Participants

Greg McNeeffe; Investor Relations; Silvaco Group Inc

Babak Taheri; Chief Executive Officer, Independent Board Member, Member of the Board, Member of the Lead Independent Board Member, Member, Compensation Committee, Member, Other; Silvaco Inc

Ryan Benton; Chief Financial Officer; Silvaco Group Inc

Charles Shi; Analyst; Needham & Company

Unidentified Participant

Blair Abernathy; Analyst; Rosenblatt

Robert Mertens; Analyst; TD Securities (USA) LLC

Mayur Popuri; Analyst; B. Riley

Presentation

Operator

Thank you for standing by, and welcome to the Silvaco fourth quarter 2024 financial results conference call. (Operator Instructions) As a reminder, today's program is being recorded.
And now I'd like to introduce your host for today's program, Greg McNiff, Investor Relations. Please go ahead, sir.

Greg McNeeffe

Thank you. Joining me on the call today are Babak Taheri, Silvaco's CEO; and Ryan Benton, Silvaco's CFO. As a reminder, a press release highlighting the company's results, along with supplemental financial results and an earnings presentation are available on the company's IR site at investors.silvaco.com. An archived replay of the conference 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, earnings presentation and on this conference call. The Risk Factors section in Silvaco's most recent Form 10-Q filing with the Securities and Exchange Commission provides a description of these risks.
With that, I'd like to turn the call over to Silvaco's CEO, Babak Taheri. Babak?

Babak Taheri

Thank you, Greg. Hello, and welcome to Silvaco's fourth quarter 2024 earnings call. I am Babak Taheri, CEO of Silvaco. Thank you for joining us today. In addition to discussing Silvaco's results, we will provide guidance for the first quarter and full year 2025, along with updates on our recent press releases, business developments and current market trends.
For those joining us for the first time, Silvaco is a provider of TCAD, EDA and semiconductor IP products that enable chip design, chip manufacturing and photonics through digital-twin modeling and simulation, utilizing AI and machine learning. We have decades of deep expertise in modeling and simulation software from concept to design and manufacturing.
Silvaco's digital-twin platform drives advances for the next generation of power semiconductors, photonics, memory devices and advanced CMOS technologies utilized in design and fabrication of next generation of integrated circuits. I will now highlight our non-GAAP results for full year 2024 and our targets for full year 2025. Our CFO, Ryan, will discuss our annual and quarterly non-GAAP financial results and guidance in more detail later on.
For the fiscal year 2024, we reported gross bookings of $65.8 million, reflecting a 13% increase from 2023. Revenue of $59.7 million, representing a 10% increase from 2023. Non-GAAP gross margin of 86% increased from 83% in 2023. Non-GAAP operating income of $5.5 million compared to $4.4 million in 2023. Non-GAAP net income per share of $0.25 compared to $0.17 in 2023.
Shares used in the calculation of non-GAAP income per share increased to 26.8 million from 20 million in the same period a year ago. Now for the fiscal year 2025, we expect gross booking in the range of $72 million to $79 million, reflecting a 9% to 20% increase from 2024, revenue in the range of $66 million to $72 million, representing an 11% to 21% increase from 2024, non-GAAP gross margin in the range of 84% to 89%, which would compare to 86% in 2024.
Non-GAAP operating income in the range of $2 million to $7 million compared to $6.7 million in 2024 and non-GAAP net income per share in the range of $0.07 to $0.19 compared to $0.25 in 2024. I'm really excited about the progression of the business we have seen and our execution on the strategies we outlined since we went public last year.
We believe our strategic focus on driving innovation through AI-based semiconductor design for advanced CMOS geometries and power semiconductors, which includes digital-twin modeling and quantum computing, positions us well for long-term growth and our strong business fundamentals and innovation product lines will continue to drive our customer momentum.
Next, I'd like to discuss our achievements in Q4. Please turn to next slide. Highlights of Silvaco milestone achievements. Silvaco expanded its AI-based digital-twin modeling platform, FTCO adoption in May and October. We announced a partnership with Micron Global in December to expand Silvaco's reach across the EMEA market, leveraging Micon's expertise to deliver cutting-edge TCAD, EDA and SIP solutions to new customers.
Silvaco joined the Smart USA Institute under the CHIPS Manufacturing USA program to advance digital-twin technologies in semiconductor manufacturing also in December, reinforcing Silvaco's leadership in innovation. Additionally, Silvaco expanded its Victory TCAD and Digital Twin Modeling Platform to Planar CMOS, FinFET and Advanced CMOS technologies, which is a necessary step to enable FTCO for advanced process in September. In October, the company achieved the ISO 9001 certification of TCAD, EDA and IP products. In the next slide, I would like to review how our land and expand strategies have performed in 2024 compared to '23. Please turn to the next slide.
Top vertical market trends and performance in fiscal year 2024. As previously stated, our focus in 2024 was expanding in the power and memory markets while maintaining display customers and adding new customers in other markets. I'm very proud of our team that has delivered 46 new customers or new logos in 2024. This slide represents a breakdown of 43 new customer wins that contributed to our primary end markets along with their year-over-year growth rates. Although new customer growth was down in three end markets, we view this as an opportunity to expand within the accounts we have already secured.
As a reminder, we often land customers in certain markets with small opportunities and expand in them in the future. Notably, we added 13 new power customers with 43% increase in bookings year-over-year in this segment for TCAD and EDA, one new memory customer with 89% increase in revenue year-over-year for our TCAD product line, five new customers in Photonics for TCAD and EDA, three new foundry customers for TCAD, IP and EDA, three new 5G, 6G customers for IP and EDA, five government and mil-aero customers for EDA and IP, five new customers in IoT for IP and EDA, 8 new customers in automotive for TCAD and IP and three others.
On the next slide, I would like to review how we are expanding our SAM, including through the recently announced acquisition. Please turn to the next slide. Electronic design and manufacturing software enables value chain.
Silvaco is expanding its market SAM using AI-based digital-twin modeling and simulation. The first step in developing a semiconductor chip is designing it using EDA software and semiconductor IPs. As I mentioned in our last call, Silvaco provides software platforms for both step 1, which is design, and step 2, which is manufacturing preparation as shown in this slide. Additionally, we have expanded our SAM by $0.5 billion through our FTCO platform. I'd like to draw your attention to the new green arrows on this slide.
These arrows highlight the crucial interface between chip design and manufacturing, especially the final step after design and the first step in manufacturing. The last step before manufacturing is the optimization of the design layout data for mass generation, a process known in the industry as optical proximity correction or OPC. Think of OPC as a technology that enables the creation of precise masks needed for semiconductor manufacturing.
At a high level, advanced algorithms analyze and correct distortions that occur due to optical and proximity effects, ensuring that masks used to pattern wafers in the lithography process produce highly accurate and manufacturable chips. With our technology, Silvaco now directly addresses the first 2 key steps in the semiconductor value chain.
I'm excited to announce that we've added OPC capabilities to our platform through the recent acquisition of Cadence's OPC product line. This strategic addition enables Silvaco to participate in a $357 million SAM, a market we previously did not address. Next, I'd like to go over the key highlights of this acquisition. Please turn to the next slide. Silvaco acquisition of Cadence's OPC product line overview.
Driving innovation, customer value and market expansion through strategic acquisitions. Silvaco's strategic expansion into the growing OPC markets strength its position in advanced memory manufacturing and foundry operations, aligning with our long-term road map. This move enables us to foster deeper relationships with key memory manufacturers by addressing critical advanced node requirements, including EUV and AI-driven lithography.
By integrating AI and machine learning into our OPC tools, Silvaco enhances efficiency and scalability, driving innovation in next-generation semiconductor manufacturing. Additionally, entering high-value OPC segment expands our SAM by $357 million, broadening our customer base with critical solutions.
The acquisition also brings a highly skilled and innovative team, ensuring seamless integration and continuous product development. While the initial revenue impact in 2025 will be modest due to ASC 606 timing, contributions are expected to reach mid-single-digit revenue by 2026, reinforcing our financial growth strategy. Please turn to the next slide. Key differentiators of acquired OPC products. Advanced OPC solutions are setting new industry standards with cutting-edge technologies designed to improve semiconductor manufacturing.
Hybrid SRAF optimization or sub-resolution assist features are tiny non-printing patterns added to a photomask to ensure the accuracy of the chip design. They help correct distortions that naturally occur during the printing process, making complex chip patterns more reliable and manufacturable. The hybrid approach combines both rule-based and AI-driven techniques to enhance performance, especially for the most advanced semiconductor chips.
As chips become smaller down to 2-nanometer and beyond, the traditional correction methods struggle to keep up. EUV OPC or extreme ultraviolet optical proximity correction is a specialized technique that fine-tunes chip patterns for EUV lithography, which uses an ultra-small 13.5 nanometer wavelength light, ensuring precision at the smallest scale.
Instead of using only straight lines and right anglers, curve linear OPC allows chip patterns to have smooth round shapes, leading to better performance. Our technology ensures these designs comply with manufacturing standards while also improving efficiency and accuracy. Trusted by top memory manufacturers, these solutions have already proven their ability to speed up chip development while maintaining a high quality.
By integrating seamlessly with chip design and manufacturing processes, our OPC technology helps reduce errors, increases efficiency and accelerates product time lines. As the semiconductor industry pushes towards smaller, more powerful chips, 2-nanometer, 1.4-nanometer and beyond, Silvaco is staying ahead of the curve, delivering faster, smarter and more reliable solutions to power the future of semiconductor manufacturing.
Please turn to the next slide. Fourth levels uses of artificial intelligence in EDA. As I mentioned earlier, Silvaco leverages AI industry trends through our digital-twin modeling capabilities, which allows customers to create models, which reduce costs and improve time to market. The EDA industry has historically utilized AI to assist chip designers at three levels: optimizing historical tool performance for chip designers, aiding in design steps, and lastly, generating chip designs from specification. Silvaco has introduced a four level of AI, which is not in the design space, but rather in the manufacturing space.
This is where Silvaco is expanding its TAM by enabling operators in fabs to save time and reduce wafer production costs. Next slide, please. Here is Silvaco's AI-driven fab technology co-optimization, also known as FTCO. An example of Silvaco's AI-driven FTCO, this slide provides a more detailed layout of how digital-twin models are generated at the wafer level. We leverage AI and machine learning to process the large volumes of data provided by the customers, transforming them into high accurate wafer models.
By rapidly building and refining these models, AI and machine learning significantly reduce development time from months to just weeks or even days. With AI-enhanced FTCO, customers can lower cost, improve margins and accelerate time to market. Lastly, I'd like to review our growth strategies, which are fundamental to supporting our customers and driving future market share expansion. Please turn into the next slide. Here is Silvaco's growth strategy summary.
In summary, we believe our strategic focus on driving innovation through AI-enabled semiconductor design, particularly for new announced advanced CMOS geometries and power semiconductors, including digital-twin modeling, positions us well for long-term market expansion while addressing customer needs. We further address customer needs through agile R&D as well as both organic and inorganic growth strategies. Finally, we continue to leverage our deep relationships with R&D centers and academia to stay at the forefront of technological advancements. With that, I'll turn it over to Ryan to review the quarter and discuss our guidance.

Ryan Benton

Thanks, Bob, and thank you all for joining us today. I will review our financial results for the fourth quarter and full year 2024 and provide guidance for the first quarter and full year 2025. As a reminder, we announced preliminary unaudited results for the quarter and full year on January 14. Please note that I will be discussing non-GAAP results going forward.
As a reminder, our GAAP financial results, along with a reconciliation between GAAP and non-GAAP results, can be found in our earnings press release in the appendix of the presentation and within the supplemental financials on our website.
Gross bookings for our software and semiconductor IP products in the fourth quarter were $20.3 million, up 30% year-over-year, setting a new quarterly record. Revenue was $17.9 million, up 43% year-over-year, also a quarterly record, driven by continued adoption of our FTCO platform and strong EDA sales. I will discuss the drivers behind our performance in more detail shortly.
Our non-GAAP operating expenses were $12.8 million, up from $11.1 million last year, primarily due to increased G&A costs related to being a public company as well as continued investment in R&D and sales. Breaking down our cost structure, R&D was 23% of revenue, sales and marketing was 20% and G&A was 29%.
While G&A expenses have increased with our transition to becoming a public company, we expect these costs to scale more efficiently over time. Non-GAAP operating income was $3.1 million, up from a loss of $1.3 million in Q4 2023. Our non-GAAP net income for the quarter was $4.3 million compared to a non-GAAP net loss of $1.6 million in the same period last year.
Diluted non-GAAP net income per share came in at $0.15, an improvement of $0.23 from a non-GAAP net loss of $0.08 in Q4 2023. These bottom line results reflect the impact that increased revenue scale can bring.
Two quick comments on ending balances. We ended the December quarter with $87.5 million in cash, cash equivalents and marketable securities. Our ending diluted share count for the fourth quarter was 28.8 million shares. I would now like to discuss our fourth quarter bookings performance by product. We achieved total gross bookings of $20.3 million, an increase of 30% year-over-year.
We saw strong bookings growth across multiple product categories. TCAD bookings were $14.3 million, up 68%, driven by a large follow-on order for our FTCO product. EDA bookings were $5.5 million, up 31% year-over-year. SIP bookings were $0.6 million, down 79%, reflecting lingering impacts from the Q2 delay in renewing a key strategic resale agreement as well as general order slowdowns in APAC. Despite this, we remain confident in the long-term opportunity for SIP.
Our non-GAAP gross margin for the quarter came in just shy of our long-term target at 89%, up from 79% in Q4 2023. The improvement was simply driven by the revenue growth and the largely fixed nature of our cost of revenues, which came in at $1.9 million in the quarter. I'll now review our financial results for the full year.
For 2024, we achieved annual record for gross bookings of $65.8 million, up 13% year-over-year, and annual record for revenue of $59.7 million, up 10% year-over-year. Our non-GAAP operating expenses for the full year were $45.9 million compared to $40.5 million in 2023.
R&D was 25% of sales, sales and marketing was 23% of sales and G&A was 29% of sales. This resulted in an annual record for non-GAAP operating income of $5.5 million, up from $4.4 million in 2023. Our non-GAAP net income for the full year was $6.7 million compared to $3.4 million in 2023. And lastly, again, diluted non-GAAP income per share was $0.25, up $0.08 from 2023. Turning to our bookings performance by product for the full year 2024.
We achieved total gross bookings of $65.8 million, an increase of 13% year-over-year. Similarly to the quarter, our strong bookings performance was driven by TCAD and our FTCO product specifically. TCAD bookings were $46.9 million, up 32%. EDA bookings were $15.4 million and SIP bookings were $3.4 million. Again, for SIP, we took a step back in 2024, but we're expecting good things in 2025 and beyond.
I would now like to highlight our bookings performance throughout the year. We finished strong in Q4. We successfully added 13 new customers in the fourth quarter alone, which brings our year-to-date new customer total wins to 46. Turning to our revenue splits between geographic regions. For the fourth quarter of 2024, Asia Pacific revenues were $9.2 million or 52% of total sales.
The Americas was just over $7 million or 40% of sales, and EMEA was $1.5 million or 8% of sales. For the full year, Asia Pacific revenues were $31.6 million or 53% of sales. The decline in SIP sales impacted our full year performance, but strong Q4 recovery in TCAD and EDA helped stabilize our results for this region. The Americas was $22.5 million or 38% of sales. This region showed exceptional growth compared to 2023, driven by the adoption of the new FTCO product at a key memory customer.
Europe was $5.6 million or 9% of sales, fueled by EDA sales with additional momentum from further TCAD adoption in the fourth quarter. On the next slide here, we show the trend of remaining performance obligations, or RPO, which at year-end stood at $34.3 million, with 46% expected to be recognized as revenue within the next 12 months.
This reflects strong customer commitments that support top line growth. On this slide, I will now review our first quarter 2025 guidance. I will note that the first quarter and the full year guidance on the following slide reflects the acquisition of the OPC product line, which will reflect less than 1 month operating activity for the first quarter.
I will also add that there are several complexities that may arise during the transition that could impact revenue recognition for the first year in particular. And as such, we are being cautious in our approach to forecasting current year sales from the acquisition. Considering all that, for Q1 2025, we expect gross bookings between $16 million and $19 million, revenue between $14.5 million and $17 million, non-GAAP gross margin between 84% and 87%, non-GAAP operating income between a loss of $1 million and $1 million income, and non-GAAP income per share between $0.03 loss and $0.03 income. Turning to the next slide. We'll review our guidance for the full year 2025.
For 2025, we expect gross bookings to grow to come in between $72 million and $79 million. We expect revenue in the range of $66 million to $72 million, non-GAAP gross margin to come in between 84% and 89%, non-GAAP operating income between $2 million and $7 million and non-GAAP income per share between $0.07 and $0.19.
Again, this assumes a modest top line contribution from the recent OPC acquisition. As the ink is perhaps not even quite dry on the acquisition and there are some commercial sensitivities, there are limitations to what we're able to discuss about our plans and expectations for the business today. We should be able to provide a more detailed view on our next quarterly call.
What I can definitely say today, which echoes Babak's comments, is we're excited about this acquisition. It's a wonderfully brilliant team that we're inheriting. It's a great technological and product fit, and we're thrilled to have it done. Now let's move to review our long-term financial targets. We continue to target 15% to 25% revenue growth.
For our long-term target model, we expect 90% plus non-GAAP gross margin and 25% plus non-GAAP operating margin. We believe we can achieve these targets through global sales expansion, deeper customer engagements, broader adoption of our FTCO platform and the continued execution of strategic acquisitions to leverage our core technology strengths and operational efficiencies.
And with that, Babak and I will be happy to take your questions. Operator?

Question and Answer Session

Operator

Charles Shi, Needham and Company.

Charles Shi

Hi. Just want to ask a clarification, the contribution of the acquisition, of the cadence OPC product line. I get it that you're saying, it's probably going to be somewhere missing the digit of the 2026. Revenue kind of implies somewhere about, let's say $3 million, $4 million per year revenue run rate. But you're saying because of ASC606 that you're expecting a modest contribution to quantify, but can you quantify that? What do you mean by modest? Do you think it's still like somewhere in the $3 million, $4 million range? What that means?

Ryan Benton

Yeah. It's okay, Babak, I'll take first crack at it. So this is Ryan. Again, we're super excited about this acquisition. Again, as I said in the prepared remarks, I really will not be providing a separate number in terms of revenue forecast for the acquisition for the current year.
There are certain complexities in terms of how the transaction works in terms of how the commercial agreements are transitioned over to Silvaco, but there are certain dominoes in terms of how the revenue recognition gets applied and what ends up happening. Again, I use the word cautious. We try to be extremely cautious in terms of how we forecasted that number. So very modest. Babak, do you want to add to that?

Babak Taheri

No. I think, Ryan, you said it well. And we will have a lot more details in our next call. We will have a lot more data that we can rely on. And so I would have repeated what Ryan said, but it's modest at this time.

Unidentified Participant

Do you have a number like what is the last year's revenue run rate or the trailing 12 months of that business, the revenue run rate of that business before you acquired it?

Ryan Benton

Yeah, Charles, we do have that number, we're under an NDA, which prohibits us from speaking to that number specifically. I think the best data point to look towards is Babak's comment in terms of what our expectations are for 2026 in terms of how we expect the business to settle out. In terms of '25, again, there's a lot of upside depending on how things fall and how things get contracted, but we just thought it prudent to be extremely cautious with what we kind of baked into the number. The acquisition literally has only been closed for plus or minus 24 hours.

Unidentified Participant

Okay. The other question, obviously, the guidance for fiscal '25, you're guiding to a good amount of revenue growth, gross margin expansion, but operating profits you're expecting a down year, kind of implies a pretty meaningful OpEx increase. Is that all because of the acquisition? Or you're also a little bit ramping up the existing part of the Silvaco business, the OpEx for that part of the business?

Ryan Benton

Yeah. So there's really both parts. So certainly, we have been, hiring has always been the plan to have some operating expense growth that kind of coincides with the revenue growth that we expect. And again, we've commented specifically, we expect R&G, R&D as well as sales and marketing to kind of grow with revenue, just a tad bit of leverage perhaps out of sales and marketing, G&A, we expect to get leverage. But the second part of your question, you're absolutely right.
The acquisition is now closed. And so the cost that we have projected, the operating expenses absolutely includes the cost of the team that we've inherited and that we've taken on as well as, again, another area, as you know, when you do acquisitions, there's a certain amount of cost that you incur in the first year of an acquisition that don't necessarily repeat into the second and third year. And so whenever we've said we've taken a cautious approach, we've done that in both top line as well as expenses. And so for expenses, that means, of course, you bake in the expenses that you've inherited and you expect.

Operator

Blair Abernethy, Rosenblatt Securities.

Blair Abernathy

Just a couple on the acquisition, if I could. Would you be willing to give us sort of a ballpark number of how many customers are coming with this business unit?

Babak Taheri

Sure. I would say to start with, I would add that some of the customers that we also acquired as part of the deal are our existing customer. So we consider OPC part to those customers to be an expansion of a landed customer we already have. And then we also have new customers that if you will, we have not had those logos before. And the top customers, I would say, are single-digit numbers, less than 10.
And that's a number we already have. And as you know,, Blair, we've always been able to land and expand in these customers. So that would be the first thing we will be doing. But those are the numbers that I would, and out of that top 10, about 3 or 4 of them are existing.

Blair Abernathy

Okay. And then from a product perspective, is there a technical integration path that you're going to take this on vis-a-vis some of your other products like the FTCO? Or is this really a stand-alone products that you'll sell with your existing products?

Babak Taheri

That's a great question. So as you know, currently, it's being sold as stand-alone with minor integration of other products, which we will continue to do so. But as we said on our call, our plan is to, and by the way, this acquisition falls under our EDA product line, just to be exact, since it would be the last step after GDS before manufacturing that OPC takes place. However, as you know, since it's the first step in manufacturing is making masks and making patterns that go on a wafer more reliable and more accurate and better yielding patterns. It also falls into manufacturing part, which FTCO is part of that.
So although the product line is within EDA, the algorithms, the technology and AI-based modeling aspect of it will also be integrated as part of the FTCO. So this will complete actually what's needed to have a full FTCO platform from mask making all the way to final wafers. So it's a big advance for us, and we will continue to expand this capability into FTCO.

Blair Abernathy

And what's any sense on the time line about, I guess, as to when that would be sort of more tightly integrated with the FTCO?

Babak Taheri

Yeah, absolutely. So as you know, we already have customers that utilize FTCO. We are working with customers that potentially could use FTCO. And I would say, typically, it takes us between 6 months to 9 months to integrate these products into our current platform. And that would be the right time.
I would say 6 to 9 months would be the correct time frame to do that. But don't forget that we do advance R&D with our customers. As a matter of fact, we will start advance R&D combining this to the FTCO with some potential customers that we will start discussions in Q2. So getting advanced R&D part of it will be including some customers that we work with. And those will start much sooner than that. So...

Blair Abernathy

Okay. Great. And then just shifting over to the FTCO as it's been marketed, I guess, this past year. How is the pipeline shaping up for that?

Babak Taheri

It's exactly as we mentioned, we already have two customers that are evaluating this technology. And as we said, Q2 time frame would be the time frame that we are pushing to get adoption. They've already adopted at the R&D level. The question is when can we get them adopt this for final manufacturing steps. And as I had mentioned before on our previous call, we have a customer in advanced CMOS and a customer in power that we're working with through R&D and hoping to close those for manufacturing acceptance this year, ideally in Q2, but it may be Q3.

Blair Abernathy

Okay. Great. And then just shifting over to your end markets. Clearly, a lot of traction in 2024 in the power market, 13 new customers. Can you just give us some color on sort of what exactly those customers have been buying?
And has it been fairly similar across the board? Or just give me a sense of what that end market is looking like for you?

Babak Taheri

No, absolutely. As we've said before, we have been focusing on power as well as memory and display markets historically and power market, as we said, we added 4 top-level logos last year to the power market. And the power market includes, I would say, new technologies like silicon carbide, GaN and some of the old historical technologies like transistor CMOS-based technologies, DMOS and what have you.
And as it turns out, as you noticed probably and have seen the news, silicon carbide has its own challenges for scaling. And as customers are realizing that these challenges exist and they need more understanding of the physics aspect of these devices and how they scale, we get more traction.
And also, as you know, GaN is also picking up. So I would say a combination of GaN and silicon carbide has been companies that adopt our TCAD technology and starting to for EDA as well. So I would just summarize it in mainly TCAD, some EDA coming up in silicon carbide, GaN and also older technology power devices. And it's across the world. It's US and Europe and Asia.

Operator

Robert Mertens, TD Cowen.

Robert Mertens

This is Robert Mertens on for Krish Sankar. Congrats on the quarter and the strong yearly outlook. It looks like it's maybe 400 basis points or so above what your large cap peers are sort of guiding. I know Charles sort of touched upon this already in a prior question. But with your operating profit forecast, it seems to imply on the low end, OpEx can grow sort of in line with sales this year and upwards of maybe 25% year-over-year.
Could you just walk us through maybe where the major R&D investments this year are focused and what sort of flexibility you have in the spending there?

Ryan Benton

Yeah. Babak, it's okay. I'll just make one quick comment. Babak will, of course, speak to the types of investment that we'll be making. Specifically, though, again, just reiterating the growth in the R&D line that I think you wouldn't necessarily have expected coming into the last 24 hours is as a result of the costs that we're absorbing as part of the acquisition as well as what I believe are some costs that will be in the first year and won't necessarily be recurring beyond year one. But in terms of the investments, Babak?

Babak Taheri

Yeah, absolutely. So I showed in one of our slides, I believe it was slide 4 or 5, that what our vertical end market trends and performance was last year. Blair earlier alluded to power, which was 43% up for us. I should mention that memory was up also 89%, and then also, we mentioned that photonics market, we actually had five new customers. So as you will see, and we have emphasized on these markets is our focus is in power, memory, maintaining display, growing in photonics and others.
Where our investment falls is as we delve into more power and memory markets, especially the OPC tool latest acquisition gets us a stronger foothold in the memory market. The tools that we have initially are focusing and specializing in memory products. and the customers, our majority that we've acquired are in memory products. So that strengthens our presence in memory market. And of course, the costs associated with the acquisition of getting extremely intelligent talent, which is part of the OpEx that Ryan has already mentioned.
But the other areas that we are investing to grow is power. We are making sure that we have enough agile R&D for our new customers to be able to design and manufacture their next generation of products. And as I mentioned, photonics in the past several quarters, but the proof is in the pudding, the fact that we have added five new photonics customers is a proof that we are actually increasing our presence in that market.
And photonics market, as you know, consists of anything that has to do with lasers, image sensors, displays, anything that has optics and electronics, optoelectronics involved. And because we have acquired these new customers and we are doing advanced R&D for them, some of the OpEx comes from that as well.
And we've always said, actually 95-plus percent of our revenue comes from advanced R&D projects in our customers and landing in them is the first key steps and expanding in them requires a bit more R&D for the first few years, and then it rolls out as a standard product, which we tend to expand in the existing and land new and more customers. So our power devices are in that category already. We are expanding less of an R&D. But with photonics and memory, we are spending more R&D to get us to the next level of customers.

Robert Mertens

Great. That's helpful. And then just one follow-up, if I may. In your outlook for March as well as the full year, just how are you viewing your current exposure to China? Earlier, you had mentioned some customer delays that got pushed out into the December quarter and beyond. Just have your views changed at all over the past couple of months? Or is the revenue contribution from the region probably expected similar levels this year as calendar year '24?

Ryan Benton

That's a good question. So roughly 20% calendar '24, and we have said 15% to 20% for '25 from China region. So we expect it to be flat literally and maybe a bit down, but not significantly so.

Operator

Craig Ellis, B. Riley.

Mayur Popuri

This is Mayur on for Craig Ellis. I kind of wanted to ask about the gross margin that you're guiding for, for full year of 2025 and rectifying that with the kind of reiterated long-term target at about 90%. So we have, at that midpoint, gross margin not going up by a significant amount, I think, about 50 bps. How do you kind of leverage these 2 facts? Do we see maybe gross margins starting to pick up again later into the year?
Is it sort of a first half digestion and then we get back on track? If you could characterize this for me, that would be great.

Ryan Benton

Yeah. No, absolutely, I'll take that. I mean look, obviously, we did 89%, really close to the 90% target model in Q4. Again, I said so many times, our cost of revenues are largely fixed cost, right? And so it's really generally a factor of revenue and scales.
And so you look at the kind of the undulations of revenue from quarter-to-quarter. So when we have a stronger quarter in revenue, and that's what's going to cause the margin to creep up. But really a couple of hundred thousand dollars of cost can be a couple of points in terms of gross margin. So it's just that level of range that is very sensitive to those costs.

Mayur Popuri

All right. Got it. Okay. So then kind of switching gears, can you help us understand where you're on with funnel conversion with other deals that might be going on? And so when you have just closed a deal like you just have, and congrats on that.
Can you have multiple streams of deals going on? Or is there a period of ingestion where once one closes, there has to be some time for everything to reorganize and resettle before you guys can move on to another opportunity?

Babak Taheri

I'll take that, Ryan. I think there is always a period of ingestion. And we do have a pipeline and our pipeline historically, we've done 1 and 2. So that would actually extend us to a point that we can potentially do 2. But the first one, and typically, the period in which we absorb technology and talent, the closer to what we do, the easier and the faster it is.
And in case of our OPC platform that we just acquired, I think this is faster than other acquisitions we've done. So I would say 3 to 6 months. As a matter of fact, and that's why Ryan and I said that we will have a lot more information and data to give you in the next call before the end of Q2, I would say. So with that, ingestion period for the first acquisition would be 3 to 6 months. We are trying to get that done in 3 months.
As a matter of fact, as Ryan said, the ink is 24 hours, but the team is already on board and have all their compute power and data transfers done, and that will be completed by this week and the rest is just a matter of supporting the existing customers and expanding in them, which we have already started discussions with them, a matter of fact, as of today.
So that's going to be fast. But we honestly can digest and do two of these at a time if needed. But depending on what area that is, that could be also 3 months to 9 months depending on what kind of acquisitions we do. But this one is pretty much, we are well versed in it.
We know the technology. And we used to have a lithography process ourselves, but this gets us to the next level that we wanted to get to.

Mayur Popuri

Okay. And then just one last question. So I believe you said you acquired 13 new customers this quarter. I think it was a very similar amount last quarter. Is this kind of a pace that we can see continuing into 2025? Or will there be any sort of upside or downside, I guess, push?

Babak Taheri

That's a good question. And it's hard to answer. I'll tell you why, and I'll give you an answer anyways at the end. But the quality of the customers that we tend to start acquiring over time has changed. And part of the reasons we went public was to have financial visibility for much larger customers that we are dealing with.
So the quality and the size of the deals that we would make with our new customers will be larger. The numbers are important so that we can show where we are at, and as we said already, we added 13 power customers, but we said there were only four power customers that are in the top 10 power market, right, that we have acquired. And to us, we lead the market if we have six or more of the top 10. So our goal is to go after the 6 or more in the markets we don't have. So we need to add definitely at least two more to the power.
But the numbers are though important. We always try to land. But the quality and the position of where those customers are even more important. But going back to give you a shorter answer, we expect the numbers to be the same, but the quality will change.

Operator

(Operator Instructions)
And this does conclude the question-and-answer session of today's program. I'd like to hand the program back to Dr. Taheri, CEO of Silvaco.

Babak Taheri

Thank you very much. I wanted to again mention that we appreciate all of you attending this. Great questions, and we are always there to answer more later on. I wanted to say that we are very proud to close out the year with strong momentum and growing customer traction, including the 46 new customer wins that we talked about in 2024 and multiple bookings on our FTCO platform.
Our first acquisition as a public company marks a significant milestone for us in executing our M&A strategy for talent, technology and expanding through inorganic growth. We will continue doing that. And our focus area will be in business units that we have, EDA, TCAD product lines and IP as well. With that, I wanted to thank everyone again, and have a great rest of the day.

Operator

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.