Good day, everyone, and welcome to the PDF Solutions, Inc. conference call to discuss its financial results for the first quarter conference call ending Monday, 03/31/2025. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session.

To ask a question during the session, you will need to press 11 on your telephone. As a reminder, this conference is being recorded. If you have not yet received a copy of the corresponding press release, it has been posted to PDF's website at www.PDF.com.

Some of the statements that will be made in the course of this conference are forward-looking, including statements regarding PDF's future financial results and performance, growth rates, and demand for its solutions. PDF's actual results could differ materially.

You should refer to the section entitled risk factors on pages 16 through 30 of 10-K for the fiscal year ended 12/31/2024, and similar disclosures in subsequent SEC filings. The forward-looking statements and risks stated in this conference call are based on information available to PDF today. PDF assumes no obligation to update them.

Now I'd like to introduce John Kibarian, PDF's president and chief executive officer, and Adnan Raza, PDF's chief financial officer. Mister Kibarian? Please go ahead..

Thank you for joining us on today's call. If you've not already seen our earnings press release and management report for the first quarter, please go to the Investors section of our website where each has been posted.

As we enter 2025, we expected a customer environment where some would be recovering from a relatively weak 2024, while others would be continuing momentum into this year.

Given our strong products, which align well with the trends of 3D processing in advanced nodes, complex packaging and test flows, and increased use of AI to streamline operations, we anticipated growth of 21% to 23% for the year albeit with growth being lumpy quarter over quarter due to eProp sales model driving more variability in revenues.

Consistent with our expectations, the first quarter was a strong start to our year, with the second largest revenue quarter in our history topped only by Q4 of last year which benefited from an ePROB sale. Significant bookings in the quarter were primarily for enterprise-wide solutions.

Sapiens Manufacturing Hub Enterprise, which is designed to connect enterprise applications such as SAP MES, and engineering analytics, drove a meaningful percentage of bookings as a large customer moved from a pilot that began in 2024 to a contract for full deployment.

Exensio bookings were driven primarily by Fabless and OSATs, for offline analytics and test operations. The trend of more complex test flows and advanced packaging are strong drivers for this solution.

Symmetric's bookings were strong as equipment vendors utilized more runtime licenses as they increased shipments particularly of our more advanced tool control and communication modules. SecureWise, which closed late in the quarter, contributed less than one month of revenues.

Gainshare drove the IYR revenue growth as new fabs and process nodes under contract begin to deliver revenues. We expect IYR revenues to continue to improve during this year overall, based on this trend. With respect to DFI, we've previously talked about shipping at least four eProbes tools this year. With some of them contributing to revenue.

In the year. In fact, this past quarter, we shipped two tools, which is a great start to exceeding our goal of four system ship. We anticipate one of those ship systems has the potential to contribute incremental revenue growth this year.

Overall, demo, install, and engineering activity with customers is at a very high level, and we anticipate meeting or exceeding our goals for DFI this year. In the quarter, we also completed the acquisition of SecureWise. Now with just about two months of operating together, things are going well.

We have been meeting with equipment companies, fabless foundries, and OSATs, to discuss SecureWise and how we believe it fits into our overall platform. Based on these meetings, and our internal discussions, we are refining plans for integration with our platform.

In particular, customers see benefits of integrating SecureWise with our DEX nodes at the OSATs, as advanced packaging and test requires more collaboration between OSATs, fabless, foundries, and equipment vendors.

Customers also want to see tighter integration between Symmetrix and SecureWise, so equipment vendors can more easily collaborate, enable collaboration, and manage AIML systems in the field. Overall, it's a strong start to the year, both in terms of our traction with customers and our product development.

I'd like to make a few comments about our view on the industry and opportunities for our business going forward. Since April, tariffs have taken center stage. Semiconductors have been a focus of many governments all over the world for the last few years.

The industry leaders have become accustomed to adjusting to frequent shifts in the regulatory environment. So far, we have not seen any noteworthy change in customer behavior with us as a result of tariffs. Most of our software business, including SaaS, is generally not impacted by tariffs..

For the EProbe, tariffs could impact the cost of components shipped into the US..

However, at this point, we believe it will have only a modest impact on our financial results. Given our progress in Q1, and despite the macro uncertainty, we reconfirm our revenue growth estimate for the year to be in the range of 21% to 23% when compared with 2024.

I want to thank all the PDF customers, employees, and contractors for their efforts during the first quarter, including our new SecureWise colleagues. Now I'll turn the call over to Adnan, who will review the financials and provide his perspective on our results. All done..

Thank you, John. Good afternoon, everyone..

Good to speak with you again today, and I hope all of you and your families are well. We are pleased to review the financial results for the first quarter of 2025. As mentioned, our earnings release and a management report are posted in the Investor Relations section of our website. Our Form 10-Q was also filed with the SEC today.

Please note that all of the financial results we discuss in today's call are on a non-GAAP basis. And a reconciliation to GAAP financials is provided in the materials on our website. We are pleased with multiple important milestones achieved during the quarter. We announced and closed the $130 million acquisition of SecureWise.

And signed a large deal for Sapiens Manufacturing Hub enterprise platform with a new customer, as a result of our continued partnership with SAP. As John said, on the Exensio side, our bookings this quarter also came from many customers spread across multiple Exensio software modules. On the equipment side, Symmetric's products continue to be strong.

And we benefited from less than one month of SecureWise revenues as well. Our backlog ending this quarter was approximately $227 million, growing slightly compared to the prior quarter. Total revenues for the first quarter were $47.8 million, up 16% versus the same quarter of last year.

Analytics revenue came in at $42.5 million, an increase of 10% year over year, and was lower compared to the prior quarter mainly due to the eProbe sale in Q4. On a year-over-year basis, our Q1 IYR revenue was up meaningfully by 86% or $2.5 million, driven by the start of a new gainshare from a customer engagement we completed during the quarter.

Overall, when we think about our business over the last few years, we are pleased with the progress towards establishing us as the leading independent data analytics platform, optimized for the semiconductor industry. Our customer base is spread across three key areas of fabless, fab, equipment companies.

We serve these three customer groups with optimized solutions respectively, mapped to a product portfolio addressing existing nodes, leading-edge nodes, and connectivity software.

We have built our offerings on top of a robust, scalable, and secure analytics platform, specifically designed for the semiconductor industry, and are making the platform smarter with machine learning and AI offerings such as ML Ops.

Our gross margin for the first quarter came in at 77%, versus 72% in the prior quarter and 72% for the same quarter of last year, driven this quarter by increased strength in gainshare. Our cost of sales this quarter was also lower compared to the prior quarter wherein we sold an ePro machine.

Our operating margin for the first quarter came in at 18%, versus a similar 18% for the prior quarter and 12% for the same quarter a year ago. We are pleased that on a dollar basis, we generated $8.6 million of operating profit this quarter compared to $8.8 million in the prior quarter that had the benefit of the eProbe machine.

Compared to the last quarter, we grew our R&D slightly by 1%, and our SG&A by 6% this quarter with the increase in SG&A driven by increased sales and marketing from customer presales activities.

Net income for the quarter totaled $8.1 million, or 21¢ per share, compared to $5.7 million or 15¢ per share in the same quarter a year ago, or up approximately 40% for each of net income and EPS on a year-over-year basis.

Turning to the balance sheet, we ended the quarter with cash, cash equivalents, and short-term investments of $54 million, compared to $115 million at the end of the prior quarter, with the change primarily driven by approximately $61 million for the SecureWise acquisition, $8 million for CapEx, primarily for Eprobe machines, and offset by positive operating cash flow of $9 million for the quarter, even after the annual bonus payout which happens during Q1.

In terms of balance sheet changes to finance the SecureWise acquisition, besides the aforementioned approximately $61 million of cash from our balance sheet, we took on bank debt of approximately $70 million via a combination of a revolving credit facility and a term loan, both structured for a five-year term.

As we look to the rest of the year, we remain committed to our prior guidance of revenues for this year to grow in the range of 21% to 23%, on a year-over-year basis, which is ahead of our long-term growth rate target of 20% annual revenue growth. With that, let me turn the call over to the operator for Q&A.

Operator?.

Thank you, Mr. Raza. Ladies and gentlemen, if you have a question at this time, please press 11 on your telephone. If you are using a speakerphone, please lift your handset before asking a question. Our first question comes from the line of William Jellison of D. A. Davidson and Company. Please go ahead, William..

Great. Thanks for taking my question. It was great to see the overall revenue guidance maintained for the year. I was wondering if you could give some more detail as to the moving pieces potentially between IYR and analytics or even within analytics. Or if expectations are across the board pretty in line with where we last published them..

Sure. Thank you, Will. Yeah, overall, it's pretty in line with where we started the year. We do expect meaningful growth in IYR just because it was off a very small base and had been declining for the last couple of years, so a jump of a couple million dollars. Really on a percentage basis is a big deal.

But in terms of the total business, it's just under 10%. Overall analytics growth is a few things that are going on. In general, we do see increased effort from our customers on the advanced node capability. We do expect that to be growing this year from a booking standpoint, and that will be impacted also by eProbe sales.

And then on the analytics, like I said in my prepared remarks, it's more and more the customers on the enterprise side. So you know, the Sapiens Manufacturing Hub, larger deployments of Exensio, Exensio with the test and ML capability, and we will be announcing our user conference at the end of this year.

Some of that's gonna really just show how this is really all one integrated platform and more and more, you know, Sapiens Manufacturing Hub uses the Exensio database and the data schema. Common MLOps capability across the entire platform. So we'll start showing how these are really all just different components of the same platform.

And as Adnan said in his prepared remarks, we do target the fabless, the foundries, and equipment vendors, but they all more and more what each of them experience is different parts of that platform brought out to them for their applications.

And that enables the collaboration that we think the industry overall needs, which is where SecureWise and the things we're doing with DeX come into play.

Because they, you know, increasingly fabless companies need to know what equipment companies are doing, and collaboration across that entire supply chain is necessary, particularly with respect to complex packaging..

Thanks, John. And then, Adnan, in your prepared remarks, you mentioned the step up in sales and marketing expense, both in dollars and in percent of revenue, due to higher presales activity.

I'm wondering if you could give you or John could give any more detail about where you're putting that money to work and where you're expecting growth to come from those investments..

Yeah. I'll take the first answer at it, and, of course, John can add. Look, I mean, I think the beauty of the product portfolio that's becoming wider and wider for us is that we see continued engagement across a wide variety of product offerings with the customers. Right? It's not just the three themselves, but it's also cross-correlation.

Like John said, the equipment guys versus the fabless guys all wanting to exchange or know data from the other side as well. So, look, we're finding opportunities across the board, and, therefore, we have spent over the last few years on sales and marketing. And we'll continue to align it with the opportunities that we are seeing..

Yeah. A little bit on top of that just so I think, you know, with whether it's the eProbe or SMH, you know, Sapiens Manufacturing Hub, we've done a lot of R&D over these last couple of years. And now as evidenced by the large enterprise contract last quarter for Sapiens, the activity with the eProbe, activity with Exensio test and MLOps.

We've got a lot of ongoing pilots with customers. Some of which are starting to convert into bookings like the Summit and Enterprise last quarter. And that's where some of this, like the digestion of your previous year's R&D..

Great. Thank you both..

Thank you. Our next question comes from the line of Blair Abernethy of Rosenblatt Securities. Please go ahead, Blair..

Thanks. Nice quarter, guys.

I was just wondering if you can give us a little more color on the SecureWise integration plan, sort of from a technical standpoint, you know, vis a vis, what are sort of the what's the low hanging fruit, and what are you would you where do you kinda see this I guess, longer term particularly in light of, the Symmetrics product you have? And then also, from a go-to-market standpoint, where do you see sort of maybe some of the best potential revenue synergies or cross-selling opportunities with the new product line?.

Sure. Okay. So that's a great question. So first of all, as we met with customers, I would say number one, customers really love the security it provides. Adherence to the standards like the ISO standards and emerging standards in Europe. And the fact that it can operate around the world.

PDF has an even bigger footprint, a much bigger footprint in Taiwan, in Korea, in China, all around Asia than SecureWise did. So I think leveraging PDF's infrastructure in Asia is a value to the customers.

And combining PDF's attention to security, which is always, as you can imagine from a database and systems side because of the kinds of data customers store in our systems, and their ability to transit data and engineering activity around the world in a secure manner.

Putting those two things together is a big interest for the customers, number one on security. Number two, as I said in my prepared remarks, this was using SecureWise is used by the most sophisticated equipment companies in the world with the most challenging equipment bring up and production control, etcetera.

And the assembly world was always kind of like an afterthought in our industry. But as more and more process complexity is going in there, into assembly and advanced packaging, the equipment vendors see value in the SecureWise platform being out there.

Moreover, if you look at our engagement with these OSAT facilities, it's primarily on the test floor. For AIML models and rules at the test edge. But when we talk to our fabless customers, they would like to ship more than rules and data around. They would like engineers to be able to collaborate with their equipment and OSAT vendors.

Interactively with the engineering. Moreover, one of the applications SecureWise supports is when an equipment vendor wants to upgrade software on equipment tool, it can be done in a secure manner and the fab can run the proper virus checks and scans on it as it comes in.

You know, if you remember, six or seven years ago, there was a large foundry that had a huge problem where someone brought in on a memory stick. An upgrade to an equipment, a piece of equipment. I think it was a not sure. And caused a huge virus in the fab and took down an entire fab for a chunk of time.

Well, SecureWise can handle that very well in fabs. Now if you just think about the OSATs world, more and more your fabless customers wanna bring models AI models into your facility. You'd like those virus scanned and checked out, and SecureWise has that infrastructure as well.

So the first thing we did was demonstrate we could put SecureWise on a DEX network at an OSAT, and you could interact with it. This is something we'll expand on.

Technically, interaction of PDF's AI modeling, PDF connections to the tools, and SecureWise, myriad of ways of enabling communications and collaboration much richer than what we provided with DEX is always a big low hanging fruit that you described.

And then business-wise low hanging fruit obviously, additional equipment vendors get to the advanced packaging world where they all want to get connectivity. And then even we've had dialogue with customers within foundries and IDMs. Collaboration between the equipment teams.

Everyone's, especially in a world of the geopolitical situation, where everyone's standing up fabs all around the world. So a lot of our customers are needing to support fabs in many parts of the world. And equipment expertise whether it's at the equipment vendor or it's at the foundry or IDM, is scarce.

So you really wanna be able to have a secure way and engineer in one location also interrupt with the tool in a different location. And we are starting to have dialogues with customers around that as well. So overall, it's just a great fit with the, you know, the platform we're building out.

We do think with the trends of additional ML and AI it enables a number of security features that customers will really want. And I think we're very excited to see that we were bringing to our ML Ops capability..

That's great, John. Thanks for the explanation. That's really helpful.

And I just want to ask on the Sapient side of things, how is the pipeline building there? It's great to see a deal this quarter, but how is this kind of is it starting to pick up? I know you working with SAP for a couple of years on this, but just kinda wondering if you're starting to see a bit of a shift in adoption..

Yes. We do see additional do expect to close additional contracts this year. For SMH enterprise. And, you know, again, some of that new capability enables new workflows. And so we like to make sure we help the customers with new workflows and an AI workflow.

A big motivator for moving to something like this because the more accurate data from the facilities is important to enable better AI at the enterprise level.

So yeah, we do expect more business this year on SMH, and we do think that there's a growing set of ways that we can help customers get more value out of it, which will create, I think, incrementally beyond this year additional opportunities..

Great. Thanks very much..

Thank you. As a reminder, to ask a question, please press 11 on your telephone. Our next question comes from the line of Gus Richard of Northland Capital Markets. Your line is open, Gus..

Yes. Thanks for taking the question. John, you mentioned you shipped two DFI systems in the quarter. One, potential revenue was just wondering if you could provide a little bit of color on that.

Is that a new customer? Is that an existing customer? You know, is it Logic DRAM, you know, and the other system, you know, where any color on where that one went?.

Yeah. So these are both logic customers, both existing customers. And as I said, in the last call, we do anticipate shipping for DRAM applications as we get through this year, and we remain committed about that. We do see that opportunity as well.

And maybe this is we're going to take a digestion pause as we digest these machines and the other ones that we've stood up recently. But we do expect in the second half of the year to ship again and exceed our goals for the year..

Okay. And just out of curiosity on the hope to recognize some revenue. This is existing customers.

And, you know, and an additional tool, what you know, what's the hesitancy or what's the delay in rev rec?.

So one of them, you know, basically, new capability that we're demonstrating for the customer. It's a new configuration machine that does some new things..

Okay. Understand. And then you know, you were very popular at a recent event and made an appearance on stage.

And I'm just wondering you know, is that signaling you know, a strengthening of that relationship and perhaps an opportunity for additional DFI or other services at that customer or any sort of color around a potential opportunity?.

Yeah. It's very you may never really speculate on specific customers, Gus. I mean, we were very honored to be able to be on the stage and talk about our collaboration with them over the years. We hope to be able to extend that. And we think that there's a lot we can do together. Their road map is very interesting for a lot of our customers too.

But, you know, it would be speculative for me to kinda go on and say what that meant if other than it was just a nice opportunity to get up on stage..

Okay. I understand. And then last one for me. The analytics business, you know, grew 10% year on year. The growth rate appears to have slowed a bit.

And I'm just wondering you know, what are the challenges to picking up the growth rate of analytics?.

Yeah. It's a you know, overall, Gus, I think we've done a lot on R&D. It kind of comes to that sales and marketing spend that I think was maybe Blair that asked us about. New innovation takes a while to get digested. And so that's, I think, an effort for us. Things like our SMH product, it's quite a complex deployment.

Right? So that pilot we did last year was very small, right, on the order you know, of a couple million dollars. Right? And that just it takes a year, right, to then get to the point where they can go and say, This is useful. I think I'll make a more substantial booking and store and actually deploy.

So a lot of it for think as we as Exensio overall analytics platform becomes more and more enterprise-wide, system, do think that way we sell needs to evolve. We're spending more money to get better at that. Yeah. I don't I wouldn't give us an A. I don't think I'd give us a B yet. Yeah. I think we're still a C student. Yeah. But we'll work at it.

And try to become a better student at it. I still think our effort is as we get new technology out, do we get it to hands with customers and show it really works? And show them the value? To us, that's what's most critical. To drive growth..

Got it.

And then, Adnan, just with the acquisition, can you give us a little bit of color on how we should think about gross margin and OpEx going forward? What is the incremental spend and in which lines?.

Yeah. Absolutely. So, look, I mean, I think when we announced the acquisition as well, we've talked about how we expect the acquisition to be accretive to our earnings, so we still believe that. It should also be accretive to our operating margins as well.

Although there, you know, as you acquire the company, you also had some thoughts around the additional spend it might need given that it's a carve-out situation and it wasn't a fully functioning organization by itself. So there are pieces of spend that we would add to this.

I would say, overall, think of us as a combined company still marching towards our long-term gross margin targets and the operating margin targets that we had set, like, what's in the fall of 2023. What we need to see is do we get all the way there, or are we just under? So that's the path that we will continue to study as the year goes on.

But overall, very pleased with the acquisition. And the results that we're seeing already, like John said, at the two months of working together and the one less than one month of results that are incorporated into our numbers..

Okay. That's it for me. Thanks so much..

Thanks, Gus. Our next question comes from the line of Christian Schwab of Craig Hallum Capital. Please go ahead, Christian..

Thanks. So, guys, you know, it's good to see that, you know, previous announced partnerships such as SAP has led to contracts you know, in hand. Could you give us an update you know, if numerous partnerships and then thinking of Advantest in particular.

Is there is there any other, you know, pilots that have been ongoing that we should revenue over the next year? anticipate could turn into contract.

Sure. Yeah. You're right about we have a number of other partnerships. With respect to Advantest, we have ongoing revenue from the Advantest engagement that includes both mutual selling, joint selling at customers where customers use our product integrated with you know, so it works with some of their hardware.

Enabling more dynamic testing, more model-based testing. And they also are a customer of using our systems on-premise. We anticipate that relationship continuing and pieces of it will grow over time. Some of it will there's some of it will not grow. Some of it will stay relatively constant. Some may shrink a little bit.

But overall, we expect to have a relationship with Advantest on an ongoing basis. There's numerous other ones, but that's Siemens or IBM. Most of them were involved with some joint selling. A lot of times, it's we show how our works with their stuff. We sell our stuff. They sell their stuff. That's like in the case of SAP.

Even, you know, most of the work we do with Advantest is like that as well. So, you know, I would say, overall, we've learned a lot about how to run partnerships. Effectively. We still believe in the activity of integrating our solution with theirs. We think customers want that.

A lot of times, we will do the selling of our solution you know, our part of the solution on our own. Like we do with this with SAP. As it's you know, we're better able to speak to its specific value and, in effect, you know, capture the opportunity that's there working in collaboration with them..

Great. No other questions. Thanks, guys..

Thanks, Christian..

Thank you..

Our next question comes from the line of William Jellison of D. A. Davidson and Company. Please go ahead, William..

Thanks for taking the follow-up question. I wanted to ask, you know, John, at the very beginning of the call, you mentioned how this year started with some of the industry who was relatively soft last year, hoping for better performance this year. You mentioned in your in the Q&A that advanced nodes would likely remain strong. This year as well.

With that in mind, you know, I'm curious how you think about your trailing edge customers and where they sit right now and your perspective on their relative strength or perhaps still waiting for their recovery?.

Yeah. I mean, what I've noticed about the customers that are I refer to mostly as the merchant semiconductor customers. They're some of the most aggressive at reforming their business operations. Driving more AI in the way they operate, trying to get more productive on the way they respond to the market.

So the SAP activity, the ML Ops opportunity, some of the things we're doing on the enterprise-wide Exensio database capability. We find a lot of interest from the customers in that part of the world.

I think in part because our industry is as I said in my prepared remarks, we've always been very good at dealing with an uncertain environment, whether that was due to just supply and demand, or regulatory issues or otherwise. And they want to get to a higher degree of nimbleness or flexibility.

And so I think that some of what PDF can offer is a value to that customer base right now. For our leading-edge customers, the train for nanometer or 1.4 nanometer or the one x or the one y layer DRAM, that train leaves no matter what. So they need to either be on that train or not on that train.

And that always is an impetus for customers making a decision fast for the stuff on the leading edge. When it comes to enterprise-wide, business process evolution, obviously, always take an extra quarter for them to make a decision to some extent. There's always timing issues there are harder to predict.

But I think for that merchant customer, really, nimbleness is the name of the game. They're all looking to achieve more of it. We hope to help them with that and what we're bringing our enterprise-wide solutions. You know, that's kind of what we see in the space right now..

Great. Thanks, Tom..

Thank you. Our next question is a follow-up from Blair Abernethy of Rosenblatt Securities. Please go ahead, Blair..

Thanks. So just to I don't know. Just a quick question on capital allocation. And so you've taken on $139 million in debt. You haven't bought any back any shares. This year..

Blair, are you still there? You're very faint?.

Sorry.

Can you hear me? Is that better?.

Perfect. Yeah. Okay. Just in terms of capital allocation, how should we think about over the next couple of years, your prioritization vis a vis debt reduction, share buyback, and so forth, given that you should be cash flowing fairly strongly..

Yeah. Good. Well, first of all, thanks for that confidence. In the last part of your question. And yes, we certainly believe so as well, particularly with the businesses. We said in our prepared remarks and John said in the Q&A answers as well that the business is starting to show diversity now finally for the Gainshare side as well.

So, look, I mean, that is a necessity when we were looking at the acquisitions that have been put in place. Obviously, with John and Kim in as the founders of the company, you've seen us not carry any debt. So our objective high up on the list is going to remain how fast and how soon can we, you know, start to pay off that debt.

That said, when the opportunities arise, are we gonna look at buybacks? Yes. We absolutely will as well. But at the same time, it's gonna be the balance of how much min cash we wanna carry on the balance sheet. So I would think of it as debt and then coupled with some buyback.

Obviously, the last couple of quarters, as you can imagine, with the announcement of the deal, it puts you in a situation where you can't really go and buy in the market and then a few years ago, you saw us buy back larger chunks of shares. When the large blocks become available.

So we'll remain opportunistic and balance it with the desire number one of reducing the debt amount as well as then when the opportunities arise to buy back the stock..

Okay. Great. And just one other one, if I could, on SecureWise.

Adnan, what's the gross margin profile look like, of that business? And is it mostly a subscription revenue base or a maintenance base? What does that side look like?.

Yeah. Great question. So I'll answer in the flip order just to put the context around it. So the business is highly recurring. In fact, nearly all recurring. And it's got multiple pieces of it that constitute to the recurring nature.

So as we have explained the business at the time when we did the acquisition, as John has also explained it today, is obviously a license component that the end customers will pay to have access to the secure system. That's one. Second, you also get an opportunity for some of the contracts to build them on the data usage that's flowing to the system.

Both of those together along with other pieces tend to make this business a highly recurring nature business. In terms of gross margin, look. That was one of the attractive things for us. We don't break it out separately, but let me just say it is accretive. To our gross margin.

So over the long term, particularly balanced with some of the spend that we alluded to earlier that we do need to make because it's a carve-out situation. We, net net, still expect to be a positive for us for the year.

And hence, our earlier comments as well that we remain committed to know, our target margin model that we had set of gross margin of 75% and 20% operating margin in the long term. I mean, back to the question that I think Will had asked also on the increased spend on sales and marketing. Look. Yes.

We will optimize the spend and sometimes increase sometimes decrease it. But rest assured, we remain committed to making sure to solve for the 75% gross and 20% operating margin as our North Star..

Great. Thanks very much..

Thank you..

And at this time, there are no more questions. Ladies and gentlemen, this concludes the program. Thank you for joining us on today's call..