Good day, everyone, and welcome to the PDF Solutions, Inc. conference call to discuss its financial results for the fourth quarter and year-end 2025 ending Wednesday, December 31, 2025. [Operator Instructions] As a reminder, this conference is being recorded. If you have not yet received a copy of the corresponding press release, it has been posted to PDF's website at www.pdf.com. Some of the statements that will be made in the course of this conference are forward-looking, including statements regarding PDF's future financial results and performance, growth rates and demand for its solutions. PDF's actual results could differ materially. You should refer to the section entitled Risk Factors on Page 16 through 30 of PDF's annual report on Form 10-K for the fiscal year ended December 31, 2024, and similar disclosures in subsequent SEC filings. The forward-looking statements and risks stated in this conference call are based on the information available to PDF today. PDF assumes no obligation to update them. Now I'd like to introduce John Kibarian, PDF's President and Chief Executive Officer; and Adnan Raza, PDF's Chief Financial Officer. Mr. Kibarian, please go ahead.

Thank you for joining us on today's call. If you've not already seen our earnings press release and management report for the fourth quarter and full year, please go to the Investors section of our website where each has been posted. 2025 was a transformative year for PDF. In my prepared remarks, I will summarize our current positioning, key achievements in the year and our major goals. I will also comment on the near-term business climate and our expectations for 2026. After Adnan's remarks on our financial results, we will take your questions. As we discussed last December in our Users Conference, there are semiconductor industry trends that have established PDF's opportunity today and in the future. IC manufacturing processes, both in the Wafer Fab and Assembly are creating more complex 3D structures. IC companies have moved from providing components to systems. The complexity of system manufacturing, particularly of 3D components is driving the customers to look for new ways to characterize, analyze and control production. As the industry rapidly scales to over $1 trillion in revenue, it is building manufacturing operations around the world. To operate effectively, these facilities need the collaboration of engineers and systems from the entire ecosystem of suppliers, factory operators and customers. In our industry, this means moving from a people-centric approach to an AI-driven collaboration. Finally, the chip industry is a critical driver for AI and increasingly needs to benefit from AI to keep up with the demand. These drivers, 3D manufacturing, supply chain complexity and AI present a significant opportunity for PDF to reinvent itself again. In the first half of this decade, PDF Solutions growth stemmed from our transition to an analytics platform provider. Since 2020, the company grew at approximately 20% compound annual growth rate and expanded its gross margins from…

Thank you, John. Good afternoon, everyone. Good to speak with you again today. We are pleased to review the financial results of the full year and the fourth quarter of 2025. As John said, we posted our earnings release and a management report in the Investor Relations section of our website. We expect to file our annual report on Form 10-K with the SEC by the end of February after our 2025 audit is complete. As a result, all financial results described in this call should be considered preliminary and are subject to change to reflect any necessary adjustments or changes in accounting estimates that are identified prior to the time we filed our 10-K. Please note that all the financial results we discuss in today's call will be on a non-GAAP basis, and a reconciliation to GAAP financials is provided in the materials on our website. We are pleased to again report record quarterly and annual total revenues. We finished the year strong with Q4 total revenues of $62.4 million versus $50.1 million in the same quarter a year prior. We are pleased that our total revenues for the quarter grew 25% year-over-year, ahead of our long-term growth rate target model. For the full year 2025, we generated record total revenues of $219.0 million versus $179.5 million in 2024, a 22% year-over-year increase and consistent with our guidance for the full year. As you will recall, at our Analyst Day in December 2025, we previewed plans for a new presentation of revenues, breaking the total into Platform and Volume-based. For a different insight, we also disaggregate total revenue into 2 different categories of Recurring and Upfront. Further description of these categories is provided in our 8-K filed today. Platform revenue for the fourth quarter was $52.5 million and up…

[Operator Instructions] Our first question comes from Blair Abernethy with Rosenblatt Securities.

Nice quarter. Just wanted to -- maybe we could just start with the DFI. So just to level set, Adnan, you said 4 DirectScan systems were shipped in the year 2025. Was that correct?

Yes, correct. Consistent with what we have spoken throughout the year, you're absolutely right, 4 were shipped during 2025.

Okay. And so what -- so -- and then in John's comments about have 2x as many in the field this coming year. Is that -- so is that 8? Or what is the total field count today, I guess, is the question?

Yes. Remember, we had also done a CapEx sale. So total in the field today is 6. So when we think about next year, you should contextualize John's comment with that. And John said nearly that many. So that's the way I would think about it.

Got it. Got it. Okay. And then on the CapEx spend, so it looks like in your supplemental, you said it's around $32.8 million, just under $33 million in 2025. So is that -- how has that come in over '26? Is it front-end loaded? Just kind of some sense of -- and what are you using it for?

Yes, we'll try to manage it evenly during the year. This year, as you saw, there was a little bit of an uplift towards the end of the year. But next year, we think it's probably even. In between a quarter, is there a little bit of variation maybe towards the middle of the year? That's possible as we look to place some orders in advance. But even give us some room towards the middle of the year.

Okay. And is -- does that -- I mean, is that positioning you for '27? Is that what this is doing? And I guess, I know you don't want to give guidance for '27 at all, but do we -- should we think of it as this is going to be the level for a while? Or just give us some sense of how much is going to be required.

Yes. I'll take that one, Blair. So yes, we -- obviously, a lot of the capital that we spent in the second half of last year was for machines we expect to ship in the first half of this year. The machines are disproportionately now on subscriptions, and we hope to maintain that again this year. So as we modeled out our long-term targets that we provided in December, we thought, okay, even if we stay at this level, but keep machines on subscriptions, you get this installed base of machines over time that all contribute. So we kind of built out assuming we stayed at this capital level and could sustain our growth. We obviously will look to increase our penetration in the market. But because of the subscription model, it becomes a workable model over time with this approach.

Got it. Got it. Great. Okay. And then just if I could, just over on the SAP relationship. I think you mentioned there's another deal there. Just how is that going? And just sort of what are your expectations for next year from that partnership?

Yes. So we continue when we meet with customers, we see increased needs for orchestration, as I said in my prepared remarks, for folks to be able to truly apply more automation, more AI to their operations, you really need that those connections between the major systems. No one is going to build the perfect database that has all information from their financial systems, their operation systems, their engineering. And then the whole purpose of Sapience is the world -- you want a consistent way when you, let's say, do costing from a finance perspective that how you look at machine time on the equipment. So you need to be able to define these orchestrations in the way you take very complex data in the operations side and summarize it for finance and vice versa. So we continue to work with SAP. And increasingly, we're talking with the system integrators as well. And you probably saw some of them present at our Users Conference around ways we can jointly market that solution. But why we like it is it gives another reason why folks want to keep engaged with us on the Exensio side. If you listen to one of the speakers at our Users Conference, they talked about, well, if one part of the organization is using Exensio, then it makes sense to use Sapience because 1/3 of the data, if you say the engineering data is in Exensio, the operations data in their MES system and the finance data in ERP, then you kind of have kind of 1/3 of it already kind of taken care of for "free." So through our partnership with SAP and the SIs, we expect to kind of build on our installed base and engineering to get to the other parts of our customer organization. If you look at the contracts for Sapience, they typically are part of the finance team's spend and the contracts for Exensio are typically the engineering team, our operations team spend. So it allows us to kind of touch and tap into another part of the organization. And we do expect selling throughout this year, just to summarize.

Okay. Great. Maybe just one quick one for you, Adnan. Just -- so how should we be thinking about your balance sheet, your debt levels over the next couple of years? Should we -- are you comfortable with the debt where it is? Are you looking at sort of paying it down again? What sort of what should we be modeling there for capital allocation?

Good question. Yes. So look, I mean, the debt, A, is structured at good rates; B, with the interest rate cuts, that's helping; C, we are a cash-generating history entity on the operating cash flow side. And we've been careful about where we needed to make the investments. I mean, Q3 to Q4, you saw us build the cash. So naturally, we will pay off the required amortization levels of the debt. But beyond that, I think we're going to carefully balance, of course, the spend on the CapEx and also try to build back the cash balance on the balance sheet before we start to think about any massive payback on the debt. But of course, our goal remains that we get out of the debt situation. We never had a -- we've had a history of not having the debt, and we'd like to get back there. So prioritizing with the other priorities and getting back to a healthy cash level and then beyond that, start paying debt, I think, with the expanding margins positions us well to start heading in that direction.

Our next question comes from Clark Wright with D.A. Davidson.

First off, great quarter. Would love to understand a little bit more about the new methodology around describing revenue and partially around your expectations for growth on the Volume-based revenue going forward? And how should we think about the cross-selling opportunity of secureWISE as we think about normalized levels going forward in 2026?

Sure. Maybe I'll take the beginning part and have John jump in on the second piece. So look, many of you have been talking to us about trying to understand the business a little bit more. So that was partly the motivation for breaking it out into the Recurring versus the Upfront. And then secondly, on the Platform versus Volume-based, if you think back over the last 5 years, the business has evolved. Prior to when we did the Cimetrix acquisition, the business was probably more platform -- was more platform-based. So as we acquired Cimetrix. And as we now have acquired secureWISE and over the years, we've also enjoyed and continue to enjoy the Gainshare. It made sense to count those 3 pieces of Cimetrix, largely the 3 pieces of obviously full definitions in the 8-K, but largely the 3 pieces of Cimetrix, secureWISE and Gainshare in our Volume-based revenue, which is -- another way to think about it is it's a revenue that will [indiscernible] to our benefit based on customers' own changes in their business, and we're happy to get that. So that's the Recurring versus Upfront and then the Platform versus the Volume.

Yes. So I think just also it kind of helps you think a little bit. The Volume revenue is typically not in our backlog. We don't have a backlog for Gainshare or on time licenses or the data usage on secureWISE. So we thought it would give some visibility on the part of the business that's really tied to our customers' success with our products, if you think about those 3 elements. And the other one gives you kind of an understanding about the part of the business that kind of is related to the backlog. Just we used to break out IYR and analytics, but then IYR became such a small percentage of the business. We felt it wasn't very instructive for the shareholders, like stockholders. So that kind of gives you the first answer, Clark, if that's adequate. And I can go on to your question about the cross-sell on secureWISE, if you like.

Yes. I mean that's helpful. Just would love to understand just going forward, just given the fact that it grew largely because of the secureWISE piece, how much of that should we be thinking about secureWISE versus what the organic growth rate is of that business?

Yes, we're not breaking out within those pieces. Look, I mean, if you go back and do the calculations, you'll see Platform revenue for us over the last many quarters even that we are sharing in the supplemental has been north of 80%. The Recurring revenue is north of 90%. So it's definitely above those levels. Overall, we'll continue to make sure that the business performs on an aggregate basis...

I think a little bit of the growth on the volume base, Clark, was Gainshare was up quite substantially in 2025 over 2024. And yes, you had the contribution from secureWISE. And actually, as I said in my prepared remarks, we had record runtime revenue licensed revenues for Cimetrix as well. So fundamentally, because the industry is at a relatively elevated level, all 3 of those things were contributing pretty meaningfully to that growth number. It wasn't just secureWISE. I think [indiscernible] part of it, but not all of it at all or nowhere near. So then I think to get to your second question on cross-sell, there's quite a few things we're doing. If you look at our runtime licenses and SDKs for Cimetrix business, we give the equipment company a development kit, so they can use our libraries and software embedded in their equipment to control the screens, the operator, the communication with the factory execution systems and the communication with the factory analytics systems, often things like Exensio. So secureWISE also provides an agent that runs on the equipment that allows for remote communication and full control of what data is shared between the equipment through the factory to the equipment vendor that the factory controls, the factory decides which engineer is able to see what data, which knobs are about to change on the tool, what data goes to the factory at what cadence -- the equipment vendor at what cadence. So the first obvious thing that we're doing is including the secureWISE agent on -- in the Cimetrix software development kit. Just to put it in perspective, in 2024, I don't remember the numbers 2025, over 8,000 tools shipped with Cimetrix Connectivity. And that is -- that's more tools than any single equipment vendor shipped.…

No, that's super helpful. And then the only follow-up I have is just around -- you made a comment during the prepared remarks around logic and memory and the role that PDF can continue to play where we're seeing significant bottlenecks that look like there's no end to. Would love to understand how PDF is continuing to build this value proposition for specifically that client base.

Yes. So I think we've, for a long time, been involved in the advanced logic fabs, and we continue on that. We do see a number of activities this year and even some for test vehicles and DirectScan, eProbe, even in some more mature, I think nodes that you consider slightly more mature on the logic side as people are trying to expand capacity. On the memory side, we've been engaged in a couple of pilots with customers on DRAM. And we expect that to ramp up this year with at least 1 or 2 of those companies as we see very positive results. And we -- I think as the DRAM is also becoming more and more 3D, they're also doing both DRAM and flash bonding of wafers, wafer-wafer bonding, the need to be able to do an electrical inspection is increasing. So we do see a number of opportunities there as well. Overall, we believe manufacturing in semiconductors is increasingly strategic for countries. So it creates the need to put factories in many countries and around the world, and the demand for semiconductors is quite substantial. The characterization capability, the DirectScan, the secureWISE networking capability and the analytics will increasingly become important to our customer base. I think we've had a lot of really exciting conversations with customers in this first month and a week or whatever this year around new opportunities for our -- for our systems.

[Operator Instructions] At this time, there are no more questions. Ladies and gentlemen, this concludes the program. Thank you for joining us on today's call.