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Date

Thursday, May 7, 2026 at 5 p.m. ET

Call participants

  • Chief Executive Officer — John K. Kibarian
  • Chief Financial Officer — Adnan Raza

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Takeaways

  • Total Revenue -- $60.1 million, representing a 26% increase year over year, driven by platform solutions and major bookings.
  • Platform Revenue -- $50.9 million, up 36% year over year, attributed to Exensio software strength and a full quarter of SecureWise contribution.
  • Volume-Based Revenue -- $9.2 million, down 12% year over year, primarily due to lower gainshare.
  • Backlog -- $246 million at quarter-end, representing a 9% year-over-year increase.
  • Gross Margin -- 76%, compared to 77% in the previous quarter, affected by a modest cost of revenue increase.
  • Operating Margin -- 25% in the quarter, up from 24% in the prior quarter and 18% a year ago.
  • Operating Profit -- Approximately $15 million, 75% above the $8.6 million achieved in the same quarter last year.
  • Net Income -- $12.6 million, representing 56% growth over the comparable quarter, with EPS at $0.31, up 48% year over year.
  • Cash, Equivalents, and Short-Term Investments -- $31 million at quarter-end, down from $42 million in the previous quarter, driven by approximately $10 million of CapEx, primarily for eProbe system build-out.
  • Revolving Credit Facility -- $30 million unused and newly expanded, now available for future liquidity needs.
  • eProbe Shipments -- One eProbe machine shipped in the quarter; management confirmed the goal to ship six machines for the year, with approximately two of these to net new customers and one as a demo unit.
  • SecureWise -- Successful integration and product improvement marked by expanded customer adoption among fabs, equipment vendors, OSATs, and fabless companies.
  • AI-Enabled Exensio Analytics -- Development on schedule, with a beta release targeted for the third quarter, and customer interest described as "very high."
  • Revenue Growth Outlook -- Management reconfirmed its expectation for year over year total revenue growth consistent with the 20% long-term target.
  • Operating Model Progress -- Management affirmed continued progress toward the long-term targets of 27% operating margin and 77% gross margin.
  • CapEx Spend -- Step-up in quarterly capital expenditures is primarily demand-driven to support eProbe system delivery plans.

Summary

PDF Solutions (PDFS 0.81%) demonstrated broad-based growth in analytics platforms, product adoption, and operating efficiency, with management highlighting deeper customer engagements and accelerating progress toward long-term financial targets. AI integration into Exensio and eProbe, alongside SecureWise network expansion, were portrayed as catalysts for both competitive positioning and future bookings diversification. Management stated, "this is the most interesting time that I have ever seen for the industry and PDF Solutions in particular," reflecting both increased industry demand for AI-driven manufacturing and customer recognition of the company's leadership in this transition.

  • Large bookings in the Exensio Test and fab control software segments contributed meaningfully to the backlog increase, with "double-digit million-dollar" contract values cited by management.
  • Management indicated that eProbe business is subscription-oriented, suggesting a recurring revenue base may build as installed units grow from six at the end of last year to an expected 12 by year-end, with most units "subscribed over that time period."
  • Management clarified that volume-based revenue volatility is outside its direct control but expects margin leverage as scale and customer shipping activity grow.
  • SecureWise adoption expanded into fab operators, OSATs, and fabless segments, with pilots underway to further extend the solution’s reach beyond equipment makers.
  • Product innovation is targeting leading-edge semiconductor customers, focusing specifically on AI capabilities within Exensio Characterization and eProbe design integration.

Industry glossary

  • Exensio: PDF Solutions’ analytics software platform providing yield, test, and reliability data management and analysis for semiconductor manufacturing.
  • eProbe: An electron-beam based inspection tool, typically sold on a subscription model, used for non-contact, in-depth analysis of semiconductor wafers.
  • SecureWise: A secure, remote equipment access and monitoring platform enabling advanced data services and support for manufacturing tools worldwide.
  • OSAT: Outsourced Semiconductor Assembly and Test—companies providing independent semiconductor assembly and testing services to device manufacturers and fabless companies.
  • CV (Characterization Vehicle): Reference test chip and measurement systems used to collect and analyze process characterization data in semiconductor manufacturing environments.
  • IDM: Integrated Device Manufacturer—a company that designs, manufactures, and sells its own semiconductor devices.
  • Gainshare: A volume-based revenue component calculated from the customer’s production volume or performance outcomes.

Full Conference Call Transcript

John K. Kibarian: Thank you for joining us on today’s call. If you have not already seen our earnings press release and management report for the first quarter, please go to the Investors section of our website where each has been posted. For today’s call, I will provide a summary of the past quarter, our perspective on the environment, and outlook for the remainder of the year. The first quarter was a good start to the year as we made solid progress on our mission to position PDF Solutions, Inc. as the leading commercial data analytics and mission-critical platform for the semiconductor industry. This was visible in the nature of the bookings, business activity, and our product development during the quarter.

From a bookings perspective, Exensio and eProbe were particularly strong. Exensio’s strength was primarily from larger deployments, including an enterprise-wide deployment for Exensio Test at a large IDM. Symmetrix’s booking strength came in part from our larger customers placing orders for runtime licenses in anticipation of additional machine shipments in future quarters. Total revenues were up 26% compared to Q1 of the prior year; Adnan will provide revenue details in his prepared remarks. We shipped one eProbe in the quarter and anticipate that machine beginning to contribute to revenue in Q2. Our capital investments in eProbe were meaningful in the quarter as we build additional machines to support our goal of shipping six machines this year.

Selling activity was very high across all aspects of the semiconductor industry from hyperscalers to equipment vendors. We did see significant activity in our characterization and DFI business as customers look to develop advanced processes and products. We anticipate that this activity will result in strong bookings in this category as the year progresses. Development of our new AI-enabled Exensio analytics systems that we announced at our Users Conference in December 2025 remained on track in Q1, and we anticipate a beta release in the third quarter. Customer interest has been very high for this capability. In the quarter, we celebrated our first anniversary with SecureWise as a part of PDF Solutions, Inc.

Our SecureWise system provides secure end-to-end remote access and monitoring for manufacturing equipment, enabling the equipment companies to provide better support and advanced services for the equipment installed at fabs all over the world. During the past year, we invested in R&D to improve the product and services, expanded the customer base to include fab owners, not just equipment makers, and now we are expanding the network into the OSATs and fabless. As collaboration in the chip industry moves from being driven by humans to being led by AI, we believe that remote connectivity enabled by SecureWise will increasingly be important. Customer enthusiasm for our stewardship of SecureWise has been strong.

Overall, it was a strong start to the year, both in terms of our traction with customers and our product development. Now let us turn to our perspective on the environment. I believe this is my one hundredth quarterly conference call with investors, and as I reflect on my tenure, having the honor and opportunity to serve our stockholders, customers, and employees, I realize that this is the most interesting time that I have ever seen for the industry and PDF Solutions, Inc. in particular. I do not say that lightly, and in fact, I have never said that before. Over the years, we have experienced many semiconductor cycles. Each time, we are told this one is different.

I have little doubt that this cycle can overshoot like all the past ones. What is different this time is how AI is changing the way engineering is being performed everywhere. A recent business trip in Asia this past quarter highlighted that for me. What I found interesting was that in eight of the nine customer meetings, the CEO attended and was very interested in learning how AI is being used in R&D and manufacturing across the industry from PDF Solutions, Inc.’s vantage point. The inference that I drew from this is that executives realize that AI is having the most profound effect on how companies operate and may result in changing the nature of the industry and, hence, companies.

These CEOs see PDF Solutions, Inc. as a leader in bringing AI to manufacturing, and they want to understand our perspective on the transformation that is happening and our vision for manufacturing, product and test engineering, and yield ramp as a result of AI. What this means for PDF Solutions, Inc. is that this is the most interesting business environment we have experienced in our twenty-five years as a listed company. As the PDF Solutions, Inc. platform transitions from a system used within a company to increasingly an AI and analytics platform used across the industry, we believe we can deliver and capture more value as we help our customers seize on the opportunities that our platform can provide them.

This is resulting in deeper collaborations with our customers and ultimately can result in larger engagements with them. Given our progress in Q1, we reconfirm our total year-over-year revenue growth for this year to be consistent with our 20% long-term target. I want to thank all the PDF Solutions, Inc. customers, employees, and contractors for their efforts during the quarter. Now I will turn the call over to Adnan, who will review finances and provide his perspective on our results. Adnan,

Adnan Raza: Thank you, John. Good afternoon, everyone. Good to speak with you again today, and I hope all of you and your families are well. We are pleased to review the financial results for 2026. As mentioned, our earnings release and management report are posted in the Investor Relations section of our website. Our Form 10-Q was also filed with the SEC today. Please note that all of the financial results we discuss on today’s call are on a non-GAAP basis, and a reconciliation to GAAP financials is provided in the materials on our website.

John K. Kibarian: We are pleased with the results of Q1.

Adnan Raza: With multiple large bookings during the quarter, we secured a double-digit million-dollar Exensio Test Operations booking to help our customer manage geographically distributed operations, an Exensio renewal with a large fabless customer for better analytics, and a booking for fab control software for a large fab customer in Asia. We ended the quarter with a backlog of $246 million, up 9% versus the same quarter of last year. Total revenue for the first quarter was $60.1 million, up 26% versus the same quarter of last year. Our Platform revenue was $50.9 million for the quarter, up 36% versus the same quarter of last year, driven by strength in our leading-edge solutions, Exensio software, and one complete quarter of SecureWise revenues.

Volume-based revenue for this quarter was $9.2 million, down 12% versus the same period of last year, primarily due to lower gainshare. Our gross margin for the first quarter came in at 76%, versus 77% last quarter, driven by a small increase in cost of revenue with a smaller revenue base as expected. Our operating margin for the first quarter came in at 25%, versus 24% for the prior quarter and 18% for the same quarter a year ago.

We are pleased that on a dollar basis, we generated approximately $15 million of operating profit this quarter, slightly higher than operating profit during last quarter, and 75% higher than the $8.6 million operating profit in the same quarter of last year. We remain cognizant of our long-term target operating margin of 27% and continue to make meaningful progress towards that goal. Before we updated our long-term targets in December 2025, we had achieved our prior long-term targets set in 2023 within two years of setting those prior targets.

As we reflect on our current target model of 27% operating margin and achievement of 24% during 2025 and 25% for 2026, we are happy to note that we are making faster progress towards our long-term target than the last time. Net income for the quarter totaled $12.6 million, or $0.31 per share, compared to $8.1 million, or $0.21 per share, in the same quarter a year ago, up 56% for net income and 48% for EPS on a year-over-year basis. We anticipate improvements in EPS as we approach the long-term model due to the scale the business is achieving, as our cost to operate the business is rising slower than our revenues. Turning to the balance sheet.

We ended the quarter with cash, cash equivalents, and short-term investments of $31 million, compared to $42 million at the end of the prior quarter, with the change primarily driven by approximately $10 million used for CapEx needs, related primarily to building eProbe systems and fulfilling the customer demand we have spoken about. Given the demand we are seeing, we expect to increase our CapEx spend for this year versus last year, balanced by customer collections, such that we expect to grow our cash balance over the coming quarters, particularly in the second half of the year.

After the quarter close, we also expanded our revolving credit facility and have $30 million of unused revolver credit facility now available for use by the company as needed. As we look to the rest of the year, we reiterate our expectation that 2026 revenue will grow year over year consistent with our 20% long-term revenue growth target, and that we will make meaningful progress towards our long-term target operating model of 27% with gross margin of 77%. With that, I will now turn the call over to the operator. We will now open the call for questions. Operator?

Operator: Certainly. Ladies and gentlemen, if you do have a question at this time, please press 11 on your telephone. Our first question comes from the line of Blair Harold Abernethy from Rosenblatt Securities. Your question, please.

Blair Harold Abernethy: Thanks, guys. Nice quarter. I just wanted to, John, maybe if you could give us a little more color on how you are doing with the eProbe, particularly around new customers. What is that pipeline looking like? And you said you are on track for about six shipments this year. How much of that is net new customers?

John K. Kibarian: We expect about a third of them to end up at net new customers and the others to be repeat orders at existing customers, and maybe not all of them directly contributing to revenue this year. One of them will be a demo machine, so probably five of the six will be revenue generating. One will be demo. Two will be at new customers. The other four should be at existing customers, at least as it looks now.

Blair Harold Abernethy: And looking ahead to 2027—I know it is only May here—but how are you thinking about how the pipeline is developing for next year?

John K. Kibarian: It is a great question. We do see quite a bit of interest. We are trying to build as many additional machines as we can. We have committed to six. We are looking to see what we can do about additional. We do have interest to be able to ship additional demo machines, and it is gated by our ability to execute. What we do not get to this year, we will start serving next year.

Blair Harold Abernethy: Okay, great. And then on SecureWise, how is that pipeline developing now that you have had it for a year?

John K. Kibarian: Yes, thank you. A couple of things have happened. First, as I mentioned in my prepared remarks, we started providing service directly to the fabs. What we found was fabs also have people all around the world, and the security features that SecureWise provides—the ability to have a log of who was looking at what data when and what machine when, auditable for a couple of years—is very valuable even when it is within the same company. Starting last year, we started selling to the fabs. At our Users Conference, Intel talked about how they standardized on SecureWise.

What that has also done is gotten a lot of the equipment vendors—when we bought the company, the largest equipment vendors in the world were the heaviest users of SecureWise data and also the biggest customers because they had developed the most services, usually related to AI, that provided value by taking the data from the machines, analyzing it at headquarters, and providing back updated models and value-added capabilities—but every equipment company wants to be able to do that.

I think the Intel announcement gave a number of other equipment companies the realization that this was going to become more available, and so we have started picking up and have quite a deep pipeline to expand the business with what I would say is SecureWise classic—the business with equipment vendors. Also, we have been picking up more business with the fabs, and as I said in my prepared remarks, more recently, as we look at the OSATs and the fabless and even the foundries as they go out to those facilities, we start getting interest in people connecting front end to back end as advanced packaging becomes more important—back-end packaging as the testing and production is becoming more important.

So we have got pilots ongoing to bring SecureWise out to that part of the community too, leveraging the fact that we already had DEX services there, which was our own historical system, to many of the OSATs as well. So it has been a natural extension, bringing the additional capabilities SecureWise provides out to that part of the market, and now we are going into that. That is our big activity for the second year of our stewardship of the product.

Blair Harold Abernethy: Okay. Great. Thanks very much.

Operator: Thank you. Our next question comes from the line of Clark Joseph Wright from D.A. Davidson. Your question, please.

Clark Joseph Wright: Awesome. Thank you. I would like to start with a question for Adnan around the CapEx guidance that you brought up with the step-up that we saw in Q1. Could we maybe parse through whether that is demand driven—where you are seeing CapEx up front in order to supply eProbe systems later this year—or if there is anything more related to the long-term objectives of that business?

Adnan Raza: As you have heard in our prior remarks, and as we are confirming today, one out of the six machines that we targeted for this year shipped. If you look at our installed base that we had spoken about—six machines through the end of last year and then shipping six this year—that is a meaningful step up we are trying to get to this year, and that spend is to make sure that we are positioned well to meet that demand. Some of it is starting to think about the future, but it is mostly related to current demand that we need to meet for this year.

Clark Joseph Wright: Got it. Additionally, last year 53% of revenue came from the top three customers based on your disclosures in the 10-K. Can you provide any color on the conversations you are having right now? You referenced numerous times the points around demand and interest. How do you expect these large relationships to grow this year—any upside potential opportunities within that base?

John K. Kibarian: Sure. Always in our business, the largest bookings follow an 80/20 rule—the top 20% drive a high percentage of the bookings volume, typically—and we expect that again this year. You are correct that it is broadening in terms of the number and types of customers. Before, we had a top-20 list; now we have equipment companies in the top-five list, and that is growing quite meaningfully. Also, we see with what we are doing with Exensio a lot of opportunity to expand in the core fabless and merchant semiconductor IDM list. So we do expect this year the bookings to broaden out.

We do have a couple of customers that are very large, significant customers that we do expect renewal bookings with this year too. The exact ratio, Clark, I am not so sure about, but I think the volume of bookings this year will have a mix that is weighted a little bit more in terms of numbers of newer significant customers; in terms of dollars, probably the repeat customers may be some of the bigger dollar amounts.

Clark Joseph Wright: Got it. That is helpful. One last thing as I was going through the Q, I wanted to understand the margin implication. Looking at gainshare and Advantage as revenues were down year over year, should we expect margins to benefit from increased share there, or are you not expecting additional gainshare revenue going forward, at least on the growth side?

John K. Kibarian: The volume-based part of the business is the least in our control—how customers ship volumes, how much data they use, and how many wafers they ship—so that is relatively volatile. We do not put that in our backlog, yet we know it is always going to be there. When that is significant, it does help with our gross margin. To achieve the 76% gross margin that we achieved this quarter while that number was down really speaks to the overall scale of the business and why we are confident we can meet or exceed the 77% long-term target, maybe in a shorter time than the typical three-plus years that people would set for a long-term target.

Recognize we just set that target in December. We know as customers start shipping, we will start seeing those volume-based numbers go back up, and as they come back up, as well as the scale in the rest of the business, we do expect to meet and exceed our gross margin targets.

Clark Joseph Wright: Got it. Thank you. I will step back in the queue.

Operator: Thank you. Our next question comes from the line of Christian David Schwab from Craig-Hallum. Your question, please.

Analyst: Hey, guys. This is Ben, Ben Taksal, on for Christian Schwab.

Unknown Speaker: Hey, Ben. Great quarter.

Analyst: I just want to go back to those targets and tracking a little bit earlier than expected. I know it is still early, but could we expect getting to those targets to be a 2027 event, or could it be a little bit longer?

John K. Kibarian: If you look, our 2023 targets were 20% revenue growth, 75% gross margin, and 20% operating margin, and within two years—by 2025, really just in Q4 of 2025—we exceeded all those numbers. We then set new targets for, again, 20% revenue growth but now on a much bigger base, 77% gross margin, and 27% operating margin. I think people were surprised at the big jump up in operating margin going from 20% to 27% while gross margins were going from 75% to 77%, and that was in part because as we start getting scale, the R&D leverage you start getting becomes significant. The G&A leverage is also significant.

If you look at the first couple of quarters, we are now at, let us say, 24–25% on that operating number, so we have made reasonable progress toward that 27%. We are at 76% on gross margin; we have made some progress from 75% toward 77%. We do think we can get there sooner than the typical three years and probably sooner than we did the last time. How much sooner—we are not quite ready, Ben, to say how much sooner. We will see how the remainder of the year progresses, but we are confident this will come in strong and quickly; it is not going to take us the typical three years for a long-term model.

Analyst: Great. And then one more on eProbe. You talked about the six this year. Where could that be in 2027–2028? How big of an opportunity could this be over a multiyear period? A little more color on that.

John K. Kibarian: It is a question that we are getting our own hands on. What I can tell you is the majority of the machines are subscribed, and we expect them to stay subscribed over that time period. That means it is not like a capital purchase where we have to start from zero every quarter; we build from that base. Our base exiting last year was six machines, with five of the six on subscription. We expect to end this year with approximately double that on a subscription basis—about 10 of the 12, with one in demo and one that was purchased. That means we keep building that foundation.

If we can sustain modest growth in the number of machines we ship each year, we can get substantially more revenue growth than units because the majority of the previous machines are still contributing revenue. We believe as you look out over 2027–2028, even if all we do is maintain this level, eProbe continues to be a very important and growing part of the business. The total market for e-beam has been talked about by others as the fastest growing inspection product category in the front end because so many of the defects are now three-dimensional in nature, and e-beam is the most efficient way to look at 3D defects. We feel we have very unique capability there.

The overall market is quite substantial—depending on who you listen to, it is over a $1 billion market. You would have to flip that to a subscription market versus a perpetual market, so you might model that a little bit differently on a subscription basis, but it would stack up over time and is a meaningful market.

Analyst: Great. Thanks, guys.

Operator: Thank you. We have a follow-up question from the line of Clark Joseph Wright from D.A. Davidson. Your question, please.

Clark Joseph Wright: Hi there. I wanted to jump back in and ask about the leading-edge players and your relationships there. I know during the Investor Day that was a point of emphasis from a go-to-market perspective. Could you provide any update on the initiatives you are putting in action to gain share with those fab players in the broader ecosystem?

John K. Kibarian: Sure, Clark. A few things. Your previous question about the eProbe is a significant part of it. There is a big emphasis there. The eProbe tie-in to design is increasingly important for our customers. They would like to understand exactly when the eProbe finds things, what about the design interacted with the process. Some AI capabilities that we are building into the eProbe for that—customers love that—because the eProbe has to grok the entire design, not just the layer it is looking at, but how that layer is connected to every other layer. Secondarily, in my prepared remarks I talked about AI integration with Exensio and the releases that we are making this year.

One of the targeted areas is the ability to interpret and understand the data coming off our test vehicles. Test vehicles are probably the most widely used in the industry and very detailed, and they have thousands of experiments in them, and of course the engineer has to know how to go through and look through all of that. You can see how AI could play a very important role there—to find the critical signals, interpret that, and tie it into layout.

The way we are going back and showing customers why they want to do more with our vehicles and systems is in part that AI integration with the Exensio module—Exensio Characterization—that does the interpretation of the CV data, the characterization vehicle data. Sorry for all the PDF acronyms there. That is a big piece of what we are doing in terms of driving from a product innovation standpoint. Lastly, partnerships in the industry—collaborations—are always places where our systems turn out to be very valuable because you are able to share data, share analytics, and understand how to work together, whether that is SecureWise, the characterization vehicles, or Exensio itself.

These are all systems that we provide to customers that are looking to collaborate in this environment. More and more collaboration is needed, and it is a great selling environment for us for that capability on the leading edge.

Clark Joseph Wright: Got it. Thank you.

Operator: Thank you. At this time, there are no more questions. Ladies and gentlemen, this concludes the program. Thank you for joining us on today’s call.