AIP - Earnings call transcript Q1 2024

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Operator

Good afternoon, everyone, and welcome to the Arteris First Quarter 2024 Earnings Call. Please note, this call is being recorded and simultaneously webcast. All material contained in the webcast is sole property and copyright of the Arteris, Inc. with all rights reserved.For opening remarks and introductions, I will now turn the call over to Erica Mannion of Sapphire Investor Relations. Please go ahead.

Erica Mannion

afternoon. good and you, Thank With me Officer; Janac, Executive are from Nick Hawkins, Arteris and Charlie Chief Chief today Financial Officer. with first XX, Charlie results begin a of review will the for the quarter XXXX. March ended brief business Nick full followed for the quarter the by XXXX. of the will quarter company's and financial review second for first results the year outlook

forward-looking are the make we differ you should to and remind like of will open not statements this laws. involve We during I'd on These then within to cause anticipated, the uncertainties material begin, call results, forward-looking call statements. securities undue federal risks materially place that management, or those events meaning that for will statements, actual questions.Before statements from you could and reliance

for the ended reconciliation found GAAP XX, from, be for, the these These measures or during not measures will means they how regarding measure loss Arteris could uncertainties the performance. considered per call, note the with superior net are the appear free flow, should to to cash time-to-time release information presented Exchange in understanding we and provide as issued these not differ, December we to the release the by non-GAAP substitutes evaluating prepared non-GAAP that non-GAAP non-GAAP in U.S. isolation are Securities in The today which the measures and results financial cite of measures, evaluates non-GAAP in operating U.S. filed believe as from nearest factors quarter in press reports company's accordance XXXX. in and loss, of with and investors cause share press documents Commission.Please with the this management with be and company's prepared non-GAAP measures and Arteris including net measures accordance GAAP.A GAAP. can risks, Additional certain

quarter contract in the release In as this performance of please the section the addition, ended press a ended may starts, active do customers the visiting used and XXXX.Listeners Relations Investor have company's indicators remaining not key for XXXX, the annual March presentation, release obtain website. for value, certain copy XX, of XX, the for quarter confirmed of of such who obligations, performance copy March a the by a design see press definition

to found In Relations be in addition, the be Charlie. section under XXXX tab.Now management turn will the to website can Presentations will company's QX presentation, referring the earnings call Investor which Events over of and I the the

Karel Janac

joining first a cash free afternoon. on Thank report We're $XX.X you, XXXX royalties also of reaffirming target a of that positive flow highlight this flow I'd where contract positive cash with free we to we're delivered value for us quarter, Erica, the everyone plus XXXX. our call and in million. achieving excited to to solid thanks quarter like of annual

and robust quarter's success machine intelligence across language by activity in is with and approximately our recent deals.As customers, increasingly the artificial design deals, This was driven first AI AI of learning our license enterprise with driving of by computing all a large licensing quarter our enabling starts, automotive applications. for generative supporting led half factor continued in model quarters, and rise particular verticals,

system of of the these We large companies.Each our foothold, demonstrates with increasingly growing semiconductor to as with technology wins, global with customers and top continue our X followed major wins as expand and XX system companies, for computing by significant were continued and activity such Arteris. commercial applications and automotive, in communications IP healthy our vendors for demand consumer design primarily deployments customers from saw industrial electronics. enterprise We a

system IP a company. one our in largest first the top XX is of wins One of the enterprise with semiconductor deals computing quarter,

trend our XX relationships SoC of and deployment the significantly technology of the companies across relationship IPs of expands approximately designs. of customers. top a number network-on-chip continues time.As half expanded growing with be today, semiconductor that can securing companies over it of technology This major Arteris' Arteris Specifically, business are

Ncore, As middle our products, the chips are hardware performance this Arteris computing we Rebellions, unit inference to find Magillem performance, our for FlexNoC believe verticals adoption. trend, solid this requirements announced adoption increasing large Arteris startup release a and our growing to neural processing power the supporting body we next chip while to vehicle of mentioned of multiple IPs, customer Rebellions delivers design at and to size, spans ADAS, protocols, a Arteris broad automotive of and from IPs integration Mobileye, for systems is is continues is a IP across meeting performance, immediate and efficient ISO last of pioneering the automotive configurations, processor well is of Collaboration we cache next enable The at the Building upon pre-validating high has design aimed chips.As Software, autonomous long-time XXXXX automotive IP deliver semiconductor infotainment version momentum, latest suited on coherent geographical This IP, semiconductors. flexibility, automotive IP, and of generative safety Arm's previously seamlessly from of AI our all designs, AI network-on-chip Korea, accelerated more.By small Ncore to supporting AI. requirements chassis and of for safe from an of adoption and path main integrating which and Ncore and and network-on-chip IP.Arteris and fueling its earlier, protocols, Ncore electronics, the any our complexity, customers control with radar, results forefront AI latest availability microcontrollers Arm IP, connects systems, flexible LiDAR, range year, supports customers. generation the superior driving cost of all to in The launched on example announced power markets SoCs. based the and vision, of and cost the in Ncore FlexNoc automation efficiency with to Ncore by to tackle network-on-chip automotive Arteris product processor generation the work autonomous that driver utilized evolution. optimizing scale.On chips. X processor advanced of licensed interconnect software expanded per energy benefit partnership.Targeting their announced chose needed ArmvX functional in our aim enabling at cockpit SoC to AI efficient front, growth also offering assistance interconnect various and pre-validation including Arteris or who

a part Mercedes chiplets of and Synopsys, Speaking automotive at partners Arm, presented Benz vision standardization of automotive Intel Foundry, Arteris by collaboration, Automotive Computing including and Conference, multi-die others.We Renesas, for recent supported the are computing the with range in level ADU full for its autonomous addressing a Mercedes to applications. network-on-chip, platform, pioneering partnering excited be last implementations driving a as and cache of reference of Benz

deterioration for to including Arm SoC.Currently, our IP by quarter, U.S. processors at concerning both restrictions of on-chip we are seeing SoCs. ecosystem support expanding further processor uncertainties trade, capability dynamics, and not help choices to customers, U.S. though the same connectivity China, underscores including BIS RISC-V Damo-XuanTie Another collaboration processor first our this to in support, deploying time. geopolitical in business, our their made support RISC-V the impact offer companies continue the on included This collaboration certain the and the Arteris macroeconomic

strong our we system that largest opportunity with long-term new system pipeline a our our and headwinds, the technologies, AI to companies Arteris near-term the solid relationships of over in as create of autonomous discuss more do such in world, who and supported generative scope dynamics in some believe results to scale by remains and driving, financial innovate the robust, I'll that, of detail. product IP continue IP Nick, using these turn electronics it While exciting areas technologies.With to

Nicholas Hawkins

Charlie good everyone. afternoon and Thank you,

is first of to non-GAAP be A well release, GAAP which will is our review to available quarter our of as referring note non-GAAP today, our please in included reconciliation results earnings GAAP on today's website. as metrics. financials As I

and the to gross growth representing reflecting growing our the $XX.X account million, the prudent $XX.X million the first million period. end quarter $XX.X We'll million growth a first year in of reminder, was a the diluted was the in of quarter of take sequentially, million quarter obligations change the the of while strategically than is X% approximately to of a X weighted and end and X or Non-GAP quarter. second investing be profitable or spending profit shares $X.X of team's Relations loss revenue $XX.X of positive for in XXXX, with revenue ended average new above capital margin XXXX, includes fourth a first into diluted or loss and the midpoint areas, company's XX%. operating $XX.X Non-GAAP was the Total $XX.X the profit cash be was loss to expenditure, to GAAP $X.XX. and guidance or margin first in XXXX management quarter, was X. quarter million million range investments. XX% your on in the first have sheet and in positive be X. gross contract to $X.X representing above continued of draw of would midpoint the operating ever Non-GAAP loss $XX of Events million prior million methodology full million, solid XX% the a revenue and quarter to of instead our to based our revenue. X% operating and found attention first treatment our diluted expenses. Free the X% net turning we expense sequentially, the gross revenue range.Remaining and flow, under down in reflecting on but current net for year-over-year to now This in company's the to the year-over-year, in deals. RPO year reported, for but refer highest in the dollars first the in would per quarter, prior GAAP quarter X% I of net compared Net in quarter the the $X.X loss up we a year.I moving million $XX.X loss $X.XX, fact annual of the growth.GAAP royalties quarter, loss to presentation. outlook the quarter, million, guidance XX%.Now the flow to lower was ratable We Slide quarter critical for million, flow. the $X.X to for of period. level Slide first gross I guidance of which million, was $XXX,XXX. section license free presentation, range. or to limit was year-over-year outstanding.Moving with value Slide our the second XXXX XX%. share the terms If As first turn performance million, changed, above At free focus percent plus cash Presentations million, now the of would the equivalents $X.X quarter a Investor in at share cash compared was operating year quarter can was compared of line $XX.X loss were in that flow operating midpoint tab.Turning $X.X representing guidance cash up will $XX.X operating per Non-GAAP our the and cash, of like the loss of continue cash have was website of to to been ACV also has terms referring to guiding balance quarter goal, expense the in Total quarter to to Slide which earnings the the

for negative of we flow positive cash top start XXXX, $XX.X to management, million. $XX.X million.In in above in million year cash quarter, second of strong XXXX year-over-year million in quarter.For and $X.X strong encouraged to in our which expect million to the between of by all to midpoint; conclusion, million line our the flow up negative $X.X free $X.X non-GAAP guidance of million; metrics it to $XX.X effective the over cost $XX.X million first million performance non-GAAP ACV in quarter. to to resulted million, up for the million the $X.X has $XX $XX are non-GAAP plus free financial for free first to exit plus we $X.X XX% the quarter. $XX positive operating $X.X generated at call of For ACV maintain million I'm full to $XX positive encouraged operator open with by the revenue I reflecting that, will royalties this the sales to $XX.X million, to million We the loss loss of flow revenue of $XX.X particularly our guidance aim operating follows: million; the the XXXX, at million, the to royalties of questions. is remainder year.With turn momentum as Non-GAAP to cash

Operator

[Operator line of Instructions] Your comes from from question TD Matt first Cowen. the Ramsay

Matthew Ramsay

into wanted and year-over-year. First like the around like of what of of changes over that sort and flow. in a the how a reflective congrats business just deals And remind I just revenue should directional flowing all, forward. just RPO, you of going million almost guys to confidence revisit are of the and RPO. and way sustainable free to Nick, It's think, us, those different that question free basis? is, how ask up sort be numbers butter flow just of XX% cash a XX% accounting what on that give looks of things that time, cash general are growth $XX sort into RPO level some given its that, And and peanut kind wanted can I the in

Nicholas Hawkins

Yes. Matt. day. Happy Hi, earnings

As deals revenue, in, flow RPO always, that they remind amortizes. flow way get The just great the way recognized as RPO is that a they works, into RPO as into question.

being So recognized, coming generally, deals revenues in if are RPO than increases. faster then

We some sort the treatment, ] because ratable recognized $XX.X have into is flow revenue.Nevertheless, tailwind a by million point. GAAP all [ will the of back into at revenue that shift had throttled revenue speed that RPO RPO special which of at being to a

in sort you some strength want there pipeline, better And the thing. that you such if represents the of X.X run it is to rate revenue, -- somewhere of understanding essentially a gives want close for backlog revenue word. of of future So worth is if of year which a

expect But because the pretty growing. suddenly the So infinitum, It because flow stop is to go But logically that still continue you of deal your shift strong. grow could yes, encouraged the in really. ratability. answer to increase of very and that.As grow strongly. by is of It and it quite will on can part, XX% don't not expect will is die to increase, to we're rate question to ad continue

Matthew Ramsay

No, helpful it's Nick.

will Just really quarter sort where you remind me quickly be RPO an report guys of -- will year-over-year which apples-to-apples? number the

Nicholas Hawkins

another That's very good question.

third where have a when of we in managed in they So we shifted have quarter We completely. 'XX, of quarter, little the gone fourth vestigial quarter was hadn't second deals 'XX the couple the did to quite the completely. non-ratable and a now of stem deals. But

and lapping -- purposes, So, essentially. quarter but intents size by apples-to-apples to we will numbers this right of all be end

to this now, be will misleading. -- there if growth been for out, be the will well Right anymore going we X. would be I that have won't like-for-like third don't been comparable, to of shift hadn't quarter confusion if point it So we think and ratability it

So essentially, we're true when line. third reporting life you'll quarter see

Matthew Ramsay

leader products AI and the networking, data I'm devices, center, then starting at what's The second that, keeps to across, be the question, the complicated to other IP wondering in customer side time. your Are to things any all and of if value, the internal out speeding up innovation some we've likely in up license? quicker My stressing over third-party in you're base, happening very that was. would into as of markets roadmap you think seeing the reflected for more seeing automotive, where industry especially faster teams with pace. moving guys gradually seems but would getting are that roll business move, more for conversations of a I systems, having in treadmill in terms client quicker it the be the you new interactions edge, obviously use AI its as seem of you it's these it it. Got been affecting and it speeding folks the Charlie the

Karel Janac

AI language quickly the the to learning is to in talked sense of we the to yes just has of slow, right, are customers automotive be And customers. order the the both changing as the and Yes, as kind that because It's fast make short, I evaluations to automotive quickly.So we're lifetime is large of be things being in model course, compared and silicon algorithms sense. other extremely the disadvantage one done really, talk moving, very the that then Generative -- advantage for really an on is those mean opposite. certain about may hand a designs of which very, relatively we well.

were a design there's of said saw So I approaches.And we are generation. in the of cycles, and and that -- essentially are the different very, things and lot that of trying quarter, on to premium design IP people yes, basically answer think a There's very we productivity system machine learning a a automation moving. innovations is fast lot to starts designs puts get half which

opportunity So it's an for sure.

Matthew Ramsay

of return or and the for would permanent don't -- China table sense. were guys, makes but in know to are Charlie totally clear my on China, if I headwinds state, it are likely? still we I I feel additional your to those thought guess there's and remotely a catalysts my things is in now last roadblock that what they even to a unlock is any And there like that you do bit there. things. or and there steady not little -- I stabilized are very have some where No, was that script be, things certainly question more guess right sort you normal, have the question, in

Karel Janac

that some make things could some there's and to I is unpleasantness on to a that the of the There's China would level. new obviously but of sort a customers go the get U.S. things banking say there's scenario U.S. that at also previous around scenario headwinds consider between kind of going Taiwan, number the, we're of accommodation, to not it's where continue current stay On team Yes, But We're sort and those is an worse. basically in I business mean the we going wins, management the to new better. will the keep will started China which design where scenarios, bonanza, things a that getting China, same.That going the as right? come scenarios, to the one before

the quo stay same. for status Chinese So business. things our we're to We're terms for planning of planning in

Operator

line question Mosesmann of next from from Your comes Rosenblatt. Hans the

Hans Mosesmann

us on how's sense over progresses? trend year how's or you the a quarter, give trends ASP Can looking past royalties, licensing, the that as it

Karel Janac

nicely.And the the So on ASP nicely. products into ASP as system with growing our been that We're complex ASPs have track the get IPO years market, the much ago, that. show get trends pretty -- ASPs growing and couple of on use very the the chips and financials I more we discussed whereas think higher we is IP, more with more

$X I very said that that easily that by And continues. happen. can think we what XXXX average So to going ASP is we're trend million and be at

Hans Mosesmann

around And that? they're right of now half

Karel Janac

Yes, little a it's bit, we year I were $XXX,XXX. say last think so would right now I around somewhere

Now a of over that the know we we're is over something $XXX,XXX, million. number that are XXX,XXX, the deals probably track, on like reason this. But $X probably we're

will actually average it's eventually not, definitely $X million. deal it's be so, over probable And the that

ASPs the growing are well. So

Nicholas Hawkins

there the ASP when in at again. also addition royalties, you to of we've in is before, the is commentary other in Nick. royalties, royalties, catch piece Charlie's look is conversation had This color to One ascendancy. this Nice up

very Xx ago market dominated which royalty have and to cell small smartphones probably royalty dominated transitioned -- market, mobility several of rates.Now by the more rate we the being similar devices. from years by the with phone, As has smartphone automotive, away into

space substantially as likes some are that than So has the out, much Charlie to ASP. and higher type point application higher

the So that's another factor to upside. drag

Hans Mosesmann

several saying SoCs and X Okay. IPO, years? as platforms, That's maybe automotive per helpful. happen years the the maybe XX you or that just seen a next ago, been in from see and you then, And many car a X. of was guys, over still XX north question Is since guess, what could between XX, back or in it you've few to I that

Nicholas Hawkins

I pretty conceived And absolutely. Yes, track where in on much think the originally timeline. was we're terms to that of

Karel Janac

for we we X and that right? that had with can discussion of it they way basically level So, with need feel I that right? advance more. customer, So consumption And in would SoCs, a were they cameras XX a projection. having be telling X yes, pretty imply camera us comfortable mean, driving, SoC

Hans Mosesmann

in the from last out, of over your the has that for question, time from changed to past production license licensing queue. to customer Then back the engagements, Okay. or and tape time I'll years? The to couple go

Karel Janac

What it the designs, design people particular vertical, AI So, has. technologies So, have still mean, not, is right? those that impact the I being of generative automotive models X.X, on X in years. the that large has algorithmic as the a and takes language and are changed do it has more silicon. designs, employed, underlying

and segment moving we've other or looking And of very that months less, cycles that life X fast, product than so much probably or years X X only. segment any is seen.People cycles for faster design very, are

segment enable very right? chips and because And that are within each individual and complexity on the segment, complex, lower but automation that and not each fast, But So to within productivity very, the term. between people constant fight faster, the there's we're change so, seeing go design we segment. more much would, moving is average, a

Operator

Instructions] [Operator WestPark the next line of from Kevin from question Your Garrigan comes Capital.

Kevin Garrigan

Let me progress. echo my, on congrats the

cars, Hans' you customer gave know I of multiple of kind example and regarding for off cameras. question an vision of a SoCs Going looking

OEMs while seeing expected. kind infotainment I kind may automotive ADAS taking You're now, be a introduce, of right bit little a of lot longer would features than say, more

seeing across than the more the starts infotainment like kind of maybe or for design you're board? others, on functions focusing kind category So designs one is there of that currently all

Karel Janac

more categories, mean, driving, OEMs chips, publicity activity to lot, some In build there's Tier seeing, design don't X seeing whole decisions to Because right? those are progress really the of Xs see some So I we're starting but made a changing terms continues, we're deployment. of the build about So X automotive chips. automated see before we and right? electronic We're more years right? to a lot noise starting

on feeling automated be side, we've driving exceedingly on highly and city slowdown a this environment going continue. along, seeing is therefore the cities, we're driving longer. is is people difficult and automotive direction.It's primary very So automated all practical useful the been design But I've in without saying, to that the are valuable. highways, just the and secondary changing take realizing, not in any will and a that and and secondary very -- highways lot highways, driving highways will And that been

Kevin Garrigan

Okay. And to of Perfect. for kind noted pipeline it color. use is in so decide evaluations than sooner you many more prospective Arteris, phenomenon? are whether there as just I that follow-up, appreciate Do the these FlexNoC customers and of to a rather expect you end-of-year customers an several of kind or X. later maybe that more

Nicholas Hawkins

right? expectations. penetration meeting doing FlexNoC been X is the So No, well, very I has mean,

XX The second-generation nanometer. provides to very awareness physical below valuable capability customers

FlexNoC will a further business. a XX% what innovation looking year, X And of additional combination further that's announce so some value that is the helps pricing And ASP sometime to we're that provide and so value. to has really forward increase this uptick, and

Operator

Your from of line from Northland. Gus next the question comes Richard

Auguste Richard

positive Promised cash And congratulations entering flow. a the Land, free on

Karel Janac

doing we're and it, promised we make absolute best to it our happen. Yes,

Auguste Richard

and by companies, tech the it market if that You global explain what color XX you companies. top by Is mentioned you XX deals revenue? on Is mean you statement. X technology I release, just delivered. wondering Just Is global was press exactly cap? it little it top by it hyperscalers? more a bit of could Is semis? In with the

Karel Janac

Yes.

market a a order going by have methodology, sort of in to unified So we're cap.

basically by up It's market top houses companies index. the Arteris market and system call by top together, XX then cap, so, And XX. semiconductor they XX XX top what Top we the technology it's And cap. make

Auguste Richard

those it. companies in? buckets Got system houses? the And or were X which The companies semi then

Karel Janac

public from available, because don't the unified Both is the is, do we you sort that's right? market you the want sides. revenue, The revenue made go made a reason revenue house to is semiconductor from why system of by companies cap revenue, know we sense chip just but -- perspective. methodology So what really

Auguste Richard

Got And bookings at million? the order the is it just reasonable cash quarter then assume sort and your in numbers are realizing of of the $X it. how to that works, looking the on

Nicholas Hawkins

I So didn't of get it? again, end tail ask Gus. the that question

Auguste Richard

Sure.

of calculations, at looking is sort order reasonable some in of envelope to making back accounting assume on were the $X and quarter? your Just million of it bookings the that the

Nicholas Hawkins

than Hopefully lot that. No. a more

Karel Janac

Yes. A that. more lot than

Nicholas Hawkins

Because OpEx of runs at XXs. our high sort that means

in not quarter. the high XXs -- XXs Sorry,

contract that's the the And deal. working of mess at minus little bookings, capital cash to But plus yes. be So But or basic in sometimes the can to basically, TCV which things up end terms a beginning the total value, excess shifts got of bit. has quarter and the then flow of the quarter, run in in that of collections of you've positive quarter.

be not north it's it OpEx cash is together, the if we plus obviously makes non-GAAP that we bucket, So OpEx, and be royalties have bookings, TCV, which would everything the non-GAAP a sense. is SBC to number. because has throw of what OpEx into The so and that the would call expense, to

Karel Janac

that Does sense, Gus? make

Auguste Richard

Yes, absolutely. typically new Yes, what, there that announce then thoughts product wondering, every year? on I'm you does and new are indeed. And year, when and be might of sort guys a this any just product

Karel Janac

we're the understatement. quarter feel but we that to And this ready working impact good expect from on revenue changed half. progress, second to be make very to quarter. fourth the said going is hard. to not we what that and that's in been there We've announce, We've still we Not been making a

Auguste Richard

it. Got

Karel Janac

excited very it. we're about And

Operator

I call for closing time. this at comments. questions further no are over There to Janac now the Charlie will turn

Karel Janac

conferences and Thank upcoming you, to seeing look much. Thank we look for of you we're the at to call. we the And on forward on forward of And the you everyone, most that company. the in. updating being very good progress participating you questions the

Operator

concludes a Have may you great now disconnect. session. call, and That question-and-answer our

Arteris (AIP) 2 May 242024 Q1 Earnings call transcript