CEVA(US:CEVA)2019-05-06 16:22Financial Data and Key Metrics Changes - Total revenue for Q1 2019 was $17 million, down 3% year-over-year [9] - License revenue was $11 million, up 9% year-over-year [9] - Royalty revenue was $6 million, down 20% year-over-year [9] - Gross margins were 88% on a GAAP basis and 89% on a non-GAAP basis [17] - U.S. GAAP net loss for the quarter increased by 5%, with diluted loss per share at $0.10 [18] Business Line Data and Key Metrics Changes - Licensing performance was strong, with eight license agreements concluded, three for smart sensor products and five for connectivity products [10] - Non-handset royalty revenues were up 22% year-over-year, with total non-handset units up 16% year-over-year to 86 million units [14] - Handset unit decline was down 27% year-over-year, attributed to excess inventory levels [14] Market Data and Key Metrics Changes - Shipped units by CEVA licensees during Q1 2019 were 175 million, down 30% sequentially and down 11% year-over-year [19] - Of the 175 million units shipped, 89 million units (51%) were for handset baseband chips, reflecting a sequential decrease of 34% [19] - Non-handset baseband volume shipments were down 25% sequentially but increased by 16% year-over-year [19] Company Strategy and Development Direction - CEVA aims to double its annual royalty revenue by 2022, focusing on growth and diversification beyond handsets [5][9] - The company is expanding its presence in the automotive sector and 5G markets, with significant agreements in AI and connectivity technologies [11][12] - CEVA is positioned to capitalize on the emerging edge compute industry, leveraging its technologies for 5G and AI [13] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the ability to maintain guidance despite challenges in the handset market due to inventory levels [14][21] - The company anticipates a gradual recovery in demand as excess inventory is consumed, leading to growth in the second half of the year [21] - Management highlighted the importance of strategic engagements and the potential for downstream adoption of technologies in the automotive sector [29] Other Important Information - Michael Boukaya was appointed as Chief Operating Officer, allowing the CEO to focus on developing new growth engines [15] - CEVA completed its buyback plan, repurchasing approximately 91,000 shares for about $2.5 million [20] Q&A Session Summary Question: Impact of Intel's exit from the 5G smartphone space on CEVA's outlook - Management indicated that it is too early to assess the impact of Intel's exit on 2022 projections, emphasizing resilience in non-handset markets [26][27] Question: Details on automotive agreements and potential royalties - Management described the agreement with a major automotive OEM as transformative, with expectations for downstream adoption and royalties from automotive Tier 1s [29] Question: Inventory levels and market confidence in the handset sector - Management noted that Chinese customers are working to replenish inventory, with expectations for a return to growth in shipments [32][34] Question: Trends in the wireless infrastructure market - Management reported positive dynamics in the 5G infrastructure market, with ongoing interest in V2X applications [36] Question: Licensing deal sizes and revenue trends - Management confirmed that larger deals contributed to revenue growth, with a mix of high ASP products driving non-handset royalty revenue [40][42] Question: Future growth opportunities and M&A potential - Management indicated that they are exploring various growth opportunities, including content expansion and potential M&A activities [43]