Q1 2022 CEVA Inc Earnings Call
T markets are.
Our ability to execute more base station and Iot license agreements.
Fact of intense industry competition and consolidation.
<unk> chip market trends, including supply chain issues as a result of COVID-19 and.
And other factors.
Our ability 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.
With that said I'll now hand, the call over to Gideon.
Okay.
Thank you Rachel good morning, everyone and thank you for joining us today.
We delivered a strong start for 2022 with a record high revenue.
$34 4 million.
Up 35% on a year over year basis, driven by better than expected smartphone shipment and strong licensing execution.
The licensing and the energy environment continued to be strong delivering $22 $4 million in quarterly revenue up 56% year over year with 14, new agreements of which three were with first time customers.
We continue to bolster our relationship with key customers shrank a comprehensive agreement for a new generation of new DSP CEVA XC DSP technology with top field base station OEM and with a lead customer for our new New program edge AI.
<unk> platform targeting the brief automotive market in China.
We continued to experience strong demand for our wireless and edge AI platform technologies by customer targeting a broad range of markets and application among which our smartphone smart home PC, Adas, <unk>, Iot and low Earth orbit or Leo satellite.
Patients.
Royalty revenue came in at $12 million up 9% year over year with a record of $531 million CEVA power shipments up 56% versus last year.
In the smartphone space, we experienced better than expected shipment as a key customer of ours is gaining share with top tier Oems.
Royalties from base station and Iot products category were impacted by our customers' ability to ship products to Oems ODM in China, resulting from the lockdown, there and due to supply chain constrained at all <unk> base station ran customers are facing.
Despite these headwinds the base station and Iot category was up 24% in revenue <unk>.
Assess their respective quarter last year.
Let me take the next few maintenance to add more perspective on our market position and strategy.
Wireless connectivity is vital to drive Iot proliferation.
He is a fast growing market that is forecasted to reach 215 billion units annually by 2026.
In the last few years CEVA has emerged as a prime wireless IP window with the position and market dominance is.
LTV is full <unk> IP.
Our indisputable ability to offer comprehensive wireless solution for them.
Most of.
Advanced and complex wireless protocol for five G. Wi Fi Bluetooth and UW be lower the entry barrier for a growing number of Oems and semiconductor companies to incorporate wireless technologies for the sizeable buckets of smartphones smart home.
We have a $1 billion <unk> automotive metro growth industrial and mode.
Underpinned by this powerful foundation, where.
We are intensifying, our five gene ovation and looking to realize the full potential of <unk>, new radio in enabling new industries can attribute such as broadband satellite communication.
Linked to support pedestrian safety for direct cellular connection of smartphone and Wearables two vehicles.
Red Cup to enable energy constraints.
Medical Wearables and industrialize pm mode.
The <unk> mobile World Congress event, we announced the Panther <unk> two our second generation <unk> base station baseband processor platform IP.
Entergy too is a comprehensive five G architecture that integrates multiple CEVA DSP.
Highly efficient hardware and AI copilot vessel, along with the associated software.
<unk> two streamlines, the complexity of developing and integrating <unk> modem into the new class of <unk> cellular Iot devices of course, its two main segments.
<unk> Iot and massive Iot.
An additional five <unk> space, where we are looking to capitalize demand is five <unk> radio access network or run.
Latest generation of <unk> base stations architecture, or virtualize with this aggregation of the run workloads between the distributed unit ODU and directing unit or the <unk>.
Paul is a highly demanding and accustomed to DSP processing and effectively more than double.
Addressable market versus traditional LTE base station Aki picture.
As I noted earlier, we have concluded in the first quarter.
<unk> strategic agreement with top tier OEM for a new class of DSP architecture.
We will announce in the coming months.
These new DSP architecture will set the stage for the proliferation of Virtualized run an open run and will be our underlying technology for next generation cellular solutions.
We also made noteworthy progress in the past quarter in the Gi space.
In our brio only in quarter, we outlined our AI strategy, which focuses on AI edge, a fast growing market focused by Abi research to surpassed one 3 billion units by 2026.
Capitalize on these sizable opportunity, we unveiled a new edge AI processor architecture, the Newport him with scalable performance starting from 'twenty parallel operations per second folks and going up to 1200 pumps.
Your appointment.
AIA requirement of broad market application, among which our smartphone autonomous car mix reality <unk> mode.
As noted earlier, we signed a lead customer license agreement with semi conductor.
Okay.
Target to Adas and intelligent cockpit market in China. It is our first entry to the vibrant automotive market in China.
Leach the transformation of golf in the form of software defined architectures and electrification.
In sum era, and Sean Silva continued to execute well in the first quarter with a strong performance and financials, even in the face of challenging macro events we.
We have the vision the market reach and execution capability to monetize our technology innovation.
While the lockdown in China has impacted our customer do that.
The end market demand for product continued to show strength, which position us to continue to.
The phone.
Through 2020.
With that said, let me handover the call to <unk> for the financials.
Thank you.
I'll start by further reviewing our results of operations for the first quarter of 2022.
Revenue for the first quarter was a record high $34 $4 million up 35% compared to $25 4 million for the same quarter last year.
The revenue breakdown is as follows.
<unk> related revenue was a record high $22 $4 million, reflecting 65% our total revenues.
Up 56% as compared to $14 4 million for the first quarter of 2021.
Royalty revenue was $12 million, reflecting 35% of our total revenues.
Up 9% from $11 million in the first quarter of 2021.
Base station and Iot royalty revenue contributed $7 1 million.
In the quarter up 24% year over year, despite a headwind from supply chain constraints in the <unk> base station ran space and the impact of the Lockdown in China on some of our Chinese customers.
For the gross margin was 81% on GAAP basis, and 84% a non-GAAP basis.
With better than expected <unk>.
non-GAAP quarterly gross margin excluded approximately zero point $3 million of equity based compensation expenses, and 0.5 million of amortization of assets associated with the intrinsic acquisition and <unk> investment.
Total operating expenses for the first quarter was $27 5 million at the higher end of our guidance due to lower allocation of intrinsic and REIT costs from R&D into cost of revenues per our prior quarter guidance.
Thus shift between these two expense line items may occur from time to time and are tied to the actual chip design work performed in any specific quarter.
Opex also included aggregated.
Equity based compensation of approximately $3 1 million amortization of acquired tangibles of $1 1 million and <unk> 3 million for the costs associated with the intrinsic acquisition.
Total operating expenses for the first quarter. Excluding these items were $23 4 million.
Just over the high end of our guidance due to the same reasons I just discussed for GAAP.
GAAP.
On the tax front, there were few developments in the quarter.
We have implemented a new tax regulations in France named IP box tax regime, enabling our corporate tax rate to be lower than the statutory 25% on specific types of revenues.
This was offset with higher withholding tax so is associated with our future utilization in our Israeli subsidiary.
GAAP other income, including $1 $1 million loss from our evaluation reevaluation of the investment in CPR, formerly eyesight technologies and <unk>.
Leading provider of in cabin sensing solution for the automotive industry that went public in the fourth quarter of 2021 as we explained last quarter, we will continue to adjust our investment quarterly up or down based on the market valuation of these shares.
GAAP net loss for the quarter was $1 7 million and diluted loss per share was <unk> <unk> compared to a net loss of $3 6 million and diluted loss per share of <unk> 16 for the first quarter last year.
non-GAAP operating income more than doubled to $5 5 million from $2 $6 million reported in the first quarter of 2021.
Our non-GAAP net income and diluted EPS for the first quarter of 2022 was.
It was $4 $2 million 18, respectively.
And net income and diluted EPS for the first quarter of 'twenty, one or zero point $3 million.01.
Respectively.
Other related data.
Shipped units by CEVA licensees during the first quarter of 2022 were a record 531 million units up 21% sequentially.
56% for the first quarter of 2021.
Of the 531 million units shipped 100 million or 19% were for handset baseband chips, reflecting a sequential increase of 20% from 83 million units of handset baseband chips shipped in the fourth quarter of 'twenty one.
On the 22% decrease from 129 million units shipped a year ago.
Our base station and Iot product shipments were $431 million.
Units in the quarter up 21% sequentially and 104% year over year.
Note Bluetooth was a record 333 million units in the quarter, an all time record high with sensor fusion Wifi and cellular Iot also delivering strong contributions.
As for the balance sheet items.
The end of March 2022, our cash cash equivalents balances marketable securities and bank deposits were $162 million.
Our DSO for the first quarter of 2022 continued to be lower than the norm at 32 days compared to the first quarter.
Of 39 days.
During the first quarter, we generated $9 8 million of.
Cash from operation, our depreciation and amortization was one $9 million and purchase of fixed assets was <unk> $9 million.
At the end of the first quarter, our head count was 476 employees.
Of which 391 RMG meters slightly lower than the total of 475 employees at the end of December 21.
On a yearly guidance.
As Gideon explained the fundamentals of our business are strong which.
Which is implemented by record revenue in the first quarter.
We continue to dominate the wireless IP space.
Stepping up our relationship with top tier customers.
Are encouraged by the share gains by our key handset customer the tier one smartphone Oems.
We therefore are arising our annual raising our annual revenue guidance to a range of $142 million to $146 million versus $122 9 million for 2021.
This guidance.
Contemplate consistent recovery in China as the extraction there are gradually lifted throughout the year.
Specifically for the second quarter of 2022 gross margin is expected to be approximately 78% on GAAP and 82% a non-GAAP basis.
Excluding aggregate of zero point $3 million of equity based compensation and $5 million for Amortizations.
Opex for the second quarter is forecasted to be similar to the first quarter of 2022.
GAAP based Opex is expected to be in the range of 27, 1% to $28 $1 million and our total operating expenses for the second quarter.
Three 3 million is expected to be attributed to equity based compensation zero 8 million for amortization and <unk> three for the cost associated with intrinsic.
Yes.
Our non-GAAP opex, excluding all these items is expected to be in the range of 23% to $24 million.
Net interest income is expected to be approximately zero point $4 million.
And taxes for the second quarter are expected to be similar to the first quarter.
<unk> generated from the new 10% significantly lower tax rate on specific revenue sources for our French activity.
Offset by tax expenses associated with holding taxes and their future utilization.
In our Israeli subsidiary.
Share count for the second quarter is expected to be 24 million shares for on a non-GAAP EPS calculation basis.
Hey, Betsy you can now open the Q&A session.
Thank you.
We will now begin the question and answer session.
To ask a question you May press Star then one on FX turns down.
Thank you and good morning Speakerphone, please pick up your handset.
Keith.
If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Our first question comes from carbon possible with Rosenblatt.
Please go ahead.
Thanks for taking my question and congratulations on a great quarter.
Maybe on the.
The topic of the earnings season has been China and all the shutdowns.
We are expecting a gradual improvement.
I guess, how are you getting that from your customers that are saying that they see this change in their government policy.
Government Hi, Kevin Thank you.
What would you said.
Government policies, not something that our customer can <unk> can control.
The lockdown in the Shanghai area.
In place.
Areas that you see.
Releases.
When it comes to our customer as we appointed in them.
<unk>.
Okay.
Alright.
Things that happen when people cannot do go to work in manufacturing liner basically.
Automotive shutdowns.
Okay.
There is no point to assemble products.
And get the chip for bit nobody to do so.
Don.
The indication that we're getting from there.
They don't see.
Declining demand the demand is there keep in mind that our.
Technology goes to all sort of new.
Application in the Iot area and the industrial areas.
Things that are.
Wireless driven entered in high demand.
We believe that the plants.
Get back to work.
Things will recover.
Plus as they can.
Okay great.
No demand destruction.
And maybe I think your acquisition of it turns out.
Certainly important.
It has great opportunities can you talk a little bit about that.
Your funnel of opportunities that you're working on like what might've changed during the quarter.
Yes.
I think there are two aspects of the activities of the dynamics that we see within transit.
Number one is there is a very solid position in the defense market.
And.
And you'll see from the U S.
The ambitions and the need to ramp up the investment both in the defense side.
At the back of what is happening in Europe as well as.
Overall building a semiconductor infrastructure.
We see these implied.
Implied to intrinsic in terms of.
Engagement. The other thing that we are now under the umbrella of silver.
<unk> is too.
Promote of proposed to customer.
Our new business model that we call integrated AP solutions. So basically we take the CIP and the intrinsic capability to design chip design.
Complicate one combination of RF mixed signal.
Digital.
Pulse is sold.
And we basically elevate.
Proposition to customers.
It's not just the take the component the call, but rather will build yield.
The design of the Src.
Okay.
As a result, and we are getting in particular in the U S.
A lot of interest from Oems.
And also semiconductor Lake both VIP and.
The resources.
So there is a scarce resources at both engineers.
And we're getting good feedback and we see some moves.
<unk> in this respect so overall the intrinsic.
The acquisition.
Is it similar to the next level.
<unk> trusted partnership with customer I know just flip.
Supply.
Players customer relationship.
Great. Thank you.
Thank you Kevin.
The next question comes from.
Yes.
<unk> with Roth capital. Please go ahead hi.
Alright, Thanks ill Echo my congratulations as well so getting any.
So maybe following up on Ken's question the intrinsic.
Efforts here are you seeing that business models kind of I guess extension or a shift to maybe more licensing upfront is that starting to take hold or will that take some quarters to kick in.
I mean, it's ongoing we believe that as time goes by is when when Youll see the integrated IP solution, which are largest.
Larger deal size overall, both in the lab in the upfront side and the.
The royalties.
Are you seeing more.
Higher components of IP in the intrinsic deal, which youre going to see it in the.
The cook side of our business, but it is.
A process that we.
We gradually wants to promote it.
And focus on large customers because it's.
It's a different relationship.
By the way it will remind you that the first deal that we sign are integrate I think it was last quarter in Q4.
Last year that was the first deal the project the shoot and now with the second quarter and then eventually we should see a flow.
Flow of royalties down.
The road as soon as that chip goods into production. So that's first part of being able to design the IP with the surrounding and rework is something that we have already started and I think from.
Every once in a while every quarter. So we will be able to talk about a new deal that's the goal.
Okay, Great that's very helpful.
Of the areas in <unk>.
Auto Iot that.
Our position to grow sensor fusion Wi Fi cellular Iot can you talk about which ones maybe have the most opportunity in the second half of this year that I know, they're all growing I'm just curious.
Any of them starting to inflect at all or are they all steady growers.
Yes.
So I would say that wireless and <unk> too.
But I am saying wireless it's all over the place we are full.
<unk> technologies, <unk>, 12, <unk>, Wifi Uwp and Bluetooth.
<unk>.
In fact, the interest that we see is in the Iot side cellular Iot.
The late the upcoming standout in five GSA leases and theme and release a teens.
We will open up.
A lot of new use cases, some of them I mentioned in the call Red Cup, which.
Displays the narrow band Iot.
Sorry.
User usage model.
The site link which is.
Basically think about.
Putting these kinds of cellular.
So for every smartphone and wearable device. So you can communicate with vehicles and get additional.
Safety.
So these.
In <unk>, we see a lot of customer interest at <unk>.
We see it in China, all over the place for Smart home access point.
And also industrial and UW B is upcoming.
The standout that youll see it in Q4.
Yes.
For automotive.
<unk>.
People, even talk about audio over <unk>.
Deepak.
Standouts for Metro bills.
So.
In terms of interest and potential wellness all over the place.
And I said in the prepared remarks, we are in a position that is and dominant in this wireless IP space.
Yes.
Is the CPI.
The go to Guy.
When people want to do because the comprehensiveness and.
And the proved successful as since we have.
The other area that I mentioned as edge AI.
We believe that going forward.
<unk> will have an AI both fulfill.
And different form factors.
We build this new pool and the new product that we announced vacancy is in light of something more generic.
The previous generation.
Which was more content related.
And that's what we see now people are coming to us with.
Excuse me.
With the requirement.
And.
The challenge with <unk>, and we are addressing deep not just in the hardware, but the software as well as to make it simple for people to develop these applications.
And Thats make a strong way.
Ray we look holistically on these problems.
And not just the technology itself.
Okay. Thank you for all that color getting thanks, guys.
Thank you.
The next.
Chris <unk> with Barclays. Please go ahead.
Hi, Thanks for taking my questions and congratulations on the quarter.
You mentioned some.
Problems.
China.
Okay.
Mr. King can you talk a little more color on.
How is that impacting.
In terms of getting things.
Alright, you mentioned shipping.
And then just on a follow up the guidance.
For revenues.
That's an increase can you give some of that.
Some of that.
The things going into that.
Are you more confident about.
Guidance.
Sure, let me try to help out Chris So on our first on the guidance perspective, we took it up you are right.
The beginning of the year and obviously much higher than last year last year, we closed the 'twenty one 'twenty two nine the guide the new guidance is $1 42 to $1 46, so a notch higher than what we had in mind at the beginning of the year due to a strong start for Q1.
China, I think what Gideon talked about earlier I would look at it from two perspectives from a licensing perspective.
Well, we have all been doing business with Covid alongside for the last two years two plus years. So on the licensing front of licensing new technologies and nothing has changed in China, nor in the rest of the World Cup.
Companies in the technology sector are continuing to license new technology is over zoom and teams and all the virtual capabilities without less travel from country to country, but.
But when there are no lockdowns of course darn internal team as the local teams in each country does.
Go from them from a customer to customer and to face to face meeting. So you saw that in the licensing record licensing in the quarter a lot of deals in China five deals out of the 14, our China business as usual. Unfortunately, they are under lockdown. So.
Part of that design work is done from home and remote but not from their own offices and facilities. That's one side of China that really hasnt changed in the country. There is still good demand and we saw that in licensing both last year and this year and the numbers continue to be.
Quite strong they're the same as the interest.
Moving to the royalty front and the royalty front and we also came up with a better quarter compared to last year. So China is a big factor in our revenues and our customers.
But what we have seen that in specific markets like the base station market.
Our customers demand.
We get the full access of supply to build the base stations.
It's that CEVA only related it's an industry related this has a lot to do with the lockdowns that hasnt been happening for the last month and a half or so.
In China, and I think Thats, what we referred to that in some segments of our business. The royalty reports were lower than what we had in mind for the first quarter, but we believe that will catch up because the demand is there in <unk> base stations and record demand around the world.
And even the consumer devices that some of our customers were down they may be in.
20% or 30% from what we anticipated the overall scheme of things you saw that our royalties were up.
The year over year from 11% to $12 million. So I think that the problems is really having some of these facility being closed for such a long time as soon as it reopens. The we may see that correction.
Quite fast we saw two years ago, when China was locked down in the first quarter in the second quarter was robust around.
In China, because everybody was picking up the pace so.
We don't have that crystal ball of exact timing, but as Gideon said earlier the demand for all of these products that we are in both with our consumer or or electronics or the digital era still is around us.
We probably could have had a better set of numbers without the pandemic right now in China, but with that said record high. So I think that's what we're trying to convey that still business is strong there, although they're facing some difficulties.
Mhm.
Thanks, Bob and then just one more thank you.
How do you how are you looking at the M&A pipeline.
<unk>.
Yes.
When it comes to M&A are valid.
The strategy for US we're looking at.
Different options.
We've done well.
Don't see any.
Change in terms of.
No.
Lockdowns to sell company.
Ambitions to to buy company, we do it one by one different aspects in order to find the right fit for US we did.
And the last.
I would say.
93 acquisition and all of them all.
Firmly.
Successful.
In growing our business.
Okay.
Okay. Thanks.
Thank you.
Thank you.
The next question comes from Martin <unk> with Cowen. Please go ahead.
Hey, Good morning. This is Shawn lockman on for Matt. Thanks for taking my question.
I wanted to talk about Asp's quickly and I think if you look at the license asps in the quarter It seems strong.
But I know that Theres, probably more NRG there in the past than in the past from the intrinsic so maybe you could.
Speak to the split between license versus an <unk> in that line and then just on the royalty side Bluetooth as you called out <unk>.
Record shipments and Thats, what driving the <unk>.
Maybe a little lower ASP, there or is there something else in the baseband mix. Thanks.
Sure Good question.
On licensing.
We've always said for years that it doesn't make too much sense, you come up with a number but there is not too much logic behind it if you take the licensing number and divide it by 14 deals.
Some deals are service oriented so you don't recognize that amount upfront.
<unk>.
One of those 14 deals a few of those 14 deals that you divided by or not really relevant to the revenue because they are not in the revenue line.
Sometimes because of the accounting rules are start ups, you don't deliver before the customer actually pays us so again the same stuff.
The result that you get a number but it's not doesn't necessarily reflecting if it's a single use if it's a larger multimillion dollar deal for a wider range of products.
I think that over the years, we've managed to come up with a nice portfolio of different technology is now services as well the pipeline is strong.
And then the numbers are going up so that $22 $4 million I think is a combination of all of these different factors.
What we could say maybe on the wireless side and obviously the five <unk> type deals are more expensive and lucrative than <unk>.
Deal years ago, and the same applies for lifestyle.
<unk>.
We talked last quarter about Wi Fi, leading edge technology are of course.
Higher priced than them.
And then the Bluetooth type of device so that that's on the licensing front, but to give you a little bit more color on the more type of technologies required let me come up with like Gideon talked about edge AI.
The nicer offering into higher Asp's, we have for these types of deals. So it's really technology driven that the newer technology that comes out we overall.
You can charge more of it.
The next two or three years old.
On the royalty front.
A bluetooth.
Surprisingly the asp's are not even going down, but not just flat slightly higher and the reason is that we have more and more customers new customers joining in and the asp's usually in a newer customer.
With the royalty scheme is higher than the existing customer with a very large volumes.
Alright.
Keeping the asp's.
Better than flat on the on the Bluetooth side no doubt.
333 million unit per quarter.
<unk> move the needle with the royalties the royalties overall for us for Bluetooth and overall Iot at base station group is higher due to that and nice factor and I think maybe.
Were asked earlier about this and how do you see the rest of the year some of the exciting things one of the exciting add ons to Bluetooth and Wi Fi.
More than <unk> four combo chips today, and if you we start we will start seeing more Bluetooth and Wifi.
Prices in the market. The Asp's are not necessarily wanted one it's too but that one in one type of technology it could be that.
Equal to three because the asp's likewise.
More expensive than a Bluetooth so from our perspective as a percent of that combo chip and the <unk>.
<unk>.
Previously.
Part of our customers' powering $300 million device in the quarter start, adding Bluetooth Wi Fi to it that's that's the winning factor on the royalty side.
That's something to take into account from the ASP perspective.
These are the two biggest factors right now.
Probably worthwhile mentioning from an ASP perspective.
I hope I covered.
Yeah. Thank you that's helpful and maybe segue off of that you can talk about Wi Fi flying potentially enter the rabbit into the royalties maybe bigger picture. If you could just talk about.
Licenses that you signed in 2021, how youre thinking about the timeline of those flowing into the royalties I mean it was.
A pretty solid year for you last year continued into this quarter.
Obviously it depends on the end market auto is going to be longer but how are you thinking about that are you starting to see royalties already from 2021 licenses or is that a 'twenty two 'twenty three 'twenty four type thing.
In general.
The connectivity, which we have Wifi Bluetooth uwp this the design cycle as much.
Sure the let's say five G <unk>.
A much bigger vessels see there is more stringent certification with operators. So let's take between 18 to 24 months I believe that we're going to see DSO to assign let's say in this.
First.
First late first half of <unk>.
Last year, we see it.
Early 2023 in mass production because of weather.
The whole process.
The sales decline get cheap is much shorter.
Most important.
Proposition that we have for connectivity is much more integrated with not just provide the outflow, but also the software.
So.
The cycle is something between 12 to 15 months four months production.
Super helpful. Thanks, a lot guys.
Sure.
The next question comes from Martin <unk> with Oppenheimer. Please go ahead.
Hi, Good morning, and thank you for taking my question looking to Bluetooth strength in the first quarter.
Can you maybe talk about what did that strength come from how sustainable that is and whether or not that's associated with.
Inventory replenishment activities by our customers. Thank you.
Glucose is.
<unk>.
Yes.
Very good.
Paolo standout.
In terms of the diversity of applications.
What we are seeing now in terms of customer shipments.
Late to Tw.
The EBA.
Market.
The market Thats, a growing market, that's close to 1 billion units.
And the next deal.
So.
And this.
This market is now getting into different headset space, whether it's for VR metal.
And.
And in gaming in general.
So to your question it's extremely.
Sustainable and growing.
The Bluetooth standup is working on next generation.
The technologies that.
We will provide the customer with beyond the audio that we all know use Bluetooth for that purpose.
About location, so think about the different <unk> that going to be all over the place that's going to be.
Sure.
Even bigger market than the audio side, so overall youre talking about Bluetooth four <unk> billion.
Units.
Year.
Annually and.
And it's expected to go.
Understood.
Next question.
<unk> AI comments, so are you implying that most of the edge AI.
Limitations, you have are mostly fallen camera related applications and for cordis newer generation, where do you think of what market segment do you think we'll get first adopted besides camera applications.
Okay.
The.
Good question.
When when people talk about AI the head Jay items, just in the last two years people start using it to distinguish between the AIA activity that happens in the data center.
Hi.
Initial usable as it related to card member so when people talk about <unk>.
So it's a comment that you make.
You put it you use AI to detect pedestrians.
Traffic light.
So things like days or.
Surveillance camera.
Two.
Two.
To detect.
Strange behavior.
The.
Yeah.
As time goes by people got more familiar with how you use AI of other applications. So in <unk> you can use it for optimizing.
The network performance. So when it comes to a smartphone in general you can use AI to optimize the power.
The metrics by.
Collecting data knowing how people specifically usually.
Natural language processing virtually coordination.
We are seeing a lot of customers are using AI for things that in the past they wrote software.
And thats the Thats, what drove us to come out with new programming to say this is not just the AI for camera. This is AI for sensing in general.
<unk> is for any workloads that youll need to do it.
Think about CPU for AI, the same thing <unk> done.
Customer or not.
To use it for certain tasks. They just use it for everything that they need same goes for the new people we use.
People will use this platform for any workload any application that relates to AI.
Thank you for the insight.
Good luck and I'll add one more thing to your prior.
A question and Gideon talked about the size of the Bluetooth market don't forget that last year and this is part of the excitement for us in the connectivity in the wireless space.
Last year, we talked about two design wins that we add into the cellular space with Bluetooth or Wi Fi connectivity, one as a semiconductor company and one was an OEM and actual.
Chinese OEM doing handset and we are going they're going to do their own chip with our.
With our connectivity technology, replacing an incumbent supplier.
Is there today, so that's part of the growth and part of the opportunity that we haven't Bluetooth not just Iot devices, but also back in handsets with more technology to them just the modems that we have done for many years.
Makes sense. Thank you.
Thank you.
The next question comes from Gus Richard with Northland. Please go ahead.
Yes, thanks for taking the question.
I apologize in advance for having to ask this.
In the old days used to recognize revenue for royalties one quarter in arrears and then one that would be $6. Six came along you had recognized revenue in the current period.
But I don't think you get all of your royalty reports by the time.
You put your numbers together and I'm just wondering has that changed your customers get the royalty reports to you or if not how do you estimate royalties in the period without all the reporting.
Any color there would be helpful.
Yes excellent question Gus Good morning, the first Youre most welcome Suraj.
<unk> and request the change the rules that will make all of our lives is much easier.
And it is more complex there is no doubt that we don't get all the sports, especially this quarter.
When the company is in China, where specifically were shut down and people can't come to work in close. The numbers. Then you have the systems. So we did call up all of our customers. We did try to get as much insight as we can for there.
For their business some gave us.
Verbal estimate some gave us.
An assumption of where they think they are compared to the prior quarter and the dollars the estimates for the best.
To translate it into royalties thats the best we could do with a company that did not report to us and a big portion did report on time and still manage.
Whether it's a draft or a final report, but to those that were not around their officers that the theme that we did for this quarter a bit more challenging than in prior quarters.
Business as usual deeper on the office.
Got it and when do you true up.
<unk> six from Q1 and Q2 earnings.
Yes, that's always the case the next quarter, where it was.
Updated and true it up to the final report usually we know these customers for many years.
The ones that are in production so.
Okay. They are not big surprises.
And if they are they will be trade up in the following quarter.
Got it. Thank you so much very helpful.
Sure. Thank you.
This concludes our question and answer session I would like to turn the conference back over to Richard Kingston for any closing remarks.
Thank you.
Thank you all for joining us today and for your continued interest in CEVA.
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 conferences. The Oppenheimer 23rd annual Israeli conference May 22nd the 24th in Tel Aviv.
Cowen <unk> annual TMT Conference June 1st and second in New York.
Rosenblatt Securities Technology Summit age of AI Conference June nine and 10.
Further information on these events in all events, we will be participating in can be found on the investors section of our website. Thank you and goodbye.
The conference has now concluded thank you for attending.
You may now disconnect.
Okay.
Okay.
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