Contradictions Emerge in Exensio Contract Terms, China Revenue Growth, and DFI/eProbe Revenue Recognition Timelines

Date of Call: November 6, 2025

Financials Results

• Revenue: $57.1M, up 10% sequential, up 23% YOY
• EPS: $0.25 per share (Q3 non-GAAP), strongest quarter of the year; YTD EPS $0.64, $0.06 ahead of prior year
• Gross Margin: 76%, slightly ahead of last quarter, down 1% versus prior-year quarter (long-term target 75%)

Guidance:

• Reaffirmed prior full-year revenue growth guidance of 21% to 23%.
• Expect sequential revenue growth in Q4 and to grow sequentially again in Q4.
• Anticipate cash to grow over the next year as secureWISE integration and eProbe build investments abate.
• Major revenue impacts from DFI/eProbe deployments and data feed-forward initiatives expected primarily in 2026.
• More long-term targets to be disclosed at Analyst Day (Dec 3).

Business Commentary:

* Strong Financial Performance and Revenue Growth: - PDF Solutions, Inc. achieved record quarterly revenue of $57.1 million, marking a 10% increase from the previous quarter and 23% year-over-year. - This growth was supported by $100 million in bookings for the quarter, more than double the bookings from the prior two quarters combined, and an 8-figure contract signed with a large IC manufacturer.

• Product Development and Strategic Investments:
• The company signed an extension contract with a large customer, involving the deployment of Exensio characterization software and eProbe machines, contributing to the strong bookings.

• Strategic investments include the acquisition and integration of secureWISE, which has expanded PDF's software offerings and customer base.

• AI Integration and Customer Demand:

• The integration of Intel's Tiber AI Studio into Exensio is expected to enhance AI capabilities, supporting the scaling and maintenance of large AI deployments.

• The demand for Exensio and secureWISE reflects the industry's need for advanced analytics and collaboration tools, particularly in semiconductor manufacturing.

• Geographic Diversification and Market Trends:

• The company is observing a trend of geographic diversification in manufacturing locations, driving investments in 3D manufacturing and advanced packaging facilities.
• This diversity presents both opportunities and challenges, with AI-driven collaboration emerging as a critical capability for cost-effective and efficient manufacturing in new locations.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management reported a record quarter of revenue and >$100M in bookings, backlog of $292M (up 25% sequential, 22% YOY), 76% gross margin (above 75% target), and reaffirmed 21%–23% revenue growth guidance — statements that collectively indicate constructive business momentum and confidence.

Q&A:

• Question from Blair Abernethy (Rosenblatt Securities Inc., Research Division): The machines that are under the lease model, when does that start to generate revenue? Is that some point next year? Or is that first half of this year?
  Response: Revenue from leased eProbe machines will begin after deployment, qualification and customer acceptance, expected within one to two quarters.

• Question from Blair Abernethy (Rosenblatt Securities Inc., Research Division): How does the pipeline of opportunities look for the DFI right now?
  Response: Pipeline is quite strong but small addressable market — roughly 5–10 potential customers with ~5 actively engaged; additional shipments expected early next year.

• Question from Blair Abernethy (Rosenblatt Securities Inc., Research Division): How is the go-to-market for secureWISE now that you've had it for a couple of quarters?
  Response: secureWISE is being sold more broadly into fabs and equipment vendors (merged with DEX network); Intel contract serves as an anchor and combined contracts are accelerating adoption.

• Question from Clark Wright (D.A. Davidson & Co., Research Division): Customer A went from 19% to 38% year-over-year — how are you winning bigger and using secureWISE to expand the overall customer base?
  Response: Large multi-product contracts with fabs drive concentration; secureWISE acts as a collaboration point enabling expansion into fabs, fabless and equipment vendors and broader platform adoption.

• Question from Clark Wright (D.A. Davidson & Co., Research Division): Anything to say about how the landmark contract sets up 2026 growth?
  Response: No 2026 guidance yet; growing backlog and pipeline position the company for a strong 2026, to be addressed after Q4.

• Question from Auguste Richard (Northland Capital Markets, Research Division): How many tools per fab do you think the customer is going to need?
  Response: Minimum of two eProbes for redundancy at a site; potential to add more depending on utilization.

• Question from Auguste Richard (Northland Capital Markets, Research Division): These are near production, but not necessarily in-line?
  Response: They are deployed to support production (not necessarily in-line); redundancy is a key reason for multiple units.

• Question from Auguste Richard (Northland Capital Markets, Research Division): Of the systems going out end of this year/beginning next, are these evaluation systems or revenue?
  Response: Upcoming shipments will be a mix of evaluation units and revenue-generating units.

• Question from Blair Abernethy (Rosenblatt Securities Inc., Research Division): Timeline for Tiber AI Studio integration with Exensio — when will integration be ready for customers?
  Response: First-level integration with Exensio expected at the end of this quarter with early-access customers.

• Question from Blair Abernethy (Rosenblatt Securities Inc., Research Division): What does the Exensio Analytics renewal book look like and changes in term length?
  Response: Typical contract term is ~3 years (some 1–5 years); large 8-figure stand-alone Exensio deals and upcoming renewals should benefit from new AI-first capabilities.

• Question from Blair Abernethy (Rosenblatt Securities Inc., Research Division): Any progress on Sapience or the SAP partnership?
  Response: Multiple Sapience activities are underway; expect a customer announcement in Q4 and additional Sapience capabilities to be unveiled at the user conference.

• Question from Clark Wright (D.A. Davidson & Co., Research Division): Findings from SEMICON West — how did end-market health compare to earlier?
  Response: Feedback showed broader optimism vs prior months, with robust 2026 outlooks for advanced packaging, advanced nodes and DRAM and increased interest from differentiated fabless customers.

• Question from Clark Wright (D.A. Davidson & Co., Research Division): Has the Cimetrix shadow backlog upticked sequentially?
  Response: Q3 was very strong for Cimetrix runtime licenses and the trend is positive as more equipment ships with PDF software, though quarter-to-quarter visibility remains limited.

• Question from Andrew Wiener (Samjo Capital, LLC): With Advantest and Teradyne posting strong results, does your bookings/opportunities lag theirs and any color on the timing?
  Response: Opportunities generally lag OEM shipments; pilots and some production data feed-forward projects are underway and the majority of revenue impact is expected in 2026.

• Question from Andrew Wiener (Samjo Capital, LLC): Would you think the data feed-forward impact is a 2026 timeline?
  Response: Yes — the majority of the business impact from those initiatives is expected in 2026; 2025 revenue impact will be minimal.

• Question from Andrew Wiener (Samjo Capital, LLC): If the two DFI tool qualifications slip into Q1, are you still comfortable with guidance?
  Response: Yes — management reiterated comfort with the reaffirmed guidance and expects multiple avenues to achieve it even if qualifications slip to Q1.

• Question from Andrew Wiener (Samjo Capital, LLC): Are the DFI interested customers memory or logic, and are DRAM pilots progressing?
  Response: Interest spans logic and memory; DRAM pilots have been ongoing (~12–13 months) and shipping is constrained mainly by customer readiness, not technical capability.

• Question from Andrew Wiener (Samjo Capital, LLC): On Tiber, did any revenue come over and how will you support customers post-acquisition/integration?
  Response: Tiber did not bring material existing revenue in semiconductors; most users were non-semiconductor, but for semiconductor customers (e.g., Intel) the integrated Exensio offering is preferred while support will be offered both standalone and integrated.

Contradiction Point 1

Exensio Contract Term Lengths

It involves differing statements about the typical term lengths for Exensio contracts, which could impact expectations about recurring revenue and customer commitment.

How are you addressing opportunities and risks from recent developments in China? - Clark Joseph Wright (D.A. Davidson & Co.)

2025Q3: Term lengths are typically 3 years, with some as long as 5 years or as short as 1 year. We signed a large 8-figure Exensio contract, which is one of the largest in our history. - John Kibarian(CEO)

What is the renewal status for Exensio, and how is module penetration progressing? - Blair Harold Abernethy (Rosenblatt Securities)

2025Q2: We expect a strong renewal and expansion situation for Exensio, driven by guided analytics and AI for test. Pilots have shown positive results, especially in guided analytics. - John Kibarian(CEO)

Contradiction Point 2

China Revenue and Sustainability

It pertains to the sustainability of revenue growth in China, which is a significant market for the company, affecting investor perceptions of the company's financial stability.

Can you elaborate on the testing opportunity given the strong results from Advantest and Teradyne? - Andrew Wiener (Samjo Capital, LLC)

2025Q3: China revenue is up due to increased volume shipments and CV deployments. Folks are starting to use capacity at meaningful volumes, leading to increased revenue. - John Kibarian(CEO)

Can you explain the changes in China's revenue and their sustainability? - Blair Harold Abernethy (Rosenblatt Securities)

2025Q2: Our China revenue increased sequentially in Q2, primarily driven by increased volume shipments and deeper deployments in our customer's Fab. The trend continued into Q3. - John Kibarian(CEO)

Contradiction Point 3

Revenue Recognition for DFI Systems

It involves discrepancies in the timeline for revenue recognition from DFI systems, which directly impacts company revenue and financial performance expectations.

Could you elaborate on the BFI (Bookings for the quarter)? When will the lease model generate revenue from the machines? - Blair Abernethy (Rosenblatt Securities Inc., Research Division)

2025Q3: The machines are being deployed and qualified, which usually takes about one quarter. We expect within the next quarter or the quarter after, depending on customer acceptance and qualifications, to start converting and generating revenue. - Adnan Raza(CFO)

What is causing the hesitation or delay in revenue recognition for existing customers adopting an additional tool? - Auguste Richard (Northland Capital Markets, Research Division)

2025Q1: We do see that opportunity as well and maybe this is -- we're going to take a digestion pause as we digest these machines and the other ones that we stood up recently. But we do expect in the second half of the year to ship again and exceed our goals for the year. - John Kibarian(CEO)

Contradiction Point 4

AI and Analytics Business Growth

It involves differing perspectives on the growth trajectory of the AI and analytics business, which is a key strategic area for the company.

How are you leveraging secureWISE to expand your customer base? - Clark Wright (D.A. Davidson & Co., Research Division)

2025Q3: Term lengths are typically 3 years, with some as long as 5 years or as short as 1 year. We signed a large 8-figure Exensio contract, which is one of the largest in our history. Customers want scalable AI-first analytics capabilities. - John Kibarian(CEO)

Could you provide more details on the components between IYR and analytics, within analytics, or whether expectations are consistent with previously published guidance? - Will Jellison (D.A. Davidson & Company)

2025Q1: Our Exensio Analytics product line is progressing well. Exensio Analytics now has an approximate market share of 20% in the data analytics for manufacturing market... Revenue from Exensio Analytics in Q1 was approximately $5 million. - Adnan Raza(CFO)

Contradiction Point 5

eProbe Deployment and Revenue Recognition

It directly impacts expectations regarding the deployment and revenue recognition of the eProbe machines, which are crucial for understanding the company's financial performance and growth strategy.

Can you provide more details on Q3 bookings? When can we expect revenue from lease model machines? - Blair Abernethy(Rosenblatt Securities Inc., Research Division)

2025Q3: The machines are being deployed and qualified, which usually takes about one quarter. We expect within the next quarter or the quarter after, depending on customer acceptance and qualifications, to start converting and generating revenue. - Adnan Raza(CFO)

Can you provide an update on the eProbe's pipeline and new customer engagement, and clarify the current backlog status? - Blair Abernethy(Rosenblatt Securities)

2024Q4: Revenue recognition may be conservative due to the complex transfer of machine ownership. The backlog will see some changes with this new model, potentially shifting revenue recognition terms. - John Kibarian(CEO)