Silvaco Group, Inc.

Previous wording

You should read the following discussion and analysis of financial condition and results of operations together with our audited consolidated financial statements and the related notes included in Part II, Item 8 of this Annual Report on Form 10-K. This discussion and other parts of this report contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve risks, uncertainties and assumptions. 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 under Part I, Item 1A. Risk Factors of this Annual Report on Form 10-K. 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 financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and the related notes included in Part II, Item 8 of this Annual Report on Form 10-K. This discussion and other parts of this report contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve risks, uncertainties and assumptions. 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 under Part I, Item 1A. Risk Factors of this Annual Report on Form 10-K. 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 74% and 73% of our revenue for the years ended December 31, 2024 and 2023, respectively, and associated maintenance and services accounted for 26% and 27% of our revenue for the years ended December 31, 2024 and 2023, respectively. For the years ended December 31, 2024 and 2023, approximately 90% and 81% of our bookings came from existing customers and 10% and 19% came from new customers, respectively. See “—Key Operating Indicators and Non-GAAP Financial Measures—Bookings” for a description of how we define bookings.

Current wording

Our customers include foundries, integrated device manufacturers (“IDMs”) and fabless semiconductor companies. Our go-to-market strategy centers on selling software solutions and associated maintenance and services. Our software solutions accounted for 68% and 74% of our revenue for the years ended December 31, 2025 and 2024, respectively, and associated maintenance and services accounted for 32% and 26% of our revenue for the years ended December 31, 2025 and 2024, respectively.

Previous wording

Building long-term relationships with our existing customer base is critical in driving renewals for our licenses and overall revenue growth. We have a global sales force selling to semiconductor companies and engineering universities that also instruct fabrication facility managers and the next generation of chip designers on the use and benefits of our design tools. Most of our customers enter into multi-year software license agreements for a fixed price including a multi-year software license and maintenance and services.

Current wording

Building long-term relationships with our existing customer base is critical in driving renewals for our licenses and overall revenue growth. We have a global sales force that also advises fabrication facility managers and the next generation of chip designers on the benefits of our design tools. Most of our customers enter into multi-year software license agreements for a fixed price including a multi-year software license and maintenance and services.

Previous wording

When we renew expiring contracts with our customers, we may increase our bookings by selling them additional or new software or SIP. Over time, we expect that existing customers will choose to upgrade and/or purchase additional products, particularly as we de-emphasize our lower margin products, which we expect will over the long term drive margin expansion. Our ability to continue to generate sales from our existing customers and to expand those relationships is dependent on our ability to continue to offer software solutions that our existing customers demand. Any failure to continue to generate sales with our existing customers or expand our product and service offerings with our existing customers may have an adverse effect on our revenue and results of operations.

Current wording

When we renew contracts with our customers, we may increase our bookings by selling them additional or new software or SIP. Over time, we expect that existing customers will choose to upgrade and/or purchase additional products. Our ability to continue to generate sales from our existing customers and to expand those relationships is dependent on our ability to continue to offer software solutions that our existing customers demand. Any failure to continue to generate sales with our existing customers or expand our product and service offerings with our existing customers may have an adverse effect on our revenue and results of operations.

Previous wording

We enter into standard software licensing agreements with each of our customers. Pursuant to these agreements, we grant our customers a non-exclusive, non-transferable limited license, without the right to sublicense, to execute, use and operate certain software. Each party has the right to terminate the software license agreement under certain circumstances, in which event the customer will be required to remove, delete and return all software, related documentation and confidential information furnished under the license agreement.

Current wording

We enter into standard software licensing agreements with our customers. Pursuant to these agreements, we grant our customers a non-exclusive, non-transferable, limited license, without the right to sublicense, to execute, use and operate certain software. Each party has the right to terminate the software license agreement under certain circumstances, in which event the customer will be required to remove, delete and return all software, related documentation and confidential information furnished under the license agreement.

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 (“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 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 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

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 35% and 24% of revenue for the years ended December 31, 2024 and 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 expenses were 47% and 35% of revenue for the years ended December 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

Our revenue is derived from software licensing and maintenance and services. Our customer agreements include combinations of licensed software and maintenance and services, which are accounted for as separate performance obligations with differing revenue recognition patterns.

Current wording

Our revenue is derived principally from software licensing, customization and related maintenance and services, which are generally accounted for as separate performance obligations with differing revenue recognition patterns. Arrangements with both software licenses and customization services are accounted for as a combined performance obligation.

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, amortization of acquired intangible assets, and royalties related to the recognized revenue. Historically, we have not recognized stock-based compensation expense, but after the consummation of the IPO during the year ended December 31, 2024, we recognized $3.0 million of stock-based compensation expense in cost of revenue. We also recognized $0.7 million of amortization associated with our acquired intangible assets in cost of revenue during the year ended December 31, 2024. See Note 11 and Note 6 of our consolidated financial statements in Item 8 in this Annual Report on Form 10-K for further discussion. 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. Historically, we have not recognized stock-based compensation expense, but after the consummation of the IPO during the year ended December 31, 2024, we recognized $3.0 million of stock-based compensation expense in cost of revenue. We recognized $1.3 million of stock-based compensation expense in cost of revenue during the year ended December 31, 2025. We also recognized $1.0 million and $0.7 million of amortization associated with our acquired intangible assets in cost of revenue during the years ended December 31, 2025 and 2024, respectively. See Note 13 and Note 8 of our consolidated financial statements in Item 8 in this Annual Report on Form 10-K for further discussion. Gross profit represents revenue less cost of revenue.

Previous wording

Our operating expenses consist of research and development, selling and marketing, general and administrative, 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 during the year ended December 31, 2024, we recognized an aggregate of $23.9 million of stock-based compensation expense in operating expenses. Of the aggregate stock-based compensation expense recorded, we recognized $14.5 million, $5.1 million, and $4.3 million in general and administrative expense, research and development expense, and selling and marketing expense, respectively, during the year ended December 31, 2024. See Note 11 of our consolidated financial statements in Item 8 in this Annual Report on Form 10-K for further discussion.

Current wording

Our operating expenses consist of research and development, selling and marketing, general and administrative, and litigation settlement. 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 during the year ended December 31, 2024, we recognized an aggregate of $23.9 million of stock-based compensation expense in operating expenses. During the year ended December 31, 2025, we recognized $9.5 million in total stock-based compensation expense. The year over year decrease was primarily due to stock-based compensation expense recorded during 2024 in connection with our IPO. See Note 13 of our consolidated financial statements in Item 8 in this Annual Report on Form 10-K for further discussion.

Previous wording

Loss on debt extinguishment includes losses incurred related to the extinguishment of our note purchase agreement with Micron Technology Inc. and our loan facility with East West Bank.

Current wording

Loss on debt extinguishment includes losses incurred related to the extinguishment of our note purchase agreement with Micron Technology Inc. (the “Micron Note”) and our loan facility with East West Bank (the “East West Bank Loan”). See Note 12 of our consolidated financial statements for further discussion.

Previous 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.

Current wording

Interest expense and other income (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

Income tax provision is our estimate of current tax expense incurred from the consolidated results of operations globally.

Current wording

Income tax (benefit) provision is our estimate of current tax benefit or expense incurred from the consolidated results of operations globally.

Previous wording

The following table sets forth our results of operations for the years ended December 31, 2024 and 2023:

Current wording

The following table sets forth our results of operations:

Previous wording

The following table summarizes our results of operations as a percentage of total revenue for the years ended December 31, 2024 and 2023:

Current wording

The following table summarizes our results of operations as a percentage of total revenue:

Previous wording

Research and development expenses were $20.7 million and $13.2 million for the years ended December 31, 2024 and 2023, respectively. The increase of $7.6 million, or 57%, was primarily due to $5.1 million of stock-based compensation expense recorded as a result of the consummation of the IPO, $1.0 million increase in salary and benefits expenses, primarily related to increased headcount and merit increases, a $0.9 million increase in software maintenance expense, and a $0.6 million increase in engineering support expenses.

Current wording

The decrease in general and administrative expenses of $3.5 million, or 9% for the year ended December 31, 2025 compared to the year ended December 31, 2024, was primarily due to a decrease in stock-based compensation expense of $9.5 million, partially offset by a $1.7 million increase in employee compensation from increased headcount, merit increases, severance and the related payroll taxes, a $1.6 million increase in amortization expense of acquired intangible assets, a $1.0 million increase in legal and professional fees, $0.6 million of executive severance costs, a $0.5 million increase in software maintenance expense, and a $0.1 million increase in facility expenses.

Previous wording

On May 13, 2024, the senior subordinated convertible promissory note (the “Micron Note”) between us and Micron Technology, Inc. (“Micron”) was converted into 294,217 shares of our common stock in connection with the consummation of the IPO. As a result, $5.6 million was recognized in additional paid-in capital and we recognized a loss on debt extinguishment of $0.6 million during the year ended December 31, 2024. We also recognized a loss on debt extinguishment of $0.1 million associated with the settlement of our loan facility with East West Bank (the “East West Bank Loan”) during the year ended December 31, 2024. See Note 10 of our consolidated financial statements in Item 8 in this Annual Report on Form 10-K for further discussion.

Current wording

On May 13, 2024, the senior subordinated convertible promissory note (the “Micron Note”) between us and Micron Technology, Inc. (“Micron”) was converted into 294,217 shares of our common stock in connection with the consummation of the IPO. As a result, $5.6 million was recognized in additional paid-in capital and we recognized a loss on debt extinguishment of $0.6 million during the year ended December 31, 2024. We also recognized a loss on debt extinguishment of $0.1 million associated with the settlement of our loan facility with East West Bank during the year ended December 31, 2024. See Note 12 of our consolidated financial statements in Item 8 in this Annual Report on Form 10-K for further discussion.

Previous wording

Interest income reflects interest earned and accretion on our cash and cash equivalents and marketable securities.

Current wording

Interest income reflects interest earned and accretion on our cash and cash equivalents and marketable securities.The decrease in interest income for the year ended December 31, 2025 compared to year ended December 31, 2024 was due to lower average balances of marketable securities.

Previous wording

Interest and other expense, net, was expense of $0.9 million and $0.6 million for the years ended December 31, 2024 and 2023, respectively. The change in interest and other expense, net, for the year ended December 31, 2024 was primarily due to an increase in the amount of interest associated with our vendor financing obligation during the current year. The Company does not have any interest-bearing debt outstanding as of December 31, 2024.

Current wording

Interest expense and other income (expense), net, was expense of $0.7 million and $0.9 million for the years ended December 31, 2025 and 2024, respectively. The decrease in interest expense and other income (expense), net, for the year ended December 31, 2025 was primarily due to an decrease in foreign exchange losses and lower average debt and financing obligation balances.

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 December 31, 2024, we had $19.6 million in cash and cash equivalents, of which $4.5 million was held by our foreign subsidiaries, and $63.1 million in current marketable securities.

Current wording

Since inception, we have financed operations primarily through proceeds received from payments from our customers, borrowings from a principal stockholder 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 December 31, 2025, we had $10.0 million in cash, cash equivalents and short-term marketable securities, of which $5.5 million was held by our foreign subsidiaries.

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 $4.4 million as of December 31, 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 $3.2 million as of December 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

On April 16, 2024, we entered into a note purchase agreement with Micron, a customer of the Company, pursuant to which we issued 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.

Current wording

On April 16, 2024, we entered into a note purchase agreement with Micron, a customer of the Company, pursuant to which we issued 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 completion of the IPO.

Previous 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.

Current wording

We believe our cash and cash equivalents, restricted cash and marketable securities balances 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 December 31, 2024, $2.4 million, or 12%, 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 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 December 31, 2025, $11.0 million, or 64%, of our cash and cash equivalents and restricted cash 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 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 in operating activities for the year ended December 31, 2024, was $19.8 million compared to $1.2 million of net cash provided by operating activities for the year ended December 31, 2023. The $21.0 million decrease in net cash provided by operating activities reflects a $1.4 million increase in net loss, 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 $19.6 million increase in net working capital, primarily due to changes in contract assets, accounts receivable, deferred revenue and the payment of accrued operating expenses in connection with our IPO and accrued royalties for licensed technology sold in our product lines during the year ended December 31, 2024.

Current wording

Net cash used in operating activities for the year ended December 31, 2025, was $33.9 million compared to $19.8 million of net cash used in operating activities for the year ended December 31, 2024. The $14.1 million increase in net cash used in operating activities reflects a $1.8 million increase in net loss, $16.1 million paid for the litigation settlement, and a decrease of $11.9 million in the non-cash effects of stock-based compensation expense, provision for credit losses, litigation settlement, loss on debt extinguishment, change in fair value of contingent consideration, depreciation and amortization, loss on fixed asset disposal, and the accretion of discount on marketable securities. The use of cash was partially offset by a $15.7 million increase in net working capital, primarily due to changes in accrued expenses and other current liabilities, accounts receivable and contract assets.

Previous wording

Net cash used in investing activities for the years ended December 31, 2024 and 2023 was $66.5 million and $0.3 million, respectively. Use of cash during the year ended December 31, 2024 includes $99.6 million in purchases of marketable securities and $0.5 million in purchases of property and equipment, partially offset by $33.6 million of maturities in marketable securities. During the year ended December 31, 2023, we used $0.3 million of cash to purchase property and equipment.

Current wording

Net cash provided by investing activities for the year ended December 31, 2025 was $33.7 million compared to use of $66.5 million for the year ended December 31, 2024. Cash provided by investing activities during the year ended December 31, 2025 includes $34.9 million from maturities in marketable securities and $32.3 million from sales of marketable securities, partially offset by use of $32.9 million in business acquisitions. Net cash used in investing activities for the year ended December 31, 2024 includes $99.6 million in purchases of marketable securities, partially offset by $33.6 million provided by maturities in marketable securities.

Previous wording

Net cash provided by financing activities for the year ended December 31, 2024, was $101.3 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, $4.3 million from our drawdown on the East West Bank Loan, and $0.3 million in proceeds from the issuance of common stock through our employee stock purchase plan partially offset by $4.6 million of cash in payment of employee withholding taxes upon vesting of RSUs, $4.3 million repayment of the East West Bank Loan, $2.6 million of payments 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 by financing activities for the year ended December 31, 2023, was $1.7 million and reflects $1.0 million of contingent consideration paid in connection with our Nangate and PolytEDA acquisitions, $1.0 million repaid on the 2022 Credit Line, and $0.7 million of transaction costs incurred in connection with the IPO; partially offset by $1.0 million of proceeds from the 2022 Credit Line.

Current wording

Net cash used in financing activities for the year ended December 31, 2025, was $2.2 million, compared to net cash provided by financing activities of $101.3 million for the year ended December 31, 2024. Net cash used during the year ended December 31, 2025 includes payroll taxes related to shares withheld from employees of $1.8 million and payments on our vendor financing obligation of $1.3 million, which was partially offset by $0.9 million in proceeds from issuance of common stock for share-based awards. During the year ended December 31, 2024, we received $106.0 million in net proceeds from our IPO, $4.9 million in net proceeds from the Micron Note, and $4.3 million from our drawdown on the East West Bank Loan, which were 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 our IPO, the $2.0 million repayment of the line of credit with a principle shareholder, and $0.6 million of payments for our vendor financing obligation.

Previous wording

The effects of exchange rate fluctuations on cash were $0.2 million and $(0.2) million for the years ended December 31, 2024 and 2023, respectively.

Current wording

The effects of exchange rate fluctuations on cash were $49 thousand and $0.2 million for the years ended December 31, 2025 and 2024, respectively.

Previous wording

Our consolidated financial statements have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Actual results may differ from these estimates. To the extent that there are material differences between these estimates and our actual results, our future financial statements will be affected.

Current wording

Our consolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Actual results may differ from these estimates. To the extent that there are material differences between these estimates and our actual results, our future financial statements will be affected.

Previous wording

Our revenue is derived principally from software licensing and related maintenance and service. We enter into agreements that include combinations of software and maintenance and services, which are accounted for as separate performance obligations with differing revenue recognition patterns. We recognize revenue pursuant to ASC Topic 606, Revenue from Contracts with Customers. The core principle of this guidance is that an entity should recognize revenue to depict the delivery of software or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for such software or services. To achieve this objective we apply a five-step approach: (1) identify the contract(s) with a customer, (2) identify the performance obligations within the contract, (3) determine the transaction price, (4) allocate the transaction price to the separate performance obligations and (5) recognize revenue when, or as, each performance obligation is satisfied.

Current wording

We recognize revenue pursuant to Accounting Standard Codification Topic 606, Revenue from Contracts with Customers. Revenue is recognized upon transfer of control of the promised good or service to the customer in an amount that reflects the consideration to which we expect to be entitled in exchange for such software or service. To achieve this objective we apply a five-step approach: (1) identify the contract(s) with a customer, (2) identify the performance obligations within the contract, (3) determine the transaction price, (4) allocate the transaction price to the separate performance obligations and (5) recognize revenue when, or as, each performance obligation is satisfied.

Previous wording

Software license revenue is recognized upfront upon delivery of the licensed software. Typically, our software solutions are licensed with PCS which includes unspecified technical enhancements and customer support. The PCS is classified as maintenance and service revenue and is recognized ratably over the term of the maintenance period, as we satisfy the PCS performance obligation over time.

Current wording

Revenue from software licenses is classified as software license revenue. Software license revenue is recognized upfront upon delivery of the licensed software. Typically, our software solution is licensed with post-contract support ("PCS"), which includes unspecified technical enhancements and customer support. The PCS is classified as maintenance and service revenue and is recognized ratably over the term of the contract period, as we satisfy the PCS performance obligation over time.

Previous wording

We also offer standard SIP licenses, developed both in house and in partnership with industry-recognized firms. 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 re-invent similar design methodology. SIP licenses offered by us are generally ready to use upon delivery. No modification is required in order for the customer to obtain value for use in their integrated circuit designs. We do not license SIP without support.

Current wording

We also offer standard SIP licenses, which provide customers with access to SoC design intellectual property (“IP”) that meet established industry standards. Standard SIP licenses offered by us are ready to use upon delivery. No modification is required in order for the customer to receive value for use in their integrated circuit designs. We also offer SIP licenses that require customization in accordance with the customer’s specifications. Revenue associated with the license of our SIP is classified as software license revenue and recognized as revenue (i) upfront upon delivery of the standard SIP license, or (ii) over time, when customization services are combined with the SIP license, as specific contractual milestones are met and incremental functionality is delivered to the customer. We do not offer SIP licenses without support. The support service for SIP licenses is classified as maintenance and service revenue and is recognized ratably over the term of the support period.

Previous wording

Under certain SIP license agreements, we can also derive revenue through royalties from customers who agree to pay usage-based fees to embed our SIP into their own software offerings. Revenue under SIP royalty agreements is generally recognized during the period in which the customer sells its solutions which incorporate our SIP.

Current wording

Under certain SIP license agreements, we also derive revenue through royalties from customers who agree to pay usage-based fees to embed our SIP into their own SoCs. Royalties are generally recognized as revenue during the period in which the customer sells its solutions which incorporate our SIP license.

Previous wording

In connection with our SIP which was developed in partnership with a third party vendor, we have entered into various renewable license agreements under which we have the right to sell the technology we license from the third party vendor. When we license these particular SIP to a customer, we generally act as a principal to the transaction because we control the promised SIP that we deliver to the customer. Consistent with our role as a principal, we recognize SIP revenue on a gross basis. Royalty costs are reported in cost of revenue upon delivery pursuant to the terms and conditions of our contractual obligations with the licensors.

Current wording

In connection with our SIP license that was developed in partnership with a third party vendor, we have entered into various renewable license agreements under which we have the right to sell the technology we license from the third party vendor. When we license this particular SIP to a customer, we generally act as a principal to the transaction because we control the promised SIP that we deliver to the customer. Consistent with our role as a principal, we recognize SIP revenue on a gross basis. Royalty costs are reported in cost of revenue upon delivery pursuant to the terms and conditions of our contractual obligations with the licensors.

Previous wording

No indicators of impairment or impairments charges were identified or recorded to goodwill or other intangible assets during the fiscal years ended December 31, 2024 and 2023.

Current wording

No indicators of impairment or impairment charges were identified or recorded to goodwill or other intangible assets during the fiscal years ended December 31, 2025 and 2024.

Previous wording

We account for stock-based payments in accordance with the authoritative guidance issued by the FASB on stock-based compensation, which establishes the accounting for transactions in which an entity exchanges its equity instruments for goods or services. Under the provisions of the authoritative guidance, stock-based compensation expense is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the requisite employee service period (generally the vesting period), net of actual forfeitures. For stock-based payment awards that contain performance criteria, stock-based compensation expense is recorded when the achievement of the performance condition is considered probable of achievement and is recorded on a straight-line basis over the requisite service period. If such performance criteria are not met, no compensation expense is recognized and any recognized compensation expense is reversed. For awards with market and service conditions, we recognize stock-based compensation on a straight-line basis for all awards for which the service conditions are met, regardless of whether the market condition is achieved.

Current wording

We account for stock-based compensation in accordance with Accounting Standard Codification Topic 718, Compensation - Stock Compensation, which establishes the accounting for transactions in which an entity exchanges its equity instruments for goods or services. Under the provisions of the authoritative guidance, stock-based compensation expense is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the requisite employee service period (generally the vesting period), net of actual forfeitures. For stock-based payment awards that contain performance criteria, stock-based compensation expense is recorded when the achievement of the performance condition is considered probable of achievement and is recorded on a straight-line basis over the requisite service period. If such performance criteria are not met, no compensation expense is recognized and any recognized compensation expense is reversed. For awards with market and service conditions, we recognize stock-based compensation on a straight-line basis for all awards for which the service conditions are met, regardless of whether the market condition is achieved.

Previous wording

Prior to the IPO, we had not recorded stock-based compensation expense, as the RSUs granted under the 2014 Plan carry both a “time-based vesting requirement” and a “liquidity event vesting requirement,” with the satisfaction of the “liquidity event vesting requirement”, an improbable contingency as of December 31, 2023. See Note 11 to our consolidated financial statements in Item 8 on this Annual Report on Form 10-K for additional information.

Current wording

Prior to the IPO, we had not recorded stock-based compensation expense, as the restricted stock units (“RSUs”) granted under the 2014 Plan carry both a “time-based vesting requirement” and a “liquidity event vesting requirement,” with the satisfaction of the “liquidity event vesting requirement”, an improbable contingency until the consummation of our IPO on May 13, 2024. See Note 13 to our consolidated financial statements in Item 8 on this Annual Report on Form 10-K for additional information.