Silvaco Group, Inc.

Previous wording

The following discussion should be read together with our audited consolidated financial statements and notes thereto and related Management’s Discussion and Analysis of Financial Condition and Results of Operations set forth in our final prospectus relating to the initial public offering, dated May 8, 2024 (the “Prospectus”), relating to the Registration Statement on Form S-1 (File No. 333-278666), as amended (“Registration Statement”), filed with the SEC on May 10, 2024, pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended (“Securities Act”). This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks, uncertainties and assumptions set forth in our Registration Statement. Our actual results could differ materially from those discussed in or implied by these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this Quarterly Report on Form 10-Q titled “Risk Factors.” Forward-looking statements may be identified by words including, but not limited to, “may,” “will,” “could,” “would,” “can,” “should,” “anticipate,” “expect,” “intend,” “believe,” “estimate,” “project,” “continue,” “forecast,” "likely," "potential," "seek," or the negatives of such terms and similar expressions. The information included herein represents our estimates and assumptions as of the date of this filing. Unless required by law, we undertake no obligation to update publicly any forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

Current wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included under Part I, Item 1 in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and the related notes and the discussion under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for the fiscal year ended December 31, 2024 included in the 2024 Form 10-K. This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks, uncertainties and assumptions set forth in our 2024 Form 10-K. Our actual results could differ materially from those discussed in or implied by these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this Quarterly Report on Form 10-Q titled “Risk Factors.” Forward-looking statements may be identified by words including, but not limited to, “may,” “will,” “could,” “would,” “can,” “should,” “anticipate,” “expect,” “intend,” “believe,” “estimate,” “project,” “continue,” “forecast,” "likely," "potential," "seek," or the negatives of such terms and similar expressions. The information included herein represents our estimates and assumptions as of the date of this filing. Unless required by law, we undertake no obligation to update publicly any forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

Previous wording

Our go-to-market strategy centers on selling software solutions and associated maintenance and services. Our software solutions accounted for 62% and 72% of our revenue for the three and nine months ended September 30, 2024, respectively, and 74% and 73% of our revenue for the three and nine months ended September 30, 2023, respectively. Associated maintenance and services revenue accounted for 38% and 28% of our revenue for the three and nine months ended September 30, 2024, respectively, and 26% and 27% of our revenue for the three and nine months ended September 30, 2023, respectively. For the three and nine months ended September 30, 2024, approximately 88% and 90% of our bookings came from existing customers, respectively, and the remainder of our bookings came from new customers. For the three and nine months ended September 30, 2023, approximately 85% and 80% of our bookings came from existing customers, respectively, and the remainder came from new customers.

Current wording

Our go-to-market strategy centers on selling software solutions and associated maintenance and services. Our software solutions accounted for 71% and 77% of our revenue for the three months ended March 31, 2025 and 2024, respectively. Associated maintenance and services revenue accounted for 29% and 23% of our revenue for the three months ended March 31, 2025 and 2024, respectively. For the three months ended March 31, 2025 and 2024, approximately 76% and 88% of our bookings came from existing customers, respectively, and the remainder came from new customers. See “Key Operating Indicators and Non-GAAP Financial Measures—Bookings” for a description of how we define bookings.

Previous wording

Similar to trends observed across the semiconductor industry, we saw a decline in orders from Asia during the three months ended September 30, 2024 primarily driven by economic challenges and the ongoing strain in U.S.-China trade relations. During the three and nine months ended September 30, 2024, our bookings were $9.9 million and $45.5 million, respectively, as compared to $12.5 million and $42.5 million for the three and nine months ended September 30, 2023. Our revenue was $11.0 million and $41.8 million for the three and nine months ended September 30, 2024, respectively, as compared to $14.9 million and $41.8 million for the three and nine months ended September 30, 2023, respectively.

Current wording

Similar to trends observed across the semiconductor industry, we saw a decline in orders from Asia during the three months ended March 31, 2025 primarily driven by economic challenges and the ongoing strain in U.S.-China trade relations. During the three months ended March 31, 2025, our bookings were $13.7 million as compared to $16.1 million for the three months ended March 31, 2024. Our revenue was $14.1 million for the three months ended March 31, 2025, as compared to $15.9 million for the three months ended March 31, 2024.

Previous wording

We believe that the growth of our business and our future success are dependent upon many factors including those described above in “Part II, Item 1A. Risk Factors” and elsewhere in this quarterly report and those described below. While each of these factors presents significant opportunities for us, these factors also pose challenges that we must successfully address to sustain the growth of our business and enhance our results of operations. The growth of our business and our future success are also subject to uncertainties and risks as described in Part II, Item 1.A., Risk Factors of this Quarterly Report on Form 10-Q.

Current wording

We believe that the growth of our business and our future success are dependent upon many factors including those described above and elsewhere in this quarterly report and those described below. While the factors set forth below present significant opportunities for us, these factors also pose challenges that we must successfully address to sustain the growth of our business and enhance our results of operations. The growth of our business and our future success are also subject to uncertainties and risks as described in Part II, Item 1.A., Risk Factors of this Quarterly Report on Form 10-Q.

Previous wording

To meet the increasing complexity of semiconductor designs, the introduction of new advanced materials, and the increased costs associated with more advanced semiconductor technology nodes, we will need to continually enhance our product offerings through our own in-house research and development efforts, acquisitions, or strategic partnerships with third parties. The in-house development of new product offerings or enhancements to our existing product offerings requires significant research and development activities and time and may or may not result in offerings we can successfully market and sell to customers. For example, we have developed an artificial intelligence, or AI, -based solution named fab technology co-optimization or FTCOTM for wafer level fabrication facilities. FTCO utilizes manufacturing data to perform statistical and physics-based machine learning software simulations to create a computer model of a wafer, which we call the “digital twin” of the wafer, in order to simulate the fabrication of wafers. We may also seek to acquire companies or assets for products or solutions which we believe are complementary to our existing products or solutions. Additionally, we currently, and have in the past, and may in the future, partner with third parties to expand our product offerings to our customers. If in the future, we enter into additional licensing agreements with other third parties and are unable to extend the term of those licensing arrangements, we will experience an associated decline in revenue relating to those products.

Current wording

To meet the increasing complexity of semiconductor designs, the introduction of new advanced materials, and the increased costs associated with more advanced semiconductor technology nodes, we will need to continually enhance our product offerings through our own in-house research and development efforts, acquisitions, or strategic partnerships with third parties. The in-house development of new product offerings or enhancements to our existing product offerings requires significant research and development activities and time and may or may not result in offerings we can successfully market and sell to customers. For example, we have developed an artificial intelligence (“AI”), -based solution named fab technology co-optimization or FTCOTM for wafer level fabrication facilities. FTCO utilizes manufacturing data to perform statistical and physics-based machine learning software simulations to create a computer model of a wafer, which we call the “digital twin” of the wafer, in order to simulate the fabrication of wafers. We may also seek to acquire companies or assets for products or solutions which we believe are complementary to our existing products or solutions. Additionally, we currently, and have in the past, and may in the future, partner with third parties to expand our product offerings to our customers. If in the future, we enter into additional licensing agreements with other third parties and are unable to extend the term of those licensing arrangements, we will experience an associated decline in revenue relating to those products.

Previous wording

According to Grand View Research, the global EDA software market was valued at $11.1 billion in 2022 and is forecasted to reach $22.2 billion in potential revenue in 2030, representing a 9% CAGR, driven in part by the growth in the integrated circuits and electronics manufacturing markets, growing complexity of semiconductor and photonics designs and increasing challenges associated with advanced materials and shrinking process technology nodes across the EDA market. We believe these trends will increase the demand for our software solutions over time, which will have a direct impact on our future revenues and results of operations. In response to this increase in complexity and new challenges facing designers, we have increased investments in our research and development for new software product offerings. For example, our research and development expense was 38% and 37% of revenue for the three and nine months ended September 30, 2024, respectively, and 22% and 24% of revenue for the three and nine months ended September 30, 2023, respectively. We plan to continue to invest in our software solutions to establish and expand a leadership position in our target markets. We also plan to use our research and development efforts to continue to cater to strategic customer needs.

Current wording

We believe that trends in the global EDA software market, including growth in the integrated circuits and electronics manufacturing markets, growing complexity of semiconductor and photonics designs, and increasing challenges associated with advanced materials and shrinking process technology nodes across the EDA market, will increase the demand for our software solutions over time, which will have a direct impact on our future revenues and results of operations. In response to this increase in complexity and new challenges facing designers, we have increased investments in our research and development for new software product offerings. For example, our research and development expense was 34% and 23% of revenue for the three months ended March 31, 2025 and 2024, respectively. We plan to continue to invest in our software solutions to establish and expand a leadership position in our target markets. We also plan to use our research and development efforts to continue to cater to strategic customer needs.

Previous wording

If we can execute on our growth strategy and grow our revenue through a combination of new customer growth, upgrades and increased usage of our products by existing customers, as well as accretive acquisitions, our results will be impacted by our ability to reduce the rate at which our expenses increase in proportion with a rise in revenue. We believe this is possible in a number of expense line items, which may provide for additional gross margin and operating margin expansion. For example, we anticipate as our existing customers choose to upgrade to newer software solutions, our costs related to the support of legacy software decreases, outpacing any increases in cost related to supporting the upgraded software. Additionally, we have incurred increased general and administrative expenses in connection with preparing to become a public company, including increased staff costs and professional services fees, including legal and accounting fees. While we anticipate the increased level of costs to remain, we do not anticipate those costs scaling proportionally with our revenue. Finally, we may be able to gain sales efficiencies as our revenue grows, such that our sales and marketing expenses will decrease as a percentage of revenue. In the aggregate, our ability to keep these expenses from growing proportionally with our revenue may provide for meaningful gross margin and operating margin expansion.

Current wording

If we can execute on our growth strategy and grow our revenue through a combination of new customer growth, upgrades and increased usage of our products by existing customers, as well as accretive acquisitions, our results will be impacted by our ability to reduce the rate at which our expenses increase in proportion with a rise in revenue. We believe this is possible in a number of expense line items, which may provide for additional gross margin and operating margin expansion. For example, we anticipate as our existing customers choose to upgrade to newer software solutions, our costs related to the support of legacy software decreases, outpacing any increases in cost related to supporting the upgraded software. Additionally, we have incurred increased general and administrative expenses in connection with preparing to become a public company, including increased staff costs and professional services fees, including legal and accounting fees. We have also incurred a significant increase in stock-based compensation expense. While we anticipate the increased level of costs to remain, we do not anticipate those costs scaling proportionally with our revenue. Finally, we may be able to gain sales efficiencies as our revenue grows, such that our sales and marketing expenses will decrease as a percentage of revenue. In the aggregate, our ability to keep these expenses from growing proportionally with our revenue may provide for meaningful gross margin and operating margin expansion.

Previous wording

Revenue from our software licenses is classified as software license revenue. Software license revenue is recognized upfront upon delivery of the licensed product. We also offer licenses of our standard SIP developed in house, and we offer licenses developed in partnership with NXP (the “NXP IP”). Our SIP licenses provide customers with access to SoC design SIP which meet established industry standards, thus saving customers the time and resources required to develop similar design methodologies. Our standard SIPs are generally ready to use upon delivery, meaning no customization is required for our customers to obtain value from the use of our SIP in their IC designs. We recognize revenue associated with licenses of our SIP at the commencement of the contract upon delivery of the licensed SIP. With respect to the NXP IP, we generally act as a principal to the transaction because we have a license to sell, and therefore control the NXP IP that we deliver to the customer. Consistent with our role as the principal, we recognize SIP revenue of the NXP IP on a gross basis. Any royalty fees based upon unit sales, revenue or flat fees which were paid to NXP were reported in cost of revenue upon delivery pursuant to the terms and conditions of our contractual obligations with the customers.

Current wording

Revenue from our software licenses is classified as software license revenue. Software license revenue is recognized upfront upon delivery of the licensed product. We also offer licenses of our standard SIP developed in house, and we offer licenses developed in partnership with NXP Semiconductors Netherlands B.V. (“NXP”) (the “NXP IP”). Our SIP licenses provide customers with access to SoC design SIP which meet established industry standards, thus saving customers the time and resources required to develop similar design methodologies. Our standard SIPs are generally ready to use upon delivery, meaning no customization is required for our customers to obtain value from the use of our SIP in their IC designs. We recognize revenue associated with licenses of our SIP at the commencement of the contract upon delivery of the licensed SIP. With respect to the NXP IP, we generally act as a principal to the transaction because we have a license to sell, and therefore control the NXP IP that we deliver to the customer. Consistent with our role as the principal, we recognize SIP revenue of the NXP IP on a gross basis. Any royalty fees based upon unit sales, revenue or flat fees which were paid to NXP were reported in cost of revenue upon delivery pursuant to the terms and conditions of our contractual obligations with the customers.

Previous wording

Typically, our software solutions are sold with post-contract support, or PCS, which includes unspecified technical enhancements and customer support. PCS is classified as maintenance and service revenue and is recognized ratably over the term of the contract, as we satisfy the PCS performance obligation over time.

Current wording

Typically, our software solutions are sold with post-contract support (“PCS”), which includes unspecified technical enhancements and customer support. PCS is classified as maintenance and service revenue and is recognized ratably over the term of the contract, as we satisfy the PCS performance obligation over time.

Previous wording

We also recognized an immaterial portion of our revenue from device characterization and modeling services for the three and nine months ended September 30, 2024 and 2023. Revenue is recognized upon the completion of the requested services and, as applicable, satisfaction of customer acceptance terms. Revenue from these services is classified as maintenance and service revenue.

Current wording

We also recognized an immaterial portion of our revenue from device characterization and modeling services for the three months ended March 31, 2025 and 2024. Revenue is recognized upon the completion of the requested services and, as applicable, satisfaction of customer acceptance terms. Revenue from these services is classified as maintenance and service revenue.

Previous wording

Cost of revenue consists of personnel costs comprised of salaries and benefits for employees directly involved in our customer support function, such as customer support engineering salary and benefits, costs of our other customer services, allocation of overhead and facility costs and royalties related to the recognized revenue. We recognized $0.3 million and $2.8 million of stock-based compensation expense in cost of revenue during the three and nine months ended September 30, 2024, respectively. Gross profit represents revenue less cost of revenue.

Current wording

Cost of revenue consists of personnel costs comprised of salaries and benefits for employees directly involved in our customer support function, such as customer support engineering salary and benefits, costs of our other customer services, allocation of overhead and facility costs, amortization of acquired intangible assets, and royalties related to the recognized revenue. We recognized $0.2 million of stock-based compensation expense in cost of revenue during the three months ended March 31, 2025. We also recognized $0.2 million of amortization associated with our acquired intangible assets in cost of revenue during the three months ended March 31, 2025. Gross profit represents revenue less cost of revenue.

Previous wording

Our operating expenses consist of research and development, selling and marketing, general and administrative expenses, and estimated litigation claim. Related personnel costs are the most significant component of our operating expenses and consist of salaries, benefits, stock-based compensation expense, bonuses and commissions. Our operating expenses also include consulting costs, costs of facilities, information technology, depreciation and amortization. We expect our operating expenses to fluctuate as a percentage of revenue over time. Historically, we have not recognized stock-based compensation expense, but after the consummation of the IPO, we recognized an aggregate of $2.6 million and $24.4 million of stock-based compensation expense during the three and nine months ended September 30, 2024, respectively. Of the aggregate stock-based compensation expense recorded, we recognized $1.4 million, $0.5 million, and $0.4 million in general and administrative expense, research and development expense, and selling and marketing expense, respectively, during the three months ended September 30, 2024, and $13.1 million, $4.6 million, and $3.9 million in general and administrative expense, research and development expense, and selling and marketing expense, respectively, during the nine months ended September 30, 2024.

Current wording

Our operating expenses consist of research and development, selling and marketing, general and administrative expenses, and estimated litigation claim. Related personnel costs are the most significant component of our operating expenses and consist of salaries, benefits, stock-based compensation expense, bonuses and commissions. Our operating expenses also include consulting costs, costs of facilities, information technology, depreciation and amortization. We expect our operating expenses to fluctuate as a percentage of revenue over time. During the three months ended March 31, 2025, we recognized $2.1 million in total stock-based compensation expense. Of the total stock-based compensation expense recorded, we recognized approximately $1.5 million, $0.2 million, and $0.3 million in general and administrative expense, research and development expense, and selling and marketing expense, respectively, during the three months ended March 31, 2025.

Previous wording

Estimated litigation claim expense consists of legal costs that became probable and reasonably estimable associated with our obligations with respect to the earnout payment due to the selling shareholders of Nangate, Inc. (“Nangate”), along with a third cross complainant (collectively, the “Nangate Parties”). On July 23, 2024, a jury awarded the Nangate Parties $11.3 million in damages under breach of contract related claims, including breach of contract and breach of convenant of good faith and fair dealing, along with the potential for an award of statutory pre-judgment interest, and court and litigation related costs and certain expert expenses subject to the Nangate Parties establishing the legal right to them and to be determined by the court (the “Contract Damages”). The jury also awarded damages for certain of the fraudulent and negligent misrepresentation claims of $6.6 million to the Nangate Parties and incremental punitive damages, including $17.0 million payable by the Company (the “Fraud Damages”). The Nangate Parties will have the option to choose either the Contract Damages or the Fraud Damages, but in no circumstances will the Nangate Parties receive both remedies. We recorded a charge to estimated litigation claim and accrued expenses and other current liabilities of $0.4 million and $15.1 million during the three and nine months ended September 30, 2024, respectively. See Note 10 of our condensed consolidated financial statements for further discussion.

Current wording

Estimated litigation claim expense consists of legal costs that became probable and reasonably estimable associated with our obligations with respect to the earnout payment due to the selling shareholders of Nangate, Inc. (“Nangate”), along with a third cross complainant (collectively, the “Nangate Parties”). On July 23, 2024, a jury awarded the Nangate Parties $11.3 million in damages under breach of contract related claims, including breach of contract and breach of the covenant of good faith and fair dealing, and court and litigation related costs and certain expert expenses subject to the Nangate Parties establishing the legal right to them and to be determined by the court (the “Contract Damages”). As a result, during the year ended December 31, 2024, we recorded a charge to estimated litigation claim and accrued expenses and other current liabilities of $11.3 million for the Contract Damages awarded to the Nangate Parties. The jury also found Silvaco and our board of directors (the “Co-Defendants”) liable for certain of the fraudulent and negligent misrepresentation claims and awarded the Nangate Parties $6.6 million. Incremental punitive damages relating to these claims, including $17.0 million payable by Silvaco and a total of $16.0 million to be paid by the Co-Defendants, were awarded following a hearing on August 16, 2024 (collectively, the “Fraud Damages”). The Nangate Parties have the option to choose either the Contract Damages or the Fraud Damages, but in no circumstances will the Nangate Parties receive both remedies.

Previous wording

Interest income includes interest income earned on our cash and marketable securities balances and accretion of the purchase discounts on our marketable securities balances.

Current wording

Interest income includes interest income earned on our cash and cash equivalents and marketable securities balances and accretion of the purchase discounts on our marketable securities balances.

Previous wording

Interest and other (expense) income, net includes interest expense associated with the cost of borrowings, leases or interest-bearing agreements, foreign exchange gains and losses and changes in the fair value of contingent consideration associated with legacy acquisitions.

Current wording

Interest and other expense, net includes interest expense associated with cost of borrowings, leases or interest-bearing agreements, foreign exchange gains and losses and changes in the fair value of contingent consideration associated with legacy acquisitions.

Previous wording

The following table sets forth our results of operations for the three and nine months ended September 30, 2024 and 2023:

Current wording

The following table sets forth our results of operations for the three months ended March 31, 2025 and 2024:

Previous wording

The following table summarizes our results of operations as a percentage of total revenue for the three and nine months ended September 30, 2024 and 2023:

Current wording

The following table summarizes our results of operations as a percentage of total revenue for the three months ended March 31, 2025 and 2024:

Previous wording

Comparison of the Three and Nine Months Ended September 30, 2024 and 2023

Current wording

Comparison of the Three Months Ended March 31, 2025 and 2024

Previous wording

Total revenue decreased by $3.9 million, or 27%, to $11.0 million for the three months ended September 30, 2024 from $14.9 million for the three months ended September 30, 2023. The decrease in total revenue for thethree months ended September 30, 2024 is primarily due to the economic challenges in Asia and the ongoing strain in U.S.-China trade relations. Revenue associated with our TCAD and EDA tools decreased $1.4 million and $1.9 million, respectively, and revenue derived from IP sales decreased $0.6 million. Software license revenue decreased by $4.3 million, or 38%, to $6.8 million for the three months ended September 30, 2024 from $11.1 million for the three months ended September 30, 2023. Maintenance and service revenue increased by $0.2 million, or 7%, to $4.1 million for the three months ended September 30, 2024 from $3.9 million for the three months ended September 30, 2023.

Current wording

Total revenue decreased by $1.8 million, or 11%, to $14.1 million for the three months ended March 31, 2025 from $15.9 million for the three months ended March 31, 2024. The decrease in total revenue for thethree months ended March 31, 2025 is primarily due to softening demand in the Americas, economic challenges in Asia, and the ongoing strain in U.S.-China trade relations. Revenue associated with our TCAD tools decreased by $2.7 million. This decrease was partially offset by revenue derived from our EDA tools and IP sales which increased by $0.4 million and $0.5 million, respectively. Software license revenue decreased by $2.2 million, or 18%, to $10.0 million for the three months ended March 31, 2025 from $12.3 million for the three months ended March 31, 2024. Maintenance and service revenue increased by $0.5 million, or 12%, to $4.1 million for the three months ended March 31, 2025 from $3.6 million for the three months ended March 31, 2024.

Previous wording

Gross profit decreased by $4.5 million, or 35%, to $8.2 million for the three months ended September 30, 2024 from $12.7 million for the three months ended September 30, 2023, primarily due to a decline in orders from Asia. Gross profit margin decreased to 75% for the three months ended September 30, 2024 from 85% for the three months ended September 30, 2023. The decrease was also attributable to$0.3 million in non-cash stock-based compensation expense associated with cost of goods sold and$0.3 million of non-cash amortization associated with our licensed IP.

Current wording

Gross profit decreased by $2.8 million, or 20%, to $11.1 million for the three months ended March 31, 2025 from $13.9 million for the three months ended March 31, 2024, primarily due to a decline in orders from Asia and the Americas. Gross profit margin decreased to 79% for the three months ended March 31, 2025 from 88% for the three months ended March 31, 2024. The decrease was also attributable to$0.3 million of non-cash amortization associated with our acquired intangible assets, $0.2 million of stock-based compensation expense, and an increase in our allocation of labor time and effort dedicated to cost of sales.

Previous wording

Research and development expenses were $4.1 million and $3.3 million for the three months ended September 30, 2024 and 2023, respectively. The increase of $0.8 million, or 26%, was primarily due to $0.5 million of stock-based compensation expense recorded during the three months ended September 30, 2024, and a $0.3 million increase in software maintenance expense.

Current wording

Research and development expenses were $4.8 million and $3.6 million for the three months ended March 31, 2025 and 2024, respectively. The increase of $1.2 million, or 33%, was primarily due to a $0.6 million increase in employee compensation and benefits due to increased headcount, merit increases, and payroll tax, a $0.3 million increase in software maintenance expense and $0.2 million of stock-based compensation expense recorded during the three months ended March 31, 2025.

Previous wording

Income tax provision was$0.2 million and$0.3 million for the three months ended September 30, 2024 and 2023, respectively, and$1.2 million and$0.6 million for the nine months ended September 30, 2024 and 2023, respectively. See Note 8 of ourcondensed consolidated financial statements for further discussion.

Current wording

Income tax provision was $0.2 million and $0.8 million for the three months ended March 31, 2025 and 2024, respectively. See Note 9 of our condensed consolidated financial statements for further discussion.

Previous wording

We define a booking as a signed contract and related purchase commitment from a customer, based on the value set forth in a purchase order. We believe bookings are a useful metric to measure the success of customer sales and provide an indication of trends in our operating results that are not necessarily reflected in our revenue, because we recognize revenues on the later satisfaction of the obligations to our customers, and not at the time of sale to a customer. Reported bookings may be subject to adjustments and potential cancellations prior to the satisfaction of the obligations to our customers. For the three and nine months ended September 30, 2024, we recorded $9.9 million and $45.5 million in bookings, respectively, as compared to $12.5 million and $42.5 million in bookings for the three and nine months ended September 30, 2023, respectively.

Current wording

We define a booking as a signed contract and related purchase commitment from a customer, based on the value set forth in a purchase order. We believe bookings are a useful metric to measure the success of customer sales and provide an indication of trends in our operating results that are not necessarily reflected in our revenue, because our revenue recognition is based on the satisfaction of our customer obligations, and not of the successful execution of a booking at the time of sale. Reported bookings may be subject to adjustments and potential cancellations prior to the satisfaction of our customer obligations. For the three months ended March 31, 2025, we recorded $13.7 million in bookings as compared to $16.1 million in bookings for the three months ended March 31, 2024.

Previous wording

We report our financial results in accordance with GAAP. However, our management believes that non-GAAP operating income and non-GAAP net income provide investors with additional useful information in evaluating our performance. These financial measures are not required by or presented in accordance with GAAP. We believe, however, that these non-GAAP financial measures, when taken together with our financial results presented in accordance with GAAP, provide meaningful supplemental information regarding our operating performance and facilitate internal comparisons of our historical operating performance on a more consistent basis by excluding certain items that may not be indicative of our business, results of operations or outlook and provide a useful measure for period-to-period comparisons of our business performance.

Current wording

We report our financial results in accordance with GAAP. However, our management believes that non-GAAP operating (loss) income and non-GAAP net (loss) income provide investors with additional useful information in evaluating our performance. These financial measures are not required by or presented in accordance with GAAP. We believe, however, that these non-GAAP financial measures, when taken together with our financial results presented in accordance with GAAP, provide meaningful supplemental information regarding our operating performance and facilitate internal comparisons of our historical operating performance on a more consistent basis by excluding certain items that may not be indicative of our business, results of operations or outlook and provide a useful measure for period-to-period comparisons of our business performance.

Previous wording

We define non-GAAP operating income (loss) as our GAAP operating income (loss) adjusted to exclude certain costs, including certain transaction-related costs, IPO preparation costs, acquisition-related estimated litigation claim and legal costs, stock-based compensation expense, amortization of acquired intangible assets, impairment charges, and executive severance costs. We define non-GAAP net income (loss) as our GAAP net income (loss) adjusted to exclude certain costs, including certain transaction-related costs, IPO preparation costs, acquisition-related estimated litigation claim and legal costs, stock-based compensation expense, amortization of acquired intangible assets, impairment charges, executive severance costs, change in fair value of contingent consideration, foreign exchange (gain) loss, loss on debt extinguishment, and the income tax effect on non-GAAP items. We monitor non-GAAP operating income (loss) and non-GAAP net income (loss) as non-GAAP financial measures to supplement the financial information we present in accordance with GAAP to provide investors with additional information regarding our financial results.

Current wording

We define non-GAAP operating income as our GAAP operating (loss) income adjusted to exclude certain costs, including initial public offering (“IPO”) preparation costs, acquisition-related estimated litigation claim and legal costs, acquisition-related professional fees and retention bonus, stock-based compensation expense, and amortization of acquired intangible assets. We define non-GAAP net (loss) income as our GAAP net (loss) income adjusted to exclude certain costs, including IPO preparation costs, acquisition-related estimated litigation claim and legal costs, acquisition-related professional fees and retention bonus, stock-based compensation expense, amortization of acquired intangible assets, change in fair value of contingent consideration, foreign exchange (gain) loss, and the income tax effect on non-GAAP items. We monitor non-GAAP operating (loss) income and non-GAAP net (loss) income as non-GAAP financial measures to supplement the financial information we present in accordance with GAAP to provide investors with additional information regarding our financial results.

Previous wording

Certain items are excluded from our non-GAAP operating income (loss) and non-GAAP net income (loss) because these items are non-cash in nature or management believes they are not indicative of our core operating performance and render comparisons with prior periods and competitors less meaningful. We adjust GAAP operating income (loss) and net income (loss) for these items to arrive at non-GAAP operating income (loss) and non-GAAP net income (loss) because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structure and the method by which the assets were acquired. By excluding items that may not be indicative of our recurring core operating results, we believe that non-GAAP operating income (loss) and non-GAAP net income (loss) provide meaningful supplemental information regarding our performance.

Current wording

Certain items are excluded from our non-GAAP operating (loss) income and non-GAAP net (loss) income because these items are non-cash in nature or management believes they are not indicative of our core operating performance and render comparisons with prior periods and competitors less meaningful. We adjust GAAP operating (loss) income and net (loss) income for these items to arrive at non-GAAP operating (loss) income and non-GAAP net (loss) income because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structure and the method by which the assets were acquired. By excluding items that may not be indicative of our recurring core operating results, we believe that non-GAAP operating (loss) income and non-GAAP net (loss) income provide meaningful supplemental information regarding our performance.

Previous wording

(1)Reflects litigation-related expenses incurred in connection with our acquisitions and the Nangate Litigation estimated claim accrual.

Current wording

(1)Reflects litigation-related expenses incurred in connection with our acquisitions and the Nangate estimated litigation claim accrual.

Previous wording

(2)Reflects the amortization of intangible assets attributable to our acquisitions and the NXP IP.

Current wording

(3)Reflects the amortization of intangible assets attributable to our acquisitions and the NXP IP.

Previous wording

(3)Reflects one-time costs including third-party professional services fees and costs incurred in connection with, and in preparation for, the IPO. Such costs do not include those costs that were considered direct and incremental to the IPO and therefore capitalized as deferred transaction costs.

Current wording

(4)Reflects one-time costs including third-party professional services fees and costs incurred in connection with, and in preparation for, the IPO. Such costs do not include those costs that were considered direct and incremental to the IPO and therefore capitalized as deferred transaction costs.

Previous wording

(4)Includes the change in fair value of contingent consideration recorded in connection with our acquisitions.

Current wording

(5)Includes the change in fair value of contingent consideration recorded in connection with our acquisitions.

Previous wording

Since inception, we have financed operations primarily through proceeds received from payments from our customers, borrowings from Ms. Ngai-Pesic and other lenders, and the net proceeds from the sale of our common stock in the IPO. Our primary sources of liquidity are cash, cash equivalents and marketable securities including cash generated from operations. As of September 30, 2024, we had $26.6 million in cash and cash equivalents, of which $3.4 million was held by our foreign subsidiaries, and $73.8 million in short-term marketable securities.

Current wording

Since inception, we have financed operations primarily through proceeds received from payments from our customers, borrowings from Ms. Ngai-Pesic and other lenders, and the net proceeds from the sale of our common stock in the IPO. Our primary sources of liquidity are cash, cash equivalents and marketable securities including cash generated from operations. As of March 31, 2025, we had $29.5 million in cash and cash equivalents, of which $6.2 million was held by our foreign subsidiaries, and $45.0 million in short-term marketable securities.

Previous wording

In December 2023, we entered into a loan facility with East West Bank (the “East West Bank Loan”) which provides for borrowings of up to $5.0 million bearing interest at a per annum rate equal to one half of one percent (0.5%) above the greater of (i) the prime rate as reported in The Wall Street Journal or (ii) four and one half percent (4.5%). We drew $4.3 million on the East West Bank Loan during the nine months ended September 30, 2024. In May 2024, the East West Bank Loan was repaid in full and terminated.

Current wording

In December 2023, we entered into a loan facility with East West Bank (the “East West Bank Loan”) which provides for borrowings of up to $5.0 million bearing interest at a per annum rate equal to one half of one percent (0.5%) above the greater of (i) the prime rate as reported in The Wall Street Journal or (ii) four and one half percent (4.5%). We drew $4.3 million on the East West Bank Loan during the three months ended March 31, 2024. In May 2024, the East West Bank Loan was repaid in full and terminated.

Previous wording

On April 11, 2024, we amended and restated our license agreement with NXP, pursuant to which we recorded an associated vendor financing obligation. The vendor financing obligation was $4.6 million as of September 30, 2024. We determined that the vendor financing obligation had an imputed interest rate of 9%, which is reflective of our borrowing rate with similar terms to that of the license agreement.

Current wording

On April 11, 2024, we amended and restated our license agreement with NXP, pursuant to which we recorded an associated vendor financing obligation. The vendor financing obligation was $4.2 million as of March 31, 2025. We determined that the vendor financing obligation had an imputed interest rate of 9%, which is reflective of our borrowing rate with similar terms to that of the license agreement.

Previous wording

We believe our cash and marketable securities balances, which include proceeds received in connection with the IPO and the $5.0 million received in connection with the Micron Note will be sufficient to meet our expected working capital needs, capital expenditures, financial commitments and other liquidity requirements associated with our existing operations for at least the next 12 months. We currently have no committed sources of capital.

Current wording

We believe our cash and cash equivalents and marketable securities balances, which include proceeds received in connection with the IPO and the $5.0 million received in connection with the Micron Note will be sufficient to meet our expected working capital needs, capital expenditures, financial commitments and other liquidity requirements associated with our existing operations for at least the next 12 months. We currently have no committed sources of capital.

Previous wording

As of September 30, 2024, $5.0 million, or 18.7%, of our cash and cash equivalents was maintained with one financial institution, where our current deposits are in excess of federally insured limits. Past macroeconomic conditions have resulted in the actual or perceived financial distress of many financial institutions, including the recent failures of Silicon Valley Bank, Signature Bank and First Republic Bank and the UBS takeover of Credit Suisse. If the financial institutions with whom we do business were to become distressed or placed into receivership, we may be unable to access the cash we have on deposit with such institutions. If we are unable to access our cash as needed, our financial position and ability to operate our business could be adversely affected.

Current wording

As of March 31, 2025, $4.1 million, or 13.9%, of our cash and cash equivalents was maintained with one financial institution, where our current deposits are in excess of federally insured limits. Past macroeconomic conditions have resulted in the actual or perceived financial distress of many financial institutions, including the 2023 failures of Silicon Valley Bank, Signature Bank and First Republic Bank and the UBS takeover of Credit Suisse. If the financial institutions with whom we do business were to become distressed or placed into receivership, we may be unable to access the cash we have on deposit with such institutions. If we are unable to access our cash as needed, our financial position and ability to operate our business could be adversely affected.

Previous wording

Net cash used by operating activities for the nine months ended September 30, 2024 was $10.7 million compared to $0.3 million of net cash provided by operating activities for the nine months ended September 30, 2023. The $11.0 million decrease in net cash provided by operating activities was primarily due to a $6.2 million decrease in net (loss) income, after excluding the non-cash effects of stock-based compensation expense, provision for credit losses, estimated litigation claim, loss on debt extinguishment, change in fair value of contingent consideration, depreciation and amortization, and the accretion of discount on marketable securities, and a $4.8 million decrease in net working capital, primarily due to changes in contract assets and accounts receivable and the payment of litigation-related expenses incurred in connection with our acquisitions.

Current wording

Net cash used in operating activities for the three months ended March 31, 2025 was $1.1 million compared to $2.6 million of net cash used in operating activities for the three months ended March 31, 2024. The $1.5 million decrease in net cash used in operating activities was primarily due to a $6.9 million decrease in net working capital, primarily due to changes in contract assets and accounts receivable; partially offset by a $5.4 million decrease in net income, after excluding the non-cash effects of stock-based compensation expense, provision for credit losses, estimated litigation claim, change in fair value of contingent consideration, depreciation and amortization, and the accretion of discount on marketable securities.

Previous wording

Net cash used in investing activities for the nine months ended September 30, 2024 and 2023 was $73.0 million and $0.2 million, respectively. Use of cash during the nine months ended September 30, 2024, includes $81.6 million in purchases of marketable securities and $0.3 million in purchases of property and equipment, partially offset by $9.0 million of maturities in marketable securities. During the nine months ended September 30, 2023, we used $0.2 million of cash to purchase property and equipment.

Current wording

Net cash provided by investing activities for the three months ended March 31, 2025 was $11.4 million, as compared to $10,000 used in investing activities for the three months ended March 31, 2024. Cash provided by investing activities during the three months ended March 31, 2025, includes $23.0 million of maturities in marketable securities, partially offset by cash paid to acquire OPC of $11.5 million and $0.1 million in purchases of property and equipment. During the three months ended March 31, 2024, we used $10,000 of cash to purchase property and equipment.

Previous wording

Net cash provided by financing activities for the nine months ended September 30, 2024, was $105.5 million. We received $106.0 million in net proceeds from the IPO, $4.9 million in proceeds from the Micron Note, net of debt issuance costs, and $4.3 million from our drawdown on the East West Bank Loan, partially offset by the $4.3 million repayment of the East West Bank Loan, payment of $2.6 million related to deferred transaction costs incurred in connection with the IPO, the $2.0 million repayment of the 2022 Line of Credit, $0.6 million of payments for our vendor financing obligation and $0.1 million of contingent consideration paid. Net cash used in financing activities for the nine months ended September 30, 2023 was $1.0 million due to contingent consideration paid.

Current wording

Net cash used in financing activities for the three months ended March 31, 2025 was $0.5 million, as compared to net cash provided by financing activities of $3.9 million for the three months ended March 31, 2024. Net cash used during the three months ended March 31, 2025 includes payroll taxes related to shares withheld from employees of $0.3 million and payments on our vendor financing obligation of $0.2 million. Net cash provided by financing activities for the three months ended March 31, 2024 includes our $4.3 million drawdown on the East West Bank Loan, partially offset by the payment of $0.4 million of transaction costs incurred in connection with the IPO.

Previous wording

The effects of exchange rate fluctuations on cash were $0.3 million for each of the nine months ended September 30, 2024 and 2023, respectively.

Current wording

The effects of exchange rate fluctuations on cash and cash equivalents were $0.1 million and $27,000 for the three months ended March 31, 2025 and 2024, respectively.

Previous wording

There have not been any material changes during the three and nine months ended September 30, 2024 to the methodology applied by management for critical accounting policies previously disclosed in our audited financial statements set forth in our Registration Statement. For further discussion of our critical accounting policies and estimates, please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in our Registration Statement.

Current wording

There have not been any material changes during the three months ended March 31, 2025 to the methodology applied by management for critical accounting policies previously disclosed in our audited financial statements set forth in our 2024 Form 10-K. For further discussion of our critical accounting policies and estimates, please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in our 2024 Form 10-K.