Silvaco Group, Inc. (SVCO)

Overview

We are a provider of technology computer aided design software (“TCAD”), electronic data automation software (“EDA”), and semiconductor intellectual property (“SIP”). Our solutions are used by engineers to optimize semiconductor manufacturing processes and efficiently bring semiconductor products to market. Our differentiated solutions enable our customers to increase productivity, accelerate time-to-market and reduce development and manufacturing costs. Our customers include semiconductor manufacturers and systems companies that design and manufacture products containing semiconductors. Semiconductors are at the heart of innovation in many industries, including AI, display, power devices, automotive, memory, hyperscale and cloud computing, Internet of Things (“IoT”), telecommunications and many more.

Our TCAD solutions are used in the semiconductor industry to model and optimize manufacturing processes and device performance. This includes foundational TCAD software and more advanced artificial intelligence (“AI”) machine learning for process development, called Fab Technology Co-Optimization (“FTCOTM”). We are a pioneer in the leverage of AI to redefine manufacturing process development in partnership with customers.

Our EDA software is used by semiconductor companies to design, simulate, and verify semiconductors. Our EDA products include SPICE modeling and simulation, parasitic extraction and reduction, standard cell generation and optical proximity correction.

Our SIP portfolio includes a range of products, including foundation technology, such as standard cells and memory compilers, as well as a suite of interface technologies. Our SIP portfolio benefited from recent acquisitions, most notably Mixel Group, Inc. (“Mixel”), which is positioned for growth as we roll out Mixel’s quality processes to the rest of the organization.

Our customers include foundries, integrated device manufacturers and fabless semiconductor companies. Our go-to-market strategy centers on selling software solutions and associated maintenance and services. Our software solutions accounted for 66% of our revenue for both the three and six months ended June 30, 2026, as compared to 60% and 66% during the same periods in 2025. Revenue from associated maintenance and services accounted for 34% of our revenue for both the three and six months ended June 30, 2026, as compared to 40% and 34% during the same periods in 2025, respectively.

Recent Acquisitions

During the six months ended June 30, 2025, we completed two acquisitions: (i) Cadence Design System's (“Cadence”) Process Proximity Compensation product line (the “OPC Business”) for $11.5 million in March 2025; and (ii) Tech-X Corporation (“Tech-X”) for $8.2 million in April 2025.

On August 1, 2025, we consummated a stock purchase agreement with the shareholders of Mixel Group, Inc. (“Mixel”), pursuant to which we agreed to acquire all of the outstanding shares of Mixel for an aggregate purchase price of $22.5 million, which includes (i) $19.7 million in cash and (ii) 643,617 shares of the Company’s common stock with a fair value of $2.8 million on the closing date.

Key Factors Affecting our Results of Operations and Future Performance

Current Economic Conditions

Because of our global operations, our business is subject to economic downturns in the countries in which we do business, volatility in exchange rates, changes in interest rates, evolving trade control regulations and geopolitical conflicts.

We have been impacted by the expansion of trade control laws and regulations, including the broadening of the list of Chinese technology companies on the U.S. Department of Commerce Bureau of Industry and Security “Entity List.” We expect the impact of these expanded trade controls on our business to be limited.

We also monitor geopolitical conflicts around the world, including the conflict in Ukraine and conflicts in the Middle East. To date, these conflicts have not materially impacted our business.

For additional information on the potential impact of macroeconomic conditions on our business, see Part II, Item 1A, “Risk Factors” of this Quarterly Report on Form 10-Q.

Cost Reduction Initiatives

In October 2025, we began implementing targeted cost-savings initiatives intended to streamline our organizational structure, improve execution, and enhance stockholder value (the “Restructuring Plan”). The Restructuring Plan includes a voluntary early retirement program, a voluntary exit program, an involuntary reduction in force, and certain planned site closures. We expect to incur $5.0 million of costs in connection with the Restructuring Plan that primarily consists of severance costs for 82 terminated employees and other costs such as the site closures as part of our global site strategy. Of the total expected costs, $0.9 million and $2.4 million were incurred during the three and six months ended June 30, 2026, respectively, and $1.3 million during the year ended December 31, 2025. We expect to complete the Restructuring Plan in 2026. We anticipate these initiatives will result in significant annualized operating expense reductions. See Note 5 of our condensed consolidated financial statements for further discussion of the Restructuring Plan.

Relationships with Our Existing Customers

Building long-term relationships with our existing customer base is critical in driving renewals for our licenses and overall revenue growth. We have a global sales force that advises semiconductor industry business leaders, fabrication facility managers and the next generation of chip designers on the benefits of our design tools and semiconductor IP. Most of our customers enter into multi-year software license agreements for a fixed price including a multi-year software license and maintenance and services.

When we renew contracts with our customers, we may increase our bookings by selling them additional or new software or SIP. Over time, we expect that existing customers will choose to upgrade and/or purchase additional products. Our ability to continue to generate sales from our existing customers and to expand those relationships depends on our ability to continue to offer software solutions that our existing customers demand. Any failure to continue to generate sales with our existing customers or expand our product and service offerings with our existing customers may have an adverse effect on our revenue and results of operations.

We enter into standard software licensing agreements with our customers. Pursuant to these agreements, we grant our customers a non-exclusive, non-transferable, limited license, without the right to sublicense, to execute, use and operate certain software. Each party has the right to terminate the software license agreement under certain circumstances, in which event the customer will be required to remove, delete and return all software, related documentation and confidential information furnished under the license agreement.

Our Ability to Expand Our Product Offerings

To meet the increasing complexity of semiconductor designs, the introduction of new advanced materials, and the increased costs associated with more advanced semiconductor technology nodes, we need to continually enhance our product offerings through our own in-house research and development efforts, acquisitions, or strategic partnerships with third parties. The in-house development of new product offerings or enhancements to our existing product offerings requires significant research and development activities and time and may or may not result in offerings we can successfully market and sell to customers. We may also seek to acquire companies or assets for products or solutions which we believe are complementary to our existing products or solutions. Additionally, we currently, and have in the past, and may in the future, partner with third parties to expand our product offerings to our customers. If in the future, we enter into additional licensing agreements with other third parties and are unable to extend the term of those licensing arrangements, we will experience an associated decline in revenue relating to those products.

Our Ability to Expand into New Markets and Applications and Expansion of our Existing Markets

The development of semiconductors that are optimized for specific applications, including AI, 5G/6G communications and IoT, has continued to fuel demand for TCAD and EDA software tools, which in turn fuels demand to develop solutions to meet our markets’ evolving needs. Our ability to successfully generate customer demand amongst new customers and in new markets is dependent on our ability to educate these customers and markets about our software solutions and our ability to generate sufficient new solutions that solve problems for these potential customers. Our ability to continue to expand our product offerings into new markets also requires that we direct our research and development efforts toward value-generating new and existing initiatives. Our future revenues and results of operations will be directly impacted by our ability to produce and provide new software solutions in new and expanding markets.

Our Ability to Successfully Identify, Complete and Integrate Acquisitions

Our success depends in part on our ability to identify, complete and integrate acquisitions. Our goal for future potential acquisitions is to pursue acquisitions that will increase our competitiveness in our markets and increase our bookings and revenue. Our ability to successfully identify, complete and integrate acquisitions will depend on a number of factors, including access to adequate capital, potential competition for the assets, and technology fit. When we engage in mergers and acquisitions, we aim to retain the customers of our acquired companies due to our expanded offerings or improved services. As a result, acquiring target companies is a key part of our growth strategy and may allow us to access and serve a broader range of customers, which ultimately may lead to more bookings, increased revenue growth and expansion in our market share presence.

Our Ability to Scale While Mitigating Increases in Expenses

If we can execute on our growth strategy and grow our revenue through a combination of new customer growth, upgrades and increased usage of our products by existing customers, as well as accretive acquisitions, our results will be impacted by our ability to reduce the rate at which our expenses increase in proportion with a rise in revenue. We believe this is possible in a number of expense line items, which may provide for additional gross margin and operating margin expansion. For example, we anticipate as our existing customers choose to upgrade to newer software solutions, our costs related to the support of legacy software decreases, outpacing any increases in cost related to supporting the upgraded software. Additionally, we have incurred a significant increase in stock-based compensation expense since becoming a public company. However, we do not anticipate that to scale proportionally with our revenue. Finally, we have been able to gain sales efficiencies as our revenue grows, such that our sales and marketing expenses will have decreased as a percentage of revenue. In the aggregate, our ability to keep these expenses from growing proportionally with our revenue may provide for meaningful gross margin and operating margin expansion.

Results of Operations

The following table sets forth our results of operations for the three and six months ended June 30, 2026, and 2025:

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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and the related notes included in Part II, Item 8 of this Annual Report on Form 10-K. This discussion and other parts of this report contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve risks, uncertainties and assumptions. Our actual results could differ materially from those discussed in or implied by these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed under Part I, Item 1A. Risk Factors of this Annual Report on Form 10-K. Forward-looking statements may be identified by words including, but not limited to, “may,” “will,” “could,” “would,” “can,” “should,” “anticipate,” “expect,” “intend,” “believe,” “estimate,” “project,” “continue,” “forecast,” "likely," "potential," "seek," or the negatives of such terms and similar expressions. The information included herein represents our estimates and assumptions as of the date of this filing. Unless required by law, we undertake no obligation to update publicly any forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

Overview

We are a provider of technology computer aided design software (“TCAD”), electronic data automation software (“EDA”), and semiconductor intellectual property (“SIP”). Our solutions are used by engineers to optimize semiconductor manufacturing processes and efficiently bring semiconductor products to market. Our differentiated solutions enable our customers to increase productivity, accelerate time-to-market and reduce development and manufacturing costs. Our customers include semiconductor manufacturers and systems companies that design and manufacture products containing semiconductors. Semiconductors are at the heart of innovation in many industries, including AI, display, power devices, automotive, memory, hyperscale and cloud computing, Internet of Things (“IoT”), telecommunications and many more.

Our TCAD solutions are used in the semiconductor industry to model and optimize manufacturing processes and device performance. This includes foundational TCAD software and more advanced artificial intelligence (“AI”) machine learning (“ML”) for process development, called Fab Technology Co-Optimization (“FTCOTM”). We are a pioneer in the leverage of AI to redefine manufacturing process development in partnership with customers.

Our EDA software is used by semiconductor companies to design, simulate, and verify semiconductors. Our EDA products include SPICE modelling and simulation, parasitic extraction and reduction, standard cell generation and optical proximity correction.

Our SIP portfolio includes a range of products, including foundation technology, such as standard cells and memory compilers, as well as a suite of interface technologies. Our SIP portfolio benefited from recent acquisitions, most notably Mixel Group, Inc. (“Mixel”), which is positioned for growth as we roll out Mixel’s quality processes to the rest of the organization.

Our customers include foundries, integrated device manufacturers (“IDMs”) and fabless semiconductor companies. Our go-to-market strategy centers on selling software solutions and associated maintenance and services. Our software solutions accounted for 68% and 74% of our revenue for the years ended December 31, 2025 and 2024, respectively, and associated maintenance and services accounted for 32% and 26% of our revenue for the years ended December 31, 2025 and 2024, respectively.

Recent Acquisitions

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On March 4, 2025, we consummated an asset purchase agreement with Cadence Design Systems, Inc. (“Cadence”), pursuant to which, among other things, we agreed to acquire certain assets and assume certain liabilities comprising Cadence’s Process Proximity Compensation product line, an optical proximity correction suite of tools (the “OPC Business”), in exchange for $11.5 million in cash.

On April 29, 2025, we consummated a stock purchase agreement with the shareholders of Tech-X Corporation (“Tech-X”), pursuant to which we acquired all of the outstanding shares of Tech-X for an aggregate purchase price of $8.2 million. The purchase consideration consisted of (i) $4.1 million in cash, (ii) 457,666 shares of the Company’s common stock with a fair value of $2.4 million on the closing date, and (iii) contingent consideration, with a maximum payout of $2.0 million, and with an estimated fair value of $1.7 million, payable in cash upon the achievement of specified technical milestones through December 2026. In February 2026, the Company amended the form of payment of the contingent consideration and post-closing net working capital adjustments to be payable in shares of the Company’s common stock. The Company also extended the date through which contingent consideration can be earned to July 2027.

On August 1, 2025, we consummated a stock purchase agreement with the shareholders of Mixel Group, Inc. (“Mixel”), pursuant to which we agreed to acquire all of the outstanding shares of Mixel for an aggregate purchase price of $22.5 million, which includes (i) $19.7 million in cash and (ii) 643,617 shares of the Company’s common stock with a fair value of $2.8 million on the closing date.

Key Factors Affecting our Results of Operations and Future Performance

Current Economic Conditions

Because of our global operations, our business is subject to economic downturns in the countries in which we do business, volatility in exchange rates, changes in interest rates, evolving trade control regulations and geopolitical conflicts.

We have been impacted by the expansion of trade control laws and regulations, including the broadening of the list of Chinese technology companies on the U.S. Department of Commerce Bureau of Industry and Security “entity list.” We expect the impact of these expanded trade controls on our business to be limited.

We also monitor geopolitical conflicts around the world, including the conflict in Ukraine and conflicts in the Middle East. To date, these conflicts have not materially impacted our business.

For additional information on the potential impact of macroeconomic conditions on our business, see Part I, Item 1A, “Risk Factors.”

Cost Reduction Initiatives

In October 2025, we began implementing targeted cost-savings initiatives intended to streamline our organizational structure, improve execution, and enhance stockholder value (the “Restructuring Plan”). The Restructuring Plan includes a voluntary early retirement program, a voluntary exit program, an involuntary reduction in force, and certain planned site closures. During the year ended December 31, 2025, we incurred pre-tax charges of $1.3 million for severance, termination benefits, and site closures. The majority of impacted employees were affected in the year ended December 31, 2025. We anticipate these initiatives will result in significant annualized operating expense reductions.

Relationships with Our Existing Customers

Building long-term relationships with our existing customer base is critical in driving renewals for our licenses and overall revenue growth. We have a global sales force that also advises fabrication facility managers and the next generation of chip designers on the benefits of our design tools. Most of our customers enter into multi-year software license agreements for a fixed price including a multi-year software license and maintenance and services.

When we renew contracts with our customers, we may increase our bookings by selling them additional or new software or SIP. Over time, we expect that existing customers will choose to upgrade and/or purchase additional products. Our ability to continue to generate sales from our existing customers and to expand those relationships is dependent on our ability to continue to offer software solutions that our existing customers demand. Any failure to continue to generate sales with our existing customers or expand our product and service offerings with our existing customers may have an adverse effect on our revenue and results of operations.

We enter into standard software licensing agreements with our customers. Pursuant to these agreements, we grant our customers a non-exclusive, non-transferable, limited license, without the right to sublicense, to execute, use and operate certain software. Each party has the right to terminate the software license agreement under certain circumstances, in which event the customer will be required to remove, delete and return all software, related documentation and confidential information furnished under the license agreement.

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Our Ability to Expand Our Product Offerings

To meet the increasing complexity of semiconductor designs, the introduction of new advanced materials, and the increased costs associated with more advanced semiconductor technology nodes, we need to continually enhance our product offerings through our own in-house research and development efforts, acquisitions, or strategic partnerships with third parties. The in-house development of new product offerings or enhancements to our existing product offerings requires significant research and development activities and time and may or may not result in offerings we can successfully market and sell to customers. For example, we have developed an AI-based solution named Fab Technology Co-Optimization or FTCOTM for wafer level fabrication facilities. FTCO utilizes manufacturing data to perform statistical and physics-based machine learning software simulations to create a computer model of a wafer, which we call the “digital twin” of the wafer, in order to simulate the fabrication of wafers. We may also seek to acquire companies or assets for products or solutions which we believe are complementary to our existing products or solutions. Additionally, we currently, and have in the past, and may in the future, partner with third parties to expand our product offerings to our customers. If in the future, we enter into additional licensing agreements with other third parties and are unable to extend the term of those licensing arrangements, we will experience an associated decline in revenue relating to those products.

Our Ability to Expand into New Markets and Applications and Expansion of our Existing Markets

We believe that trends in the global EDA software market, including growth in the integrated circuits and electronics manufacturing markets, growing complexity of semiconductor and photonics designs, and increasing challenges associated with advanced materials and shrinking process technology nodes across the EDA market, will increase the demand for our software solutions over time, which will have a direct impact on our future revenues and results of operations. In response to this increase in complexity and new challenges facing designers, we have increased investments in our research and development for new software product offerings. For example, our research and development expenses were 47% and 35% of revenue for the years ended December 31, 2025 and 2024, respectively. We plan to continue to invest in our software solutions to establish and expand a leadership position in our target markets. We also plan to use our research and development efforts to continue to cater to strategic customer needs.

The drive to increase performance and diversification of applications is further acc

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