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- **Strategic Focus on AI and IP Growth**: Silvaco is prioritizing FTCO (AI-driven TCAD) and Mixel’s interconnect IP, with Mixel’s Cairo-based team setting a quality benchmark for the IP business.
- **$15M Annual Cost Savings**: Workforce reductions and office consolidation will reduce OPEX, enabling profitability at current revenue levels and driving gross margin expansion.
- **FTCO Adoption Challenges**: Despite strong potential, FTCO’s slow adoption due to complex customer integration highlights the need for patience and resource allocation.
- **Q3 Financial Strength**: 70% YoY revenue growth, 81.5% Non-GAAP gross margin, and $22.8M bookings (131% YoY) demonstrate operational progress, though profitability remains a near-term focus.
- **2026 Outlook**: Expect low double-digit revenue growth driven by FTCO, Mixel, and cost discipline, with mid-double-digit growth achievable in the longer term.

**【CEO Summary Section】**
- **Strategic Focus on Growth Drivers**: CEO Wally Rines emphasized a shift to concentrate resources on high-growth areas like AI (FTCO), interconnect IP (Mixel), and power solutions. FTCO, a unique AI-driven TCAD tool, is positioned to become a market leader, with partnerships like Micron driving adoption. Mixel’s acquisition is expected to accelerate IP growth, leveraging Silvaco’s global sales network.
- **Financial Discipline and Cost Reduction**: The company aims to achieve profitability at current revenue levels by reducing annualized operating expenses by $15 million through workforce reductions, office footprint consolidation, and discretionary spend cuts. This includes an early retirement incentive program and leaver programs across regions.
- **M&A Integration Challenges**: FTCO adoption has been slower than expected due to the complexity of integrating AI into semiconductor manufacturing processes. Mixel, while highly regarded for its quality and responsiveness, requires time to fully integrate with Silvaco’s existing IP business.

**【CFO Financial Commentary】**
- **Q3 2025 Financial Highlights**: 
  - **Revenue**: $18.7 million (70% YoY growth), with 74% from licenses and 26% from maintenance/services. Americas revenue spiked to 55% of total, driven by a major EDA contract.
  - **Gross Margin**: 77.9% (GAAP) and 81.5% (Non-GAAP), up 326 and 179 basis points YoY, respectively, due to revenue growth outpacing cost of sales.
  - **Operating Loss**: GAAP $9.3 million (up YoY), Non-GAAP $2.3 million (slightly down YoY). Net loss improved to $2.1 million (Non-GAAP) from $1.8 million YoY.
- **Cost Reduction Progress**: Early retirement programs and other measures are expected to reduce OPEX by $15 million annually, with most savings realized by Q1 2026. This will enable gross margin expansion and profitable growth.

**【Q&A Key Highlights】**
- **Pipeline and FTCO Adoption**: FTCO’s long sales cycle and customization requirements have delayed additional customer wins, but the product’s unique value proposition in AI-driven process development is expected to drive growth in 2026. The pipeline for EDA and TCAD remains stable, with 50% of revenue from renewals.
- **Mixel Integration**: Mixel’s Cairo-based engineering team and reputation for defect-free IP are seen as a benchmark for Silvaco’s existing IP business. Synergies with Silvaco’s sales force are expected to accelerate Mixel’s growth, with $3-$5 million in incremental revenue anticipated in 2026.
- **Future Growth Without Acquisitions**: CEO Wally Rines stated that organic growth through existing assets can achieve low double-digit revenue growth, with mid-double-digit growth possible in the longer term. The company will focus on improving forecasting accuracy and operational efficiency to support this growth.

Silvaco Group Inc (SVCO) Q3 2025 Earnings Call Transcript

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SVCO

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