Silvaco Group Q1 Earnings Call Highlights

Key Points

• Silvaco’s Q1 results improved sharply, with bookings and revenue both rising 26% year over year to $17.2 million and $17.8 million, respectively, while the company said it is on track to return to non-GAAP operating profitability in Q2.
• Margins and cash flow strengthened as gross margins expanded into the high-80% range, operating expenses declined for a second straight quarter, and unrestricted cash rose nearly 10% sequentially for the first time since the IPO.
• TCAD and FTCO were key growth drivers, while the semiconductor IP business remained strong on a year-over-year basis despite a sequential dip; management also highlighted growing interest in FTCO from governments, power applications and semiconductor equipment companies.

Silvaco Group NASDAQ: SVCO reported first-quarter fiscal 2026 results that management said showed improving momentum across bookings, revenue, margins and cash, while the company guided for a return to non-GAAP operating profitability in the second quarter.

Chief Executive Officer and Director Wally Rhines said the company delivered bookings, revenue and gross margin above the midpoint of its guidance range in the quarter, helping cut its non-GAAP operating loss in half sequentially. Revenue rose 26% year over year, and Rhines said the company recorded its first sequential increase in unrestricted cash since its May 2024 initial public offering.

“Our focus on financial discipline and predictability is delivering tangible results,” Rhines said. “Our team has rallied around this cause and is delivering solid results and important milestones.”

Bookings and Revenue Rise 26%

Chief Financial Officer Chris Zegarelli said Silvaco delivered $17.2 million in bookings and $17.8 million in revenue in the first quarter, both above consensus and above the midpoint of guidance. Bookings and revenue each increased 26% from the prior-year period.

TCAD was the main source of strength. Rhines said TCAD bookings grew 13% sequentially and 49% year over year to $10.5 million. TCAD revenue rose 10% sequentially and 22% year over year to $9.6 million.

The semiconductor IP business softened sequentially after a strong fourth quarter, but remained sharply higher from the prior year. Rhines said IP bookings were $3 million, down 41% sequentially but up more than 200% year over year. IP revenue was $4 million, down 21% sequentially but up 270% year over year. He attributed the sequential decline to the timing of new customer wins, saying a few key designs were pushed out by about one quarter.

Rhines said the year-over-year performance in IP reflects a “new baseline” following the integration of Mixel’s MIPI PHY IP. He added that the IP sales pipeline has roughly doubled over the past year, with particular strength in automotive soft IP and Mixel PRO, a production-ready set of products introduced in the first quarter.

EDA bookings and revenue declined in the quarter, with bookings of $3.8 million and revenue of $4.1 million. Rhines said the company is focusing on a smaller group of core products that it believes can drive future growth, including Jivaro and UTMOST, a database-driven platform for device characterization and SPICE model extraction.

AI-Driven Manufacturing Gains Traction

Management highlighted continued momentum for FTCO, Silvaco’s AI-driven manufacturing offering, which is reported within TCAD. Rhines said the company secured a new FTCO customer engagement for the second consecutive quarter and also received an order from an existing FTCO customer for new functionality. Zegarelli said the company expects to close one more new FTCO customer in the second quarter.

Rhines said Silvaco is seeing interest in FTCO from governments, power applications and semiconductor equipment companies. In response to analyst questions, he said the breadth of potential users has been “surprising,” noting that the technology can be applied beyond its initial work with Micron.

For semiconductor equipment companies, Rhines said FTCO can be used both for equipment design and development and for work with end customers. He described applications including digital twin modeling to help tune equipment, develop process recipes and accelerate equipment setup time.

“By having a reliable model, they can in fact tune in what the ultimate result should be from the process step, and therefore drive how the setup should be done,” Rhines said.

Margins Improve as Costs Decline

Silvaco reported GAAP gross margin of 86.4% and non-GAAP gross margin of 87.9% in the first quarter. Zegarelli said GAAP and non-GAAP gross margins increased sequentially by 305 and 235 basis points, respectively, and rose 779 and 788 basis points year over year. He said the improvement benefited from restructuring activities and that the company expects gross margins to remain in the mid- to upper-80% range.

GAAP operating expenses declined 4.5% sequentially to $21 million, while non-GAAP operating expenses declined 3.6% to $16.1 million. Zegarelli said total non-GAAP spending declined for two consecutive quarters for the first time since the IPO and is expected to decline again in the second quarter.

The company reported a GAAP operating loss of $5.7 million, an improvement from the prior quarter. Non-GAAP operating loss was $471,000. GAAP net loss was $5.9 million, or $0.19 per share, while non-GAAP net loss was $574,000, or $0.02 per share.

Zegarelli said Silvaco’s $20 million cost reduction initiative is largely behind it, though some additional reductions, particularly internationally, are still expected to flow through over time. He said operating expenses are likely to trend “down to flattish” from current levels, while the company continues targeted investments, including in AI tools.

Cash Position Improves

Silvaco ended the quarter with $10.9 million in cash and cash equivalents and no restricted cash on the balance sheet. Zegarelli said unrestricted cash increased nearly 10% sequentially, marking the first such increase since the IPO.

Net cash used in operating activities was $11 million, which included an $8.3 million final litigation settlement payment and $1 million in severance payments. Excluding those items, net cash used in operating cash flow would have been $1.7 million, compared with $7.4 million in the fourth quarter on the same adjusted basis.

“The improvement from $7.4 million to $1.7 million speaks to the meaningful improvement in our underlying economics,” Zegarelli said, adding that the company expects positive operating cash flow by the third quarter.

Silvaco also signed a non-binding term sheet with its banking partner for a $10 million revolving line of credit, which it expects to close during the second quarter.

Second-Quarter Guidance Points to Profitability

For the second quarter of fiscal 2026, Silvaco guided for bookings of $19 million, plus or minus 10%, and revenue of $18 million, plus or minus 10%. The company expects non-GAAP gross margin of about 88% and non-GAAP operating expenses of $15.5 million, plus or minus 5%.

Zegarelli said the guidance indicates Silvaco expects to deliver positive non-GAAP operating income in the second quarter. Rhines said that would be the company’s first quarter of non-GAAP operating profitability since the fourth quarter of 2024.

During the question-and-answer session, Zegarelli said IP is expected to grow sequentially in the second quarter, EDA could be flat to slightly down, and TCAD could be flat to slightly up. He also disclosed that remaining performance obligations, or backlog, were about $46.6 million, down slightly from the fourth quarter but still in what he described as an elevated high-$40 million range.

Rhines said TCAD should remain a solid core business, though he cautioned that its roughly 50% year-over-year bookings growth rate is not expected to continue. He said FTCO’s inclusion in TCAD provides an additional growth driver as the company continues to add customers and identify new applications.

“We’ve made great strides in stabilizing the business, enhancing liquidity, and streamlining operations,” Rhines said. “We all continue to believe that the best is yet to come.”

About Silvaco Group NASDAQ: SVCO

Silvaco Group, Inc is a provider of electronic design automation (EDA) software and semiconductor intellectual property (IP) solutions. Founded in 1984 and headquartered in Santa Clara, California, the company offers a suite of tools for process and device simulation, circuit design, verification, and physical implementation. Silvaco's core product lines include technology computer-aided design (TCAD) for process modeling, SPICE circuit simulators for analog and digital analysis, and layout and parasitic extraction tools for physical verification.

In addition to its EDA software, Silvaco delivers semiconductor IP in areas such as memory compilers, interface IP (including USB, PCI Express and DDR), and embedded analog/mixed-signal cores.

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