Q3 2022 CEVA Inc Earnings Call
Good day.
To the CEVA, Inc. Third quarter 2022 earnings conference call, all participants will be in listen only mode.
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I would 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 good morning, everyone and welcome to <unk> third quarter 2022 earnings conference call on.
I'm joined today by Gideon Weyerhaeuser, Chief Executive Officer, and your need or your Alley, Chief financial officer of CEVA.
Ian will cover the business aspects and highlights for the third quarter and provide general qualitative data.
<unk> will then cover the financial results for the third quarter and also provide guidance for the fourth quarter and full year 2022.
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 market trends and dynamics, including anticipated growth in wireless and edge AI adoption and growing market share in Japan.
Our market position and strategy, including expansion of our design pipeline increases to our IP content revenue diversification and our abilities to develop partnerships with key customers and Oems onto increased license fees and royalty a S. P.
Impacts of global economic uncertainty and Covid on our business, including royalties.
Demand for our benefit all of our technologies expectations and financial guidance regarding future performance, including for the full year 2022 unanticipated royalties for 2023.
And the timing and impact of changes to see what's management.
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, including continued restrictions in China.
Extent and length of the restrictions associated with the pandemic and the impact on customers consumer demand in the global economy generally.
The ability of T was IP for smarter connected devices to continue to be strong growth drivers for us.
That's in penetrating new markets and maintaining our market position in existing markets.
The ability of new products, incorporating our technologies to achieve market acceptance the speed and extend of the expansion of the five G and Iot networks, our ability to execute more base station and Iot license agreements the effect of intense industry competition and consolidation global chip market trends, including supply.
Chain issues as a result of COVID-19.
Other factors.
And 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 welcome everyone and thank you for joining us today.
We've managed to deliver a year over year revenue goals bolstered.
And then royalties during a difficult economic climate.
These highlights of a diverse product portfolio and resilient business model, we continue to gain momentum with our wireless and edge AI adoptions across an expanding customer base.
Can be seen by our licensing revenue achievement.
Royalty compositions showed notable strength in five G. Ron why lower handset baseband royalties reflects adjustments to inventory level at the big slowdown in consumer demand.
Revenue for the quarter came at $33 7 million below.
Up 3% on a year over year basis.
Licensing environment continues to outperform delivering $22.3 million in licensing revenue on the back of a.
Licensing agreement.
Customer agreements this quarter all for a broad range of market segments. Among we chose a das Wifi devices and access point.
Wireless audio devices satellite communication and more.
We are also expanding our design pipeline, resulting from the unique speciality and focus will follow intrinsic business unit in the defense and always design spaces.
China and the U S, where the larger diverse fall business in the quarter, while Japan is also becoming an important market for us due to eat large automotive and industrial activities there.
Okay.
Royalty revenue came in at 11 4 million up 2% on a year over year basis handset baseband royalty will up.
Thank you for you, but down 20% sequentially.
Electing the weakening economy and inventory adjustments.
Oh base station Iot royalties on they're all doing well down repo send people give you, but up 16% sequentially.
Driven by growing five Gerard shipment and as is our two larger Oems are benefiting from share gains in China and continued five G.
Capex investment in the U S.
Also to note an OEM customer of ours recently won the majority share of the various studies have been run deployment in India.
Each will further contribute a one piece.
Good thing for them next year.
Overall, the diversity of products and customers, we have under the base station and Iot got globally led us to report our second highest royalty revenue of.
$8 2 million for beef cut to gulli and help us to mitigate headwinds in the consumer and mobile spaces.
A noteworthy development in relation to all day velocity Whoa Whoa disturb what their launch of a new wearable device all the major Oems that is enabled by our cellular technology.
Yeah.
That being said deferred there'll be two reiteration of consumer demand coupled with the extended COVID-19 restrictions in China is driving Oems across the handset and consumer electronic industry to adjust their inventory levels.
As a result it was these are not expected to grow in the fourth quarter as we reach to the holiday season.
We remain prudent in managing our investment to drive all diversification strategy and continue to keep close eye on and monitor our operating expenses.
Let me spend the next few minutes to update you on other aspects of our growth strategy, which is to increase or IP content by going up in the value chain and by licensing sort of I P. Tau yes.
We believe this will enable us to develop glascock partnership with our key customers and we need to hire in license fees and royalties ASB.
We recently announced the 10th that you run platform, which.
Our portfolio for the five G run market beyond the DSP close this we already licensed to top tier base station Oems.
G. Ron is a comprehensive solution that also.
400 baseband chip.
Integration of CEVA DSP.
Oh, well biotype Morgan accelerate though.
AI engine and the related software.
All required to enable baseband processing for various wants it.
[laughter].
Entergy run with you said the high entry barrier for the run chipset market, which is currently exclusive to very few large Oems build their own a seeks oyu xilinx FPGA.
It's basically a wasteful semi certain Oems want to penetrate the space at the back of Disaggregation in Rolla picture and the growing adoption of open run excellent theyre not massive mimo small doses and do very promising private networks.
Despite your market position diversify and secular growth opportunity for CEVA.
Do you run proposition will increase our license revenue and royalties.
The other aspect of our strategy is revenue diversification via software IP to Oems, which we recently started to engage with customers. We have discussed in the past our strength in wireless and all the IP.
Well, we haven't been devices, such as two wireless audio gaming headset smartwatch is hearing aid.
And down the roads V oven accelerates it.
We have more than 50 licensees using the old technologies and now any shipment unit into the space.
Surpass 500 million units last year.
These families and their OEM customer base form a sizable ecosystem of users that need also software IP on top of all of them.
In the last few years, we have invested in building up software IP technology base that included pay shallow deal AI based environmental conservation voice recognition and I am your base activity did pixel.
We are taking advantage of our ecosystem to engage in license software might be directly to the OEM.
We already signed up a top five hits at OEM that will use our software IP technologies on top of a chip usually go how do IP.
We are actively pursuing.
And in evaluation with other Oems and believe these possess a size of that opportunity to grow our loyalty base.
In summary, she likes to performing well during a challenging environment, we are focusing on things that all in our control and maximizing the value by licensing market.
Strategy and dominance in wireless and smart sensing enable us to continue to grow our customer base and as I pointed out earlier, we are looking and content its content increase and software IP to further monetize all valued technology.
With that said, we are mindful of the current challenging macro environment space, and we'll remain disciplined and prudent in focusing our investment on differentiation and shareholder value.
Last before handing over the call to your need for the financials.
After more than seven being used as the CEO CFO I've decided to retire from the CEO position as of December 31st this year.
While continuing to serve as a board member and focusing on growth strategies.
Well, it's a great honor to serve you, although these skus well through organic investment and M&A, we managed to transform and people to vote on wireless and smoke.
Sensing excellences.
Looking although this year.
Focusing on technologies that reduce entry barrier for well cost him now made us stronger and more resilient.
Fever carries a great for me.
Technology is undisputed.
By brand and relentless culture, and they bleed to see ahead and be committed to execute on this.
So the mobile if instead used to say, it's always the next generation device business cycles, which I believe more represent the CEVA DNA DC.
As we announced this morning, a meal panache will take over the CEO role starting January 1st Wednesday, 20 suite.
EMEA has an excellent track record of leadership of cloud technology companies, including PDK infant and Qualcomm.
His strong relationships within the industry with many infill sections, we see less target market.
I believe there is no limit to where American Pixie Lott, who I'm here and the market it will expand into unbilled.
His leadership I'm excited on how this will play out full CEVA any shareholders.
Okay.
You all see my employees I'd like to take this opportunity to thank you for your tireless devotion in driving the CEVA strategy informed me.
CEVA is giving you the platform to maximize yield innovation into weakness how these are proliferated across many products in market.
I am proud achievement and confident between EMEA and the lead CEVA will continue to be an exciting place to work and grow.
Let me now turn the call over to your needs for the financials.
Okay.
Thank you.
I wish you all the best in your upcoming retirement and thank you on behalf of Steve The management team and employees for many years, but she's named joint work and effort and partnership.
I'll now start by reviewing the results of our operations for the third quarter of 2022.
Revenue for the third quarter was up 3% to $33 $7 million.
Compared to $32 8 million for the same quarter last year.
The revenue breakdown is as follows licensing and related revenue was $22 $3 million, reflecting 66% of our total revenue up 3% from $1 6 million for the third quarter of 'twenty one.
Royalty revenues were $11 $4 million, reflecting 34% of our total revenue up 2% from $11 2 million for the same quarter last year.
Importantly, gross margin came in lower than expected on GAAP basis.
Higher on non-GAAP basis.
Gross margin was 76% and GAAP basis, and 85%, a non-GAAP basis compared to our 81% and 84% guidance on GAAP and non-GAAP respectively.
So we're got poorly gross margins were largely attributed to a one time impairment of $2 million, our non-GAAP quarterly gross margin excluded approximately.
Zero point $4 million.
[laughter] based compensation in those $2 million of impairment as well as half a million for the acquired amortization.
Our GAAP operating expenses for the third quarter was above the high end of our guidance of $29 7 million due to the same one time impairment charges associated with the aim of vision and asked me.
Intangibles Opex also included an aggregated equity based compensation of approximately $3.3 million and $4 6 million for the impairment and amortization.
Write offs.
Our non-GAAP operating expenses for the third quarter.
Excluding equity based compensation impairment amortization and write off.
With $21.8 million below the low end of our guidance.
So there's also demonstrated in the prior quarter and this was due to positive FX effect.
It says lower outsourcing costs and overall compensation related expense.
Our GAAP operating loss for the quarter was $4 million down from GAAP operating profit of $1 $7 million in the same quarter a year ago.
Yup quarterly operating profit included a one time.
Equity based compensation of $3 $7 million and the impact that the amortization of acquired intangibles of one $3 million.
Zero point $3 million associated within 26 acquisition and the five and a half million dollars.
Associated with impaired.
Our non-GAAP operating profit was six 9 million up 4% from the third quarter of 2021.
For the first nine months of 2022, non-GAAP operating profit was up 9% year over year to $16 $9 million.
Illustrating the growing operating leverage we have.
We have achieved as.
As we scaled the business.
In the third quarter, we wrote off $15 $7 million of deferred tax assets, including withholding tax assets that we will not be able to use the lives as tax credits.
Were recorded in the tax law.
non-GAAP taxes to $2 million or 34% pre tax income higher than usual as we now record tax expenses based on the withholding tax of Maryland, when revenues are recognized and the applicable tax rates of 5% to 10%.
Yes.
Net loss for the quarter was $21 3 million and diluted loss per share was <unk> 96 cents for.
For the quarter as compared to a net loss of zero to.
$2 million and they alluded loss per share of <unk> for the third quarter of 2021.
Our non-GAAP net income and diluted EPS for the third quarter.
There were $4 $7 million.20 flat year over year.
Net GAAP.
GAAP net income and diluted EPS for the third quarter excluded all the items I previously mentioned.
With respect to other related data.
Units by CEVA licensees during the third quarter of 2022.
357 million units down 23% from the third quarter of 2021 reported chip.
The 357 million units reported $78 million or 22% were for handset baseband chips.
Base station and Iot products shipments were to 279 million down 20% sequentially and 31%.
On a year over year.
Also in the quarter, we learn with one of our customers has begun to deploy cellular modem technology and high profile Iot device.
Consumer market Okay.
<unk> lead these royalties are being reported as cellular Iot world.
Overall base station and Iot royalties in the quarter was the second highest.
Record, reaching 87 2 million jobs.
Yeah.
As for the balance sheet items as of the end of the September 2022, or cash cash equivalent balances marketable securities were $144 million. We continued our buyback program by repurchasing approximately 83000 shares for $2 $3 million.
Today around 280000 shares.
Still available for repurchase.
Our dsos for the third quarter was lower than normal at 31 days down from the prior quarter of 44 days, which is closer to our norm.
During the quarter, we generated $1 $8 million cash from operating activity.
Depreciation and amortization was $1 90 million and the purchase of fixed assets was Europe .
Oh.
And then in the third quarter, our head count.
The intrinsic steam was 494 people.
411, where engineers this is up from a total of 492 people.
In June .
Now for the guidance.
He and elaborated earlier, the smartphone and consumer electronic markets are suffering from softer demand extended COVID-19 measures in China and elevated inventories.
We expect this to prolonged into the fourth quarter and anticipate a royalty revenue to be lower by about 10% sequentially.
Our licensing business is showing good resilience despite the uncertainty.
And expect it to be at a similar elevated level of the $22 million.
On an annual basis, our revenue is expected to be in the range of 132, and a half million dollar to a $135 million.
No.
Present, 8% to 10% annual growth over 2021.
Our non-GAAP net income and diluted EPS are also forecasting.
Approximately 14% and 12% over 2021, respectively. Despite the issues faced.
Specifically for the fourth quarter.
Gross margin is expected to be approximately 80% on GAAP basis, and 82% are not.
non-GAAP basis, excluding an aggregate zero point $4 million of equity based compensation expenses and 014 million.
Amortization of acquired intangibles.
Opex for the fourth quarter.
Lower than the third quarter, the fourth quarter GAAP based Opex is expected to be in the range of 25 8 million to 26 1 million.
The anticipated.
Total operating expenses for the quarter $3 6 million is expected to be attributed to equity based compensation expenses 0.3 million to the intrinsic holdback related expenses.
Half a million dollars for amortization of acquired intangibles.
non-GAAP Opex is also expected to be lower than the third quarter as we take immediate measures to align our expense base.
And in the range of 28 to 21 $8 million.
Net interest income is expected to be approximately $400000 in taxes for the fourth quarter is expected to be approximately one 7% to 29% on a non-GAAP basis.
Last call for the fourth quarter is expected to be 2022.
2 million shares.
We can now open the Q&A session.
Thank you if you'd like to ask a question. Please press Star then one on you touched on firm.
Speaker phone, we ask you. Please pickup your handset before pressing the keys to withdraw your question. Please press Star then two.
Today's first question comes from Kevin Cassidy at Rosenblatt Securities. Please go ahead.
Oh. Thank you thanks for taking my question.
And congratulations Gideon and all the best and enjoy your retirement and congratulations on a successful career.
Until we got to look at.
You're welcome thanks.
As we look at the five G rollout in India now.
How would you compare that to the rollout you saw in China.
Yeah.
But no doubt.
When it comes to five G round out.
Very significant rollout.
In.
The base station, one east China, both the second one is U S.
The Celadon is India. These are the largest places where you live.
The amount of base stations.
Uh huh.
The China and the U S. So the rollout is underway and we expect to go to the next.
Generation and specifically in China, We mentioned D. C is now ongoing from two respects one is share gain after the Huawei stockpiles is coming to an end.
And our customer or getting your data getting there with.
More advanced its actually our most advanced DSP.
And the most advanced DSP today in the market.
India, specifically is a it's an untapped area and that we start from scratch our customers as I mentioned got a significant chunk on the tenders. There was due to one it's hard to know it's higher but it's a very big.
Yeah.
I don't know about the China, it's not as big as China, but is either.
Should be go.
In the U S. The pace of how fast they are going to rollout D. C is yet to be determined but from a model standpoint since we are starting from.
Basically.
Zero.
It should be noticeable.
Yeah, Thanks for that.
And maybe just to jump over to the you'd mentioned licensing software I E. How does how do those contracts differ from circuit or hardware IP.
Yeah, that's coming.
I mean, that's a very good question because it relates to how we monetize it.
Our.
Dominance in the connectivity side and the chipsets right.
Yeah.
When we when we license out cheap we license to the semiconductor companies and they build the the chip and then go.
Go to the Oems and the and then we build the product there is.
A large amount of software that the OEM need either to develop a license.
And the fact that they use our DSP inside give us advantage because we.
If we provide the software we all.
We can optimize it because we had this intimate understanding of our IP I'll do like.
No the model when you go to the in the software IP is a royalty base. So you go to a speed that is percentage of the product.
The license.
The amount is is a it's small it could be also annually. So you don't we don't expect to see movement in the licensing Bob because of this of the IP, we do see and as early as next year.
We are we are going to see a rollout of broadband headset product that it basically no technology.
And that will add to our one P. A S b.
The.
Live then.
I would say starting from next year.
Yeah.
Okay, great. Thanks for that explanation.
All the best again.
Okay.
Ladies and gentlemen, our next question today comes from Chris Kramer with Barclays. Please go ahead.
Yeah, Hi, Thank you for taking my question.
I was wondering if you could give any color and changes in customer demand you touched on the softness with the handsets and smart things.
You could just talk about some of the trends you're seeing with the other verticals.
Yeah. So.
The the way we see it.
And below the demand, it's basically a combination of two events that you.
Usually it does not happen he was really U S. Tilt importantly, it's it's a it's chill.
She'll cooler.
It could depend it's a cyclic one that you have the <unk>.
And the inventory and that is it's growing as a result of.
Lower sell through or lower demand and then product that had been sworn seen oh decades happens once in a way, but what they've been specifically in D. C. That's the reason that we see.
I would say I would call it even helps stop for money in is that we are moving from.
Yeah.
Supply constrained.
Yes.
Book and build inventory not because of demand, but because of it.
A lack of supply so they what wherever they could all del bingo.
So we are in a situation that suddenly.
There is good supply or easing supply.
And the demand because of the inflation of other economies are functional.
Coming down so the supply the inventory is higher than usual no I you know this is something that.
Goes down anyway, because demand these del maybe low well so its amit.
Few quarters until we get to a normalized level of.
Inventory in the end and the start we're going to see demand or shipments picking up.
And.
It just a matter of time I.
So I wouldn't.
The C D C something that you're going to see for a long time, just admit them to clean up the to go to a different level of inventory and from that point.
The demand.
The impact is primarily mobile receipt in mobile.
We see significant changes in mobile the other one is consumer products. The thing we see that we are highly diversified and we have many products. So we don't see it all over the place it's at.
The envelope of this but not all over the place and the what mitigate all of these changes is that well.
I would say Jeremy in the in the in the base station and Iot that is completely immune from these inventory issues and demand.
Maybe I will add one more thing with Gideon explained in your question only apply as of right now to a royalty revenue line and not to license life.
Licensing front, we see all over the place like whether it's China or the U S. We still see a lot of the ship's design starts and the.
The trends that start off with Covid.
Haven't really slowed down the demand of the royalties or something else and then product, but not on the innovation and the needs for chips for so many different.
Market segments. So that's still healthy we've seen the numbers over the past three quarters and all of this is also the guidance for us.
For the fourth quarter same level and same type of execution.
We will try to achieve.
Hi, Yeah. Thanks, that's really helpful color and additionally, given your you sound cash position I'm wondering if you are looking.
Looking at the M&A environment any differently, considering a valuation levels have dropped off maybe a little bit is there anything you.
You can comment to add to your pipeline or how're you.
Acquisitions in the near future.
Yeah.
Alright, So let me try to help you out with that I don't think anything has changed dramatically obviously valuations have but.
The real question for Steve is there how do we take it in the post <unk> era.
What markets, what add ons to the IP model can we add in order to increase the business profitability growth and at the end of the day also shareholder value.
We are still with our 144 ish million dollars, we did about $7 million of buybacks in the beginning of the year.
And I'm sure that this will be one of the topics that we will discuss when he joined US and joins US next year and start learning about the company and its future opportunities. So theres no immediate the M&A plan on board, but for sure harvest Steve of the future and three point always too.
Continued to find us interesting technologies or interesting add ons that didn't work out very nicely.
And hopefully could take us through the Nextgen right next era as well in the future.
Great got it. Thank you that's it for me.
I don't know.
It comes from Matt Ramsay of Cowen. Please go ahead.
Hey, guys. Thanks for taking the question. This is actually Chateau Lachlan on for Matt.
Matt apologizes for not being on but I think he's currently listening to watch Bobby brought it down by PSA at JFK Airport. So.
So congrats to you get in and I wanted to ask about the Penta G ran platform it sounds like a pretty exciting expansion of what you're doing and Oh five G infrastructure space.
And can you maybe talk about either some initial customer feedback on the platform or maybe initial even design win was just in the first couple of weeks that you've.
Had it in general availability and then.
Maybe asking the same question a different way what was the what was the thought process that led to this product variety.
Like was this a customer poll or or was this just an opportunity that you saw it to sort of enter the the five G.
Maybe the private five G radio network market.
Yeah.
Thanks for the question Lisa.
But the question of things that we are.
Considering a fully widen out so.
There is a difference in the base station architecture, and the landscape the supplier landscape between LTE and <unk>.
In L. P was completely vertically integrated meaning there was those Huawei Nokia Ericsson Z D to a lesser extent Samsung those guys.
Controlling the hall.
The whole base station equipment.
And the <unk>.
Sure.
They build their own chips for their purposes, and we will riding on this one because we have as you know we have two out of these five that I mentioned the fuel cell technology exclusive.
And when it comes to five G. The I'll keep picture because the five G is much more ubiquitous meaning you.
You have the new usage models for the five D. Itch no just settling the handset is not just say it'll thing.
It's more industrially to promote the true.
Cellular Iot meet theirs, so it's all under the new five G.
The mission.
And as a result of it the architecturally says.
It is completely revolutionize in terms of eh, having new form factors or five G could be smart says it could be played with network that you mentioned could be active antenna. It would be opened run so do you sell different solutions.
Under the base station run.
The proposition.
They are.
The people are looking to do.
And these.
Attract many new commerce into the space it could be semiconductor companies could be newly M that wants to build their own chips to be India that wants to be.
The independent in N designs, we're getting all these inquiries and questions and to do it and what we found out that there is between our traditional business model of licensing the Pos so the DSP for their purposes, and what customers need in order.
To really be there.
And to be independent.
Yep.
And we decided to step forward and develop the platform to disclose the Pinta G, Iran, which is a mall.
Comprehensive and more and higher integrated solution. So it's not just the DSP is the DSP and all the other components that build their digital both off of the base station wrong.
It would be in the antenna side it could be in the in the base station chip.
In the end.
You know we are going to look like it hit the sweet spot, where they need it and we're all optimistic about being gas and that's the going up in the value chain not any more not just the DSP that applies to.
No very big companies with large R&D centers.
And the capabilities, but going to smaller scale company either semiconductor either it's even operate those in India that want to build a cheap open run companies, we see large new comments that could be candidate for this type solution and.
Complementary things that we are adding like software and.
Also with the twin snakes do part of the design of it.
For them, so it's exciting place and for US five G run off too.
Oh quite a wild time of building the momentum there becomes a better product and especially in these days well you know everything is kind of the suffering and facing headwinds do you see something that looks like circular.
Yeah very helpful. Very helpful summary, there and then if I could just.
Staying on that same topic, if I could just summarize and then maybe ask a second question on that <unk> platform, but it sounds like then.
What you're looking to do is not necessarily allow customers to directly compete with the Nokia and Ericsson of the world, but rather just to implement them in a smaller or more niche.
Areas that would maybe normally be served by those large Oems.
So you know it is that is that the right way to think about it and then do you have a.
Do you have a internal estimate for maybe like the size of this opportunity is and then finally like when should we think about materiality to the model there.
Yeah, that's a that's an accurate.
And perspective of what the idea is the idea is to reduce debt funding income now that all sort of SD.
Estimations about.
How big it is.
Well, it's it's it's a bit difficult to decipher.
The timeline of what is going to do the focus now is to engage.
Engage with customers and see days under the licensing revenue.
The World is as you know in the in this space is higher significantly where we charge for consumer electronics, because we've hired Sharon and the volume is low.
Yeah.
It's a promising space and I'll focus now is just too.
And to engage with those customers.
Yeah.
It wants to get into this market than that as I said there are plenty.
Super helpful. Thanks, a lot and congrats again to get there.
Thank you.
Thank you and our next question comes from Martin Yang of Oppenheimer. Please go ahead.
Thank you for taking my question and again also fees.
I would also my congratulations to your opinion.
How humans.
Thank you so much.
My question.
Or is <unk>.
What's your view on the men's or inventory reduction period, but do you see the handsets in consumer electronics.
How long will they locked in Europe heading into 2023.
Yeah.
Yeah, you know.
Well, we oh.
The in the <unk>.
The value of Chegg is exactly how long will it takes I haven't quite caught me, saying it's too.
To quote elsewhere in the Sims.
Space with them, so I would.
Think about in a similar way.
The deep to quote them before we get to a normal level.
Inventory that we still see demand picking up.
Got it thank you.
And a follow up.
The relevant impact on licensing activities I know you haven't seen any licensing activities slowing down.
But do you think that other macro factors could.
Hi, either negative or positive impact on the licensee into next year.
Well at least from when it comes to Q4.
We don't see indications for such a thing called licensing keys can.
It can be lumpy people can make.
Decisions I would say that places like China.
Still no beer.
And the crisis, everybody knows that that's a tempo Wally.
It's a it's a.
You know, it's a ways still relates to the Covid and the.
Demand for chips and connected devices.
Something that is sustainable.
And we don't see right now any slowdown in the adoption.
Oh, starting of new projects and all IP gets into the picture.
Thank you very much.
I forget.
Good morning, ladies and gentlemen, as a reminder to ask a question. Please press Star then one our next question comes from Sushi, the silver with Roth Capital. Please go ahead.
Hi, Gideon Hi, and Ive getting I congratulate you on your retirement, but I don't think you know quite how to retire so well see how this goes hum.
Yeah. So the the the five G. Ed. Thank you for the answer before that's very detailed on the prior question, but I'm wondering since there are new players and some Asian Oems if they're considering just kind of leapfrogging doing five G. Like an ericsson Nokia and just including AI at the edge are including Wi Fi and putting it all together.
You're seeing those kind of fixed wireless asset type of access kind of boxes that are kind of combine all of that.
Yeah. So GE each I think is a by product it's not the highlights feature yes, everybody that bill.
The five G.
Yeah.
Ron if you'll see whether it's for the macro or the small cells. So the antenna.
Inc. O N G I.
The functionality and that's exactly where we step in you know we are not going onto the nvidia spaces. So.
All those guys did build in.
Several bills.
They need they have an application in my.
Very well defined they know exactly the performance and that's a place that we get another aspect is Z in China one of the.
One of the things that you're seeing in China is that because the export control and the limitation on.
A I N G four.
Wholesale meal compute.
What they have in mind, and we see it tomorrow than in the west.
They'd say, okay, let's move that's Mako and devices smartphone so we offload from the cloud.
Into the device, whether it's the civilians come out whether it's a.
It's our smallest phone whether it's a it's a car so what do we see you see lot of interest in China for a N G I into the device itself.
You know there to offload more functionality from let's say handicapped now and sell them AI.
It's a very interesting perspective get in and then also just to follow up on on the automotive business could you talk about an update as to the automotive customers that the timing of revenue there or what's the progress there is thanks.
Hi.
No. This is an industry that you have to take it to take a deep breath before and Youll see some think once you see it as a 10 year cycle I believe that when it comes to us.
Are we going to see 'twenty 'twenty four 'twenty 'twenty five.
As far as the for both millions.
The rollout of chips based on technology, it's an ongoing process. It's a it's a they they have to follow the steps that they need safety and qualification and growing up deal on Oems and build the car. So 2020 for 2025, that's the latest update that we go.
For those customers that gives us.
Okay, Thanks, and congratulations again.
Thank you. Thank you and ladies and gentlemen. This concludes the question and answer session I would like to turn the conference back over to Richard Kingston for closing remarks.
Thanks Rocco.
Thank you all 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 unacceptable through the investors section of the website.
With regards to upcoming events, we will be participating in a we will be at the following conferences the <unk>.
Wells Fargo sixth annual TMT Summit November 29th December 1st in Las Vegas.
The consumer Electronics show CES January 5th through eighth at 2023 in Las Vegas, and that show <unk> and our CEO will be in attendance on our new CEO also a mere penuche will also be in attendance and CES this year on <unk>.
Finally, we will also be attending the 25th annual Needham growth Conference January 10 through 12 are in New York.
For further information on these events in all events, we will be participating in can be found on the investors section of our website and that's it for now thank you and goodbye.
Thank you Sir This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.