Arteris, Inc. (Nasdaq: AIP), a leading provider of system IP which
accelerates system-on-chip (SoC) creation, today announced
financial results for the first quarter ended March 31, 2024
and provided second quarter and full year 2024 guidance.
“We’re encouraged by our solid start to 2024,
with positive free cash flow in the first quarter, and Annual
Contract Value and Trailing-Twelve-Month Variable Royalties of
$58.2 million, driven by robust licensing activity across all
of our verticals including Enterprise Computing and Automotive
deals,” said K. Charles Janac, President and CEO of Arteris.
“Nearly half of our license deals this quarter facilitated AI/ML
design starts, showcasing the significance of AI for our clients.
In addition, we secured five major deals with top 30 global
technology firms, underscoring Arteris' continued influence as a
leading commercial system IP vendor in the semiconductor industry,”
concluded Janac.
First Quarter 2024 Financial
Highlights:
- Revenue of $12.9 million
- Annual Contract Value (ACV) and
trailing-twelve-months (TTM) variable royalties of
$58.2 million, up 6% year-over-year
- Remaining performance obligation
(RPO) of $74.7 million, up 30% year-over-year, growing to the
highest level we have ever reported
- Operating loss of
$9.1 million
- Non-GAAP operating loss of
$5.3 million, compared to a Non-GAAP operating loss of
$5.6 million in the year ago period
- Net loss of $9.4 million or
$0.25 per share
- Non-GAAP net loss of
$5.6 million or $0.15 per share
- Non-GAAP free cash flow of positive
$0.3 million or 2.2% of revenue
First Quarter 2024 Business Highlights:
- Another quarter of robust design
activity, with confirmed design starts in Enterprise Computing and
Automotive, followed by Communications, Industrial applications and
Consumer Electronics;
- Expanded Arteris’ foothold with
large customers, winning five significant license deals among top
30 global technology companies;
- Announced Rebellions has licensed
FlexNoC interconnect IP for its next-generation Neural Processing
Unit aimed at Generative AI;
- Released the latest version of its
cache coherent interconnect solution, Ncore 3.6, which supports any
processor IP that connect to Ncore supported protocols, flexible
configurations, and is ISO 26262 functional safety certified;
- Delivered on Arteris’ previously
announced automotive partnership with Arm, enabling the next
generation of automotive electronics, through optimization and
pre-validation of Arteris’ Ncore network-on-chip IP to work with
and support various Armv9 processor IP;
- At the 2024 Automotive Computing
Conference, Mercedes Benz presented its vision for standardization
for automotive computing hardware, partnering with Arteris to
pioneer a reference for addressing a full range of autonomous
driving applications; and
- Continued adoption of FlexNoC 5 by
customers, with several more evaluations and prospective customers
in the pipeline.
Non-GAAP gross profit, Non-GAAP gross margin,
Non-GAAP operating loss, Non-GAAP operating loss margin, Non-GAAP
net loss, Non-GAAP net loss per share, free cash flow and free cash
flow margin are Non-GAAP financial measures. Additional information
on Arteris’ historic reported results, including a reconciliation
of these Non-GAAP financial measures to their most comparable GAAP
measures, is included in the financial tables below.
Second Quarter and Full Year 2024
Guidance:
|
Q2 2024 |
FY 2024 |
|
(in millions) |
ACV + TTM royalties |
$58.0 - $62.0 |
$62.0 - $68.0 |
Revenue |
$13.2 - $14.2 |
$54.5 - $57.5 |
Non-GAAP operating loss |
$4.5 - $6.5 |
$19.4 - $23.4 |
Free cash flow |
$(1.4) - $1.6 |
$(2.4) - $2.6 |
|
|
|
The guidance provided above are forward-looking
statements and reflects Arteris' expectations as of today's date.
Actual results may differ materially. Refer to the section titled
"Forward-Looking Statements" below for information on the factors,
among others, that could cause our actual results to differ
materially from these forward-looking statements.
A reconciliation of Non-GAAP guidance measures
reported above to corresponding GAAP measures is not available on a
forward-looking basis without unreasonable effort due to the
uncertainty of expenses that may be incurred in the future,
although it is important to note that these factors could be
material to Arteris' results computed in accordance with GAAP.
Definitions of the other business metrics used
in this press release including ACV, active customers, confirmed
design starts and RPO are included below under the heading “Other
Business Metrics.”
Conference Call
Arteris will host a conference call today on May 2, 2024 to
review its first quarter 2024 financial results and to discuss its
financial outlook.
|
Time: |
4:30PM ET |
|
United States/Canada Toll
Free: |
1-888-886-7786 |
|
International Toll: |
1-416-764-8658 |
A live webcast will also be available in the
Investor Relations section of Arteris’ website at:
https://ir.arteris.com/events-and-presentations
A replay of the webcast will be available in the
Investor Relations section of Arteris' website approximately two
hours after the conclusion of the call and remain available for
approximately 30 calendar days.
About Arteris
Arteris is a leading provider of system IP for
the acceleration of system-on-chip (SoC) development across today’s
electronic systems. Arteris network-on-chip (NoC) interconnect IP
and SoC integration automation technology enable higher product
performance with lower power consumption and faster time to market,
delivering better SoC economics so its customers can focus on
dreaming up what comes next. Learn more at arteris.com.
© 2004-2024 Arteris, Inc. All rights reserved
worldwide. Arteris, Arteris IP, the Arteris IP logo, and the other
Arteris marks found at https://www.arteris.com/trademarks are
trademarks or registered trademarks of Arteris, Inc. or its
subsidiaries. All other trademarks are the property of their
respective owners.
Investor Contacts:ArterisNick HawkinsChief
Financial OfficerIR@arteris.com
Sapphire Investor Relations, LLCErica Mannion and Michael
Funari+1 617 542 6180IR@arteris.com
Forward-Looking Statements
This press release contains forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995, as amended, including but not limited to,
statements regarding our future financial and operating
performance, including our GAAP and Non-GAAP guidance for the
second quarter and full year 2024; our market opportunity and its
potential growth; our ability to execute on existing customer
contracts and drive increased customer adoption of our system IP;
and our position within the market and our ability to drive
customer value. The words "may," "might," "will," "could," "would,"
"should," "expect," "plan," "anticipate," "intend," "believe,"
"expect," "estimate," "seek," "predict," "future," "project,"
"potential," "continue," "target" and similar words or expressions
are intended to identify forward-looking statements, although not
all forward-looking statements contain these identifying words. Any
forward-looking statements contained herein are based on our
historical performance and our current plans, estimates and
expectations and are not a representation that such plans,
estimates, or expectations will be achieved. These forward-looking
statements represent our expectations as of the date of this press
release. Subsequent events may cause these expectations to change,
and we disclaim any obligation to update the forward-looking
statements in the future, except as required by law. These
forward-looking statements are subject to known and unknown risks
and uncertainties that may cause actual results to differ
materially from our current expectations. Important factors that
could cause actual results to differ materially from those
anticipated in our forward-looking statements include, but are not
limited to, the significant competition we face from larger
companies and third-party providers; our history of net losses;
whether semiconductor companies in the automotive market,
enterprise computing market, communications market, consumer
electronics market, and industrial markets incorporate our
solutions into their end products and the growth and economic
stability of these end markets; our ability to attract new
customers and the extent to which our customers renew their
subscriptions for our solutions; the ability of our customers’ end
products achieving market acceptance or growth; our ability to
sustain or grow our licensing revenue; our ability, and the cost,
to successfully execute on research and development efforts; the
occurrence of product errors or defects in our solutions; if we
fail to offer high-quality support; the occurrence of
macro-economic conditions that adversely impact us, our customers
and their end product markets; the effects of geopolitical
conflicts, such as the military conflict between Russia and
Ukraine; the range of regulatory, operational, financial and
political risks we are exposed to as a result of our dependence on
international customers and operations; our ability to protect our
proprietary technology and inventions through patents and other IP
rights; whether we are subject to any liabilities or fines as a
result of government regulation, including import, export and
economic sanctions laws and regulations; the occurrence of a
disruption in our networks or a security breach; risks associated
with doing business in China; and the other factors described under
the heading “Risk Factors” in our Quarterly Report on Form 10-Q for
the quarter ended March 31, 2024 to be filed with the Securities
and Exchange Commission (SEC) on May 2, 2024. All forward-looking
statements reflect our beliefs and assumptions only as of the date
of this press release. We undertake no obligation to update
forward-looking statements to reflect future events or
circumstances. Our results for the quarter ended March 31, 2024 are
not necessarily indicative of our operating results for any future
periods.
Arteris, Inc.Condensed Consolidated
Statements of Loss(In thousands, except share and per
share data)(Unaudited) |
|
|
Three Months Ended March 31, |
|
|
2024 |
|
|
|
2023 |
|
Revenue |
|
|
|
Licensing, support and maintenance |
$ |
11,739 |
|
|
$ |
11,844 |
|
Variable royalties and other |
|
1,208 |
|
|
|
1,310 |
|
Total revenue |
|
12,947 |
|
|
|
13,154 |
|
Cost of revenue |
|
1,468 |
|
|
|
1,124 |
|
Gross profit |
|
11,479 |
|
|
|
12,030 |
|
Operating expenses: |
|
|
|
Research and development |
|
10,835 |
|
|
|
11,381 |
|
Sales and marketing |
|
5,456 |
|
|
|
5,005 |
|
General and administrative |
|
4,322 |
|
|
|
4,401 |
|
Total operating expenses |
|
20,613 |
|
|
|
20,787 |
|
Loss from operations |
|
(9,134 |
) |
|
|
(8,757 |
) |
Interest expense |
|
(76 |
) |
|
|
(32 |
) |
Other income (expense),
net |
|
936 |
|
|
|
908 |
|
Loss before income taxes and
loss from equity method investment |
|
(8,274 |
) |
|
|
(7,881 |
) |
Loss from equity method
investment, net of tax |
|
759 |
|
|
|
834 |
|
Provision for income
taxes |
|
370 |
|
|
|
295 |
|
Net loss |
$ |
(9,403 |
) |
|
$ |
(9,010 |
) |
|
|
|
|
Net loss per share
attributable to common stockholders, basic and diluted |
$ |
(0.25 |
) |
|
$ |
(0.26 |
) |
Weighted average shares used
in computing per share amounts, basic and diluted |
|
37,709,058 |
|
|
|
34,597,839 |
|
|
|
|
|
|
|
|
|
Arteris, Inc.Condensed Consolidated
Balance Sheets (In thousands, except share and per share
data)(Unaudited) |
|
|
As of |
|
March 31, 2024 |
|
December 31, 2023 |
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
26,119 |
|
|
$ |
13,696 |
|
Short-term investments |
|
18,695 |
|
|
|
27,477 |
|
Accounts receivable, net of
allowance of $93 as of both March 31, 2024 and
December 31, 2023 |
|
12,265 |
|
|
|
12,003 |
|
Prepaid expenses and other
current assets |
|
4,718 |
|
|
|
5,254 |
|
Total current assets |
|
61,797 |
|
|
|
58,430 |
|
Property and equipment,
net |
|
5,244 |
|
|
|
5,745 |
|
Long-term investments |
|
8,602 |
|
|
|
11,802 |
|
Equity method investment |
|
7,741 |
|
|
|
8,500 |
|
Operating lease right-of-use
assets |
|
4,060 |
|
|
|
4,289 |
|
Intangibles, net |
|
3,662 |
|
|
|
3,858 |
|
Goodwill |
|
4,178 |
|
|
|
4,178 |
|
Other assets |
|
6,070 |
|
|
|
5,999 |
|
TOTAL ASSETS |
$ |
101,354 |
|
|
$ |
102,801 |
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
754 |
|
|
$ |
183 |
|
Accrued expenses and other
current liabilities |
|
12,659 |
|
|
|
11,831 |
|
Operating lease liabilities,
current |
|
858 |
|
|
|
781 |
|
Deferred revenue, current |
|
33,558 |
|
|
|
31,537 |
|
Vendor financing arrangements,
current |
|
1,987 |
|
|
|
2,070 |
|
Total current liabilities |
|
49,816 |
|
|
|
46,402 |
|
Deferred revenue,
noncurrent |
|
26,559 |
|
|
|
25,172 |
|
Operating lease liabilities,
noncurrent |
|
3,333 |
|
|
|
3,610 |
|
Vendor financing arrangements,
noncurrent |
|
1,094 |
|
|
|
1,292 |
|
Deferred income,
noncurrent |
|
8,520 |
|
|
|
8,810 |
|
Other liabilities |
|
2,486 |
|
|
|
2,412 |
|
Total liabilities |
|
91,808 |
|
|
|
87,698 |
|
Stockholders' equity: |
|
|
|
Preferred stock, par value of $0.001 - 10,000,000 shares authorized
as of both March 31, 2024 and December 31, 2023; no
shares issued and outstanding as of both March 31, 2024 and
December 31, 2023 |
|
— |
|
|
|
— |
|
Common stock, par value of $0.001 - 300,000,000 shares authorized
as of both March 31, 2024 and December 31, 2023;
38,291,425 and 37,518,583 shares issued and outstanding as of
March 31, 2024 and December 31, 2023, respectively |
|
38 |
|
|
|
37 |
|
Additional paid-in
capital |
|
122,104 |
|
|
|
118,193 |
|
Accumulated other
comprehensive income |
|
54 |
|
|
|
120 |
|
Accumulated deficit |
|
(112,650 |
) |
|
|
(103,247 |
) |
Total stockholders' equity |
|
9,546 |
|
|
|
15,103 |
|
TOTAL LIABILITIES AND
STOCKHOLDERS’ EQUITY |
$ |
101,354 |
|
|
$ |
102,801 |
|
|
|
|
|
|
|
|
|
Arteris, Inc.Condensed Consolidated
Statements of Cash Flows (In thousands)(Unaudited) |
|
|
Three Months Ended March 31, |
|
|
2024 |
|
|
|
2023 |
|
CASH FLOWS FROM OPERATING
ACTIVITIES: |
|
|
|
Net loss |
$ |
(9,403 |
) |
|
$ |
(9,010 |
) |
Adjustments to reconcile net loss to net cash used in operating
activities: |
|
|
|
Depreciation and amortization |
|
833 |
|
|
|
601 |
|
Stock-based compensation |
|
3,657 |
|
|
|
2,985 |
|
Amortization of deferred income |
|
(294 |
) |
|
|
(291 |
) |
Loss from equity method investment |
|
759 |
|
|
|
834 |
|
Net accretion of discounts on available-for-sale securities |
|
(181 |
) |
|
|
(259 |
) |
Other, net |
|
31 |
|
|
|
27 |
|
Changes in operating assets and liabilities: |
|
|
|
Accounts receivable, net |
|
(262 |
) |
|
|
(2,607 |
) |
Prepaid expenses and other assets |
|
479 |
|
|
|
364 |
|
Accounts payable |
|
546 |
|
|
|
555 |
|
Accrued expenses and other liabilities |
|
904 |
|
|
|
(974 |
) |
Deferred revenue |
|
3,408 |
|
|
|
(614 |
) |
Net cash provided by (used in) operating activities |
|
477 |
|
|
|
(8,389 |
) |
CASH FLOWS FROM INVESTING
ACTIVITIES: |
|
|
|
Purchases of property and
equipment |
|
(196 |
) |
|
|
(120 |
) |
Purchases of
available-for-sale securities and other |
|
(3,421 |
) |
|
|
(4,909 |
) |
Proceeds from maturities of
available-for-sale securities and other |
|
15,519 |
|
|
|
5,450 |
|
Net cash provided by investing activities |
|
11,902 |
|
|
|
421 |
|
CASH FLOWS FROM FINANCING
ACTIVITIES: |
|
|
|
Payments of contingent
consideration for business combination |
|
— |
|
|
|
(1,000 |
) |
Principal payments under
vendor financing arrangements |
|
(197 |
) |
|
|
(192 |
) |
Proceeds from exercise of
stock options |
|
241 |
|
|
|
256 |
|
Payments to tax authorities
for shares withheld from employees |
|
— |
|
|
|
(14 |
) |
Net cash provided by (used in) financing activities |
|
44 |
|
|
|
(950 |
) |
NET INCREASE (DECREASE) IN
CASH, CASH EQUIVALENTS AND RESTRICTED CASH |
|
12,423 |
|
|
|
(8,918 |
) |
CASH, CASH EQUIVALENTS AND
RESTRICTED CASH, beginning of period |
|
14,084 |
|
|
|
37,423 |
|
CASH, CASH EQUIVALENTS AND
RESTRICTED CASH, end of period |
$ |
26,507 |
|
|
$ |
28,505 |
|
|
|
|
|
|
|
|
|
Non-GAAP Financial Measures
To supplement our financial results, which are
prepared and presented in accordance with GAAP, we use certain
non-GAAP financial measures, as described below, to understand and
evaluate our core performance. These non-GAAP measures, which may
be different than similarly-titled measures used by other
companies, are presented to enhance investors’ overall
understanding of our financial performance and should not be
considered a substitute for, or superior to, the financial
information prepared and presented in accordance with GAAP.
We define "Non-GAAP gross profit and Non-GAAP
gross margin" as GAAP gross profit and GAAP gross margin, adjusted
for stock-based compensation expense included in cost of revenue.
We define “Non-GAAP Loss from Operations” as our income (loss) from
operations adjusted to exclude stock-based compensation,
acquisition costs and amortization of acquired intangible assets.
We define “Non-GAAP Net Loss” as our net income (loss) adjusted to
exclude stock-based compensation, acquisition costs and
amortization of acquired intangible assets.
We define “Non-GAAP EPS”, as our Non-GAAP Net
Income (Loss) divided by our GAAP weighted-average number of shares
outstanding for the period on a diluted basis. Management uses
Non-GAAP EPS to evaluate the performance of our business on a
comparable basis from period to period.
The above items are excluded from our Non-GAAP
Gross Profit, Non-GAAP Income (Loss) from Operations and Non-GAAP
Net Income (Loss) because these items are non-cash in nature, or
are not indicative of our core operating performance, and render
comparisons with prior periods and competitors less meaningful. We
believe Non-GAAP Gross Profit, Non-GAAP Income (Loss) from
Operations and Non-GAAP Net Income (Loss) provide useful
supplemental information to investors and others in understanding
and evaluating our results of operations, as well as provide a
useful measure for period-to-period comparisons of our business
performance.
We define free cash flow as net cash (used in)
provided by operating activities less cash used for purchases of
property and equipment. We believe that free cash flow is a useful
indicator of liquidity that provides information to management and
investors, even if negative, about the amount of cash used in our
operations other than that used for investments in property and
equipment.
Other Business Metrics
Active Customers – we define
Active Customers as customers who have entered into a license
agreement with us that remains in effect. The retention and
expansion of our relationships with existing customers are key
indicators of our revenue potential.
Annual Contract Value (ACV) –
we define Annual Contract Value for an individual customer
agreement as the total fixed fees under the agreement divided by
the number of years in the agreement term. Our total ACV is the
aggregate ACVs for all our customers as measured at a given point
in time. Total fixed fees includes licensing, support and
maintenance and other fixed fees under IP licensing or software
licensing agreements but excludes variable revenue derived from
licensing agreements with customers, particularly royalties.
Confirmed Design Starts – we
define Confirmed Design Starts as when customers confirm their
commencement of new semiconductor designs using our interconnect IP
and notify us. Confirmed Design Starts is a metric management uses
to assess the activity level of our customers in terms of the
number of new semiconductor designs that are started using our
interconnect IP in a given period. We believe that the number of
Confirmed Design Starts is an important indicator of the growth of
our business and future royalty revenue trends.
Remaining Performance Obligations (RPO)
– we define Remaining Performance Obligations as the
amount of contracted future revenue that has not yet been
recognized, including deferred revenue, billed and unbilled
cancelable and non-cancelable contracted amounts.
Arteris, Inc.Reconciliation of GAAP
Measures to Non-GAAP Measures(In thousands, except share
and per share data)(Unaudited) |
|
|
Three Months Ended March 31, |
|
|
2024 |
|
|
|
2023 |
|
Gross profit |
$ |
11,479 |
|
|
$ |
12,030 |
|
Add: |
|
|
|
Stock-based compensation
expense included in cost of revenue |
|
189 |
|
|
|
83 |
|
Amortization of acquired
intangible assets (1) |
|
50 |
|
|
|
— |
|
Non-GAAP gross profit |
$ |
11,718 |
|
|
$ |
12,113 |
|
Gross margin |
|
89 |
% |
|
|
91 |
% |
Non-GAAP gross margin |
|
91 |
% |
|
|
92 |
% |
|
|
|
|
Research and development |
$ |
10,835 |
|
|
$ |
11,381 |
|
Stock-based compensation
expense |
|
(1,608 |
) |
|
|
(1,429 |
) |
Amortization of acquired
intangible assets (1) |
|
(85 |
) |
|
|
(135 |
) |
Non-GAAP research and
development |
$ |
9,142 |
|
|
$ |
9,817 |
|
|
|
|
|
Sales and marketing |
$ |
5,456 |
|
|
$ |
5,005 |
|
Stock-based compensation
expense |
|
(723 |
) |
|
|
(685 |
) |
Amortization of acquired
intangible assets (1) |
|
(57 |
) |
|
|
(57 |
) |
Non-GAAP sales and
marketing |
$ |
4,676 |
|
|
$ |
4,263 |
|
|
|
|
|
General and
administrative |
$ |
4,322 |
|
|
$ |
4,401 |
|
Stock-based compensation
expense |
|
(1,137 |
) |
|
|
(788 |
) |
Non-GAAP general and
administrative |
$ |
3,185 |
|
|
$ |
3,613 |
|
|
|
|
|
Loss from operations |
$ |
(9,134 |
) |
|
$ |
(8,757 |
) |
Stock-based compensation
expense |
|
3,657 |
|
|
|
2,985 |
|
Amortization of acquired
intangible assets (1) |
|
192 |
|
|
|
192 |
|
Non-GAAP loss from
operations |
$ |
(5,285 |
) |
|
$ |
(5,580 |
) |
|
|
|
|
Net loss |
$ |
(9,403 |
) |
|
$ |
(9,010 |
) |
Stock-based compensation
expense |
|
3,657 |
|
|
|
2,985 |
|
Amortization of acquired
intangible assets (1) |
|
192 |
|
|
|
192 |
|
Non-GAAP net loss (2) |
$ |
(5,554 |
) |
|
$ |
(5,833 |
) |
|
|
|
|
Net loss per share
attributable to common stockholders, basic and diluted |
$ |
(0.25 |
) |
|
$ |
(0.26 |
) |
Per share impacts of
adjustments to net loss (3) |
$ |
0.10 |
|
|
$ |
0.09 |
|
Non-GAAP net loss per share
attributable to common stockholders, basic and diluted |
$ |
(0.15 |
) |
|
$ |
(0.17 |
) |
|
|
|
|
Weighted average shares used
in computing per share amounts, basic and diluted |
|
37,709,058 |
|
|
|
34,597,839 |
|
(1) Represents the amortization expenses of our intangible
assets attributable to our acquisitions.(2) Our GAAP tax provision
is primarily related to foreign withholding taxes and income tax in
profitable foreign jurisdictions. We maintain a full valuation
allowance against our deferred tax assets in the US. Accordingly,
there is no significant tax impact associated with these Non-GAAP
adjustments.(3) Reflects the aggregate adjustments made to
reconcile Non-GAAP Net Loss to our net loss as noted in the above
table, divided by the GAAP diluted weighted average number of
shares of the relevant period.
Free Cash Flow
|
Three Months Ended March 31, |
|
|
2024 |
|
|
|
2023 |
|
Net cash
provided by (used in) operating activities |
$ |
477 |
|
|
$ |
(8,389 |
) |
Less: |
|
|
|
Purchase of property and
equipment |
|
(196 |
) |
|
|
(120 |
) |
Free cash flow |
$ |
281 |
|
|
$ |
(8,509 |
) |
Net cash provided by investing
activities |
$ |
11,902 |
|
|
$ |
421 |
|
Net cash provided by (used in)
financing activities |
$ |
44 |
|
|
$ |
(950 |
) |
|
|
|
|
|
|
|
|
Arteris (NASDAQ:AIP)
Historical Stock Chart
From Aug 2024 to Sep 2024
Arteris (NASDAQ:AIP)
Historical Stock Chart
From Sep 2023 to Sep 2024