PDF Solutions Reports Record Fourth Quarter and Total Year 2004 Revenu

    Business Editors/High-Tech Editors

    SAN JOSE, Calif.--(BUSINESS WIRE)--Jan. 27, 2005--PDF Solutions, Inc.(R)(Nasdaq:PDFS) the leading provider of process-design integration technologies to enhance IC manufacturability, today announced financial results for its fourth fiscal quarter and full fiscal year ended December 31, 2004.
    Revenue for the fourth fiscal quarter of 2004 totaled a record $18.1 million, an increase of 50%, compared with revenue of $12.1 million for the fourth fiscal quarter of 2003. On a GAAP basis, net income for the fourth fiscal quarter of 2004 totaled approximately $1.6 million, or $0.06 per diluted share, compared with a net loss of approximately $1.3 million, or $0.05 per diluted share, for the fourth fiscal quarter of 2003.
    Revenue for the full fiscal year ended December 31, 2004 totaled a record $62.3 million, an increase of 47%, compared with revenue of $42.5 million for the full fiscal year ended December 31, 2003. On a GAAP basis, net loss for the full fiscal year of 2004 totaled approximately $614,000, or $0.02 per diluted share, compared with a net loss of approximately $4.5 million, or $0.19 per diluted share, for the full fiscal year of 2003.
    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 or loss, which excludes amortization of stock-based compensation and acquired intangible assets. Using this non-GAAP measure, net income for the fourth fiscal quarter of 2004 totaled $3.6 million, or $0.13 per diluted share, compared with non-GAAP net loss of approximately $135,000, or $0.01 per diluted share, for the fourth fiscal quarter of 2003.
    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 quarterly results. 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 PDF Solutions' 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 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(R) is a registered trademark of PDF Solutions, Inc.

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

December 31, December 31, 2004 2003 ------------ ------------ ASSETS Current assets: Cash and cash equivalents $45,660 $39,110 Accounts receivable, net of allowances 15,978 11,869 Prepaid expenses and other current assets 2,685 2,614 Deferred tax assets 1,586 1,808 ------------ ------------ Total current assets 65,909 55,401 Property and equipment, net 3,321 4,110 Goodwill 39,886 40,548 Intangible assets, net 15,791 22,906 Other assets 500 1,002 ------------ ------------ Total assets $125,407 $123,967 ============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities: Accounts payable $1,023 $835 Accrued compensation and related benefits 3,209 1,952 Other accrued liabilities 2,545 1,485 Other acquisition obligations 48 1,880 Taxes payable 3,286 2,871 Deferred revenue 2,905 3,300 Billings in excess of recognized revenue 1,581 465 ------------ ------------ Total current liabilities 14,597 12,788 Long-term liabilities 311 287 Deferred tax liabilities 1,701 4,340 ------------ ------------ Total liabilities 16,609 17,415 ------------ ------------

Stockholders' equity: Common stock 4 4 Additional paid-in-capital 134,191 129,568 Treasury stock (4,806) -- Deferred stock-based compensation (148) (688) Notes receivable from stockholders (550) (3,025) Accumulated deficit (19,975) (19,361) Accumulated other comprehensive income 82 54 ------------ ------------ Total stockholders' equity 108,798 106,552 ------------ ------------ Total liabilities and stockholders' equity $125,407 $123,967 ============ ============

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

Three Months Twelve Months Ended Ended ----------------- ----------------- Dec. 31, Dec. 31, Dec. 31, Dec. 31, 2004 2003 2004 2003 -------- -------- -------- --------

Revenue: Design-to-silicon-yield solutions $15,300 $10,454 $54,544 $35,629 Gain share 2,751 1,615 7,802 6,897 -------- -------- -------- -------- Total revenue 18,051 12,069 62,346 42,526 -------- -------- -------- --------

Cost and expenses: Cost of design-to-silicon-yield solutions: Direct costs of design-to- silicon-yield solutions: 6,245 3,686 21,855 14,412 Amortization of acquired core technology 1,266 1,350 5,209 2,168 Research and development 5,352 5,318 20,332 18,441 Selling, general and administrative 3,987 3,739 15,207 12,459 Stock-based compensation amortization(a) 61 411 742 1,755 Amortization of other acquired intangible assets 235 410 1,406 547 Write-off of in-process research and development -- -- -- 800 -------- -------- -------- -------- Total costs and expenses 17,146 14,914 64,751 50,582 -------- -------- -------- --------

Income (loss) from operations 905 (2,845) (2,405) (8,056) Interest and other income 234 197 675 1,195 -------- -------- -------- -------- Income (loss) before taxes 1,139 (2,648) (1,730) (6,861)

Tax benefit (414) (1,373) (1,116) (2,345) -------- -------- -------- -------- Net income (loss) $1,553 $(1,275) $(614) $(4,516) ======== ======== ======== ========

Net income (loss) per share: Basic $0.06 $(0.05) $(0.02) $(0.19) ======== ======== ======== ======== Diluted $0.06 $(0.05) $(0.02) $(0.19) ======== ======== ======== ========

Weighted average common shares: Basic 25,391 25,010 25,330 23,278 ======== ======== ======== ======== Diluted 26,975 25,010 25,330 23,278 ======== ======== ======== ========

(a) Stock-based compensation amortization: Cost of design-to-silicon- yield solutions $-- $52 $39 $345 Research and development 61 314 667 1,099 Selling, general and administrative -- 45 36 311 ---- ----- ----- ------- $61 $411 $742 $1,755 ==== ===== ===== =======

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

Three Months Ended ------------------------- December 31, December 31, 2004 2003 ------------ ------------

GAAP net income (loss) $1,553 $(1,275)

Stock-based compensation amortization 61 411

Amortization of intangibles, net of taxes 2,019 729

------------ ------------ Non-GAAP net income (loss) $3,633 $(135) ============ ============

Non-GAAP net income (loss) per share - diluted $0.13 $(0.01) ============ ============

Weighted average common shares - diluted 26,975 25,010 ============ ============

    Use of Non-GAAP Information

    In addition to providing results that are determined in accordance with Generally Accepted Accounting Principles (GAAP), PDF 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 PDF's 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 acquired intangibles.

--30--AD/sf*

CONTACT: PDF Solutions, Inc. Sonia Segovia, 408-938-6491 (Investor Relations) sonia.segovia@pdf.com or Armstrong Kendall, Inc. Abbie Kendall, 503-672-4681 (Corporate Communications) abbie@akipr.com

KEYWORD: CALIFORNIA INDUSTRY KEYWORD: HARDWARE COMPUTERS/ELECTRONICS TELECOMMUNICATIONS SOFTWARE EARNINGS CONFERENCE CALLS SOURCE: PDF Solutions, Inc.

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