Silvaco Group, Inc. Common Stock 2026 Q2 Earnings Call

Please proceed. Thank you. Joining me on the call today is Wally Rhines, Silvaco's CEO and Director.

As a reminder, a press release highlighting the company's results, along with supplemental financial results, are available on the company's IR site at investors.silvaco.com. An archived replay of the call will be available on this website for a limited time after the call. Please note that during this call, management will 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. 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 and on this conference call. The Risk Factors section in Silvaco's annual report on Form 10-K for the year ended December 31, 2025, and the most recent quarterly report on Form 10-Q provide descriptions of these risks. With that, I'd like to turn the call over to our CEO, Wally Rhines.

Wally? Good afternoon. Welcome. We appreciate you joining us on today's call.

I'm pleased to report that in the second quarter, we made solid progress on our strategic transformation, highlighted by multiple new partnerships, strong year-over-year growth across all product areas, and the company's return to non-GAAP operating profitability for the first time in almost two years. For those of you who may be new or still coming up to speed on our story, I want to begin with a brief high-level summary of our ongoing strategic transformation. Over the last year, we've made significant progress on our plan to streamline operations, reduce costs, and focus on strategic growth drivers. Our objective is clear: drive to profitability and position the company for sustainable, profitable growth. Looking at Q2 results through this lens of transformation, we see meaningful progress. We delivered another sequential quarter of non-GAAP operating expense reductions.

We saw our first non-GAAP operating profit since late 2024, almost two years ago. We also delivered 48% revenue growth year-over-year and saw record bookings and revenue in our IP products. We also announced multiple strategic partnerships that fundamentally strengthen our position in the emerging market of AI-enabled manufacturing and process development. Partnering with NVIDIA on GPU enablement and with Dassault Systèmes on multi-physics, and deepening our partnership with Micron highlights the value of our strategic focus on AI manufacturing. I'd now like to talk about the three transformational partnerships. All three focus on Silvaco's leading multi-physics portfolio and give us more paths to market, more exposure to leading-edge AI assets, and broader reach as part of a more complete solution for our customers. The first strategic partnership is a collaboration with NVIDIA.

As was announced by NVIDIA at the Design Automation Conference, we've collaborated to integrate NVIDIA accelerated computing and AI with our physics-based simulation portfolio to enable next-generation digital twins. Through this partnership, Silvaco is combining decades of physics-based modeling expertise with NVIDIA's accelerated computing, CUDA-X platform, and AI frameworks. Our combined technologies are expected to help customers reduce simulation cycles from weeks to days, to improve accuracy and insight, and to scale engineering collaboration. We're excited about what this partnership means for our customers and for the industry as a whole. The second strategic partnership is with Dassault Systèmes' Simulia to develop interoperable workflows. This partnership is focused on developing connected workflows that help semiconductor manufacturers achieve first-time right process development, accelerate their yield ramps, and make better manufacturing decisions before committing costly fab resources.

The collaboration brings together complementary simulation technologies spanning reactor scale plasma simulation, feature scale semiconductor process modeling, and structural stress analysis. By connecting these domains through integrated workflows, we aim to help semiconductor companies better understand how equipment conditions influence wafer level outcomes, enabling more informed engineering decisions. By improving interoperability, customers can identify potential issues earlier in development and make decisions with greater confidence. The third strategic partnership builds upon our longstanding relationship with Micron. We announced today that Micron is investing $10 million in a Silvaco convertible note. More importantly, the two companies aligned on deeper strategic collaboration to continue building out the disruptive FTCO, or Fab Technology Co-optimization, foundation that Micron and Silvaco have built together. Micron was early to see the potential of combining AI with physics-based simulation to create a truly virtual platform to accelerate time to market.

I'd like to take a moment to thank our friends and partners at Micron. These three partnerships lay the foundation for accelerated growth. Given our strong pipeline into Q4, and with these new partnerships in place, we now expect to see record revenue in Q4 and to deliver double-digit revenue growth in 2027. Looking forward, we expect to continue benefiting from three significant growth drivers. First, FTCO. Silvaco has a strong foundation in multi-physics. Our investments in AI have created a disruptive FTCO workflow that broadens our user base well beyond traditional TCAD engineers and unlocks unique value propositions and use cases for our customers. The partnerships announced today reflect broad recognition of that differentiation and potential, and we remain focused on driving our advantage here in delivering above-average market growth in this area.

We see outsized growth potential for this business, driven by broadening the user base, adding AI functionality, and integrating more assets from across Silvaco to deliver a truly unique and disruptive platform. Second growth driver is IP. With the market-leading assets acquired with Mixel, we see IP emerging as a solid growth driver. We delivered record IP bookings and revenue in Q2 and continue to see potential for this business to double year-over-year in 2026. This business grew revenue 238% year-over-year in second quarter. The market for our IP is vast, at more than $1 billion. In this context, our expected $20 million of IP revenue in 2026 is just a drop in the bucket. We've also seen the most growth in our pipeline in the IP space, with the pipeline up more than 4x over the last year.

Our focus on efficiency, AI integration, and redoubling sales efforts has a lot of room to run. We look forward to seeing our IP team continue to build a solid book of business with some of the largest players in the industry. The third growth driver is AI. Our view is that AI is a clear positive for Silvaco. We see significant increases in our capacity to innovate with our existing resources as we invest in usage of AI tools for internal development. For example, we've seen some forms of prototyping accelerating up to 30x, source code analysis up to 11x, scripting about 10x, and debugging up to 5x. We expect these innovations to accelerate our roadmap, accelerate time to market, and position us to deliver profitable growth.

On the product side, we continue to develop AI-focused products, including our FTCO workflow, integrating AI into existing products, adding agentic offerings, and using AI agents to further improve our customers' productivity. These innovations include an AI-enhanced version of our product called Utmost that reduces time to model by up to 50%. In our IP business, we're developing disruptive tools with AI that will accelerate the cadence and quality of our offerings. In EDA, three of the five largest chip companies turn to Silvaco for netlist reduction. With Jivaro Pro, we can reduce terabyte netlists to gigabytes and reduce simulation times by an average of 6x. In conclusion, our strategic transformation is progressing well, and our roadmap and partnerships set a solid foundation for growth. I'd now like to turn the call over to Chris, who will discuss our financial results and outlook in more detail.

Chris? Thanks, Wally. Good afternoon, everyone.