Earnings call transcript: Silvaco misses Q2 2025 forecasts; stock drops 6%

Silvaco Group Inc. (SVCO) reported its second-quarter 2025 earnings, revealing a significant miss on both earnings per share (EPS) and revenue forecasts, which led to a 6.17% drop in its stock price during aftermarket trading. The company recorded an EPS of -$0.16, falling short of the expected $0.12, marking a surprise of -233.33%. Revenue came in at $12.05 million, a 19% decline year-over-year, further disappointing investors. According to InvestingPro analysis, the stock appears undervalued at current levels, despite facing significant headwinds. For deeper insights, investors can access the comprehensive Pro Research Report, which provides detailed analysis of SVCO among 1,400+ US stocks.

Key Takeaways

• Silvaco’s Q2 EPS was -$0.16, missing the forecast by 233.33%.
• Revenue declined 19% year-over-year to $12.05 million.
• Stock price fell 6.17% in aftermarket trading following the earnings release.
• The company expanded its Total Addressable Market (TAM) to $4.5 billion.
• Strategic acquisitions are expected to drive future growth.

Company Performance

Silvaco’s performance in the second quarter of 2025 showed a significant downturn compared to the same period last year. The company is navigating a challenging market environment, with a notable decline in revenue and bookings. Despite these setbacks, Silvaco has been actively expanding its market reach through strategic acquisitions and innovations in semiconductor design.

Financial Highlights

• Revenue: $12.05 million, down 19% year-over-year.
• EPS: -$0.16, compared to a forecast of $0.12.
• Gross Bookings: $12.9 million, down 34% year-over-year.
• Non-GAAP Operating Loss: $5.7 million.
• Cash and Equivalents: $55.5 million, down from $74.5 million in Q1.

Earnings vs. Forecast

Silvaco’s Q2 EPS of -$0.16 was a substantial miss against the forecasted $0.12, resulting in a negative surprise of 233.33%. This marks a significant deviation from expectations and highlights the challenges the company faces in achieving its financial targets.

Market Reaction

The disappointing earnings report led to a 6.17% drop in Silvaco’s stock price during aftermarket trading, closing at $4.87. This decline places the stock closer to its 52-week low of $3.55, signaling investor concerns about the company’s short-term prospects.

Outlook & Guidance

Despite the current challenges, Silvaco maintains a positive long-term outlook. The company projects full-year 2025 gross bookings between $67 million and $74 million, with revenue expected to range from $64 million to $70 million. Silvaco aims to achieve a non-GAAP gross margin of 83-86% and targets a return to 15% top-line growth once macroeconomic conditions stabilize.

Executive Commentary

CEO Babak Taheri expressed confidence in the company’s growth potential, stating, "We are positioned for significant growth by capitalizing on immediate revenue synergies from recent acquisitions." Dan Shaw, Senior Director of FP&A, added, "Our long-term target model remains intact, and we expect to return to 15% top-line growth once macroeconomic conditions stabilize."

Risks and Challenges

• Revenue Decline: Continued revenue contraction poses a significant risk.
• Acquisition Integration: Successfully integrating recent acquisitions is crucial for achieving projected synergies.
• Market Conditions: Macroeconomic instability could impede growth targets.
• Competitive Pressure: Intense competition in semiconductor design software may affect market share.
• Cash Position: The decline in cash reserves may limit strategic flexibility.

Q&A

During the earnings call, analysts inquired about the potential revenue impact from the Mixcel acquisition, estimated at $3-5 million for the remainder of 2025. Management also addressed concerns about delayed purchase orders, expressing confidence in closing these in the upcoming quarters. The minimal impact from the China market was also discussed, reflecting the company’s diversified market strategy.

Full transcript - Silvaco Group Inc (SVCO) Q2 2025:

Conference Operator: Good afternoon and welcome to Silvaco’s Second Quarter Fiscal Year twenty twenty five Conference Call. All participants are in a listen only mode. After the speakers’ 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 Greg McNiffe, Investor Relations for Silvaco.

Please proceed.

Greg McNiffe, Investor Relations, Silvaco: Thank you. Joining me on the call today are Babak Taheri, Silvaco’s CEO and Dan Shaw, Silvaco’s Director of FP and 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 investors.sabaco.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, earnings presentation and on this conference call. The Risk Factors section in Savaco’s Annual Report on Form 10 ks 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 Silvaco’s CEO, Babak Taheri. Babak?

Babak Taheri, CEO, Silvaco: Thank you, Greg. Hello, and welcome to Silvaco’s second quarter twenty twenty five earnings call. I am Babak Taheri, CEO of Silvaco. 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 but underpins every line on the balance sheet.

It is our people and investors. And not just any people or investors. They’re ones who remain through our product cycles that stretch into years. They’re ones who choose to be here when the market shifts, when uncertainty arises, and when 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 easy replicated.

Now moving to our results, I’m excited to update you on the strong momentum we’ve built since going public in May. For fiscal year twenty twenty four, we delivered a 13% increase in bookings and achieved 10% organic revenue growth over fiscal year twenty twenty three. 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 Silvaco for strategic acquisitions that would meaningfully expand our serviceable addressable market or SAM. We launched our acquisition strategy in 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 $600,000,000 in incremental SAM, reinforcing our position in fast expanding markets and further diversifying our growth engine. The market response to this strategy has been very encouraging. Our new acquisition for Mixel adds another $110,000,000 of SAM for us. Revenue for the Q2 came at $12,050,000 within our guidance. Likewise, we are maintaining our fiscal year twenty twenty five guidance in the range of $64,000,000 to $70,000,000 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 twenty twenty five, guidance for Q3 and full year 2025, and our Director of FP and A, Dan Shah, will discuss our detailed financial results and guidance in his remarks. For Q2 twenty twenty five, 14% of revenue from 10 new customer purchases in Q2, equivalent of $4,180,000 in bookings.

6% of our revenue came from new customer purchases in previous quarters, 20% of land and expand in new customers. We had also 40% of revenue from expansion in existing customers, 40% of revenue from renewals totaling 100% for Q2 twenty twenty five. For Q3, we are providing the following guidance: Q3 booking guidance of $14,000,000 to $18,200,000 revenue guidance of $14,000,000 to $18,000,000 non GAAP GM of 81% to 85% non GAAP OI or loss of minus $3,500,000 to plus $05,000,000 non GAAP net income or loss of minus $0.12 to plus $0.02 per diluted share. For the full year 2025, we are maintaining our existing guidance. Gross bookings in the range of 67,000,000 to $74,000,000 reflecting an increase of up to 13% year over year.

Revenue in the range of $64,000,000 to $70,000,000 reflecting an increase of up to 17 percent 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 $2,000,000 loss to $1,000,000 income compared to $5,500,000 in 2024. Non GAAP net income per share of up to $03 Please note that this guidance includes the acquisition of Cadence’s PBC 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 we included, we 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 disciplined 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 Silvaco 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 Silvaco solves 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 Silvaco 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 wave of technological breakthroughs, leading it through artificial intelligence, through advanced algorithms in motor 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 nitride, silicon carbide, and photonics integrated devices are pushing the boundaries of fabrication and design. Third, go to market challenges, including rising costs and rising risks cost of design, cost of tools, cost 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 Mixcell Incorporated, which we believe expands our SAM by another $110,000,000 with silicon proven mixed signal IP in the world’s leading foundries, many of which are ISO 26,262 and ISO 9,001 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.

Alf Alpine adopted Silvaco’s GIVARO Pro to accelerate SPICE post layout simulations. Fraunhofer, ISIT, one of the top leading R and D companies in the world to advance next generation gallium nitride with Selaco’s DtCO flow. WaveTech deployed Selaco’s VICTOR TCAD 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 q two twenty twenty five, we didn’t just grow our customer base. We landed 10 new customers in photonics, automotive, milero, 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 q two versus 21% ending in q one. Next slide, please.

We’ve added three new executives to our team. Andrew Wright as senior vice president and general manager of semiconductor IP group BU, Gadsvinder Singh as senior vice president and general manager of EDA group BU, John Berg 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 insights 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 worldwide. 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 opportunity using AI based digital twin modeling.

On our last earnings call, I discussed the strategic rationale and opportunity behind the acquisition of Cadence’s process proximity compensation, or PPC product line, which combined with our acquisition of TechX, we believe has increased our SAM to $4,400,000,000 Today, I’m excited to share an overview of our recently announced acquisition of MixCell mixed signal IP, including our technology integration plans and the strategic rationale driving this move. We believe MiXcel expands our SAM by an additional $110,000,000 It is important to note that historically, Telvaco’s digestion period for acquisitions of this site 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 TAM has expanded by over $710,000,000 through both organic growth and strategic acquisitions. The increase is from $3,800,000,000 in 2024 to $4,500,000,000 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 $4,500,000,000 which includes two sixty million dollars from the TechX acquisition. This includes $115,000,000 from Photonics Design Software and $145,000,000 from wafer fabrication solutions covering advanced capabilities such as plasma etch at the tool level and packaging impact on photonics integrated circuit.

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. Mixcell makes signal IP strategic rationale. Silvaco’s acquisition of Mixell brings in a portfolio of silicon proven mixed signal IP that is already deployed in the world’s leading foundry. Mixcell has a twenty five plus year track record of delivering successful silicon solution and is widely recognized for its low power, high performance IP.

Strategically, Silvaco expects to land new customers through Mixel’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. Mix cell’s MiPi five cores stand out in the market due to their comprehensive support across entire MiPi multimedia ecosystems, including automotive, camera, display, and storage. Mixel is a number two company in terms of MIPI revenue.

The diagram highlights Mixel’s broad coverage of multi protocol layers such as CSI two, DSI two, UFS, all supported by versatile PHY implementations, DFI, CFI, MPHI, and other combinations. This flexibility enables SOC designers to integrate a single interoperable physical layer IP across a wide range of use cases, reducing time to market and validation complexity. Additionally, MiXcel’s long standing track record of first pass silicon success and compliance with NEPI Alliance standards position it as a trusted supplier. These technical strengths, coupled with seamless support for emerging standards and multi 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. Next slide.

Strategic focus for the remainder of 2025 and 2026. Servaco 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 on 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 deepening AI based FTCo engagement with memory, advanced CMOS, power, and photonics r and 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 enablement 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 and D customers, broadening semiconductor IP portfolio, and driving expansion in high growth market of silicon based photonics to enable, enhance, support AI infrastructure, AI architecture, AI power management, and compute resources for both static and autonomous applications. Together, these strategic priorities position Silaco 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, Silvaco: Thanks, Silvak, and thank you all for joining us today. My name is Dan Shaw, Silvako’s Senior Director of FP and A. Today, I will be reviewing our financial results for the 2025 and providing guidance for the third quarter and full year of 2025. Please note that I will be discussing non GAAP results going forward. As a reminder, our GAAP financial results, along with a reconciliation between GAAP and non GAAP results, can be found in our earnings press release, in the appendix of the presentation and within the 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 $55,500,000 in cash, cash equivalents, restricted cash and marketable securities.

This is down from $74,500,000 at the end of Q1, primarily due to the Nangate litigation settlement and the acquisition of TechX during the quarter. Other expenses this quarter have also increased as a result of both organic R and D investments as well as recent acquisitions, impacting both our gross margin and operating expense forecast 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’m excited to announce that we have achieved trailing twelve month ACV growth of 26% in Q2 twenty twenty five, which is up from last quarter.

As a reminder, annual contract value, or ACV, is a meaningful metric for measuring Silvaco’s underlying performance as it normalizes for multiyear deals as well as minimizes the impact of ASC six zero six revenue accounting rules. Lastly, I will get into details on the 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 IT products in the second quarter were $12,900,000 down 34% year over year. Revenue was $12,050,000 down 19% year over year.

The Q2 year over year decline was primarily due to the high value of the FTCO booking in Q2 twenty twenty four as well as pressures stemming from short term macroeconomic uncertainty. Our non GAAP operating expenses were $14,900,000 up from $14,000,000 last quarter. Breaking down our cost structure, R and D was 42% of revenue, sales and marketing was 36% and G and A was 46%. The increase in operating expenses was primarily driven by higher headcount related costs in research and development as well as sales and marketing, which also included commissions. Non GAAP operating loss was 5,700,000 down from non GAAP operating income of $1,700,000 in Q2 twenty twenty four.

Our non GAAP net loss for the quarter was $4,600,000 compared to a non GAAP net income of $1,800,000 in the same period last year. Diluted non GAAP net loss per share came in at $0.16 compared to a non GAAP net income per share of $07 in Q2 twenty twenty four. Our weighted average diluted share count for the second quarter was 29,300,000 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 Bhavak 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 PTC. We are also pleased that our bookings for our SiP product increased by approximately $1,500,000 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 $36,400,000 with 50% expected to be recognized as revenue within the next twelve months. Moving to revenue. Q2 was down 6% year over year on a trailing twelve month basis ACV. 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 in 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.

EMEA 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 twenty twenty four. The year over year decline was driven mostly by lower revenue due to temporary order push outs.

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 ARVR.

Leveraging acquired technologies and established channels, we believe the company is well positioned to deliver multiphysics simulation solutions across semiconductor and display applications. Strategic next steps include deepening engagement with memory, advanced CMOS, power and photonics R and D customers, broadening semiconductor IT portfolios and driving expansion in the high growth market 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 FTCO, 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 in revenue that results from ASC six zero six revenue accounting rules as well as from large multiyear 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 as 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 twelve month period. Further details around the definition of ACV are provided in our earnings release 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 twelve month basis, ACV was $55,900,000 for the second quarter, up 26% year over year, an increase of 5% from Q1. While quarterly revenue may fluctuate, core 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 twenty twenty five guidance, our updated forecast is gross bookings between $14,000,000 and $18,200,000 revenue in the range of $14,000,000 and $18,000,000 non GAAP gross margin between eighty one percent and eighty five percent non GAAP operating loss between $3,500,000 and a positive $500,000 non GAAP net loss per share between $0.12 to net income per share of $02 For our full year 2025, we are maintaining our guidance. Gross bookings are between $67,000,000 and 74,000,000 revenue in the range of $64,000,000 and $70,000,000 non GAAP gross margin between 8386% non GAAP operating loss between $2,000,000 and income of 1,000,000 non GAAP net loss per share between $07 to net income per share of $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, TechX and now Mixel, we continue to execute our goals to drive revenue growth through expansion of our SAM through M and 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 percent 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, Babak and I would be happy to answer your questions. Operator?

Conference Operator: Our first question is from Blair Abernethy with Rosenblatt Securities. Please proceed.

Dan Shaw, Senior Director of FP&A, Silvaco: Thanks. Good afternoon, gentlemen.

Babak Taheri, CEO, Silvaco: Hi, Blair.

Dan Shaw, Senior Director of FP&A, Silvaco: Can you hear me okay?

Babak Taheri, CEO, Silvaco: Absolutely. Yes.

Dan Shaw, Senior Director of FP&A, Silvaco: For providing the ACV number again and updating that. I guess, first question is around, 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 ACV organic growth was and how much was acquired? Yes, I can take that. Hi, Blair.

So yes, 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 1% to 2% range of that 5% increase. 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 go to market side?

Babak Taheri, CEO, Silvaco: 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. To us, the integration consists of having the R and D team and all the other teams to be integrated physically and software wise within the organization.

That’s already done, completed. 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 and D, as well as SG and 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 2,000,000 to $4,000,000 range. And we’ve already as we said last quarter, 1,920,000.00 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 close more deals with the existing and as well as new expansions. Okay,

Dan Shaw, Senior Director of FP&A, Silvaco: great. And then just, Babak, 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 end markets?

Babak Taheri, CEO, Silvaco: That’s a great question. No impact to the China market. As a matter of fact, we said in Q1 that some of the push outs 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.

Dan Shaw, Senior Director of FP&A, Silvaco: Okay, great. Thanks. I’ll jump back in the queue.

Babak Taheri, CEO, Silvaco: Thanks, Blair.

Conference Operator: Thank you. Our next question is from Blayne Curtis with Jefferies. Please proceed.

Blayne Curtis, Analyst, Jefferies: Hey, good afternoon, guys. Maybe you can ask on Xcel, it’s closed. So was just curious if you could outline how much revenue contribution to think about from that one for September and December quarter.

Babak Taheri, CEO, Silvaco: You bet. We didn’t say that in our written statements. But from where 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 3,000,000 to $5,000,000 additional revenue.

Blayne Curtis, Analyst, Jefferies: And that’s quarterly or annual?

Babak Taheri, CEO, Silvaco: For the remainder of the year.

Blayne Curtis, Analyst, Jefferies: 3,000,000 to 5,000,000 for the starting point?

Babak Taheri, CEO, Silvaco: For Q3 and Q4, yes.

Blayne Curtis, Analyst, Jefferies: Got 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 Taheri, CEO, Silvaco: Yes. And we’ve already given guidance for Q2 and if you our numbers for Q4 will 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. As a matter of fact, as you know, the macro with regards to Asia has improved for everyone industry and we expect to actually grow that as well.

Those are some of 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, up to last quarter, said our main markets have been photonics, 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 expand really nicely with a 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 nine thousand one hundred two sixty six to compliant, which makes us very unique in terms of the offering that will help us expand those as well.

Blayne Curtis, Analyst, Jefferies: Thanks. And then maybe just one last one. If I do contemplate adding that mix of revenue back in, I mean, guess, what about on the OpEx side? Is that I mean, these employees now work for you today. So is that contemplated in OpEx?

And I think I’ve seen some numbers of employees, so maybe you can just help us with how much OpEx per quarter you’re going to bring over.

Babak Taheri, CEO, Silvaco: So I’ll let Dan answer it, but let me start with Dan. What I would say, in terms of our annual guidance, as we said, we did not include any mix of contributions to in terms of OpEx or revenue as we are closing on quite a bit of books and financials. But naturally, we will have OpEx associated with them. We’re looking at synergies for all all three acquisitions, as I said, and we are getting more mature in terms of our understanding of our synergies for PBC as well as SECACs. And I think we’ll have a very good handle on what it is that MiXcel would bring in, in terms of both revenue and OpEx by end of the quarter, hoping that on the next call, we’ll give you a lot more detail than what we have provided today.

Okay.

Blair Abernethy, Analyst, Rosenblatt Securities: Thank you.

Dan Shaw, Senior Director of FP&A, Silvaco: Sure.

Conference Operator: Thank you. Our next question comes from Craig Ellis with B. Riley Securities. Please proceed.

Blair Abernethy, Analyst, Rosenblatt Securities: Yes, 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 Mixel were adding 6,000,000 to $11,000,000 in revenues this year. And if I annualize MiXcel potential revenues, that would be 6,000,000 to $10,000,000 if we double that 3,000,000 to 5,000,000 So in total, it seems like there could be from acquisitions 12,000,000 to $21,000,000 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 Taheri, CEO, Silvaco: Absolutely. That’s a fantastic question, Greg, as usual. Thank you for that. The general guidance we’ve given for OPC this year since it was Q2 ish, we said to do four for TechX, we gave the range of 1,000,000 to $2,000,000 and mix for sale this year, we said three to five. So and a good assumption to think about, and we’ll be glad by end of this quarter, 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 sales, we said three to five, 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 you can you can do the same thing for the other two. So what you’re saying is not unreasonable. But what I we would like to do is give us bit of time till end of this quarter so we can fine tune this and 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 into the 30 plus customers that we’ve acquired through this acquisition.

Blair Abernethy, Analyst, Rosenblatt Securities: That’s helpful, Dibak. Thank you. My next question was related to the cash balance. I believe in the deck it showed that cash was $555,000,000 and I expect that’s before we’ve completed the cash part of the MiXcel payment. So can you just confirm that, that is so?

Then if so, I would expect that we would be about $35,000,000 in cash with the cash part of the MiXcel 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 Taheri, CEO, Silvaco: That’s a perfect way to look at it. But initially, you said €550,000,000 not €55,000,000 And I was getting excited about that.

Blair Abernethy, Analyst, Rosenblatt Securities: Little bit too much credit. Sorry.

Babak Taheri, CEO, Silvaco: But you’re right. But your final number came down to 35,000,000 And I think it’s reasonable to think that 30,000,000 to $35,000,000 would be the right number. Absolutely.

Blair Abernethy, Analyst, Rosenblatt Securities: Excellent. Thank you, guys.

Conference Operator: Thank you so much. Our last question comes from Ross Cole with Needham and Company. Please proceed.

Craig Ellis, Analyst, B. Riley Securities: 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 3Q twenty twenty five guidance would look like without those acquisitions? Because I know the full year, they’re adding 6,000,000 to $11,000,000 but do you think the third quarter guidance would be slightly different? Thank you.

Babak Taheri, CEO, Silvaco: So, we’ve included what we have seen from the customers from PPC and TechX in Q3. So, our guidance includes what you’ve seen. And as I said, for the fraction, I would say to just estimate, frankly, right now, as we said, again, I’ll reemphasize, these are great questions, by the way, Ross. Thanks for joining. And one is the fact that we said, to four for OPC, we’ve recognized two already.

So, for the remainder of the year, need to there is another $2,000,000 at least on the table for the range we’ve guided. And then for TechX, you said 1,000,000 to $2,000,000 And I think there’s another $1,000,000 or so left for the rest of the year. So, if you look at the numbers we provided, I would say a third or so of those totals would come in Q3, the rest in Q4.

Craig Ellis, Analyst, B. Riley Securities: Great. Thank you so much.

Babak Taheri, CEO, Silvaco: You bet. Great question.

Conference Operator: Thank you. And this concludes our Q and A session. I will turn it back to Babak Taheri for final comments.

Babak Taheri, CEO, Silvaco: 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.

Conference Operator: And this concludes our conference. Thank you all for participating and you may now disconnect.

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