment vendors that spoke at the conference on their excitement there and that will be a growing piece of our business, but yes, I mean, I don't think we focus too much on the leadership change and if you go back to 2014 to 15 win.
Speaker Change: 85% of our revenue was three accounts, yes, I was very concerned about CEO changes at all of our customers today.
Speaker Change: Just regular course of business.
Speaker Change: Okay got it and then.
Speaker Change: There's clearly a shortage of course capacity.
Speaker Change: A lot of the Oss are bringing up what I call co was light.
Speaker Change: And at the same time Im seeing.
Speaker Change: The complexity of these triplets assemblies.
Speaker Change: Getting more so.
I'm just wondering is that.
Are those the things that are driving the advanced packaging or are you sort of seeing a flurry of activity over the last couple of quarters because of this.
Speaker Change: Yes, so far our business on advanced packaging has been with the most advanced parts of the market.
Speaker Change: Foundries and idms that are really kind of leading the forefront of the most sophisticated but the point you bring up is exactly what we think is going to be impacting our business as we get these next years, because when I meet with those leaders, particularly at some of the companies. They really don't want to build out all the capacity they want to rely more and more.
Speaker Change: <unk> partners for doing a lot of the parts of that manufacturing flow in test flow that.
Speaker Change: They are really very well skilled at doing die attach testing et cetera.
Speaker Change: The manufacturing floor when it gets to scale right now I think it's bespoke and very targeted to a small number of customers with very important and very high volume products, but it's not a.
Speaker Change: It's not.
Easy to use technology, so far for a lot of companies. So as that happens you're going to see pieces of that flow move out to those companies. We think thats going to have a profound change on how if you just look at that manufacturing flow.
Speaker Change: It's a very complex process. It relies on amazing performance precision out of equipment, and it's very specific and bespoke to the products. The die sizes. The mechanical stress the amount of spending on the materials et cetera. So really the collaboration across those three parts of the market are going to more and more be required.
Speaker Change: We think that will impact our business in 2025 and 26 as we bring out more next nodes to that part of the market and the dialogue that we've been having with our equipment customers right now, but so far in the second half of the year, it's been leaders, where they've got tremendous systems.
Speaker Change: And capability process expertise internally rely less on the equipment vendors don't need as much help from their customers, we think going forward youre going to see more and more equipment company participation and that work is it goes to the <unk> more and more of the.
Speaker Change: Customers.
Speaker Change: <unk> engaged in the qualification.
Speaker Change: Got it and then just last one from me I apologize if some of your questions on an HCM DRAM and the.
Speaker Change: The complexity there are ya.
Speaker Change: Starting to penetrate those accounts.
Speaker Change: Makes sense.
Speaker Change: And back end applications.
Speaker Change: Yes, that's a great question, because we have historically not made a lot of effort on the software side and that and then.
Speaker Change: The memory area.
Speaker Change: What was really.
Speaker Change: I had a positive for me.
Speaker Change: An executive.
Speaker Change: Their team to quickly send us wafers for the April and within a month no changes to the system.
Speaker Change: <unk> was able to show them that you can do with you probe on the process technologies that go into HBM rate, particularly on the silicon processing is very advanced.
Speaker Change: And processing wafer processing.
Speaker Change: And that kicked off a whole flurry of work in the fourth quarter, which is why in my prepared remarks, I talked about DRAM is very much related to the HBM work, but it's primarily on the silicon processing so far in primarily on the April.
Speaker Change: It's re introducing us to those that part of the market that we had to be candid with you had neglected for many years and so now we're starting to see opportunities beyond the <unk> probe into <unk> and other things that probably were a little bit tone deaf too.
Speaker Change: To be candid with you because a lot of our century business is really with Fabless and system companies.
Speaker Change: Idms that are basically asset light manufacturers really even for them most of the silicone analytes and extensive is coming out of foundries.
Speaker Change: So this is kind of the Eva.
Speaker Change: Repo markets kind of introduces type part of the market and we will explore that as we get into 2025.
Speaker Change: Right now in our anticipation of our outlook for 2005 and 26 when it comes to memory, it's primarily because of the program.
Speaker Change: Got it got it very helpful. Appreciate it.
Speaker Change: Let me pass it on.
Speaker Change: Thank you.
Speaker Change: Thank you again, if you'd like to ask a question. Please press star one one.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: At this time there are no more questions, ladies and gentlemen. This concludes the program. Thank you for joining us on today's call good day.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: [music].
Speaker Change: <unk>.
Speaker Change: [music].
Speaker Change: Yes.
Speaker Change: [music].