Good day and thank you for standing by. Welcome to the PDF Solutions, Fourth Quarter in year end 2021 conference call. At this time, all participants are in a listen-only mode. After the speakers presentation, there will be a question-and-answer session for instructions will be given at that time, and I would now like to hand this over to Mr. Joseph Diaz of Lytham Partners. Please go ahead, sir.

Thank you, operator. And thanks to all of you for joining us today on this call. We appreciate your time and your ongoing interest in PDF Solutions. As the operator indicated, my name is Joseph Diaz. I'm Lytham Partners, we're the Investor Relations consulting firm for PDF, if you do not yet have a copy of today's press release, it's available on the Company's website at pdf.com. Some of the statements made during this conference call will be forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. including statements regarding PDF's future financial results, performance, growth rates, and demand for its solutions. PDF results could differ materially. The forward-looking statements and risks referred to on this call are based on information available to PDF today. The Company has no obligation to update them. You are advised to refer to the section titled Risk Factors on the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2020. And similar disclosures in subsequent SEC filings. With that, I'd like to introduce John Kibarian, PDF Solutions ' President and Chief Executive Officer. He will be followed by Adnan Raza, Executive Vice President, and Chief Financial Officer. At the conclusion of management's prepared remarks, we will open the call for your questions. Let me now turn the call over to. John Kibarian, President and CEO of PDFs Solutions. John.

Thank you for joining us on today's call. If you've not already seen our earnings press release and management report for the fourth quarter and the full year, please go to the Investors section of our website where each has been posted. As Adnan will discuss in more detail, 2021 was a record year for total revenue, and a year where our Analytics business achieved tremendous growth. Also exciting is the foundation that we have laid to establish stronger business in 2022 and beyond. In the fourth quarter, we celebrated our 30th year in business. So today in addition to summarizing the progress we made in Q4 in 2021, and providing our expectations for the coming year, I will provide some perspective on our journey, what has gotten PDF to this point and what we believe will position us for continued long-term success. During our 30-years, we have been a leader in Analytics for [Indiscernible] manufacturing, demonstrating consistent and persistent innovation. We have advanced the application and capabilities of our products and solutions by combining a team with extended longevity and deep knowledge of the company with a continuous addition of new team members that bring unique perspectives. Besides our dedication to manufacturing Analytics, virtually everything else has changed over the years, including our customer base, selling and marketing strategy, and fundamental business model. For many years, our business was defined by the integrated Yield Ramp, or what we call N IYR. In that business, we accelerate our customers Yield Ramp by combining Analytics with our characterization systems that provide the missing quality information that enable yield engineers to make the best improvements. By the end of 2014, we realized that drivers of the IYR business, robust geometry scaling, and competitive foundry market were waning. However, we believe that the…

Thank you, John. Good afternoon, everyone. Good to speak with you again today, and I hope all of you and your families are well and enjoyed a great football weekend. We are pleased to review the financial results for the full year and the fourth quarter of 2021. We posted our earnings release and our management report in the Investor Relations section of our website. Our Form 10-K with final results will be filed with the SEC in early March after review by our auditors. Please note that all of the financial results we discuss in today's call will be on a non - GAAP basis and a reconciliation to GAAP financials is provided in the materials on our website. As John indicated in his comments, 2021 was a strong year for PDF Solutions. We generated record revenue of $111 million, versus $88 million in 2020, a 26% year-over-year increase. While 26% year-over-year revenue growth is remarkable in of itself, it is worth noting that the Analytics business grew in 2021 at a rate well in excess of that. The growth of Analytics more than compensated for the expected decline in IYR revenues, far outgrowing our 20% Analytics revenue growth targets. Analytics revenue increased 63% on a year-over-year basis and accounted for 84% of total revenue. Non-GAAP gross margin for the full year was 64% compared to 63% for the prior year. Earnings per share on a non-GAAP basis came in at $0.08 versus negative $0.02 in 2020; a $0.10 per share profitability improvement. Bookings were up more than 40% compared to full year 2020 and recall that 2020 was a record year for bookings. Our backlog also increased 66% versus last year. The increase in bookings and backlog, give us confidence, that 2022 will be another strong year for…

Thank you presenters. [Operator Instructions] And we have our first question from Christian Strong from Craig-Hallum. Your line is open sir.

Hey guys, this is Tyler on the question and thanks for letting us ask a couple of questions. First, I guess point of clarification, the quick start contract that you signed here in Q4. I just want to make sure that's with the same customer that you booked a couple of previous contracts with over the last couple of quarters and then if so your time will be multiyear type contracts. I was wondering if you can maybe frame the magnitude. Would you expect this customer be 10% customer? In '22 you called it significant revenue, but any frame we can put on that would be helpful.

Sure. This quick start with a similar size to the previous quick start, the follow-up contract we expect to be slightly smaller than the last one, but a similar duration in part, the mix of hardware and software elements was a little bit different this time than the previous one. In terms of -- we're always very, very careful about talking about customers, so we really won't comment about one specific customer that are there. We do expect that there will be at least one 10% customer for us in 2022.

That's great. Appreciate the color. And then maybe a little bit of a modeling question. Your OpEx in Q4 was down sequentially, 700,000 or so, I think, mostly due to selling or SG&A expense being down. As we look to '22, just wondering if you could help us think about OpEx, Should that SG&A stay at estimator levels in R&D ramp modestly as we invest for growth, or was there any sort of one-time things in Q4 that we should be aware of?

No. From a operating profit perspective, just like we alluded in our comments, we would expect those margins to expand. I think we also commented that we would manage the cost between our cost of sales and our operating expenses, so that we can invest more in the sales and marketing side. Specifically on the total spend, we would expect that to expand less than our total revenue growth rate, thereby increasing the operating margin. On the SG&A and the R&D spend, I think we're feeling comfortable where we are, but we will continue to work towards expanding the operating margins.

All right. That's great. I appreciate the color. That's all from me, guys. Thanks.

[Operator Instructions]. We have our next question from Tom Diffely from D.A. Davidson. Please go ahead.

Yes. Good afternoon and thanks for the question. Adnan, I was wondering if you could give us a little bit of detail on an organic basis for things like bookings or revenue for the year.

Yeah. I think the color that we're providing is that look, first of all growth trends -- growth continues to be strong this year. Obviously, there's a uplift that we have for the Cimetrix acquisitions is now as Gary, the full-year impact. But even without that, we feel pretty happy about where the Exensio and the rest of the business pieces growth is coming in. In terms of bookings, I think we made the comment that it is up over 40%. In terms of backlog, we made the comment that it is up over 66% -- around 66% for the full-year basis. So feeling pretty good about those two aggregate numbers and also within the component of the business, maybe John can highlight some deals.

Another point, Tom. You may recognize that the Cimetrix runtime license is mostly a turns business, right? It doesn't really impact our bookings much more than the revenue that's there. If you take your estimate of Symmetrix revenue, subtract that from the bookings, you'd say that the vast majority of the bookings came from what you were declared as organic business.

Okay. That's helpful. Thank you, John. Also John, when you look at the DFI business on a go-forward basis, is that a business that will be ramping on a quarterly basis? Are you at a set run rate, what is the initial quick start customer at a current level, that should maintain through the year?

Besides our customer, we have other activities going on. We do anticipate it ramping through the year. I don't know that linearly through the year, it's kind of lumpy in the way that it would come on. We do expect to ramp it through this year. Timing exactly, I would say between the second and third quarters.

Okay. And between your traditional customers [Indiscernible] to new customers, how many tools do you think you could have in the field by the end of this year?

I don't think we're limited -- we'll be limited by our ability at some point to put machines in place. But our goal would be to have no more than two or three installed in the world by end of this year.

Okay. And then finally on the Gainshare piece, are you completely done with your older traditional customers and the current Gainshare has now just -- is relatively due largely aging customers?

That's correct. And as we said in the previous center, prepared remarks, right? Because we are full year without the historical contracts, your Gainshare will be down. but as we said on the previous call, on a quarterly basis, this level that we saw in Q3 and Q4 is roughly a floor and expect it to slowly build back up.

Okay. One more question for Adnan, quickly. When you look at the DFI expansion, does that change anything in the operating model?

No, I think you're seeing the benefit of all of the business pieces. And Cimetrix has done really well for us, Exensio is growing strong, as well as the leading edge pieces. Which is why you're hearing this optimism in our tone of talking about increased revenue growth, even in the face of the decline the IYR impacting on a full-year basis, number one. Number two, You're hearing from us on gross margin we're starting to feel confident and then therefore that should carry to the operating expenses and operating profit expansion, which is why we are seeing another profitable year for this year.

Great. Thank you both for your time today.

Sure thing.

[Operator Instructions]. We have our next question from Gus Richard from Northland. Please go ahead.

Yes. Thanks for taking the question. Just curious on the quick start contracts you signed in the quarter; is there a DFI component of that?

This is for -- as we said, for DFM, for foundry fabless interface. So it's really just about software and characterization for design rules. But it's a design and foundation IP primarily. That does not include DFI P to it.

Okay. So it's CBs and that sort of thing?

Yeah, Exensio and systems there's a layer of Exensio that pre -analyses foundation IP and looks for weaknesses in foundation IP and helps the engineers optimize that. So it's all geared around foundry fabless interface.

Okay, I understand. And then --

[Indiscernible] to this, Gus.

And then any color on what process node it's for?

Yeah. I don't think that -- it just kind of protected in the confidentiality of the customers and I don't think I can say which node it is. Typically of course these things are applied to newer nodes.

Okay. Got it. That's very helpful. And then just looking at the other end of the process spectrum, I'm wondering what you're seeing from clearing Edge fabs and their need to improve their productivity and frequent their fabs. is there anything that Exensio can do there to help those guys out? And if so, are you seeing any demand?

Sure. Yes. Sure, Guess -- I mean, I think not just on the tabs, but on the test floors and test operations and we're seeing this across the customer base. So I was on a call probably on the go with kind of acute quarterly technical review within an SVP of one of our customers that does trailing edge -- what's considered trailing edge chips or chips that are industrial and automotive and things like that. And they were going over the ways that the Exensio test operations improve their output on their test floor and what they would get out from the deployments and roll out across more for us, and more facilities. We see that on the front-end as well too, with some of the new capabilities that extend to your process control offers for the ability to look for, prevent, predictive maintenance issues on equipment and identify when you can continue to run a two or where you need to be more [Indiscernible] of our own scheduled downtimes. So yeah. A lot of the Exensio as I said in my prepared remarks, the vast majority Exensio usage is trailing edge stuff. We see that quite being a very robust part of the business throughout 2021, a lot of the cloud deals were for trailing edge guys. And looking into 2022, we expect that to be the same as well. And so I think that's going to be a continued good opportunity to help customers get more productivity out fabrication assets.

Okay. And then just the write-down of equipment in the quarter, any more color around what that was?

Yes. We've put a number of one you propane fifties into the field that were some spare parts and components that we had purchased in part of all of that as those machines we completed the usage of those machines, the extra components that we had associated with those machines, we wrote down.

Got it. That's it for me. Thanks so much.

[Operator Instructions] We have our next question from Andrew Weiner from Samjo Capital. Please go ahead.

Hi, good afternoon, guys.

Hey, Andrew.

Adnan, I want to make sure, sort of thinking about the math correctly. If I take the back half of 2021 on the IYR business or the like, this and even assume like a modest increase from that run rate through habits of '22 to get to a minimum of 20% growth, it implies a minimum of 30% growth in the Analytics business. I assume I got that math right?

At the risk of stealing John's comment from a few calls ago, yeah, his math scores must be really good. [Indiscernible]

And then second, John, I was maybe hoping you could talk about whether or not you've started to see any revenue contribution from the Siemens relationship; if not, when you'd expect that, and how we should think about the size of the opportunities perhaps. Whether it's more of a commercial opportunity versus building a moat if I think about the IBM partnership and the Siemens partnerships.

Sure. So when we did the webinar in January, Andrew, we announced that we were having early access partners or customers join Siemens and what that means is they will use the beta version of the product. There is a small charge for that. It's not huge revenue, so we do expect revenue in this year associated with those early access customers and they would get beyond access to the [Indiscernible] builder, use it to debug and bring up their new products. They get some ability to influence the roadmap of the product, and as we and Siemens finalize the future set. And then in terms of beyond that, how it generates revenue for us. Siemens EDAs ' full diagnostic products are market leaders. And so they have, from what we can tell, the largest share in the market. There is a good overlap of customers but when we look at the attendees of the webinar, there were a number of companies on that list that were not previously Exensio customers. And then even the companies that were Exensio customers, it was parts of the organization that historically not been users of Exensio have been using probably the diagnostic tools. So we do expect it to grow the customer base both within our existing customers as well as with new customers. And I think the same will be true for Siemens as well. In terms of the -- [Indiscernible] brought up comments about IBM and, what we heard if you listen to the questions that we got asked by the engineers on that Siemens webinar call. As well as the comments we get from customers about IBM and some of the other software systems that we look to partner with. Customers that are used to working on their phone and…

So along those lines, John, we've talked a lot about in the past, the importance you view of building partnerships sort of an ecosystem. What are the -- what potential holes would you -- from a partnership perspective, would you look like to be or look to fill in 2022?

Yeah. Well I don't want to blow any thunder on that stuff. One of the things that we'd like to be able to announce them with some excitement when we announce them, Andrew. But I can say this. If you just think about the way companies work, obviously, and as Gus ' questions alluded to, there's a lot of issues about understanding my supply chain, where my parts are, what's going on, what's my prediction, if my yield drop ped, what does that mean downstream? Am I going to have a problem making unit shipments? If a test floor is bottlenecked, what is the implication of that? If I add more testers, would that get me more capacity out? Will I be able to ship significantly more units. So there's a lot of customers want to be able to do the combined engineering from a semiconductor engineering with what we would have called industrial engineering or operations research. So it's a lot of activities there that then touches what you want to do in finance. As we look at product bringing up in product diagnostics, there's a lot to do there too. Most customers are redesigned products -- re-designed products with lots of reused IP. When you have a challenge on one product, you'd like to understand what the impact is across a wide variety of things. So all the ways of being able to answer questions much more quickly. You can think of it as like when I was a kid and I wanted to know something, I can nag my parents to take me to the library so I could go look stuff up. My kids just takes out his phone at dinner and looks at Google searches up stuff. We had a debate of cilantro and [Indiscernible], Cilantro and corriander are the same thing, and he just looked at up on this phone, right? I would have to go to the library for that as a kid. So those same kinds of questions that our engineer -- our customers want to be able to ask, whether they have financial implications and industrial engineering implication, product design implication or chip manufacturing. We want them to be able to answer those questions without having to go and wrangle off the data.

Okay. And as you build this out, is that tied to the deployments of the DEX networks?

Of course, yes. Right on because you want to then say, okay, well where do I have equipment that this would be exposed to or I want to change my screening criteria at these -- you got to take action. To take action in our world means changing what goes on in equipment. It's not enough just to know it's different; you got to do something about it. So a DEX is an important part of that, but that's why overall we see the platform as this platform for the industry to collaborate like we're having Advantest collaborate with its customers. And in a way, that lets people cross operational boundaries so you can get the most productive capacity in the world. And that gets at Gus ' questions around this environment. How do I get more chips out which many of our customers ask us all time.

Great. Thank you.

[Operator Instructions] There are no further questions. At this time I will return the call over to Mr. Kibarian for closing remarks.

Thank you for participating in our Q4 call. We look forward to talking with you again soon. Have a great day.

Ladies and gentlemen. This concludes today's presentation. Thank you for participating. You may now disconnect.