Q - Arteris,

ARTERIS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS

Arteris, Inc. was incorporated in Delaware on April 12, 2004. Arteris, Inc. and its subsidiaries (collectively, the Company or Arteris) develop, license, and support the on-chip interconnect fabric technology used in System-on-Chip (SoC) designs for a variety of devices and in the development and distribution of Networks-on-Chip (NoC) interconnect intellectual property (IP). The Company also provides software and services to enable efficient deployment of NoC IP, IP support & maintenance services, professional services and training and on-site support services. The Company is headquartered in Campbell, California and has offices in the United States, France, Poland, Japan, South Korea, Taiwan and China.

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (GAAP) for interim financial information and do not include all disclosures normally required in annual consolidated financial statements prepared in accordance with GAAP. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2024 and the related notes included in the Company’s Form 10-K filed on February 18, 2025 (2024 Form 10-K) with the U.S. Securities and Exchange Commission (SEC). The December 31, 2024 condensed consolidated balance sheet was derived from the audited consolidated financial statements as of that date. In management’s opinion, the unaudited interim consolidated financial statements have been prepared on the same basis as the annual financial statements and reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the unaudited condensed consolidated financial statements.

The operating results for the three and six months ended June 30, 2025 are not necessarily indicative of the results to be expected for the full year or any other future interim or annual period.

Principles of Consolidation

The unaudited condensed consolidated financial statements include the accounts of Arteris, Inc. and its wholly-owned subsidiaries. All intercompany transactions and accounts have been eliminated.

Segment Information

The Company operates as a single operating segment. The chief operating decision maker (CODM) is the Company’s Chief Executive Officer, who makes resource allocation decisions and assesses performance based on financial information presented on a consolidated basis, accompanied by disaggregated revenue information. Accordingly, the Company has determined that it has a single reportable segment and operating segment.

Use of Estimates

The preparation of the unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Such estimates relate to, among others, revenue recognition, the useful lives of assets, assessment of recoverability of property, plant and equipment, fair value of investments, impairment of the equity method investment, fair values of goodwill and other intangible assets, including impairments, leases, allowance for credit losses, deferred tax assets and related valuation allowance, stock-based compensation, potential reserves relating to litigation and tax matters, collectability of certain receivables, fair value and amortization of deferred income, as well as other accruals or reserves. Actual results could differ from those estimates and such differences may be material to the unaudited condensed consolidated financial statements.

Cash, Cash Equivalents and Restricted Cash

The Company considers all highly liquid investments purchased with original maturities of three months or less from the purchase date to be cash equivalents. The Company’s cash equivalents include deposits in money market accounts which were unrestricted as to withdrawal or use and are stated at fair value. The Company’s cash equivalents occasionally include certificates of deposit. As of June 30, 2025, cash and cash equivalents consisted primarily of checking, savings, money market accounts and highly liquid investments with original maturities of three months or less. Interest earned on cash and cash equivalents is included in other income (expense), net in the unaudited consolidated statements of operations.

As of both June 30, 2025 and December 31, 2024, the Company’s restricted cash balance was $0.4 million, primarily related to a letter of credit for its facility lease agreement. Restricted cash, current is included in prepaid expenses and other current assets and restricted cash, noncurrent is included in other assets on the consolidated balance sheets.

Concentrations of Credit Risk

Financial instruments that potentially subject us to concentration of credit risk consist of cash and cash equivalents, investments and accounts receivable. Cash is currently held in three financial institutions that the Company believes are creditworthy. Cash held at these financial institutions generally exceed federally insured limits. The Company is exposed to credit risk in the event of default by the financial institution holding its cash, cash equivalents, and investments to the extent recorded in the balance sheet. The Company has not experienced any losses to date related to these concentrations.

The Company’s accounts receivable are derived principally from revenue earned from customers located in Americas, Europe, Middle East and Asia Pacific regions.

Accounts receivable from the Company’s major customers representing 10% or more of total accounts receivable was as follows:

• Customer accounted for less than 10% of total accounts receivable at period end.

During the three months ended June 30, 2025 the Company entered into an ordinary course, long-term license agreement with Customer A with standard payment and other customary terms.

Revenue from the Company’s major customers representing 10% or more of total revenue was as follows:

• Customer accounted for less than 10% of total revenue during the period.

Significant Accounting Policies

There have been no significant changes to the Company’s significant accounting policies during the six months ended June 30, 2025 from those disclosed in the annual consolidated financial statements for the year ended December 31, 2024.

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, which amends the guidance in Accounting Standard Codification (ASC) Topic 740, Income Taxes. This ASU is intended to improve the transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures. This ASU is effective for fiscal years beginning after December 15, 2024. The adoption of ASU 2023-09 does not have a significant impact on the Company’s annual consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses, and in January 2025, the FASB issued ASU 2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures, to provide disaggregated disclosures of specific expense categories underlying certain income statement expense line items on an annual and interim basis. ASU 2024-03, as clarified by ASU 2025-01, is effective for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027. The Company is currently evaluating the impact of adopting these ASUs on its consolidated financial statements and disclosures.

3. REVENUE

Disaggregated Revenue

The following table shows revenue by product and services groups (in thousands):

Contract Balances

The following table provides information about accounts receivable, net, contract assets and deferred revenue (in thousands):

The Company recognized revenue of $14.0 million and $11.5 million for the three months ended June 30, 2025 and 2024, respectively, and $25.5 million and $20.6 million for the six months ended June 30, 2025 and 2024, respectively, that was included in the deferred revenue balance at the beginning of the respective periods. Contract assets, current are included in prepaid expenses and other current assets on the consolidated balance sheets.

As of June 30, 2025, non-cancelable contracted but unsatisfied or partially satisfied performance obligations that have not yet been recognized were $95.8 million which includes deferred revenue, amounts that will be invoiced and recognized as revenues in future periods and Flexible Spending Accounts (FSA) commitments, from customers where actual product selection and quantities of specific products are to be determined by customers at a future period. The Company expects to recognize $48.2 million of this balance over the next 12 months and the remainder thereafter. FSA commitments amounted to $6.0 million and $2.3 million as of June 30, 2025 and December 31, 2024, respectively. The Company has elected to exclude the potential future royalty receipts from these amounts.

Costs of Obtaining a Contract with a Customer

Incremental costs of obtaining a contract with a customer consist primarily of direct sales commissions incurred upon execution of the contract. These costs are required to be capitalized under ASC 340-40, Other Assets and Deferred Costs—Contracts With Customers, and amortized over the license term. As direct sales commissions paid for term extensions are commensurate with the amounts paid for initial contracts, the deferred incremental costs for initial contracts and for term extensions are recognized over the respective contract terms. Total capitalized direct commission costs were as follows (in thousands):

Amortization of capitalized sales commissions was $0.9 million for both the three months ended June 30, 2025 and 2024, and $1.7 million and $1.8 million for the six months ended June 30, 2025 and 2024, respectively, and are included in sales and marketing expense in the unaudited condensed consolidated statements of operations.

4. NET LOSS PER SHARE

The following table presents the calculation of basic and diluted net loss per share attributable to common stockholders (in thousands, except share and per share data):

Since the Company was in a loss position for all periods presented, the diluted earnings per share was equal to the basic earnings per share as the effect of potentially dilutive securities would have been antidilutive.

The following table summarizes the potentially dilutive securities that were excluded from the calculation of diluted earnings per share because they would be anti-dilutive:

5. INVESTMENTS

The following tables summarize the fair value and amortized cost of the Company’s cash equivalents and available-for-sale securities by major security type (in thousands):

The maturity dates of the Company’s investments are as follows (in thousands):

As of both June 30, 2025 and December 31, 2024, there wereno securities in a continuous net unrealized loss position for more than 12 months. As of both June 30, 2025 and December 31, 2024, the unrealized losses for available-for-sale investments were non-credit related and the Company does not intend to sell the investments that were in an unrealized loss position, nor does it foresee or project that it will be required to sell those investments before recovery of their amortized costs basis, which may be at maturity. Thus, as of both June 30, 2025 and December 31, 2024 no allowance for credit losses or impairment losses for the Company’s investments were recorded.

6. FAIR VALUE MEASUREMENTS

Assets Measured and Recorded at Fair Value on a Non-Recurring Basis

Equity method investments, and certain non-financial assets, such as intangible assets are remeasured at fair value only if an impairment or observable price adjustment is recognized in the current period.

Financial Instruments Not Recorded at Fair Value on a Recurring Basis

Financial instruments not recorded at fair value on a recurring basis include vendor financing arrangements. The carrying value of the vendor financing agreements was $2.5 million and $2.1 million as of June 30, 2025 and December 31, 2024, respectively. The Company’s vendor financing arrangements are classified within Level 2 because these borrowings are not actively traded and have a variable interest rate structure based upon the Company’s incremental borrowing rate. The estimated fair values of these financial instruments approximate their carrying values.

Financial Instruments Recorded at Fair Value on a Recurring Basis

The following tables summarize the Company’s financial assets measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):

Money market funds are highly liquid investments and are actively traded. The fair value is based on quoted prices for identical assets in active markets and therefore classified as Level 1 of the fair value hierarchy.

The Company’s other investments are considered Level 2 financial instruments as their fair values are determined using inputs that are directly or indirectly observable in active or less active markets. There were no transfers between levels during the periods presented.

7. INTANGIBLE ASSETS AND GOODWILL

Intangible assets, net

Intangible assets, net consisted of the following as of June 30, 2025 (in thousands):

Intangible assets, net consisted of the following as of December 31, 2024 (in thousands):

Amortization expense of intangible assets was $0.2 million for both the three months ended June 30, 2025 and 2024 and $0.4 million for both thesix months ended June 30, 2025 and 2024.

The expected future amortization expense of these intangible assets as of June 30, 2025 is as follows (in thousands):

Goodwill

As of both June 30, 2025 and December 31, 2024, goodwill was $4.2 million. No goodwill impairments were recorded during the three and six months ended June 30, 2025 and 2024.

8. LEASES

The Company leases its offices and data center housing space at various locations under non-cancelable operating lease agreements expiring at various dates through 2034. Under the terms of these agreements, the Company also bears the costs for certain insurance, property tax, and maintenance. The terms of certain lease agreements provide for increasing rental payments at fixed intervals.

Total operating lease related costs were as follows (in thousands):

The weighted-average remaining term of the Company’s operating leases was 4.2 years and 3.9 years as of June 30, 2025 and December 31, 2024, respectively. The weighted-average discount rate used to measure the present value of the operating lease liabilities was 10.0% as of both June 30, 2025 and December 31, 2024. Cash payments made related to operating lease liabilities were$0.5 million and $0.2 millionfor the three months ended June 30, 2025 and 2024, respectively, and $0.8 million and$0.5 million for the six months ended June 30, 2025 and 2024, respectively.

Maturities of operating lease liabilities as of June 30, 2025 were as follows (in thousands):

9. BORROWINGS

Vendor financing arrangements—The Company has various vendor financing arrangements with extended payment terms on the purchase of software licenses and equipment. In order to determine the present value of the commitments, the Company used an imputed interest rate of 10.0%, which is an estimate based on the Company’s collateralized borrowing rate.

Expected cash flows related to vendor financing arrangements as of June 30, 2025 were as follows (in thousands):

Interest expense from vendor financing arrangements was less than $0.1 million for both the three months ended June 30, 2025 and 2024, and $0.1 million for both the six months ended June 30, 2025 and 2024.

10. COMMITMENTS AND CONTINGENCIES

Letter of Credit—In conjunction with the execution of the operating lease for the Company’s headquarters facility, a letter of credit in the amount of$0.4 million was issued and outstanding as of both June 30, 2025 and December 31, 2024. No draws have been made under such letter of credit.

Indemnifications—The Company often enters into limited indemnification provisions in license agreements in the ordinary course of the Company’s licensing business. Pursuant to these provisions, which are often inserted into license agreements in the semiconductor IP and software licensing industries, the Company agrees to indemnify, hold harmless, and reimburse the indemnified parties up to a capped amount for losses suffered or incurred by such indemnified parties due to third-party claims if such claims are determined to be caused by the Company. The term of these indemnification provisions is generally either for a term of years or perpetual, in each case beginning on the execution date of the agreement. The Company has also agreed to indemnify under indemnity agreements with its directors and officers, to the extent legally permissible, against liabilities incurred in connection with any action in which such individual may be involved by reason of such individual being or having been a director or officer, other than certain liabilities arising from willful misconduct of the individual.

The Company has incurred no actual payment obligations from these above-noted indemnification provisions and director and officer indemnity agreements for the three and six months ended June 30, 2025 and 2024 and the unaudited condensed consolidated financial statements do not include liabilities for any potential indemnity-related obligations as of June 30, 2025 and December 31, 2024.

Legal—The Company has been and will continue to be subject to legal proceedings and claims.

In the normal course of business, the Company may receive inquiries or become involved in legal disputes regarding such litigation matters. The resolution of these matters often develops over time and expectations can change as a result of new findings, rulings, appeals or settlement arrangements. These matters are subject to inherent uncertainties and management’s view of these matters may change in the future. Pursuant to ASC 450, Contingencies, the Company makes a provision for a liability relating to legal matters when it is both probable that a liability has been incurred, and the amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, estimated settlements, legal rulings, advice of legal counsel and other information and events pertaining to a particular matter.

Significant judgement is required in both the determination of probability and determination as to whether a loss is reasonably estimable. Intellectual property claims are inherently unpredictable and may have a material adverse effect on the Company’s financial position, results of operations, or cash flows. Due to the inherent uncertainties and complex technical issues arising from this or any intellectual property litigation, the Company cannot predict or guarantee any result of, and cannot reasonably estimate liability if any, or range of loss that could result from such intellectual property litigation. Future revisions to such estimates could materially impact the Company’s results.

In December 2022, the Company received notice of a complaint filed by Network System Technologies, LLC (NST) against the Company and another defendant in the semiconductor industry in the United States District Court for the Western District of Texas. Additional complaints were filed in the Eastern District of Texas against certain companies, including some customers of the Company, asserting among other things patent infringement seeking damages and injunctive relief. On September 4, 2024, the court in the Western District of Texas dismissed all claims against the Company without prejudice. The court will maintain jurisdiction solely for the purpose of enforcing discovery. The Company has not received any new claims involving the Company nor any new customer indemnity claims in connection with the NST litigation. The Company will continue to monitor this matter.

The Company has no material contractual non-cancelable commitments as of both June 30, 2025 and December 31, 2024.

11. STOCK-BASED COMPENSATION

2021 Stock Plan

The Company adopted the 2021 Incentive Award Plan (the 2021 Plan) effective October 26, 2021. The 2021 Plan provides for a variety of stock-based compensation awards, including stock options, SARs, restricted stock awards, RSUs, performance bonus awards, performance stock unit awards, dividend equivalents, or other stock or cash based awards.

Following the effectiveness of the 2021 Plan, the Company will not make any further grants under the Arteris, Inc. 2016 Incentive Plan (the 2016 Plan). However, the 2016 Plan will continue to govern the terms and conditions of the outstanding awards granted under this plan. Shares of common stock subject to awards granted under the 2016 Plan that are forfeited or lapse unexercised and withheld to cover taxes which following the effective date of the 2021 Plan are not issued under the 2016 Plan will be available for issuance under the 2021 Plan.

2022 Employment Inducement Incentive Plan

The Company adopted the 2022 Employment Inducement Incentive Plan (the 2022 Inducement Plan) effective November 3, 2022, pursuant to which it reserved 2,000,000 shares of its common stock. The 2022 Inducement Plan provides for a variety of stock-based compensation awards, including stock options, SARs, restricted stock awards, restricted stock unit awards, performance bonus awards, performance stock unit awards, dividend equivalents, and other stock or cash-based awards. Awards under the 2022 Inducement Plan can only be made to newly hired employees.

Stock Options

The aggregate intrinsic value of the options exercised for the six months ended June 30, 2025 and 2024 was $3.1 million and $3.3 million, respectively. The total grant-date fair value of options vested was $0.2 million for both the six months ended June 30, 2025 and 2024.

As of June 30, 2025, there was $2.1 million of unamortized stock-based compensation cost related to unvested stock options, which is expected to be recognized over a weighted-average period of 3.1 years.

Restricted Stock Units and Awards

The following table summarizes the restricted stock unit activities under the Company’s 2016 Plan, the 2021 Plan and the 2022 Inducement Plan:

The total grant-date fair value of restricted stock units vested was$8.5 million and $8.0 million during the six months ended June 30, 2025 and 2024, respectively.

As of June 30, 2025, there was $34.5 million of unamortized stock-based compensation cost related to unvested restricted stock units, which is expected to be recognized over a weighted-average period of 2.6 years.

2021 Employee Stock Purchase Plan

The Company adopted the 2021 Employee Stock Purchase Plan (the 2021 ESPP) effective on October 26, 2021. The 2021 ESPP enables elig ible employees of the Company to purchase shares of common stock at a discount to fair market value. The 2021 ESPP provides for six-month offering periods beginning May 22 and November 22 of each year, and each offering period consists of asix-month purchase period. The first offering period began on May 22, 2024 and ended on November 21, 2024. During the six months ended June 30, 2025,88,668 shares of common stock were purchased under the 2021 ESPP. As of June 30, 2025,1,882,728 shares of common stock were available for future issuance under the 2021 ESPP.

On each purchase date, eligible employees are entitled to purchase the shares at a price per share equal to 85% of the lesser of (1) the fair market value of our common stock on the offering date or (2) the fair market value of our common stock on the purchase date.

As of June 30, 2025, there was $0.2 million of unamortized stock-based compensation cost related to ESPP, which is expected to be recognized over a weighted average period of 0.4 years.

The fair value of common stock to be issued under the 2021 ESPP is estimated on the first day of the offering period using the Black-Scholes option-pricing model, which uses (i) a risk-free interest rate based on the U.S. Treasury zero-coupon issues for an expected term equivalent to the offering period; (ii) expected term based on the simplified method; (iii) volatility based on historical volatility of the Company’s common stock; and (iv) an expected dividend yield of zero as the Company has never declared or paid any cash dividend and does not currently plan to pay a cash dividend in the foreseeable future.

The following table summarizes the ESPP valuation assumptions:

Stock-based Compensation

Stock-based compensation expense is recorded on a departmental basis, based on the classification of the award holder. The following table presents the amount of stock-based compensation related to stock-based awards to employees on the Company’s unaudited condensed consolidated statements of operations (in thousands):

12. EQUITY METHOD INVESTMENT

On February 21, 2022, Arteris IP (Hong Kong) Ltd. (AHK), a wholly-owned subsidiary of the Company, entered into a Share Purchase and Shareholders Agreement with certain investors and Ningbo Transchip Information Consulting Partnership (Limited Partnership) (Management Co), pursuant to which, the Company, certain investors and Management Co subscribed to the registered capital of Transchip Technology (Nanjing) Co., Ltd. (Transchip). The Company’s ownership interest in Transchip’s registered capital was 35.0% on a fully diluted basis as of June 30, 2025. The Company’s loss from its proportionate share of its equity method investment in Transchip was $0.8 million and $0.7 million for the three months ended June 30, 2025 and 2024, respectively, and $1.6 million and $1.5 million for the six months ended June 30, 2025 and 2024, respectively.

The Company reviews its investment in Transchip for impairment if and when circumstances indicate that a decline in fair value below its carrying amount may have occurred. Since Transchip’s formation, it has incurred losses financed primarily through investor capital. Transchip's ability to continue its operations is dependent upon raising additional capital, which it is currently expected to be able to raise. After completing an impairment assessment based on the prevailing facts and circumstances, the Company determined that the impairment condition was not considered other than temporary. As such, no impairment charge was recognized during the three months ended June 30, 2025. If adequate funding is not obtained, an impairment charge may be recorded.

13. INCOME TAXES

The Company’s effective tax rate was (6.9)% and (8.2)% for the six months ended June 30, 2025 and 2024, respectively. The Company’s income tax provision was $1.1 million and $1.3 million for the six months ended June 30, 2025 and 2024, respectively. The change in forecasted foreign withholding tax, changes in the geographic mix of worldwide earnings which are taxed at different rates, and the impact of losses in jurisdictions with full valuation allowances, has resulted in a decrease in the income tax provision for the period ended June 30, 2025 compared to the period ended June 30, 2024.

The Company’s management continuously evaluates the need for a valuation allowance and, as of June 30, 2025, concluded that a full valuation allowance on its federal, state, and certain foreign jurisdictions deferred tax assets was still appropriate.

As of June 30, 2025 and 2024, the Company’s gross liability for unrecognized tax benefits was $3.6 million and $3.5 million, respectively. The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. As of June 30, 2025 and 2024, the Company had immaterial accrued interest or penalties related to its unrecognized tax benefits. If any unrecognized tax benefits are realized, it would not result in any income tax benefit as the Company currently has a full valuation allowance against the deferred tax assets in which there is currently an uncertain tax benefit.

On July 4, 2025, President Trump signed H.R. 1, the One Big Beautiful Bill Act, into law. The Company is currently in the process of analyzing the tax impacts of the law change. In accordance with GAAP, the Company will account for the tax effects of changes in tax law in the period of enactment which is the third quarter of calendar year 2025.

14. RELATED PARTY TRANSACTIONS

The Company defines related parties as directors, executive officers, nominees for director and stockholders that have significant influence over the Company, or are a greater than 10% beneficial owner of the Company’s capital and their affiliates or immediate family members. Transchip, an equity method investee of the Company, is also deemed as a related party.

On November 15, 2024, the Company entered into a design services licensing collaboration agreement with Transchip. This arrangement gives Transchip a non-exclusive license right to make design house offerings using certain of the Company's products. The Company retains the manufacturing and royalty-related rights in relation to the Company’s products used in the design house offerings. During the three months ended March 31, 2025, the Company delivered a three-year term license to Transchip under this arrangement. During the three months ended June 30, 2025, the Company performed a reassessment of the agreement with Transchip in accordance with ASC 606, Revenue from Contracts with Customers. Specifically, the Company reevaluated whether a contract existed under step one of the five step approach, which requires that it is probable that the Company will collect the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer. As a result of this reassessment, the Company concluded that the criteria for the existence of the contract under ASC 606 were not met as of June 30, 2025. Consequently, the previously recognized amounts related to this arrangement were reversed. The reversal resulted in a decrease to both accounts receivable and deferred revenue of $0.7 million. The impact on revenue was not material in any period.

15. SEGMENT AND GEOGRAPHIC INFORMATION

The Company operates inone reportable segment, as more fully described in Note 2. The Company’s CODM reviews and allocates resources using the Company’s financial performance, primarily the net loss presented in the consolidated statements of operations. Other financial performance measures include Annual Contract Value (ACV), ACV plus royalties and remaining performance obligations. The CODM is regularly provided with only the consolidated expenses as noted on the face of the consolidated statements of operations, that are considered as significant expenses. Interest expense and other income (expense), net as presented in the consolidated statements of operations are not considered as significant expenses.