CEVA(CEVA) - 2023 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue for Q3 2023 was $24.1 million, down from$ 30 million in the same quarter last year, with licensing revenue at $13.9 million and royalty revenue at$ 10.1 million [18][21] - GAAP net loss for continuing operations was $2.7 million, compared to a net loss of$ 22.3 million in Q3 2022, with diluted EPS of $0.21 for Q3 2023 [21] - Non-GAAP operating income was$ 1.6 million, down from $7.3 million in the same period last year [20][21] Business Line Data and Key Metrics Changes - Licensing and related revenue accounted for 58% of total revenues, reflecting a 3% sequential increase [18] - Royalty revenue represented 42% of total revenues, marking the second sequential increase in royalties [19] - CEVA shipped 500 million units in Q3 2023, a 35% sequential increase and a 40% year-over-year increase [22] Market Data and Key Metrics Changes - Bluetooth shipments reached 313 million units, up from 210 million units in the previous quarter, driven by strong consumer demand [23] - Cellular IoT shipments hit an all-time high of over 35 million units, reflecting a maturing market [23] - Wireless infrastructure showed softness, with main customers reporting weaker-than-anticipated 5G network builds [15] Company Strategy and Development Direction - The company divested the Intrinsix business to focus on core strengths in wireless communications, edge AI, and sensing software IP [7][9] - CEVA aims to reinforce its leadership position as the world's number one supplier of wireless communication IP and pursue opportunities in edge AI [9][16] - The company plans to increase its share repurchase program by an additional 700,000 shares to enhance shareholder value [16][24] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery in consumer demand and the strength of the licensing pipeline [15][26] - The company anticipates that the divestment of Intrinsix will lead to improved gross margins and a focus on high-volume IP licensing [8][26] - Future growth is expected to be driven by demand for WiFi 7 and continued strength in Bluetooth and cellular IoT markets [12][27] Other Important Information - The company established a corporate strategy function and appointed a Chief Strategy Officer to drive long-term growth [16] - CEVA's cash equivalent balances were approximately$ 132 million at the end of Q3 2023 [24] - The company reported a significant increase in shipments of smart edge devices and audio technologies [15] Q&A Session Summary Question: Why is CEVA outperforming in a tough IoT market? - Management attributed the performance to a larger customer base and competitive positioning, allowing for increased volume despite market challenges [31] Question: How are US sanctions affecting licensing deals in China? - Management indicated that sanctions have not significantly impacted their licensing activities in China, as their focus is on consumer markets [32][34] Question: What benefits are expected from the sale of Intrinsix? - The sale is expected to improve gross margins and allow for a more focused IP business model, enhancing overall profitability [35][37] Question: What are the drivers for revenue growth in 2024? - Key drivers include strong leadership in wireless communication, increased demand for UWB and 5G IoT technologies, and new edge AI products [44][45] Question: What is the outlook for wireless infrastructure in 2024? - Management noted that while the market is currently soft, there is potential for growth as demand for 5G continues to evolve [56][58] Question: What is the status of licensing activity in China? - Demand in China has stabilized, with customers seeking next-generation technologies, indicating potential for growth in 2024 [52][53]