PDF Solutions, Inc.

year as investments were ahead of the growth they enabled. We expect the profits generated from these investments in 2025 will enrich our balance sheet in 2026 and beyond. Finally, I encourage you all to attend our Analyst Day and Users Conference. There you will see our customers, partners, and PDF folks talk about the needs and opportunities for AI and analytics in manufacturing. We are honored to have Mike Campbell, SVP of Qualcomm, Aziz Safa, Corporate VP of Intel, Tom Caulfield, Exec Chairman of Global Foundries, and Jean-Marc Cherie, CEO of STMicro, among others, share their perspectives. Now I'll turn the call over to Adnan. Adnan?

Thank you, John. Good afternoon, everyone. Good to speak with you all again today. We're 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. As you saw from our press release, with our Q3 results, we achieved another record for quarterly revenue. our bookings for this quarter totaled over $100 million as a result of multiple large deals signed across our product portfolio of Leading Edge, Xencio, and SecureWise. During the third quarter, our bookings were greater than the prior two quarters combined. On a year-to-date basis, for the three-quarter period, our bookings were 49% higher than the comparable period of last year. With the contracts John mentioned, as well as additional business closed in the quarter, we ended Q3 with backlog of 292 million, which is 25% higher than last quarter and 22% higher than the same period a year ago. We are pleased that we were able to grow our backlog while delivering record quarterly revenue. Our total revenue for the Q3 period came in at $57.1 million. or 10% higher than last quarter, and 23% higher on a year-over-year basis. Our analytics revenue came in at $54.7 million, or 12% higher versus the prior quarter, and 22% higher on a year-over-year basis. The growth in analytics compared to the prior quarter was driven by business from leading-edge customers and equipment software. Integrated yield ramp revenue was 4% of total revenue in Q3 and was lower by 0.5 million compared to the prior quarter and up on a year-over-year basis by 0.8 million. On gross margin, we reported 76%, or slightly ahead of last quarter, and down 1% versus last year's comparable quarter, which had meaningful perpetual software revenue in that quarter. As you will recall, our long-term target for gross margin is 75%. We're pleased that we were able to be ahead of that target for this quarter. Our operating expenses in Q3 grew 3% compared to the prior quarter, primarily due to spend related to development improvements for our platform and increased variable compensation accruals due to strong results. On EPS, we were able to deliver 25 cents per share for the quarter our strongest quarter for the year. For the first three quarters of 2025, our EPS of 64 cents is now six cents ahead of the comparable period of last year. We generated positive operating cash flow of 3.3 million this quarter and 6.7 million for the first nine months of this year. We ended the quarter with cash, cash equivalents, and short-term investments of approximately 35.9 million. compared to the prior quarter's ending cash balance of approximately $40.4 million. We repurchased $0.2 million of our stock this quarter at a per share price of $19.55 per share. During the quarter, we invested $6.3 million in CapEx, which is lower than the $8.5 million in Q2 and the $8.2 million in Q1 of this year. 2025, has been an important investment for us, like John said, as we use significant cash on the acquisition of SecureWise and related integration expenses, while only benefiting from a partial year of ownership. During the year, we also invested in building E-Pro machines to meet customer demand in 2025 and 2026, without the benefit of full subscription run rate return on the investment within the year. Now, with two additional machines shipped and going through qualification on a subscription model, as well as the integration costs of the SecureWise acquisition largely behind us, we anticipate cash to grow over the next year. Given the strong business activity, the growth in our backlog, and the customer opportunities in front of us, we reaffirm our prior guidance of 21% to 23% annual revenue growth range for this year. As we get ready for our analyst day and user conference on December 3rd, we look forward to sharing more details about our long-term targets for the next phase of PDF growth with you at that time. We are also thankful to our customers and partners for supporting the growth we delivered this quarter and look forward to growing sequentially again in Q4. With that, I'll turn the call over to the operator to commence the Q&A session. Operator?

Thank you, Mr. Raza. Ladies and gentlemen, if you have a question at this time, please press star 11 on your telephone. If you're using a speakerphone, please lift the handset before asking a question. Please wait a moment for our first question. Our first question comes from the line of Blair Abernethy from Rosenblatt. Please go ahead.