Table of Contents

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)	 	October 23, 2003	

	
PDF Solutions, Inc.

(Exact Name of Registrant as Specified in its Charter)
 	 	 	 	 	
Delaware	 	000-31311	 	25-1701361	

	
(State or Other Jurisdiction of Incorporation)	 	(Commission File Number)	 	(IRS Employer Identification No.)	
 	 	 	
333 West San Carlos Street, Suite 700, San Jose, CA	 	95110	

	
(Address of Principal Executive Offices)	 	(Zip Code)	
 	 	 	
Registrant’s telephone number, including area code	 	(408) 280-7900	

	
Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

TABLE OF CONTENTS
 	 	 	 	 	 	 	 	 	
 	Item 7. Financial Statements and Exhibits.	
 	Item 12. Results of Operations and Financial Condition.	
SIGNATURES	
EXHIBIT INDEX	
EXHIBIT 99.1	
EXHIBIT 99.2	

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Item 7. Financial Statements and Exhibits.
 	 	 	 	 	 	
 	(c)	 	Exhibits.	 	 	

	 	 	
 	 	 	99.1	 	Press Release dated October 23, 2003 regarding financial results and certain other information related to the third quarter of fiscal 2003	
 	 	 	99.2	 	Press Release dated October 23, 2003 regarding the financial outlook for the fourth quarter of fiscal 2003 and the first quarter of fiscal 2004	

Item 12. Results of Operations and Financial Condition.

     On October 23, 2003, PDF Solutions, Inc. issued a press release regarding its financial results and certain other information related to the third quarter of fiscal year 2003. Also on October 23, 2003, PDF Solutions, Inc. issued a press release regarding the financial outlook for the fourth quarter of fiscal 2003 and the first quarter of fiscal 2004. A copy of each of these press releases is attached as Exhibit 99.1 and Exhibit 99.2.

Use of Non-GAAP Information

     In addition to providing results that are determined in accordance with Generally Accepted Accounting Principles (GAAP), PDF Solutions also provides certain non-GAAP financial measures that exclude certain charges as additional information relating to its operating results. PDF’s management believes that the presentation of these measures provides useful information to investors regarding certain additional financial and business trends relating to its financial condition and results of operations. PDF has also chosen to provide this information to investors to enable them to perform meaningful comparisons of its past, present and future operating results. These measures are not in accordance with, or an alternative to, GAAP and may be different from non-GAAP measures used by other companies. The calculations of non-GAAP financial measures have been adjusted to exclude the effects of amortization of stock-based compensation and intangibles.

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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.	 	
 	
 	By:	 	/s/ P. Steven Melman	 	

	 	
 	Name:	P. Steven Melman	 	
 	Title:	Vice President, Finance and Administration and Chief Financial Officer	 	
Dated: October 23, 2003

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EXHIBIT INDEX
 	 	 	
Number	 	Exhibit	

	 	

	
99.1	 	Press Release dated October 23, 2003 regarding financial results and certain other information related to the third quarter of fiscal 2003	
99.2	 	Press Release dated October 23, 2003 regarding the financial outlook for the fourth quarter of fiscal 2003 and the first quarter of fiscal 2004	

 

EXHIBIT 99.1

News Release
 	 	 	
Investor Relations Contact:	 	Corporate Communications Contact:	
Rochelle Krause	 	Abbie Kendall	
PDF Solutions, Inc.	 	Armstrong Kendall, Inc.	
Tel: (408) 938-6437	 	Tel: (503) 672-4681	
Email: rochelle.krause@pdf.com	 	Email: abbie@akipr.com	
PDF Solutions® Reports Third Quarter 2003 Financial Results

     SAN JOSE, Calif.—October 23, 2003—PDF Solutions, Inc. (Nasdaq: PDFS) the leading provider of process-design integration technologies to enhance IC manufacturability, today announced financial results for its third fiscal quarter ended September 30, 2003.

     Revenue for the third fiscal quarter of 2003 totaled $11.3 million, an increase of 2% compared with revenue of $11.0 million for the third fiscal quarter of 2002. Pro forma net income for the third fiscal quarter of 2003, excluding amortization of stock-based compensation and acquired intangible assets and the write-off of in-process research and development resulting from the acquisition of IDS Software Systems, Inc., totaled $332,000, or $0.01 per diluted share, compared with pro forma net income of $853,000, or $0.04 per diluted share, for the third fiscal quarter of 2002. Reported net loss for the third fiscal quarter of 2003 totaled $1.2 million, or $0.05 per diluted share, compared with reported net income of $185,000, or $0.01 per diluted share, for the third fiscal quarter of 2002.

     “We are pleased with our third fiscal quarter financial results and we are excited about the opportunities that lie ahead,” said John Kibarian, PDF’s President and Chief Executive Officer. “Closing the acquisition of IDS Software Systems, commencing the full integration of the people and the dataPOWER™ yield management products into PDF Solutions, and the public debut of our process-aware pDfx™ environment positions PDF to provide even more comprehensive yield improvement solutions to our customers as their need for such solutions continues to grow.”

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     As previously announced, the company will hold a live conference call beginning at 3:00 p.m. PDT/6:00 p.m. EDT today to discuss the quarterly results. A live webcast of this teleconference will be available on the company’s 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 the company’s 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.

About PDF Solutions

PDF Solutions, Inc. (Nasdaq: PDFS) is the leading provider of process-design integration technologies for manufacturing integrated circuits (ICs). PDF’s 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® is a registered trademark, and dataPOWER™ and pDfx™ are trademarks, of PDF Solutions, Inc.

Forward-Looking Statements

Some of the statements in this press release are forward looking, including the statements regarding future market and revenue opportunities, and PDF’s ability to integrate acquired technologies and gain market acceptance for new product offerings, at all or in a timely manner. The words “estimate”, “project”, “expect”, “believe”, “continues” and similar expressions also identify forward-looking statements. Actual results could differ materially from those expressed in any 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’s products and services. Readers should also refer to the risk disclosures set forth in PDF’s periodic public filings with the SEC, including, without limitation, its reports on Form 10-K, most recently filed on April 26, 2003, and on Form 10-Q, most recently filed on August 14, 2003. The forward-looking statements contained in this release are made as of the date hereof, and PDF does not assume any obligation to update such statements nor the reasons why actual results could differ materially from those projected in such statements.

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PDF SOLUTIONS, INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS
(In thousands)
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	September 30,	 	December 31,	
 	 	 	 	 	 	2003	 	2002	

	 	

	
 	 	 	 	 	 	 	 	 	 	(audited)	
ASSETS	 	 	 	 	 	 	 	 	
Current assets:	 	 	 	 	 	 	 	 	
 	Cash and cash equivalents	 	$	46,567	 	 	$	71,490	 	
 	Accounts receivable, net of allowances	 	 	9,701	 	 	 	7,924	 	
 	Prepaid expenses and other current assets	 	 	4,004	 	 	 	4,406	 	

	 	 	 	

	 	
 	 	 	Total current assets	 	 	60,272	 	 	 	83,820	 	
Property and equipment, net	 	 	4,024	 	 	 	3,533	 	
Goodwill	 	 	40,721	 	 	 	662	 	
Intangible assets, net	 	 	24,666	 	 	 	220	 	
Other assets	 	 	4,756	 	 	 	1,564	 	

	 	 	 	

	 	
 	 	 	Total assets	 	$	134,439	 	 	$	89,799	 	

	 	 	 	

	 	
LIABILITIES AND STOCKHOLDERS’ EQUITY	 	 	 	 	 	 	 	 	
Current liabilities:	 	 	 	 	 	 	 	 	
 	Accounts payable	 	$	1,429	 	 	$	499	 	
 	Accrued compensation and related benefits	 	 	2,238	 	 	 	1,143	 	
 	Other accrued liabilities	 	 	2,433	 	 	 	1,669	 	
 	Other acquisition obligations	 	 	7,646	 	 	 	—	 	
 	Taxes payable	 	 	2,990	 	 	 	1,838	 	
 	Deferred revenues	 	 	2,256	 	 	 	4,496	 	
 	Billings in excess of recognized revenue	 	 	333	 	 	 	606	 	

	 	 	 	

	 	
 	 	 	Total current liabilities	 	 	19,325	 	 	 	10,251	 	
Deferred tax liability	 	 	8,985	 	 	 	752	 	
Deferred rent	 	 	102	 	 	 	39	 	
Long-term liabilities	 	 	194	 	 	 	15	 	

	 	 	 	

	 	
 	 	 	Total liabilities	 	 	28,606	 	 	 	11,057	 	

	 	 	 	

	 	
Stockholders’ equity:	 	 	 	 	 	 	 	 	
 	 	Common stock	 	 	4	 	 	 	3	 	
 	 	Additional paid-in-capital	 	 	128,685	 	 	 	99,884	 	
 	 	Deferred stock-based compensation	 	 	(1,098	)	 	 	(1,340	)	
 	 	Notes receivable from stockholders	 	 	(3,755	)	 	 	(4,998	)	
 	 	Accumulated deficit	 	 	(18,086	)	 	 	(14,845	)	
 	 	Cumulative other comprehensive income	 	 	83	 	 	 	38	 	

	 	 	 	

	 	
 	 	 	Total stockholders’ equity	 	 	105,833	 	 	 	78,742	 	

	 	 	 	

	 	
 	 	 	Total liabilities and stockholders’ equity	 	$	134,439	 	 	$	89,799	 	

	 	 	 	

	 	
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PDF SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except per share data)
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	Three Months Ended	 	Nine Months Ended	

	 	

	
 	 	 	 	September 30,	 	September 30,	 	September 30,	 	September 30,	
 	 	 	 	2003	 	2002	 	2003	 	2002	

	 	

	 	

	 	

	
Revenue:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Design-to-silicon-yield solutions	 	$	9,033	 	 	$	8,213	 	 	$	25,175	 	 	$	26,098	 	
 	Gain share	 	 	2,267	 	 	 	2,824	 	 	 	5,282	 	 	 	8,632	 	

	 	 	 	

	 	 	 	

	 	 	 	

	 	
 	 	Total revenue	 	 	11,300	 	 	 	11,037	 	 	 	30,457	 	 	 	34,730	 	

	 	 	 	

	 	 	 	

	 	 	 	

	 	
Cost and expenses:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Cost of design-to-silicon-yield solutions	 	 	3,768	 	 	 	3,650	 	 	 	10,726	 	 	 	11,624	 	
 	Research and development	 	 	4,421	 	 	 	3,989	 	 	 	13,123	 	 	 	11,143	 	
 	Selling, general and administrative	 	 	3,106	 	 	 	2,630	 	 	 	8,720	 	 	 	7,716	 	
 	Stock-based compensation amortization*	 	 	366	 	 	 	640	 	 	 	1,344	 	 	 	2,198	 	
 	Amortization of acquired intangible assets	 	 	789	 	 	 	41	 	 	 	955	 	 	 	123	 	
 	Write-off of in-process research and development	 	 	800	 	 	 	—	 	 	 	800	 	 	 	—	 	

	 	 	 	

	 	 	 	

	 	 	 	

	 	
 	 	Total costs and expenses	 	 	13,250	 	 	 	10,950	 	 	 	35,668	 	 	 	32,804	 	

	 	 	 	

	 	 	 	

	 	 	 	

	 	
Income (loss) from operations	 	 	(1,950	)	 	 	87	 	 	 	(5,211	)	 	 	1,926	 	
Interest and other income	 	 	278	 	 	 	443	 	 	 	998	 	 	 	1,140	 	

	 	 	 	

	 	 	 	

	 	 	 	

	 	
Income (loss) before taxes	 	 	(1,672	)	 	 	530	 	 	 	(4,213	)	 	 	3,066	 	
Tax (benefit) provision	 	 	(441	)	 	 	345	 	 	 	(972	)	 	 	1,736	 	

	 	 	 	

	 	 	 	

	 	 	 	

	 	
Net income (loss)	 	$	(1,231	)	 	$	185	 	 	$	(3,241	)	 	$	1,330	 	

	 	 	 	

	 	 	 	

	 	 	 	

	 	
Net income (loss) per share:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Basic	 	$	(0.05	)	 	$	0.01	 	 	$	(0.14	)	 	$	0.06	 	

	 	 	 	

	 	 	 	

	 	 	 	

	 	
 	Diluted	 	$	(0.05	)	 	$	0.01	 	 	$	(0.14	)	 	$	0.06	 	

	 	 	 	

	 	 	 	

	 	 	 	

	 	
Weighted average common shares:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Basic	 	 	23,002	 	 	 	22,127	 	 	 	22,701	 	 	 	21,860	 	

	 	 	 	

	 	 	 	

	 	 	 	

	 	
 	Diluted	 	 	23,002	 	 	 	23,133	 	 	 	22,701	 	 	 	23,172	 	

	 	 	 	

	 	 	 	

	 	 	 	

	 	
* Stock-based compensation amortization:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Cost of design-to-silicon yield solutions	 	$	77	 	 	$	186	 	 	$	293	 	 	$	672	 	
 	Research and development	 	 	222	 	 	 	307	 	 	 	785	 	 	 	1,111	 	
 	Selling, general and administrative	 	 	67	 	 	 	147	 	 	 	266	 	 	 	415	 	

	 	 	 	

	 	 	 	

	 	 	 	

	 	
 	 	$	366	 	 	$	640	 	 	$	1,344	 	 	$	2,198	 	

	 	 	 	

	 	 	 	

	 	 	 	

	 	
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PDF SOLUTIONS, INC.
RECONCILIATION OF REPORTED GAAP NET INCOME (LOSS) TO PRO FORMA NET INCOME
(UNAUDITED)
(In thousands, except per share data)
 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended	

	
 	 	September 30,	 	September 30,	
 	 	2003	 	2002	

	 	

	
Net income (loss)	 	$	(1,231	)	 	$	185	 	
Stock-based compensation amortization	 	 	366	 	 	 	640	 	
Amortization of intangibles, net	 	 	397	 	 	 	28	 	
Write-off of in-process research and development	 	 	800	 	 	 	—	 	

	 	 	 	

	 	
Pro forma net income	 	$	332	 	 	$	853	 	

	 	 	 	

	 	
Pro forma net income per share – diluted	 	$	0.01	 	 	$	0.04	 	

	 	 	 	

	 	
Weighted average common shares — diluted	 	 	24,383	 	 	 	23,133	 	

	 	 	 	

	 	
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EXHIBIT 99.2

News Release
 	 	 	
Investor Relations Contact:	 	Corporate Communications Contact:	
Rochelle Krause	 	Abbie Kendall	
PDF Solutions, Inc.	 	Armstrong Kendall, Inc.	
Tel: (408) 938-6437	 	Tel: (503) 672-4681	
Email: rochelle.krause@pdf.com	 	Email: abbie@akipr.com	
PDF Solutions® Provides Financial Outlook For
The Fourth Fiscal Quarter of 2003 and The First Fiscal Quarter of 2004

     SAN JOSE, Calif.—October 23, 2003—PDF Solutions, Inc. (Nasdaq: PDFS), the leading provider of process-design integration technologies to enhance IC manufacturability, today provided its financial outlook for the fourth fiscal quarter ending December 31, 2003 and the first fiscal quarter ending March 31, 2004.

     PDF Solutions expects total revenue in the range of $12.0 million to $12.5 million for the fourth fiscal quarter ending December 31, 2003. Pro forma net loss for the fourth fiscal quarter of 2003, excluding amortization of stock-based compensation and acquired intangible assets, is projected in a range of $405,000 to $75,000, or $0.02 to $0.00 per diluted share. Reported net loss, on a GAAP basis, for the fourth fiscal quarter of 2003 is projected in a range of $1.9 million to $1.5 million, or $0.08 to $0.06 per diluted share.

     PDF Solutions expects total revenue in the range of $13.5 million to $14.3 million for the first fiscal quarter ending March 31, 2004. Pro forma net income for the first fiscal quarter of 2004, excluding amortization of stock-based compensation and acquired intangible assets, is projected in a range of $375,000 to $750,000, or $0.01 to $0.03 per diluted share. Reported net loss, on a GAAP basis, for the first fiscal quarter of 2004 is projected in a range of $955,000 to $580,000, or $0.04 to $0.02 per diluted share.

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     As previously announced, the company will hold a live conference call beginning at 3:00 p.m. PDT/6:00 p.m. EDT today to discuss the third quarter 2003 financial results and the financial outlook for the fourth quarter 2003 and first quarter 2004. A live webcast of this teleconference will be available on the company’s 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 the company’s 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.

About PDF Solutions

PDF Solutions, Inc. (Nasdaq: PDFS) is the leading provider of process-design integration technologies for manufacturing integrated circuits (ICs). PDF’s 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® is a registered trademark of PDF Solutions, Inc.

Forward-Looking Statements

Some of the statements in this press release are forward looking, including the statements regarding PDF’s 2003 fourth fiscal quarter and 2004 first fiscal quarter outlook, the expected growth in revenue, the pro forma net loss and net income and pro forma net loss and net income per share and the reported net loss and net loss per share. The words “estimate”, “project”, “expect”, “believe” and similar expressions also identify forward-looking statements. Actual results could differ materially from those expressed in any 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’s products and services. Readers should also refer to the risk disclosures set forth in PDF’s periodic public filings with the SEC, including, without limitation, its reports on Form 10-K, most recently filed on April 26, 2003, and on Form 10-Q, most recently filed on August 14, 2003. The forward-looking statements contained in this release are made as of the date hereof, and PDF does not assume any obligation

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to update such statements nor the reasons why actual results could differ materially from those projected in such statements.

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PDF SOLUTIONS, INC.
RECONCILIATION OF PROJECTED REPORTED GAAP NET INCOME ( LOSS)
TO PROJECTED PRO FORMA NET INCOME ( LOSS)
(In thousands, except per share data)
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ending	
 	 	December 31, 2003	
PROJECTED RESULTS	 	

	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net loss per share — diluted	 	$	(0.08	)	 	to	 	$	(0.06	)	

	 	 	 	 	 	 	 	

	 	
Net loss	 	$	(1,865	)	 	to	 	$	(1,535	)	
Stock-based compensation amortization	 	 	410	 	 	 	 	 	 	 	410	 	
Amortization of acquired intangibles, net	 	 	1,050	 	 	 	 	 	 	 	1,050	 	

	 	 	 	 	 	 	 	

	 	
Pro forma net loss	 	$	(405	)	 	to	 	$	(75	)	

	 	 	 	 	 	 	 	

	 	
Pro forma net loss per share – diluted	 	$	(0.02	)	 	to	 	$	0.00	 	

	 	 	 	 	 	 	 	

	 	
Weighted average common shares — diluted	 	 	25,000	 	 	 	 	 	 	 	25,000	 	

	 	 	 	 	 	 	 	

	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ending	
 	 	March 31, 2004	
PROJECTED RESULTS	 	

	
Net loss per share — basic	 	$	(0.04	)	 	to	 	$	(0.02	)	

	 	 	 	 	 	 	 	

	 	
Net loss	 	$	(955	)	 	to	 	$	(580	)	
Stock-based compensation amortization	 	 	240	 	 	 	 	 	 	 	240	 	
Amortization of acquired intangibles, net	 	 	1,090	 	 	 	 	 	 	 	1,090	 	

	 	 	 	 	 	 	 	

	 	
Pro forma net income	 	$	375	 	 	to	 	$	750	 	

	 	 	 	 	 	 	 	

	 	
Pro forma net income per share – diluted	 	$	0.01	 	 	to	 	$	0.03	 	

	 	 	 	 	 	 	 	

	 	
Weighted average common shares — basic	 	 	25,000	 	 	 	 	 	 	 	25,000	 	

	 	 	 	 	 	 	 	

	 	
Weighted average common shares — diluted	 	 	26,250	 	 	 	 	 	 	 	26,250	 	

	 	 	 	 	 	 	 	

	 	
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