PDF Solutions, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. The filing also reports unaudited fourth-quarter results. PDF Solutions provides software, services, measurement systems and intellectual property for semiconductor and electronics manufacturing analytics and yield improvement.
Financial performance
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | $111.1 million | $88.0 million |
| Gross profit / margin | $66.9 million / 60% | $51.3 million / 58% |
| Net loss | $21.5 million | $40.4 million |
| Net loss per share, diluted | $0.58 | $1.17 |
| Cash provided by operating activities | $4.2 million | $21.8 million |
| Cash, cash equivalents and short-term investments at year-end | $140.2 million | $145.3 million |
| Working capital at year-end | $144.7 million | $151.2 million |
Analytics revenue increased 63% to $93.4 million, or 84% of total revenue. Integrated Yield Ramp revenue declined 43% to $17.6 million. The filing reports no borrowings or undisclosed debt; operating lease liabilities totaled $7.0 million, and total liabilities were $54.2 million.
Fourth quarter: Revenue was $29.9 million versus $22.4 million in Q4 2020; net loss was $7.0 million versus $33.4 million. The filing does not provide quarterly segment revenue in the presented summary.
Material changes and notable items
- Revenue growth reflected a full year of Cimetrix results following its December 2020 acquisition, higher demand for Exensio software licenses, and more CV characterization services. Management attributed about $30.1 million of the Analytics increase to Cimetrix and Exensio, and $6.1 million to CV systems.
- Integrated Yield Ramp revenue fell as Gainshare periods ended on certain contracts and hours worked declined on others.
- Research and development expense rose 26% to $43.8 million; selling, general and administrative expense rose 15% to $37.6 million. A $3.2 million write-down related to first-generation DFI e-beam tools was recorded due to limited market demand and customer needs.
- Net loss improved year over year partly because FY2020 included a substantial tax expense from establishing a full valuation allowance on U.S. deferred tax assets. The allowance was $51.6 million at year-end 2021.
- Operating cash flow decreased to $4.2 million, with management citing changes in operating assets and liabilities and lower non-cash adjustments. Cash and investments declined $5.1 million during the year.
- Two customers represented 27% of FY2021 revenue; two customers represented 44% of gross accounts receivable at year-end. International revenue was approximately 55%.
Outlook, risks and contingencies
The company gave no specific revenue or earnings guidance. Remaining performance obligations were approximately $179.5 million at year-end, with most expected to be recognized over the next two years; this amount is subject to contract changes and excludes certain future usage-based royalties and other arrangements. Management said available resources and anticipated operating funds should meet cash requirements for at least the next 12 months.
Management sees potential in semiconductor analytics, cloud computing and smart manufacturing, while noting that COVID-19 restrictions impeded some customer engagement and travel. Risks highlighted include customer concentration; variable Gainshare revenue tied to customers’ production and yield; long sales cycles; competition and technology investment; supply-chain constraints and inflation; cybersecurity and customer data protection; export controls and geopolitical tensions, particularly involving China; and the continuing effects of COVID-19.
PDF Solutions is pursuing arbitration against SMIC over unpaid contractual fees. The matter remained ongoing, and the filing does not state a clear value for the recovery sought. The company reported $2.0 million of related arbitration expenses in 2021. Management also disclosed no other material legal proceedings for which a loss was probable and estimable. The independent auditor gave unqualified opinions on the financial statements and internal control over financial reporting; revenue recognition was identified as a critical audit matter.
Most important facts for investors to verify
- Whether Analytics growth, particularly from Cimetrix and Exensio, can offset continued declines in Integrated Yield Ramp and Gainshare revenue.
- The sustainability and cash conversion of revenue growth, given FY2021 operating cash flow of $4.2 million and increased receivables.
- Customer concentration and collections: two customers accounted for 44% of year-end gross receivables, and two customers contributed 27% of annual revenue.
- Progress and commercial demand for DFI systems after the $3.2 million write-down, and any further related impairments or investment needs.
- Outcome and potential additional costs of the SMIC arbitration, and recoverability of outstanding customer receivables.
- Use of tax attributes and the full U.S. deferred-tax-asset valuation allowance, as well as the potential effects of changing tax rules.