SVCO earnings call analysis

NASDAQ:SVCO Q4 2025 Earnings Call Transcript Generated on 6/6/2026 Operator | Conference Operator: Good afternoon, and welcome to the Sovacos, a fourth quarter fiscal year 2025 conference call. All participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. Please note this event is being recorded. I would now like to turn the conference over to Chris Segarelli, Chief Financial Officer for Sovaco. Please proceed. Chris Segarelli | Chief Financial Officer: Thank you. Joining me on the call today is Wally Rines, Silvaco's CEO and Director. As a reminder, a press release highlighting the company's results along with supplemental financial results are available on our IR site at investors.silvaco.com. An archived replay of the call will be available on this website for a limited time after the call. Please note that during this call, management will be making remarks regarding future events and the future financial performance of the company. These remarks constitute forward-looking statements for purposes of the safe harbor provisions of the Private Securities Litigation Reform Act. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. It is important to also note that the company undertakes no obligation to update such statements except as required by law. The company cautions you to consider risk factors that could cause actual results to differ materially from those in the forward-looking statements contained in today's press release and on this conference call. The risk factors section in SILVACO's annual report on Form 10-K for the year ended 12-31-2024 and the most recent Form 10-Q filing with the Securities and Exchange Commission provide descriptions of these risks. With that, I'd like to turn the call over to our CEO, Wally Rhines. Wally? Wally Rhines | Chief Executive Officer and Director: Thanks, Chris. Good afternoon, and thank you all for joining the call. I'm pleased with our performance in the fourth quarter of 2025. We're executing our turnaround plan faster than anticipated, which can be seen clearly in the numbers. For Q4, we delivered bookings at the high end of the guided range, revenue and gross margin above the high end, and non-GAAP operating expenses at the low end, all resulting in a much lower operating loss than expected in the quarter. Our Q1 guide is strong as well. I'm proud of the team for delivering such strong results and positioning us for a faster than expected recovery in the business. Chris will walk you through the details later in the call. But now, I'll turn to discussing our progress toward the return of the business to a strong, predictable growth. I'd like to start with big news on the AI front. We reached an important milestone in Q4 ahead of our prior expectations. During the quarter, a second customer adopted our AI-driven solution for manufacturing process development known as FTCO. This win was a customer in Asia and is outside of our memory segment. We believe that this win confirms the clear customer value of our AI solution beyond memory and points to significant opportunities ahead. This AI bundle delivered above average bookings and revenue reflecting the high value placed on our unique set of AI capabilities. It's very encouraging to see adoption of our AI solutions faster than expected. In our total TCAD business in Q4, we saw a 70% sequential increase in bookings to $9.2 million and a 34% sequential increase in revenue to $8.7 million, driven by adoption of FTCO by a new customer. We continue to enhance this AI-driven process development platform with new and upgraded features that put more AI features in front of more design and manufacturing engineers to slash their development signs, save money, and enable first-time-rate silicon. We believe that the transition to more AI-enabled sales will be a long-term tailwind to the business. After a soft 2025, We also expect the pace of TCAD contract renewals to accelerate in 2026. These trends support our expectation that the TCAD business will grow sequentially in Q1 and will grow for the full year 2026 as well. In Q4, we also saw a meaningful inflection in the semiconductor IP business. We deliver record IP revenue and bookings of over $5 million in the quarter, driven by our first full quarter of Mixel revenue post-acquisition. Mixel's industry-leading MIFI IP continues to have a strong following globally, led by its reputation for unparalleled quality. We're building on that reputation by leveraging the entirety of the Siwako sales force to drive more growth in Mixel products. We're also broadening our offerings from custom solutions to production ready or PRO products. Our PRO portfolio is silicon proven in nine different foundries and 12 different manufacturing nodes. Mixcel IP has proven to enable up to 35% reduction in dye area and up to 50% reduction in leakage power. The MIPI PHY market It's over $300 million per year, and we still have a relatively modest share. We're positioned for steady growth in this area as we ramp MIPI Pro products, which serve the largest part of the market. Outside of Mixel, Andy Wright, head of Sovaco's IP business, has done a great job of increasing our internal capacity for foundational IP elements, such as memory compilers and standard cells. As we look to the latter part of 2026 and into 2027, we see considerable opportunity to grow these areas given our increase in efficiency. Our IP business continues to be positioned as our fastest grower in 2026. It is already almost 30% of our business as we exit 2025. We expect to continue to deliver steady growth in IP sales across interface and foundational IP elements as well as our acceleration in MIPI. This is a story to watch in 2026. Now turning to EDA, we saw a significant decline in our Q4 bookings and revenue after all time records in Q3. Bookings for Q4 came in at just under $4 million with revenue of 4.4 million. Here, we continue to focus on shifting priority to a handful of core products that we believe can deliver significant growth. One of these focus areas is Javaro, which continues to see relatively strong customer interest and has a strong pipeline for new business potential. Javaro has been adopted by leading companies as it accelerates post-layout SPICE simulations by up to 10x with sign-off accuracy. Javaro and the other core EDA products are well positioned for growth as we focus development, sales, and field application resources on core growth drivers. We expect stability in EDA in the short term and then a return to growth as these new priorities deliver results later in the year. Underlying this improved business performance are the series of restructuring steps that we put in place almost from day one. We drove targeted reductions in support groups as well as in product areas to enable the teams to focus on core growth drivers. We also challenged product and support teams to limit direct customer support work done by business unit R&D staff so that they could focus more on product development. This change alone has had the benefit of simultaneously improving our gross margins while increasing R&D capacity. We also put in place leading AI tools to accelerate our software development. We're continuing to drive other process improvements to continue improving our ability to plan, drive, and execute the business. These changes have been widely embraced across the company, and I look forward to seeing how they continue to accelerate our execution and to delight our customers. And while I'm proud of the team for the significant progress we made in quarter, I want to reiterate that we still have a lot of work in front of us. In the coming quarters, we expect to build on momentum from the fourth quarter. For example, we'll continue to deliver significant growth in our IT business. We can already see evidence of this improvement in a strengthening pipeline, which we expect to convert into strong revenue in 2026. We also see good growth in TCAD, as renewals grow and interest continues to increase around our AI solutions. For EDA, we'll see benefit from our restructuring activities later in the year as we focus on key growth segments. And overall, we expect our AI-driven machine learning capability to change the way semiconductor manufacturing process development is done and to add broad capabilities for fab engineers to improve yields, throughput, and failure analysis. As I said last quarter, Chris and I are firmly committed to an aggressive acceleration of Sivaka's business. We're off to a good start, but the best is yet to come. I'd now like to turn the call over to Chris, who will discuss our financial results and our outlook in more detail. Chris? Chris Segarelli | Chief Financial Officer: Thanks, Wally. Good afternoon, everyone. In Q4, we delivered $18.3 million in bookings near the high end of our guided range. Strength in the quarter came from IP products and our TCAD solutions. IP delivered more bookings in Q4 than it did in the entire year of 2024. IP bookings grew almost five times sequentially as Mixel started to meaningfully contribute to the business. TCAD bookings were also particularly strong, up 70% to 9.2 million with the close of another AI-driven process development win with a large OEM in Asia. Strong bookings helped propel revenue to $18.3 million in the quarter, above the high end of the guided range. TCAD and IP revenue grew strongly in the quarter, up 34% and almost 3x, respectively. IP strength was driven by Mixel, while TCAD strength was driven by our latest FTCO win. EDA, on the other hand, saw a significant sequential decline after setting records in Q3. 65% of revenue in the quarter came from license revenue and the remaining 35% from maintenance and service. From a geographic perspective, we saw the most growth in Q4 from the APEC region, which spiked to 57% of total revenue in the quarter. APEC strength was driven by FTCO. Looking down the P&L, gap gross margin in Q4 was 83.3% and non-gap gross margin was 85.6%. Gross margin increased roughly five full points sequentially and came in well ahead of guidance. As part of our restructuring activities, Wally and I set clear expectations for the field application teams to prioritize customer support, while R&D teams focused primarily on product development. We also drove some reductions in these areas as well. Taken together, these changes resulted in much faster than expected improvement in our gross margin. We believe this trend is sustainable. Gap operating expenses were down almost 8% sequentially to $22 million. Non-gap operating expenses were down 5% sequentially to $16.7 million, below the midpoint of the guided range. This result is more meaningful than it may appear. We think about total spending as the combination of cost of sales and operating expenses. In our business, the majority of cost of sales is the cost of our colleagues supporting customers. From this perspective, our total non-GAAP spending, which combines both cost of sales and operating expenses, trended from $21.3 million in Q3 to $19.3 million in Q4, a sequential decrease of just over 9%. Our guidance indicates that this trend continues in Q1 with a similar level of sequential reduction in total spending. We expect further reductions in Q2. These reductions are ahead of our expectations and reinforce our commitment to driving the business to profitability. We indicated on our last call that we were committed to reducing annualized non-GAAP operating expenses by at least $15 million annually. We now believe that we will deliver $20 million in gross annualized non-GAAP spending reductions. Our guiding principle remains the same. We intend to turn the business profitable at flat revenue, Achieving this goal will create a strong foundation for future profitable growth. GAAP operating loss improved quarter over quarter to a $6.8 million loss. Non-GAAP operating loss was just over $1 million, well ahead of Q3 and ahead of expectations. GAAP net loss in the quarter was $7.2 million, and GAAP EPS was a $0.24 loss. Non-GAAP net loss in the quarter was $0.8 million, and non-GAAP EPS was a $0.03 loss. Next, turning to the balance sheet and cash flow. Cash and marketable securities at quarter end was $18.3 million, including $8.3 million of restricted cash due to the Nangate settlement. Given that we have executed cost reductions ahead of prior expectations and given strength in bookings and revenue, our underlying burn rate, net of one-time items, has declined significantly in Q1. We expect that the $10 million of unrestricted cash on the balance sheet as of year end will support operations as we drive to positive operating cash flow later in the year. We expect to approach operating cash flow breakeven in Q2 and to see positive operating cash flow in Q3. Now, turning to guidance. For Q1 2026, we expect bookings of between $15 and $19 million, revenue of between $15 and $19 million, non-GAAP gross margin of around 85%, and non-GAAP operating expenses of $14.5 to $16.5 million. In closing, we believe that with improved financial discipline and a focus on key growth opportunities, we will set the stage for profitable growth going forward. We would also note that the non-GAAP operating profitability is within the high end of the guided range for Q1. which is ahead of our prior expectations. And with that, operator, we will now take questions. Operator | Conference Operator: Certainly. As a reminder, to ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile our Q&A roster. Our first question will be coming from the line of Craig Ellis of B-Riley Securities. Your line is open, Craig. Craig Ellis | Analyst, B. Riley Securities: Yes, thanks for taking the question, and congratulations on the strong execution team. Wally, I wanted to start one that's a fairly high-level question for you. When you came in, you outlined a number of growth priorities, and it seems like we're off on the right foot as we close out 4Q and 1Q. Can you just go into more detail on where you're happy with the business's execution, and on the two or three things you really want to see the business execute on as we go through the first half of this year. Wally Rhines | Chief Executive Officer and Director: Sure, Craig. I'd be glad to. And it's true. I've now been here for over five months, and I now have a much better perspective on where the opportunities lie, where the weaknesses are, and where we need to move ahead. I think the first thing of note, of course, was that we needed more financial flexibility and so the cost reduction program has been executed well. It's always difficult, but I think morale has improved greatly, and now after the majority of it is over, people are back to work and thinking about new opportunities. The survey of all of the product lines became more detailed as I, this last quarter, met with customers, traveled the world, Asia, Europe. I spent time with our Mixcel employees in Egypt. I spent time in India with new customers. I've come to the conclusion that we have an incredible long-term opportunity driven by artificial intelligence and the whole change that's underway in how process development is done and how wafer fab engineers and product engineers optimize their processes, optimize their manufacturing, find defects, look for yield problems. And that, I think, builds well on the core manufacturing capability of Silvaco and provides the long-term growth engine. The thing that I was particularly pleased by, though, was in the short term, such strength in IP. driven, as Chris indicated, by the strength of the Mixel business, but also the rest of the IP product line, as Andy Wright has brought in new disciplines, made it more efficient, greatly increased our capacity, and the great marriage that came by joining a well-seasoned, significant sales force with a negligible sales force at Mixel, has produced a very promising outlook for very rapid growth for the IP business in the year ahead. EDA, while it is down, has selected good opportunities. Jabarro is a category killer and is, in fact, a sign-off tool at least one major company and then at a slew of other very leading semiconductor companies, and it's one of a handful of EDA products that can provide not only the strength of contract renewals going forward, but some potential for growth. But it's going to be a stabilization issue in the short term and then growth in the longer term. So summarizing, great long-term opportunity in the evolution of TCAD to the next generation of AI-driven process development, great-looking short-term IP business, driven by Mixcel, but complemented by the efficiencies in the existing business, and a good stable base of key targeted products in EDA, which although they won't grow in the short term, they provide a strong renewal base of revenue, and it makes me very glad that I joined Zolaco. Craig Ellis | Analyst, B. Riley Securities: That's really helpful, Wally. Thank you. Chris, I'll direct a follow-up to you. in part a clarification and then in part a question that the clarification for the NICE Asia Foundry FTCO deal. Did that fully rep rack in the first quarter or is that a multi-quarter rep rack and can you provide any color there? And then the second part of the question, love the incremental expense the team is able to achieve going from 15 million to 20 million. Can you give us some color on where you're realizing that incremental $5 million in savings? Thank you. Chris Segarelli | Chief Financial Officer: Yep. Craig, happy to do it. So from a REVREC perspective, the FTCO win, it was not all recognized in Q4. So a significant amount of it was recognized. The rest of it will run over the term of the contract. And as you saw, good momentum in FTCO leads to good numbers. in TCAD, good, strong growth sequentially. And as Wally was indicating, we're seeing, you know, incremental interest there, a good pipeline on FTCO, you know, a lot to be excited about as we look at new FTCO opportunities, you know, through this year and beyond. In terms of cost savings, I think, you know, we laid it out last call that obviously we were, you know, incrementally more focused on support organizations, for example. for reductions, but we also, you know, did look across the organization to streamline, reset some org structures, for example, and extract some value. I think for me, Craig, and I pointed it out in the prepared remarks, but I want to emphasize it here. You know, some of our spending does go through cost of sales. So one of the reasons why you saw gross margin perform so well in the quarter and why we think it's sustainable at these levels is is that we were able to have the product teams really focus on product development and have most of the customer support work being done by the field application engineers. And that just leads to a much more cost-effective view on cost of sales. And it also increases capacity on the R&D side where the team can focus more on engineering those new, exciting AI-driven products that Wally was alluding to. So I think it was broad-based, a little bit more on the support side. We have been streamlining. We do think some more cost does you know, come out into Q2. So, you know, I can already confidently say there will be a sequential decline again in Q2. And that's where profitability will, you know, be within our grasp after delivering some pretty good numbers here in Q4. And I think a pretty good guide for Q1. Craig Ellis | Analyst, B. Riley Securities: Good numbers indeed. Thanks, guys. Chris Segarelli | Chief Financial Officer: Thanks, Craig. Operator | Conference Operator: And our next question will be coming from the line of Kevin Gerrigan of Jefferies. Kevin, your line is open. Kevin Gerrigan | Analyst, Jefferies: Yeah, hey, Wally and Chris, let me echo my congrats on the results and all the progress. Hey, Wally, previously you mentioned the adoption process of FTCO was always kind of a gating factor. You know, your second FTCO customer was faster than you expected. So are you able to kind of speed up the adoption process? Or what was the driver of the faster than expected adoption? And can that translate to other engagements? Wally Rhines | Chief Executive Officer and Director: I think our efficiency is, at closing and ramping FTCO customers is going to continuously increase. The initial engagements were very upfront service oriented, a lot of bringing the customer online. This particular one was based both on the vision they could see ahead as well as some initial purchases to get things going. And I think in the future, The message is becoming better honed. Our field sales organization is able to communicate the value. And the pipeline is increasing for the number of customers. So I think I would expect that the time it takes to go from initial engagement to real revenue is going to decrease as we move forward and as people see what the benefits are for applying AI to the next generation of processes. Kevin Gerrigan | Analyst, Jefferies: Okay, perfect. And then, Chris, can you just kind of give us any color on how we should think about bookings by segment in Q1? Should we expect it to be more kind of TCAD-driven and SIP versus EDA? Chris Segarelli | Chief Financial Officer: Yeah, that's a good guess, and I would agree with that. We're seeing continued strength in TCAD, sequentially in Q1, so that's a very strong story. You know, IP, after delivering really good numbers in Q4, it's in the same range, maybe down a slight tick. And EDA feels flattish sequentially. So yes, a good TCAD uplift in Q1. Kevin Gerrigan | Analyst, Jefferies: Okay, perfect. I appreciate the color and congrats again on all the results. Operator | Conference Operator: Thanks. And our next question would be coming from the line of Robert Mertens of TD Cohen. Your line is open, Robert. Robert Mertens | Analyst, TD Cowen: Hi, this is Robert on for Chris. Thanks for taking my questions. Maybe just to go back to the FTCO product, just how you're thinking about the new customers ramp through the year and your older customer, if you expect any acceleration of orders in calendar year 26 or more of the upside could be a 27 story. Wally Rhines | Chief Executive Officer and Director: Yeah. Well, if you want me to take that, I guess you were talking to Chris first, but the way the pipeline is shaping up, we expect it to be a 2026 story. We have enough additional customers in the queue, and I'd point out that there are two elements to this TCAD growth sector. One is the people who are traditional TCAD users, and We have a strong renewal contract, a strong queue of contract renewals that provide growth in the base business. The SDCO is really a different thing. It's how you shift and develop processes in a totally different way. It doesn't really head-on compete with our traditional PCAD business. It's really a different business. And as more and more people are realizing that, then it's not something where we have much direct competition with customers. It's just the case of selling the value of moving to a new paradigm for process development. And we're just being helped along a great deal by all the NVIDIA publicity and the people talking about tools, Anthropic, OpenAI, and so on, where everyone's looking and saying, how is my world going to change? And the people who've done or used TCADs to develop and optimize their processes in the past are asking that question, and so we just need to be there with an answer that they can act upon quickly, and it seems to be going very well. Robert Mertens | Analyst, TD Cowen: Great. Got it. Thank you. Operator | Conference Operator: And our next question will be coming from the line of Christian Schwab of Cray-Halem Capital Group. Your line is open, Christian. Christian Schwab | Analyst, Craig-Hallum Capital Group: Great, thanks. Solid results. I just have one quick question. Can you give us an idea of what you're anticipating, either percentage-wise or dollar-wise, in growth from the MixLX acquisition in 25 versus 26? Craig Ellis | Analyst, B. Riley Securities: I can take that one. Chris Segarelli | Chief Financial Officer: Feel free to add more color if you'd like. I mean, as you saw sequentially from Q3 to Q4, From a booking standpoint, IP grew $4 million sequentially. A good piece of that was from Mixel. And if you just annualize that quarterly performance, you can get a sense of what that business is doing, call it approaching double digits. And then, as Wally said, there's the PRO or PRO products, and there's increased efficiency within the team and leveraging of the sales force. So we think growth comes from there, but that gives you a sense of, you know, the baseline of where they're coming from and how we do see that growing sequentially into this year. And, you know, more momentum probably in the second half is what I'd say as we lay the groundwork for really supporting those pro products that we just recently announced. Christian Schwab | Analyst, Craig-Hallum Capital Group: Great. Wally Rhines | Chief Executive Officer and Director: Go ahead, Wally. Sorry. Wally, and thanks for that quote. Between that and strong TCAD year, We really expect to deliver double-digit revenue growth in the current calendar year. Great. Christian Schwab | Analyst, Craig-Hallum Capital Group: That was going to be my next question. Thanks for answering it. No other questions. Thank you. Operator | Conference Operator: Okay. As a reminder, to ask a question, please press star 1-1 on your touchtone telephone and wait for your name to be announced. Again, if you'd like to ask a question, please press star 1-1 Our next question will be coming from the line of Dennis Piasci of Needham & Company. Your line is open, Dennis. Dennis Piasci | Analyst, Needham & Company: Great. Thank you very much. So my first question is basically about your three segments. So performance-wise, what do you think we can expect from all of these in 2026? Do you think you could provide some sort of color that's either quantitative or qualitative in nature in terms of which ones would do better than the other? Wally Rhines | Chief Executive Officer and Director: Okay. As we indicated in the summary, the really large percentage growth will come in IP. But the core business of TCAD continues, will be strong. It's a profitable growing business. And so it's, while not the fastest grower in the coming year, it will grow just as Chris indicated. The third is, will grow less. had a record growth this past year, and that's EDA. So we expect it to simply be stable, a good part of the business, having strong renewals, but the growth of individual products will be slower. So fastest growth, IP, second fastest, TCAD, and the new FCCO, which is almost a totally different business from TCAD, and then IP, third. I'm sorry, he had EDA, sir. Dennis Piasci | Analyst, Needham & Company: Yeah, no, that's great. Thank you. And then, so for my second question, I think you mentioned that you're going to be doing like an incremental $5 million in annualized OPEX reduction. Can you tell us what is this additional source of savings that you found? Chris? Chris Segarelli | Chief Financial Officer: Yeah, no, I can speak to that. I mean, we were always executing this as broad streamlining and cost reduction effort within the company. Last call, we said at least $15 million But as we've been working through the synergies, we found some good opportunities in SG&A, for example, to really streamline and kind of focus the team on activities. And we've also found some opportunities in selected businesses as well. I think for me, this is all part of that broader strategy of getting the business profitable at flat revenue. You can see with the reductions in OpEx in Q4, which was faster than expected, a continuation into Q1, and it will continue into Q2. This is just showing that move towards profitability. And then as we hit the growth drivers that Wally was alluding to, there's a lot of profitable growth that comes from that kind of upside once we kind of get that firm foundation in place. So expect some incremental reductions to go from here. As Wally indicated, most of it has already been executed. There is a little bit more And that's kind of what you see in the coming quarters in terms of sequential reduction. Dennis Piasci | Analyst, Needham & Company: Understood. Much appreciated. Thank you. Operator | Conference Operator: And I am showing no further questions. I would now like to turn the call back to Wally for closing remarks. Wally Rhines | Chief Executive Officer and Director: Well, we thank you all for joining us today. It's been a great quarter for us, and our outlook is strong and getting very exciting here. We look forward to talking to you again in the near future, and thank you again for joining us today. Operator | Conference Operator: And this concludes today's program. Thank you for participating. You may now disconnect. jsPDF 3.0.3 D:20260606090443-00'00'

NASDAQ:SVCO Q3 2025 Earnings Call Transcript Generated on 6/6/2026 Operator | Conference Operator: Good afternoon and welcome to Sovaco's third quarter fiscal year 2025 conference call. All participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. Please note this event is being recorded. I would now like to turn the conference over to Greg Bignif, investor relations for Sovaco. Please proceed. Greg Bignif | Investor Relations, Sovaco: Thank you. Joining me on the call today are Wally Rines, Sovaco's CEO and director, and Chris Zegarelli, Sovaco's CFO. As a reminder, a press release highlighting the company's results along with supplemental financial results and an earnings presentation are available on the company's IR site at investors.savaco.com. An archived replay of the call will be available on this website for a limited time after the call. Please note that during this call, management will be making remarks regarding future events and the future financial performance of the company. These remarks constitute forward-looking statements for purposes of the safe harbor provisions of the Private Security Litigation Reform Act. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. It is important to also note that the company undertakes no obligation to update such statements except as required by law. The company cautions you to consider risk factors that could cause actual results to differ materially from those in the forward-looking statements contained in today's press release, earnings presentation, and on this conference call. The risk factors section in Sivago's annual report on Form 10-K for the year filed 12-31-2024 And the most recent form, 10Q, filing with the Securities and Exchange Commission, provide descriptions of these risks. With that, I'd like to turn the call over to the Silvaco CEO, Wally Rines. Wally? Good afternoon. Wally Rines | CEO and Director, Sovaco: I'm pleased to be part of Silvaco, and I look forward to regular communication with you, our investors. Since I became CEO, I've engaged with customers, employees, and investors who provided invaluable feedback on our strengths challenges, and most importantly, the road ahead. The conclusion is clear. Silvaco is a company with great potential, supported by a rich history, dedicated core customers, and strong foundational elements. Two broader themes came out of these discussions. First, our success requires us to focus on key products that are sufficiently differentiated to become leaders in their respective categories of use. Achieving this requires reduced attention on mature products and concentrated focus on a limited number of growth opportunities. I can see multiple areas where this shift in focus will pay off, namely in AI, interconnect IP, and power. Second, it's clear that Silvaco allows spending since the IPO to grow much faster than revenue. This was also clear to me from day one. We've already taken steps to reverse this trend to strengthen our financials, and to free up resources needed to accelerate growth. I'm confident that these two areas, strategic focus on core growth drivers and financial discipline, are the keys to strengthening the business and delivering profitable growth. I'll provide more color on the first, and Chris will walk you through the second. Stepping into the CEO role at Tabaco is like deja vu all over again for me. When I joined Mentor Graphics as CEO in 1993, the company had failed to meet expectations for many quarters. None of Mentor's products were number one in their category, the company was not profitable, and cash conservation was an issue. During my time at Mentor, I learned a great deal about the EDA business. Closed dozens of acquisitions, grew market value more than 10x before acquisition by Siemens, substantially increased profitability and developed and grew a number of products, including Caliber and Tessent, which by themselves generated most of the company's profits. I find Selvaco in a similar position to where I find Mentor. The company has failed to meet expectations after the IPO, it's not yet profitable, and the products are not number one in their markets except in some very specialized categories. I believe that my Mentor playbook can be applied to Selvaco. The first step is focusing on two key areas, financial and operational discipline, and focusing on select core growth drivers. We believe the key to reinvigorating the business lies in focusing on the right markets with differentiated solutions to solve critical customer challenges. We have a very clear example of this in Silvaco's AI machine learning product for process development called FTCO. Silvaco created this unique AI product that gives customers a valuable tool to solve real manufacturing challenges. This single product enabled Silvaco to establish a partnership with Micron. It will also be one of our foundational growth drivers looking forward. We can learn from FTCO as an example of building disruptive technology that can create meaningful value for our customers and for us. Another example is Mixel. the acquisition that closed in the third quarter. With Mixel, we expect the IP business to grow rapidly. Customers have nothing but praise for Mixel's perfect quality and responsiveness. And Andy Wright, our new head of the IP business, has breathed life and growth into the rest of Selvaco's once small IP business. I see synergies emerging that exceed our initial expectations. The Selvaco sales force will become a force multiplier for Mixcel, while the rest of the Silvaco IP business is learning from the world-class development processes that have earned Mixcel such praise in the industry. My expectation is that the legacy Silvaco businesses can and will learn from Mixcel best practices. In the EDA business, as in TCAD, we have years of legacy products, many of which continue to generate significant maintenance revenues. These can generate steady revenue with little cost if we increase the cost discipline in our business. Skilled engineers who support the mature products continue to add features and enhancements long after the products have stopped achieving new design wins. In general, the customers neither want nor do they adopt the new versions of the software. Only a small amount of resources required to keep the products useful and skilled engineers can be moved to products with growth opportunities providing them with increased motivation and excitement. One example of a growth product that solves key customer problems is Javaro. It's been adopted by companies like NVIDIA, Samsung, SK Hynix, and many others to accelerate post-layout SPICE simulations by more than a factor of 10 with sign-off accuracy. Looking across Silvaco, solutions that include AI, power analysis, and interconnect IP are consistently winning new customer engagements. As we de-emphasize areas that are subscale or generating immaterial new revenue, we can free up resources to accelerate our stronger products, including FTCO and TCAD. Our success also depends on establishing fiscal and operational discipline. The data speaks for itself. Since our company's IPO, financial performance has been disappointing. Revenue growth has lagged peers and operating expenses have grown much faster than revenue. Underestimation of the time and effort required to bring on the new FTCO customers produced disappointing results for what should be the key growth franchise. The fact that expenses have grown much faster than revenue is another problem. Expense reduction has therefore become our top priority. We've initiated a significant cost reduction program at the beginning of the quarter. Chris and I have set a clear expectation with the team that we'll drive the business to profitability at current revenue levels so that growth can produce incremental profit. Chris will discuss these actions and early progress on this goal in more detail. Operational discipline also requires a strong focus on execution. We've added several key new leaders to the team in the last few months, including our CFO, heads of the IP and EDA businesses, and our head of business development. The energy I see in this team is exactly what we need to create a culture of speed and high-quality execution. I see a team that's not satisfied with the status quo and one that wants to win. With our renewed focus on core growth drivers, we'll be able to invest at the right levels in the right areas to ensure that we close gaps with competitors and establish Silvaco as the leading name in EDA for our targeted growth segments including AI, Power, and Interconnect IP. Another contributor to the company's underperformance has been delays in integrating and extracting value from our two most recent M&A transactions. For Mixel, we underestimated the time required to activate the sales resources in Salvaco and to establish new modes of distribution, including off-the-shelf sales of non-customized IP. For TechX, growth remains dependent on overall market adoption of its plasma and optical solutions. Focus on this effort should accelerate realization of the value that TechX brings. Looking forward, we expect both Nixell and TechX to contribute meaningful growth in 2026. We remain optimistic on the longer-term contributions of both of these acquisitions. Now, taking a step back, there's a lot of value and strength from Silvaco's rich history. The company continues to benefit from the fact that users of EDA software are reluctant to change, and older products continue to generate maintenance revenue long after growth from new customers has slowed. This gives us a stable foundation upon which to build. It also gives us many compelling assets with which to focus and grow. We have a lot of work in front of us. In the coming quarters, we expect to right-size the business, streamline the portfolio, and focus on key growth segments to enable us to deliver steady, profitable growth. We recognize it will take some time for you to see this redoubled focus in the numbers. I encourage you to watch for OPEX to trend flat to down, gross margins to improve, and evidence of growth starting to materialize in 2026. Chris and I are firmly committed to an aggressive acceleration of Silvaco's business. I'm looking forward to increased personal interaction with Silvaco customers. We appreciate your support as we execute on these growth plans. I'm confident that we will deliver strong results as this new strategy is implemented. I'd now like to turn the call over to Chris, who will discuss our financial results and the outlook in more detail. Chris Zegarelli | CFO, Sovaco: Chris? Thanks, Wally. Good afternoon, everyone. Silvaco delivered record quarterly revenue in bookings in Q3. Bookings increased 131% year over year to $22.8 million. Strength in the quarter was driven by closing a significant EDA contract with one of our core customers in the United States. Revenue came in at 18.7 million, up 70% year over year. 74% of revenue in the quarter came from license revenue and the remaining 26% from maintenance and service. EDA saw the most growth sequentially in Q3, while TCAD and IP trended down slightly. From a geographic perspective, We saw the most growth in Q3 from the Americas, which spiked to 55% of total revenue in the quarter. APAC represented 40% of total revenue. EMEA stayed flattish and at 5% of revenue in the quarter. Looking down the P&L, gap gross margin in Q3 was 77.9%, up 326 basis points year over year, and non-gap gross margin was 81.5%, up 179 basis points year-over-year. Gross margin improvement was driven by growth in revenue exceeding growth in cost of sales. Going forward, we expect gross margin to benefit from our cost reduction plans. GAAP operating loss expanded year-over-year but improved slightly quarter-over-quarter to a $9.3 million loss. Non-GAAP operating loss was $2.3 million, down slightly year-over-year. Gap net loss in the quarter was $5.3 million, up from the $6.6 million loss posted in the same period last year. Non-gap net loss in the quarter was $2.1 million, down slightly from the $1.8 million loss posted in the same period last year. Gap EPS was an $0.18 loss, and non-gap EPS was a $0.07 loss. Next, turning to the balance sheet and cash flow. Cash and marketable securities was $27.8 million, including $12.4 million of restricted cash due to the Nangate settlement. Cash used in operating activities was $7.8 million. Remaining performance obligations, or RPO, at quarter end stood at $48 million, with 54% expected to be recognized as revenue within the next 12 months. With UPX at more than 50% year-over-year and cash down since the IPO, we have begun implementing a broad cost reduction program. We began with an early retirement incentive program in the U.S. and Asia and an early lever program in Europe. We are taking other steps in addition to these programs, including reducing office footprints, reducing discretionary spend, and minimizing use of consultants and contractors. These steps, when taken together and when fully implemented, are expected to reduce annualized non-GAAP operating expenses by at least $15 million annually. We also anticipate these actions to drive an increase in gross margin, enabling more leverage from future growth. Our guiding principle from Wally is to turn the business profitable at flat revenue. Achieving this goal will create a strong foundation for future profitable growth. Now, turning to guidance. For Q4 2025, we expect bookings of $15 to $19 million, revenue of $14 to $18 million, non-GAAP gross margin in the range of 78% to 82%, and non-GAAP operating expenses of $16 to $18 million. In closing, we believe that with improved financial discipline and a focus on key growth opportunities, we will set the stage for profitable growth going forward. And with that, operator, we will now take questions. Operator | Conference Operator: Thank you. Ladies and gentlemen, if you have a question or a comment at this time, please press star 1-1 on your telephone. If your question has been answered or you wish to move yourself from the queue, please press star 1-1 again. We'll pause for a moment while we compile our Q&A roster. Our first question comes from Craig Ellis with B Raleigh Securities. Your line is open. Craig Ellis | Analyst, B. Riley Securities: Yeah, thanks for taking the question and appreciate all the color team. Wally, I wanted to start with you and it's a higher level question relating to your transition from the board to the CEO role. It sounds like in a fairly short amount of time at that lower level of detail, you've got a real confident grasp of what you've got in the portfolio, both things that are advantaged in the marketplace and and other businesses that have lost their advantage. And you talked about mixing out some revenue. One, is that read correct? And two, how significant is the revenue mix-out that is ahead of the company? Wally Rines | CEO and Director, Sovaco: Well, thanks, Craig. Yes, indeed. Being on the board, you really don't get the level of visibility down to individual products and people that are making the difference in the company or that holding us up from making further progress. So it's the last few months now have given me the opportunity to see that in a lot of detail. I think your assessment is correct. There is substantial opportunity ahead. There are specific things that I'm quite certain will grow. And then there are others that could grow given the right level of focus. But as I noted and as Chris noted in his comments, we've let the expense base grow faster than the revenue And that's been a limiter in the available resources we can put on these key growth areas. And so going forward, while painful, I think we will be able to right that trend and be able to free up the resources we need to take advantage of some very specific areas of strength. And with that, I think we can restore confidence that CELVACO can do what it was originally intended to do as we went public. Craig Ellis | Analyst, B. Riley Securities: Excellent. Chris, I'll ask the follow-up question to you. It's a two-parter. One, you did a good job speaking to the geographic areas where you hope to take about $15 million out of the business. So the tactical question is, over what time period should we expect that to occur and the The more strategic question is, as you've been in and have had a chance to assess the systems, the processes that are in place, the forecasting mechanisms, given the difficulty the business had in delivering forecasts, how do you feel about the dashboard that's in place for you and Wally? And do you feel like it's one that today can can deliver reliable results or are there some things you need to do to make either system or people or process changes so that the business can forecast more accurately? Thank you. Chris Zegarelli | CFO, Sovaco: Very good question, Craig, and thanks so much for that. Both questions are good. From a time period perspective, the way that we're looking at it, you should expect most of the cost to be out by the end of this year. But that means you won't see as much of the impact in Q4, but you should see a reduction in OPEX in Q1. And then the rest of it should be throughout the rest of 2026. So expect to see a step down in Q1 OPEX as most of it is out by the end of the year. And fair question on the forecasting methodologies and tools as well. That's something that Wally and I looked at almost immediately from day one. And I'll tell you, the tools are in place. We do see the data, the pipeline. is robust. We do review what is expected in the coming quarters. So I'm confident that what we've given is something we have high visibility into and something that we're confident in. But that being said, Craig, you know me. I think there are things we can do to further improve and build upon that, and that's something that I'll be working on with the team. But I'm confident that what you heard from us is something we're confident in and we will deliver on. Operator | Conference Operator: Excellent. Thanks, Chris. Thanks, Wally. One moment for our next question. Our next question comes from Charles Shi with Needham & Company. Your line is open. Charles Shi | Analyst, Needham & Company: Good afternoon, Wally, Chris. First off, Wally, never thought that we're going to have a conversation like this. But once again, looking forward to working with you and Chris. So maybe the first question, maybe for Wally, I understand the priority probably is to, if I may, just to get the housing order. But Wally, you mentioned about Caliber, you mentioned about the test and those were the two successful products of Mentor, which were based, are basically the golden standard for the industry. I think it would be ideal for some of the Silvaco products to get there. What do you think, what kind of products in the portfolio today has the potential to get to what the caliber is, what the test is today? And by the way, how do you get there? The reason why I ask this is I did read your bibliography. And I knew, you know, it takes probably both effort and maybe you need a little bit of luck to really get there. But time has changed. And what's your thought there in that question? Yeah, thank you. Wally Rines | CEO and Director, Sovaco: Yeah, well, thank you, Charles. It's good to talk again. We've been talking over many years. And you're right, when I just joined MENTOR, you initiated the work that developed Caliber and we did an acquisition that was the basis for Tessin, and yet it took quite a long time before those became the dominant industry standards in their space. I believe the way you do this is you start out with a focused market and a focused set of customers and see something that you can be the leader in. And so I've been searching within Silvaco where are the seeds that can lead to the same kind of success. A good example is where they've taken tools that were really created for IC design and applied them to displays, for example, and the manufacturing of those displays where they build a franchise with six different display companies using the same flow. Once you build a franchise that's dominant or, excuse me, that is the leader in that area, then you expand to next areas. So you asked me, where do I see that potential? Well, as I mentioned, that in the earlier comments, the Silvaco has been very early into actually building machine learning models around process development. And it's a market that others haven't been chasing. It's relatively specialized, and it takes a lot of work, and you need a TCAD foundation to build upon, so that eliminates the number of companies that could do it. But I think that's the kind of basis that can lead to a franchise, that can lead to an industry-leading product. Similarly, if you're in the IP business, being a supplier of general purpose IP may generate revenue, but it doesn't generate market advantage and profitability at the same level as if you pick specific types of IP and become the leader. So I think the acquisition of Mixel was well thought out clearly in MIPI. There are only two major suppliers. They have a strong reputation. And then you say, okay, well, what comes beyond? There are lots of IO standards that they can expand into. Plus, there's the existing Sovaco business that's really quite successful, actually has more demand than we can currently service in areas like memory compilers and even in the standard cell-based libraries. So, and lastly, of course, I mentioned the area of power where Silvaco models I've found for silicon carbide, gallium nitride, and other things form a foundation for differentiated products. My strategy, do what others aren't doing. Pick things you can do better than anyone else. Build upon those franchises, and that's indeed exactly what I plan to do here at Silvaco. Charles Shi | Analyst, Needham & Company: Thanks, Wally. You partially answered my second question, but I do want to maybe just double down on that to get a little bit more color. Speaking of Mixel, I know you just closed the deal last quarter, but it sounds like you think highly of the team, of the product. I wonder if you can walk us through again what exactly they do. I think I can see the press release, but what exactly they do that make you think this is a high-quality product, a high-quality team, and what makes you think it's actually the benchmark for the rest of the Sylvaco team, as you mentioned it very much? Wally Rines | CEO and Director, Sovaco: Thanks. Yes. And I'm basing that. on customer feedback, talking to actual users, asking them what they think. And they're quite specific in saying if all of Silvaco produced the kind of quality and the execution to schedule and other things that Mixcel had, we would be champions of the IP business. So it's not just my impression talking to people. It's my conclusion from dealing with customers. And looking at the track record, 27 years and they've never had a customer find a bug in their IP, really admirable. And another aspect is they have the vast majority of the people that are developing the products and supporting them are based in Cairo, Egypt. I have a long history there at Mentor. I started the group, and it became a very valuable resource to us for having cost-effective engineers who are very well-educated, very experienced, The Cairo University and have programs in EDA. And I found that's a very good basis to build upon. So put it all together, I think it's a great acquisition. I think you will see substantial growth next year because of that. And I think the interaction with Mixcel will greatly improve the performance of the existing Silvaco business. And the two together will cause substantial growth in the coming year. Operator | Conference Operator: One moment for our next question. Our next question comes from Blair Abernathy with Rosenblatt Securities. Your line is open. Blair Abernathy | Analyst, Rosenblatt Securities: Hi, thanks for taking my call, guys. I appreciate it. I'm sorry I missed the very beginning of the call, but I wanted to ask a little bit about the pipeline. And Wally, you know, I know you've only... really been getting into the weeds of it for a couple of months now, but how are you thinking about the pipeline of the business as it stands? And is the FTCO, how is that looking to you? I know it's a longer sales cycle, but how does that opportunity look from your standpoint at this point? Wally Rines | CEO and Director, Sovaco: Yeah, well, first, with regard to the overall pipeline, there is a large base of very mature products that produce pretty stable maintenance revenue and give the opportunity to grow each year. So roughly half our total business can be generated just from those renewals which don't require an enormous amount of effort. The rest of the business requires more direct effort and I think it's been highlighted before that the FTCO is a big opportunity. It's a big opportunity because Silvaco has gotten ahead of the game and because Silvaco has a teacher customer in Micron who's been quite vocal about expressing the value of it. The disappointing part is it's evolved very slowly. There was a continuing expectation last year that we would announce additional customers. That hasn't occurred. And the reason it hasn't occurred is there is an adoption process that requires an extensive amount of interaction with the customer, customizing it to the uniqueness of their processes, and so it requires a funnel of customer opportunities and then a lot of resource to go with it. So disappointment in how quickly it's arisen, optimism at what it can become, and how it can take AI into one more branch of EDA that other people are not focusing on, that Silvaco can and has the base business in TCAD to build upon and create success as we bring on those additional customers. Blair Abernathy | Analyst, Rosenblatt Securities: Okay, great. Thank you for that. And then, Chris, just on the expense savings, you know, is this out of a core business? Is there any of the acquisitions that you did this year that are impacted by that? And just to clarify, you said that you'll be completely done by the end of this fiscal? Chris Zegarelli | CFO, Sovaco: So a majority of it will be, we believe a majority of it will be out by the end of this fiscal year. So by the end of the year, you won't see the benefit of that really until Q1, just from a full quarters perspective. And then the rest of it will come out, you know, through the 2026. It is, cost areas are pretty broad. For example, you know, McSell had an office in California. We have a headquarters in California. So we can put those two together and kind of save costs there. We'll reduce office footprints in other places. You know, it's mostly what I would call the core Silvaco side of the business is kind of what we're looking at when we do these actions. So it's, again, to get us to right size the cost structure and then help us be more nimble and focus on growth. Blair Abernathy | Analyst, Rosenblatt Securities: Okay, great. Thanks very much, guys. Operator | Conference Operator: One moment for our next question. Our next question comes from Chris Sankar with TD Cowan. Your line is open. Chris Sankar | Analyst, TD Cowen: Thanks for taking my question. And Wally, welcome back. And nice to have a seasoned operator at the helm. Thank you. I had two questions. Maybe the first one for Chris. When you look at Biden, it looks like the revenues are looking a little lighter. And, you know, I thought the Q4 season is strong for you. And if I look at the full year revenue guide, it's only up like 2% despite all the acquisitions. So I'm kind of wondering, are there any idiosyncratic things in Q4 or what is going on? I'm going to follow up for Wally. Chris Zegarelli | CFO, Sovaco: Okay. No, that's a very fair question. So when we look at Q4, I think you're right. I mean, in Q3, you know, the Mixel acquisition, for example, was a nominal addition to revenue, as you can see in the numbers. It'll be a stronger contributor in 2026. There is some sequential growth there in Q4, but it'll be stronger next year. TechX is more of a stronger grower in 2026 as well. When we look at next quarter, I mean, you saw the EDA strength in Q3. Based on how we recognize revenue, EDA will step down sequentially in Q4, but TCAD and the IT business are expected to increase sequentially, which is how we landed on these numbers. I would just point to what Wally said earlier. I mean, there was some expectation that a second FTCO engagement would materialize sooner than expected. We're still working on several engagements. We're still confident in that, but we're not seeing that in Q4 of this year. Chris Sankar | Analyst, TD Cowen: Got it. Super helpful, Chris. And then, Wally, I'm just kind of curious. Do you have all the pieces of the pie to grow from here, or do you need more M&A to complete the product circle, or is there a goal to increase term-based or software licenses as a percentage of revenue? Wally Rines | CEO and Director, Sovaco: Yeah, we're somewhat limited in the number of acquisitions we can do going forward just based upon the resources we have to do them. So what Chris and I have come down to is look, we need to grow with the existing companies or the existing resources we have. We've done three good acquisitions that will add to growth and the base, the The overall business needs to be stable and growing, but at a lower level. So looking forward, we're planning things around no significant acquisitions for a while now. And that's why, as Chris noted, that we want to be sure that at the current revenue levels, we can be profitable so that the growth we experience, both from these acquisitions and any growth in other parts of the business, will fall through as profitably and create a clear path ahead so we don't have to wait for the time that we accelerate our acquisitions once again. Chris Sankar | Analyst, TD Cowen: Thank you. Operator | Conference Operator: Again, ladies and gentlemen, if you have a question or a comment at this time, please press star 11 on your telephone. Our next question comes from Christian Schwab with Craig Howland Capital Group. Your line is open. Christian Schwab | Analyst, Craig Howland Capital Group: Great. Regarding the $15 million in OPEX reductions on a year-over-year basis, should we assume that kind of comes from the midpoint of your OPEX guidance for this quarter, meaning kind of 68 million minus 15 to get to 53 million. Is 53 million the target or 55 or 51? Is this crystal clear to me? Chris Zegarelli | CFO, Sovaco: This is Chris. I can take that one. So you can look at the midpoint of the guide in Q4 at the starting point. I would just comment that the 15 million will be realized when all of the actions are implemented over the course of 2026. So you wouldn't expect it to be all Q25 to 26. It'll be mostly out by the end of this year. You'll see a benefit in Q1. The rest will play out through the year. And so the full year-over-year impact would be less just given the timing of the reductions. I hope that gives you a good sense of how we're looking at it. Christian Schwab | Analyst, Craig Howland Capital Group: Yeah, that helps. And then on Mixel, it kind of sounded like there was some commentary about you know, time to accelerate sales, et cetera. I know you guys have previously highlighted, you know, that you expected, you know, three to five million in revenue quickly after closing the acquisition, the remainder of 25. I assume you didn't attain that goal. Can you give us an idea of what you do anticipate selling then? Wally Rines | CEO and Director, Sovaco: We didn't attain it in the third quarter. We will see more growth in the fourth quarter. And as you alluded to, I think, here, the great machine of profitability in EDA is when you take a company with great product but limited distribution and combine it with a company that has worldwide distribution and maybe not as much in the way of products. That's the great way that the EDA industry grew. That's how Cadence started by acquiring ECAD and then built upon it And the same thing is true here. I think Mixel is a great example. They have basically one sales person producing the level of revenue that they have today. You combine that with our sales force and the inevitable result is that we can keep them fully loaded with demand and then they can continue to add resource and grow the revenue. So it's almost a perfect model for the kind of acquisition for which there is leverage for a company like Silvaca. Christian Schwab | Analyst, Craig Howland Capital Group: Great. And then my last question, you know, more longer term, you know, on a multi-year timeframe basis, you know, given the product set that you have in hand and it sounds like no meaningful acquisitions, you know, in the near term, If we never made another acquisition again, what type of top-line growth prospects do you think the company has, like a range of outcomes? Wally Rines | CEO and Director, Sovaco: The longer term clearly needs to be double-digit. We're in an industry that's growing double-digit, and we expect to gain share out in the future, so clearly the long-term target is there. Getting there, we are below that clearly today, And so we'll have to increase as we head through 2026. But I don't think long term is five years away. I think it's much closer. And we can return certainly to low double digits and then in the longer term, mid double digits as we move forward. Christian Schwab | Analyst, Craig Howland Capital Group: Perfect. Thank you. No other questions. Operator | Conference Operator: Again, ladies and gentlemen, if you have a question or a comment at this time, please press star 1 1 on your telephone. And I'm not showing any further questions this time. And as such, this does conclude today's presentation. We thank you for your participation. You may now disconnect and have a wonderful day. jsPDF 3.0.3 D:20260606090444-00'00'

NASDAQ:SVCO Q2 2025 Earnings Call Transcript Generated on 6/6/2026 Operator | Conference Operator: Good afternoon and welcome to ZILVACO's second quarter fiscal year 2025 conference call. All participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To participate, you will need to press star 1-1 on your telephone. You will then hear a message advising your hand is raised. To withdraw your question, simply press star 1-1 again. Please note, this event is being recorded. I would now like to turn the conference over to Greg McNiff, Investor Relations for ZILVACO. Please proceed. Greg McNiff | Investor Relations: Thank you. Joining me on the call today are Babak Tahiri, ZILVACO's CEO, and Dan Shaw, ZILVACO's Director of FP&A. As a reminder, a press release highlighting the company's results, along with supplemental financial results, and an earnings presentation are available on the company's IR site at .zilvaco.com. An archive replay of the conference call will be available on this website for a limited time after the call. Please note that during this call, management will be making remarks regarding future events and the future financial performance of the company. These remarks constitute forward-looking statements for purposes of the safe harbor provisions of the Private Securities Litigation Reform Act. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. It is important to also note that the company undertakes no obligation to update such statements, except as required by law. The company cautions you to consider risk factors that could cause actual results to differ materially from those in the forward-looking statements contained in today's press release, earnings presentation, and on this conference call. The risk factors section in ZILVACO's annual report on Form 10-K for the year ended December 31, 2024, and the most recent Form 10-Q filing with the Securities and Exchange Commission provide descriptions of these risks. With that, I'd like to turn the call over to ZILVACO CEO Babak Tahari. Babak. Babak Tahari | CEO: Thank you, Greg. Hello and welcome to ZILVACO's second quarter 2025 earnings call. I am Babak Tahari, CEO of ZILVACO. Thank you for joining us today. As we report on our financial performance and strategic direction, I want to pause and acknowledge something that doesn't always appear in the numbers. It is our people and investors. I'm not just any people or investors. The ones who remain through our product cycles that stretch into years, the ones who choose to be here when the market shifts, when uncertainty arises, and then the outcomes are not yet realized. The ones who commit to the mission even when the short-term picture is difficult. In the ADA space, where innovation is deep tech and long horizon, progress often demands patience. It's not always easy to stay the course, yet time and again our team does. Not because it's easy or glamorous or immediately rewarding, but because they believe in what we are building. Their loyalty and resilience form a competitive advantage that isn't easily replicated. Now moving to our results, I'm excited to update you on the strong momentum we've built since going public in May of last year. For fiscal year 2024, we delivered a 13% increase in bookings and achieved 10% organic revenue growth over fiscal year 2023. We also added over 46 new customer logos underscoring the growing demand for our software platforms. A core objective of our IPO was to position Silver Echoes for strategic acquisitions that would meaningfully expand our serviceable addressable market or SAM. We launched our acquisition strategy in Q1 of 2025 and have maintained that momentum into this quarter, targeting high growth sectors such as AI, photonics, and high performance compute for edge and data centers. Our first two most recent acquisitions have added more than an estimated $600 million in incremental SAM. Reinforcing our position in fast expanding markets and further diversifying our growth engine. The market response to the strategy has been very encouraging. Our new acquisition from Excel has another $110 million of SAM for us. Revenue for the Q2 came at $12.05 million within our guidance. Likewise, we are maintaining our fiscal year 2025 guidance in the range of $64 to $70 million, representing 7 to 17% year over year growth, which we intentionally set with a conservative approach given the current macroeconomic environment. We are taking a conservative approach on this guidance and did not include the mix of potential upside revenue for the year. We are equally confident in our long term growth trajectory underpinned by strong market demand for organic growth, strategic expansion, and increasing value for our technology stack. Next slide, please. I will now highlight our non-GAAP results for Q2 2025 guidance for Q3 and full year 2025, and our Director of FP&A Dan Schell will discuss our detailed financial results and guidance in his remarks. For Q2 2025, 14% of revenue from 10 new customer purchases in Q2, equivalent of $4.18 million in bookings. 6% of our revenue came from new customer purchases in previous quarters, totaling 20% of land and land expansion in new customers. We had also 40% of revenue from expansion in existing customers. 40% of revenue from renewals, totaling 100% for Q2 2025. For Q3, we are providing the following guidance. Q3 booking guidance of $14 to $18.2 million. Revenue guidance of $14 to $18 million. Non-GAAP GM of 81 to 85%. Non-GAAP OI or loss of minus 3.5 to plus half a million dollars. Non-GAAP net income or loss of minus 12 cents to plus 2 cents per diluted shares. For the full year 2025, we are maintaining our existing guidance. Gross bookings in the range of $67 to $74 million, reflecting an increase of up to 13% year over year. Revenue in the range of $64 million to $70 million, reflecting an increase of up to 17% year over year. Non-GAAP gross margin in the range of 83 to 86%, compared to 86% in 2024. Non-GAAP operating income in the range of $2 million loss to $1 million income, compared to $5.5 million in 2024. Non-GAAP net income per share of up to 3 cents. Please note that this guidance includes the acquisition of Cadence's TBC platform for the full year and TechX for Q2 through Q4. Considering only initial revenue synergies, not including potential land and expand for these acquisitions, nor have they included, makes sell potential revenue at this time. We are strategically expanding our capabilities to meet the evolving needs of our customers, particularly in high growth sectors for design and manufacturing of semiconductors and photonics. At the same time, we are taking disciplining approach to managing operating expenses, cash flow, and liquidity, reflecting a prudent posture in today's macroeconomic environment. This balance between targeted investment and financial discipline positions still lack of to lead in some of the fast growing segments such as AI, high performance compute, memory, power, and photonics while protecting shareholder value and ensuring long term sustainability. Next, I'd like to discuss how to lack of solve semiconductor and photonics challenges facing our customers. Acquisitions expand solutions in key AI markets. Today, we face numerous design and manufacturing challenges, and we believe SILZACO is well positioned to address key AI markets with our organic strategies and our recent acquisitions. I have highlighted the key AI markets with dashed orange boxes that we are expanding into. These include memory, high performance compute, photonics, automotive data centers, and edge compute to augment and enable AI democratization. New technologies are emerging, product complexities are increasing, customers are challenged, their expectations are evolving, and we must lead in addressing and solving these challenges by doing what we do best, anticipating the next big technological breakthroughs, leading it through artificial intelligence, through advanced algorithms in multi-physics, through digital twin models that guide customers through complex design and manufacturing. To stay ahead, we don't work alone. We partner with universities, with leading research labs, with our strategic customers, and through targeted strategic acquisitions. We are focused on AI, we are focused on photonics, we are focused on high performance computing and connectivity. Let's look closer at the challenges shaping our markets. First, design and manufacturing complexity. Transistors are getting smaller with more functionality packed inside, complex multi-core architectures are being designed, all of it impacting memory, high performance computing, automotive, and more. Second, new materials such as gallium nitrite, silicon carbide, and photonics integrated devices are pushing the boundaries of fabrication and design. Third, -to-market challenges, including rising costs and rising risks, costs of design, costs of tools, costs of wafers, and pressure of time to market. This is the landscape we are navigating. This is the opportunity we are capturing with technology, with strategy, and with vision. Next slide, please. Executive summary for the quarter. We just announced the acquisition of Mixcel Incorporated, which we believe expands our SAM by another $110 million with silicon proven MixCycNL IP in the world's leading foundries, many of which are ISO 26262 and ISO 9001 certified. Representing the high quality of the products for automotive and other markets. And that's not all. We announced the addition of three new executives, which I will give more details in the next slide. We also announced some of our recent customer successes. Al Salpine adopted Silvaco's Jivaro Pro to accelerate spice post layout simulations. Fraunhofer ISIT, one of the top leading R&D companies in the world, to advance next generation gallium nitride with Silvaco's DTCO flow. WaveTech deployed Silvaco's Victory TCAT to drive innovation in GAN-based connectivity solution, helping our lead position in power electronics. And there is more coming. We expect to announce new customer wins in the second half of the year. In Q2 2025, we didn't just grow our customer base. We landed 10 new customers in photonics, automotive, mill arrow, foundry, and power markets. Three in photonics, one in foundry, two in power, and others in markets such as mill and arrow. Furthermore, we achieved ACV of 26% TTM, ending in Q2 versus 21% ending in Q1. Next slide, please. We've added three new executives to our team. Andrew Wright, a senior vice president and general manager of semiconductor IP group BU, Gazzwinder Singh, a senior vice president and general manager of EDA group BU, John Burke, as vice president of business development. Collectively, they bring decades of experience in semiconductor design and software development to Silvaco and will play pivotal roles in accelerating innovation and operational excellence. Adding these accomplished leaders strengthens our ability to innovate and scale Silvaco's organic growth. This will be our main focus for the remainder of 2025. Their insight and proven track records will help advance and accelerate the next phase of our growth. With their expertise, we are well positioned to broaden our market presence and deliver even greater value to our customers all-white. On the next slide, I will walk you through our recent acquisitions that are accelerating our expansion into new high-growth markets. Next slide. Expanding market opportunities using AI based visual twin modeling. On our last earnings call, I discussed the strategic rational and opportunity behind the acquisition of cadences, process, proximity compensation, or PPC product line, which combined with our acquisition of TechX, we believe has increased our SAM to $4.4 billion. Today, I'm excited to share an overview of our recently announced acquisition of Mixcel MixSignal IP, including our technology integration plan and the strategic rational driving this move. We believe Mixcel expands our SAM by an additional $110 million. It is important to note that historically, Silvaco's digestion period for acquisitions of this size has been about six months. We have already integrated the initial revenue synergies for the two previous acquisitions and are on track to complete the operation and tax synergies over the coming quarters. This year, Silvaco's total SAM has expanded by over $710 million through both organic growth and strategic acquisitions. The increase is from $3.8 billion in 2024 to $4.5 billion in 2025. Positioning us for stronger long-term growth. Next slide, please. Expanding market in silicon photonics integrated circuits. For the first time, we are excited to share our strategic expansion and roadmap for photonics, which builds on our strong momentum in the market. As I mentioned, our total SAM now stands at $4.5 billion, which includes $260 million from the TechX acquisition. This includes $150 million from photonics design software and $145 million from wafer fabrication solutions, covering advanced capabilities such as Plasma H at the tool level and packaging impact on photonics integrated circuits. This new segment represents a compelling growth engine for the coming year and beyond, expanding our reach into high growth, high value markets. Next slide, please. Mixcel MixSignal IP strategic rationale. Silvaco's acquisition of Mixcel brings in a portfolio of silicon proven MixSignal IP that is already deployed in the world's leading foundry. Mixcel has a -plus-year track record of delivering successful silicon solutions and is widely recognized for its low-power, high-performance IP. Strategically, Silvaco expects to land new customers through Mixcel's base while driving revenue synergies with existing accounts. Leveraging Silvaco's global channel is projected to accelerate revenue growth. Please turn to the next slide for specific examples of how this technology is changing the industry. Mixcel's MIPI-5 cores stand out in the market due to their comprehensive support across entire MIPI multimedia ecosystems, including automotive, camera, display, and storage. Mixcel is the number two company in terms of MIPI revenue. The diagram highlights Mixcel's broad coverage of multi-protocol layers such as CSI-2, DSI-2, and UFS, all supported by versatile PHY implementations including D-PHY, C-PHY, M-PHY, and other combinations. This flexibility enables associate designers to integrate a single, interoperable physical layer IP across a wide range of used cases, reducing time to market and validation complexity. Additionally, Mixcel's long-standing track record of first-pass silicon success and compliance with MIPI Alliance standards position it as a trusted supplier. These technical strengths, coupled with seamless support for emerging standards and multi-plug protocol convergence, differentiate Mixcel in a crowded space and position the company to capture significant market shares as demand grow for high-speed, low-power interfaces in mobile, automotive, and other applications. Strategic focus for the remainder of 2025 and 2026. Silvaco is positioned for significant growth by capitalizing on immediate revenue synergies from recent acquisitions, unlocking access to over 30 new customers, and enabling expanded cross-selling and landing of new logos in high-demand sectors such as AI, photonics, and advanced semiconductors. Leveraging acquired technologies and established channels, the company is well positioned to deliver multi-physics simulation solutions across semiconductor and display applications. Strategic next steps include defending AI-based FTCL engagements with memory, advanced CMOS, power, and photonics R&D customers. Broadening semiconductor IP portfolio and driving expansion in the high-growth market of silicon-based photonics integrated circuits for HPC, automotive, and sensing applications that play a large role in AI development and infrastructure. With a sharp focus on enhancing customers' time to market and costs, we are able to command higher margins and go through new product development and recent acquisitions. To summarize, strategic next steps include deepening engagement with R&D customers, broadening semiconductor IP portfolio, and driving expansion in high-growth market of silicon-based photonics to enable, enhance, and support AI infrastructure, AI architecture, AI power management, and compute resources for both static and autonomous applications. Together, these strategic priorities position to lack of to accelerate growth, strengthen margins, and deliver sustained profitability through the remainder of 2025 and into 2026. With that, I'll turn it over to Dan to review details of quarter financials and our guidance for Q3 and fiscal year 2025. Thank you. Dan? Dan Shaw | Senior Director of FP&A: Thanks, Bavak, and thank you all for joining us today. My name is Dan Shaw, Bavak's Senior Director of FP&A. Today, I will be reviewing our financial results for the second quarter of 2025 and providing guidance for the third quarter and full year of 2025. Please note that I will be discussing non-GAP results going forward. As a reminder, our GAP financial results, along with a reconciliation between GAP and non-GAP results, can be found in our earnings press release in the appendix of the presentation and within supplemental financials on our website. Moving to the next slide, I'd first like to start the financial overview by saying that our long-term target model remains intact, and we remain confident in our ability to achieve our strategic and financial objectives. Q2 results fell within our quarterly guidance range. While some orders were shifted from Q1 into Q3 and Q4, we fully expect to book those POs later this year. We exited the quarter with $55.5 million in cash, cash equivalents, restricted cash, and marketable securities. This is down from $74.5 million at the end of Q1, primarily due to the NANDGATE litigation settlement and the acquisition of TechX during the quarter. Other expenses this quarter have also increased as a result of both organic R&D investments as well as recent acquisitions, impacting both our gross margin and operating expense forecasts for the short term. We are actively working to minimize these effects. Following the PPC product acquisition in Q1, and now with the recent acquisitions of TechX in Q2 and Mixcel in Q3, our focus has shifted to integration and driving higher revenue through land and expansion. Next, I am excited to announce that we have achieved trailing 12-month ACV growth of 26% in Q2 2025, which is up from last quarter. As a reminder, annual contract value, or ACV, is a meaningful metric for measuring Savaco's underlying performance as it normalizes for multi-year deals as well as minimizes the impact of AFC 606 revenue accounting rules. Lastly, I will get into details on this guidance shortly, but I want to highlight that our annual guidance remains the same. Let's turn to the next slide. To begin, our Q2 results in more detail. Gross bookings for our software and semiconductor IP products in the second quarter were $12.9 million, down 34% year over year. Revenue was $12.05 million, down 19% year over year. The Q2 year over year decline was primarily due to the high value of the FTCO booking in Q2 2024, as well as pressures stemming from short term macroeconomic uncertainty. Our non-GAAP operating expenses were $14.9 million, up from $14 million last quarter. Breaking down our cost structure, R&D was 42% of revenue, sales and marketing was 36%, and G&A was 46%. The increase in operating expenses was primarily driven by higher headcount related costs and research and development, as well as sales and marketing, which also included commissions. Non-GAAP operating loss was $5.7 million, down from non-GAAP operating income of $1.7 million in Q2 2024. Our non-GAAP net loss for the quarter was $4.6 million, compared to a non-GAAP net income of $1.8 million in the same period last year. The alluded non-GAAP net loss per share came in at $0.16, compared to a non-GAAP net income per share of $0.07 in Q2 2024. Our weighted average diluted share count for the second quarter was 29.3 million shares. For the year, we reiterate that we are expecting to be neutral in non-GAAP net income and breakeven on a free cash flow basis. Turning to our bookings performance in more detail, as Babak mentioned, we did have some delays in customer POs in Q2. However, we are proud to have still added 10 new customer wins for the second quarter. In terms of product breakouts, TCAD bookings were down 55% year over year due to the timing of large renewals that happened last year. And EDA bookings were down slightly by 7% year over year with some partial offsets coming from the addition of PPC. We are also pleased that our bookings for our SIP product increased by approximately $1.5 million, a growth of 87% year over year, and we expect continued growth from this product line. Remaining performance obligations or RPO at quarter end stood at $36.4 million, with 50% expected to be recognized as revenue within the next 12 months. Moving to revenue, Q2 was down 6% year over year on a trailing 12-month basis, ACB. For the quarter, our software licenses accounted for 60% of our total revenue, while maintenance and services accounted for 40%, consistent with historical levels. Looking by product, TCAD revenue was down 34% year over year once again due to the timing of renewals. EDA revenue was up 15% year over year, again driven by a key renewal for our recently acquired PPC product line. Revenue for our SIP product increased by 11% year over year due to traction and technical enablement for foundries. Turning to our split between geographic regions, revenue from the Americas was down 44% year over year due to lower revenue from our TCAD product. Asia Pacific was up 11% year over year, driven by higher EDA sales. Enea was down 22% year over year due to lower TCAD sales in this region. I will again reiterate that despite the current macro headwinds, as we continue to work towards closing some of the delayed customer orders and introducing our new products acquired to existing and new customer base, we believe the company is well positioned for higher growth rates moving forward. Moving to the next slide, our non-GAAP gross margin for the quarter came in at 76%, down from 86% in Q2 2024. The year over year decline was driven mostly by lower revenue due to temporary order pushouts. You can see from this chart that historically our cost of goods sold is relatively fixed and therefore the gross margin closely coordinates with revenue. As was the case with last quarter, this quarter we saw an increase in our cost of goods sold due to higher headcount related costs, in part from a cost structure that now also includes both the PPC and TechX acquisitions. With both acquisitions now in our rearview mirror, we are now focused on optimizing costs as part of integrating the operations. As we continue to scale, we still expect non-GAAP gross margins to expand towards our long-term target of 90% plus. We believe the company is poised for significant growth by capitalizing on immediate revenue from recent acquisitions and increases by our land and expand strategy, unlocking access to over 30 new customers and enabling expanded cross-selling in high-demand sectors such as automotive, robotics and AR slash VR. Leveraging acquired technologies and established channels, we believe the company is well positioned to deliver multi-physics simulation solutions across semiconductor and display applications. Strategic next steps include deepening engagement with memory, advanced CMOS, power and photonics R&D customers, broadening semiconductor IP portfolios and driving expansion in the high-growth markets of silicon-based photonics integrated circuits for HPC, automotive and sensing applications. With a sharp focus on enhancing first article yield and accelerating customer time to volume, the company is targeting fast-growing segments with robust markets for FPCO, silicon photonics and power semiconductors, creating what we believe to be a compelling trajectory for sustained investor value. Moving to the next slide. As we introduced last quarter, I'm excited to look at our new non-GAAP performance metric annual contract value or ACV. We believe that ACV is a more meaningful metric for measuring the underlying performance and health of the business, particularly in light of the quarterly volatility and revenue that results from ASC 606 revenue accounting rules as well as from large multi-year deals and the impact from the timing of renewals. Our ACV calculation includes all of our software licenses from EDA and TCAD as well as maintenance and services. Please note that the definition excludes semiconductor IP product sales because they are generally not recurring in nature. We believe this new metric reflects a more stable normalized growth by accounting for all contract types over a 12-month period. Further details around the definition of ACV are provided in our earnings reliefs as well as our investor presentation. Moving to the next slide. You can see the quarterly fluctuations in bookings and revenue, which is specifically why we will be providing ACV as an additional metric starting this year. On a trailing 12-month basis, ACV was $55.9 million for the second quarter, up 26% -over-year, an increase of 5% from Q1. While quarterly revenue may fluctuate, quarter-recurring revenue from new bookings has shown consistent annual growth. Moving on to the next slide. I will now cover our Q3 and full year 2025 guidance. For Q3 2025 guidance, our updated forecast is gross bookings between $14 million and $18.2 million, revenue in the range of $14 million and $18 million, non-GAAP gross margin between 81% and 85%, non-GAAP operating loss between $3.5 million and a positive $0.5 million, non-GAAP net loss per share between $0.12 to net income per share of $0.02. For our full year 2025, we are maintaining our guidance. Gross bookings are between $67 million and $74 million, revenue in the range of $64 million and $70 million, non-GAAP gross margin between 83% and 86%, non-GAAP operating loss between $2 million and income of $1 million, non-GAAP net loss per share between $0.07 to net income per share of $0.03. Given the recent timing of the acquisitions, this forecast does include assumptions of initial revenue synergies for the PPC and TechEx acquisitions, but does not include cost or tax synergies. Moving on to my final slide, with macros expected to stabilize, we are confident in our ability to regain momentum and execute on our long-term strategy. With the acquisitions of PPC, TechEx, and now Mixcel, we continue to execute our goals to drive revenue growth through expansion of our SAM through M&A, which was one of the primary expected uses of the capital raised in our IPO. We expect to return to 15% top-line growth once macroeconomic conditions stabilize and continue to target 15% to 25% top-line growth, 90% non-GAAP gross margin, and 25% plus non-GAAP operating margin. We expect to achieve these targets by expanding our presence in key end markets and continuing to pursue the right strategic inorganic opportunities with additional focus on driving expansion in the high-growth market of silicon-based photonics integration circuits for HPC, automotive, and sensing applications. With that, Lavak and I would be happy to answer your questions. Operator? Operator | Conference Operator: Thank you so much. And as a reminder, if you do have a question, press star 1-1 on your telephone and wait for your name to be announced. To remove yourself, press star 1-1 again. Our first question is from Blair Abernethy with Rosenblatt Securities. Please proceed. Blair Abernethy | Analyst, Rosenblatt Securities: Thanks. Good afternoon, gentlemen. I've lost. Can you hear me okay? Babak Tahari | CEO: Absolutely. Blair Abernethy | Analyst, Rosenblatt Securities: Thanks for providing the ACB number again and updating that. I guess the first question is around, you know, that's pretty good growth overall, but you did make certainly the PPC acquisition would have affected that, maybe the TechX a little bit. But would you tell us what the ACB organic growth was? How much was acquired? Dan Shaw | Senior Director of FP&A: Yeah, I can take that. Hi, Blair. So yeah, for that growth, we're seeing obviously a sizable portion of that coming from the additional revenue from our acquisitions. I think the organic component of that was in the -2% range of that 5% increase. Blair Abernethy | Analyst, Rosenblatt Securities: Okay, great. And then can you talk a little bit more about the Cadence Division integration? So where you're, that's obviously the one that's you've held the longest now a few months. What's the integration looking like on the -to-market side? Babak Tahari | CEO: So Dan, I'll take that one. Thanks for that. That's a good question. So as we said, we've already recognized some revenue last quarter from that. And to us, the integration consists of having the R&D team and all the other teams to be integrated physically and software wise within the organization that's already done, completed. And the only portion of the integration that we're still working on is financials in terms of some of the other synergies and tax synergies that we're working on, including, if you will, OPEX, R&D, as well as SG&A. That's what Dan reported that we're working on. But we expect, we also provided the guidance in terms of annual revenue from that to be in the $2 to $4 million range. And we've already, as we said last quarter, $1.9 to $2 million of it was already recognized in Q1. So we have still additional revenue to be recognized from PPC acquisition. But again, as we are working with the teams and the customers, our expectation is always higher to be able to pose more deals with the existing and as well as new expansions. Blair Abernethy | Analyst, Rosenblatt Securities: Okay, great. And then just back on the macro environment. You came in sort of, you were trying to get your bookings, this Q2 were sort of 14 to 18, I think was the original range came in around 13. Is that any, what's the environment like there versus Q1 and any change in your China and markets? Babak Tahari | CEO: That's a great question. No impact to the China market. As a matter of fact, we said in Q1 that some of the pushouts came from Asia. And matter of fact, the ones that came from Asia, we've already closed in Q1. And our expectation is that the other portions of the delays will close in Q3 and maybe Q4, but we expect most of those delays to be covered in Q3. Blair Abernethy | Analyst, Rosenblatt Securities: Okay, great. Thanks. I'll jump back in the queue. Dan Shaw | Senior Director of FP&A: Thanks, Blair Abernethy | Analyst, Rosenblatt Securities: Blair. Operator | Conference Operator: Thank you. Our next question is from Blaine Curtis with Jeffreys. Please proceed. Blaine Curtis | Analyst, Jefferies: Hey, good afternoon, guys. Maybe you can ask, Mixcel, it's closed. So, I'm just curious if you could outline how much revenue contribution to think about from that one for September and December quarter. Babak Tahari | CEO: You bet. We didn't say that in our written statements, but from, as you know, we just closed it last week. And to be conservative, we haven't included, as I mentioned earlier, any of the potential revenues coming from them this year. However, we can provide a range of numbers that we think is within our capability to close. And that range is between $3 to $5 million additional revenue. Blaine Curtis | Analyst, Jefferies: In that quarterly or annual? Babak Tahari | CEO: For the remainder of the year. Blaine Curtis | Analyst, Jefferies: 3 to 5 for the starting. Babak Tahari | CEO: For Q3 and Q4. Got Blaine Curtis | Analyst, Jefferies: you. And I guess I wanted to talk about, you kept the annual guidance. I think you made the comment that it's conservative to keep it. But like, your results have come in lower throughout the year. So, to get to the midpoint would require like 50% sequential growth, 90% gross margin. So, I guess I'm just trying to figure out. I know you're confident you're going to get back these sales that were delayed. But are we talking about that magnitude of a Q4? Babak Tahari | CEO: Yeah, and we've already given guidance for Q2 and if you see our numbers for Q4, we'll get us to those points. And we're very confident also that some of these delays in POs from Q1 trickling into Q2, will close in Q3 and Q4. And that's part of it. There has not been any cancellation. And as a matter of fact, as you know, the macro with regards to Asia has improved for everyone in our industry and we expect to actually grow that as well. Those are so the regional, I would say, growth that we expect to get. But also the acquisitions we've done. As we've done our analysis, you know, we've always historically and up to last quarter, we said our main markets have been photonics and have been power, have been memory. And as you see more and more of what we are, our commentary was that we see also we can expand really nicely with the combined synergy in terms of products for go to market. In terms of expanding into new markets that we have played smaller role, but we can play bigger role and those include a wider base for high performance compute automotive, especially the introduction of all these new IPs for automotive. And being, you know, being ISO 9001 and 262.62 compliant, which makes us very unique in terms of the offering that will help us expand those as well. Blaine Curtis | Analyst, Jefferies: Thanks. And then maybe just one last one. If I do contemplate adding that mix cell revenue back in, I mean, I guess, is what about on the OPEC side? Is that I mean, these employees now work for you today. So is that contemplated in OPEC and, you know, I think I've seen some numbers of employees, so maybe you can just help us with how much OPEC recorder you're going to bring over. Babak Tahari | CEO: So I let Dan answer it, but let me start it then. What I would say in terms of our annual guidance, as we said, we did not include any mix cell contributions to either in terms of OPEC or revenue as we are closing on quite a bit of the books and financials. But naturally we will have OPEC associated with them. They're looking at synergies for all three acquisitions, as I said, and we are getting more mature in terms of our understanding of our synergies for PPC as well as TECACs. And I think we'll have a very good handle on what it is that mix cell would bring in in terms of both revenue and OPEC's part of the recorder, hoping that our next call will give you a lot more detail than what we have provided today. Okay, thank you. Operator | Conference Operator: Sure. Thank you. Our next question comes from Craig Ellis with B Riley Securities. Please proceed. Craig Ellis | Analyst, B. Riley Securities: Yeah, thanks for taking the question. And I wanted to go a little bit deeper into the inorganic growth activity and what it could mean a little bit further out than I think where Blaine was headed with implications for this year. So I think the company indicated that acquisitions pre mix cell were adding 6 to 11 million in revenues this year. And if I annualize mix cell potential revenues, that would be 6 to 10 million if we double that, 3 to 5. So in total, it seems like there could be from acquisitions 12 to 21 million in annual revenues. So the question is this, is that the reasonable way to think about the inorganic growth revenue range for next year? And if not, can you help us with what a reasonable range might be? Babak Tahari | CEO: Absolutely. That's a fantastic question, Craig, as usual. Thank you for that. And, you know, the general guidance we've given for OPC this year, since it was Q2-ish, we set it to 4 for TechX. We gave the range of 1 to 2 million and for mix cell this year, we set it to 3 to 5. So, and a good assumption to think about and we'll be glad by end of this quarter we will be helping in terms of whatever details we can provide so that you can fine tune all these models for at least this year and the remainder for the next year. But one linear way of interpolating the data I gave you for this year is you can see the partial revenue from these acquisitions, what they are. I've given you the numbers just even now. And those are the partial. So if you think of mix cell, we set 3 to 5, which is only, you know, two quarters, I would say, two quarters, but less than one month less, right. About five months of revenue, you can extrapolate that for the full year next year. You can do the same thing for the other two. So what you're saying is not unreasonable, but what we would like to do is give us a bit of time to end of this quarter so we can fine tune these and give you a much better feel for it because as we speak, you know, my whole executive team from the sales from all over the world are in Santa Clara. They've been there this whole week trying to merge and hash out what are the new opportunities for each of these acquisitions, what are the new customers that we need to go after, plus how can we expand that into the 30 plus customers that we've acquired through these acquisitions. So. Craig Ellis | Analyst, B. Riley Securities: That's helpful to block. Thank you. My next question was related to the cash balance, I believe, in the deck. It showed that cash was 555 million. I expect that's before we've completed the cash part of the mixel payment. So you can, can you just confirm that that is so and then if so, I would expect that we would be about 35 million in cash with the cash part of the mixel payment made. Is that a fair way to look at what's happened as we started out the month of August here mid 3Q. Thanks, guys. Babak Tahari | CEO: That's a perfect way to look at it. But initially you said 550 million, not 55 million and I was getting excited about that. I gave you a little bit too much credit. Yeah, sorry. But you're right. You're right. But your final number came down to 35 and I think that it's reasonable to think that 30 to 35 million would be the right number. Absolutely. Craig Ellis | Analyst, B. Riley Securities: Excellent. Thank you, guys. Operator | Conference Operator: Thank you so much. Our last question comes from Ross Cole with Needham and Company. Please proceed. Ross Cole | Analyst, Needham & Company: Thank you for taking my question. So I wanted to dive in a little bit to the acquisitions of PPC and TechX and what the 3Q25 guidance would look like without those acquisitions. Because I know the full year they're adding 6 to 11 million, but do you think the third quarter guidance would be slightly different? Thank you. Babak Tahari | CEO: So we've included what we have seen from the customers from PPC and TechX in Q3. So our guidance includes what we've seen. And as I said, for the fraction, I would say to just estimate frankly right now, as we said again, I'll re-emphasize. These are great questions by the way, Ross. Thanks for joining. One is the fact that we said 2 to 4 for OPC. We've recognized 2 already. So for the reminder of the year, there's another 2 million at least on the table for the range we've guided. And then for TechX, we said 1 to 2 million. And I think there's another million or so left for the rest of the year. So if you look at the numbers we've provided, I would say a third or so of those totals would come in Q3, the rest in Q4. Great. Thank you so much. You bet. Great question. Operator | Conference Operator: Thank you. And this concludes our Q&A session. I will turn it back to Babak Tahiri for final comments. Babak Tahari | CEO: Thank you, operator. I wanted to thank everyone for being part of our journey. And thank you again for your support. We look forward to our Q3 and Q4. And we'll see you soon. Thank you. Operator | Conference Operator: And this concludes our conference. Thank you all for participating. And you may now disconnect. jsPDF 3.0.3 D:20260606090445-00'00'