Silvaco Group, Inc. Common Stock Q3 FY2025 earnings call

• Focus on key products differentiated to be leaders in categories, reducing attention on mature products and concentrating on growth opportunities like AI, interconnect IP, and power. - Initiated a significant cost reduction program to reduce annualized non-GAAP operating expenses by at least $15 million annually, including early retirement and leaver programs, reducing office footprints, and minimizing discretionary spend. - Mentioned Silvaco's AI machine learning product FTCO as a growth driver, and the acquisition of Mixel to boost the IP business, with synergies expected between Mixel and Silvaco's existing IP business. - Highlighted operational discipline with new leaders added to the team to create a culture of speed and high-quality execution. - Acknowledged delays in integrating M&A transactions but remain optimistic about Mixel and Tech-X contributing meaningful growth in 2026.

In Q3, Silvaco delivered record quarterly revenue and bookings. Revenue was $18.7 million, up 70% year-over-year. 74% of revenue came from license revenue and 26% from maintenance and service. EDA saw sequential growth, while TCAD and IP trended down slightly. Geographically, Americas spiked to 55% of total revenue, APAC represented 40%, and EMEA was 5%. GAAP gross margin in Q3 was 77.9%, up 326 basis points year-over-year, and non-GAAP gross margin was 81.5%, up 179 basis points year-over-year.

• For Q4 2025, expected bookings of $15 million to $19 million, revenue of $14 million to $18 million, non-GAAP gross margin in the range of 78% to 82%, and non-GAAP operating expenses of $16 million to $18 million. - Guiding principle is to turn the business profitable at flat revenue.

• Risks from the annual report and SEC filings, including factors that could cause actual results to differ from forward-looking statements. - Delays in integrating and extracting value from M&A transactions, such as underestimating time to activate sales resources for Mixel and market adoption challenges for Tech-X's solutions.

Q: Craig Ellis asked about revenue mix and how significant the revenue mix out is ahead of the company.

A: Walden Rhines responded that being on the Board provided less visibility into individual products, there's a substantial opportunity ahead with specific areas that could grow, and the expense base has grown faster than revenue, but they aim to free up resources for key growth areas.

Q: Charles Shi asked about products in the portfolio with potential to be like Calibre and Tessent.

A: Walden Rhines said to start with a focused market and customers, examples include Silvaco's work on process development with machine learning and the Mixel acquisition in IP, and focusing on specific types of IP to become a leader.

Q: Blair Abernethy asked about the pipeline and FTCO.

A: Walden Rhines said the pipeline has stable maintenance revenue from mature products, FTCO is a big opportunity but evolved slowly due to extensive customer interaction and customization needs, but there's optimism it can become a leading product.

Q: Krish Sankar asked about Q4 revenue guidance and growth prospects without acquisitions.

A: Chris Zegarelli said Q4 revenue has sequential changes due to EDA stepping down, TCAD and IP increasing, and still working on FTCO engagements; Walden Rhines said they're limited on acquisitions and plan to grow with existing resources, aiming for profitability at current revenue levels.

Q: Christian Schwab asked about OpEx reductions and Mixel revenue expectations.

A: Chris Zegarelli said most cost reductions will be out by end of fiscal year, with benefit seen in Q1 and rest in 2026; Walden Rhines said Mixel has great product but limited distribution, combining with Silvaco's distribution will lead to growth.