PDF Solutions Beats Q3 Earnings and Revenues, Down Y/Y
Shares of PDF Solutions Inc. (PDFS) are trending up post the company’s better-than-expected third-quarter earnings reported on Oct 23, 2014.
PDF Solutions reported adjusted earnings (including stock-based compensation but excluding expenses related to impairment, amortization, restructuring and a non-cash portion of income tax expense) of 12 cents that comfortably beat the Zacks Consensus Estimate of 4 cents.
Pdf Solutions, Inc - Earnings Surprise | FindTheBest
Nevertheless, PDF Solutions’ earnings and revenues declined on a year-over-year basis.
Quarter Details
PDF Solutions’ Design-to-Silicon-Yield solutions revenues of $10.9 million were down 36.2% year over year more than offset the 36.3% increase in Gainshare revenues to $11.5 million. This resulted in a 12.1% decline in total revenue for the quarter which came in at $22.4 million. The Zacks Consensus Estimate for the quarter was pegged at $22 million.
It is worth noting that 94% of total revenue came from PDF Solutions’ top 10 customers. Geographically, 41% of revenues came from Europe, 47% from North America and the remaining 12% was contributed by Asia.
Gross margins for the quarter came in at 56.6% compared with 58.8% reported in the year-ago quarter, primarily due to lower revenue base. Operating expenses (excluding amortization and restructuring expenses) came in at $7.8 million, up 8.9% year over year, while operating income decreased 37.8% year over year to $4.8 million. Operating margins came in at 21.6% compared with 30.5% in the year-ago quarter.
PDF Solutions reported adjusted net income (including stock-based compensation but excluding expenses related to impairment, amortization, restructuring and a non-cash portion of income tax expense) of $4.1 million or 12 cents compared with $6.7 million or 21 cents reported in the year-ago quarter.
The company exited the third quarter with cash and cash equivalents of $116.1 million compared with $106.9 million in the previous quarter. Deferred revenues were $2.6 million compared with $3.4 million in the previous quarter. The company did not have any long-term debt.
Our Take
Despite PDF Solutions’ better-than-expected third-quarter results, the year-over-year comparisons were unfavorable. Results were impacted due to delays in contract signings which were primarily responsible for the tepid top-line performance.
Nonetheless, the increasing user engagement and multi-year contracts with customers are expected to remain the growth catalysts in the next few quarters. Particularly so because the ongoing technology transitions in the semiconductor industry require the qualification and testing of processes, which increases demand for PDF Solutions’ software solutions and services.
PDF Solutions’ customers include leading foundries like GlobalFoundries and Samsung that are currently trying to improve the yield of their new processes. Therefore, the company will likely see sales momentum.
However, competition from Synopsys, Inc. (SNPS) and Rudolph Technologies Inc. (RTEC), and customer concentration remain the headwinds (top 10 customers contribute 94% of total revenue).
Currently, PDF Solutions has a Zacks Rank #3 (Hold). Investors may also look at SunEdison (SUNE) which sports a Zacks Rank #1 (Strong Buy).
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