Q3 2024 Silvaco Group Inc Earnings Call - Q&A
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Operator: [music] Good afternoon and welcome to Silvaco's third quarter 2024 conference call. All participants will be in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. Please note, this event is being recorded.
Okay.
Speaker Change: Good afternoon, and welcome to show Tobaccos third quarter 2024 conference call all participants will be in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw your question.
Speaker Change: Please press Star one again. Please note. This event is being recorded I would now like to turn the conference over to Greg Mcniff Investor Relations for <unk>. Please go ahead.
Greg McNiff: I would now like to turn the conference over to Greg McNiff, Investor Relations for Silvaco. Please go ahead.
Speaker: Thank you.
Greg McNiff: Joining me on the call today are Babak Taheri, Silvaco's CEO, and Ryan Benton, Silvaco's As a reminder, a press release highlighting the company's results, along with supplemental financial and an earnings presentation are available on the company's IR site at investors.silvaco.com. An archived replay of the conference call will be available on this website for a limited time after the call.
Thank you joining me on the call today are back to Harry <unk>, CEO and Ryan Benton tobacco CFO.
Speaker Change: As a reminder, a press release highlighting the company's results along with supplemental financial results and earnings presentation are available on the company's IR site at investors thought tobacco Dot Com an archive replay of the conference call will be available on this website for a limited time after the call. Please note that during this call.
Speaker: Please note that during this call, management will be making remarks regarding future events and the future financial performance of the conference. These remarks constitute forward-looking statements for purposes of the Safe Harbor Provision. Private Securities Litigation Reform Act. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. It is important to also note that the company undertakes no obligation to update such statements except as required by law. The company cautions you to consider risk factors that could cause actual results to differ materially from those in the forward-looking statements contained in today's press release, earnings presentation, and on this conference call.
Speaker Change: We'll be making remarks regarding future events and the future financial performance of the company. These remarks constitute forward looking statements for purposes of the Safe Harbor provisions of the private Securities Litigation Reform Act.
Speaker Change: Forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward looking statements. It is important to also note that the company undertakes no obligation to update such statements except as required by law. The company cautions you to consider risk factors that could cause actual results to differ materially.
Speaker Change: <unk> from those in the forward looking statements contained in today's press release earnings presentation and on this conference call. The risk factors section in tobacco is most recent Form 10-Q filings with the Securities and Exchange Commission provides a description of these risks with that I'd like to turn the call over to tobacco CEO, but back to Harry.
Speaker: The risk factors section in Silvaco's most recent Form 10-Q following with the Security and Exchange Commission provides a description of these risks.
Greg McNiff: With that, I'd like to turn the call over to Silvaco's CEO, Babak Taheri. Babak?
Speaker Change: Mark.
Babak Taheri: Hello and welcome to Silvaco's third quarter earnings call. I am Babak Taheri, CEO of Silvaco. Thank you for joining us.
buyback Taheri: Hello, and welcome to <unk> third quarter earnings call I am buyback Taheri CEO of <unk>.
buyback Taheri: Thank you for joining us today.
Babak Taheri: In addition to discussing Silvaco's results, we will also provide an update on our most recent press releases, business outlook, and current market trends. For those joining us for the first time, Silvaco is a provider of TCAD, EDA, and semiconductor IP solutions that enable chip design, digital twin modeling, and simulation utilizing AI and machine learning. We have decades of deep expertise in modeling and simulation software from concept to design and manufacturing. Silvaco's digital twin platform drives advances for the next generation of power semis such as silicon carbide, gallium nitride for high performance compute and AI. Displays for watches, computers, cars, and televisions.
buyback Taheri: In addition to discussing <unk> results. We will also provide an update on our most recent press releases business outlook and current market trends.
buyback Taheri: For those joining us for the first time since <unk> is a provider of tea CAD Eas semi conductor IP solutions.
buyback Taheri: Enable chip design did.
buyback Taheri: Did you talk to in modeling and simulation utilizing AI and machine learning.
buyback Taheri: We have decades of deep expertise in modeling and simulation software from concept to design and manufacturing.
buyback Taheri: Exactly the Celgene platform drives advances for the next generation of power semi such as Silicon carbide gallium nitride for high performance compute and AI.
buyback Taheri: Displays for watches computers cars and televisions.
Babak Taheri: Memory devices for servers, clouds, laptops, and IoT devices, and advanced CMOS technologies utilized in design and fabrication of integrated circuits. We have 800 plus customers worldwide and hold the number two position in the global TCAD revenue. We have 260 plus employees. Our headquarter is located in Silicon Valley.
buyback Taheri: Memory devices for servers to clouds, laptops, and Iot devices, and advanced Cmos technologies utilized in design and fabrication of integrated circuits.
buyback Taheri: We have 800, plus customers worldwide and hold the number two position in the global tea CAD revenue.
buyback Taheri: We have 260 plus employees our headquarter is located in Silicon Valley.
Babak Taheri: I'm really excited about the progression of the business we've seen. And we are executing on the strategies we outlined since we went public earlier this We believe our strategic focus on driving innovation through AI-based semiconductor design for advanced CMOS geometry. and Power Semiconductors, which includes digital twin modeling, positions us well for long-term growth. and our strong business fundamentals and innovative product lines will continue to drive our customer momentum and growth trajectory.
buyback Taheri: I'm really excited about the progression of the business, we have seen and we are executing on the strategies we outlined.
buyback Taheri: Since we went public earlier this year.
buyback Taheri: We believe our strategic focus on driving innovation through AI based semiconductor design for advanced Cmos geometries, and power semiconductors, reaching foods digital twin modeling.
buyback Taheri: Positions us well for long term growth.
buyback Taheri: And our strong business fundamentals and innovative product lines will continue to drive our customer momentum and growth trajectory.
Babak Taheri: If you'd like to learn more about our company and our mission, I encourage you to refer to my opening remarks from our second quarter earnings call and to the materials on our investor relations site.
Angela: If you'd like to learn more about our company and our mission I encourage you to refer to my opening remarks from our second quarter earnings call Angela materials on our Investor Relations site.
Babak Taheri: I now want to touch on a few recent achievements and provide some commentary on the importance of the recent press release. please turn to slide four. First, we continued expansion of our FTCO platform in the third quarter. We received a $5 million order late in the quarter, which we were not able to recognize until the first week of the Q4. However, the significance of this order is that we further expanded our FTCO offering with our partners.
Angela: I now want to touch on a few recent achievements and provide some commentary on the importance of their recent press releases.
Please turn to slide four.
Angela: First we continued expansion of our TCR platform in the third quarter, we received a $5 million order late in the quarter, which were not able to recognize until the first week of the Q4. However, the significance of this order.
Angela: Is that be further expanded rft's youre offering with our partners.
Babak Taheri: I'll comment more on this in the next slide.
Angela: I'll comment more on this in the next slide.
Babak Taheri: Second, in June, Silvaco announced strategic partnership with Purdue, Stanford, and Arizona State University to help overcome the talent shortage and expand research activities. In addition to these efforts, Silvaco has collaborated with Stanford University to publish a comprehensive book on chip fabrication that includes extensive TCAD examples using Silvaco platform. This joint effort aims to create a valuable resource that bridges the gap between academia and industry. offering insights and knowledge on the latest advancement in TCAD technology.
Angela: Second in June <unk> announced strategic partnership with Purdue, Stanford and Arizona State University to help overcome the times shortage and expand research activities.
Angela: In addition to these efforts sales vacco has collaborated with Stanford University to publish a comprehensive book and chip fabrication that includes extensive T. Canada examples using tobacco platforms. This joint effort aims to create a valuable resource that bridges.
Angela: Gap between academia and industry.
Angela: Offering insights and knowledge on the latest advancement in tea CAD technology.
Babak Taheri: Third, in September, Silvaco appointed Candace Jackson as SVP, General Counsel, and Corporate Secretary. We welcome Ms. Jackson to our team. Her semiconductor industry experience and background in corporate governance, litigation management, M&A, and SEC reporting has made a significant impact.
Angela: Third in September sales backlog appointed Kansas, Jackson, as SVP General Counsel and corporate Secretary.
Angela: We welcome Ms Jackson to our team.
Angela: Semiconductor industry experience and background.
Angela: And corporate governance litigation management, M&A NFC reporting has made a significant impact.
Babak Taheri: Fourth. In September, Silvaco announced the expansion of its Victory TCAD and digital twin modeling platform. to planar CMOS, FinFET, and advanced CMOS technology. Our TCAL platform has gained significant traction in display, photonics, memory, and power semiconductor markets where our solutions have been instrumental in driving innovation and enhancing performance. We have now extended our comprehensive suite of tools to the advanced CMOS market, enabling next-generation semiconductor technologies to address growing markets, such as foundries, 5G, AI, and high-performance computing. Our newly released TCAD platform. has been utilized by a strategic customer for the past few years and is now available for broad market adoption.
Angela: Fourth.
Speaker Change: In September <unk> announced the expansion of his victory T Kat and digital twin modeling platform to planar Cmos Finfet and advanced Cmos technologies. Our T cell platform has gained significant traction in display photonics memory.
Speaker Change: And power semiconductor markets.
Speaker Change: Our solutions have been instrumental in driving innovation and enhancing performance.
Speaker Change: We have now extended our comprehensive suite of tools to the advanced Cmos market, enabling next generation semiconductor technologies to address growing markets.
Speaker Change: As foundries five G AI and high performance computing.
Speaker Change: Our newly released <unk> platform has been utilized by strategic customer for the past few years and is now available for broad market adoption.
Babak Taheri: This new capability for advanced CMOS technology enables customers to accelerate their technology development with significant cost savings, and it's a fundamental step in expansion of our AI-based FTCO platform into advanced CMOS marketing.
Speaker Change: This new capability for advanced Cmos technology enables customers to accelerate their technology development with significant cost savings.
And it's fundamental step in expansion of our AI based FTC or platform into advanced Cmos markets.
Babak Taheri: In September, Silvaco was added to the Russell 2000, Russell 3000, and Russell microcap industry. Silvaco's inclusion in these widely-tracked Russell indices represents another important milestone for our company. We look forward to the increased visibility in this inclusion, which will enable us to broaden our shareholder base by reaching a wider range of passive and active investors, including ETFs and other institutional funds.
Speaker Change: In September <unk> was added to the Russell 2000, Russell 3000, and Russell Microcap indices.
Speaker Change: <unk> inclusion in these widely tracked Russell indices represents another important milestone for our company.
Speaker Change: We look forward to the increased visibility in this inclusion.
Speaker Change: Which will enable us to broaden our shareholder base by reaching a wider range of passive and active investors, including Etfs and other institutional funds.
Babak Taheri: Finally, Silvaco achieved ISO 9001 certification of TCAD, ADA, and IP products in October.
Speaker Change: Finally, <unk> achieved ISO 9001 certification of tea, CAD, EDA and IP products in October.
Babak Taheri: I now want to touch on a few financial and operational highlights of the third quarter, as well as provide some commentary on our outlook. Ryan Benton, RCFO, will go into more detail later about our financial results and guidance. Q3 gross bookings were $9.9 million, our Q1 through Q3. Total bookings was $45.5 million, representing a 7% growth year-over-year for the first three quarters. We recognized revenue of $11 million for Q3 and $41.8 million for the first three quarters. We had a strong quarter in terms of customer traction. We signed 14 new customers as well as expanded our relationship.
Speaker Change: I now want to touch on a few financial and operational highlights of the third quarter as well as provide some commentary on our outlook.
Speaker Change: Brian maintain our CFO.
Speaker Change: We will go into more detail later about our financial results and guidance.
Speaker Change: Q3, gross bookings were $9 $9 million, our Q1 through Q3 total bookings was $45 $5 million, representing a 7% growth year over year for the first three quarters.
Speaker Change: We recognized revenue of $11 million for Q3, and $41 $8 million for the first three quarters.
Speaker Change: We had a strong quarter in terms of customer traction.
Speaker Change: We signed 14, new customers as well as expanded our relationship.
Babak Taheri: with several existing customers across key markets, including Power, Memory, Foundry, and Display. We also signed a follow-on contract for our digital twin product with a large memory customer, which validates our strategic focus on this unique technology.
Speaker Change: With several existing customers across key markets, including power memory foundry and display.
Speaker Change: Also signed a follow on contract for our digital twin product with a large memory customer, which validates our strategic focus on this unique technology.
Babak Taheri: This demonstrates our solid business process and strategies for securing new clients and deepening existing part We expect this momentum to continue into Q4 2025 and beyond. While Q3 revenues were impacted by the shift of some orders, including a substantial $5 million order received in the first week of the quarter, we remain confident in our ability to achieve our revised full-year financial targets due to strong customer demand. We expect to regain momentum and execute on our long-term strategy by expanding our footprint across the key end markets as well as executing on the right strategic and organic opportunity.
Speaker Change: This demonstrates our solid business process and strategies for securing new clients and deepening existing partnerships.
Speaker Change: We expect this momentum to continue into Q4 2025 and beyond.
Speaker Change: While Q3 revenues were impacted by the shift of some orders, including a substantial $5 million order received in the first week of the quarter, we remain confident in our ability to achieve our revised full year financial targets due to strong customer demand.
Speaker Change: We expect to regain momentum and execute on our long term strategy by expanding our footprint across the key end markets as well as executing on the right strategic inorganic opportunities.
Babak Taheri: We believe our business prospects remain strong, as you will see reflected in our Q4 and Foulier 2024 guidance. Despite the lower expected revenue for the quarter, the relative impact to gross margin was minimal. For Q3, non-GAAP gross margin was 80% and GAAP was 75%. compared to 85% for GAP and non-GAP alike in the same period last. The fact that we were able to maintain such a healthy gross margin despite a decline in expected revenue speaks to the significant value of our solutions provide our customers.
Speaker Change: We believe our business prospects remain strong as you will see reflected in our Q4 and full year 2020 for guidance.
Speaker Change: Despite the lower expected revenue for the quarter. They are relatively impact to gross margin was minimal.
Speaker Change: For Q3, non-GAAP gross margin was 80% and GAAP was 75% compared to 85% for GAAP and non-GAAP alike in the same period last year.
Speaker Change: The fact that we were able to maintain such a healthy gross margin despite a decline in.
Speaker Change: In the expected revenues speaks to the significant value of our solutions provide our customers.
Speaker: The next few slides offer an overview of our products and markets, which we covered in more detail on our previous earnings.
Speaker Change: The next few slides offer an overview of our products and markets, which we covered in more detail on our previous earnings calls.
Babak Taheri: I would like to turn to slide 11 to summarize our growth strategies in that. slide number 11. In summary, we believe our strategic focus on driving innovation through AI-enabled semiconductor design for newly announced advanced CMOS geometries and power semiconductors which include digital twin modeling. positions us well for long-term growth. Additionally, we've continued to leverage our deep relationships with R&D centers and academia to stay ahead of the technology. We believe this approach, along with our strong business fundamentals, will continue to drive our customer momentum now and in the future.
I would like to turn.
Speaker Change: Slide 11 to summarize our growth strategies in that slide.
Speaker Change: Slide number 11.
Speaker Change: In summary, we believe our strategic focus on driving innovation through AI enabled semiconductor design for newly announced advanced Cmos geometries and power semiconductors.
Speaker Change: Which includes digital twin modeling.
Speaker Change: Positions us well for long term growth.
Speaker Change: Additionally, we have continued to leverage our deep relationships with R&D centers and academia to stay ahead of the technology.
Speaker Change: We believe this approach.
Speaker Change: Along with our strong business fundamentals will continue to drive our customer momentum now and in the future.
Ryan Benton: With that, I'll turn it over to Ryan to review the quarter and discuss our guidance. Ryan.
Speaker Change: With that I'll turn it over to Ryan to review the quarter and discuss our guidance Brian.
Ryan Benton: Thanks, Babak, and thank you for joining us. Today I will review our financial results for the third quarter of 2024 and discuss our outlook for the fourth quarter in full year. As a reminder, we announced preliminary unaudited Q3 revenue and updated our full year guidance on October 15th.
Ryan: Thanks, Bob and thank you for joining us.
Ryan: Today, I will review our financial results for the third quarter of 2024.
Ryan: Discuss our outlook for the fourth quarter and full year.
As a reminder, we announced preliminary unaudited Q3 revenue and updated our full year guidance on October 15th.
Ryan Benton: Turning to slide 13, there are a couple growth drivers in our business model, which I'd like to highlight today. First, as Babak covered in his prepared remarks, we remain very excited about the opportunity for our digital twin modeling platform to create enormous value for our customers. Second, with our strong financial position and operational expertise, we're actively pursuing strategic acquisitions that we believe will bolster our products, enhance our competitiveness and market presence, add strong engineers and scientists, and provide much needed skill that can leverage our business model.
Ryan: Turning to slide 13, there are a couple of growth drivers in our business model, which I'd like to highlight today.
Ryan: First as Bob covered in his prepared remarks, we remain very excited about the opportunity for our digital twin modeling platform to create enormous value for our customers.
Ryan: Second with our strong financial position and operational expertise, we are actively pursuing strategic acquisitions that we believe will bolster our products enhance our competitiveness and market presence.
Ryan: Strong engineers and scientists and provide much needed scale that can leverage our business model.
Ryan Benton: Now let's turn to discuss our third quarter financial performance on the next slide. Starting with bookings, we achieved gross bookings for our software and semiconductor IP products of $9.9 million, a decrease of 21% year-over-year. It is important to note that the first day of Q4, we secured a $5 million follow-on order from a strategic memory customer, which expands our relationship through the deployment of our FTCO digital twin product. The order taking longer to finalize than originally expected is a function of the company moving so far up the value chain. It is a major win for us, and we believe a significant portion of the order will be recognized as revenue in Q4.
Ryan: Now, let's turn to discuss our third quarter financial performance on the next slide.
Ryan: Starting with bookings, we achieved gross bookings for our software and semiconductor IP products of $9 9 million.
Ryan: A decrease of 21% year over year.
Ryan: It is important to note that the first day of Q4, we secured a $5 million follow on order from a strategic memory customer, which expands our relationship through the deployment of our <unk> digital twin product.
Ryan: The order taking longer to finalize than originally expected is a function of the company and moving so far up the value chain.
Ryan: It is a major win for us and we believe a significant portion of the order will be recognized as revenue in Q4.
Ryan Benton: Additionally, there was a delay in certain orders principally from China. However, we believe we will be able to book orders and recognize revenue for many, if not all, of these customers in the coming quarters. As a reminder, China remains a relatively modest portion of our overall revenue, 17% of our year-to-date revenue as of Q3 2024. For Q3, we successfully added 14 new customers, which brings our year-to-date new customer wins to 33, including 11 in the power market and six automotive, two key markets where we continue to see strong demand.
Ryan: Additionally, there was a delay in certain orders principally from China. However, we believe we will be able to book orders and recognized revenue for many if not all of these customers in the coming quarters.
Ryan: As a reminder, China remains a relatively modest portion of our overall revenue.
Ryan: 17% of our year to date revenue as of Q3 2024.
Ryan: For Q3, we successfully added 14, new customers, which brings our year to date, new customer wins to 33, including 11 in the power market and six automotive two key markets, where we continue to see strong demand.
Ryan Benton: Turning to revenue on slide 15, we generate revenue from sales of our software and IP products. As a reminder, for a new customer or a new product sale to an existing customer, we generally recognize software license revenue upfront upon delivery of the licensed product. For the upsell of a product to an existing customer, for example, the sale of additional seat licenses or an extension of tenure, the license is typically recognized at the beginning of the renewal period. Maintenance and services revenue is recognized evenly over the contract term. The revenue recognition of SFP is generally straightforward since these products are usually sold without any additional performance obligation.
Ryan: Turning to revenue on slide 15, we.
Ryan: We generate revenue from sales of our software and IP products.
Ryan: As a reminder, for a new customer or a new product sale to an existing customer we generally recognize software license revenue upfront upon delivery of the license products.
Ryan: For the up sell the product to an existing customer for example, the sale of additional seat licenses or an extension of tenure.
Ryan: It is typically recognized at the beginning of the renewal period.
Ryan: Maintenance and services revenue is recognized evenly over the contract term.
Ryan: The revenue recognition of SMT is generally straightforward since these products are usually sold without any additional performance obligation.
Ryan Benton: Unless customization is involved, the revenue is typically recognized upon delivery of the technology license to the customer, or in some cases, once the cash is received from the customer. For the third quarter, we posted total revenue of $11 million down 27% year over year, primarily due to the delayed orders previously mentioned. Year-to-date through Q3, we recognize $41.8 million in total revenue. which is flat compared to the previous year.
Speaker Change: I'll ask customization involved.
Speaker Change: <unk> is typically recognized upon delivery of the technology license to the customer.
Speaker Change: Some cases once the cash is received from the customer.
Speaker Change: For the third quarter, we posted total revenue of $11 million down 27% year over year, primarily due to the delayed orders previously mentioned.
Speaker Change: Year to date through Q3, we recognized $41 8 million in total revenue.
Speaker Change: Which is flat compared to the previous year.
Ryan Benton: As we will see in the following slides, we are reiterating the FY 24 guidance we provided in the October 15 press release, which equates to what we believe will be record quarterly revenue in Q4 and double digit growth for the full year. The pie charts show the year-to-date splits. I will reference the third quarter splits in my remarks.
Speaker Change: We will see in the following slides we are reiterating the FY 'twenty guidance, we provided in the October 15th press release, which equates to what we believe will be record quarterly revenue in Q4 and double digit growth for the full year.
Speaker Change: The Pie chart show the year to date splits our referenced the third quarter splits in my remarks. However, please note that these along with 11 quarters of historical data are included in the financial supplement available on our Investor Relations website.
Ryan Benton: However, please note that these, along with 11 quarters of historical data, are included in the financial supplement available on our investor relations website. For the third quarter of 2024, approximately 62% of our revenue came from software life. while 38% was from maintenance and services. Year-to-date, the chart shows that software license revenue was a bit higher at 72% of total sales, and maintenance and services was a bit lower at 28%. Q3-24 year-to-date software license revenue of $30.1 million was down 2% year-over-year, which does not include the large TCAT order that was booked in Q4. to 324 year-to-date maintenance and services revenue of $11.7 million was up 5% year-over-year as we continue to build our recurring revenue base.
For the third quarter of 2020 for approximately 62% of our revenue came from software licensing, while 38% from maintenance and services.
Speaker Change: Year to date the chart shows that software license revenue was a bit higher at 72% of total bells and maintenance and services was a bit lower at 28%.
Speaker Change: Q3, 24 year to date software license revenue of $30 1 million was down 2% year over year, which does not include the large <unk> order that was booked in Q4.
Speaker Change: Q3, 24 year to date maintenance and services revenue of 11 $7 million.
Speaker Change: It was up 5% year over year as well.
Speaker Change: We continue to build our recurring revenue base.
Ryan Benton: On a product basis for the third quarter of 2024, TCAD revenue was $6.5 million, EDA revenue was $2.6 million, and SIP revenue was $1.8 million.
Speaker Change: On a product basis for the third quarter of 2020 for Teekay revenue was $6 5 million.
Speaker Change: EMEA revenue was $2 $6 million in Sip revenue was $1 8 million.
Ryan Benton: This brings product revenue on a year-to-day basis to the following. TCAD revenue of $27.5 million, or 66% of sales, EDA revenue of $10.3 million, 25% of sales, and SIP revenue of $4 million, 9% of sales. On a year-to-date basis, TCAT is up $3 million, or 12% year-over-year, even with the large FTCO order slipping into Q4. So TCAT is set up nicely to continue its solid growth trend. PDA on a year-to-date basis is down $0.99 or 8%. dip on a year-to-date basis is down $2.1 million or 34% year-to-date. to the still playing catch up from the delay we had in renewing a strategic resale agreement in Q2, as well as being impacted by the order delays in the Asia-Pacific region.
Speaker Change: This brings product revenue on a year to date basis to the following.
Speaker Change: <unk> revenue of $27 5 million or.
466% of sales NDA.
Speaker Change: EMEA revenue of $10 $3 million, 25% at Bell and Sip revenue of $4 million, 9% of sales.
Speaker Change: On a year to date basis peak at about $3 million or 12% year over year, even with the large <unk> orders slipping into Q4.
Speaker Change: So to get it set up nicely to continue its solid growth trends.
Speaker Change: EBITDA on a year to date basis was down <unk> 9 million or 8%.
Speaker Change: On a year to date basis was down $2 1 billion or 34% year to date.
Speaker Change: <unk> still playing catch up from the delay we had in renewing our strategic retail agreement in Q2.
Speaker Change: As well as being impacted by the order delays in the Asia Pacific region.
Ryan Benton: Although we aren't satisfied with the short-term results, we have high expectations for this product line in the future. There are numerous M&A opportunities to bolster this product line in particular to provide complementary products, technologies, and engineering teams, as well as that much needed revenue bulk and enhanced profitability. Turning to our split between geographic regions, for the third quarter of 2024, Asia Pacific revenues were $6.5 million, or 59% of sales. The Americas was $3.3 million for 30% of sales. and EMEA was $1.2 million for 11% of sales. On Q3-24 year-to-date basis, the Americas represented 37% of total sales, which is essentially the US.
Speaker Change: Although we arent satisfied with the short term results, we have high expectations for this product line in the future.
Speaker Change: There are numerous M&A opportunities to bolster this product line in particular to provide complementary products technology and engineering teams as well that much needed revenue bulk and enhanced profitability.
Speaker Change: Turning to our split between geographic regions for the third quarter of 2020 for Asia Pacific revenues were $6 5 million or 59% of sales.
Speaker Change: Americas was $3 3 million or 30% of sales.
Speaker Change: And EMEA was $1 2 million or 11% of sales.
Speaker Change: On Q3 to 24 year to date basis. The Americas represented 37% of total sales, which is essentially the U S.
Ryan Benton: Asia represented 53% of sales. EMEA was 10% of total sales, similar to historical levels.
Speaker Change: Asia represented 53% of sales EMEA was 10% of total sales similar to historical levels.
Ryan Benton: Before turning to gross margins, expenses, and profitability, I would like to note that I will be discussing non-GAAP results going forward. As a reminder, our GAAP financial results, along with a reconciliation between GAAP and non-GAAP results, can be found in our earnings press release, in the appendix of the presentation, and within the supplemental financials on our website. Gap gross margin for 2-3 was 75%. impacted by stock-based compensation of approximately $313,000 and $249,000 amortization of purchase intangibles. excluding those two items, non-GAAP gross margin was 80% in the third quarter, down from 85% for GAAP and non-GAAP alike in the same period last year.
Speaker Change: Before turning to gross margins expenses and profitability electing note that we'll be discussing non-GAAP results going forward.
Speaker Change: As a reminder, our GAAP financial results along with a reconciliation between GAAP and non-GAAP results can be found in our earnings press release, and the appendix of the presentation and within the supplemental financials on our website.
Speaker Change: GAAP gross margin for Q3 was 75%.
Speaker Change: Impacted by stock based compensation of approximately $313000 and $249000 amortization of purchased intangibles.
Speaker Change: Excluding those two items non-GAAP gross margin was 80% in the third quarter down from 85% for GAAP and non-GAAP alike in the same period last year.
Ryan Benton: This put us at 85% non-GAAP gross margin year-to-date. Our non-gap cost revenues, which is primarily the wages and related costs for the staff supporting our customers, are largely fixed in nature. non-GAAP cost of revenues for Q3 was $2.2 million, consistent with the previous quarter and the third quarter last year. This is partly where we believe we can gain leverage. As revenues increase, we expect non-GAAP gross margins to expand towards our long-term target of 90% plus.
Speaker Change: This put us at 85% non-GAAP gross margin year to date.
Speaker Change: Our non-GAAP cost of revenues, which is primarily the wages and related costs for the staff supporting our customers are largely fixed in nature.
Speaker Change: non-GAAP cost of revenues for Q3 was $2 $2 million consistent with the previous quarter and the third quarter of last year. This is partly where we believe we can gain leverage as revenues increase we expect non-GAAP gross margins to expand towards our long term target of 90% plus.
Ryan Benton: Turning to operating expenses, our GAAP operating expenses were $15.5 million, which includes $2.2 million in SBC expense and approximately $1.9 million legal fees and expenses related to an acquisition-related estimated litigation claim. Please refer to the press release we issued on July 24th and my remarks on our Q2 earnings call for more detail on the litigation claim and its impact on our financial results. Our non-GAAP operating expenses for the third quarter were $11.3 million, compared to $9.9 million in the same period last year. The increase in costs year over year was due to increases in general and administrative, followed by research and development in sales and marketing.
Turning to operating expenses, our GAAP operating expenses were $15 5 million.
Speaker Change: Which includes $2 2 million in SBC expense and approximately $1 9 billion legal fees and expenses related to an acquisition related estimated litigation claim.
Speaker Change: Please refer to the press release, we issued on July 24th and my remarks on our Q2 earnings call for more detail on the litigation claim and its impact on our financial results.
Speaker Change: Our non-GAAP operating expenses for the third quarter were $11 3 million compared.
Speaker Change: Compared to $9 9 million in the same period last year.
The increase in costs year over year was due to increases in general and administrative followed by our research and development and sales and marketing.
Ryan Benton: Consistent with the previous quarter, the increase in G&A expenses is largely due to the cost associated with becoming a public company. increases in R&D and sales and marketing expenses are a result of expanding our engineering and sales teams respectively. For Q3-24 year-to-date, non-GAAP operating expenses were 79% of sales. R&D with 26% of sales. Our ongoing investment in both advanced research and product development positions us to take advantage of an enormous EDA software market, which is expected to reach $22 billion by 2030, according to a study conducted by Grandview Research. Sales and marketing was 24% of sales.
Speaker Change: Consistent with the previous quarter the increase in G&A expenses was largely due to the costs associated with becoming a public company.
The increases in R&D and sales and marketing expenses are a result of expanding our engineering and sales teams respectively.
Speaker Change: For Q3 to 24 year to date non-GAAP operating expenses were 79% of sales.
Speaker Change: R&D was 26% sales our ongoing investments in both advanced research and product development positions us to take advantage of an enormous EDA software market, which is expected to reach $22 billion by 2030. According to a study conducted by <unk> research.
Speaker Change: Sales and marketing was 24% of sales we will continue to invest proportionately in this team as revenues grow.
Ryan Benton: We will continue to invest proportionately in this team as revenues grow. GNA was 29% of sales. Due to the semi-fixed nature of a lot of our GNA costs, we do not expect GNA costs to scale at the same rate of sales. We believe it can leverage the people and infrastructure that we have built out.
Speaker Change: G&A was 29% of sales due to the semi fixed nature of a lot of our G&A costs, we do not expect G&A cost to scale at the same rate of sales. We believe can leverage the people and infrastructure that we have built out.
Ryan Benton: So the net is that non-GAAP operating loss was $2.6 million compared to a non-GAAP operating income of $2.7 million in Q3 2023. The decline was largely due to the lower revenue amount recognized in the quarter. Q3 2024 year-to-date non-GAAP operating income and non-GAAP operating margin were $2.4 million and 6% respectively. Our net loss for the quarter was $6.6 million, which again, included the charges for stock-based compensation and the acquisition-related estimated litigation claim charge. Our non-GAAP net loss of the quarter was $1.8 million compared to the non-GAAP net income of $2.3 million in the same period last year.
So the net is that non-GAAP operating loss was $2 6 million compared.
Speaker Change: Compared to a non-GAAP operating income of $2 7 million in Q3 2023.
Speaker Change: The decline was largely due to the lower revenue amount recognized in the quarter.
Speaker Change: Q3, 2024 year to date, non-GAAP operating income and non-GAAP operating margin for $2 4 million and 6% respectively.
Speaker Change: Our net loss for the quarter was $6 $6 million, which again included the charges for stock based compensation and the acquisition related estimated litigation claim charge.
Speaker Change: Our non-GAAP net loss for the quarter was $1 8 million.
Speaker Change: Compared to the non-GAAP net income of $2 3 million in the same period last year.
Ryan Benton: Our EPS basic and diluted was a loss of 23 cents per share for T3. Non-GAAP EPS basic and diluted came in at a loss per share of $0.06 compared to non-GAAP EPS basic and diluted of $0.12 per share in the year ago period.
Speaker Change: Our EPS basic and diluted was a loss of 23 per share for Q3.
Speaker Change: non-GAAP EPS basic and diluted came in at a loss per share of <unk> compared to non-GAAP EPS basic and diluted of <unk> 12 per share in the year ago period.
Ryan Benton: Common Law Balance Sheet. We ended the September quarter with $100.4 million in cash, cash equivalents, and marketable security. For the third quarter, free cash flow was an outflow of $2.16 million, similar to the $1.84 million outflow in the same period last year. Our basic and diluted share count for the third quarter was 29 million shares. As to share count, following the IPO lockup expiration last week, approximately 2.9 million vested RSUs were released. Given the decline in our share price, we chose to utilize net settlement to minimize dilution. This resulted in the issuance of approximately 725,000 fewer shares for a net of 2.2 million shares, and the company utilizing approximately $5.3 million of its cash to settle the associated tax.
Speaker Change: A comment on our balance sheet.
We ended the September quarter with $104 million in cash cash equivalents and marketable securities.
Speaker Change: For the third quarter free cash flow was an outflow of $2. One 6 million similar to the 184 million outflow in the same period last year.
Speaker Change: Our basic and diluted share count for the third quarter was 29 million shares.
Speaker Change: As the share count.
Speaker Change: Following the IPO lockup expiration last week.
Ultimately $2 $9 billion <unk> were released.
Speaker Change: Given the decline in our share price, we chose to utilize net settlement to minimize dilution.
Speaker Change: This resulted in the issuance of approximately 725000 fewer shares for a net of $2 2 million shares in the company utilizing approximately $5 $3 million of its cash to settle the associated taxes.
Ryan Benton: As a result, as of last week, the company had approximately 28.5 million shares outstanding. We expect the shares outstanding at the end of T4 to be approximately 28.6 million.
Speaker Change: As a result as of last week. The company had approximately $28 5 million shares outstanding we expect the shares outstanding at the end of Q4 to be approximately $28 6 million.
Ryan Benton: On slide 17, I will now review the full year guidance, which is unchanged from the guidance we provided in our October 15 press release. For bookings, we expect gross bookings for the full year to be in the range of $64 to $67 million. which would represent a 10% to 15% increase from 2023. As Babak and I noted earlier, the updated forecast reflects macro uncertainty in Asia. Despite this near-term headwind, however, we still believe bookings remain a great leading indicator of performance and relative strength of the business. We continue to see strong customer demand across our key markets, driven by an increasing adoption of our software solutions and positive feedback from new and existing customers.
Speaker Change: On Slide 17, I will now review the full year guidance, which is unchanged from the guidance. We provided in our October 15th press release.
Speaker Change: For bookings, we expect gross bookings for the full year to be in the range of $64 million to $67 million.
Speaker Change: Which would represent a 10% to 15% increase from 2023.
Speaker Change: As Bob and I noted earlier, the updated forecast reflects macro uncertainty in Asia. Despite this near term headwind. However, we still believe bookings remain a great leading indicator of performance and relevant strength of the business.
Speaker Change: We continue to see strong customer demand across our key markets driven by an increasing adoption of our software solutions and positive feedback from new and existing customers.
Ryan Benton: This demand, coupled with our strategic initiatives and execution of our land and expanse strategy, gives us confidence in our ability to achieve our long-term targets, which we'll all discuss in a moment. We expect revenue for the full fiscal year to be in the range of $60 to $63 million, which would represent a 10 to 16 percent increase from 2023. This full year guidance applies a strong sequential rebound in Q4 for both bookings and revenue. Specifically, we expect Q4 bookings to be in the range of $18.5 million to $21.5 million, which would exceed what we believe was a record for quarterly bookings in Q2 2024.
Speaker Change: This demand coupled with our strategic initiatives and execution of our land and expand strategy gives us confident in our ability to achieve our long term targets, which ill discuss in a moment.
Speaker Change: We expect revenue for the full fiscal year to be in the range of 60% to $63 million.
Speaker Change: Which would represent a 10% to 16% increase from 2023.
Speaker Change: This full year guidance implied that strong sequential rebound in Q4 for both bookings and revenue.
Speaker Change: Specifically, we expect Q4 bookings to be in the range of $18 5 million to $21 5 million, which will exceed what we believe was a record for quarterly bookings in Q2 2024.
Ryan Benton: Likewise, we expect Q4 revenue to be in the range of $18.1 million to $21.2 million, which would exceed what we believe was a record for quarterly revenue in Q1 2024 of $15.9 million. This forecast includes approximately $2.8 million in revenue expected to be recognized in Q4 from the $5 million order received in the first week of the quarter. For non-GAP rest margins, we are at 85% year-to-date through Q3. Based upon expected strong Q4 revenues for the full year, we are forecasting non-GAAP gross margins to be in the range of 85% to 87%. For non-GAAP operating income for the full year, we're now expecting to be in the range of $5 to $8 million, which would be an increase from 2023 of between 14% and 82%.
Speaker Change: Likewise, we expect Q4 revenue to be in the range of $18 1 million to $21 2 million, which would exceed what we believe was a record for quarterly revenue in Q1 2024 of $15 9 million.
Speaker Change: This forecast includes approximately $2 8 million in revenue expected to be recognized in Q4 from the $5 million order received in the first week of the quarter.
Speaker Change: For non-GAAP gross margins were at 85% year to date through Q3.
Speaker Change: Based upon expected strong Q4 revenues for the full year, we are forecasting non-GAAP gross margins to be in the range of 85% to 87%.
Speaker Change: For non-GAAP operating income for the full year, we're now expecting to be in the range of $5 million to $8 million, which would be an increase from 2023 of between 14% and 82%.
Ryan Benton: Now let's move to slide 18 to review our long-term financial target. While we are disappointed with the near-term revisions to our guidance due to the challenges we faced this quarter, we are confident in our ability to regain momentum and execute on our long-term strategy. We continue to target 15% to 25% top-line growth, 90% non-GAAP gross margin. and 25% plus non-GAAP operating margin over the next several years. We expect to achieve these targets by expanding our presence in key end markets and pursuing the right strategic inorganic opportunity.
Speaker Change: Now, let's move to slide 18 to review, our long term financial targets.
While we are disappointed with the near term revisions to our guidance due to the challenges we faced this quarter, we're confident in our ability to regain momentum and execute on our long term strategy.
Speaker Change: We continue to target, 15% to 25% top line growth.
Speaker Change: 90% non-GAAP gross margin.
Speaker Change: And 25% plus non-GAAP operating margin over the next several years.
Speaker Change: We expect to achieve these targets by expanding our presence in key end markets and pursuing the right strategic inorganic opportunities.
Babak Taheri: With that, Babak and I would be happy to take your questions.
Speaker Change: With that Bob and I will be happy to take your questions operator.
Operator: Operator. Thank you.
Operator: As a reminder, to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. One moment for questions.
Speaker Change: Thank you as a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.
Speaker Change: One moment for questions.
Chris Sankar: Our first question comes from Chris Sankar with TD Cowen, you may proceed.
Speaker Change: Our first question comes from Chris Shankar with TD Cowen You May proceed.
Robert Mertens: Hi, this is Robert Mertens on the line. On behalf of CRISH, you mentioned that you signed 14 new customers in the quarter up from, I think, 10 wins last quarter, which was split sort of between power and auto and I think one solar customer. So, it looks like this quarter you added Foundry and Display, which is nice to see, but could you provide any more breakout maybe between where the main skew of these customers operate in?
Speaker Change: Hi, This is Robert Burns on the line.
Speaker Change: Chris you.
Speaker Change: You mentioned that you signed 14, new customers in the quarter up from I think 10 wins last quarter, which was split sort of between power in auto and I think one solar customer.
Speaker Change: Looks like this quarter you added foundering display, which is nice to see but could you provide any more break out maybe between where the main skew. These customers operate then was it primarily powered automotive or more evenly spread.
Babak Taheri: Was it primarily power and automotive or more evenly spread?
Babak Taheri: Yeah, so hi, this is Babak Taheri. 14 edition of new customers, new logos this quarter, 11 last quarter, just to be to get the record straight. Out of the 14, there were in Q3 of 2024, we had more power. Matter of fact, we had also Millero, that's US-based, as well as we had some, as Ryan mentioned, in automotive and display. But majority, over five of them were from power. If you think of our revenue for Q3 2024, in terms of markets, the top four were power in terms of landing, right, new logos. It was 58% of the lands were power.
Speaker Change: Yes.
Roberto: Hi, This is Roberto here.
Roberto: 14 addition of new customers new logos this quarter 11 last quarter just to be to.
Roberto: To get the record straight.
Roberto: The 2014.
Roberto: There.
Roberto: In Q3 of.
Roberto: <unk> 24, we had more power and matter of fact, we had.
Roberto: Also.
Roberto: Milagro and Thats U S U S based.
Roberto: As well as we had some.
As Ryan mentioned in automotive and display so but majority over five of them are from power. If you think of our revenue for Q3 2024 in terms of markets the top four where power.
Roberto: In terms of landing right new logos it was 58% of the lands.
Our power.
Babak Taheri: Neil Arrow was about 10%, Automotive was 8%, and IoT was 7%, and some foundries.
Roberto: <unk> was about 10% automotive was 8% and Iot was 7% and some foundry as well so.
Babak Taheri: Those are the top.
Roberto: Those are the top ones.
Speaker: Great, thank you. That's helpful.
Speaker Change: Great. Thank you that's helpful and.
Ryan Benton: And then just in terms of the guide for December, it looks like the implied OPEX is sort of flat, maybe up 25% quarter over quarter. How much of that would be seasonal factors in the compensation structure versus just general growth in the hiring?
And then just in terms of the guide for December It looks like Opex is sort of flat to maybe up 25% quarter over quarter.
Speaker Change: How much of that would be seasonal factors and the compensation structure versus just general growth in the hiring.
Ryan Benton: And is there any sort of directional guide you're comfortable giving into the first quarter next year?
Speaker Change: Is there any sort of directional guide you're comfortable giving into the first quarter next year.
Ryan Benton: Yeah, this is Ryan. I'll take that question. Similar to last year, there absolutely is a portion of those operating expenses that we expect to grow sequentially in the fourth quarter, really attributable to variable comps. Some of the compensation structures have yearly accelerators that get hit, depending on those levels, as well as there's also some one-off things that tend to happen in December.
Speaker Change: Yes.
Speaker Change: This is Ryan I'll take that question they are.
Speaker Change: Similar to last year, there absolutely is a portion of those operating expenses that we expect to grow sequentially in the fourth quarter really attributable to variable comp some of the compensation structures have.
Speaker Change: Yearly accelerators that hit get hit depending on on those bubbles.
Speaker Change: Well there is also some one off things that tend to tend to happen in December.
Speaker: We haven't really given guidance for 2025, so I won't comment on that. But again, I think you expect that some of the costs that we've added in Q4, we've built out the headcount, as we said, so there's obviously some natural growth that's happened in Q3 and Q4 as we've added staff. Got it. Okay.
We havent really given.
Speaker Change: We haven't really given guidance for 2025, so I won't comment on that but again I think you expect that.
Speaker Change: That some of the cost that we've added in Q4, we built out the head count as we said so there is obviously a natural some natural growth that's happened in Q3 and Q4 as we've added staff.
Speaker: Thank you.
Got it okay. Thank you I appreciate it.
Speaker: I appreciate it. Thank you.
Speaker Change: Thank you.
Charles Shi: Our next question comes from Charles Shi with Needham & Company. You may proceed. I do want to check in with you on the China revenue side, because mostly it's the sum of the shortfall in your China revenue that's causing you to move the four-year outlook down by roughly speaking $3 million. I recall right around the time you had the pre-announcement that you were speaking about maybe some of the Chinese customers were delaying the contract renewal. in light of the U.S. presidential election.
Speaker Change: Our next question comes from Charles <unk> with Needham <unk> Company you May proceed.
Speaker Change: Tom.
Tom: I'll do one.
Tom: Yes.
Tom: Second with you.
Tom: On the China rattling aside.
Tom: Yes.
Tom: Mostly.
Tom: Some of the shortfall in China revenue, that's causing you to move the whole year outlook down by roughly speaking.
Tom: Elliot.
Elliot: I recall right around the time you had the pre announcement.
Elliot: You were.
Elliot: Just thinking about maybe some of the cost of Chinese customers were delaying the contract renewals.
In light of the U S presidential election now the election is over.
Babak Taheri: Now the election's over, how is that conversation changing with your Chinese customers? In addition, I think in the prepared remarks, you said you expect to recoup some of the loss of sale with those Chinese customers. Is there a timeline for that? Are you expecting maybe in Q1 or Q2? Can you provide some specifics there?
Speaker Change: How is that the conversation.
Speaker Change: Changing out with Chinese customers.
Speaker Change: I think in the prepared remarks, you said.
Speaker Change: Back to recoup some of that lost a sale with those Chinese customers.
Do you is there a timeline for that are you expecting maybe in Q1 or Q2.
Speaker Change: Can you provide some specifics there thanks.
Babak Taheri: Hey, Charles, thank you for the question. This is Babak Taheri. Yes, last time we did the pre-release announcement, we stated it will take several quarters. And we still stand to say several quarters. As a matter of fact, We have seen some that we are working with customers meeting practically on a weekly and monthly basis that a few of them have the potential of closing this quarter, field Q1 and field Q2, I would say. So, the message we are trying to give is these are not lost opportunities. It has been a delayed opportunity, as Ryan stated.
Bill: Hey, Charles Thank you for your question. This is bill back to Harry.
Harry: Yes last time, we did the pre release announcement, we stated it will take several quarters.
Harry: And we still have time to take several quarters as a matter of fact.
Harry: We have seen some.
Harry: <unk>, we are working with customers meeting package here.
Harry: We can monthly basis.
Harry: A few of them have the potential of closing this quarter.
Harry: Q1, and Q2 I would say so.
The message we were trying to give you these are not lost opportunities.
Harry: It has been a delayed opportunity is.
Babak Taheri: Some of it has to do with the macroeconomics in Asia in general and China specific. And then also Having impact on decisions based on that as when to place the order and that's what we have seen. So we haven't seen any cancellation, it's a matter of delay and in summary we think in the next few quarters we'll close all those. And the last, I mean, the last color I want to add, as Ryan said, to date, our China revenue has been about 17%. So which is, we've always said 15 to 20%. So it doesn't mean that it's gone down.
Ryan: Ryan stated some of it has to do with the macro economics in Asia in general in China specific.
Ryan: And then also.
Ryan: Having impact.
On decisions based on that as well.
Ryan: Then to place the order and that's what we have seen so we haven't seen any cancellation, it's a matter of delay.
Ryan: And in summary, we think in the next few quarters will close all those aside.
And the last I mean, the last color I want that as Ryan said to date.
Ryan: Our China revenue has been about 17%, which is we've always said, 15% to 20%. So it doesn't mean that it's gone down.
Babak Taheri: Bottom line is our expectation for growth, as much as we thought, Some of that growth is delayed rather than canceled.
Ryan: Bottom line is that our expectation for growth as much as we thought.
Ryan: Some of that growth is delayed rather than canceled.
Speaker: Got it.
Ryan Benton: Obviously, the $5 million deal that was signed in the earlier part of this quarter probably kind of pushed up the Q4 revenue a little bit more than you originally planned, but that could potentially make the sequential growth in Q1 look a little bit lighter. But any directional color on the Q1, I know you're not guiding for 2025, but do you want to get a little bit sense on where you think Q1 revenue could potentially land, especially given that the base for Q4 is a little bit higher, but at the same time, it does sound like some of the delayed opportunity in Q3, Q4, some of that won't be fully recouped by the time you get into Q1.
Speaker Change: Got it.
Speaker Change: Obviously.
Speaker Change: The 5 million dollar deal.
Speaker Change: <unk> earlier part of this quarter, probably kind of could stop that the Q4 revenue outlook more than originally planned.
Speaker Change: Could that could potentially make the.
Speaker Change: Sequential growth from Q1 of carloads of the lighter but.
Speaker Change: Any directional color on the Q1, I know youre not guiding for qualified but we wanted to get a little bit SaaS.
Speaker Change: Where do you think Q1 revenue could potentially lad.
Especially given.
Speaker Change: The base.
Speaker Change: Lucky for us a little bit higher but up at the second time it does sound like some of the.
Speaker Change: Delayed opportunity.
Speaker Change: In Q3 Q4, some of that can be fully recouped by the time it gets into Q1. Thanks.
Ryan Benton: Yeah, this is Ryan. Maybe I'll take first step of that, Babak. So look, of course, as we as we kind of said in prepared remarks, you know, previously, we believe, you know, Q1 of 24 was a record for the company in terms of quarterly revenue, which was 15.9 million dollars.
Speaker Change: Yes. This is Ryan maybe I'll pick first step of that buyback. So look at of course as we as we kind of said in prepared remarks. Previously. We believe Q1 24 was a record for the company in terms of quarterly revenue, which was 15 9 million.
Ryan Benton: And so the range, the forecast range for revenue that we provide, you know, for the fourth quarter of this year is, you know, obviously 18.1 to 21.2 million will be, you know, anywhere in that range will be a substantial, should be a substantial, you know, record revenue quarter for the company.
And so the range the forecast range for revenue and we've provided for.
Speaker Change: For the fourth quarter.
This year is.
Speaker Change: Obviously 18, 1% to $21 2 million.
Speaker Change: Anywhere in that range will be a substantial should be a substantial.
A record revenue quarter for the company again.
Ryan Benton: You know, again, we haven't we haven't given guidance yet at Q1, don't want to talk about Q1, but a more reasonable approach would be to, again, to look at Q1 and 24 and think of sequential, think of that as a good comp rather than looking at Q4.
Again, we haven't we haven't given guidance at Q1, I don't want to talk about Q1, but having a more reasonable approach would be to again to look at Q1 at 24 and think of sequential think of that as a good comp rather than looking at Q4.
Speaker: Thank you.
Speaker Change: Thank you.
Operator: And as a reminder, to ask a question, please press star 1-1 on your telephone.
Speaker Change: Thank you and as a reminder to ask a question. Please press star one on your telephone.
Craig Ellis: Our next question comes from Craig Ellis with B. Reilly Securities. He may proceed.
Speaker Change: Our next question comes from Craig Ellis with B Riley Securities You May proceed.
Craig Ellis: Yeah, thanks for taking the question, guys. I wanted to go back to the second five million tranche on the FTCO deal that booked here in early 4Q and just try and get a better understanding of what some of the project milestones are related to that. And since this is the second element that's that's reprised with this customer, is there potential for further such extensions to the deal or will this really take the deal to its natural fullness?
Craig Ellis: Yes, thanks for taking the question guys. So I wanted to go back to.
Craig Ellis: The second $5 million tranche.
Craig Ellis: FTC deal.
Craig Ellis: <unk> booked here in early <unk> in gist.
Craig Ellis: Try and get a better understanding of what some of the project milestones are related to that and since this is the second.
Craig Ellis: Element.
That's right Brad with this customer is there potential for further such extensions to the deal or will this really take the deal too.
Speaker Change: Two it's natural for us.
Babak Taheri: Hey, Greg, thank you for asking. That's a great question. We've said historically and continue on our same path that even though we sell new technologies, we've always tried to provide solutions that address issues three to five years down the road. And by the nature of FTCO that we have actually worked on for the past four and a half years and now soon to be five, we've always said that these kind of products are suited for enhancing yields, getting to market faster, and lowering costs for manufacturing. And we've said always that one element of these software tools and AI platforms are always going to need an improvement, an enhancement based on what product lines our customers run into their fab and which fab it is.
Speaker Change: Hey, Greg Thank you for asking.
Speaker Change: Great question.
Speaker Change: We've said historically and continue on our same path that even though we found new technologies.
Speaker Change: We've always tried to provide solutions that address issues three to five years down the road.
Speaker Change: And by the nature of FTC.
Speaker Change: And that we have actually worked on in for the past four and half years and now soon to be five.
We've always said that.
Speaker Change: These kind of these kind of products.
Speaker Change: Suited for.
Speaker Change: Enhancing yields getting to market faster and lowering costs for manufacturing and we've said all these that one element.
Speaker Change: These software tools and AI Todd.
Speaker Change: Platforms are always.
Speaker Change: Going to need.
Speaker Change: An improvement and enhancement based on blood product lines.
Speaker Change: Our customers run into their fab and we travel days so.
Babak Taheri: So, the addition that we had in Q3 was a natural extension that we knew and we've been working on with the customer on what we call wafer-level elements and physics modeling. Rather than going from a simple process level, we are actually getting to more of the wafer-level enhancements and improvements on our modeling. And that was the natural course of it. And that's what we started. And also we proposed an enhanced version of what we thought are newer algorithms and better solutions for what we call parasitic extraction. And that's what extended this work. And as we go along the path of exploration and see how we can improve this thing, I foresee and expect that this continues to grow.
Speaker Change: In addition that we had in Q3 was a natural extension that we knew.
Speaker Change: And we've been working on with our customer on what we called wafer level a record level.
Speaker Change: Elements and physics modeling.
Speaker Change: Rather than going from simple process level, we're actually getting to more of the wafer level enhancements and improvements in our modeling.
Speaker Change: And that's that was a natural.
Speaker Change: Of course, some of it and that's what we started and also.
Speaker Change: We propose an.
Speaker Change: An enhanced version of what we thought our near algorithms and better solutions for what we call a parasitic extraction and that's that's what extended this work.
Speaker Change: And as we go along the path of exploration and see how we can improve this thing.
Speaker Change: Foresee and expect that.
Babak Taheri: Again, we are on the cutting edge of the technology. And every time we're in the cutting edge of the technology, I assume we have solved all the problems. But there's always something that requires more attention, more details, more enhancements. And those are what we consider to be our extension to our projects. And I expect that to keep on going for the years to come.
Speaker Change: This continues to grow and again, we are we are on the cutting edge of the technology and every time, we are in the cutting edge of technology I assume you have solved all the problems, but there is always something that that requires more attention more details more enhancements and <unk>.
Speaker Change: And those are what we consider to be our.
Speaker Change: Our extension to our projects and I expect that to.
Speaker Change: To keep on going.
Babak Taheri: And because of the fact that technology changes, the technology gets improved, requirements for technology are different than what it was four years ago, and enhancements are needed, and advanced enhancements are needed. So we will continue on this path with this customer.
Speaker Change: And for the years to come so and because of the fact that technology.
Speaker Change: Changes that technology gets improved requirements, where technology are are different than what it was four years ago and enhancements are needed and advanced enhancements are needed. So we will continue on this path with this customer.
Babak Taheri: And as we announced also on our advanced CMOS, we've been working for a couple of years on TCAD with our advanced CMOS customer that We are actually working with them in order to get them switched into FTCO, and that's our next step in growing that whole business and that market.
Speaker Change: And as we announced also on our advanced Cmos. We are we have been working for a couple of areas.
Speaker Change: On T <unk> with our advanced seamless customer debt.
Speaker Change: We are actually working with them.
Speaker Change: In order to get them switched into F. Tcl and that's our next step and growing that Tam that whole business in that market.
Speaker: Got it.
Speaker: That's very helpful, Babak. Thank you.
Speaker Change: Got it that's very helpful. Thank you and then.
Speaker: And then I'll switch gears. M&A was brought up a couple times as an important part of the growth strategy and how you'll get to longer term targets.
Speaker Change: I'll switch gears.
Speaker Change: M&A was first brought up a couple of times.
Speaker Change: An important part of our growth strategy.
Speaker Change: And how youll get to longer term targets.
Babak Taheri: Not a new strategic thrust for the company, but I was wondering if there's any new information you can share with us just in terms of how things are progressing with funnel management and getting closer to selecting potential targets. Thank you. So that's a great question. No, as you know, we have the funnel, we have been working through it. We have narrowed it down much, much closer and we've started discussions with potentials and that's a vehicle we have. But as you know, we have a very high bar in terms of our requirements for acquisitions and the ones that we are looking at fall in that category and we're working very hard to see how fast and how quick we can close them.
Speaker Change: Not a new.
Speaker Change: Strategic thrust for the company Petrobras wondering if theyre semi.
Speaker Change: New information you can share with us just in terms of how things are progressing with final management and getting closer to.
Speaker Change: Selecting potential targets. Thank you.
Speaker Change: So good that's a great question no as you know we have the funnel we have been working through it.
Speaker Change: We have narrowed it down much much closer and we've done we have started discussions with with potentials.
Speaker Change: <unk>.
And that's that's a recall we have but as you know we have a very high bar in terms of our requirements for our acquisitions and the ones that we're looking at are falling that category and.
Speaker Change: We're working very hard to see how fast and how quick we can close them. So.
Speaker: Got it.
Speaker: Thanks, guys. Thank you.
Speaker Change: Got it thanks guys.
Babak Taheri: I would now like to turn the call back over to Babak Taheri for any closing remarks. Yes, thank you very much. I wanted to thank all of you for joining us on this call. We always enjoyed having this conversation and be transparent to the public, to the public as well as our investors and analysts. We welcome any questions, follow-ons and thanks again. I appreciate your time for joining. Thank you.
Speaker Change: Thank you I would now like to turn the call back over to go back to Harry for any closing remarks.
Harry: Yes. Thank you very much I wanted to thank all of you for joining us on this call we always enjoyed.
Harry: Having this conversation and be transparent.
Harry: To the public.
Harry: And.
Harry: To the public as well as our investors.
Harry: An analyst.
We welcome any questions follow ons and thanks again I appreciate your time for joining us.
Operator: This concludes the conference. Thank you for your participation.
Speaker Change: Thank you. This concludes the conference. Thank you for your participation you may now disconnect.
Operator: You may now disconnect.
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