Q1 2021 CEVA Inc Earnings and to Acquire Intrinsix Corp Call
Good day and welcome to the CEVA, Inc. First quarter 2021 of the earnings Conference call.
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Asking question on the first start with the one on you touched on flow.
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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.
The headset.
Thank you Rocco good morning, everyone and welcome to see was the first quarter 2021 earnings Conference call I'm joined today by Gideon worked hard the Chief Executive Officer, and you need all of your Alley, Chief Financial Officer of CEVA.
Gideon will cover the business aspects on the highlights from the first quarter on provide general qualitative data.
He will then cover the financial results for the first quarter on also provide qualitative data for the second quarter on full year 2021.
I will start with the forward looking statements.
Please note that today's discussion contains forward looking statements that involve risks and uncertainties as well as assumptions that if they materialize or prove incorrect could cause the results of CEVA to differ materially from those expressed or implied by such forward looking statements on assumptions.
Forward looking statements include statements regarding demand for on benefits all of our technologies, including five G technologies on our Blue Bird plot for my P unrelated deal flow.
Expectations regarding market trends of computing growth in shipments of ultra wideband devices on true wireless ear buds on secular growth in the Iot space.
Lease regarding benefits of the intrinsic ex acquisition as well as the closing of the acquisition of.
Our ability to help customers mitigate risks associated with supply constraints.
And guidance I'm qualitative data for the first quarter on full year 2021.
For information on the factors that could cause a difference in our results. Please refer to our filings with the Securities and Exchange Commission.
These include the scope and duration of the pandemic the.
The extent of length of the restrictions associated with the pandemic and the impact on customers consumer demand and the global economy generally.
The ability of CEVA as Ips for smarter connected devices to continue to be strong gross drivers for us our.
Our success in penetrating new markets and maintaining our market position in existing markets the ability of new products, incorporating our technologies to achieve market acceptance the.
Speed and extent of the expansion of the five G. In the Iot networks, our ability to execute more base station on Iot license agreements.
The effect of intense industry competition and consolidation.
And global chip market trends, including supply chain issues as a result of COVID-19 on other factors.
<unk> assumes no obligation to update any forward looking statements or information, which speak as of their respective dates.
And with that said I'll now hand, the call over to Gideon.
Thank you Rachel good morning, everyone and thank you for joining us today.
2021 of results toward the robust starts with strong licensing the execution and warrant is exceeding our expectations.
During the quarter, we end weighted new boat sales.
So it's kind of IP platform for the booming the model of the true wireless Dws Earbuds smart watches gaming headset headset and other weird.
Good day, we are announcing the acquisition of <unk> and neighbor of Massachusetts based leading chip design in for Q, well first of all IP company with an extensive experience and solid business in the aerospace and defense market.
I will elaborate shortly on these strategic initiatives.
Total revenue for the first quarter of 2021 was $24 4 million.
Up 8% of people do you.
The licensing the environment continues to be had.
She was $14 4 million ball on licensing revenue down 1% year over year, we signed 11, new agreements of which.
Two were with first time customers.
China continues to be of very strong from a good for wireless connectivity technologies.
The high adoption rates bolstered by strong being permanent and your customers.
We are experiencing increasing interest for five G technologies, specifically, the new five <unk> provision known as Red Cup will reduce capability, which is good for the only situation of Iot devices, such as wearable investing.
On the essential.
So the volume's coming on and more.
Oh of Bluetooth and Wifi technologies continues to be in high demand for.
For the variety of Iot devices for smart home and mobile devices.
We also signed up a lead customer for ultra Wideband PWB technology.
We are currently developing.
You do WB usability of the show tens of wireless communication that he's able to safely for the angulate location of devices the high security.
It is already widely used in the automobile industry.
And recently <unk>.
Samsung bench of Nuomi.
And the embedded UW levy in their flagship model.
Gradually and bad debt UW be in order of the high volume devices, such as the recently announced <unk>.
Harrison.
According to Abi research.
With 85 million uwp devices are expected to be shipped this year.
Focus to reach the 1 billion devices by 2025.
Once the revenue reached $11 million up 21% deal volume.
The head of our expectations. This was driven by a robust demand for our consumer and Iot products in the above the seasonal demand in smartphone.
We believe the pet similarly facing tight supply constrained.
Is is most of the industry and are working how to expedite shipments for high demand products.
Let me now go through the rationale for the acquisition of intrinsic which we are announcing today.
<unk> is the leading chip design in for Q successful IP specialties.
Targeting the growing should the development program in the aerospace and defense market.
And the range of our other IC design for medical and industrial products.
Intrinsic sales successfully executed more than 1500.
The design project.
The 34 years of history.
And being the successful business the general rate more than 20 million below in the annual revenue.
Although the yields the deep strong relationships with blue chip semiconductor companies and Oems.
Among which all of Intel IBM laid those located in Mount being Honeywell and many more.
The chip design skills and expertise are scarce and include proving compete the increase in RF mixed signal digit the software security and risk five processes.
With the addition of the intrinsic CEVA stands to benefit from.
The three growth pillars.
For risk.
Extending CEVA market reach into the sustained the opinion sizeable aerospace and defense space.
The market forecasted to reach two 6 billion below the anywhere on the semiconductor spending.
Hey, Ken.
Increasing our content in customer of design and accordingly, increasing license and royalty revenue of the GMAC.
By offering hence the IP platform that combine CEVA connectivity and smart sensing the IP with Inc. Intrinsic chip design expertise and security and interface IP.
Third extending CEVA IP portfolio of we secured for central IP.
For the IOP devices.
Total of genius SLC infill face a fee for the growing adoption of Chipotle, which also of the foster of any less extensive impairment.
The high R&D costs.
And complexities associated with the monolithic IC development.
We welcome the intrinsic scheme for the single family and look forward to the exciting opportunity for him.
We expect the closing of the agreement to take place during this quarter.
Yaniv will discuss the financial aspects of this acquisition later on.
Another important product. We recently introduced is the blue but platform might be.
The only curation of two wireless ear buds.
Honeywell keeping is the millions of world scale steam of advanced don't flow.
And the other professions.
Our required to spend much more time in voice over video calls and niche phasing in high quality audio experience for the wireless earbuds.
According to recent data from count of three sales channel strategy and analytics.
<unk> market is expected to reach to 600 million units by 2022.
And to see 70% CAGR over the next three years.
The underlying technology used for PWM.
As broadly you would say.
Kevin carried forward the <unk>.
Small torches over the counter of hearing AIDS mobile gaming.
The next at home Entertainment speakers and small home appliances.
With the global proposition CEVA strives to become the de facto standard belt for wireless audio in the IP industry.
Our unique technology can keep the entries and holistic view the allow us to address the substantial technology challenges the.
Hide from the need for extremely low power consumption and the intelligible audio quality.
Nobody is of sales content platform enabled by how you run the the CEVA Bx, one DSP and incorporates all of the software framework and the hardwood Felicia laws.
Wireless for the wireless audio system.
Global accounts also optional value add SDK, including all we spoke.
The base voice recognition software clear walks, our echo cancellation of noise suppression software and motion engine Neil for INU based yields of control.
I am pleased to share of that we have already signed up a high volume lead customer for blue, but at the beginning of the second quarter and are expecting more of these to follow as the product is released to the wider market.
So in summary.
We are very pleased with our solid performance in the first.
Our business fundamentals are strong.
The acquisition of intrinsic we are extending into the aerospace and defense market and in reaching our value proposition and commentary.
They also impairing CIP platform, a new IP for security and H C interface.
Without acknowledging the technology based co complete the infusion customer relationship we are well positioned to capitalize on secular gross in value of the space.
Lastly.
We are monitoring closely the impact.
The industry.
Why on the industry wide supply constraints, and we will help our customers to mitigate very least and challenges where we can as they become it followed.
With that said, let me handle the call for the need for the financials.
Okay.
Thank you Peter I'll start by reviewing the results of operations for the first quarter of 2021.
Revenue for the first quarter was up 8% the $25 4 million.
As compared with 23.
$6 million for the same quarter last year.
Revenue breakdown of this follows licensing and related revenue was approximately $14 4 million, reflecting 57% of.
Of our total revenue.
The slightly lower than 14 in the half million look for the first quarter of 2020.
Royalty revenue was up one 1% for $11 million.
Reflecting 43% of our total revenue.
Compared to $9 1 million for the same quarter last year.
For the gross margin was 91% on the GAAP basis, the 92% of non-GAAP basis, both volume than what we projected.
Non-GAAP quarterly gross margin excluded approximately zero one of $1 million for equity based compensation of <unk> 2 million for the impact of the amortization of acquired intangibles.
Total operating GAAP operating expenses for the first quarter with just over the high end of our guidance for 'twenty.
For the fourth.
Million.
Total operating expenses for the first quarter, excluding equity based compensation expenses and amortization of intangibles.
$27 million also just over the high end of on guidance.
Tax expense for the first quarter came higher than expected throughput uncommon in the revenue mix.
The majority of our revenues recognized on <unk>.
So share it with our connectivity products.
And Wi Fi originally Inc.
France.
Which of the higher corporate tax rate of 26, 5%.
And the ongoing basis, the corporate tax rate should be lower and in line with our original expectations.
But.
Mainly prudent on the outcome of the revenue all location mix.
U S. GAAP net loss for the quarter was $3 $6 million of diluted loss per share was <unk> 16 cents for the first quarter of compared to loss of $1 $2 million and five the laws of the first of all of 2012.
Our non-GAAP net income on diluted EPS for the first quarter was zero point of 3 million dollar than the one.
Respectively.
This is compared to the first quarter of 2020 with $3 2 million of net income and zero or Inc.
The 11 six.
With respect to other related data.
<unk> units by CEVA licensees during the first quarter of 2021 for 341 million units down 30% sequentially.
And up 31% for the.
Of 2020 reported shipments.
The 341 million units shipped $129 million or 38% were for handset baseband chips, reflecting.
King of sequential decrease of 41 per se from 217 million units of handset baseband chips shipped during the fourth quarter of 2020.
And the 16% increase from 111 million units shipped a year.
On a group.
Our base station in the Iot product shipments were 212 million units.
Down, 21% sequentially and up 41% year over year.
As for the balance sheet items of ends at the end of March 31.
Cash cash equivalent in the balance of marketable securities of bank deposits were $174 million.
We did not exercise of our buyback program the score as we focus on the intrinsic acquisition and the expansion of the business.
Upon closing the deal our cash balances will be reduced by approximately $33 million.
The acquisition consideration as well as deal costs.
Our dsos for the first quarter was 49 days similar to the price corridor.
And during the quarter, we generated $15 2 million.
The balance of net cash flow operation depreciation expenses and amortization of $1 5 million and the purchase of fixed assets was $1 1 million.
At the end of the first quarter of head Count was 412 people on.
Of which 346 for engineers up from a total of 400 for people at the end of 2020.
Now for the guidance.
We continue to experience the healthy licensing inviolate environment and pipeline is solid.
Royalty.
We believe our customers are still dealing with industry wide supply constraints.
Which may prolong for.
The remaining of the year.
That said the demand for the products based on our technology is strong and our customers with our support of working relentlessly to fulfill the purchase orders.
We have announced earlier today, we agreed to acquired intrinsic net.
Expect to close the deal later in the quarter.
From the financial point of view, we expect intrinsic to contribute between $10 million to $11 million placebo stopped line in the second half of the year.
And the.
And that this deal will be accretive as early as 2021 on a non-GAAP basis.
We will provide more information on the <unk>.
Next earnings call.
On the back of this.
We forecast our new total revenues for 2021 to be between $116 million for $117 million compared to about $100 million in 2020.
This is subject to the intrinsic acquisition closing on the anticipated time line.
Specifically for the second quarter of 2021.
Gross margin is expected to be approximately 89% on GAAP basis of 91% of non-GAAP basis.
<unk> in aggregate at zero point of $1 million of equity based compensation and zero point of $2 million of the amortization of other assets.
Opex for the second quarter should be lower than the first quarter for.
For the second quarter GAAP based Opex is expected to be in the range of $22 nine of $23 $9 million.
Of our anticipated total operating expenses for the second quarter of $2 9 million.
The to be attributed to equity based compensation of 0.6 for the amortization of intangibles. So on a non-GAAP opex is expected for being the range of 19 $5 million to $25 million.
Net interest income is expected to be approximately four.
For $5 million.
The factors for the second quarter are expected to be around 0.7 million ball on both GAAP and non-GAAP basis in line with our prior expectations of mall.
Share count for the second quarter of expected to be approximately <unk> 23 in the half a million Inc.
<unk>.
Rocco you could now open the Q&A session. Thank you. Thank you. We will now begin the question and answer session to ask a question in the press Star then one on your touch on song.
Okay.
Yeah.
So the draw your question. Please press Star then two.
Today's first question comes from Matt Ramsey with Cowen. Please go ahead.
Thank you very much good afternoon, good morning, everybody.
Congratulations on on the acquisition Gideon, maybe you could give us a little bit more background on intrinsic your relationship with them have you guys collaborated with them on the other projects in the past.
If you could walk us through what are the particular poles from the.
I guess, the aerospace and defense and government sectors for technology.
<unk> technologies that are appropriate for CEVA as portfolio, which pieces you might've had in house, which pieces you are acquiring.
It looks like a good deal it was just a little bit on.
Anyway, we externally weren't familiar with the company I imagine a lot of your investors Werent. So if you could give us a little background that would be great. Thank you.
Good morning.
Let me start by explaining the both the intrinsic in the the Russian on trauma for us to do so it's true.
At the very.
It's very hard to find such a scale share the under one roof.
They can do.
The complex design in work different disciplines like RF mixed signal, the security, which everybody.
Has the ability been bearing the IOP.
On the bleed on the way from their specification to the design and we.
And for this company.
The.
35 for 36 years on the track record of doing such and such.
Such projects now.
Is that in mind.
We plan to take.
Take advantage of it and true gross billings of one of the security and the aerospace and defense. This is the market that we were looking to expand into in conjunction of what you're doing in the consumer and the pellicle model, it's a big market.
BSP interest in.
In terms of because you do lot on rate of GPS, who do a lot of DSP processing.
On the.
The designs.
They have a very solid business in general on the aerospace and defense here of big spend the big spend the system companies.
True high entry barrier to penetrate.
Once you are there is for the non coal so what we are.
We plan to do there is basically increase the content because we can maintain our DSP in conjunction of the design the door in the customer of the day they have.
With that in place.
Yes.
Exposure for a market that any way, we win and we plan to do and much faster exposure and the.
The content wave of.
For the.
Our IP on the portfolio.
Portfolio that we're going to be the.
It's one pillar of the second pillar is what we call internally <unk>.
10, CIP of what we define the burn CIP.
There are many system companies today that the.
They want to build the chip to create the competitive edge.
And those guys.
The they need to.
Not all of them can can build the team the design team because this is again the skills.
Very hard to find and take the long time to build the <unk>.
Go ahead Susan.
So those guys go either for AC company all the.
Oh and the other.
Either way.
As for C companion wouldn't the change so what do we we plan to do is the.
Take care of our IP and the.
The two big Gws is one example, like Bluebird It basically comes on the person with the proposition that not just with the.
So all of the IP with other of hardware and basically provide to the customer the design of the achieved the then they can go directly to the.
The foundry.
And the manufacture of the chip.
[laughter].
And we've seen.
Something that we've seen a lot of interest from customers coming in there.
And then the requiring Inc. SaaS.
Such capabilities.
The total you can thinking it's a very soon the Viva length of the world.
These blinking semi custom win AMD design cheap for Playstation legs books, the bringing their IP and the and provide the design for extraordinary Microsoft Fainting.
And the different example, close toward the market that we are in is what led the mountain to acquire of weather was milder than had been the IP and the variable I can do the tailor made designs for the customer. So we are not going to do chip manufacturing, we will be IP company.
But we.
All the customers to go directly to the fund to be on not taken in the Missouri.
The in between so that's the second pillar of our South pillar is a piece of debt we'd be the payers in D. C is the.
Secured debt secured processor of IP. This is something that appears to remain the <unk>.
Multi device in the Iot is our main market and if you've done very fuel yields the heck in the advanced the technology the the deal with it for many of the starting from the upward.
And the other IP that they bring game is what is called the <unk>.
The HOS <unk>.
On C, which is the hybrid pencil C and D. C is basically shipments.
During the back to those system companies.
Very difficult very the.
Complicated to do them on the lead the infancy line quarter Bill is doing and the chips. So oh semi companies in the Inc, and the.
Chip line piece basically.
You take different die on connected unveil.
Discounting proposal the combine them into one chip.
And the.
In physic is of a strategic relationship with the intent.
The day.
The elite.
In the in this area and one of the <unk> there.
Foundry strategy.
The new foundry strategy. So we will be looking to capitalize on this so that's on the.
Okay.
The.
The consideration that led us to for this for <unk>.
Transaction.
The inventory is very familiar with DSP the familiar with the emerging within the projects in the past, but the.
The order the engage and communicate and share.
The.
With key customers these capability and good feedback.
Great. Thanks, Gideon for all all of the detailed there good luck with the deal.
A couple of.
Financial questions. One is once that is on the acquisition I think you said on your script $10 million to $11 million for the back half of the year. If you could give us any sense of of the.
The rest of the P&L of the acquisition around margins Opex taxes things like that and I guess the second part of the question is on the core business of the tax rate in the March quarter very different than any of us had modeled and I get the mix of revenue between Europe, and the U S et cetera, and in Asia, but.
It sounds like something Must've went differently in the quarter than you guys had forecasted initially in terms of revenue mix and if you could enlighten us on that that'd be great. Thanks, guys.
Let's see let me of untrue.
Second question about to give you a big on for the revenue will makes the two of them.
Okay.
The revenue came with.
Unexpected surge in revenue, we start seeing things in the second half of <unk>.
On the demand of our connectivity product and we saw much stronger demand it would do but what happened.
Late in the year ending this quarter is that it comes with non comprehensive agreements with customers.
The they are looking for the portfolio of felt the technology Theyre looking for architectural the line.
Some of the diesel much more extensive product line in the in the Q1, we had the kind of the concentration of at least two of three <unk>.
The agreement.
In the connectivity space.
The.
Basically.
You know we didn't anticipate this the demand but on the other and it's good news because you talked about large customers that are willing to pay and I appreciate all the technologies.
So take that there.
Very strange makes the even for us was the.
For the surprise as Gideon explained part of the <unk>.
One of the deal of the million dollar deal many millions of dollars deal the day with a leading handset OEM.
But it all happened in France ex rate is much higher for the concentration was almost everything in France in the first quarter on any of these days that will level out the minutes of the more of that we see at the.
Is it just something very awkward about they had a large payment for the for the offline, but when we add the next couple of floors of the same run rate that we talked about last quarter of annual guidance, we did give of 22% of instead of day.
The France has the more business these days rather than the level of Q1 across the year of digital.
Go back for the normal mix of revenues between Israel, you asked the Ireland, not just friends and we should be back in.
In more of a normal territory and the the same.
We have never seen that type of concentration in France, yet in the eye.
On SEDAR.
Repeating itself into the in the near future of it could happen but for them.
It's very rare it's very.
So I think from the from a tax per second we will have a higher tax.
The other from overall of the year. The percentage is in the next couple of quarters would not change we kept the models of the same of 22% with the higher Q1 with that said, we see the stand alone before intrinsic we already added or adding about $1 million to our prior guidance for.
Instead of the one of those six we're looking more of like the one of $7 million for this year. This is Steve of Standalone.
Higher taxes on a very solid the entry into the second quarter Indian the talks about the the pipeline I mentioned the.
Look you see bolt on royalty that in the in licensing so we don't give quarterly.
The revenue guidance, but we are looking at and feeling very comfortable with at least the licensing and volume.
Of control.
So over the year of that by itself could the close.
Close the gap or start closing the gap versus the higher Q on active and if you have for that intrinsic.
The good question top line, we're adding maybe $10 million of.
Revenue in the second in the second half I.
I would look at operating margins of about 10% for this type of business.
And on.
On that front, we should have the tax benefit in the U S and the combined that business with CEVA. So all in all of that is going to be accretive based on the current model that we have today with actual Q1 and higher tax day and that should be able to also offset the Q1.
On the expenses so all in all better revenues for the year, specifically with the intrinsic acquisition of outflows of the on time.
On some recovery maybe all of you been all of it we just don't know the rebound by for EPS with just given the trends in the business.
But we could see some up some corrections on those few strength that we lost from Q1 and making it the either from higher revenues or any of them.
Or just the more.
Hence the.
The monitoring and things like that and better normal tax rates for the rest of the year.
So I hope for you guys for thanks, guys for all of the details there really appreciate it. Thank you.
Thank you Beth.
And our next question today comes from surgery, the silver with Roth Capital. Please go ahead.
Hi, Good evening on Eve congratulations on the intrinsic acquisition based on your last future acquisitions, I am Matt I'd be expecting good things on the phone as well could you talk about the competition for intrinsic and also the secure.
I P. The risk five IP what opportunities there are to take that outside of the defense market.
Hi, good morning.
You broke up on the only in the day managed to capture is the secured the question about security.
And the competition Gideon Gideon the competition.
On the competition, Okay. So security.
He is the basically.
It is true compete solution based on risk factors.
The 10.
The probably to how the base.
The platform debt.
It was the velo.
The on few projects for the developer and the it's in the <unk>.
Acuity of secure like this for.
For the is the it's a very dynamic market because spreads are being developed innovative every day on unit will find the way to to somehow the fixed and deal with it and the increasing debt has the platform available.
The.
As the company they didn't do the.
IP business, that's probably close.
The that's not of all of the focus here the equivalent of 4 billion Boes, Inc. We of the platform we have the sales channel.
In terms of competition and then we will see the ease of competitive bowl.
I think the felt the main competitor.
As time goes by we look more closely on the competitive landscape and a bell on the.
And the flavors to make it the IP.
The business, but for the Washington easy licensing.
Add on because we come to the person with the baskets we have the.
On the activity with the sensors and now we are adding security.
Into the mix.
Okay very helpful. Thanks, and then perhaps on the current royalty run rates the.
Wireless infrastructure market <unk>, Inc.
Restructuring can you talk about how that's been trending the last this quarter last quarter. This quarter and then what the outlook for the rest of the year is including perhaps new customers coming on line as well.
Yeah.
The.
On the trend is positive so we see the gross.
The.
Moving both on the heels of the here and also on the quarter over quarter.
I would say that it's a bit slower than we thought about it.
And we see the cause of the both because.
It's a matter of all for them.
The ultimate rate of capital spending on the next wave of the next sales of says.
In the <unk>, which are small in the sense.
On the private network, but it's moving kind of no question about the.
The that it will come in terms of the customer we had one customer and.
And other test them out publicly said that the.
It goes into production in this quarter.
The positive maybe.
Maybe I'll add some color on <unk>. If you look at the start of the some other factors of the base station and Iot.
The Bluetooth.
It was up.
84% year over year, and royalties and our sensor fusion was up 51% year over year. So these are the pieces of IP that the like now with intrinsic to be bought over the years Inc.
Invested there and we see the fruits and recent peer and hopefully that's what we've seen few years from intrinsic as well, but the overall growth in the first quarter.
The also.
Positively surprised us in the.
For now there are customers, especially on the Iot space the consumer devices Tvs robust cleaners were super strong in the first quarter, which is obviously an anomaly because they usually for the post Christmas.
And that was not the case of this year with COVID-19 around.
Okay I appreciate the color thanks, guys.
Thank you.
And the next question today comes from top of your Rosner with Barclays. Please go ahead.
Hi. This is Peter is debt on for Tavis. Thanks for taking my question I wondered if you could comment on the type of growth. The intrinsic has had historically and maybe youre going forward expectations say, one or two years out given some of these synergies on the.
Customer overlap that you discussed earlier.
Okay. So heike.
The increase because of the standalone businesses of growing the business we see.
We sell format the.
Financially the consistent growth from starting from 2007 will be really turned the corner in the aerospace on demand the aerospace on demand defense space.
Is a growing space more spending by the Dod.
In semiconductor.
And the highest speed in five G from Vod standpoint, and also the highest voted in AI.
In the in the intrinsic in the.
The is basically growing they are taking more projects more lucrative project debt.
The <unk> gain.
And then the Nokia now what do we all of adding to this one is work we.
<unk> seen.
The is the IP. So when you both of the defense we are going to.
The present to the prospect of the customers.
On the IP that.
That we have and the most of them.
They need the DSP the.
The old connectivity thinks that we have.
The the other things that we're going to go is to go to our.
For now lot of them are now coming to our school built of IP and we come to the why don't you.
We moved for you the whole design, including IP, because we are of the expert there at the end.
Can any of the.
Combine all the the the.
Has the most experience and intimate understanding on the combined with the design of holiday so debt for initiatives that were growing the bank is and as I mentioned. The also brings in a bid that we are going to edit volume.
Let me try to summarize the and if we are looking at the on a half year for this year, we're looking at $10 million, obviously with simple math you could double that for next year on top.
Of that as the pillars of the Gideon talked about growth will give more color. After we close the deal flow. So when we get closer to 2022, but there is no doubt the with Steve on board and bring these together the $20 million, we state of the growth driver in the next couple of years both.
And the the Nonorganic as the combination of services and IP.
Okay. Great. That's helpful color. Thank you and then just wanted to ask about the licensing results for them given that revenues were pretty strong sequentially, but the deal count was a bit lighter was that simply related to some of those deals last quarter that were signed but not yet recognized the net.
On the revenues.
Yeah and this is the question of you always ask and we said, it's not that important to divide the total debacle of the by the deal kind of some are not able we are not able to recognize some specifically on this quarter is the very large deals of that we talked about earlier with the OEM handset OEM.
Which was the multimillion dollar deal and the.
At the end of the day, if you look at 14 and something million dollars. This is the first time ever the chemo recording of $14 million and higher net sales to eat all of it goes all in the last year and on five quarters that had happened in Q4.
The 19 for the very first time, and then again in Q.
In Q1 and again so the decision just to show that this the combination of the market to meet the clauses the worked out well and the pipeline for us on the backlog for us for the second quarter of it is strong.
Alright, Thanks, again and congrats on the quarter.
Thank you.
And our next question today comes from Martin Young at Oppenheimer. Please go ahead.
Oh, Hi, I can then get the thanks for taking my question first of all want to ask about the turnkey IP business model and can you comment on what or how long on the design cycles and does that usually involve just onetime fees for all the customers are.
The higher royalties as they choose to go with the attorney.
Turnkey IP.
Yeah.
The time line.
The the cycle the design cycle it depends on the complexity of the project.
The.
Yeah.
It could range between.
Six months the one the other than Nishu the Magnum.
Because of the project in terms of payment it will be.
The the component of that we have for Mike of familiar and license fees for the IP and the lead.
For the development and all of this.
There will be higher because we combined both for.
For the combination of the design and the IP.
Great. Thanks.
Can you also comment on the development of Bluetooth New OE audio on now it's being announced for over years now.
How are the adoption rate in the market and do you see that as a meaningful driver.
For the Bluetooth products.
Yes, he being the.
The.
Hmm.
Jeremy submit the potential.
The platform that we all have.
We announced the blue mud support both of the BLA or the land.
The the classical Bluetooth the.
The below EBITDA is not yet.
The deployed in the mass market.
Brazil of local of legacy.
The simple.
So the new multiple of the dual mode, which is a combination of the BLE in the.
In the classical Bluetooth.
For the benefit of yearly audio substantially all of them.
And then the classical glucose is more modern one than we expected this to be the mainstream bucket when we think for us.
The next I have no more questions.
Thank you and all of us.
Our next question today comes from David O'connor actually on BNP Paribas. Please go ahead.
Great. Good morning, Thanks for taking my question.
On may be M. Gideon just going back to the intrinsic deal.
What's the just the topic was the business entirely design services as it exist today.
They get paid per and.
And the REIT per design and is the plan to transform that existing business of theirs into more classic Steve of licensing and royalties and where you get paid per shipment versus just and are we on the design.
And also then on debt in our res side of things I mean, how scalable is that because I mean, it's all relative to the number of engineers that you have and the ability to kind of rapidly grow grow that part of the business.
That's my first question and then the follow up on the ultra wide band.
Can you just give us the quick overview of the ultra wide band how many customers you have today is the sort of first customer and ultra wideband what the.
Pipeline looks like and what does the end application for this class of smart.
In terms of end markets. Thank you.
Hi, David So let me start with the intensity indeed, the intrinsic model is the.
Then of the basins they get paid.
For the resource of the reporting this project.
The model on the CEVA will be a hybrid of both to the.
The continuing the.
Finally marketing to this model and are licensing the IP, which is just the license fee and royalties on sales.
When it comes to what we call the parent CIP.
<unk>.
It's a it's true.
It's more for us.
The containment, meaning the higher royalties.
It's more closely as you pointed out to what we are doing the IBM most of them.
We'll get the NAV.
For the project.
The think about the.
The the same thing and therefore the people in the semiconductor was doing the.
The take some building of the cost of the cost could be.
The.
Payments will be higher than the past.
True.
On the breakdown you get Hollywood.
So that's in terms of in transits.
What about <unk> is the.
Is the.
And for very promising space that we decided to do we have the elite customer on within finished the design into Bakersfield more months to finish the design.
In terms of go to the market strategy.
That's a natural entry point for.
For the moment.
We have on what we have in the handset space in terms of they've been in the last quarter.
We signed another big deal of.
Connectivity of many people are using our technology node for the bench strength that unsold for the connectivity side wildfire neutrals and this was an agreement debt.
Some of the gaming for revenue this quarter.
This was the.
The igloo.
And that's in a way to get into the mobile ecosystem of mobile customer base for the connectivity with the Weizmann will be a third.
The entry point into the market.
I believe the smallest of the flagship model will include all of them.
The wideband because people on.
We'd like to see the benefit of the of location.
Price location.
The the ethical.
It really is just one example.
The debate I believe that going forward, the and put the can dws and watches because you tend to forget those.
The multiple of the place so.
It's the technology that we decided to develop.
On the resources working we of the lead customer of theirs.
On the.
The direction that we do and the and it can be market. They put the numbers in the in the 1 billion as far as I recall and towards the 2025.
Very helpful. Thanks, Gideon and if I could just.
Squeeze one in for <unk>, maybe I missed the book the gross margin for Q1 that you mentioned I think it was better.
Than expected and what was it within the mix there that drove that.
Better than expected gross margin thanks, Scott.
Sure. So two things one that sometimes we do some type of customization of changes for our customers when we licensing.
Some projects.
In Q1, because most of the veto the of Bluetooth Wi Fi and that's the standard almost off the shelf.
We had less of the mix of.
R&D cost that we needed to bring up for the for the cost of goods. So that was one reason and that's why we had more mature deals the coming out of France, because that's usually the 100% of recognizable.
And with no additional work and the second because of the DSP also was lower than the normal mix, we had less payments to the chief.
The Israeli innovation authorities in the normal course, neither of the two elements of brought up slightly.
Nicely to the.
The margins.
Understood. Thanks, guys.
Thank you.
Ladies and gentlemen. This concludes the question and answer session I would like to turn the call back over to the management team for any final remarks.
Thank you Rocco and thank you all for joining us today and for your continued interest in CEVA as a reminder of the prepared remarks for this conference call are filed as an exhibit to the current report on form 8-K unacceptable through the investors section of our website.
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The count of 49th annual Technology Media and Telecom conference on June 1st.
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All of these conferences, we will be attending virtually on for further information on these events are on all of these events, we will be participating and can be found on the investors section of our website.
Do you and goodbye.
Thank you Sir This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.