PDF Solutions Q3 revenue rises 20% to $68.3M
PDF Solutions reaffirmed its 20% 2026 annual revenue growth target while reporting lower backlog than a year earlier.
Sentiment and the balance of points
Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.
Rhea-AI Filing Summary
PDF Solutions (PDFS) reported third-quarter 2026 revenue of $68.3 million, up 20% from $57.1 million in the year-earlier quarter. GAAP net income was $6.8 million, compared with $1.3 million, and diluted earnings per share were $0.16 versus $0.03. On a non-GAAP basis, net income was $17.2 million and diluted EPS was $0.40, compared with $9.8 million and $0.25.
GAAP gross and operating margins were 73% and 12%; non-GAAP margins were 77% and 28%. Ending backlog was $247.2 million, compared with $292.0 million a year earlier. The company reported $13.759 million in operating cash flow and $15.071 million cash used for capital expenditures for the quarter.
PDF Solutions reaffirmed its 20% annual revenue growth target for 2026 based on results through Q3 and the Q4 pipeline. It also described Exensio Aurora, announced September 9, 2026, as an analytics architecture designed for semiconductor manufacturing data at petabyte scale and secure deployment of agentic AI.
How this balance works
Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.
It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.
Rhea-AI Sentiment measures something else, the tone of the wording.
Positive
- Moderate pointRevenue reached $68.3 million, up 20% year over year.
- Moderate pointGAAP net income rose to $6.8 million from $1.3 million.
Negative
- Moderate pointEnding backlog was $247.2 million, versus $292.0 million in Q3 2025.
8-K Event Classification
Key Figures
Key Terms
non-GAAP gross margin financial
Recurring revenue financial
Volume-based revenue financial
backlog financial
Exensio Aurora technical
Earnings Snapshot
Reaffirmed its 20% annual revenue growth target for 2026, based on actual results through the third quarter and the fourth-quarter pipeline.
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
How much revenue did PDFS report in Q3 2026?
Which regions contributed most to PDFS Q3 2026 revenue?
AI-generated analysis. How Rhea-AI works. Not financial advice.
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(State or Other Jurisdiction of Incorporation)
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(I.R.S. Employer Identification No.)
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Name of each exchange on which registered
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The
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Item 2.02. Results of Operations and Financial Condition
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Item 9.01. Financial Statements and Exhibits
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SIGNATURES
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Exhibit No.
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Description
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99.1
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Press Release dated November 5, 2026, regarding financial results and certain other information related to the third quarter ended September 30, 2026.
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99.2
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Management Report by PDF Solutions, Inc. for the quarter ended September 30, 2026.
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104
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Cover Page Interactive Data File (embedded within the Inline XBRL document)
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PDF SOLUTIONS, INC. (Registrant)
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By:
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/s/ Adnan Raza
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Adnan Raza
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EVP, Finance, and Chief Financial Officer (principal financial and accounting officer)
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Exhibit 99.1
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| 2858 De La Cruz Boulevard, Santa Clara, CA 95050 USA |
| +1.408.280.7900 www.pdf.com |
News Release
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Company Contacts: |
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Adnan Raza |
Sonia Segovia |
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Chief Financial Officer |
Investor Relations |
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Tel: (408) 280-7900 |
Tel: (408) 938-6491 |
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Email: adnan.raza@pdf.com |
Email: sonia.segovia@pdf.com |
PDF Solutions® Reports Third Quarter 2026 Financial Results
Santa Clara, CA, November 5, 2026 – PDF Solutions, Inc. (Nasdaq: PDFS), a leading provider of comprehensive data solutions for the semiconductor and electronics ecosystem, today announced financial results for its third quarter ended September 30, 2026.
Financial Highlights of Third Quarter 2026
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Record quarterly total revenues of $68.3 million, up 20% over last year’s comparable quarter |
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| ● | GAAP gross margin of 73% and non-GAAP gross margin of 77% | |
| ● | GAAP operating margin of 12% and non-GAAP operating margin of 28% | |
| ● | GAAP diluted earnings per share (EPS) of $0.16 and non-GAAP diluted EPS of $0.40 | |
| ● | Ending backlog of $247.2 million |
Total revenues for the third quarter of 2026 were $68.3 million, compared to $61.5 million for the second quarter of 2026 and $57.1 million for the third quarter of 2025.
GAAP gross margin for the third quarter of 2026 was 73%, compared to 69% for the second quarter of 2026 and 72% for the third quarter of 2025. Non-GAAP gross margin for the third quarter of 2026 was 77%, compared to 73% for the second quarter of 2026 and 76% for the third quarter of 2025.
GAAP operating margin for the third quarter of 2026 was 12%, compared to 8% for the second quarter of 2026 and 8% for the third quarter of 2025. Non-GAAP operating margin for the third quarter of 2026 was 28%, compared to 22% for the second quarter of 2026 and 23% for the third quarter of 2025.
GAAP net income for the third quarter of 2026 was $6.8 million, or $0.16 per diluted share, compared to net income of $4.3 million, or $0.10 per diluted share, for the second quarter of 2026, and net income of $1.3 million, or $0.03 per diluted share, for the third quarter of 2025. Non-GAAP net income for the third quarter of 2026 was $17.2 million, or $0.40 per diluted share, compared to non-GAAP net income of $11.4 million, or $0.27 per diluted share, for the second quarter of 2026, and non-GAAP net income of $9.8 million, or $0.25 per diluted share, for the third quarter of 2025.
Ending backlog for the third quarter of 2026 was $247.2 million, compared to $270.7 million for the second quarter of 2026 and $292.0 million for the third quarter of 2025.
Financial Outlook
“In the third quarter of 2026, PDF Solutions continued its growth trajectory with total revenues 20% higher compared to the third quarter of 2025,” said John Kibarian, CEO and President of the Company. He continued, “On September 9, 2026, we announced Exensio Aurora, the new, highly-scalable Exensio analytics architecture. Exensio Aurora is purpose-built to handle semiconductor manufacturing data at petabyte scale and to securely deploy agentic AI across manufacturing operations and the supply chain. We believe this new architecture will help semiconductor companies address the challenges associated with the fast growth and transformation of the industry. Based on actual results through the third quarter and the pipeline for the fourth quarter, we reaffirm our 20% annual revenue growth target for 2026.”
PDF Solutions® Reports Third Quarter 2026 Financial Results
Conference Call
As previously announced, PDF Solutions will discuss these results on a live conference call beginning at 2:00 p.m. Pacific Time / 5:00 p.m. Eastern Time today. To participate on the live call, analysts and investors should pre-register at: https://edge.media-server.com/mmc/p/j2asc9y9/. We encourage participants to dial into the call ten minutes ahead of the scheduled time. The teleconference will also be webcast simultaneously on the Company’s website at https://ir.pdf.com/webcasts. A replay of the conference call webcast will be available after the call on the Company’s investor relations website. A copy of this press release, including the disclosure and reconciliation of certain non-GAAP financial measures to the comparable GAAP measures, which non-GAAP measures may be used periodically by PDF Solutions’ management when discussing financial results with investors and analysts, will also be available on PDF Solutions’ website at http://www.pdf.com/press-releases on and following the date of this release.
Third Quarter 2026 Financial Commentary Available Online
A Management Report reviewing the Company’s third quarter 2026 financial results will be furnished to the Securities and Exchange Commission on Form 8-K and published on the Company’s website at http://ir.pdf.com/financial-reports. Analysts and investors are encouraged to review this commentary prior to participating in the conference call.
Information Regarding Use of Non-GAAP Financial Measures
In addition to providing results that are determined in accordance with accounting principles generally accepted in the United States of America (“GAAP”), PDF Solutions also provides certain non-GAAP financial measures. Non-GAAP gross profit and margin exclude stock-based compensation expense and the amortization of acquired technology under costs of revenues. Non-GAAP income from operations and operating margin exclude stock-based compensation expense, amortization of acquired intangible assets, and the effects of certain non-recurring items, such as expenses for certain legal proceedings, and acquisition-related and integration costs. Non-GAAP net income excludes stock-based compensation expense, amortization of acquired intangible assets, amortization of debt issuance costs, and the effects of certain non-recurring items, such as expenses for certain legal proceedings, acquisition-related and integration costs, recovery from previously written-off property and equipment, and their related income tax effects, as applicable, as well as adjustments for the valuation allowance for deferred tax assets and reconciling items. PDF Solutions management uses non-GAAP financial measures to evaluate the Company’s operating performance and make strategic decisions because these measures exclude items that management believes are not indicative of ongoing operating results and that can vary significantly between periods. These non-GAAP results should not be considered an alternative to, or a substitute for, GAAP financial information, and may differ 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 or loss as a measure of performance, or to cash flows from operating, investing and financing activities as a measure of liquidity. A reconciliation of the comparable GAAP financial measures to the non-GAAP financial measures is provided at the end of the Company’s unaudited condensed consolidated financial statements presented below.
PDF Solutions® Reports Third Quarter 2026 Financial Results
About PDF Solutions
PDF Solutions (Nasdaq: PDFS) provides comprehensive data solutions designed to empower organizations across the semiconductor and electronics industry ecosystems to improve the yield and quality of their products and operational efficiency for increased profitability. The Company’s products and services are used by Fortune 500 companies across the semiconductor ecosystem to achieve smart manufacturing goals by connecting and controlling equipment, collecting data generated during manufacturing and test operations, and performing advanced analytics and machine learning to enable profitable, high-volume manufacturing.
Founded in 1991, PDF Solutions is headquartered in Santa Clara, California, with operations across North America, Europe, and Asia. The Company (directly or through one or more subsidiaries) is an active member of SEMI, INEMI, TPCA, IPC, the OPC Foundation, and DMDII. For the latest news and information about PDF Solutions or to find office locations, visit https://www.pdf.com/.
Characterization Vehicle, Cimetrix, CV, DirectScan, eProbe, PDF Solutions, Sapience, secureWISE, and logos therefor are trademarks or registered trademarks of PDF Solutions, Inc. or its subsidiaries.
Forward-Looking Statements
This press release and the planned conference call include forward-looking statements regarding the Company’s future expected business performance and financial results, including statements regarding backlog, the Company’s growth trajectory, capabilities of the Exensio Aurora architecture, fourth quarter 2026 pipeline, annual growth target for 2026, and other statements identified by words such as “could,” “expects,” “intends,” “may,” “plans,” “potential,” “should,” “will,” “would,” or similar expressions and the negatives of those terms, that are subject to future events and circumstances. Other than statements of historical fact, all statements contained in this press release and the planned conference call are forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. 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: the effectiveness of the Company’s business and technology strategies; current semiconductor industry trends and competition; rates of adoption of the Company’s solutions by new and existing customers; project milestones or delays and performance criteria achieved; cost and schedule of new product development and investments in research and development; the continuing impact of macroeconomic conditions, including inflation, changing interest rates and tariffs, energy prices, the evolving trade regulatory environment and geopolitical tensions, armed conflicts, government shutdowns, and other trends impacting the semiconductor industry, the Company’s customers, operations, and supply and demand for its products; supply chain disruptions; changes in laws and regulations, including tax and data privacy laws and regulations, or the interpretation or enforcement thereof; the success of the Company’s strategic growth opportunities and partnerships; recent and future acquisitions, strategic alliances and relationships and the Company’s ability to successfully integrate acquired businesses and technologies; whether the Company can successfully convert backlog into revenue; customers’ production volumes under contracts that provide Gainshare; the sufficiency of the Company’s cash resources and anticipated funds from operations; the Company’s ability to obtain additional financing if needed and its ability to use support and updates for certain open-source software; and other risks and uncertainties discussed in PDF Solutions’ periodic public filings with the Securities and Exchange Commission, including, without limitation, its Annual Report on Form 10-K for the year ended December 31, 2025, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K and any amendments to such reports. All forward-looking statements made in this press release and the conference call 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® Reports Third Quarter 2026 Financial Results
PDF SOLUTIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands)
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September 30, |
December 31, |
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2026 |
2025 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
$ | 107,131 | $ | 42,220 | ||||
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Accounts receivable, net |
96,869 | 82,938 | ||||||
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Prepaid expenses and other current assets |
53,185 | 38,735 | ||||||
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Total current assets |
257,185 | 163,893 | ||||||
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Property and equipment, net |
104,333 | 81,609 | ||||||
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Operating lease right-of-use assets, net |
7,439 | 4,778 | ||||||
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Goodwill |
94,990 | 95,005 | ||||||
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Intangible assets, net |
46,060 | 52,194 | ||||||
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Deferred tax assets, net |
541 | 69 | ||||||
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Other non-current assets |
30,408 | 21,149 | ||||||
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Total assets |
$ | 540,956 | $ | 418,697 | ||||
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities: |
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Accounts payable |
$ | 12,639 | $ | 17,076 | ||||
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Accrued compensation and related benefits |
20,154 | 22,437 | ||||||
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Accrued and other current liabilities |
8,275 | 8,719 | ||||||
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Operating lease liabilities ‒ current portion |
2,025 | 1,982 | ||||||
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Deferred revenues ‒ current portion |
32,776 | 19,441 | ||||||
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Current portion of long-term debt, net |
2,237 | 2,236 | ||||||
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Total current liabilities |
78,106 | 71,891 | ||||||
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Long-term income taxes |
5,331 | 4,273 | ||||||
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Operating lease liabilities – non-current portion |
6,278 | 3,838 | ||||||
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Long-term debt, net |
63,096 | 64,763 | ||||||
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Other non-current liabilities |
5,137 | 2,910 | ||||||
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Total liabilities |
157,948 | 147,675 | ||||||
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Stockholders’ equity: |
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Common stock and additional paid-in capital |
641,287 | 533,509 | ||||||
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Treasury stock, at cost |
(177,433 | ) | (165,808 | ) | ||||
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Accumulated deficit |
(78,725 | ) | (94,628 | ) | ||||
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Accumulated other comprehensive loss |
(2,121 | ) | (2,051 | ) | ||||
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Total stockholders’ equity |
383,008 | 271,022 | ||||||
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Total liabilities and stockholders’ equity |
$ | 540,956 | $ | 418,697 | ||||
PDF Solutions® Reports Third Quarter 2026 Financial Results
PDF SOLUTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except per share amounts)
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Three Months Ended |
Nine Months Ended |
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September 30, |
June 30, |
September 30, |
September 30, |
September 30, |
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2026 |
2026 |
2025 |
2026 |
2025 |
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Revenues (1): |
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Platform |
$ | 58,331 | $ | 49,130 | $ | 48,001 | $ | 158,397 | $ | 128,522 | ||||||||||
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Volume-based |
10,003 | 12,399 | 9,114 | 31,596 | 28,099 | |||||||||||||||
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Total revenues |
68,334 | 61,529 | 57,115 | 189,993 | 156,621 | |||||||||||||||
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Costs and Expenses: |
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Costs of revenues |
18,593 | 19,107 | 15,840 | 54,638 | 43,681 | |||||||||||||||
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Research and development |
19,446 | 17,316 | 15,435 | 55,090 | 44,976 | |||||||||||||||
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Selling, general, and administrative |
20,969 | 18,984 | 19,944 | 57,445 | 63,060 | |||||||||||||||
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Amortization of acquired intangible assets |
1,040 | 1,058 | 1,069 | 3,157 | 2,515 | |||||||||||||||
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Income from operations |
8,286 | 5,064 | 4,827 | 19,663 | 2,389 | |||||||||||||||
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Interest expense |
(1,123 | ) | (1,106 | ) | (1,238 | ) | (3,318 | ) | (2,791 | ) | ||||||||||
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Interest income and other, net |
1,189 | 666 | (102 | ) | 2,447 | 964 | ||||||||||||||
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Income before income tax expense |
8,352 | 4,624 | 3,487 | 18,792 | 562 | |||||||||||||||
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Income tax expense |
(1,511 | ) | (353 | ) | (2,193 | ) | (2,889 | ) | (1,154 | ) | ||||||||||
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Net income (loss) |
$ | 6,841 | $ | 4,271 | $ | 1,294 | $ | 15,903 | $ | (592 | ) | |||||||||
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Net income (loss) per share: |
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Basic |
$ | 0.16 | $ | 0.10 | $ | 0.03 | $ | 0.39 | $ | (0.02 | ) | |||||||||
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Diluted |
$ | 0.16 | $ | 0.10 | $ | 0.03 | $ | 0.38 | $ | (0.02 | ) | |||||||||
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Weighted average common shares used to calculate net income (loss) per share: |
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Basic |
42,193 | 40,932 | 39,500 | 41,003 | 39,247 | |||||||||||||||
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Diluted |
42,976 | 41,776 | 39,619 | 41,718 | 39,247 | |||||||||||||||
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(1) |
In the fourth quarter of 2025, the Company updated its presentation of revenue categories. The Company now presents revenue in the following categories: Platform and Volume-based. Platform revenue is derived from the following primary offerings: licenses for software (other than Cimetrix runtime licenses) and related software maintenance and technical support services; SaaS; engineering services; fixed fees associated with CV systems; and licenses and purchase contracts for DirectScan systems. Volume-based revenue is derived from Cimetrix runtime licenses, secureWISE data, and Gainshare. Prior periods Condensed Consolidated Statements of Operations have been reclassified to conform to the new revenue presentation. The change in presentation of revenue does not change the Company’s total revenues or costs of revenues. |
PDF Solutions® Reports Third Quarter 2026 Financial Results
PDF SOLUTIONS, INC.
RECONCILIATION OF GAAP GROSS PROFIT AND MARGIN TO NON-GAAP GROSS PROFIT AND MARGIN (UNAUDITED)
(Dollars in thousands)
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Three Months Ended |
Nine Months Ended |
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September 30, |
June 30, |
September 30, |
September 30, |
September 30, |
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2026 |
2026 |
2025 |
2026 |
2025 |
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GAAP |
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Total revenues |
$ | 68,334 | $ | 61,529 | $ | 57,115 | $ | 189,993 | $ | 156,621 | ||||||||||
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Costs of revenues |
18,593 | 19,107 | 15,840 | 54,638 | 43,681 | |||||||||||||||
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GAAP gross profit |
$ | 49,741 | $ | 42,422 | $ | 41,275 | $ | 135,355 | $ | 112,940 | ||||||||||
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GAAP gross margin |
73 | % | 69 | % | 72 | % | 71 | % | 72 | % | ||||||||||
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Non-GAAP |
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GAAP gross profit |
$ | 49,741 | $ | 42,422 | $ | 41,275 | $ | 135,355 | $ | 112,940 | ||||||||||
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Adjustments to reconcile GAAP to non-GAAP gross profit: |
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Stock-based compensation expense |
1,593 | 1,258 | 1,274 | 4,130 | 3,873 | |||||||||||||||
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Amortization of acquired technology under costs of revenues |
958 | 998 | 998 | 2,954 | 2,674 | |||||||||||||||
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Non-GAAP gross profit |
$ | 52,292 | $ | 44,678 | $ | 43,547 | $ | 142,439 | $ | 119,487 | ||||||||||
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Non-GAAP gross margin |
77 | % | 73 | % | 76 | % | 75 | % | 76 | % | ||||||||||
RECONCILIATION OF GAAP INCOME FROM OPERATIONS AND OPERATING MARGIN TO NON-GAAP INCOME FROM OPERATIONS AND OPERATING MARGIN (UNAUDITED)
(Dollars in thousands)
|
Three Months Ended |
Nine Months Ended |
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September 30, |
June 30, |
September 30, |
September 30, |
September 30, |
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2026 |
2026 |
2025 |
2026 |
2025 |
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GAAP income from operations |
$ | 8,286 | $ | 5,064 | $ | 4,827 | $ | 19,663 | $ | 2,389 | ||||||||||
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GAAP operating margin |
12 | % | 8 | % | 8 | % | 10 | % | 2 | % | ||||||||||
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Adjustments to reconcile GAAP to non-GAAP income from operations: |
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Stock-based compensation expense |
8,472 | 5,998 | 6,264 | 20,866 | 19,059 | |||||||||||||||
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Amortization of acquired intangible assets |
1,998 | 2,056 | 2,067 | 6,111 | 5,189 | |||||||||||||||
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Expenses for certain legal proceedings (1) |
436 | 501 | 170 | 1,147 | 397 | |||||||||||||||
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Acquisition-related and integration costs |
30 | 30 | 22 | 68 | 4,526 | |||||||||||||||
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Non-GAAP income from operations |
$ | 19,222 | $ | 13,649 | $ | 13,350 | $ | 47,855 | $ | 31,560 | ||||||||||
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Non-GAAP operating margin |
28 | % | 22 | % | 23 | % | 25 | % | 20 | % | ||||||||||
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(1) |
Represents legal costs and expenses related mainly to a certain arbitration proceeding, which are expected to continue until this matter is fully resolved. |
PDF Solutions® Reports Third Quarter 2026 Financial Results
PDF SOLUTIONS, INC.
RECONCILIATION OF GAAP NET INCOME (LOSS) TO NON-GAAP NET INCOME (UNAUDITED)
(In thousands, except per share amounts)
|
Three Months Ended |
Nine Months Ended |
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September 30, |
June 30, |
September 30, |
September 30, |
September 30, |
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2026 |
2026 |
2025 |
2026 |
2025 |
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GAAP net income (loss) |
$ | 6,841 | $ | 4,271 | $ | 1,294 | $ | 15,903 | $ | (592 | ) | |||||||||
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Adjustments to reconcile GAAP net income (loss) to non-GAAP net income: |
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Stock-based compensation expense |
8,472 | 5,998 | 6,264 | 20,866 | 19,059 | |||||||||||||||
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Amortization of acquired intangible assets |
1,998 | 2,056 | 2,067 | 6,111 | 5,189 | |||||||||||||||
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Expenses for certain legal proceedings (1) |
436 | 501 | 170 | 1,147 | 397 | |||||||||||||||
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Acquisition-related and integration costs |
30 | 30 | 22 | 68 | 4,526 | |||||||||||||||
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Recovery from previously written-off property and equipment |
— | — | — | — | (663 | ) | ||||||||||||||
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Amortization of debt issuance costs |
64 | 60 | 54 | 189 | 130 | |||||||||||||||
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Tax impact of valuation allowance for deferred tax assets and reconciling items (2) |
(680 | ) | (1,544 | ) | (66 | ) | (3,102 | ) | (2,825 | ) | ||||||||||
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Non-GAAP net income |
$ | 17,161 | $ | 11,372 | $ | 9,805 | $ | 41,182 | $ | 25,221 | ||||||||||
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GAAP net income (loss) per diluted share |
$ | 0.16 | $ | 0.10 | $ | 0.03 | $ | 0.38 | $ | (0.02 | ) | |||||||||
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Non-GAAP net income per diluted share |
$ | 0.40 | $ | 0.27 | $ | 0.25 | $ | 0.99 | $ | 0.64 | ||||||||||
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Weighted average common shares used in GAAP net income (loss) per diluted share calculation |
42,976 | 41,776 | 39,619 | 41,718 | 39,247 | |||||||||||||||
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Weighted average common shares used in non-GAAP net income per diluted share calculation |
42,976 | 41,776 | 39,619 | 41,718 | 39,390 | |||||||||||||||
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(1) |
Represents legal costs and expenses related mainly to a certain arbitration proceeding, which are expected to continue until this matter is fully resolved. |
| (2) | The difference between the GAAP and non-GAAP income tax provisions is primarily due to the valuation allowance on a GAAP basis and non-GAAP adjustments. For example, on a GAAP basis, the Company does not receive a deferred tax benefit for foreign tax credits or research and development credits after the valuation allowance. The Company’s non-GAAP tax rate and resulting non-GAAP tax expense is not calculated with a full U.S. federal or state valuation allowance due to the Company’s cumulative non-GAAP income and management’s conclusion that it is more likely than not to utilize its net deferred tax assets (DTAs). Each reporting period, management evaluates the need for a valuation allowance and may place a valuation allowance against its U.S. net DTAs on a non-GAAP basis if it concludes it is more likely than not that it will not be able to utilize some or all of its U.S. DTAs on a non-GAAP basis. |
Exhibit 99.2
 |
Q3 2026
Management Report
November 5, 2026
|
|
Contents
■ Q3 2026 Results
– Overview
– Key Financial & Operating Metrics
– Revenue by Geographic Area
■ Q3 2026 Non-GAAP Results
– Reconciliation of GAAP Net Income (Loss) to Non-GAAP Net Income
– Reconciliation of GAAP to Non-GAAP Spending by Function
■ Related Information
The following commentary is provided by management and should be referenced in conjunction with PDF Solutions’ Third Quarter 2026 financial results press release available on its Investor Relations website at http://www.pdf.com/financial-news. These remarks represent management’s current views of the Company’s financial and operational performance and are provided to give investors and analysts further insight into its performance in advance of the earnings call webcast. The Company disclaims any duty to update this information for future events.
|
|
PDF Solutions Reports Third Quarter 2026 Results
|
Q3 2026 Key Metrics |
FINANCIAL RESULTS SUMMARY |
|
|
Total Revenues: $68.3M |
■ Q3 2026 Total revenues of $68.3M was up 11% over Q2 2026, and up 20% over Q3 2025
■ Q3 2026 Platform revenue of $58.3M was up 19% over Q2 2026, and up 22% over Q3 2025
■ Q3 2026 Volume-based revenue of $10.0M was down 19% from Q2 2026, and up 10% over Q3 2025
■ Q3 2026 Recurring revenue was 88%, Q2 2026 was 80%, and Q3 2025 was 95%
■ Q3 2026 Upfront revenue was 12%, Q2 2026 was 20%, and Q3 2025 was 5% |
|
| GAAP Gross Margin: 73% | ||
|
Non-GAAP Gross Margin: 77% |
||
| GAAP Operating Margin: 12% | ||
| Non-GAAP Operating Margin: 28% | ||
|
GAAP Diluted EPS: $0.16 |
||
|
Non-GAAP Diluted EPS: $0.40 |
||
|
Operating Cash Flow: $13.8M |
||
|
Cash Used for Capital Expenditures: $15.1M |
||
|
|
Key Financial & Operating Metrics
Quarterly
(in thousands, except outstanding shares, which are in millions, and percentages)
|
Q3’26 |
Q2’26 |
Q1’26 |
Q4’25 |
Q3’25 |
||||||
|
Revenues |
$68,334 | $61,529 | $60,130 | $62,403 | $57,115 | |||||
|
GAAP Gross Margin |
73 | % | 69 | % | 72 | % | 73 | % | 72 | % |
|
Non-GAAP Gross Margin |
77 | % | 73 | % | 76 | % | 77 | % | 76 | % |
|
GAAP Operating Margin |
12 | % | 8 | % | 10 | % | 6 | % | 8 | % |
|
Non-GAAP Operating Margin |
28 | % | 22 | % | 25 | % | 24 | % | 23 | % |
|
Outstanding Debt Principal |
$66,250 | $67,500 | $67,500 | $68,125 | $68,750 | |||||
|
Operating Cash Flow |
$13,759 | $16,401 | $1,674 | $17,341 | $3,287 | |||||
|
Cash Used for Capital Expenditures (CAPEX) |
$15,071 | $14,082 | $10,500 | $9,791 | $6,325 | |||||
|
$ Shares Repurchased |
$— | $— | $— | $— | $244 | |||||
|
Weighted Average Common Shares Outstanding |
42.2 | 40.9 | 39.9 | 39.5 | 39.5 | |||||
|
Effective Tax Rate |
18 | % | 8 | % | 18 | % | 102 | % | 63 | % |
|
|
|
Nine Months Ended September 30, |
|||||||||
|
2026 |
2025 |
2024 |
|||||||
|
Revenues |
$189,993 | $156,621 | $129,380 | ||||||
|
GAAP Gross Margin |
71 | % | 72 | % | 70 | % | |||
|
Non-GAAP Gross Margin |
75 | % | 76 | % | 75 | % | |||
|
GAAP Operating Margin |
10 | % | 2 | % | <1% | ||||
|
Non-GAAP Operating Margin |
25 | % | 20 | % | 17 | % | |||
|
Outstanding Debt Principal |
$66,250 | $68,750 | $— | ||||||
|
Operating Cash Flow |
$31,834 | $6,712 | $8,097 | ||||||
|
Cash Used for CAPEX |
$39,653 | $23,054 | $11,938 | ||||||
|
$ Shares Repurchased |
$— | $244 | $6,899 | ||||||
|
Weighted Average Common Shares Outstanding |
41.0 | 39.2 | 38.5 | ||||||
|
Effective Tax Rate |
15 | % | 205 | % | 31 | % | |||
|
|
|
Revenue by Geographic Area
|
(Dollars in thousands)
|
Q3’26 |
Q2’26 |
Q1’26 |
Q4’25 |
Q3’25 |
|||||||||||
|
United States |
$22,702 | $34,036 | $24,507 | $36,439 | $30,143 | ||||||||||
|
% of Total |
33 | % | 55 | % | 41 | % | 58 | % | 53 | % | |||||
|
Japan |
$21,655 | $6,563 | $8,679 | $8,156 | $10,091 | ||||||||||
|
% of Total |
32 | % | 11 | % | 14 | % | 13 | % | 18 | % | |||||
|
China |
$11,068 | $8,723 | $8,514 | $7,866 | $5,842 | ||||||||||
|
% of Total |
16 | % | 14 | % | 14 | % | 12 | % | 10 | % | |||||
|
Rest of the world |
$12,909 | $12,207 | $18,430 | $9,942 | $11,039 | ||||||||||
|
% of Total |
19 | % | 20 | % | 31 | % | 17 | % | 19 | % | |||||
|
Total revenues |
$68,334 | $61,529 | $60,130 | $62,403 | $57,115 |
|
|
|
Revenue by Geographic Area
|
|
Nine Months Ended September 30, |
|||||||||
|
2026 |
2025 |
2024 |
|||||||
|
United States |
$81,245 | $68,325 | $58,021 | ||||||
|
% of Total |
43 | % | 43 | % | 45 | % | |||
|
Japan |
$36,897 | $31,131 | $25,495 | ||||||
|
% of Total |
19 | % | 20 | % | 20 | % | |||
|
China |
$28,305 | $26,075 | $17,526 | ||||||
|
% of Total |
15 | % | 17 | % | 14 | % | |||
|
Rest of the world |
$43,546 | $31,090 | $28,338 | ||||||
|
% of Total |
23 | % | 20 | % | 21 | % | |||
|
Total revenues |
$189,993 | $156,621 | $129,380 | ||||||
|
|
| GAAP / Non-GAAP Presentation |
In addition to providing results that are determined in accordance with accounting principles generally accepted in the United States of America (“GAAP”), the Company also provides certain non-GAAP financial measures. Non-GAAP gross profit and margin exclude stock-based compensation expense and the amortization of acquired technology under costs of revenues. Non-GAAP income from operations and operating margin exclude stock-based compensation expense, amortization of acquired intangible assets, and the effects of certain non-recurring items, such as expenses for certain legal proceedings, and acquisition-related and integration costs. Non-GAAP net income excludes stock-based compensation expense, amortization of acquired intangible assets, amortization of debt issuance costs, and the effects of certain non-recurring items, such as expenses for certain legal proceedings, acquisition-related and integration costs, recovery from previously written-off property and equipment, and their related income tax effects, as applicable, as well as adjustments for the valuation allowance for deferred tax assets and reconciling items. PDF Solutions management uses non-GAAP financial measures to evaluate the Company’s operating performance and make strategic decisions because these measures exclude items that management believes are not indicative of ongoing operating results and that can vary significantly between periods. These non-GAAP results should not be considered an alternative to, or a substitute for, GAAP financial information, and may differ 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 or loss as a measure of performance, or to cash flows from operating, investing and financing activities as a measure of liquidity. A reconciliation of the comparable GAAP financial measures to the non-GAAP financial measures is included herein.
|
|
|
Reconciliation of GAAP Gross Profit and Margin to
Non-GAAP Gross Profit and Margin
|
Quarterly
(Dollars in thousands)
|
Q3’26 |
Q2’26 |
Q1’26 |
Q4’25 |
Q3’25 |
||||||||||||||||
|
GAAP |
||||||||||||||||||||
|
Total revenues |
$ | 68,334 | $ | 61,529 | $ | 60,130 | $ | 62,403 | $ | 57,115 | ||||||||||
|
Costs of revenues |
18,593 | 19,107 | 16,938 | 16,942 | 15,840 | |||||||||||||||
|
GAAP gross profit |
$ | 49,741 | $ | 42,422 | $ | 43,192 | $ | 45,461 | $ | 41,275 | ||||||||||
|
GAAP gross margin |
73 | % | 69 | % | 72 | % | 73 | % | 72 | % | ||||||||||
|
Non-GAAP |
||||||||||||||||||||
|
GAAP gross profit |
$ | 49,741 | $ | 42,422 | $ | 43,192 | $ | 45,461 | $ | 41,275 | ||||||||||
|
Adjustments to reconcile GAAP to non-GAAP gross profit: |
||||||||||||||||||||
|
Stock-based compensation expense |
1,593 | 1,258 | 1,279 | 1,379 | 1,274 | |||||||||||||||
|
Amortization of acquired technology under costs of revenues |
958 | 998 | 998 | 998 | 998 | |||||||||||||||
|
Non-GAAP gross profit |
$ | 52,292 | $ | 44,678 | $ | 45,469 | $ | 47,838 | $ | 43,547 | ||||||||||
|
Non-GAAP gross margin |
77 | % | 73 | % | 76 | % | 77 | % | 76 | % | ||||||||||
|
|
|
Reconciliation of GAAP Gross Profit and Margin to
Non-GAAP Gross Profit and Margin
|
Year to Date
(Dollars in thousands)
|
Nine Months Ended September 30, |
||||||||||||
|
2026 |
2025 |
2024 |
||||||||||
|
GAAP |
||||||||||||
|
Total revenues |
$ | 189,993 | $ | 156,621 | $ | 129,380 | ||||||
|
Costs of revenues |
54,638 | 43,681 | 38,243 | |||||||||
|
GAAP gross profit |
$ | 135,355 | $ | 112,940 | $ | 91,137 | ||||||
|
GAAP gross margin |
71 | % | 72 | % | 70 | % | ||||||
|
Non-GAAP |
||||||||||||
|
GAAP gross profit |
$ | 135,355 | $ | 112,940 | $ | 91,137 | ||||||
|
Adjustments to reconcile GAAP to non-GAAP gross profit: |
||||||||||||
|
Stock-based compensation expense |
4,130 | 3,873 | 3,751 | |||||||||
|
Amortization of acquired technology under costs of revenues |
2,954 | 2,674 | 1,752 | |||||||||
|
Non-GAAP gross profit |
$ | 142,439 | $ | 119,487 | $ | 96,640 | ||||||
|
Non-GAAP gross margin |
75 | % | 76 | % | 75 | % | ||||||
|
|
|
Reconciliation of GAAP Income from Operations and Operating Margin to
Non-GAAP Income from Operations and Operating Margin
|
Quarterly
(Dollars in thousands)
|
Q3’26 |
Q2’26 |
Q1’26 |
Q4’25 |
Q3’25 |
||||||||||||||||
|
GAAP income from operations |
$ | 8,286 | $ | 5,064 | $ | 6,313 | $ | 3,458 | $ | 4,827 | ||||||||||
|
GAAP operating margin |
12 | % | 8 | % | 10 | % | 6 | % | 8 | % | ||||||||||
|
Adjustments to reconcile GAAP to non-GAAP income from operations: |
||||||||||||||||||||
|
Stock-based compensation expense |
$ | 8,472 | $ | 5,998 | $ | 6,396 | $ | 6,866 | $ | 6,264 | ||||||||||
|
Amortization of acquired intangible assets |
1,998 | 2,056 | 2,057 | 2,066 | 2,067 | |||||||||||||||
|
Expenses for certain legal proceedings (1) |
436 | 501 | 210 | 2,574 | 170 | |||||||||||||||
|
Acquisition-related and integration costs |
30 | 30 | 8 | 2 | 22 | |||||||||||||||
|
Non-GAAP income from operations |
$ | 19,222 | $ | 13,649 | $ | 14,984 | $ | 14,966 | $ | 13,350 | ||||||||||
|
Non-GAAP operating margin |
28 | % | 22 | % | 25 | % | 24 | % | 23 | % | ||||||||||
|
(1) |
Represents legal costs and expenses related mainly to a certain arbitration proceeding, which are expected to continue until this matter is fully resolved. |
|
|
|
Reconciliation of GAAP Income from Operations and Operating Margin to
Non-GAAP Income from Operations and Operating Margin
|
Year to Date
(Dollars in thousands)
|
Nine Months Ended September 30, |
||||||||||||
|
2026 |
2025 |
2024 |
||||||||||
|
GAAP income from operations |
$ | 19,663 | $ | 2,389 | $ | 423 | ||||||
|
GAAP operating margin |
10 | % | 2 | % |
<1% |
|||||||
|
Adjustments to reconcile GAAP to non-GAAP income from operations: |
||||||||||||
|
Stock-based compensation expense |
$ | 20,866 | $ | 19,059 | $ | 18,540 | ||||||
|
Amortization of acquired intangible assets |
6,111 | 5,189 | 2,466 | |||||||||
|
Expenses for certain legal proceedings (1) |
1,147 | 397 | — | |||||||||
|
Acquisition-related and integration costs |
68 | 4,526 | — | |||||||||
|
Non-GAAP income from operations |
$ | 47,855 | $ | 31,560 | $ | 21,429 | ||||||
|
Non-GAAP operating margin |
25 | % | 20 | % | 17 | % | ||||||
|
(1) |
Represents legal costs and expenses related mainly to a certain arbitration proceeding, which are expected to continue until this matter is fully resolved. |
|
|
| Reconciliation of GAAP Net Income (Loss) to Non-GAAP Net Income |
Quarterly
(in thousands, except for per share amounts)
|
Q3’26 |
Q2’26 |
Q1’26 |
Q4’25 |
Q3’25 |
|||||||||||
|
GAAP net income (loss) |
$6,841 | $4,271 | $4,791 | $(48 | ) | $1,294 | |||||||||
|
Adjustments to reconcile GAAP net income (loss) to non-GAAP net income: |
|||||||||||||||
|
Stock-based compensation expense |
8,472 | 5,998 | 6,396 | 6,866 | 6,264 | ||||||||||
|
Amortization of acquired intangible assets |
1,998 | 2,056 | 2,057 | 2,066 | 2,067 | ||||||||||
|
Expenses for certain legal proceedings (1) |
436 | 501 | 210 | 2,574 | 170 | ||||||||||
|
Acquisition-related and integration costs |
30 | 30 | 8 | 2 | 22 | ||||||||||
|
Amortization of debt issuance costs |
64 | 60 | 65 | 55 | 54 | ||||||||||
|
Tax impact of valuation allowance for deferred tax assets and reconciling items (2) |
(680 | ) | (1,544 | ) | (878 | ) | 495 | (66 | ) | ||||||
|
Non-GAAP net income |
$17,161 | $11,372 | $12,649 | $12,010 | $9,805 | ||||||||||
|
GAAP net income (loss) per diluted share |
$0.16 | $0.10 | $0.12 | $(0.00 | ) | $0.03 | |||||||||
|
Non-GAAP net income per diluted share |
$0.40 | $0.27 | $0.31 | $0.30 | $0.25 | ||||||||||
|
Weighted average common shares used in GAAP net income (loss) per diluted share calculation |
42,976 | 41,776 | 40,377 | 39,524 | 39,619 | ||||||||||
|
Weighted average common shares used in Non-GAAP net income per diluted share calculation |
42,976 | 41,776 | 40,377 | 39,911 | 39,619 |
|
(1) |
Represents legal costs and expenses related mainly to a certain arbitration proceeding, which are expected to continue until this matter is fully resolved. |
| (2) | The difference between the GAAP and non-GAAP income tax provisions is primarily due to the valuation allowance on a GAAP basis and non-GAAP adjustments. For example, on a GAAP basis, the Company does not receive a deferred tax benefit for foreign tax credits or research and development credits after the valuation allowance. The Company’s non-GAAP tax rate and resulting non-GAAP tax expense is not calculated with a full U.S. federal or state valuation allowance due to the Company’s cumulative non-GAAP income and management’s conclusion that it is more likely than not to utilize its net deferred tax assets (DTAs). Each reporting period, management evaluates the need for a valuation allowance and may place a valuation allowance against its U.S. net DTAs on a non-GAAP basis if it concludes it is more likely than not that it will not be able to utilize some or all of its U.S. DTAs on a non-GAAP basis. |
|
|
|
Reconciliation of GAAP Net Income (Loss) to Non-GAAP Net Income
|
Year to Date
(in thousands, except for per share amounts)
|
Nine Months Ended September 30, |
||||||
|
2026 |
2025 |
2024 |
||||
|
GAAP net income (loss) |
$15,903 | $(592 | ) | $3,518 | ||
|
Adjustments to reconcile GAAP net income (loss) to non-GAAP net income: |
||||||
|
Stock-based compensation expense |
20,866 | 19,059 | 18,540 | |||
|
Amortization of acquired intangible assets |
6,111 | 5,189 | 2,466 | |||
|
Expenses for certain legal proceedings (1) |
1,147 | 397 | — | |||
|
Acquisition-related and integration costs |
68 | 4,526 | — | |||
|
Recovery from previously written-off property and equipment |
— | (663 | ) | (55 | ) | |
|
Amortization of debt issuance costs |
189 | 130 | — | |||
|
Tax impact of valuation allowance for deferred tax assets and reconciling items (2) |
(3,102 | ) | (2,825 | ) | (1,710 | ) |
|
Non-GAAP net income |
$41,182 | $25,221 | $22,759 | |||
|
GAAP net income (loss) per diluted share |
$0.38 | $(0.02 | ) | $0.09 | ||
|
Non-GAAP net income per diluted share |
$0.99 | $0.64 | $0.58 | |||
|
Weighted average common shares used in GAAP net income (loss) per diluted share calculation |
41,718 | 39,247 | 39,028 | |||
|
Weighted average common shares used in Non-GAAP net income per diluted share calculation |
41,718 | 39,390 | 39,028 | |||
|
(1) |
Represents legal costs and expenses related mainly to a certain arbitration proceeding, which are expected to continue until this matter is fully resolved. |
| (2) | The difference between the GAAP and non-GAAP income tax provisions is primarily due to the valuation allowance on a GAAP basis and non-GAAP adjustments. For example, on a GAAP basis, the Company does not receive a deferred tax benefit for foreign tax credits or research and development credits after the valuation allowance. The Company’s non-GAAP tax rate and resulting non-GAAP tax expense is not calculated with a full U.S. federal or state valuation allowance due to the Company’s cumulative non-GAAP income and management’s conclusion that it is more likely than not to utilize its net deferred tax assets (DTAs). Each reporting period, management evaluates the need for a valuation allowance and may place a valuation allowance against its U.S. net DTAs on a non-GAAP basis if it concludes it is more likely than not that it will not be able to utilize some or all of its U.S. DTAs on a non-GAAP basis. |
|
|
| Reconciliation of GAAP to Non-GAAP Spending by Function |
Quarterly
(in thousands)
|
Q3’26 |
Q2’26 |
Q1’26 |
Q4’25 |
Q3’25 |
||||||
|
Cost of Revenue - GAAP |
$18,593 | $19,107 | $16,938 | $16,942 | $15,840 | |||||
|
Adjustments to reconcile GAAP Cost of Revenue to Non-GAAP Cost of Revenue: |
||||||||||
|
Stock-based compensation expense |
(1,593 | ) | (1,258 | ) | (1,279 | ) | (1,379 | ) | (1,274 | ) |
|
Amortization of acquired technology |
(958 | ) | (998 | ) | (998 | ) | (998 | ) | (998 | ) |
|
Cost of Revenue - Non-GAAP |
$16,042 | $16,851 | $14,661 | $14,565 | $13,568 | |||||
|
Research & Development - GAAP |
$19,446 | $17,316 | $18,328 | $19,258 | $15,435 | |||||
|
Adjustments to reconcile GAAP R&D to Non-GAAP R&D: |
||||||||||
|
Stock-based compensation expense |
(3,173 | ) | (2,169 | ) | (2,392 | ) | (2,586 | ) | (2,204 | ) |
|
Research & Development - Non-GAAP |
$16,273 | $15,147 | $15,936 | $16,672 | $13,231 | |||||
|
Selling, General, & Administrative - GAAP |
$20,969 | $18,984 | $17,492 | $21,676 | $19,944 | |||||
|
Adjustment to reconcile GAAP SG&A to Non-GAAP SG&A: |
||||||||||
|
Stock-based compensation expense |
(3,706 | ) | (2,571 | ) | (2,725 | ) | (2,901 | ) | (2,786 | ) |
|
Expenses for certain legal proceedings (1) |
(436 | ) | (501 | ) | (210 | ) | (2,574 | ) | (170 | ) |
|
Acquisition-related and integration costs |
(30 | ) | (30 | ) | (8 | ) | (2 | ) | (22 | ) |
|
Selling, General, & Administrative - Non-GAAP |
$16,797 | $15,882 | $14,549 | $16,199 | $16,966 |
|
(1) |
Represents legal costs and expenses related mainly to a certain arbitration proceeding, which are expected to continue until this matter is fully resolved. |
|
|
|
Reconciliation of GAAP to Non-GAAP Spending by Function
|
Year to Date
(in thousands)
|
Nine Months Ended September 30, |
|||||||||
|
2026 |
2025 |
2024 |
|||||||
|
Cost of Revenue - GAAP |
$54,638 | $43,681 | $38,243 | ||||||
|
Adjustments to reconcile GAAP Cost of Revenue to Non-GAAP Cost of Revenue: |
|||||||||
|
Stock-based compensation expense |
(4,130 | ) | (3,873 | ) | (3,751 | ) | |||
|
Amortization of acquired technology |
(2,954 | ) | (2,674 | ) | (1,752 | ) | |||
|
Cost of Revenue - Non-GAAP |
$47,554 | $37,135 | $32,740 | ||||||
|
Research & Development - GAAP |
$55,090 | $44,976 | $39,149 | ||||||
|
Adjustments to reconcile GAAP R&D to Non-GAAP R&D: |
|||||||||
|
Stock-based compensation expense |
(7,734 | ) | (6,874 | ) | (6,640 | ) | |||
|
Research & Development - Non-GAAP |
$47,356 | $38,102 | $32,509 | ||||||
|
Selling, General, & Administrative - GAAP |
$57,445 | $63,060 | $50,851 | ||||||
|
Adjustment to reconcile GAAP SG&A to Non-GAAP SG&A: |
|||||||||
|
Stock-based compensation expense |
(9,002 | ) | (8,312 | ) | (8,149 | ) | |||
|
Expenses for certain legal proceedings (1) |
(1,147 | ) | (397 | ) | — | ||||
|
Acquisition-related and integration costs |
(68 | ) | (4,526 | ) | — | ||||
|
Selling, General, & Administrative - Non-GAAP |
$47,228 | $49,825 | $42,702 | ||||||
|
(1) |
Represents legal costs and expenses related mainly to a certain arbitration proceeding, which are expected to continue until this matter is fully resolved. |