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

(Exact name of registrant as specified in its charter)

000-31311
(Commission File Number)

Delaware (State or Other Jurisdiction of Incorporation)		25-1701361 (I.R.S. Employer Identification No.)

333 West San Carlos Street, Suite 700
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:

o		Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o		Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o		Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o		Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

Item 2.02 Results of Operations and Financial Condition.

     On April 20, 2006, the Registrant issued a press release regarding its financial results and certain other information related to the first fiscal quarter of 2006 ended March 31, 2006. A copy of the press release is attached hereto as Exhibit 99.1. The information in this Item 2.02, including Exhibit 99.1, is furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into the filings of the Company under the Securities Act of 1933, as amended.

Item 7.01 Regulation FD Disclosure.

     On April 20, 2006, the Registrant issued a press release regarding the financial outlook for the second fiscal quarter ending June 30, 2006 and the third fiscal quarter ending September 30, 2006. A copy of the press release is attached hereto as Exhibit 99.2. The information in this Item 7.01, including Exhibit 99.2, is furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into the filings of the Company under the Securities Act of 1933, as amended.

Item 9.01. Financial Statements and Exhibits.

(c) Exhibits

Exhibit No.		Description
99.1		Press Release dated April 20, 2006 regarding financial results and certain other information related to the first fiscal quarter of 2006 ended March 31, 2006.
99.2		Press Release dated April 20, 2006 regarding the financial outlook for the second fiscal quarter ending June 30, 2006 and the third fiscal quarter ending September 30, 2006.

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.

Dated: April 20, 2006

EXHIBIT INDEX

Exhibit No.		Description
99.1		Press Release dated April 20, 2006 regarding financial results and certain other information related to the first fiscal quarter of 2006 ended March 31, 2006.
99.2		Press Release dated April 20, 2006 regarding the financial outlook for the second fiscal quarter ending June 30, 2006 and the third fiscal quarter ending September 30, 2006.

Exhibit 99.1

News Release

Investor Relations Contact:		Corporate Communications Contact:
Steven Melman, V.P. of Investor Relations		Abbie Kendall, Principal
PDF Solutions, Inc.		Armstrong Kendall, Inc.
Tel: (408) 938-6445		Tel: (503) 672-4681
Email: steven.melman@pdf.com		Email: abbie@akipr.com

PDF Solutions^® Reports First Quarter
2006 Results

Record Gain Share Contributes to 13^th Sequential Quarter of Revenue Growth

     SAN JOSE, Calif.—April 20, 2006—PDF Solutions, Inc. (Nasdaq: PDFS) the leading provider of process-design integration technologies to enhance IC manufacturability, today announced financial results for its first fiscal quarter ended March 31, 2006.

     Revenue for the first fiscal quarter of 2006 totaled a record $19.9 million, an increase of 10%, compared with revenue of $18.1 million for the first fiscal quarter of 2005. Gain share revenue for the first fiscal quarter of 2006 totaled a record $5.0 million, an increase of 140%, compared to the first fiscal quarter of 2005. On a GAAP basis, net income for the first fiscal quarter of 2006 totaled $268,000, or $0.01 per diluted share, compared with net income of $1.4 million, or $0.05 per diluted share, for the first fiscal quarter of 2005. The adoptions of SFAS 123(R) during the first fiscal quarter of 2006 resulted in $2.2 million in stock-based compensation expense or approximately $0.08 per diluted share.

     In addition to using GAAP results in evaluating PDF Solutions’ business, management also believes it is useful to measure results using a non-GAAP measure of net income or loss, which excludes amortization of stock-based compensation and acquired intangible assets. Using this non-GAAP measure, net income for the first fiscal quarter of 2006 totaled approximately $3.3 million, or $0.12 per diluted share, compared with non-GAAP net income of approximately $2.7 million, or $0.10 per diluted share, for the first fiscal quarter of 2005.

     As previously announced, PDF will hold a live conference call beginning at 3:00 p.m. Pacific Time/6:00 p.m. Eastern Time today to discuss these results. A live webcast of this

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conference call will be available on PDF Solutions’ website at http://ir.pdf.com/medialist.cfm. A replay of the call will be available at the same website address beginning approximately two hours after completion of the live call. Further, a copy of this press release, including the disclosure and reconciliation of certain non-GAAP financial measures to the comparable GAAP measure, which non-GAAP measures may be used periodically by PDF Solutions’ management when discussing financial results with investors and analysts, will be available on PDF Solutions’ website at http://www.pdf.com/news_archive.phtml following the date of this release.

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 that exclude the effects of amortization of stock-based compensation and acquired intangible assets. PDF Solutions’ management believes that the presentation of these measures provides useful supplemental information to investors regarding PDF’s operating results. These non-GAAP financial measures are used by management internally to measure the company’s profitability and performance. PDF’s management believes that excluding the effects of amortization of stock-based compensation and acquired intangible assets provides a useful supplemental measure of the company’s ongoing operations in light of the fact that neither category of expense has a current effect on the future uses of cash nor do they have use with regards to 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 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 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 non-GAAP financial measures to the comparable GAAP financial measure is provided at the end of the company’s financial statements presented below.

About PDF Solutions

PDF Solutions, Inc. (Nasdaq: PDFS) is the leading provider of process-design integration technologies for manufacturing integrated circuits (ICs). PDF Solutions’ software, methodologies and services enable semiconductor companies to create IC designs that can be more easily manufactured using manufacturing processes that are more capable. By simulating deep sub-micron product and process interactions, the PDF solution offers clients reduced time to market, increased IC yield and performance, and enhanced product reliability and profitability. Headquartered in San Jose, Calif., PDF Solutions operates worldwide with additional offices in Europe and Japan. For more information, visit www.pdf.com.

PDF Solutions^Ò is a registered trademark of PDF Solutions, Inc.

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PDF SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands)

		March 31,				December 31,
		2006				2005
ASSETS
Current assets:
Cash and cash equivalents		$	40,135			$	60,506
Short-term investments			24,923				—
Accounts receivable, net of allowances			21,579				22,082
Prepaid expenses and other current assets			1,762				1,992
Deferred tax assets			730				908
Total current assets			89,129				85,488
Property and equipment, net			3,635				3,328
Goodwill			39,886				39,886
Intangible assets, net			8,287				9,787
Deferred tax assets			823				877
Other assets			487				526
Total assets		$	142,247			$	139,892
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	986			$	1,728
Accrued compensation and related benefits			2,937				4,922
Other accrued liabilities			1,240				1,469
Taxes payable			5,037				4,950
Deferred revenues			3,259				2,281
Billings in excess of recognized revenue			590				1,604
Total current liabilities			14,049				16,954
Long-term liabilities			230				257
Total liabilities			14,279				17,211
Stockholders’ equity:
Common stock			4				4
Additional paid-in-capital			146,728				141,720
Treasury stock, at cost			(5,549	)			(5,549	)
Deferred stock-based compensation			—				(27	)
Accumulated deficit			(13,184	)			(13,451	)
Accumulated other comprehensive loss			(31	)			(16	)
Total stockholders’ equity			127,968				122,681
Total liabilities and stockholders’ equity		$	142,247			$	139,892

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PDF SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except per share amounts)

		Three Months Ended
		March 31,				March 31,
		2006				2005
Revenue:
Design-to-silicon-yield solutions:
Integrated solutions		$	12,229			$	12,557
Software licenses			2,612				3,449
Gain share			5,016				2,087
Total revenue			19,857				18,093
Cost and expenses:
Cost of design-to-silicon-yield solutions:
Direct costs of design-to-silicon-yield solutions:
Integrated solutions			6,429				5,750
Software licenses			11				157
Amortization of acquired core technology			1,266				1,266
Research and development			6,256				5,378
Selling, general and administrative			4,956				3,914
Amortization of other acquired intangible assets			235				235
Total costs and expenses			19,153				16,700
Income from operations			704				1,393
Interest and other income			635				272
Income before taxes			1,339				1,665
Tax provision			1,071				271
Net income		$	268			$	1,394
Net income per share:
Basic		$	0.01			$	0.05
Diluted		$	0.01			$	0.05
Weighted average common shares:
Basic			26,542				25,696
Diluted			28,223				27,129

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PDF SOLUTIONS, INC.
IMPACT OF NON-GAAP ADJUSTMENTS ON REPORTED NET INCOME (UNAUDITED)
(In thousands, except per share amounts)

		Three Months Ended												Three Months Ended
		March 31, 2006												March 31, 2005
		As reported				Adjustments				Non-GAAP				As reported				Adjustments				Non-GAAP
Revenue:
Design to-silicon-yield solutions:
Integrated solutions		$	12,229			$	—			$	12,229			$	12,557			$	—			$	12,557
Software licenses			2,612				—				2,612				3,449				—				3,449
Gain share			5,016				—				5,016				2,087				—				2,087
Total revenue			19,857				—				19,857				18,093				—				18,093
Cost and expenses:
Cost of design-to-silicon-yield solutions:
Direct cost of design-to-silicon-yield solutions:
Integrated solutions			6,429				(621	) (a)			5,808				5,750				—				5,750
Software licenses			11				—				11				157				—				157
Amortization of acquired core technology			1,266				(1,266	) (b)			—				1,266				(1,266	) (b)			—
Research and development			6,256				(618	) (a)			5,638				5,378				(42	) (a)			5,336
Selling, general and administrative			4,956				(929	) (a)			4,027				3,914				—				3,914
Amortization of other acquired intangible assets			235				(235	) (b)			—				235				(235	) (b)			—
Total costs and expenses			19,153				(3,669	)			15,484				16,700				(1,543	)			15,157
Income from operations			704				3,669				4,373				1,393				1,543				2,936
Interest and other income			635				—				635				272				—				272
Income before taxes			1,339				3,669				5,008				1,665				1,543				3,208
Tax provision			1,071				673	(a,b)			1,744				271				238	(b)			509
Net income		$	268			$	2,996			$	3,264			$	1,394			$	1,305			$	2,699
Net income per share — diluted		$	0.01			$	0.11			$	0.12			$	0.05			$	0.05			$	0.10
Weighted average common shares — diluted(c)			28,223				28,223				28,223				27,129				27,129				27,129

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Exhibit 99.2

News Release

Investor Relations Contact:		Corporate Communications Contact:
Steven Melman, V.P. of Investor Relations		Abbie Kendall, Principal
PDF Solutions, Inc.		Armstrong Kendall, Inc.
Tel: (408) 938-6445		Tel: (503) 672-4681
Email: steven.melman@pdf.com		Email: abbie@akipr.com

PDF Solutions^® Provides Financial Outlook For
The Second and Third Quarters of Fiscal 2006

     SAN JOSE, Calif.—April 20, 2006—PDF Solutions, Inc. (Nasdaq: PDFS), the leading provider of process-design integration technologies to enhance IC manufacturability, today provided its updated financial outlook for the second and third fiscal quarters ending June 30, 2006 and September 30, 2006, respectively.

     PDF Solutions expects total revenue in the range of $18.2 million to $19.2 million for the second fiscal quarter ending June 30, 2006. Gain share revenue for the second quarter is expected to be in the range of $5.1 million to $5.6 million. On a GAAP basis, net income (loss) for the second fiscal quarter of 2006 is projected in a range of $(200,000) to $400,000, or $(0.01) to $0.01 per diluted share.

     For the third fiscal quarter ending September 30, 2006, PDF Solutions expects total revenue in the range of $20.2 million to $21.2 million. On a GAAP basis, net income for the third fiscal quarter of 2006 is projected in a range of $440,000 to $1.0 million, or $0.02 to $0.04 per diluted share.

     In addition to using GAAP results in evaluating PDF Solutions’ business, management also believes it useful to measure results using a non-GAAP measure of net income, which excludes amortization of stock-based compensation and acquired intangible assets. Non-GAAP net income for the second fiscal quarter ending June 30, 2006 is projected in a range of $2.9 million to $3.5 million, or $0.10 to $0.12 per diluted share. Non-GAAP net income for the third fiscal quarter ending September 30, 2006 is projected in a range of $3.6 million to $4.1 million, or $0.12 to $0.14 per diluted share.

     As previously announced, PDF will hold a live conference call beginning at 3:00 p.m. Pacific Time/6:00 p.m. Eastern Time today to discuss its first quarter 2006 results and financial outlook for the second and third fiscal quarters of 2006. A live webcast of this conference call will be available on PDF Solutions’ website at http://ir.pdf.com/medialist.cfm. A replay of the call will be available at the same website address beginning approximately two hours after completion of the live call. Further, a copy of this press release, including the disclosure and reconciliation of certain non-GAAP financial measures to the most directly comparable GAAP measure, which non-GAAP measures may be used periodically by PDF Solutions’ management when discussing financial results with investors and analysts, will be available on the company’s website at http://www.pdf.com/news_archive.phtml following the date of this release.

Effectiveness of Guidance:

The outlook set forth above represents PDF Solutions’ expectations only as of the date of this release, and should not be viewed as a statement about PDF Solutions’ expectations after this date. Although this release will remain available on PDF Solutions’ website, its continued availability does not indicate that PDF Solutions is reaffirming or confirming its continued validity. PDF Solutions does not intend to report on its progress, or provide comments to analysts or investors on, or otherwise, update such guidance until it releases its quarterly results.

Information Regarding Use of Non-GAAP Financial Measures:

In addition to providing guidance that is determined in accordance with Generally Accepted Accounting Principles in the United States of America (GAAP), PDF Solutions also provides certain non-GAAP financial measures that exclude the effects of amortization of stock-based compensation and acquired intangible assets. PDF Solutions’ management believes that the presentation of these measures provides useful supplemental information to investors regarding PDF’s operating results. These non-GAAP financial measures are used by management internally to measure the company’s profitability and performance. PDF’s management believes that excluding the effects of amortization of stock-based compensation and acquired intangible assets provides a useful supplemental measure of the company’s ongoing operations in light of the fact that neither category of expense has a current effect on the future uses of cash nor do they have use with regards to the generation of current or future revenues. This non-GAAP guidance 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 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 has included these non-GAAP measures to give investors an opportunity to see the company as viewed by management. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measure is provided at the end of this press release.

About PDF Solutions:

PDF Solutions, Inc. (Nasdaq: PDFS) is the leading provider of process-design integration technologies for manufacturing integrated circuits (ICs). PDF Solutions’ software, methodologies and services enable semiconductor companies to create IC designs that can be more easily manufactured using manufacturing processes that are more capable. By simulating deep sub-micron product and process interactions, the PDF solution offers clients reduced time to market, increased IC yield and performance, and enhanced product reliability and profitability. Headquartered in San Jose, Calif., PDF Solutions operates worldwide with additional offices in Europe and Japan. For more information, visit www.pdf.com.

PDF Solutions^Ò is a registered trademark of PDF Solutions, Inc.

Forward-Looking Statements:

The statements in this press release regarding PDF Solutions’ outlook for its second and third fiscal quarters of 2006, including expected revenue, net income, and net income per share, are forward looking. 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: any unforeseen industry changes; difficulties in modifying PDF’s solutions on a timely basis; and changes in the marketplace for our solutions, including the introduction of products or services competitive with PDF Solutions’ products and services. Readers should also refer to the risk disclosures set forth in PDF Solutions’ periodic public filings with the Securities and Exchange Commission, including, without limitation, its annual report on Form 10-K, most recently filed on March 16, 2006, and its quarterly reports on Form 10-Q, most recently filed on November 9, 2005. The forward-looking statements contained in this release 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.

PDF SOLUTIONS, INC.
RECONCILIATION OF PROJECTED GAAP NET (LOSS) INCOME TO PROJECTED
NON-GAAP NET INCOME
(In thousands, except per share data)

		Three Months Ending
PROJECTED RESULTS		June 30, 2006
GAAP net income (loss) per share — diluted		$	(0.01	)	to	$	0.01
GAAP net income (loss)		$	(200	)	to	$	400
Amortization of stock-based compensation, net of taxes			1,992				1,992
Amortization of acquired intangible assets, net of taxes			1,126				1,126
Non-GAAP net income		$	2,918		to	$	3,518
Non-GAAP net income per share – diluted		$	0.10		to	$	0.12
Weighted average common shares — diluted			28,600				28,600

		Three Months Ending
PROJECTED RESULTS		September 30, 2006
GAAP net income per share — diluted		$	0.02		to	$	0.04
GAAP net income		$	440		to	$	1,030
Amortization of stock-based compensation, net of taxes			1,992				1,992
Amortization of acquired intangible assets, net of taxes			1,126				1,126
Non-GAAP net income		$	3,558		to	$	4,148
Non-GAAP net income per share – diluted.		$	0.12		to	$	0.14
Weighted average common shares — diluted			29,100				29,100