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01/11 03:36
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reveals several concerns: a slight increase in net loss, lower Q4 revenue guidance, and management's acknowledgment of faster-growing expenses than revenue. Although there is optimism about product potential and recent acquisitions, the lack of specific guidance on growth timelines and the impact of cost reductions on core business raises uncertainties. The market may react negatively to these factors, especially with no clear timeline for achieving profitability or double-digit growth. Thus, the stock price is likely to experience a negative movement in the short term.
Bookings $22.8 million, increased 131% year-over-year. Strength in the quarter was driven by closing a significant EDA contract with one of our core customers in the United States.
Revenue $18.7 million, up 70% year-over-year. 74% of revenue in the quarter came from license revenue and the remaining 26% from maintenance and service. EDA saw the most growth sequentially in Q3, while TCAD and IP trended down slightly.
GAAP Gross Margin 77.9%, up 326 basis points year-over-year. Improvement was driven by growth in revenue exceeding growth in cost of sales.
Non-GAAP Gross Margin 81.5%, up 179 basis points year-over-year. Improvement was driven by growth in revenue exceeding growth in cost of sales.
GAAP Operating Loss $9.3 million, expanded year-over-year but improved slightly quarter-over-quarter.
Non-GAAP Operating Loss $2.3 million, down slightly year-over-year.
GAAP Net Loss $5.3 million, improved from the $6.6 million loss posted in the same period last year.
Non-GAAP Net Loss $2.1 million, slightly worse than the $1.8 million loss posted in the same period last year.
GAAP EPS $0.18 loss.
Non-GAAP EPS $0.07 loss.
Cash and Marketable Securities $27.8 million, including $12.4 million of restricted cash due to the Nangate settlement.
Cash Used in Operating Activities $7.8 million.
Remaining Performance Obligations (RPO) $48 million, with 54% expected to be recognized as revenue within the next 12 months.
FTCO AI Machine Learning Product: A unique AI product for process development that addresses real manufacturing challenges. It has established a partnership with Micron and is considered a foundational growth driver.
Jivaro: Adopted by companies like NVIDIA, Samsung, and SK Hynix to accelerate post-layout SPICE simulations by over 10 times with sign-off accuracy.
Mixel Acquisition: Expected to drive rapid growth in the IP business. Synergies with Silvaco's sales force and adoption of Mixel's world-class development processes are anticipated to exceed initial expectations.
Tech-X Acquisition: Growth depends on market adoption of plasma and optical solutions. Expected to contribute meaningful growth in 2026.
Cost Reduction Program: Initiated to reduce annualized non-GAAP operating expenses by at least $15 million. Includes early retirement programs, office footprint reductions, and minimizing discretionary spending.
Operational Discipline: Focus on execution with new leadership in key roles, aiming to create a culture of speed and high-quality execution.
Focus on Core Growth Drivers: Strategic shift to prioritize AI, power analysis, and interconnect IP while reducing emphasis on subscale areas.
Financial Discipline: Commitment to achieving profitability at current revenue levels and improving gross margins through cost reductions.
Focus on Key Products: The company needs to reduce attention on mature products and concentrate on a limited number of growth opportunities, which could lead to challenges in reallocating resources and potentially alienating existing customers reliant on mature products.
Financial Discipline: Silvaco's spending has grown much faster than revenue since the IPO, leading to financial strain. A significant cost reduction program has been initiated, but achieving profitability at current revenue levels remains a challenge.
Product Market Position: None of Silvaco's products are #1 in their markets, except in specialized categories, which poses a competitive risk and limits market share growth.
Operational Discipline: Delays in integrating and extracting value from recent M&A transactions (Mixel and Tech-X) have hindered expected growth and operational efficiency.
Customer Adoption: Underestimation of the time and effort required to bring on new FTCO customers has led to disappointing results, impacting growth potential.
Cost Reduction Program: The company is implementing cost-cutting measures, including early retirement programs and reducing office footprints, which may face resistance from employees and disrupt operations.
Geographic Revenue Dependence: Revenue growth is heavily dependent on the Americas, with APAC and EMEA showing less growth, which could pose risks if the Americas market slows down.
Legacy Products: Many legacy products generate maintenance revenue but require cost discipline to remain profitable. Transitioning resources from these products to growth areas may disrupt existing revenue streams.
M&A Integration: Delays in realizing synergies from Mixel and Tech-X acquisitions have slowed growth and created operational inefficiencies.
Economic and Market Conditions: Growth for Tech-X remains dependent on overall market adoption of its plasma and optical solutions, which introduces uncertainty.
Revenue Expectations: For Q4 2025, revenue is expected to range between $14 million and $18 million.
Bookings: Bookings for Q4 2025 are projected to be between $15 million and $19 million.
Gross Margin: Non-GAAP gross margin is expected to range from 78% to 82% in Q4 2025.
Operating Expenses: Non-GAAP operating expenses are anticipated to be between $16 million and $18 million in Q4 2025.
Cost Reduction Program: The company has initiated a cost reduction program expected to reduce annualized non-GAAP operating expenses by at least $15 million annually.
Growth Projections for Acquisitions: Mixel and Tech-X are expected to contribute meaningful growth starting in 2026.
Profitability Goals: The company aims to achieve profitability at current revenue levels, creating a foundation for future profitable growth.
Market Focus: The company plans to focus on key growth segments, including AI, power, and interconnect IP, to drive future growth.
The selected topic was not discussed during the call.
The earnings call reveals several concerns: a slight increase in net loss, lower Q4 revenue guidance, and management's acknowledgment of faster-growing expenses than revenue. Although there is optimism about product potential and recent acquisitions, the lack of specific guidance on growth timelines and the impact of cost reductions on core business raises uncertainties. The market may react negatively to these factors, especially with no clear timeline for achieving profitability or double-digit growth. Thus, the stock price is likely to experience a negative movement in the short term.
The earnings report reveals significant improvements in financial performance, including a 43% revenue increase and a swing to profitability. Gross margins have improved, indicating operational efficiency. Despite some uncertainties regarding acquisitions, the overall sentiment is positive due to strong earnings and optimistic guidance. The lack of shareholder return plan is a minor drawback, but the focus on growth and operational efficiency is promising. The market reaction is likely to be positive, with a potential stock price increase of 2% to 8% over the next two weeks.
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