Arteris, Inc.

Good afternoon, everyone, and welcome to the R3's first quarter 2024 earnings call. Please note, this call is being recorded and simultaneously webcast. All material contained in the webcast is sole property and copyright of the R3's Inc. with all rights reserved. For opening remarks and introductions, I will now turn the call over to Erica Mannion of Sapphire Investor Relations. Please go ahead.

Thank you and good afternoon. With me today from our terrace are Charlie Janik, Chief Executive Officer, and Nick Hawkins, Chief Financial Officer. Charlie will begin with a brief review of the business results for the first quarter ended March 31, 2024. Nick will review the financial results for the first quarter, followed by the company's outlook for the second quarter and full year of 2024. We will then open the call for questions. Before we begin, I'd like to remind you that management will make statements during this call that are forward-looking statements within the meaning of federal securities laws. These statements involve material risks and uncertainties that could cause actual results or events to differ materially from those anticipated, and you should not place undue reliance on forward-looking statements. Additional information regarding these risks, uncertainties, and factors that could cause results to differ appear in the press release Arteris issued today in the documents and reports filed by Arteris from time to time with the Securities and Exchange Commission. Please note, during this call, we will cite certain non-GAAP measures, including non-GAAP net loss, non-GAAP net loss per share, and free cash flow, which are not measures prepared in accordance with U.S. GAAP. The non-GAAP measures are presented as we believe they provide investors with the means of evaluating and understanding how the company's management evaluates the company's operating performance. These non-GAAP measures should not be considered in isolation from, as substitutes for, or superior to financial measures prepared in accordance with U.S. GAAP. A reconciliation of these non-GAAP measures to the nearest GAAP measure can be found in the press release for the quarter ended March 31, 2024. In addition, For a definition of certain of the key performance indicators used in this presentation, such as annual contract value, confirmed design starts, active customers, and remaining performance obligation, please see the press release for the quarter ended March 31, 2024. Listeners who do not have a copy of the press release for the quarter ended March 31, 2024 may obtain a copy by visiting the investor relations section of the company's website. In addition, management will be referring to the Q1 2024 earnings presentation, which can be found in the investor relations section of the company's website under the events and presentations tab. Now I will turn the call over to Charlie.

Thank you, Erika, and thanks to everyone for joining us on the call this afternoon. We're excited to report a solid first quarter of 2024 with annual contract value plus royalties of $58.2 million. I'd also like to highlight that we delivered a positive free cash flow quarter, and we're reaffirming our target of achieving positive free cash flow in 2024. This quarter's success was driven by continued robust licensing activity across all of our verticals, led in particular by enterprise computing and automotive deals. As with recent quarters, the rise in artificial intelligence is a driving factor for our customers, with approximately half of our first quarter license deals enabling AI and machine learning design starts, increasingly supporting generative AI and large language model applications. We continue to expand our foothold with large customers as five of our significant wins were with top 30 global technology companies. Each of these wins, with a major system and semiconductor companies, increasingly demonstrates the growing demand for commercial system IP vendors such as Arteris. We saw continued healthy design activity from our customers, primarily in enterprise computing and automotive, followed by deployments for communications and industrial applications and consumer electronics. One of the enterprise computing wins in the first quarter was one of our largest system IP deals with a top-10 semiconductor company. Specifically, it significantly expands the deployment of our terrorist network on chip IPs across a growing number of SOC designs. This business relationship continues our trend of securing relationships with major technology companies that can be expanded over time. As of today, approximately half of the top 30 semiconductor and technology companies are our terrorist customers. As mentioned earlier, the growth of AI is fueling the increasing adoption of our terrorist products, which we believe are well-suited to tackle the growing design size, complexity, performance, power, and cost requirements of AI chips. As an example of this trend, we announced that Rebellion's A pioneering AI semiconductor startup in Korea has licensed FlexNoc network-on-chip IP and Magilum SoC automation integration software for its next-generation neural processing unit aimed at generative AI. Rebellions chose Arteris per RIP and our software enabling superior performance and design flexibility for their inference chips while meeting energy efficiency requirements needed to deliver cost-efficient AI hardware computing at scale. On the product front, our FlexNOC 5 network on chip launched in the middle of last year continues to find solid adoption. This adoption spans across all our verticals and all of our main geographical markets from small to large customers. Building upon this momentum, we announced the release and immediate availability of the latest version of our Encore cash coherent network on chip IP. Arteris Encore supports any processor IP that connects to NCORE-supported protocols, offering multiple protocols, flexible configurations, and ISO 26262 functional safety, and is utilized by Mobileye, a long-time customer who is at the forefront of the autonomous vehicle evolution. The expanded NCORE IP also delivers on the previously announced Arm and Arteris Automotive Partnerships. Targeting a broad range of automotive designs from microcontrollers to autonomous driving chips, the collaboration results in pre-validation of our Teres N-Core interconnect IP, integrating with and supporting various ARM V9-based processor IPs for automotive semiconductors. The aim is to enable next generation of automotive electronics, including advanced driver assistance systems, or ADAS, cockpit and infotainment systems, vision, radar, LIDAR, body and chassis control, and more. By optimizing and pre-validating Arteris N-Core network on chip to work seamlessly with ARM's latest processor IPs, customers benefit from accelerated path to high-performance, power-efficient, and safe automotive SOCs. Speaking of automotive collaboration, at the recent Automotive Computing Conference, Mercedes-Benz presented a vision for standardization of automotive computing and multi-die chiplets, supported by partners including ARM, Intel Foundry, Synopsys, Renaissance, Arteris, and others. We are excited to be partnering in pioneering a reference with Mercedes-Benz for its network-on-chip and last-level cache implementations as part of the ADU platform, addressing a full range of autonomous driving applications. Yet another collaboration in the first quarter included expanding our RISC-V ecosystem support to help offer on-chip connectivity for companies deploying the DAMO Zhuan-T processor IP in their SoCs. This collaboration underscores Arteria's capability to support processor choices made by our customers, including the support of both ARM and RISC-V processors on the same SOC. Currently, certain macroeconomic dynamics, including geopolitical uncertainties and the US BIS restrictions concerning China-US trade, continue to impact our business, though we are not seeing further deterioration at this time. While these dynamics do create near-term headwinds, we believe that the scale and scope of our long-term opportunity reigns robust, supported by a strong product pipeline of new system IP technologies and solid relationships with some of the largest electronics companies in the world who continue to innovate in exciting areas such as general AI and autonomous driving using our terrorist system IP technologies. With that, I'll turn it over to Nick to discuss our financial results in more detail.