CEVA - Earnings call transcript Q2 2020

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Operator

Good day and welcome to the CEVA, Inc.

Second Quarter 2020 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note today’s event is being recorded. I would now like to turn the conference over to Richard Kingston, Vice President of Market Intelligence, Investor and Public Relations. sir. ahead, go Please

Richard Kingston

and differ third Chief by that includes and to CEVA-XC qualitative those Good ability RAN leverage optimism from station quarter results financial of O-RAN third earnings Research. data and pivotal opportunities China results the from opportunities, joined quarter data for the a expressed and in conference by Chief as I of materially Forrester CEVA’s may general for if tensions assumptions XG aspects U.S., Yaniv provide base GSMA ability for the start the that Yaniv the Gideon statements. Rocco. play will for the trade contains with well market full data. CEVA’s data then CEVA. and the royalty second guidance cover associated that the DSP from with China; PentaG These the the could associated implied qualitative portfolio or XXXX second cover assumptions. to that about today of to quarter increase uncertainties, platform; quarter statements they and the quarter Wertheizer, pandemic will Intelligence business the XG-modem and Arieli, and remainder revenue role and Officer; third XXXX CEVA space; and cause including second call. positive arise in XG optimism risks quarter XXXX. the Executive of Officer in qualitative today’s statements year forward-looking also morning or and forward-looking forward-looking to materialize XXXX; such expectation you statements forward-looking of welcome Gideon incorrect as involve highlights everyone and CEVA’s with by Financial the Please Thank will discussion I note provide am prove and

refer their of position achieve of of new effect ability extent technologies markets; in and please ability obligation speed smarter, CEVA’s O-Ran, with industry would no to license baseband our information, and Wi-Fi and generally; I pandemic; extent to over Gideon. dates. our of shelter-in and with devices us; SEC. cause markets; demand IoT incorporating market the associated be that and continue to economy the and global of for to statements like the chip now These a and products competition and expansion respective the for our to speak the difference scope of of IPs For penetrating include: the results, the on maintaining could length factors the growth of the information restrictions to existing trends. consolidation; said, the the more our acceptance; other the agreements; the as assumes update customers, more success pandemic, XG, consumer the any connected market to or market in ability filings duration which and turn place the our markets that drivers With to forward-looking non-handset new impact CEVA execute call on the in and global intense our strong the the

Gideon Wertheizer

us to Thank joining thank for and Good today. you, everyone Richard. you morning,

to the where in to pandemic. We are living the all we unprecedented continue COVID-XX times adapt of implications

customers the First look of and health worldwide. and out for and foremost, continue we employees, safety partners to our

employees thank maintain we work of milestones this like stepped would our development meet under Our these for I circumstances. and new to the our our customers’ to opportunity ensure difficult hard their to employees up have take schedules products.

as the business coronavirus will call. to up and three the uncovers. the driven later smart for XX% for and our One eight strategic new control this us million, ongoing I monitoring came eight growth were and the powertrain, in IoT products. customers of allude Second, a on impact out we spread at five are our pandemic $XX.X opportunities with automotive is from of wearables, station U.S.-based growth, XX% the than of the of closely the offset which agreements, in emerging into first-time report, the XX% the to up base ramp-ups. year-over-year. handset also in opportunity step range the of Despite quarter measures second continues with $XX.X the this base include Royalty up were year-over-year, the stereo Target connectivity lingering good the measures our in product space, currently be new low-tier recorded. of sequentially in RAN in and showed largest line decline sensing to automotive high uncertainty, line of licensing deals all-time a a government’s referred and our highest record line, revenues $XX.X signed revenue million a supply ever quarter healthy low-cost revenue a In shipments in high, million, wireless which revenue, China. handset revenue We the we where was product applications royalties. customer non-handset The customer. up ahead solid the licensing this year control to of environment to product a the we revenue expectations constraints earbuds, XX% product for year-over-year, of we with to Bluetooth second over had deployment by for very The $X.X and of true XX% devices. the smartphones demand as strength a Indian formerly year expect to the gain volume, production Wi-Fi associated line, due share in third driven by weakness IoT demand and market to quarter a experienced station many India, XG to XX% posted from a IoT resulting new million, of growth year-over-year by royalty record in virus. This comparable royalties markets. according with new result and fast also and LTE spread Canalys second more

remote technology, emerging the XG on our believe expected Intelligence predicted minutes and that in are levels, to doubling maintaining the have through claim services geopolitical are distancing you few of from pandemic. latest On available. between devices, a be opportunities networks more yearly mobile it Forrester U.S. Furthermore, XX% magnitude adoption wired markets COVID-XX this technology of broadband to With however additions the GSMA social expects we year. strong visits take new portfolio. firm healthcare current and particular pace via XXXX COVID-XX, attractive data care to figures because that expedited XXXX perspective GSMA Intelligence year UNESCO and The that market is these XX around walk Research where our activities shifted be is uncovered offset IoT new billion the of X.X U.S. study deployment net expected recent billion research persistent where forecast its and the including the tension decline. for this mobile for in said, basis down than due virtual on the China. the billion to and for The students measures industrial. nearly have that the Let there me next post-pandemic to for X of services within education, not predicts for call technology will strong world

are Onto XG-modem the platform, developments XG Mavenir and technologies and byproduct do stringent dramatically such mobile production Altiostar, tensions, on of O-RAN not rather companies, Wireless we for mobile RAN in start-ups and third as in to noticeable the the software and with is COVID-XX XG, U.S. Israel use our RAN and are these from A the Europe. looking XG Parallel PentaG and to Facebook, royalty models O-RAN power of a reduces or well time the continuously the run a As tension OEMs. stimulate enables requirements usage barriers DSP associated equipped business our Intel, this software which for majority earlier, for ramp and CEVA-XC CISCO, DSP XG-enabled geopolitical China as processing. PCs our the latest portfolio O-RAN the between different to networks. few customers, Wireless. vertical use solutions entry step trade developed new and platforms match like and new usage our U.S.-based, brings hardware of operators new play VXX. hardware I space, directly and We quarter. in revenue to we the existing and low from CEVA suppliers efficiency including based U.S., with expect aiming for role control the government base the incumbents Microsoft, adapt station our our forward O-RAN well baseband Open to models in commented as components and tier-one positioned is of discussions Fixed up latency using are newcomers. sizable front for apply prepared export and Furthermore, monitor to With on address for pivotal mix see required. technologies current rules as a than Access, to

supplier have and RAN space to experience the pedigree be lot in proliferate to We a base. gained of able the

came March XG, of China. investments already strong highlights Infrastructure. seven are areas plan front, in and has The which New called with These investments On and China deployments the plan the in the a out in the are which central of to areas, XX% in XX% government IoT. with AI ambitious new associated CEVA presence

we how this expand We our presence with on can based in Chinese on our customers plan. are continuously China discussing major

our the Furthermore, despite about opportunities and strength This Infrastructure in of and current So, the O-RAN New first closing, and in half the business to China’s company, affirms situation uncertainty expand was model. business plan. the robust by poses us year vision new COVID-XX. volatility our for in brought the of

the U.S.-China ahead, satisfied While earlier and uncertainty. than tensions in the and first our slower trade pandemic half recovery the I’m is year the the performance from anticipated pose was opportunities additional with

are and We importantly our most customer our laser-focused productivity efficiencies, on therefore engagements.

agile is any development in hand me the guidance. With to positive organization financials the Yaniv for and let negative to months. coming said, over and call to or respond that Our alert

Yaniv Arieli

$X.X for second the is related was our second start revenue XX% million, than XX% as same $XX.X XX% basis, Royalty our reflecting for all-time reached IoT approximately ever quarter to XXXX. Licensing second million, the to I’ll you last revenues, last million quarter is high in in product from of XXXX. non-GAAP for excluded year. base quarter quarter revenue a results of breakdown the higher Quarterly Thank of The slightly what $XX.X line $XX.X the million acquired and margin This on was quarterly operations expenses both we gross million the Royalty $X.X XX% than of $XX.X year. million was for record XX% follows: and revenues, total on our second of gross million, quarter a by up $XX.X GAAP reviewing for quarter amortization the It Non-GAAP quarter revenue approximately the margin the of impact Gideon, revenue compared Revenue million comparable XX% intangibles. XXXX. projected. the total of better of our highest the and of was revenue same was as was $X.X recorded. $X.X million. the the station reflecting higher quarter compensation we than & to fourth XX% we for equity-based

$X.XX expenses GAAP these OpEx the million of for operating also the acquired above guidance second U.S. diluted and excluding and items the $X.XX. expenses quarter diluted the million net our the expenses for just of $X.X for was included compensation were operating of loss second below aggregate million $X.X at Total just and This second $X.X amortization million per million, was of our an quarter approximately million. for to high-end per loss $X.X share was net quarter, for loss loss $XX.X high-end quarter GAAP two the intangibles. Our of the guidance. equity-based XXXX. $XX.X of of share compares

during quarter million XX%, XXXX sequentially EPS of of $X.XX by million data. down the and diluted and units, the diluted the Other or quarter second of XXX%, XXXX baseband a were units million million XX% and year XX% increased CEVA of EPS and by quarter income units, decrease related from XXX% million for XX% from chips, and Non-GAAP income second for shipments. XXX XXX $X.X net units non-GAAP second net quarter units during baseband were $X.X respectively, Our first the Shipped were up a XX handset licensees the XXXX to Of XXX reflecting XXXX X% decrease a shipped XXXX and second million of and respectively. handset chips $X.XX. the of of reported sequential XXX ago. shipped quarter shipped, from million units for

XXX were shipments station units, up IoT and base Our year-over-year. and million XX% down product XX% sequentially

chips station million. of we revenue year-over-year baseband of the reach reminder, IoT” beginning growth a all of year. line this since As have product to umbrella the sequential and posted non-handset This XX% products and “base under XX% categorized our $X.X

for As items. sheet the balance

June repurchase any million and have balances, our equivalent cash available of the CEVA’s and not We shares We quarter X.X of XXXX, shares marketable bank XXb-X As under repurchase. plan. did were approximately terms $XXX deposits cash for XX, securities currently million. this

for than was the days, the of for quarter XXXX this lower second quarter DSOs we the Our XX XX days year. first significantly recorded of

XXX quarter, engineers, At During the was at $X.X operations; XXXX. $X.X headcount our March purchase second amortizations million people, our a people of $X.X and XXX total XXX from second which of were million. of generated from end assets was were end and of quarter, up of cash we depreciation fixed the million the net of the

guidance. for Now the

results CEVA’s the future presented. product As customer enabled this demonstrated near-term migrate of economic pandemic our invest by half diversity year, on focused first to to challenges objectives We our the remain for in growth. our and and continue us the

As – posed coronavirus markets in emerging is tier uncertainty, of where economic prolonged in primary second particularly low markets contain exposure half emerging our the measures for for the handsets. spread to outlook, partially

reports. royalty third to Gideon base On noted have encouraged the a we the hand, just and royalty up IoT we quarter in in we station the as alluded reports by the recent the expect reflecting customer other indicators base step product in and are to, station XG revenue line

million revenues. believe the we licensing record So XXXX million we on we licensing, half as target with in year the recovery current the $X restrictions earlier said, the royalty annual forecasted are economic maintain be than first, assumption higher of $X second revenues a of based up licensing gradual lifted. the in will to the On that the over activities

on be and $X.X lower compensation gross expected the of million other the of an GAAP-based quarter third GAAP quarter, basis associated to to $X.X excluding to a million equity-based this quarters OpEx the third aggregate is equity-based of range of is of and our is expected slightly expenses for expected non-GAAP be to amortization quarter Specifically Immervision compensation forecasted for is XX% year, on XX% and margin approximately both of assets in first two investment. the to Of basis, OpEx of XXXX. million OpEx be $XX.X than anticipated acquired $XX.X total $X.X for our be amortization million. third the to to attributable intangibles. the expenses with million

approximately of million. OpEx in is expected non-GAAP both range non-GAAP to approximately Rocco, income interest for approximately the expected are million share Our session expected Q&A count the be GAAP $X.X on expected for and million be the quarter be shares. be now to and million. quarter Taxes $XX.X third Net the you to basis $X.X to is is $XX.X third to million open could XX.X please. our

Operator

with Ramsay Please comes question Matt go [Operator first from Instructions] Cowen. Today’s ahead.

Matt Ramsay

afternoon a good you in the XG side. the about your I for in it the share on licensees with materially Qualcomm kind sort at on sides question some side, on we morning, XG, everybody. much. licensees. of guys and are the of But base and seen to the the Thank of your side. maybe Good with and side expense are going the start side flip consolidation of third where ramp to important And XG handset and wanted quarter of business, step fourth sounds competitively have where to like, MediaTek competitively and things you, the Gideon, and some station start infrastructure are both feel characterize you you more can like very general back handset maybe and

could So, if XG for level just you helpful. how would are thinking of That Thank be company? about set the you kind opportunity the you.

Gideon Wertheizer

Hi, Matt.

the with the So start let me One with base one. is XG station.

in in me start new four substantially weren’t there addressable has that by LTE. LTE. that than are saying us XG And in components Let for more market XG

called antenna one The antenna. first active was what passive. The is is

antennas. and go amount and high you XG you massive when have you that Now bandwidth of have to fact this the

it’s customer processing that based the the improve of DSP. baseband and it on managed the company antenna. the some and with now by moved and come the SGPAprimarily was to So, first our with solution out while built Today peak our done

the for are a top sizable you station to you station, on itself of of is do this a So going the them pretty on market, have base antennal every done between will itself. X on because antennas. what have Each to base XXX processing

one that’s So area.

operator you gradually out The you other metro. is The cell in of rolling in is mini XG that more these start RAN because area what microwave an have fighting LTE small is component microwave private will then many cells, against on services. have called

coming they stations this time referred others stimulated more the long private like they in all base one manufacturing, the an like guys of cellular. this O-RAN is with China polarization So, lines they're by made getting the government the this there with all made sweet for will And already we and folks, is customers that was a DOS an initiative a between in and a or their Facebook, effect latencies offer. I call acquisition it’s them from active their announcement manufacturing O-RAN. for the the to in robots less Microsoft and in very what first Intel, the now good spot is that’s in installed some in and Toyota our the security that low for their

the the a sell about good and in of components the those are areas there. we and have up in is very are and prospects first deployment we have optimistic we in step visibility a one China reasons we that and those all all doing that So, LTE now antenna XG and weren’t the an

put or you right. area. about Now, It’s consolidated so, you MediaTek Qualcomm and think is there. ask I a it handsets

customer consolidated for we they approach the engaged to application process, and side why are build is – have in than people because the the is through customer other that not China. stuff that own XG. rent now wants there customers to We XG with us the go enough. initial are their through as this our to And has regulation modern This to is on not

the more are and edge. this traction AI fencing where the So conserve AI smart and becomes Processing with camera coming that’s to is to moving feature called our functional DSP-oriented Natural This smartphone also, the we is with is moving portfolio and what or NLP there. much Language getting

what new be merchant will remind XG So, in have the model, – approach process. as avenues not that but ace engagements. also there going chips just are MediaTek the market are is we that own their building to terms our OEMs for And you looking know, in Qualcomm the not speed, and is that are of and other chip

Matt Ramsay

way the Thank Gideon. around. great all That’s you, perspective

follow-up the that modem you half significantly for in second higher expect a me, the Intel less in would year the the being of about be As from guidance that first you Yaniv, I would the in and talked half get it’s the notable of revenue back the half royalties versus year. the

Just moving half you. So, on magnitude that the maybe Thank the talk base if royalty parts the in year? helpful. of kind back expecting XG are out be could of of station would the about side the you you

Yaniv Arieli

Yes.

rules we for how works get we to real the CEVA XXX, quarter in It out As end the of report model just customer many and the the the and the on there quite it’s case is visibility one then, the XX after model this new said, in days of was parts. end moving at out. are this of quarter based difficult hand the you wait why and always the

ups we downs. segment, I So, has segment, seasonality We have seasonality. every year, think, cleaners This we very, every have In very and being vacuum completely strong. changed. COVID-XX in and saw

believe strongest royalty second when true and going that more our ever the at first, be TVs. quarter, Our there from or – for QX TVs stepped different Bluetooth because rooms the for Wi-Fi or will us that the devices. time to in point the and Wi-Fi in it’s kids That’s with be remember, the Bluetooth, to shop out house it’s wanted more of to quarter. cleaner numbers on year And their for first around we came common people home into year commonly had to that the needed we half of of something pick the just the factors had second wanted We low end up. not

a long ago. half So, will months or how we – two and three just

answer. aspects, very known mentioned QX going predict there correctly. very thought you with The The So, knowing We XG least OEM like. look change which well. are there they how successful difficult doing with that today is handset came the one to space right and answer low in QX to an well extremely a version, a out is cost very, at but

advance, with I of then us, and think were aspect will that for know in like the ago strong QX results they from excellent have us that surprise different nor very by or up all second two we quarter look aspects. weeks QX as from surprised that’s well. super known couldn’t a how or do always We came everybody by

So that’s one area.

seeing they from share the to segment and in wins deployed. station. strengthen indication of market not for a you just Gideon us. about fourth curfew the base last because talked Last, and that impact go are as than is in our market significant less starting a we’ll now should walking but things the won length. emerging was to to was phones consumptions area that’s the in way quarter up may being the with and and of design buy that India of and China it cost to Amazon and ramp of the in mentioned. customers. more last XX% stores we direct different to around, the quarter. is third people lower be buying This phones corona segment down and up of those that we have close shared have to least, We This able Gideon in Another gradually economy is that not XX% quarter, open

get as the significant. no soon it. magnitude as So vision of doubt could pieces. are per VoLTE But news be that data the reports, what’s and at much are we’ll we we getting, have those different this there a that better moving quite deployment There is

quarter. So, don’t data have a it’s wrong months guess second to we we QX we overall, play stronger ago basis. out think we the to now look on I believe the to going just a for how side right be in quarter-by-quarter few positive a like and this were will need the second half on

I So, little the more hope managed moving to you bit on different parts. color a give

Matt Ramsay

much No. the for jump appreciate Thanks, it. queue, I’ll in very back that. but much

Yaniv Arieli

Thanks.

Operator

ahead. And next Barclays. Please with comes our from Tavy question today Rosner go

Peter Zdebski

on Hi. on Congratulations This the Tavy. Peter is quarter. Zdebski for

hoping Fusion you then, bigger the are could from Regarding bit that of And given the you operational, all? And if of give versus deal a headwind bit update Imaging integration us if is have that fewer particularly I sustainability think licensing, size? Sensor quarter that about on was a the we into and point should we commercial how of that view? follow-up. I at more deals XH? acquisitions just Or wondering a strength in was the continued both from could seeing that a in is I the saw the QX, a an

Gideon Wertheizer

first think the you, tell will me let I licensing. Okay

- is valleys. So, lumpy business. what that light, fact peaks don’t the fan continued, and licensing are does it’s There see your momentum mean, a not look or we the electronics is

to look to different solid. manage pipeline The You We continue those looks deal perspectives. to have flow.

our Wi-Fi strong product. have We in interest

We product. strong computer interest in have vision

it’s interest by XX% electrification with grow is Bluetooth. grow We XX%, signed have between XXXX. power CAGR train the by If for a of going of to cars. it’s very strength part important agreement This to strong the and We cars. going XXXX is

see timing So, to deals. closing negotiation on properly, commercial the the mean, don’t complete is of a licenses. legal there. this we the We I any evaluation do Again, properly, negotiation we want weakness. customer, ground are solid with but do It’s

there. Sensor significantly already. contributor. start vacuum of by-product We royalties of Fusion in stronger interest the do CEVA space. cross-sales are With we Imaging, the mentioned with PC vendors the we we Fusion, integration pandemic, between It's well are part so, it's Fusion. as the much strong at and of a Sensor our as the CEVA TV products cleaners, Sensor Regarding seeing space, on Yaniv a

the know was and it we on CEVA this on team, we history. based a We what When look make Like a smooth at integration. So, we’ll they this do a then what doing. acquired company, look is decision.

time – you a another the is said and record top not XXXX. million you overall, this level for are is that’s $X the the I’ll are licensing $XX to So all-time which for year the to from that year. by it’s add basis, million was full still quarter $XX million ask a reiterating on question? balance first Did high And which thing on earlier this earlier we group. we cross that last that front, more $X on one of this means million we still we are our looking

our So, is plan. kept this quarter. with We said, still that all it last

the are it with of confident the we rest where is for very year. still and are this this for We targeting quarter

Peter Zdebski

perspective. helpful you. Very Thank

Gideon Wertheizer

Sure.

Operator

Please Instructions] comes ahead. with Suji question go Capital. DeSilva next from Today’s ROTH [Operator

Suji DeSilva

Yaniv. momentum Hi, Gideon. Hi, here. Congratulations the on

of are guidance consumer improvement, of areas an broader am Are So, A the markets? for what in markets, kind the can second you talk still you recovery, other on, non-smartphone? or a assuming the I consumer exposed but you the just demand? half expecting about volume curious muted you commented seasonality, the non-smartphone there lot

Yaniv Arieli

after new consumer was some convey try case, the or and was devices COVID we year, these to quarter. of in to work. bit lower continue ramps time. question. ties a of especially of first new QX back was in – historically in down beginning in And a in lot people manufacturing that although IoT and historically, the picked for a in the should still This excellent and we we it It normal devices. an of It’s least alongside a hope devices normal the up saw what the the earlier. the bit QX year going sort that Demand, This start lot in second to of these pickup. volume as season one that’s hand did at wrong product

even just in So, those powering of and or pick whether of is in we it’s and continue lot new they pace and know with space for in taking pieces QX, the quarter earbuds from guess one vacations, cleaner action their for to TV people to because and surprisingly a bit or more will out mind the going we that The outdoors. easiest shelves hit pandemic, strong devices are that came up. again TV with believe increased us different customers moving a out that of not our of starting the relatively of a which as or all do all is products this, lots camera, guidance of those what, And other these don’t segments. vacuum the lower it’s the QX with you volumes very

in like press but but sounds revenue the you are in that So, of right that’s seasonality timing have or per car there. can parts. see? track. And environment challenging that maybe, started what want track, a contribution one, the good wins on I talked it’s there, the Yaniv. want about the talk now? is about say a potential market, to back things to color how moving even And on the sense that? talking you Gideon, and the you content I very appreciate – optimistic maybe mean, release No. you it, You about automotive then, it I many don’t as the these QX and a good sign you have Do

Gideon Wertheizer

breath take all - to and go we that lot I a mean, deep as ongoing of in products. have other you product customer activities initial automotive, in But I need XXXX, with until to customer need production. processing. think, You see a you we with know, to you the for late

XXXX if that production. think from all mass goes specifically I this well, product, that's

Suji DeSilva

Thanks Great. Okay. guys.

Gideon Wertheizer

Thank and good you luck.

Operator

answer turn question this back and Ladies concludes for the final conference and to remarks. I management session. to gentlemen, the the any over like would

Richard Kingston

us for all you Thank today continued CEVA. Rocco. for interest Thanks, your joining in and

an Thank virtual to as and on Investors be in, to current X-K investors.ceva-dsp.com. XXrd attend September, section starting exhibit conference Summit, are Communications of with and Hardware in prepared the Annual through events, this & Communication the Xnd and our the XXth. be August Oppenheimer’s participating report and regards Conference, at August Xth, call information on IT website. good reminder, Global As Further in bye. for these our XXXX Xth of XXth, and be Technology, will will following Conference, Infrastructure Form & we we Technology the a filed the With Semiconductor, that can Jefferies Internet found events these website all we September events upcoming you and events participating section accessible on are Xst Investors September will remarks Citi's

Operator

concludes call. This Thank today’s you. conference

disconnect your may You have now lines and wonderful day. a

CEVA (CEVA) 10 Aug 202020 Q2 Earnings call transcript