PDF Solutions, Inc.

Good day. Thank you for standing by. Welcome to PDF Solutions' third quarter 2021 conference call. At this time, all participants' line are in a listen-only mode. After the speaker's presentation, there will be a question and answer session for which instructions will be given at that time. I would now like to hand the call over to Joseph Diaz of Decent Partners. Please go ahead, sir.

Thank you, Operator, and thanks to all of you for joining us today on this call. We appreciate your time and your ongoing interest in PDF solutions. As the operator indicated, my name is Joseph Diaz. I'm with Lippin Partners. We are the investor relations consulting firm for PDF. If you do not yet have a copy of today's press release, it's available on the company's website at PDF.com. Some of the statements made during this conference call will be forward-looking within the meeting of the Private Securities Litigation Reform Act of 1995, including statements regarding PDF's future financial results, performance, growth rates, and demand for its solutions. PDF's actual results could differ materially. The forward-looking statements and risks referred on this call are based on information available to PDF today. The company has no obligation to update them. You are advised to refer to the section titled Risk Factors on the company's annual report on Form 10-K for the fiscal year ended December 31, 2020, and similar disclosures in subsequent SEC filings. With that, I'd like to introduce John Kabarian, PDF Solutions President and Chief Executive Officer He'll be followed by Adnan Raza, Executive Vice President and Chief Financial Officer. At the conclusion of management's prepared remarks, we will open the call for your questions. Let me now turn the call over to John Kavarian, President and CEO of PDF Solutions. John.

Thank you for joining us on today's call. If you've not already seen our earnings press release management report and 10Q for the quarter, Please go to the investor section of our website where each has been posted. I will start the discussion by providing commentary on the third quarter. From there, I'll provide our impressions of the semiconductor industry and conclude with our expectations for PDF's business for the remainder of the year before handing the call over to Adnan for more detailed financial update. Highlights for the third quarter demonstrate the progress the PDF team has made over the last few years. As we have discussed over many quarters, some significant legacy gainshare contracts ended in the first half of this year. This meant that Q3 for us could have been a challenging quarter. That said, by the second quarter of this year, we had expressed confidence that given our strong bookings and ratable nature of our analytics business, we anticipated that Q3, despite the gainshare headwind, would be up modestly in terms of revenue versus Q2. Now, with the third quarter behind us, we can report that the company achieved record revenue with meaningful quarter-over-quarter growth. Despite the significant drop in very high margin gainshare revenue, we also saw improvements in our gross margins and net margins. This is due to achieving more scale on our analytic subscriptions. As a result, even with the headwind of decrease in gainshare, we made progress towards our target gross margins. Turning to bookings, the third quarter was particularly strong and exceeded even last year's third quarter bookings. As some of you remember, it was one year ago that we closed the Adventest partnership and with it a $50 million contract. At the time, we reported that it was a remarkable quarter as the partnership had taken years of meaningful discussions to bring to fruition. We communicated then that we did not expect to meet or exceed that performance level for a while. Exceeding the previous bookings milestone in just four quarters speaks to the demand of our products and services. When we consider all of these factors, we believe that from a financial metrics perspective, this quarter has demonstrated that the company's transition to analytics will lead to improved growth in financial leverage as we bring the business to scale. Now let me provide a little more detail about the bookings in the quarter. Our bookings in Q3 primarily came from analytics. We had a strong quarter in Accentio bookings with the majority of Accentio bookings on a dollar basis continuing to be from customers moving to the cloud. This included another eight-figure cloud bookings as an enterprise customer moved from on-premise to cloud deployment in order to leverage the benefits of Accentio's big data storage and end-to-end performance. This quarter also included a Tier 1 auto supplier that renewed its initial Accentio cloud deployment as it expands the use of silicon in the electrification of car drivetrains. As semiconductors become more critical to automobile manufacturing, we are seeing manufacturers look to use Accentio's capabilities to improve visibility in their technology and supply chain. We also had a strong Accentio bookings from front-end fabs. deploying Accentio process control, as the demand for the additional FAD capacity drove further deployments of Accentio. Building with the demand for semiconductor capital equipment, we experienced another quarter of strong Symmetrix runtime license bookings, as equipment companies ordered Symmetrix connectivity and equipment control software licenses to ship with their products. As I discussed earlier, Yield ramp revenue was down significantly as legacy gainshare contracts completed. While we are not emphasizing integrated yield ramp contracts, we have started to see some increases in the volume reports from customers, including Chinese VABs, where we are seeing significant equipment installs. We anticipate modest improvements in integrated yield ramp revenue going forward. Lastly, as some of you may remember, we reported a quick start analytics contract that's signed in Q2. We completed the follow-on multi-year contract in Q3. This contract includes use of our characterization systems for electrical test, a DFI e-beam system, and Accentio systems including our DFM software. As a result, we began shipment of our PD-FAST test and e-probe DFI measurement systems to their facility. For customers innovating on the leading edge, Speed comes from having huge relevant data sets to be able to see failures in the parts per billion level. We believe that our DFI and CV systems provide the largest data sets, which enables superior learning using our Accenture analytics software. Our DFM capabilities allow our customers to anticipate how improvements in manufacturing will impact future products, which is particularly important for foundries. which must support a rich set of designs. With the strong bookings spanning our Accentio Symmetrix connectivity characterization vehicles and DFI systems, the third quarter demonstrates that PDF's broad value and strategic relevance across various industries, from high-voltage power IC manufacturing to the most advanced process technology development, from equipment companies to system manufacturers, PDF's manufacturing analytics platform is becoming ubiquitous in the IC industry. Now let me turn to our perspective on the IC industry and expectations for the fourth quarter. The industry continues to operate at a high level for manufacturing and R&D. Maximizing existing operational effectiveness, as well as developing new products and processes, is critical to the industry in this setting. As a result, customer interest in our products and solutions remains strong. We are pleased with the progress in the first three quarters of the year in making PDF Solutions the manufacturing analytics platform for the industry. This enables us to build recurring revenue streams to provide greater visibility and predictability to our financial results. Finally, I want to thank our employees for nimbly supporting our customers and continuing to innovate in the COVID-19 environment. Now I'll turn the call over to Adnan for review of the financials, after which we will open the call up to your questions. Adnan?

Thank you, John. Good afternoon, everyone. Good to speak with you again today, and I hope all of you and your families are keeping safe. We are pleased to review the financial results of the third quarter and to bring you up to date on the progress of the business. We posted our earnings release and management report on the investor relations section of our website. Our Form 10Q has also been filed with the SEC today. Please note that all of 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. Financial results for the third quarter of 2021 continued the strong momentum of the first half of the year. Third quarter total revenue was $29.6 million, up 28% from the comparable quarter last year, and up 8% on a sequential basis from Q2 2021. Analytics revenue was up 90%, to $27.2 million in Q3 2021 versus $14.3 million in the third quarter of last year and was up 39% sequentially from the prior quarter this year. While we do not expect this level of analytics growth the next quarter, based on continued strong bookings, we expect year-over-year revenue and backlog to continue to grow this year. For the quarter, analytics represented 92% of total revenue. IYR revenue for the quarter was $2.4 million versus $8.8 million during last year's third quarter, and represented approximately 8% of total revenue for the quarter, as some of the IYR contracts came to the end of their gainshare period. We expect that IYR revenue will tick up marginally in coming quarters for the reasons John highlighted in his prepared remarks. The IYR component of our business is lumpy by its very nature, and as we have previously stated, If customers want to engage in IYR in a meaningful way that will benefit PDF shareholders, we will certainly work with them. Our transition to become the leading analytic software provider to the global semiconductor supply chain is continuing at a very consistent pace, and we expect that to carry on going forward. Booking momentum remains strong. Our bookings for Q3 exceeded the extraordinarily successful bookings of Q3 of last year. when Adventest became a customer. For the nine months through Q3 2021, our bookings have now exceeded the bookings for all of prior year 2020, which in of itself was a remarkable bookings growth year. Backlog at the end of the third quarter totaled 181 million. On a sequential basis, that represents an increase of 30% from the 139 million the prior quarter. Notably, compared to the third quarter of 2020, Our backlog is up 60% on a year-over-year basis. Our strong bookings growth and sizable ending backlog sets a meaningful base for total revenue growth into 2022 and beyond. Our cost of sales and operating expenses for the quarter were essentially flat on a sequential basis compared with the second quarter of 2021. While we have a strong focus on managing expenses, we will make the necessary investments to enhance our technological capabilities and competitive position. This quarter, we were able to expand gross margins to 66% and continue our progress towards the 70% gross margin goal we shared in our fall 2019 analyst day. We were also able to deliver 2.4 million of operating income this quarter compared to the almost break-even operating income last quarter. We're pleased with the positive six cents of non-GAAP EPS reported this quarter as a result of the strength in our revenues and management of expenses. We were also profitable on a non-GAAP net income basis for the nine months of 2021. Turning to the balance sheet, we ended the quarter with cash and cash equivalents of approximately $141 million, compared to $139 million for the prior quarter, and no debt. Cash flow from operations for the third quarter was positive $4 million. We have also generated $3.8 million of cash flow from operations on a year-to-date basis. We expect to end the year with another continued year of operating cash flow generation. Our business continues to be strong across all sectors. We expect full-year 2021 total revenues to grow on a year-over-year basis near the top end of previously communicated 20% to 25% range. We also expect full-year 2021 analytics revenue to grow on a year-over-year basis more than 50%. We feel that we are well positioned for 2022. With that, I'll turn the call over to the operator to commence the question and answer session. Operator?

As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw a question, press the pound key. And please stand by while we compile the Q&A roster. Your first question comes from the line of Blair Abernethy of Rosenblatt Securities. Your line is open.

Good evening, gentlemen. Nice quarter. I wonder if we could talk a little bit about with the growth that you're seeing in the analytics business and the Accenture platform, just what are you doing on the go-to-market side in terms of your plans for the balance this year and looking into next year Are you ramping up your sales rep capacity? Are you looking at partnership? Just kind of want to get a sense of what you're doing to continue that momentum.

Sure. Thank you, Blair. So partnerships are very important. The Adventist Partnership has demonstrated that. We do see other partnerships out there that we've been working on for quite a while. that we believe at some point over the next few quarters will come to fruition in different ways. As we move more and more users of Accentio onto the cloud, there's a lot we can do to make it easier for them to use Accentio with all the other systems and hardware that they need to operate in order to get produced chips. So when it's an on-premise system, it's very difficult to do because every customer deploys it its own way. As they move to our cloud solution, it's much easier to kind of help them be more productive with the platform. So partnerships are very important, as well as your point around building out our channel and our ability to reach more customers. We have the benefit of having been in business for a long time and kind of grown Accentio over many years kind of organically, over 130 Accentio customers out there, substantially more than that now, And we're able to go back to them and move them. We don't feel any of them are fully penetrated. Move them from using parts of the platform to using the broader section of the platform. First step again for that is to move them to the cloud where we can then upgrade them with more modules and more capability quite comfortably. So those two areas, you know, movement to the cloud and partnerships are the two biggest things we're doing, Blair, and then subsequently, you know, more investments in the channel and more applications on the platform.

Great, thank you.

Your next question is from Tyler Burmeister of Craig Holland. Your line is open.

Hey guys, this is Tyler on behalf of Christian. Thanks for letting us ask a couple questions. John, it was great to hear your quick start contract was completing the quarter and you signed an additional multi-year contract with that customer, I think you said. I was just wondering, you know, any additional color you could give us there on you know, maybe the size of that contract, the timing, near-term, long-term of it, any additional color there would be great. Thanks.

Sure, Tyler. Yeah, we were happy to sign that contract as well. You know, as you can imagine, based on the components of the technology, it pretty much is many of the components of PDO, I think with the exception of Symmetrix, you know, it includes Accentio, the e-beam capability, electrical test, characterization vehicles, the Accentio DFM modules as well. So it was a very big – set of technology and all-encompassing deployments. As you can imagine, contract-wise, it's one of the larger contracts we've done on a subscription basis. It's multi-year, minimum of a couple of years with extensions, so it's quite substantial in that regard as well. That gives a lot of time to really have the customer get value out of the systems and then deploy it more broadly. We, of course... hope to build on this with this customer as well as others because we feel that the platform is quite valuable. And with the investments now going on in the leading edge, we believe it's quite an opportunity for the solution.

That's great to hear. And then this year, a very strong year for the analytics business. It's going to grow over 50%. But you've also seen some record bookings heading into next year. Would it be fair to assume you're going to continue to be able to grow the analytics business ahead of what I think is 20% CAGR target into next year?

Yeah, that's a great question, Tyler. We're doing our strategic planning now. As we get into 2022, we'll provide our perspective on growth rate. We had said on our analyst day that we thought analytics would grow at 20% and the business would asymptotically approach 20%. As analytics was the majority of the business now, you can see, you know, in Q3, analytics was 92% of the total business. And, you know, we're giving guidance that the growth for the overall company would exceed, you know, between 20% and 25% close to the higher end of that range. So obviously we're kind of already a little bit beyond where we had previously expected the business to be. But we're going to go and look at how the remainder of the year works out and what we think the future looks. Obviously, the industry overall is very robust. That would give us some confidence, but we need to see the details of how things look before we kind of say anything more.

Understood. That sounds great. That's all for us. Thanks, guys.

Once again, if you would like to ask a question, please press star 1 on your telephone keypad. Your next question is from Gus Richard of Northland. Your line is open.

Hey, John, congratulations on the large contract and extensive deal as well. I was just wondering if I could dig into that contract a little bit. Can you give us any color on the, you know, sort of the split between DFI, CVs, and Extensio in that contract?

Yeah, I don't know how we would go about doing that. I mean, the reality is it was a bundle of all those things. Obviously, from a cost standpoint, if you look at our cost to deploy, the DFI would have the biggest cost because the machine is the most significant. But I think in terms of value, it's a more judgmental thing. I think what the customer is buying is an integrated solution that really helps them get technologies developed more robustly and to a higher level of manufacturability quicker. So it's hard to say what's the piece that really makes a difference.

Okay. Well, let me try it this way. In the contract, how much of it is recurring and how much of it was like an upfront placement in the DFI?

It's all recurring, Gus. It's a subscription paid out over multiple years.

So all the pieces?

Correct.

All the pieces. Okay. Okay. And it was, Is it reasonable to assume it was similar in size, the bond test deal?

You know, of course, we're really not disclosing what – I mean, obviously, it's a significant deal, right? So, you know, but the specific number we haven't disclosed.

Okay. And then in terms of the IYR business, you know, it sounds like the gain share has hit sort of a bottom and should – would volume increase moving forward? Are there any other contracts that you see rolling off in the near term that would be meaningful?

No, we don't really at this time.

Okay. And then the last one for me, are there any fixed fees in the IYR left, or is it just one Chinese foundry, or is that it, or are there more?

No, that's a good point, Gus. If you remember in the second quarter of this year, we did sign a relatively large multi-year fixed fee contract that goes out over four years that is in that number as well.

Okay. It was a fairly substantial sequential decline in that business, and I'm just sort of – was there a lot of fixed fee revenue in the second quarter?

No. It was a couple – the number of contracts that actually – expired to end at the end of Q2. So on the Gainshare side. So Gainshare fell off pretty substantially.

Got it.

There was some drop-off in fixed-fee revenue, not because contracts ended, but just a percent completion ability to actually deploy vehicles and things to that account. So there was some small amount of revenue decline. quarter over quarter on a fixed fee basis due to just deployment capabilities, primarily in China. But the majority of that decline was a number of, not just one, but a number of gainshare contracts coming to their end.

And then the final one for me, given the large contracts in the quarter, is there any incremental operating expenses required to support the new contracts that are starting to deploy?

Yeah, I mean, our expenses, we expect that we have brought them to the right level. I mean, going from now into Q4, we expect maybe a slight increase in some of those expenses. But, you know, hopefully our revenue is also maybe slightly up. So we'll manage the expenses along with those revenues. But it's good to have this problem that we have, that we have more customers to meet. demand for both on the analytic side as well as some of the continued engagements from the past on the IYR side that we just talked about.

I think specifically your question, Gus, the capability required to meet that large contract is in place.

Got it. All right. Well, somebody's emailing me and I'm pushing my luck. Thanks so much.

Once again, to ask a question, please press the star, then the number one on your telephone keypad. Your next question is from Gary Schneiro of River Park Funds. Your line is open.

Hi, guys. Hi, Gary. Following up on Gus's question, you know, absent that big quick start contract, you know, your core Accentio business, I'm assuming that still grew quarter over quarter?

In a way that we were very pleased about. We don't disclose the numbers, but on a percentage basis, it's, yeah, it would analyze to a number well ahead of our 20% that we've talked about.

Great. And can you talk about your CapEx in the quarter? It looks like you stepped that up significantly, what that is and why you felt comfortable doing that.

Yeah, I mean, as John explained, you know, we had the big contract. And as I think he was being asked about what are the different components of that contract, you obviously heard him talk about different machines we have as well. So, you know, some of the machines that we have in our lab, you know, as we start to get them ready for customer shipment, there will be some upgrades that we have to do on those machines. And, you know, predominantly, that's what drove the increase. From time to time, We will also be upgrading these machines. As you know, this number was more like around 500 for Q1 and Q2, but it's remarkably lower compared to last year, which was also lower. Every year, we've started to bring that number down, but as we get ready to ship machines or do some special projects for customers sometimes in our labs, we will from time to time be spending to upgrade the different hardware pieces.

Also, as we deploy DexNotes across the OSAT environment, you'll see us have CapEx tickups for hardware that we place at the OSATs too, which I think this past quarter was a small piece of that number, but I believe in Q4 there will be another piece associated with that. That's right.

Okay, so when you're saying about getting the equipment ready, it sounds like the CapEx step-up is not just for the quick start contract, but getting equipment ready in anticipation of other contracts or in hope of other contracts? Is that fair?

Yeah, there's equipment purchase primarily on the, there's both on the electrical test and on the evening side, but for that contract, IYR contract, some other anticipated activities, And as I said, I'm not sure in Q3, I know that we've been making some purchase, I don't remember exactly the timing, for computing to support dex nodes at specific OSETs. And those are, they're all in that number. There's not one that I think just dominates it.

Okay, let me ask you in a different way. Is part of the CAPEX to have additional E-probe machines?

We have additional E-Probe machines, Gary, but it may be to replace some components on those E-Probe machines for new applications that we're developing. So in that sense, it could have involved it. But it is not just specifically for the machine shift of the quarter. In fact, probably that machine had very little capex associated with it at all.

Okay. Thank you.

Your next question is from Corey Turbin of William Blair, your line is open.

Hey, guys. Congrats on a great quarter, and thanks for taking my question. I just want to come back to the sequential increase in analytics revenue. Obviously, a real nice move up. Is this the new baseline we should think about? Like, is the $27 million we saw this quarter – the majority of it recurring and therefore we should expect to see, you know, to grow off that 27 million as we move ahead to Q4 and into 2022?

Yeah, look, I mean, our focus has been to continue to transition the business towards analytics and that too on multiple prongs, not just the Accenture software, but also on the other pieces within analytics. So, yeah, we're starting to feel comfortable with this level of analytics revenue.

Meaning it's a we should build off it from here. There's not a big non-return.

That's right. And look, I mean, precisely to help you all think about how to model this is kind of why we put some of those thoughts around what we expect the total revenue to be doing for this whole year near the 25% range that we had prior communicated, as well as the analytics business. So hopefully, when you go back into the map, you'll see that we're saying that for one quarter left, the numbers will support similar levels of analytics revenue or slightly up.

Got it. Okay, great. And then the contract value that you mentioned, the large contract, that's a TCV value? That's the total contract value? Or is that the annual contract value?

I think we reported the total. We haven't reported the specific value of the total contract value. But on both an annual basis and a multi-year basis, it is a very substantial contract in both ways you look at it.

I guess I'm just referencing the eight-figure bookings you talked about.

The eight-figure, that is total contract value for the Accenture Cloud Department.

That's a TPV number. Okay. Yep. Okay, great. Congrats again. Thank you. Thank you.

Once again, if you would like to ask a question, please press the star, then the number one on your telephone keypad. Your next question is from Oren Hirschman of iInvestmentPart. Your line is open.

Hi, thank you. AIG, it's InvestmentPartners. And again, congratulations. I'll add to that that you're really seeing some breakthrough numbers here. In terms of that very large contract, is that total contract value reflected in the bookings this quarter or or only part of it?

The parts that are non-cancellable, so yes.

Okay. And just in terms of general trends, you know, if I asked you, you know, yield improvements and automation in general versus, you know, smaller line widths we're becoming more critical and you becoming more critical for that. What's driving this? Because this is kind of turning explosive on you, which you have been hoping for for the last few years. You know, what are the drivers here?

I think so. Yeah. As I said in my, what's really cool about this right now is, and I think you kind of alluded to it in your question, it was where we were really just relevant to the foundry that was doing the advanced nodes. And, you know, that got to be a very small number of customers and our relevance was only there. But if you look at this quarter, you know, we had seven- and eight-figure contracts that were signed by companies that do the trailing of the trailing edge, you know, high-voltage stuff, microcontrollers and things like that. And then, yes, we still are very relevant to the leading-edge companies, as evidenced by that large contract that was signed on the heels of the quick start. So, you know, it's a broad base of demand now for analytics because investment is going on. not just on the leading edge now, but also new derivatives on trailing edge nodes, new capacity on trailing edge nodes, more companies like that Tier 1 auto supplier who now, you know, silicon for the drivetrain is becoming super critical, and therefore they want Accenture Analytics. So it is a very broad base of business, and this quarter I think, you know, it showed that.

Just two follow-ups. Just on, let's say, that drivetrain application, You would never necessarily think that a company like that might think, whoever the company is, it's not a normal foundry type of situation. You'd never think of them thinking so deeply and thinking analytics for better yield. Is it more than that? Is it without analytics, yield is poor? What is it? Why would they even think of that?

Yeah, because if you just look at the electrification of cars, then high-voltage transistors are super important. They set quality. They set things like the possibility of the car catching a fire. They set the liability and lifetime of that car. So manufacturing those components is really important. We've noticed in our customer base chip companies getting into wafer making, right? You've seen that ST announced that they are now making wafer. their own wafers. We see, you know, companies that did primary 200 millimeter manufacturing getting to 300 millimeter. And we see companies like, you know, Denso and Bosch start building out fabs and getting into that silicon, high voltage silicon capability because so much of the value is there in the car. And while, you know, you may not use ADAS for a long time, there's mandates about when you're going to be using electric cars. So we see that piece of the market moving very, very fast and it's changing quite a bit. And, you know, Accenture Analytics is a very valuable way to understand how to get to the highest level of quality, operational effectiveness, and yields. So it is a viable capability for these companies, and many of them were already customers of ours, and they are expanding, and some of them are kind of new customers for us, like, you know, the auto suppliers who want to be in this, who want to be in the silicon business because it's how they control their destiny.

out of curiosity, if you can say those two power names that you mentioned, existing customers and or new comps, new customers.

Yeah, probably we're always careful who we say is our customers are but suffice it to say, You know, we've always sold first the top tiers of every market we get into typically.

Question on silicon carbide. Silicon carbide requires a lot more tests, obviously very delicate to handle, super high voltages, difficult tests, and much more rigorous testing that's being done. Is that correct? Is there a module you have specifically for that? Is that figuring into one of the drivers here on your power customers?

That's a great insight. Yeah, it is an area that we have capability on Accenture test, and they have very complex burn-in, test post burn-in. And we have in Accenture unique modules that are able to load that data and align it and analyze it. And that has been something we've been piloting with those customers to date. It's not an important part of our revenue, but we believe it will more and more be an important part of our revenue because of exactly the hot points you highlight in your question.

Okay. Last comment just is, you know, on one of the previous calls, it's given out, you know, it wasn't even really important in the overall scheme of things with the following caveat. You'd given out, you know, a number just to give an indication of what kind of data point, you know, analytics and data points are being pulled in every day by your customers. And I forget the number. It was just an astounding number. You know, as you're transitioning almost from being associated with the semi-cap space which isn't a bad place to be right now, by the way, and maybe for the next few years, but there's more here where once in a while people are actually bringing you up as a SAS name. Finally, you know, you probably process more data points than many SAS companies do at this point. And certainly more mission critical in a way, you know, is it possible to give out, start giving out some metrics in some creative, nice way that people would be able to understand just what type of incredible processing that you are doing for these customers.

Yeah, that's a great point. We are tracking now the amount of data poured into Accentio Cloud for our core customers. As your question kind of alludes to, we've had a number of customers move on an enterprise basis to Accentio. We expect that many of those customers will be up and running at – it's a transition. It takes months just to even load all of their data, because they want historical data too, into the cloud system and off their on-premise system. As we get out through 2022, we'll start communicating what the size of the Accenture cloud database is. And, yes, you know, it will be in the multiple petabytes of data and processed daily. Your insight is quite sharp. Yes, the numbers on a daily basis are quite large. Now, how that compares to the overall cloud and stuff, I'm sure there's lots of things that are big. But in terms of mission-critical manufacturing data, it is a very big data set we process for customers' data. And a lot of that data comes from places that are outside their four walls, from their suppliers and foundry, test, and assembly that all get loaded in. So it is a complex web that we're building out for the customer base.

And if I may, just one last question. I'm sorry I'm taking so much time. But just in terms of being able to cross-utilize what you learn across customers, I believe that you are able to do that, obviously, anonymously. If that is the case, is at some point would you become almost like a must-have because they want and need that cost analytics in order to get the best bang for the buck?

Yeah, must-have is always a super strong word, and there's always clever people out there. So that word always makes me nervous. But the point that you bring up there, we do always, and customers want us, retain the rights to use the data to make our algorithms better, because it benefits them if our algorithms can help them find insights better. And of course, you know, the larger data set that we sit on and we can let our algorithms run, the more effective our algorithms can be for our customer base overall. And so we hope it increases importance for our customers, and we'd like it to be the platform that is the most, of analytics platforms, the most effective one for the industry. But, you know, must is always a super strong word, so I'm nervous about that word. But your general thesis, yeah, we would agree with that general thesis. And, you know, every time I meet with operations executives and I meet with them, you know, from the fabs, the IDMs and the fabless all the time, and maybe now mostly on Zoom, but I still meet with lots of them, they want us to make sure that our algorithms can see, you know, quality issues more subtly, you know, subtle quality issues sooner. and more effectively for them because they don't want, the last thing they want to do, one of the guys said to me this week, I don't want to be explaining to my customer in the auto supply chain why we had this problem. This is something that's embarrassing when it happens, so your software's got to catch it. So they want us to hone our algorithms for exactly what you described, Warren, and hopefully that will make us important to them.

Thank you, and your humility is appreciated.

As a reminder, to ask a question, please press the star, then the number one on your telephone keypad. No questions at this time, and I would like to turn the call to John Kibarigan, CEO of PDF Solutions, for closing remarks.

Thank you for participating in our Q3 call. We look forward to talking with you again soon. Stay safe and have a great day. Goodbye everyone.

This concludes today's conference. Thank you for participating. You may now disconnect.