Arteris, Inc. Q4 FY2025 earnings call

Key Points

• In 2025, Arteris achieved a record annual contract value plus royalties of $83,600,000, a 28% year-on-year increase, driven by major vertical markets including enterprise computing, automotive, and consumer electronics.
• The company closed the acquisition of Cycuity, a leading provider of semiconductor cybersecurity assurance products, which strengthens the product portfolio and helps address cybersecurity concerns in semiconductors.
• Organic products saw strong customer adoption: FlexNoC, an AI-driven smart NoC IP, was licensed for over 30 production device deployments; Ncore, a cache-coherent interconnect IP, was licensed across edge and server applications; customers like NXP, Black Sesame, and Blaize expanded their use of Arteris' products.
• Arteris is a founding member of the CHASSIS program and part of Cadence’s strategic collaboration, contributing to accelerating time to market for chiplet development.

In the fourth quarter of 2025, total revenue was $20,100,000, which was up 16% sequentially and 30% year over year, and above the top end of the guidance range. For the full year 2025, total revenue was $70,600,000, a 22% increase year over year. Variable royalties were 50% higher year over year, with the fourth quarter setting a new record. Annual contract value plus royalties at the end of the fourth quarter was $83,600,000, representing a 28% year-on-year increase and a new record high. Remaining performance obligations (RPO) at the end of the fourth quarter totaled $117,000,000, a 32% year-over-year increase. Non-GAAP gross profit in the fourth quarter was $18,500,000 with a margin of 92%, and GAAP gross profit was $18,300,000 with a margin of 91%. For the full year, non-GAAP gross profit was $64,800,000 with a margin of 92%, and GAAP gross profit was $63,700,000 with a margin of 90%.

First Quarter 2026

• ACV plus royalties expected to be $85,000,000 to $89,000,000
• Revenue expected to be $20,500,000 to $21,500,000
• Non-GAAP operating loss expected to be $3,500,000 to $2,500,000
• Non-GAAP free cash flow expected to be negative $1,500,000 to positive $1,500,000

Full Year 2026

• ACV plus royalties expected to exit 2026 at $100,000,000 to $104,000,000
• Revenue expected to be $89,000,000 to $93,000,000, including approximately $7,000,000 from the Cycuity business
• Non-GAAP operating loss expected to be between $9,000,000 to $5,000,000, with approximately $1,000,000 related to the Cycuity acquisition
• Non-GAAP free cash flow expected to be positive $5,000,000 to positive $9,000,000
• Expect to report non-GAAP operating profit as early as 2026

• Forward-looking statements involve material risks and uncertainties that could cause actual results to differ from anticipated.
• Risks associated with acquisitions, such as the Cycuity acquisition, including potential impacts on P&L and gross margins.
• Uncertainties in royalty audits and their impact on royalty revenue.

Q: Can you help us size the cross-sell opportunity by outlining which customer segments you expect to engage first and expand on how Cycuity changes your ability to increase content per customer over time?

A: Hardware security assurance is becoming a major issue. Cycuity's hardware assurance software can be used by Arteris' large customer base and essentially any semiconductor company, opening up significant opportunities to enhance system IP value and address any semiconductor.

Q: Your NXP announcement—so NXP is now using four of your solutions, which I think is probably up from one or maybe two. Are you seeing more interest from customers to deploy an entire suite of solutions? And I would imagine that if you do get customers that are deploying the entire suite, that puts your licensing ASPs well above the $1,000,000 that you were targeting a couple years ago?

A: Yes, absolutely. Using everything from Arteris prior to the Cycuity acquisition would be well north of $1,000,000, and with Cycuity, it would be higher. Cybersecurity is a big issue, and markets like automotive and aerospace require ISO 21434 certification, driving ASP above $1,000,000. Chiplet projects also help increase ASP.

Q: In Q4, the royalties had a significant quarter-on-quarter step up. Is there any catch-up royalty in that number, or should we expect that to be the run rate going forward, with a seasonal bias?

A: There was a single reasonably sized royalty pickup in the fourth quarter. Excluding that, the growth rate year over year was still in the low 40s percent, above the trajectory. Audits can produce positive results but can't be banked on.

Q: Just a little bit about Cycuity and its impact on the P&L. My top line went up at the midpoint of guidance about $7,000,000. How much of that was Cycuity for the full year? And can you talk a little bit about the impact on the P&L in terms of step up in OpEx going forward?

A: Of the $91,000,000 midpoint guide for 2026 revenue, approximately $7,000,000 is from Cycuity. Cycuity is expected to be a slight contributor to the loss for the year, around $1,000,000. There's a nuance in gross margins due to subcontractors in government work, flipping expenses between OpEx and cost of revenue.

Q: When you did the Cycuity acquisition, you guys announced an ATM and you were going to use that to replace the cash that you used for the acquisition. Where are you in that equity-raising effort and when can we expect that to conclude?

A: We are in the process of going through activation. Can't activate during quiet period. Will go through activation process shortly, with small amounts possibly dribbling through in the first quarter depending on market movement.