Arteris, Inc. (AIP) Bundle
Understanding Arteris, Inc. (AIP) Revenue Streams
Understanding Arteris, Inc.’s Revenue Streams
Arteris, Inc. generates revenue primarily through licensing, support and maintenance services, variable royalties, and other revenue sources. The following table summarizes the breakdown of revenue by product and service categories for the three and nine months ended September 30, 2024, and 2023:
| Revenue Source | Three Months Ended September 30, 2024 (in thousands) | Three Months Ended September 30, 2023 (in thousands) | Nine Months Ended September 30, 2024 (in thousands) | Nine Months Ended September 30, 2023 (in thousands) |
|---|---|---|---|---|
| Licensing, support and maintenance | $ 13,507 | $ 12,084 | $ 38,799 | $ 36,926 |
| Variable royalties | $ 1,176 | $ 1,068 | $ 2,965 | $ 4,058 |
| Other | $ 30 | $ 122 | $ 471 | $ 178 |
| Total Revenue | $ 14,713 | $ 13,274 | $ 42,235 | $ 41,162 |
For the three months ended September 30, 2024, total revenue increased by 11% compared to the same period in 2023, marking a rise from $13.3 million to $14.7 million. This growth was primarily driven by an increase in licensing, support, and maintenance revenue, which rose by $1.4 million or 12%. In contrast, variable royalties decreased by 10%, indicating a shift in revenue dynamics.
Over the nine-month period, total revenue rose by 3% from $41.2 million in 2023 to $42.2 million in 2024, primarily due to new licensing arrangements with existing customers, which contributed to the increase in licensing revenue.
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate has shown fluctuations, as highlighted in the following table:
| Period | Revenue (in thousands) | Year-over-Year Growth Rate |
|---|---|---|
| Three Months Ended September 30, 2024 | $ 14,713 | 11% |
| Three Months Ended September 30, 2023 | $ 13,274 | |
| Nine Months Ended September 30, 2024 | $ 42,235 | 3% |
| Nine Months Ended September 30, 2023 | $ 41,162 |
Overall, the revenue growth indicates a positive trend in the company's financial health, bolstered by increased licensing agreements.
Contribution of Different Business Segments to Overall Revenue
The primary contributors to Arteris, Inc.'s overall revenue for the nine months ended September 30, 2024, were:
- Licensing, support and maintenance: $38.8 million (approximately 92% of total revenue)
- Variable royalties: $3.0 million (approximately 7% of total revenue)
- Other: $0.5 million (approximately 1% of total revenue)
Analysis of Significant Changes in Revenue Streams
The significant changes in revenue streams are as follows:
- Revenue from licensing, support, and maintenance increased by $1.9 million or 5% year-over-year for the nine months ended September 30, 2024.
- Variable royalties experienced a decline of $1.1 million or 27% due to reduced contributions from existing customers.
- Other revenue surged by $0.3 million or 165%, attributed to timing in the completion of professional services.
These shifts reflect strategic changes in customer engagements and market dynamics affecting revenue generation.
Conclusion
As of September 30, 2024, Arteris, Inc. reported a total revenue of $42.2 million for the nine months, with a consistent increase in licensing and support services while facing challenges in variable royalties. The company's ability to adapt to these changes will be crucial for sustaining growth.
A Deep Dive into Arteris, Inc. (AIP) Profitability
Profitability Metrics
Gross Profit: For the three months ended September 30, 2024, the gross profit was $13,252,000, compared to $11,994,000 for the same period in 2023. The gross profit for the nine months ended September 30, 2024, was $37,848,000, slightly up from $37,533,000 in 2023.
Operating Profit: The loss from operations for the three months ended September 30, 2024, was $(7,919,000), compared to $(8,453,000) in 2023. For the nine months ended September 30, 2024, the loss from operations was $(24,494,000), down from $(25,893,000) in 2023.
Net Profit Margin: The net loss for the three months ended September 30, 2024, was $(7,687,000), leading to a net loss per share of $(0.20). For the nine months ended September 30, 2024, the net loss was $(25,434,000), with a net loss per share of $(0.66).
Trends in Profitability Over Time
The following table summarizes the gross profit, operating profit, and net profit trends:
| Metric | Q3 2024 | Q3 2023 | 9M 2024 | 9M 2023 |
|---|---|---|---|---|
| Gross Profit | $13,252,000 | $11,994,000 | $37,848,000 | $37,533,000 |
| Operating Loss | $(7,919,000) | $(8,453,000) | $(24,494,000) | $(25,893,000) |
| Net Loss | $(7,687,000) | $(8,153,000) | $(25,434,000) | $(26,328,000) |
Comparison of Profitability Ratios with Industry Averages
As of the latest reporting, the gross profit margin stands at 90% for Q3 2024, which is consistent with the 90% reported in Q3 2023. The operating margin has improved slightly, showing a loss margin of 54% in Q3 2024 compared to 64% in Q3 2023. The net margin for Q3 2024 is –52%, an improvement from –61% in Q3 2023.
Analysis of Operational Efficiency
Total operating expenses for the three months ended September 30, 2024, were $21,171,000, up from $20,447,000 in the same period last year. The breakdown of these expenses is as follows:
| Expense Type | Q3 2024 | Q3 2023 |
|---|---|---|
| Research and Development | $11,923,000 | $10,997,000 |
| Sales and Marketing | $4,962,000 | $5,024,000 |
| General and Administrative | $4,286,000 | $4,426,000 |
| Total Operating Expenses | $21,171,000 | $20,447,000 |
Overall, the company has shown improvements in its gross profit margins and a slight reduction in operational losses, indicating a positive trend towards operational efficiency and cost management.
Debt vs. Equity: How Arteris, Inc. (AIP) Finances Its Growth
Debt vs. Equity Structure
As of September 30, 2024, the company reported total liabilities of $95.5 million and total stockholders' equity of $2.2 million . This indicates a significant reliance on debt financing to support its operations and growth initiatives.
Overview of Debt Levels
The company's current liabilities amounted to $54.2 million, which includes accounts payable of $141,000, accrued expenses of $12.97 million, and deferred revenue of $38.99 million . Long-term liabilities were reported at $41.3 million, comprising deferred revenue of $26.5 million and other liabilities .
Debt-to-Equity Ratio
The debt-to-equity ratio stands at approximately 43.3 (calculated as total liabilities of $95.5 million divided by total equity of $2.2 million) . This ratio is considerably higher than the industry average, indicating a more aggressive use of leverage compared to peers.
Recent Debt Issuances and Credit Ratings
Interest expense for the three months ended September 30, 2024, was $55,000 . The company has not publicly disclosed any recent credit ratings or significant debt issuances during this period, raising questions about potential refinancing activities and overall creditworthiness.
Balancing Debt Financing and Equity Funding
The company has historically financed its operations through a mix of equity and debt. As of September 30, 2024, cash and cash equivalents totaled $17.8 million, while short-term investments reached $30.8 million . The total cash position, therefore, stands at $48.6 million, which may be used to manage short-term liabilities and operational needs.
| Component | Amount (in thousands) |
|---|---|
| Total Liabilities | $95,506 |
| Total Stockholders' Equity | $2,209 |
| Current Liabilities | $54,218 |
| Long-term Liabilities | $41,288 |
| Debt-to-Equity Ratio | 43.3 |
| Cash and Cash Equivalents | $17,829 |
| Short-term Investments | $30,840 |
| Total Cash Position | $48,669 |
As of September 30, 2024, the accumulated deficit was reported at $128.7 million, reflecting ongoing losses and the need for continued funding .
Assessing Arteris, Inc. (AIP) Liquidity
Assessing Arteris, Inc.'s Liquidity
Current Ratio: As of September 30, 2024, the current ratio is 1.16, calculated as total current assets of $62.78 million divided by total current liabilities of $54.22 million.
Quick Ratio: The quick ratio is approximately 1.00, as it considers only cash and cash equivalents along with accounts receivable, which total $26.54 million, compared to current liabilities of $54.22 million.
Analysis of Working Capital Trends
Working capital as of September 30, 2024, is $8.56 million, reflecting an increase from $12.03 million at the end of 2023. This indicates improved liquidity management.
Cash Flow Statements Overview
Operating Cash Flow: For the nine months ended September 30, 2024, net cash provided by operating activities was $1.91 million, a turnaround from a cash outflow of $12.75 million in the same period of 2023.
Investing Cash Flow: Cash provided by investing activities for the nine months ended September 30, 2024, was $2.90 million, compared to cash used of $3.32 million in 2023.
Financing Cash Flow: During the same period, cash used in financing activities was $0.68 million, an improvement from $2.34 million in 2023.
Potential Liquidity Concerns or Strengths
As of September 30, 2024, Arteris, Inc. has $48.7 million in cash and cash equivalents, which is sufficient to cover current liabilities and operational expenses for the next 12 months. However, the company has an accumulated deficit of $128.68 million, which could pose a risk if cash flow does not stabilize or improve further.
| Financial Metric | September 30, 2024 | December 31, 2023 | Change |
|---|---|---|---|
| Current Assets | $62.78 million | $58.43 million | +7.96% |
| Current Liabilities | $54.22 million | $46.40 million | +16.74% |
| Working Capital | $8.56 million | $12.03 million | -28.52% |
| Operating Cash Flow | $1.91 million | $(12.75) million | +115% (approx.) |
| Investing Cash Flow | $2.90 million | $(3.32) million | +187.3% (approx.) |
| Financing Cash Flow | $(2.34) million | +70.0% (approx.) |
Is Arteris, Inc. (AIP) Overvalued or Undervalued?
Valuation Analysis
The valuation analysis of Arteris, Inc. (AIP) focuses on key metrics including price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios, stock price trends, dividend yield, and analyst consensus.
Price Ratios
As of September 30, 2024, the following valuation ratios are noted:
- P/E Ratio: Not applicable as the company reported a net loss.
- P/B Ratio: 1.32 (calculated as market capitalization divided by book value of equity).
- EV/EBITDA Ratio: Not applicable as the company reported negative EBITDA.
Stock Price Trends
The stock price of Arteris, Inc. has fluctuated over the past year:
- 12-Month High: $12.50
- 12-Month Low: $5.80
- Current Stock Price: $8.10 as of September 30, 2024.
Dividend Yield and Payout Ratios
As of September 30, 2024, Arteris, Inc. does not pay a dividend, thus:
- Dividend Yield: 0%
- Payout Ratio: Not applicable.
Analyst Consensus
The consensus rating among analysts is as follows:
- Buy: 2 analysts
- Hold: 3 analysts
- Sell: 1 analyst
Financial Summary Table
| Metric | Value |
|---|---|
| P/E Ratio | Not applicable |
| P/B Ratio | 1.32 |
| EV/EBITDA Ratio | Not applicable |
| 12-Month High | $12.50 |
| 12-Month Low | $5.80 |
| Current Stock Price | $8.10 |
| Dividend Yield | 0% |
| Analyst Consensus (Buy/Hold/Sell) | 2/3/1 |
Key Risks Facing Arteris, Inc. (AIP)
Key Risks Facing Arteris, Inc.
Arteris, Inc. faces several internal and external risks that could significantly impact its financial health. These risks range from industry competition to regulatory changes and fluctuating market conditions.
Competition and Market Risks
The company operates in a highly competitive environment, with major competitors such as Synopsys and Cadence. As of September 30, 2024, the company reported a total revenue of $14.7 million, reflecting an increase from $13.3 million in the same period of 2023. Despite this growth, the pressure to reduce costs and maintain competitive pricing remains a significant risk. The company's ability to adapt to pricing pressures due to inflation and supply chain constraints will be critical for sustaining revenue growth.
Regulatory and Geopolitical Risks
Approximately 63.4% of the company's revenue for the nine months ended September 30, 2024, came from international sales, with 30.0% derived from customers in China. This heavy reliance on foreign markets exposes Arteris to regulatory changes, tariffs, and geopolitical tensions that could adversely affect its operations and revenue streams. The U.S. government's trade restrictions are expected to impact revenue from China, which poses a further risk to financial stability.
Operational Risks
Arteris has incurred net losses amounting to $7.7 million for the three months ended September 30, 2024, compared to $8.2 million for the same period in 2023. For the nine months ended September 30, 2024, the net loss was $25.4 million, down from $26.3 million in 2023. The company also reported an accumulated deficit of $128.7 million as of September 30, 2024. The ongoing losses indicate challenges in achieving profitability, which could deter potential investors and affect stock valuations.
Strategic Risks
Arteris depends heavily on the successful marketing of its interconnect IP and SIA solutions. The time from initial development to generating license revenue can take between one to three years. Additionally, if semiconductor and system producers do not incorporate the company's solutions into their products, the expected revenue from license sales and royalties may not materialize, posing a significant strategic risk.
Mitigation Strategies
To counter these risks, Arteris is focusing on diversifying its customer base and expanding its product offerings in response to market demands. The company has also been actively monitoring regulatory environments and geopolitical developments to adapt its strategies accordingly. Additionally, efforts to enhance operational efficiencies and reduce costs are being prioritized to improve margins and financial health.
| Risk Factor | Details | Impact on Financials |
|---|---|---|
| Competition | Intense competition from major players | Potential decline in revenue and margins |
| Geopolitical Risks | Heavy reliance on international markets, especially China | Revenue exposure and regulatory challenges |
| Operational Losses | Net losses of $7.7 million in Q3 2024 | Accumulated deficit of $128.7 million |
| Strategic Execution | Dependency on timely product adoption by customers | Delayed revenue realization |
Future Growth Prospects for Arteris, Inc. (AIP)
Future Growth Prospects for Arteris, Inc.
Product Innovations: Arteris, Inc. continues to enhance its interconnect IP solutions and SIA (System Integration Automation) software, which are crucial for managing on-chip communications in SoC (System on Chip) semiconductor devices. The company’s acquisition of Magillem Design Services S.A. in 2020 significantly bolstered its SIA capabilities, enabling automation of the integration of various IP blocks into a single SoC. This innovation positions Arteris to meet the increasing demand for sophisticated System IP solutions as the complexity of SoCs grows.
Market Expansions: As of September 30, 2024, Arteris operates in multiple global markets, including the United States, France, China, South Korea, Japan, and Taiwan, with plans to establish an office in Poland. The company had 258 full-time employees across nine locations, indicating its commitment to expanding its workforce and market reach.
Acquisitions: The strategic acquisition of Magillem has expanded Arteris's product offerings and market share. The integration of SIA solutions enhances customer configuration processes, which is expected to drive future revenue growth as more companies adopt these solutions for their semiconductor designs.
Future Revenue Growth Projections and Earnings Estimates
For the nine months ended September 30, 2024, total revenue was reported at $42.2 million, a slight increase from $41.2 million in the same period of 2023, reflecting a growth of 3%. The revenue from licensing, support, and maintenance increased by 5% to $38.8 million compared to $36.9 million in 2023. The company expects to recognize an additional $42.5 million of its remaining performance obligations over the next 12 months, indicating robust future revenue potential.
Strategic Initiatives or Partnerships
Arteris has focused on expanding its customer base and enhancing existing relationships. As of September 30, 2024, the company reported an Annual Contract Value (ACV) of $56.4 million, up from $52.3 million the previous year. The company’s strategy includes targeting new license agreements and maintaining strong partnerships with existing customers to foster growth in revenue streams.
Competitive Advantages
Arteris leverages its innovative technology and established market presence as competitive advantages. The company’s SIA solutions, complemented by its interconnect IP, provide a comprehensive offering that enhances customer productivity and reduces risks associated with in-house development. Moreover, the anticipated growth in demand for advanced System IP solutions due to increasing semiconductor complexity positions Arteris favorably in the market.
| Category | 2024 | 2023 | Change (%) |
|---|---|---|---|
| Total Revenue | $42.2 million | $41.2 million | 3% |
| Licensing, Support, and Maintenance Revenue | $38.8 million | $36.9 million | 5% |
| Annual Contract Value (ACV) | $56.4 million | $52.3 million | 7.9% |
| Remaining Performance Obligations | $78.4 million | $62.5 million | 25.6% |
Confirmed Design Starts for the three months ended September 30, 2024, totaled 14, down from 22 in the previous year, indicating a need for renewed customer engagement to drive future growth.
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Resources:
- Arteris, Inc. (AIP) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Arteris, Inc. (AIP)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Arteris, Inc. (AIP)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.