Arteris(US:AIP)2021-12-01 03:52Financial Data and Key Metrics Changes - The company reported GAAP revenue of $9 million for Q3 2021, representing a 39% year-over-year increase [9] - Total revenue for the third quarter was $9.0 million, up 39% year-over-year, while remaining performance obligations (RPO) were at $50.6 million, up 48% year-over-year [28] - Gross profit for the quarter was $8.1 million, with a gross margin of 90%, compared to $6.2 million in the year-ago period [28] - GAAP operating loss for the third quarter was $4.5 million, or 50% of revenue, increasing from a loss of $2.6 million, or 41% of revenue in the year-ago period [30] - Non-GAAP net loss for the quarter was $4.4 million, or net loss per share of $0.21 based on approximately 20.6 million weighted average diluted shares outstanding [31] Business Line Data and Key Metrics Changes - The company added 28 new system IP customers in Q3 2021, marking the highest number of new customer additions in a nine-month period in company history [9] - The total number of active customers increased from 166 to 179, with applications ranging from automotive to machine learning, consumer electronics, 5G wireless, and data center SoCs [10] - There were 22 customer design starts in Q3, taking the total for the nine months ended September 30 to 65, the highest ever in that period [11] Market Data and Key Metrics Changes - Geographically, the largest licensing regions for the quarter were EMEA, followed by China and then the USA [10] - The company believes its products are utilized in 70% to 80% of all automotive ADAS SoC projects [10] - The company estimates its total addressable market (TAM) will expand to an estimated $3.2 billion in 2026, driven by increasing SoC design wins and growing complexity [21] Company Strategy and Development Direction - The company aims to ramp up investments in next-generation product offerings, including the launch of the Harmony Trace Design Data Intelligence Solution [20] - The focus is on automotive, machine learning, and 5G from a product development perspective [72] - The company recognizes the need for sophisticated system IP products to address requirements for smaller die sizes, lower power consumption, and higher operation frequencies [22] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the market opportunity, particularly in automotive and machine learning sectors, as the complexity of SoCs increases [11][22] - The company noted that the automotive industry is undergoing a transformation, with car manufacturers regaining control over their architectures [46] - Management highlighted a strong and visible pipeline, with 70% of licensing revenue coming from renewals and a 98% retention rate among existing customers [65] Other Important Information - The company ended the quarter with $11.2 million in cash, with cash flow from operations showing a usage of $2.5 million [31] - The company expects revenue for Q4 2021 to be between $10.0 million and $11.1 million, with non-GAAP operating gross margin projected between 32% and 54% [32] Q&A Session Summary Question: Process for Adding New Customers - Management indicated that the IPO has helped reassure the market about the company's long-term sustainability, shortening the customer acquisition process to about four to five months [35] Question: Customer Technology Adoption - Once a customer successfully adopts the technology, they tend to reuse it for subsequent projects, fostering long-term relationships [37] Question: Market Opportunities - Management confirmed that the current inflection point in the automotive and AI markets is similar to the smartphone SoC inflection experienced in the past [41] Question: BMW Engagement - The engagement with BMW is an initial project, reflecting a broader trend of car manufacturers regaining control over their architectures [45][46] Question: Licensing Revenue and Renewals - Approximately 70% of licensing revenue comes from renewals, indicating a strong base of repeat customers [49] Question: ASP Expansion Trends - ASP has been increasing due to the growing complexity of SoCs requiring more system IP functionality [51] Question: Incremental Customers - New customers are coming from both traditional semiconductor companies and non-traditional system houses, including startups in China [55] Question: Design Integration Challenges - The company helps alleviate design integration challenges through its interconnect and IP deployment software, improving productivity significantly [57] Question: Impact of Heterogeneous Integration - Heterogeneous integration increases the complexity of interconnects, which the company is well-positioned to manage [61]