PDF Solutions Reports Fourth Quarter 2007 Results

Fourth Quarter Results Contribute to Record Revenue for Fiscal 2007

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| Source: PDF Solutions, Inc.

SAN JOSE, Calif., Feb. 7, 2008 (PRIME NEWSWIRE) -- PDF Solutions(r), Inc. (Nasdaq:PDFS) the leading provider of yield improvement technologies and services for the integrated circuit (IC) manufacturing process lifecycle, today announced financial results for its fourth fiscal quarter ended December 31, 2007.

Total revenue for the fourth fiscal quarter of 2007 totaled $24.6 million, an increase of 30%, compared with total revenue of $19.0 million for the fourth fiscal quarter of 2006. Gain share revenue for the fourth fiscal quarter of 2007 totaled $6.5 million, an increase of 33%, compared to $4.9 million for the fourth fiscal quarter of 2006. Total revenue for the full fiscal year ended December 31, 2007 totaled a record $94.5 million, compared with total revenue of $76.2 million for the full fiscal year ended December 31, 2006, an increase of 24%. Gain share revenue for the full fiscal year ended December 31, 2007 totaled a record $24.1 million compared with gain share revenue of $20.0 million for the full fiscal year ended December 31, 2006, an increase of 20%. Net income for the fourth fiscal quarter of 2007 totaled $1.1 million, or $0.04 per diluted share, compared with a net loss of $430,000, or $0.02 per basic and diluted share, for the fourth fiscal quarter of 2006.

In addition to using GAAP results in evaluating PDF Solutions' business, management also believes it is useful to measure results using a non-GAAP measure of net income, which excludes stock-based compensation expense, amortization of acquired intangible assets, write-off of in-process research and development, and their related income tax effects, as applicable. Using this non-GAAP measure, net income for the fourth fiscal quarter of 2007 totaled $5.8 million, or $0.21 per diluted share, compared with non-GAAP net income of $2.3 million, or $0.08 per diluted share, for the fourth fiscal quarter of 2006.

Additionally, during the fourth quarter ended December 31, 2007, PDF Solutions utilized a portion of the $10 million share repurchase plan previously authorized by its Board of Directors to repurchase 201,300 of its shares on the open market at a weighted average cost of $7.57, for a total repurchase value of $1.5 million.

As previously announced, PDF will discuss these results on a live conference call beginning at 3:00 p.m. Pacific Time/6:00 p.m. Eastern Time today. The call will be simultaneously web cast on PDF Solutions' website at http://ir.pdf.com/medialist.cfm. A replay of the web cast will be available at the same website address beginning approximately two hours after completion of the live call. Further, a copy of this press release, including the disclosure and reconciliation of certain non-GAAP financial measures to the comparable GAAP measure, which non-GAAP measures may be used periodically by PDF Solutions' management when discussing financial results with investors and analysts, will be available on PDF Solutions' website at http://www.pdf.com/news_archive.phtml following the date of this release.

Information Regarding Use of Non-GAAP Financial Measures

In addition to providing results that are determined in accordance with Generally Accepted Accounting Principles in the United States of America (GAAP), PDF Solutions also provides certain non-GAAP financial measures that exclude the effects of stock-based compensation expense, amortization of acquired intangible assets, write-off of in-process research and development, and their related income tax effects, as applicable. PDF Solutions' management believes that the presentation of these measures provides useful supplemental information to investors regarding PDF's operating results. These non-GAAP financial measures are used by management internally to measure the company's profitability and performance. PDF's management believes that excluding the effects of stock-based compensation expense, amortization of acquired intangible assets, write-off of in-process research and development, and their related income tax effects, as applicable, provides a useful supplemental measure of the company's ongoing operations in light of the fact that neither category of expense has a current effect on the future uses of cash nor do they have use with regards to the generation of current or future revenues. These non-GAAP results should not be considered an alternative to, or a substitute for, GAAP financial information, and may be different from similarly titled non-GAAP measures used by other companies. In particular, these non-GAAP financial measures are not a substitute for GAAP measures of income as a measure of performance, or to cash flows from operating, investing and financing activities as a measure of liquidity. Since management uses these non-GAAP financial measures internally to measure profitability and performance, PDF has included these non-GAAP measures to give investors an opportunity to see the company's financial results as viewed by management. A reconciliation of the non-GAAP financial measures to the comparable GAAP financial measure is provided at the end of the company's financial statements presented below.

About PDF Solutions

PDF Solutions, Inc. (Nasdaq: PDFS) is the leading provider of yield improvement technologies and services for the IC manufacturing process lifecycle. PDF Solutions offers solutions that are designed to enable clients to lower costs of IC design and manufacture, enhance time to market, and improve profitability by addressing design and manufacturing interactions from product design to initial process ramps to mature manufacturing operations. PDF Solutions' Characterization Vehicle(r) (CV(r)) test chips provide the core modeling capabilities, and are used by more leading manufacturers than any other test chips in the industry. PDF Solutions' industry leading yield management system software, dataPOWER(r), and fault detection and classification software, maestria(r), enhance yield improvement and production control activities at leading fabs around the world. Headquartered in San Jose, Calif., PDF Solutions operates worldwide with additional offices in China, Europe, Japan and Korea. For the company's latest news and information, visit http://www.pdf.com/.

Characterization Vehicle, CV, dataPOWER, Maestria, PDF Solutions, and the PDF Solutions logo are registered trademarks of PDF Solutions, Inc.

The PDF Solutions, Inc. logo is available at http://www.primenewswire.com/newsroom/prs/?pkgid=3199



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

                                                   Dec. 31,  Dec. 31,
                                                     2007      2006
                                                   --------- ---------
                  ASSETS
 Current assets:
  Cash and cash equivalents                        $ 35,315  $ 36,451
  Short-term investments                              9,949    16,402
  Accounts receivable                                38,526    27,575
  Prepaid expenses and other current assets           3,354     2,796
  Deferred tax assets                                 1,676     2,581
                                                   --------- ---------
   Total current assets                              88,820    85,805
 Property and equipment, net                          3,621     3,916
 Goodwill                                            65,170    60,034
 Intangible assets, net                              12,818    13,605
 Long-term deferred tax assets                        8,458     4,994
 Other assets                                           464       503
                                                   --------- ---------
   Total assets                                    $179,351  $168,857
                                                   ========= =========

     LIABILITIES AND STOCKHOLDERS' EQUITY
 Current liabilities:
  Current portion of long-term debt                $    421  $    302
  Accounts payable                                    3,469     3,182
  Accrued compensation and related benefits           5,950     3,325
  Other accrued liabilities                           2,604     3,843
  Taxes payable                                         208     4,767
  Deferred revenue                                    3,159     3,705
  Billings in excess of recognized revenue              553        95
                                                   --------- ---------
   Total current liabilities                         16,364    19,219
 Long-term debt                                         907     1,198
 Long-term taxes payable                              5,581        --
 Long-term other liabilities                             29       221
                                                   --------- ---------
   Total liabilities                                 22,881    20,638
                                                   --------- ---------
 Stockholders' equity:
  Common stock                                            4         4
  Additional paid-in-capital                        181,566   167,323
  Treasury stock at cost                            (11,524)   (5,549)
  Accumulated deficit                               (16,892)  (13,890)
  Accumulated other comprehensive income              3,316       331
                                                   --------- ---------
  Total stockholders' equity                        156,470   148,219
                                                   --------- ---------
    Total liabilities and stockholders' equity     $179,351  $168,857
                                                   ========= =========



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

                               Three Months Ended      Year Ended
                                ------------------  ------------------
                                Dec. 31,  Dec. 31,  Dec. 31,  Dec. 31,
                                  2007      2006      2007      2006
                                --------  --------  --------  --------
 Revenue:
  Design-to-silicon-yield
   solutions
    Services                    $17,641   $11,523   $63,731   $45,382
    Software licenses               417     2,557     6,645    10,774
  Gain share                      6,497     4,873    24,087    20,028
                                --------  --------  --------  --------
   Total revenue                 24,555    18,953    94,463    76,184
                                --------  --------  --------  --------

 Cost of design-to-silicon-yield
  solutions:
  Direct costs of
   design-to-silicon-yield
   solutions
   Services                       9,437     7,610    32,279    27,418
   Software licenses                 57       111       191       209
  Amortization of acquired
   core technology                  632     1,472     5,148     5,270
                                --------  --------  --------  --------
   Total cost of
    design-to-silicon-yield
    solutions                    10,126     9,193    37,618    32,897
                                --------  --------  --------  --------
   Gross margin                  14,429     9,760    56,845    43,287

 Operating expenses:
  Research and development        9,899     8,070    36,074    27,613
  Selling, general and
   administrative                 6,613     4,964    24,891    19,814
  Amortization of other
   acquired intangible assets       393       754     3,422     1,459
  Write-off of in-process
   research and development          --       800        --       800
                                --------  --------  --------  --------
   Total operating expenses      16,905    14,588    64,387    49,686
                                --------  --------  --------  --------

 Loss from operations            (2,476)   (4,828)   (7,542)   (6,399)
 Interest and other income, net     544       489     1,891     2,827
                                --------  --------  --------  --------
 Loss before taxes               (1,932)   (4,339)   (5,651)   (3,572)

 Income tax benefit              (3,000)   (3,909)   (2,724)   (3,133)
                                --------  --------  --------  --------
 Net income (loss)               $1,068   $  (430)  $(2,927)  $  (439)
                                ========  ========  ========  ========

 Net income (loss) per share:
   Basic                        $  0.04   $ (0.02)  $ (0.10)  $ (0.02)
                                ========  ========  ========  ========
   Diluted                      $  0.04   $ (0.02)  $ (0.10)  $ (0.02)
                                ========  ========  ========  ========

 Weighted average common shares:
   Basic                         27,964    27,459    28,066    26,885
                                ========  ========  ========  ========
   Diluted                       28,246    27,459    28,066    26,885
                                ========  ========  ========  ========



                             PDF SOLUTIONS, INC.
                              NON-GAAP RESULTS
                (In thousands, except per share amounts)

                                                    Three Months Ended
                                                     -----------------
                                                     Dec. 31, Dec. 31,
                                                       2007     2006
                                                     -------- --------

 GAAP net income (loss)                              $ 1,068  $  (430)
 Stock-based compensation expense - cost
  of design-to-silicon-yield solutions                   765      596
 Stock-based compensation expense - research
  and development                                        888      599
 Stock-based compensation expense - selling,
  general and administrative                           1,124      695
 Amortization of acquired core technology                632    1,472
 Amortization of other acquired intangible assets        393      754
 Write-off of in-process research and development         --      800
 Tax impact on reversal of stock-based compensation
  expense and amortization of
  intangible assets                                      976   (2,165)
                                                     -------- --------
     Non-GAAP net income                             $ 5,846  $ 2,321
                                                     ======== ========

 GAAP net income (loss) per diluted share            $  0.04  $ (0.02)
 Non-GAAP net income per diluted share               $  0.21  $  0.08
 Shares used in computing diluted non-GAAP
  measure of net income per share                     28,246   28,484
PDF Solutions, Inc.
Investor Relations Contact:
Steven Melman, VP, Investor Relations
(408) 938-6445
steve.melman@pdf.com
Sonia Segovia, IR Coordinator
(408) 938-6491
sonia.segovia@pdf.com