AIP — Arteris, Inc.

Summary of Arteris Q4 2025 Earnings Call

1. Key Financial Results and Metrics:

• Q4 Revenue: $20.1 million, up 30% year-over-year and 16% sequentially, exceeding guidance.
• Full Year Revenue: $70.6 million, a 22% increase year-over-year.
• Annual Contract Value (ACV) plus Royalties: $83.6 million, a record high, up 28% year-over-year.
• Remaining Performance Obligations (RPO): $117 million, a 32% year-over-year increase, with half expected to be recognized as revenue in 2026.
• Gross Profit: Non-GAAP gross profit of $18.5 million (92% margin) in Q4; full year gross profit of $64.8 million (92% margin).
• Operating Loss: Non-GAAP operating loss of $2.2 million in Q4; full year loss of $12.5 million, an improvement from the prior year.
• Net Loss: Non-GAAP net loss of $2.3 million in Q4; full year loss of $14.1 million.
• Cash Position: Ended the year with $59.5 million in cash and no debt; positive free cash flow of $3 million in Q4 and $5.3 million for the full year.

2. Strategic Updates and Business Highlights:

• Achieved record annual contract value and significant growth in royalty revenue, driven by demand across various verticals, including automotive, enterprise computing, and consumer electronics.
• Closed the acquisition of Cycuity, enhancing Arteris' cybersecurity offerings, addressing increasing semiconductor security vulnerabilities.
• Strong adoption of FlexGen, an AI-driven Smart NoC IP product, with over 30 production deployments.
• Continued expansion of product offerings, including successful licensing of Ncore and FlexNoC IPs to major clients like NXP and Black Sesame.
• Participation in initiatives like the CHASSIS program for automotive chiplets and collaboration with Cadence and Arm to streamline chiplet solutions.

3. Forward Guidance and Outlook:

• Q1 2026 Guidance: Expected ACV plus royalties of $85 million to $89 million; revenue of $20.5 million to $21.5 million; non-GAAP operating loss of $3.5 million to $2.5 million.
• Full Year 2026 Guidance: Revenue projected at $89 million to $93 million (including $7 million from Cycuity); non-GAAP operating loss of $9 million to $5 million, with expectations of reaching non-GAAP operating profit by Q4 2026.

4. Bad News, Challenges, or Points of Concern:

• GAAP operating loss increased to $8.5 million in Q4 from $7.1 million in the prior year, and full-year GAAP loss was $33.1 million.
• Cycuity acquisition may introduce initial operational losses and impact gross margins due to subcontractor-related costs.
• The company acknowledged the unpredictability of royalty revenues, with potential fluctuations based on audits and market conditions.

5. Notable Q&A Insights:

• Management highlighted the significant cross-sell opportunities presented by the Cycuity acquisition, emphasizing the growing importance of hardware security in the semiconductor industry.
• There is increasing interest from customers to deploy comprehensive solutions, which could elevate average selling prices (ASPs) above previous targets.
• The strength in royalty revenue was attributed to a diversified customer base across various sectors, particularly automotive and consumer electronics.
• Management confirmed a one-time royalty boost in Q4 but indicated that underlying growth rates remain strong, suggesting a healthy trajectory moving forward.
• Discussions on the equity raising effort related to the Cycuity acquisition indicated that activation would occur soon, contingent on market conditions.

Overall, Arteris demonstrated strong growth and strategic positioning in the semiconductor market, with a focus on cybersecurity and AI-driven solutions, while also navigating challenges related to operational losses and market volatility.