CEVA(US:CEVA)2023-08-09 19:14Financial Data and Key Metrics Changes - Revenue for Q2 2023 was $26.2 million, down from $33.2 million in Q2 2022, with licensing revenue at $16.8 million and royalty revenue at $9.4 million [18][19] - Royalty revenue grew 17% sequentially, reaching $9.5 million, indicating a recovery from previous quarters [12][19] - GAAP operating loss for Q2 2023 was $6.3 million, compared to a loss of $0.3 million in the same quarter last year [21] Business Line Data and Key Metrics Changes - Licensing revenue, which constitutes 64% of total revenue, decreased from $22.1 million in Q2 2022 to $16.8 million in Q2 2023 [18] - Royalty revenue, making up 36% of total revenue, fell from $11.1 million in Q2 2022 to $9.4 million in Q2 2023, but showed a sequential increase [18][19] - The company signed 17 new licensing and NRE agreements, including 3 WiFi 6 deals and 4 new agreements in the automotive sector [9][10] Market Data and Key Metrics Changes - Shipped units by licensees in Q2 2023 were 370 million, up 25% sequentially but down from 433 million units year-over-year [22] - Handset-based chip shipments increased to 79 million units, up from 27 million in Q1 2023 [22] - Significant recovery noted in smartphone, PC, and 5G base station markets, indicating a positive trend in demand [12][19] Company Strategy and Development Direction - The company is focusing on expanding its AI capabilities, particularly in generative AI applications, and enhancing its product portfolio to support this trend [14][16] - CEVA aims to leverage its strengths in wireless communications and sensing AI technologies to drive long-term growth [17] - The company is taking a cautious approach to forecasting revenue due to current market conditions, while anticipating sequential growth in royalties [25][27] Management's Comments on Operating Environment and Future Outlook - Management noted a slower-than-expected recovery in some regions due to challenging macroeconomic conditions, but expressed optimism about the resumption of chip demand [7][8] - The company expects continued recovery in royalty revenue through the remainder of the year, particularly in the smartphone and IoT markets [13][25] - Management emphasized the importance of monitoring market trends and adjusting strategies accordingly [26] Other Important Information - The company has taken immediate measures to reduce overall headcount and expenses in response to recent financial results [26] - Gross margin for Q2 2023 was 79% on a GAAP basis, lower than previous guidance due to a reduced revenue base [19][20] - Cash and cash equivalents at the end of Q2 2023 were approximately $136 million [24] Q&A Session Summary Question: Licensing trends in China - Management acknowledged potential in new companies emerging in China but noted that decisions are taking longer due to funding and project approvals [30][32] Question: Licensing revenue expectations for 2023 - Management indicated that licensing revenue for Q3 and Q4 is expected to be around $17 million, slightly below 2021 levels [34][36] Question: Delays in licensing deals - Most licensing deals are experiencing delays rather than cancellations, with some companies taking longer to secure necessary funding [40][41] Question: Applications for new NPU in generative AI - The new NPU is expected to be deployed across various applications, including edge devices and automotive [42][43] Question: Expansion into industrial markets - The company is already active in the industrial space and is focusing on innovation and high-performance products to drive adoption [44][45] Question: Sustainability of cost reduction measures - Management emphasized a strategic focus on long-term growth areas while implementing cost reduction measures [46][48] Question: Geographic distribution of licensing business - The company maintains a strong presence in the U.S. and China, with increasing opportunities in Europe and Japan [50][51]