PDF Solutions, Inc. (NASDAQ:PDFS) Q4 2023 Earnings Call Transcript

PDF Solutions, Inc. (NASDAQ:PDFS) Q4 2023 Earnings Call Transcript February 15, 2024

PDF Solutions, Inc. misses on earnings expectations. Reported EPS is $0.15 EPS, expectations were $0.16. PDFS isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good day everyone, and welcome to the PDF Solutions, Inc. Conference Call to discuss its financial results for the fourth quarter and year end 2023 conference call ending Sunday, December 31, 2023. [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 statements, 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 Risks Factors on Pages 17 through 30 of PDF’s Annual Report on form 10-K for the fiscal year ended December 31st, 2022, and similar disclosures in subsequent SEC filings.

The forward-looking statements and risks stated in this conference call are based on 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.

John Kibarian: Thank you for joining us on today’s call. If you have not already seen our earnings press release and management report for the fourth quarter and the full year, please go to the Investors section of our website where each has been posted. Today, I will start with a review of 2023 with a particular focus on Q4. I will provide our perspective of the semiconductor market and then conclude with our outlook on PDF solutions prospects for the year and beyond. Adnan will then provide an overview of our financial results and his perspective on the business before we turn the call over for questions. Looking back on 2023, the company made great strides in our goal of being the end-to-end analytics platform for the semiconductor and electronics industries.

This progress was particularly visible at our users conference in October. First, attendance was fantastic, with over 300 people registered from over 100 companies, which represents two times the turnout of our last conference. We had presentations from many of our customers and partners, including Intel, Analog Devices, Renesas, SAP, Advantest, and others. Second, our developers and application engineers and product managers revealed our road maps and demonstrated our new products. Customers described how they’ve used our products and platform to revolutionize their technology development, manufacturing operations and product quality. Talks included their use of our design aware inspection to accelerate bring up of new products and processes, guided analytics AI solution for product engineering to find yield issues faster, our test cell automation to enable 25% reduction in operator overhead and our Sapience Manufacturing Hub to enable manufacturing digital transformation by connecting to the enterprise.

We also provided updated information for investors. Turnout from our investors and analysts was substantially above our previous meeting. Overall, we received positive feedback from our community of customers, partners, investors, and analysts. 2023 was also a year for significant progress in our product development. Our eProbe DFI team was able to ship two machines this year, one to an existing customer, and in the fourth quarter, a machine for a manufacturing evaluation by a new customer. The eProbe model, shipped in 2023, has two times the throughput of the previous generation, and it was optimized to find yield issues at both the middle of line and the metallization layers. Our Exensio and Sapience product teams worked together to deliver our Sapience Manufacturing Hub and other analytics applications to link SAP’s ERP system to the factory information.

We signed a contract for the first customer for this solution in 2023. Finally, we released our ML Ops product. Customers tell us that the complexity of test is increasing due in part to advanced packaging. They have a desire to apply AI ML to improve product quality, yield, and operations. Building AI models is one thing, putting them online and them operating properly while producing millions of chips is another. The challenge is to get data from the entire supply chain available at the right machine so the AI models can be applied in real time to the chips in manufacturing and tests. PDF’s ML Ops enables customers to solve this challenge in putting AI models on the production floor by orchestrating the movement of data, the management of models, and the monitoring of the model’s execution and production flow.

Customer interest in our ML OPs has been fantastic. We are on pilot deployments with customers this quarter. While interest in our ML OPs has been great, the fact is there are not enough ML OPs engineers in the industry that are both familiar with AI and semiconductor manufacturing. Teaming with Intel and Carnegie Mellon University, we pioneered a new master’s course this past fall. The students were able to work with real world data to develop new AI models using Exensio software. Feedback has been great and we look forward to expand this course offering in the future. All of our marketing, product development, and field applications effort resulted in positive growth in the business. For the year, we grew revenue 12% against a backdrop of the industry that contracted 10%.

As I said earlier, Adnan will comment on the financials in depth. While bookings in the first three quarters were muted, Q4 bookings were strong and we again built backlog. Bookings in Q4 were driven by Exensio as customers deployed our process control, manufacturing analytics, and test solutions. The strong bookings helped our revenue performance despite weakness in gain share and run time licenses, due to equipment customers in wafer fabs shipping less product than we originally expected for the second half of the year. Finally, in the quarter, we booked our first contract as part of a DoD Me Commons program. The Southern California universities and defense contractors wanted to leverage Exensio to connect advanced labs with contractors fabs to smooth the transfer of new technologies to products.

We are proud to be included in this program and work is already underway. In summary, with progress we made in 2023, PDF is driving a reinvigoration of the IC manufacturing and technology development by bringing AI and ML to the factory floor. Turning to our view of 2024, many of our fabless foundry and equipment customers are reporting relatively weak first half of 2024, and in many cases, customers are reporting Q1 will be down. They generally expect now that the second half of the year will return to growth. While some customers are experiencing near-term weakness, the long-term trends driven by increasingly intelligent semiconductor products that make AI possible, the electrification of the energy economy, and the geographic diversification of manufacturing are only accelerating.

Our outlook for the year reflects both the short-term weakness in the IC industry and the longer-term macro trends that can drive significant growth. Overall, we expect bookings for the year to be up significantly versus last year, and we expect to build backlog meaningfully. Our revenue model for the year suggests the first half of the year will be roughly flat when compared to the last year and growth returning to 20% on a year-over-year basis in the second half of the year. Overall, we expect double-digit growth for the year similar to last. When we look to the progress we made in 2023 and consider the opportunities we see in front of us in 2024, we truly appreciate the effort of our employees, contractors, customers and partners that have positioned the company for the future.

Now we’ll turn the call over to Adnan for more details and comments on our results. Adnan.

Adnan Raza: Thank you, John. Good afternoon, everyone. We’re pleased to review the financial results of the full year and the fourth quarter of 2023. As John said, we posted our earnings release and a management report in the Investor Relations section of our website. Our form 10-K with final results will be filed with the SEC by the end of February after the annual audit is complete. 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. Like John, I’m also pleased that we ended the fourth quarter of 2023 by growing our backlog versus the third quarter of ’23. Our backlog at the end of the year was $230 million.

For the full-year 2023, we generated record revenue of $165.8 million versus $148.5 million in 2022, a 12% year-over-year increase. Two items are worth highlighting here. First, our analytics revenue grew 17% for the full-year ’23 on a year-over-year basis. Second, we delivered the 12% total company revenue growth rate for the full year against the backdrop of a 24% decline in IYR revenues. And as John pointed out, an industry that contracted 10%. For the fourth quarter of ’23, our total revenue was $41.1 million, up slightly on a year-over-year basis, with analytics revenue growing 9% and IYR revenue declining 55%. For the fourth quarter, our gross margin was 72% and we reported EPS of $0.15 per share. Turning back to the full year ’23 results, I will now provide detailed comments.

On a full-year basis, our gross margin was 73% and we reported EPS of $0.73. For the full year, analytics revenue increased 17% to $152.1 million versus the prior year, despite the fact that Cimetrix Connectivity run time licenses, which generate revenue when customers ship their equipment, were down double-digit percentage due to decline in end market equipment shipments. We are making solid progress on our mission to become the leading analytics software provider for the global semiconductor supply chain. Analytics has solidified as the dominant component of our overall business and is now 92% of total revenue revenues for the full year. Important contributions to analytics revenue came from Exensio product deals we signed during the year, particularly some large double-digit-million-dollar deals signed in the fourth quarter, adding to our recurring revenues.

Analytics revenue also saw contributions from continued adoption of our eProbe DFI systems by key customers. We are pleased that a second leading edge customer now has our eProbe DFI machine at their facility for manufacturing evaluation. With respect to Cimetrix products, we continued to see weakness in equipment shipments affecting the contribution to revenue which declined on a year-over-year basis for the full year. We stay engaged with our equipment software customers to watch for signs of growth in tool shipments. Just as we highlighted last year on our earnings call with the full-year 2022 results, it is worth noting for this year 2023 as well that our full-year analytics revenue for 2023 was more than the total company revenue for the prior year 2022.

This is yet another year in a row for this noteworthy achievement. For the full-year 2023, IYR revenue comprised 8% of total revenues at $13.8 million and was down 24% on a year-over-year basis, driven by completion of some fixed-fee engagement projects and reduction in revenues from gain share, primarily from reduced production volumes at key gain share customers. Gross margin for the full-year ’23 increased to 73%, up from 71% for 2022, chalking another year of expanding gross margins. Despite the fact that gain share, which is 100% gross margin, decreased, we were able to grow gross margins in part due to better optimized spending on cloud infrastructure as we improve the business scale. Turning to operating expenses, we also controlled the growth of our expenses to expand the operating margins to 17% for the full year ’23, compared to 15% for the full year 2022.

During the year, we managed our resources to better distribute use between R&D and pre-sales activities, while funding the growth of our sales team to engage in the opportunities we are seeing in our pipeline. For the year 2023, we reported EPS of $0.73 a share, a meaningful growth of more than 20% compared to the $0.60 per share we reported for the prior year 2022. During the year, we generated positive operating cash flow of $14.6 million, of which we spent $11.3 million on CapEx for data collection systems for our leading-edge business, $1.8 million on the acquisition of Lantern Machinery Analytics for our EV battery initiative, and about $0.7 million on share buybacks. We are pleased with another year of positive operating cash flow generation consistent with our history.

Turning to the balance sheet, we ended the year ’23 with cash and equivalents and short-term investments of $135.5 million, compared to $139.2 million at the end of 2022. And we continue to carry no debt. We’re proud of the performance of ’23 against the macro environment and remain committed to the long-term targets we set at our Analyst Day in October last year, of 20% year-over-year total company revenue growth rate, 75% gross margin, and 20% operating margin. Now, turning to our financial outlook for 2024, we look forward to another growth year. As John said and stated in our earnings release, our outlook for the year reflects both the short-term weakness in the semiconductor industry and the strength of our pipeline, bolstered by the macro trends of distributed manufacturing, energy electrification, and AI, which can drive significant growth.

As a result, we expect revenue for the first half of 2024 to be flat over the comparable period of the prior year, and for revenue for the second half of the year to grow by 20% over the comparable period of the prior year. With that, I’ll turn the call over to the operator to commence the question and answer session. Operator.

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Q&A Session

Operator: Thank you, Mr. Raza. [Operator Instructions] Our first question comes from the line of Blair Abernethy from Rosenblatt Securities.

Blair Abernethy: Good afternoon, gentlemen.

John Kibarian: Good afternoon, Blair.

Blair Abernethy: John, my first question is just around DFI. It’s great you’ve shipped to a second customer. I just wonder if you can give us just some color around that and have you started to recognize any revenue from that at this point? And sort of what does the pipeline look like for DFI, as you kind of look forward into 2024?

John Kibarian: Sure. So yes, we shipped in the fourth quarter. This is for, as I’m set up Parallax manufacturing evaluation. We did the technical evaluation of what the machine is capable of seeing by having the customer ship wafers to us here. Quite a number of wafers came to our facility here in California, but this is a customer in East Asia, so we had to ship the machine over there. And the purpose there is to demonstrate that it’s able to really be used in the production facility, that it maintains the up times, that it has a repeatability as you scan wafers and wafers and wafers day after day. At our user conference this past fall, our early adopter customer was able to show what they were able to do using the machine at our user conference.

So we have good confidence that we will be able to demonstrate success and then convert that into revenue upon achievement of the milestones that we’ve set out for this evaluation. In terms of the outlook for this year, we do anticipate adding additional customers in this year, as well as expanding within existing customers in this year. We expect to be able to ship just a couple of machines, but we’ll be able to – we’ve already ordered capital for quite a bit more. So we’re able to start shipping, as we get to the end of this year and early next year, at a more accelerated rate than we’re shipping let’s say this year. But we expect to end this year with quite a few machines contributing to revenue. So you saw that today – this last year, two machines contributed to revenue.

We expect to over 2X that number by the end of this year.

Blair Abernethy: Okay, great, great. And I’m just wondering, maybe you can help us with your guidance, the thoughts and rationale, I guess, into your guidances. I mean I can understand with the IYR business and equipment shipments still being pretty tepid for the first half, what gives you sort of the confidence that you can go from effectively flat first half to a pretty substantial second-half growth?

John Kibarian: Yes. So it’s a great question, Blair. It’s the bookings activity that we have ongoing, some of which completed in Q4 as Adnan said, a couple of very large contracts have signed in the fourth quarter, which is why the bookings in the fourth quarter were large. And then this quarter and next quarter, we have quite a bit of activity going on. We expect to build on that bookings momentum in Q4 and the first half of this year to be substantially over the second half of last year from a booking standpoint. And then given the volatile nature of the business as you get through the year, that just drives incremental growth. So we book in Q1, it will drive very little revenue growth, very little revenue in Q1. It will drive incrementally more in Q2, and then a lot more as you get in the second half of the year, similar to the bookings we do in Q2.

Blair Abernethy: Got it, got it. Okay.

John Kibarian: Okay. The reasons for optimism are more internal or like our specific business situation with customers than it is the macro environment. There are activities that we see that we’re in deep discussions with customers that we feel pretty confident about, the gain share and the run time licenses you put are more like the overall weather outside of us.

Blair Abernethy: I get it. So more in your control, more what you have business at hand —

John Kibarian: In front of us.

Blair Abernethy: As opposed to waiting for the market to come back to you on the equipment side or on the Cimetrix side.

John Kibarian: Correct. Right. We’re not forecasting – we are forecasting equipment getting better as we get towards the second half of the year modestly. We’re not forecasting a ton of growth in gain share. We are really forecasting a ton of growth in analytics, primarily around the selling activities, some of which happen in Q4, and more of that happens at the beginning of the second half of this year. Sorry, the first half of this year. Q1 and Q2 in particular.

Blair Abernethy: Okay, okay, great. Just one last question, if I can. Just it sounds like – so you’ve made progress on the partnership side with SAP. Would there be any other significant partners you’d highlight, John?

John Kibarian: You know, I think we did – in my prepared remarks, I did talk about the new product release on SAP. Of course, we’ve had a number of products that we’ve done in conjunction with Advantest that are generating revenue and continue to generate momentum. Some of the pilots we have on ML OPs also interface with the Advantest infrastructure and their Edge box. So we do expect those two partners to be driving additional bookings as we go throughout this year. When we look at our other partners beyond that, we are in active work with them on additional customers, and we do expect that more of our partners will start driving bookings with us as we jointly go to market with a number of different pilots with customers.

Blair Abernethy: Okay, that’s great. Thanks very much.

Operator: Thank you. One moment for our next question. Our next question comes from the line of William Jellison from DA Davidson & Co.

William Jellison: Hi, good afternoon, and thanks for taking the question. I’ll ask two and then get back in queue. The first one is I’m wondering if you can share any more color on the analytics revenue per customer metric, any updated metrics on that front, or just overall observations? And then within that, the level of module uptake you see within your existing customer base as well?

Adnan Raza: Yes, absolutely. And look, every quarter we post this metric, as we did the last quarter as well, and we’re calculating that number, finalizing it to post for the analyst day itself. But over the last few quarters, we’ve seen the trend of that number going up and we would expect that this quarter that would be the case as well. In terms of continued – in terms of adoption with additional customers, it’s nice to see that customers are using our products on a larger scale, as were referenced by the comment that we made in the call about the two large customers with the large deals that we talked about, the double-digit-million-dollar deal. So stay tuned for that metric as we post our deck in the next few days about the investor – about the details on some of those metrics.

William Jellison: Absolutely, okay. And then the second question relates to your investment in sales and marketing. I remember getting the impression from your analyst day last October that a lot of the incremental gross profit that PDF is going to get as it approaches that 75% margin target was going to get reinvested into a more concerted effort in sales and marketing. And I was just wondering on the level of intensity PDF is presently investing there to capture those opportunities and whether or not we should expect that to step up even further as it pursues more of those opportunities?

Adnan Raza: Yes, look, I mean, through this year and frankly early on in the year, we talked about increased spend that we would plan to do at the sales and marketing side. And candidly, if you – I know we reported it as a combined number within the SG&A bucket, but I’ll tell you, G&A is not where we have put some of that growth. It’s really been the S&M side. We have hired some new people, especially given some of the M&A and the dislocation in the market that we saw to grab some of the good salespeople and add them to our portfolio. And back to the question Blair asked. You compare – you add the two together and you say, okay, great, your spend on S&M, what are the early proof points? I think the tone on the call that you’re hearing from us is along those lines.

You’re catching us at a good time. This is the time of the year we also prepare our annual operating plan and present to the board. And early views of that, we do a top-down view and then as we present it to the board, we end up looking at every deal with the timing for the year. And that’s how we’re able to give you this guidance that we are sharing today. So yes, we’ve increased the spend in S&M. It’s starting to show early results in the strength of the pipeline and hopefully, the two deals in Q4 that we did chalk up some of that benefit already and hopefully more to come.

John Kibarian: Yes, I think, just to – Willie, maybe you asked a little bit around, okay, what does that mean for this year? I think when you look at a quarterly basis, we crept it up every quarter. But now, as we get into this year, we will make modest incremental investments. But a lot of the reason why sales and marketing expenses this year will be higher than last year is you have a full year’s accounting of the increase that happened throughout 2023. So we don’t expect that we’re going to incrementally increase it at a much more rapid rate. In fact, arguably, it’ll be at a more muted rate, but because you have a full year’s expense on an annualized basis, it will be a higher number than it was last year, right? But on a quarterly basis, not a lot higher than Q4. Just modestly go up over Q4. I think that might have been what you were kind of looking for.

William Jellison: Yes. Both are very helpful. Thank you, John and Adnan.

Operator: [Operator Instructions] Our next question comes from the line of Gus Richard from Northland.

Gus Richard: Yes. Good afternoon, guys. Thanks for letting me ask some questions here. The two large deals that you signed in the quarter, were those sort of enterprise-wide fab test assembly, or were they more point products? And could you give any color on, is it like analog, industrial, or leading edge? What kind of customers?

John Kibarian: Sure. So I can handle that. Both of them are front-end fab related. Both of them are process control related with advanced analytics capability in one case and more basic capabilities in the other one. They’re both enterprise-wide in that they go across all of their facilities worldwide, and both, as a result, are relatively large. These are customers that are – have been customers before and now are deploying more broadly, in one case with more advanced capabilities on top of the base capabilities. And so, yes, these are – we’ve been talking throughout the year that there’s a number of large contracts that we’ve been working on. These were two of them. There are others that we are continuing to work on. This is, again, kind of getting back to Will’s questions around the investment in sales and marketing.

That’s some of the early fruits. We expect a substantial step up again in this first half of the year as we close a number of other larger deals in this first part of the year that are all kind of related to these investments, building even larger than what we did in those two. Those were pretty substantial for us.

Gus Richard: Okay. And then can you give us a sense of the size of your pipeline? You closed a couple of deals. Are there 5,10? How many more of these enterprise-wide deals are you currently working on?

John Kibarian: Yes, I mean, off the top of my head, I don’t know that I could give a really great answer, Gus. I mean, as always is the case for us, on a dollar value basis, we live by the 80-20 rule, so, you know, there’s – or maybe even 90/10. There are probably 10% of the deals that represent a sizable 80-plus percent of the dollar value because these enterprise things tend to be quite large. There are some out there that we’re working on right now that are, as I said, substantially bigger than those first two, that are going to drive a meaningful piece of our bookings this year. And then there’s a number that are similar size to those, a handful of them, I don’t know off the top of my head, but there’s a fair number. Collectively overall, as I said in my prepared remarks, we do have a lot of confidence about the bookings this year.

It’s a – the level of activity of customers is quite meaningful given those three drivers that I spoke about, electrification of the energy economy, that’s really just driving high-voltage silicon battery technologies, the advanced process nodes really geared towards AI. That includes advanced packaging. So a ton of activity we have going on for the ML Ops piece there. And then all the DFI and leading-edge capabilities all around just advanced semiconductors driven by AI. And then the geographic diversification, customers really wanting to get to these more enterprise-wide control schemes because of the nature of their manufacturing. Two in Q4 are kind of somewhat representative of that, but we see a number of those. So overall, it’s probably, I don’t know, in the 10 range, but there’s probably two or three that drive a sizable fraction of that.

And those 10 probably are more than 80% of the bookings value for the year.

Gus Richard: Got it. Okay, that was very helpful. Thank you. And then just flipping to DFI, it sounds like you’ve got pretty decent visibility through this year in terms of what you’re building. Over the last 90 days have you – I know there’s some long-lead time items for DFI. Have you had to sort of go back to your vendors and order more material for potential deliveries in 2025?

John Kibarian: That’s a great point, Gus. Yes. If you look at our expense spend on capital, you’ll see it step up in 2024 versus 2023. And 2023 had a modest increase versus 2022, if my number memory is correct. And that step up is because of ordering for things, machines we expect to ship in 2025, more than what we expect to ship in 2024 per se. It does impact 2024 a little bit. And yes, we’ve been going back to our vendors to try to tighten up availability and delivery times. We would like to get, and we feel like we’re getting close to the point where we’re really going to be looking at how we can pull those in for our – because of the customer interest. So yes, you’ll see the spend go up this year. It’s anticipation of 2025.

We’re setting ourselves up to be able to ship significantly more in 2025 than what we’re shipping in 2024. And we are going back and even discussing what the vendors want. If we needed to pull in even more for that, how would we be able to, more than what we’re already planning, how would we be able to effect that? That would probably not affect our capital spend in 2024 very much, but it could affect our capital spend in the first part of 2025 and then shipments that would impact second half of 2025. We think we have the first half of 2025 mostly okay.

Gus Richard: Got it, got it. That’s super helpful. And then you mentioned in your prepared marks that you expected to add additional customers this year. Any color? Is that memory? Advanced logic? Is there any – is it one or two? Any color there is helpful.

John Kibarian: Yes. So we’ve – we continue to see opportunities in advanced logic, and we do expect advanced logic incrementally to contribute this year above what it contributed last year. We’ve also – we’ve been in the industry for quite a while. As you know, PDF has worked on yield ramps all around the world on – with virtually everybody. And I was chatting with an executive at one of the companies that’s just getting into what would be more advanced than a trailing edge, but nowhere near the two nanometers. But as you think about everything from 12 nanometer to 28, and we’ve started to see interest in those areas where people said, hey, if we had this, it could really accelerate our bringing up of new products. And one of the guys joked with me, hey John, we worked on yield ramps with you at my past company in these nodes, and this would have really helped.

So we think that the aperture is broader than just the leading edge. As you know, we were very focused on just what can you do on the leading edge in some way because it’s a talisman about where are you going for the industry. But now we’re going to double back and look at some of those other opportunities. And we’re also starting to get some early looks in the memory space where we’re starting to have some early dialogue. So part of our goal this year is to make sure we’ve got enough capacity in our own lab to be able to do demos and evals for customers, much like we did for that Asian fab in 2023 that enabled us to ship at the end of the year. We’d like to be able to do that this year for some additional customers in the trailing edge, quasi-trailing edge, in memory, while we continue to penetrate on the leading edge logic.

Gus Richard: Okay, and I promise this is my last question. When you talk to these not leading edge but more advanced geometry logic guys, DFI would be helpful for them because it would accelerate their learning over time the parametric tester you used to use, or is it a cost savings because you wouldn’t scrap as many wafers as you go through the development process?

Adnan Raza: It’s a great question, Gus. It’s for bringing up the node and controlling it. If you just look at PDF has had yield models based on product design layouts forever. We typically would run a test vehicle to extract kind of the intrinsic failure rates of metal shorts and opens, contact and via opens, and contact and via shorts. Those models would always show you that half of the yield loss you would see because of opens between layers, shorts and opens between layers, but you can’t see them optically. So the customer would run a test vehicle, our short flows to see the single layer shorts and opens, and the between layer shorts and opens. But then if you wanted to know, well, what does it really do on a product? Well, our test vehicle couldn’t give you that because it’s a test vehicle.

And the inspection tools could just tell you what’s happening at layer. They can’t really tell you do you have a failure in a billion or 0.1 failures in a billion or 10 failures in a billion on the contact and via layer? And the eProbe is the only thing that can really do that, can measure tens of billions and tell you, okay, what’s your real failure rate across all the layout styles on a real product? And that was the point the guy said, like, God, John, when we went from your test vehicle to product, we got caught by some issues. Took us months to solve it because we had no way to look at it. eProbe gives you a way to look at that, and that’s really the kind of – as people see that this is real, you can measure 10 billion contacts and vias.

Right? That’s a change of the game. And so even for twelve nanometer or 28 nanometer, that actually matters quite a bit. And we’ve always known in our models it’s half your yield loss, just hard to see in line.

Gus Richard: Perfect. That was super helpful. That really clarifies it for me. Thank you.

Adnan Raza: Welcome.

Operator: Thank you. [Operator Instructions] There are no more questions. Ladies and gentlemen, this concludes the program. Thank you for joining us on today’s call.