v3.26.1
BUSINESS COMBINATION
 3 Months Ended
Mar. 31, 2026
Business Combination, Asset Acquisition, Transaction between Entities under Common Control, and Joint Venture Formation [Abstract]  
BUSINESS COMBINATION BUSINESS COMBINATION
Cycuity Acquisition
On January 14, 2026 (the Closing Date), the Company completed the acquisition of Cycuity for approximately $43.1 million, consisting of cash of $15.1 million, the Company’s common stock with a fair value of $19.0 million and earn-out consideration with a fair value of $9.0 million.
Prior to the acquisition, Cycuity was a privately held provider and domain expert of semiconductor cybersecurity assurance technology. By combining innovative system IP from Arteris with leading silicon hardware security assurance technology from Cycuity, the acquisition positions Arteris to address the growing concern around hardware security. The Acquisition has been accounted for in accordance with the acquisition method of accounting for business combinations with the Company as the accounting acquirer.
The preliminary purchase price consideration allocated to the assets acquired and liabilities assumed for the Acquisition is as follows (in thousands):
JANUARY 14,
2026
Cash consideration paid at closing
$14,121 
Stock consideration
19,016 
Cash payments to settle vested awards971 
Contingent consideration9,018 
Total purchase consideration$43,126 
In connection with the Acquisition, the Company issued 1,096,280 shares of the Company’s common stock. Additionally, the former holders of Cycuity equity securities obtained the right to receive additional contingent consideration of up to $12.0 million. The contingent consideration is based on the achievement of specified bookings targets during the earn-out period from the Closing Date through December 31, 2026, and, if earned, will be payable no later than March 31, 2027. Earn-out payments will be settled in cash for in-the-money option holders and unaccredited investors and in shares of the Company’s common stock for accredited equity holders and warrant holders. The contingent consideration has been accounted for as part of the business combination and was recognized at its acquisition-date fair value as a component of total purchase consideration. The contingent consideration will be remeasured at fair value at each reporting date, with changes in fair value recognized in earnings until the contingency is resolved, and is included in accrued expenses and other current liabilities on the condensed consolidated balance sheets.
Certain outstanding option awards granted by Cycuity were accelerated as a result of the acquisition and paid in cash. As a result, the fair-value of these accelerated option awards of $0.2 million was recognized as a post-combination expense, included in stock-based compensation expense for the three months ended March 31, 2026.
The Company incurred acquisition related expenses associated with the Acquisition of $0.6 million for the three months ended March 31, 2026, which were expensed as incurred in the unaudited condensed consolidated statements of operations.
The purchase price is allocated to identifiable assets acquired and liabilities assumed based on their fair values on the acquisition date, as follows (in thousands):
Amount
Cash$3,914 
Accounts receivable1,415 
Prepaid expenses and other current assets206 
Property and equipment, net34 
Intangibles18,070 
Total assets acquired23,639 
Accounts payable1,007 
Deferred revenue, current2,910 
Accrued expenses and other current liabilities2,959 
Deferred tax liability
4,103 
Deferred revenue, noncurrent551 
Total liabilities assumed11,530 
Total identifiable net assets
12,109 
Goodwill
31,017 
Total purchase consideration
$43,126 
Additional information, which existed as of the acquisition date, may become known to the Company during the remainder of the measurement period, a period not to exceed 12 months from the date of the relevant acquisition. Changes to amounts recorded as assets and liabilities may result in a corresponding adjustment to goodwill during the respective measurement period.
The following table summarizes the fair value of the identifiable intangible assets acquired (in thousands) and useful lives:
Amount
  
Useful Lives
Developed technology$9,600 7 years
Customer relationships
8,300 8 years
Trade name170 1 year
Total acquired intangibles with definite lives
$18,070 
The fair value of the acquired developed technology intangible assets was determined primarily using the excess earnings method. The fair value of the acquired customer relationships intangible assets was determined using the with-and-without method. The fair value of the acquired trade name intangible assets was determined using the relief-from-royalty method.
Goodwill generated from this business combination is attributed to synergies between the Company and Cycuity’s respective products and services. The Company does not have any tax basis in the total goodwill of $31.0 million and the goodwill is non-deductible for income tax purposes. The Company recorded a one-time non-cash income tax benefit of $4.1 million in the condensed consolidated statement of operations for the three months ended March 31, 2026, related to the release of a portion of the valuation allowance as a result of the acquired intangibles. The revenue and earnings of the acquired business have been included in the Company’s results since the acquisition date.
Pro forma results of operations for the acquisition have not been presented because they are not material to the Company's consolidated results of operations.