CEVA(US:CEVA)2022-08-09 18:31Financial Data and Key Metrics Changes - Revenue for Q2 2022 was $33.2 million, up 9% year-over-year from $30.5 million in Q2 2021 [14] - Licensing revenue was $22.1 million, representing 67% of total revenue, up 42% from $15.5 million in Q2 2021 [14] - Royalty revenue was $11.1 million, down 26% year-over-year from $14.9 million in Q2 2021, but down only 4% when excluding a one-time adjustment from the previous year [14][15] - Gross margin was 79% on a GAAP basis and 82% on a non-GAAP basis, slightly better than expectations [15] - GAAP net loss for the quarter was $1.1 million, with diluted loss per share of $0.05, compared to net income of $3 million and $0.01 per share in Q2 2021 [18] Business Line Data and Key Metrics Changes - Licensing and NRE related revenue was $22.1 million, reflecting a strong licensing environment [14] - Base station and IoT royalty revenue contributed $7 million, flat from the previous quarter and up 6% year-over-year [15] - Handset-related royalties were $4.1 million, indicating a decline due to economic uncertainty and COVID impacts [36] Market Data and Key Metrics Changes - Asia remains a major driver of business, with increasing engagement from U.S.-based customers [8] - Bluetooth shipments increased by 35% year-over-year to 255 million units, while cellular shipments rose by 12% year-over-year to 20 million units [19] - The overall market for wearables is growing, with CEVA's technology being integrated into various devices [11] Company Strategy and Development Direction - CEVA is focusing on co-creation business models to enhance customer engagement and drive revenue growth [10][13] - The company sees significant potential in the coexistence of 5G and Wi-Fi technologies, positioning itself as a one-stop shop for both [12] - CEVA aims to leverage its IP portfolio to address key technology trends in the semiconductor market [13] Management's Comments on Operating Environment and Future Outlook - Management expressed satisfaction with financial performance despite macroeconomic challenges, particularly in the wireless space [7][13] - The company is monitoring economic uncertainties, especially in the handset market, but remains optimistic about growth in base station and IoT segments [21][22] - Future guidance indicates expectations for slightly improved gross margins and operating expenses in Q3 2022 [22][23] Other Important Information - CEVA's total operating expenses for Q2 were $26.6 million, below guidance due to favorable foreign exchange and timing of grants [16] - The company activated its share buyback program, repurchasing approximately 136,000 shares for about $4.5 million [19] Q&A Session Summary Question: Trends in different end markets and revenue guidance - Management noted challenges in providing specific revenue guidance due to the nature of customer reporting under revenue recognition rules, but highlighted positive trends in base station IoT and Bluetooth devices [26][28] Question: Impact of handset royalties - Handset royalties were identified as the weakest link, particularly in low and mid-tier smartphones, with expectations for recovery as economic conditions improve [29][32] Question: New IT deals and revenue mix - Management clarified that the number of new deals does not directly correlate with revenue due to complexities in customer relationships and project delivery [37][39] Question: Opportunities from Intrinsix - Intrinsix is expected to play a significant role in defense market projects, with ongoing design engagements [41] Question: Synergies between Wi-Fi and 5G - CEVA highlighted the technological synergies between Wi-Fi and 5G, emphasizing the integration of both technologies in customer offerings [42][43] Question: Customer ramp-up in 5G infrastructure - Management indicated strong customer relationships in the 5G space, with significant growth opportunities ahead [45][46] Question: Operating margin dynamics - The mix of licensing and royalty revenues is expected to influence operating margins, with a focus on maintaining margins in the low 80s [48][50] Question: M&A pipeline considerations - Management is actively exploring M&A opportunities but emphasizes the importance of strategic fit over valuation [52][53] Question: Co-creation agreement catalysts - The co-creation model is seen as beneficial for both CEVA and its customers, providing more visibility and potential for royalties [56][59] Question: Engagements with U.S. companies - Recent engagements have focused on wireless audio technologies for wearables, indicating a shift towards more complex projects [60][62]