After a scorching revenue run that took the top line from $42.5 million in 2003 to $73.9 million in 2005 when the company had its first operating profit bringing in almost $5 million, the revenues for the quarters in 2005 simply flattened out. Each quarter was between $18 and $19 million.
The first quarter of 2006, the company brought in revenue of $19.9 million, after doing $19 million in the last quarter of 2005. Net income was $268,000 compared to $1.4 million in Q1 05. Stock-based compensation was the major culprit for the drop. The company's cash balance is still in good shape at $65 million.
The company's business of providing semiconductor companies systems that make integrated circuits easier to manufacture actually appears to be a solid model. But PDF Solutions has certainly joined the legions of companies that can no longer go to Wall Street with growth stories, and that makes the road ahead extremely difficult for investors.
After reaching $19.99, its highest point since 2002, the stock dropped below $14 on the Q1 news. The company still sports a healthy market cap of $370 million, or almost seven times sales. And, it is quickly joining the league of companies that can no longer support those valuations.
PDFS 1-yr Chart
Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He is also the former president of Switchboard.com, which was the 10th most visited site in the world at the time, according to MediaMetrix. He has been chief executive of FutureSource LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. He can be reached at firstname.lastname@example.org.