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What changed in Arteris, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Arteris, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+385 added−485 removedSource: 10-K (2025-02-18) vs 10-K (2024-02-20)

Top changes in Arteris, Inc.'s 2024 10-K

385 paragraphs added · 485 removed · 336 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

99 edited+11 added−78 removed93 unchanged
Biggest changeOur SIA solutions have to conform not only to industry standards, but also to ever-evolving SoC integration methodologies. Once interconnect IP is designed into customer SoC projects, there are significant switching costs to adopting different interconnect IP and SIA solutions, especially in the automotive sector where switching interconnect IP solutions may involve product functional safety re-certification.
Biggest changeOnce interconnect IP is designed into customer SoC projects, there are significant switching costs to adopting different interconnect IP and SIA solutions, especially in the automotive sector where switching interconnect IP solutions may involve product functional safety re-certification. 14 Table of Contents Our research and development strategy includes offering customers several product enhancement releases per year, complemented with a planned introduction of at least one new interconnect IP or SIA product every year.
In July 2021, we submitted a voluntary self-disclosure (VSD) to the Bureau of Industry and Security (BIS), noting potential violations of the EAR. On April 28, 2022, the Office of Export Enforcement of the U.S. Department of Commerce's Bureau of Industry and Security closed the matter with the issuance of a warning letter.
In July 2021, we submitted a voluntary self-disclosure (VSD) to the U.S. Department of Commerce's Bureau of Industry and Security (BIS), noting potential violations of the EAR. On April 28, 2022, the Office of Export Enforcement of BIS closed the matter with the issuance of a warning letter.
Select offerings of our semiconductor IP product portfolio include: ■ FlexNoC and FlexWay: Silicon-proven, interconnect IP products that have been integrated into hundreds of chip designs. The underlying NoC technology converts on-chip communication signals between IP blocks, such as reads from and writes to memory, into digital packets.
Select offerings of our semiconductor IP product portfolio include: ■ FlexGen, FlexNoC and FlexWay: Silicon-proven, interconnect IP products that have been integrated into hundreds of chip designs. The underlying NoC technology converts on-chip communication signals between IP blocks, such as reads from and writes to memory, into digital packets.
Our SoC integration automation capabilities were significantly enhanced by our acquisitions of Magillem in 2020 and Semifore in 2022, complementing our interconnect IP solutions by helping automate the customer configuration of its NoC IPs, the process of integrating and assembling all the customer’s IP blocks into SoC hardware, and ensuring correct hardware-software integration for software development.
Our SoC integration automation capabilities were significantly enhanced by our acquisitions of Magillem in 2020 and Semifore in 2022, complementing our interconnect IP solutions by helping to automate the customer configuration of its NoC IPs, the process of integrating and assembling all of the customer’s IP blocks into SoC hardware, and ensuring correct hardware-software integration for software development.
With needs to address cache coherent, non-coherent, machine learning and chiplet traffic, customers need a System IP solution that works together across all these data traffic types. SoC integration automation technologies allow customers to manage the deployment of the rest of the IP blocks in the SoC in order to ease SoC IP integration.
With the need to address cache coherent, non-coherent, machine learning and chiplet traffic, customers need a System IP solution that works together across all these data traffic types. SoC integration automation technologies allow customers to manage the deployment of the rest of the IP blocks in the SoC in order to ease SoC IP integration.
Our solutions enable customer innovation because they are configurable for each customer’s design flow and SoC development projects and have wide applicability for many types of SoCs. We estimate that our solutions have been incorporated into three and a half billion production SoCs since inception.
Our solutions enable customer innovation because they are configurable for each customer’s design flow and SoC development projects and have wide applicability for many types of SoCs. We estimate that our solutions have been incorporated into over three and a half billion production SoCs since inception.
New business models such as ride-sharing, transportation subscriptions and transportation as a service are being created. New potential entrants such as ride-sharing companies, large data center companies, and new automotive startups are changing the automotive business landscape, while increasing demand for more sophisticated transportation-targeted semiconductors and therefore System IP solutions.
New business models such as ridesharing, transportation subscriptions and transportation as a service are being created. New potential entrants such as ride-sharing companies, large data center companies, and new automotive startups are changing the automotive business landscape, while increasing demand for more sophisticated transportation-targeted semiconductors and therefore System IP solutions.
Interconnect IP requires a systematic deployment of quality-oriented methodologies, as any customer-level problems in the interconnect will result in SoC project delays or even project failures. Engineering teams creating interconnects must invest heavily not only in skilled engineering resources to develop and verify, but also processes and methodologies that provide early indication of any potential quality issues.
Interconnect IP requires a systematic deployment of quality-oriented methodologies, as any customer-level problems in the interconnect will result in SoC project delays or even project failures. Engineering teams creating interconnects must invest heavily not only in skilled engineering resources to develop and verify, but also processes and methodologies that provide early indication of any potential quality issues. ■ Safety standards.
Customers typically start shipping their products containing our interconnect IP solutions between one to five years following completion of their product design, known as mass production at which point we start to receive royalties; this lasts for up to seven years or longer depending on the market segment.
Customers typically start shipping their products containing our interconnect IP solutions between one to five years following completion of their product design, known as mass production at which point we start to receive royalties; this lasts for up to seven years or longer depending on the particular market.
Growth for our solutions is being driven by growing SoC sophistication and associated complexity, now extending into disaggregation of SoCs into systems which implement the communication protocol aspects and partner with industry leading providers like Synopsys, Cadence, Alphawave and others to connect to their die to die interfaces.
Growth for our solutions is being driven by growing SoC sophistication and associated complexity, now extending into disaggregation of SoCs into systems that implement the communication protocol aspects and partner with industry-leading providers like Synopsys, Cadence, Alphawave and others to connect to their die-to-die interfaces.
We believe the combination of our solutions and the strategic neutrality that we offer to the semiconductor industry positions us well as a reliable, trusted and innovative System IP solution for our customers. 15 Table of Contents Network-on-Chip IP Products We believe we offer the semiconductor industry an industry-leading commercially available interconnect IP portfolio.
We believe the combination of our solutions and the strategic neutrality that we offer to the semiconductor industry positions us well as a reliable, trusted and innovative System IP solution for our customers. 11 Table of Contents Network-on-Chip IP Products We believe we offer the semiconductor industry an industry-leading commercially available interconnect IP portfolio.
Packetizing on-chip communications allow the interconnect to be configured for enhanced performance and simplifies the connections of on-chip IP blocks, similar to how the internet eases the simultaneous connectivity of large numbers of computing devices. FlexWay is targeted at simpler SoC while FlexNoC targets the mainstream application.
Packetizing on-chip communications allows the interconnect to be configured for enhanced performance and simplifies the connections of on-chip IP blocks, similar to how the internet eases the simultaneous connectivity of large numbers of computing devices. FlexWay is targeted at simpler SoC while FlexNoC targets the mainstream application.
We make available on our website at www.arteris.com, free of charge, copies of these reports and other information as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. 22 Table of Contents
We make available on our website at www.arteris.com, free of charge, copies of these reports and other information as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. 19 Table of Contents
We engage d third-party vendor software to assist us with an ongoing screening of new and existing customers, third-party agents or representatives, suppliers, and other vendors against U.S., France and several other jurisdictions’ prohibited or restricted party lists.
We engage d third-party vendor software to assist us with an ongoing screening of new and existing customers, third-party agents or representatives, suppliers, and other vendors against U.S., France and several other jurisdictions prohibited or restricted party lists.
In addition, our SIA solutions enable easier IP integration of our interconnect IPs – among other IP blocks that make up an SoC, across both hardware and software. We work directly with our customers throughout the SoC development process and seek to develop long-term, sustainable relationships with them as our technology becomes embedded in their products.
In addition, our SIA solutions enable easier IP integration of our interconnect IPs – among other IP blocks that make up an SoC, across both hardware and software. 5 Table of Contents We work directly with our customers throughout the SoC development process and seek to develop long-term, sustainable relationships with them as our technology becomes embedded in their products.
As a result, we believe we are well positioned to continue to attract and retain customers, and to continue developing next-generation System IP solutions for their future products. We added 23 net new Active Customers during the year ended December 31, 2023. In 2023, we had one customer that represented more than 10% of our revenue.
As a result, we believe we are well positioned to continue to attract and retain customers, and to continue developing next-generation System IP solutions for their future products. We added 10 net new Active Customers during the year ended December 31, 2024. In 2024, we had one customer that represented more than 10% of our revenue.
With our acquisition of Magillem in 2020 and Semifore in 2022, we added complementary technology that helps automate process of integrating and assembling all the customers’ IP blocks into an SoC, and its hardware-software integration to accelerate end product system development. ■ We are able to address mission critical application s.
With our acquisition of Magillem in 2020 and Semifore in 2022, we added complementary technology that helps automate the process of integrating and assembling all of the customers’ IP blocks into an SoC, and its hardware-software integration to accelerate end product system development. 9 Table of Contents ■ We are able to address mission critical application s.
Technological change and customer needs for emerging feature needs in our solutions inspire and motivate our personnel to update and enhance our offerings periodically. We focus on patent protection beyond the United States in countries and jurisdictions where we determine that such filings will assist the strategic reach and value of our patent portfolio.
Technological change and customer needs for emerging feature needs in our solutions inspire and motivate our personnel to update and enhance our offerings periodically. 15 Table of Contents We focus on patent protection beyond the United States in countries and jurisdictions where we determine that such filings will assist the strategic reach and value of our patent portfolio.
Our marketing strategy emphasizes thought leadership and educates potential customers about how our products can address their System IP challenges. We use technical papers, and in-person and online events, to highlight our capabilities. Research and Development We devote the most of our operating expenses to research and development of interconnect IP and SIA solutions.
Our marketing strategy emphasizes thought leadership and educates potential customers about how our products can address their System IP challenges. We use technical papers, and in-person and online events, to highlight our capabilities. Research and Development We devote most of our operating expense to research and development of interconnect IP and SIA solutions.
The addition of more processors, channels of memory access, machine learning sections, additional I/Os interface standards, and other subsystems within SoCs is driving the need for more advanced System IP, including NoC interconnect IP’s. The growth in the numbers of these connected on-chip subsystems places an increasing premium on the interconnect IP capability to move data inside complex SoCs.
The addition of more processors, channels of memory access, machine learning sections, additional I/Os interface standards, and other subsystems within SoCs is driving the need for more advanced System IP, including NoC interconnect IPs. The growth in the number of these connected on-chip subsystems places an increasing premium on the interconnect IP capability to move data inside complex SoCs.
You should not consider the information contained on our website to be part of this report in deciding whether to purchase shares of our common stock. Our common stock is traded on the Nasdaq Stock Market under the symbol “AIP”. Available Information Our website address is www.arteris.com.
You should not consider the information contained on our website to be part of this report in deciding whether to purchase shares of our common stock. Our common stock is traded on the Nasdaq Stock Market under the symbol “AIP”. 18 Table of Contents Available Information Our website address is www.arteris.com.
Additionally, we believe the investment required by a customer to internally create a configurable interconnect technology for a new SoC can be very expensive compared to the cost of licensing from a proven interconnect IP provider. 10 Table of Contents ■ Breadth of System IP solutions.
Additionally, we believe the investment required by a customer to internally create a configurable interconnect technology for a new SoC can be very expensive compared to the cost of licensing from a proven interconnect IP provider. ■ Breadth of System IP solutions.
Our market penetration spans all of these segments and customer adoption is most pronounced in the automotive, enterprise computing, consumer electronics, communications across wired and wireless, and industrial segments, driven by a higher rate of disruptive innovations.
Our market penetration spans all of these segments identified by Informa PLC and customer adoption is most pronounced in the automotive, enterprise computing, consumer electronics, communications across wired and wireless, and industrial markets, driven by a higher rate of disruptive innovations.
We believe our solutions make it easier for our automotive semiconductor “tier 1” and OEM customers to collaborate and meet functional safety standards by establishing traceability between requirements, specifications, hardware and software implementation, verification and testing, and quality assurance.
We believe our solutions make it easier for our automotive semiconductor Tier 1 and OEM customers to collaborate and meet functional safety standards by establishing traceability between requirements, specifications, hardware and software implementation, verification and testing, and quality assurance.
We were founded in 2003 when we believe we helped pioneer the industry’s NoC interconnect IP and have maintained our competitive position with our global team of 145 hardware and software engineers as of December 31, 2023.
We were founded in 2003 when we believe we helped pioneer the industry’s NoC interconnect IP and have maintained our competitive position with our global team of 159 hardware and software engineers as of December 31, 2024.
We believe our IP and software can save our customers time and money and enable them to focus on product differentiation and revenue generation. 11 Table of Contents ■ We believe we have grown our product portfolio through robust and focused research and development.
We believe our IP and software can save our customers time and money and enable them to focus on product differentiation and revenue generation. ■ We believe we have grown our product portfolio through robust and focused research and development.
We believe we ar e positioned to take advantage of the rapid growth of semiconductor content in cars. We have been focused on the automotive market segment since inception and have 140 automotive SoC design wins. Additionally, we have established customer relationships with market leaders such as Mobileye/Intel, BMW, NXP, Bosch, and Dreamchip.
We believe we ar e positioned to take advantage of the rapid growth of semiconductor content in cars. We have been focused on the automotive market since inception and have 162 automotive SoC design wins. Additionally, we have established customer relationships with market leaders such as Mobileye/Intel, BMW, NXP, Bosch, and Dream Chip.
By working closely with semiconductor IP and EDA leaders, some of whom compete with each other, we believe we have established credibility as a trusted enabler to integration of their products within our joint customers’ chips and design flows. 12 Table of Contents ■ We believe we benefit from distinct competitive advantages.
By working closely with semiconductor IP and EDA leaders, some of whom compete with each other, we believe we have established credibility as a trusted enabler for the integration of their products within our joint customers’ chips and design flows. ■ We believe we benefit from distinct competitive advantages.
Such a sizeable, multi-disciplinary engineering team allows us to undertake System IP products of sizeable scale and permits us to work on multiple product development projects at the same time. ■ We have grown our solutions through targeted acquisitions.
Such a sizeable, multi-disciplinary engineering team allows us to undertake System IP products of sizeable scale and permits us to work on multiple product development projects at the same time. ■ We have grown our solutions through targeted acquisitions. We believe we have the ability to complement our product development with selective acquisitions to strengthen our System IP product portfolio.
As of December 31, 2023, we had 154 total allowed or issued patents, pending patent applications and non-expired provisional patent applications worldwide.
As of December 31, 2024, we had 94 total allowed or issued patents, pending patent applications and non-expired provisional patent applications worldwide.
In addition, the chip market in these domains are sensitive to time-to-market pressures, which also generates the need for increased semiconductor design productivity and faster implementation as enhanced by sophisticated interconnect IP solutions. Our low-power features are valuable for battery life and power consumption in our targeted markets.
In addition, the chip market in these domains is sensitive to time-to-market pressures, which also generates the need for increased semiconductor design productivity and faster implementation as enhanced by sophisticated interconnect IP solutions. Our low-power features are valuable for battery life and power consumption in our targeted markets. Industry Challenges Interconnect IP development is a challenging, time-consuming, and expensive process.
Our actual or perceived failure to comply with such obligations could harm our business,” “Risk Factors—Risks Related to Legal, Regulatory, Accounting and Tax Matters—Our failure to comply with the large body of laws and regulations to which we are subject could materially harm our business,” “Risk Factors—Risks Related to Legal, Regulatory, Accounting and Tax Matters—Our failure to comply with the Foreign Corrupt Practices Act, other applicable anti-corruption and anti-bribery laws, and applicable anti-money laundering laws could subject us to penalties and other adverse consequences,” “Risk Factors—Risks Related to Legal, Regulatory, Accounting and Tax Matters—We are subject to government regulation, including import, export and economic sanctions laws and regulations that may expose us to liability and increase our costs,” “Risk Factors—Risks Related to Legal, Regulatory, Accounting and Tax Matters—We will lose sales if we are unable to obtain government authorization to export certain of our products and services, and we will be subject to legal and regulatory consequences if we do not comply with applicable export control laws and regulations or if such laws and regulations were to change.” 21 Table of Contents Human Capital Resources As of December 31, 2023, we had 243 employees as follows: Number Function Research and development 145 Sales and marketing 57 Administration 41 Geographic Distribution United States 96 France 122 China 13 South Korea 5 Japan 5 Elsewhere 2 We consider relations with our employees to be good and have never experienced a work stoppage.
Our actual or perceived failure to comply with such obligations could harm our business,” “Risk Factors—Risks Related to Legal, Regulatory, Accounting and Tax Matters—Our failure to comply with the large body of laws and regulations to which we are subject could materially harm our business,” “Risk Factors—Risks Related to Legal, Regulatory, Accounting and Tax Matters—Our failure to comply with the Foreign Corrupt Practices Act, other applicable anti-corruption and anti-bribery laws, and applicable anti-money laundering laws could subject us to penalties and other adverse consequences,” “Risk Factors—Risks Related to Legal, Regulatory, Accounting and Tax Matters—We are subject to government regulation, including import, export and economic sanctions laws and artificial intelligence regulations that may expose us to liability and increase our costs,” “Risk Factors—Risks Related to Legal, Regulatory, Accounting and Tax Matters—We will lose sales if we are unable to obtain government authorization to export certain of our products and services, and we will be subject to legal and regulatory consequences if we do not comply with applicable export control laws and regulations or if such laws and regulations were to change.” Human Capital Resources As of December 31, 2024, we had 267 employees as follows: Number Function Research and development 159 Sales and marketing 65 Administration 43 Geographic Distribution United States 94 France 136 China 18 South Korea 4 Japan 4 Poland 4 Elsewhere 7 We consider relations with our employees to be good and have never experienced a work stoppage.
For the years ended December 31, 2023 and 2022, we generated $53.7 million and $50.4 million in revenue, $15.7 million and $6.8 million in cash flows used in operating activities, and $36.9 million and $27.4 million in net loss, respectively. We expect to incur further net losses in the short term as we invest in our business.
For the years ended December 31, 2024, and 2023, we generated $57.7 million and $53.7 million in revenue, $0.7 million and $15.7 million in cash flows used in operating activities, and $33.6 million and $36.9 million in net loss, respectively. We expect to incur further net losses in the short term as we invest in our business.
As of December 31, 2023, we had 38 corporate and field application engineers. Corporate and field application engineers work closely with our customers in both presales and support roles, providing expert advice to our SoC architect and engineering users on how best to use our IP and software to design and implement their SoCs.
Corporate and field application engineers work closely with our customers in both presales and support roles, providing expert advice to our SoC architect and engineering users on how best to use our IP and software to design and implement their SoCs.
Increasing demand from emerging end markets and new market participants. New applications in markets such as automotive, enterprise computing, communications, consumer electronics, and industrial have increased the diversity and overall demand in the semiconductor market.
Rising demand from emerging end markets and new market participants is increasing the need for System IP solutions. New applications in markets such as automotive, enterprise computing, communications, consumer electronics, and industrial have increased the diversity and overall demand in the semiconductor market.
Department of Commerce’s Export Administration Regulations (EAR) and economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Controls (OFAC). Other products are subject to French export controls.
In addition, certain of our products, including our IP interconnect and other solutions and technology, are subject to U.S. export controls, including the U.S. Department of Commerce’s Export Administration Regulations (EAR) and economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Controls (OFAC). Other products are subject to French export controls.
These new applications, often including an increasing level of AI/ML technology, safety, or complex hardware-software integrations, have led to an increase in the number and complexity of SoC designs. Chips used for AI training and inference acceleration have increased in die size, further increasing design costs with new design complexities and performance requirements.
These new applications, which often include more AI/ML technology, safety, or complex hardware-software integrations, have led to an increase in the number and complexity of SoC designs. Chips used for artificial intelligence (AI) training and inference acceleration have increased in size, with added design complexities and performance requirements, leading to higher design costs.
The move toward the Internet of Cars may be non-linear and take longer than anticipated but since hardware decisions are often made between six and seven years before deployment, we believe that over the next 20 to 30 years, the creation of the internet of cars represents one of the largest semiconductor opportunities available. 8 Table of Contents Enterprise Computing Applications Large-scale cloud data centers are augmenting and replacing corporate data centers.
The move toward the Internet of Cars may be non-linear and take longer than anticipated but since hardware decisions are often made between six and seven years before deployment, we believe that over the next 20 to 30 years, the creation of the internet of cars represents one of the largest semiconductor opportunities available.
For example, we believe that the customer acquisition process has a typical duration of two to nine months; following this, a customer’s chip design cycle is typically between one to three years.
Additionally, strategic patience and focus are required to participate in the market. For example, we believe that the customer acquisition process has a typical duration of two to nine months; following this, a customer’s chip design cycle is typically between one to three years.
IPs are packaged by the tool using the widely supported IP-XACT standard and can be configured and instantiated to create an SoC design in a single environment whilst ensuring design-data consistency.
Magillem Connectivity allows users to build very complex, correct-by-construction SoC designs. IPs are packaged by the tool using the widely supported IP-XACT standard and can be configured and instantiated to create an SoC design in a single environment whilst ensuring design-data consistency.
As of December 31, 2023, we had 81 pending non-provisional and provisional patent application filings, 36 in the United States, 21 in Europe, 16 in China, five in South Korea and three in Japan. In addition, we have a trademark program covering, where feasible and in accordance with local laws, our products as well as our corporate names and logos.
As of December 31, 2024, we had 120 pending non-provisional and provisional patent application filings, 39 in the United States, 30 in Europe, 24 in China, 14 in South Korea and 13 in Japan. In addition, we have a trademark program covering, where feasible and in accordance with local laws, our products as well as our corporate names and logos.
We may not assign the License Agreement without Qualcomm’s written consent (and a change of control of our company shall be considered an assignment for the purposes of such prohibition) except that we may assign the License Agreement to an acquirer of our business that consists of licensing certain FlexNoC products, and we may only assign the Retained Rights to an entity to whom we have assigned the License Agreement.
We may not assign the License Agreement without Qualcomm’s written consent (and a change of control of our company shall be considered an assignment for the purposes of such prohibition) except that we may assign the License Agreement to an acquirer of our business that consists of licensing certain FlexNoC products, and we may only assign the Retained Rights to an entity to whom we have assigned the License Agreement. 16 Table of Contents Governmental Regulation We are subject to regulation by various governmental agencies in the United States and other jurisdictions in which we operate.
We believe the transition to 5G and 6G will accelerate System IP market growth because the high complexity of 5G and 6G chips require more stringent requirements for bandwidth, latency, and power consumption, making an easy-to-integrate, high performance and low power on-chip interconnect a critical requirement.
We believe the transition to 5G and 6G will result in more stringent requirements for bandwidth, latency, and power consumption, making an easy-to-integrate, high performance and low power on-chip interconnect a critical requirement.
Our strategy is to deliver at least one new Interconnect IP or SIA product release per year, and we have done so since 2013. As of December 31, 2023, we have 145 development engineers on staff covering IP hardware, software, verification, testing and methodology development.
Our strategy is to deliver continuous innovation across both Interconnect IP and SIA software, with at least one major new product or major technology addition each year, and we have done so since 2013. As of December 31, 2024, we have 159 development engineers on staff covering IP hardware, software, verification, testing and methodology development.
Certain countries in which our IP solutions are or may be developed, manufactured or sold may not have or enforce laws that protect our technology and intellectual property rights to the same extent as under U.S. law. 19 Table of Contents Material Agreements Qualcomm Agreements In connection with an Asset Purchase Agreement by and among Qualcomm Technologies, Inc. and Qualcomm France SARL (collectively, Qualcomm) and us and certain of our subsidiaries dated as of October 9, 2013, pursuant to which we sold to Qualcomm certain assets and intellectual property related to our FlexNoC product (the Purchase Agreement), we and our affiliates retained a non-exclusive, worldwide, perpetual right under patents acquired under the Purchase Agreement to, among other things, manufacture, license and distribute certain FlexNoC products and certain modifications thereto (the Retained Rights).
Material Agreements Qualcomm Agreements In connection with an Asset Purchase Agreement by and among Qualcomm Technologies, Inc. and Qualcomm France SARL (collectively, Qualcomm) and us and certain of our subsidiaries dated October 9, 2013, pursuant to which we sold to Qualcomm certain assets and intellectual property related to our FlexNoC product (the Purchase Agreement), we and our affiliates retained a non-exclusive, worldwide, perpetual right under patents acquired under the Purchase Agreement to, among other things, manufacture, license and distribute certain FlexNoC products and certain modifications thereto (the Retained Rights).
The interconnect design process also requires engineers to have an awareness of the physical implementation and floorplan of the target chip to generate an architecture that meets SoC requirements in terms of timing, area, and power. Designers require an in-depth knowledge of graph theory, common interface protocols, data models, and graphical user interfaces.
The design process requires expertise in developing advanced hardware architectures, engineers that have an awareness of the physical implementation and floorplan of the target chip in order to generate an architecture that meets SoC requirements and in-depth knowledge of graph theory, common interface protocols, data models, and graphical user interfaces. ■ High quality.
Our solutions address packaging, connectivity, register configuration, embedded software, and design software flows and we believe we provide best-in-class front-end design environments based on worldwide IEEE 1685 IP-XACT extensible markup language (XML) standard and SystemRDL language through our ready-made design solutions. 16 Table of Contents We believe the combination of SIA solutions and SoC interconnect hardware provides our customers with more comprehensive SoC integration capabilities.
Our solutions address packaging, connectivity, register configuration, embedded software, and design software flows and we believe we provide best-in-class front-end design environments based on worldwide IEEE 1685 IP-XACT extensible markup language (XML) standard and SystemRDL language through our ready-made design solutions.
Developing interconnect IP requires an interdisciplinary engineering team with expertise and skill sets across a wide range of sciences and domains as well as a deep understanding of semiconductor physical design, design methodologies, and networking architectures.
Developing interconnect IP requires an interdisciplinary engineering team with expertise and skill sets across a wide range of sciences and domains as well as a deep understanding of semiconductor physical design, design methodologies, and networking architectures. Building such teams and keeping them together over long periods of time presents a challenge for many companies.
As a result, there is an opportunity to add additional customer value by developing additional data plane and control plane capabilities that attach directly to our interconnect IPs and are implemented in SoCs by our IP software. Currently, we offer NoC interface IP products such as a memory scheduler, last-level cache, SoC data visibility and SoC debug IPs.
NoC Interface IP Growth Opportunity NoC IP carries the majority of the data in an SoC. As a result, there is an opportunity to add additional customer value by developing additional data plane and control plane capabilities that attach directly to our interconnect IPs and are implemented in SoCs by our IP software.
IP and SoC software, with Magillem and CSRCompiler In addition to historical annual introductions of new System IP solutions, we regularly develop and deliver updates that provide product enhancements to our customers.
Cache-coherent NoC IP, with Ncore iii. NoC interface IP, with CodaCache b. SoC Integration Automation Software Solutions Products i. IP and SoC software, with Magillem (Connectivity and Registers) and CSRCompiler In addition to historical annual introductions of new System IP solutions, we regularly develop and deliver updates that provide product enhancements to our customers.
Communications Applications The wireless communications market is in the midst of disruption as it allows efficient machine-to-machine communications at a massive scope and scale. 5G technology allows the cost-efficient connections of massive numbers of embedded sensors and other devices into ultra-reliable, high-bandwidth, and low-latency networks.
A different class of AI/ML SoCs uses such data to match the training data against actual data collected by sensors of the system utilizing “inference” SoCs. 7 Table of Contents Communications Applications The wireless communications market is in the midst of disruption as it allows efficient machine-to-machine communications at a massive scope and scale. 5G technology allows the cost-efficient connections of massive numbers of embedded sensors and other devices into ultra-reliable, high-bandwidth, and low-latency networks.
Industry Challenges Interconnect IP development is a challenging, time-consuming, and expensive process. The need for robust, maintainable interconnect technology becomes increasingly important as chip designs become more complex and larger in size, both driven by advances in semiconductor manufacturing technology.
The need for robust, maintainable interconnect technology becomes increasingly important as chip designs become more complex and larger in size, both driven by advances in semiconductor manufacturing technology. Key interconnect IP development requirements and challenges include: ■ Deep technical expertise and knowledge.
In addition to ADAS and autonomous driving control systems, our interconnect IP is used in radar, lidar, vision, communications, and dashboard/driver management. As cars continue to grow in complexity and connectivity, we believe there will be significant growth in the number of increasingly powerful SoCs that will need automotive grade on-chip interconnect IP.
As cars continue to grow in complexity and connectivity, we believe there will be significant growth in the number of increasingly powerful SoCs that will need automotive grade on-chip interconnect IP.
Due to the complex requirements of electronically enabled vehicles and the high rate of innovation required to compete in the “Internet of Cars” revolution, industry players are designing SoCs tailored to their sophisticated software and applications.
Furthermore, cars are becoming increasingly connected to a large network of data centers, roadside and city infrastructures, and other vehicles, creating the “Internet of Cars.” Due to the complex requirements of electronically enabled vehicles and the high rate of innovation required to compete in the “Internet of Cars” revolution, industry players are designing SoCs tailored to their sophisticated software and applications.
Of these, we had 73 allowed or issued patents, 64 are U.S. allowed or issued patents, five are allowed or issued China patents, two are South Korea issued patents, one is a U.K. issued patent, and one is a Japan issued patent. The 73 allowed or issued patents generally expire between July 2035 and December 2041.
Of these 94 allowed or issued patents, 78 are U.S. allowed or issued patents, 10 are allowed or issued China patents, three are South Korea issued patents, one is a U.K. issued patent, one is a Europe issued patent, and one is a Japan issued patent. The 94 allowed or issued patents generally expire between July 2035 and July 2042.
Many of our application engineers have advanced degrees, years of SoC design experience and passion for helping our customers drive their SoC designs to production status. We believe our application engineers are critical advisors to our customers’ design teams and offer competitive value to our customer’s SoC creation projects.
Many of our application engineers have advanced degrees, years of SoC design experience and passion for helping our customers drive their SoC designs to production status.
It is difficult, time-consuming and expensive to develop state-of-the-art SoC interconnect IP solutions. We believe this dynamic is accelerating the degree to which interconnect IP solutions are outsourced to commercial vendors.
There is a shift to third-party IP due to cost benefits, product differentiation, and accelerated time to market. Developing state-of-the-art SoC interconnect IP solutions is difficult, time-consuming and expensive. We believe this dynamic is accelerating the degree to which interconnect IP solutions are outsourced to commercial vendors.
This evolution expands the market size and value for enterprise solid-state storage systems and the custom ASICs that control them, further strengthening demand for interconnect technologies that improve storage performance and provide data integrity. In addition, enterprise hyperscale computing companies are now creating proprietary SoCs and accelerators for their own products and data centers.
Enterprise Computing Applications Large-scale cloud data centers are augmenting and replacing corporate data centers. This evolution expands the market size and value for enterprise solid-state storage systems and the custom ASICs that control them, further strengthening demand for interconnect technologies that improve storage performance and provide data integrity.
Our Growth Strategy We believe that as SoCs become more numerous and complex, the value of System IP technology increases since it enables the efficient movement of data within the ever-growing number SoCs.
We believe our application engineers are critical advisors to our customers’ design teams and offer competitive value to our customer’s SoC creation projects. 10 Table of Contents Our Growth Strategy We believe that as SoCs become more numerous and complex, the value of System IP technology increases since it enables the efficient movement of data within the ever-growing number of SoCs.
Our operations are also subject to the U.S. Foreign Corrupt Practices Act of 1977, as amended (the FCPA), the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S.
Our operations are also subject to the U.S. Foreign Corrupt Practices Act of 1977, as amended (the FCPA), the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act, as well as the anti-corruption, anti-bribery, and anti-money laundering laws in the U.S. and other countries where we conduct business.
In addition, we also compete with third-party providers, including Arm and several smaller companies. While we do compete with Arm in the interconnect IP market, we believe our solutions are complementary to Arm’s processor portfolio and protocol deployment and are actively collaborating on joint automotive solutions.
While we do compete with Arm in the interconnect IP market, we believe our solutions are complementary to Arm’s processor portfolio and protocol deployment and are actively collaborating on joint automotive solutions. We often execute the integration of Arm processors in heterogeneous environments, which can accelerate the deployment of Arm processors.
As of December 31, 2023, we had Annual Contract Value (ACV), which we define for an individual customer agreement as the total fixed fees under the agreement divided by the number of years in the agreement term, of $50.9 million. ACV and trailing-twelve-months variable royalties and other revenue reached $56.1 million as of December 31, 2023.
As of December 31, 2024, we had Annual Contract Value (ACV), which we define for an individual customer agreement as the total fixed fees under the agreement divided by the number of years in the agreement term, of $60.7 million. ACV plus royalties reached $65.1 million as of December 31, 2024. In 2024, we added 10 net new Active Customers.
For repeat customers, our sales cycle length is generally shorter. 17 Table of Contents As of December 31, 2023, we maintained sales offices, sales personnel, or sales representatives in the United States, China, France, South Korea, Japan, and Israel. As of December 31, 2023, our sales management had an average of 25 years of sales experience.
System IP sales cycles range from six to twelve months or longer. For repeat customers, our sales cycle length is generally shorter. As of December 31, 2024, we maintained sales offices, sales personnel, or sales representatives in the United States, China, France, South Korea, Japan, and Israel.
Our SIA technology suite across Magillem and CSRCompiler products cover the following key capabilities for SoC integration automation and overall SoC development acceleration: ■ Magillem Connectivity: The Magillem connectivity product shortens and streamlines the system-on-chip (SoC) integration process. Magillem Connectivity allows users to build very complex, correct-by-construction SoC designs.
We believe the combination of SIA solutions and SoC interconnect hardware provides our customers with more comprehensive SoC integration capabilities. Our SIA technology suite across Magillem and CSRCompiler products cover the following key capabilities for SoC integration automation and overall SoC development acceleration: ■ Magillem Connectivity: The Magillem connectivity product shortens and streamlines the system-on-chip (SoC) integration process.
NoC interface IP represents a natural expansion of our technical and business capabilities. Our Solutions We provide semiconductor interconnect IP and SIA solutions to serve our target end-markets, including automotive, enterprise computing, consumer electronics, communications across wired and wireless, and industrial segments.
Our Solutions We provide semiconductor interconnect IP and SIA solutions to serve our target end-markets, including automotive, enterprise computing, consumer electronics, communications across wired and wireless, and industrial markets. We regularly release new products to address the rapid evolution of SoC technology.
Our support organization is able to communicate the best practices in SoC design practices and receive early insight into customer requirements. This insight often results in new and innovative product features. System IP sales cycles range from two to nine months or longer.
It is important to our success that we engage our customers early and collaborate throughout the design cycle. Our support organization is able to communicate the best practices in SoC design practices and receive early insight into customer requirements. This insight often results in new and innovative product features.
These challenges have significantly complicated SoC innovation and contributed to the increasing adoption of System IP, across the growing number of customer design starts coupled with the expanding number of NoC IPs used in current SoC. 5 Table of Contents We leveraged our extensive technical expertise to develop configurable IP for a new method for on-chip communication, the NoC, that has emerged over the past couple of decades to address these critical semiconductor development challenges.
We leveraged our extensive technical expertise to develop configurable IP for a new method for on-chip communication, the NoC, that has emerged over the past couple of decades to address these critical semiconductor development challenges.
We work directly with our customers throughout their design processes to develop long-term sustainable relationships as our technology becomes embedded in their products. We have 38 corporate and field application engineers in our global support organization.
We support customers utilizing our interconnect IP solutions on a global basis with architectural reviews, training, implementation support, and tape-out support. We work directly with our customers throughout their design processes to develop long-term sustainable relationships as our technology becomes embedded in their products.
CodaCache keeps data closer to the access point and lowers costs in certain SoC architectures. Design teams and architects can easily configure CodaCache based on area, timing, and other requirements. CodaCache provides the most flexibility of any commercial on-chip last-level cache IP, from setting associativity up to 16 ways, to configuring cache sizes and multiple target ports.
CodaCache keeps data closer to the access point and lowers costs in certain SoC architectures. Design teams and architects can easily configure CodaCache based on area, timing, and other requirements.
Still further, our physical awareness capability allows the estimation of critical net latencies and estimates whether the interconnect IP will meet our customers’ required timing. Our System IP product lines are structured so that our customers can customize the interconnect for their needs, helping accelerate interconnect IP customization for their particular SoC configurations.
Our System IP product lines are structured so that our customers can customize the interconnect for their needs, helping accelerate interconnect IP customization for their particular SoC configurations.
We see an opportunity to further expand our product portfolio and market with additional control networks and subsystems that can accelerate our customers’ ability to deliver production SoCs to their end markets. Such networks may include clocking, register management and interrupt networks.
Currently, we offer NoC interface IP products such as a memory scheduler, last-level cache, SoC data visibility and SoC debug IPs. We see an opportunity to further expand our product portfolio and market with additional control networks and subsystems that can accelerate our customers’ ability to deliver production SoCs to their end markets.
For a discussion of the various risks we face from regulation and compliance matters, see “Risk Factors—Risks Related to Our Business and Industry—We are subject to data protection, privacy and security laws, regulations, standards and other requirements across different markets where we conduct our business.
We screen all customers against applicable lists of denied or restricted parties, including the Entity List administered by BIS as well as the list of Specially Designated Nationals and Blocked Persons, administered by the Treasury Department’s Office of Foreign Assets Control. 17 Table of Contents For a discussion of the various risks we face from regulation and compliance matters, see “Risk Factors—Risks Related to Our Business and Industry—We are subject to data protection, privacy and security laws, regulations, standards and other requirements across different markets where we conduct our business.
As SoC technology evolves, we believe that there is a significant opportunity for us to grow our value by introducing additional functionality for our customers to integrate their SoCs efficiently using our System IP solutions. 7 Table of Contents Omdia segments the aforementioned semiconductor and OEM markets into six industry segments: automotive, computing, consumer, industrial, wireless, and wired communication.
We call this the System IP market. The System IP market consists of interconnect IP, NoC interface IP and SIA solutions. As SoC technology evolves, we believe that there is a significant opportunity for us to increase our value by introducing additional functionality for our customers to integrate their SoCs efficiently using our System IP solutions.
High reliability of the interconnect is a heightened requirement for mission-critical markets including automotive, industrial robotics, medical and space. An in-depth knowledge of and adherence to standards, such as the ISO 26262 automotive functional safety standards, further increases the challenge of developing a reliable interconnect targeted at these applications. ■ Long time commitment and high investment cost.
High reliability of the interconnect is a heightened requirement for mission-critical markets including automotive, industrial robotics, medical and space. ■ Long time commitment and high investment cost.
As SoCs become more complex, there has emerged a class of silicon IP and software tools designed to assemble these IP blocks into a functioning SoC at target cost and performance. We call this the System IP market. The System IP market consists of interconnect IP, NoC interface IP and SIA solutions.
These IP blocks can number in the hundreds on a single chip and generate and consume commands and data, as well as work together as a unit. As SoCs become more complex, there has emerged a class of silicon IP and software tools designed to assemble these IP blocks into a functioning SoC at target cost and performance.
Integration of processors, accelerators, machine learning subsystems, sophisticated multi-channel memories, and an ever-larger number of interface standards have placed a premium on the ability to move data efficiently inside the SoC and between SoC chiplets. These trends further highlight the growing importance of interconnect IP in today’s SoCs. Increasing chip design complexity leads to rising costs.
SoCs grew more complex, enabling applications such as automated driving and enterprise computing data center acceleration. Integration of processors, accelerators, machine learning subsystems, sophisticated multi-channel memories, and an ever-larger number of interface standards has increased the need to move data efficiently inside the SoC and between SoC chiplets. Increasing chip design complexity leads to rising costs.
We also leverage our long history of interconnect IP design to deliver customer-specific features, further deepening our relationship and integration with the customer’s product. We are able to market such features to the rest of our customer base, sharing the benefits of our research and development with them.
We also leverage our long history of interconnect IP design to deliver customer-specific features, further deepening our relationship and integration with the customer’s product. With our System IP products embedded in our customers’ SoCs, there are significant switching costs in moving to alternative solutions.
In 2023, we spent $45.1 million on research and development, which represented 84% of our revenue. 18 Table of Contents Competition For interconnect IP, we primarily compete with interconnect solutions developed internally by our SoC customers and potential customers.
In 2024, we spent $45.0 million on research and development, which represented 78% of our revenue. Competition For interconnect IP, we primarily compete with interconnect solutions developed internally by our SoC customers and potential customers. Many of the largest semiconductor companies have their own interconnect IP development teams which make customer penetration relatively difficult, time-consuming, and expensive.
With our System IP products embedded in our customers’ SoCs, there are significant switching costs in moving to alternative solutions. We believe that our product quality and technical strength have enabled our high customer retention rate. ■ We offer global support for our System IP customers.
We believe that our product quality and technical strength have enabled our high customer retention rate. ■ We offer global support for our System IP customers. Interconnect IP technology is complex, and our customer support is critical for the successful deployment of our IP in our customers’ designs.
We often execute the integration of Arm processors in heterogeneous environments, which can accelerate the deployment of Arm processors. While smaller companies are developing interconnect solutions, we believe that our extensive investment in research and development over many years creates a barrier to entry.
While smaller companies are developing interconnect solutions, we believe that our extensive investment in research and development over many years creates a barrier to entry. Developing interconnect IP solutions that are robust, configurable, and capable of handling multiple functionalities require deep technology expertise and large research and development investments.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeSome of the other risks related to doing business in China include: ■ The Chinese government exerts substantial influence over the manner in which we must conduct our business activities. ■ Restrictions on currency exchange may limit our ability to receive, transfer and use our cash effectively. ■ Increased uncertainties related to the protection and enforcement of intellectual property rights, including risk of theft or misappropriation of our products and intellectual property in China, as well as any intellectual property rights that we may license to a Chinese (or other emerging jurisdiction) entity, including any joint ventures we may form. ■ Increased uncertainties relating to Chinese regulation of exports of products and technology to and from China. ■ Increased and rapidly changing export and related trade regulations and restrictions imposed by U.S. and Chinese legislation, executive actions and regulations. ■ Difficulty of travel to and from China (and to and from United States) arising from or related to the COVID-19 pandemic or any future pandemic. ■ The Chinese government may favor its local businesses and make it more difficult for foreign businesses to operate in China on an equal footing or create generally difficult conditions for foreign headquartered businesses to operate. ■ Increased uncertainties related to the enforcement of contracts with certain parties. ■ More restrictive rules on foreign investment could adversely affect our ability to expand our operations in China. ■ Geopolitical tensions between China on the one hand and the United States and/or the European Union on the other hand, may increase and may lead to increased export sanctions with Chinese entities and sanctions made against China. 47 Table of Contents Political instability, changes in government or destabilizing political developments in or around the major countries and jurisdictions in which we do business have created challenges and an adverse business environment which in turn has impacted our business and financial condition.
Biggest changeSome of the other risks related to doing business in China include: ■ The Chinese government exerts substantial influence over the manner in which we must conduct our business activities. ■ Restrictions on currency exchange may limit our ability to receive, transfer and use our cash effectively. ■ Increased uncertainties related to the protection and enforcement of intellectual property rights, including risk of theft or misappropriation of our products and intellectual property in China, as well as any intellectual property rights that we may license to a Chinese (or other emerging jurisdiction) entity, including any joint ventures we may form. ■ Increased uncertainties relating to Chinese regulation of exports of products and technology to and from China. ■ Increased and rapidly changing export and related trade regulations and restrictions imposed by U.S. and Chinese legislation, executive actions and regulations. ■ The Chinese government may favor its local businesses and make it more difficult for foreign businesses to operate in China on an equal footing or create generally difficult conditions for foreign headquartered businesses to operate. ■ Increased uncertainties related to the enforcement of contracts with certain parties. ■ More restrictive rules on foreign investment could adversely affect our ability to expand our operations in China. ■ Geopolitical tensions may lead to increased export sanctions against China and/or Chinese entities or U.S. companies operating in China or selling products or services into China. ■ Geopolitical changes in China-Taiwan relations could disrupt our operations in China and Taiwan and the operations of companies in China and Taiwan that are our customers, each of which could materially and adversely affect our business and operating results. 44 Table of Contents Political instability, changes in government, elections, or destabilizing political developments in or around the major countries and jurisdictions in which we do business have created challenges and an adverse business environment which in turn has impacted our business and financial condition.
Although we make reasonable efforts to comply with all applicable data protection laws and regulations, our interpretations and such measures may have been or may prove to be insufficient or incorrect.
Although we make reasonable efforts to comply with all applicable data protection laws and regulations, our interpretations and such measures have been or may prove to be insufficient or incorrect.
We will remain an emerging growth company, and will be able to take advantage of the foregoing exemptions, until the last day of our fiscal year following the fifth anniversary of the closing of our initial public offering or such earlier time that we otherwise cease to be an emerging growth company, which will occur upon the earliest of (i) the last day of the first fiscal year in which our annual gross revenue is $1.235 billion or more; (ii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt securities; and (iii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which will occur as of the end of any fiscal year in which (x) the market value of our common equity held by non-affiliates is $700 million or more as of the last business day of our most recently completed second fiscal quarter, (y) we have been required to file annual and quarterly reports under the Exchange Act for a period of at least 12 months and (z) we have filed at least one annual report pursuant to the Exchange Act. 52 Table of Contents Risks Related to Ownership of Our Common Stock An active and liquid trading market for our common stock may not be sustained.
We will remain an emerging growth company, and will be able to take advantage of the foregoing exemptions, until the last day of our fiscal year following the fifth anniversary of the closing of our initial public offering or such earlier time that we otherwise cease to be an emerging growth company, which will occur upon the earliest of (i) the last day of the first fiscal year in which our annual gross revenue is $1.235 billion or more; (ii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt securities; and (iii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which will occur as of the end of any fiscal year in which (x) the market value of our common equity held by non-affiliates is $700 million or more as of the last business day of our most recently completed second fiscal quarter, (y) we have been required to file annual and quarterly reports under the Exchange Act for a period of at least 12 months and (z) we have filed at least one annual report pursuant to the Exchange Act. 49 Table of Contents Risks Related to Ownership of Our Common Stock An active and liquid trading market for our common stock may not be sustained.
Our Certificate of Incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees. 56 Table of Contents Our Certificate of Incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (the Delaware Court of Chancery) will be the exclusive forum for (1) any derivative action or proceeding brought on our behalf; (2) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees or stockholders to us or our stockholders; (3) any action asserting a claim against us, any director or our officers and employees arising pursuant to any provision of the DGCL, our Certificate of Incorporation or our Bylaws, or as to which the DGCL confers exclusive jurisdiction on the Delaware Court of Chancery; or (4) any action asserting a claim against us, any director or our officers or employees that is governed by the internal affairs doctrine; provided that, the exclusive forum provision will not apply to suits brought to enforce any liability or duty created by the Securities Act, the Exchange Act, the rules and regulations thereunder or any other claim for which the federal courts have exclusive jurisdiction; and provided further that, if and only if the Delaware Court of Chancery dismisses any such action for lack of subject matter jurisdiction, such action may be brought in another state or federal court sitting in the State of Delaware.
Our Certificate of Incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees. 53 Table of Contents Our Certificate of Incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (the Delaware Court of Chancery) will be the exclusive forum for (1) any derivative action or proceeding brought on our behalf; (2) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees or stockholders to us or our stockholders; (3) any action asserting a claim against us, any director or our officers and employees arising pursuant to any provision of the DGCL, our Certificate of Incorporation or our Bylaws, or as to which the DGCL confers exclusive jurisdiction on the Delaware Court of Chancery; or (4) any action asserting a claim against us, any director or our officers or employees that is governed by the internal affairs doctrine; provided that, the exclusive forum provision will not apply to suits brought to enforce any liability or duty created by the Securities Act, the Exchange Act, the rules and regulations thereunder or any other claim for which the federal courts have exclusive jurisdiction; and provided further that, if and only if the Delaware Court of Chancery dismisses any such action for lack of subject matter jurisdiction, such action may be brought in another state or federal court sitting in the State of Delaware.
The GDPR, and national implementing legislation in each member state, imposes a strict data protection compliance regime including: (i) providing detailed disclosures about how personal data is collected and processed; (ii) demonstrating that an appropriate legal basis is in place or otherwise exists to justify data processing activities; (iii) granting certain rights for data subjects in regard to their personal data (including transparency, the right to be “forgotten,” right to data portability, right of access, and right to rectification); (iv) obligation to notify data protection regulators or supervisory authorities (and in certain cases, affected individuals) of significant data breaches; (v) imposing limitations on retention of personal data; (vi) maintaining a record of data processing; and (vii) complying with the principal of accountability and the obligation to demonstrate compliance through policies, procedures, training and audit.
The GDPR, and national implementing legislation in each member state, imposes a data protection compliance regime including: (i) providing detailed disclosures about how personal data is collected and processed; (ii) demonstrating that an appropriate legal basis is in place or otherwise exists to justify data processing activities; (iii) granting certain rights for data subjects in regard to their personal data (including transparency, the right to be “forgotten,” right to data portability, right of access, and right to rectification); (iv) obligation to notify data protection regulators or supervisory authorities (and in certain cases, affected individuals) of data breaches; (v) imposing limitations on retention of personal data; (vi) maintaining a record of data processing; and (vii) complying with the principal of accountability and the obligation to demonstrate compliance through policies, procedures, training and audit.
We experience a strong seasonality in sales in the fourth calendar quarter of the year. As a result, our results of operations are subject to substantial quarterly fluctuations, which may seriously harm our business. We have experienced, and expect to continue to experience, seasonal fluctuations in sales due to the spending patterns of semiconductor customers who license our products.
We typically experience a strong seasonality in sales in the fourth calendar quarter of the year. As a result, our results of operations are subject to substantial quarterly fluctuations, which may seriously harm our business. We have experienced, and expect to continue to experience, seasonal fluctuations in sales due to the spending patterns of semiconductor customers who license our products.
Unless otherwise indicated, references to our business being harmed in these risk factors will include harm to our business, reputation, financial condition, results of operations, revenue and future prospects. In such event, the trading price of our common stock could decline, and you could lose all or part of your investment.
Unless otherwise indicated, references to our business being harmed in these risk factors will include harm to our business, reputation, financial condition, results of operations, revenue and future prospects. In such an event, the trading price of our common stock could decline, and you could lose all or part of your investment.
From initial product design-in to volume production, many factors could impact the timing and/or amount of sales actually realized from the design-in. These factors include, but are not limited to, changes in the competitive position of our customers’ product, our customers’ financial stability, and our customers’ ability to ship products under our customers’ original schedule.
From initial product design-in to volume production, many factors could impact the timing and/or amount of sales realized from the design-in. These factors include, but are not limited to, changes in the competitive position of our customers’ product, our customers’ financial stability, and our customers’ ability to ship products under our customers’ original schedule.
In addition, the legal system in China has inherent uncertainties that may limit the legal protections available in the event of any claims or disputes that we have with third parties, including our ability to protect the IP we develop in China or elsewhere.
In addition, the legal system in China has inherent uncertainties that may limit the legal protections available in the event of any claims or disputes that we have with third parties, including our ability to protect the IP we develop or license in China or elsewhere.
Moreover, as noted above, even if a customer selects our IP interconnect and other solutions, we cannot guarantee that this will result in any royalty or future licensing revenue, as the customer may ultimately change or cancel its product plans, or the customer’s efforts to market and sell its product may not be successful. 27 Table of Contents We continually pursue new IP interconnect, SoC integration automation, and other technology initiatives, and if we fail to successfully carry out these initiatives, our business could be harmed.
Moreover, as noted above, even if a customer selects our IP interconnect and other solutions, we cannot guarantee that this will result in any royalty or future licensing revenue, as the customer may ultimately change or cancel its product plans, or the customer’s efforts to market and sell its product may not be successful. 24 Table of Contents We continually pursue new IP interconnect, SoC integration automation, and other technology initiatives, and if we fail to successfully carry out these initiatives, our business could be harmed.
In the event that any third-party succeeds in asserting a valid claim against us or any of our customers, we could be forced to do one or more of the following: ■ discontinue selling access to certain technologies that contain the allegedly infringing intellectual property which would result in a decline in our revenue and could result in breach of contract claim by our affected customers and damage to our reputation; ■ stop receiving payment from a customer that can no longer sell the end-product if it contains allegedly infringing intellectual property ; 39 Table of Contents ■ seek to develop non-infringing technologies, which may not be feasible; ■ incur significant legal expenses; ■ pay substantial monetary damages to the party whose intellectual property rights we may be found to be infringing; and/or ■ we or our customers could be required to seek licenses to the infringed technology that may not be available on commercially reasonable terms, if at all.
In the event that any third-party succeeds in asserting a valid claim against us or any of our customers, we could be forced to do one or more of the following: ■ discontinue selling access to certain technologies that contain the allegedly infringing intellectual property which would result in a decline in our revenue and could result in breach of contract claim by our affected customers and damage to our reputation; ■ stop receiving payment from a customer that can no longer sell the end-product if it contains allegedly infringing intellectual property ; ■ seek to develop non-infringing technologies, which may not be feasible; ■ incur significant legal expenses; ■ pay substantial monetary damages to the party whose intellectual property rights we may be found to be infringing; and/or ■ we or our customers could be required to seek licenses to the infringed technology that may not be available on commercially reasonable terms, if at all.
Our failure to achieve or maintain profitability could negatively impact the value of our common stock. 24 Table of Contents Because our IP solutions are components of end products, if semiconductor, system producers and/or end product producer companies in the automotive market, enterprise computing market, communications market, consumer electronics market, and industrial market do not incorporate our solutions into their end products or if the end products of our customers do not achieve market acceptance, we may not be able to generate adequate license sales and royalty income from our products.
Our failure to achieve or maintain profitability could negatively impact the value of our common stock. 21 Table of Contents Because our IP solutions are components of end products, if semiconductor, system producers and/or end product producer companies in the automotive market, enterprise computing market, communications market, consumer electronics market, and industrial market do not incorporate our solutions into their end products or if the end products of our customers do not achieve market acceptance, we may not be able to generate adequate license sales and royalty income from our products.
Any of the foregoing could irreparably damage our reputation and business, which could have a material adverse effect on our results of operations, cause us to incur significant costs, including legal expenses and remediation costs.
Any of the foregoing could irreparably damage our reputation and business, could have a material adverse effect on our results of operations, and cause us to incur significant costs, including legal expenses and remediation costs.
Claims that our products infringe the intellectual property rights of others, regardless of merit, may cause us to incur large costs to respond to, defend and resolve the claims, and they may divert the efforts and attention of our management and technical personnel from our operations. 57 Table of Contents In addition, in the past, following periods of volatility in the overall market and the market price of a company’s securities, securities class action litigation has often been instituted against companies that experienced such volatility.
Claims that our products infringe the intellectual property rights of others, regardless of merit, may cause us to incur large costs to respond to, defend and resolve the claims, and they may divert the efforts and attention of our management and technical personnel from our operations. 54 Table of Contents In addition, in the past, following periods of volatility in the overall market and the market price of a company’s securities, securities class action litigation has often been instituted against companies that experienced such volatility.
Moreover, conducting business outside the United States subjects us to a number of additional risks and challenges, including: ■ Changes in a specific country’s or region’s political, regulatory or economic conditions. ■ Imposition of significant new export control regulations targeting the Chinese semiconductor industry and technical support of the Chinese semiconductor industry, tariffs and other barriers, restrictions and regional stability measures, including as between U.S.-China. ■ A pandemic, epidemic or other outbreak of an infectious disease, including the recent COVID-19 pandemic, which may cause us or our distributors, vendors and/or customers to temporarily suspend our or their respective operations in the affected city or country or completely. 29 Table of Contents ■ Compliance with a wide variety of domestic and foreign laws and regulations (including those of municipalities or provinces where we have operations) and unexpected changes in those laws, export and trade controls, and regulatory requirements, including uncertainties regarding taxes, social insurance contributions and other payroll taxes and fees to governmental entities, tariffs, quotas, export controls, export licenses and other trade barriers. ■ Unanticipated restrictions on our ability to sell to foreign customers where sales of products and the provision of services may require export licenses or are prohibited by government action, unfavorable foreign exchange controls and currency exchange rates. ■ Potential for substantial penalties and litigation related to violations of a wide variety of laws, treaties and regulations, including labor regulations, export control and anti-corruption regulations (including the U.S.
Moreover, conducting business outside the United States subjects us to a number of additional risks and challenges, including: ■ Changes in a specific country’s or region’s political, regulatory or economic conditions. ■ Imposition of significant new export control regulations targeting the Chinese semiconductor industry and technical support of the Chinese semiconductor industry, tariffs and other barriers, restrictions and regional stability measures, including as between U.S.-China. ■ A pandemic, epidemic or other outbreak of an infectious disease, which may cause us or our distributors, vendors and/or customers to temporarily suspend our or their respective operations in the affected city or country or completely. 26 Table of Contents ■ Compliance with a wide variety of domestic and foreign laws and regulations (including those of municipalities or provinces where we have operations) and unexpected changes in those laws, export and trade controls, and regulatory requirements, including uncertainties regarding taxes, social insurance contributions and other payroll taxes and fees to governmental entities, tariffs, quotas, export controls, export licenses and other trade barriers. ■ Unanticipated restrictions on our ability to sell to foreign customers where sales of products and the provision of services may require export licenses or are prohibited by government action, unfavorable foreign exchange controls and currency exchange rates. ■ Potential for substantial penalties and litigation related to violations of a wide variety of laws, treaties and regulations, including labor regulations, export control and anti-corruption regulations (including the U.S.
In addition, we have offices globally with our sales and research and development being conducted in offices located in the San Francisco Bay Area, Texas, France, China, South Korea, and Japan.
In addition, we have offices globally with our sales and research and development being conducted in offices located in the San Francisco Bay Area, Texas, France, Poland, China, South Korea, and Japan.
We may not be able to consummate acquisitions at rates similar to the past, which could adversely impact our growth rate and the trading price of our common stock.
We may not be able to consummate acquisitions at rates similar to in the past, which could adversely impact our growth rate and the trading price of our common stock.
Should developers limit access to their IP protocol information or cease cooperation with us for any reason, our ability to support certain processors and IP protocols would be delayed, which could harm our business. 28 Table of Contents We may have to invest more resources in research and development than anticipated, which could increase our operating expenses and negatively affect our operating results.
Should developers limit access to their IP protocol information or cease cooperation with us for any reason, our ability to support certain processors and IP protocols would be delayed, which could harm our business. 25 Table of Contents We may have to invest more resources in research and development than anticipated, which could increase our operating expenses and negatively affect our operating results.
Any such interruption or breach of our systems could adversely affect our business operations and/or result in the loss of critical or sensitive confidential information or intellectual property, and could result in financial, legal, business and reputational harm to us. 41 Table of Contents Data security breaches could also expose us to liability under various laws and regulations across jurisdictions and increase the risk of litigation and governmental or regulatory investigation.
Any such interruption or breach of our systems could adversely affect our business operations and/or result in the loss of critical or sensitive confidential information or intellectual property, and could result in financial, legal, business and reputational harm to us. 38 Table of Contents Data security breaches could also expose us to liability under various laws and regulations across jurisdictions and increase the risk of litigation and governmental or regulatory investigation.
Although we believe these solutions are complementary to our IP interconnect solutions, we have less experience and a more limited operating history in offering software that, among other things, manages register configurations of IP blocks, assembles multiple IP blocks into SoC platforms and links design parameters and metadata to documentation, and our ongoing efforts in this area may not be successful.
Although we believe these solutions are complementary to our IP interconnect solutions, we have a more limited operating history in offering software that, among other things, manages register configurations of IP blocks, assembles multiple IP blocks into SoC platforms and links design parameters and metadata to documentation, and our ongoing efforts in this area may not be successful.
In addition, we or our third-party service providers could be required to fundamentally change our business activities and practices or modify our products and services, which could harm our or our third-party service providers’ business.
In addition, we or our third-party service providers could be required to fundamentally change our business activities and practices or modify our products and services, which could harm our business.
Like many other companies, we experience attempted cybersecurity actions on a frequent basis, and the frequency of such attempts could increase in the future. While we have invested in the protection of data and information technology, there can be no assurance that our efforts will prevent or quickly identify service interruptions or security breaches.
Like many other companies, we experience attempted cybersecurity actions on a frequent basis, and the frequency of such attempts could increase in the future. While we have invested in measures for the protection of data and information technology, there can be no assurance that our efforts will prevent or quickly identify service interruptions or security breaches.
The trading price of our common stock could be volatile and subject to wide fluctuations in response to various factors, many of which are beyond our control, including, but not limited to: ■ variations in our actual or anticipated annual or quarterly operating results or those of others in our industry; ■ the potential effects arising if U.S. inflationary and/or currency devaluation trends appear or increase; ■ results of operations that otherwise fail to meet the expectations of securities analysts and investors; ■ changes in earnings estimates or recommendations by securities analysts, or other changes in investor perceptions of the investment opportunity associated with our common stock relative to other investment alternatives; ■ market conditions in the semiconductor industry; ■ failure to meet our publicly announced guidance or other expectations about our business; ■ publications, reports or other media exposure of our products or those of others in our industry, or of our industry generally; ■ announcements by us or others in our industry, or by our or their respective suppliers, distributors or other business partners, regarding, among other things, significant contracts, price reductions, capital commitments or other business developments, the entry into or termination of strategic transactions or relationships, securities offerings or other financing initiatives, and public reaction thereto; ■ additions or departures of key management personnel; ■ regulatory actions involving us or others in our industry, or actual or anticipated changes in applicable government regulations or enforcement thereof; ■ the development and sustainability of an active trading market for our common stock; ■ sales, or anticipated sales, of large blocks of our common stock, such as any sales that may occur following the expiration of the lockups entered into in connection with our initial public offering or any sales to cover tax obligations or exercise costs in connection with the vesting of restricted stock units or the exercise of options, respectively; ■ general economic and securities market conditions, including rising interest rates; and ■ other factors discussed in this “Risk Factors” section and elsewhere in this report. 53 Table of Contents Furthermore, the stock market in general has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of particular companies.
The trading price of our common stock could be volatile and subject to wide fluctuations in response to various factors, many of which are beyond our control, including, but not limited to: ■ variations in our actual or anticipated annual or quarterly operating results or those of others in our industry; ■ the potential effects arising if U.S. inflationary and/or currency devaluation trends appear or increase; ■ results of operations that otherwise fail to meet the expectations of securities analysts and investors; ■ changes in earnings estimates or recommendations by securities analysts, or other changes in investor perceptions of the investment opportunity associated with our common stock relative to other investment alternatives; ■ market conditions in the semiconductor industry; ■ market volatility caused by the rapidly evolving AI-related developments; ■ failure to meet our publicly announced guidance or other expectations about our business; ■ publications, reports or other media exposure of our products or those of others in our industry, or of our industry generally; ■ announcements by us or others in our industry, or by our or their respective suppliers, distributors or other business partners, regarding, among other things, significant contracts, price reductions, capital commitments or other business developments, the entry into or termination of strategic transactions or relationships, securities offerings or other financing initiatives, and public reaction thereto; ■ additions or departures of key management personnel; ■ regulatory actions involving us or others in our industry, or actual or anticipated changes in applicable government regulations or enforcement thereof; ■ the development and sustainability of an active trading market for our common stock; ■ sales, or anticipated sales, of large blocks of our common stock, such as any sales that may occur following the expiration of the lockups entered into in connection with our initial public offering or any sales to cover tax obligations or exercise costs in connection with the vesting of restricted stock units or the exercise of options, respectively; ■ general economic and securities market conditions, including rising interest rates; and ■ other factors discussed in this “Risk Factors” section and elsewhere in this report. 50 Table of Contents Furthermore, the stock market in general has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of particular companies.
We maintain cyber liability insurance; however, this insurance may not be sufficient to cover the financial, legal, business or reputational losses that may result from an interruption or breach of our systems. We are subject to data protection, privacy and security laws, regulations, standards and other requirements across different markets where we conduct our business.
We maintain cyber liability and business interruption insurance renewed annually; however, this insurance may not be sufficient to cover the financial, legal, business or reputational losses that may result from an interruption or breach of our systems. We are subject to data protection, privacy and security laws, regulations, standards and other requirements across different markets where we conduct our business.
As a public company, we are required to provide an annual management report on the effectiveness of our internal control over financial reporting. 51 Table of Contents Our independent registered public accounting firm is not required to formally attest to the effectiveness of our internal control over financial reporting until after we are no longer an “emerging growth company” as defined in the JOBS Act.
As a public company, we are required to provide an annual management report on the effectiveness of our internal control over financial reporting. 48 Table of Contents Our independent registered public accounting firm is not required to formally attest to the effectiveness of our internal control over financial reporting until after we are no longer an “emerging growth company” as defined in the JOBS Act.
The semiconductor industry has also faced significant global supply chain issues as a result of the impact both on demand for devices to enable wireless connectivity and remote environments and on supply from the related imposition of government restrictions on staffing and facility operations due to the recent COVID-19 pandemic as well as other trends such as the increasing demand for semiconductors in automobiles, which together have resulted in the inability of fabrication plants to produce sufficient quantities of chips to meet demand, supply chain shortages and other disruptions.
The semiconductor industry has also faced significant global supply chain issues as a result of the impact both on demand for devices to enable wireless connectivity and remote environments and on supply from the related imposition of government restrictions on staffing and facility operations due to the COVID-19 pandemic as well as other trends such as the increasing demand for semiconductors in automobiles and artificial intelligence, which together have resulted in the inability of fabrication plants to produce sufficient quantities of chips to meet demand, supply chain shortages and other disruptions.
If we have limited access to additional financing sources, we may be required to defer capital expenditures or seek other sources of liquidity, which may not be available to us on acceptable terms or at all. All of these factors related to global economic conditions, which are beyond our control, could harm our business.
If we have limited access to additional financing sources, we may be required to defer capital expenditure or seek other sources of liquidity, which may not be available to us on acceptable terms or at all. All of these factors related to global economic conditions, which are beyond our control, could harm our business.
The effects of any applicable U.S. state, federal and international laws and regulations that are currently in effect or that may go into effect in the future, are significant and may require us to modify our data processing practices and policies and to incur substantial costs and potential liability in an effort to comply with such laws and regulations.
The effects of any applicable state, federal and international laws and regulations that are currently in effect or that may go into effect in the future, are significant and may require us to modify our data processing practices and policies and to incur substantial costs and potential liability in an effort to comply with such laws and regulations.
Any of the foregoing could result in additional cost and liability to us, damage our reputation, inhibit sales, and harm our business. 44 Table of Contents Risks Related to Legal, Regulatory, Accounting and Tax Matters Our failure to comply with the large body of laws and regulations to which we are subject could materially harm our business.
Any of the foregoing could result in additional cost and liability to us, damage our reputation, inhibit sales, and harm our business. 41 Table of Contents Risks Related to Legal, Regulatory, Accounting and Tax Matters Our failure to comply with the large body of laws and regulations to which we are subject could materially harm our business.
Accordingly, we may not be able to utilize a material portion of our NOL carryforwards, even if we achieve profitability. 50 Table of Contents The requirements of being a public company require significant resources and management attention and affect our ability to attract and retain executive management and qualified board members.
Accordingly, we may not be able to utilize a material portion of our NOL carryforwards, even if we achieve profitability. 47 Table of Contents The requirements of being a public company require significant resources and management attention and affect our ability to attract and retain executive management and qualified board members.
Until the net proceeds we receive are used, they may be placed in investments that do not produce income or that lose value. 55 Table of Contents Provisions in our Certificate of Incorporation and Bylaws and under the DGCL contain antitakeover provisions that could prevent or discourage a takeover .
Until the net proceeds we receive are used, they may be placed in investments that do not produce income or that lose value. 52 Table of Contents Provisions in our Certificate of Incorporation and Bylaws and under the DGCL contain antitakeover provisions that could prevent or discourage a takeover .
Factors affecting these markets could seriously harm our customers and/or end customers and, as a result, harm us, examples of which include: ■ Reduced sales of our customers’ and/or end customers’ products. ■ The effects of catastrophic and other disruptive events at our customers’ and/or end customers’ offices or facilities including, but not limited to, natural disasters, telecommunications failures, cyber-attacks, terrorist attacks, regional conflicts, pandemics, epidemics or other outbreaks of infectious disease, including the recent COVID-19 pandemic, breaches of security or loss of critical data. ■ Increased costs associated with potential disruptions to our customers’ and/or end markets’ supply chain and other manufacturing and production operations. ■ The deterioration of our customers’ and/or end customers’ financial condition. ■ Delays and project cancellations as a result of design flaws in the products developed by our customers and/or end customers. ■ The inability of our customers and/or end customers to expand or dedicate the resources necessary to promote and commercialize their products. ■ The inability of our customers and/or end customers to adapt to changing technological demands resulting in their products becoming obsolete. ■ The failure of our customers’ and/or end customers’ products to achieve market success and gain broad market acceptance. 25 Table of Contents ■ Disruption and uncertainty caused by new developments in export and related regulations. ■ Regional and global effect of inflation or other adverse economic conditions, such as rising interest rates, recessions or economic slowdowns, resulting in delays or cancellations of new product design starts. ■ Adverse impact of multiple interest rate increases implemented and forecasted by the U.S.
Factors affecting these markets could seriously harm our customers and/or end customers and, as a result, harm us, examples of which include: ■ Reduced sales of our customers’ and/or end customers’ products. ■ The effects of catastrophic and other disruptive events at our customers’ and/or end customers’ offices or facilities including, but not limited to, natural disasters, telecommunications failures, cyber-attacks, terrorist attacks, regional conflicts, pandemics, epidemics or other outbreaks of infectious disease, breaches of security or loss of critical data. ■ Increased costs associated with potential disruptions to our customers’ and/or end markets’ supply chain and other manufacturing and production operations. ■ The deterioration of our customers’ and/or end customers’ financial condition. ■ Delays and project cancellations as a result of design flaws in the products developed by our customers and/or end customers. ■ The inability of our customers and/or end customers to expand or dedicate the resources necessary to promote and commercialize their products. ■ The inability of our customers and/or end customers to adapt to changing technological demands resulting in their products becoming obsolete. ■ The failure of our customers’ and/or end customers’ products to achieve market success and gain broad market acceptance. 22 Table of Contents ■ Disruption and uncertainty caused by new developments in export and related regulations. ■ Regional and global effects of inflation or other adverse economic conditions, such as rising interest rates, recessions or economic slowdowns, resulting in delays or cancellations of new product design starts. ■ Adverse impact of multiple interest rate increases implemented and forecasted by the U.S.
We have experienced downturns in the past and may experience such downturns in the future. For example, the industry experienced a significant downturn in connection with the most recent global recession in 2008, and further experienced downturns in 2020 and 2022, which may be prolonged as a result of the economic impact of the COVID-19 pandemic.
We have experienced downturns in the past and may experience such downturns in the future. For example, the industry experienced a significant downturn in connection with the most recent global recession in 2008, and experienced further downturns in 2020 and 2022, which was prolonged as a result of the economic impact of the COVID-19 pandemic.
We compete principally on the basis of technology, product quality and features, license, royalty and usage terms, post-contract customer support, interoperability among products, and price and payment terms. We operate in industries characterized by rapidly changing technologies as well as technological obsolescence.
We compete principally on the basis of technology, product quality and features, license, royalty and usage terms, post-contract customer support, interoperability among products, and price and payment terms. We operate in industries characterized by rapidly changing technologies as well as rapid innovation and technological obsolescence.
In addition, computer programmers and hackers also may be able to develop and deploy viruses, worms and other malicious software programs that attack our products, or that otherwise exploit any security vulnerabilities, and any such attack, if successful, could expose us to liability to customer claims.
In addition, computer programmers and hackers also may be able to develop and deploy viruses, worms and other malicious software programs that attack our products, or that otherwise exploit any security vulnerabilities, and any such attack, could expose us to liability to customer claims.
These rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies.
These rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by the courts, regulatory and governing bodies.
We have 300,000,000 shares of common stock authorized as of December 31, 2023. In addition, our Certificate of Incorporation authorizes us to issue up to 10,000,000 shares of preferred stock with such rights and preferences as may be determined by our board of directors.
We have 300,000,000 shares of common stock authorized as of December 31, 2024 . In addition, our Certificate of Incorporation authorizes us to issue up to 10,000,000 shares of preferred stock with such rights and preferences as may be determined by our board of directors.
The cost of compliance with these laws, regulations and standards is high and is likely to increase in the future. 42 Table of Contents As part of our business, we collect personal data, and other potentially sensitive and/or regulated data from our customers.
The cost of compliance with these laws, regulations and standards is high and is likely to increase in the future. 39 Table of Contents As part of our business, we collect personal data, and other potentially sensitive and/or regulated data from our customers.
Our executive officers, directors and stockholders affiliated with our directors also may buy or sell additional shares outside of a Rule 10b5-1 plan when they are not in possession of material, nonpublic information. 54 Table of Contents K.
Our executive officers, directors and stockholders affiliated with our directors may also buy or sell additional shares outside of a Rule 10b5-1 plan when they are not in possession of material, nonpublic information. 51 Table of Contents K.
Allegations of non-compliance, whether or not true, could be costly, time consuming, distracting to management, and cause reputational harm. In addition to government regulation, privacy advocates and industry groups may propose new and different self-regulatory standards.
Allegations of non-compliance, whether or not true, could be costly, time consuming, and cause reputational harm. In addition to government regulation, privacy advocates and industry groups may propose new and different self-regulatory standards.
Alternatively, we may issue additional equity securities, which could dilute your ownership and voting power. ■ We expect to incur integration and startup costs. ■ Acquisitions, joint ventures and other strategic relationships could cause our financial results to differ from our own or the investment community’s expectations in any given period, or over the long-term challenges associated with integrating employees from the acquired company into our organization. ■ Pre-closing and post-closing earnings charges could adversely impact operating results in any given period, and the impact may be substantially different from period to period. ■ Acquisitions, joint ventures and other strategic relationships could create demands on our management, operational resources and financial and internal control systems that we are unable to effectively address. ■ We could experience difficulty in integrating personnel, operations and financial and other controls and systems and retaining key employees and customers. ■ We may be unable to achieve cost savings or other synergies anticipated in connection with an acquisition, joint venture or other strategic relationship. ■ We may assume unknown liabilities, known contingent liabilities that become realized, known liabilities that prove greater than anticipated, internal control deficiencies or exposure to regulatory sanctions resulting from the acquired company’s or investee’s activities and the realization of any of these liabilities or deficiencies may increase our expenses, adversely affect our financial position and/or cause us to fail to meet our public financial reporting obligations. ■ In connection with acquisitions and joint ventures, we often enter into post-closing financial arrangements such as purchase price adjustments, earn-out obligations and indemnification obligations, which may have unpredictable financial results. 35 Table of Contents ■ As a result of our acquisitions, we have recorded significant goodwill and other assets on our consolidated balance sheet and if we are not able to realize the value of these assets, or if the fair value of our investments declines, we may be required to incur impairment charges. ■ We may have interests that diverge from those of our joint venture partners or other strategic partners and we may not be able to direct the management and operations of the joint venture or other strategic relationship in the manner we believe is most appropriate, exposing us to additional risk. ■ Investing in or making loans to early-stage companies often entails a high degree of risk, and we may not achieve the strategic, technological, financial or commercial benefits we anticipate; we may lose our investment or fail to recoup our loan; or our investment may be illiquid for a greater-than-expected period of time.
Alternatively, we may issue additional equity securities, which could dilute your ownership and voting power. ■ We expect to incur integration and startup costs. 31 Table of Contents ■ Acquisitions, joint ventures and other strategic relationships could cause our financial results to differ from our own or the investment community’s expectations in any given period, or over the long-term challenges associated with integrating employees from the acquired company into our organization. ■ Pre-closing and post-closing earnings charges could adversely impact operating results in any given period, and the impact may be substantially different from period to period. ■ Acquisitions, joint ventures and other strategic relationships could create demands on our management, operational resources and financial and internal control systems that we are unable to effectively address. ■ We could experience difficulty in integrating personnel, operations and financial and other controls and systems and retaining key employees and customers. ■ We may be unable to achieve cost savings or other synergies anticipated in connection with an acquisition, joint venture or other strategic relationship. ■ We may assume unknown liabilities, known contingent liabilities that become realized, known liabilities that prove greater than anticipated, internal control deficiencies or exposure to regulatory sanctions resulting from the acquired company’s or investee’s activities and the realization of any of these liabilities or deficiencies may increase our expenses, adversely affect our financial position and/or cause us to fail to meet our public financial reporting obligations. ■ In connection with acquisitions and joint ventures, we often enter into post-closing financial arrangements such as purchase price adjustments, earn-out obligations and indemnification obligations, which may have unpredictable financial results. ■ As a result of our acquisitions, we have recorded significant goodwill and other assets on our consolidated balance sheet and if we are not able to realize the value of these assets, or if the fair value of our investments declines, we may be required to incur impairment charges. ■ We may have interests that diverge from or are adverse to those of our joint venture partners or other strategic partners, expose our IP and intellectual property rights to misappropriation or other licensing risks, and we may not be able to direct the management and operations of the joint venture or other strategic relationship in the manner we believe is most appropriate, exposing us to additional legal, financial, or technical risk. ■ Investing in or making loans to early-stage companies often entails a high degree of risk, and we may not achieve the strategic, technological, financial or commercial benefits we anticipate; we may lose our investment, or fail to recoup our loan; or our investment may be illiquid for a greater-than-expected period of time.
The size and complexity of our information systems make such systems potentially vulnerable to service interruptions or to security breaches from inadvertent or intentional actions by our employees or vendors, or from attacks by malicious third parties.
The size and complexity of our information systems make such systems potentially vulnerable to service interruptions or to security breaches from inadvertent or intentional actions by our employees or external service providers, vendors, or from attacks by malicious third parties.
A downturn in the automotive market could delay automakers’ plans to introduce new vehicles with these features, which would negatively impact the demand for our products and our ability to grow our business.
The reported downturn in the automotive market could delay automakers’ plans to introduce new vehicles with these features, which would negatively impact the demand for our products and our ability to grow our business.
Any significant impairments of our intellectual property rights from any litigation we face could harm our business and our ability to compete in our industry. We may not be able to continue to obtain licenses to third-party software and intellectual property on reasonable terms or at all, which may disrupt our business and harm our financial results.
Any significant impairments of our intellectual property rights from any litigation we face could harm our business and our ability to compete in our industry. 36 Table of Contents We may not be able to continue to obtain licenses to third-party software and intellectual property on reasonable terms or at all, which may disrupt our business and harm our financial results.
We may also decide to increase our research and development investment to seize customer or market opportunities, which could negatively impact our financial results. We continue to experience hiring challenges, including for engineering resources. Product errors or defects could expose us to liability and harm our reputation and we could lose market share.
We may also decide to increase our research and development investment to seize customer or market opportunities, which could negatively impact our financial results. We expect that we will continue to experience hiring challenges, including for engineering resources. Product errors or defects could expose us to liability and harm our reputation and we could lose market share.
Bribery Act). ■ Difficulties and costs of staffing and managing international operations across different geographic areas, time zones and cultures. ■ Changes in diplomatic and trade relationships. ■ Potential political, legal and economic instability, armed conflict, and civil unrest in the countries in which we and our customers are located. ■ Difficulty and costs of maintaining effective data security. ■ Inadequate protection of our intellectual property. ■ Nationalization and expropriation. ■ Restrictions on the transfer of funds to and from foreign countries, including withholding taxes and other potentially negative tax consequences. ■ Unfavorable and/or changing foreign tax treaties and policies. ■ Increased exposure to general market and economic conditions inside and outside of the United States. ■ Currency exchange rate fluctuations and the resulting effect on our revenue and expenses, and the cost and risk of entering into hedging transactions if we chose to do so in the future. ■ Increased regulatory uncertainties with respect to our wholly foreign-owned enterprise operating in China and any joint ventures we may form or contribute IP or other resources to in the future. ■ Trends such as global and regional inflation, supply shortages and supply chain disruptions, geopolitical conflicts and retaliatory actions and regulations affecting or relating to regions such as but not limited to Ukraine, Russia, Eastern Europe or in the Greater China region, may lead to the deterioration of our immediate customers’ and/or end market customers’ ability and/or willingness to purchase, use, develop, market or sell products or solutions that incorporate or are made while using our products.
Bribery Act). ■ Difficulties and costs of staffing and managing international operations across different geographic areas, time zones and cultures. ■ Changes in diplomatic and trade relationships and uncertainties around political elections create an unpredictable business environment. ■ Potential political, legal and economic instability, armed conflict, and civil unrest in the countries in which we and our customers are located. ■ Difficulty and costs of maintaining effective data security. ■ Inadequate protection of our intellectual property. ■ Nationalization and expropriation. ■ Restrictions on the transfer of funds to and from foreign countries, including withholding taxes and other potentially negative tax consequences. ■ Unfavorable and/or changing foreign tax treaties and policies. ■ Increased exposure to general market and economic conditions inside and outside of the United States. ■ Currency exchange rate fluctuations and the resulting effect on our revenue and expenses, and the cost and risk of entering into hedging transactions if we choose to do so in the future. ■ Increased regulatory uncertainties with respect to our wholly foreign-owned enterprise operating in China and any joint ventures we may form or contribute IP or other resources to in the future. ■ Trends such as global and regional inflation, supply shortages and supply chain disruptions, geopolitical conflicts and retaliatory actions and regulations affecting or relating to regions such as but not limited to Ukraine, Russia, Eastern Europe, Israel and the Middle East, or in the Greater China region, may lead to the deterioration of our immediate customers’ and/or end market customers’ ability and/or willingness to purchase, use, develop, market or sell products or solutions that incorporate or are made while using our products.
If we do not achieve our revenue goals, our results of operations could decline. 26 Table of Contents The nature of the design win process requires us to incur significant expenses without any guarantee that research and development and sales efforts will generate revenue, which could adversely affect our financial results.
If we do not achieve our revenue goals, our results of operations could decline. The nature of the design win process requires us to incur significant expenses without any guarantee that research and development and sales efforts will generate revenue, which could adversely affect our financial results.
Security breaches, computer malware and computer hacking attacks have become more prevalent across industries and may occur on our systems or those of our third-party service providers or partners.
Security breaches, computer malware, prolonged outages, and computer hacking attacks have become more prevalent across industries and may occur on our systems or those of our third-party service providers or partners.
Given these limitations, we may not be able to continue to attract, retain and motivate qualified personnel necessary for our business. In addition, we recruit from a limited pool of engineers with expertise in SoC design and the competition for such personnel can be intense.
Given these limitations, we may not be able to continue to attract, retain and motivate qualified personnel necessary for our business. 33 Table of Contents In addition, we recruit from a limited pool of engineers with expertise in SoC design and the competition for such personnel can be intense.
If we fail to satisfy the continued listing standards, we could be de-listed, which would negatively impact the value and liquidity of your investment. Our stock price may be volatile, and investors in our common stock may not be able to resell shares of our common stock at or above the price paid, or at all.
If we fail to satisfy the continued listing standards, we could be delisted, which would negatively impact the value and liquidity of your investment. Our stock price may be volatile, and investors in our common stock may not be able to resell shares of our common stock at or above the price paid, or at all.
Fluctuations in our revenue and operating results could cause our stock price to decline and, as a result, you may lose some or all of your investment. 33 Table of Contents Royalty rates could decrease for existing and future license agreements, which could materially adversely affect our operating results.
Fluctuations in our revenue and operating results could cause our stock price to decline and, as a result, you may lose some or all of your investment. Royalty rates could decrease for existing and future license agreements, which could materially adversely affect our operating results.
Some of our agreements, including those with key customers like Texas Instruments Incorporated and Samsung Electronics Co., Ltd., provide for indemnification, and some require us to provide technical support and information to a customer that is involved in litigation involving use of our technology.
Some of our agreements, including those with key customers like Texas Instruments Incorporated and Samsung Electronics Co., Ltd., have historically provided for indemnification, and some require us to provide technical support and information to a customer that is involved in litigation involving use of our technology.
Exports of certain of our IP interconnect and other solutions are subject to export controls imposed by the U.S. government and administered by the U.S. Departments of State and Commerce. In certain instances, these regulations may require pre-shipment authorization from the administering department. For products subject to the EAR, administered by the U.S.
Exports of certain of our IP interconnect and other solutions are subject to export controls imposed by the U.S. government and administered by the U.S. Departments of State and Commerce. In certain instances, these regulations may require pre-shipment authorization from the administering department.
The appearance of new competitors, introduction of new products by our competitors or our failure to timely develop new or enhanced products or technologies in response to changing market demand, whether due to technological shifts or otherwise, could result in the loss of customers and decreased revenue and have an adverse effect on our business, financial condition, and results of operations.
The appearance of new competitors, including start-up enterprises, introduction of new products by our competitors or our failure to timely develop new or enhanced products or technologies in response to changing market demand, whether due to technological shifts or otherwise, could result in the loss of customers and decreased revenue and have an adverse effect on our business, financial condition, and results of operations.
For example, the CCPA requires covered companies to, among other things, provide certain disclosures to California consumers about use of personal information, and affords such consumers new privacy rights such as the ability to opt-out of certain sales of personal information and expanded rights to access and require deletion of their personal information, opt out of certain personal information sharing, and receive detailed information about how their personal information is collected, used and shared.
For example, the CCPA requires covered companies to, among other things, provide certain disclosures to California consumers about use of personal information, and affords such consumers privacy rights such as the ability to opt-out of certain sales of personal information and expanded rights to access and delete their personal information, opt out of certain personal information sharing, and receive detailed information about how their personal information is collected, used and shared.
As a consequence of the above referenced factors, as well as unforeseen factors in the future, the royalty rates we receive for use of our technology could decrease with new or renewed customers, thereby decreasing future anticipated revenue and cash flow. Variable royalty revenue was 9.6% of our revenue for the year ended December 31, 2023 .
As a consequence of the above referenced factors, as well as unforeseen factors in the future, the royalty rates we receive for the use of our technology could decrease with new or renewed customers, thereby decreasing future anticipated revenue and cash flow. Variable royalty revenue was 7.6% of our revenue for the year ended December 31, 2024.
Cybersecurity threats continue to increase in frequency and sophistication; a successful cybersecurity attack could interrupt or disrupt our information technology systems, or those of our third-party service providers, or cause the loss of confidential or protected data which could disrupt our business, force us to incur excessive costs or cause reputational harm.
Cybersecurity threats continue to increase in frequency and sophistication; a successful cybersecurity attack or prolonged outage regardless of cause could interrupt or disrupt our information technology systems, or those of our third-party service providers, or cause the loss of availability of confidential or protected data which could disrupt our business, force us to incur excessive costs or cause reputational harm.
We seek to protect our proprietary technology and innovations, particularly those relating to the design of our products, through patents, trade secrets and other intellectual property rights. As of December 31, 2023, we had 154 total allowed or issued patents, pending patent applications and non-expired provisional patent applications worldwide.
We seek to protect our proprietary technology and innovations, particularly those relating to the design of our products, through patents, trade secrets and other intellectual property rights. As of December 31, 2024, we had 214 total allowed or issued patents, pending patent applications and non-expired provisional patent applications worldwide.
The techniques used by cybercriminals to obtain unauthorized access to systems or sabotage systems, or disable or degrade services, change frequently, may not be recognized until launched against a target and can originate from a wide variety of sources, including outside groups such as external service providers, organized crime affiliates, terrorist organizations or hostile foreign governments or agencies.
The techniques used by cybercriminals to obtain unauthorized access to systems or sabotage systems, or to disable or degrade services, change frequently, and may not be recognized when launched against a target and can originate from a wide variety of sources, including outside groups such as organized crime affiliates, terrorist organizations or hostile foreign governments or agencies.
In addition, our reputation, our revenue or our stock price could be adversely affected if we become the subject of any negative publicity related to actual or potential violations of any of these laws and regulations. 45 Table of Contents We are subject to government regulation, including import, export and economic sanctions laws and regulations that may expose us to liability and increase our costs.
In addition, our reputation, our revenue or our stock price could be adversely affected if we become the subject of any negative publicity related to actual or potential violations of any of these laws and regulations. 42 Table of Contents We are subject to government regulations, including import, export and economic sanctions laws and artificial intelligence regulations that may expose us to liability and increase our costs.
For example, the California Consumer Privacy Act of 2018 as amended by the California Privacy Rights Act, collectively the CCPA, imposes a private right of action for security breaches that could lead to some form of remedy including regulatory scrutiny, fines, private right of action settlements, and other consequences.
For example, the California Consumer Privacy Act of 2018 as amended by the California Privacy Rights Act, collectively the CCPA, includes a private right of action for security breaches that could lead to some form of remedy, as well as, regulatory scrutiny, fines, private right of action settlements, and other consequences.
Furthermore, consolidation among our customers may increase the leverage of our existing customers to extract concessions from us in royalty rates. Changing currency exchange rates could harm our business.
Furthermore, consolidation among our customers may increase the leverage of our existing customers to extract concessions from us in royalty rates. 30 Table of Contents Changing currency exchange rates could harm our business.
If the volume of our international operations increases and foreign currency exchange rates change, the impact to our consolidated statements of operations could be significant and may affect the comparability of operating results. The impact from foreign currency exchange for the the year ended December 31, 2023 was immaterial.
If the volume of our international operations increases and foreign currency exchange rates changes, the impact to our consolidated statements of operations could be significant and may affect the comparability of operating results. The impact from foreign currency exchange for the year ended December 31, 2024, was immaterial.
Difficulties in any of our new product development efforts or our efforts to enter adjacent markets, including delays or disruptions due to factors outside of our control such as any adverse impact resulting from changing macroeconomic and geopolitical environments, market and inflationary pressures, export and trade controls, and COVID-19 or other pandemic, could harm our business.
Difficulties in any of our new product development efforts or our efforts to enter adjacent markets, including delays or disruptions due to factors outside of our control such as any adverse impact resulting from changing macroeconomic and geopolitical environments, market and inflationary pressures, export and trade controls, and pandemics, could harm our business.
The global data protection landscape is rapidly evolving, and we are or may become subject to numerous state, federal and foreign laws, regulations, legal requirements, contractual obligations and industry standards regarding security, data protection and privacy and any actual or perceived failure to comply with these requirements, obligations or standards could harm our reputation and business.
The global data protection landscape continues to evolve, and we are or may become subject to numerous state, federal and foreign laws, regulations, legal requirements, contractual obligations and industry standards regarding security, data protection and privacy and any actual or perceived failure to comply with these requirements, obligations or standards could harm our reputation and business.
Because the interpretation and application of privacy and data protection laws are still uncertain, it is possible that these laws may be interpreted and applied in a manner that is inconsistent with one another or inconsistent with our existing data management practices or the features of our products and services.
Because the interpretation and application of privacy and data protection laws continue to evolve, it is possible that these laws may be interpreted and applied in a manner that are inconsistent with one another or inconsistent with our existing data management practices or the features of our products and services.
In July 2020, the Court of Justice of the EU (CJEU) limited how organizations could lawfully transfer personal data from the EU/EEA to the United States by invalidating the Privacy Shield for purposes of international transfers and imposing further restrictions on the use of standard contractual clauses (SCCs).
In July 2020, the Court of Justice of the EU (CJEU) limited how organizations could lawfully transfer personal data from the EU/EEA to the United States by invalidating the Privacy Shield for purposes of international transfers and imposing further restrictions on the use of standard contractual clauses (SCCs). In March 2022, the US and EU announced the EU-U.S.
Weaknesses in the global economy and financial markets, including the current weaknesses resulting from the ongoing COVID-19 pandemic, and any adverse changes in general domestic and global economic conditions that may occur in the future, including any recession, economic slowdown or disruption of credit markets, may lead to, lower demand for products that incorporate our solutions, including in the automotive market, enterprise computing market, communications market, consumer electronics market, and industrial market.
Weaknesses in the global economy and financial markets and any adverse changes in general domestic and global economic conditions that may occur in the future, including any recession, economic slowdown or disruption of credit markets, may lead to, lower demand for products that incorporate our solutions, including in the automotive market, enterprise computing market, communications market, consumer electronics market, and industrial market.
Charles Janac, our President, Chief Executive Officer and Chairman, beneficially owns a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval. As of December 31, 2023, K. Charles Janac, our President, Chief Executive Officer and Chairman, held voting power over approximately 27.9% of our outstanding voting stock.
Charles Janac, our President, Chief Executive Officer and Chairman, beneficially owns a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval. As of December 31, 2024 , K. Charles Janac, our President, Chief Executive Officer and Chairman, held voting power over approximately 25.0 % of our outstanding voting stock.
The net losses we incur may fluctuate significantly from quarter to quarter and may increase as a result of geopolitical and market fluctuations, inflation, economic slowdown and/or recessionary pressures, COVID-19 or any future pandemic and other global economic factors.
The net losses we incur may fluctuate significantly from quarter to quarter and may increase as a result of geopolitical and market fluctuations, inflation, economic slowdown and/or recessionary pressures and other global economic factors.
These state privacy laws may increase our compliance costs and potential liability, particularly in the event of a data breach, and could harm our business, including how we use personal information. A number of other proposals exist for new federal and state privacy legislation that, if passed, could increase our potential liability, increase our compliance costs and harm our business.
These state privacy laws may increase our compliance costs and potential liability, and could harm our business, including how we use personal information. A number of other proposals exist for new federal and state privacy legislation that, if passed, could increase our potential liability, increase our compliance costs and harm our business.
DPF after determining that the additional safeguards included in Executive Order 14086 signed by President Biden on October 7, 2022, provide an adequate level of protection for personal data transferred from the European Union. The adequacy decision allows the EU-U.S.
DPF after determining that the additional safeguards included in Executive Order 14086 signed by former President Biden on October 7, 2022, provide an adequate level of protection for personal data transferred from the European Union. The adequacy decision allows the EU-U.S. DPF to facilitate the transfer of data from Europe to the United States.
As reflected in other Risk Factors, such risks may increase if additional Chinese entities are placed on the Entity List due, among other things, to their business with Russia in light of China’s stance and actions taken relating to Russia-Ukraine tensions and hostilities. 46 Table of Contents In July 2021, we submitted a voluntary self-disclosure (VSD) to the U.S.
As reflected in other Risk Factors, such risks may increase if additional Chinese entities are placed on the Entity List due, among other things, to their business with Russia in light of China’s stance and actions taken relating to Russia-Ukraine tensions and hostilities. 43 Table of Contents In July 2021, we submitted a voluntary self-disclosure (VSD) to BIS, noting potential violations of the EAR.
We do not expect that this executive order will impact us; however, further government escalation of restrictions related to Chinese investors and dealings in securities could harm certain shareholders. Additionally, on October 7, 2022, the U.S. Department of Commerce's Bureau of Industry and Security issued export controls related to the Chinese semiconductor manufacturing, advanced computing, and supercomputer industries.
We do not expect that this executive order will impact us; however, further government escalation of restrictions related to Chinese investors and dealings in securities could harm certain shareholders. Additionally, on October 7, 2022, BIS issued export controls related to the Chinese semiconductor manufacturing, advanced computing, and supercomputer industries.
These restrictions, which are effective on November 17, 2023, and any subsequent restrictions, may have an adverse effect on our business, results of operations, or financial condition and we may no longer be able to license or support our products to certain companies in China.
These restrictions and any subsequent restrictions, may have an adverse effect on our business, results of operations, or financial condition and we may no longer be able to license or support our products to certain companies in China.
Our dependence on international customers and operations also subjects us to a range of other additional regulatory, operational, financial, and political risks that could adversely affect our financial results. We derived 65.4% and 59.3% of our revenue for 2023 and 2022, respectively, from sales to customers outside of the United States.
Our dependence on international customers and operations also subjects us to a range of other additional regulatory, operational, financial, and political risks that could adversely affect our financial results. We derived 62.3% and 65.4% of our revenue for the years ended December 31, 2024, and 2023, respectively, from sales to customers outside of the United States.
The occurrence of any of the below could adversely affect our ability to compete and harm our business: ■ Our ability to anticipate and lead critical product development cycles and technological shifts as driven by our target markets, to innovate rapidly and efficiently and to improve our existing solutions. ■ Whether any competitor substantially increases its engineering and marketing resources to compete with us in the semiconductor IP interconnect and SIA software technology arena. ■ Whether a new entrant with substantially greater resources and/or supported by governmental resources decides to enter the markets in which we compete. ■ Whether any existing or new competitor bundles its technologies into one package at a discounted price that would make it uneconomical for our customers to license our products separately. ■ The challenges of developing, or acquiring externally developed, technology solutions that are adequate and competitive in meeting the rapidly evolving requirements of next-generation design challenges. ■ Our ability to compete on the basis of payment, pricing, features and/or terms. 23 Table of Contents ■ Decisions by semiconductor companies, system companies, device or other end product producers, and/or OEMs to develop IP development internally, rather than license IP from outside vendors due to budget constraints or excess engineering capacity. ■ Actions by regulators or governmental entities to impose license requirements, limit product availability, limit trade and exportability of our products, the features or contractual terms that either we or our customers can apply to product and service offerings, or to affect monetary policy. ■ Actions by regulators or governmental entities to modify or augment tax treatment of our product and service offerings. ■ The impact of global and regional inflation on ours and our customers’ profitability and expansion plans due to among other effects of inflation, increases in wages, availability of capital, salaries, operating expenses, and costs of insurance, benefits and medical coverage. ■ The potential effects of geopolitical conflicts, such as the military conflict between Russia and Ukraine and the conflict in Israel, including retaliatory, military and regulatory actions, on our customers’ engineering resources, design schedules, purchasing, development, sales and innovation responses and trends in response to such conflicts. ■ Competition, embargoes, sanctions, boycotts and/or social unrest. ■ Local or international economic headwind trends that may lead to recessions, economic slowdowns or sudden changes in economic needs of regions and consumers. ■ Silicon chip supply chain and shipment volume restrictions on our customers and their end customers that will impact the amount of royalties payable to us.
The occurrence of any of the below could adversely affect our ability to compete and harm our business: ■ Our ability to anticipate and lead critical product development cycles and technological shifts as driven by our target markets, to innovate rapidly and efficiently and to improve our existing solutions. ■ Whether any competitor substantially increases its engineering and marketing resources to compete with us in the semiconductor IP interconnect and SIA software technology arena. ■ Whether a new entrant with substantially greater resources and/or supported by governmental resources decides to enter the markets in which we compete. ■ Whether any existing or new competitor bundles its technologies into one package at a discounted price that would make it uneconomical for our customers to license our products separately. ■ The challenges of developing, or acquiring externally developed, technology solutions that are adequate and competitive in meeting the rapidly evolving requirements of next-generation design challenges. ■ Our ability to compete on the basis of payment, pricing, features and/or terms. 20 Table of Contents ■ Decisions by semiconductor companies, fabless chip design or system companies, device or other end product producers, and/or OEMs to develop IP development internally, rather than license IP from outside vendors due to budget constraints or excess engineering capacity. ■ Actions by regulators or governmental entities to impose license requirements, limit product availability, limit trade and exportability of our products, the features or contractual terms that either we or our customers can apply to product and service offerings, or to affect monetary policy. ■ Actions by regulators or governmental entities to modify or augment tax treatment of our product and service offerings. ■ The impact of global and regional inflation on ours and our customers’ profitability and expansion plans due to among other effects of inflation, increases in wages, availability of capital, salaries, operating expenses, and costs of insurance, benefits and medical coverage. ■ The potential effects of geopolitical conflicts, such as the military conflict between Russia and Ukraine and the conflict in Israel, including retaliatory, military and regulatory actions, or other actions that escalate tensions, including with respect to the conflict in Israel, actions involving Iran and other groups in the Middle East, on our customers’ engineering resources, design schedules, purchasing, development, sales and innovation responses and trends in response to such conflicts.
A decline in end-user demand can affect our customers’ demand for our products, the ability of our customers to obtain credit and otherwise meet their payment obligations and the likelihood of customers canceling or deferring existing orders.
A decline in end-user demand can affect our customers’ demand for our products, the ability of our customers to obtain credit and otherwise meet their payment obligations and the likelihood of customers canceling or deferring existing orders. Our business could be harmed by such actions.
Often, we compete against larger companies that possess substantial financial, technical, research and development and engineering resources that can be deployed so they can develop their IP solutions internally. In addition, we compete against other third-party providers of IP integration solutions, such as Arm Limited, EXTOLL GmbH, Openedges Technologies Inc., Sdn.
Often, we compete against larger companies that possess substantial financial, technical, research and development and engineering resources that can be deployed so they can develop their IP solutions internally. In addition, we compete against other third-party providers of IP integration solutions, such as Arm and Cadence that similarly possess substantial financial, technical, research and development and engineering resources.
In the event of a major earthquake, hurricane or other forms of catastrophic event such as fire, power loss, telecommunications failure, cyber-attack, war, terrorist attack or disease outbreak, we may be unable to continue our operations and may endure system interruptions, reputational harm, delays in our product development, breaches of data security, or loss of critical data, any of which could have an adverse effect on our future results of operations. 37 Table of Contents If our counterparties are unable to fulfill their financial and other obligations to us, our business and results of operations may be affected adversely.
In the event of a major earthquake, hurricane or other forms of catastrophic event such as fire, power loss, telecommunications failure, cyber-attack, war, terrorist attack or disease outbreak, we may be unable to continue our operations and may endure system interruptions, reputational harm, delays in our product development, breaches of data security, or loss of critical data, any of which could have an adverse effect on our future results of operations.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeManagement updates the board of directors, as necessary, regarding any significant cybersecurity incidents, as well as any incidents with lesser impact potential. The board of directors receives briefings from management periodically on our cyber risk management program and presentations on cybersecurity topics as part of the board of directors’ continuing education on topics that impact public companies.
Biggest changeThe Cybersecurity Management Team updates the board of directors, as necessary, regarding any significant cybersecurity incidents. The board of directors receives briefings from management and the Cybersecurity Management Team periodically on our cyber risk management program and presentations on cybersecurity topics as part of the board of directors’ continuing education on topics that impact public companies.
Our cybersecurity risk management program includes: ■ Risk assessments designed to help identify cybersecurity risks to our critical systems, information, products, services, and our broader enterprise IT environment; ■ A management team, including the Chief Financial Officer (CFO), head of information technology (Head of IT), General Counsel/Chief Compliance Officer, and Deputy General Counsel (together, the Cybersecurity Management Team) responsible for managing and communicating priorities related to (1) our cybersecurity risk assessment processes, (2) our security controls, and (3) our response to cybersecurity incidents; ■ The use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of our security processes; ■ Cybersecurity awareness training of our employees, incident response personnel, and senior management; ■ A cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents; and ■ A third-party risk management process for essential service providers, suppliers, and vendors.
Our cybersecurity risk management program includes: ■ Risk assessments designed to help identify cybersecurity risks to our critical systems, information, products, services, and our broader enterprise IT environment; ■ A management team, including the Chief Financial Officer (CFO), head of information technology (Head of IT), General Counsel/Chief Compliance Officer, and Deputy General Counsel (together, the Cybersecurity Management Team) responsible for managing and communicating priorities related to (1) our cybersecurity risk assessment processes, (2) our security controls, and (3) our response to cybersecurity incidents; ■ The use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of our cybersecurity risk management program; ■ Cybersecurity awareness training of our employees, incident response personnel, and senior management; ■ A cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents; and ■ A third-party risk management process to oversee and identify cybersecurity risks for our use of service providers, suppliers, and vendors.
Our Cybersecurity Management Team is responsible for assessing and managing our material risks from cybersecurity threats. The Head of IT has a primary responsibility for our overall cybersecurity risk management program and supervises both our internal IT personnel and our retained external cybersecurity consultants.
Our Cybersecurity Management Team is responsible for assessing and managing our material risks from cybersecurity threats. The Head of IT has primary responsibility for our overall cybersecurity risk management program and supervises both our internal IT personnel and our retained external cybersecurity consultants.
Our Cybersecurity Management Team is informed about and monitors the prevention, detection, mitigation, and remediation of cybersecurity risks and incidents through various means, which may include among other things, briefings with internal security personnel, threat intelligence and other information obtained from governmental, public or private sources, including external consultants engaged by us, and alerts and reports produced by security tools deployed in our IT environment. 58 Table of Contents We have not at this time identified risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents, that have materially affected us, including our operations, business strategy, results of operations, or financial condition.
Our Cybersecurity Management Team is informed about and monitors the prevention, detection, mitigation, and remediation of cybersecurity risks and incidents through various means, which may include among other things, briefings with internal security personnel, threat intelligence and other information obtained from governmental, public or private sources, including external consultants engaged by us, and alerts and reports produced by security tools deployed in our IT environment. 55 Table of Contents We have not at this time identified risks from known cybersecurity threats, including as a result of any prior cybersecurity events, that have materially affected us, including our operations, business strategy, results of operations, or financial condition.
Our cybersecurity risk management program includes common methodologies, reporting channels and governance processes that apply across the enterprise to other legal, compliance, strategic, operational, and financial risk areas.
As part of our comprehensive risk management program, our cybersecurity risk management program includes methodologies, reporting channels and governance processes that apply across the enterprise to other legal, compliance, strategic, operational, and financial risk areas.
Item 1C. Cybersecurity Risk Management and Strategy We have developed and implemented a cybersecurity risk management program intended to protect the confidentiality, integrity, and availability of our critical systems and information. Our cybersecurity risk management program includes a cybersecurity incident response plan.
Item 1C. Cybersecurity Risk Management and Strategy We have developed and implemented a cybersecurity risk management program intended to protect the confidentiality, integrity, and availability of our critical systems and information and is designed to identify, assess, prioritize and manage cybersecurity threats.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe believe our existing facilities are adequate and suitable for our current needs and that, should it be needed, suitable additional or alternative space will be available on commercially reasonable terms to accommodate our operations. Item 3. Legal Proceedings Refer to Note 12 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. Item 4.
Biggest changeWe lease all our facilities and do not own any real property. We believe our existing facilities are adequate and suitable for our current needs and that, should it be needed, suitable additional or alternative space will be available on commercially reasonable terms to accommodate our operations. Item 3.
Item 2. Properties Our principal executive office is located in Campbell, California. We currently lease offices in the United States in Campbell, California and Austin, Texas which consists of approximate ly 15,500 square fe et of space. We also lease space in France, China, Japan and South Korea. We lease all our facilities and do not own any real property.
Item 2. Properties Our principal executive office is located in Campbell, California. We currently lease offices in the United States in Campbell, California and Austin, Texas which consists of approximate ly 15,500 square fe et of space. We also lease space in France, Poland, China, Japan, Taiwan and South Korea.
Removed
Mine Safety Disclosures Not applicable. 59 Table of Contents Part II
Added
Legal Proceedings Refer to Note 11 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. Item 4. Mine Safety Disclosures Not applicable. 56 Table of Contents Part II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThere has been no material change in the planned use of proceeds from our IPO as described in our Final Prospectus for the IPO dated as of October 26, 2021 and filed with the SEC pursuant to Rule 424(b)(4) on October 28, 2021. Issuer Purchases of Equity Securities None. 60 Table of Contents Item 6. [Reserved] 61 Table of Contents
Biggest changeThere has been no material change in the planned use of proceeds from our IPO as described in our Final Prospectus for the IPO dated as of October 26, 2021, and filed with the SEC pursuant to Rule 424(b)(4) on October 28, 2021. Issuer Purchases of Equity Securities None. 57 Table of Contents Item 6. [Reserved] 58 Table of Contents
Securities Authorized for Issuance under Equity Compensation Plans The information required by this item is incorporated by reference to the definitive Proxy Statement for our 2024 Annual Meeting of Stockholders, which will be filed with the SEC no later than 120 days after December 31, 2023.
Securities Authorized for Issuance under Equity Compensation Plans The information required by this item is incorporated by reference to the definitive Proxy Statement for our 2025 Annual Meeting of Stockholders, which will be filed with the SEC no later than 120 days after December 31, 2024.
Prior to that date, there was no public trading market for our common stock. Holders of Record As of February 13, 2024, there were 376 stockholders of record of our common stock.
Prior to that date, there was no public trading market for our common stock. Holders of Record As of February 11, 2025, there were 417 stockholders of record of our common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeYear ended December 31, 2023 2022 (in thousands) Total revenue $ 53,666 $ 50,378 Cost of revenue (1) 5,077 4,281 Gross profit 48,589 46,097 Operating expenses: Research and development (1) 45,128 41,167 Sales and marketing (1) 20,659 17,419 General and administrative (1) 17,944 16,367 Total operating expenses 83,731 74,953 Loss from operations (35,142) (28,856) Interest expense (211) (89) Other income (expense), net 3,558 1,425 Loss before income taxes and loss from equity method investment (31,795) (27,520) Loss from equity method investment, net of tax 3,397 284 Provision for (benefit from) income taxes 1,677 (417) Net loss $ (36,869) $ (27,387) (1) Includes stock-based compensation expense as follows: Year Ended December 31, 2023 2022 (in thousands) Cost of revenue $ 556 $ 562 Research and development 7,324 5,865 Sales and marketing 2,712 2,123 General and administrative 3,943 3,142 Total stock-based compensation $ 14,535 $ 11,692 68 Table of Contents The following table summarizes our results of operations as a percentage of total revenue for each of the periods indicated: Year Ended December 31, 2023 2022 (as a percentage of total revenue) Total revenue 100 % 100 % Cost of revenue 9 8 Gross profit 91 92 Operating expenses: Research and development 84 82 Sales and marketing 38 35 General and administrative 33 32 Total operating expenses 155 149 Loss from operations (64) (57) Interest expense — — Other income (expense), net 7 3 Loss before income taxes and loss from equity method investment (57) (54) Loss from equity method investment, net of tax 6 1 Provision for (benefit from) income taxes 3 (1) Net loss (66) % (54) % Comparison of the Years Ended December 31, 2023 and 2022 Revenue Year Ended December 31, Change 2023 2022 $ % (in thousands) Licensing, support and maintenance $ 48,273 $ 46,012 $ 2,261 5 % Variable royalties 5,158 3,140 2,018 64 % Other 235 1,226 (991) (81) % Total $ 53,666 $ 50,378 $ 3,288 7 % Revenue from licensing, support and maintenance increased $2.3 million during the year ended December 31, 2023 as compared to the year ended December 31, 2022.
Biggest changeYear ended December 31, 2024 2023 (in thousands) Total revenue $ 57,724 $ 53,666 Cost of revenue (1) 5,962 5,077 Gross profit 51,762 48,589 Operating expenses: Research and development (1) 45,007 45,128 Sales and marketing (1) 20,796 20,659 General and administrative (1) 17,555 17,944 Total operating expenses 83,358 83,731 Loss from operations (31,596) (35,142) Interest expense (244) (211) Other income (expense), net 3,400 3,558 Loss before income taxes and loss from equity method investment (28,440) (31,795) Loss from equity method investment, net of tax 2,698 3,397 Provision for income taxes 2,500 1,677 Net loss $ (33,638) $ (36,869) (1) Includes stock-based compensation expense as follows: Year Ended December 31, 2024 2023 (in thousands) Cost of revenue $ 783 $ 556 Research and development 7,509 7,324 Sales and marketing 3,079 2,712 General and administrative 4,567 3,943 Total stock-based compensation $ 15,938 $ 14,535 64 Table of Contents The following table summarizes our results of operations as a percentage of total revenue for each of the periods indicated: Year Ended December 31, 2024 2023 (as a percentage of total revenue) Total revenue 100 % 100 % Cost of revenue 10 9 Gross profit 90 91 Operating expenses: Research and development 78 84 Sales and marketing 36 38 General and administrative 30 33 Total operating expenses 144 155 Loss from operations (54) (64) Interest expense — — Other income (expense), net 6 7 Loss before income taxes and loss from equity method investment (48) (57) Loss from equity method investment, net of tax 5 6 Provision for income taxes 4 3 Net loss (57) % (66) % Comparison of the Years Ended December 31, 2024, and 2023 Revenue Year Ended December 31, Change 2024 2023 $ % (in thousands) Licensing, support and maintenance $ 52,815 $ 48,273 $ 4,542 9 % Variable royalties 4,405 5,158 (753) (15) % Other 504 235 269 114 % Total $ 57,724 $ 53,666 $ 4,058 8 % Revenue from licensing, support and maintenance increased $4.5 million for the year ended December 31, 2024, compared to the year ended December 31, 2023.
Growth for our solutions is being driven by growing SoC sophistication and associated complexity, now extending into disaggregation of SoCs into systems for which implement the communication protocol aspects and partner with industry leading providers like Synopsys, Cadence, Alphawave and others to connect to their die to die interfaces.
Growth for our solutions is being driven by growing SoC sophistication and associated complexity, now extending into disaggregation of SoCs into systems which implement the communication protocol aspects and partner with industry leading providers like Synopsys, Cadence, Alphawave and others to connect to their die-to-die interfaces.
Investing Activities Net cash used in investing activities for the year ended December 31, 2023 was $4.7 million primarily attributable to $47.8 million of purchases of available-for-sale securities and certificate of deposit, and $1.5 million of purchases of property and equipment, partially offset by $44.7 million of proceeds from maturities of available-for-sale securities.
Net cash used in investing activities for the year ended December 31, 2023, was $4.7 million primarily attributable to $47.8 million of purchases of available-for-sale securities and certificate of deposit, and $1.5 million of purchases of property and equipment, partially offset by $44.7 million of proceeds from maturities of available-for-sale securities.
We enter into licensing arrangements with customers that typically range from two to three years and generally consist of delivery of a design license that grants the customer the right to use the IP to design a contractually defined number of products, a right to access the benefits of its proprietary software tool (RTL), and support and maintenance services that provide the customer a significant benefit from ongoing access to Corporate Application Engineers (CAE) and Field Application Engineers (FAE) (collectively, Application Engineer Support Services) to perform certain verifications including benchmark performance, simulations and ultimately, through the RTL, instantiate designs into silicon over the design term.
We enter into licensing arrangements with customers that typically range from two to three years and generally consist of delivery of a design license that grants the customer the right to use the IP to design a contractually defined number of products, a right to access the benefits of its proprietary software tool (RTL), and support and maintenance services that provide the customer a significant benefit from ongoing access to Corporate Application Engineers (CAE) and Field Application Engineers (FAE) (collectively, Application Engineer Support Services) to perform certain verifications including benchmark performance, simulations and ultimately, through the RTL, instantiate designs into silicon over the design term.
We generally measure an investment in the common stock of an investee initially at cost. The carrying value of the our equity method investments is reported in equity method investment on the consolidated balance sheets. We record our proportionate share of the income or loss in our equity method investments on a one-quarter lag.
We generally measure an investment in the common stock of an investee initially at cost. The carrying value of our equity method investments is reported in equity method investment on the consolidated balance sheets. We record our proportionate share of the income or loss in our equity method investments on a one-quarter lag.
Loss from equity method investment: Loss from equity method investment consists of our proportionate share of net losses from our equity method investee. Provision for (benefit from) income taxes: Our income tax provision consists primarily of income taxes in certain foreign jurisdictions in which we conduct business and includes foreign non-recoverable withholding taxes.
Loss from equity method investment: Loss from equity method investment consists of our proportionate share of net losses from our equity method investee. Provision for income taxes: Our income tax provision consists primarily of income taxes in certain foreign jurisdictions in which we conduct business and includes foreign non-recoverable withholding taxes.
For a majority of our royalty revenues, we receive the actual sales data from our customers after the quarter ends and account for it as unbilled receivables. In such instances, we recognize royalty revenues based on our estimation of the customer’s sales during the quarter.
For the majority of our royalty revenues, we receive the actual sales data from our customers after the quarter ends and account for it as unbilled receivables. In such instances, we recognize royalty revenues based on our estimation of the customer’s sales during the quarter.
Our leading proprietary System IP solutions achieve this by connecting client IP blocks such as processors, memories, artificial intelligence/machine learning (AI/ML) accelerators, graphics subsystems, safety and security, and other input/output subsystems (I/Os) via multiple Network-on-Chips (NoCs) in order for our customers to experience faster SoC targeting, as well as, more efficient, and lower cost solutions.
Our leading proprietary System IP solutions achieve this by connecting client IP blocks such as processors, memories, artificial intelligence/machine learning (AI/ML) accelerators, graphics subsystems, safety and security, and other input/output subsystems (I/Os) via multiple Networks-on-Chips (NoCs) in order for our customers to experience faster SoC targeting, as well as, more efficient, and lower cost solutions.
For a majority of our royalty revenues, we receive the actual sales data from our customers after the quarter ends and account for it as unbilled receivables.
For the majority of our royalty revenues, we receive the actual sales data from our customers after the quarter ends and account for it as unbilled receivables.
For example, the requirements of smaller die size, lower power consumption, a higher frequency of operation and management of critical net latency in a timely and cost-effective manner for on-chip processing in the automotive, enterprise computing, communications, consumer electronics, and industrial markets has resulted in increased SoC design complexity for chips used in these markets.
For example, the requirements of smaller die size, lower power consumption, a higher frequency of operation and management of critical net latency in a timely and cost-effective manner for on-chip processing in the automotive, enterprise computing, communications, consumer electronics, and industrial markets have resulted in increased SoC design complexity for chips used in these markets.
These investments, which included growth in engineering headcount, have resulted in substantially increased research and development expenses in recent periods. As we continue to invest in our technology and new product design efforts, we anticipate research and development expense will increase on an absolute basis and as a percentage of revenue in the near term.
These investments, which continue to include growth in engineering headcount, have resulted in substantially increased research and development expenses in recent periods. As we continue to invest in our technology and new product design efforts, we anticipate research and development expense will continue to increase on an absolute basis and as a percentage of revenue in the near term.
As a result of how these contracts are structured and the revenue is recognized, our revenue in the year ended December 31, 2023 may not be comparable to future periods if we do not enter into similar contractual agreements. Further, a meaningful percentage of our revenue is generated through royalty payments.
As a result of how these contracts are structured and the revenue is recognized, our revenue in the year ended December 31, 2024, may not be comparable to future periods if we do not enter into similar contractual agreements. Further, a meaningful percentage of our revenue is generated through royalty payments.
We completed the most recent annual impairment test of goodwill at the reporting unit level. We have one reporting unit. We determined that our reporting unit had significant fair value in excess of carrying value. For the years ended December 31, 2023 and 2022, we did not have any goodwill or other indefinite-lived intangible assets impairment.
We completed the most recent annual impairment test of goodwill at the reporting unit level. We have one reporting unit. We determined that our reporting unit had significant fair value in excess of carrying value. For the years ended December 31, 2024, and 2023, we did not have any goodwill or other indefinite-lived intangible assets impairment.
We expect to maintain this full valuation allowance until it becomes more likely than not that the deferred tax assets will be realized. 67 Table of Contents Results of Operations The following table summarizes our GAAP results of operations for the periods presented. The results below are not necessarily indicative of results to be expected for future periods.
We expect to maintain this full valuation allowance until it becomes more likely than not that the deferred tax assets will be realized. 63 Table of Contents Results of Operations The following table summarizes our GAAP results of operations for the periods presented. The results below are not necessarily indicative of results to be expected for future periods.
Customers typically start shipping their products using our interconnect IP solutions between one to five years following completion of their product design, known as mass production, at which point we start to receive royalties; this lasts for up to seven years depending on the market segment.
Customers typically start shipping their products using our interconnect IP solutions between one to five years following completion of their product design, known as mass production, at which point we start to receive royalties; this typically lasts for up to seven years depending on the particular market.
Acquired finite-lived intangible assets are amortized on a straight-line basis over the estimated useful lives of the assets, which range from five to eight years, unless the lives are determined to be indefinite. We routinely review the remaining estimated useful lives of finite-lived intangible assets. Amortization expenses are recorded operating expenses on the consolidated statements of loss.
Acquired finite-lived intangible assets are amortized on a straight-line basis over the estimated useful lives of the assets, which range from five to eight years, unless the lives are determined to be indefinite. We routinely review the remaining estimated useful lives of finite-lived intangible assets. Amortization expenses are recorded operating expenses on the consolidated statements of operations.
We believe our cash and cash equivalents, short-term investments, and cash provided by sales of our products will be sufficient to meet our expected working capital needs, capital expenditures, financial commitments and other liquidity requirements associated with our existing operations for at least the next 12 months.
We believe our cash and cash equivalents, investments and cash provided by sales of our products will be sufficient to meet our expected working capital needs, capital expenditures, financial commitments and other liquidity requirements associated with our existing operations for at least the next 12 months.
As a result of the foregoing, revenue may fluctuate significantly from period to period and any increase or decrease in such revenue may not be indicative of future period-to-period increases or decreases. 63 Table of Contents Technological Development and Market Growth We believe our growth has been and will continue to be driven by technology trends in our end markets.
As a result of the foregoing, revenue may fluctuate significantly from period to period and any increase or decrease in such revenue may not be indicative of future period-to-period increases or decreases. Technological Development and Market Growth We believe our growth has been and will continue to be driven by technology trends in our end markets.
Judgment is also required to determine the standalone selling price for each distinct performance obligation. 75 Table of Contents Contract Balances The timing of revenue recognition may differ from the timing of invoicing to customers, and these timing differences result in contract assets (unbilled receivables), or contract liabilities (deferred revenue) on our consolidated balance sheets.
Judgment is also required to determine the standalone selling price for each distinct performance obligation. Contract Balances The timing of revenue recognition may differ from the timing of invoicing to customers, and these timing differences result in contract assets (unbilled receivables), or contract liabilities (deferred revenue) on our consolidated balance sheets.
Services performed on a fixed price basis are recognized over time, generally using costs incurred or hours expended to measure progress. 74 Table of Contents Multiple Performance Obligations Most of our contracts with customers contain multiple performance obligations. For these contracts, we account for individual performance obligations separately, if they are distinct.
Services performed on a fixed price basis are recognized over time, generally using costs incurred or hours expended to measure progress. Multiple Performance Obligations Most of our contracts with customers contain multiple performance obligations. For these contracts, we account for individual performance obligations separately, if they are distinct.
Certain SIA solutions contracts include termination rights that allow the customer to cancel and receive a pro-rata refund on support and maintenance services at the end of each month of the contract period, which results in a ratable recognition of the related license revenue over the contract term.
Majority of our SIA solutions contracts include termination rights that allow the customer to cancel and receive a pro-rata refund on support and maintenance services at the end of each month of the contract period, which results in a ratable recognition of the related license revenue over the contract term.
Certain SIA solutions contracts include termination rights that allow the customer to cancel and receive a pro-rata refund on support and maintenance services at the end of each month of the contract period, which results in a ratable recognition of the related license revenue over the contract term.
Majority of our SIA solutions contracts include termination rights that allow the customer to cancel and receive a pro-rata refund on support and maintenance services at the end of each month of the contract period, which results in a ratable recognition of the related license revenue over the contract term.
Royalty revenues are recognized during the quarter in which the sale of the product incorporating our IP occurs, and are included in variable royalties and other revenue in the consolidated statements of loss.
Royalty revenues are recognized during the quarter in which the sale of the product incorporating our IP occurs and are included in variable royalties and other revenue in the consolidated statements of operations.
For example, U.S. export regulations, including regulations announced October 7, 2022 and further amended effective November 17, 2023, that impose broad end-use and other restrictions on doing business with certain customers and facilities in China that develop or produce semiconductor chips or manufacturing equipment, may limit or adversely impact our ability to license or support our products to entities in or doing business with certain advanced AI or “supercomputer” design companies, foundries and manufacturers of assemblies and components in China.
For example, U.S. export regulations, including regulations announced on October 7, 2022 (as further amended), that impose broad end-use and other restrictions on doing business with certain customers and facilities in China that develop or produce semiconductor chips or manufacturing equipment, may limit or adversely impact our ability to license or support our products to entities in or doing business with certain advanced AI or “supercomputer” design companies, foundries and manufacturers of assemblies and components in China.
This trend in turn has created increased demand for in-licensing commercial semiconductor design IP, which in turn has positively impacted our revenue and growth. In order to address technological developments such as the above and expand our offerings, we have invested significantly in our research and development efforts.
This trend in turn has created increased demand for in-licensing commercial semiconductor design IP, which in turn has positively impacted our revenue and growth. 60 Table of Contents In order to address technological developments such as the above and expand our offerings, we have invested significantly in our research and development efforts.
Information regarding our non-cancelable lease commitments as of December 31, 2023 can be found in Note 10 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Information regarding our non-cancelable lease commitments as of December 31, 2024, can be found in Note 9 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Therefore, revenue from Interconnect Solutions IP licensing arrangements is recognized over the design term ratably. Revenues that are derived from the sale of a licensee’s products that incorporate our IP are classified as royalty revenues.
Therefore, revenue from Interconnect Solutions IP licensing arrangements is recognized ratably over the design term. 69 Table of Contents Revenues that are derived from the sale of a licensee’s products that incorporate our IP are classified as royalty revenues.
Terms of our Agreements with Customers Our revenue from period to period can be impacted by the terms of the agreements we enter into with our customers. For example, in recent periods we have made certain changes to SIA agreements that result in the ratable recognition of the related license revenue over the contract term.
Terms of our Agreements with Customers Our revenue from period to period can be impacted by the terms of the agreements we enter into with our customers. For example, in 2023 we made certain changes to SIA agreements that result in the ratable recognition of the related license revenue over the contract term.
We expect RPO to fluctuate up or down from period to period for several reasons, including amounts, timing, and duration of customer contracts, as well as the timing of billing cycles for each contract. Our RPO was $72.7 million and $57.7 million as of December 31, 2023 and 2022, respectively.
We expect RPO to fluctuate up or down from period to period for several reasons, including amounts, timing, and duration of customer contracts, as well as the timing of billing cycles for each contract. Our RPO was $88.4 million and $72.7 million as of December 31, 2024, and 2023, respectively.
When we do not receive actual sales data from the customer prior to the finalization of our financial statements, royalty revenues are recognized based on our estimation of the customer’s sales during the quarter. Our SIA solutions product and CSRCompiler product arrangements provide customers the right to software licenses, software updates and technical support.
When we do not receive actual sales data from the customer prior to the finalization of our financial statements, royalty revenues are recognized based on our estimation of the customer’s sales during the quarter. 62 Table of Contents Our SIA products and CSRCompiler product arrangements provide customers with the right to software licenses, software updates and technical support.
Products incorporating our IP are used to carry most of the important data inside complex SoCs for sophisticated applications, including automotive, enterprise computing, communications, consumer electronics, and industrial markets. As of December 31, 2023, we had 243 em ployees and offices in eight locations in the United States, France, China, South Korea and Japan.
Products incorporating our IP are used to carry most of the important data inside complex SoCs for sophisticated applications, including automotive, enterprise computing, communications, consumer electronics, and industrial markets. As of December 31, 2024, we had 267 em ployees and offices in ten locations in the United States, France, China, South Korea, Japan and Taiwan.
Total fixed fees include licensing, support and maintenance and other fixed fees under IP licensing or software licensing agreements but exclude variable revenue derived from licensing agreements with customers, particularly royalties. ACV was $50.9 million and $49.2 million as of December 31, 2023 and 2022, respectively.
Total fixed fees include licensing, support and maintenance and other fixed fees under IP licensing or software licensing agreements but exclude variable revenue derived from licensing agreements with customers, particularly royalties. ACV was $60.7 million and $50.9 million as of December 31, 2024, and 2023, respectively.
On December 20, 2021, the OECD released Pillar Two model rules defining a 15 percent global minimum tax rate for large multinational corporations. The OECD continues to release additional guidance and countries are implementing legislation with widespread adoption of the Pillar Two Framework expected by calendar year 2024.
On December 20, 2021, the OECD released Pillar Two model rules defining a 15 percent global minimum tax rate for large multinational corporations. The OECD continues to release additional guidance, and countries are implementing legislation with widespread adoption of the Pillar Two Framework and additional countries continue to adopt the Framework.
SoC Integration Automation Software Solutions SoC Integration Automation software (SIA) (formerly IP deployment) solutions product arrangements provide customers the right to software licenses, software updates and technical support. The software licenses are time-based licenses with terms generally ranging from one to three years.
SoC Integration Automation Software Solutions Our SIA products and CSRCompiler product arrangements provide customers with the right to software licenses, software updates and technical support. The software licenses are time-based licenses with terms generally ranging from one to three years.
Our interconnect IP and NoC interface IP customer base started a total of 95 and 82 design starts during each of the years ended December 31, 2023 and 2022, respectively. We believe that the number of Confirmed Design Starts is an important indicator of the growth of our business and future royalty revenue trends.
Our interconnect IP and NoC interface IP customer base contributed to a total of 76 and 95 design starts during the years ended December 31, 2024, and 2023, respectively. We believe that the number of Confirmed Design Starts is an important indicator of the growth of our business and future royalty revenue trends.
For 2022, 59.3% of our revenue was derived from sales to customers outside of the United States and 28.8% of our revenue was derived from customers located in China. While we believe operating internationally has beneficially impacted our results of operations, we are subject to inherent risks attributed to operating in a global economy.
For 2023, 65.4% of our revenue was derived from sales to customers outside of the United States and 31.1% of our revenue was derived from customers located in China. While we believe operating internationally has beneficially impacted our results of operations, we are subject to inherent risks attributed to operating in a global economy.
Impact of Operating Globally We believe our products’ global footprint provides us with the opportunity to enter new markets and accelerate our growth. For 2023, 65.4% of our revenue was derived from sales to customers outside of the United States and 31.1% of our revenue was derived from customers located in China.
Impact of Operating Globally We believe our products’ global footprint provides us with the opportunity to enter new markets and accelerate our growth. For 2024, 62.3% of our revenue was derived from sales to customers outside of the United States and 29.2% of our revenue was derived from customers located in China.
Such costs include costs associated with office facilities, depreciation of property and equipment, certain support function personnel costs and other expenses. 66 Table of Contents Research and development (R&D) expenses: R&D expenses consist primarily of salaries and associated personnel-related costs, facilities expenses associated with research and development activities, third-party project-related expenses connected with the development of our intellectual property which are expensed as incurred, and stock-based compensation expense and other allocated costs.
Research and development (R&D) expenses: R&D expenses consist primarily of salaries and associated personnel-related costs, facilities expenses associated with research and development activities, third-party project-related expenses connected with the development of our intellectual property which are expensed as incurred, and stock-based compensation expense and other allocated costs.
The primary drivers of the changes in operating assets and liabilities were a $7.1 million decrease in accounts receivable, a $0.2 million decrease in prepaid expenses and other assets, a $0.5 million increase in accrued expenses and other liabilities, and a $0.8 million increase in deferred revenue, offset by a $1.0 million decrease in accounts payable.
The drivers of the changes in operating assets and liabilities were a $8.6 million increase in accounts receivable, and a $1.1 million increase in prepaid expenses and other assets, partially offset by a $18.9 million increase in deferred revenue, a $3.1 million increase in accrued expenses and other liabilities, and a $0.3 million decrease in accounts payable.
For the year ended December 31, 2022, net cash used in operating activities was $6.8 million, primarily due to our net loss of $27.4 million, adjusted for non-cash charges of $13.0 million and $7.6 million changes in operating assets and liabilities.
For the year ended December 31, 2024, net cash used in operating activities was $0.7 million, primarily due to our net loss of $33.6 million, adjusted for non-cash charges of $20.3 million and $12.6 million changes in operating assets and liabilities.
The increase in our income tax expense was primarily due to changes in current year foreign withholding taxes which are associated with revenues earned in certain foreign countries and changes in uncertain tax positions during the year ended December 31, 2023 .
The increase in our income tax expense was primarily due to changes in current year foreign withholding taxes which are creditable in foreign jurisdictions and changes in uncertain tax positions during the year ended December 31, 2024.
These arrangements generally have two distinct performance obligations that consist of transferring the licensed software and the support and maintenance service. Support and maintenance services consist of a stand-ready obligation to provide technical support and software updates over the support term. For the majority of these contracts, there are no termination rights and the transaction price is non-refundable.
These arrangements generally have two distinct performance obligations that consist of transferring the licensed software and the support and maintenance service. Support and maintenance services consist of a stand-ready obligation to provide technical support and software updates over the support term.
Our obligations as of December 31, 2023 under our vendor finance arrangements are described in Note 11 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. Critical Accounting Estimates Our consolidated financial statements are prepared in accordance with GAAP. The preparation of consolidated financial statements requires us to make certain estimates, judgments, and assumptions.
Our obligations as of December 31, 2024, under our vendor finance arrangements are described in Note 10 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. 68 Table of Contents Critical Accounting Estimates Our consolidated financial statements are prepared in accordance with GAAP.
Besides Application Engineer Support Services, support and maintenance services also consist of a stand-ready obligation to provide technical support and software updates over the support term. Generally, the first-year of technical support and software updates are bundled with and into the license fee with a customer option to renew additional years of support throughout the license term.
Generally, the first year of technical support and software updates are bundled with and into the license fee with a customer option to renew additional years of support throughout the license term.
As of December 31, 2023, we had $41.2 million in cash and cash equivalents and short-term investments of which $2.6 million was held by our foreign subsidiaries.
As of December 31, 2024, we had $43.8 million in cash and cash equivalents and short-term investments of which $2.4 million was held by our foreign subsidiaries. In addition, as of December 31, 2024, we also had $8.5 million in long-term investments.
For the year ended December 31, 2022, net cash used in financing activities was $4.2 million, primarily attributable to payments to tax authorities for shares withheld from employees of $2.1 million, payments of contingent consideration for business combination of $1.6 million, principal payments under vendor financing arrangements of $1.1 million, partially offset by proceeds from exercise of stock options of $0.9 million. 72 Table of Contents Contractual Obligations Our principal commitments consist of obligations under our operating leases for office space and data center hosting space and vendor finance arrangements.
For the year ended December 31, 2023, net cash used in financing activities was $2.9 million, primarily attributable to payments of contingent consideration for business combinations and principal payments under vendor financing arrangements. Contractual Obligations Our principal commitments consist of obligations under our operating leases for office space and data center hosting space and vendor finance arrangements.
Cost of revenue Year Ended December 31, Change 2023 2022 $ % (in thousands) Cost of revenue $ 5,077 $ 4,281 $ 796 19 % The increase in cost of revenue during the year ended December 31, 2023 was primarily due to higher FAE employee-related expenses. 69 Table of Contents Operating expenses Year Ended December 31, Change 2023 2022 $ % (in thousands) Research and development $ 45,128 $ 41,167 $ 3,961 10 % Sales and marketing 20,659 17,419 3,240 19 General and administrative 17,944 16,367 1,577 10 Total operating expenses $ 83,731 $ 74,953 $ 8,778 12 % Research and development expenses R&D expenses increased $4.0 million, or 10%, to $45.1 million for the year ended December 31, 2023 from $41.2 million for the year ended December 31, 2022.
Cost of revenue Year Ended December 31, Change 2024 2023 $ % (in thousands) Cost of revenue $ 5,962 $ 5,077 $ 885 17 % Cost of revenue increased $0.9 million or 17% for the year ended December 31, 2024, from $5.1 million for the year ended December 31, 2023 The increase in cost of revenue during the year ended December 31, 2024, was primarily due to higher FAE employee-related expenses. 65 Table of Contents Operating expenses Year Ended December 31, Change 2024 2023 $ % (in thousands) Research and development $ 45,007 $ 45,128 $ (121) — % Sales and marketing 20,796 20,659 137 1 % General and administrative 17,555 17,944 (389) (2) % Total operating expenses $ 83,358 $ 83,731 $ (373) — % Research and development expenses R&D expenses decreased $0.1 million , to $45.0 million for the year ended December 31, 2024, from $45.1 million for the year ended December 31, 2023.
Our ongoing cash outflows from operating activities primarily relate to payroll-related costs, payments for professional services, obligations under our property leases and design tool licenses. Our primary source of cash inflows is receipts from our accounts receivable.
Our ongoing cash outflows from operating activities primarily relate to payroll-related costs, payments for professional services and obligations under our property leases. Our primary source of cash inflows is receipts from our customers. The timing of receipts of accounts receivable from customers is based upon the completion of agreed milestones or agreed dates as set forth in the contracts.
If the demand in this market continues to grow, we anticipate it will continue to have a positive impact on our revenue. In contrast, if general market conditions deteriorate or other factors occur such as supply chain issues resulting in fewer semiconductors utilizing our IP solutions being available for sale, our revenue would be adversely affected.
In contrast, if general market conditions deteriorate or other factors occur, such as supply chain issues and global trade restrictions resulting in fewer semiconductors utilizing our IP solutions being available for sale, our revenue would be adversely affected.
For the year ended December 31, 2023, we generated revenue of $53.7 million, net loss of $36.9 million and net loss per share, basic and diluted of $1.03. As of December 31, 2023, we had Annual Contract Value (as defined below) of $50.9 million.
For the year ended December 31, 2024, we generated revenue of $57.7 million, net loss of $33.6 million and net loss per share, basic and diluted of $0.86. As of December 31, 2024, we had Annual Contract Value (as defined below) and Annual Contract Value plus royalties of $60.7 million and $65.1 million, respectively .
These end markets, which include the automotive, enterprise computing, communications, consumer electronics, and industrial markets, are subject to a number of factors including end-product acceptance and sales, competitive pressures, supply chain issues and general market conditions. For example, our revenue has been supported by the increased need for more complex SoCs to enable sophisticated automated driving.
These end markets, which include the automotive, enterprise computing, communications, artificial intelligence and machine learning, consumer electronics, and industrial markets, are subject to a number of factors including end-product acceptance and sales, competitive pressures, supply chain issues and general market conditions.
Confirmed Design Starts We define Confirmed Design Starts as when customers confirm their commencement of new semiconductor designs using our interconnect IP and notify us.
We added 10 and 23 net new Active Customers during the years ended December 31, 2024, and 2023, respectively. Confirmed Design Starts We define Confirmed Design Starts as when customers confirm their commencement of new semiconductor designs using our interconnect IP and notify us.
We base our estimates on historical experience and on various other assumptions that we believe to be reasonable based upon information available to us at the time that these estimates, judgments, and assumptions are made. Our estimates and related judgments and assumptions are continually evaluated based on available information and experiences. However, actual amounts could differ from those estimates.
The preparation of consolidated financial statements requires us to make certain estimates, judgments, and assumptions. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable based upon information available to us at the time that these estimates, judgments, and assumptions are made.
For additional details, see the section titled “Risk Factors—Our business has been, and may continue to be, adversely affected by health epidemics, pandemics and other outbreaks of infectious disease.” Key Performance Indicators We use the following key performance indicators to analyze our business performance and financial forecasts and to develop strategic plans, which we believe provide useful information to investors and others in understanding and evaluating our results of operations in the same manner as our management team.
Key Performance Indicators We use the following key performance indicators to analyze our business performance and financial forecasts and to develop strategic plans, which we believe provide useful information to investors and others in understanding and evaluating our results of operations in the same manner as our management team.
While each of these factors presents significant opportunities for us, these factors also pose challenges that we must successfully address in order to sustain the growth of our business and enhance our results of operations.
While each of these factors presents significant opportunities for us, these factors also pose challenges that we must successfully address in order to sustain the growth of our business and enhance our results of operations. 59 Table of Contents License Agreements with New and Existing Customers Our ability to generate revenue from new license agreements, and the timing of such revenue, is subject to a number of factors, risks and contingencies.
The following are the critical accounting policies requiring estimates, judgments, and assumptions that we believe have the most significant impact on our consolidated financial statements. Revenue Recognition We recognize license revenues as we transfer control of deliverables (software and services) to our customers in an amount reflecting the consideration to which we expect to be entitled.
For information on our significant accounting policies, see Note 2, Basis of Presentation and Summary of Significant Accounting Policies to our consolidated financial statements included elsewhere in this report. Revenue Recognition We recognize license revenues as we transfer control of deliverables (software and services) to our customers in an amount reflecting the consideration to which we expect to be entitled.
See “Risk Factors —Risks Related to Our Business and Industry—Our ability to raise capital in the future may be limited and could prevent us from executing our growth strategy” for additional information. 71 Table of Contents Cash Flows The following table summarizes changes in our cash flows for the periods indicated: Year Ended December 31, 2023 2022 (in thousands) Net cash used in operating activities $ (15,729) $ (6,767) Net cash used in investing activities $ (4,691) $ (37,481) Net cash used in financing activities $ (2,919) $ (4,154) Operating Activities Cash flows from operating activities may vary significantly from period to period depending on a variety of factors including the timing of our receipts and payments.
Cash Flows The following table summarizes changes in our cash flows for the periods indicated: Year Ended December 31, 2024 2023 (in thousands) Net cash used in operating activities $ (720) $ (15,729) Net cash provided by (used in) investing activities $ 970 $ (4,691) Net cash used in financing activities $ (262) $ (2,919) 67 Table of Contents Operating Activities Cash flows from operating activities may vary significantly from period to period depending on a variety of factors including the timing of our receipts and payments.
In making such determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. As of December 31, 2023 and 2022, we recorded a full valuation allowance against our U.S. federal, state, and certain foreign jurisdiction deferred tax assets.
In making such determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations.
The cash outflow was offset by proceeds of $0.2 million from principal portion of our related party loan. Financing Activities For the year ended December 31, 2023, net cash used in financing activities was $2.9 million, primarily attributable to payments of contingent consideration for business combinations and principal payments under vendor financing arrangements.
Financing Activities For the year ended December 31, 2024, net cash used in financing activities was $0.3 million, primarily attributable to principal payments under vendor financing arrangements, partially offset by proceeds from exercise of stock options and employee stock purchase plan.
We believe ACV provides investors with useful information to assess the strength and trajectory of our business as growth demonstrates the expansion of customer adoption of our platform. ACV fluctuates due to a number of factors, including the timing, duration and dollar amount of customer contracts.
We monitor ACV to measure our success and believe the increase in the number shows our progress in expanding our customers’ adoption of our platform. We believe ACV provides investors with useful information to assess the strength and trajectory of our business as growth demonstrates the expansion of customer adoption of our platform.
Sales and marketing expenses S&M expenses increased $3.2 million, or 19%, to $20.7 million for the year ended December 31, 2023 from $17.4 million for the year ended December 31, 2022. The increase in S&M expenses was primarily due to higher employee-related costs of $1.7 million mainly driven by increased headcount to support growth of our business.
Sales and marketing expenses S&M expenses increased $0.1 million , or 1%, to $20.8 million for the year ended December 31, 2024, from $20.7 million for the year ended December 31, 2023. The increase in S&M expenses was primarily due to higher company-wide event costs of $0.1 million related to an in-person sales event.
License Agreements with New and Existing Customers Our ability to generate revenue from new license agreements, and the timing of such revenue, is subject to a number of factors, risks and contingencies. For new products, the time from initial development until we generate license revenue can be lengthy, typically between one and three years.
For new products, the time from initial development until we generate license revenue can be lengthy, typically between one and three years.
Allocation of Overhead Costs: Overhead costs that are not substantially dedicated for use by a specific functional group are allocated based on headcount.
Allocation of Overhead Costs: Overhead costs that are not substantially dedicated for use by a specific functional group are allocated based on headcount. Such costs include costs associated with office facilities, depreciation of property and equipment, certain support function personnel costs and other expenses.
Flexible Spending Accounts Some customers enter into a non-cancelable flexible spending account agreements (FSA Agreements) whereby the customer commits to a fixed dollar amount over a specified period of time that can be used to purchase from a list of our products or services.
In instances where foreign licensees withhold and remit taxes to local authorities in accordance with local laws and regulations, we recognize and present revenue on a gross basis, and includes the withholding tax in income tax expense. 70 Table of Contents Flexible Spending Accounts Some customers enter into a non-cancelable flexible spending account agreements (FSA Agreements) whereby the customer commits to a fixed dollar amount over a specified period of time that can be used to purchase from a list of our products or services.
Application Engineer Support Services are integral and fundamental to the customer’s ability to derive its intended benefit from the IP.
Application Engineer Support Services are integral and fundamental to the customer’s ability to derive its intended benefit from the IP. Besides Application Engineer Support Services, support and maintenance services also consist of a stand-ready obligation to provide technical support and software updates over the support term.
Application Engineer Support Services are integral and fundamental to the customer’s ability to derive its intended benefit from the IP.
Application Engineer Support Services are integral and fundamental to the customer’s ability to derive its intended benefit from the IP. Besides Application Engineer Support Services, support and maintenance services also consist of a stand-ready obligation to provide technical support and software updates over the support term.
Periods of rapid growth and capacity expansion are occasionally followed by significant market corrections in which our customers’ sales decline, inventories accumulate, and facilities go underutilized.
Periods of rapid growth and capacity expansion are occasionally followed by significant market corrections in which our customers’ sales decline, inventories accumulate, and facilities go underutilized. During an expansion cycle, we may increase research and development hiring to add to our product offerings or spend more on sales and marketing to acquire new customers.
Provision for (benefit from) income taxes Year Ended December 31, Change 2023 2022 $ % (in thousands) Provision for (benefit from) income taxes $ 1,677 $ (417) $ 2,094 * * Not meaningful The provision for (benefit from) income taxes for the year ended December 31, 2023 was as expense of $1.7 million, compared to a benefit of $0.4 million for the year ended December 31, 2022.
Provision for income taxes Year Ended December 31, Change 2024 2023 $ % (in thousands) Provision for income taxes $ 2,500 $ 1,677 $ 823 49 % The provision for income taxes for the year ended December 31, 2024 was $2.5 million, compared to $1.7 million for the year ended December 31, 2023.
Components of Our Results of Operations Revenue: Our revenue is primarily derived from licensing intellectual property, licensing software, support and maintenance services, professional services, training services, and royalties.
Components of Our Results of Operations Revenue: Our revenue is primarily derived from licensing intellectual property, licensing software, support and maintenance services, professional services, training services, and royalties. Our agreements often include other service elements including training and professional services which were immaterial for both the years ended December 31, 2024 and 2023.
The cost of securities sold is based on the specific-identification method. 76 Table of Contents Equity Method Investments We use the equity method to account for our investments in companies which we do not control but are deemed to have the ability to exercise significant influence over operating and financial decisions of the investee.
As of December 31, 2024, and 2023, we recorded a full valuation allowance against our U.S. federal, state, and certain foreign jurisdiction deferred tax assets. 71 Table of Contents Equity Method Investments We use the equity method to account for our investments in companies which we do not control but are deemed to have the ability to exercise significant influence over the operating and financial decisions of the investee.
During periods of slower growth or industry contractions, our sales generally suffer due to a decrease in customers’ Confirmed Design Starts or in sales of our customers’ products. COVID-19 Impact The duration and extent of the COVID-19 pandemic already had an adverse effect on the global economy and the lasting effects of the pandemic continue to be unknown.
During periods of slower growth or industry contractions, our sales generally suffer due to a decrease in customers’ Confirmed Design Starts or in sales of our customers’ products.
Active Customers We define Active Customers as customers who have entered into a license agreement with us that remains in effect. The retention and expansion of our relationships with existing customers are key indicators of our revenue potential. We added 23 and 38 net new Active Customers during each of the years ended December 31, 2023 and 2022, respectively.
ACV fluctuates due to a number of factors, including the timing, duration and dollar amount of customer contracts. 61 Table of Contents Active Customers We define Active Customers as customers who have entered into a license agreement with us that remains in effect. The retention and expansion of our relationships with existing customers are key indicators of our revenue potential.
The increase in other income (expense), net was primarily due to higher interest rates on cash balances and interest income earned on our available-for-sale investments as well as deferred income from our license agreement with Transchip. 70 Table of Contents Loss from equity method investment Year Ended December 31, Change 2023 2022 $ % (in thousands) Loss from equity method investment $ 3,397 $ 284 $ 3,113 * * Not meaningful Loss from equity method investment was $3.4 million for the year ended December 31, 2023, compared to $0.3 million for the year ended December 31, 2022, representing our proportionate share of Transchip’s net loss during the trailing twelve months ended September 30, 2023.
Other income (expense), net Year Ended December 31, Change 2024 2023 $ % (in thousands) Other income (expense), net $ 3,400 $ 3,558 $ (158) (4) % Other income (expense), net for the year ended December 31, 2024, remained relatively flat compared to the year ended December 31, 2023 . 66 Table of Contents Loss from equity method investment Year Ended December 31, Change 2024 2023 $ % (in thousands) Loss from equity method investment $ 2,698 $ 3,397 $ (699) (21) % Loss from equity method investment was $2.7 million for the year ended December 31, 2024, compared to $3.4 million for the year ended December 31, 2023 , representing our proportionate share of Transchip’s net loss during the trailing twelve months ended September 30, 2024.
We report revenue net of any revenue-based taxes assessed by governmental authorities that are imposed on and concurrent with specific revenue-producing transactions. In instances where foreign licensees withhold and remit taxes to local authorities in accordance with local laws and regulations, we recognize and present revenue on a gross basis, and includes the withholding tax in income tax expense.
We report revenue net of any revenue-based taxes assessed by governmental authorities that are imposed on and concurrent with specific revenue-producing transactions.
During the year ended December 31, 2023, we added 23 net new Active Customers (as defined below) and our customers had 95 Confirmed Design Starts (as defined below). Acquisitions On December 27, 2022, we completed our acquisition of Semifore, Inc., (Semifore) for a total consideration of $3.1 million .
During the year ended December 31, 2024, we added 10 net new Active Customers (as defined below), and our customers had 76 Confirmed Design Starts (as defined below).
The increase was primarily due to the addition of new customers, offset by a change in timing of revenue recognition for certain arrangements for the year ended December 31, 2023 compared to the year ended December 31, 2022.
The increase was primarily due to new license arrangements with existing customers, and the addition of new customers. The decline in variable royalty revenue was primarily due to revenue from royalty audits in the year ended December 31, 2023.
Growth in our variable royalty revenue was due to production increase from existing customers and royalty audit findings in the year ended December 31, 2023 compared to the year ended December 31, 2022. Other revenue decreased for the year ended December 31, 2023 compared to the year ended December 31, 2022 due to timing of completion of professional services.
Other revenue increased for the year ended December 31, 2024, compared to the year ended December 31, 2023, due to timing of completion of professional services.
In addition, total ACV and trailing twelve months variable royalties and other revenue was $56.1 million and $52.4 million as of December 31, 2023 and 2022, respectively. We monitor ACV to measure our success and believe the increase in the number shows our progress in expanding our customers’ adoption of our platform.
In addition, total ACV plus royalties was $65.1 million and $56.1 million as of December 31, 2024, and 2023, respectively. ACV plus royalties is calculated based on ACV and the trailing-twelve-months variable royalties and other revenue.
Net cash used in investing activities for the year ended December 31, 2022 was $37.5 million primarily attributable to $35.0 million of purchases of available-for-sale securities, $1.1 million of payments for business combination, net of $0.3 million of cash acquired, purchases of property and equipment of $1.1 million, and $0.5 million of payments related to investment in our equity method investee, see Note 15 to our consolidated financial statements.
Investing Activities Net cash provided by investing activities for the year ended December 31, 2024, was $1.0 million primarily attributable to $38.5 million of proceeds from maturities of available-for-sale securities, partially offset by $37.2 million of purchases of available-for-sale securities and certificate of deposit, and $0.3 million of purchases of property and equipment.
General and administrative expenses G&A expenses increased $1.6 million, or 10%, to $17.9 million for the year ended December 31, 2023 from $16.4 million for the year ended December 31, 2022. The increase in G&A expenses was primarily due to higher professional fees of $1.5 million driven by legal expenses related to our intellectual property litigation.
General and administrative expenses G&A expenses decreased $0.4 million, or 2%, to $17.6 million for the year ended December 31, 2024, from $17.9 million for the year ended December 31, 2023.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeIf the volume of our international operations increases and foreign currency exchange rates change, the impact to our consolidated statements of operations could be significant and may affect the comparability of operating results. The impact from foreign currency remeasurement during the year ended December 31, 2023 and 2022 was approximately $0.4 million and $0.1 million, respectively.
Biggest changeIf the volume of our international operations increases and foreign currency exchange rates changes, the impact to our consolidated statements of operations could be significant and may affect the comparability of operating results. The impact from foreign currency remeasurement during the years ended December 31, 2024, and 2023 was approximately $0.2 million and $0.4 million, respectively.
Our market risk exposure is primarily the result of fluctuations in interest rates and foreign currency exchange rates. 77 Table of Contents Foreign Currency Exchange Risk Operating in international markets involves exposure to possible volatile movements in currency exchange rates.
Our market risk exposure is primarily the result of fluctuations in interest rates and foreign currency exchange rates. 72 Table of Contents Foreign Currency Exchange Risk Operating in international markets involves exposure to possible volatile movements in currency exchange rates.
We do not believe a 10% increase or decrease in foreign exchange rates would have resulted in a material impact to our operating results. 78 Table of Contents
We do not believe a 10% increase or decrease in foreign exchange rates would have resulted in a material impact to our operating results. 73 Table of Contents

Other AIP 10-K year-over-year comparisons