The accompanying consolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles and include the accounts of Silvaco and all of the Company's wholly owned subsidiaries with operations in North America, Europe, Asia, Africa, and South America. All intercompany transactions and balances have been eliminated upon consolidation.

The Company is an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act, until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that the Company (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Estimates also affect the amounts of revenue and expenses during the reported periods. The Company’s most significant estimates relate to revenue recognition and the valuation of goodwill and other intangible assets. Other uses of estimates include, but are not limited to, current expected credit losses for accounts receivable and contract assets, stock-based compensation expense, contingent consideration, derivative valuations, uncertain tax positions, legal contingencies and income taxes. Actual results could differ from those estimates.

The Company's revenue is derived principally from software licensing, customization and related maintenance and service, which are generally accounted for as separate performance obligations with differing revenue recognition patterns. Arrangements with both software licenses and customization services are accounted for as a combined performance obligation.

The Company recognizes revenue pursuant to Accounting Standard Codification (“ASC”) Topic 606, Revenue from Contracts with Customers. Revenue is recognized upon transfer of control of the promised good or service to the customer in an amount that reflects the consideration to which the Company expects to be entitled in exchange for such software or service. To achieve this objective, the Company applies a five-step approach: (1) identify the contract(s) with a customer, (2) identify the performance obligations within the contract, (3) determine the transaction price, (4) allocate the transaction price to the separate performance obligations and (5) recognize revenue when, or as, each performance obligation is satisfied.

Revenue from software licenses is classified as software license revenue. Software license revenue is recognized upfront upon delivery of the licensed software. Typically, the Company's software solution is licensed with post-contract support ("PCS"), which includes unspecified technical enhancements and customer support. The PCS is classified as maintenance and service revenue and is recognized ratably over the contract period, as the Company satisfies the PCS performance obligation over time.

The Company also offers standard SIP licenses, which provide the customer with access to SoC design intellectual property (“IP”) that meets established industry standards. Standard SIP licenses offered by the Company are ready to use upon delivery. No modification is required in order for the customer to receive value for use in their integrated circuit designs. The Company also offers SIP licenses that require customization in accordance with the customer’s specifications. Revenue associated with the license of the Company’s SIP is classified as software license revenue and recognized as revenue (i) upfront upon delivery of the standard SIP license, or (ii) over time when customization services are combined with the SIP license, as specific contractual milestones are met and incremental functionality is delivered to the customer. The Company does not offer SIP licenses without support. Support services for SIP licenses are classified as maintenance and service revenue and are recognized ratably over the term of the support period.

Under certain SIP license agreements, the Company also derives revenue through royalties from customers who agree to pay usage-based fees to embed the Company's licensed software into their own software offerings. Royalties are generally recognized as revenue during the period in which the customer sells its solutions which incorporate the Company’s SIP license.

In connection with the Company’s SIP licenses that was developed in partnership with a third party vendor, Silvaco has entered into various renewable license agreements under which the Company has the right to sell the technology it licenses from the third party vendor. When the Company licenses this particular SIP to a customer, it generally acts as a principal to the transaction because the Company controls the promised SIP that it delivers to the customer. Consistent with its role as principal, the Company recognizes SIP revenue on a gross basis. Royalty costs are reported in cost of revenue upon delivery pursuant to the terms and conditions of the Company’s contractual obligations with the licensors.

The Company recognized an immaterial portion of its revenue from device characterization and modeling services for the years ended December 31, 2025 and 2024. Revenue is recognized upon the completion of the requested services and, as applicable, satisfaction of customer acceptance terms. Revenue from these services is classified as maintenance and service revenue.

Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within 30 days. Invoicing may vary from timing of revenue recognition. In instances where the timing of revenue recognition differs from the timing of invoicing, the Company has determined its contracts generally do not include a significant financing component.

Non-income related taxes collected from customers and remitted to governmental authorities are recorded on the consolidated balance sheets as accounts receivable and accrued expenses. The collection and payment of these amounts are reported on a net basis in the consolidated statements of loss.

Silvaco does not offer a right of return. The Company warrants to its customers that its software will perform substantially as specified in its current user manuals. Silvaco has not experienced significant claims related to software warranties beyond the scope of maintenance support, which the Company is already obligated to provide. The warranty is not sold, and cannot be purchased, separately. The warranty does not provide any type of additional service to the customer or performance obligation for Silvaco.

The Company's agreements with customers generally require Silvaco to indemnify the customer against claims that the Company's software infringes third-party patent, copyright, trademark or other proprietary rights. Such indemnification obligations are generally limited in a variety of industry-standard respects, including by affirming Silvaco's right to replace an infringing product.

Silvaco's contracts typically include promises to transfer licenses, which enables customers to use the Company's software, and services. Judgment is required to determine if the promises are separate performance obligations, and if so, to allocate the transaction price to each performance obligation. The Company uses the estimated standalone selling price method to allocate the transaction price for each performance obligation. The estimated standalone selling price is determined using all information reasonably available to the Company, including market conditions and other observable inputs, historical pricing and the value relationship between Silvaco's various product and service offerings. The corresponding revenues are recognized as the related performance obligations are satisfied.

The timing of revenue recognition may differ from the timing of invoicing to customers, and these timing differences result in receivables (billed), contract assets (unbilled), or contract liabilities (deferred revenue) on the Company’s consolidated balance sheets. The Company records a contract asset when revenue is recognized prior to the right to invoice, or deferred revenue when revenue is recognized subsequent to invoicing. For time-based software agreements, customers are generally invoiced in equal, quarterly amounts, although some customers are invoiced in single or annual amounts. The Company records an unbilled receivable when revenue is recognized and it has an unconditional right to invoice and receive payment. The Company records an accounts receivable upon invoicing.

Silvaco is required to adjust promised amounts of consideration for the effects of the time value of money if the timing of the payments provides the customer or the Company with a significant financing benefit. Silvaco considers various factors in assessing whether a financing component exists, including the duration of the contract, market interest rates and the timing of payments. The Company's contracts do not include a significant financing component requiring adjustment to the transaction price.

Sales commissions associated with multi-year contracts for new term-based licenses are deferred, capitalized, and amortized over an estimated customer life of five years. Capitalized sales commissions are included in prepaid expenses and other current assets and other assets on the Company's consolidated balance sheets. Amortization of sales commissions is included in selling and marketing expenses on the Company's consolidated statements of loss. The Company applies a practical expedient to expense sales commissions as incurred when the amortization period would have been one year or less. During the years ended December 31, 2025 and 2024, the Company capitalized sales commissions of $0.4 million and $0.9 million, respectively. Amortization of sales commissions during each of the years ended December 31, 2025 and 2024 was $0.9 million.

Cash and cash equivalents consist of bank deposits and highly liquid investments in marketable securities with original maturities of three months or less at the time of purchase. The Company’s cash and cash equivalents as of December 31, 2025 and 2024 consisted of bank deposits, money market funds, and U.S. treasury securities with a fair value of $9.0 million and $19.6 million, respectively.

Research and development (“R&D”) costs consist primarily of personnel costs for product development, engineering, quality assessment and other related costs associated with the development of new products, enhancements to existing products, quality assurance and testing. R&D costs are expensed as incurred. Internally developed software costs required to be capitalized as defined by ASC 350-40, Internal-Use Software are not material to the Company's consolidated financial statements.

To determine whether transactions should be accounted for as acquisitions of assets or business combinations, the Company makes certain judgments, which include assessment of the inputs, processes, and outputs associated with the acquired set of activities. If the Company determines that substantially all of the fair value of gross assets included in a transaction is concentrated in a single asset (or a group of similar assets), the assets will not represent a business. To be considered a business, the assets in a transaction need to include an input and a substantive process that together significantly contribute to the ability to create outputs.

The Company allocates the fair value of the purchase consideration to the assets acquired and liabilities assumed based on their estimated fair values at the acquisition date. The fair values of intangible assets are determined utilizing information available near the acquisition date based on expectations and assumptions that are deemed reasonable by management. Given the considerable judgment involved in determining fair values, the Company typically obtains assistance from third-party valuation specialists for significant items. If the transaction is deemed to be a business combination, any excess of the purchase price over the estimated fair values of net assets acquired is recorded as goodwill. Transaction costs are expensed as incurred. Amounts recorded in a business combination may change during the measurement period, which is a period not to exceed one year from the date of acquisition, as additional information about conditions that existed as of the acquisition date becomes available. Refer to Note 4, Acquisitions for additional information.

Goodwill represents the excess of the fair value of consideration transferred over the fair value of net identifiable assets acquired. Other intangible assets consist of trade name, customer relationships, developed technology, noncompete agreements and licensed IP which are amortized over their useful lives of two to twelve years. Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate an asset’s carrying value may not be recoverable.

Goodwill is not amortized but is tested annually for impairment and more often if there is an indicator of impairment that would more likely than not reduce the fair value of the Company’s single reporting unit below its carrying amount. Goodwill is considered impaired if the carrying value of the reporting unit exceeds its fair value.

The Company continually monitors events and changes in circumstances that could indicate the carrying amounts of long-lived assets, including property and equipment, may not be recoverable. Accordingly, when indicators of impairment are present, the Company evaluates the carrying value of such assets in relation to the future undiscounted cash flows of the underlying assets. The Company's policy is to record an impairment loss when it is determined that the carrying amount of the assets may not be recoverable. No impairment charges were recorded to other long-lived assets for the years ended December 31, 2025 and 2024.

Deferred offering costs are capitalized and consist of fees and expenses incurred in connection with the Company’s IPO, including the legal, accounting, printing, and other IPO-related costs. Upon completion of the IPO in May of 2024, $3.3 million of deferred transaction costs were reclassified to stockholders’ equity and recorded against the proceeds from the offering. No balance was outstanding as of December 31, 2025 and 2024.

In addition to trade receivables and revenue, the Company's cash on deposit with financial institutions is also exposed to concentration risk. The Company's cash on deposit with financial institutions is insured through various public and private bank deposit insurance programs, foreign and domestic; however, a significant portion of cash balances held as of December 31, 2025 and 2024 exceeded insured limits.

As of December 31, 2025, $11.0 million, or 64%, of the Company’s cash, cash equivalents and restricted cash was maintained with one financial institution, where the Company’s current deposits are in excess of federally insured limits, and $5.5 million, or 55%, was held by the Company’s foreign subsidiaries.

As of December 31, 2025, the Company held restricted cash of $8.3 million to secure an irrevocable standby letter of credit issued in connection with a litigation settlement entered into in May 2025 with the former shareholders of Nangate, Inc. (“Nangate”). The letter of credit, secured with East West Bank on May 17, 2025, is scheduled to expire on June 30, 2026. As of December 31, 2025 no amounts had been drawn under the letter of credit. Restricted cash is classified as a current asset on the consolidated balance sheets. See Note 10, Related Parties, and Note 16, Commitments and Contingencies, for additional information.

The Company’s investments in marketable securities have been classified and accounted for as available-for-sale and are recorded at estimated fair value. The Company’s available-for-sale marketable securities are comprised of money market funds, U.S. treasury securities and U.S. government securities. The Company classifies its investments with original maturities of three months or less when acquired as cash equivalents. The Company classifies its marketable securities with original maturities of longer than three months but within twelve months as of the reporting date as current marketable securities. Marketable securities with maturities of twelve months or longer as of the reporting date are classified as non-current marketable securities. Purchase discounts are accreted using the effective interest method over the life of the related security and such accretion is included in interest income in the consolidated statements of loss.

The Company did not recognize any other-than-temporary impairment on its marketable securities during the years ended December 31, 2025 and 2024. Unrealized gains and losses (excluding other-than-temporary impairment and credit loss) on available-for-sale marketable securities are reported in other comprehensive loss on the consolidated statements of comprehensive loss. Credit-related unrealized losses are recognized as an allowance on the consolidated balance sheets with a corresponding charge to interest expense and other income (expense), net on the consolidated statements of loss. The cost of securities sold is based on the specific identification method and realized gains and losses are reported in interest income and interest expense and other income (expense), net on the consolidated statements of loss, respectively. The Company recognized $0.1 million of unrealized loss and $0.1 million of unrealized gain on available-for-sale marketable securities in other comprehensive loss on the consolidated statements of comprehensive loss during the years ended December 31, 2025 and 2024, respectively.

The Company assesses its ability to collect outstanding receivables and contract assets and provides customer-specific allowances, allowances for credit losses for the portion of receivables and contract assets that are estimated to be uncollectible. Allowances for credit losses are based on historical collection experience and expected credit losses, customer specific financial condition, current economic trends in the customer's industry and geographic region, changes in customer demand and the overall economic climate in the market the Company serves. Provisions for the allowance for expected credit losses attributable to bad debt are recorded as general and administrative expenses in the consolidated statements of loss. Account balances deemed uncollectible are written off, net of actual recoveries. If circumstances related to specific customers or the market the Company serves change, the Company’s estimate of the recoverability of its accounts receivable and contract assets could be further adjusted. The Company does not have any material account receivable or contract asset balances that are past due and has not written off any significant balances in its portfolio against the allowance for credit losses for the periods presented. The following table presents the Company’s allowance for credit losses:

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period of the enactment date.

The Company records net deferred tax assets to the extent it believes these assets will more likely than not be realized. In making such determinations, the Company considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial operations. In the event the Company determines that Silvaco will be able to realize deferred tax assets for which a valuation allowance was used to reduce their carrying value, the adjustment to the valuation allowance will be recorded as a reduction to the provision for income taxes.

Tax benefits related to uncertain tax positions taken or expected to be taken on a tax return are recorded when such benefits meet a more-likely-than-not threshold. Otherwise, these tax benefits are recorded when a tax position has been effectively settled, which means that the statute of limitations has expired, or the appropriate taxing authority has completed its examination even though the statute of limitations remains open.

The financial statements of Silvaco's international subsidiaries with local functional currencies are translated to U.S. dollars upon consolidation. Assets and liabilities are translated at the effective exchange rate on the balance sheet date. Results of operations are translated at average exchange rates, which approximate rates in effect when the underlying transactions occurred. For the years ended December 31, 2025 and 2024, the Company recorded foreign currency translation adjustments of $0.5 million and $0.4 million, respectively, within accumulated other comprehensive loss.

Certain sales and intercompany transactions are denominated in foreign currencies. These transactions are recorded in functional currency at the appropriate exchange rate on the transaction date. Monetary assets and liabilities denominated in a currency other than the Company's functional currency or its subsidiaries' functional currencies are remeasured at the effective exchange rate on the balance sheet date. Gains and losses resulting from foreign exchange transactions are included in interest expense and other income (expense), net in the consolidated statements of loss. The Company recorded net foreign exchange losses of $0.2 million and $0.4 million for the years ended December 31, 2025 and 2024, respectively.

The Company accounts for stock-based compensation in accordance with ASC Topic 718, Compensation - Stock Compensation, which establishes the accounting for transactions in which an entity exchanges its equity instruments for goods or services. Under the provisions of the authoritative guidance, stock-based compensation expense is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the requisite employee service period (generally the vesting period), net of actual forfeitures. For stock-based payment awards that contain performance criteria, stock-based compensation expense is recorded when the achievement of the performance condition is considered probable of achievement and is recorded on a straight-line basis over the requisite service period. If such performance criteria are not met, no compensation expense is recognized and any recognized compensation expense is reversed. For awards with market and service conditions, the Company recognizes stock-based compensation on a straight-line basis for all awards for which the service conditions are met, regardless of whether the market condition is achieved.

Prior to the IPO in May 2024, the Company did not record stock-based compensation expense. The restricted stock units (“RSUs”) granted under the 2014 Plan generally had two vesting requirements, a service-based requirement (the “Time-Based Requirement”) and a liquidity event requirement (the “Liquidity Event Requirement”), and the satisfaction of the Liquidity Event Requirement was not deemed probable. Refer to Note 13, Stock-Based Compensation for additional information.

Prior to January 1, 2024, the Company valued the awards granted using historical estimates of the fair value of Silvaco’s common stock. These third-party valuations were performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants Accounting and Valuation Guide, Valuation of Privately-Held Company Equity Securities Issued as Compensation.

Commencing January 1, 2024 and prior to the IPO, the grant date fair value of the awards was derived from an interpolation based on the contemplated listing price of the Company’s anticipated IPO. For RSUs granted after the IPO, the Company used the publicly listed closing stock price on the grant date as the grant date fair value.

The Company defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company uses valuation approaches that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

■Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.

As of December 31, 2025 and 2024, the carrying amount of the Company’s cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued expenses approximated their fair values due to their short maturities. The Company’s available for sale marketable securities have an amortized costs that approximates fair value, which was determined using quoted prices in active markets for identical assets and if that is unavailable, using third-party inputs which are either directly or indirectly observable, such as reported trades and broker or dealer quotes as of December 31, 2025 and 2024. Refer to Note 18, Fair Value of Financial Instruments for additional information.

Silvaco is a recipient of R&D grants and tax subsidies associated with the Company's French and British subsidiaries. Grants and tax subsidies are determined on the basis of eligible R&D expenses incurred during the calendar year. Eligible expenditures include depreciation expenses relating to fixed assets, created or acquired newly, assigned to eligible R&D projects, including patents acquired; costs relating to staff qualifying as scientists or engineers; expenses resulting from outsourced R&D projects; expenses incurred for patent registration or in connection with the defense of patents; and expenses relating to the monitoring of technical developments. The grants and tax subsidies are recorded as a reduction of R&D expense as qualifying expenditures are incurred. Certain tax subsidies can be offset against corporate income tax liabilities payable with respect to the calendar year during which the eligible R&D expenditures were incurred, and any excess credit is refunded to the taxpayer. Certain tax subsidies and all grants are paid to the Company in cash, which are included in prepaid expenses and other current assets in the Company's consolidated balance sheets until the Company receives the cash payment.

The Company determines if an arrangement is a lease at inception of the contract, which is the date on which the terms of the contract are agreed to, and the agreement creates enforceable rights and obligations. A contract is or contains a lease when the Company has the right to control the use of an identified asset for a period of time. The commencement date of the lease is the date that the lessor makes an underlying asset available for use by the lessee. On the commencement date, leases are evaluated for classification and assets and liabilities are recognized based on the present value of lease payments over the lease term. Leases are classified as either operating or finance leases based on certain criteria. This classification determines the timing and presentation of expenses on the income statement, as well as the presentation of the related cash flows and balance sheet. Operating leases with terms greater than 12 months are recorded on the balance sheet as operating lease right-of use assets, other accrued expenses and liabilities, and non-current operating lease liabilities. The Company has elected the practical expedient to account for the lease and non-lease components as a single lease component for all asset classes.

The lease term used to calculate the lease liability includes options to extend or terminate the lease when it is reasonably certain that the option will be exercised. The right of use (“ROU”) asset is initially measured as the amount of lease liability, adjusted for any initial lease costs, prepaid lease payments and any lease incentives. Variable lease payments, consisting primarily of reimbursement of costs incurred by lessors for common area maintenance, real estate taxes and insurance, are not included in the lease liability and are recognized as they are incurred.

As most of the Company’s leases do not provide an implicit rate, the Company uses the incremental secured borrowing rate at lease commencement to measure ROU assets and lease liabilities. The discount rate used for operating leases is primarily determined based on an analysis of the Company’s incremental secured borrowing rate. The related lease payments are expensed on a straight-line basis over the lease term, including, as applicable, any free-rent period during which the Company has the right to use the asset.

The Company's restructuring expenses consist of employee severance, one-time termination benefits and ongoing benefits related to the reduction of its workforce, and other exit and disposal costs. One-time involuntary termination benefits are expensed at the date the entity notifies the employee, unless the employee must provide future service beyond a minimum retention period, in which case the benefits are expensed ratably over the future service period. Ongoing benefits and one-time voluntary termination benefits are expensed when restructuring activities are probable and the benefit amounts are estimable. Other costs primarily consist of termination fees, idle rent and related expenses for exited locations and other costs related to restructuring activities, and are expensed when incurred. Refer to Note 5, Restructuring, for additional information.

Basic net loss per share is computed based on the weighted average number of shares of common stock outstanding. Diluted net loss per share is computed based on the weighted average number of common shares outstanding increased by dilutive common stock equivalents attributable to RSU grants.

In December 2023, the Financial Accounting Standards Board (“FASB”) issued accounting standard update (“ASU”) No. 2023-09, Income Taxes (Topic 740): Improvement to Income Tax Disclosures to enhance the transparency and decision usefulness of income tax disclosures (“ASU 2023-09”). ASU 2023-09 is only effective for annual periods beginning after December 15, 2024, on a prospective basis. The Company adopted the new standard on a prospective basis with the filing of this Annual Report on Form 10-K. See Note 14, Income Taxes for additional information.

In November 2024, the FASB issued ASU No. 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Topic 220): Disaggregation of Income Statement Expenses. This ASU requires additional disclosure of certain amounts included in the expense captions presented on the statements of loss as well as disclosures about selling expenses. This ASU is effective on a prospective basis, with the option for retrospective application, for annual periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of this accounting standard update on its consolidated financial statements and related disclosures.

In July 2025, the FASB issued ASU No. 2025-05, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. This ASU provides a practical expedient that allows entities to estimate expected credit losses for current accounts receivable and contract assets assuming that conditions at the balance sheet date remain unchanged over the life of the asset. This ASU is effective for annual periods beginning after December 15, 2025, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of this ASU on the consolidated financial statements.

In September 2025, the FASB issued ASU No. 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. This ASU eliminates the accounting consideration of software project development stages to align with the agile method for developing software and enhances the guidance related to assessing the probability of project completion. This ASU is effective for annual periods beginning after December 15, 2027, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of this ASU on the consolidated financial statements.