UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
Date of Report (Date of Earliest Event Reported): April 27, 2017
 
PDF SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)
 
000-31311
(Commission File Number)
 
Delaware	25-1701361	
(State or Other Jurisdiction of Incorporation)	(I.R.S. Employer Identification No.)	
 
333 West San Carlos Street, Suite 1000
San Jose, CA 95110
(Address of principal executive offices, with zip code)
 
(408) 280-7900
(Registrant’s telephone number, including area code)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)	
 
☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)	
 
☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))	
 
☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))	
 
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.
 
Emerging growth company ☐
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 
TABLE OF CONTENTS
 
Item 2.02. Results of Operations and Financial Condition	
Item 9.01. Financial Statements and Exhibits	
SIGNATURES	
EXHIBIT INDEX	

 

 
  
Item 2.02. Results of Operations and Financial Condition.
 
On April 27, 2017 PDF Solutions (the “Company”) issued a press release regarding its financial results and certain other information related to the first fiscal quarter ended March 31, 2017. The Company also posted on the Investor Relations section of its website ( www.pdf.com ) a management report with regard to the quarter ended March 31, 2017. Copies of the press release and management report are attached to this report as Exhibit 99.1 and 99.2, respectively. Information on the website is not, and will not be deemed, a part of this report or incorporated into any other filings the Company makes with the Securities and Exchange Commission.
 
The information in this Item 2.02, including Exhibits 99.1 and 99.2, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), or otherwise subject to the liabilities under that Section, and shall not be deemed incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
 
Item 9.01. Financial Statements and Exhibits.
 
(d) Exhibits

 
Exhibit No.	 	Description	
99.1	 	Press Release dated April 27, 2017, regarding financial results and certain other information related to the first fiscal quarter ended March 31, 2017.	
 	 	 	
99.2	 	Management Report by PDF Solutions, Inc. as of April 27, 2017	

 

 
 
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 	PDF SOLUTIONS, INC.
(Registrant)	 	

 	By:	/s/Gregory C. Walker	 	
 	 	Gregory C. Walker
VP, Finance, and Chief Financial Officer
(principal financial and accounting officer)	 	
 
Dated: April 27, 2017

 

 
  
EXHIBIT INDEX
 
Exhibit No.	 	Description	
99.1	 	Press Release dated April 27, 2017, regarding financial results and certain other information related to the first fiscal quarter ended March 31, 2017.	
 	 	 	
99.2	 	Management Report by PDF Solutions, Inc. as of April 27, 2017	

  

Exhibit 99.1
 
News Release
 
Company Contacts:	 	
Gregory Walker,	Sonia Segovia,	
VP, Finance and CFO	IR Coordinator	
Tel: (408) 938-6457	Tel: (408) 938-6491	
Email:gregory.walker@pdf.com	Email: sonia.segovia@pdf.com	

PDF Solutions® Reports First Fiscal Quarter Results
 
SAN JOSE, Calif.— April 27, 2017—PDF Solutions, Inc. (“PDF Solutions” or the “Company”) (NASDAQ: PDFS), the leading provider of process-design integration technologies to enhance integrated circuit (IC) manufacturability, today announced financial results for its first fiscal quarter ended March 31, 2017.
 
Total revenues for the first fiscal quarter of 2017 totaled $24.3 million, down 15% from $28.4 million for the fourth fiscal quarter of 2016 and down 3% from $25.1 million for the first fiscal quarter of 2016. Design-to-silicon-yield solutions revenue for the first fiscal quarter of 2017 totaled $19.7 million, up 1% from $19.5 million for the fourth fiscal quarter of 2016 and up 6% from $18.6 million for the first fiscal quarter of 2016. Gainshare performance incentives revenue for the first fiscal quarter of 2017 totaled $4.6 million, down 49% from $9.0 million for the fourth fiscal quarter of 2016 and down 29% from $6.5 million for the first fiscal quarter of 2016.
 
On a GAAP basis, net income for the first fiscal quarter of 2017 was $0.5 million, or $0.02 per basic and diluted share, compared to net income of $2.9 million, or $0.09 per basic and diluted share, for the fourth fiscal quarter of 2016, and compared to net income of $2.1 million, or $0.07 per basic and diluted share, for the first fiscal quarter of 2016.
 
Cash and cash equivalents were $114.9 million at March 31, 2017, compared to $116.8 million at December 31, 2016.
 
Non-GAAP net income for the first fiscal quarter of 2017 was $2.6 million, or $0.08 per diluted share, compared to $5.6 million, or $0.17 per diluted share, for the fourth fiscal quarter of 2016, and compared to $5.4 million, or $0.17 per diluted share, for the first fiscal quarter of 2016. EBITDAR for the first quarter of 2017 was $3.5 million, compared to $7.4 million for the fourth fiscal quarter of 2016 and compared to $6.8 million for the first fiscal quarter of 2016.

1

 
 
As previously announced, PDF Solutions will discuss these results on a live conference call beginning at 2:00 p.m. Pacific Time/5:00 p.m. Eastern Time today. The call will be simultaneously web cast on PDF Solutions’ website at http://ir.pdf.com/events.cfm . A replay of the web cast will be available at the same website address beginning approximately two hours after completion of the live call. A copy of this press release, including the disclosure and reconciliation of certain non-GAAP financial measures to the comparable GAAP measures, which non-GAAP measures may be used periodically by PDF Solutions’ management when discussing financial results with investors and analysts, will also be available on PDF Solutions’ website at http://www.pdf.com/press-releases following the date of this release.
 
First Quarter 2017 Financial Commentary Available Online
 
A Management Report reviewing the Company’s first quarter 2017 financial results, as well as providing updated 2017 financial outlook, will be furnished to the SEC on Form 8-K and published on the Company’s website at http://ir.pdf.com/sec.cfm. Analysts and investors are encouraged to review this commentary prior to participating in the conference call webcast.

Information Regarding Use of Non-GAAP Financial Measures
 
In addition to providing results that are determined in accordance with Generally Accepted Accounting Principles in the United States of America (GAAP), PDF Solutions also provides certain non-GAAP financial measures. Non-GAAP net income excludes the effects of non-recurring items, stock-based compensation expenses, amortization of acquired technology and other acquired intangible assets, and their related income tax effects, as applicable, as well as adjusts for the non-cash portion of income taxes. EBITDAR is calculated by taking GAAP net income, adding back the effects of non-recurring items, stock-based compensation expenses, amortization of acquired technology and other acquired intangibles, depreciation expense and income tax provision (benefit). These non-GAAP financial measures are used by management internally to measure the Company’s profitability and performance. PDF Solutions’ management believes that these non-GAAP measures provide useful supplemental measures to investors regarding the Company’s ongoing operations in light of the fact that none of these categories of expense has a current effect on the future uses of cash (with the exception of certain non-recurring items) nor do they impact the generation of current or future revenues. These non-GAAP results should not be considered an alternative to, or a substitute for, GAAP financial information, and may be different from similarly titled non-GAAP measures used by other companies. In particular, these non-GAAP financial measures are not a substitute for GAAP measures of income or loss as a measure of performance, or to cash flows from operating, investing and financing activities as a measure of liquidity. Since management uses these non-GAAP financial measures internally to measure profitability and performance, PDF Solutions has included these non-GAAP measures to give investors an opportunity to see the Company’s financial results as viewed by management. A reconciliation of the comparable GAAP financial measures to the non-GAAP financial measures is provided at the end of the Company’s financial statements presented below.

2

 
  
Forward-Looking Statements
 
The statements made on the planned conference call regarding the Company's future expected business performance and financial results are forward looking and are subject to events and circumstances of the future. Actual results could differ materially from those expressed in these forward-looking statements. Risks and uncertainties that could cause results to differ materially include risks associated with: customers' production volumes at Gainshare-covered facilities; continued adoption of the Company's solutions by new and existing customers; project milestones or delays and performance criteria achieved; the provision of technology and services prior to the execution of a final contract; and other risks set forth in PDF Solutions' periodic public filings with the Securities and Exchange Commission, including, without limitation, its Annual Reports on Form 10-K, most recently filed for the year ended December 31, 2016, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K and amendments to such reports. The forward-looking statements made in the conference call are made as of the date hereof, and PDF Solutions does not assume any obligation to update such statements nor the reasons why actual results could differ materially from those projected in such statements.

About PDF Solutions
 
PDF Solutions enables customers to reduce the time to market of integrated circuits (“ICs”), lower the cost of IC design and manufacturing and improve profitability. The Company has developed proprietary products and provides services that target the entire Process Life Cycle, which is a term used to mean the time from technology development and the design of an IC to volume manufacturing of that IC to product assembly and test.
 
PDF Solutions’ products and services consist of proprietary test structures and electrical test systems, physical intellectual property, enterprise platform software and professional services. The Company’s Characterization Vehicle ®  (CV ® ) electrical test chip infrastructure provides core modeling capabilities, and is used by more leading manufacturers than any other test chips in the industry. The Design-for-Inspection™ solution extends the Company’s electrical characterization technologies into the e-beam measurement of extremely dense test structures, or DFI™ cells, across an entire fabrication process. Proprietary Template ™  layout patterns for standard cell libraries optimize area, performance, and manufacturability for designing IC products. The Exensio ®  platform for big data unlocks relevant, actionable information buried in wafer fabrication, process control and test data through four, key components: Exensio ®  -Yield, Exensio ®  -Control, Exensio ®  -Test, and Exensio ®  -Char. The Exensio ®  platform is available either on-premise or via software as a service (SaaS).
 
Headquartered in San Jose, Calif., PDF Solutions operates worldwide with additional offices in Canada, China, France, Germany, Italy, Japan, Korea, and Taiwan. PDF Solutions is listed on The NASDAQ National Market under the ticker symbol PDFS. For the Company’s latest news and information, visit http://www.pdf.com/.

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Characterization Vehicle, CV, Exensio, PDF Solutions, and the PDF Solutions logo are registered trademarks of PDF Solutions, Inc. or its subsidiaries. Design-for-Inspection, DFI, and Template are trademarks of PDF Solutions, Inc. or its subsidiaries.

4

 
  
PDF SOLUTIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands)
 
 	 	March 31,	 	 	December 31,	 	
 	 	2017	 	 	2016	 	
 	 	 	 	 	 	 	 	 	
ASSETS	 	 	 	 	 	 	 	 	
Current assets:	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	$	114,926	 	 	$	116,787	 	
Accounts receivable, net	 	 	50,088	 	 	 	48,157	 	
Prepaid expenses and other current assets	 	 	6,741	 	 	 	5,335	 	
Total current assets	 	 	171,755	 	 	 	170,279	 	
Property and equipment, net	 	 	20,798	 	 	 	19,341	 	
Goodwill	 	 	215	 	 	 	215	 	
Intangible assets, net	 	 	4,035	 	 	 	4,223	 	
Deferred tax assets	 	 	16,201	 	 	 	15,640	 	
Other non-current assets	 	 	14,615	 	 	 	12,631	 	
Total assets	 	$	227,619	 	 	$	222,329	 	
 	 	 	 	 	 	 	 	 	
LIABILITIES AND STOCKHOLDERS’ EQUITY	 	 	 	 	 	 	 	 	
Current liabilities:	 	 	 	 	 	 	 	 	
Accounts payable	 	$	2,436	 	 	$	2,206	 	
Accrued compensation and related benefits	 	 	4,988	 	 	 	5,959	 	
Accrued and other current liabilities	 	 	1,913	 	 	 	2,080	 	
Deferred revenues - current portion	 	 	9,777	 	 	 	8,189	 	
Billings in excess of recognized revenue	 	 	200	 	 	 	88	 	
Total current liabilities	 	 	19,314	 	 	 	18,522	 	
Long-term income taxes payable	 	 	3,247	 	 	 	3,354	 	
Other non-current liabilities	 	 	1,802	 	 	 	1,650	 	
Total liabilities	 	 	24,363	 	 	 	23,526	 	
 	 	 	 	 	 	 	 	 	
Stockholders’ equity:	 	 	 	 	 	 	 	 	
Common stock and additional paid-in-capital	 	 	285,935	 	 	 	281,428	 	
Treasury stock at cost	 	 	(55,726	)	 	 	(54,882	)	
Accumulated deficit	 	 	(25,235	)	 	 	(25,752	)	
Accumulated other comprehensive loss	 	 	(1,718	)	 	 	(1,991	)	
Total stockholders’ equity	 	 	203,256	 	 	 	198,803	 	
Total liabilities and stockholders’ equity	 	$	227,619	 	 	$	222,329	 	

5

 
  
PDF SOLUTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except per share amounts)
 
 	 	Three months ended	 	
 	 	 	 	 	 	 	 	 	 	
 	 	March 31,	 	 	December 31,	 	 	March 31,	 	
 	 	2017	 	 	2016	 	 	2016	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Revenues:	 	 	 	 	 	 	 	 	 	 	 	 	
Design-to-silicon-yield solutions	 	$	19,698	 	 	$	19,458	 	 	$	18,578	 	
Gainshare performance incentives	 	 	4,591	 	 	 	8,975	 	 	 	6,503	 	
Total revenues	 	 	24,289	 	 	 	28,433	 	 	 	25,081	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Costs of Design-to-silicon-yield solutions:	 	 	 	 	 	 	 	 	 	 	 	 	
Direct costs of Design-to-silicon-yield solutions	 	 	11,335	 	 	 	12,040	 	 	 	10,110	 	
Amortization of acquired technology	 	 	96	 	 	 	96	 	 	 	96	 	
Total costs of Design-to-silicon-yield solutions	 	 	11,431	 	 	 	12,136	 	 	 	10,206	 	
Gross profit	 	 	12,858	 	 	 	16,297	 	 	 	14,875	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating expenses:	 	 	 	 	 	 	 	 	 	 	 	 	
Research and development	 	 	7,282	 	 	 	7,171	 	 	 	6,311	 	
Selling, general and administrative	 	 	5,899	 	 	 	6,290	 	 	 	5,124	 	
Amortization of other acquired intangible assets	 	 	92	 	 	 	92	 	 	 	117	 	
Total operating expenses	 	 	13,273	 	 	 	13,553	 	 	 	11,552	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from operations	 	 	(415	)	 	 	2,744	 	 	 	3,323	 	
Interest and other income (expense), net	 	 	(230	)	 	 	378	 	 	 	(236	)	
Income (loss) before income taxes	 	 	(645	)	 	 	3,122	 	 	 	3,087	 	
Income tax provision (benefit)	 	 	(1,162	)	 	 	197	 	 	 	1,026	 	
Net income	 	$	517	 	 	$	2,925	 	 	$	2,061	 	

Net income per share:	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	 	$	0.02	 	 	$	0.09	 	 	$	0.07	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted	 	$	0.02	 	 	$	0.09	 	 	$	0.07	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Weighted average common shares:	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	 	 	31,991	 	 	 	31,636	 	 	 	31,168	 	
Diluted	 	 	33,594	 	 	 	33,293	 	 	 	31,754	 	

6

 
 
PDF SOLUTIONS, INC.
RECONCILIATION OF GAAP TO NON-GAAP NET INCOME (UNAUDITED)
(In thousands, except per share amounts)
 
 	 	Three months ended	 	
 	 	 	 	 	 	 	 	 	 	
 	 	March 31,	 	 	December 31,	 	 	March 31,	 	
 	 	2017	 	 	2016	 	 	2016 (2)	 	
GAAP net income	 	$	517	 	 	$	2,925	 	 	$	2,061	 	
Adjustments to reconcile GAAP net income to non-GAAP net income:	 	 	 	 	 	 	 	 	 	 	 	 	
Stock-based compensation expense	 	 	2,884	 	 	 	3,067	 	 	 	2,666	 	
Amortization of acquired technology	 	 	96	 	 	 	96	 	 	 	96	 	
Amortization of other acquired intangible assets	 	 	92	 	 	 	92	 	 	 	117	 	
Acquisition related deferred revenue adjustment (1)	 	 	-	 	 	 	1	 	 	 	115	 	
Non-cash portion of income tax expense	 	 	(995	)	 	 	(587	)	 	 	299	 	
Non-GAAP net income	 	$	2,594	 	 	$	5,594	 	 	$	5,354	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
GAAP net income per diluted share	 	$	0.02	 	 	$	0.09	 	 	$	0.07	 	
Non-GAAP net income per diluted share	 	$	0.08	 	 	$	0.17	 	 	$	0.17	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Shares used in diluted shares calculation	 	 	33,594	 	 	 	33,293	 	 	 	31,754	 	

PDF SOLUTIONS, INC.
RECONCILIATION OF GAAP NET INCOME TO EBITDAR (UNAUDITED)
(In thousands, except per share amounts)
 
 	 	Three months ended	 	
 	 	 	 	 	 	 	 	 	 	
 	 	March 31,	 	 	December 31,	 	 	March 31,	 	
 	 	2017	 	 	2016	 	 	2016 (2)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
GAAP net income	 	$	517	 	 	$	2,925	 	 	$	2,061	 	
Adjustments to reconcile GAAP net income to EBITDAR:	 	 	 	 	 	 	 	 	 	 	 	 	
Stock-based compensation expense	 	 	2,884	 	 	 	3,067	 	 	 	2,666	 	
Amortization of acquired technology	 	 	96	 	 	 	96	 	 	 	96	 	
Amortization of other acquired intangible assets	 	 	92	 	 	 	92	 	 	 	117	 	
Acquisition related deferred revenue adjustment (1)	 	 	-	 	 	 	1	 	 	 	115	 	
Depreciation expense	 	 	1,091	 	 	 	1,000	 	 	 	765	 	
Income tax provision (benefit)	 	 	(1,162	)	 	 	197	 	 	 	1,026	 	
EBITDAR	 	$	3,518	 	 	$	7,378	 	 	$	6,846	 	

 
(1) As announced on July 20, 2015, the Company completed the acquisition of Syntricity, Inc., the industry leading hosted solution for characterization and yield management. In relation to this acquisition, the Company incurred direct acquisition costs, acquisition related contingent earn-out and recorded an adjustment to reduce revenue recognized from deferred revenue arising from the acquisition. Accordingly, for non-GAAP purposes, the Company is excluding these expenses and the reduction to revenue in order to provide better comparability between periods.
 
(2) The results for the period ended March 31, 2016 have been updated to reflect the Company’s adoption of the Accounting Standards Update (ASU) 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The Company elected to early adopt this new standard in the fourth quarter of 2016, which required that any adjustments be reflected as of January 1, 2016, the beginning of the fiscal year that includes the interim period of adoption.

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Exhibit 99.2