Q2 2025 Arteris Inc Earnings Call

Operator: Good afternoon, everyone, and welcome to the Arteris second quarter 2025 earnings call. Please note that this call is being recorded and simultaneously webcast. All material contained in the webcast is sole property and copyright of Arteris Inc. with all rights reserved. For opening remarks and introductions, I will now turn the call over to Erica Mannion of Sapphire Investor Relations. Please go ahead.

Good afternoon, everyone, and welcome to the Arteris Second Quarter 2025 Earnings Call.

Please note that this call is being recorded and simultaneously webcast, all material. Contained in the webcast is sold property and copyright of our terrorists Inc with all rights reserved

For opening remarks. Introductions, I will now turn the call over to Erica Manion of sapphire investor relations. Please go ahead.

Erica Mannion: Thank you, and good afternoon. With me today from Arteris are Charlie Janac, Chief Executive Officer, and Nick Hawkins, Chief Financial Officer. Charlie will begin with a brief review of the business results for the second quarter ended June 30, 2025. Nick will review the financial results for the second quarter, followed by the company's outlook for the third quarter and the full year of 2025. We will then open the call for questions. Before we begin, I'd like to remind you that management will make statements during this call that are forward-looking statements within the meaning of federal securities laws. These statements are based on management's current expectations and assumptions and involve material risks and uncertainties that could cause actual results or events to differ materially from those anticipated, and you should not place undue reliance on forward-looking statements.

Thank you and good afternoon with me today from our terrorists, or Charlie, Janet chief executive officer, and Nick Hawkins, Chief Financial Officer. Charlie will begin.

With a brief review of the business results. For the second quarter end of June, 3020 2025 Nic will review the financial results for the second quarter followed by the company's outlook for the third quarter. And the full year of 2025 we will then open the call for questions.

Before we begin, I'd like to remind you, that management will make statements during this call that are forward-looking statements within the meeting of federal Securities laws.

Erica Mannion: Additional information regarding these risks, uncertainties, and factors that could cause actual results to differ appear in the press release Arteris issued today and in the documents and reports filed by Arteris from time to time with the Securities and Exchange Commission. Please note, during this call, we will cite certain non-GAAP measures, including, among others, non-GAAP net loss, non-GAAP net loss per share, and free cash flow, which are not measures prepared in accordance with US GAAP. These non-GAAP measures are presented as we believe that they provide investors with a means of evaluating and understanding how the company's management evaluates the company's operating performance. These non-GAAP measures should not be considered in isolation from, as substitutes for, or superior to financial measures prepared in accordance with US GAAP.

These statements are based on management's current expectations and assumptions and involve material risks and uncertainties that could cause actual results or events to differ materially from those anticipated. You should not place undue reliance on forward-looking statements.

Additional information regarding these risks uncertainties and factors that could cause actual results to differ appear in the press release or terrorists issued today. And in the documents and reports filed by our terrorist

From time to time with the Securities and Exchange Commission.

please note during this call, we will say certain non-gaap measures including among others, non-gaap net loss, non-gaap, net loss, per share and free cash flow, which are not measures prepared in accordance with us, gaap,

Is operating performance.

Erica Mannion: A reconciliation of these non-GAAP measures to the nearest GAAP measure can be found in the press release for the quarter ended June 30, 2025. In addition, for a definition of certain of the key performance indicators used in this presentation, such as annual contract value, confirmed design starts, and remaining performance obligations, please see the press release for the quarter ended June 30, 2025. These key performance indicators are presented for supplemental informational purposes only, should not be considered a substitute for financial information presented in accordance with GAAP, and may differ from similarly titled metrics or measures used by other companies, securities analysts, or investors. Listeners who do not have a copy of the press release for the quarter ended June 30, 2025 may obtain a copy by visiting the Investor Relations section of the company's website.

These non-gaap measures should not be considered in isolation from as substitutes for or Superior to financial measures prepared in accordance with the US. Gaap

A Reconciliation of these non-gaap measures to the nearest Gap measure. Can be found in the press release for the quarter. End of June 3025.

In addition, for a definition of certain key performance indicators used in this presentation, such as Annual Contract Value, Confirmed Design Stars, and Remaining Performance Obligations, please see the press release for the quarter ended June 30, 2025.

Erica Mannion: In addition, management will be referring to Q2 2025 earnings presentation, which can be found in the Investor Relations section of the company's website under the Events and Presentations tab. Now, I will turn the call over to Charlie.

These key performance indicators are presented for supplemental information purposes. Only should not be considered a substitute for financial information presented in accordance with gaap and may differ from similarly titled metrics or measures used by other companies. Securities analysts or investors listeners. Who do not have a copy of the press release for the quarter. End of June, 3020 2025 May obtain a copy of that by visiting, the investor relations section of the company's website.

In addition management will be referring to Q2 2025 earnings presentation, which can be found in the investor relations section of the company's website, under the events and presentations table.

Charlie Janac: Thank you, Erica, and thanks to everyone for joining us on our call today. In the second quarter of 2025, we achieved record annual contract value plus royalties of 69.1 million. We exited the quarter with 99.3 million in remaining performance obligations, or RPO, highlighting the growing demand for our system IP technology. During the second quarter, we saw increased adoption, particularly in enterprise computing and automotive applications, driven largely by the proliferation of AI computing, where the speed and reliability of data movement enabled by Arteris is paramount. One of these strategic wins was AMD, a global leader in high performance and adaptive computing in a top 10 semiconductor company by revenue, which signed an agreement to utilize Arteris FlexGen smart network on chip IP, the technology we announced earlier this year.

Now, I will turn the call over to Charlie.

Thank you, Erica. And thanks to everyone for joining us on our call today.

in the second quarter of 2025, we achieved record annual contract Value Plus royalties of 69.1 million

We exited the quarter with $99.3 million in remaining performance obligations, or RPO, highlighting the growing demand for our system IP technology.

During the second quarter, we saw increased adoption particularly in Enterprise Computing and Automotive applications.

driven largely by proliferation of AI Computing, where the speed and reliability of data movement enabled by, our terrorists is Paramount,

1 of these strategic wins was AMD.

Charlie Janac: FlexGen will aim to provide high-performance data transport in AMD chiplets, powering AI across AMD's broad portfolio, which spans from data centers to edge and end devices. It will also be used in combination with AMD Infinity Fabric Interconnect, underscoring the increasing complexity of modern SOCs and chiplet-based architectures, which now require multiple, highly specialized interconnects or NOCs. In addition to the AMD relationship, we now have over two dozen FlexGen installations at multiple customers and anticipate that this product will contribute to our revenue over time. We believe FlexGen is a breakthrough technology in terms of productivity and optimization of SOC data movement. I'm proud that Arteris was recently recognized in the eighth annual AI Breaks Awards, with FlexGen winning the AI Engineering Innovation Award from among the over 5,000 global nominations.

A global leader in high-performance and adaptive Computing and the top 10 Semiconductor Company by Revenue, which signed the agreement to utilize our terrorists, flexion smart Network on chip. It the technology we announced earlier this year.

Legend will aim to provide high-performance data transport in AMD chiplets, powering AI across AMD's broad portfolio, which spans from data centers to edge and end devices.

It will also be used in combination with AMD Infinity fabric. Interconnect underscoring, the increasing complexity of modern slc's and chiplet based architectures which now require multiple highly Specialized interconnects or nox.

In addition to the AMD relationship, we now have over 2, dozen Flex, Jen, installations and multiple customers and anticipate that this product will contribute to our Revenue over time.

We believe FlexGen is a breakthrough technology in terms of productivity and optimization of SoC data movement.

Charlie Janac: FlexGen was recognized for its ability to successfully automate critical aspects of NOC IP creation, ensuring rapid correct-by-design interconnect fabrics that optimize performance and efficiency of AI-driven SOCs. Another recent AI-related customer win was Railchip, a fabulous semiconductor provider that specializes in developing data center ASICs and processors for high-bandwidth applications, including cloud servers, interconnect computing, and blockchain computing, among others. As the semiconductor industry accelerates efforts to increase performance and efficiency, especially driven by AI workloads, we are seeing a growing shift from traditional monolithic chips toward multi-die or chiplet architectures in the AI era. Consequently, during the second quarter, we announced an expansion of our multi-die solution, which we believe delivers further foundational technology for rapid chiplet-based innovation.

I'm proud that our Terrace was recently recognized in the 8th Annual AI breakthrough Awards with flexion winning the AI engineering Innovation award from among to the over 5,000 Global nominations.

Flex Jen was recognized for its ability to successfully, automate critical aspects of knock IP creation, ensuring rapid correct by Design, interconnect Fabrics that optimize performance and efficiency of AI driven soc's.

Another reason AI-related customer win was Railchip, a fabulous semiconductor provider that specializes in developing data center A6 processors for high-bandwidth applications, including cloud servers, interconnect computing, and blockchain computing, among others.

As the semiconductor industry accelerates efforts to increase performance and efficiency, it is especially driven by our workloads.

We are seeing a growing shift from traditional monolithic chips toward multi, die or chiplet, architectures in the AI era.

Charlie Janac: This includes broader standard support for the Universal Chiplet Interconnect Express, or UCIE, collaboration and extended support for ARM/EMBA protocols, chiplet interface collaborations with Synopsys and Cadence, and RISC-V ecosystem support with partners such as Andes, SciFi, and Tenstorent. Moreover, the Arteris expanded multi-die solution has been developed in close partnership with key customers who are increasingly designing chiplets such as Renesas. For example, Arteris Technologies is used to provide underlying data transport and connectivity in the fifth generation of the ArCar automotive silicon developed by the high-performance computing SOC business unit. Arteris multi-die solutions help Renesas deliver on the integration and scalability offered by multi-die SOCs as AI applications push the limit of performance and power efficiency. Lastly, as the number of chiplets in multi-die SOCs increases, so does the underlying number of individual IP blocks.

Consequently, during the second quarter, we announced an expansion of our multi-day solution, which we believe delivers further foundational technology for rapid chip-based innovation.

This includes broader standard support for the universal chiplet, interconnect Express or ucie collaboration and extended support for armed and by protocols.

Actions with synopsis and cadence and risk. 5E, support with partners such as Andes, sci-fi, and Storage.

Moreover, the arteries, expanded multi-disc solution has been developed in close partnership with key customers who are increasingly designing chiplets, such as Renaissance.

For example.

Our terrorists Technologies is used to provide underlying data transport and connectivity in a fifth generation of the arar automotive silicon developed by the high performance Computing associate business unit.

Our terrorists multi Solutions helps deliver on the integration and scalability offered by multi soc's as AI applications push the limit of performance and power efficiency.

Charlie Janac: As such, it becomes increasingly important to properly and reliably package and prepare hundreds or even thousands of these IP components for effective integration and reuse across SOCs, chiplets, and complex IP subsystems. To capitalize on this trend in the second quarter, we announced Magiland Packaging, a new software product designed to automate IP packaging to simplify and speed up the process of assembling silicon chiplets and chips. Utilizing the latest version of the IEEE 6085 IP Exact standard, Magiland Packaging is designed to work seamlessly with industry tools and silicon IP, with the goal of helping companies meet increasing design demands while reducing costly errors and delays associated with integrating an ever-growing number of IP blocks and the associated rising system complexity.

lastly, as the number of triplets in multi-day Associates increases so does the underlying number of individual IP blocks

as such he becomes increasingly important to properly and reliably package and prepare hundreds, or even thousands of these IP components for Effective integration and reuse across soc's chiplets and complex, IP subsystems

To capitalize on this trend in the second quarter we announced madelin packaging. A new software product designed to automate IP packaging to simplify and speed up the process of assembling silicon chiplets and chips.

Charlie Janac: We believe the scale and scope of our opportunity remain robust, supported by our current products and strong product pipeline of new silicon system IP technologies, as well as growing relationships with the largest and most advanced electronics companies in the world. Our customers continue to innovate in exciting high-growth areas, including across multiple applications of AI from data centers to the edge, autonomous driving, advanced communications, consumer, and industrial use cases. While we continue to diligently monitor the current global economic uncertainty, this did not lead to any deal cancellations or delays in the second quarter. In addition, we are seeing opportunities for customers to accelerate outsourcing of their system IP needs to Arteris in order to accelerate their products' time to market, reduce their own costs, and increase their operating efficiencies. Nick will cover these impacts more when he discusses our guidance.

Utilizing the latest version of the I Triple E 6085 IP exact standard Malin packaging is designed to work seamlessly with industry tools, and silicon IP, with the goal of helping companies, meet increasing design demands, while reducing costly errors and delays associated with integrating an Ever growing number of Ip blocks and the associated Rising system complexity.

We believe the scale and scope of our opportunity remain robust supported by our current products and strong product pipeline of new silicon system IP Technologies, as well as growing relationships with the largest and most advanced electronics companies in the world.

Our customers continue to innovate in exciting high growth areas including across multiple applications of AI from data centers to the edge autonomous driving Advanced Communications consumer and Industrial use cases.

while we continue to diligently monitor, the current global economic uncertainty

This did not lead to any deal cancellations or delays in the second quarter.

In addition, we are seeing opportunities for customers to accelerate outsourcing of their systems. IP needs to our customers in order to accelerate their product's time to market, reduce their own costs, and increase operating efficiencies.

Charlie Janac: With that, I'd like to turn it over to Nick to discuss our financial results in more detail.

Nick will cover these impacts more when he discusses our guidance.

Nick Hawkins: Thank you, Charlie, and good afternoon, everyone. As I review our second quarter results today, please note that I'll be referring to GAAP as well as non-GAAP metrics. The reconciliation of GAAP to non-GAAP financials is included in today's earnings release, which is available on our website. Also, as a reminder, I will be referring to the Q2 2025 earnings presentation, which can be found on the Investor Relations section of our company's website under the Events and Presentations tab. We had a strong second quarter characterized by meeting or beating our guidance on all key financial metrics. Turning to slide five of the presentation, total revenue for the second quarter was $16.5 million, up 13% year over year, and at the top end of our guidance range.

With that. I'd like to turn it over to Nick to discuss our financial results in more detail.

Thank you, Charlie and good afternoon everyone.

As our review, our second quarter results today, please note that I'll be referring to Gap as well as non-gaap metrics.

For reconciliation of gaap to non-gaap financials is included in today's earnings release, which is available on our website.

Also, as a reminder, I will be referring to the 2q 2025 earnings presentation, which can be found on the investor relations section of our company's website under the events and presentations table.

We had a strong second quarter characterized by meeting or beating our guidance on all key financial metrics.

Turning to slide 5 of the presentation.

Total revenue for the second quarter was $16.5 million, up 13% year-over-year and at the top end of our guidance range.

Nick Hawkins: At the end of the second quarter, annual contract value, or ACV, plus royalties was $69.1 million, up 15% year over year, above the midpoint of our guidance range, our record high for the company. Remaining performance obligations, or RPO, at the end of the second quarter were $99.3 million, representing a 28% year-over-year increase, once again a new high. Non-GAAP gross profit for the quarter was $15 million, representing a gross margin of 91%. GAAP gross profit in the quarter was $14.8 million, representing a gross margin of 89%. Now turning to slide six, non-GAAP operating expense in the quarter was $18.6 million, roughly flat sequentially, and 10% high year over year. We continue to scale investments in our R&D and field application engineering teams that drive technology innovations and solution support. Total GAAP operating expense for the second quarter was $23 million, representing a 12% year-over-year increase.

At the end of the second quarter, annual contract value or ACV plus royalties. Was 69.1 Million up, 15% year-over-year?

And range and a record high for the company.

Remaining performance obligations or RPO. At the end of the second quarter were 99.3 million representing a 28% year-over-year increase once again a new high.

Non-gaap gross profit for the quarter was 15 million representing, a gross margin of 91%.

Gap. Gross profit in the quarter was 14.8 million representing gross margin of 89%.

Now, turning to slide 6.

Non-gaap operating expense in the quarter was 18.6 Million, roughly flat sequentially and 10% higher year-over-year.

That drive technology Innovations and solutions sport.

Total Gap operating expense for the second quarter was 23 million representing a 12% year-over-year, increase.

Nick Hawkins: As we look ahead, we plan to focus spending on strategically critical areas, in particular to help drive new product development, enhance customer support, and expand the geographic and key account reach of our global sales team. We believe that these ongoing investments can help accelerate our top-line growth in the coming years. At the same time, we are delivering operating leverage by controlling our G&A spending, which has remained broadly flat on a non-GAAP basis for approximately three years. Non-GAAP operating loss in the quarter was $3.5 million, in line with our guidance and flat year-over-year. GAAP operating loss for the second quarter was $8.2 million, compared to a loss of $7.4 million in the prior year period. Non-GAAP net loss for the quarter was $4.4 million, or diluted net loss per share of 11 cents, based on approximately 41.8 million weighted average diluted shares outstanding.

As we look ahead, we plan to focus spending on. Strategically critical areas in particular, to help Drive new product development, enhance customer support and expand the geographic and Care account reach of our Global sales team.

We believe that these ongoing Investments can help accelerate our Topline growth in the coming years.

at the same time we are delivering operating leverage by controlling our GNA spending

Which has remained broadly flat on a long gap basis for approximately three years.

Non-gaap operating loss in the quarter was 3.5 million in line with our guidance and flat year-over-year.

For the second quarter, the loss was $8.2 million compared to a loss of $7.4 million in the prior year period.

Non-gaap net loss for the quarter was 4.4, million or diluted net loss, per share of 11 cents.

Nick Hawkins: GAAP net loss for the quarter was $9.1 million, or diluted net loss per share of 22 cents. Moving to slide seven and turning to the balance sheet and cash flow, we ended the quarter with $53.9 million in cash, cash equivalents, and investments, and had no financial debt. Free cash flow, which includes capital expenditure, was negative $2.8 million for the second quarter, approximately at the midpoint of our guidance range. I would now like to turn to the outlook for our third quarter and the full year 2025 and refer now to slide eight. For the third quarter of 2025, we expect ACV plus royalties of $69.5 million to $72.5 million, revenue of $16.8 million to $17.2 million, with non-GAAP operating loss of $3 to $4 million, and non-GAAP free cash flow of $0.5 million to $3.5 million.

Based on approximately 41.8 million weighted, average diluted shares outstanding.

Gap. Net loss for the quarter was 9.1 million or diluted net loss, per share of 22 cents.

Moving to slide 7 and turning to the balance sheet and cash flow.

We entered the quarter with 53.9 million in cash cash equivalents and Investments.

And have no financial debt.

Free cash flow, which includes capital expenditure, was approximately $2.8 million for the second quarter, next to the midpoint of our guidance range.

I would now like to turn to the outlook for our third quarter and the full year 2025 and refer. Now to slide 8

For the third quarter of 2025, we expect ACB, plus royalties of 69.5 million to 72.5 million.

Revenue of 16.8 million to 17.2 million.

With non-gaap, operating loss of 3 to 4 million.

And non-gaap, free cash flow of 0.5 million to 3.5 million.

Nick Hawkins: For the full year 2025, our guidance is as follows: ACV plus royalties to exit 2025 at $72 million to $78 million, revenue of $66 million to $70 million, non-GAAP operating loss of between $10.5 million to $15.5 million, and non-GAAP free cash flow of $1 million to $7 million. Our OPEX is currently running higher than previously expected, predominantly as a result of the weaker US dollar, especially against the euro. Although the US dollar has strengthened somewhat in recent days, in assessing our non-GAAP operating loss guidance, we have assumed that the recent prevailing foreign exchange rates remain at these levels for the remainder of 2025. Despite the near-term impacts of foreign exchange fluctuations, we remain encouraged by our strong deal execution, witnessed by the 28% year-over-year growth in RPO at the end of the second quarter.

Philadelphia 2025. Our guidance is as far as.

ACV plus royalties to exit 2025 at 72 million to 78 million.

Revenue of 66 million to 70 million.

Non-gaap operating loss of between 10.5 million to 15.5 million.

And non-gaap, free cash flow of 1 million to 7 million.

Our Opex is currently running higher than previously expected, predominantly as a result of the weaker US dollar, especially against the euro.

Although the US dollar has strengthened somewhat in recent days in assessing our non-gaap operating loss and guidance, we have assumed that the recent prevailing foreign exchange rates remain at these levels for the remainder of 2025.

Nick Hawkins: Reiterating the point raised earlier by Charlie, we are seeing promising signs of accelerated interest by some major customers to increase their outsourcing of system IP products to Arteris. With that, I will turn the call back to the operator for the Q&A portion of our call. Operator.

Despite the near-term. Impacts of Foreign Exchange fluctuations, we remain encouraged by our strong deal execution witnessed by the 28% year-over-year growth in RPO. At the end of the second quarter,

reiterating the point raised earlier by Charlie. We are seeing promising signs of accelerated interest by some major customers to increase their Outsourcing of the system IP products to our Terrace.

With that, I will turn the call back to the operator, for the Q&A portion of our call operator.

Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star, followed by the number one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star, followed by the number two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from the line of Joshua Buckletter from TD Cannon. Your line is now open. Please go ahead.

Thank you.

Ladies and gentlemen, we will now begin the question and answer session. Should you have a question please? Press the star, followed by the number 1 on your touchtone phone, you will hear a prompt that your hand has been raised. Should you wish to decline from the polling process? Please press the star, followed by the number 2.

If you are using a speaker-phone, please lift the handset. Before pressing any Keys 1 moment, please for your first question.

Josh Buchalter: Hey, guys. Thank you for taking my questions, and congrats on the results on the AMD announcement yesterday. I wanted to ask about that. Any details you can share on the scope? You know, the press release named pretty much all of their products. I believe AMD had been an existing partner of yours. So maybe you could talk through, you know, how they're using your IP, and you know, they've been providing chiplets for a while. So what are you guys bringing to the table, and you know, what led them to need to use you guys more expansively going forward? Thank you.

Your first question comes from the line of Joshua Buchalter from TV Calendar. Your line is now open. Please go ahead.

How they're using your IP and and you know they've they've been providing chiplets for a while. So so what do you guys bringing to the table? And you know what led them to to need to use you guys more expansively going forward. Thank you.

Nick Hawkins: I don't know whether we've lost Charlie. Charlie, you're on mute.

I don't know whether we've lost Charlie, Charlie, you're on mute.

Charlie Janac: Apologies. Sorry about that. Thank you. So yes. So in February, we announced the FlexGen product, which basically allows higher levels of productivity and also some advantages in PPA in terms of wire length. Basically, AMD extensively evaluated this product, including some benchmarks against competitive alternatives, and they basically chose that as the best product for them going forward. So what we bring to the table is the new innovative FlexGen technology, and you know, AMD basically decided to apply it to a variety of products, including AI data center chiplets.

Apologies, sorry about that, thank you. Um, so um, yes, so in February, we announced the, uh, the flagship product.

Um uh which basically allows higher levels of productivity and also some advantages in PPA uh in terms of wire length.

Um, basically AMD extensively evaluated, this product, including, uh, uh, uh, some benchmarks against, uh, competitive Alternatives. And they, uh, they basically, uh, chose that as the, uh, uh, the best product for them, uh, going forward. So what we bring to the table is the, uh, the new, uh, Innovative flexion technology and, uh, you know, AMD basically decided to apply it to a variety of products, including AI, uh, Data Center chiplets.

Josh Buchalter: Okay. Thank you. And then for my follow-up, how should we think about this layering into the model from a timeline and magnitude perspective? I believe FlexGen has an ASP that's up 30% gen to gen. So you know, how meaningful can this be to the model? Thank you and congrats again.

Okay, thank you. And then, um, for my follow-up. Um, how should we think about this layering into the model from a timeline and magnitude perspective, I believe flexion has an asp that's up 30%, uh, gen to gen. So you know how meaningful this can this be to the model. Uh, thank you and congrats again.

Nick Hawkins: Charlie, should I speak to that one?

Charlie Janac: Yeah, please do.

I speak to that 1.

Nick Hawkins: Is that more of a numbers question?

Charlie Janac: Yes. So hi, Josh. Thanks for joining. Great to speak to you again. We do secure a fairly decent number of what we refer to as whale deals, major deals in a year. This is one of those. When we put our guidance out at the end of the first quarter, this deal was already in the works. It's been in the works for many months. And so it was already baked into guidance at that point. I wouldn't want you to think this is the only big deal we have. We have one or two every quarter major deals. So this was already contemplated when we guided previously. It's very helpful, though.

Yeah, please.

Say hi Josh. Thanks for joining great to speak to you again. Um the uh the we we do. Um we do secure a fairly decent number of what we refer to as whale dealers, major deals. Uh in a year this is this is 1 of those uh when we formed when we put our guidance uh, out at the end of the first quarter, this was uh this deal was already in the works has been in the works for many months and so it was already baked into guidance. At that point, uh, I wouldn't want you to think this is the only big deal. We've, we, we, we have we have, uh, 1 or 2 every quarter, uh, major deals. So, uh, so this is, uh, but this was already contemplated when we, when we guided previously,

It's very helpful, though.

Josh Buchalter: Okay. I will leave it there, and thank you and congratulations again.

Okay, uh, I will leave it there and and thank you and congratulations again.

Operator: Your next question comes from the line of Kevin Juergen from Rosenblatt Securities. Your line is now open. Please go ahead.

Your next question comes from the line of Kevin here again from rosenblat Securities. Your line is now open. Please go ahead.

Kevin Garrigan: Yeah. Hey, Charlie. Nick, congrats on the solid results. I was just kind of wondering, can you comment on whether the decision by AMD was because they're looking to disband their NOC internal team, or if this was more surrounding just kind of not being able to hit performance metrics, so they're looking for another solution?

Yeah. Hey Charlie Nick, congrats on the solid results. Um, I'm just kind of wondering can you comment on whether the decision by AMD was because they're looking to dispense their their knock internal team or if this was more surrounding just kind of not being able to hit performance metrics. So they're looking for another solution.

Charlie Janac: Not at all. So as we mentioned, FlexGen is going to work with the AMD's Infinity Fabric, which is their cash coherent solutions, which is made internally. So basically, the decision that AMD came to is that they are going to continue to use their very capable cash coherent fabric and that they are going to augment that with the Arteris technology for their non-coherent applications. So it's a mix and match approach.

Not at all. Um, so um, as we we mentioned, uh, Flex Jen is going to work with the amd's infinity fabric, which is their, uh, cache coherent Solutions which is made internally. Um so I I basically the uh the decision that AMD came to is that they are going to continue to use uh their uh you know, very capable cache coherent Fabric and that they are going to augment that with the uh with the arteries technology uh for their uh for their non-coherent uh applications. So it's a mix and match approach.

Kevin Garrigan: Got it. Okay. That makes sense. And then as a follow-up, you know, you guys previously noted about 20 customers were experimenting with FlexGen, and you talked about how large customers are looking to accelerate adoption of Arteris product. I mean, is there anything else that you guys can do to get these customers over the finish line, or are you pretty much just kind of waiting in the wings for them to make a decision?

Charlie Janac: Yeah. I mean, you know, FlexGen evolves in certain senses, changes in methodologies. And so some of these evaluations are faster than others. But there's a fair number of FlexGens in the wild, you know, more than, as we said, more than two dozen. And we anticipate that they're going to result in sales starting in the second half in addition to the AMD deal.

Got it. Okay, that makes sense. Um, and then, as a, a follow-up, you know, you guys previously, noted about 20 customers were experimenting with selection and, you know, you talked about how large customers are looking to to accelerate adoption of of our terrorists product. I mean, is there anything else that you guys can do to to get these customers over the finish line? Or, you know, are you pretty much just kind of waiting in the wings for them to make a decision?

Yeah. I mean um, you know, flexion evolves uh, in in certain senses changes in methodologies.

And and so uh some of these evaluations are faster than others. Uh but uh there's a fair number of flex genens in the wild of, you know, more than as we said, more than 2 dozen.

And we anticipate that they're going to result in sales starting in the second half, in addition to the AMD deal.

Kevin Garrigan: Okay.

Nick Hawkins: I appreciate that. I'll add something really quick, Kevin. This is Nick again. And welcome to the call. Thank you for joining. The validation by such a great company as AMD on this technology will certainly be helpful to our cause.

I appreciate that. Some

This is Nick again. Um, and, and welcome to Cole. Thank you for joining, uh, the the, the, the validation by such a great company as AMD on this technology, uh, will certainly be helpful to our cause

Kevin Garrigan: Yeah. No, I completely agree. I mean, the pioneer of the chiplet era is huge. Okay. Perfect. I appreciate the caller. Thanks, guys.

Yeah, no. I, I completely agree. I mean, the uh, the pioneer of of the chiplet areas is huge. Um, okay perfect, I I appreciate the caller. Thanks, guys.

Operator: As a reminder, if you wish to ask a question, please press star one. For your next question, it'll come from the line of Gus Richard from Northland. Your line is now open. Please go ahead.

As a reminder, if you wish to ask a question, please press star 1.

Gus Richard: Yes. Thanks for taking the question. Just in terms of, I'm sorry to keep on asking about AMD. Is this primarily for, you know, chiplet implementations or heterogeneous implementations?

For your next question. Uh, it'll come from the line of Gus rishard from Northland. Your line is now open. Please go ahead.

Yes. Uh, thanks for taking the question. Um, just in terms of, I'm sorry to keep on asking about AMD, is this primarily for um, you know, chiplin implementations or heterogeneous implementations.

Charlie Janac: I think it's going to be used in a variety of products. But one of the ones that is certainly going to be used is on AI, data center AI-oriented chiplets, chiplet SOCs. But you know, it's a multi-licensed deal, and so it's going to be used on a variety of products. But chiplets are certainly one of them.

Um, I think it's, uh, it's going to be used in variety of products, uh, but 1 of the ones that is certainly going to be used is on uh, on AI, uh, uh, data center, AI oriented chiplets, uh, chiplets soc's. But, um, you know, it's a, it's a multi licensed deal and so it's going to be used on on variety of products, but chiplets are certainly 1 of them.

Gus Richard: Got it. Got it. And then just can you give us a little bit of an update on sort of how many heterogeneous chiplet projects you see out there now?

Yeah, got it. Got it. Um, and then just can you give us a little bit of an update on sort of how many heterogeneous chiplet projects you see out there now?

Charlie Janac: So there is, so what we see, and what a lot of people see, is a little bit different. There's about 600 to 700 SOCs out there. And at this time, we're seeing probably 30 projects right now. So there's probably more than that, but what we see is about 30. So it's about 5% of the total. But we are anticipating that over the next couple of years, chiplet projects are going to be probably 30% of the overall SOC design starts. But today, we see maybe 5% of that number.

um, so, um

There is uh so what we see with a lot of people see is is a little bit, a little bit different. Um, there's about 6 to 700 soc's out there.

and at this time, we're seeing probably

30 projects right now.

Um,

So, uh, there's probably more than that, but what we see is about 30. So it's about 5% of the of the total, uh, but we are anticipating that over the next couple of years. Uh, chiplet projects are going to be probably 30% of the overall, uh, SOC design starts.

but today, we

5%.

Of that number.

Gus Richard: Oh, okay. And that's chiplets in general, not heterogeneous chiplets.

So, okay. And that's, um, that's chiplets in general, not heterogeneous chiplets.

Charlie Janac: So that's not you're asking a question because homogeneous chiplets have been in production for a while, right? This would be more in the heterogeneous chiplet category.

um,

so,

that's,

Not, you're asking the question because all of these people have been in production for a while, right? Um, uh, this would be um, this be more in the uh in in the heterogeneous chiplet category.

Gus Richard: Got it. And then one for you, Nick, just in all go. You know, just looking at RPO and a couple of other things, it looks like Book-to-Bill was probably north of 1.5 in the quarter. Is that a fair guess?

Got it and then 1 for you Nick just and I'll go um you know just looking at RPO and a couple other things it looks like book the bill was probably north of 1.5 in the quarter. Is that that a fair guess?

Nick Hawkins: Yeah. I don't really monitor Book-to-Bill specifically, and so I certainly wouldn't comment on that one on Gus. But it is a very positive indicator to have your leading indicator of growth, which is the way we characterize RPO, and essentially is our backlog of future revenue to grow to nearly $100 million and 28% year over year is a great outcome.

Yeah, I I don't really uh monitor book to bill um, specifically and and so certainly wouldn't comment on that 1 and gas but the the it is a very positive indicator to have your, your leading indicator of growth which is the way we characterize RPO in the essentially is our backlog of future Revenue to grow to nearly 100 million dollars, uh, in, in 20 years over year is, uh, is a great outcome.

Gus Richard: Got it. Thanks so much.

Got it. Thanks so much.

Operator: There are no further questions at this time. Please continue, Mr. Charlie Janac.

There are no further questions at this time. Please continue, Mr. Charlie Janak.

Charlie Janac: Yes. So we'd like to thank you for your interest in Arteris. We look forward to meeting with you in the upcoming investor conferences that we're participating in during the next couple of months. And we look forward to updating you all on our business progress in the quarters to come. So thank you very much for your support.

Yes. Um,

So we we would like to thank you uh for your interest in ours. Um we've uh we look forward to meeting with you in the upcoming investor conferences that we're participating in through the next couple of months.

And we look forward to updating you all on our business progress uh in the course to come. So thank you very much for your support.

Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.