Q3 2021 CEVA Inc Earnings Call
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Come to the CEVA, Inc.
2021 earnings conference call.
All participants will be in a listen only mode.
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After today's presentation there'll 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.
Morning, everyone and welcome to <unk> third quarter 2021 earnings Conference call.
I'm joined today by Gideon Burkheiser, Chief Executive Officer, and you need very early Chief financial officer of CEVA.
Gideon will cover the business aspects and the highlights for the third quarter and provide general qualitative data.
And he will then cover the financial results for the third quarter and also provide qualitative data for the fourth quarter and 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.
We're looking statements includes.
<unk> regarding demand for and benefits all of our technologies.
Expectations regarding market dynamics, including anticipated growth in the cellular Iot markets.
Beliefs regarding benefits and impacts of the intrinsic acquisition, including expansion into the aerospace and defense market.
<unk> to offer integrated IP solutions, and enriched security and insurance products.
And guidance and qualitative data for the fourth quarter and 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.
Extent and length of the restrictions associated with the pandemic and the impact on customers consumer demand on the global economy generally.
The ability of <unk> IP for smarter connected devices to continue to be strong growth drivers for us are.
Success in penetrating new markets and maintaining our position in existing markets.
The ability of new products, incorporating our technologies to achieve market acceptance.
The speed and extend of the expansion of the five <unk> and Iot markets are.
Our ability to execute more base station and Iot license agreements the.
The effect of intense industry competition, and consolidation global chip market trends, including supply chain issues as a result of COVID-19, and other factors.
Our ability to successfully integrate intrinsic into our business.
CEVA assumes no obligation to update any forward looking statements or information, which speak as of their respective dates.
With that said I would now like to hand, the call over to Gideon.
Thank you Richard.
Exciting time placebo.
The need for and the deployment of our technologies for the digital transformation era never been more evident.
Wireless solutions.
But we must do a big catalyst for that.
James a new smart devices, and lung, which are <unk> boats and hearing AIDS.
Smart watches smart home products industry full born zero of factory automation.
And more.
Innovation innovative solutions market reach and strong execution.
Why it goes for another outstanding quarter of new licensing agreements and royalty program.
Total revenue for the third quarter was 2021 was a record high of $34 8 million Boe level up 31% year over year.
The licensing environment continues to be able to Buck and came in at 21 6 million below.
74% year over year.
Our global product.
Product targeted for dws deal, but our glasses and smart watch market.
A wifi solution.
Which are ubiquitous across many Iot devices.
At this point products were key contributors.
Also in the quarter, our intrinsic team executed very well signing important design agreement with Lockheed Martin.
A major industrial company in the <unk>.
Space.
With an innovative wearable device company in the medical space.
In total we signed 25.
Licensing agreements.
<unk> remains weak.
Well first time customers.
Royalty revenue came at $11 $2 million in the quarter down 11% year over year.
The royalty contribution from our base station and Iot product category was all time high driven by secular growth in Bluetooth computer vision sensor fusion and cellular Iot markets.
<unk> base station ran visibility is low it's been more months as the space experiences longer lead time deal supply chain constraints.
In total royalty you and achievement of CEVA base station and Iot enabled products.
405 million units in the quarter up from 200 million units in the third quarter last year.
Handset baseband royalty. This quarter include the milestone of the first five G. Smartphone report we have received of just shy of 3 million units.
This gross driver were muted by larger than expected decline in royalty revenue, we do not see this decline as a market indicate though is the <unk> market is still sizable in developing countries and we have experienced this pattern, although the yields from time to time in <unk>.
<unk>.
Let me now make few remarks on our business in the third quarter.
The first is our Wi Fi product line, which has become a strong driver for us in recent quarters.
The complexity of Wifi technology rises dramatically when moving to a new generation of the sunbelt.
This possess technology challenges.
Third a growing number of incumbents or new entrants from developing technology in house earnings.
Ed who seek our technology will solidify their time to market.
The recent Wi Fi six in Wifi six E standout being.
Being rapidly adopted in late in the latest smartphone and louder.
Now extending to X our headset such as the recent meta various initiatives meta.
Formerly faithful.
As well as security Carmelo.
Wifi six is also expected to have a fundamental role in autonomous Gov.
We'll be used upload terabytes of data collected everyday to the cloud.
It will be used for AI based optimization.
CEVA is benefiting from our unique position as the only viable supplier.
Enable semiconductor companies and Oems to address the diverse and large market did require a Wi Fi six or six E and upcoming Wi Fi seven standup.
We have now more than 20, Wifi six customers and our licensing revenue from this space.
149%.
Compared to the first nine months last year.
We are also seeing good progress in ship CEVA based Wi Fi product.
<unk> grew 204% to more than 111 million units versus the first nine months of last year.
Hey, Ken.
Our customer activities has picked up as we continue to integrate and previously seen placebo.
As we noted in prior calls.
Cause our gross strategies, driven one intrinsic experience and customer base in the aerospace and defense market, which we believe will.
Allow us to expand into these lucrative space and our capabilities to offer integrated solutions, which combines the fever IP portfolio and increase the chip design competencies to broaden our impact and to grow.
Our revenue base with strategic customer design.
The third quarter was extremely successful in concluding.
Isabelle agreements in the defense and medical space.
We book, an important and sizeable agreement with Lockheed Martin for Us.
<unk>.
Interest IPA.
Hence for systemic security interface.
<unk> hardware and feeling well.
<unk> aims to evolution dies the way electronic systems.
Perfect.
Gays defense means of exploitation as part of the <unk> program.
Through our subsidiary intrinsic.
<unk> is involved in the development of new hardware security architecture and related design tools.
Protect against entire clusters of vulnerabilities exploited through software and not just specific vulnerability instances.
The methodology is being developed as part of this program.
And we chose security and insurance.
Offering, bringing new levels of protection with connected cars wireless communication and other industrial markets.
Another project that intrinsic in conclusion during the quarter. This was a major U S based defense company for advanced node cheaply design.
<unk> technology is a new wave in semiconductor integration with the Gulf cost effectively assemble multiple dies or chip leads into one small chip package and by such gain time to market and lower entry barrier to key markets.
<unk> technology is already deploying cloud achieves by Intel Broadcom AMD and Marvell.
The intrinsic steam with the financial backing of doubt and its ecosystem partner is aiming to drive cheap players to the defense market and favorable.
Lisa read them for commercial applications.
And lastly regarding our activities and market dynamics in cellular Iot cellular Iot model is used in a wide variety of verticals, among which our logistic Ashford affecting industrial agriculture monitoring.
<unk> payment system.
A lot of connectivity and more.
It is a high volume and fast growing market forecasted by Adi to reach two 920 million models by 2026 growing it.
99% compound annual growth rate.
The main segment in the cellular Iot space is NB Iot.
Turing approximately 40% of the volume and growing 44% CAGR between 2019 and 22000 feet.
CEVA is strong traction in the cut one and NB Iot spaces.
We'll start off with Germany.
Which dominates the deployments to date.
During the third quarter, we continued to see strong growth in volume up 356% compared to the third quarter of last year.
And received royalty reports for the first time.
A new cellular Iot test in one of the was top 10 ranked IC design houses.
Europe also prioritizing cellular Iot at the back of its large manufacturing base.
We have three widely non European customers that have designed CEVA technology.
First is no big semi.
CEVA <unk> with dozens of customers.
Second requirements.
Using our <unk> platform for <unk>, five <unk> cellular Iot with number of high profile design win.
<unk> is an unnamed leading semiconductor who is developing cellular Iot chips targeting it's large industrial and smart.
Customer base.
So in summary, CEVA is transforming from speciality in DSP technology for a trusted technology hubs with Kiva, a role in enabling new industries, who become connected in smoke.
Our success is underpinned by our unique strengths to combine DSP AI software analog and RF design into a holistic solution for customer and industry needs.
We believe we are at an inflection point to scale, our business and strengthen our collaborations with key players.
Broadening range of industries.
Finally, we continue to monitor any possible implications of the ongoing supply chain constraints.
As commonly acknowledged the semiconductor supply chain challenges.
Our broad industries in a different manner, which may translate to low visibility with that said we are on track to meet our target and we will continue to work with our customers and partners.
Mitigate negative impacts.
With that said, let me handover the call to your need for the financials.
Thank you.
Following a review of our.
Our operation for the third quarter of 2021.
Revenue for the third quarter was up 41% to $42 $8 million.
Second sequential all time high.
<unk> $25 million for the same quarter last year.
The revenue breakdown is as follows.
Licensing and related revenue was approximately 21 6 million.
All right.
Following high reflecting 66% of our total revenue.
74% growth from $12 4 million for the third quarter of 2020, and 39% sequential growth.
I think the full first quarter that we recognize MLB revenue, which resulted from our acquisition of intrinsic back in June.
Royalty revenue was down 11% to $11 2 million.
Texting, 34% of our total revenue.
<unk> and $12 5 million for the same quarter last year.
No David.
Consistent growth in base station, and Iot and the penetration to five <unk> smartphone is muted by the larger than expected decline in Fuji royalty rate.
Quarterly gross margins came in better than expected due to lower allocation of intrinsic in our REIT costs.
R&D expense line to the cost of goods expense.
Gross margin was 85% on GAAP basis, and 87%, a non-GAAP basis as compared to our 80, 182% guide.
Non-GAAP quarterly gross margin exceeded approximating zero point $2 million of equity based compensation expense and <unk> 2 million.
So the impact of amortization.
Total GAAP operating income for the third quarter was over the high end of our guidance at $26 3 million.
Due to lower allocation of intrinsic in our REIT costs from R&D to the cost of goods.
For our prior quarters.
Such <expletive> between these two expense volume may happen from time to time and are tied to the actual design services reformed in the quarter.
Opex also included an aggregate equity based compensation expenses of $3 2 million and $1 2 million for the different amortization.
Our total non-GAAP opex.
For the third quarter. Excluding these items was 21 $9 million over the high end of our guidance due to the same reason I just stated with regards to the GAAP numbers.
GAAP operating profit for the third quarter was $1 7 million.
Up from $2000 in the same quarter a year ago.
Non-GAAP operating profit was $6 5 million.
Up 61% of the third quarter of 2020.
For the first nine months of 2021, non-GAAP operating profit was up 69% year over year to $15 5 million.
Illustrating the growing operating leverage we are achieving while we scaled the business.
Tax expenses for the third quarter was approximately $1 8 million a.
A bit higher than forecasted with strong revenue mix and interest for our connectivity products.
<unk> in France, which had a higher corporate tax rate.
U S. GAAP net loss for the quarter was <unk> 2 million and diluted loss per share was <unk> 10 for the third quarter of 2021 as compared to a net loss of $7 million.
And diluted loss per share of <unk> for the third quarter of 2000.
Non-GAAP net income and diluted EPS for the third quarter of 'twenty one.
We were $4 $7 million in 2010.
Up, 29% and 25% year over year, respectively.
Non-GAAP net income and diluted EPS for the third quarter of 2020 or $3 6 million.
16.
Okay.
With respect to other related data.
Shipped units by CEVA licensees during the third quarter of 2021 was 438 million unit.
Up one 6% from the third quarter of 2020 shipments.
438 million units reported 33 million units or 8% of <unk>.
Handset baseband chips.
Our base station and Iot products shipments were a record 405 million unit.
29% sequentially and 103% year over year.
Of note Bluetooth.
A new record.
291 million units for the quarter.
Cellular Iot also reached a new record high of $26 million.
As for the balance sheet items.
As of the angles to September 2021, seamless cash cash equivalent balances marketable securities and bank deposits were $145 million, our dsos for the third quarter were 43 days.
It's higher than the prior quarter, but at our norm level.
During the third quarter, we generated $6 4 million from operating activities.
Depreciation and amortization was $1 7 million.
The purchase of fixed assets was zero point $2 million.
The end of the third quarter, our head count, including the 2016.
485 people of which 403 are engineers.
Now for the guidance.
Our strong topline performance in the first nine months of 2021.
Outstanding and provides us with a strong confidence in our business and strategy going forward.
We therefore are raising our annual revenue guidance up to a new range of $120 million to $122 million.
Our licensing business and our market reach is expanding.
Good backlog and pipeline for the upcoming quarter.
We believe the growth in the base station and Iot category.
<unk> and <unk>.
<unk> into the fourth quarter.
To the extent that such growth in the fourth quarter being subject to any near term supply chain constraints.
Specifically for the fourth quarter of 2021.
Gross margin is expected to be approximately 82% on GAAP basis, and 84% on non-GAAP basis.
Excluding an aggregate <unk> 3 million for equity based compensation expense and <unk> 2 million of amortization.
Opex for the fourth quarter should be slightly lower than the third quarter.
For the fourth quarter GAAP based opex.
To be in the range.
Five and a half to 26 and a half million dollars.
As anticipated total operating expense for the fourth quarter, three 2 million is expected to be attributed to equity based compensation and $1 2 million.
The different amortization.
Therefore, our non-GAAP opex is expected to be in the range of <unk>.
<unk>, one <unk>, one to $22 $1 million net.
Net interest income is expected to be approximately zero point $3 million.
Access for the fourth quarter are expected to be approximately 25% on a non-GAAP basis.
And share count for the fourth quarter is expected to be around 23 8 million shares.
And Rocco, we can now open the Q&A session.
Yes.
As we like to ask a question. Please press Star then one on your thoughts on phone.
My question has been addressed like to remove yourself from Hugh Please press Star then two.
Today's first question comes from Matt Ramsay of Cowen. Please go ahead.
Thank you very much good afternoon, and good morning, everybody.
I guess for.
Art off with.
Congratulations on all the progress in the business and the raising of the guidance and all I just wanted to understand a bit.
About what happened in the mobile I guess base band, our handset units dropping off.
And such a big way and the results and get in if you could just walk me through the market dynamics are there particular licensee situation that went on it was just kinda or were there some reclassification of numbers as you guys refocus the company on on new growth areas Im just trying to get my mind around that one a little bit. Thank you.
Okay.
Good morning, Let me go through first on the composition of the road.
The way, we see so as we discuss the base station and Iot category as flow issue.
And we have.
Almost all the products there.
Growing because when you look year over year significantly computer vision.
The cellular Iot sensor fusion, so that's what we plan in Ames and narrow it.
It's Keith.
Base station and Iot.
<unk>.
Last year, we had a very strong quarter.
Went out of the Lockdown. So that was the first full quarter of come and go the Lockdowns.
Our comparison, but.
Overall, it's it's moving we see it also in the design wins that will get in China Mobile for example, VP both of them.
Chunk, a big chunk of it.
When you look at.
I would say generally is trending the way we expected.
CMT going.
Okay.
<unk> is growing.
Something that we had in the past.
The.
There could be different treatment I don't think its a little early advent of inventory in these days, it's more like prioritization, we've seen many.
Chip companies, giving priorities on that location that they get.
Who.
Yes.
Okay.
The top tier for high end phones and not produce one.
From time to time, we do true up because we had last quarter was very significant ones. When we move things between quarters. So I would think the Fuji I don't see it as a market.
So I think next quarter it become big that's the reason that we don't change our guidance and as a result so.
It's nothing to do with the general trend.
We see in the mobile which is as we expected and the good. The good thing is that no. We are in the fives.
And that's when you look at it from a nine months perspective smartphones are up year.
Year over year for volume.
And the <unk> it looks better on the online.
Months comparison still lower than last year, but this was due to this Q3.
Hiccup and we think it could pick up next quarter.
Got it thank you for that guys.
One quick little follow up to that and then one more question I guess the follow up is should I take it from the fact that the.
That mobile run rate came down as much as it is.
That sort of a headwind from.
The Intel modem transition.
In Cupertino is kind of fully behind you guys didn't run rate now.
And then my other question is completely unrelated but <unk> on gross margin you guys came in.
Well above Opex was higher too I just wonder.
You guys brought in in transit and I think some of the folks there might've been categorized in cost of goods versus opex that would've been in your old like core business.
I mean, working with your auditors on whatever it is there any kind of change in the allocation there and how should we think about gross margin going forward. Thanks.
Sure, let's start with the first one.
Apple is still selling the iPhone 11, MSC low cost type of phones and it still.
It's still in there.
Don't know until last and how long it stays but.
Our report for Q3 was stronger than Q2 for example.
They are still contributing and is longer.
Phones are shift.
We are getting paid.
That's still a contribution.
Contribution much lower than in the past, but still a positive contribution for us that's the comment on Apple It has nothing to do.
With those with that design.
Qualcomm.
On the cost of goods you arrive at the business the service business when you have projects and recognize revenues those expenses out.
Our Whitney at the cost of good thing what happened last quarter, but not all the people. The R&D guys were utilized for those deals.
We're still doing R&D per se for intrinsic enough services and therefore, we had to.
Unlike what we.
Forecasted originally in the beginning of the quarter of 81.
2%.
Just a bigger portion of them still in that R&D for whether it's security or chip match or a bunch of other technologies that intrinsic test today, and we are trying to make.
<unk>.
In IP.
Business out of that and combine it with the ongoing services so it.
Has nothing to do with the auditors whatsoever at this point would.
It's something that could move from quarter to quarter, that's in our control.
And it depends on the timing of closing a deal indexed to start.
Of an employee or engineer starting to.
Make that with design services as soon as it does those costs are recorded.
As long as it's not there, it's an R&D and that could shift and we had about $1 million shifted our expectation in the third quarter, we think that in the fourth quarter there'll be more and higher revenues from Emory and therefore higher expenses in Cogs in a little bit lower.
In the R&D line.
The shift of could happen from from time to time.
Got it just to be clear there.
Just to set the expectation for investors that could bounce around a little bit on a quarter by quarter basis, but it's not really indicative that anything is changing in the business or the accounting, it's just kind of the way.
Hey.
Business could work as you fold in intrinsic overtime. Thank you for taking my questions guys.
Yes, that's exactly the case, Matt nothing to do with accounting just the ramp up of the project that I'm sure that when we are fully ramped up and have many more customers and prospects.
You may have less of that effect, because most people would be.
Involved with directly with customers.
Thank you and our next question today comes from <unk> Parekh.
Please please go ahead.
Hi, good afternoon, thanks for taking my questions.
Can you breakout what the interesting revenue contribution was this quarter just to get a sense of what organic growth was.
Interest income you said.
Physics low interest rates.
Transit.
Right now we're looking at is the one business model, we started off last quarter for the first five with just one month or we stated that it's new but when we bought intrinsic that was around the $20 million run rate.
Said that the first earnings call.
With the combination.
Plus minus that those.
The annual run rate.
The idea for us is not to as Gideon alluded earlier in the prepared remarks is not just to.
A pack of above market within our Reis services, but also with the combination of IP.
Integrated IP solution and then those are the things that we're working on.
And hopefully that one rates could increase when we offer more ips.
They're existing and new customers in the future.
So I hope that's helpful.
Yes, no differently and just following up on that.
Were you able to quantify.
<unk> within.
Alrighty worth space and defense.
Well this is <unk>.
So roughly $6 billion.
Market in.
A yield in different chips.
Shipments.
The.
Tens of billions of dollars.
In RMB project.
And the idea for us is to not just who get continue to get.
Larger share in this project, but more broadly.
Dropping into OAP and in such a case you youll make a combination of IP and services into this one and it becomes more typical to what we are doing today.
The licensing of the shape of the other approach is to go outside of the defense.
Two large Oems in both of them.
Customization of the IP that we have with CEVA.
Call. It integrated AP solution is more comprehensive.
Solution to the customer and which the benefit for this is higher overall deal size and wealth.
And Thats exactly what we are doing in this space.
I appreciate the color.
Back to the queue. Thank you.
Thank you.
Our next question today comes from Susan Silva of Roth Capital. Please go ahead.
Hello, Good evening, Dave Congrats on the progress here and the diversification certainly a couple of questions about that.
The.
Base station and Iot.
Now that Bluetooth.
As the strong I was curious the non Bluetooth part of base station and Iot.
What do you think of the best growth opportunities over the next several quarters in that because I think it's going to be an increasingly important.
I want to talk about the non Bluetooth.
Base station and Iot segment.
So in terms of shipment.
The shipment trends in the market.
I can expand on this later so in terms of shipments.
Talked about Wi Fi Wi Fi is growing significantly.
In terms of units.
We.
Domestically cellular Iot.
Another angle now that Europe is bringing up this one.
And we have three customers do.
So that's another one computer vision, which comes together with AI. So these are.
Active project and when you look year over year.
It's a substantial goals and Thats a driver.
No we have.
Excellent product for the dws market.
We see now in the licensing this is what we call the blue, but we expanded on that on the prepared remarks.
And we have now I think three or four licensees just in a very short period.
And that will be advisor in my opinion in the second half of next year.
Okay. Thanks, and then on Bluetooth It is a large part of your units at this point is the ASP there relatively static or is there an opportunity to uplift the asps.
Through products as you go forward.
Excellent question assume GSO.
The market itself is its pretty stable there, it's really volume driven at this point because the price points are obviously at the right.
Placed in order to tackle such a huge market and consumer.
Industrial and gaming and everything Thats connected to Bluetooth Wifi is making its first steps because of the advantages of the bandwidth.
The.
Technology that has really evolved with audio and others.
They're the asp's are higher than obviously the bookings.
But the combination of higher.
Asp's overall for CEVA is either combo chips than we have seen those Bluetooth and Wi Fi together these days.
And on top of that this is what Gideon talked about it.
Either audio or audio in sensor fusion and then the royalty is really jump up significantly so.
We are bringing all the different.
In flavors I would say.
<unk> alone Bluetooth, Bluetooth and Wi Fi and these other new technologies and I think that.
So with two new deals.
PWA is the first one last quarter and the market is looking very very hard.
It's a nice prospects and achievement for us let.
Let me give you just the indication of the size of the market. The Bluetooth overall, it's about 4 billion units.
And the outlook for each $1 4 billion.
It is all deal.
So tw.
And that's exactly where we want to go because we can.
<unk> position that will combine this pool will position.
Thats exactly what we there isn't that we build is blue, but we can go with the largest market in the Bluetooth and come out with higher value and as such.
Would be higher.
If I could sneak in one last question as a licensing at this run rate the new level.
Or how should we think about that thanks.
Licensing revenues have increased for both of this.
This product line and it's a new sort of combination of product for us not a DSP per se that gluten.
Look through charges, a premium for that and I think it also saves money for the OEM will fund the chip vendor because they don't need to deal with two different suppliers and vendors and chips and technology you integrate that into one.
I see so it's a win win for both sides and the licensing activity has been very active.
Again look at steamboat overall for the first time north of $20 million 21 plus million dollars either.
Number that we had never seen before.
Fever, and part of it is intrinsic part of it as the new CFO, new markets and new opportunities.
What we do.
Another benefit that we see with this licensing.
But you'll get R&D.
The leverage because we are booking about 69 performed under nine months.
Yes.
69% and operating profit.
So the royalties.
Down in year over year, but the.
Yeah.
But.
When you look on the operating.
You get substantially.
Net benefit.
Okay. Thanks, everybody.
Thank you so as you kind of my next question.
I'm sure Martin Yang of Oppenheimer. Please go ahead.
Hi, Good afternoon. Thanks for taking my question first I wanted to ask about your traction with customers on Wi Fi six and how can you maybe give us more details on how the customers are using Wifi six at what are the high growth end market applications Youre, assuming for Wifi six.
I am hoping.
The way, we see it today likely fee is what is called smart home.
Many many products would be the TV would be smart speakers could be.
And the security Nonetheless.
So the main driver of Wifi six we start seeing automotive we start seeing the industrial use cases, but as.
Smartphone.
The big driver.
Got it thanks.
Second question is.
Your traction with smartphone Oems that are developing in house chips is there any update there and how have the impact of do you think they might be <unk>.
Eloping their own chips in the current environment.
Yes.
Your line is not that clearly did you talk about smartphone on small.
Oems with smartphone the smartphone smartphone OEM, perhaps behind.
The base.
Our license agreement with you.
Yeah I mean.
In terms of landscape in the smartphone.
It's split.
Similarly, the deals to date without the few Oems that internalize into development, we are associated with some of them.
It is.
Some of them are big also.
And there are not.
Thats mainly.
Newcomers.
The into the smartphone.
Now we have several other angles into the smartphone and also to the site in terms of smartphone will.
Getting into the smartphone to a Wi Fi and Bluetooth technology, because all of those smartphone it connectivity. So we have several Oems.
Using our connectivity full smartphone and we ship them.
Philosophy indifferent, whether you'd baseband.
Connectivity doesn't method.
To some extent, we weren't getting higher royalties.
So thats one of those the other approach.
But in the prepared remarks is what is concerning all Iot.
It is everything that relate to five G.
That is not small.
So it could be more it could be.
The fixed wireless access, which is a very big market could be.
Similarly in automotive. This is these are really the most inhaled opportunities are much more open the market is much more fragmented and the need for a company like us that comes with a holistic solution.
Platform solution, not just component bail in debt associated with services.
<unk>.
The highly valued in this space and we do get customers.
On that I, just mentioned three just in Europe.
Activity work.
Thank you.
Thank you Martin.
And gentlemen, as a reminder, if you'd like to ask a question. Please press Star then one.
Next question comes from Kevin Cassidy of Rosenblatt Securities. Please go ahead.
Thank you and congratulations on the strong results.
I'm wondering if.
Conversations with your customers about the supply tightness.
Tightness for next year.
What kind of increase in unit shipments have they given you anything like this.
Kevin Good morning.
Kind of a 1 million dollar question.
Ill completely Smith and.
About the severity of this crisis.
We just don't know.
To give an example, it looks like in the third quarter.
Only to fly for manufacture and mobile unweighted with Hooper site and people.
It's completely.
Fran between load between markets.
I mean, we.
So we don't know, but I'm, telling you that our customer.
No different people have different opinions, so we need to take it step by step quarter by quarter by quarter and see where the.
Last year, we will in a better position than worst position, but the supply chain is Brian.
And.
It's unknown to almost everybody unless you are a big name when you can.
The changes.
Impact.
Yes.
Okay. Thanks.
How about visibility into <unk> base station deployments.
Are you seeing any of that coming in 2022.
Okay.
Let me say the driver in the market the demand is there.
No doubt.
Customers, which is built with April are waiting for chips waiting for assistance.
And when you look on the base station, it's not just where we are.
The baseband workload, it's a bunch of other achieved some of them some of them in the antenna side systems.
They also get into.
To become completely so.
Some of our customers publicly said it's become challenging.
We think we are on track.
They're healthy.
But.
It's those back to you.
With this question about.
When the supply chain, we can see that we know what's going on right now, but the good news is that demand is the design wins.
Are there at least from our customer.
Customer base.
But we need to take it quarter by quarter to try to help them as much as we can and hope for the best.
Most of the rest of our leading the public data that you guys have access to we don't have yet.
The physical especially information about 2020 to so many of our base station customers our handset customers.
In that respect.
Okay. Thank you very much.
Thank you.
Ladies and gentlemen. This concludes the question and answer session I would like to turn the conference back over to the management team for any final remarks.
Thanks, Rocco and thank you everybody for joining us today and for your continued interest in CEVA.
As a reminder, the prepared remarks for 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 investor events.
10th annual Roth Technology event November 17th and 18th.
The fifth annual Wells Fargo TMT Summit November 30 through December 2nd.
And Barclays Global Technology Media, and Telecommunications Conference December 7th and eighth.
For further information on these events and all events, we will be participating in can be found on the investors section of our website.
And goodbye.
Hello, Ladies and gentlemen. 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.