Silvaco Group, Inc.(SVCO) - 2025 Q1 - Quarterly Report

PART I. Financial Information This section presents the unaudited condensed consolidated financial statements, management's discussion and analysis, and related disclosures Financial Statements (unaudited) This section presents the unaudited condensed consolidated financial statements for Silvaco Group, Inc. as of March 31, 2025, and for the three-month periods ended March 31, 2025 and 2024 Condensed Consolidated Balance Sheets Total assets decreased to $138.1 million from $142.3 million, while total liabilities increased to $54.5 million from $42.3 million, leading to a decline in stockholders' equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total current assets | $99,922 | $107,280 | | Total assets | $138,135 | $142,345 | | Total current liabilities | $46,744 | $34,488 | | Total liabilities | $54,542 | $42,262 | | Total stockholders' equity | $83,593 | $100,083 | - Goodwill increased from $9.0 million to $14.3 million, and Intangible assets increased from $4.4 million to $10.0 million, reflecting the recent acquisition[6] - Accrued expenses and other current liabilities rose significantly from $19.8 million to $32.4 million, largely due to the accrued litigation claim[6] Condensed Consolidated Statements of (Loss) Income For the three months ended March 31, 2025, the company reported a net loss of $19.3 million, a stark contrast to the $1.4 million net income in the same period of 2024, driven by decreased revenue and a substantial litigation claim Q1 2025 vs. Q1 2024 Income Statement (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total revenue | $14,092 | $15,889 | | Gross profit | $11,076 | $13,916 | | Total operating expenses | $30,708 | $11,528 | | Operating (loss) income | $(19,632) | $2,388 | | Net (loss) income | $(19,273) | $1,378 | | Basic and diluted EPS | $(0.67) | $0.07 | - A significant charge of $13.1 million for an 'Estimated litigation claim' was recorded in Q1 2025, which was the primary driver of the operating loss[9] Condensed Consolidated Statements of Comprehensive (Loss) Income The company reported a comprehensive loss of $19.1 million for Q1 2025, primarily due to the net loss, slightly offset by foreign currency translation adjustments Q1 2025 vs. Q1 2024 Comprehensive (Loss) Income (in thousands) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net (loss) income | $(19,273) | $1,378 | | Other comprehensive income (loss) | $206 | $(185) | | Comprehensive (loss) income | $(19,067) | $1,193 | Consolidated Statements of Stockholders' Equity Total stockholders' equity decreased from $100.1 million to $83.6 million due to the net loss of $19.3 million, partially offset by stock-based compensation expense - The accumulated deficit increased from $(28.0) million to $(47.3) million due to the net loss of $19.3 million in Q1 2025[14] Condensed Consolidated Statements of Cash Flows Net cash used in operating activities was $1.1 million, while investing activities provided $11.4 million, primarily from marketable securities maturities offsetting acquisition costs, leading to a $9.9 million increase in cash Q1 2025 vs. Q1 2024 Cash Flows (in thousands) | Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(1,135) | $(2,572) | | Net cash provided by (used in) investing activities | $11,404 | $(10) | | Net cash (used in) provided by financing activities | $(503) | $3,873 | | Net increase in cash and cash equivalents | $9,883 | $1,318 | - A non-cash charge of $13.1 million for the estimated litigation claim was a major adjustment reconciling net loss to operating cash flow[17] - Investing activities were dominated by $23.0 million in maturities of marketable securities and a $11.5 million cash payment for the acquisition of Process Proximity Compensation[17] Notes to the Condensed Consolidated Financial Statements The notes detail accounting policies, the $11.5 million acquisition of Cadence's OPC tool suite, a $13.1 million litigation claim, revenue recognition, and the subsequent acquisition of Tech-X Corporation - On March 4, 2025, the company acquired Cadence's Process Proximity Compensation (OPC) product line for $11.5 million in cash, resulting in $5.3 million of goodwill and $6.0 million of intangible assets[44][45][47] - The company recorded an additional charge of $13.1 million for an estimated litigation claim related to the Nangate lawsuit, bringing the total probable loss estimate to $24.4 million based on a preliminary settlement agreement[78] - As of March 31, 2025, the company had $33.7 million in remaining performance obligations, with approximately 45% expected to be recognized as revenue over the next 12 months[41] - Subsequent to the quarter end, on April 29, 2025, the company acquired Tech-X Corporation for $5.0 million in cash and stock, plus up to $2.0 million in contingent consideration[83] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the 11% year-over-year revenue decline to softening demand and economic challenges, with the significant net loss primarily driven by a $13.1 million litigation charge, while strategic acquisitions enhance product offerings and liquidity remains strong Q1 2025 vs. Q1 2024 Results of Operations (in thousands) | Metric | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Total revenue | $14,092 | $15,889 | (11)% | | Gross profit | $11,076 | $13,916 | (20)% | | Operating (loss) income | $(19,632) | $2,388 | (922)% | | Net (loss) income | $(19,273) | $1,378 | (1,499)% | - Bookings decreased to $13.7 million in Q1 2025 from $16.1 million in Q1 2024, reflecting a decline in orders from Asia due to economic challenges and U.S.-China trade tensions[89][131] - Operating expenses increased 166% YoY, primarily due to a $13.1 million estimated litigation claim, $1.5 million in stock-based compensation, and a $0.7 million increase in acquisition-related legal fees[118][125][126] Reconciliation of GAAP to Non-GAAP Operating (Loss) Income (in thousands) | Line Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Operating (loss) income (GAAP) | $(19,632) | $2,388 | | Acquisition-related estimated litigation claim and legal costs | $13,795 | $594 | | Stock-based compensation expense | $2,277 | $— | | Other adjustments | $1,065 | $336 | | Non-GAAP operating (loss) income | $(2,495) | $3,318 | Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Silvaco is exempt from providing quantitative and qualitative disclosures about market risk - As a smaller reporting company, Silvaco is exempt from providing quantitative and qualitative disclosures about market risk[162] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting during the quarter - The CEO concluded that the company's disclosure controls and procedures were effective at the end of the reporting period[163] - No changes in internal control over financial reporting (ICFR) occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's ICFR[164] PART II. Other Information This section covers legal proceedings, risk factors, equity sales, and other required disclosures Legal Proceedings This section directs readers to Note 11 of the unaudited condensed consolidated financial statements for information regarding the company's current legal proceedings, specifically the Nangate litigation - Information regarding legal proceedings is detailed in Note 11 of the financial statements[166] Risk Factors The company outlines significant risks including intense competition, dependence on the cyclical semiconductor industry, economic downturns, potential litigation, and risks associated with being a 'controlled company' due to majority ownership - The company faces significant competition from larger entities like Synopsys, Cadence, and Siemens EDA, which have greater resources[169][170] - The business is highly dependent on the cyclical semiconductor and photonics industries, and economic downturns, especially in China (which accounted for 14% of revenue in Q1 2025), can significantly reduce sales[180][183][187] - The Nangate litigation poses a significant financial risk, with a potential settlement leading to a $13.1 million charge in Q1 2025 and a potential appellate bond of up to $35.4 million if a settlement is not finalized[312] - The company is a 'controlled company' as the Pesic family holds over 50% of the voting power, exempting it from certain Nasdaq corporate governance requirements, such as having a majority of independent directors[292] Unregistered Sales of Equity Securities and Use of Proceeds The company's IPO on May 13, 2024, generated $114.0 million in gross proceeds, with net proceeds of $106.0 million used for general corporate purposes and debt repayment - The IPO on May 13, 2024, generated gross proceeds of $114.0 million and net proceeds of $106.0 million[354] - Proceeds were used for general corporate purposes and to repay $2.0 million of the 2022 Credit Line and $4.3 million of the East West Bank Loan[355] Defaults Upon Senior Securities The company reports no defaults upon senior securities - The company reports no defaults upon senior securities[356] Mine Safety Disclosures The company reports no mine safety disclosures - The company reports no mine safety disclosures[356] Other Information The company reports no other information under this item - The company reports no other information under this item[356] Exhibits This section lists the exhibits filed with the Form 10-Q, including key legal documents and officer certifications - The report includes key legal documents as exhibits, such as the Asset Purchase Agreement for the Cadence OPC acquisition and officer certifications required by the Sarbanes-Oxley Act[357]