Q2 2023 Ceva Inc Earnings Call
Good day and welcome to the <unk> second quarter 2023 earnings Conference call.
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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.
Everyone and welcome to <unk> second quarter 2023 earnings Conference call.
Joining me today on the call are Amir <unk> Chief Exec.
And you've already got a chief financial officer of CEVA.
Before handing over to Amir I would like to remind everyone that today's discussions contain 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 border.
Forward looking statements include statements regarding market trends and dynamics, including anticipated recovery in semiconductor startup funding opportunities for Wi Fi and generous of AI or.
Our market position strategy and growth drivers demand for our benefits all of our technologies.
Expectations and financial guidance regarding future performance, including expected recovery in revenues I'm guidance for the third quarter and full year 2023.
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 effect of intense industry competition.
The ability of zebra technologies and products, incorporating seamless technologies to achieve market acceptance.
Steve its ability to meet changing needs and users on evolving market demands.
Critical nature and general economic conditions in the semiconductor industry.
See visibility to diversify its royalty stream.
License revenues.
She was ability to continue to generate significant revenues from the handset baseband market entre penetrate new markets.
Steve It assumes no obligation to update any forward looking statements or information, which speak of their respective dates.
In addition, we will be discussing certain non-GAAP financial measures, which we believe provide a more meaningful analysis of our core operating results and comparison of quarterly results.
A reconciliation of non-GAAP financial measures is included in the earnings release, we issued this morning, and indeed, the SEC filing section of our Investor Relations website at investors CEVA DSP Dot com.
With that said I'd like to turn the call over to Amir who will review our business performance for the quarter I'll provide some insight into our ongoing business I'm here.
Thank you Richard welcome everyone and thank you for joining us today.
Our second quarter results reflect a dynamic environment brought about by challenging macroeconomics condition that has led to slower than expected recovery in some regions on the other hand, we also saw assumptions and chip demand following a few quarters of inventory correction.
Our licensing business experienced a slowdown in the quarter, which I will explain momentarily on royalties. We saw royalty revenue recovered to grow 17% sequentially and we anticipate this recovery can continue in the coming quarters.
In licensing our revenue came in below our expectation and the primary reason for this relates to the semiconductor started up a customer base that is an important contributor to any IP licensing business semiconductor startups rely on venture capital funding to underpin their businesses.
Funding for D C for semi startups slowdown towards the end of 2022 and global basically funding for the first quarter of 2023 50.
50% year over year comp.
Consequentially some of it is we start ups, we anticipate closing in the quarter did not come through as planned and the resulting shortfall in licensing revenue was unexpected.
However, we are already seeing funding I'll start ups in the semiconductor ecosystem picking up again and anticipate licensing to these companies we're going to recover in the coming quarters. We also saw mixed results in our design services activities into quarter, where their overall defense industry is moving slower than expected to come.
Including new investments and funding there it takes more time.
As a result, some projects in our sales pipeline are taking longer to get funded.
Looking at licensing business, concluding in the quarter in more detail, we signed 17, new licensing agreements.
Agreements, we have not too already interest in our wireless communications offerings and encompassing five G cellular Iot Wi Fi Bluetooth and uwp.
All of these technologies continue to be in demand with data science in each of these areas.
We signed three Wi Fi six <unk> four combo chips, where we also license our latest technology why don't these deals was with a strategic customer.
A leading supplier of connectivity chips into Iot devices.
<unk> consumer industrial and smart home.
This latest deal with the customer is a multi use agreement as they look to expand their Wi Fi six business on the back of their highly successful.
Wi Fi phone business.
So these latest ends with the customer as they want to use it.
Yeah.
Okay.
Where they have shipped more than 300 million CEVA power Wifi chips to date as we have discussed previously the average royalty per unit, we get for Wifi six is higher than previous generation of Wifi, having an established customers and leader in this space migrate Wi Fi six presents another potentially strong country beat your Java Wi Fi royalty.
Stream in the coming years.
Other deals of not in the quarter include four new agreements for Automotives, two four hour UW bead technology for digital keys and in cabin greater applications and two for our AI compiler technology that creates fully optimized one time software for our sense of purpose. They had stores in your plan and abuse.
Our product offering are very well aligned with the automotive industry's push towards electrification and even more powerful safety system. We have many touch points already in the car, including our vision AI processors for Adas sensor fusion DSP for drive thru drivetrain.
And battery management systems.
And UW be Bluetooth Wi Fi five G N V to exports safety infotainment communications and connectivity.
Our inherently low power solution are in excellent shape for Automotives and while it can take quite a number of years before I went to module design wins show up in production vehicles. We are very excited about design wins, we have secured to date and the potential royalty stream that we can generate from these highly lucrative market.
Finally, we signed junior agreements instead of Iot space, one for our new <unk>.
Never been Iot technology and are therefore targeting five G.
Now to royalties after a weak first quarter, we saw a good recovery in the second quarter, driven by smartphone targeting emerging markets and restocking for consumer and industrial Iot products following the inventory correction.
Royalties for the quarter reached $9 $5 million up 17% sequentially.
We so CEVA powered chip volumes increased sequentially across the broad spectrum of markets, we address and a notable recovery in smartphones Pcs and five G base stations in particular.
On the last earning calls we explained it was a significant inventory correction, taking place, particularly in the smartphone and consumer Iot spaces, where we have meaningful exposure.
Going in conversation with all our customers and other companies in the supply chain. We believe that this inventory has been a walk through for the most part in our world does reflect a resumption in demand to refill the China's we reiterate our belief that the first quarter was the bottom for our royalty business and we anticipate continued recovery far warranty business.
Through the reminder of the year.
Now I would like to switch to discuss our new strategic market Tam expansion opportunity that we are addressing with our products targeting AI from the cloud to the edge earlier.
Earlier this week, we announced our latest neural processors targeting generating AI applications generative AI is creating a lot of headlines recently.
I mean, I think day I never these things too Chad J P T and the other generating pre trained Transformers, Oh Gee PK models in general.
Right it into training, including deep learning and machine learning and influence, including computer vision co piloting photonics, such as fast optical networking animal.
As a dress influenza application, we have our sensor Paul and Newport product line for a number of years and has been successful in helping our customers deploy AI across multiple end markets and devices, including industrial automotive and consumer.
Generally the AI next day air experience to the next level transformer base models have led to significant breakthrough in several forms of generate do they are.
They are key in both increasingly powerful dextra image models, such as Delta E or stable diffusion and language and instruction. Following your models such as jet GPT on for Patrick.
Today, such networks are typically typically executed on GPU based compute infrastructure in the cloud because of their massive module sizes and high memory bandwidth requirements.
However, as Transformers based networks mature and become increasingly popular there is an opportunity spanning all the way from the cloud edge to increase the performance and efficiency of executing generates either AI.
For example, there are new generate to the AI models, which are domain and enterprise specific niches smaller proprietary data sets with fewer upon majors and expert systems.
These generate deep AI models don't require a GPU based compute to execute and thanks to our extensive experience in developing processors that supports AI and low power devices, we have in our hands, our new boy I'm N P family to support this transformative base Lodge language models L. A N N Gen.
Alright, do AI models to allow natural language processing and generating capability locally co.
Oh pilot team with incredible efficiency.
This directly improve the latency and the overall personal experience of fusing generate debate I protect the privacy of the use of data.
Dressing a key concern of cloud based AI today and significantly reduces the cost spread quarry.
I believe that our ability to support transformer architecture, we've exceptionally low power consumption and the highly efficient.
Positions us very well to exploit this new wave of AI across the full spectrum of end markets, Brooklyn from consumer Iot to industrial automotive and networking.
Our new plan is already available for licensing to customers and we are very excited about the potential here to grow our AI footprint, we have a decent hence product family.
In summary, despite the revenue shortfall in licensing this quarter, we believe our portfolio of wireless communications and sensing technologies is unrivaled and leads the industry in terms of performance power efficiency and quality, our new appliance family further expands our strengths in AI to address the growing.
Trend of deployment the incredible potential of a general idea of AI to any device and application.
We have our technology leadership position and top tier customer base and desire to go on expense, we remain very optimistic about the long term trends in our business and our ability to drive long term shareholder value.
Now I will turn the call over to your need for the financials.
Thank you Amir and good day to all.
I'll now start by reviewing the results of our operations for the second quarter of 2023.
Revenue for the second quarter was $26 $2 million compared to $33 2 million for the same quarter last year.
The revenue breakdown is as follows.
Licensing.
And a related revenue, reflecting 64% of total revenues were $16 8 million as compared to $22 1 million for the second quarter of 2022.
The licensing business can be volatile in the IP industry and in recent periods has been influenced both ways cyclical macro economic trends as well as short term conditions such as shifts in fundings.
Startup customers.
Royalty revenue, reflecting 36% of total revenue was $9 $4 million as compared to $11 1 million for the same quarter last year illustrative of the overall soft demand in our end markets, but this time last year.
Encouragingly on a sequential basis royalty revenue grew 17% and was we expected a significant improvement and experienced significant improvement in the smartphone.
<unk> G base station and D C markets from the first quarter level.
Quarterly gross margin came in lower on GAAP, and non-GAAP basis, compared to our guidance due to lower revenue base and a higher subcontracting related expenses in our Costco revenues gross margin was 79% on GAAP basis, and 82% on non-GAAP basis.
As compared to 82% and 85% guidance on GAAP and non-GAAP , respectively.
Our non-GAAP .
Quarterly gross margin excluded approximately $400000 of equity based compensation expenses and amortization of acquired intangibles of $400000.
Total GAAP operating expenses for the second quarter was lower than the low end of our guidance at $26 $9 million due two immediate actions taken by management associated with lower overall employee related benefit accruals as well as better.
Ex environment with a stronger U S dollar compared to other currencies and lower overall marketing related activities.
Total GAAP operating expenses for the second quarter, excluding equity based compensation expenses amortization of intangibles and hold back expenses were $22 $4 million.
Also below the low end of our guidance due to the same reasons I just explained.
GAAP operating loss for the second quarter was $6 $3 million up from GAAP operating loss of zero point $3 million for the same quarter last year.
non-GAAP operating loss was $1 million.
Compare to operating income of one $4 6 million for the same quarter a year ago.
GAAP and non-GAAP tax expenses of zero point $5 million was recorded mainly associated with withholding tax deducted by our customers that could not be utilized in more expense.
Our GAAP net loss was $5 8 million and diluted loss per share was 25 cents for the second quarter of 2023.
Baird.
Loss of $1 $1 million and diluted loss per share or five cents for the second quarter a year ago.
Yeah.
With respect to other related data.
Shipped units by CEVA licensees during the second quarter of 2023 were 370 million units up 25% sequentially compared to the first score of 2023 reported shipments of 297 million units and that.
From 433 million units a year ago, primarily to the reason a mere discussed earlier.
Of the 370 million units reported 17 9 million units or 21% were for handset based.
Chips up from 27 million in the first quarter of the year.
Our base station and Iot product shipments were 291 million.
8% sequentially from 270 million units for the first quarter of 2023 and down 17% year over year from 349 million units.
Bluetooth shipments were $210 million for the quarter as compared to $190 million for the first score of 2023.
As we saw in the beginning of the restocking.
Following the inventory correction that we experienced.
Wifi shipments were 29 million units as compared to 21 million units in the first quarter of 2023.
Cellular Iot shipments were 21 million units as compared to 29 million units in the first quarter.
And other shipments under our base station and Iot umbrella totaled 31 million units in the quarter. This includes our computer vision AI audio sensor fusion five G Rand and DSP is from non cellular communications.
And let me restate it we saw a significant recovery in handset baseband chips for smartphones in the quarter driven by channel restocking in emerging market following the inventory correction in the prior quarter.
As for the balance sheet items at the end of the quarter, our cash cash equivalent balances marketable securities and bank deposits were approximately $136 million.
Our dsos for the second quarter or.
47 days better than the first quarter was 55 days.
During the second quarter, we used $4 8 million daus.
Cash from operating activities and our ongoing depreciation and amortization was one 4 million and purchase of fixed assets was $1.1 million.
At the end of the second quarter, our head Count was 497 people on food and 410 that were engineers. This is the same count as we had at the end of the first quarter.
Now turning to our outlook.
Our licensing and marine related revenue business is fueled by a strong portfolio of wireless connectivity and sensing AI technologies and provides critical building blocks for many in the semiconductor industry.
With that said and with current market condition, we're taking a cautious approach in forecasting a lower.
Lower base revenue level, then achieved last year.
In royalties the correction of an improved environment in handset baseband royalties can continue into the second half of the year.
Our base station and Iot customers also look more positively in the upcoming two quarters. So we anticipate sequentially higher royalties for the third and fourth quarters.
In parallel we'll continue to monitor market trends.
Early in the year on our Q4 'twenty two earnings conference call Amir outlined this scenario and the potential of the licensing business to be impacted by project expense adjustment and realignments within the semiconductor industry.
At the time, we also stated that this may further our cost control measures if required.
In light of the recent financial results refocused on the products and technology investments.
And to some extent also tied to the current macro economic environments.
We have acted and we are taking few immediate measures to reduce overall head count and expenses.
And the forecast overall lower expenses and most of the third and the fourth quarter well.
Well continue to monitor our expenses closely and strategically invest our resources.
Specifically for the third quarter of 2023.
Gross margin is expected to be higher in the second quarter, approximately 82% on GAAP basis.
And higher sequentially, a non-GAAP basis, and 85% excluding aggregate based compensation expenses of zero point $4 million and amortization of acquired intangibles of zero point $4 million as well.
Opex for the third quarter than anticipated to be slightly higher compared to the second quarter of 2023 due to R&D effort allocation from cost of goods.
And in the range of 26.7 to 27 7 million.
Including in a prison and anticipated $4 $7 million of equity based compensation.
0.8, 2 million for amortization of inquired intangibles.
non-GAAP Opex is also expected to be slightly higher in the second quarter due to the reasons I just explained and in the range of 22 to $23 2 million.
I want to emphasize that overall expenses for CEVA in the third quarter is forecasted to be lower.
And then the second lower second quarter expenses level that we recorded due to the cost measures I just mentioned.
Net interest income was approximately $1 million taxes for the third quarter are expected to be shy of a million dollars derived mainly from withholding taxes associated with new deals to be signed and reported royalties during the quarter.
Share count for the third quarter is expected to be approximately 24.7 million shares.
And Rocco, we could open the Q&A session.
Thank you.
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Our first question today comes from Matt Ramsey with Cowen. Please go ahead.
Thank you very much good afternoon guys.
I guess for my first question Amir I totally get it.
Changing sort of landscape right now from a licensing perspective, and some of the things that you you mentioned about smaller and startup companies.
They're funding situation to take licenses, so I get that on the headwind side I guess what.
I'd like to hear a little bit more about it.
The licensing trends in China, we've heard from a few folks that as as the high Silicon Huawei semiconductor business essentially could manufacture stuff on the leading edge anymore. There is a lot of new companies that have sprung up over there.
The same engineering base and have quite a bit of funding behind them. So I guess could you talk a little bit about <unk>.
Any restrictions you guys might have in terms of export controls or whatnot and licensing into China, what the licensing trends are there and I'm I guess I'm, a little bit surprised that some of those new companies that are popping up over there maybe it didn't make up for some of the shortfall that you mentioned in the western market.
Yes.
Good point I think I met several things here first so that's definitely a potential as we look forward and some of those companies that you mentioned there is a very strong engineering base, there that actually extremely familiar with our technologies and we say that's interests are coming later on in the year, but.
Those things you know are those changes has happened more recently.
It will take some times four.
Basically get to establish getting the funding building and then deciding on their technology and product line. So that the activity overall is still a very strong adjusted some of those decision taking longer.
And so our business in China is solid and actually we see lots of potential as we keep driving towards that in the next few quarters, but overall as I mentioned in the Pan.
And in my prepared remarks is that the overall fine microeconomics and we'd have to see if you see funding and just decision to make.
I want to take on new projects and and to use that cash.
Cash and just taking a longer that's that's what's really happening in this quarter and as we look towards the recipe here.
And I'll add Matt maybe you asked about extra control. So we obviously comply with export control and don't have any special limitations that we are aware of or anything has changed recently. So that's that's really not the case, but those exact type of company that you mentioned that the.
Maybe it started off and there are great potential, but didn't get to the final stage of signing and executing those deals that we were working with.
Hum.
Thank you guys as my.
Follow up question.
I wanted to focus on the model a little bit you mentioned in your script.
Obviously in our results and guidance are lower.
Licensing revenue so I'm just trying to get my head around what you guys are trying to message. There I mean are we for the full year 'twenty.
2023 or are we looking at licensing revenue similar to what it was in 2021 so like that.
Three.
3 million give or take is that kind of I'm just trying to use that as a benchmark to see if that's in the right ballpark and then the second piece as you you mentioned lower Opex for Q3, and then Q4 as well, but maybe you could go through the non-GAAP guidance again on Opex, because maybe I misheard, but it looked like it might be actually up a little bit sequentially.
And in September versus June helped.
On those two items I'd appreciate it thank you.
Sure, let's start with the licensing I think for Q3 and Q4, we're keeping the licensing more or less so obviously it could be a range plus or minus.
A million $2 million depends on the quarter.
It will look like but we're looking at about 17 ish million like like very similar to what we came out right now.
For Q3, and Q4 again pending deals that you could get five maybe earlier than planned or are larger in size, but that's that's the model so probably a little bit shy of the 2021, but that's that's the.
In the ballpark that you are you asked about.
And that's on the licensing royalties, we mentioned, we started where they got up to nine four.
We are looking at both Q3 and Q4 sequential growth, we don't know exactly the pace and the magnitude of that so we are taking it slow but the all of the indications from the royalty report we received from Q2 show that there is a significant recovery in handsets in the P CS and five G.
He ran man base stations. So all that is baked in and continuous growth in the next two quarters.
Not necessarily a 17% sequential growth, but but still are more limited than growth.
Until we get the actual report and have a better obviously visibility.
On the expense level I want to again emphasize their tool expense lines, there's the cost of goods for us.
And the R&D line, the operating expenses and the expense that moves around a bit from quarter to quarter between R&D and cost of goods in that show service costs and he'd be a cost that are associated with those services that we are and that's b provide M. <unk>.
Margin gross margins are slightly higher.
And the 90 85 percentage both for Q3 and Q4 compared to 82% that we just reported.
And on the other hand some of those.
The higher expense and better margins.
Our lower cost of good expenses go to back to the R&D line. So you're right that the for Q3 slightly higher than they are in the operating expenses, we guided 22, 2% to 23 point to somewhere in the middle is probably where we end up including those are variable expenses that move up and down.
From R&D to cost of goods, but if you look at the overall expenses went up in higher gross margin, you'll see that the overall expenses from Q2 to Q3 will go down and that's the plan for Q4 as well.
Alright, Thank you yanni, particularly the last point about total expenses, including Cogs, but helpful. Really appreciate it I'll get back in the guide. Thank you. Thanks.
Thanks, Matt.
And our next question today comes from Kevin Cassidy at Rosenblatt Securities. Please go ahead.
Thanks for taking my.
Question.
During the quarter.
Working on these deals.
They slipped out or were they cancel.
Yeah.
Yeah, Kevin that's a good question, it's actually to some degree it makes most of the most part they are getting delayed.
So definitely that they are companies that takes longer to make those decisions on what it takes longer for them to get the final approval of the funding that they need in order to so called to to make the final call on in license from lots of technology. That's the majority of the cases, but there are also.
Some cases, where the company decided to eventually not to go ahead.
I'll add one more thing Kevin that we also signed a one or two deals that are divorced signed but because of payment concerns until this funding gets executed we didn't deliver it didn't recognize so you'll see it and that's not just.
Just for this quarter it happened in the past as well and if we're not sure about the Collectability, we don't deliver and don't don't.
Don't recognize any revenue so they're all on both sides.
Sure.
The liner.
Okay, great. Thanks for that clarification, and a new way.
Exciting regenerative AI and.
And I'm sure you've been developing with our customers.
Customers already are potential customers can you say, where there are applications that are in there.
The handset with the P C or is it a new types of problems.
It's actually Kevin Great question, it's actually across a wide variety of applications.
Well you see it right now so called slow for edge devices co pilot team use cases, so they liked it you mentioned it like PC tablets and handsets devices, that's definitely where you would see those things deployed in the future and in addition, as things were that in the future for high speed Photonics.
Also in the areas of Automotives.
Foreseeing that all of a different type of fuse cases, and and really a quite wide range of applications.
In the consumer space and I don't want it.
Yeah.
Okay, great. Thank you.
Thank you.
Thank you and ladies and gentlemen, as a reminder.
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Our next question comes from Chris Reimer of Barclays. Please go ahead.
Yeah.
Yeah, Hi, thanks for taking my questions.
I was wondering if you could give any more color you've mentioned several times in the past quarters are back getting into the industrial and the larger consumer products market. I was wondering what has to happen before you break more into that area.
Yeah, we're actually already playing out quite a bit in the industrial space and things everything related to <unk>.
Hey, application and DSP processing as well as with our leadership in wireless communication.
And so there is already quite high adoptions with our different type of Wi Fi Bluetooth five chip technologies.
And in the rats cabinet is coming to the industrial space.
I I don't think there is once things in particular that we need to do differently, but I'd say keep driving innovation with our product line and addressing these market.
Overall like with the other markets, we are focusing a lot on power efficiencies and and high performance and high quality of our product and this is worried about picking but also for the industrial space.
Okay.
Touching on the.
Our efficiency measures.
How sustainable are they and if you could just touch on what exactly you did in order to reduce expenses.
Yeah, I think the best way to look at that is really starting with the strategic decision first where I want our team to focus in terms of driving the long term go up. So first we really have a very strong leadership in wireless communication spending all the way from five <unk> to.
Wi Fi Bluetooth, which all I've been never been at a T and definitely that's an area of focus that we'll keep and invest and enlarge our capabilities there and the other focus area is Iran, DSP processing moving into that space.
And as I mentioned in your plan with the additional very great capabilities too to support Transformers and general antibody. So those are the focus area that we are heavily investing with debt I kept basically walking wounded team, where we see.
Other activities that aren't necessarily waive the focus of the long term strategy of the company and that's what makes it clear we drive more efficiencies and overall cost reduction and so we have done that through the towards the end of this quarter and as we get into Q3 and Q4 as you had mentioned and we will continue monitoring.
Basically our success in the market and the strategic David just wanted to drive.
I wanted to ensure that focus.
Oh long way very strong focus on our IP portfolio to drive that to the market.
Got it thanks, that's it for me.
Thank you Chris.
And our next question comes from Gus Richard with Northland. Please go ahead.
Yeah. Thanks for taking the question I was just wondering if you could give us a little bit of color on the geographic distribution of your licensing business.
Yeah.
And same same as in the past nothing too dramatic.
Dramatic all of our our service business.
Is it in the U S to regain relating to our aerospace and defense.
Yeah.
Strong presence in China.
More than half of the business usually comes from there and as we were asked earlier I also bought all of the new startups or are emerging and are a lot of investments over the last decade has been a it's been relevant there.
We're seeing them more in the Europe and the U S. Obviously opening in May and creating Fabs. We saw TSMC announcement yesterday about opening a new fab in Europe with the joint with them, they're very large semiconductor players all of that the fuels, both the U S and Europe the two.
Two more.
Sensitive services IP ship design activities ought to.
Be able to fill up those fabs. So we're trying to shoot at all the different areas of the new markets. Obviously will also change a bit the mix the geographical mix for US Japan has been strong this last quarter, Taiwan has been strong for us with a very nice deal there.
So all over the place, but I would say that they were trying to move and add more offerings and more revenues over time in both the Europe and the U S.
I will add a little bit thanks, Sidney and I will add a little bit more colors on that and we have talked about four days that we had this quarter and in the automotive space.
And this wave the generative the AI and all the all focused on high performance N. P is for they are those are the type of technology that will help us actually with expense very very nicely and the other regions.
And on top of that and in the previous earning calls I mentioned about so called the tailwind that we expect it to more to come towards as we go into 2024, and 2025, which is the funding the local funding for let's say a local semiconductor industries from the five two overall development.
It's definitely something that we see happening in the different regions and that will also propel and more opportunities for us on this with a combination of focusing on.
The AI space and they'll do more things in addition to our leadership in the wireless communication, Okay will drive more adoption of our technology is so called outside of FX.
Got it.
That's helpful.
Just and again back to the licensing business you know as you look forward you know where do you see your best opportunities for licensing over the next couple of years is that AI auto or does it remain wireless.
Any color on that.
<unk> area would be helpful. Thank you.
It's quite a similar to what I mentioned previously.
There is first of course everything related to wireless communication, we are and it really was a very strong position and we expect that to continue and even to transfer and so that's definitely will continue to drive significant portion of our licensing and business overall.
But also in addition to really the processing that DSP processing and moving into AI. That's so called the new Gulf area on top of that that will drive lots and lots of our success.
And lastly is that in the previous calls I mentioned, our software embedded application goes on top of that that drives a much more demand directly with the OEM that will drive also additional golf was especially on the royalty side so long attack.
Yeah.
Got it perfect. Thank you so much.
Thank you.
And our next question today is a follow up from Kevin.
Cassidy at Rosenblatt Securities. Please go ahead.
Okay.
Yeah, just for a little more detail on that with the four deals in automotive.
Traditional semiconductor companies or are they are.
Tier ones or you mean dealing with the automotive companies that are designing their own stomach.
So in most cases, we are dealing with the tier ones.
Or the semiconductor sorry, we're dealing with the semiconductor suppliers and in some cases also directly with the tier ones. So it depends on the application and how they would like to deploy it in a in their systems.
But I'd say its combination with majority of the semiconductor.
Yes.
Yeah.
Okay. Thank you.
Thank you and ladies and gentlemen. This concludes our question and answer session I would like to turn the conference back to Richard Kingston for closing remarks.
Yeah.
Thank you 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 conferences.
I'm, a 26th annual Internet Communications and Technology conference taking place today virtually.
Frozen blocks third annual technology summit, the age of AI, taking place August 22nd 24 virtually Jeff.
Jeffrey semiconductor hardware and communications Technology Summit August 29th in 30th in Chicago.
The Jefferies Israel Tech Trek September 11th to Turkey, and Israel.
Further information on these events in all events, we will be participating and can be found on the investors section of our website. Thank you and goodbye.
Thank you Sir This concludes today's conference call.
You all for attending today's presentation. You may now disconnect your lines and have a wonderful day.