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What changed in Arteris, Inc.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Arteris, Inc.'s 2024 and 2025 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 2025 report.

+450 added−425 removedSource: 10-K (2026-02-12) vs 10-K (2025-02-18)

Top changes in Arteris, Inc.'s 2025 10-K

450 paragraphs added · 425 removed · 349 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

106 edited+38 added−13 removed84 unchanged
Biggest changeCustomers We license our products to a global and diverse customer base, including semiconductor manufacturers, OEMs, hyperscale system houses, semiconductor design houses and other producers of electronic systems. We work directly with our customers throughout their design processes and seek to develop long-term, sustainable relationships with them as our technology becomes embedded in their products.
Biggest changeWe work directly with our customers throughout their design processes 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 products for their future products.
We believe that we enable lower chip research and development costs, lower SoC unit costs and reduce project risk as compared to solutions developed internally or licensed from another vendor. We have targeted our interconnect IP to be area-efficient so that we can offer silicon area savings, and resulting chip cost savings, compared to other interconnect IP alternatives.
We believe that we enable lower chip research and development costs, lower SoC unit costs and reduce project risk as compared to solutions developed internally or licensed from another vendor. We have targeted our interconnect IP to be area-efficient so that we can offer silicon area savings, and resulting chip and chiplet cost savings, compared to other interconnect IP alternatives.
In addition, we are committed to developing products not only in the U.S. but in France and other countries, where the country of origin may favorably impact the ability to license our IP solutions and technology in accordance with applicable export laws and regulations.
In addition, we are committed to developing products not only in the U.S. but in France, Poland, and other countries, where the country of origin may favorably impact the ability to license our IP solutions and technology in accordance with applicable export laws and regulations.
Our growth strategy includes the following: ■ Leverage our System IP technology leadership and focused research and development to provide solutions for the semiconductor industry that designs and builds complex SoCs. ■ Address high-growth markets, including automotive, enterprise computing, consumer electronics, communications across wired and wireless, industrial and AI/ML markets . ■ Expand our customer base through ongoing System IP innovation. ■ Expand our customer base through increased investment in sales and marketing. ■ Continue to pursue selective acquisitions and other strategic transactions, such as joint ventures, to acquire complementary solutions and accelerate growth.
Our growth strategy includes the following: ■ Leverage our System IP technology leadership and focused research and development to provide solutions for the semiconductor industry that designs and builds complex SoCs. ■ Address high-growth markets, including aerospace and defense, automotive, communications across wired and wireless, consumer electronics, enterprise computing, industrial and AI/ML markets . ■ Expand our customer base through ongoing System IP innovation. ■ Expand our customer base through increased investment in sales and marketing. ■ Continue to pursue selective acquisitions and other strategic transactions, such as joint ventures, to acquire complementary solutions and accelerate growth.
Over time, we have expanded and scaled our interconnect IP and other IP businesses to provide hardware, software, documentation, support, and training under a license fee and a royalty business model, to companies that design and produce semiconductors.
Over time, we have expanded and scaled our interconnect IP and other IP businesses to provide hardware, software, documentation, support, and training under a license, support and maintenance fee and a royalty business model, to companies that design and produce semiconductors.
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.
In addition, our SoC Integration Automation software 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.
The move to more advanced process nodes has led to significantly more expensive and complex chip design methods and manufacturing processes. Increasing SoC complexity leads to increasing System IP value while also placing pressure on IP block assembly and connectivity efforts. As SoCs grow in size, partly due to machine learning subsystems, communication complexity increases.
The move to more advanced process nodes has led to significantly more expensive and complex chip design methods and manufacturing processes. Increasing chiplet and SoC complexity leads to increasing System IP value while also placing pressure on IP block assembly and connectivity efforts. As chiplets and SoCs grow in size, partly due to machine learning subsystems, communication complexity increases.
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.
Currently, we offer NoC interface IP products such as a memory scheduler, last-level cache, SoC data observability 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.
We believe that using our System IP solutions can result in improved SoC metrics such as higher performance, lower power consumption and smaller die area. We have extensive low-power management features such as three levels of clock gating and power domain features for low-power applications such as smartphone application processors and other SoCs for hand-held applications.
We believe that using our System IP products can result in improved SoC metrics such as higher performance, lower power consumption and smaller die area. We have extensive low-power management features such as three levels of clock gating and power domain features for low-power applications such as smartphone application processors and other SoCs for hand-held applications.
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.
Our SoC integration automation capabilities were significantly enhanced by our acquisitions of Magillem in 2020, Semifore in 2022 and Cycuity in 2026, 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.
Traditional on-chip communication methods, including bus and crossbar interconnect IPs, are generally inadequate in handling modern semiconductor communications, and even more so for sophisticated applications or more complex designs. Technological advancements have led to increasingly complex SoCs that integrate numerous functions into a single semiconductor device.
For example, traditional on-chip communication methods, including bus and crossbar interconnect IPs, are generally inadequate in handling modern semiconductor communications, and even more so for sophisticated applications or more complex chiplet designs. Technological advancements have led to increasingly complex SoCs that integrate numerous functions into a single semiconductor device.
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.
Such a sizable, multi-disciplinary engineering team allows us to undertake System IP products of sizable 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.
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.
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. 12 Table of Contents Network-on-Chip IP Products We believe we offer the semiconductor industry an industry-leading commercially available interconnect IP portfolio.
Some of the key areas for workload specific acceleration in data centers are AI/ML, database processing, video/audio transcoding, and scientific computing. AI/ML SoCs must be “trained” on large data sets that have to be collected from real-world data utilizing “training” SoCs.
Some of the key areas for workload specific acceleration in data centers are AI, database processing, video/audio transcoding, and scientific computing. AI SoCs and computing pods must be “trained” on large data sets that have to be collected from real-world data utilizing “training” SoCs.
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.
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 and integrate with Arm processor IPs. We often execute the integration of Arm processors in heterogeneous environments, which can accelerate the deployment of Arm processors.
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 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. 20 Table of Contents
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. 12 Table of Contents SoC Integration Automation Software Solutions We provide a suite of SIA solutions that enables the packaging, reuse and integration of most types of IP blocks using the IP-XACT (IEEE 1685) standard.
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. 13 Table of Contents SoC Integration Automation Software Solutions We provide a suite of SoC Integration Automation software solutions that enables the packaging, reuse and integration of most types of IP blocks using the IP-XACT (IEEE 1685) standard.
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.
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 products.
We also believe that, as SoCs become more complex, interconnect IP technology becomes more time-consuming and riskier to develop internally within semiconductor and system companies, favoring System IP solutions provided by outside parties such as Arteris.
We also believe that, as SoCs become more complex, interconnect IP technology becomes more time-consuming and riskier to develop internally within semiconductor and system companies, favoring System IP products provided by outside parties such as Arteris.
Products incorporating our IP are used to carry important data inside today’s complex SoCs across a broad range of applications, including automotive, enterprise computing, communications, consumer electronics, and industrial markets.
Products incorporating our IP are used to carry important data inside today’s complex SoCs across a broad range of applications, including aerospace and defense, automotive, communications, consumer electronics, enterprise computing, and industrial markets.
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.
These challenges have significantly complicated SoC innovation and contributed to the increasing adoption of System IP, across the numerous customer design starts coupled with the expanding number of NoC IPs used in current SoC.
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.
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.
This software suite manages the assembly of multiple IP blocks into SoC devices, registers configurations of IP blocks, and links design parameters and metadata to documentation. Our SIA solutions are designed to shorten our customers’ design schedules and improve SoC engineers’ productivity across architects, logic designers, software/firmware developers, verification teams, and documentation teams.
This software suite manages the assembly of multiple IP blocks into SoC devices, registers configurations of IP blocks, and links design parameters and metadata to documentation. Our SoC Integration Automation software solutions are designed to shorten our customers’ design schedules and improve SoC engineers’ productivity across architects, logic designers, software/firmware developers, verification teams, and documentation teams.
In addition, we are also finding an increasing number of customers further down the supply chain, such as system-level companies and automotive original equipment manufacturers (OEMs).
In addition, we are finding an increasing number of customers further down the supply chain, such as system-level companies and original equipment manufacturers (OEMs).
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.
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.
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.
These new applications, which often include more AI technology, safety, or complex hardware-software integrations, have led to an increase in the number and complexity of chiplet and SoC designs. Chips used for AI training and inference acceleration have increased in size, with added design complexities and performance requirements, leading to higher design costs.
Our SIA solutions also help accelerate SoC development by enabling the IP blocks making up an SoC to be packaged in a standard format called IP-XACT (Institute of Electrical and Electronics Engineers—IEEE 1685), which provides a uniform IP block assembly and reuse methodology.
Our SoC Integration Automation software solutions also help accelerate SoC development by enabling the IP blocks making up an SoC to be packaged in a standard format called IP-XACT (Institute of Electrical and Electronics Engineers—IEEE 1685), which provides a uniform IP block assembly and reuse methodology.
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 chiplets and increasingly complex SoCs that will need automotive grade on-chip interconnect IP.
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.
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 four billion production SoCs since inception.
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.
We believe our application engineers are critical advisors to our customers’ design teams and offer competitive value to our customer’s silicon projects. 11 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.
FlexNoC and FlexWay started shipping in 2011 and w e estimate that our solutions have been incorporated into over three and a half billion production SoCs since inception. Our most recently announced product FlexGen builds upon the silicon-proven and physically aware FlexNoC IP to automate the creation of high-performance NoC designs.
FlexNoC and FlexWay started shipping in 2011 and w e estimate that our solutions have been incorporated into over four billion production SoCs since inception. Our most recently announced product, FlexGen smart NoC IP, builds upon the silicon-proven and physically aware FlexNoC IP to automate the creation of high-performance NoC designs.
We enable customers to partition their designs into “frequency domains”, allowing some domains to run at higher frequencies than others, in order to trade off performance against SoC power consumption. ■ We enable lower customer research and development and SoC unit costs.
We enable customers to partition their designs into “frequency domains”, allowing some domains to run at higher frequencies than others, in order to trade off performance against SoC power consumption. 9 Table of Contents ■ We enable lower customer research and development and SoC unit costs.
We believe that, as we have and continue to deliver new products since the date of the License Agreement, such as our range of SIA solutions, Ncore cache coherent interconnect, CodaCache last-level cache, and CSRCompiler physical awareness capabilities, the importance to our business and product portfolio of the FlexNoC development environment will decrease over time.
We believe that, as we have and continue to deliver new products since the date of the License Agreement, such as our range of SoC Integration Automation software solutions, Ncore cache coherent interconnect, CodaCache last-level cache, and CSRCompiler physical awareness capabilities, the importance to our business and product portfolio of the FlexNoC development environment will decrease over time.
Interconnect IP is the data transport backbone of the SoC, connecting IP blocks such as CPUs, GPUs and memory controllers.
Interconnect IP is the data movement backbone of the SoC, connecting IP blocks such as CPUs, GPUs and memory controllers.
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.
Rising demand from emerging end markets and new market participants is increasing the need for System IP products. New applications in markets such as aerospace and defense, automotive, communications, consumer electronics, enterprise computing, and industrial have increased the diversity and overall demand in the semiconductor market.
The designs require configuration using thousands of parameters that must be meticulously managed with millions of combinations; ■ Capability to understand the physical implementation and floorplan of the target SoC in order to generate a design that meets physical implementation requirements in terms of timing, area and power; ■ Sophisticated design verification methodologies to ensure the quality of configurable interconnect IP across millions of possible combinations, as well as complex test benches for simulation and emulation; ■ In-depth knowledge of common interface protocols, graph theory, data models and graphical user interfaces; ■ In-depth knowledge of safety standards including ISO 26262 ASIL B/D for automotive, IEEE 1685 IP-XACT IP standard for IP and SoC packaging, IEEE 1800 UVM verification standard; and ■ Support a broad ecosystem of processors suppliers, other IP vendors, SoC design tool software providers, semiconductor foundries, and others.
The designs require configuration using thousands of parameters that must be meticulously managed with millions of combinations; ■ Capability to understand the physical implementation and floorplan of the target SoC in order to generate a design that meets physical implementation requirements in terms of timing, area and power; ■ Sophisticated design verification methodologies to ensure the quality of configurable interconnect IP across millions of possible combinations, as well as complex test benches for simulation and emulation; 15 Table of Contents ■ In-depth knowledge of common interface protocols, graph theory, data models and graphical user interfaces; ■ In-depth knowledge of safety standards including ISO 26262 ASIL B/D for automotive, IEEE 1685 IP-XACT IP standard for IP and SoC packaging, IEEE 1800 UVM verification standard; and ■ Support a broad ecosystem of processors suppliers including Arm, RISC-V, x86, other IP vendors including Synopsys and Cadence, SoC design tool software providers, semiconductor foundries including TSMC and Intel Foundry, and others.
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.
The System IP market consists of NoC interconnect IP, NoC interface IP and SoC Integration Automation 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.
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.
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 SoC Integration Automation software solutions.
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 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 170 hardware and software engineers as of December 31, 2025.
We work with suppliers who provide these blocks, including IP companies such as Arm, SiFive, MIPS, Synopsys, Cadence Design Systems, Semidynamics, Andes, Codasip and other RISC-V IP vendors to support their products and protocols working with our SIA and interconnect IP products.
We work with suppliers who provide these blocks, including IP companies such as Arm, SiFive, MIPS, Synopsys, Cadence Design Systems, Semidynamics, Andes, Codasip and other RISC-V IP vendors to support their products and protocols working with our SoC Integration Automation software and interconnect IP products.
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 Solutions We provide semiconductor interconnect IP and SoC Integration Automation software solutions to serve our target end-markets, including automotive, communications across wired and wireless, consumer electronics, enterprise computing, and industrial markets including robotics. We regularly release new products to address the rapid evolution of SoC technology.
This SIA suite of products from Magillem and Semifore acquisition s provides a design environment to any semiconductor and system company from the architecture of the SoC through the delivery of a fully documented and traceable chip design.
This SoC Integration Automation software suite of products from Magillem and Semifore acquisition s provides a design environment to any semiconductor and system company from the architecture of the SoC through the delivery of a fully documented and traceable chip design.
Our SIA tool suite includes numerous packages that allow the configuration of IP block exit port registers, establish high-level SoC connectivity and link documentation to the IP-XACT design information. ■ Our products help improve the performance of our customers’ SoCs.
Our SoC Integration Automation software tool suite includes numerous packages that allow the configuration of IP block exit port registers, establish high-level SoC connectivity and link documentation to the IP-XACT design information. ■ Our products help improve the performance and security of our customers’ SoCs.
The increasing use of cache coherent and non-coherent traffic in a single SoC may amplify demand for our System IP solutions. Increased SoC complexity also requires SoC teams to manage potentially hundreds of IP blocks from various vendors and internal development groups.
The increasing use of coherent and non-coherent traffic in a single chiplet or SoC may amplify demand for our System IP products. Increased SoC complexity also requires SoC teams to manage potentially hundreds of IP blocks and chiplets from various vendors and internal development groups.
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.
Our strategy is to deliver continuous innovation across both Interconnect IP and SoC Integration Automation 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, 2025, we have 170 development engineers on staff covering IP hardware, software, verification, testing and methodology development.
Our SIA solutions have to conform not only to industry standards, but also to ever-evolving SoC integration methodologies.
Our SoC Integration Automation software solutions have to conform not only to industry standards, but also to ever-evolving SoC integration methodologies.
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.
High reliability of the interconnect is a heightened requirement for mission-critical markets including automotive, aerospace and defense, and industrial for robotics, medical and other applications. ■ Long time commitment and high investment cost.
In addition, enterprise hyperscale computing companies are now creating proprietary SoCs and accelerators for their own products and data centers. We believe that these new entrants into semiconductor design may provide market opportunities for third-party System IP solutions, including those from Arteris.
In addition, enterprise hyperscale computing companies are now creating proprietary multi-die SoCs and accelerators for their own products and data centers. We believe that these new entrants into semiconductor design will further accelerate market opportunities for third-party System IP products, including those from Arteris.
As of December 31, 2024, we had 94 total allowed or issued patents, pending patent applications and non-expired provisional patent applications worldwide.
As of December 31, 2025, we had 115 total allowed or issued patents, pending patent applications and non-expired provisional patent applications worldwide.
With respect to government authorizations, we have no pending export license requests to BIS or any other government agency, and no export licenses are currently required to export our products from the United States or other countries to countries where we do business.
With respect to government authorizations, we have no pending export license requests to the U.S. Department of Commerce's Bureau of Industry and Security (BIS) or any other government agency, and no export licenses are currently required to export our products from the United States or other countries to countries where we do business.
Our SIA solutions similarly compete mainly against internally developed solutions. Commercial competitors consist of smaller companies that generally provide point products rather than complete solutions. Intellectual Property and Proprietary Rights We rely on a combination of intellectual property rights, including patents, trade secrets, copyrights and trademarks, and contractual protections, to protect our core technology and intellectual property.
Commercial competitors consist of smaller companies that generally provide point products rather than complete solutions. 16 Table of Contents Intellectual Property and Proprietary Rights We rely on a combination of intellectual property rights, including patents, trade secrets, copyrights and trademarks, and contractual protections, to protect our core technology and intellectual property.
Our core strengths include: ■ We help accelerate our customers’ time to market. Our interconnect IP software and SIA solutions help accelerate SoC development at several different steps in the design cycle. For example, we offer design exploration and modeling capability and we have automated test bench generation to accelerate the verification of our interconnect IP products.
Our interconnect IP software and SoC Integration Automation software solutions help accelerate SoC development at several different steps in the design cycle. For example, we offer design exploration and modeling capability, and we have automated test bench generation to accelerate the verification of our interconnect IP products.
Since the initial shipment in 2016, we have launched multiple releases of Ncore which have been designed into various production SoCs for automotive, consumer electronics, industrial, and communications applications.
Since the initial shipment in 2016, we have launched multiple releases of Ncore which have been designed into various production SoCs for aerospace and defense, automotive, consumer electronics, enterprise computing and industrial markets.
This will result in more complex automotive-targeted SoCs, which we expect will continue to grow demand for reliable, configurable, and proven interconnect technologies that accelerate a product’s time to market while reducing overall costs. The “Internet of Cars” revolution is disrupting the automotive supply chain.
This will result in more complex automotive-targeted SoCs, which we expect will continue to grow demand for reliable, configurable, and proven interconnect technologies that accelerate a product’s time to market while reducing overall costs.
We recently announced the release of an innovative new non-coherent NoC IP product that is marketed under the name FlexGen, which builds upon the silicon-proven and physically aware FlexNoC to automate the creation of high-performance network-on-chip designs. Our two core product platforms are as follows: a. Network -on-Chip IP Products i. Non-coherent NoC IP, with FlexGen, FlexNoC and FlexWay ii.
In 2025 we announced the release of an innovative new non-coherent NoC IP product FlexGen, which is a next-generation product that builds upon the silicon-proven and physically aware FlexNoC expertise to automate the creation of high-performance network-on-chip designs. Our two core product platforms are as follows: a. Network -on-Chip IP Products i.
As a result, we believe these trends have led to an increased economic benefit of in-licensing commercial semiconductor design IP, a trend that we expect to continue.
As a result, we believe these trends have led to an increased economic benefit of in-licensing commercial semiconductor design IP and increased use of supported Electronic Design Automation (EDA) software a trend that we expect to continue.
As mentioned above, critical tools in our SIA product portfolio have been “Tool Confidence Level” (TCL)-certified by the TUV Sud to confirm that they are safe to use in automotive and mission-critical markets like aerospace & space as part of the industrial vertical.
As mentioned above, critical tools in our SoC Integration Automation software product portfolio have been “Tool Confidence Level” (TCL) - certified by the TUV Sud to confirm that they are safe to use in mission-critical markets like automotive, aerospace and defense, and industrial.
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.
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 regulations, including import, export and economic sanctions laws and artificial intelligence regulations that may restrict our ability to sell to or get paid by customers in certain regions, or 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.” 19 Table of Contents Human Capital Resources As of December 31, 2025, we had 299 employees as follows: Number Function Research and development 170 Sales and marketing 81 Administration 48 Geographic Distribution United States 96 France 150 China 21 Poland 12 South Korea 8 Japan 6 Elsewhere 6 We consider relations with our employees to be good and have never experienced a work stoppage.
More specifically, we believe our growth will be driven by technology trends requiring more sophisticated on-chip processing in the automotive, communications, enterprise computing, consumer electronics, and industrial markets.
More specifically, we believe our growth will continue to be driven by technology trends requiring more advanced sophisticated on-chip data movement in the aerospace and defense, automotive, communications, consumer electronics, enterprise computing, and industrial markets.
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.
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. Additionally, we have established customer relationships with market leaders such as Mobileye, Renesas, Socionext, NXP, BMW, Bosch, and many others.
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.
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.
Supported by AI-driven automation, FlexGen reduces manual iteration providing expert-level NoC topologies. We believe these advancements are critical to meet the increasing computing demands of advanced technologies like AI, autonomous driving and cloud computing. ■ Ncore: Silicon-proven, cache coherent interconnect IP product that provides scalable, configurable, and area-efficient features for use across multiple end markets.
We believe these advancements are critical to meet the increasing computing demands of advanced technologies like AI, autonomous driving and cloud computing. ■ Ncore: Silicon-proven, cache coherent interconnect IP product that provides scalable, configurable, and area-efficient features for use across multiple end markets.
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.
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.
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.
With our acquisition of Magillem in 2020, Semifore in 2022 and Cycuity in 2026, we added complementary technology that helps automate the process of integrating and assembling all of the customers’ IP blocks into chiplets, SoC, and its hardware-software integration to accelerate end product system development, as well as providing our customers hardware security verification solutions. ■ We are able to address mission critical application s.
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.
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.
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.
Our market penetration spans multiple segments and cus tomer adoption is most pronounced in the aerospace and defense, automotive, communications across wired and wireless, consumer electronics, enterprise computing, and industrial markets, driven by a higher rate of disruptive innovations.
We provide solutions for the global SoC market and believe that market growth will be driven by an increasing number of SoC designs and growing complexity, increasing average selling prices of interconnect IP and SIA, and the growing proliferation of the NoC interface IP market segment.
We provide solutions for the global chiplet and SoC market and believe that market growth will be driven by an increasing number of SoC designs and growing complexity, increasing average selling prices of interconnect IP and SoC Integration Automation software products.
Our commercially available interconnect IP products are shipping in billions of devices worldwide. Innovative use of proprietary networking techniques for on-chip communications has enabled our industry-proven solutions to deliver higher SoC performance with shorter design schedules, lower research and development costs, lower SoC unit costs, and reduced project risk when compared to customer-developed internal solutions.
Innovative use of proprietary networking techniques for on-chip communications has enabled our industry-proven solutions to deliver higher chiplet and SoC performance with shorter design schedules, lower research and development costs, lower single-die and multi-die SoC unit costs, and reduced project risk when compared to customer-developed internal solutions.
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 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.
Item 1. Business Overview We are a leading provider of semiconductor system IP, including interconnect and other intellectual property, (collectively, System IP) technology. Our System IP technology manages the on-chip communications and IP block deployments in System-on-Chip (SoC) semiconductors and systems of chiplets.
Item 1. Business Overview We are a leading provider of semiconductor system IP, including interconnect and other intellectual property (collectively, System IP) technology. Our System IP technology manages on-chip communications and IP block deployments by helping to enable the underlying data movement across chiplets, single-die and multi-die System-on-Chip (SoC) semiconductors.
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).
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. 17 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 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).
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.
Growing demand for our products and solutions is being driven by increasing SoC sophistication and associated complexity, now extending into disaggregation of SoCs into systems that implement the communication protocol aspects and partnering with industry-leading providers like Arm, Cadence, Synopsys, and others to help realize advanced systems.
Also, the need for sophisticated system IP products is growing rapidly in order to address the requirements of smaller die size, multi-die systems, lower power consumption, and higher operation frequency, as well as management of critical net latency in a timely and cost-effective manner.
Also, the need for sophisticated system IP products is growing rapidly to address the requirements of chiplets and multi-die systems, lower power consumption, and higher operation frequency, smaller die size, and the ability to limited chip design expert resources to scale design needs in a cost-effective manner.
In 2022 we also entered into an Arm automotive agreement, with Arm as the processor IP provider and Arteris as interconnect IP provider for automotive microcontrollers (MCU) and SoCs to service growing customer needs.
In 2022 we also entered into an Arm automotive agreement, with Arm as the processor IP provider and Arteris as interconnect IP provider for automotive microcontrollers (MCU) and SoCs to service growing customer needs. In 2023 Ncore achieved ISO 26262 certification up to ASIL-D, the most stringent level of functional automotive safety.
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.
Of these 115 allowed or issued patents, 88 are U.S. allowed or issued patents, 10 are China issued patents, six are South Korea issued patents, four are U.K. issued patents, four are Europe issued patents, and three are Japan issued patents. The 115 allowed or issued patents generally expire between July 2035 and June 2043.
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.
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.
We believe this increase in SoC complexity has created a significant opportunity for sophisticated System IP solutions that incorporate NoC interconnect IP, SoC Integration Automation software (SIA) (formerly IP deployment software) and NoC interface IP (consisting of peripheral data transport IP and control plane networks connected to NoC interconnect IPs).
We believe this increase in SoC complexity has created a significant opportunity for sophisticated System IP products and solutions that incorporate NoC interconnect IP, NoC interface IP and SoC Integration Automation software.
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.
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.
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.
We believe the transition to 5G and 6G, accelerated by AI demands, will result in further stringent requirements for bandwidth, latency, and power consumption, making an easy-to-integrate, high performance and low power on-chip interconnect a critical requirement. Consumer Electronics Applications Consumer electronics are trending towards being smaller, lighter, and more portable, while consumers expect simultaneously increased functionality and performance.
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.
This evolution expands the market size and value for AI GPUs and other XPUs used in them, enterprise solid-state storage systems and high-bandwidth memories, and the custom ASICs that control them, further strengthening demand for interconnect technologies that improve overall throughput, bandwidth, storage performance and provide data integrity.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeBribery 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.
Biggest changeBribery 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 the current U.S. administration’s policies, including tariffs and reciprocal tariffs, create a highly unpredictable and volatile business environment, a potential increased likelihood of recession, potential slowdown in capital markets, and potential impacts to the valuation of the U.S. dollar and other currencies. ■ 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 particularly as state-sponsored threats and cyber espionage incidents increase. ■ Inadequate protection of our intellectual property. ■ Nationalization and the uncertain impact on the perception or reputation of our products or services in foreign markets. ■ 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 tensions, wars or conflicts and retaliatory actions and regulations affecting or relating to regions such as but not limited to Ukraine, Russia, Eastern Europe, Israel and Iran 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. 28 Table of Contents These factors, individually or in combination, could impair our ability to effectively operate one or more of our foreign facilities or deliver our semiconductor IP or SoC Integration Automation software solutions, result in unexpected and material expenses, or cause an unexpected decline in the demand for our products in certain countries or regions.
In order to succeed in executing our business plan, we will need to manage our growth effectively as we make significant investments in research and development and sales and marketing and expand our operations and infrastructure both domestically and internationally.
In order to succeed in executing our business plan, we will need to manage our growth effectively as we make significant investments in research and development and sales and marketing to expand our operations and infrastructure both domestically and internationally.
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.
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 33 Table of Contents 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 reasons for this delay include, among other things, the following: ■ Changing customer requirements, resulting in an extended development cycle for the product. ■ Delay in the ramp-up of volume production of the customer’s products into which our solutions are designed. ■ Delay or cancellation of the customer’s product development plans. ■ Market or competitive pressures to reduce the selling price of the customer’s end-product. ■ The discovery of design flaws, defects, errors or bugs in the products, whether or not those defects, errors or bugs are related to our IP interconnect and other solutions that delay the customer from finishing the product in which our IP solution is incorporated. ■ Lower than expected acceptance of the customers’ end-products.
The reasons for this delay include, among other things, the following: ■ Changing customer requirements, resulting in an extended development cycle for the product. ■ Delay in the ramp-up of volume production of the customers’ products into which our solutions are designed. ■ Delay or cancellation of the customers’ product development plans. ■ Market or competitive pressures to reduce the selling price of the customers’ end-products. ■ The discovery of design flaws, defects, errors or bugs in the products, whether or not those defects, errors or bugs are related to our IP interconnect and other solutions that delay the customer from finishing the product in which our IP solution is incorporated. ■ Lower than expected acceptance of the customers’ end-products.
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.
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. 50 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.
Some 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.
Some 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 including tariffs 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. 45 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.
Among other things, these provisions include those establishing: ■ a classified board of directors with three-year staggered terms, which may have the effect of deferring, delaying or discouraging hostile takeovers, or changes in control of us or our management; ■ no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; ■ the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from filling vacancies on our board of directors; ■ the ability of our board of directors to authorize the issuance of shares of preferred stock and to determine the terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; ■ the ability of our board of directors to alter our bylaws without obtaining stockholder approval; ■ the required approval of the holders of at least two-thirds of the shares entitled to vote at an election of directors to amend or repeal our bylaws or amend the provisions of our Certificate of Incorporation regarding the election and removal of directors; ■ a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; ■ the requirement that a special meeting of stockholders may be called only by the chairman of the board of directors or a majority of our board of directors, which may delay the ability of our stockholders to force consideration of a proposal or for stockholders controlling a majority of our capital stock to take action, including the removal of directors; and ■ advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or to propose matters to be acted upon at an annual meeting or special meeting of stockholders, which may discourage or delay a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us until the next stockholder meeting or at all.
Among other things, these provisions include those establishing: ■ a classified board of directors with three-year staggered terms, which may have the effect of deferring, delaying or discouraging hostile takeovers, or changes in control of us or our management; ■ no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; 53 Table of Contents ■ the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from filling vacancies on our board of directors; ■ the ability of our board of directors to authorize the issuance of shares of preferred stock and to determine the terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; ■ the ability of our board of directors to alter our bylaws without obtaining stockholder approval; ■ the required approval of the holders of at least two-thirds of the shares entitled to vote at an election of directors to amend or repeal our bylaws or amend the provisions of our Certificate of Incorporation regarding the election and removal of directors; ■ a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; ■ the requirement that a special meeting of stockholders may be called only by the chairman of the board of directors or a majority of our board of directors, which may delay the ability of our stockholders to force consideration of a proposal or for stockholders controlling a majority of our capital stock to take action, including the removal of directors; and ■ advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or to propose matters to be acted upon at an annual meeting or special meeting of stockholders, which may discourage or delay a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us until the next stockholder meeting or at all.
Moreover, the automotive industry is affected by general economic, trade and geopolitical conditions and associated responses by governments of various countries, the automotive industry, including manufacturers, dealers, distributors, and third-party suppliers may be adversely impacted. In addition, government-imposed restrictions on businesses, operations and travel and the related economic uncertainty have impacted demand in many global markets.
Moreover, the automotive industry is affected by general economic, trade policy, and geopolitical conditions and associated responses by governments of various countries, the automotive industry, including manufacturers, dealers, distributors, and third-party suppliers may be adversely impacted. In addition, government-imposed restrictions on businesses, operations and travel and the related economic uncertainty have impacted demand in many global markets.
In addition, our Magillem and Semifore, Inc. acquisitions along with our Transchip investment as well as any acquisition, investment, joint venture or other strategic transaction that we may enter into in the future, involve a number of additional financial, accounting, managerial, operational, legal, regulatory and other risks, which may include, among others: ■ Any business, technology, service or product that we acquire or invest in could under-perform relative to our expectations and the price that we paid or not perform in accordance with our anticipated timetable, or we could fail to operate any such business profitably. ■ We may incur or assume significant debt in connection with our acquisitions, joint ventures and other strategic relationships, which could also cause a deterioration of our credit ratings, result in increased borrowing costs and interest expense and diminish our future access to the capital markets.
In addition, our Magillem, Semifore and Cycuity acquisitions along with our Transchip investment as well as any acquisition, investment, joint venture or other strategic transaction that we may enter into in the future, involve a number of additional financial, accounting, managerial, operational, legal, regulatory and other risks, which may include, among others: ■ Any business, technology, service or product that we acquire or invest in could under-perform relative to our expectations and the price that we paid or not perform in accordance with our anticipated timetable, or we could fail to operate any such business profitably. ■ We may incur or assume significant debt in connection with our acquisitions, joint ventures and other strategic relationships, which could also cause a deterioration of our credit ratings, result in increased borrowing costs and interest expense and diminish our future access to the capital markets.
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 EAR and economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Controls.
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.
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.
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. 25 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 ; ■ 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; 37 Table of Contents ■ 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.
Many companies, particularly small to medium enterprises, are experiencing challenges raising money leading to cutbacks and project delays. ■ 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 the 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.
Many companies in the affected regions, particularly small to medium enterprises, are experiencing extended challenges raising money leading to cutbacks and project delays. ■ 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 the 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.
We may experience disruptions in our research and development efforts resulting from the inability to hire qualified engineers globally including from the Middle East due to the Israel conflict and escalating conflicts and tensions with Iran.
We may experience disruptions in our research and development efforts resulting from the inability to hire qualified engineers globally including from the Middle East due to the Israel conflict and escalating conflicts and tensions in the Middle East, particularly with Iran.
If we do not help our customers quickly resolve issues and provide effective ongoing support, our ability to maintain and expand our offerings to existing and new customers could suffer, and our reputation with existing or potential customers could suffer.
If we do not or cannot help our customers quickly resolve issues and provide effective ongoing support, our ability to maintain and expand our offerings to existing and new customers could suffer, and our reputation with existing or potential customers could suffer.
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.
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 SoC Integration Automation 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. 21 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 or to impose tariffs. ■ 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 Iran and 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.
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.
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, tariffs and other trade and/or currency devaluation trends continue 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. 51 Table of Contents Furthermore, the stock market in general has experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of particular companies.
If we are found to have breached any such laws or regulations in any such jurisdiction, we may be subject to enforcement actions that require us to change our business practices in a manner which may negatively impact our revenue, as well as expose us to litigation, fines, civil and/or criminal penalties and adverse publicity that could cause our customers to lose trust in us, negatively impacting our reputation and business in a manner that harms our financial position.
If we are found to have violated any such laws or regulations in any such jurisdiction, we may be subject to enforcement actions that require us to change our business practices in a manner which may negatively impact our revenue, as well as expose us to litigation, fines, civil and/or criminal penalties and adverse publicity that could cause our customers to lose trust in us, negatively impacting our reputation and business in a manner that harms our financial position.
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.
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. 26 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.
Joint ventures or similar investments such as the investment in Transchip as discussed elsewhere in this report, and other joint ventures or similar investments we may form in the future are subject to a number of risks, including but not limited to: ■ Our joint venture or investment partners may not commit sufficient resources to market and distribute our products or to otherwise support the joint venture and its intended operations. ■ Our joint venture or investment partners may have economic or business interests or goals that are different from ours. ■ Our joint venture or investment partners may infringe the IP we assign or license to such joint venture, or the IP of other parties, which may be adverse to us, expose us to litigation and other potential liabilities. ■ Disputes may arise among us and our joint venture or investment partners that result in adverse business conditions, delays or termination of activities contemplated by such joint venture or investment or that could result in costly litigation or arbitration that diverts management attention and resources. ■ Our joint venture or investment partners may not provide us with timely and accurate information regarding the status, compliance or activities of the joint venture or investment which could, among other things, impact our ability to accurately forecast financial results or provide timely information to our shareholders. ■ Risks associated with the ability to generate sufficient revenue and or investment to continue operations. ■ Any of the risks related to doing business in China or having a Chinese joint venture or investment that are discussed elsewhere in these risk factors. 46 Table of Contents The occurrence of one or more of the above risks, or any other negative events, could adversely impact our joint ventures or similar investments including our investment in Transchip and we may be required to incur impairment charges.
Joint ventures or similar investments such as the investment in Transchip as discussed elsewhere in this report, and other joint ventures or similar investments we may form in the future are subject to a number of risks, including but not limited to: ■ Our joint venture or investment partners may not commit sufficient resources to market and distribute our products or to otherwise support the joint venture and its intended operations. ■ Our joint venture or investment partners may have economic or business interests or goals that are different from ours. ■ Our joint venture or investment partners may infringe the IP we assign or license to such joint venture, or the IP of other parties, which may be adverse to us, expose us to litigation and other potential liabilities. ■ Disputes may arise among us and our joint venture or investment partners that result in adverse business conditions, delays or termination of activities contemplated by such joint venture or investment or that could result in costly litigation or arbitration that diverts management attention and resources. ■ Our joint venture or investment partners have, and may in the future, not provide us with timely and accurate information regarding the status, compliance or activities of the joint venture or investment which could, among other things, impact our ability to accurately forecast financial results, provide timely information to our shareholders and could create a potential risk of us having to restate our financial results. ■ Risks associated with the ability to generate sufficient revenue and our investment to continue operations. ■ Any of the risks related to doing business in China or having a Chinese joint venture or investment that are discussed elsewhere in these risk factors. 47 Table of Contents The occurrence of one or more of the above risks, or any other negative events, could adversely impact our joint ventures or similar investments including our investment in Transchip and we may be required to incur significant impairment charges.
Further, on June 3, 2021, former President Biden issued Executive Order 14032 (Addressing the Threat from Securities Investments that Finance Certain Companies of the People’s Republic of China) targeting entities that are deemed part of the Chinese military-industrial complex. Among other things, this executive order prohibits the purchase or sale of any publicly traded securities of a designated entity.
Further, on September 3, 2021, former President Biden issued Executive Order 14032 (Addressing the Threat from Securities Investments that Finance Certain Companies of the People’s Republic of China) targeting entities that are deemed part of the Chinese military-industrial complex. Among other things, this executive order prohibits the purchase or sale of any publicly traded securities of a designated entity.
Continuing to meet 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 chips used in the automotive market, enterprise computing market, communications market, consumer electronics market, and industrial market have resulted in increased SoC design complexity for chips used in these markets.
Continuing to meet 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 chips used in the aerospace and defense market, automotive market, communications market, consumer electronics market, enterprise computing market, and industrial market have resulted in increased SoC design complexity for chips used in these markets.
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.
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 aerospace and defense market, automotive market, communications market, consumer electronics market, enterprise computing market, and industrial market.
In addition, insurance carriers may seek to rescind or deny coverage with respect to any claim or lawsuit. If we do not have sufficient coverage under our policies, or if coverage is denied, we may be required to make material payments to settle litigation or satisfy any judgment. Any of these consequences could harm our business. Item 1B.
In addition, insurance carriers may seek to rescind or deny coverage with respect to any claim or lawsuit. If we do not have sufficient coverage under our policies, or if coverage is denied, we may be required to make material payments to settle litigation or satisfy any judgment. Any of these consequences could harm our business.
We have operations and assets in the U.S. as well as foreign jurisdictions, and we prepare our consolidated financial statements in U.S. dollars, but a portion of our earnings and expenditures are denominated in other currencies. We therefore must translate our foreign assets, liabilities, revenue and expenses into U.S. dollars at applicable exchange rates.
We have operations and assets in the United States as well as foreign jurisdictions, and we prepare our consolidated financial statements in U.S. dollars, but a portion of our earnings and expenditures are denominated in other currencies. We therefore must translate our foreign assets, liabilities, revenue and expenses into U.S. dollars at applicable exchange rates.
It is difficult to predict what further trade-related actions governments may take, whether the new U.S. presidential administration may impact such tensions, the extent to which we may be able to mitigate the effects of any trade-related actions, and the longer-term implications of trade-related actions on the market opportunities for us.
It is difficult to predict what further trade-related actions governments may take, whether the current U.S. presidential administration may impact such tensions, the extent to which we may be able to mitigate the effects of any trade-related actions, and the longer-term implications of trade-related actions on the market opportunities for us.
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.
Accordingly, we may not be able to utilize a material portion of our NOL carryforwards, even if we achieve profitability. 48 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.
Social and environmental responsibility regulations, policies and provisions, as well as customer and investor demands, may make our supply chain more complex and may adversely affect our relationships with customers and investors. There is an increased focus on corporate social and environmental responsibility in the semiconductor industry.
Social and environmental responsibility regulations, policies and provisions, as well as customer and investor demands, may make our supply chain more complex and may adversely affect our relationships with customers, investors and government regulators. There is an increased focus on corporate social and environmental responsibility in the semiconductor industry.
A fundamental shift in technologies, the regulatory climate or demand patterns and preferences in our existing product markets or the product markets of our customers or end-users could make our current products obsolete, prevent or delay the introduction of new products or enhancements to our existing products or render our products irrelevant to our customers’ needs.
A fundamental shift in technologies, regulatory, trade or demand patterns and preferences in our existing product markets or the product markets of our customers or end-users could make our current products obsolete, prevent or delay the introduction of new products or enhancements to our existing products or render our products irrelevant to our customers’ needs.
Cyclical downturns can result from a variety of market forces including constant and rapid technological change, rapid product obsolescence, price erosion, evolving standards, short product life cycles and wide fluctuations in product supply and demand, all of which can result in significant declines in semiconductor demand.
Cyclical downturns can result from a variety of market forces including constant and rapid technological change, rapid product obsolescence, price erosion, evolving standards, short product life cycles, geopolitical tensions and wide fluctuations in product supply and demand, all of which can result in significant declines in semiconductor demand.
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.
We have 300,000,000 shares of common stock authorized as of December 31, 2025. 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.
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.
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, 2025 was immaterial.
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.
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. 52 Table of Contents K.
Changes in immigration laws, regulations or procedures may adversely affect our ability to hire or retain such workers, increase our operating expenses and negatively impact our ability to deliver our products and services, any of which would harm our business.
Changes in immigration laws, executive orders and regulations or procedures may adversely affect our ability to hire or retain such workers, increase our operating expenses and negatively impact our ability to deliver our products and services, any of which would harm our business.
Any failure to maintain effective disclosure controls and internal control over financial reporting could harm our business and could cause a decline in the trading price of our common stock. We are an “emerging growth company,” and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.
Any failure to maintain effective disclosure controls and internal control over financial reporting could harm our business and could cause a decline in the trading price of our common stock. 49 Table of Contents We are an “emerging growth company,” and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.
Therefore, a significant decrease in our royalty revenue could materially adversely affect our operating results. Moreover, royalty rates may be negatively affected by macroeconomic and geopolitical trends, including from global semiconductor supply chain issues (including from shortages in the availability of the supply of chips in several semiconductor sectors and applications), and its world effects and changes in products mix.
Therefore, a significant decrease in our royalty revenue could materially adversely affect our operating results. Moreover, royalty rates may be negatively affected by macroeconomic and geopolitical trends, including global semiconductor supply chain issues (such as shortages in the availability of the supply of chips in several semiconductor sectors and applications), and its world effects and changes in products mix.
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.
Our failure to achieve or maintain profitability could negatively impact the value of our common stock. 22 Table of Contents Because our IP solutions are components of end products, if semiconductor, system producers and/or end product producer companies in the aerospace and defense market , automotive market, communications market, consumer electronics market, enterprise computing 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.
As part of our business strategy, we make acquisitions of and investments in new businesses, such as our acquisitions of Magillem and Semifore, Inc., products and technologies and enter into joint ventures and other strategic relationships in the ordinary course.
As part of our business strategy, we make acquisitions of and investments in new businesses, such as our acquisitions of Magillem, Semifore and Cycuity, products and technologies and enter into joint ventures and other strategic relationships in the ordinary course.
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.
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.
Furthermore, the third-party licensable IP model is highly dependent on the market adoption of new services and products, including in the automotive market, enterprise computing market, communications market, consumer electronics market, and industrial market.
Furthermore, the third-party licensable IP model is highly dependent on the market adoption of new services and products, including in the aerospace and defense market, automotive market, communications market, consumer electronics market, enterprise computing market, and industrial market.
As supervisory authorities issue further guidance on personal data export mechanisms, we could suffer additional costs, complaints and/or regulatory investigations or fines. 40 Table of Contents Further, the exit of the U.K. from the EU, often referred to as Brexit, created uncertainty with regard to data protection regulation in the U.K.
As supervisory authorities issue further guidance on personal data export mechanisms, we could suffer additional costs, complaints and/or regulatory investigations or fines. Further, the exit of the U.K. from the EU, often referred to as Brexit, created uncertainty with regard to data protection regulation in the U.K.
Our continued success will depend in large part on general economic growth and stability, and growth and stability within our target markets in the automotive market, enterprise computing market, communications market, consumer electronics market, and industrial market.
Our continued success will depend in large part on general economic growth and stability, and growth and stability within our target markets in the aerospace and defense market, automotive market, communications market, consumer electronics market, enterprise computing market, and industrial market.
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.
If we do not achieve our revenue goals, our results of operations could decline. 24 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 are unable to meet these demands for increased SoC design complexity, if we are unable to anticipate technological changes in our industry by introducing new or enhanced IP interconnect and other solutions and/or SIA solutions in a timely and cost-effective manner, or if we fail to introduce new technologies that meet market demand, we may lose our competitive position, our products may become obsolete, and our business could be harmed.
If we are unable to meet these demands for increased SoC design complexity, if we are unable to anticipate technological changes in our industry by introducing new or enhanced IP interconnect and other solutions and/or SoC Integration Automation software solutions in a timely and cost-effective manner, or if we fail to introduce new technologies that meet market demand, we may lose our competitive position, our products may become obsolete, and our business could be harmed.
Our success in these product areas depend on a variety of factors, including the following: ■ Our ability to continue to attract new customers in industries in which we have less experience. ■ Our successful development of sales and marketing strategies that meet customer requirements. ■ Our ability to accurately predict, prepare for, and promptly respond to technological developments in existing and new fields. ■ Our ability to compete with new and existing competitors, many of which may have more financial resources, industry experience, brand recognition, relevant intellectual property rights, and/or more established customer relationships than we currently do, and they could include free and open-source solutions that provide similar SIA solutions. ■ Our ability to continually balance our investment in adjacent markets with investment in our existing products and services. ■ Our ability to attract and retain employees with expertise in new or emerging fields affecting our business.
Our success in these product areas depends on a variety of factors, including the following: ■ Our ability to continue to attract new customers in industries in which we have less experience. ■ Our successful development of sales and marketing strategies that meet customer requirements. ■ Our ability to accurately predict, prepare for, and promptly respond to technological developments in existing and new fields. ■ Our ability to compete with new and existing competitors, many of which may have more financial resources, industry experience, brand recognition, relevant intellectual property rights, and/or more established customer relationships than we currently do, and they could include free and open-source solutions that provide similar SoC Integration Automation software solutions. ■ Our ability to continually balance our investment in adjacent markets with investment in our existing products and services. ■ Our ability to attract and retain employees with expertise in new or emerging fields affecting our business.
While demand in the automotive industry is dependent on a number of factors, any adverse effects on the automotive industry could harm our business, as well as our ability to execute our growth strategy. A significant portion of our revenue comes from licensing fees, which may vary period to period.
While demand in the automotive industry is dependent on a number of factors, any adverse effects on the automotive industry could harm our business, as well as our ability to execute our growth strategy. 31 Table of Contents A significant portion of our revenue comes from licensing fees, which may vary from period to period.
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.
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.
If we are unable to retain our employees, our business could be harmed. Our management team has limited experience managing a public company. Many members of our management team have limited experience managing a publicly traded company, interacting with public company investors and complying with the increasingly complex laws pertaining to public companies.
If we are unable to retain our employees, our business could be harmed. 35 Table of Contents Our management team has limited experience managing a public company. Many members of our management team have limited experience managing a publicly traded company, interacting with public company investors and complying with the increasingly complex laws pertaining to public companies.
Therefore, this stockholder will have the ability to influence us through this ownership position. For example, this stockholder may be able to exercise significant influence over elections of directors, amendments of our organizational documents, or approval of any merger, sale of assets, or other major corporate transaction.
T herefore, this stockholder will have the ability to influence us through this ownership position. For example, this stockholder may be able to exercise significant influence over elections of directors, amendments of our organizational documents, or approval of any merger, sale of assets, or other major corporate transaction.
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.
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. 40 Table of Contents We are subject to data protection, AI, and privacy and security laws, regulations, standards and other requirements across different markets where we conduct our business.
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.
The cost of compliance with these laws, regulations and standards is high and is likely to increase in the future. As part of our business, we collect personal data, and other potentially sensitive and/or regulated data from our customers.
In addition, any allegations of manufacturability issues resulting from use of our IP interconnect and other solutions or semiconductor design efficiency issues resulting from our SIA solutions could, even if untrue, adversely affect our reputation and our customers’ willingness to license our technology.
In addition, any allegations of quality issues resulting from use of our IP interconnect and other solutions or semiconductor design efficiency issues resulting from our solutions could, even if untrue, adversely affect our reputation and our customers’ willingness to license our technology.
We must continue to obtain new significant licensees and to increase our revenue and grow our business. Failure to effectively expand our sales and marketing capabilities could harm our ability to increase our customer base and achieve broader market acceptance of our products.
We must continue to obtain new significant licensees and to increase our revenue and grow our business. 30 Table of Contents Failure to effectively expand our sales and marketing capabilities could harm our ability to increase our customer base and achieve broader market acceptance of our products.
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.
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 and state-sponsored actors.
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.
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 wars or 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. 23 Table of Contents ■ Disruption and uncertainty caused by new developments in U.S. trade and tariff policy, reciprocal tariffs imposed by other countries, export, foreign direct investment, 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 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.
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, 2025, we had 261 total allowed or issued patents, pending patent applications and non-expired provisional patent applications worldwide.
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.
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.
Data Protection Act 2018 (UK GDPR) (collectively, the GDPR) imposes comprehensive data privacy compliance obligations on our collection, processing, sharing, disclosure, transfer and other use of data relating to an identifiable living individual or “personal data”.
General Data Protection Regulation and the U.K. Data Protection Act 2018 (UK GDPR) (collectively, the GDPR) imposes comprehensive data privacy compliance obligations on our collection, processing, sharing, disclosure, transfer and other use of data relating to an identifiable living individual or “personal data”.
The timing and amount of our working capital and capital expenditure requirements may vary significantly depending on numerous factors, including: ■ market acceptance of our semiconductor IP and other solutions, and our SIA solutions; ■ the need to adapt to changing technologies and technical requirements; ■ the existence of opportunities for expansion; and ■ access to and availability of sufficient management, technical, marketing and financial personnel.
The timing and amount of our working capital and capital expenditure requirements may vary significantly depending on numerous factors, including: ■ market acceptance of our semiconductor IP and other solutions, and our SoC Integration Automation software solutions; ■ the need to adapt to changing technologies and technical requirements; ■ the existence of opportunities for expansion; and ■ access to and availability of sufficient management, technical, marketing and financial personnel.
License agreements for our interconnect IP are generally treated as ratable revenue, with revenue being recognized evenly over the license term. In recent periods we have made and will continue to make certain changes to SIA agreements that result in ratable recognition of the related license revenue over the contract term.
License agreements for our interconnect IP are generally treated as ratable revenue, with revenue being recognized evenly over the license term. In recent periods we have made and will continue to make certain changes to SoC Integration Automation software agreements that result in ratable recognition of the related license revenue over the contract term.
If anticipated demand in the end market for these vehicles does not materialize, whether due to consumer demand not materializing, regulatory interventions delaying the deployment of automated driving, or the emergence of economic instability in end markets arising from factors such as inflationary trends, deteriorating purchasing power, trade or supply chain disruptions and regional and/or worldwide chip shortages or excess supply, demand fluctuations, unemployment spikes, labor shortages or end market reactions to regional or global geopolitical uncertainties or conflicts, or other factors beyond our control, it would adversely affect demand for our products from customers and royalty revenue and impact our ability to execute our growth strategy.
If anticipated demand in the end market for these vehicles does not materialize, whether due to consumer demand not materializing, regulatory interventions or changes to incentives, delays in the deployment of electronic vehicles and automated driving, or the emergence of economic instability in end markets arising from factors such as inflationary trends, interest rate fluctuations and general economic uncertainty, deteriorating purchasing power, trade or supply chain disruptions and regional and/or worldwide chip shortages or excess supply, demand fluctuations, unemployment spikes, labor shortages or end market reactions to regional or global geopolitical uncertainties, wars or conflicts, or other factors beyond our control, it would adversely affect demand for our products from customers and royalty revenue and impact our ability to execute our growth strategy.
This evolution may create uncertainty in our business, affect our ability to operate in certain jurisdictions or to collect, store, transfer, use and share personal information, necessitate the acceptance of more onerous obligations in our contracts, result in liability or impose additional costs on us.
The evolution of new standards and enforcement practices may create uncertainty in our business, affect our ability to operate in certain jurisdictions or to collect, store, transfer, use and share personal information, necessitate the acceptance of more onerous obligations in our contracts, result in liability or impose additional costs on us.
Our long-term success is dependent upon our ability to successfully market our interconnect IP and SIA solutions, develop new interconnect IP and SIA solutions, earn revenue, obtain additional capital when needed and, ultimately, to maintain profitable operations. We will need to generate significant additional revenue to achieve profitability.
Our long-term success is dependent upon our ability to successfully market our interconnect IP and SoC Integration Automation software solutions, develop new interconnect IP and SoC Integration Automation software solutions, earn revenue, obtain additional capital when needed and, ultimately, to maintain profitable operations. We will need to generate significant additional revenue to achieve profitability.
In particular, we derived 29.2% and 31.1% of our revenue for the years ended December 31, 2024, and 2023, respectively, from customers located in China. We expect our revenue from China to decrease due to the applicable U.S. government trade restrictions. As a result, the economic, political, legal and social conditions in China could harm our business.
In particular, we derived 24.5% and 29.2% of our revenue for the years ended December 31, 2025 and 2024 from customers located in China. We expect our revenue from China to decrease due to the applicable U .S. government trade restrictions. As a result, the economic, political, legal and social conditions in China could harm our business.
As a result of the foregoing, we and our applicable subsidiaries may need to take appropriate steps to comply with the Final Rule and the cost of doing so, as well as any to comply, could have an adverse impact on our business. results of operation or financial condition. 45 Table of Contents We anticipate conducting certain of our operations through joint venture arrangements with Chinese entities.
As a result of the foregoing, we and our applicable subsidiaries may need to take appropriate steps to comply with these regulations and the cost of doing so, as well as any failure to comply, could have an adverse impact on our business, results of operation or financial condition. 46 Table of Contents We anticipate conducting certain of our operations through joint venture arrangements with Chinese entities.
Our ability to hire and retain these employees and their ability to remain and work in the U.S. are impacted by laws and regulations, as well as by procedures and enforcement practices of various government agencies.
Our ability to hire and retain these employees and their ability to remain and work in the United States are impacted by laws and regulations, as well as by procedures and enforcement practices of various government agencies.
If a third-party causes us to discontinue the use of any of our technologies, we could be required to design around those technologies. This could be costly and time-consuming and could have an adverse impact on our financial results.
If a third-party, AI or open source content causes us to discontinue the use of any of our technologies, we could be required to design around those technologies. This could be costly and time-consuming and could have an adverse impact on our financial results.
Product errors, including those resulting from third-party suppliers, could negatively affect the performance or interoperability of our IP interconnect and SIA solutions, could delay the development or release of new solutions or new versions and could adversely affect market acceptance or perception of our technology.
Product errors, including those resulting from third-party suppliers, could negatively affect the performance or interoperability of our IP interconnect and SoC Integration Automation software solutions, could delay the development or release of new solutions or new versions and could adversely affect market acceptance or perception of our technology.
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.
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.
In the U.S., numerous federal and state laws and regulations, including data breach notification laws, data privacy and security laws, and consumer protection laws and regulations govern the collection, use, disclosure, protection and other processing of personal information.
In the United States, numerous federal and state laws and regulations, including data breach notification laws, data privacy and security laws, and consumer protection laws and regulations govern the collection, use, disclosure, protection and other processing of personal information.
The prospect of future export controls that are implemented in a similar manner may continue to have an ongoing impact on our business, results of operation, or financial conditions. There have been additional regulatory mandates from the U.S. government that affect our current and future sales and operations in China. On October 28, 2024, the U.S.
The prospect of future export controls that are implemented in a similar manner may continue to have an ongoing impact on our business, results of operation, or financial conditions. There have been additional regulatory mandates from the U.S. government that affect our current and future sales and operations in China. Beginning on January 2, 2025, the U.S.
Our future growth will depend on the level of market acceptance of our third-party licensable IP model, the variety of IP offerings available on the market and the shift in customer preference away from in-house development of semiconductor IP technologies and SIA.
Our future growth will depend on the level of market acceptance of our third-party licensable IP model, the variety of IP offerings available on the market and the shift in customer preference away from in-house development of semiconductor IP technologies and SoC Integration Automation software .
See “Business—Competition”. We have a history of net losses, and we may not achieve or maintain profitability in the future. We have incurred net losses in certain periods historically. We incurred a net loss of $33.6 million and $36.9 million for the years ended December 31, 2024, and 2023, respectively.
See “Business—Competition”. We have a history of net losses, and we may not achieve or maintain profitability in the future. We have incurred net losses in certain periods historically. We incurred a net loss of $34.7 million and $33.6 million for the years ended December 31, 2025 and 2024, respectively.
Even if we succeed in securing design wins for our IP interconnect and other solutions and our SIA solutions, we may not generate timely or sufficient margins or margins from those wins and our financial results could suffer.
Even if we succeed in securing design wins for our IP interconnect and other solutions and our SoC Integration Automation software solutions, we may not generate timely or sufficient margins or margins from those wins and our financial results could suffer.
Changes in export or import laws or sanctions policies may adversely impact our operations, delay the introduction and sale of our products in international markets, or, in some cases, prevent the export or import of our products and technology to certain countries, regions, governments, persons, or entities altogether, which could harm our business.
Changes in export or import laws or sanctions policies may adversely impact our operations, delay the introduction and sale of our products in international markets, or, in some cases, restrict our ability to sell to or get paid by customers, prevent the export or import of our products and technology to certain countries, regions, governments, persons, or entities altogether, which could harm our business.
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.
Our dependence on international customers and operations also subjects us to a range of other additional regulatory, trade policy, operational, financial, and political risks that could adversely affect our financial results. We derived 60.3% and 62.3% of our revenue for the years ended December 31, 2025, and 2024, from sales to customers outside of the United States.
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.
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. Royalty payments under existing and future license agreements could be lower than currently anticipated.
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 have experienced downturns in the past and may experience such downturns in the future, including the potential likelihood of a recession. For example, the industry experienced a significant downturn in connection with the global recession in 2008, and further downturns in 2020 and 2022, which were prolonged as a result of the economic impact of the COVID-19 pandemic.
These changes will lead to additional costs and increase our overall risk exposure. In addition, we are subject to evolving data privacy and security laws, rules and regulations in the PRC, particularly the Personal Information Protection Law (PIPL), Cybersecurity Law (CSL) and Data Security Law (DSL), along with their implementing regulations and standards.
Any changes to this decision will lead to additional costs and increase our overall risk exposure. 41 Table of Contents In addition, we are subject to evolving data privacy and security laws, rules and regulations in the PRC, particularly the Personal Information Protection Law (PIPL), Cybersecurity Law (CSL) and Data Security Law (DSL), along with their implementing regulations and standards.
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.
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 fl ow. Variable royalty revenue was 9% of our revenue for year ended December 31, 2025.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur 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.
Biggest changeOur 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.
The 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.
The 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. 56 Table of Contents
Our Head of IT has served in various roles in information technology and information security for over 17 years. Our Deputy General Counsel has over 20 years of experience as an attorney and holds various certifications related to privacy and data protection.
Our Head of IT has served in various roles in information technology and information security for over 18 years. Our Deputy General Counsel has over 25 years of experience as an attorney and holds various certifications related to privacy and data protection.
Added
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.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeLegal 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
Biggest changeLegal 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. 57 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 changeSecurities 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.
Biggest changeSecurities 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, 2025. Recent Sales of Unregistered Equity Securities None.
There 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
There 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. Item 6. [Reserved] 58 Table of Contents
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.
Prior to that date, there was no public trading market for our common stock. Holders of Record As of February 5, 2026, there were 513 stockholders of record of our common stock.
Removed
Recent Sales of Unregistered Equity Securities On December 27, 2022, we issued an aggregate of 663,143 shares of our common stock to eight accredited investors at $3.77 per share, for an aggregate consideration of approximately $2.5 million, in connection with our acquisition of Semifore, Inc.
Removed
Unless otherwise stated, the issuances of the above securities were deemed to be exempt from registration under the Securities Act in reliance upon Section 4(a)(2) of the Securities Act.
Removed
Individuals who purchased securities as described above represented their intention to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were affixed to the share certificates issued in such transactions.

Item 7. Management's Discussion & Analysis

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

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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.
Biggest changeYear ended December 31, 2025 2024 (in thousands) Total revenue $ 70,579 $ 57,724 Cost of revenue (1) 6,895 5,962 Gross profit 63,684 51,762 Operating expenses: Research and development (1) 49,908 45,007 Sales and marketing (1) 26,782 20,796 General and administrative (1) 20,131 17,555 Total operating expenses 96,821 83,358 Loss from operations (33,137) (31,596) Interest expense (193) (244) Other income (expense), net 2,872 3,400 Loss before income taxes and loss from equity method investment (30,458) (28,440) Loss from equity method investment, net of tax 2,813 2,698 Loss before income taxes (33,271) (31,138) Provision for income taxes 1,475 2,500 Net loss $ (34,746) $ (33,638) (1) Includes stock-based compensation expense as follows: Year Ended December 31, 2025 2024 (in thousands) Cost of revenue $ 877 $ 783 Research and development 7,990 7,509 Sales and marketing 4,492 3,079 General and administrative 5,017 4,567 Total stock-based compensation $ 18,376 $ 15,938 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, 2025 2024 (as a percentage of total revenue) Total revenue 100 % 100 % Cost of revenue 10 10 Gross profit 90 90 Operating expenses: Research and development 71 78 Sales and marketing 38 36 General and administrative 29 30 Total operating expenses 138 144 Loss from operations (48) (54) Interest expense — — Other income (expense), net 4 6 Loss before income taxes and loss from equity method investment (44) (48) Loss from equity method investment, net of tax 4 5 Loss before income taxes (48) (53) Provision for income taxes 2 4 Net loss (50) % (57) % Comparison of the Years Ended December 31, 2025, and 2024 Revenue Year Ended December 31, Change 2025 2024 $ % (in thousands) Licensing, support and maintenance $ 63,859 $ 52,815 $ 11,044 21 % Variable royalties 6,596 4,405 2,191 50 % Other 124 504 (380) (75) % Total $ 70,579 $ 57,724 $ 12,855 22 % Revenue from licensing, support and maintenance increased by $11.0 million for the year ended December 31, 2025, compared to the year ended December 31, 2024.
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, stock-based compensation expense and other allocated costs.
General and administrative (G&A) expenses: G&A expenses consist primarily of salaries for management and administrative employees, depreciation, insurance costs, accounting, legal and consulting fees, other professional service fees, expenses related to the development of corporate initiatives and facilities expenses associated with G&A activities and stock-based compensation expense, fees for directors and other allocated costs.
General and administrative (G&A) expenses: G&A expenses consist primarily of salaries for management and administrative employees, depreciation, insurance costs, accounting, legal and consulting fees, other professional service fees, expenses related to the development of corporate initiatives and facilities expenses associated with G&A activities, stock-based compensation expense, fees for directors and other allocated costs.
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.
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.
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.
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.
Nature of Products and Services Our revenue is primarily derived from licensing intellectual property, licensing software, support and maintenance services, professional services, training services, and royalties. Design Solutions Interconnect Solutions product arrangements provide customers the right to software licenses, services, and support and maintenance.
Nature of Products and Services Our revenue is primarily derived from licensing intellectual property, licensing software, support and maintenance services, professional services, training services, and royalties. Design Solutions Our interconnect solutions product arrangements provide customers the right to software licenses, services, and support and maintenance.
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.
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 Engineering Support Services) to perform certain verifications including benchmark performance, simulations and ultimately, through the RTL, instantiate designs into silicon over the design term.
Sales and marketing (S&M) expenses: S&M expenses consist primarily of salaries, commissions, travel and other costs associated with S&M activities, as well as advertising, trade show participation, public relations, and other marketing costs, stock-based compensation expenses and other allocated costs.
Sales and marketing (S&M) expenses: S&M expenses consist primarily of salaries, commissions, travel and other costs associated with S&M activities, as well as advertising, trade show participation, public relations and other marketing activities, stock-based compensation expense and other allocated costs.
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.
As of December 31, 2025, and 2024, 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.
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.
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 in the consolidated statements of operations.
Further, although technical support and software updates is a distinct performance obligation, it is accounted for as if it were part of a single performance obligation that includes the licenses, RTL and Application Engineer Support Services because the technical support and updates are provided in practice for the same period of time and have the same time-based pattern of transfer to the customer as the combined design license, RTL, and Application Engineer Support Services.
Further, although technical support and software updates is a distinct performance obligation, it is accounted for as if it were part of a single performance obligation that includes the licenses, RTL and Application Engineering Support Services because the technical support and updates are provided in practice for the same period of time and have the same time-based pattern of transfer to the customer as the combined design license, RTL, and Application Engineering Support Services.
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.
As a result of how these contracts are structured and the revenue is recognized, our revenue in the year ended December 31, 2025, may not be comparable to future periods if we do not enter into similar contractual agreements. Further, a meaningful percentage of our revenue is generated through royalty payments.
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.
These investments, which continue to include growth in engineering headcount, have resulted in substantially increased research and development expenses. 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.
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.
We expect to maintain this full valuation allowance until it becomes more likely than not that the deferred tax assets will be realized. 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.
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.
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, 2025 and 2024.
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.
Our obligations as of December 31, 2025, 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.
Cyclical Nature of the Semiconductor Industry The semiconductor industry in which our customers operate is highly cyclical and is characterized by increasingly rapid technological change, product obsolescence, competitive pricing pressures, evolving standards, short product life cycles, and fluctuations in product supply and demand.
Cyclical Nature of the Semiconductor Industry The semiconductor industry in which our customers operate is highly cyclical and is characterized by increasingly rapid technological change, regulatory uncertainty, product obsolescence, competitive pricing pressures, evolving industry standards, short product life cycles, and fluctuations in product supply and demand.
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 Engineering Support Services are integral and fundamental to the customer’s ability to derive its intended benefit from the IP. Besides Application Engineering 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. 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 Engineering Support Services are integral and fundamental to the customer’s ability to derive its intended benefit from the IP. Besides Application Engineering Support Services, support and maintenance services also consist of a stand-ready obligation to provide technical support and software updates over the support term.
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.
SoC Integration Automation Software Solutions Our SoC Integration Automation software solutions and CSRCompiler product arrangements provide customers the right to software licenses, software updates and technical support. The software licenses are time-based licenses with terms generally ranging from one to three years.
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 us e 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 Engineering Support Services) to perform certain verifications including benchmark performance, simulations and ultimately, through the RTL, instantiate designs into silicon over the design term.
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 completed the most recent annual impairment test of goodwill at the reporting unit level. We have one reporting unit. We determined that our report ing unit had significant fair value in excess of carrying value. For the years ended December 31, 2025, and 2024, we did not have any goodwill or other indefinite-lived intangible assets impairment.
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.
Our interconnect IP and NoC interface IP customer base contributed to a total of 83 and 76 design starts during the years ended December 31, 2025, and 2024, respectively. We believe that the number of Confirmed Design Starts is an important indicator of the growth of our business and future royalty revenue trends.
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.
Therefore, revenue from Interconnect Solutions IP licensing arrangements is recognized ratably over the design term. Revenues that are derived from the sale of a licensee’s products that incorporate our IP are classified as royalty revenues.
However, we may continue to provide technical support and software updates throughout the license term even if the customer does not renew these services in subsequent years, making the license term and support and maintenance term co-terminus. Revenues that are derived from the sale of a licensee’s products that incorporate our IP are classified as royalty revenues.
However, we typically continue to provide technical support and software updates throughout the license term even if the customer does not renew these services in subsequent years, making the license term and support and maintenance term co-terminus. 62 Table of Contents Revenues that are derived from the sale of a licensee’s products that incorporate our IP are classified as royalty revenues.
We expect R&D expenses to increase in absolute terms and as a percentage of revenue in the short term and to continue to increase in absolute terms in the medium to long term but decrease as a percentage of revenue as certain new products are launched.
We expect R&D expenses to increase in absolute terms over the long term, and as a percentage of revenue in the short term. We expect R&D expenses to decrease as a percentage of revenue as certain new products are launched in the medium to long term.
Our interconnect solutions product arrangements provide customers the right to software licenses, services, and support and maintenance.
Our interconnect solutions product arrangements provide customers the right to software licenses, services, a nd support and maintenance.
The software licenses are time-based licenses with terms generally ranging from one to three years. These arrangements generally have two distinct performance obligations that consist of transferring the licensed software and the support and maintenance service. Support and maintenance services consist of a stand-ready obligation to provide technical support and software updates over the support term.
The software licenses are time-based with terms generally ranging from one to three years. These arrangements generally have two distinct performance obligations for us that consist of transferring the licensed software and the support and maintenance service. Support and maintenance services consist of a stand-ready obligati on to provide technical support and software updates over the support 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.
Majority of our SoC Integration Automation software solutions contracts include termination rights that allow the customer to cancel and receive a pro-rata refund on support and maintenance services at the end of each month of the contract period, which results in a ratable recognition of the related license revenue over the contract term.
(Magillem) in 2020, complement our interconnect IP solutions by helping to automate not only the customer configuration of its NoC interconnect but also the process of integrating and assembling all of the customer’s IP blocks into an SoC.
(Cyuity) in 2026, complement our interconnect IP solutions by helping to automate not only the customer configuration of its NoC interconnect but also the process of integrating and assembling all of the customer’s IP blocks into an SoC.
Non-cash charges primarily consisted of stock-based compensation of $14.5 million and depreciation and amortization of $3.1 million, loss from our equity method investment of $3.4 million, partially offset by amortization of deferred income of $1.2 million and net accretion of discounts on available-for-sale securities of $0.9 million.
Non-cash charges primarily consisted of stock-based compensation of $18.4 million and depreciation and amortization of $3.4 million, loss from our equity method investment of $2.8 million, partially offset by amortization of deferred income of $1.2 million and net accretion of discounts on available-for-sale securities of $0.4 million.
The drivers of the changes in operating assets and liabilities were a $4.9 million increase in accounts receivable, a $1.3 million increase in prepaid expenses and other assets, and a $0.4 million decrease in accounts payable, offset by a $6.0 million increase in deferred revenue, and a $2.5 million increase in accrued expenses and other liabilities.
The drivers of the changes in operating assets and liabilities were a $19.7 million increase in deferred revenue, a $3.3 million increase in accrued expenses and other liabilities, and a $1.4 million decrease in accounts receivable, partially offset by a $6.3 million increase in prepaid expenses and other assets, and a $0.2 million decrease in accounts payable.
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.
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 SoC Integration Automation software products and CSRCompiler product arrangements provide customers with the right to software licenses , software updates and technical support.
In addition, because the selection process by our customers is typically lengthy and market requirements and alternative solutions available to customers for IP-based products change rapidly, we may be required to incur significant research and development expenditures in pursuit of new products over extended, multiyear periods of time with no assurance that our solutions will be successfully developed or ultimately selected by our customers.
In addition, because the selection process by our customers is typically lengthy and market requirements and alternative solutions available to customers for IP-based products change rapidly, we may be required to incur significant research and development expenditures in pursuit of new products over extende d, multi-year p eriods of time with no assurance that our solutions will be successfully developed or ultimately selected by our customers.
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.
Loss from equity method investment: Loss from equity method investment consists of our proportionate share of net losses from our equity method investee. 63 Table of Contents 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-recoverabl e withholding taxes.
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.
The majority of our SoC Integration Automation software s olutions 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.
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.
For example, the requirements of smaller die s ize, chiplet and multi-chip package design, low er power consumption, and a higher frequency of operation and management of critical net latency in a timely and cost-effective manner for on-chip processing in the automotive, enterprise computing, communications, consumer electronics, and industrial markets have resulted in increased SoC design complexity for chips used in these markets.
This trend in turn has created increased demand for in-licensing commercial semiconductor design IP, which in turn has positively impacted our revenue and growth. 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.
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 rapid t echnological developments and expand our offerings, we have invested significantly in our research and development efforts.
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.
We expect RPO to fluctuate up or down from period to period for several reasons, including variations in amounts, timing, and duration of customer contracts, as well as the timing of billing cycles for each contract. Our RPO was $116.8 million and $88.4 million as of December 31, 2025, and 2024, respectively.
The Interconnect Solutions IP, RTL, and the Application Engineering Support Services serve to fulfill our commitment to the customer, as they represent inputs to a single, combined performance obligation that commences upon the later of the arrangement effective date or transfer of the software license.
Customers cannot benefit from the design license on its own; the Interconnect Solutions IP, RTL, and the Application Engineering Support Services serve to fulfill our commitment to the customer, as they represent inputs to a single, combined performance obligation that commences upon the later of the arrangement effective date or transfer of the software license.
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.
Impact of Operating Globally We believe our products’ global footprint provides us with the opportunity to enter new markets and accelerate our growth. For 2025, 60.3% of our revenue was derived from sales to customers outside of the United States and 24.5% of our revenue was derived from customers located in China, respectively.
For 2023, 65.4% of our revenue was derived from sales to customers outside of the United States and 31.1% of our revenue was derived from customers located in China. While we believe operating internationally has beneficially impacted our results of operations, we are subject to inherent risks attributed to operating in a global economy.
For 2024, 62.3% of our revenue was derived from sales to customers outside of the United States and 29.2% of our revenue was derived from customers located in China. While we believe operating internationally has beneficially impacted our results of operations, we are subject to inherent risks attributed to operating in a global economy.
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.
Products incorporating our IP are used to carry most of the important data inside complex SoCs for sophisticated applications, including aerospace and defense, automotive, communications, consumer electronics, enterprise computing, and industrial markets. As of December 31, 2025, we had 299 emp loyees and offices in eleven locations in the United States, France, China, South Korea, Japan, Taiwan and Poland.
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.
Cash Flows The following table summarizes changes in our cash flows for the periods indicated: Year Ended December 31, 2025 2024 (in thousands) Net cash provided by (used in) operating activities $ 6,733 $ (720) Net cash provided by investing activities $ 12,028 $ 970 Net cash provided by (used in) financing activities $ 1,417 $ (262) 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.
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.
As of December 31, 2025, we had $54.6 million in cash and cash equivalents and short-term investments of which $2.2 million was held by our foreign subsidiaries. In addition, as of December 31, 2025, we also had $4.9 million in long-term investments.
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.
ACV was $77.0 million and $60.7 million as of December 31, 2025, and 2024, respectively. In addition, total ACV plus royalties was $83.6 million and $65.1 million as of December 31, 2025, and 2024, respectively. ACV plus royalties is calculated based on ACV and the trailing-twelve-months variable royalties and other revenue.
The accounting for modifications to our contracts involves assessing whether the products and services added to an existing contract are distinct and whether the pricing is at the standalone selling price.
Contract modifications Our contracts may be modified to add, remove or change existing performance obligations. The accounting for modifications to our contracts involves assessing whether the products and services added to an existing contract are distinct and whether the pricing is at the standalone selling price.
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.
Provision for income taxes Year Ended December 31, Change 2025 2024 $ % (in thousands) Provision for income taxes $ 1,475 $ 2,500 $ (1,025) (41) % The provision for income taxes for the year ended December 31, 2025 was $1.5 million compared to $2.5 million for the year ended December 31, 2024.
Interest expense Year Ended December 31, Change 2024 2023 $ % (in thousands) Interest expense $ (244) $ (211) $ (33) 16 % Interest expense for the year ended December 31, 2024, remained relatively flat compared to the year ended December 31, 2023.
Interest expense Year Ended December 31, Change 2025 2024 $ % (in thousands) Interest expense $ (193) $ (244) $ 51 (21) % Interest expense for the year ended December 31, 2025, remained relatively flat compared to the year ended December 31, 2024.
These key performance indicators are presented for supplemental informational purposes only, should not be considered a substitute for financial information presented in accordance with generally accepted accounting principles in the United States (GAAP), and may differ from similarly titled metrics or measures used by other companies, securities analysts, or investors.
These key performance indicators are presented for supplemental informational purposes only, should not be considered a substitute for financial information presented in accordance with generally accepted accounting principles in the United States (GAAP), and may differ from similarly titled metrics or measures used by other companies, securities analysts, or investors. 61 Table of Contents Annual Contract Value We define Annual Contract Value (ACV) for an individual customer agreement as the total fixed fees under the agreement divided by the number of years in the agreement term.
For the year ended December 31, 2023, net cash used in operating activities was $15.7 million, primarily due to our net loss of $36.9 million, adjusted for non-cash charges of $19.2 million and $1.9 million changes in operating assets and liabilities.
For the year ended December 31, 2025, net cash provided by operating activities was $6.7 million, primarily due to our net loss of $34.7 million, adjusted for non-cash charges of $23.6 million and $17.9 million changes in operating assets and liabilities.
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.
Investing Activities Net cash provided by investing activities for the year ended December 31, 2025, was $12.0 million primarily attributable to $42.9 million of proceeds from maturities and sales of available-for-sale securities, partially offset by $29.5 million of purchases of available-for-sale securities, and $1.4 million of purchases of property and equipment.
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 .
For the year ende d December 31, 2025, we generated revenue of $70.6 million, net loss of $34.7 million and net loss per share, basic and diluted of $0.82. As of December 31, 2025, we had Annual Contract Value (as defined below) and Annual Contract Value plus royalties of $77.0 million and $83.6 million, respectively .
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.
General and administrative expenses G&A expenses increased by $2.6 million, or 15%, to $20.1 million for the year ended December 31, 2025, from $17.6 million for the year ended December 31, 2024.
Generally, the transaction price of our contracts is fixed at the inception of the contract, except for variable royalties. Our contracts generally do not include terms that could cause variability in the transaction price.
Generally, the transaction price of our contracts is fixed at the inception of the contract, except for variable royalties.
Considering the nature of the combined license and assisting our customers in applying our IP technology in our customers’ development environment and the relative significance thereof, we have concluded that our promise to provide an Interconnect Solutions IP license is not distinct from our obligation to provide the Application Engineer Support Services and benefits of the RTL.
However, we typically continue to provide technical support and software updates throughout the license term even if the customer does not renew these services in subsequent years, making the license term and support and maintenance term co-terminus. 69 Table of Contents Considering the nature of the combined license and assisting our customers in applying our IP technology in our customers’ development environment and the relative significance thereof, we have concluded that our promise to provide an Interconnect Solutions IP license is not distinct from our obligation to provide the Application Engineering Support Services and benefits of the RTL.
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.
Contractual Obligations Our principal commitments consist of obligations under our operating leases for office space and data center hosting space and vendor finance arrangements. Information regarding our lease commitments as of December 31, 2025, can be found in Note 9 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
We assess the timing of the transfer of goods or services to the customer as compared to the timing of payments to determine whether a significant financing component exists. As a practical expedient, we do not assess the existence of a significant financing component when the difference between payment and transfer of deliverables is a year or less.
As a practical expedient, we do not assess the existence of a significant financing component when the difference between payment and transfer of deliverables is a year or less. If the difference in timing arises for reasons other than the provision of finance to either the customer or us, no financing component is deemed to exist.
These agreements do not meet the definition of a revenue contract until the customer executes a separate order to identify the required products and services that they are purchasing. The combination of the FSA agreement and the subsequent order creates enforceable rights and obligations, thus meeting the definition of a revenue contract.
These agreements do not meet the definition of a revenue contract until the customer executes a separate order to identify the required products and services that they are purchasing. Each separate order under the agreement is treated as an individual contract and accounted for based on the respective performance obligations included within the FSA agreements.
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.
The increase in cost of revenue was primarily due to higher employee-related expenses, mainly driven by increased headcount of our application engineers. 65 Table of Contents Operating expenses Year Ended December 31, Change 2025 2024 $ % (in thousands) Research and development $ 49,908 $ 45,007 $ 4,901 11 % Sales and marketing 26,782 20,796 5,986 29 % General and administrative 20,131 17,555 2,576 15 % Total operating expenses $ 96,821 $ 83,358 $ 13,463 16 % Research and development expenses R&D expenses increased by $4.9 million, or 11%, to $49.9 million for the year ended December 31, 2025, from $45.0 million for the year ended December 31, 2024.
Professional Services Our agreements may include service elements (other than maintenance and support services). These services include training, design assistance, and consulting.
We record obligations for refunds in accrued expenses and other current liabilities on the consolidated balance sheets. Professional Services Our agreements may include service elements (other than maintenance and support services). These services include training, design assistance, and consulting.
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.
Flexible Spending Accounts Some customers enter into a non-cancelable flexible spending account agreement (FSA Agreement) 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.
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.
The decrease in our income tax expense was primarily due to changes in current year foreign withholding taxes and changes in income tax laws that allow the Company to deduct domestic R&D expenses during the year ended December 31, 2025.
Cost of revenue: Cost of revenue relates to costs associated with our licensing agreements and support and maintenance, including applicable FAE personnel-related costs such as stock-based compensation, travel, amortization of developed technology acquired intangibles and allocated overhead. We expect cost of revenue as a percentage of revenue to modestly decline over time due to productivity improvements of our FAE processes.
We record obligations for refunds in accrued expenses and other current liabilities on the consolidated balance sheets. Cost of revenue: Cost of revenue relates to costs associated with our licensing agreements and support and maintenance, including applicable application engineers’ personnel-related costs such as stock-based compensation, travel, amortization of developed technology acquired intangibles and allocated overhead.
Our System IP technology manages the on-chip communications and IP block deployments in System-on-Chip (SoC) semiconductors and systems of chiplets.
Our System IP technology manages on-chip communications and IP block deployments by helping to enable the underlying data movement across chiplets, single-die and multi-die System-on-Chip (SoC) semiconductors.
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.
Our total ACV is the aggregate ACVs for all our customers as measured at a given point in time. Total fixed fees include licensing, support and maintenance and other fixed fees under IP licensing or software licensing agreements but exclude variable revenue derived from licensing agreements with customers, particularly royalties.
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.
Such costs include costs associated with office facilities, depreciation of property and equipment, certain support function personnel costs and other expenses.
We report revenue net of any revenue-based taxes assessed by governmental authorities that are imposed on and concurrent with specific revenue-producing transactions.
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 include the withholding tax in income tax expense.
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.
The increase in revenue from licensing, support and maintenance was primarily due to new license arrangements with existing customers and the addition of new customers. Growth in our variable royalty revenue was primarily due to an increase in product sales from certain existing customers and an increase of $0.3 million from a royalty audit.
The decrease in G&A expenses was primarily due to lower professional fees of $1.1 million, predominantly related to our intellectual property litigation, and lower directors and officers liability insurance expenses of $0.4 million, partially offset by higher employee-related costs of $1.0 million including stock-based compensation expense of $0.6 million.
The increase in G&A expenses was primarily due to higher legal and consulting services associated with acquisition-related activities of $1.4 million, higher employee-related costs of $0.8 million mainly driven by increased headcount to support the growth of our business and higher stock-based compensation expense of $0.5 million. These increases were partially offset by lower professional fees of $0.7 million.
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.
The decrease in other income (expense), net was primarily due to lower market interest rates on cash balances and lower interest income earned on our available-for-sale investments. 66 Table of Contents Loss from equity method investment Year Ended December 31, Change 2025 2024 $ % (in thousands) Loss from equity method investment $ 2,813 $ 2,698 $ 115 4 % Loss from equity method investment remained relatively flat for the year ended December 31, 2025 compared to the year ended December 31, 2024.
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.
ACV fluctuates due to a number of factors, including the timing, duration and dollar amount of customer contracts. 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.
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).
During the year ended December 31, 2025, our customers had 83 Confirmed Design Starts (as defined below). Acquisitions On January 14, 2026, we completed the acquisition of Cycuity.
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.
Our leading proprietary System IP solutions achieve this by connecting various semiconductor IP blocks such as processors, memory and logic via multiple Network-on-Chips (NoCs) in order for our customers to meet functional design goals as well as performance and power requirements, while addressing design complexity with efficient and lower cost solutions.
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.
We also incurred higher professional fees of $1.1 million. These increases were largely offset by higher R&D tax credits of $0.9 million granted to our subsidiary in France. Sales and marketing expenses S&M expenses increased by $6.0 million, or 29%, to $26.8 million for the year ended December 31, 2025, from $20.8 million for the year ended December 31, 2024.
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.
Other revenue decreased primarily due to revenue from professional services that was recognized during the year ended December 31, 2024, which did not repeat during the year ended December 31, 2025.
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.
Financing Activities For the year ended December 31, 2025, net cash provided by financing activities was $1.4 million, primarily attributable to proceeds from exercise of stock options and employee stock purchase plan, partially offset by principal payments under vendor financing arrangements.
Such losses are expected to continue in the near future.
Such losses are expected to continue in the near future. Transchip's ability to continue its operations is dependent upon raising additional capital, which it currently expects to be able to raise.
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.
Further, royalty revenue can be significantly impacted period to period due to changing trends in consumer spending, especially as it relates to the automotive, computing and consumer electronics markets. 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.

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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 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.
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, 2025, and 2024 was approximately $0.4 million and $0.2 million, respectively.

Other AIP 10-K year-over-year comparisons