Q3 2020 CEVA Inc Earnings Call
Good morning, and welcome to the seabed ink third quarter 2020 earnings conference call.
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Oh now like to turn the conference over to Richard Kingson, Vice President of market Intelligence and Investor Relations. Please go ahead.
[laughter]. Thank you Brandon.
Everyone and welcome to see the third quarter of 2020 earnings Conference call.
I'm joined today by getting <unk>, Chief Executive Officer, I'm Gonna need <unk>, Chief Financial Officer, a fever.
Gideon will cover it the business aspect some highlights from the third quarter.
General quantitative data you'll.
You need a band called the Department.
The results for the third quarter and I'll take the bad quantitative data for the fourth quarter and full year 2020.
It's dark looking statements.
Please note that today's discussion contains forward looking statements that involved with an uncertainty a lot of assumptions that if they materialized Oh please incorrect.
The results can see that to get their materially Sunday expressed orange like light such forward looking statements and assumptions.
Forward looking statements and paid guidance and quantitative data for the fourth quarter and full year 2020.
Ultimately bye bye Bye G base station UN plugged in China.
Relationship with D. G E.
And opportunities presented by accident and connectivity technology.
Pretty strong quarter highlighted by record royalties for awhile basic patience and <unk> for the carpet go and licensing agreements with major players in T industry.
Before we expand or the also quote the result that we'd like to acknowledge the tireless fourth of all talented employees around the world that continue to deal with the challenges Covid, 19%.
Will do housework will successfully growing old business, keeping the commitment to our customers and maintaining the fast.
Base of innovation and new technology development.
Thank you <unk>.
But ah revenue for the same quarter with 25 million Burleigh up 6% deal W.
Licensing business continue to be solid at 12.4 million Buddha for the quarter.
10% year over you.
The revenue was 12.5 million dollar up 3% on the eve of real base.
We concluded so the new agreement during the quarter of which five well for connectivity and eight wonderful small Tennessee.
Six of those agreements well was first time customer.
Target applications will follow new licensing agreement include strategic design Winfield AIDS us with one of the largest automotive semiconductor player, which I will extend later on the call.
Either target application for our customers. This quarter include digital imaging to wireless stereo airbags Smart T V and digital conferencing systems for home use a grind space is more people are switching to work from home permanently.
And upgrading their home office setup.
On royalty revenue, we have we had a strong quarter driven by a record shipment for base station IOP product category, formerly failed Hunan Hanford program.
Royalty revenue from these cut the go go 86% sequentially and one O 5% <unk> to reach a record of seven 9 million dollar.
We have benefited from expedite that five G run deployment in China, which I will touch on later in the call.
And some serious of product launches and shipments enabled by all Bluetooth Wifi and central fusion technology.
And a handful basement category, we so a strong recovery formal China based customer of targeting low feel full G smartphones and features funds for India and other developing economies royalty.
<unk> premium feel smell from decline on a yearly basis is new five G smartphone serious launched last month users modern form another supplier does not incorporate out technologies.
With that said our technology remained incorporated in the low cost smile for these customers launched earlier in the U which continues to hear the stronger market direction around the world.
Let me take the next few minutes to elaborate on key development in the quota.
Thousand Fiveg base station.
As of the first half of the day.
Lisa present about a third of the global run market.
Sema is a prime beneficiary of this upgrade cycle in China through our strategic relationship with ZT.
<unk> and <unk> network N automotive space.
We are managing all business for the long haul and confidence you know go strategy, yet we remain the payment in full calls to drive efficiency and prudency to cope.
Please the ongoing uncertainty COVID-19 <unk>.
I did finally I'd like to think again I'll customer apartment and fever have located please.
Your health and safety continue to be our first priority.
With that said, let me handle the cold over to your need for financial some guidance.
Thank you.
I'll start by reviewing the result of operations for the first four of 2020.
Mhm U for the third quarter was up 6% to $25 million as compared to 23 and a half million dollars for the same for the last year.
It is the highest third quarter revenue, we are very cool.
Revenue breakdown is as follows.
Licensing and related revenue was approximately $12.4 million, reflecting 50% of total revenue, 10% higher than the 11.3 million the third quarter of 2019.
Which cannot be utilized in future years, our third quarter 2019 financials included a $1 million tax benefit.
As a result of a successful conclusion of tax audits.
Categorized all are known hence the basement chips I'm Gonna <unk> umbrella base station and I O T category since the beginning of this year.
It's for the balance sheet items out of as of the end of September save us cash cash equivalent imbalances marketable securities and banking deposits were $153 million.
We did not and purchased any shares during the quarter you have approximately 500000 shares available for.
Yeah.
Ah Dsos for the third quarter was 57 days.
Higher than the second quarter level, but lower than the first quarter level.
During the quarter used for $3 million cash from operations are depreciation and motivation was $1.4 million and the purchase of fixed assets is what was $1.2 million.
Higher than the norm for larger investment in hardware computer servers and engineering development software.
There are certain expenses and the same amount for amortization of other assets.
Opex for the thought fourth quarter is forecast to be slightly lower than the last two quarters.
GAAP based Opex is expected to be in the range of $21.9 million to $22.9 million.
Of our anticipated opex for the third quarter $3.5 million is expected to be attributed to equity based compensation expense and 0.64 more physicians.
Our non-GAAP Opex is expected to be in the range of 17.8 $18.8 million.
Net interest income is expected to be approximately $700000.
And the five G base station business about their trajectory of filling in for some of those voids that Huawei it might be leaving in in the industry and how that might change how you're thinking about the potential over the next 18 24 months for your.
For your business and royalties for base stations. Thank you.
Sure and good morning, I'll start with the first question I don't think there was any inline breaking a we didn't mention specifically any numbers related to a base station roles, even the third quarter. We did say, however that our base station and <unk>.
This stability trial to say at this stage.
Got it. Thanks, thanks, guys for the detail there.
As.
My second question I Gideon I understand that there may be some things you can disclose and suddenly you can't but.
I wanted to follow up further on the new.
Automotive design wins or agreements for that you guys have gotten in place now with the tier one chip supplier that you mentioned that there is any additional detail that you gave about.
Number of chips per car royalty potential per car.
And then and then as a follow up on how how do you see the to the the runway in China in terms of the pace of the Fiveg Rollouts and where they are in that deployment cycle.
Oh.
Yeah, Yeah sure. So we don't break out the numbers of little specific customer or how many ships.
Unfortunately, but they would do bundle it with the 200 million unit that reached record high. So of course base station is in the on the smaller and smaller quantities of those 200 million.
It's a significant contributor in a step up from what we had before is due to as they get some expenses both supplying the modem as well as the smaller antennas, which their volume could be much much higher than our traditional modem only type of Soc and this could be a few tens.
Then came as per base station and Thats the opportunity we have them.
In the future, but we don't.
We can't Unfortunately.
Open up specific volumes for even for a specific customer.
I hope that helps.
That was but thank you and then and then as a size do you see this the pace of.
His role at accelerating for from for from here and then how many quarters do you think.
Could be sustained.
Yes, I mean, the prospect for Fiveg.
Is it bigger than base has increased probably will speak about base station and we refer to the big one Demarco base station, but this time as time goes by and Fiveg and.
Technology said becomes more mature and thats something the team.
Which is Nokia so as soon as they get into production, it's not gonna be I'll need the tea, but another may station is Gideon said on top of that we have other aspects of five G. A an customers in that space that the <unk>.
Hopefully should be ramping up as well as we have license <unk> technology to them alright.
Oh this is in the pipeline in the in the coming years.
Great. Thank you for that.
Sure. Thank you.
As a reminder, if you would like to ask a question. Please press star than one.
Our next question comes from Tsuji Dasilva with Roth Capital. Please go ahead.
Get in how you didn't Eva congratulations on progress here.
I'm looking at the calendar here 21.
Cross the nonsense non baseband the five G base station B I O T connectivity. The censors can you talk can you talk about the strongest growth opportunities into California, one cause it seems like all three of those are doing well just Wanna know, maybe rank order, which ones would have the best opportunity for growth contribution looking out to counter 21.
Yeah, let me in the mornings I didn't bring my glasses, so I don't see as far.
They look at only 2020 because of the sites visiting here.
<unk> cautiously cautiously.
I'll put almost driving and the U S.
I still have a substantial.
My full name is.
The disability because he likes to fuse mainly send so many fell on my heart could beat words <unk>.
And I doubt with me up to 16, So let me go fuse them to get them <unk> <unk> view 360 degrees.
No I'll I'll hang day is in <unk> B S people surfing and these specific customer will take the bleeding guy it should be a speed we came out.
I recently was a new <unk> category. So I've just next generation school, we call it <unk> and the the theme of sense for you spill central fusion, meaning combining the vehicles from different central and that's why there's a man.
Okay got it understood.
Maybe turning to the base station sites on the active antenna units.
How should we model that long term it can that grow to as big as the base station baseband.
So basically.
Only base then.
Let's say cheaper baseband that is base station you going forward between.
Three two.
And then a portion is because of the volume at Twox. Many.
Many companies.
By the way from different angle it could be.
Optical transceiver companies that integrate DSP for this one it could be.
Networking company could be.
Antenna company, so all of them.
We try to get the share in these very lucrative space. So then.
One hopes for the other one is what is a watch fight.
All the different aspects to the access point that people, who wants to move to work from home.
And.
Yeah.
So within a very short period of time, we jumped from 20 to 30 to 40 now to 50 for the very first time or more than 50 in licensing so those.
Those markets and those technologies as we went into really paid off and these R&D investments that we have put over the years has really paid off increased licensing activity.
Very helpful. Thank you.
Thank you.
Our next question comes from Gus Richard with Northland. Please go ahead.
Yes. Thanks for taking my question just on the eight EPS when.
Is is this just cameras and.
Radar that Youre doing sensor fusion core or does it includes light our vida borrower sonar or is that yet to be determined.
Steve.
It's all of the above Manning it.
All of those sounds a little bit you mentioned.
And the entity that therapies from al Stanton yet to be determined.
And so if you could maybe walk us through the puts and takes a bit on revenue it looks like I'm going to be down a couple of million dollars sequentially.
Maybe if there was any help you can give on on which piece of that decline might be licensing versus royalty that would be helpful. And then on the royalty side is the primary driver of it being down sequentially just to the shift in modem procurement for Apple or are there other things that are that we.
We consider thank you.
Sure.
Hello.
On the licensing front as.
Did you say that we mentioned earlier, we were looking at a solid quarter overall.
In order to reach that.
Chicks, while I'm looking at something similar for the next quarter and and that's pretty much all the survey found because it's hard to guess we need to look at the hindsight them get the royalty report them very thoughtfully the numbers, but we're looking at something quite similar to where where we are today.
So I'll make that helps you know again, if you compared to last year, we had a very strong queue for it's sporadic after being.
2019, she wants you to see wasn't at 10 $11 million range. It then Q4 suddenly jump. This year, we started with a great momentum at the beginning of the year.
At 11 12. This level is also something cause we're very happy and feel comfortable in the.
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