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CEVA(CEVA) - 2019 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenue for Q3 2019 was $23.5 million, up 28% sequentially and 10% year-over-year [10][19] - License revenue was $11.3 million, reflecting a 15% increase year-over-year [10][19] - Royalty revenue reached $12.2 million, up 61% sequentially and 5% year-over-year [10][19] - Gross margin was 88% on a GAAP basis and 89% on a non-GAAP basis [20] - U.S. GAAP net income for the quarter was $0.8 million, with diluted earnings per share of $0.03, down from $2.5 million and $0.11 in Q3 2018 [21] Business Line Data and Key Metrics Changes - Non-handset baseband royalty revenue reached an all-time high of $3.9 million, with units up 29% sequentially and 27% year-over-year [16][19] - Shipped units by CEVA licensees during Q3 2019 were 292 million units, up 35% sequentially and 11% year-over-year [22] - Non-handset shipments reached an all-time record high of 123 million units, up 27% sequentially and annually [22] Market Data and Key Metrics Changes - In the U.S., opportunities are seen in smart edge devices for consumer, robotics, and automotive [11] - In Europe, strong interest is noted in digital health and smart city applications [11] - In APAC, excluding China, interest is growing for ADAS and consumer electronics [11] - In China, engagement is ongoing across various verticals including wireless infrastructure and IoT devices [11] Company Strategy and Development Direction - The company is focused on executing licensing agreements and gaining key customer adoption, which is seen as a precursor for royalty growth [18] - The strategy includes leveraging a comprehensive portfolio for wireless connectivity and smart sensing to meet the IP needs of semiconductor companies and OEMs [11] - The company aims to double royalty levels by 2022 from 2018 levels, with a strong focus on new technologies and customer diversification [40] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the IP portfolio for wireless connectivity and smart sensing, as well as new agreements in the automotive space [6] - The adoption of NarrowBand-IoT is progressing globally, with significant initiatives in India [15] - Management noted that the market for motion sensors is expected to grow to over $6 billion by 2024 [17] Other Important Information - The company has $148 million in cash and equivalents, down from $166 million in the prior quarter, due to investments in new technologies [23] - The company has repurchased approximately 194,000 shares for about $4.9 million in 2019 [23] Q&A Session Summary Question: Can you expand on the renewed strength in 4G devices? - Management noted that there is still a sizable amount of feature phones being shipped in developing markets, and customers are gaining market share due to price advantages [29] Question: What is the update on the timing and magnitude of royalty revenues for 5G? - Management indicated that customers are in design for 5G, but visibility on volume ramp-up is limited [31] Question: How do you see the next 1 to 2 years developing for infrastructure customers? - Management stated that they cannot specify timing but emphasized that customers are committed to winning market share once products are ready [37] Question: Is the business model tracking to double royalty levels by 2022? - Management confirmed that they are committed to this goal and have seen progress in 2019 [40] Question: How many customers are commercially shipping products today? - Management estimated around 40 to 50 customers are currently shipping, with more than 60 in design [42] Question: Can you provide insights on the competitive landscape in the automotive sector? - Management highlighted that the new automotive customer is a strong incumbent, and they are leveraging broad technologies to gain visibility in this high-entry-barrier market [52]