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PDFS, PDF Solutions Inc.

Software asset-light CyclicalSerial acquirer

Solutions, which are designed to shorten the time necessary for technology development and provide their fabless customers with a higher yielding process with improved electrical performance, which are both critical metrics for market success.

We provide comprehensive data solutions designed to empower organizations across the semiconductor and electronics ecosystems to improve the yield and quality of their products and operational efficiency for increased profitability.

We derive revenues from two categories, Platform and Volume-based fees.

Latest annual: FY2025 10-K

PDFS · PDF Solutions Inc.

The business

What it sells, where the money comes from, the kind of company it is.

Revenue · FY2025

$219M

+22.0% YoY · 20% 5-yr CAGR

Vital signs · TTM, with 5-yr average

Revenue $231M 5-yr avg $165M

Gross margin 72% 5-yr avg 68%

Operating margin 6.8% 5-yr avg −2.6%

ROIC 3% 5-yr avg −1%

Owner-earnings margin 5% 5-yr avg 7%

Free cash flow margin −8% 5-yr avg 2%

The business in brief

read the 10-K →

What this business is and what moves its needle, from its own SEC filings.

What it is: Revenue is Platform (83%) and Volume-Based (17%).
Situation: Cyclical. Margins collapse and recover repeatedly across the record; a single year, good or bad, misstates the through-cycle earning power. Serial acquirer. Goodwill and acquired intangibles are 35% of assets, with meaningful acquisition spending in 5 of the record's 10 years; much of what this business is was bought, at prices the record carries.
What moves the needle: Operating margin has reached 12% at its best but run negative through the cycle (median −0.1%) on a 60% gross margin — so the question is which reading is truer: whether the median was pulled below zero by one-off charges, by the cycle, or by spending it is still growing into, and whether it settles back at a profit. Capital spending runs about 10% of sales, well above depreciation, so the return earned on what it sinks into that plant weighs as much as the margin. Read this kind of business on retention and the cost of growth. On its own account, the filing leans hardest on customer concentration, set against the numbers in what the filing emphasizes, below.
Is it a good business?: Return on capital has rarely cleared the cost of capital (median 0%, above 15% in 0 of 10 years). The steadier read is owner earnings: roughly 7% of revenue reaches owners as cash, consistently. The cycle and the balance sheet decide this one; the worst year tells more than the median, and the rest is in the 10-K.

Every line is arithmetic on the company's filings, shown in full in the sections below.

Where the money comes from

read the 10-K →

Platform is 83% of revenue, with Volume-Based the other meaningful line at 17%.

Revenue by product line, FY2025

Platform83%$181M
Volume-Based17%$38M

From the segment footnote of the company's own 10-K. Shares are of total revenue; the profit bar shows each segment's share of segment operating profit, before unallocated corporate costs.

The record

Ten years of arithmetic, read across the cycle.

The record, 2016–2025

realized figures from each filing · older years to the left

2016’16	2017’17	2018’18	2019’19	2020’20	2021’21	2022’22	2023’23	2024’24	2025’25	TTMTTMMar 2026
											Income statement
$107M	$102M	$86M	$86M	$88M	$111M	$149M	$166M	$179M	$219M	$231M	RevenueRevenue
59%	53%	50%	61%	58%	60%	68%	69%	70%	72%	72%	Gross marginGross mgn
21%	23%	28%	31%	37%	34%	31%	38%	39%	39%	34%	SG&A / revenueSG&A/rev
26%	30%	33%	38%	39%	39%	38%	31%	30%	29%	29%	R&D / revenueR&D/rev
$13M	$190K	($10M)	($7M)	($18M)	($18M)	$470K	($151K)	$935K	$6M	$16M	Operating incomeOp. inc.
12.1%	0.2%	−11.6%	−8.6%	−20.5%	−16.5%	0.3%	−0.1%	0.5%	2.7%	6.8%	Operating marginOp. mgn
$9M	($1M)	($8M)	($5M)	($40M)	($21M)	($3M)	$3M	$4M	($640K)	$7M	Net incomeNet inc.
30%	—	—	—	—	—	—	36%	38%	—	40%	Effective tax rateTax rate
											Cash flow & returns
$2M	$11M	$13M	$25M	$22M	$4M	$32M	$15M	$10M	$24M	$17M	Operating cash flowOp. cash
$4M	$5M	$5M	$6M	$7M	$6M	$6M	$5M	$4M	$4M	$5M	DepreciationDeprec.
($22M)	($5M)	$6M	$13M	$43M	$7M	$11M	($15M)	($23M)	($5M)	($21M)	Working capital & otherWC & other
$11M	$10M	$13M	$11M	$6M	$4M	$8M	$11M	$17M	$33M	$35M	CapexCapex
10.5%	10.1%	15.3%	12.3%	6.8%	3.3%	5.7%	6.8%	9.6%	14.9%	15.1%	Capex / revenueCapex/rev
($2M)	$6M	$8M	$19M	$16M	$571K	$27M	$10M	$6M	$20M	$12M	Owner earningsOwner earn.
−1.5%	5.7%	9.8%	21.7%	17.9%	0.5%	18.0%	5.8%	3.4%	9.1%	5.2%	Owner earnings marginOE mgn
($9M)	$290K	$222K	$14M	$16M	$571K	$24M	$3M	($7M)	($9M)	($18M)	Free cash flowFCF
−8.6%	0.3%	0.3%	16.4%	17.9%	0.5%	16.1%	2.0%	−4.2%	−3.9%	−7.7%	Free cash flow marginFCF mgn
—	$4M	—	$3M	$29M	$3M	—	$2M	$0	$130M	$0	AcquisitionsAcquis.
$2M	$13M	$5M	$10M	$0	$5M	$22M	$743K	$7M	$244K	—	BuybacksBuybacks
11%	0%	-8%	-6%	-7%	-8%	0%	-0%	0%	1%	3%	ROICROIC
5%	-1%	-4%	-3%	-17%	-10%	-2%	1%	2%	-0%	3%	Return on equityROE
5%	−1%	−4%	−3%	−17%	−10%	−2%	1%	2%	−0%	3%	Retained to equityRetained/eq
											Balance sheet
$117M	$101M	$96M	$98M	$145M	$140M	$139M	$136M	$115M	$42M	$31M	Cash & investmentsCash+inv
$48M	$58M	$52M	$41M	$34M	$40M	$42M	$45M	$74M	$83M	$96M	ReceivablesReceiv.
$2M	$3M	$2M	$8M	$4M	$6M	$6M	$3M	$8M	$17M	$17M	Accounts payablePayables
$46M	$55M	$49M	$33M	$30M	$35M	$36M	$42M	$65M	$66M	$79M	Operating working capitalOper. WC
$170M	$164M	$157M	$148M	$193M	$189M	$193M	$198M	$206M	$164M	$176M	Current assetsCur. assets
$19M	$20M	$20M	$28M	$42M	$44M	$58M	$51M	$61M	$72M	$75M	Current liabilitiesCur. liab.
9.2×	8.3×	8.1×	5.3×	4.6×	4.3×	3.3×	3.9×	3.4×	2.3×	2.3×	Current ratioCurr. ratio
$215K	$2M	$2M	$2M	$16M	$14M	$14M	$15M	$15M	$95M	$95M	GoodwillGoodwill
$222M	$224M	$226M	$240M	$288M	$274M	$279M	$290M	$315M	$419M	$431M	Total assetsAssets
—	—	—	—	—	—	—	—	$0	$67M	$66M	Total debtDebt
—	—	—	—	—	—	—	—	($115M)	$25M	$35M	Net debt / (cash)Net debt
$199M	$198M	$200M	$196M	$235M	$220M	$210M	$229M	$246M	$271M	$280M	Shareholders’ equityEquity
10.2%	11.6%	12.0%	13.3%	14.2%	11.6%	13.2%	13.0%	14.0%	11.8%	11.1%	Stock comp / revenueSBC/rev
											Per share
32.4M	32.0M	32.2M	32.4M	34.5M	37.1M	37.3M	38.9M	39.0M	39.3M	40.4M	Shares out (diluted)Shares
$3.31	$3.18	$2.67	$2.64	$2.56	$2.99	$3.98	$4.26	$4.60	$5.57	$5.73	Revenue / shareRev/sh
$0.28	$-0.04	$-0.24	$-0.17	$-1.17	$-0.58	$-0.09	$0.08	$0.10	$-0.02	$0.18	EPS (diluted)EPS
$-0.05	$0.18	$0.26	$0.57	$0.46	$0.02	$0.72	$0.25	$0.16	$0.51	$0.30	Owner earnings / shareOE/sh
$-0.29	$0.01	$0.01	$0.43	$0.46	$0.02	$0.64	$0.09	$-0.19	$-0.22	$-0.44	Free cash flow / shareFCF/sh
$0.35	$0.32	$0.41	$0.33	$0.17	$0.10	$0.23	$0.29	$0.44	$0.83	$0.87	Cap. spending / shareCapex/sh
$6.13	$6.19	$6.21	$6.05	$6.81	$5.91	$5.63	$5.88	$6.30	$6.89	$6.95	Book value / shareBVPS

Per-share growththe realized rate an owner's share compounded

	9-yr	5-yr
Revenue / share	+5.9%/yr	+16.9%/yr
Owner earnings / share	—	+2.1%/yr
Capital spending / share	+10.1%/yr	+36.6%/yr
Book value / share	+1.3%/yr	+0.3%/yr

The year, in the company's words

the filing →

Verbatim from the 10-K's management discussion. Each sentence is shown only because its subject, direction, and stated figures check out against the filed numbers on this page. The words are the company's; the arithmetic is the record's.

Platform+15.2%
“Platform revenue was $181.0 million for the year ended December 31, 2025, an increase of $23.9 million, or 15%, compared to prior year. The increase in Platform revenue was driven by higher revenue from fixed fees associated with CV systems and the addition of revenues related to secureWISE systems, partially offset by decreases in revenue from perpetual licenses and DirectScan systems.”
✓ figure matches the filed record
Volume-Based+70.4%
“Volume-based Revenue Volume-based revenue was $38.0 million for the year ended December 31, 2025, an increase of $15.7 million, or 70%, compared to the year ended December 31, 2024. The increase in Volume-based revenue was due to increases in revenue from Gainshare, secureWISE data usage, and Cimetrix runtime license.”
✓ figure matches the filed record

The record, charted

FY2016–2025

Each measure over its full record; the current point and the worst year marked.

Share count

39Mpeak FY2025

ROIC

1%low FY2018

Gross margin

72%low FY2018

Owner earnings vs. net income

Owner earningsNet income

The accountant's number, and the cash an owner can take; the gap is the tell.

$20Mowner earningsvs.($640K)net incomelow FY2016

Where the cash went

ReinvestBuybacksDividendsAcquisitionsRetainedBeyond op. cash

Each year's outlays against its operating cash: the mix, and how it drifts. The hatched cap is spending beyond that year's operating cash — financed from the balance sheet or borrowing, not operations.

FY2016FY2025

Owner-earnings bridge

FY2021–FY2025cash-flow statement, SEC EDGAR →

Net income is the accountant's number; owner earnings is the cash an owner could take out. The walk between them, off the cash-flow statement, and whether the gap is widening or holding.

In fiscal 2025 the business earned $20M of owner earnings, the operating cash left after the $4M it takes just to hold its position. It put $29M more into growth; free cash flow, after that spending, was ($9M).

	FY2025	FY2024	FY2023	FY2022	FY2021
Reported net income	($640K)	$4M	$3M	($3M)	($21M)
Depreciation & amortizationnon-cash charge added back	+$4M	+$4M	+$5M	+$6M	+$6M
Stock-based compensationreal costnon-cash, but a real cost	+$26M	+$25M	+$21M	+$20M	+$13M
Working capital & othertiming of cash in and out, other non-cash items	−$5M	−$23M	−$15M	+$11M	+$7M
Cash from operations	$24M	$10M	$15M	$32M	$4M
Maintenance capital expenditurethe spending needed just to hold position and volume	−$4M	−$4M	−$5M	−$6M	−$4M
Owner earnings	$20M	$6M	$10M	$27M	$571K
Growth capital expenditurediscretionary; spent to get bigger, not to stand still	−$29M	−$14M	−$6M	−$3M	—
Free cash flow	($9M)	($7M)	$3M	$24M	$571K
Owner-earnings marginowner earnings ÷ revenue	9%	3%	6%	18%	1%

Owner earnings is the cash an owner could pull out without starving the business: operating cash less the maintenance capital it must spend to hold its position (here about $4M, roughly its depreciation, the rate its assets wear out). The other $29M of its capital spending is growth it chose, not upkeep it owed; charged only with the maintenance it must do, the business earns well more than the year's free cash flow shows. The cash-flow statement also adds stock comp back as non-cash, but it is a real cost paid in shares; counted as the expense it is (less $26M), owner earnings is nearer ($6M).

Maintenance capex is estimated as depreciation where a growing business invests above it; free cash flow is the figure the scorecard's free-cash margin reads.

III

Quality & stewardship

Returns, the balance sheet, capital allocation, and pay.

Owner’s Scorecard

FY2025 10-K · source on SEC EDGAR →

Will it survive?

Can it pay its interest? 1.5×

Thin

Operating income $6M ÷ interest expense $4M

What this means
Operating profit covers interest, but with little room. A bad year, a refinancing at higher rates, or a revenue wobble closes the gap fast.
How heavy is the debt, net of cash? $25M · 4.2× operating profit

Heavy net debt

Cash $42M − debt $67M

What this means
Netting $42M of cash and short-term investments against $67M of debt leaves $25M owed, about 4.2× a year's operating profit (11.5× on the gross debt, before the cash). Net debt is the leverage figure that matters: the cash is already set against the debt. Strategic or illiquid investments aren't counted here.
How long is cash tied up? 35d

Tight

DSO 138 + DIO 0 − DPO 103 days

What this means
Days cash is tied up between paying suppliers and collecting from customers. Lower is better; a long cycle means growth itself eats cash. (Little or no inventory, a services / asset-light model, so the inventory leg is ~0.)

Is it a good business?

Return on invested capital -0%

Below average through the cycle

10-yr median, range -8%–11%; 1% latest = NOPAT $3M ÷ invested capital $296M

Industry peers: median -6%

What this means
The rate the business earns on the money tied up in it, Buffett's north star, because over time a stock tracks the ROIC beneath it. Above ~15% sustained hints at a moat; a return below the cost of capital (~8%) erodes value as a business grows rather than building it — the test Buffett weighs most. The headline is the median of the last 10 years (it ran 1% most recently), so one peak or trough year doesn't set the verdict. Asset-light businesses (R&D expensed, little capital) read artificially high, pair this with Owner Earnings.
Owner-earnings margin 6%

Solid through the cycle

10-yr median margin, range -1%–22%; latest $20M = operating cash $24M − maintenance capex $4M

Industry peers: median -8%

What this means
What an owner could take out without starving the business: operating cash less the maintenance capital it must spend to hold its position — Buffett's owner earnings. That's 9% of revenue this year, a 6% median across 10 years. It chose to put $29M more into growth, so free cash flow this year was ($9M) — the gap is investment, not weakness. Treating stock comp as the real expense it is (less $26M of SBC) leaves ($6M).
Are earnings backed by cash? $24M

Loss, but cash-generative

Net income ($640K) · cash from operations $24M

What this means
The company reported a net loss, so a conversion ratio isn't meaningful. What matters then is whether operations still threw off cash, here, they did.

How is the cash used?

Where do the earnings go? 1%

Reinvests most of it

Dividends + buybacks $244K ÷ Owner Earnings $20M

What this means
Of $20M Owner Earnings, $244K (1%) went back to shareholders, $0 dividends, $244K buybacks. But the buybacks barely exceed stock issued to employees ($26M SBC), net of dilution, little was truly returned. Returning most of it is the mark of a mature business with little left to reinvest at a high return; reinvesting most could mean a long runway, or empire-building. The split doesn't say which; the return earned on it (see ROIC) does.
Investing or harvesting? 7.99×

Expanding

Capex $33M ÷ depreciation $4M

What this means
Descriptive, not a grade. Above ~1× means investing faster than assets wear out (growth, or, sustained for years, today's earnings carrying less depreciation than tomorrow's will). Below means spending less than it's wearing out (efficiency, or a melting asset base). The ratio won't tell you which; the filings will.

Graham’s defensive tests · 3 of 6 met

Graham’s numerical criteria for the defensive investor (The Intelligent Investor, ch. 14), run on the filings. A floor of safety, not a buy signal; many fine modern businesses fail his strictest liquidity rules by design.

Adequate size Miss

Revenue ≥ $2B · $219M

What this means
Big enough to weather a storm. Graham's 1972 floor was ~$100M of sales (≈ $700M today); we use a $2B revenue line as a conservative modern stand-in.
Strong liquidity Pass

Current ratio ≥ 2× · 2.28×

What this means
Current assets at least twice current liabilities, near-term bills covered without touching the business. Strict by design: many cash-rich modern firms run leaner and miss it, holding their cushion in longer-dated securities.
Conservative debt Pass

Debt ≤ working capital · $67M vs $92M WC

What this means
Graham's rule that borrowings not exceed net current assets. Capital-heavy and buyback-heavy firms routinely fail it, read it next to interest coverage, not alone.
Earnings stability Miss

A profit every year (10-yr record) · 7 loss years

What this means
Graham wanted earnings in each of the past ten years, the stability a defensive owner leans on.
Dividend record Miss

Uninterrupted dividends · none paid

What this means
An unbroken dividend was Graham's mark of durability. He wanted twenty years; the filings show about ten, and a single suspension breaks the streak. Non-payers, many fine modern compounders, fall outside his defensive net by design.
Earnings growth Pass

Earnings +33% over the record · +12944%

What this means
At least a third more earnings than a decade ago, averaging three years at each end. Net income (not per-share), so stock splits don't distort it, buybacks and dilution show up in the share-count line instead.
Moderate price —

P/E ≤ 15 and P/E × P/B ≤ 22.5 · decided by the price

What this means
Graham's valuation gate, the wall he kept between a sound business and a sound investment. Three-year average earnings are $0.05/share (latest year $-0.02), the averaged base the calculator's gate runs on, and book value is $6.79/share. Enter a price in “What the price implies” just below for the P/E, P/B, and whether it clears. But this is the rule Buffett outgrew: there's no hard P/E law, and a wonderful business can deserve a far richer multiple if the thesis holds, treat it as the bargain-hunter's floor, not a verdict on the price.

Durability & moat, 2016–2025

Whether the record’s returns held, and what the capital reinvested earned.

Profitable years 3 of 10

What this means
Lost money in 7 year(s), look at what happened there before trusting the average.
Operating margin 0% → 1% (3-yr avg ends)

In the filing’s words The filing attributes gains to higher prices, but the margin in the record has not followed — the claim outruns the result here.

What this means
Through the cycle the operating margin held roughly steady — about 0% early, 1% lately, median −0%.
Reinvestment, incremental ROIC returns capital

What this means
The capital base barely grew: this business returns cash through dividends and buybacks rather than reinvesting. Judge it on the cash returned, not on compounding.
Owner earnings growth +23%/yr

What this means
Owner earnings grew about 23% a year over the record.
Worst year 2020 · −20.5% op. margin

What this means
Operations went underwater in 2020, understand why before trusting the good years.
Share count +2.2%/yr

What this means
The share count is rising, dilution works against you on a per-share basis.

Does AI threaten the moat?

Elevated contestability

The product is software or information, the very thing capable AI now produces more cheaply, so the moat is more contestable than the record alone implies.

In its own filing Named as a competitive risk

Its FY2025 10-K names artificial intelligence as a competitive threat.

“The third-party AI technologies may also provide outputs that appear to be correct but are incomplete, inaccurate, or otherwise flawed and may lead us to make erroneous decisions or recommendations to customers, which could result in harm to our reputation and competitive position, customer loss, and legal liability.…”

AI has collapsed the cost of building a capable substitute for the very thing this business sells. When a credible alternative can be assembled for a fraction of the incumbent's price, it is pricing power that erodes first, not revenue tomorrow. The live question is whether the moat survives that, not whether it held in the past. Whether that question is answerable at all is yours to decide, against your own circle of competence.

Read from the filing's own risk factors, paired with the industry's structure under its SIC code; the durability is read above, the price below.

All figures as filed; the source filing is linked above.

Current Position

as of the latest quarter, Mar 31, 2026

Can the business pay what it owes this year, off the freshest balance sheet: the quality of the assets, the debt actually coming due, and what a low ratio means here.

Current assets$176M

Cash & short-term investments$31M
Receivables$96M
Other current assets$48M

Current liabilities$75M

Debt due within a year$2M
Accounts payable$17M
Other current liabilities$56M

Current ratio2.34×all current assets ÷ what's due · Graham looked for 2×

Quick ratio2.34×stricter: inventory excluded

Cash ratio0.42×strictest: cash alone against what's due

Working capital$101Mthe cushion left after near-term bills

Debt due this year vs. cash$2M due · $31M cash covered by cash on hand, no refinancing forced · both figures from the Mar 31, 2026 balance sheet

Revenue, latest quarter vs. a year ago+25.9%the freshest read on whether the business is still growing

Current ratio, recent quarters3.5× → 2.3×

Deeper floors

Tangible book value$135Mequity stripped of goodwill & intangibles

Net current asset value$26MGraham's net-net: current assets less all liabilities

Debt incl. operating leases$72M$6M of it operating leases

Deferred revenue$24Mcustomer cash collected before delivery; operating float

From the company's latest filing.

How the cash was used, 2016–2025

Over the record, the business generated $157M of operating cash; how management split it reads as a reinvestor, most operating cash is plowed back into the business.

Reinvested$124M · 79%
Buybacks$65M · 42%

Returned to owners$65M
59% of the owner earnings the business produced over the span, $0 as dividends and $65M as buybacks.
Source of funding−$33M
Reinvestment and shareholder returns ran $33M beyond the operating cash the business generated, so the gap was financed off the balance sheet: cash and short-term investments drew down $86M.
Average price paid for buybacks$15.93
Across the years where the filing reports a share count, 1M shares were bought for $13M, about $15.93 each.
Net change in share count24.5%
The diluted count rose from 32M to 40M: issuance (stock pay, deals) outran any buybacks, so owners were diluted on net.
Dividend record—
No dividend line was reported in the filing data over the span; the record here neither confirms nor rules out a payout.

Buybacks are gross of stock issued to staff; the share-count line above is the net of that, the figure that decides whether owners gained. The average price paid blends a year of purchases (and any accelerated repurchase), so it is close, not exact. The record of where the cash went and on what terms.

Acquisitions & goodwill

from the balance sheet & the 10-year cash-flow record

Goodwill grows only when a company acquires and falls only when it concedes it overpaid. The size of that bet, the cash put into buying rather than building, and how much has already been written off.

Goodwill & intangibles$147M35% of all assets; the premium carried on the balance sheet for businesses acquired

Against book equity35%goodwill is this share of book equity; the rest is the company’s own retained and paid-in capital

Cash spent acquiring$170Mover 10 years buying other businesses, against $124M of capital spent building

None written down over the record; the goodwill is still carried at full cost. That is the deals holding their value on the books so far; whether they keep doing so is the test an owner watches, since the write-down, when it comes, is the admission the price was too high.

Goodwill, acquired intangibles and equity from the latest balance sheet; acquisition spend and write-downs summed across the 10-year record, from the company's own filings.

Management, ownership & pay

read the proxy →

From the proxy: how much of the business the people running it own, and how they are paid, beside what the business earned for its owners in the same years.

Fiscal year	Chief executive	Pay, as filed	“Actually paid”	Owner earnings
2021	John K. Kibarian	$409k	$409k	$571K
2022	John K. Kibarian	$655k	$655k	$27M
2023	John K. Kibarian	$596k	$596k	$10M
2024	John K. Kibarian	$590k	$590k	$6M
2025	John K. Kibarian	$694k	$694k	$20M

Both pay figures are the company’s own, from the pay-versus-performance table its proxy statement files. “As filed” is the Summary Compensation Table total: salary, bonus, and equity awards at their value on the day of grant. “Actually paid” is the SEC’s prescribed recalculation, which re-marks those equity awards to what they became as they vested; it can swing far above or below the filed figure in either direction, and negative years occur. Owner earnings are the whole business's, from the record above, for the same fiscal years.

Insider ownership<1%
The stake all directors and executive officers hold together, per the 2026 proxy: skin in the game, the first thing Munger reads.
CEO pay ratio82:1
What the chief earns for every dollar the median employee makes, per the 2026 proxy. A high ratio alone settles nothing; some businesses are genuinely top-heavy in scarce skill. A runaway figure is where Buffett starts asking whether the board is doing its job.
Stock-based compensation$26M
The slice of the business handed to employees in shares this year, 12% of revenue, equal to 443% of operating profit. Buffett's oldest accounting fight: this is compensation, compensation is an expense, real whether or not the headline earnings admit it. One trap: the cash-flow statement adds SBC back, so the operating cash, and the owner earnings drawn from it, are flattered by exactly this amount; counted as the cost it is, what an owner keeps is lower.

Inverting the record

Invert: instead of why PDF Solutions Inc. is a good business, the question is what would make owning it a mistake, and whether those marks are in the record. Disconfirming tests across 2016–2025.

1 of the 4 tests turned up something to look into; the other 3 came back clean.

Look hereDid the share count rise anyway?24.5%
Diluted shares grew 24.5% over 2016–2025, even as the company spent $65M on buybacks. The repurchases were a treadmill: stock issued to staff outran them, so owners' slice still shrank. Read the buyback line beside this one, not on its own.

And these came back clean

Is it less profitable than it was?
Did receivables and inventory outpace sales?
Are "one-time" charges a yearly habit?

Each test is read from the filings and is noisy alone; a flag can mark a cyclical trough or a year of heavy investment as easily as a problem. The filing says which.

Peers, Software

The same industry, side by side on owner economics. Each figure is a through-cycle median, so a peak or trough year can’t distort it; the group median at the foot is the line to read each against.

Company	Revenue	Gross margin	Op. margin	ROIC	Owner earn. margin
DOMODomo, Inc.	$319M	73%	-34.5%	—	-8%
CRNCCerence Inc.	$252M	70%	1.3%	-1%	12%
AIC3.ai Inc.	$250M	67%	-80.5%	-36%	-37%
WEAVWeave Communications Inc.	$239M	63%	-35.0%	-111%	-10%
PDFSPDF Solutions Inc.	$219M	61%	0.0%	0%	7%
XZOExzeo Group Inc.	$217M	40%	28.4%	—	35%
IIIVi3 Verticals Inc.	$213M	32%	1.9%	1%	10%
SOUNSoundHound AI Inc	$169M	69%	-308.2%	-6%	-150%
Group median	—	65%	-17.2%	-3%	-0%

The price

What a price has to assume.

What the price implies

reverse-DCF

Type today's close and see the owner-earnings growth you'd have to believe to justify it, beside what PDF Solutions Inc. has delivered.

PDF Solutions Inc.’s latest year shows negative owner earnings, the mark of a build-out: total capital spending outruns the cash the business throws off today. So the tool opens on the steady-state base (maintenance capex in place of the build-out spend), the cash it would earn at rest; clear the toggle below to read the latest year exactly as reported.

Today’s price $

Through the cycle, PDF Solutions Inc. earns about $16M on its 7.5% median owner-earnings margin. This year’s 9.1% margin runs above that; the reported figure may flatter a peak you'd be paying on. Normalize, below, values the price on that through-cycle figure rather than the latest year. It comes pre-checked here for that reason, the same rule that already normalizes a trough; clear it to price the year as filed.

Base Normalize · through-cycle ($16M) Net of stock comp (−$26M) Steady-state · maintenance capex ($13M)

—

The assumptions Required return 9% Years of high growth 10 Terminal growth 2.5%

9.0% = the 4.55% 10-year Treasury (Jul 15, 2026) + 4.45 points of equity premium. The rate you require is yours to set.

Enter a price above to run it.

Implied by the price—

Owner-earnings growth · ’21→’25−1%/yr

Owner-earnings growth · ’16→’25+23%/yr

Owner-earnings yield—

P/E (3-yr earnings ’23–’25)—

P/B—

Graham’s price gate—

Graham capped the multiple at 15×; Buffett and Munger let that rule go: a wonderful business can deserve 50× if the thesis holds. The gate marks the bargain-hunter's floor.

Against a high-grade bond: Graham’s yardstick bond yield%

Prefilled with the 10-year Treasury (4.55%, as of Jul 15, 2026). Edit it for today’s exact figure, or a AAA corporate yield.

Graham measured a stock against the bond you could own instead, the heart of his margin of safety. Enter a price above to weigh the owner-earnings yield against this bond.

Free cash flow ($18M) on 40M shares outstanding, per the 10-Q cover, as of 2026-05-04; net debt $35M. The base opens on the through-cycle figure (the latest year sits above the record’s own median, and Graham’s averaging cuts both ways); clear Normalize to use the year as filed. Net of stock comp treats option pay as the expense it is. Capex ($35M) runs well above depreciation ($5M), so this is a build-out; Steady-state swaps total capex for maintenance (≈ depreciation), lifting the base to about $13M, the cash it would throw off if it stopped expanding. The dials set the multiple a growth belief justifies; the price, and every dollar on this page, is yours.

Weigh PDFS against another business →

Cite: Owner Scorecard, "PDF Solutions Inc. (PDFS), the owner's record," https://ownerscorecard.com/c/PDFS, data as of 2026-07-09.

Manual order: ← PD its page in the Manual PDLB →

Industry order: ← PD the Software chapter PDYN →