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

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Paragraph-level year-over-year comparison of Silvaco Group, 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.

+466 added−770 removedSource: 10-K (2026-03-12) vs 10-K (2025-03-05)

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

466 paragraphs added · 770 removed · 246 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeAs a virtual representation of the manufacturing process and the wafer, this “digital twin” serves as a platform through which customers can run experiments and tests to understand the impact on the yield of a wafer due to any variations in the parameters of the manufacturing process, predict the yield for further research on new products, and reduce the time to market for products, all without the need to run physical wafers which can be time-consuming and expensive.
Biggest changeThis “digital twin” serves as a simulation platform through which customers can run countless experiments to analyze many variables and improve yield due to variations in a wide range of parameters in the manufacturing process. All of this is done without the need to run physical wafers which can be time-consuming and expensive.
We utilize account managers to engage with our customers early in their design-in cycles and collaborate with them throughout the design journey. We rely primarily on direct sales channels across the world and augment our sales efforts with distributors in growth or emerging markets, such as Israel, India and Southeast Asia.
We utilize account managers to engage customers early in their design-in cycles and collaborate with them throughout the design journey. We rely primarily on direct sales channels across the world and augment our sales efforts with distributors in growth or emerging markets, such as Israel, India and Southeast Asia.
For example, we are subject to anti-corruption, anti-bribery, anti-money laundering, and similar laws in the United States and other countries in which we conduct activities, including the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S.
We are subject to anti-corruption, anti-bribery, anti-money laundering, and similar laws in the United States and other countries in which we conduct activities, including the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S.
We pride ourselves on research and development agility, allowing us to design capabilities specific to customers’ requirements and, where appropriate, integrate those capabilities into our software solutions. We also offer cost-effective complete solutions due to the synergies across our product portfolio. ■ Focus on a portfolio approach to the licensing and sale of our software platform.
We pride ourselves on research and development agility, allowing us to design capabilities specific to customers’ requirements and, where appropriate, integrate those capabilities into our software solutions. • Focus on a portfolio approach to the licensing and sale of our software platform.
These privacy and security laws may increase our compliance obligations and exposure for any noncompliance. See the section titled “ Risk Factors—Risks Related to Legal, Regulatory, Accounting and Tax Matters ” for additional information about the laws and regulations to which we are or may become subject and about the risks to our business associated with such laws and regulations.
These privacy and security laws may increase our compliance obligations and exposure for any noncompliance. See Item 1. A . Risk Factors for additional information about the laws and regulations to which we are or may become subject and about the risks to our business associated with such laws and regulations.
As of December 31, 2024, we had 19 issued U.S. patents expiring generally between 2028 and 2039, 3 pending U.S. patent applications, 4 issued foreign patents (including 2 French patents, 1 Taiwanese patent, and 1 Japanese patent) expiring generally between 2032 and 2041, 5 pending foreign patents (including 2 pending Taiwanese applications, 2 pending European patent applications, and 1 pending Japanese patent application) and 3 pending International Patent Cooperation Treaty patent applications.
As of December 31, 2025, we had 47 issued U.S. patents expiring generally between 2026 and 2039, 5 pending U.S. patent applications, 4 issued foreign patents (including 2 French patents, 1 Taiwanese patent, and 1 Japanese patent) expiring generally between 2032 and 2041, and 9 pending foreign patent applications (including 2 pending Taiwanese applications, multiple pending European patent applications, and multiple pending Japanese patent applications).
We utilize patents to provide protection for our developed products, helping maintain product differentiation. Currently, our patent portfolio is focused on SIP (fingerprinting and DNA-analysis), circuit and standard cell design, generation and optimization, cell libraries with a large number of cells, memory cells and arrays, physical verification, simulation of light emitting diodes, (“LED”), and other related spaces.
Currently, our patent portfolio is focused on SIP (fingerprinting and DNA-analysis), circuit and standard cell design, generation and optimization, cell libraries with many cells, memory cells and arrays, physical verification, simulation of light emitting diodes, (“LED”), and other related spaces.
We seek to differentiate ourselves through the breadth of our software and SIP offerings, addressing the full design cycle needs of our customers across applications and industries.
We seek to differentiate ourselves through the breadth of our software and SIP offerings, addressing the full design cycle needs of our customers. • Expand our customer base. We believe that we can both expand our customer base and grow within our existing customers.
As of December 31, 2024, our revenue was geographically distributed as follows: 53% from customers in Asia, 38% from customers in North America, and 9% from customers in Europe. Sales and Marketing We work closely with our customers throughout the semiconductor lifecycle with our solutions, and support offerings to meet their specific and complex needs.
As of December 31, 2025, our revenue was geographically distributed as follows: 54% from customers in Asia, 38% from customers in the Americas, and 8% from customers in Europe. 4 Table of Contents Sales We work closely with our customers to meet their specific and complex needs.
All such filings are available free of charge. In addition, the SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. 13 Table of Contents
All such filings are available free of charge. In addition, the SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. Growth Drivers Our software solutions enable customers to simulate and optimize semiconductor manufacturing processes as well as design, simulate and verify innovative semiconductor products.
To support our growth, we intend to continue our investments in research and development. Intellectual Property Our patents and other legal intellectual property protections are created when we believe we have developed proprietary and unique technologies that may impact our customers’ businesses and help differentiate our products.
We therefore expect to continue making significant investments in this area going forward. Intellectual Property Our patents and other legal intellectual property protections are created when we believe we have developed proprietary and unique technologies that may impact our customers’ businesses and help differentiate our products. We utilize patents to provide protection for our developed products, helping maintain product differentiation.
Sales cycles vary depending upon the product and offerings along with the specific needs and complexities of the individual customer. TCAD and EDA opportunities generally have a sales cycle of six to nine months whereas SIP opportunities generally range from three to eight months. Renewal engagement generally starts six to 12 months prior to license expiration.
Manufacturing process development and EDA opportunities generally have a sales cycle of six to nine months whereas SIP opportunities generally range from three to nine months. Renewal engagement generally starts six to 12 months prior to license expiration.
To handle the complexities of the industry, we use account managers with specialized knowledge who cover and can speak to all company products.
To handle the complexities of the industry, we use account managers with specialized knowledge who cover and can speak to all company products. In addition, we rely upon field application engineers for product specialization and our sales operations to handle universities and smaller sales opportunities.
We plan to continue to expand our ecosystem to maximize our reach, integrate into established flows and offer world-class solutions. Customers We provide end-to-end solutions such as software, design IP, and world-class support to a global and diverse customer base of engineers and researchers in both semiconductor companies and academia.
Customers We provide end-to-end solutions such as software, design IP, and world-class support to a global and diverse customer base of engineers and researchers in both semiconductor companies and academia. We aim to support our customers’ use of our products to solve semiconductor design challenges spanning the levels of atoms, devices, and systems.
With our combined platform, we believe we can attract new customers, retain existing ones, and create upsell opportunities. As of December 31, 2024, we had over 800 customers that relied on our solutions worldwide, of which over 200 are academic institutions.
As of December 31, 2025, we had over 800 customers that relied on our solutions worldwide, of which over 200 are academic institutions.
Growth Strategy As the demands of semiconductor technology continue to grow and increase in complexity, we intend to take the following actions to deliver value to our customers with our TCAD, EDA and SIP solutions, further our long-term growth and increase our market share: ■ Focus on large, growing markets where we have cemented ourselves as a reliable solutions provider.
Growth Strategy We intend to take the following actions to deliver value to our customers: • Focus on large, growing markets where we have cemented ourselves as a trusted solutions provider.
Our TCAD solutions are designed to provide complete, fast, and accurate simulations and modeling of semiconductor and photonics device behavior, allowing our customers to design original, value-added processes and devices, explore trade-offs in performance, power, size and reliability and optimize their final design for manufacturing.
Our traditional TCAD tools enable simulations of existing and new technologies for device performance optimization. Our solution is designed to provide complete, fast, and accurate results, allowing customers to explore trade-offs in performance, power, size and reliability and optimize their final design.
FTCO uses manufacturing data to perform statistical and physics-based machine learning software simulations to create a computer model or “digital twin” of a wafer that can be used to simulate the fabrication process.
Our FTCO AI/ML solution uses manufacturing and simulated data to create a computer model or “digital twin” of manufacturing processes that can be used to simulate the fabrication process in "real time".
Employees and Human Capital Resources As of December 31, 2024, we had 279 employees worldwide, including 104 full-time equivalent employees located in the United States, consisting of 47 in research and development, 25 in sales and marketing, and 32 in general and administrative. We consider relations with our employees to be good and have never experienced a work stoppage.
Employees and Human Capital Resources As of December 31, 2025, we had 406 employees worldwide, including 105 full-time equivalent employees located in the United States, consisting of 61 in research and development, 18 in sales and marketing, and 26 in general and administrative. We also have 99 full-time equivalent employees located in Egypt.
In addition, we gained 13 new customers in the power end-market and eight new customers in the memory end-market in 2024. ■ Establish, maintain and expand relationships with key technology providers and academic partners. We have relationships with SIP providers, foundries, design service companies, EDA companies, our commercial customers and academia.
This growth will be enabled by our global salesforce and application engineers. • Establish, maintain and expand relationships with key technology providers and academic partners. We have relationships with SIP providers, foundries, design service companies, EDA companies, our commercial customers and academia.
Item 1. Business Overview We are a provider of technology computer aided design (“TCAD”) software, electronic data automation (“EDA”) software and semiconductor intellectual property (“SIP”) solutions that enable semiconductor and photonics companies to increase productivity, accelerate their products’ time-to-market and reduce their development and manufacturing costs.
Item 1. Business Overview Silvaco Group, Inc. is a provider of technology computer aided design (“TCAD”) software, electronic data automation (“EDA”) software and semiconductor intellectual property (“SIP”). Our solutions are used by engineers to optimize semiconductor manufacturing processes and efficiently bring semiconductor products to market.
We aim to support our customers’ use of our products to solve semiconductor design challenges spanning the levels of atoms, devices, and systems. Through decades of collaboration with academia, we have created an end-to-end solution for display visualization and simulated stress-testing coupled with an integrated support system and SIP services.
Through decades of collaboration with academia, we have created an end-to-end solution for display visualization and simulated stress-testing coupled with an integrated support system and SIP services. With our combined platform, we believe we can attract new customers, retain existing ones, and create upsell opportunities.
In addition, we rely upon field application engineers for product specialization and sales operations to handle universities and smaller opportunities. 11 Table of Contents Although the specific terms of our contracts vary from customer to customer, the license agreements are commonly one or three-year commitments.
Although the specific terms of our contracts vary from customer to customer, the license agreements are commonly one or three-year commitments. Sales cycles vary depending upon the product and offerings along with the specific needs and complexities of the individual customer.
We intend to continue to target acquisitions that allow us to expand our solutions portfolio to better service our customers’ needs. ■ Leverage our technology in TCAD, EDA, SIP and SIP management software.
We plan to continue to expand our ecosystem to maximize our reach, integrate into established flows and offer world-class solutions. • Continue to seek strategic acquisitions to accelerate growth and expand our market footprint. We intend to continue to target acquisitions that allow us to expand our solutions portfolio to better service our customers’ needs.
In the SIP segment, we compete based on PPA, idle power consumption, data movement performance such as frequency, latency, bandwidth, and time to market. Major players in this industry include Arm Limited, Synopsys, Cadence, and CEVA, Inc. Government Regulation We face increasingly stringent and evolving regulatory challenges.
In the SIP segment, we compete based on PPA, idle power consumption, data movement performance and time to market. For more information on risks related to competitive factors affecting our business, see the relevant discussions throughout Item 1A. “Risk Factors.” 5 Table of Contents Government Regulation We face increasingly stringent and evolving regulatory challenges.
We seek to continue and expand our presence in the growing display, automotive semiconductor, memory device and IoT markets.
We seek to expand our presence in multiple growing markets, including display, automotive semiconductor, memory, quantum computing, photonics, data center, and AI markets. • Enhance our competitive advantage by addressing unique customer needs.
None of our employees are either represented by a labor union or subject to a collective bargaining agreement. Additional Information Our website address is www.silvaco.com. Our website and the contents therein or connected thereto are not intended to be incorporated into this Annual Report on Form 10-K.
Our headquarters are located at 4701 Patrick Henry Drive, Building #23, in Santa Clara, CA 95054, and our headquarters’ telephone number is (408) 567-1000. We have 12 offices worldwide. Our website address is https://www.silvaco.com. Our website and the contents therein or connected thereto are not intended to be incorporated into this Annual Report on Form 10-K.
Our issued patents and pending patent applications generally relate to SIP characterization, standard cells, memory, physical verification and LED simulation. As of December 31, 2024, we have obtained registered U.S. federal trademarks for SILVACO and VIRTUAL WAFER FAB, and have pending applications for FTCO and PCAIO.
As of December 31, 2025, we had 16 U.S. registered copyrights. As of December 31, 2025, we have obtained registered U.S. federal trademarks for Mixel Mixed-Signal Excellence, SILVACO, Simulations Empowering Your nnovations, Tech-X, USim, VIRTUAL WAFER FAB, VSim, and VORPAL and have pending applications for FTCO and PCAIO.
Competition Within the TCAD software segment, we compete against several other vendors, including Synopsys, Inc., Ansys, Inc., and Coventor, Inc., a Lam Research Company. We compete in the industry based on the market segments we serve, technology leadership, product efficiency, ease of integration, ease of use, payment structures, customer support, and time to market.
Some of our competitors have made or may make acquisitions and/or have entered or may enter into partnerships or other strategic relationships which may alter their ability to compete with us. We compete based on the market segments we serve, technology leadership, product efficiency, ease of integration, ease of use, payment structures, customer support, and time to market.
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We have decades of expertise developing the “technology behind the chip” and providing solutions that span from atoms to systems, starting with providing software for the atomic level simulation of semiconductor and photonics material for devices, to providing software and SIP for the design and analysis of circuits and system level solutions.
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Our differentiated solutions enable our customers to increase productivity, accelerate time-to-market and reduce development and manufacturing costs. 1 Table of Contents Our TCAD solutions are used in the semiconductor industry to model and optimize manufacturing processes and device performance.
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We provide SIP for system-on-a-chip (“SoC”), integrated circuits (“ICs”) and SIP management tools to enable team collaborations on complex SoC designs.
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This includes foundational TCAD software and more advanced artificial intelligence (“AI”) machine learning (“ML”) for process development, called Fabrication Technology Co-Optimization (“FTCO TM ”). We are a pioneer in the leverage of AI to redefine manufacturing process development in partnership with customers. Our EDA software is used by semiconductor companies to design, simulate, and verify semiconductors.
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Our customers include semiconductor manufacturers, original equipment manufacturers (“OEMs”) and original design manufacturers (“ODMs”) who deploy our solutions in production flows across our target markets, including display, power devices, automotive, memory, high performance computing (“HPC”), Internet of Things (“IoT”) and 5G/6G mobile markets.
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Our EDA products include SPICE modelling and simulation, parasitic extraction and reduction, standard cell generation and optical proximity correction. Our SIP portfolio includes a range of products, including foundation technology, such as standard cells and memory compilers, as well as a suite of interface technologies. Our SIP portfolio benefited from recent acquisitions, most notably Mixel Group, Inc.
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EDA offerings, including our solutions, enable companies to streamline their IC design workflows, develop complex IC designs in a cost-efficient manner, and maintain acceptable IC manufacturing yield, by providing interoperable tools that capture and simulate designs from concept to analysis.
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(“Mixel”), which is positioned for growth as we roll out Mixel’s quality processes to the rest of the organization. Our customers include foundries, integrated device manufacturers (“IDMs”) and fabless semiconductor companies. Corporate Information Silvaco was incorporated in the State of Delaware in 2009 under the name Saratoga International, Inc., and changed its name to Silvaco Group, Inc. in November 2013.
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Our TCAD device and process simulation tools provide compatible data structures that can be used with our EDA modeling, analysis, simulation, verification and yield enhancement tools. Further, our EDA tools are used for designing SIP and IC designs that can be managed and validated by our SIP management tools.
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Growth in demand for these tools is driven by key trends, including the launch of more advanced manufacturing processes by foundries and IDMs, as well as advancements in many end markets, including memory, automotive, quantum computing, photonics, data center, cellular technologies and AI. Our growth prospects are enhanced by the inherent differentiation embodied in our products.
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By reducing the need to run expensive and time-consuming experiments in manufacturing, TCAD solutions enable companies to rapidly bring their products to market. In addition, we have combined our expertise in semiconductor technologies with machine learning and data analysis to develop an artificial intelligence-based solution named fab technology co-optimization, or FTCO TM , for wafer-level fabrication facilities.
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We design our solutions to address our customers’ biggest challenges. We differentiate based on efficiency, cost, performance, and time to market. Our leadership in AI-powered process development is a good example of a solution that accelerates time to market for our customers while dramatically reducing their development costs. We see these trends as a powerful growth opportunity for Silvaco.
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We have partnered with Micron Technology, Inc. for the development of these modeling tools. We began licensing this new product in the second quarter of 2024.
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As semiconductor companies continue to define new generations of more complex products and processes, they increasingly leverage our growing suite of differentiated software solutions and semiconductor IP. Our Products We define our solutions in three product categories: TCAD, EDA, and SIP. TCAD Solutions Our manufacturing process development solutions include traditional TCAD tools combined with leading-edge AI/ML simulation tools.
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Our EDA solutions provide analog custom design flows that bring electrical and physical layout views together with circuit simulation and physical verification including sign-off at select foundries to help ensure correct-by-design and high-yielding products before committing to final silicon.
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We have partnered with Micron Technology, Inc. for the development and deployment of these AI/ML tools. 2 Table of Contents Both solutions are designed to help reduce the time and manufacturing cycles spent developing semiconductor technologies and help reduce costs and accelerate development cycles.
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We provide device characterization and modeling solutions that enable our customers to generate accurate, high-quality models for use in simulation and analysis of analog, mixed-signal and RF circuits across our target markets. SIP solutions, including our offerings, provide pre-verified, high-yielding and silicon-proven SIP blocks designed to accelerate time-to-market for SoC designs.
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By reducing the need to run expensive and time-consuming experiments, our solutions enable customers to rapidly and cost-effectively bring their products to market. Our AI-augmented solutions include GPU-enablement for plasma simulation and photonics, which are recent additions to our product portfolio from our acquisition of Tech-X Corporation.
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Our patented SIP fingerprint technology authenticates SIP before and after use in complex SoC designs to avoid costly design iterations and silicon re-spins. Our EDA solutions for SIP design integrate patented machine learning technologies with the goal of minimizing simulation time, chip area and power consumption.
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Typical applications include simulation of process variation; device performance; thermal effects; optical intensity; plasma chamber and radiation effect. Our FTCO AI/ML solution provides compatible data structures that can be used with our EDA modeling, analysis, simulation, verification and yield enhancement tools. We also provide design services, expert training and workshops on our latest manufacturing process development solutions.
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We provide SIP management software at the enterprise-level for managing, tracking and controlling SIPs that are used in SoC designs. We leverage decades of extensive technological expertise to provide our customers with agilely developed products.
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EDA Solutions Silvaco offers a full, production-proven IC-CAD signoff design platform, comprehensive automated standard cell library creation and characterization solutions, and advanced IP management tool suites.
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In doing so, we have built long-term relationships with select strategic customers that enable us to work with them from project inception in order to tailor solutions for their specific needs. These customer relationships help us improve our new product offerings for the larger market.
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Its IC-CAD design flow supports the complete path from design capture and circuit simulation through layout design, physical verification, parasitic extraction and reduction, and post-layout analysis including statistical variation and yield analysis, enabling silicon-accurate verification and predictable signoff.
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Our business model primarily consists of selling time-based software licenses, with an average of approximately 3 years per term-based license (“TBL”) for the years ended December 31, 2024 and 2023. We seek to grow our business by renewing TBL contracts and licensing new products. In addition to TBL revenue, we have revenue streams from our maintenance, support, and services.
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The automated standard cell library solutions accelerate development through layout generation, optimization, parasitic-aware characterization, and variation-aware modeling to deliver high-quality libraries optimized for power, performance, and area.
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During 2024, we generated $65.8 million in bookings and recognized $59.7 million of revenue, a $39.4 million net loss and $19.8 million of cash flows used in operating activities. We also had a GAAP operating loss of $40.3 million and a non-GAAP operating income of $5.5 million.
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In addition, Silvaco’s IP management tools address the growing complexity of modern SoC development by enabling efficient onboarding of third-party IP, structured reuse of internal IP, version control, traceability, and secure collaboration across distributed teams.
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During 2023, we generated $58.1 million in bookings and recognized $54.2 million of revenue, a $0.3 million net loss and $1.2 million of cash flows provided by operating activities. We also had a GAAP operating income of $1.1 million and a non-GAAP operating income of $4.4 million during 2023.
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SIP Solutions The number of third-party IP design blocks incorporated into customers’ semiconductor designs has increased as system-on-chip (“SoC”) architectures grow more complex and development cycles compress. Customers increasingly rely on pre-verified and silicon-proven IP to reduce design risk, manage costs, and accelerate time-to-market.
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See “ Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Operating Indicators and Non-GAAP Financial Measures ” of Part II, Item 7 of this Annual Report on Form 10-K for additional information on bookings and non-GAAP operating income and the reconciliation of operating (loss) income to non-GAAP operating income. 2 Table of Contents Silvaco Group, Inc. was incorporated in the State of Delaware in 2009 under the name Saratoga International, Inc., and changed its name to Silvaco Group, Inc. in November 2013.
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Our SIP portfolio offers a comprehensive portfolio of solutions for SoC designs, including hard and soft IP, foundational libraries, and embedded memory technologies. These SIP solutions are designed to integrate into customer designs across a range of process technologies and end markets.
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Initial Public Offering In May 2024, we completed our initial public offering (“ IPO”), in which we sold 6,000,000 shares of our common stock at an offering price of $19.00 per share and raised a total of $114.0 million in gross proceeds, or approximately $106.0 million in net proceeds after deducting underwriting discounts and commissions of $7.9 million and before deducting offering-related expenses.
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Silvaco’s SIP portfolio includes: Interface IP • Production-ready and Custom silicon-proven mixed-signal IP solutions for high-speed interfaces, including Mixel® MIPI® C-PHY™, D-PHY™, and M-PHY® as well as LVDS and other multi-standard SerDes • Production-ready and silicon-proven soft IP solutions supporting industry-standard interfaces, including MIPI® I3C, Arm® AMBA® interconnect fabric, and peripheral components Logic Libraries and Physical IP • Production-ready and Custom Standard cell logic libraries, including Core, Power Management, Engineering Change Order (“ECO”), Advanced Compute, and physical completion library components • Libraries are designed to support performance, power, and area optimization requirements across a range of applications and process nodes Embedded Memory Solutions • Production-ready Embedded memory compilers for both volatile and non‑volatile memory technologies • Memory solutions incorporate integrated test and repair features intended to improve yield, reliability, and manufacturability Automotive IP 3 Table of Contents • Production-ready IP solutions for automotive applications, including CAN FD and CAN XL, designed to meet safety, reliability, and security requirements for automotive electronics Silvaco’s SIP products are typically incorporated into customer designs early in the development cycle and may remain in production for extended periods.
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Industry Overview Design and manufacturing of SoCs is a time intensive and costly process. Complex AI-driven high performance computing, IoT class of SoCs, high performance memories, and GPU class processors cost millions to billions of dollars to develop. The development, qualification and manufacturing cycle for processors, memories and SoCs varies by market and may require lengthy development times.
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This pattern is particularly common in markets with long product lifecycles, such as automotive, industrial, and robotic applications. Silvaco’s SIP is also deployed in higher-volume markets with shorter product cycles, including mobile, consumer drones, edge AI computing, Internet of Things (“IoT”), and mobile-adjacent applications such as AR, VR, and wearables.
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Similarly designing power systems utilizing new materials such as gallium nitride (“GaN”) and silicon carbide (“SiC”) adds additional costs, time to market and complexity to the systems that enable AI. Increasing semiconductor design complexity.
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As a result, Silvaco’s SIP business is influenced by customer design activity across a range of end markets, adoption of industry standards, and broader trends in semiconductor integration and system complexity Customer Support We provide a consistently high level of customer support and training to ensure our customers extract the full value of our solutions.
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The latest technological applications require greater semiconductor performance and functionality, which have necessitated the shift towards more advanced manufacturing process technologies, new materials, and continued reduction of transistor sizes. IC and SoC complexity have significantly increased to accommodate the increased number of functional SIP blocks per chip.
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This support is provided through a global network of application engineering teams. Customer support includes frequent software updates. We also offer workshops to increase customer productivity through courses offered worldwide, as well as online training. Product Warranties We generally warrant our products to conform to material specifications for a limited period of time.
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The slowing of Moore’s Law, which states that the number of circuits on a microchip will double every two years, has also led to the adoption of new semiconductor materials to address varying application requirements. For example, SiC, and GaN, materials are being adopted in automotive, consumer, and industrial power applications.
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We also provide customers with limited indemnification with respect to claims that their use of our software products infringes on patents, copyrights, trademarks or trade secrets. We have not experienced material warranty or indemnity claims to date.
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New memory technologies, including resistive random-access memory and magneto-resistive random-access memory, or MRAM, are being deployed across mobile, HPC, and IoT applications. All these factors have increased semiconductor design complexity, which in turn increases the probability for significant development delays and project failures.
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Our sales and marketing teams have international coverage segmented into three distinct regions: the Americas (U.S. and Brazil), Europe, the Middle East, and Asia (“EMEA”) and Asia-Pacific (“APAC”), which includes Japan, China, Korea, Taiwan and Singapore. Research and Development Our success is inextricably linked to our ability to deliver new innovative solutions and maintain our existing product portfolio.
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As a result, we believe there is a growing need for differentiated and cost-effective tools such as TCAD, EDA and SIP solutions that enable rapid and reliable development of products containing these newly added materials and technologies. Increasing semiconductor manufacturing and development time and costs.
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Our research and development (“R&D”) priorities are centered around our three main product areas described above. Our R&D team evolves existing products to address new customer challenges and deliver next generations of even more innovative and unique solutions to the industry’s largest challenges. R&D efforts are central to our long-term business success.
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With each reduction in manufacturing process geometry comes a corresponding increase in manufacturing and development costs.
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We did not have any pending International Patent Cooperation Treaty applications as of December 31, 2025. Our issued patents and pending patent applications generally relate to SIP characterization, standard cells, memory, physical verification, LED simulation, computational lithography, optical proximity correction, multi-patterning and photomask optimization, semiconductor manufacturability modeling and yield enhancement, and mixed-signal physical layer interface technologies.
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Factors driving development cost and time include those associated with the number of personnel required to design, the verification of the design, and the test and validation of the design, as well as the cost of tools for design, verification, test and validation, and the associated manufacturing costs of masks, wafers and production costs, including testing.
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Competition We compete most frequently with Synopsys, Inc., Siemens EDA, and Cadence, Inc. by providing specialized differentiation that is generally unavailable from larger EDA companies. We also compete with other tools providers, customers with their own EDA capabilities and other IP companies, including Keysight Technologies, Inc., Schrödinger, Inc., CEVA, Inc., Zuken Ltd., Huada Empyrean, M31 and Primarius Technologies.
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In general, the more complex the IC, the more personnel and more tools per personnel are needed, hence increasing the cost of design. Many new GPU processors require thousands of engineers to design over many years. Additionally, the COVID-19 pandemic and subsequent semiconductor shortage have emphasized the need for supply chain optimization, further accelerating investments in semiconductor foundries.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf we are held to have breached or failed to fully comply with all the terms and conditions of an open source software license, or if an author or other third party that distributes such open source software were to allege that we had not complied with the conditions of one or more of these licenses, we could be required to incur significant legal expenses defending against such allegations, could be subject to significant damages, enjoined from the licensing of our software licenses or other liability, or be required to seek costly licenses from third parties to continue providing our software on terms that, if available at all, are not economically feasible, to re-engineer our software, to discontinue or delay the provision of our software if re-engineering could not be accomplished on a timely basis, or to make generally available, in source code form, our proprietary code, any of which would adversely affect our business, financial condition and results of operations.
Biggest changeIf we are held to have breached an open source software license, we could be required to incur significant legal expenses, pay substantial damages, be enjoined from licensing our software, seek costly third-party licenses, re-engineer our software, or make our proprietary code generally available in source code form, any of which would adversely affect our business, financial condition and results of operations. 19 Table of Contents Product errors or defects could expose us to liability and harm our reputation, and we could lose market share.
However, we have based this estimate on our current operating plans and expectations, which are subject to change, and cannot assure you that that our existing resources will be sufficient to meet our future liquidity needs. We may require additional capital to respond to business opportunities, challenges, acquisitions or other strategic transactions and/or unforeseen circumstances.
However, we have based this estimate on our current operating plans and expectations, which are subject to change, and cannot assure you that that our existing resources will be sufficient to meet our future liquidity needs. We may require additional capital to respond to business opportunities, challenges, acquisitions or other strategic transactions or unforeseen circumstances.
Our employees, consultants and third-party providers have in the past and may in the future engage in misconduct that materially adversely affects us. Our employees, consultants and third-party providers have in the past and may in the future engage in misconduct that materially and adversely affects us.
Our employees have in the past, and our employees, consultants and third-party providers may in the future engage in misconduct that materially adversely affects us. Our employees have in the past, and our employees, consultants and third-party providers may in the future engage in misconduct that materially and adversely affects us.
The timing and amount of our working capital and capital expenditure requirements may vary significantly depending on numerous factors, including: ■ market acceptance of our SIP and other solutions, and our IP deployment 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 SIP, IP deployment solutions, FTCO, and other 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.
While none of our revenue is derived from Russia or Ukraine, we have employees based in both countries and had, prior to the beginning of the conflict, offices in both countries. In response to the ongoing conflict, we recently closed our office in Moscow, Russia, and our office in Kyiv, Ukraine, has been temporarily closed.
While none of our revenue is derived from Russia or Ukraine, we have employees based in Ukraine and had, prior to the beginning of the conflict, offices in both countries. In response to the ongoing conflict, we closed our office in Moscow, Russia, and our office in Kyiv, Ukraine, has been temporarily closed.
Therefore, we are not required to comply with certain corporate governance rules that would otherwise apply to us as a listed company on Nasdaq, including the requirement that (i) we have a majority of independent directors on our board of directors; (ii) the compensation of our executive officers be determined by a majority of the independent directors or a compensation committee comprised solely of independent directors; and (iii) director nominees selected or recommended for our board be approved either by a majority of the independent directors or a nominating committee comprised solely of independent directors.
Therefore, we are not required to comply with certain corporate governance rules that would otherwise apply to us as a listed company on Nasdaq, including the requirements that (i) we have a majority of independent directors on our board of directors; (ii) the compensation of our executive officers be determined by a majority of the independent directors or a compensation committee comprised solely of independent directors; and (iii) director nominees selected or recommended for our board be approved either by a majority of the independent directors or a nominating committee comprised solely of independent directors.
From time to time, we receive communications from third parties that allege that our software solutions or technologies infringe their patent or other intellectual property rights.
From time to time, we receive communications from third parties that allege that our software solutions or technologies infringe their copyright, patent or other intellectual property rights.
Reduced customer spending or the loss of a number of customers, particularly our large customers, could adversely affect our business, financial position and results of operations. In addition, we and our competitors from time to time acquire businesses and technologies to complement and expand our respective software solutions offerings.
Reduced customer spending or the loss of customers, particularly large customers, could adversely affect our business, financial position and results of operations. In addition, we and our competitors from time to time acquire businesses and technologies to complement and expand our respective software solutions offerings.
In addition, any future acquisitions or investments may result in: ■ issuances of dilutive equity securities, which may be at a discount to market price; ■ use of significant amounts of cash; ■ the incurrence of debt; ■ the assumption of significant liabilities; ■ unfavorable financing terms; ■ large one-time expenses; and ■ the creation of certain intangible assets, including goodwill, the write-down of which may result in significant charges to earnings.
In addition, any future acquisitions or investments may result in: • Issuances of dilutive equity securities, which may be at a discount to market price; • Use of significant amounts of cash; • The incurrence of debt; • The assumption of significant liabilities; • Unfavorable financing terms; 16 Table of Contents • Large one-time expenses; and • The creation of certain intangible assets, including goodwill, the write-down of which may result in significant charges to earnings.
We may take advantage of these exemptions for up to five years or until we are no longer an “emerging growth company,” whichever is earlier. 43 Table of Contents In addition, Section 107 of the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards.
We may take advantage of these exemptions for up to five years or until we are no longer an “emerging growth company,” whichever is earlier. In addition, Section 107 of the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards.
We may not be able to resolve any potential conflicts, and even if we do, the resolution may be less favorable than if we were dealing with an unaffiliated party.
We may not be able to resolve any potential disputes, and even if we do, the resolution may be less favorable than if we were dealing with an unaffiliated party.
Ngai-Pesic, or other members of the Pesic Family, with respect to our past, future and ongoing relationships may adversely affect our operating results. We lease several office facilities from entities controlled by Ms. Ngai-Pesic pursuant to which we recorded a rent expense of $0.5 million during each of the years ended December 31, 2024 and 2023.
Ngai-Pesic, or other members of the Pesic Family, with respect to our past, future and ongoing relationships may adversely affect our operating results. We lease several office facilities from entities controlled by Ms. Ngai-Pesic, pursuant to which we recorded a rent expense of $0.5 million and $0.5 million during the years ended December 31, 2025 and 2024, respectively.
For example, in response to this increasing complexity, some customers may choose to focus on one discrete phase of the design process or opt for less advanced, but less risky, manufacturing processes that may not require new or enhanced design solutions.
For example, in response to this increasing complexity, some customers have chosen to focus on one discrete phase of the design process or opt for less advanced, but less risky, manufacturing processes that may not require new or enhanced design solutions.
Accordingly, the shares of common stock held by other stockholders may be worth less than they would be if the Pesic Family did not maintain voting control over us. The interests of the Pesic Family could conflict with or differ from the interests as a holder of other stockholders.
Accordingly, the shares of common stock held by other stockholders may be worth less than they would be if the Pesic Family did not maintain voting control over us. The interests of the Pesic Family could conflict with or differ from the interests of other stockholders.
Congress, government agencies in non-U.S. jurisdictions where we and our affiliates do business, and the Organization for Economic Cooperation and Development, or OECD, have recently focused on issues related to the taxation of multinational corporations.
Congress, government agencies in non-U.S. jurisdictions where we and our affiliates do business, and the Organization for Economic Cooperation and Development (“OECD”), have recently focused on issues related to the taxation of multinational corporations.
In addition, in October 2023 and December 2024, BIS tightened restrictions and compliance burdens on the transfer to China (including Macau) of certain advanced artificial intelligence chips, semiconductors and supercomputing items, software and technology subject to U.S. export controls, in addition to restricting sales to certain semiconductor fab facilities in China.
In October 2023 and December 2024, BIS tightened restrictions and compliance burdens on the transfer to China (including Macau) of certain advanced artificial intelligence chips, semiconductors and supercomputing items, software and technology subject to U.S. export controls, in addition to restricting sales to certain semiconductor fab facilities in China and on U.S. persons’ activities in support of the transfer of certain items not subject to U.S. export controls.
On August 9, 2023, President Biden issued an executive order addressing investments by U.S. persons in companies located in designated countries of concern, currently, China (including Hong Kong and Macau) that engage with certain categories of sensitive technology and products, including semiconductors and microelectronics, quantum information technologies and AI.
On August 9, 2023, President Biden issued an executive order addressing investments by U.S. persons in companies located in China (including Hong Kong and Macau) that engage with certain categories of sensitive technology and products, including semiconductors and microelectronics, quantum information technologies and AI.
We will also be required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, or Section 404(b), following the later of the date we are deemed to be an “accelerated filer” or a “large accelerated filer,” each as defined in the Exchange Act, or the date we are no longer an “emerging growth company,” as defined in the JOBS Act.
We will also be required to comply with the auditor attestation requirements of Section 404(b) following the later of the date we are deemed to be an “accelerated filer” or a “large accelerated filer,” or the date we are no longer an “emerging growth company,” as defined in the JOBS Act.
While we do not currently consider the conflict between Israel and its adversaries to have had a material impact on our business, the ongoing regional conflict could have a negative impact on the economy and business activity globally, and therefore could adversely affect our results of operations, financial condition and cash flow.
While we do not currently consider the regional conflict between the United States and Israel and their adversaries to have had a material impact on our business, the ongoing regional conflict could have a negative impact on the economy and business activity globally, and therefore could adversely affect our results of operations, financial condition and cash flow.
Item 1A. Risk Factors IA description of the risks and uncertainties associated with our business is set forth below.
Item 1A. Risk Factors A description of the risks and uncertainties associated with our business is set forth below.
Some of our software licenses contain software modules licensed to us under “open source” licenses, and we expect to continue to incorporate such open source software in our software licenses in the future.
Some of our software licenses contain software modules licensed under “open source” licenses, and we expect to continue incorporating such open source software in the future.
As a result of these and other factors, you should not rely on the results of any prior interim or annual periods, or any historical trends reflected in such results, as indications of our future revenue or operating performance.
As a result, you should not rely on the results of any prior interim or annual periods, or any historical trends reflected in such results, as indications of our future revenue or operating performance.
The increasing complexity of designs of or SoC, ICs, electronic systems and customers’ concerns about managing costs, have previously led to, and in the future could lead to, a decrease in design starts and design activity in general.
The increasing complexity of designs of semiconductors and electronic systems, and customers’ concerns about managing costs, have previously led to, and in the future, could lead to, a decrease in design starts and design activity in general.
In July and October 2022 and January 2023, we also filed voluntary disclosures with OFAC regarding potential violations of OFAC sanctions programs, specifically the download of certain Company software modules by users in U.S. embargoed countries.
In July and October 2022 and January 2023, we also filed voluntary disclosures with the Office of Foreign Assets Control (“OFAC”) regarding potential violations of OFAC sanctions programs, specifically the download of certain Company software modules by users in U.S. embargoed countries.
Any change in export or import laws and regulations, shift in the enforcement or scope of existing laws and regulations, or change in the countries, governments, persons or technologies targeted by such laws and regulations, could also result in decreased use of our software solutions and technology, or in our decreased ability to export or sell our software solutions and technology to existing or potential customers.
Any change in export or import laws and regulations, shift in the enforcement or scope of existing laws and regulations, or change in the countries, governments, persons or technologies targeted by such laws and regulations, could also affect our customers’ use of our software solutions and technology and our ability to export our software solutions and technology to existing or potential customers.
Our charter and bylaws provide that, unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, the Court of Chancery of the State of Delaware (or, if that court lacks subject matter jurisdiction, another federal or state court situated in the State of Delaware) shall be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, or the DGCL, our certificate of incorporation, or our bylaws, or any issue, in one or more series, of all or any of the remaining shares of preferred stock, and, in the resolution or resolutions providing for such issue; (iv) any action to interpret, apply, enforce, or determine the validity of our certificate of incorporation or our bylaws; or (v) any action asserting a claim against us governed by the internal affairs doctrine.
Our charter and bylaws provide that, unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, the Court of Chancery of the State of Delaware (or, if that court lacks subject matter jurisdiction, another federal or state court situated in the State of Delaware) shall be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, or the DGCL, our certificate of incorporation, or our bylaws; (iv) any action to interpret, apply, enforce, or determine the validity of our certificate of incorporation or our bylaws; or (v) any action asserting a claim against us governed by the internal affairs doctrine.
While we have policies and procedures intended to address compliance with anti-corruption, anti-bribery, anti-money laundering and similar laws, we cannot assure you that all of our employees, representatives, contractors, partners, agents, intermediaries or other third parties have not taken, or will not take, actions in violation of our policies and applicable law, for which we may be ultimately held responsible.
While we have policies and procedures intended to address compliance with these laws, we cannot assure you that all of our employees, representatives, contractors, partners, agents, intermediaries or other third parties have not taken, or will not take, actions in violation of our policies and applicable law, for which we may be ultimately held responsible.
In addition, the estimated global EDA market may not materialize in the timeframe we expect, if ever, and even if the markets meet the estimates presented in this report, this should not be taken as indicative of our future growth or prospects.
In addition, the estimated global EDA market may not materialize in the timeframe we expect, if ever, and even if the markets meet our current expectations, this should not be taken as indicative of our future growth or prospects.
Although we have certain processes in place to monitor and manage our use of open source software to avoid subjecting our software licenses to conditions we do not intend, the terms of many open source licenses have not been interpreted by U.S. or foreign courts, and there is a risk that these licenses could be construed in a way that could impose unanticipated conditions or restrictions on our ability to provide or distribute our products.
Although we have processes to monitor and manage our use of open source software, the terms of many open source licenses have not been interpreted by U.S. or foreign courts, and there is a risk that these licenses could be construed in a way that imposes unanticipated conditions or restrictions on our ability to provide or distribute our products.
As a newly public company, we may be slow to attract research coverage and the analysts who publish information about our common stock will have had relatively little experience with us, which could affect their ability to accurately forecast our results and could make it more likely that we fail to meet their estimates.
As a newly public company, the analysts who publish information about our common stock have had relatively little experience with us, which could affect their ability to accurately forecast our results and could make it more likely that we fail to meet their estimates.
If one or more analysts cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline or become volatile.
If one or more analysts cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline or become volatile. We do not intend to pay dividends on our common stock.
In the United States, the Tax Cuts and Jobs Act enacted in 2017, the Coronavirus Aid, Relief, and Economic Security Act enacted in 2020, and the Inflation Reduction Act enacted in 2022 made many significant changes to U.S. tax laws.
In the United States, the Tax Cuts and Jobs Act enacted in 2017, the Coronavirus Aid, Relief, and Economic Security Act enacted in 2020, the Inflation Reduction Act enacted in 2022, and the One Big Beautiful Bill Act enacted in 2025 made many significant changes to U.S. tax laws.
Additionally, some open source projects have vulnerabilities and architectural instabilities and are provided without warranties or services to actively provide us patched versions when available, and which, if not properly addressed, could negatively affect the performance of our products.
Additionally, some open source projects have vulnerabilities and architectural instabilities and are provided without warranties or services to supply patched versions, which, if not properly addressed, could negatively affect the performance of our products.
Any failure to recruit and retain key employees could harm our business, results of operations and financial condition. Additionally, efforts to recruit and retain qualified employees could be costly and negatively impact our operating expenses. Historically we have issued equity awards as a key component of our overall compensation.
Any failure to recruit and retain key employees could harm our business, results of operations and financial condition. Additionally, efforts to recruit and retain qualified employees could be costly and negatively impact our operating expenses. We issue equity awards from employee equity plans as a key component of our overall compensation.
Our technology is subject to the threat of piracy, unauthorized copying and other forms of intellectual property infringement. We regard our technology as proprietary and take measures to protect our technology and other confidential information from infringement. Piracy and other forms of unauthorized copying and use of our technology may become persistent, and policing is difficult.
Our technology is subject to the threat of piracy, unauthorized copying and other forms of intellectual property infringement. We regard our technology as proprietary and take measures to protect it from infringement. Piracy and unauthorized copying of our technology may become persistent and difficult to police.
We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any dividends for the foreseeable future.
We do not anticipate declaring or paying any dividends for the foreseeable future as we currently anticipate retaining future earnings for the development, operation and expansion of our business.
We will remain an emerging growth company until the earlier of (ii) the last day of the fiscal year (a) in which the fifth anniversary of the completion of the IPO, (b) in which we have total annual gross revenue of at least $1.235 billion or (c) in which we become a large accelerated filer, which means that we have been public for at least 12 months, have filed at least one annual report and the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of the last day of our then-most recently completed second fiscal quarter, and (ii) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.
We will remain an emerging growth company until the earlier of (i) the last day of the fiscal year (a) in which the fifth anniversary of the completion of the IPO, (b) in which we have total annual gross revenue of at least $1.235 billion or (c) in which we become a large accelerated filer, which means that we have been public for at least 12 months, have filed at least one annual report and the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of the last day of our then-most recently completed second fiscal quarter, and (ii) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. 27 Table of Contents We are also a “smaller reporting company.” We may continue to be a smaller reporting company if either (i) the market value of our common stock held by non-affiliates is less than $250.0 million or (ii) our annual revenue is less than $100.0 million during the most recently completed fiscal year and the market value of our common stock held by non-affiliates is less than $700.0 million.
We may not be able to maintain or expand sales to our significant customers for a variety of reasons, and our customers can stop incorporating or using our solutions, decline to renew their agreements or terminate their agreements, often with limited notice to us and often with little or no penalty.
We may not be able to maintain or expand sales to our significant customers, and customers can stop using our solutions, decline to renew, or terminate their agreements, often with limited notice and little or no penalty.
Consolidation among our customers could lead to fewer customers or the loss of customers, increased customer bargaining power or reduced customer spending on software and services. Consolidation among our customers could also reduce the demand for our software solutions and services if customers streamline research and development or operations, reduce purchases or delay purchasing decisions.
Consolidation among our customers could lead to fewer customers, increased customer bargaining power or reduced customer spending on software and services. It could also reduce the demand for our software solutions and services if customers streamline research and development or operations.
If one or more analysts adversely change their recommendation regarding our stock or change their recommendation about our competitors’ stock, our stock price could decline.
If one or more of the analysts covering us adversely change their recommendation regarding our stock or change their recommendation about our competitors’ stock, our stock price could decline.
Our success depends on the interoperability of our software solutions with our customers’ intended use cases and with products and services of other companies, including our competitors.
Our success depends on the interoperability of our software solutions with our customers’ intended use cases and with products and services of other companies, including our competitors. The success of our software solutions depends in part on their interoperability with our customers’ intended use cases and with the existing products and services of other companies, including our direct competitors.
The situation remains uncertain, and while it is difficult to predict the impact of any of the foregoing, the conflict and actions taken in response to either conflict could, but are not presently expected to, materially increase our costs, disrupt our supply chain, reduce our sales and earnings, impair our ability to raise additional capital when needed on acceptable terms, if at all, or otherwise further adversely affect our business, financial condition, and results of operations. 22 Table of Contents A substantial portion of our revenue comes from our international sales channels, and we have significant operations in numerous international geographies.
The situation remains uncertain, and while it is difficult to predict the impact of any of the foregoing, the conflict and actions taken in response to either conflict could, but are not presently expected to, materially increase our costs, disrupt our supply chain, reduce our sales and earnings, impair our ability to raise additional capital when needed on acceptable terms, if at all, or otherwise further adversely affect our business, financial condition, and results of operations.
Our operations could be disrupted by geopolitical conditions, trade disputes, international boycotts and sanctions, political and social instability, acts of war, terrorist activity or other similar events, which could adversely affect our business, financial condition, and results of operations.
Our operations could be disrupted by political and social instability, acts of war, terrorist activity or other similar events, which could adversely affect our business, financial condition, and results of operations.
In addition, to the extent that hardware and software vendors, including our competitors, perceive that their applications or technologies compete with our software solutions or services, they may have an incentive to withhold any cooperation necessary to ensure interoperability, decline to share access or sell to us their proprietary protocols or formats, or engage in practices to actively limit the functionality, compatibility and certification of our software solutions.
To the extent that software vendors, including our competitors, perceive that their applications or technologies compete with our software solutions or services, they may withhold cooperation necessary to ensure interoperability, decline to share access to or sell us their proprietary protocols or formats, or otherwise actively limit the compatibility and certification of our software solutions.
For example, we have previously commenced legal proceedings against certain of our customers to protect our intellectual property rights and we may do so again in the future, which could result in resentment within our customer base and adversely affect our business, financial condition and results of operations.
For example, we previously commenced legal proceedings against certain of our customers to protect our intellectual property rights and may do so again in the future, which could result in resentment within our customer base and adversely affect our business, financial condition and results of operations. Other active proceedings include customary audit activities by various taxing authorities and legal proceedings.
If we are unable to obtain licenses to these third-party software and intellectual property on reasonable terms or at all, we may not be able to sell the affected products, our customers’ use of the licenses may be interrupted, or our software solutions development processes and professional services offerings may be disrupted, which could in turn harm our financial results, our customers, and our reputation. 31 Table of Contents The inclusion of third-party intellectual property in our software solutions can also subject us and our customers to intellectual property infringement claims.
If we are unable to obtain licenses to third-party software and intellectual property on reasonable terms or at all, we may not be able to sell the affected products, our customers’ use of the licenses may be interrupted, or our software solutions development processes and professional services offerings may be disrupted, which could harm our financial results, our customers, and our reputation.
Our sales personnel continually monitor the status of all proposals, including the estimated closing date and the value of the sale, in order to forecast quarterly and annual sales. These forecasts are subject to significant estimation and are impacted by many external factors.
We make many operational and strategic decisions based upon short-term and long-term sales forecasts. Our sales personnel continually monitor the status of all proposals, including the estimated closing date and the value of the sale, in order to forecast quarterly and annual sales. These forecasts are subject to significant estimation and are impacted by many external factors.
If we fail to comply with these laws and regulations, we and certain of our employees could be subject to substantial civil or criminal penalties, including the possible loss of export or import privileges, as well as reputational harm.
If we fail to comply with these laws and regulations, we and certain of our employees could be subject to substantial civil or criminal penalties, including the possible loss of export or import privileges, as well as reputational harm. Complying with export control and sanctions laws and regulations can be time-consuming and result in the loss of sales opportunities.
Additionally, on October 7, 2022, the Bureau of Industry and Security of the U.S. Department of Commerce (“BIS”), issued new export controls related to the Chinese semiconductor manufacturing, advanced computing and supercomputer industries.
Further, the U.S. government has implemented and periodically tightened export controls affecting China. On October 7, 2022, the Bureau of Industry and Security of the U.S. Department of Commerce (“BIS”), issued new export controls related to the Chinese semiconductor manufacturing, advanced computing and supercomputer industries.
Further, for so long as the Stockholders Agreement, dated April 12, 2024, among us and the Pesic Family remains in effect and the Pesic Family owns in the aggregate, at least 25% of the voting power of the then outstanding shares of our capital stock, our amended and restated certificate of incorporation provide that the prior written approval or consent of the Pesic Family shall be required for us to (i) implement any amendments to our amended and restated certificate of incorporation or bylaws that would adversely affect the Pesic Family’s rights thereunder, (ii) effect or consummate a change of control or approve another merger, consolidation, business combination, sale or acquisition that results in changes in the rights and privileges of holders of equity securities, and (iii) effect the liquidation or dissolution or winding up of our business operations. 35 Table of Contents Additionally, the Stockholders Agreement provides the Pesic Family has the ability to designate up to four nominees for our board of directors and one non-voting board observer, depending on ownership levels.
Pursuant to the Stockholders Agreement, dated April 12, 2024, among us and the Pesic Family, for so long as the Pesic Family owns in the aggregate at least 25% of the voting power of our then outstanding capital stock, our amended and restated certificate of incorporation provides that the prior written approval or consent of the Pesic Family is required for us to (i) implement any amendments to our amended and restated certificate of incorporation or bylaws that would adversely affect the Pesic Family’s rights thereunder, (ii) effect or consummate a change of control or approve another merger, consolidation, business combination, sale or acquisition that results in changes in the rights and privileges of holders of equity securities, and (iii) effect the liquidation or dissolution or winding up of our business operations.
In addition, in response to Russia’s invasion of Ukraine, the United States and certain other countries imposed significant sanctions and export controls against Russia, Belarus and certain individuals and entities connected to Russian or Belarusian political, business and financial organizations, and the United States and certain other countries could impose further sanctions, trade restrictions, and other retaliatory actions should the conflict continue or worsen.
In addition, in response to Russia’s invasion of Ukraine, the United States and certain other countries imposed significant sanctions and export controls against Russia, Belarus and certain individuals and entities connected to Russian or Belarusian political, business and financial organizations.
Use and distribution of open source software may entail greater risks than use of third-party commercial software, as open source licensors generally do not provide support, warranties, indemnification, or other contractual protections regarding infringement claims or the quality of the code. In addition, the public availability of such software may make it easier for others to compromise our products.
Open source licensors generally do not provide support, warranties, indemnification, or other contractual protections regarding infringement claims or code quality, and the public availability of such software may make it easier for others to compromise our products.
Any such bugs or defects or delays in releasing new products or new versions of products or allegations of unsatisfactory performance could cause us to lose customers, increase our service costs, result in diversion of resources, damage to our reputation and subject us to liability for damages, any one of which could materially and adversely affect our business and operating results.
Any such errors or delays in releasing new products or new versions of products or allegations of unsatisfactory performance could cause us to lose customers, increase our service costs, subject us to liability for damages and divert our resources from other tasks, any one of which could materially and adversely affect our business, operating results and financial condition.
Further, the laws of some countries in which our products are or may be distributed either do not protect our intellectual property rights to the same extent as the laws of the United States, or are poorly enforced. Legal protection of our rights may be ineffective in such countries.
The laws of some countries in which our products are distributed do not protect our intellectual property rights to the same extent as U.S. law, or are poorly enforced, making legal protection of our rights ineffective in such countries.
Product bugs or defects, including those resulting from third-party licensors, have in the past and may in the future affect the performance or interoperability of our products, could delay the development or release of new products or new versions of products and could adversely affect market acceptance or perception of our products.
Product errors, including those resulting from third-party suppliers, could affect the performance or interoperability of our products, could delay the development or release of new products or new versions of products and could adversely affect market acceptance or perception of our products.
An active market in our common stock may not be sustainable or liquid enough for you to sell your shares, especially given the concentration of outstanding shares. If an active market for our common stock is not sustained, it may be difficult for you to sell shares you purchased in the IPO at the price you paid.
An active market in our common stock may not be sustainable or liquid enough for you to sell your shares, especially given the concentration of outstanding shares.
We may issue additional common stock, preferred stock, convertible securities or other equity or equity linked securities in the future. We also expect to issue common stock to our employees, directors and other service providers pursuant to our equity incentive plans. Such issuances will be dilutive to investors and could cause the price of our common stock to decline.
We may issue additional common stock, preferred stock, convertible securities or other equity or equity linked securities in the future. We also expect to issue common stock to our employees, directors and other service providers pursuant to our equity incentive plans.
Future guidance from the Internal Revenue Service and other tax authorities with respect to any tax legislation may affect us, and certain aspects of such legislation could be repealed or modified in future legislation. 38 Table of Contents Due to the potential for changes in tax laws and regulations or changes in the interpretation thereof (including regulations and interpretations pertaining to recent tax reform in the United States), the ambiguity of tax laws and regulations, the subjectivity of factual interpretations, uncertainties regarding the geographic mix of earnings in any particular period and other factors, our estimates of our effective tax rate and our income tax assets and liabilities may be incorrect and our financial statements could be adversely affected.
Due to the potential for changes in tax laws and regulations or changes in the interpretation thereof (including regulations and interpretations pertaining to recent tax reform in the United States), the ambiguity of tax laws and regulations, the subjectivity of factual interpretations, uncertainties regarding the geographic mix of earnings in any particular period and other factors, our estimates of our effective tax rate and our income tax assets and liabilities may be incorrect and our financial statements could be adversely affected.
Our ability to operate and expand our business depends on the availability of adequate capital, which in turn depends on cash flow generated by our business and future debt, equity or other applicable financing arrangements.
Our ability to raise additional capital in the future may be limited and could prevent us from executing our growth strategy. Our ability to operate and expand our business depends on the availability of adequate capital, which in turn depends on cash flow generated by our business and future debt, equity or other applicable financing arrangements.
We have in the past identified material weaknesses in our internal control over financial reporting (“ICFR”). We may discover additional material weaknesses in our system of internal financial and accounting controls and procedures that could result in a material misstatement of our financial statements. Our ICFR will not prevent or detect all errors and all fraud.
We have in the past identified material weaknesses in our internal control over financial reporting (“ICFR”). Although we have remediated this deficiency, we may discover additional material weaknesses in our system of internal financial and accounting controls and procedures that could result in a material misstatement of our financial statements.
If we fail to satisfy the continued listing standards, we could be delisted, which would negatively impact the value and liquidity of your investment. 40 Table of Contents Future issuances of our common stock or sales of a substantial number of shares of our common stock in the public market, or the perception that such sales could occur, could cause the price of our common stock to decline.
If we fail to satisfy the continued listing standards, we could be delisted, which would negatively impact the value and liquidity of your investment. Future sales or issuances of our common stock could cause the price of our common stock to decline.
See Note 8 to our consolidated financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.” More generally, disputes may arise between Ms.
See Note 10 to our consolidated financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.” More generally, disputes may arise between the Pesic Family, us, members of our board of directors and management.
However, OFAC reserved the right to take future enforcement action should additional information warrant renewed attention. If either BIS and OFAC chooses to bring an enforcement action against us in relation to any potential violations in the future, such actions could result in the imposition of significant penalties against us.
If either BIS or OFAC chooses to bring an enforcement action against us in relation to any potential violations in the future, such actions could result in the imposition of significant penalties against us.
If a court were to find one or more of the choice of forum provisions that will be contained in our amended and restated certificate of incorporation and amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could seriously harm our business. 42 Table of Contents General Risk Factors and Risks Related to Being a Public Company We have experienced a material weakness in our internal control over financial reporting in the past.
If a court were to find one or more of the choice of forum provisions that will be contained in our amended and restated certificate of incorporation and amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could seriously harm our business.
New investors in such issuances could also receive rights senior to those of holders of our common stock.
Such issuances will be dilutive to investors and could cause the price of our common stock to decline, and new investors in such issuances could also receive rights senior to those of holders of our common stock.
As of December 31, 2024, we had 8 employees and 4 contractors in Ukraine, all of whom were working remotely. If our employees in Ukraine become subject to a military draft or are unable to work due to the ongoing conflict, the development of our next generation software could be delayed, which could negatively impact our business.
If our employees in Ukraine become subject to a military draft or are unable to work due to the ongoing conflict, the development of our next generation software could be delayed, which could negatively impact our business.
Our board of directors has received periodic reports from management regarding the impact of the conflict on us and considered whether such events have had, or are reasonably likely to have, a material impact on us. Unless and until the conflict in Ukraine is stabilized, we do not intend to reopen office locations in either country.
Our board of directors has received periodic reports from management regarding the impact of the conflict on us and considered whether such events have had, or are reasonably likely to have, a material impact on us.
If any of our trade secrets are subject to unauthorized disclosure or are otherwise misappropriated by third parties, our competitive position may be materially and adversely affected. 28 Table of Contents We may be subject to claims that we have wrongfully hired an employee from a competitor, or that our employees, consultants or independent contractors have wrongfully used or disclosed confidential information of third parties or that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.
We may be subject to claims that we have wrongfully hired an employee from a competitor, or that our employees, consultants or independent contractors have wrongfully used or disclosed confidential information of third parties or that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.
In October 2023, we also filed voluntary disclosures with OFAC regarding certain banking transactions made by our third party service provider in Russia on our behalf, through a bank that was sanctioned by OFAC. In July 2024, OFAC issued a cautionary letter regarding the sanctions matters instead of pursuing a civil monetary penalty or taking other enforcement action.
In October 2023, we also filed voluntary disclosures with OFAC regarding certain banking transactions made by our third-party service provider in Russia on our behalf, through a bank that was sanctioned by OFAC. In July 2024, OFAC issued a cautionary letter regarding the sanctions matters, reserving the right to take future enforcement action should additional information warrant renewed attention.
The market price and trading market for our common stock may be influenced by the research and reports that industry or securities analysts publish about us, our business and our market.
If securities analysts or industry analysts downgrade our common stock, publish negative research or reports, or fail to publish reports about our business, our stock price and trading volume could decline. 25 Table of Contents The market price and trading market for our common stock may be influenced by the research and reports that industry or securities analysts publish about us, our business and our market.
Section 404(a) of the Sarbanes-Oxley Act requires that we include a management report on our internal controls, including an assessment of the effectiveness of our internal controls and financial reporting procedures, beginning with the annual report for our fiscal year ending December 31, 2025.
As a public company, we are subject to Section 404 of the Sarbanes-Oxley Act, which requires that we maintain effective internal control over financial reporting and disclosure controls and procedures. Section 404(a) requires that we include a management report on our internal controls beginning with the annual report for our fiscal year ending December 31, 2025.
Risks Related to Legal, Regulatory, Accounting and Tax Matters We are subject to anti-corruption and anti-money laundering laws with respect to our operations and non-compliance with such laws can subject us to criminal and/or civil liability and harm our business.
Risks Related to Legal, Regulatory, Accounting and Tax Matters We are subject to anti-corruption and anti-money laundering laws with respect to our operations and non-compliance with such laws can subject us to criminal or civil liability and harm our business. 22 Table of Contents We are subject to anti-corruption, anti-bribery, anti-money laundering, and similar laws in the United States and other countries in which we conduct activities, including the U.S.
We and these third parties may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities and we may be held liable for the corrupt or other illegal activities of these third-party intermediaries and partners, our employees, representatives, contractors, and other third parties, even if we do not explicitly authorize such activities.
We use third parties, including intermediaries and partners, to support sales of our products, and we may be held liable for the corrupt or other illegal activities of these third-party intermediaries and partners, our employees, representatives, contractors, and other third parties, even if we do not explicitly authorize such activities.
However, we may be required to devote more resources than anticipated to address requirements for specific target markets, new competitors, technological advances in the semiconductor and photonics industries or by competitors, our acquisitions, our entry into new markets, or other competitive factors.
However, we may be required to devote more resources than anticipated to address requirements for specific target markets, competitors, technological advances in the semiconductor industry, our acquisitions, our entry into new markets, or other competitive factors. If we are required to invest significantly greater resources than anticipated without a corresponding increase in revenue, our operating results could decline.
Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all such Securities Act actions. Accordingly, both state and federal courts have jurisdiction to entertain such claims.
These provisions do not apply to suits brought to enforce a duty or liability created by the Exchange Act. Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all such Securities Act actions. Accordingly, both state and federal courts have jurisdiction to entertain such claims.
The success of our business depends on sustaining or growing our software license revenue and our maintenance and service revenue and the failure to increase such revenue would lead to a material decline in our results of operations.
Our success depends on sustaining or growing our software license revenue and our maintenance and service revenue, and the failure to increase such revenue could negatively affect our results of operations. Our revenue consists of software license fees, royalties, and maintenance and service fees.
Any investigations, actions or sanctions could harm our reputation, business, operating results and financial condition. 36 Table of Contents We are subject to governmental export and import controls and sanctions that could impair our ability to compete in international markets due to licensing requirements and subject us to liability if we are not in compliance with applicable laws.
We are subject to governmental export and import controls and sanctions, laws and regulations that could impair our ability to compete in international markets due to licensing requirements and subject us to liability if we do not comply with applicable laws and regulations.
There can be no assurance that we will be able to achieve our objectives or successfully grow our business, capture meaningful market share or take advantage of market opportunities. 26 Table of Contents Risks Related to Intellectual Property, Information Technology and Data Privacy and Security If we are unable to protect our proprietary technology and inventions through patents and other intellectual property rights, our ability to compete successfully and our financial results could be adversely impacted.
There can be no assurance that we will be able to achieve our objectives or successfully grow our business, capture meaningful market share or take advantage of market opportunities. Risks Related to Our Technology, Intellectual Property and Information Technology Systems If we fail to protect our proprietary technology, our business will be harmed.
Ngai-Pesic and the members of her immediate family collectively holding more than 50% of the voting power of our company, following the completion of the IPO in May, we became a “controlled company” within the meaning of the Nasdaq listing rules.
Ngai-Pesic and the members of her immediate family (the “Pesic Family”) collectively own more than 59.4% of our total outstanding common stock. As a result of the Pesic Family collectively holding more than 50% of the voting power of our company, we are a “controlled company” within the meaning of the Nasdaq listing rules.
Misconduct by these parties could include intentional failures to comply with the applicable laws and regulations in the United States and abroad, report financial information or data accurately, violate our internal security policies or duties of confidentiality or disclose unauthorized activities to us.
For example, in 2021, a former U.S. employee impermissibly used our computers and software to write and configure software for another company. Misconduct by these parties could include intentional failures to comply with applicable laws and regulations, report financial information accurately, violate our internal security policies or duties of confidentiality, or disclose unauthorized activities.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeItem 1C. Cybersecurity Our SVP, Global Operations is responsible for monitoring the prevention, mitigation, detection, and remediation of cybersecurity incidents and reports the same to the Audit Committee of the Board each quarter. The Audit Committee has been delegated the responsibility for fulfilling the Board’s oversight responsibilities regarding cybersecurity risk.
Biggest changeItem 1C. Cybersecurity Our SVP, Global Operations, Brian Bradburn, is responsible for monitoring the prevention, mitigation, detection, and remediation of cybersecurity incidents and reports the same to the Audit Committee of the Board each quarter. Mr. Bradburn has over 10 years of experience as an information technology professional and reports to the Chief Executive Officer.
Our cybersecurity risk management program is part of our overall approach to enterprise risk management. Our cybersecurity risk management program seeks to protect our information systems by managing and reducing material risks from cybersecurity threats and by responding to and mitigating cybersecurity incidents.
The Audit Committee has been delegated the responsibility for fulfilling the Board’s oversight responsibilities regarding cybersecurity risk. Our cybersecurity risk management program is part of our overall approach to enterprise risk management. Our cybersecurity risk management program seeks to protect our information systems by managing and reducing material risks from cybersecurity threats and by responding to and mitigating cybersecurity incidents.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe also lease offices in China, France, Japan, Korea, Singapore, Taiwan, the United Kingdom and Georgia, U.S.A. We believe that our facilities are generally sufficient to meet our current needs and that, if we require additional space, we will be able to obtain additional facilities on commercially reasonable terms.
Biggest changeWe believe that our facilities are generally sufficient to meet our current needs and that, if we require additional space, we will be able to obtain additional facilities on commercially reasonable terms.
Item 2. Properties 44 Table of Contents Our principal executive offices are located in a leased facility in Santa Clara, California, consisting of approximately 11,118 square feet of office space under a lease that expires in March 2025. This facility accommodates our principal engineering, sales, marketing, operations, finance, and administrative activities.
Item 2. Properties Our principal executive office is located in a leased facility in Santa Clara, California, consisting of approximately 11,118 square feet of office space under a lease that expires in April 2028. This facility accommodates our principal engineering, sales, marketing, operations, finance, and administrative activities.
Added
In addition to our principal facility, we lease office space in Colorado and Georgia within the United States. Internationally, we lease office facilities in China, Egypt, France, Japan, Korea, Singapore, Taiwan, the United Kingdom and Vietnam.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeFor more information regarding our current legal proceedings, see Note 14 of our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K and “Risk Factors—Risks Related to Legal, Regulatory, Accounting and Tax Matters—Pending or future investigations or litigation could have a material adverse effect on our results of operations and our stock price.” Item 4.
Biggest changeItem 3. Legal Proceedings We are party to various litigation matters and claims arising from time-to-time in the ordinary course of business. For more information regarding our current legal proceedings, see Note 16 of our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K and Item 1 A. Risk Factors . Item 4.
Mine Safety Disclosures Not applicable. 45 Table of Contents Part II
Mine Safety Disclosures Not applicable. 28 Table of Contents Part II
Removed
Item 3. Legal Proceedings We are party to various litigation matters and claims arising from time-to-time in the ordinary course of business.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeItem 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information on Common Stock Our common stock is traded on the Nasdaq Global Select Market under the symbol "SVCO". As of February 28, 2025, there was 1 holder of record of our common stock.
Biggest changeItem 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information on Common Stock Our common stock is traded on the Nasdaq Global Select Market under the symbol "SVCO". As of March 09, 2026, there were 7 holder of record of our common stock.
Any future determination to declare cash dividends will be made at the discretion of our board of directors, subject to applicable laws, and will depend on a number of factors, including our financial condition, results of operations, capital requirements, contractual restrictions, general business conditions and other factors that our board of directors may deem relevant.
Any future determination to declare cash dividends will be made at the discretion of our board of directors, subject to applicable laws, and will depend on a number of factors, including our financial condition, results of operations, capital requirements, contractual restrictions, general business conditions and other factors that our board of directors may deem relevant. Item 6. [Reserved]
Removed
Use of Proceeds On May 13, 2024, the Company completed its IPO in which an aggregate of 6,000,000 shares of Common Stock at a price to the public of $19.00 per share pursuant to a Registration Statement on Form S-1 that was declared effective on May 8, 2024 (File No. 333-278666).
Removed
Jefferies LLC and TD Securities (USA) LLC acted as joint book-running managers for the IPO, Needham & Company, LLC as lead manager, and Craig-Hallum Capital Group LLC and Rosenblatt Securities Inc. acted as co-managers for the IPO.
Removed
The gross proceeds to the Company from the IPO were $114.0 million, with $106.0 million funded to the Company after deducting underwriting discounts and commissions. Proceeds from the IPO have been used for general corporate purposes, including working capital, selling and marketing activities, research and product development, general and administrative matters, and capital expenditures.
Removed
Additionally, proceeds were used to repay $2.0 million outstanding under the 2022 Credit Line and $4.3 million under the East West Bank Loan. There has been no material change in our intended use of proceeds as described in the Registration Statement. Item 6. [Reserved]

Item 7. Management's Discussion & Analysis

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

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Biggest changeIncome Tax Provision Income tax provision is our estimate of current tax expense incurred from the consolidated results of operations globally. 50 Table of Contents Results of Operations The following table sets forth our results of operations for the years ended December 31, 2024 and 2023: Year Ended December 31, 2024 2023 (in thousands) Revenue: Software license revenue $ 43,991 $ 39,331 Maintenance and service 15,689 14,915 Total revenue 59,680 54,246 Cost of revenue 12,042 9,354 Gross profit 47,638 44,892 Operating expenses: Research and development 20,740 13,170 Selling and marketing 18,300 12,707 General and administrative 37,571 17,881 Estimated litigation claim 11,306 — Total operating expenses 87,917 43,758 Operating (loss) income (40,279) 1,134 Loss on debt extinguishment (718) — Interest income 2,976 6 Interest and other expense, net (899) (630) (Loss) income before income tax provision (38,920) 510 Income tax provision 484 826 Net loss $ (39,404) $ (316) 51 Table of Contents The following table summarizes our results of operations as a percentage of total revenue for the years ended December 31, 2024 and 2023: Year Ended December 31, 2024 2023 Revenue: Software license revenue 74 % 73 % Maintenance and service 26 % 27 % Total revenue 100 % 100 % Cost of revenue 20 % 17 % Gross profit 80 % 83 % Operating expenses: Research and development 35 % 24 % Selling and marketing 31 % 23 % General and administrative 63 % 33 % Estimated litigation claim 19 % — % Total operating expenses 147 % 81 % Operating (loss) income (67) % 2 % Loss on debt extinguishment (1) % — % Interest income 5 % — % Interest and other expense, net (2) % (1) % (Loss) income before income tax provision (65) % 1 % Income tax provision 1 % 2 % Net loss (66) % (1) % Comparison of the Years Ended December 31, 2024 and 2023 Revenue Year Ended December 31, 2024 2023 (in thousands) Revenue: Software license revenue $ 43,991 $ 39,331 Maintenance and service 15,689 14,915 Total revenue $ 59,680 $ 54,246 Despite economic challenges in Asia including the impact of the ongoing strain in U.S.-China trade relations, total revenue increased by $5.4 million, or 10%, to $59.7 million for the year ended December 31, 2024 from $54.2 million for the year ended December 31, 2023.
Biggest changeResults of Operations The following table sets forth our results of operations: Year Ended December 31, 2025 2024 (in thousands) Revenue: Software license revenue $ 42,885 $ 43,991 Maintenance and service 20,179 15,689 Total revenue 63,064 59,680 Cost of revenue 13,694 12,042 Gross profit 49,370 47,638 Operating expenses: Research and development 29,858 20,740 Selling and marketing 18,310 18,300 General and administrative 34,028 37,571 Litigation settlement 13,069 11,306 Total operating expenses 95,265 87,917 Operating loss (45,895) (40,279) Loss on debt extinguishment — (718) Interest income 1,947 2,976 Interest expense and other income (expense), net (697) (899) Loss before income tax provision (44,645) (38,920) Income tax (benefit) provision (3,439) 484 Net loss $ (41,206) $ (39,404) 34 Table of Contents The following table summarizes our results of operations as a percentage of total revenue: Year Ended December 31, 2025 2024 Revenue: Software license revenue 68 % 74 % Maintenance and service 32 % 26 % Total revenue 100 % 100 % Cost of revenue 22 % 20 % Gross margin 78 % 80 % Operating expenses: Research and development 47 % 35 % Selling and marketing 29 % 31 % General and administrative 54 % 63 % Litigation settlement 21 % 19 % Total operating expenses 151 % 147 % Operating loss (73) % (67) % Loss on debt extinguishment — % (1) % Interest income 3 % 5 % Interest expense and other income (expense), net (1) % (2) % Loss before income tax provision (71) % (65) % Income tax (benefit) provision (5) % 1 % Net loss (65) % (66) % Comparison of the Years Ended December 31, 2025 and 2024 In March, April, and August 2025, we acquired the OPC Business, Tech-X, and Mixel, respectively.
Any failure to continue to generate sales with our existing customers or expand our product and service offerings with our existing customers may have an adverse effect on our revenue and results of operations. We enter into standard software licensing agreements with each of our customers.
Any failure to continue to generate sales with our existing customers or expand our product and service offerings with our existing customers may have an adverse effect on our revenue and results of operations. We enter into standard software licensing agreements with our customers.
Interest and Other Expense, Net Interest and other expense, net includes interest expense associated with cost of borrowings, leases or interest-bearing agreements, foreign exchange gains and losses and changes in the fair value of contingent consideration associated with legacy acquisitions.
Interest Expense and Other Income (Expense), Net Interest expense and other income (expense), net includes interest expense associated with cost of borrowings, leases or interest-bearing agreements, foreign exchange gains and losses and changes in the fair value of contingent consideration associated with legacy acquisitions.
See Note 11 to our consolidated financial statements in Item 8 on this Annual Report on Form 10-K for additional information. Prior to January 1, 2024, we valued the awards granted using historical estimates of the fair value of our common stock.
See Note 13 to our consolidated financial statements in Item 8 on this Annual Report on Form 10-K for additional information. Prior to January 1, 2024, we valued the awards granted using historical estimates of the fair value of our common stock.
On May 13, 2024, the Micron Note was converted into 294,217 shares of our common stock in connection with the consummation of the IPO. On May 13, 2024, we sold 6,000,000 shares of common stock in the IPO at a price to the public of $19.00 per share.
On May 13, 2024, the Micron Note was converted into 294,217 shares of our common stock in connection with the completion of the IPO. On May 13, 2024, we sold 6,000,000 shares of common stock in the IPO at a price to the public of $19.00 per share.
We also recognized a loss on debt extinguishment of $0.1 million associated with the settlement of our loan facility with East West Bank (the “East West Bank Loan”) during the year ended December 31, 2024. See Note 10 of our consolidated financial statements in Item 8 in this Annual Report on Form 10-K for further discussion.
We also recognized a loss on debt extinguishment of $0.1 million associated with the settlement of our loan facility with East West Bank during the year ended December 31, 2024. See Note 12 of our consolidated financial statements in Item 8 in this Annual Report on Form 10-K for further discussion.
When we license these particular SIP to a customer, we generally act as a principal to the transaction because we control the promised SIP that we deliver to the customer. Consistent with our role as a principal, we recognize SIP revenue on a gross basis.
When we license this particular SIP to a customer, we generally act as a principal to the transaction because we control the promised SIP that we deliver to the customer. Consistent with our role as a principal, we recognize SIP revenue on a gross basis.
Historically, we have not recognized stock-based compensation expense, but after the consummation of the IPO during the year ended December 31, 2024, we recognized an aggregate of $23.9 million of stock-based compensation expense in operating expenses.
Historically, we have not recognized stock-based compensation expense, but after the consummation of the IPO during the year ended December 31, 2024, we recognized an aggregate of $23.9 million of stock-based compensation expense in operating expenses. During the year ended December 31, 2025, we recognized $9.5 million in total stock-based compensation expense.
Cost of Revenue and Gross Profit Cost of revenue consists of personnel costs comprised of salaries and benefits for employees directly involved in our customer support function, such as customer support engineering salary and benefits, costs of our other customer services, allocation of overhead and facility costs, amortization of acquired intangible assets, and royalties related to the recognized revenue.
Cost of Revenue and Gross Profit Cost of revenue consists of personnel costs comprised of salaries and benefits for employees directly involved in our customer support function, such as customer support engineering salary and benefits, costs of our other customer services, allocation of overhead and facility costs, amortization of acquired intangible assets, and royalties.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations You should read the following discussion and analysis of financial condition and results of operations together with our audited consolidated financial statements and the related notes included in Part II, Item 8 of this Annual Report on Form 10-K.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and the related notes included in Part II, Item 8 of this Annual Report on Form 10-K.
Royalty costs are reported in cost of revenue upon delivery pursuant to the terms and conditions of our contractual obligations with the licensors. 58 Table of Contents We also recognized an immaterial portion of our revenue from device characterization and modeling services for the years ended December 31, 2024 and 2023.
Royalty costs are reported in cost of revenue upon delivery pursuant to the terms and conditions of our contractual obligations with the licensors. We also recognized an immaterial portion of our revenue from device characterization and modeling services for the years ended December 31, 2025 and 2024.
See “Risk Factors—Risks Related to Our Business and Industry—Our ability to raise additional capital in the future may be limited and could prevent us from executing our growth strategy ” in Item 1A in Part 1 in this Annual Report on Form 10-K for further discussion As of December 31, 2024, $2.4 million, or 12%, of our cash and cash equivalents was maintained with one financial institution, where our current deposits are in excess of federally insured limits.
See “Risk Factors—Risks Related to Our Business and Industry—Our ability to raise additional capital in the future may be limited and could prevent us from executing our growth strategy ” in Item 1A in Part 1 in this Annual Report on Form 10-K for further discussion As of December 31, 2025, $11.0 million, or 64%, of our cash and cash equivalents and restricted cash was maintained with one financial institution, where our current deposits are in excess of federally insured limits.
Loss on Debt Extinguishment Loss on debt extinguishment includes losses incurred related to the extinguishment of our note purchase agreement with Micron Technology Inc. and our loan facility with East West Bank.
Loss on Debt Extinguishment Loss on debt extinguishment includes losses incurred related to the extinguishment of our note purchase agreement with Micron Technology Inc. (the “Micron Note”) and our loan facility with East West Bank (the “East West Bank Loan”).
The vendor financing obligation was $4.4 million as of December 31, 2024. We determined that the vendor financing obligation had an imputed interest rate of 9%, which is reflective of our borrowing rate with similar terms to that of the license agreement.
The vendor financing obligation was $3.2 million as of December 31, 2025. We determined that the vendor financing obligation had an imputed interest rate of 9%, which is reflective of our borrowing rate with similar terms to that of the license agreement.
The timing of invoices to our customers and subsequent collection is based on executed agreements and payment terms that can vary by customer. Net cash used in operating activities for the year ended December 31, 2024, was $19.8 million compared to $1.2 million of net cash provided by operating activities for the year ended December 31, 2023.
The timing of invoices to our customers and subsequent collection is based on executed agreements and payment terms that can vary by customer. Net cash used in operating activities for the year ended December 31, 2025, was $33.9 million compared to $19.8 million of net cash used in operating activities for the year ended December 31, 2024.
Income Tax Provision Income tax provision was $0.5 million and $0.8 million for the years ended December 31, 2024 and 2023, respectively. See Note 12 of our consolidated financial statements in Item 8 in this Annual Report on Form 10-K for further discussion.
Income Tax (Benefit) Provision Income tax (benefit) provision was a benefit of $3.4 million and provision of $0.5 million for the years ended December 31, 2025 and 2024, respectively. See Note 14 of our consolidated financial statements in Item 8 in this Annual Report on Form 10-K for further discussion.
We have a global sales force selling to semiconductor companies and engineering universities that also instruct fabrication facility managers and the next generation of chip designers on the use and benefits of our design tools. Most of our customers enter into multi-year software license agreements for a fixed price including a multi-year software license and maintenance and services.
We have a global sales force that also advises fabrication facility managers and the next generation of chip designers on the benefits of our design tools. Most of our customers enter into multi-year software license agreements for a fixed price including a multi-year software license and maintenance and services.
In response to this increase in complexity and new challenges facing designers, we have increased investments in our research and development for new software product offerings. For example, our research and development expense was 35% and 24% of revenue for the years ended December 31, 2024 and 2023, respectively.
In response to this increase in complexity and new challenges facing designers, we have increased investments in our research and development for new software product offerings. For example, our research and development expenses were 47% and 35% of revenue for the years ended December 31, 2025 and 2024, respectively.
Year Ended December 31, 2024 2023 (in thousands) Cash provided by (used in): Net cash (used in) provided by operating activities $ (19,774) $ 1,180 Net cash used in investing activities (66,535) (339) Net cash provided by (used in) financing activities 101,301 (1,652) Effect of exchange rate changes 193 (246) Net increase (decrease) in cash $ 15,185 $ (1,057) 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 collections and payments.
Year Ended December 31, 2025 2024 (in thousands) Cash provided by (used in): Net cash used in operating activities $ (33,906) $ (19,774) Net cash provided by (used in) investing activities 33,723 (66,535) Net cash (used in) provided by financing activities (2,214) 101,301 Effect of exchange rate changes 49 193 Net (decrease) increase in cash $ (2,348) $ 15,185 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 collections and payments.
Effects of Exchange Rate Fluctuations on Cash The effects of exchange rate fluctuations on cash were $0.2 million and $(0.2) million for the years ended December 31, 2024 and 2023, respectively. Contractual Obligations 57 Table of Contents Our financial commitments for contractual obligations as of December 31, 2024, include our operating leases and our vendor financing obligation.
Effects of Exchange Rate Fluctuations on Cash The effects of exchange rate fluctuations on cash were $49 thousand and $0.2 million for the years ended December 31, 2025 and 2024, respectively. 39 Table of Contents Contractual Obligations Our financial commitments for contractual obligations as of December 31, 2025, include operating leases, vendor financing obligation , contingent consideration, and litigation settlement .
Debt financing, if available, may contain covenants that significantly restrict our operations or our ability to obtain additional debt financing in the future. Any additional financing that we raise may contain terms that are not favorable to us or our stockholders.
If we raise additional funds by issuing equity securities or convertible debt securities, our stockholders will experience dilution. Debt financing, if available, may contain covenants that significantly restrict our operations or our ability to obtain additional debt financing in the future. Any additional financing that we raise may contain terms that are not favorable to us or our stockholders.
See Note 2 of our consolidated financial statements in Item 8 on this Annual Report on Form 10-K for a description of our other significant accounting policies. Revenue Recognition Our revenue is derived principally from software licensing and related maintenance and service.
See Note 2 of our consolidated financial statements in Item 8 on this Annual Report on Form 10-K for a description of our other significant accounting policies. Revenue Recognition Our revenue is derived principally from software licensing, customization and related maintenance and service, which are generally accounted for as separate performance obligations with differing revenue recognition patterns.
Our Ability to Scale While Mitigating Increases in Expenses If we can execute on our growth strategy and grow our revenue through a combination of new customer growth, upgrades and increased usage of our products by existing customers, as well as accretive acquisitions, our results will be impacted by our ability to reduce the rate at which our expenses increase in proportion with a rise in revenue.
Our future ability to shape our product mix with higher margin products making up a larger percentage of our total revenue will impact our results of operations. 31 Table of Contents Our Ability to Scale While Mitigating Increases in Expenses If we can execute on our growth strategy and grow our revenue through a combination of new customer growth, upgrades and increased usage of our products by existing customers, as well as accretive acquisitions, our results will be impacted by our ability to reduce the rate at which our expenses increase in proportion with a rise in revenue.
We believe our cash and cash equivalents and marketable securities balances, which include proceeds received in connection with the IPO and the $5.0 million received in connection with the Micron Note, will be sufficient to meet our expected working capital needs, capital expenditures, financial commitments and other liquidity requirements associated with our existing operations for at least the next 12 months.
We believe our cash and cash equivalents, restricted cash and marketable securities balances will be sufficient to meet our expected working capital needs, capital expenditures, financial commitments and other liquidity requirements associated with our existing operations for at least the next 12 months.
If in the future, we enter into additional licensing agreements with other third parties and are unable to extend the term of those licensing arrangements, we will experience an associated decline in revenue relating to those products. 47 Table of Contents Our Ability to Expand into New Markets and Applications and Expansion of our Existing Markets We believe that trends in the global EDA software market, including growth in the integrated circuits and electronics manufacturing markets, growing complexity of semiconductor and photonics designs, and increasing challenges associated with advanced materials and shrinking process technology nodes across the EDA market, will increase the demand for our software solutions over time, which will have a direct impact on our future revenues and results of operations.
Our Ability to Expand into New Markets and Applications and Expansion of our Existing Markets We believe that trends in the global EDA software market, including growth in the integrated circuits and electronics manufacturing markets, growing complexity of semiconductor and photonics designs, and increasing challenges associated with advanced materials and shrinking process technology nodes across the EDA market, will increase the demand for our software solutions over time, which will have a direct impact on our future revenues and results of operations.
Historically, we have not recognized stock-based compensation expense, but after the consummation of the IPO during the year ended December 31, 2024, we recognized $3.0 million of stock-based compensation expense in cost of revenue. We also recognized $0.7 million of amortization associated with our acquired intangible assets in cost of revenue during the year ended December 31, 2024.
Historically, we have not recognized stock-based compensation expense, but after the consummation of the IPO during the year ended December 31, 2024, we recognized $3.0 million of stock-based compensation expense in cost of revenue. We recognized $1.3 million of stock-based compensation expense in cost of revenue during the year ended December 31, 2025.
Prior to the IPO, we had not recorded stock-based compensation expense, as the RSUs granted under the 2014 Plan carry both a “time-based vesting requirement” and a “liquidity event vesting requirement,” with the satisfaction of the “liquidity event vesting requirement”, an improbable contingency as of December 31, 2023.
Prior to the IPO, we had not recorded stock-based compensation expense, as the restricted stock units (“RSUs”) granted under the 2014 Plan carry both a “time-based vesting requirement” and a “liquidity event vesting requirement,” with the satisfaction of the “liquidity event vesting requirement”, an improbable contingency until the consummation of our IPO on May 13, 2024.
If the financial institutions with whom we do business were to become distressed or placed into receivership, we may be unable to access the cash we have on deposit with such institutions.
If the financial institutions with whom we do business were to become distressed or placed into receivership, we may be unable to access the cash we have on deposit with such institutions. If we are unable to access our cash as needed, our financial position and ability to operate our business could be adversely affected.
When we renew expiring contracts with our customers, we may increase our bookings by selling them additional or new software or SIP. Over time, we expect that existing customers will choose to upgrade and/or purchase additional products, particularly as we de-emphasize our lower margin products, which we expect will over the long term drive margin expansion.
When we renew contracts with our customers, we may increase our bookings by selling them additional or new software or SIP. Over time, we expect that existing customers will choose to upgrade and/or purchase additional products.
We currently have no committed sources of capital. If our cash and cash equivalents and marketable securities including cash generated from operating activities are not sufficient to satisfy our liquidity requirements, we may be required to seek additional financing. If we raise additional funds by issuing equity securities or convertible debt securities, our stockholders will experience dilution.
We currently have no committed sources of capital. 37 Table of Contents If our cash and cash equivalents and marketable securities including cash generated from operating activities are not sufficient to satisfy our liquidity requirements, we may be required to seek additional financing.
As a result, $5.6 million was recognized in additional paid-in capital and we recognized a loss on debt extinguishment of $0.6 million during the year ended December 31, 2024.
(“Micron”) was converted into 294,217 shares of our common stock in connection with the consummation of the IPO. As a result, $5.6 million was recognized in additional paid-in capital and we recognized a loss on debt extinguishment of $0.6 million during the year ended December 31, 2024.
In the aggregate, our ability to keep these expenses from growing proportionally with our revenue may provide for meaningful gross margin and operating margin expansion. 48 Table of Contents Components of Results of Operations Revenue Our revenue is derived from software licensing and maintenance and services.
In the aggregate, our ability to keep these expenses from growing proportionally with our revenue may provide for meaningful gross margin and operating margin expansion. Components of Results of Operations Revenue Our revenue is derived principally from software licensing, customization and related maintenance and services, which are generally accounted for as separate performance obligations with differing revenue recognition patterns.
Overview We are a provider of technology computer aided design (“TCAD”) software, electronic data automation (“EDA”) software and semiconductor intellectual property (“SIP”). TCAD, EDA and SIP solutions enable semiconductor and photonics companies to increase productivity, accelerate their products’ time-to-market and reduce their development and manufacturing costs.
Overview We are a provider of technology computer aided design software (“TCAD”), electronic data automation software (“EDA”), and semiconductor intellectual property (“SIP”). Our solutions are used by engineers to optimize semiconductor manufacturing processes and efficiently bring semiconductor products to market. Our differentiated solutions enable our customers to increase productivity, accelerate time-to-market and reduce development and manufacturing costs.
We are a “smaller reporting company” as defined under the federal securities laws, and will continue to be a smaller reporting company until such time as (i) the market value of our common stock held by non-affiliates is more than $250.0 million or (ii) our annual revenue is more than $100.0 million during the most recently completed fiscal year and the market value of our common stock held by non-affiliates is more than $700.0 million.
We have elected to “opt-in” to this extended transition period for complying with new or revised accounting standards and, therefore, we will not be subject to the same new or revised accounting standards as other public companies that comply with such new or revised accounting standards on a non-delayed basis. 42 Table of Contents We are a “smaller reporting company” as defined under the federal securities laws, and will continue to be a smaller reporting company until such time as (i) the market value of our common stock held by non-affiliates is more than $250.0 million or (ii) our annual revenue is more than $100.0 million during the most recently completed fiscal year and the market value of our common stock held by non-affiliates is more than $700.0 million.
We received $106.0 million in net proceeds from the IPO, $4.9 million in proceeds from the Micron Note, net of debt issuance costs, $4.3 million from our drawdown on the East West Bank Loan, and $0.3 million in proceeds from the issuance of common stock through our employee stock purchase plan partially offset by $4.6 million of cash in payment of employee withholding taxes upon vesting of RSUs, $4.3 million repayment of the East West Bank Loan, $2.6 million of payments related to deferred transaction costs incurred in connection with the IPO, the $2.0 million repayment of the 2022 Line of Credit, $0.6 million of payments for our vendor financing obligation and $0.1 million of contingent consideration paid.
During the year ended December 31, 2024, we received $106.0 million in net proceeds from our IPO, $4.9 million in net proceeds from the Micron Note, and $4.3 million from our drawdown on the East West Bank Loan, which were partially offset by the $4.3 million repayment of the East West Bank Loan, payment of $2.6 million related to deferred transaction costs incurred in connection with our IPO, the $2.0 million repayment of the line of credit with a principle shareholder, and $0.6 million of payments for our vendor financing obligation.
In connection with our SIP which was developed in partnership with a third party vendor, we have entered into various renewable license agreements under which we have the right to sell the technology we license from the third party vendor.
Royalties are generally recognized as revenue during the period in which the customer sells its solutions which incorporate our SIP license. 40 Table of Contents In connection with our SIP license that was developed in partnership with a third party vendor, we have entered into various renewable license agreements under which we have the right to sell the technology we license from the third party vendor.
Our go-to-market strategy centers on selling software solutions and associated maintenance and services. Our software solutions accounted for 74% and 73% of our revenue for the years ended December 31, 2024 and 2023, respectively, and associated maintenance and services accounted for 26% and 27% of our revenue for the years ended December 31, 2024 and 2023, respectively.
Our software solutions accounted for 68% and 74% of our revenue for the years ended December 31, 2025 and 2024, respectively, and associated maintenance and services accounted for 32% and 26% of our revenue for the years ended December 31, 2025 and 2024, respectively.
Our Ability to Expand Our Product Offerings To meet the increasing complexity of semiconductor designs, the introduction of new advanced materials, and the increased costs associated with more advanced semiconductor technology nodes, we will need to continually enhance our product offerings through our own in-house research and development efforts, acquisitions, or strategic partnerships with third parties.
Each party has the right to terminate the software license agreement under certain circumstances, in which event the customer will be required to remove, delete and return all software, related documentation and confidential information furnished under the license agreement. 30 Table of Contents Our Ability to Expand Our Product Offerings To meet the increasing complexity of semiconductor designs, the introduction of new advanced materials, and the increased costs associated with more advanced semiconductor technology nodes, we need to continually enhance our product offerings through our own in-house research and development efforts, acquisitions, or strategic partnerships with third parties.
Related personnel costs are the most significant component of our operating expenses and consist of salaries, benefits, stock-based compensation expense, bonuses and commissions. Our operating expenses also include consulting costs, costs of facilities, information technology, depreciation and amortization. We expect our operating expenses to fluctuate as a percentage of revenue over time.
Our operating expenses also include consulting costs, costs of facilities, information technology, depreciation and amortization. We expect our operating expenses to fluctuate as a percentage of revenue over time.
The in-house development of new product offerings or enhancements to our existing product offerings requires significant research and development activities and time and may or may not result in offerings we can successfully market and sell to customers.
The in-house development of new product offerings or enhancements to our existing product offerings requires significant research and development activities and time and may or may not result in offerings we can successfully market and sell to customers. For example, we have developed an AI-based solution named Fab Technology Co-Optimization or FTCO TM for wafer level fabrication facilities.
Interest Income Interest income reflects interest earned and accretion on our cash and cash equivalents and marketable securities. Interest and Other Expense, Net Interest and other expense, net, was expense of $0.9 million and $0.6 million for the years ended December 31, 2024 and 2023, respectively.
Interest Expense and Other Income (Expense), Net Interest expense and other income (expense), net, was expense of $0.7 million and $0.9 million for the years ended December 31, 2025 and 2024, respectively.
Interest Income Interest income includes interest income earned on our cash and cash equivalents and marketable securities balances and accretion of the purchase discounts on our marketable securities balances.
See Note 12 of our consolidated financial statements for further discussion. 33 Table of Contents Interest Income Interest income includes interest income earned on our cash and cash equivalents and marketable securities balances and accretion of the purchase discounts on our marketable securities balances.
Software license revenue is recognized upfront upon delivery of the licensed software. Typically, our software solutions are licensed with PCS which includes unspecified technical enhancements and customer support. The PCS is classified as maintenance and service revenue and is recognized ratably over the term of the maintenance period, as we satisfy the PCS performance obligation over time.
Revenue from software licenses is classified as software license revenue. Software license revenue is recognized upfront upon delivery of the licensed software. Typically, our software solution is licensed with post-contract support ("PCS"), which includes unspecified technical enhancements and customer support.
We also recognized an immaterial portion of our revenue from device characterization and modeling services for the years ended December 31, 2024 and 2023. Revenue is recognized upon the completion of the requested services and, as applicable, satisfaction of customer acceptance terms. Revenue from these services is classified as maintenance and service revenue.
Professional services revenue, which is classified as maintenance and service revenue, is recognized based on when the Company delivers the related service pursuant to the terms of the arrangement. We also recognized an immaterial portion of our revenue from device characterization and modeling services for the years ended December 31, 2025 and 2024.
Our customer agreements include combinations of licensed software and maintenance and services, which are accounted for as separate performance obligations with differing revenue recognition patterns. Software License Revenue Revenue from our software licenses is classified as software license revenue. Software license revenue is recognized upfront upon delivery of the licensed product.
Arrangements with both software licenses and customization services are accounted for as a combined performance obligation. Software License Revenue Revenue from software licenses is classified as software license revenue. Software license revenue is recognized upfront upon delivery of the licensed software.
Under certain SIP license agreements, we also derive revenue through royalties from customers who agree to pay usage-based fees to embed our SIP into their own SoCs. Royalties are generally recognized as revenue during the period in which the customer sells its solutions which incorporate our SIP.
We do not offer SIP licenses without support. The support service for SIP licenses is classified as maintenance and service revenue and is recognized ratably over the term of the support period. Under certain SIP license agreements, we also derive revenue through royalties from customers who agree to pay usage-based fees to embed our SIP into their own SoCs.
(8) Reflects the increase in income tax expenses due to non-GAAP adjustments. Liquidity and Capital Resources Since inception, we have financed operations primarily through proceeds received from payments from our customers, borrowings from Ms. Ngai-Pesic and other lenders, and the net proceeds from the sale of our common stock in the IPO.
Liquidity and Capital Resources Since inception, we have financed operations primarily through proceeds received from payments from our customers, borrowings from a principal stockholder and other lenders, and the net proceeds from the sale of our common stock in the IPO. Our primary sources of liquidity are cash, cash equivalents and marketable securities including cash generated from operations.
Maintenance and service revenue increased by $0.8 million, or 5%, to $15.7 million for the year ended December, 2024 from $14.9 million for the year ended December 31, 2023. 52 Table of Contents Gross Profit and Cost of Revenue Year Ended December 31, 2024 2023 (in thousands) Total revenue $ 59,680 $ 54,246 Cost of revenue 12,042 9,354 Gross profit $ 47,638 $ 44,892 Gross profit margin 80 % 83 % Gross profit increased by $2.7 million, or 6%, to $47.6 million for the year ended December 31, 2024 from $44.9 million for the year ended December 31, 2023.
Maintenance and service revenue increased by $4.5 million, or 29%, to $20.2 million for the year ended December, 2025 from $15.7 million for the year ended December 31, 2024. 35 Table of Contents Gross Profit and Cost of Revenue Year Ended December 31, 2025 2024 (in thousands) Total revenue $ 63,064 $ 59,680 Cost of revenue 13,694 12,042 Gross profit $ 49,370 $ 47,638 Gross profit margin 78 % 80 % The increase in gross profit of $1.7 million, or 4%, for the year ended December 31, 2025 compared to the year ended December 31,2024, was primarily due to a $3.4 million increase in revenue, partially offset by a $1.7 million increase in cost of revenue.
Financing Activities Net cash provided by financing activities for the year ended December 31, 2024, was $101.3 million.
Investing Activities Net cash provided by investing activities for the year ended December 31, 2025 was $33.7 million compared to use of $66.5 million for the year ended December 31, 2024.
Use of cash during the year ended December 31, 2024 includes $99.6 million in purchases of marketable securities and $0.5 million in purchases of property and equipment, partially offset by $33.6 million of maturities in marketable securities. During the year ended December 31, 2023, we used $0.3 million of cash to purchase property and equipment.
Net cash used in investing activities for the year ended December 31, 2024 includes $99.6 million in purchases of marketable securities, partially offset by $33.6 million provided by maturities in marketable securities. 38 Table of Contents Financing Activities Net cash used in financing activities for the year ended December 31, 2025, was $2.2 million, compared to net cash provided by financing activities of $101.3 million for the year ended December 31, 2024.
See Note 11 of our consolidated financial statements in Item 8 in this Annual Report on Form 10-K for further discussion. 49 Table of Contents Research and Development Our research and development expense consists primarily of personnel costs comprised of salaries, stock-based compensation expense, and benefits for employees directly involved in our research and development efforts , as well as engineering, quality assessment, other related costs associated with the development of new products, enhancements to existing products, quality assurance and testing and allocated overhead costs.
The following table summarizes stock-based compensation expense: 32 Table of Contents Year Ended December 31, 2025 2024 Research and development $ 2,708 $ 5,091 Selling and marketing 1,722 4,319 General and administrative 5,066 14,531 $ 9,496 $ 23,941 Research and Development Our research and development expense consists primarily of personnel costs comprised of salaries, stock-based compensation expense, and benefits for employees directly involved in our research and development efforts , as well as engineering, quality assessment, other related costs associated with the development of new products, enhancements to existing products, quality assurance and testing and allocated overhead costs.
The PCS is classified as maintenance and service revenue and is recognized ratably over the term of the contract, as we satisfy the PCS performance obligation over time.
The PCS is classified as maintenance and service revenue and is recognized ratably over the term of the contract period, as we satisfy the PCS performance obligation over time. We also offer standard SIP licenses, which provide customers with access to SoC design intellectual property (“IP”) that meet established industry standards.
We recorded a charge to estimated litigation claim and accrued expenses and other current liabilities of $11.3 million during the year ended December 31, 2024. See Note 14 of our consolidated financial statements in Item 8 in this Annual Report on Form 10-K for further discussion.
We also recognized $1.0 million and $0.7 million of amortization associated with our acquired intangible assets in cost of revenue during the years ended December 31, 2025 and 2024, respectively. See Note 13 and Note 8 of our consolidated financial statements in Item 8 in this Annual Report on Form 10-K for further discussion.
Revenue associated with our TCAD and EDA tools increased by $8.1 million and $0.6 million, respectively, and revenue derived from IP sales decreased by $3.2 million. Software license revenue increased by $4.7 million, or 12%, to $44.0 million for the year ended December 31, 2024 from $39.3 million for the year ended December 31, 2023.
Software license revenue decreased by $1.1 million, or 3%, to $42.9 million for the year ended December 31, 2025 from $44.0 million for the year ended December 31, 2024.
The core principle of this guidance is that an entity should recognize revenue to depict the delivery of software or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for such software or services.
Revenue is recognized upon transfer of control of the promised good or service to the customer in an amount that reflects the consideration to which we expect to be entitled in exchange for such software or service.
See Note 8 and Note 14 of our consolidated financial statements in Item 8 on this Annual Report on Form 10-K for further discussion. Critical Accounting Policies and Significant Judgments and Estimates Our consolidated financial statements have been prepared in accordance with GAAP.
As of December 31, 2025, no amounts had been drawn under the letter of credit. See Note 10 and Note 16 of our consolidated financial statements for further discussion. Critical Accounting Policies and Significant Judgments and Estimates Our consolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles.
We drew $4.3 million on the East West Bank Loan during the year ended December 31, 2024. In May 2024, the East West Bank Loan was repaid in full and terminated. On April 11, 2024, we amended and restated our license agreement with NXP, pursuant to which we recorded an associated vendor financing obligation.
As of December 31, 2025, we had $10.0 million in cash, cash equivalents and short-term marketable securities, of which $5.5 million was held by our foreign subsidiaries. On April 11, 2024, we amended and restated our license agreement with NXP, pursuant to which we recorded an associated vendor financing obligation.
We enter into agreements that include combinations of software and maintenance and services, which are accounted for as separate performance obligations with differing revenue recognition patterns. We recognize revenue pursuant to ASC Topic 606, Revenue from Contracts with Customers .
Arrangements with both software licenses and customization services are accounted for as a combined performance obligation. We recognize revenue pursuant to Accounting Standard Codification Topic 606, Revenue from Contracts with Customers .
See Note 11 and Note 6 of our consolidated financial statements in Item 8 in this Annual Report on Form 10-K for further discussion. Gross profit represents revenue less cost of revenue. Operating Expenses Our operating expenses consist of research and development, selling and marketing, general and administrative, and estimated litigation claim.
See Note 10 and Note 16 of our consolidated financial statements in Item 8 in this Annual Report on Form 10-K for further discussion. 36 Table of Contents Restructuring expense Restructuring expense was $1.3 million for the year ended December 31, 2025, of which $0.7 million, $0.4 million and $0.2 million were recognized in research and development, selling and marketing, and general and administrative expenses, respectively.
The $21.0 million decrease in net cash provided by operating activities reflects a $1.4 million increase in net loss, after excluding the non-cash effects of stock-based compensation expense, provision for credit losses, estimated litigation claim, loss on debt extinguishment, change in fair value of contingent consideration, depreciation and amortization, and the accretion of discount on marketable securities, and a $19.6 million increase in net working capital, primarily due to changes in contract assets, accounts receivable, deferred revenue and the payment of accrued operating expenses in connection with our IPO and accrued royalties for licensed technology sold in our product lines during the year ended December 31, 2024.
The $14.1 million increase in net cash used in operating activities reflects a $1.8 million increase in net loss, $16.1 million paid for the litigation settlement, and a decrease of $11.9 million in the non-cash effects of stock-based compensation expense, provision for credit losses, litigation settlement, loss on debt extinguishment, change in fair value of contingent consideration, depreciation and amortization, loss on fixed asset disposal, and the accretion of discount on marketable securities.
The increase of $7.6 million, or 57%, was primarily due to $5.1 million of stock-based compensation expense recorded as a result of the consummation of the IPO, $1.0 million increase in salary and benefits expenses, primarily related to increased headcount and merit increases, a $0.9 million increase in software maintenance expense, and a $0.6 million increase in engineering support expenses.
General and Administrative Expenses The decrease in general and administrative expenses of $3.5 million, or 9% for the year ended December 31, 2025 compared to the year ended December 31, 2024, was primarily due to a decrease in stock-based compensation expense of $9.5 million, partially offset by a $1.7 million increase in employee compensation from increased headcount, merit increases, severance and the related payroll taxes, a $1.6 million increase in amortization expense of acquired intangible assets, a $1.0 million increase in legal and professional fees, $0.6 million of executive severance costs, a $0.5 million increase in software maintenance expense, and a $0.1 million increase in facility expenses.
Investing Activities Net cash used in investing activities for the years ended December 31, 2024 and 2023 was $66.5 million and $0.3 million, respectively.
Litigation Settlement Litigation settlement was $13.1 million and $11.3 million for the years ended December 31, 2025 and 2024, respectively.
The change in interest and other expense, net, for the year ended December 31, 2024 was primarily due to an increase in the amount of interest associated with our vendor financing obligation during the current year. The Company does not have any interest-bearing debt outstanding as of December 31, 2024.
The decrease in interest expense and other income (expense), net, for the year ended December 31, 2025 was primarily due to an decrease in foreign exchange losses and lower average debt and financing obligation balances.
Estimated Litigation Claim In addition to our financial commitments for contractual obligations as of December 31, 2024, we recorded a charge to estimated litigation claim and accrued expenses and other current liabilities of $11.3 million during the year ended December 31, 2024 in connection with the Nangate Litigation.
We recorded a litigation settlement expense of $13.1 million and $11.3 million during the years ended December 31, 2025 and 2024, respectively, related to the Settlement Agreement. As of December 31, 2025, our remaining liability under the Settlement Agreement was $8.3 million, which is included in accrued expenses and other current liabilities on the consolidated balance sheet.
Goodwill is considered impaired if the carrying value of the reporting unit exceeds its fair value.
Goodwill is considered impaired if the carrying value of the reporting unit exceeds its fair value. No indicators of impairment or impairment charges were identified or recorded to goodwill or other intangible assets during the fiscal years ended December 31, 2025 and 2024.
Our standard SIPs are generally ready to use upon delivery, meaning no customization is required for our customers to obtain value from the use of our SIP in their IC designs. We recognize revenue associated with licenses of our SIP at the commencement of the contract upon delivery of the licensed SIP.
Standard SIP licenses offered by us are ready to use upon delivery. No modification is required in order for the customer to receive value for use in their integrated circuit designs. We also offer SIP licenses that require customization in accordance with the customer’s specifications.
Maintenance and Service Revenue Typically, our software solutions are sold with post-contract support (“PCS”), which includes unspecified technical enhancements and customer support. PCS is classified as maintenance and service revenue and is recognized ratably over the term of the contract, as we satisfy the PCS performance obligation over time.
Maintenance and Service Revenue Maintenance and service revenue, which consists of both post-contract support ("PCS") for software licenses and support services for SIP licenses, is recognized ratably over the term of the contract period.
The increase of $5.6 million, or 44%, was primarily due to $4.3 million of stock-based compensation expense recorded as a result of the consummation of the IPO, a $1.0 million increase in salary and benefits expenses, primarily related to increased headcount and merit increases, and a $0.3 million increase in sales and marketing related travel, conferences, trade shows and advertising.
Selling and Marketing Expenses Selling and marketing expenses remained flat for the year ended December 31, 2025 compared to the year ended December 31, 2024, primarily due to a $2.7 million increase in employee compensation and benefits in the current year, resulting from increased headcount, merit increases, and the related payroll taxes, offset by a $2.6 million decrease in stock-based compensation expense and a $0.1 million decrease in travel and marketing expense.
No indicators of impairment or impairments charges were identified or recorded to goodwill or other intangible assets during the fiscal years ended December 31, 2024 and 2023. 59 Table of Contents Stock-Based Compensation We account for stock-based payments in accordance with the authoritative guidance issued by the FASB on stock-based compensation, which establishes the accounting for transactions in which an entity exchanges its equity instruments for goods or services.
Stock-Based Compensation We account for stock-based compensation in accordance with Accounting Standard Codification Topic 718, Compensation - Stock Compensation , which establishes the accounting for transactions in which an entity exchanges its equity instruments for goods or services.
Gross profit margin decreased to 80% for the year ended December 31, 2024 from 83% for the year ended December 31, 2023. The decrease was attributable to $3.0 million in stock-based compensation expense recorded upon the consummation of the IPO and $0.7 million of amortization associated with our acquired intangible assets .
Gross profit margin decreased to 78% for the year ended December 31, 2025 from 80% for the year ended December 31, 2024 primarily due to an increase in employee compensation and benefits resulting from increased headcount and an increase in amortization expense.
Loss on debt extinguishment 53 Table of Contents On May 13, 2024, the senior subordinated convertible promissory note (the “Micron Note”) between us and Micron Technology, Inc. (“Micron”) was converted into 294,217 shares of our common stock in connection with the consummation of the IPO.
We did not have restructuring expenses for the year ended December 31, 2024. See Note 5 and Note 13 of our consolidated financial statements in Item 8 in this Annual Report on Form 10-K for further discussion. Loss on debt extinguishment On May 13, 2024, the senior subordinated convertible promissory note (the “Micron Note”) between us and Micron Technology, Inc.
If we are unable to access our cash as needed, our financial position and ability to operate our business could be adversely affected. 56 Table of Contents Cash Flows The following table summarizes changes in our cash flows for the periods indicated.
Cash Flows The following table summarizes changes in our cash flows for the periods indicated.
The growth of our business and our future success are also subject to uncertainties and risks as described in Part I, Item 1A., Risk Factors of this Annual Report on Form 10-K. Relationships with Our Existing Customers Building long-term relationships with our existing customer base is critical in driving renewals for our licenses and overall revenue growth.
We anticipate these initiatives will result in significant annualized operating expense reductions. Relationships with Our Existing Customers Building long-term relationships with our existing customer base is critical in driving renewals for our licenses and overall revenue growth.
Net cash used by financing activities for the year ended December 31, 2023, was $1.7 million and reflects $1.0 million of contingent consideration paid in connection with our Nangate and PolytEDA acquisitions, $1.0 million repaid on the 2022 Credit Line, and $0.7 million of transaction costs incurred in connection with the IPO; partially offset by $1.0 million of proceeds from the 2022 Credit Line.
Net cash used during the year ended December 31, 2025 includes payroll taxes related to shares withheld from employees of $1.8 million and payments on our vendor financing obligation of $1.3 million, which was partially offset by $0.9 million in proceeds from issuance of common stock for share-based awards.
Removed
We have decades of expertise developing the “technology behind the chip” and providing solutions that span from atoms to systems, starting with providing software for the atomic level simulation of semiconductor and photonics material for devices, to providing software and SIP for the design and analysis of circuits and system level solutions.
Added
Our customers include semiconductor manufacturers and systems companies that design and manufacture products containing semiconductors. Semiconductors are at the heart of innovation in many industries, including AI, display, power devices, automotive, memory, hyperscale and cloud computing, Internet of Things (“IoT”), telecommunications and many more.
Removed
We provide SIP for system-on-a-chip (“SoC”) and integrated circuits (“ICs”), and SIP management tools to enable team collaborations on complex SoC designs.
Added
Our TCAD solutions are used in the semiconductor industry to model and optimize manufacturing processes and device performance. This includes foundational TCAD software and more advanced artificial intelligence (“AI”) machine learning (“ML”) for process development, called Fab Technology Co-Optimization (“FTCO TM ”). We are a pioneer in the leverage of AI to redefine manufacturing process development in partnership with customers.
Removed
Our customers include semiconductor manufacturers, original equipment manufacturers (“OEMs”) and design teams who deploy our solutions in production flows across our target markets, including display, power devices, automotive, memory, high performance computing (“HPC”), internet of things (“IoT”) and 5G/6G mobile markets. 46 Table of Contents EDA offerings, including our solutions, enable companies to streamline their IC design workflows, develop complex IC designs in a cost-efficient manner, and maintain acceptable IC manufacturing yield, by providing interoperable tools that capture and simulate designs from concept to analysis.
Added
Our EDA software is used by semiconductor companies to design, simulate, and verify semiconductors. Our EDA products include SPICE modelling and simulation, parasitic extraction and reduction, standard cell generation and optical proximity correction. Our SIP portfolio includes a range of products, including foundation technology, such as standard cells and memory compilers, as well as a suite of interface technologies.

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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 changeItem 7A. Qualitative and Quantitative Disclosures about Market Risk We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item. 60 Table of Contents
Biggest changeItem 7A. Quantitative and Qualitative Disclosures about Market Risk We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item. 43 Table of Contents