Q2 2021 CEVA Inc Earnings Call
[music].
Good day.
Second quarter 2021 earnings conference call.
All participants will be on listen only mode.
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After todays presentation, there will be an opportunity to ask questions.
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Please note today's event is being recorded.
I'd now like to turn the conference over to Richard Kingston, Vice President market Intelligence Investor and public Relations. Please go ahead Sir.
Thank you Rocco and good morning, everyone.
To see the second quarter 2021 earnings conference call.
I'm joined today by Gideon worth Taser, Chief Executive Officer, and you need of our Yeti Chief financial officer of CEVA.
Gideon will cover the business aspects on the highlights from the second quarter and provide general qualitative data.
And he will then cover the financial results for the second quarter and also provide qualitative data for the third quarter on full year 2021.
I'll 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 unrelated deal flow.
Including increased revenues from our Chinese wireless customer.
Expectations regarding market dynamics, including growth into <unk> on 5 G handset space and true wireless stereo ear buds space.
Beliefs regarding benefits on impacts of the intrinsic acquisition.
And guidance on qualitative data for the third 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 security and Exchange Commission.
These include the scope and duration of the pandemic.
The extent and length of the restrictions associated with the pandemic on the impact on customers of consumer demand on the global economy generally.
The ability of CEVA is IP for smarter connected devices to be continued to be strong growth drivers for us.
Our success in penetrating new markets on maintaining our market position in existing markets.
The ability of new products, incorporating our technology to achieve market acceptance.
The speed and extend of the expansion of the 5 G on Iot markets.
Our ability to execute more base station on Iot license agreements.
The effect of intense industry competition on consolidation.
Global chip market trends, including supply chain issues as a result of COVID-19 on OS.
Other factors and our ability.
<unk> to successfully integrate intrinsic into our business.
<unk> assumes no obligation to update any forward looking statements or information, which speak as of their respective dates on.
With that said I would like to now hand, the call over to Gideon.
Thank you Rachel.
Second quarter results were exceptional and demonstrate the momentum in our business.
Our customer will play.
High volume high value on our products in conjunction with sales 5 G and Iot roadmap and we are continually experiencing successful rollout.
<unk>, new CEVA enabled products.
On a revenue and earnings came in significantly ahead of our expectation.
Vertical solid overall business environment.
Tight industry wide challenges with respect to the semi conductor on supply.
Revenue in this quarter also incorporate and royalty payments owed to us after we constructively resolve a disagreement on the royalty rates with the customer on bus chip.
Late in the quarter, we concluded the acquisition of intrinsic value.
Leading chip design, especially in secured VIP, which expands our market reach to the large aerospace and defense space and enable us to offer a compelling proposition.
Optimized IP solution to our customers.
Total revenue for the second quarter of 2021 was an all time record high sales <unk> 5 million golar up 29% year over year.
The licensing environment continues to be strong with good diversity of IP adoptions in targeted markets.
Sensing revenue came at $15.5 million.
Up 15% year over year and include debt for the first time non recurring engineering or <unk>.
Revenue from intrinsic business after we finalize the acquisition late last quarter.
We signed 17, new agreements of which.
6 well with first time customers.
Customer targets market the market reflect a brisk design activity in the 2 wireless stereo or tw, a skill that space.
The growing adoption of Wifi, 6 and 5 G in telecom enterprise and industrial market and a range of application for Iot.
Humira on Medicaid.
In addition, we signed a cents per to computer vision and AI DSP license agreement with a key customer that recently won design wins, 1 of the largest China based surveillance camera OEM.
Placing huawei high silicone with CEVA based solution.
So at the beginning of the sales quarter, we signed a comprehensive and sizeable portfolio of agreement with a key semiconductor player in the mobile market in China.
The agreement extends our footprint and provide us with additive royalty opportunities on LP and 5 G. Hence achievement derived from our connectivity piece.
Based on recent reports from senior research in China discussed and they'll manage to penetrate to top 5 list of smartphone chipset suppliers in China in May for the first time.
Is it latest shapes are adopted.
By top tier OEM such as on oil.
And believe me.
Royalty revenue came in at $14.9 million in the quarter up 48% dealer value.
Royalty unit shipment were 451 million on the deck on strong demand for CEVA power, Bluetooth Wifi and cellular Iot devices.
Base station side, you run royalty growth substantially on a quarterly basis, reflecting share gains and debt exemptions of capital investment inside your network by Chinese operators.
In handset all Chinese semiconductor customers continues to expand in the fall G and 5 <unk> kits.
Is it successfully penetrate.
Top tier Chinese OEM.
This call is supposed to offset by slightly lower than expected shipment by all our tier 1 U S base OEM, which we believe is largely attributed to supply constraints and softness in India due to the pandemic.
As noted earlier the royalty revenue for the second quarter incorporates approximately $3.3 million dollar.
Due to us following a resolution of the disagreement on royalty rates.
Let me now provide some details on the market dynamics, we all experiences and see how it fits in our main market, namely Gws you know about.
P Ws ear Bud I would expect it to be the second largest category. After a smartphone in terms of unit volume.
Adult adoption has driven down the price says, making tw's ear buds and foldable, even in developing countries such as India.
The technology is systematically progressing toward becoming a value based smart voice assistant like smart speaker and the health monitoring device to measure things like PPG ECG temperature.
Low cost level and fitness.
Does he have set executive all day by President by then to allow Americans to buy hearing AIDS, although they count per se.
So to diversify and expand the use of dws into these very large and lucrative space.
Our recently announced Bluebird platform is a key a neighborhood enabler for this notification and diversification of dws usages.
It's also a comprehensive integration of the most prominent common denominator. It goes in all Pw's ear Bud day.
<unk> being wireless connectivity audio and central processing.
I'll leave y'all waves, Bluetooth 5.2 controller and the CEVA Bx, 1 DSP all day.
2 widely.
And it appears that the technologies that successfully address day inherent challenges of low power audio performance and cost. Furthermore, the bluebird platform isn't reached with a range of key Softgel technologies from CEVA.
And 1 reach all sense link.
Softgel framework to seamlessly integrate the software and application of different sense. So our clear Volkswagen we split technologies for AI based voice assistant capabilities, and now emotion and gene for a range of fuel and fitness applications.
Blue Bird's unique book position put CEVA in a position to become the de facto standout in transforming ear buds from an audio only device to a small wireless device empowering advanced services, such as AI based virtual assistant and health.
Related features.
On.
On the intrinsic from the integration is underway and progressing smoothly, we are getting constructive feedback from customer in the defense and industrial spaces and have already started to reach out additional customers resolve combined book positions.
Intrinsic chip design and IP capabilities has a pivotal role to play index expansion of CEVA business from licensing standardized IP download the license Inc of highly integrated IP based solutions powered by our portfolio.
DSP connectivity security.
In Michigan on IP.
And capitalizing on intrinsic technologies and expertise CEVA easing in excellent position to move up in the value chain to address the needs of system and semiconductor company fully optimized and differentiated chip design, but take advantage.
CEVA high value.
This book position in town create strongest ties with customer and larger revenue opportunities.
So in summary, we continue to leverage on our day sales in high value technology portfolio to deepen engagement with customers and to capture the exploding demand for smart and connected devices.
We are encouraged by our penetration in the <unk> handset space, where we can address in addition to baseband processing additional business vectors, such as wireless connectivity and audience.
The T W. S space and its evolution towell smart wearable devices presents a huge market opportunity, where we can capitalize on our unique excellence to combine audio and wireless connectivity.
Last but not least with the intrinsic steam on both we are in the early stage of secular growth trajectory with our unreachable position provide us with access to new market and lucrative customer engagement.
Yeah.
On the supply storage, we are working hard shoulder to shoulder sales with our customers and suppliers to meet the outstanding demand for chips enabled by all it'd be we hope supply constraint will not close much long ago.
With that said, let me handover the call to your need for the financials.
Yeah.
Thank you Peter I'll start by reviewing the results of our operations for the second quarter.
'twenty 'twenty 1.
Revenue for the second quarter was up 29% to $35 million.
All time high as compared to $23.6 million for the same quarter last year.
The revenue breakdown is as follows.
Licensing and marine related revenue was approximately $15.5 million.
Reflecting 51% of our total revenue.
15% growth from $13.5 million for the second quarter of 2020.
This is the first quarter, we recorded an array revenues, which resulted from the acquisition of intrinsic since June.
<unk> revenues totaled approximately $1.2 million for the second quarter.
Royalty revenue was up 48% to $14.9 million.
Reflecting 49% of our total revenues compared to $10.1 million from the same quarter last year.
Second quarter 2021 royalties included a royalty payments owed to us of approximately $3.3 million.
After we constructively settle a dispute on royalty rates with the customer.
Quarterly gross margin was 88% on GAAP basis, and 89% on non-GAAP basis.
Both slightly lower than what we projected as we integrated intrinsic NAV and our east cost into the cost of revenue.
Non-GAAP quarterly gross margin excluded approximately zero point $1 million of equity based compensation expenses and <unk> 2 million.
So the impact of amortization of acquired intangibles.
Total GAAP operating expenses for the second quarter was over the high end of our guidance of $25.2 million.
Due to the integration of intrinsic expenses for the month of June ahead of our expectation and prior quarters guidance.
As well as the <unk> $9 million associated with intrinsic deal costs.
Opex also included an aggregated equity based compensation expenses of approximately $2.8 million.
And zero point $8 million for the amortization of acquired intangibles, including intrinsic value.
Our non-GAAP operating expenses for the second quarter, excluding equity based compensation expenses and amortization of intangible and deal cost.
27 million.
Just over the high end of our guidance due to the integration of intrinsic <unk> expenses for the months of June ahead of our expectation in prior quarters guidance.
Tax expense for the second quarter came in as expected still with strong revenue mix and interest on our connectivity product originated in France.
Which has a higher corporate tax rate of 26, 5%.
U S. GAAP net income for the quarter was zero point $3 million on diluted net income per share was 1 <unk> for the second quarter of 2021 as compared to a net loss of $1.1 million and.
And diluted loss per share a 5 day for the second quarter of 'twenty 1.
Last non-GAAP net income and diluted EPS for the second quarter of 2021 were $5.1 million in 'twenty 2 sales.
77% and 83% year over year, respectively.
Non-GAAP.
Net income and diluted EPS for the second quarter.
Excluded $2.9 million.
And we're at $2.9 million for 2020, and 12 <unk> respectively.
Second quarter 2021 figures exclude equity based compensation expenses net of tax.
$2.9 million.
The impact of amortization of acquired intangibles in the amount of $1 million.
And <unk> 9 million of costs associated with the intrinsic acquisition.
With respect to other related data.
Shipped units by CEVA licensees during the second quarter of 2021 were 451 million units.
Up 32% sequentially and up 95% for the second quarter of 2020 reported shipments.
The 451 million units shipped 138 million.
Or 31% were for handset baseband chips.
Selecting a sequential increase of 7%.
From 129 million units of handset baseband chips.
During the first quarter of 2021.
And a 39% increase from 99 million units shipped a year ago.
On a base station and Iot products shipments were a record 313 million units up 48% sequentially and 137% year over year.
Of note Bluetooth was a new record high with a 189 million units shipped this quarter.
Wi Fi and cellular Iot units also reached record highs.
5 day ran base station shipments and revenues were stronger than in the last few quarters due to a customer in China delivering equipment for the continuing 5 <unk> network rollout in China.
As for the balance sheet items.
As of June 32021, simple cash cash equivalent balances marketable securities and bank deposits were $137 million.
We did not exercise our buyback plan this quarter as we focused on the intrinsic acquisition and expansion of our business.
Our dsos for the second quarter of 2021 were 31 days lower than the prior quarter and lower than our norm.
During the second quarter cash used in operation activities was $6.8 million.
Depreciation and amortization were $1.6 million.
Purchases of fixed assets were zero point $2 million.
At the end of the second quarter, our head count included intrinsic steam for the very first time and was 468 people.
<unk> 387 were engineers.
This is up from a total of 412 people at the end of the first quarter due to adding the intrinsic employees.
Now for the guidance.
Given our strong topline performance during the first half of 2021 and the opportunities ahead.
We are raising our annual revenue guidance.
2 of 119 to $1.21 million range.
Up approximately 20% versus our 2020 revenues.
As Gideon alluded to earlier we are.
Experiencing healthy licensing environment and the pipeline is solid.
We also.
Expanding into new markets and can offer and reached the value to our customers as a result of the integration within forensics.
On royalties.
Our base station and Iot category continues to expand.
As illustrated by record shipments this quarter.
And the return to growth for a China 5 G around customer and a new 5 DRAM customer ramping production.
In mobile our key Chinese wireless customer is expanding into top tier Chinese OEM.
Which will add to the royalty mix.
6 we expect all these growth engines.
To help offset the expected decline of royalties from a U S. Based OEM that recently moved to Qualcomm based 5 G modems.
Specifically for the third quarter of 2021.
Gross margin is expected to be approximately 81% on GAAP and 82% on non-GAAP basis.
Excluding an aggregate.
Zero point $1 million on equity based compensation of $2.2 million of amortization of other assets associated with it.
<unk> vision investment.
Both include a full quarter of intrinsic engineering Cogs allocation for <unk> projects.
Opex for the third quarter of 2021 should be similar to slightly lower than the second quarter.
For the third quarter GAAP Opex is expected to be in the range of $24.4 to $25.4 million.
On the anticipated total operating expenses for the second quarter $3.1 million.
Exit to be attributed to equity based compensation.
049 million to amortization of acquired intangible.
Zero point $3 million for intrinsic holdback related expenses net.
We will be recorded for the next 2 years on a quarterly basis.
Non-GAAP Opex is expected to be in the range of 21 to <unk>.
<unk> $1.1 million.
Net interest income is expected to be approximately <unk> $4 million.
Taxes for the third quarter expected to be approximately 22% to 24% on non-GAAP basis.
On that share count for the third quarter is expected to be approximately 23.6 million shares.
Rocco we can now open the Q&A session. Thank you.
Thank you Sir.
Like to ask a question. Please press Star then 1 of your comfort zone.
The speaker phone, we ask that you. Please pick up your handset before pressing the keys.
Draw. Your question. Please press Star then 2.
Today's first question comes from Matt Ramsay of Cowen. Please go ahead.
Yes. Thank you very much good morning, good afternoon everybody.
I guess my first question Gideon it's taken the industry.
Little bit of time.
Just to the fact debt.
Hi, Silicon from Huawei has been unable to make.
Chipset at TSM because of some of the political situations and.
No doubt many of high silicon customers had built up quite a bit of inventory and we've taken a few quarters to work through that but my observation from your prepared comments is.
New equilibrium with high Silicon out of the market has provided quite a bit of momentum for for your customers whether that be.
Good.
Be really helpful. Thank you.
Yes.
On a high silicon, which is semiconductor all of that is.
<unk> debt is linked to.
To Huawei, but they are.
Standalone competitive extremely powerful in different verticals in the in China and on.
On over the place.
And then what do you say, it's what we are seeing is the.
More and more Oems the appeals tie silicone in the thoughts on this.
Standard they cannot be sales to.
To the same extent.
They do.
From supply and also Fahad lips.
To customers. So in specific what we referred in the prepared remarks, you surveillance market. So there is no because the huge market, it's about 400 million units a year.
Advanced.
Okay.
It gives me and we have.
The last few weeks.
Godfrey paired with.
A few customer will FRC to approach this market.
We are happy that this quarter it becomes.
We are getting there.
We are already collecting royalties.
From few models this quarter, we signed a more comprehensive and well future.
The.
Licensing agreement.
Hopefully will take us to.
2 higher presence in this.
Key customers.
Please.
Got it thank you.
As a follow up question.
Real quick in China.
We've been watching from afar as I guess the debt.
Xinhua unit group has been a bit teetering towards bankruptcy in China, and I know there.
The owner of <unk>.
From the end of RDA and in the wireless space in China Im Wonder Gideon if.
If you are confident that that situation. However, it resolve itself is not going to have any impact on your royalty business. Thank you and I have 1 follow up.
Yeah, So Matt we did that.
Ask the same question.
Customer, we don't see any.
Sure.
Single play itself.
Yes.
They are on their heads.
Let me focus is doing very well recently as we are.
Alluded.
In the corn and.
And.
No.
I read somewhere that day, I will now becoming the real number 3 after mediatek and Qualcomm and Thats in.
They also take advantage of deferred debt high silicon.
<unk>.
No.
<unk> got any more debt 5 G Dallas shipping now <unk> technologies.
This company is doing well.
At least from what we see from Daily book and Bill business.
Thank you.
Add 1 more thing.
Even if you look at our DSO for the quarter, which is 1 of the lowest we ever had and the AR balance. So we haven't seen in recent months any change or negative change from the payment schedules or any liquidity issues that we as we encountered so far it's a very positive sign.
Thank you and you just real quick follow up for you.
Could you just go through the gross margin guidance again, and if there was any change because of the intrinsic acquisition that we should expect on a more sustained basis. Thank you.
Sure So historically, Steve on the IP.
Licensing and royalty business, we were around the 90 ish percent gross margin non-GAAP for a long time, when you were adding day intrinsic capabilities in design and <unk>.
We're starting off with design services, which their cost is not.
Located in the R&D line, but in cost of goods. So all these costs that we're doing the design work that they're doing for their customers are allocated to cost of goods and we've talked about being in the 80 ish.
Percentage gross margins for the time being 81 on GAAP 82 on non-GAAP.
As Gideon explained the business model and the trends with them. We are looking to add much more IP offerings and as soon as that happens and that kicks in first in licensing later on in royalties potentially than those margins will probably crawled up to the mid eighties.
We add mooring every quarter it may shift a bit.
In any way from the low eighty's to the mid <unk> based on the revenue mix of services versus IP that we're able to add to their business than CEVA overall numbers.
Thank you very much to say appreciate it.
From the R&D line and allocate some of these costs to cost of goods.
Thank you.
And our next question today comes from Kevin Cassidy of Rosenblatt Securities. Please go ahead.
Hi, Thank you for taking my question and congratulations on the results.
Can you say a little more detail on where you are first time customers wherever they located geography wise.
Hi, Kevin it's Gideon.
Hello.
Sure.
On the diversity of the application and the geographies that we are experiencing is very wide margin.
In general on China is.
Sure.
It's very strong in particular in wireless and this could be we are seeing a booming PWA is we have a substantial amount of agreement in this space that this is not just the PWA is as I referred in the prepared remarks is not going to be adjusted and audio device, it's going to be on AI.
Device going to be a medical is going to be on hearing AIDS and <unk>.
And just recently.
Came out with a software led on to make it.
Let's go to solid, though even gabe.
Wifi 6 is extremely strong on over the players.
And other Iot device in the consumer and going on.
Thanks.
On a customer that don't want to talk about the application because they have something.
A unique they want to surprise everybody so to answer your question.
The.
<unk> spend in the geography is all over the place specifically to wireless <unk>.
Another fleet relates to China.
By the way the day count is the 1 on 1 in the U S than 5 in China from all these different markets that Gideon explained.
Okay. Thank you for that.
And on the intrinsic you have given me.
Our forecast for the end of the year has there been any change to that and I'll, let you.
Have taken.
Ownership.
No not yet.
The ownership, just a very new and it just happened a.
On a month or so ago too.
We are still looking at $10 million to $11 million coming from intrinsic value.
On top of that the very strong Q1 enabled us to take first half and I'll. Just Q1, but also Q2 enabled us to take the new guidance to be 119 to $1.21.
Okay, great. Thank you.
And our next question today comes from.
So would you the silver with Roth capital. Please go ahead.
Gideon Hi, Dave Congrats on the progress here, maybe you can talk about the wireless infrastructure market, a little bit and obviously the dynamics, maybe with DT and Huawei in place, but just the overall underlying demand whether that looks like its sustained recovery in China spending there and the customers you're ramping now how many customers you have.
Ramping as we understand.
The opportunity there.
Yes.
Thank you for the question so.
I'm trying to give you a wider.
Perspective from the <unk> ran radio access network and the infrastructure.
So what we saw in the second quarter is a step in the <unk>.
On the.
Compared to what.
We saw what we experienced in Q4 on Q1.
And Thats relates to 2 Fox Hill, you mentioned I think in your question 1 is market share.
[music].
Our customers get Inc. Now on all these new contracts.
They used to get about 9% to 10% on the overall.
Tim do budget debt is the sign for the budget now download on the therapy.
The percentage of 30%.
And the second thing is the investment in <unk>.
Thank you <unk>.
As we see it is not just the big macro base station, it's about growing into the industrial what is called private Netherlands going into small sales for millimeter wave.
So it could be all over the place is going to be gradual.
It's not the demand these days, but it's not like consumer.
But the.
The.
There is consistency on market share capture in the.
And then you use cases regarding who is shipping so we have another.
Other customers.
Debt.
On the ramp up production is very vocal on explaining it.
And Thats a start there then we see those.
Movement.
And they'll bounce of company's debt.
Doing senior level bulge like Qualcomm some of them all Chinese.
They do standard product for the small sales for millimeter wave and the.
Some of them.
Just thought that the day.
On <unk>.
I would say on pole position there.
They have the silicon they need to.
Quarterly price they need to on the simplification, but you're going to see we are going to see a SSP chips going into the base station run multiple Denmark on now to the big base stations, but moving into the commercial bucket 1.
Okay, that's very encouraging Gideon thanks for that color.
Then on the Dws market, you said that would be as big as <unk>.
Hey, guys, but as meaningful as the smartphone over time.
What's the timeframe for that to be a meaningful set of units and then how is the non aircard Airpods market.
Developing to your opportunity and the mix of kind of low end versus <unk>.
AI dws those dynamics would be helpful to understand.
Yes.
First of all Dws is.
Okay.
As I said in the prepared remarks is is going to reshape and become much beyond then.
Your device.
You can see from.
The reduction of market share loss outboard debt.
The market is growing EBITDA.
Market share is.
To some extent declines.
Manny.
The company's debt getting into them into the market B cell.
I would say all the smartphone OEM has today the on brand dws.
The tons of add on.
All the companies and people that are going into.
On a white box.
On the dws.
No.
We all.
Getting all of the substantial amount of shipments into dws, but I think the impact will be seen sometime next year. When all those deals that were signed in just this quarter we had.
8 out of the all agreements that we signed 17.8.
Well you related.
The soldiers could be healy good it could be dws, it could be somebody that they get to it.
Medical approach.
The DSO.
I believe youre going to see these companies.
Getting to mass market.
Just 2 on Bluetooth and we have substantial amount of mythology, but youre going to see next deal and all those people get into the markets and the new form factor of dws.
Yeah.
Very helpful on rates higher Roe.
Also it includes the DSP and adjusted Lucas.
From the prior model.
Understood that's very helpful incremental color, thanks, guys and congrats again.
Thank you. Our next question comes from Martin Yang.
Please go ahead.
Thank you for taking my question on a follow up from previous analyst question. So can you give us an ASP implications of.
For the T. W. S.
On customers.
When you compare winning just the Bluetooth versus.
Having additional features such as DSP or are there any other sensor features.
Yes, sure sure are partially or business model, namely the either percentage of a chip price our sense 6 cents per.
Share based on the volumes.
If you come up with not only a Bluetooth chip, but add more functionality to our customer is able to charge more for it usually improves the margin and then we enjoy that as well so obviously it could be.
<unk> 3 X what our offerings as they may just standalone Bluetooth because we are adding more content and more technology in the chip price at the end of the day is also more expensive because it replaces and another in other component on a single chip device on a system on a chip so that's.
Part of the big benefits of running an IP company and adding more offerings and Thats. What we are going to see also in the in the ISP royalty ISP and the deal size as well when you license you don't license to 1 of the 2 technologies that you combine them and there is an advantage for us and for the customer.
And I would say.
Yes, I just want to say about gifts from multiple perspective, we mentioned in the call the Blue bar.
On technology, where we uniquely can do.
And.
The connectivity and the central we can combine them both on the hardware side.
The software per se.
What happened was this platform is number 1 as we've mentioned day of speed that we are charging in reserve is higher than just licensing, but those components separately like Bluetooth will just disappear but.
But what it does it enable many other companies' debt.
Sure.
MS has value so think about medical company debt.
Technology for.
The <unk>.
Cause the measurement was the bluebird decent enable them to go into the market because they can integrate their sense. So into this plotline don't clearly be Bob sales the complexity of the hardware on the connectivity so with this.
It's all a part she is not just growing and provide to the same customer or higher value products, but to enable many companies into the second wave of <unk>. When you have an AI and when you have a medical to get into the market.
And for those company the value that we all are big is substantial.
Got it thanks for the insight and on the overall.
Overall market I know you.
On break out growth.
From the others are TWD us from the rest of the products yet do you plan to do that and right. Now is there any way to provide us with more contacts on how big.
As as a percentage of your total revenues or shipments any context would be helpful. Thank you.
Yes, yes sure that standard.
Yes, we don't have yet the spa.
Pacific breakdown.
Within the base station and Iot the first 1 that we broke out as Bluetooth.
Meaningful.
And we are every quarter supplying the data.
Second in place, maybe a Wi Fi going forward, we had record volumes there.
On the tens of millions of units.
For the first time.
Really significant.
And record high so we've known as soon as any of the adjacent market.
Day part of our base station on Iot.
On the meaningful we'll open it up.
Yes.
Talked about.
Strong for us.
The weighted.
They are close to 109 billion devices, just air and obviously the full solution of adding.
<unk> are have started in the last year or so the licensing.
We introduced these newer products so the royalties from them.
It will be much more meaningful as we go along.
I hope this.
Covered a bit the youre your question.
Yes. Thank you.
Martin just this is Richard here I can add 1 more element here, so not all of our customers breakout, which Bluetooth chips are shipping for which applications, but we do have customers for instance, best technique in China, who previously we've seen has about 30% of the day.
Non Apple Youre bird market today so.
The best technique Beacon and so on we have some very strong prominent players in the business book.
As I said in some cases theyre shipping non.
On a different types of chips on different end sockets that don't actually break out what the end application is in most cases, so guys like best technique is a very good indicator of our presence in the market, but I don't think its possible to actually break out the units just the gws versus other.
Thanks Richard.
And our next question today comes from Javier Rosner Barclays. Please go ahead.
Hi, Good afternoon, most of my questions have been asked but maybe just on industries Inc.
I got disconnected for a second so were there any revenue contribution in the second quarter and I guess, just looking to remaining of the year.
On which you can go over to strategy, you mentioned last quarter to cross selling opportunity.
For the existing customer base, and perhaps regaining some of interesting technology.
To your current customers.
You kind of expand it a little bit since you guys talked about it last quarter.
Yes, let me, let me jump in on explaining the overall prospect because thats a good question about the intrinsic and then you can refer to the financial Inc.
Yeah.
So we've been transits.
We all we get.
Very experience in how to find the design teams.
And they have.
The capabilities of all of those mix seasonality secured the IP. These are the things that our customers on.
You're looking at.
And when we get to talk to them and they say okay. Your IP is 1 thing that we have a bunch of other things to do beyond debt. Now was that compete then we can get from it and I think 2 things number 1 is exposure.
To the very lucrative markets, which is aerospace and defense. This is a market that we will not address inc. As a standalone company and the more we get to know these days and the potential and the effect now that the U S is really.
Getting direct together and building semiconductor you'll see it all over the place you'll see it in terms of investment you've saved in terms of new startups coming.
And developing creative speaks so the.
The access to the U S in general.
Aerospace and defense margin DT is it.
On to our business and the other Op, Inc, which we do.
Discussed briefly in the call is what we want to do with the competency debt intending to provide us is to go out to customers and also what we call.
Integrate day IP solutions, basically we tell to their customer you'll get the IP, but we can do for you the hull design and create the on basically is so simple you.
And optimize it to your needs.
This is.
What are you doing <unk> going up.
In the value chain.
Not to the level of semiconductor content, because we don't want to compete on a customer we don't want to.
To provide chip to do the supply chain, but to be growing GAAP into value agenda on your go up in the value chain the deal size and overhaul on retail for debt investors.
Be higher.
To do it and have closed the relationship with the customer more.
Speaking I would say so that's the approach of intrinsic were all about the reached out customers.
This idea and this approach.
It's good to them I would say.
Maybe you want to refer to the financial.
Yes, and just to add the color we had recorded $1.2 million. This was the first.
We.
Reported that in the licensing and related revenue line.
Obviously next quarter, it's going to be a full quarter not not just 1 month, it's going to be a bigger number and that falls as I said earlier in the $10 million to $11 million add on debt, we will and we plan to.
Add to 2021 model and revenue is based on the intrinsic contributions.
Thank you for the color and congrats on the strong results.
Thank you Debbie.
Our next question comes from Gus Richard.
Please go ahead.
Yes, thanks from my.
Taking the question just on a follow up on intrinsic.
Sounds like Youre going to move into an ASIC business model.
But.
The production of the units to the customer.
Or is it going to be more youre.
Youre going to take intrinsic.
Capability and create.
Standardized IP.
A little bit on 4 color there would be very helpful.
Yes. It does give you on thanks, that's a very good question and you put your finger on where the differences.
So.
The idea with the integrated IP solutions seem debt, we are coming to the customer or another day as I said, we are reaching out and talked to them about debt is to create an optimized solution about IP. So it's not going to be standard.
We're going to take our IP understand what are the problems that customers face in terms from <unk> power and take advantage of what we know in VIP and to build.
And optimized solution. So as you pointed out we're not going to manufacture cheaper if they're not going to the foundry, but are we going to do all.
All the design.
Our steps to create for our customers.
Sure.
Solution.
The design.
So that's.
What we are.
1.2.
Do with our customers and you can think about what.
AMD is doing well is dead on semi custom model AMD for when they provide the chip and they do provide basic chips when they go to Playstation or Xbox They take advantage of graphics IP on Corso sell IP and can I add something unique for <unk>.
Thanks, Sharon and something that plays very well for legs book. So we do the same thing Bob on the IP space. So we do all the profit.
Sections of the performance, but done we don't manufacture chips.
<unk> supply chain.
Got it and then.
You talked about getting the blended gross margin up to.
Mid Eighty's is is this part of that or is it mix can you just again sort out.
How much of improvement of intrinsic gross margin profile, you're going to get out of out of this new strategy.
Yes. This is again an important question because right now in transits is doing well.
They deal with.
<unk> been in the mix.
As a standalone company to do so with debt.
IP solution, what are we going to do is to go to the customer and offer them.
All of our IP and to optimize all IP. So from that point, Dan amount of optimization customization out of the all the on deal will be less because it will be based on our IP.
Which is.
More color.
Yes, 1 more color. This is not for the next quarter or 2 this is <unk>.
Starting to integrate the team and build the roadmap. So the idea here is this is for the next 2 or 3 years.
This year for sure.
With the <unk> and that model will evolve.
As soon as we can that's the plan, but it's not an overnight next quarter or the quarter after.
Got it alright makes complete sense I get it thank you.
Thank you.
Our next question today comes from David O'connor of Exane BNP Paribas. Please go ahead.
Great. Thanks for thanks for taking my question.
Just 1 or 2 follow ups to previous questions on light side.
Maybe <unk> going back to the base station and Iot unit shipment $313 million in the quarter very strong you called out Bluetooth is 189.
Just wondering about incremental $120 million order in there.
It seems like a big jump book.
For more.
So just help us to try and get there maybe you could rank for instance.
The other <unk>.
They're across Wifi, maybe wireless earbuds depletion as well to kind of help us model that that's my first question.
<unk> question is just anything on seasonality on intrinsic that's worth calling out.
And the third 1 just to follow up on the question previously on the run side of things.
On the 2021 guide does that assume book.
Big ran customers I'll say the shipping in volume in the second half. Thank you.
Sure So let's start from the beginning.
The volume that I think I extended the certainly the biggest volume of number 2 after the Bluetooth.
Volume is the Wi Fi this is new.
<unk> been in these.
A level, then I would say, maybe even half of that delta.
Yes.
Wi Fi, which is tens of millions of units.
The other ones are.
<unk>, which is a nice ramp up again record on this would be the third and then the others are still smaller so I think the very very interesting ones to highlight this quarter would be the Wi Fi and number 2 in the sensor fusion.
So a nice number that hasnt been with us for for a while now 2 years.
On the cellular Iot, which is ramping up the fastest after after Wi Fi.
So that's from.
That's from the volume perspective.
The second question was sorry remind me yeah, just on the intrinsic seasonality or anything to call out there.
Thanks.
Yes, I would say 1 thing in general for now these are the stood on the chip design services, because a big portion is the aerospace and defense, which is a lucrative new markets for CEVA.
On the cycle is that there is a government approval DARPA.
Just the timing of different projects and different customers, who get everything squared away and fine.
So W are the new deals on your projects.
I think the day more critical timing aspect that we will be dealing with but it's not 1 project, it's multiple projects running in parallel so.
Those are the things that probably could take longer or shorter.
For things to start kicking in in revenues to be.
I recognize the revenues pretty simple, it's based on a time and material and IP blocks that will start adding game as soon as we can and that's what we talked about earlier.
That's from the seasonality perspective, so less than a typical licensing type of model.
Which either ideal get sign or doesn't get signed and if it does you need to deliver and recognize it immediately to a little bit more.
Allocated over the different quarters.
Third David sorry about that yes got it yes, and then the last 1 just on the within the 2021 guide does that assume both of your Big Ryan Costumers shipping volume.
Correct.
I think we're seeing on the news around us from both customers.
Doing well Hey, Phil.
Followed their public announcement and that is the case.
And gentlemen. This concludes today's question and answer session I would like to turn the conference back over to the management team for any final remarks.
Thank you Rocco and thanking all of you for joining us today and for your continued interest in CEVA.
As a reminder, the prepared remarks from this conference call are filed as an exhibit to the current report on form 8-K and accessible through the investors section of our website.
With regards to upcoming events, we will be participating in the following conferences. The Oppenheimer 24th annual technology Internet and Communications Conference August 11th.
Rosenblatt Securities Technology summit, the edge of AI from August 24th on August 26th Jefferies 2021, semiconductor hardware and Communications conference from August 31st on September <unk>.
And from information on these events on all events, we will be participating in can be found on the investors section of our website.
Thank you and goodbye.
Thank you Sir This concludes today's conference call. Thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.