• Arteris Announces Financial Results for the First Quarter 2022 and Estimated Second Quarter and Full Year 2022 Guidance

    Source: Nasdaq GlobeNewswire / 10 May 2022 16:05:01   America/New_York

    CAMPBELL, Calif., May 10, 2022 (GLOBE NEWSWIRE) -- Arteris, Inc. (Arteris or Arteris IP), a leading provider of network-on-chip (NoC) interconnect and other intellectual property (IP) technology that manages the on-chip communications in system-on-chip (SoC) semiconductor devices, today announced financial results for the first quarter ended March 31, 2022 as well as estimated second quarter and full year 2022 guidance.

    "We’re excited to report a strong start to 2022, with Annual Contract Value plus Trailing Twelve Month Royalties of $52.8 million, up 26% year-over-year,” said K. Charles Janac, President and CEO of Arteris IP. “The ongoing democratization of SoC design as well as a disintermediation of the semiconductor supply chain is driving a strong need for automation of System IP solutions in order to compensate for a shortage of SoC architects and skilled interconnect IP engineers. We believe we are uniquely positioned to capitalize on this nascent but immense opportunity as it emerges.”

    First Quarter 2022 Financial Highlights:

    • Annual Contract Value (ACV) and Trailing-twelve-month (TTM) royalties of $52.8 million, up 26% year-over-year
    • Revenue of $11.8 million, up 77% year-over-year
    • Remaining performance obligation (RPO) of $60.5 million, up 28% year-over-year
    • Operating loss of $6.6 million or 56% of revenue
    • Non-GAAP operating loss of $4.2 million or 36% of revenue, compared to a loss of $5.8 million in the year-ago period
    • Net loss of $6.8 million or $0.22 per share
    • Non-GAAP net loss of $4.4 million or $0.14 per share
    • Non-GAAP free cash flow of $(1.5) million or (12)% of revenue

    First Quarter 2022 Business Highlights:

    • 19 designs starts in the first quarter, including two in automotive, four in consumer electronics and seven enabling artificial intelligence/machine learning (AI/ML);
    • We added seven Active Customers during the first quarter, of which four are customers enabling AI/ML for IoT, data center and automotive applications;
    • We announced that BMW licensed Arteris IP for a Neural Network Accelerator project; and
    • We further strengthened our executive team during the quarter with the addition of Pankaj Mayor as Executive Vice President Global Sales and Michal Siwinski as Chief Marketing Officer, each bringing significant industry as well as public company experience.

    Estimated Second Quarter and Full Year 2022 Guidance:

     Q2 2022FY 2022
     (in millions, except %)
    ACV + TTM royalties$49.5 - $51.5$51.6 - $55.6
    Revenue$11.5 - $14.5$48.0 - $52.0
    Non-GAAP operating loss (%)19.4% - 34.4%24.9% - 39.9%
    Free cash flow (%)(44.4)% - (29.4)%(25.5)% - (10.5)%

    The guidance provided above are forward-looking statements and reflect our expectations as of today's date. Actual results may differ materially. Refer to the section titled "Forward-Looking Statements" below for information on the factors, among others, that could cause our actual results to differ materially from these forward-looking statements.

    Non-GAAP gross profit, Non-GAAP gross margin, Non-GAAP operating loss, non-GAAP operating loss margin, non-GAAP net loss, non-GAAP net loss per share, free cash flow and free cash flow margin are non-GAAP financial measures. Additional information on Arteris’ historic reported results, including a reconciliation of these non-GAAP financial measures to their most comparable GAAP measures, is included in the financial tables below. A reconciliation of non-GAAP guidance measures reported above to corresponding GAAP measures is not available on a forward-looking basis without unreasonable effort due to the uncertainty of expenses that may be incurred in the future, although it is important to note that these factors could be material to Arteris' results computed in accordance with GAAP.

    Definitions of the other business metrics used in this press release including ACV, customers and customer retention, design starts and RPO are included below under the heading “Other Business Metrics.”

    Conference Call

    Arteris will host a conference call today on May 10, 2022 to review its first quarter 2022 financial results and to discuss its financial outlook.

    Time:4:30PM ET
    United States/Canada Toll Free:877-407-9208
    International Toll:1-201-493-6784
    Conference ID:13728557

    A live webcast will also be available in the Investor Relations section of Arteris’ website at: https://ir.arteris.com/events-and-presentations

    A replay of the webcast will be available in the Investor Relations section of the company’s web site approximately two hours after the conclusion of the call and remain available for approximately 30 calendar days.

    About Arteris

    Arteris IP (Nasdaq: AIP) provides system-on-chip (SoC) system IP consisting of network-on-chip (NoC) interconnect IP and IP deployment technology to accelerate system-on-chip (SoC) semiconductor development and integration for a wide range of applications from AI to automobiles, mobile phones, IoT, cameras, SSD controllers, and servers for customers such as Bosch, Mobileye, Samsung, Toshiba and NXP. Arteris IP products include the Ncore® cache coherent and FlexNoC® non-coherent interconnect IP, the CodaCache® standalone last level cache, and optional Resilience Package (ISO 26262 functional safety), FlexNoC AI Package, and PIANO® automated timing closure capabilities. Our IP deployment products provide intelligent automation that accelerates the development and increases the quality of SoC hardware designs and their associated software and firmware, verification and simulation platforms, and specifications and customer documentation. Customer results obtained by using Arteris IP products include lower power, higher performance, more efficient design reuse and faster SoC development, leading to lower development and production costs.

    Investor Contacts:
    Arteris
    Nick Hawkins
    Chief Financial Officer
    IR@arteris.com

    Sapphire Investor Relations
    Erica Mannion and Michael Funari
    +1 617 542 6180
    IR@arteris.com

    Forward-Looking Statements

    This press release contains forward-looking statements, including but not limited to, statements regarding our future financial and operating performance, including our GAAP and non-GAAP guidance for the second quarter and full year 2022; our market opportunity and its potential growth; our position within the market and our ability to drive customer value. Any forward-looking statements contained herein are based on our historical performance and our current plans, estimates and expectations and are not a representation that such plans, estimates, or expectations will be achieved. These forward-looks statements represent our expectations as of the date of this press release. Subsequent events may cause these expectations to change, and we disclaim any obligation to update the forward-looking statements in the future, except as required by law. These forward-looking statements are subject to known and unknown risks and uncertainties that may cause actual results to differ materially from our current expectations. Important factors that could cause actual results to differ materially from those anticipated in our forward-looking statements include, but are not limited to, the significant competition we face from larger companies and third-party providers; our history of net losses; whether semiconductor companies in the automotive market, AI/ML market, 5G and wireless communications market, large scale cloud and data center market and consumer electronics market incorporate our solutions into their end products and the growth and economic stability of these end markets; our ability to attract new customers and the extent to which our customers renew their subscriptions for our solutions; the ability of our customers’ end products achieving market acceptance or growth; our ability to sustain or grow our licensing revenue; our ability, and the cost, to successfully execute on research and development efforts; the occurrence of product errors or defects in our solutions; if we fail to offer high-quality support; the occurrence of macro-economic conditions that adversely impact us, the effects of geopolitical conflicts, such as the military conflict between Russia and Ukraine, our customers and their end product markets; the range of regulatory, operational, financial and political risks we are exposed to as a result of our dependence on international customers and operations; our ability to protect our proprietary technology and inventions through patents and other IP rights; whether we are subject to any liabilities or fines as a result of government regulation, including import, export and economic sanctions laws and regulations; the occurrence of a disruption in our networks or a security breach; risks associated with doing business in China; and the other factors described under the heading “Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 to be filed with the Securities and Exchange Commission (SEC) on May 10, 2022. All forward-looking statements reflect our beliefs and assumptions only as of the date of this press release. We undertake no obligation to update forward-looking statements to reflect future events or circumstances. Our results for the quarter ended March 31, 2022 are not necessarily indicative of our operating results for any future periods.

    Arteris, Inc
    Condensed Consolidated Statements of Loss and Comprehensive Loss
    (in thousands, except share and per share data)
    (Unaudited)

     Three Months Ended 
    March 31,
     2022
     2021
    Revenue   
    Licensing, support and maintenance$10,575  $6,161 
    Variable royalties and other 1,180   497 
    Total revenue 11,755   6,658 
    Cost of revenue (1) 979   868 
    Gross profit 10,776   5,790 
    Operating expense:   
    Research and development (1) 9,456   6,538 
    Sales and marketing (1) 3,921   2,448 
    General and administrative (1) 4,015   3,251 
    Total operating expenses 17,392   12,237 
    Loss from operations (6,616)  (6,447)
    Interest and other expense, net (81)  (114)
    Loss before provision for income taxes (6,697)  (6,561)
    Provision for income taxes 123   156 
    Net loss and comprehensive loss$(6,820) $(6,717)
        
    Net loss per share attributable to common stockholders, basic and diluted$(0.22) $(0.36)
    Weighted average shares used on computing per share amounts, basic and diluted 31,619,706   18,832,800 

    (1) Includes stock-based compensation expense as follows:

     Three Months Ended
     March 31,
     2022 2021
     (in thousands)
    Cost of revenue$96 $13
    Research and development 1,144  199
    Sales and marketing 271  24
    General and administrative 798  97
    Total stock-based compensation expense$2,309 $333

    Arteris, Inc.
    Condensed Consolidated Balance Sheets
    (In thousands, except share and per share data)
    (unaudited)

     As of
     March 31,
    2022
     December 31,
    2021
    ASSETS   
    Currents assets:   
    Cash$82,236  $85,825 
    Accounts receivable, net 8,199   13,873 
    Prepaid expenses and other current assets 8,456   6,949 
    Total current assets 98,891   106,647 
    Property and equipment, net 2,281   2,438 
    Operating lease right-of-used assets 2,595   2,765 
    Intangibles, net 2,840   2,959 
    Goodwill 2,677   2,677 
    Other assets 3,088   2,957 
    TOTAL ASSETS$112,372  $120,443 
    LIABILITIES AND STOCKHOLDERS' EQUITY   
    Current liabilities:   
    Account payable$1,032  $1,722 
    Accrued expenses and other current liabilities 9,456   10,573 
    Operating lease liabilities, current 1,007   961 
    Deferred revenue, current 28,115   28,403 
    Vendor financing arrangements, current 802   833 
    Total current liabilities 40,412   42,492 
    Deferred revenue, noncurrent 21,361   20,773 
    Operating lease liabilities, noncurrent 1,660   1,851 
    Vendor financing arrangements, noncurrent 124   266 
    Other liabilities 1,156   2,157 
    Total liabilities 64,713   67,539 
    Stockholders' equity:   
    Preferred stock, par value of $0.001 - 10,000,000 shares authorized and no shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively.     
    Common stock, par value of $0.001 - 300,000,000 shares authorized as of March 31, 2022 and December 31, 2021; 31,858,420 and 31,530,682 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively 31   31 
    Additional paid-in-capital 93,520   91,945 
    Accumulated other comprehensive loss (81)  (81)
    Accumulated deficit (45,811)  (38,991)
    Total stockholders' equity 47,659   52,904 
    TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$112,372  $120,443 

    Arteris, Inc.
    Condensed Consolidated Statements of Cash Flows
    (In thousands)
    (unaudited)

     Three Months Ended
    March 31,
     2022 2021
    CASH FLOW FROM OPERATING ACTIVITIES:   
    Net loss$(6,820) $(6,717)
    Adjustments to reconcile net loss to net cash (used in) provided by operating activities:   
    Depreciation and amortization 401   369 
    Stock-based compensation 2,309   333 
    Operating non-cash lease expense 25   (3)
    Other, net    (8)
    Changes in operating assets and liabilities:   
    Accounts receivable, net 5,674   6,084 
    Prepaid expenses and other assets (1,447)  (762)
    Account payable (434)  666 
    Accrued expenses and other liabilities (1,370)  (1,237)
    Deferred revenue 301   1,791 
    Net cash (used in) provided by operating activities (1,361)  516 
    CASH FLOWS FROM INVESTING ACTIVITIES:   
    Purchases of property and equipment (92)  (39)
    Payments of deferred transaction costs relating to investment in Transchip (191)   
    Net cash used in investing activities (283)  (39)
    CASH FLOWS FROM FINANCING ACTIVITIES:   
    Payments of contingent consideration for business acquisition (1,573)   
    Principle payments under vendor financing arrangements (205)  (138)
    Proceeds from exercise of stock options 90   184 
    Payments of deferred offering costs (257)  (94)
    Payments of principle portion of Term loan    (150)
    Other    (2)
    Net cash used in financing activities (1,945)  (200)
    NET DECREASE IN CASH (3,589)  277 
    CASH, beginning of period 85,825   11,744 
    CASH, end of period$82,236  $12,021 

    Non-GAAP Financial Measures

    To supplement our financial results, which are prepared and presented in accordance with GAAP, we use certain non-GAAP financial measures, as described below, to understand and evaluate our core performance. These non-GAAP measures, which may be different than similarly-titled measures used by other companies, are presented to enhance investors’ overall understanding of our financial performance and should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

    We define "Non-GAAP gross profit and Non-GAAP gross margin" as GAAP gross profit and GAAP gross margin, adjusted for stock-based compensation expense included in cost of revenue. We define “Non-GAAP Loss from Operations” as our income (loss) from operations adjusted to exclude stock-based compensation, acquisition costs and amortization of acquired intangible assets. We define “Non-GAAP Net Loss” as our net income (loss) adjusted to exclude stock-based compensation, acquisition costs, amortization of acquired intangible assets and gain on extinguishment of debt.

    We define “Non-GAAP EPS”, as our Non-GAAP Net Income (Loss) divided by our GAAP weighted-average number of shares outstanding for the period on a diluted basis. Management uses Non-GAAP EPS to evaluate the performance of our business on a comparable basis from period to period.

    The above items are excluded from our Non-GAAP Gross Profit, Non-GAAP Income (Loss) from Operations and Non-GAAP Net Income (Loss) because these items are non-cash in nature, or are not indicative of our core operating performance, and render comparisons with prior periods and competitors less meaningful. We believe Non-GAAP Gross Profit, Non-GAAP Income (Loss) from Operations and Non-GAAP Net Income (Loss) provide useful supplemental information to investors and others in understanding and evaluating our results of operations, as well as provide a useful measure for period-to-period comparisons of our business performance.

    We define free cash flow as net cash (used in) provided by operating activities less cash used for purchases of property and equipment. We believe that free cash flow is a useful indicator of liquidity that provides information to management and investors, even if negative, about the amount of cash used in our operations other than that used for investments in property and equipment.

    Other Business Metrics

    Annual Contract Value (ACV) – we define Annual Contract Value for an individual customer agreement as the total fixed fees under the agreement divided by the number of years in the agreement term. Our total ACV is the aggregate ACVs for all our customers as measured at a given point in time. Total fixed fees includes licensing, support and maintenance and other fixed fees under IP licensing or software licensing agreements but excludes variable revenue derived from licensing agreements with customers, particularly royalties. We monitor ACV to measure our success and believe the increase in the number shows our progress in expanding our customers’ adoption of our solutions.

    Active Customers – we define Active Customers as customers who have entered into a license agreement with us that remains in effect. The retention and expansion of our relationships with existing customers are key indicators of our revenue potential.

    Design Starts – we define Design Starts as when customers commence new semiconductor designs using our interconnect IP and notify us. Design Starts is a metric management uses to assess the activity level of our customers in terms of the number of new semiconductor designs that are started using our interconnect IP in a given period. We believe that the number of Design Starts is an important indicator of the growth of our business and future royalty revenue trends.

    Remaining Performance Obligations (RPO) – we define Remaining Performance Obligations as the amount of contracted future revenue that has not yet been recognized, including both deferred revenue and contracted amounts that will be invoiced and recognized as revenue in future periods.

    Arteris, Inc.
    Reconciliation of GAAP Measures to Non-GAAP Measures
    (In thousands, except share and per share data)
    (unaudited)

    Non-GAAP Gross Profit and Gross Margin

     Three Months Ended 
    March 31,
     2022
     2021
     (in thousands)
    Gross profit$10,776  $5,790 
    Add:   
    Stock-based compensation expense included in cost of revenue (1) 96   13 
    Non-GAAP gross profit$10,872  $5,803 
    Gross margin 92%  87%
    Non-GAAP gross margin 92%  87%

    (1) See table in footnote (1) to the condensed consolidated statements of loss and comprehensive loss above for breakdown of stock-based compensation expense by line item.

    Non-GAAP Loss from Operations

     Three Months Ended 
    March 31,
     2022
     2021
     (in thousands)
    Loss from operations$(6,616) $(6,447)
    Add:   
    Stock-based compensation expense (1) 2,309   333 
    Acquisition costs (2)    183 
    Amortization of acquired intangible assets (3,4) 119   119 
    Non-GAAP loss from operations$(4,188) $(5,812)

    (1) See table in footnote (1) to the condensed consolidated statements of loss and comprehensive loss above for breakdown of stock-based compensation expense by line item.

    (2) Includes advisory, legal, accounting, valuation, and other professional or consulting fees associated with the Magillem acquisition.

    (3) Represents the amortization expenses of our intangible assets attributable to the Magillem acquisition.

    (4) Includes amortization of acquired intangible assets as follows:

     Three Months Ended
     March 31,
     2022 2021
     (in thousands)
    Research and development$85 $85
    Sales and marketing 34  34
    Total amortization$119 $119

    Non-GAAP Net Loss and Non-GAAP EPS, Basic and Diluted

     Three Months Ended 
    March 31
     2022
     2021
     (in thousands, excepts per share
    Net loss$(6,820) $(6,717)
    Add:   
    Stock-based compensation expense (1) 2,309   333 
    Acquisition costs (2)    183 
    Amortization of acquired intangible assets (3,4) 119   119 
    Gain on extinguishment of debt    (10)
    Non-GAAP net loss (5)$(4,392) $(6,092)
        
    Net loss per share attributable to common stockholders, basic and diluted$(0.22) $(0.36)
    Per share impacts of adjustments to net loss (6)$0.08  $0.04 
    Non-GAAP EPS, basic and diluted$(0.14) $(0.32)
        
    Weighted average shares used in computing per share amounts, basic and diluted 31,619,706   18,832,800 

    (1) See table in footnote (1) to the condensed consolidated statements of loss and comprehensive loss above for breakdown of stock-based compensation expense by line item.

    (2) Includes advisory, legal, accounting, valuation, and other professional or consulting fees associated with the Magillem acquisition.

    (3) Represents the amortization expenses of our intangible assets attributable to the Magillem acquisition.

    (4) See table in footnote (4) to the Non-GAAP Loss from Operations above for breakdown of amortization of acquired intangible assets by line item.

    (5) Our GAAP tax provision is primarily related to foreign withholding taxes and income tax in profitable foreign jurisdictions. We maintain a full valuation allowance against our deferred tax assets in the US. Accordingly, there is no significant tax impact associated with these non-GAAP adjustments

    (6) Reflects the aggregate adjustments made to reconcile Non-GAAP Net Loss to our net loss as noted in the above table, divided by the GAAP diluted weighted average number of shares of the relevant period.

    Free Cash Flow

     Three Months Ended 
    March 31,
     2022
     2021
     (in thousands)
    Net cash (used in) provided by operating activities$(1,361) $516 
    Less:   
    Purchase of property and equipment (92)  (39)
    Free cash flow$(1,453) $477 
    Net cash used in investing activities$(283) $(39)
    Net cash used in financing activities$(1,945) $(200)

     


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