• Total Revenue: $15.5 million for Q4 2024, up 24% year over year.
• Annual Contract Value (ACV) plus Royalties: $65.1 million, a record high for the company.
• Remaining Performance Obligations (RPO): $88.4 million, a 22% year-over-year increase.
• Non-GAAP Gross Profit: $14.2 million, representing a gross margin of 91% for Q4 2024.
• GAAP Gross Profit: $13.9 million, representing a gross margin of 90% for Q4 2024.
• Non-GAAP Operating Expense: $16.9 million for Q4 2024, flat sequentially and 1% higher year over year.
• GAAP Operating Expense: $21 million for Q4 2024, a 4% year-over-year increase.
• Non-GAAP Operating Loss: $2.8 million for Q4 2024, a $2.7 million improvement from the prior year period.
• GAAP Operating Loss: $7.1 million for Q4 2024, compared to $9.2 million in the prior year period.
• Non-GAAP Net Loss: $3.9 million for Q4 2024, or $0.10 per share.
• GAAP Net Loss: $8.2 million for Q4 2024, or $0.20 per share.
• Cash, Cash Equivalents, and Investments: $52.3 million at the end of Q4 2024.
• Free Cash Flow: Negative $2.7 million for Q4 2024.

• Warning! GuruFocus has detected 4 Warning Signs with AIP.

Release Date: February 18, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Arteris Inc (NASDAQ:AIP) achieved a record annual contract value plus royalties of $65.1 million in Q4 2024, driven by increased demand for semiconductor System IP products.
• The company reported a 24% year-over-year increase in total revenue for Q4 2024, reaching $15.5 million, which was above the midpoint of their guidance range.
• Arteris Inc (NASDAQ:AIP) successfully expanded its customer base, adding 14 new customers, including major players like Infineon and GigaDevice, and increased its presence in the microcontroller market.
• The introduction of FlexGen Smart NoC IP is expected to significantly enhance engineering productivity and improve power consumption and overall performance, with early adoption by over 10 companies.
• The company maintained a strong financial position with $52.3 million in cash, cash equivalents, and investments, and no financial debt at the end of Q4 2024.

Negative Points

• Arteris Inc (NASDAQ:AIP) reported a non-GAAP net loss of $3.9 million for Q4 2024, with a diluted net loss per share of $0.10.
• The company's free cash flow was negative $2.7 million in Q4 2024, impacted by short-term working capital timing changes.
• GAAP operating loss for Q4 2024 was $7.1 million, although this was an improvement from the prior year period.
• The company faces challenges in maintaining profitability, with a non-GAAP operating loss of $2.8 million in Q4 2024, despite improvements from the previous year.
• Arteris Inc (NASDAQ:AIP) noted that the royalties and other income line was slightly lower year over year, partly due to one-time benefits in 2023 not recurring in 2024.

Q & A Highlights

Q: Nick, by my calculation, your bookings were over $30 million in the quarter. Am I in the right zip code? A: Nicholas Hawkins, CFO: We don't specifically talk about bookings as a published metric, but the fourth quarter was characterized as a strong deal flow quarter, which is typically our strongest of the year.

Q: Charlie, could you talk more about FlexGen and its productivity increase? A: K. Charles Janac, CEO: FlexGen is based on FlexNoC 5 and automates the creation of NoC designs, reducing manual iteration by over 90%. It offers significant productivity increases and improvements in wire length, latency, and power. We've shipped it to about 13 companies, and the uptake has been strong.

Q: Is the uplift on FlexGen about a 30% increase in ASP? A: K. Charles Janac, CEO: That's right.

Q: Can you talk about ASP trends per project and if the $1 million ASP target for 2026 is still on track? A: K. Charles Janac, CEO: Yes, we're on track for the $1 million ASP for complex SoCs. However, microcontroller ASPs will be lower as they don't require FlexGen. We're currently achieving $1 million per project deals, and if customers buy everything from us, it could be around $1.5 million.

Q: Considering the broader macro backdrop, particularly in the automotive space, can you expand on licensing and royalty results? A: Nicholas Hawkins, CFO: Variable royalties were up 20% year over year, despite a major inventory correction by Mobileye. Excluding Mobileye, variable royalty growth was over 30%. Automotive still accounts for about half of total variable royalties.

Q: How should we think about the profitability trajectory and free cash flow target for 2025? A: Nicholas Hawkins, CFO: We're flipping from negative to positive free cash flow, driven by high teens to low 20% top-line growth and constrained OpEx growth. Most cash inflow is expected in the second half of the year due to seasonality.

Q: Can you talk about your involvement with x86 architecture? A: K. Charles Janac, CEO: We are involved in PC chipset designs.

Q: How does the chiplet design trend affect your opportunity and competitive landscape? A: K. Charles Janac, CEO: Chiplet designs increase interconnect complexity and ASPs. They often involve multiple companies and licenses, significantly increasing revenue opportunities for Arteris.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.