Arteris Inc

Previous 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, 2023 included in the 2023 Form 10-K. This discussion and analysis contains forward-looking statements based upon current beliefs, plans and expectations that involve risks, uncertainties and assumptions, such as statements regarding our plans, objectives, expectations, intentions and projections. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under the heading “Risk Factors” in this Quarterly Report on Form 10-Q. You should carefully read the “Risk Factors” section of this Quarterly Report on Form 10-Q to gain an understanding of the important factors that could cause actual results to differ materially from forward-looking statements. Please also see the section under the heading “Cautionary Note Regarding Forward-Looking Statements” in the 2023 Form 10-K.

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 Annual Report on Form 10-K for the year ended December 31, 2024 (2024 Form 10-K). This discussion and analysis contains forward-looking statements based upon current beliefs, plans and expectations that involve risks, uncertainties and assumptions, such as statements regarding our plans, objectives, expectations, intentions and projections. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under the heading “Risk Factors” in this Quarterly Report on Form 10-Q. You should carefully read the “Risk Factors” section of this Quarterly Report on Form 10-Q to gain an understanding of the important factors that could cause actual results to differ materially from forward-looking statements. Please also see the section under the heading “Cautionary Note Regarding Forward-Looking Statements” in the 2024 Form 10-K.

Previous wording

We are a leading provider of semiconductor system IP, including interconnect and other intellectual property, (collectively, System IP) technology. Our System IP technology manages the on-chip communications and IP block deployments in System-on-Chip (SoC) semiconductors and systems of chiplets. Our leading proprietary System IP solutions achieve this by connecting client IP blocks such as processors, memories, artificial intelligence/machine learning (AI/ML) accelerators, graphics subsystems, safety and security, and other input/output subsystems (I/Os) via multiple Network-on-Chips (NoCs) in order for our customers to experience faster SoC targeting, as well as, more efficient, and lower cost solutions. Growth for our solutions is being driven by growing SoC sophistication and associated complexity, now extending into disaggregation of SoCs into systems for which implement the communication protocol aspects and partner with industry leading providers like Synopsys, Cadence, Alphawave and others to connect to their die to die interfaces. The addition of more processors, channels of memory access, machine learning sections, additional I/Os interface standards, and other subsystems within SoCs is driving the need for more advanced System IP, including NoC interconnect IP’s. The growth in the numbers of these connected on-chip subsystems places an increasing premium on the interconnect IP capability to move data inside complex SoCs. We believe this increase in SoC complexity has created a significant opportunity for sophisticated System IP solutions that incorporate NoC interconnect IP, SoC Integration Automation software (SIA) (formerly IP deployment software) and NoC interface IP (consisting of peripheral data transport IP and control plane networks connected to NoC interconnect IPs). Moreover, our technology can also provide more cost-effective solutions and reduce the risks of building and maintaining in-house NoC teams, which we believe has positively contributed to our market segment share growth.

Current wording

We are a leading provider of semiconductor system IP, including interconnect and other intellectual property, (collectively, System IP) technology. Our System IP technology manages the on-chip communications and IP block deployments in System-on-Chip (SoC) semiconductors and systems of chiplets. Our leading proprietary System IP products achieve this by connecting client IP blocks such as processors, memories, artificial intelligence/machine learning (AI/ML) accelerators, graphics subsystems, safety and security, and other input/output subsystems (I/Os) via multiple Networks-on-Chips (NoCs) in order for our customers to experience faster SoC targeting, as well as, more efficient, and lower cost solutions. Growth for our solutions is being driven by growing SoC sophistication and associated complexity, now extending into disaggregation of SoCs into systems which implement the communication protocol aspects and partner with industry leading providers like Synopsys, Cadence, Alphawave and others to connect to their die-to-die interfaces. The addition of more processors, channels of memory access, machine learning sections, additional I/Os interface standards, and other subsystems within SoCs is driving the need for more advanced System IP, including NoC interconnect IP’s. The growth in the numbers of these connected on-chip subsystems places an increasing premium on the interconnect IP capability to move data inside complex SoCs. We believe this increase in SoC complexity has created a significant opportunity for sophisticated System IP products that incorporate NoC interconnect IP, SoC Integration Automation software (formerly IP deployment software) and NoC interface IP (consisting of peripheral data transport IP and control plane networks connected to NoC interconnect IPs). Moreover, our technology can also provide more cost-effective solutions and reduce the risks of building and maintaining in-house NoC teams, which we believe has positively contributed to our market segment share growth.

Previous wording

Our SIA solutions, which were significantly enhanced by our acquisition of Magillem Design Services S.A. (Magillem) in 2020, complement our interconnect IP solutions by helping to automate not only the customer configuration of its NoC interconnect but also the process of integrating and assembling all of the customer’s IP blocks into an SoC. Products incorporating our IP are used to carry most of the important data inside complex SoCs for sophisticated applications, including automotive, enterprise computing, communications, consumer electronics, and industrial markets.

Current wording

Our SoC Integration Automation software solutions, which were significantly enhanced by our acquisition of Magillem Design Services S.A. (Magillem) in 2020, complement our interconnect IP solutions by helping to automate not only the customer configuration of its NoC interconnect but also the process of integrating and assembling all of the customer’s IP blocks into an SoC. Products incorporating our IP are used to carry most of the important data inside complex SoCs for sophisticated applications, including automotive, enterprise computing, communications, consumer electronics, and industrial markets.

Previous wording

As of September 30, 2024, we had 258 full-time employees and offices in nine locations in the United States, France, China, South Korea, Japan and Taiwan. As of September 30, 2024, we are taking steps to establish anoffice in Poland. For the three months ended September 30, 2024, we generated revenue of $14.7 million, net loss of $7.7 million, and net loss per share, basic and diluted of $0.20. As of September 30, 2024, we had Annual Contract Value (as defined below) of $56.4 million. During the three months ended September 30, 2024, we had 14 Confirmed Design Starts (as defined below).

Current wording

As of March 31, 2025, we had 270 full-time employees and offices in eleven locations in the United States, France, China, South Korea, Japan, Taiwan and Poland. For the three months ended March 31, 2025, we generated revenue of $16.5 million, net loss of $8.1 million, and net loss per share, basic and diluted of $0.20. As of March 31, 2025, we had Annual Contract Value (as defined below) and Annual Contract Value plus royalties of $62.1 million and $66.8 million, respectively. During the three months ended March 31, 2025, we had 17 Confirmed Design Starts (as defined below).

Previous wording

Our ability to generate revenue from new license agreements, and the timing of such revenue, is subject to a number of factors, risks and contingencies. For new products, the time from initial development until we generate license revenue can be lengthy, typically between one and three years. In addition, because the selection process by our customers is typically lengthy and market requirements and alternative solutions available to customers for IP-based products change rapidly, we may be required to incur significant research and development expenditures in pursuit of new products over extended, multiyear periods of time with no assurance that our solutions will be successfully developed or ultimately selected by our customers. While we make efforts to observe market demand and market need trends, we cannot be certain that our investment in developing and testing new products will generate an adequate rate of return in the form of fees, royalties or other revenues, or any revenues. Moreover, the customer acquisition process has a typical duration of six to nine months; following this, a customer’s chip design cycle is typically between one to three years and may be delayed due to factors beyond our control, which may result in our customer’s product not reaching the market until long after we entered into a contract with such customer. Customers typically start shipping their products using our interconnect IP solutions between one to five years following completion of their product design, known as mass production, at which point we start to receive royalties; this typically lasts for up to seven years depending on the market segment. Any significant delay in the ramp-up of volume production of the customer’s products into which our product is designed could adversely affect our business due to delayed or significantly reduced revenues. Further, because the average selling prices of our products may decline over time, we consider new license agreements and new product launches to be critical to our future success and anticipate that for our newer products, we are and will remain highly dependent on market demand timing and revenue from new license agreements.

Current wording

Our ability to generate revenue from new license agreements, and the timing of such revenue, is subject to a number of factors, risks and contingencies. For new products, the time from initial development until we generate license revenue can be lengthy, typically between one and three years. In addition, because the selection process by our customers is typically lengthy and market requirements and alternative solutions available to customers for IP-based products change rapidly, we may be required to incur significant research and development expenditures in pursuit of new products over extended, multiyear periods of time with no assurance that our solutions will be successfully developed or ultimately selected by our customers. While we make efforts to observe market demand and market need trends, we cannot be certain that our investment in developing and testing new products will generate an adequate rate of return in the form of fees, royalties or other revenues, or any revenues. Moreover, the customer acquisition process has a typical duration of six to nine months; following this, a customer’s chip design cycle is typically between one to three years and may be delayed due to factors beyond our control, which may result in our customer’s product not reaching the market until long after we entered into a contract with such customer. Customers typically start shipping their products using our interconnect IP solutions between one to five years following completion of their product design, known as mass production, at which point we start to receive royalties; this typically lasts for up to seven years depending on the particular market. Any significant delay in the ramp-up of volume production of the customer’s products into which our product is designed could adversely affect our business due to delayed or significantly reduced revenues. Further, because the average selling prices of our products may decline over time, we consider new license agreements and new product launches to be critical to our future success and anticipate that for our newer products, we are and will remain highly dependent on market demand timing and revenue from new license agreements.

Previous wording

Demand for our interconnect IP solutions and associated royalty revenue is highly dependent on market conditions in the end markets in which our customers operate. These end markets, which include the automotive, enterprise computing, communications, artificial intelligence and machine learning, consumer electronics, and industrial markets, are subject to a number of factors including end-product acceptance and sales, competitive pressures, supply chain issues and general market conditions. For example, our revenue has been supported by the increased need for more complex SoCs to enable sophisticated automated driving. If the demand in this market continues to grow, we anticipate it will continue to have a positive impact on our revenue. In contrast, if general market conditions deteriorate or other factors occur, such as supply chain issues and global trade restrictions resulting in fewer semiconductors utilizing our IP solutions being available for sale, our revenue would be adversely affected.

Current wording

Demand for our interconnect IP solutions and associated royalty revenue is highly dependent on market conditions in the end markets in which our customers operate. These end markets, which include the automotive, enterprise computing, communications, artificial intelligence and machine learning, consumer electronics, and industrial markets, are subject to a number of factors including end-product acceptance and sales, competitive pressures, supply chain issues and general market conditions. For example, our revenue has been supported by the increased need for more complex SoCs to enable sophisticated automated driving. If the demand in this market continues to grow, we anticipate it will continue to have a positive impact on our revenue. In contrast, if general market conditions deteriorate or other factors occur, such as supply chain issues and global trade restrictions resulting in fewer semiconductors utilizing our IP solutions being available for sale, our revenue would be adversely affected. Further, royalty revenue can be significantly impacted period to period due to changing trends in consumer spending, especially as it relates to the automotive market.

Previous wording

Our revenue from period to period can be impacted by the terms of the agreements we enter into with our customers. For example, in 2023, we made certain changes to SIA agreements that result in the ratable recognition of the related license revenue over the contract term. As a result of how these contracts are structured and the revenue is recognized, our revenue in thethree and nine months ended September 30, 2024 may not be comparable to future periods if we do not enter into similar contractual agreements. Further, a meaningful percentage of our revenue is generated through royalty payments. Because the time between a new license agreement win and the customer’s end product being sold can be substantial, with sales of the end product being subject to a number of factors outside our control, our revenue from royalties is difficult to predict. As a result of the foregoing, revenue may fluctuate significantly from period to period and any increase or decrease in such revenue may not be indicative of future period-to-period increases or decreases.

Current wording

Our revenue from period to period can be impacted by the terms of the agreements we enter into with our customers. As a result of how these contracts are structured and the revenue is recognized, our revenue in thethree months ended March 31, 2025 may not be comparable to future periods if we do not enter into similar contractual agreements. Further, a meaningful percentage of our revenue is generated through royalty payments. Because the time between a new license agreement win and the customer’s end product being sold can be substantial, with sales of the end product being subject to a number of factors outside our control, our revenue from royalties is difficult to predict. As a result of the foregoing, revenue may fluctuate significantly from period to period and any increase or decrease in such revenue may not be indicative of future period-to-period increases or decreases.

Previous wording

We believe our growth has been and will continue to be driven by technology trends in our end markets. For example, the requirements of smaller die size, lower power consumption, a higher frequency of operation and management of critical net latency in a timely and cost-effective manner for on-chip processing in the automotive, enterprise computing, communications, consumer electronics, and industrial markets has resulted in increased SoC design complexity for chips used in these markets. This trend in turn has created increased demand for in-licensing commercial semiconductor design IP, which in turn has positively impacted our revenue and growth.

Current wording

We believe our growth has been and will continue to be driven by technology trends in our end markets. For example, the requirements of smaller die size, lower power consumption, a higher frequency of operation and management of critical net latency in a timely and cost-effective manner for on-chip processing in the automotive, enterprise computing, communications, consumer electronics, and industrial markets have resulted in increased SoC design complexity for chips used in these markets. This trend in turn has created increased demand for in-licensing commercial semiconductor design IP, which in turn has positively impacted our revenue and growth.

Previous wording

We believe our products’ global footprint provides us with the opportunity to enter new markets and accelerate our growth. For thenine months ended September 30, 2024, 63.4% of our revenue was derived from sales to customers outside of the United States and 30.0% of our revenue was derived from customers located in China, respectively. For 2023, 65.4% of our revenue was derived from sales to customers outside of the United States and 31.1% of our revenue was derived from customers located in China. While we believe operating internationally has beneficially impacted our results of operations, we are subject to inherent risks attributed to operating in a global economy. Further, our international operations have been, and may in the future continue to be, subject to restrictive government regulations. For example, U.S. export regulations, including regulations announced October 7, 2022 and further amended effective November 17, 2023, that impose broad end-use and other restrictions on doing business with certain customers and facilities in China that develop or produce semiconductor chips or manufacturing equipment, may limit or adversely impact our ability to license or support our products to entities in or doing business with certain advanced AI or “supercomputer” design companies, foundries and manufacturers of assemblies and components in China. As a result of these restrictions, our customers may experience changes to or delays in their design projects, and we may face challenges to maintain our revenue and/or our revenue may decrease.

Current wording

We believe our products’ global footprint provides us with the opportunity to enter new markets and accelerate our growth. For thethree months ended March 31, 2025, 60.1% of our revenue was derived from sales to customers outside of the United States and 25.1% of our revenue was derived from customers located in China, respectively. For 2024, 62.3% of our revenue was derived from sales to customers outside of the United States and 29.2% of our revenue was derived from customers located in China. While we believe operating internationally has beneficially impacted our results of operations, we are subject to inherent risks attributed to operating in a global economy. Further, our international operations have been, and may in the future continue to be, subject to restrictive government regulations. For example, U.S. export regulations, including regulations announced on October 7, 2022 (as further amended), that impose broad end-use and other restrictions on doing business with certain customers and facilities in China that develop or produce semiconductor chips or manufacturing equipment, may limit or adversely impact our ability to license or support our products to entities in or doing business with certain advanced AI or “supercomputer” design companies, foundries and manufacturers of assemblies and components in China. As a result of these restrictions, our customers may experience changes to or delays in their design projects, and we may face challenges to maintain our revenue and/or our revenue may decrease.

Previous wording

We define Annual Contract Value (ACV) for an individual customer agreement as the total fixed fees under the agreement divided by the number of years in the agreement term. Our total ACV is the aggregate ACVs for all our customers as measured at a given point in time. Total fixed fees include licensing, support and maintenance and other fixed fees under IP licensing or software licensing agreements but exclude variable revenue derived from licensing agreements with customers, particularly royalties. ACV was $56.4 million and $52.3 million as of September 30, 2024 and 2023, respectively. In addition, total ACV plus royalties was $60.5 million and $57.3 million as of September 30, 2024 and 2023, respectively. ACV plus royalties is calculated based on ACV and the trailing-twelve-months variable royalties and other revenue. We monitor ACV to measure our success and believe the increase in the number shows our progress in expanding our customers’ adoption of our platform. We believe ACV provides investors with useful information to assess the strength and trajectory of our business as growth demonstrates the expansion of customer adoption of our platform. ACV fluctuates due to a number of factors, including the timing, duration and dollar amount of customer contracts.

Current wording

We define Annual Contract Value (ACV) for an individual customer agreement as the total fixed fees under the agreement divided by the number of years in the agreement term. Our total ACV is the aggregate ACVs for all our customers as measured at a given point in time. Total fixed fees include licensing, support and maintenance and other fixed fees under IP licensing or software licensing agreements but exclude variable revenue derived from licensing agreements with customers, particularly royalties. ACV was $62.1 million and $53.5 million as of March 31, 2025 and 2024, respectively. In addition, total ACV plus royalties was $66.8 million and $58.2 million as of March 31, 2025 and 2024, respectively. ACV plus royalties is calculated based on ACV and the trailing-twelve-months variable royalties and other revenue. We monitor ACV to measure our success and believe the increase in the number shows our progress in expanding our customers’ adoption of our platform. We believe ACV provides investors with useful information to assess the strength and trajectory of our business as growth demonstrates the expansion of customer adoption of our platform. ACV fluctuates due to a number of factors, including the timing, duration and dollar amount of customer contracts.

Previous wording

We define Confirmed Design Starts as when customers confirm their commencement of new semiconductor designs using our interconnect IP and notify us. Confirmed Design Starts is a metric management uses to assess the activity level of our customers in terms of the number of new semiconductor designs that are started using our interconnect IP in a given period. Our interconnect IP and NoC interface IP customer base contributed to a total of 14 and 22 design starts during the three months ended September 30, 2024 and 2023, respectively. We believe that the number of Confirmed Design Starts is an important indicator of the growth of our business and future royalty revenue trends.

Current wording

We define Confirmed Design Starts as when customers confirm their commencement of new semiconductor designs using our interconnect IP and notify us. Confirmed Design Starts is a metric management uses to assess the activity level of our customers in terms of the number of new semiconductor designs that are started using our interconnect IP in a given period. Our interconnect IP and NoC interface IP customer base contributed to a total of 17 and 21 design starts during the three months ended March 31, 2025 and 2024, respectively. We believe that the number of Confirmed Design Starts is an important indicator of the growth of our business and future royalty revenue trends.

Previous wording

The RPO amount is intended to provide visibility into future revenue streams. We expect RPO to fluctuate up or down from period to period for several reasons, including amounts, timing, and duration of customer contracts, as well as the timing of billing cycles for each contract. Our RPO was $78.4 million and $62.5 million as of September 30, 2024 and 2023, respectively.

Current wording

The RPO amount is intended to provide visibility into future revenue streams. We expect RPO to fluctuate up or down from period to period for several reasons, including variations in amounts, timing, and duration of customer contracts, as well as the timing of billing cycles for each contract. Our RPO was $88.9 million and $74.7 million as of March 31, 2025 and 2024, respectively.

Previous wording

Revenue: Our revenue is primarily derived from licensing intellectual property, licensing software, support and maintenance services, professional services, training services, and royalties. Our agreements often include other service elements including training and professional services which were immaterial for thethree and nine months ended September 30, 2024 and 2023, respectively.

Current wording

Revenue: Our revenue is primarily derived from licensing intellectual property, licensing software, support and maintenance services, professional services, training services, and royalties. Our agreements often include other service elements including training and professional services which were immaterial for both thethree months ended March 31, 2025 and 2024.

Previous wording

Besides Application Engineer Support Services, support and maintenance services also consist of a stand-ready obligation to provide technical support and software updates over the support term. Generally, the first-year of technical support and software updates are bundled with and into the license fee with a customer option to renew additional years of support throughout the license term. However, we may continue to provide technical support and software updates throughout the license term even if the customer does not renew these services in subsequent years, making the license term and support and maintenance term co-terminus.

Current wording

Application Engineer Support Services are integral and fundamental to the customer’s ability to derive its intended benefit from the IP. Besides Application Engineer Support Services, support and maintenance services also consist of a stand-ready obligation to provide technical support and software updates over the support term. Generally, the first year of technical support and software updates are bundled with and into the license fee with a customer option to renew additional years of support throughout the license term. However, we may continue to provide technical support and software updates throughout the license term even if the customer does not renew these services in subsequent years, making the license term and support and maintenance term co-terminus.

Previous wording

Revenues that are derived from the sale of a licensee’s products that incorporate our IP are classified as royalty revenues. Royalty revenues are recognized during the quarter in which the sale of the product incorporating the IP occurs. Royalties are calculated either as a percentage of the revenues received by a licensee’s sale of products incorporating the IP or on a per unit basis, as specified in the agreements with the licensees. For a majority of our royalty revenues, we receive the actual sales data from our customers after the quarter ends and account for it as unbilled receivables. When we do not receive actual sales data from the customer prior to the finalization of our financial statements, royalty revenues are recognized based on our estimation of the customer’s sales during the quarter.

Current wording

Revenues that are derived from the sale of a licensee’s products that incorporate our IP are classified as royalty revenues. Royalty revenues are recognized during the quarter in which the sale of the product incorporating the IP occurs. Royalties are calculated either as a percentage of the revenues received by a licensee’s sale of products incorporating the IP or on a per unit basis, as specified in the agreements with the licensees. For the majority of our royalty revenues, we receive the actual sales data from our customers after the quarter ends and account for it as unbilled receivables. When we do not receive actual sales data from the customer prior to the finalization of our financial statements, royalty revenues are recognized based on our estimation of the customer’s sales during the quarter.

Previous wording

Our SIA products and CSRCompiler product arrangements provide customers the right to software licenses, software updates and technical support. The software licenses are time-based licenses with terms generally ranging from one to three years. These arrangements generally have two distinct performance obligations that consist of transferring the licensed software and the support and maintenance service. Support and maintenance services consist of a stand-ready obligation to provide technical support and software updates over the support term. Revenue allocated to the software license is generally recognized at a point in time upon the later of the delivery date or the beginning of the license period, and revenue allocated to support services is recognized ratably over the support term. Certain SIA solutions contracts include termination rights that allow the customer to cancel and receive a pro-rata refund on support and maintenance services at the end of each month of the contract period, which results in a ratable recognition of the related license revenue over the contract term.

Current wording

Our SoC Integration Automation software products and CSRCompiler product arrangements provide customers with the right to software licenses, software updates and technical support. The software licenses are time-based licenses with terms generally ranging from one to three years. These arrangements generally have two distinct performance obligations that consist of transferring the licensed software and the support and maintenance service. Support and maintenance services consist of a stand-ready obligation to provide technical support and software updates over the support term. Majority of our SoC Integration Automation software solutions contracts include termination rights that allow the customer to cancel and receive a pro-rata refund on support and maintenance services at the end of each month of the contract period, which results in a ratable recognition of the related license revenue over the contract term.

Previous wording

Provision for (benefit from) income taxes: Our income tax provision consists primarily of income taxes in certain foreign jurisdictions in which we conduct business and includes foreign non-recoverable withholding taxes. We have a full valuation allowance against our U.S. federal and state deferred tax assets as the realization of the full amount of these deferred tax assets is uncertain, including net operating loss carryforwards and tax credits related primarily to research and development. We expect to maintain this full valuation allowance until it becomes more likely than not that the deferred tax assets will be realized.

Current wording

Provision for income taxes: Our income tax provision consists primarily of income taxes in certain foreign jurisdictions in which we conduct business and includes foreign non-recoverable withholding taxes. We have a full valuation allowance against our U.S. federal and state deferred tax assets as the realization of the full amount of these deferred tax assets is uncertain, including net operating loss carryforwards and tax credits related primarily to research and development. We expect to maintain this full valuation allowance until it becomes more likely than not that the deferred tax assets will be realized.

Previous wording

Revenue from licensing, support and maintenance increased $1.4 million for the three months ended September 30, 2024 when compared to the three months ended September 30, 2023. The increase was primarily due to new license arrangements with existing customers. Growth in our variable royalty revenue was primarily due to an increase in production from existing customers.

Current wording

Revenue from licensing, support and maintenance increased $3.6 million for the three months ended March 31, 2025, compared to the three months ended March 31, 2024. The increase was primarily due to new license arrangements with existing customers. Growth in our variable royalty revenue was primarily due to an increase in product sales of certain existing customers. Other revenue decreased primarily due to revenue from professional services that was recognized during the three months ended March 31, 2024, which did not repeat during the three months ended March 31, 2025.

Previous wording

R&D expenses increased, $0.9 million, or 8%, to $11.9 million for the three months ended September 30, 2024 from $11.0 million for the three months ended September 30, 2023. The increase in R&D expenses was due to higher employee-related costs of $0.4 million primarily attributable to increased engineering headcount to support our continued growth and investment in our interconnect technology and SIA solutions. We also incurred higher stock-based compensation expense of $0.4 million primarily related to new grants in 2024.

Current wording

R&D expenses increased, $1.0 million, or 9%, to $11.9 million for the three months ended March 31, 2025 from $10.8 million for the three months ended March 31, 2024. The increase in R&D expenses was due to higher employee-related costs of $0.7 million, including stock-based compensation expense. We also received lower grants of $0.2 million by our subsidiary in France for R&D projects and incurred higher professional fees of $0.1 million.

Previous wording

G&A expenses remained relatively flat for the three months ended September 30, 2024 when compared to the three months ended September 30, 2023.

Current wording

G&A expenses remained relatively flat for the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

Previous wording

Interest expense remained relatively flat for the three months ended September 30, 2024 when compared to the three months ended September 30, 2023.

Current wording

Interest expense remained relatively flat for the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

Previous wording

Loss from equity method investment was $2.1 million for the nine months ended September 30, 2024, compared to $2.5 million for the nine months ended September 30, 2023, representing our proportionate share of Transchip’s net loss during the trailing nine months ended June 30, 2024. The decrease in loss from equity method investment was primarily due to Transchip recognizing higher revenue during the trailing nine months ended June 30, 2024, compared to the trailing nine months ended June 30, 2023. Such losses are expected to continue in the near future.

Current wording

Loss from equity method investment remained relatively flat for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. Such losses are expected to continue in the near future.

Previous wording

Provision for income taxes for the nine months ended September 30, 2024 was $1.3 million, compared to $0.5 million for the nine months ended September 30, 2023. The increase in our income tax expense was due to a change in the forecasted geographic mix of worldwide earnings which are taxed at different statutory tax rates, the impact of losses in jurisdictions which have full valuation allowances, and changes in current year foreign withholding taxes. Foreign withholding taxes are generally assessed on gross revenue generated, rather than pre-tax income, in certain countries in which the Company does not file an income tax return.

Current wording

The provision for income taxes was $0.3 million for the three months ended March 31, 2025 compared to $0.4 million for the three months ended March 31, 2024. The decrease in our income tax expense was due to a change in the forecasted geographic mix of worldwide earnings which are taxed at different statutory tax rates, the impact of losses in jurisdictions which have full valuation allowances, and changes in current year foreign withholding taxes. Foreign withholding taxes are generally assessed on gross revenue generated, rather than pre-tax income, in certain countries in which the Company does not file an income tax return.

Previous wording

Since inception, we have financed operations primarily from payments received from our customers, the net proceeds from the sale of our common stock in the IPO as well as the net proceeds from the private issuance of our convertible preferred stock and common stock. As of September 30, 2024, we had$48.7 million in cash and cash equivalents and short-term investments of which $1.8 million was held by our foreign subsidiaries. In addition, as of September 30, 2024, we also had$5.8 million in long-term investments.

Current wording

Since inception, we have financed operations primarily from payments received from our customers, the net proceeds from the sale of our common stock in the IPO as well as the net proceeds from the private issuance of our convertible preferred stock and common stock. As of March 31, 2025, we had$42.3 million in cash and cash equivalents and short-term investments of which $2.0 million was held by our foreign subsidiaries. In addition, as of March 31, 2025, we also had$12.8 million in long-term investments.

Previous wording

Cash flows from operating activities may vary significantly from period to period depending on a variety of factors including the timing of our receipts and payments. Our ongoing cash outflows from operating activities primarily relate to payroll-related costs, payments for professional services, obligations under our property leases and design tool licenses. Our primary source of cash inflows is receipts from our customers. The timing of receipts of accounts receivable from customers is based upon the completion of agreed milestones or agreed dates as set forth in the contracts.

Current wording

Cash flows from operating activities may vary significantly from period to period depending on a variety of factors including the timing of our receipts and payments. Our ongoing cash outflows from operating activities primarily relate to payroll-related costs, payments for professional services and obligations under our property leases. Our primary source of cash inflows is receipts from our customers. The timing of receipts of accounts receivable from customers is based upon the completion of agreed milestones or agreed dates as set forth in the contracts.

Previous wording

For the nine months ended September 30, 2024, net cash provided by operating activities was $1.9 million, primarily due to our net loss of $25.4 million, adjusted for non-cash charges of $15.1 million and $12.3 million changes in operating assets and liabilities. Non-cash charges primarily consisted of stock-based compensation of $11.8 million, depreciation and amortization of $2.5 million and loss from our equity method investment of $2.1 million, partially offset by amortization of deferred income of $0.9 million and net accretion of discounts on available-for-sale securities of $0.5 million. The drivers of the changes in operating assets and liabilities were a $8.8 million increase in deferred revenue, a $3.3 million decrease in accounts receivable and a $1.5 million increase in accrued expenses and other liabilities, partially offset by a $1.2 million increase in prepaid expense and other assets.

Current wording

For the three months ended March 31, 2025, net cash provided by operating activities was $2.9 million, primarily due to our net loss of $8.1 million, adjusted for non-cash charges of $5.7 million and $5.2 million of changes in operating assets and liabilities. Non-cash charges primarily consisted of stock-based compensation of $4.3 million, depreciation and amortization of $0.8 million and loss from our equity method investment of $0.8 million, partially offset by amortization of deferred income of $0.3 million and net accretion of discounts on available-for-sale securities of $0.1 million. The drivers of the changes in operating assets and liabilities were a $10.3 million decrease in accounts receivable, partially offset by a $2.0 million decrease in accrued expenses and other liabilities, a $1.9 million decrease in deferred revenue, a $0.9 million increase in prepaid expense and other assets and a $0.3 million decrease in accounts payable.

Previous wording

For the nine months ended September 30, 2023, net cash used in operating activities was $12.8 million primarily due to our net loss of $26.3 million, adjusted for non-cash charges of $14.1 million and $0.5 million changes in operating assets and liabilities. Non-cash charges primarily consisted of stock-based compensation of $11.0 million, loss from our equity method investment of $2.5 million and depreciation and amortization of $2.2 million, partially offset by amortization of deferred income of $0.9 million and net accretion of discounts on available-for-sale securities of $0.7 million. The drivers of the changes in operating assets and liabilities were a $3.2 million increase in accounts receivable, a $0.5 million increase in prepaid expense and other current assets and a $0.2 million decrease in accounts payable, offset by a $1.9 million increase in deferred revenue and a $1.5 million increase in accrued expenses and other liabilities.

Current wording

For the three months ended March 31, 2024, net cash provided by operating activities was $0.5 million, primarily due to our net loss of $9.4 million, adjusted for non-cash charges of $4.8 million and $5.1 million of changes in operating assets and liabilities. Non-cash charges primarily consisted of stock-based compensation of $3.7 million, loss from our equity method investment of $0.8 million and depreciation and amortization of $0.8 million, partially offset by amortization of deferred income of $0.3 million and net accretion of discounts on available-for-sale securities of $0.2 million. The drivers of the changes in operating assets and liabilities were a $0.3 million increase in accounts receivable, partially offset by a $3.4 million increase in deferred revenue, a $0.9 million increase in accrued expenses and other liabilities, a $0.5 million increase in accounts payable and a $0.5 million decrease in prepaid expense and other current assets.

Previous wording

Net cash used in investing activities for the nine months ended September 30, 2023 was $3.3 million, primarily attributable to purchases of property and equipment, available-for-sale securities and certificate of deposit, partially offset by proceeds from maturities of available-for-sale securities.

Current wording

Net cash used in investing activities for the three months ended March 31, 2025 was $0.1 million, primarily attributable to purchases of available-for-sale securities and property and equipment, partially offset by proceeds from maturities of available-for-sale securities and certificate of deposit.

Previous wording

Net cash provided by investing activities for the nine months ended September 30, 2024 was $2.9 million, primarily attributable to proceeds from maturities of available-for-sale securities and certificate of deposit, partially offset by purchases of available-for-sale securities and property and equipment.

Current wording

Net cash provided by investing activities for the three months ended March 31, 2024 was $11.9 million, primarily attributable to proceeds from maturities of available-for-sale securities and certificate of deposit, partially offset by purchases of available-for-sale securities and property and equipment.

Previous wording

Net cash used in financing activities for the nine months ended September 30, 2024 was $0.7 million, primarily attributable to principal payments under vendor financing arrangements, partially offset by proceeds from exercise of stock options.

Current wording

Net cash used in financing activities for the three months ended March 31, 2025 was $0.1 million, primarily attributable to principal payments under vendor financing arrangements, partially offset by proceeds from exercise of stock options.