Silvaco Group, Inc.

Key Operating Indicators and Non-GAAP Financial Measures

We use the following key performance indicators and non-GAAP financial measures to analyze our business performance and financial forecasts and to develop strategic plans which we believe provide useful information to investors and others in understanding and evaluating our results of operations in the same manner as our management team. These key performance indicators and non-GAAP financial measures are presented for supplemental informational purposes only, should not be considered a substitute for financial information presented in accordance with GAAP and may differ from similarly titled metrics or measures presented by other companies.

Bookings

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.

The following table sets forth our bookings for each of the three month periods during the trailing five quarters as of March 31, 2025.

Non-GAAP Operating (Loss) Income and Non-GAAP Net (Loss) Income

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.

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.

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.

The following table reconciles operating (loss) income to non-GAAP operating (loss) income.

The following table reconciles net (loss) income to non-GAAP net (loss) income.

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

(2)Reflects acquisition-related professional fees and retention bonuses related to acquisitions of the OPC business and other potential acquisitions.

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

(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.

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

(6)Reflects the increase in income tax expenses due to non-GAAP adjustments.

Liquidity and Capital Resources

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.

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.

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.

On April 16, 2024, we entered into a note purchase agreement with Micron Technology, Inc. (“Micron”), a customer of the Company, pursuant to which we issued a senior subordinated convertible promissory note (the “Micron Note”) in the principal amount of $5.0 million. The Micron Note accrued interest at a rate of 8% per annum with principal and interest due upon maturity three years after the date of issuance. On May 13, 2024, the Micron Note was converted into 294,217 shares of our common stock in connection with the consummation of the IPO.

On May 13, 2024, we sold 6,000,000 shares of common stock in the IPO at a price to the public of $19.00 per share. The gross proceeds from the IPO were $114.0 million, with $106.0 million funded to us after deducting underwriting discounts and commissions of $8.0 million.

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.

If our cash and cash equivalents and marketable securities including cash generated from operating activities are not sufficient to satisfy our liquidity requirements, we may be required to seek additional financing. If we raise additional funds by issuing equity securities or convertible debt securities, our stockholders will experience dilution. Debt financing, if available, may contain covenants that significantly restrict our operations or our ability to obtain additional debt financing in the future. Any additional financing that we raise may contain terms that are not favorable to us or our stockholders. We cannot assure you that we would be able to obtain additional financing on terms favorable to us or our existing stockholders, or at all. See“Risk Factors—Risks Related to Our Business and Industry—Our ability to raise additional capital in the future may be limited and could prevent us from executing our growth strategy” in Item 1A in Part II in this Quarterly Report on Form 10-Q for further discussion

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.

Cash Flows

The following table summarizes changes in our cash flows for the periods indicated.

Operating Activities

Cash flows from operating activities may vary significantly from period to period depending on a variety of factors including the timing of our collections and payments. Our ongoing cash outflows from operating activities primarily relate to personnel related costs, payments for professional services, office leases and related facilities costs, and software supporting our company infrastructure, among others. Our primary source of cash inflows is collections of our accounts receivable. The timing of invoices to our customers and subsequent collection is based on agreements executed and payment terms that can vary by customer.

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.

Investing Activities

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.

Financing Activities

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.

Effects of Exchange Rate Fluctuations on Cash and Cash Equivalents

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.

Contractual Obligations

Our financial commitments for contractual obligations as of March 31, 2025, include our operating leases and our vendor financing obligation. Our operating leases include a current obligation of $0.6 million and a non-current obligation of $0.9 million. Our vendor financing obligation, as noted in Note 7 of our condensed consolidated financial statements, includes a current obligation of $1.2 million and a non-current obligation of $3.0 million.

Estimated Litigation Claim

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.

The parties have reached preliminary agreement on key terms of a potential settlement, subject to negotiation and execution of a settlement agreement. In connection with the potential settlement, we recorded a charge to estimated litigation claim and accrued expenses and other current liabilities of $13.1 million for the three months ended March 31, 2025. We can give no assurance that a settlement will be finalized. If a settlement is not finalized, we and the Co-Defendants can appeal the judgement, which will require us to collateralize and post an appellate bond of up to $35.4 million. We believe we have strong grounds for appeal and are pursuing post-trial motions. Additionally, we believe that there are strong arguments in support of substantially reducing the punitive damages portion of the Fraud Damages, which we believe are excessive under California Law, and the United States and California constitutions, particularly given the disproportionate nature of the punitive damages relative to the compensatory damages. See Note 11 of our condensed consolidated financial statements for further discussion.

Off-Balance Sheet Arrangements

As of March 31, 2025 and December 31, 2024, we did not have any off-balance sheet arrangements.

Critical Accounting Policies and Significant Judgments and Estimates

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.