Q3 2023 Arteris Inc Earnings Call
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Speaker 1: The.
Okay.
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Yeah.
Speaker 2: Good afternoon, everyone, and welcome to the Arteris third quarter 2023 earnings call. Please note this call is being recorded and simultaneously webcast. All material contained in the webcast is sole property and copyright of Arteris Inc. with all rights reserved.
Good afternoon, everyone and welcome to the yards Harris third quarter 2023 earnings call. Please note. This call is being recorded and simultaneously webcast. All material contained in the webcast is sole property and copyright of parts and everything.
With all rights reserved.
Speaker 2: For opening remarks and introductions, I will now turn the call over to Erica Manion of Sapphire Investor Relations. Please go ahead.
For opening remarks, and introductions I will now turn the call over to Erica Mannion of Sapphire Investor Relations. Please go ahead.
Speaker 3: Thank you, and good afternoon. With me today from our terrace are Charlie Janik, Chief Executive Officer, and Nick Hawkins, Chief Financial Officer. Charlie will begin with a brief review of the business results for the third quarter ended September 30, 2023. Nick will review the financial results for the third quarter followed by the company's outlook for the fourth quarter and full year of 2023. We will then open the call for questions.
Thank you and good afternoon.
Today's from our tariffs are Charlie <unk>, Chief Executive Officer, and Nick Hawkins, Chief Financial Officer, Charlie will begin with a brief review of the business results for the third quarter ended September 32023, Nik will review the financial results for the third quarter, followed by the company's outlook for the fourth quarter and full year of 2023.
We will then open the call for questions.
Speaker 3: Before we begin, I'd like to remind you, management will make statements during this call that are forward-looking statements within the meaning of federal securities laws. These statements involve material risks and uncertainties that could cause actual results or events to maturely differ from those anticipated, and you should not place undue reliance on forward-looking statements.
Before we begin I'd like to remind you <unk> management will make statements. During this call that are forward looking statements within the meaning of federal securities laws.
Statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated and you should not place undue reliance on forward looking statements.
Speaker 3: Additional information regarding these risks, uncertainties, and factors that could cause actual results to differ appear in the press release or tariff issued today and in the documents and reports filed by a tariff from time to time with the Securities and Exchange Commission.
Additional information regarding these risks uncertainties and factors that could cause actual results to differ appear in the press release are terrorists issued today and in the documents and reports filed Bioterrorists from time to time with the Securities and Exchange Commission.
Speaker 3: Please note, during this call, we will cite certain non-GAAP measures, including non-GAAP net loss, non-GAAP net loss per share, and free cash flow, which are not measures prepared in accordance with U.S. GAAP.
Please note during this call we will cite certain non-GAAP measures, including non-GAAP net loss non-GAAP net loss per share and free cash flow, which are not measures prepared in accordance with U S. GAAP.
Speaker 3: The non-GAAP measures are presented as we believe they provide investors with a means of evaluating and understanding how the company's management evaluates the company's operating performance.
The non-GAAP measures are presented as we believe they provide investors with the means of evaluating and understanding how the company's management evaluates the company's operating performance.
Speaker 3: These non-GAAP measures should not be considered in isolation from, as substitutes for, or superior to financial measures prepared in accordance with U.S. GAAP.
These non-GAAP measures should not be considered in isolation from as substitutes for or superior to financial measures prepared in accordance with U S. GAAP.
Speaker 3: A reconciliation of these non-GAAP measures the nearest gap measure can be found in the press release for the quarter ended September 30 2023.
A reconciliation of these non-GAAP measures. The nearest GAAP measure can be found in the press release for the quarter ended September 32023.
Speaker 3: In addition, for a definition of certain of the key performance indicators used in this presentation, such as annual contract value, confirmed design starts, active customers and remaining performance obligations, please see the press release for the quarter ended September 30, 2023. Listeners who do not have a copy of the press release for the quarter ended September 30, 2023 may obtain a copy by visiting the investor relations section of the company's website.
In addition, our definition of certain of the key performance indicators used in this presentation, such as annual contract value and firm design starts active customers and remaining performance obligations. Please see the press release for the quarter ended September 32023.
Listeners, who do not have a copy of the press release for the quarter ended September 32023 may obtain a copy by visiting the Investor Relations section of the Companys website.
Speaker 3: I will now turn the call over to CEO Charlie Janet.
I'll now turn the call over to CEO Charlie Janet.
Speaker 4: Thank you, Erica. And thanks to everyone for joining us on the call this afternoon.
Thank you Erica and thanks to everyone for joining us on the call. This afternoon.
Speaker 4: We're pleased to report a solid third quarter with annual contract value plus trailing 12-month royalties of $57.3 million and the addition of 22 new customer chip designs.
We're pleased to report a solid third quarter with annual contract value plus trailing 12 month royalties of $67 3 million and the addition of 22 new customer chip design.
Speaker 4: We added two new customers and numerous license expansion deals from existing customers, three of which were with top ten global technology companies.
We added two new customers and numerous license expansion deals from existing customers.
Of which were with the top 10 global technology companies.
Speaker 4: Our customers' design pipelines continue to be robust across enterprise computing, consumer electronics, automotive, industrial, and communications, with many SoC projects incorporating machine learning or AI applications.
Our customers design pipelines continued to be robust across enterprise computing consumer electronics, automotive industrial and communications with many as Youll see projects incorporating machine learning or AI applications.
Speaker 4: As we have stated previously, we believe that SoC design complexity, including in the emerging triplet markets, continues to grow, leading to increasing importance of commercial system IP.
As we have stated previously we believe Soc design complexity, including in the emerging markets.
Continues to grow leading to increasing importance of commercial system IP.
Speaker 4: Several established companies who today develop the bulk of their system IP internally are looking to either augment those capabilities or improve their schedules and costs by outsourcing system IP connectivity to commercial vendors such as Arteris.
Several established companies, who today developed the bulk of their system IP internally are looking to either augment those capabilities.
Their schedules and cost.
Store, saying there might be connectivity commercial vendors such as Akshay.
Speaker 4: We're seeing an emerging confirmation of this trend in our customer base.
We are seeing.
Emerging confirmation of the strength in our customer base.
Speaker 4: One of the customers we added in the third quarter is another top semiconductor company.
One of the customers we added in the third quarter is another.
Semiconductor company.
Speaker 4: securing a long-term foundational relationship with yet another industry leader.
During our long term foundation of our relationship with yet another industry leader.
Speaker 4: Arteris is now engaged with the majority of the world's top semiconductor companies who have historically used internal system IP solutions.
Our tariffs is now engaged with the majority of the worlds top semiconductor companies.
Storage, we use internal system IP solution.
Speaker 4: Though some of these relationships are only initial engagements, these design wins demonstrate the willingness of major semiconductor companies to deploy commercial system IP products from leading and proven commercial vendors, such as Arteris.
So some of these relationships are only initial engagement.
These design wins demonstrate the willingness of major semiconductor companies.
Commercial system might be products from leading and proven commercial vendors such as our tariffs.
Speaker 4: Deals in the third quarter were characterized by strong demand across all our core market segments, led by design wins in enterprise computing, consumer electronics, communications, and automotive.
Deals in the third quarter were characterized by strong demand across all our core market segments led by design wins in enterprise computing.
Electronics.
<unk> and automotive.
Speaker 4: The growing wave of artificial intelligence and machine learning or AI ML applications is evidenced by our licensing activity as over half of our licensing deals in the third quarter are enabling AI ML design.
The growing wave of artificial intelligence and machine learning or AI ml applications.
Evidenced by our licensing activity is.
Over half of our licensing deals in the third quarter, our neighboring MLP guide.
Speaker 4: As an example of our continuing AI ML momentum, we recently announced the deployment of our Terasplex stock interconnect use in new realities inference servers SoC.
As an example of our continuing momentum.
Momentum, we recently announced the deployment of our terrace livestock interconnect.
No realities.
Rooms service associate.
Speaker 4: As part of this new inference server, Archeris provided connectivity for their NR1 SoC to support the movement of very large amounts of data in generative AI applications.
As part of this new inference server service.
Terry has provided connectivity for their NR one associate.
Gordon Goldman.
Large amounts of data in January P&I obligations.
Speaker 4: The challenges that New Reality was facing require addressing SOC density and latency performance to provide improved total cost of ownership.
The challenge is that new reality, what spacing require addressing soc actually at least latency performance.
Slide improved total cost of ownership.
Speaker 4: This Neurality Inference Server connected by Arteris is further proof that our system IP is an essential part of building and deploying such AI solutions.
This new reality inference server connected by Alterra as further proof.
System IP.
Central part of building.
Morning.
Hi solutions.
Speaker 4: Another example is our partnership with Fraunhofer IESE, a leading research institute in the area of software and system engineering methods to accelerate the development of AI ML SoC.
Another example is our partnership with slot Hall for Ies.
A leading research Institute in the area of software and system engineering methods.
Accelerate the development of AI ml associates.
Speaker 4: In very high bandwidth applications, such as those used for generative AI and large language models, DRAM performance is a critical piece of the puzzle to move the amounts of data needed with customer AI requirements.
And very high bandwidth applications, such as those used for Jeremy.
<unk> language models yearend performance is critical piece of the puzzle moves the amounts of data needed with customer requirement.
Speaker 4: The performance of our TerraSystem IP coupled with Fraunhofer Memory Exploration Framework is expected to enable mutual customers to improve performance, reduce cost, and accelerate the development of AI ML electronics.
The performance of our current system IP, coupled with Fraunhofer memory exploration framework.
Expected to enable mutual customers to improve performance reduce cost.
Accelerate the development of <unk>.
Electronics.
Speaker 4: We are also seeing continued success with leading semiconductor industry players across multiple verticals, including high-performance computing, mobile handsets, networking, and more, as highlighted by the announcement of our partnership with AllChip, a top-tier provider of silicon design and production services.
We are also seeing continued success with leading semiconductor industry players across multiple verticals, including high performance computing mobile handsets networking and more as highlighted by the announcement of our partnership with all the top tier provider of Silicon design and production services.
Speaker 4: Through this partnership with Arteris, all chip can deliver to its customers highly optimized SoCs, taking full advantage of the efficiency, scalability, and configurability of our NOC technology, with particular focus on AI, autonomous driving, vision systems, and consumer electronic products.
Through this partnership with Arcturus, all chip can deliver to its customers highly optimized associates. Thank.
Taking full advantage of the efficiency scalability and configure ability of our technology.
<unk> focus on AI autonomous driving vision systems and consumer electronic products.
Speaker 4: We are seeing a growing number of different processor IPs deployed, ranging from those provided by ARM to various RISC-V providers and internal architectures, often connected together on the same SoC.
We are seeing a growing number of different processor ip's deployed ranging from those provided by arm.
Risk five providers and internal architectures, often connected together on the same SLC.
Speaker 4: Arteris is working closely with ARM and several RISC-V providers, including a recently announced partnership with Semidynamics, who provide customizable RISC-V processor IP and specializes in high-bandwidth, high-performance cores. The partnership aims to provide a better joint solution for data center-oriented AI ML applications.
Our tendency is working closely with arm.
Several risk cloud providers.
<unk>, our recently announced partnership with semi dynamics will provide customer customizable risk client processor IP and specializes in high bandwidth high performance cores.
The partnership aims to provide a better joint solution with data center oriented ml applications.
Speaker 4: I'm proud to mention Arcaria's continuous innovation was recognized with two awards granted during the quarter. The first, Technical Innovation of the Year, was given in the 20th Annual International Business Awards for our FlexNoc5 physically aware NOC.
I'm proud to mention Arcturus continuous innovation was recognized with two awards granted during the quarter.
First technical innovation of the year was given in the 20th annual International Business Awards.
<unk> physically knock.
Speaker 4: Our terms was chosen among over 3,700 nominations from organizations in over 60 countries.
Our turns was chosen among over 3700 nominations from organizations in over 60 countries.
Speaker 4: The second award, Autonomous Vehicle Technology of the Year, was given by Autotech Breakthrough for Arcaria's fundamental role in building advanced driver assistance systems, ADAS, and autonomous driving SoCs, which combine AI and functional safety.
The second award.
Economists vehicle technology of the year was given by auto Tech breakthrough.
Curious fundamental role in building advanced driver assistance systems Adas.
In autonomous driving associates, which combined AI and functional safety.
Speaker 4: Autotech's breakthrough analyzes the industry's automotive and transportation technology innovation, and Arteris was chosen among over 1,600 technology innovations from 15 different countries.
Prototypes breakthrough analyzes the industries automotive and transportation technology innovation.
<unk> was chosen among over 1600 <unk>.
G innovations.
In different countries.
Speaker 4: Moreover, I'd like to provide an update on the momentum of our recent product release, which we believe is the industry's first and only commercially available physically wear FlexNoc5 Noc IP, which we launched at the end of the second quarter.
Moreover, I would like to provide an update on the momentum of our recent product release, which we believe is the industry's first and only commercially available physically where brakes.
Brigstocke sides knock IP, which we launched at the end of the second quarter.
Speaker 4: Given the growing need for effective physical closure for all SOCs below 60 nanometer, we are seeing strong customer interest.
Given the growing need for effective physical closure for all associates 16 nanometer, we are seeing strong customer interest.
Speaker 4: We have now shipped FlexNoc5 to 9 customers, including several top technology companies.
We have now shipped.
<unk> five <unk>.
<unk> customers, including several top technology companies.
Speaker 4: In addition, we are seeing growing customer interest in FlexNOT5 adoption in the fourth quarter of 2023 and out into 2024 and subsequent years.
In addition, we are seeing growing customer interest in flex knock five adoption in the fourth quarter of 2023 and out into 2024 and subsequent years.
Speaker 4: Finally, I'm pleased to announce that we achieved an important milestone with the ISO 9001 quality management system certification, setting the solid foundation for further growth as we continue to expand our product portfolio and silicon deployment, which has already reached three and a half billion devices.
Finally, I am pleased to announce that we achieved an important milestone with the ISO 9001 quality management system certification.
Setting the solid foundation for further growth as we continue to expand our product portfolio and silicon deployment.
<unk> already reached $3 5 billion devices.
Currently.
Macroeconomic headwinds, including geopolitical uncertainties in global recessionary concerns remain in place.
Speaker 4: We continue to be impacted by U.S. BIS restrictions with respect to China-U.S. trade, as well as tightening credit conditions globally, which is impacting the ability of our smaller customers to raise capital.
We continue to be impacted by U S. Pis restrictions with respect to China U S trade.
Tightening credit conditions globally, which is impacting the ability of our smaller customers to raise capital.
Speaker 4: Notably, in the third quarter, we saw increasing softness in the China market as well as further lengthening of sales cycles globally.
Notably in the third quarter, we saw increasing softness in the China market as well as further lengthening of sales cycles globally.
Speaker 4: While these dynamics may create near-term headwinds, we believe that the scale and the scope of our long-term opportunity remains robust.
While these dynamics may create near term headwinds, we believe that the scale and the scope of our long term opportunity remains robust.
Speaker 4: The fourth quarter has historically been our strongest quarter. We're encouraged by what we're seeing in the current fourth quarter. We have robust product pipeline of new system IP technologies and solid relationships with some of the largest electronics companies in the world who continue to innovate in exciting areas such as generative AI and autonomous driving.
The fourth quarter has historically been our strongest quarter.
We're encouraged by what we're seeing in the current fourth quarter.
Our robust product pipeline of new system might be technologies and solid relationships with some of the largest electronics companies in our world.
We need to innovate and exciting areas, such as generators AI and autonomous driving.
Speaker 4: With that, I'll turn it over to Nick to discuss our financial results in more detail. Thank you.
With that I'll turn it over to Nick to discuss our financial results in more detail.
Thank you Charlie and good afternoon, everyone.
Speaker 5: As I review our third quarter results today, please note that I'm referring to non-GAAP metrics. A reconciliation of GAAP to non-GAAP financials is included in today's earnings release, which is available on our website.
As I review, our third quarter results debate.
Referring to.
Thanks, Eric.
Installation of GAAP to non-GAAP is included in today's earnings release, which is available on our website.
Speaker 5: Total revenue for the third quarter was $13.3 million, up 5% year-over-year and exceeding the midpoint of our guidance range.
Net revenue for the third quarter was $33 million up 5% year over year.
Exceeding the midpoint about guidance range.
Speaker 5: At the end of the third quarter, annual contract value for ACV, Australian 12-month royalties and other revenue, was $57.3 million.
At the end of third quarter annual contract value or ACB, Australia coal bump royalties and other revenue was $57 $3 million.
Speaker 5: As Charlie mentioned, in the third quarter, we began to see increasing softness in the China market that resulted in ACV plus trading 12-month royalties coming in below the midpoint of our guidance.
As Charlie mentioned in the third quarter, we began to see increasing softness in the China market.
Resulted in ACB, plus trailing 12 month royalties coming in below the midpoint of our guidance range.
Speaker 5: So far this quarter, we have not seen any improvement in the Chinese market.
So far this quarter, we have not seen any improvement in the Chinese market.
Speaker 5: That gross profit in the quarter was $12.0 million, representing a gross margin of 90%.
Yes page booklet Interculturally 12.
$1, representing a gross margin.
Speaker 5: non-GAAP gross profit in the quarter was $12.2 million, representing a gross margin of 92%.
non-GAAP gross profit in the quarter was $12 $2 million.
Jumping a gross margin of 92%.
Speaker 6: Total GAAP operating expenses for the third quarter was $20.4 million compared to $19.4 million in the prior year period.
Total GAAP operating expenses for the third quarter was $24 million.
$19 $4 million in the prior year period.
Speaker 6: non-GAAP operating expense in the quarter was $16.8 million compared to $16.0 million in the prior year period, and to $17.9 million in the second quarter, representing a sequential op-ex decrease of $1.1 million, or 6%, benefiting from tight cost control coupled with some limited one-time credits.
non-GAAP operating expense and the cogent was $16 $8 million compared to $16 7 million in the prior year period.
$17 $9 million in the second quarter.
Representing a sequential opex decrease of $1 $1 billion.
6% benefiting from Chinese customers.
Cost control.
Okay.
Limited onetime credits.
Speaker 5: The year-over-year increase was primarily driven by continued R&D investment in next-generation NOC IP and SoC integration automation software products.
The year over year increase was primarily driven by continued R&D investments in next generation IP SFC integration automation software products.
Speaker 6: In the fourth quarter and going into next year, we will continue to proactively manage operating expenses, limiting investments to strategic areas.
In the fourth quarter and going into next year, we will continue to proactively manage operating expenses.
You mentioned investments to strategic areas.
Speaker 6: Gap operating loss for the third quarter was $8.5 million compared to a loss of $7.8 million in the year-ago period. Non-gap operating loss was $4.6 million or 34% compared to a loss of $4.2 million in the year-ago period.
GAAP operating loss in third quarter was $8 $5 million.
Pad to a loss of $7 $8 million in the year ago period.
<unk> got operating loss was $4 $6 million.
Compared to a $2 million in the year ago.
David.
Speaker 6: Net loss for the quarter was $8.2 million or diluted net loss per share of $0.23. non-GAAP net loss for the quarter was $4.2 million or diluted net loss per share of $0.12 based on approximately 36 million weighted average diluted shares outstanding.
Net loss for the quarter was $8 2 million or diluted net loss per share in 2010.
GAAP net loss for the quarter was $4 $2 million or diluted net loss per share of <unk> 12 based on approximately $36 million.
Weighted average diluted shares outstanding.
Okay.
The balance sheet and cash flow.
Speaker 6: We ended the quarter with $56.6 million in cash, cash equivalents and investments. Cash flow used in operations was approximately $2.8 million in a quarter. Pre-cash flow, which includes capital expenditure, was approximately negative $3.1 million in line with our guidance.
We ended the quarter with $56 $6 million in cash cash equivalents and investments.
Movies in operations was approximately $2 $8 million in the quarter.
Cash flow, which includes capital expenditure was approximately a negative $1 million in line with that guidance.
Speaker 6: I would now like to turn to Outlook for the fourth quarter and the full year 2023.
I would now like to turn to outlook.
And full year 2023.
Speaker 6: For the fourth quarter, we expect ACB plus trailing 12-month royalties of $52 million to $56 million and revenue of $11.3 million to $12.3 million with non-GAAP operating loss margin of 56.1% to 76.1% and non-GAAP free cash flow margin of negative 32.4% to negative 52.4%. Incorporating this guidance.
For the fourth quarter, we expect ACB, that's trailing 12 month royalties.
Two $6 million and revenue of $11 3 million to $12 3 million adults with <unk>.
non-GAAP operating loss margin of 56, 1% to 76, 1%.
And non-GAAP free cash flow margin of negative two 4% to negative two 4%.
Incorporating this guidance of two recent trends.
Speaker 6: First, due to the dynamics within China, we anticipate continued softness in demand in the fourth quarter.
First due to the dynamics within China, We anticipate continued softness in demand in the fourth quarter.
Speaker 6: Second, as Charlie alluded to, we're encouraged by the deal activity in the fourth quarter, but at the same time, we're seeing customers take a closer look at project pipelines, given the macroeconomic environment, which impacts the timing, duration, and volume of deals signed in what is traditionally our strongest order.
Second as Charlie alluded to we are encouraged by the deal like tendency in the fourth quarter, but at the same time, we are seeing customers take a closer look at.
Pipelines, given the macroeconomic environment.
The timing duration and volume of deals signed in what is traditionally our strongest quarter.
Speaker 6: Given the fluidity of the macro situation, we are seeing interest from some customers to extend the duration of deals as their own design cycles lengthen.
Given the fluidity of the macro situation, we are seeing interest from some customers to extend the duration of deals.
Design cycles lengthening.
Speaker 6: While a near-term impact ACV, we broadly view this as a favourable dynamic as it demonstrates the importance and stiffness of our technology. It is no longer a question of what we do.
While a near term impact ACB.
Probably be favorable dynamics as it demonstrates the importance of statements about technology.
It does no good question of whether to use our tariffs.
Speaker 6: at this stage is more technical on how they can align their development costs with their revised design cycle timelines.
At this stage is more tactical on how big the lines the development costs that are advised.
Items cycle timelines.
So it's totally a 2023 guidance is as follows.
Speaker 6: Revenue of $52.5 million to $53.5 million, reflecting the slowdown in the Chinese economy.
Revenue of $52 5 million to $53 $5 million, reflecting the slowdown in the Chinese economy.
Speaker 6: While we do expect a seasonally strong fourth quarter in terms of new licences and additions to RPO, these will have a relatively muted impact on fourth quarter revenue as a result of our fully ratable revenue recognition.
While we do expect a seasonally strong fourth quarter in terms of new licenses under the since the IPO. These will have a relatively muted impact.
Revenue as a result of a fully electric revenue recognition.
Speaker 6: HCB plus training 12-month royalties to exit 2023 at $56 million.
HEB plus trailing 12 month's royalties to exit 2023 3 million $6 million.
Speaker 6: non-gap operating loss margin of 39% to 44% better than prior guidance as a result of reduced operating expenses.
non-GAAP operating loss margin of 9% to 44%.
Brian our guidance as a result of reduced operating expenses.
Speaker 6: We're continuing to actively control operating expenses with the goal of achieving meaningful savings in 2024 when compared to previous plans.
We are continuing to actively controlled operating expenses with the goal of achieving meaningful savings in 2024.
Previous sponge.
Speaker 6: non-gap pre-cash flow margin of negative 33.1% to negative 38.1%.
non-GAAP free cash flow margin of negative 33, 1% to negative comps.
Speaker 6: primarily driven by the expected change in working capital in 2023 and, to a lesser extent, the industry dynamics I referenced earlier.
<unk>.
Primarily driven by the expected change in working capital in 2023 and to a lesser extent the industry. It's my next bill referenced earlier.
Speaker 6: Going into 2024, we are committed to keeping our collections and costs in alignment. As a result, we do not expect any meaningful degradation of our cash position next year.
Yes, 2020, full we are committed to keeping our collections and costs in our lives.
As a result, we do not expect any meaningful degradation of our cash position next year.
Speaker 6: With that, I will turn the call over to the operator to open up for questions.
With that I will turn the call over to the operator.
Questions.
Speaker 2: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by one on your touchtone phone. You will hear a three-tone prompt acknowledging your request, and your questions will be polled in the order they are requested.
Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by one on your Touchtone phone.
We'll hear three ton prompt acknowledging our request and your questions will be pulled in the order. They are received should you wish to decline from the polling process. Please press star followed by two.
Speaker 2: Should you wish to decline from the polling process, please press star followed by 2. If you are using a speakerphone, please lift the handset before pressing any button.
If you are using a speaker phone please lift the handset before pressing any keys one moment. Please for your first question.
Speaker 2: Your first question comes from Matt Ramsey, TD Cowan. Matt, please go ahead. Thank you very.
Your first question comes from Matt Ramsay TD Cowen Matt. Please go ahead.
Thank you very much good afternoon everybody.
Speaker 7: So guys, it makes sense that in the guidance you talked about.
So guys.
It makes sense.
And the guidance you talked about.
Speaker 7: some slower deal flow in China, just given what's going on and the economic situation. Charlie, I wonder if you might expand on that a little bit. Do you see it as maybe slowness to bring in new customers in China? Is it programs at existing customers or maybe a combination of both? If you just give us a little bit more detail there. And then I guess the second part of the question on China.
Some slower deal flow in China, just given what's going on.
And the economic situation, Charlie I Wonder if you might expand on that a little bit is it.
Do you see it as maybe slowness to bring in new customers in China as it programs at existing customers or maybe a combination of both if you could just give us a little bit more detail. There and then I guess the second part of the question on China.
Speaker 7: if, and I think this is a big if, they can get supply of all the different components. It seems like Huawei is inclined to ship some more smartphones again. Would your old license deals that would then pay royalties on high silicon parts still be in effect, or given all the political turmoil, are those different than they were back when high silicon was a material customer? Thanks.
And I think this is a big yes, they can get supply of all the different components. It seems like Huawei is.
Inclined to ship some more smartphones again.
What would your old license deals that would then pay royalties on high silicon parts still be in effect or.
Given all the political turmoil are those different than they were back when high silicon was a material customer. Thanks.
Speaker 4: Yeah, so we're seeing two things happening in China.
Yeah. So.
We're seeing two things happening in China.
Speaker 4: One is that the BIS actions, and particularly the one that happened in the second half of Q3, has had a fairly major impact.
One is that the <unk> actions and particularly the one that happened in the second half of Q3.
<unk> had a fairly major impact.
Speaker 4: on sort of the smaller companies in China. Now, as we mentioned before, we're fairly well diversified in terms of export controls because a number of our products are from France, and so subject to French export rules. So, but the problem is that
On sort of the.
The smaller companies in China now as we mentioned before we're fairly well diversified in terms of exports.
Controls because a number of our products are from France, and so subject to French export rules, so but the problem is that.
Speaker 4: some of the Chinese companies can't get the other components exactly as you've implied.
Yes.
Some of the Chinese companies can't get the other components exactly as you as you as you implied so that has caused the slowdown.
Speaker 4: So that has caused the slowdown that we're seeing. The other thing is that there is a capital shortage in China.
Seeing the other thing is that there is.
Our capital shortage in China.
Speaker 4: And so some of the smaller companies now have a very difficult access to capital.
And so some of the smaller companies now have a very difficult access to capital so between Pis and the capital shortage in China.
Speaker 4: So between BIS and the capital shortage in China, you're looking at a fairly difficult situation. Now, the big companies, I think, are OK. So Huawei would be OK. People like Tencent, Alibaba, Baidu, they will figure out how to get access to what they need.
Youre looking at.
Fairly difficult situations now the big companies I think are okay.
So Huawei would.
We'll be okay people like Tencent Alibaba Baidu.
They will figure out how to get.
Get access to what they need.
Speaker 4: But for the smaller companies, it's much more difficult. As far as the old high silicon contract, it would still be in place if it is a current processor. If it's not a current processor, it would not be in place.
For the smaller companies, it's much more difficult.
As far as the.
The old <unk>.
Silicon contract.
It would still be in place.
It is a cure and processor.
If it's not a current processor it would not be not be in place.
Yes.
Got it.
Some of that.
Speaker 7: color. I guess the my follow up.
Yes. It does thank you Charlie thanks, Thanks for the color I guess.
My follow up question.
Speaker 7: sort of unrelated and it's more to the long-term with FlexNot5, maybe you could give a little bit more.
Unrelated and it's more to the long term with flex not five maybe you could.
Give a little bit more detail on the breadth of the traction the early traction that youre seeing and just from a.
Speaker 7: The breadth of the traction, the early traction that you're seeing and just from a.
Speaker 7: a license monetization standpoint, and then eventual royalty monetization standpoint. Like what kind of an uplift are we looking at here versus the prior generation? Thanks.
Our license.
Monetization standpoint, and then eventual royalty monetization standpoint, like what kind of an uplift are we looking at here versus the prior generation.
Speaker 4: Right, so FLEXNOC5 has a major innovation, which has physical awareness, which essentially allows customers to estimate physical effects.
Right so.
<unk> five has a major innovation, which is physical awareness, which essentially allows customers to estimate physical effects.
Speaker 4: of their architectures very early in the design process. So that essentially allows them to turn over physically verified architecture and RTL to the place and route team, which essentially would reduce the number of place route iterations and the number of time and effort that has to be placed during physical design.
Also of their architectures.
Very early in the design process, so that essentially allows them to turnover physically verified.
Architecture in RTL to the placement of our team, which essentially would reduce the number of places iterations in the number of time and effort that has to be placed in the during during physical design.
Speaker 4: So obviously, we charge a bit more for this.
<unk>.
Obviously, we charge a bit more for this.
Speaker 4: And so this is about a 33% uptick in terms of ASP. And that's kind of what we're seeing in the market.
So this is about a 33% uptick in terms of ASP.
And that's kind of what we're seeing in the market now we have shipped this we started shipping towards the very end of.
Speaker 4: Now, we have shipped this. We started shipping toward the very end of Q2 in June . We shipped some few licenses immediately in Q2. But we also shipped a significant number of licenses in Q3. So it was basically 17 FlexNoc5 licenses to nine unique customers.
Q2.
<unk>.
We shipped some few licenses immediately in Q2.
But we also shipped a significant number of licenses in.
In Q Q.
Q3, so it was basically 17 flex knock five licenses to nine unique customers.
Speaker 4: And so that's a pretty satisfactory uptake. And the evaluation pipeline for FlexNoc5 continues to be robust, and the product seems to be of great interest. And so we think that this is something that people are going to keep buying on an ongoing basis this quarter, in the fourth quarter, and also in 2024 and 2025.
So that's a that's a pretty satisfactory uptake in.
The evaluation pipeline for flex stock five continues to be robust and the product seems too.
It will be of great interest and and so we think that this is.
Something that people are going to keep buying on an ongoing basis this quarter and the fourth quarter and also in 2024 and 2025.
Speaker 5: Hey Matt, this is Nick. I've just a little bit of extra colour on that as far as your royalties question goes on Flexknock5.
Hey, Matt. This is Nick I was just a little bit of extra color on that as far as your royalties question goes on flex on size.
Speaker 5: I mean it's still early days, we've only had nine licenses at the end of the third quarter and we're seeing a lot more now, we've seen some upgrades from four to five.
I mean, it's still early days, we've only had nine licenses than the third quarter, we're seeing a lot more now we've seen some upgrades from four to five.
Speaker 5: already, and we have a very robust pipeline of FlexNOT5.
Already.
We have a very robust pipeline of flex not five.
Speaker 5: new deals that we expect to land, that the use cases for those licenses are predominantly at the moment in automotive, which is a very rich royalty scheme, as you know.
New deals that we expect to Thailand.
The use cases for those licenses.
Predominantly at the moment in automotive, which is a very rich royalties seem as you note.
Speaker 5: and also communications, interestingly, which is also a very rich role.
And also communications Interestingly, which is also a very rich.
<unk>.
Speaker 5: It's also being used in Gen AI. Now, that, of course, is a very nascent product stream as far as royalties are concerned. We wouldn't expect that to turn into royalties for a while. We are actually seeing a little bit of AI traction, but it's very, very early days.
It's also being used in Gen II.
Now that of course is a.
Very nascent.
Stream as far as royalty is concerned we wouldn't expect that tenant royalties for a while.
Actually staying a little bit of.
Traction, but it's very very early days.
But.
Speaker 6: We think in the long, long term, AI chips will start to yield some decent, decent qualities, but that's, that's a ways out.
We think in the long long term.
AI chips will start to yield some decent qualities, but that's a ways out.
Thank you both for that.
Appreciate it.
Speaker 2: Thank you. Your next question comes from Hans Mosesman, Rosenblatt. Hans, please go ahead.
Thank you. Your next question comes from Hans Moses Men Rosenblatt Hans Please go ahead.
Thanks.
Hey, guys.
Speaker 8: You guys have indicated in the past that based on, you know, automotive licensing engagements that the number of SOCs by platform over the next several years could be, you know, 20, maybe as much as 25. Has that dynamic changed at all? Is it getting pushed out? So, specific to automotive.
You guys have indicated in the past that based on automotive licensing engagements that the the number of Fsc's by platform over the next several years can be 20% maybe as much as 25.
That dynamic changed at all or is it getting pushed out so specific to automotive.
Yes.
No.
Speaker 4: So automotive continues to be robust. There is a continued number of projects.
So automotive continues to be robust.
There is.
It continued.
<unk> of projects.
Speaker 4: The interesting dynamic is going to be whether the OEMs are going to do their own ADAS solution.
The interesting dynamic is going to be whether the Oems are going to do their own Adas solutions.
Speaker 4: both short-term and long-term, or whether it's going to coagulate down to a few major players such as Mobileye and NXP. And so, you know, but we don't know the answers to that, but we keep pursuing every single automotive opportunity there is.
Both short term and long term or whether it's going to coagulate as down to a few major players such as such as mobile <unk>.
And NXP and so.
Yes.
We don't know the answers to that but we keep pursuing every single automotive opportunity. There is we keep.
Speaker 4: We keep, you know, having pretty good success there.
Having pretty good success, there and we think that automotive continues to be a very.
Speaker 4: And we think that automotive continues to be one of the biggest opportunities in high tech over the next 20 years.
One of the biggest opportunities in high tech over the next.
Our next 20 years.
Speaker 5: It answers, doesn't it? In terms of your other question, which is, which was about sort of concentration, the concentration of automotive chips per vehicle, which is, I think, the other part, which is, you know, we think long term is up to sort of 25 plus.
Hey, <unk>.
In terms of your other question, which is which was about so the concentration there.
Concentration all.
Of all types of chips per vehicle, which is I think the other part which is that we think longer term is up to sort of 25 plus.
Speaker 5: That is unchanged and really impacted whether the OEMs do their own designs or whether they look for somebody else to do their designs for them.
Okay.
That is unchanged.
And impacted us whether the Oems do their own designs or whether they look for somebody else to do the design swollen.
Speaker 8: Okay, that's helpful. And then one last question. If we look at outside of China,
Okay. That's helpful and then.
One last question if.
If we look at outside of China.
Speaker 8: How is that, the non-China business, doing in terms of licensing engagements, or are there, you know, some delays there as well?
How is that.
The non China business doing in terms of licensing engagements or are there some delays there as well.
Speaker 4: So obviously, people are looking at their roadmaps.
So.
Yes.
People are looking at their at their Roadmaps.
Speaker 4: So that's a, I would say, you know, people are looking at what projects they will do.
So thats.
I would say people are looking at what projects they will do.
Speaker 4: At the same time, what we're seeing is that
At the same time, what we're seeing is that some of the larger companies are now sort of looking at okay. Do we want to build the next generation system IP for our products or do we want to outsource that and we're having I would say significant amount of success in being selected.
Speaker 4: Some of the larger companies are now sort of looking at, okay, do we want to build the next generation system IP for our products, or do we want to outsource that? And we're having, I would say, a significant amount of success.
Speaker 4: in being selected for some of these projects where before they would do everything internally.
For some of these projects.
Sure.
Before they would do everything internally.
Speaker 4: You know, the other sort of issue is that there's also a capital difficulty in smaller U.S. companies.
So.
Yes, the other sort of issue is that there is also a capital difficulty in the smaller U S companies.
Speaker 4: but the larger companies are unaffected.
But the larger companies are unaffected.
Speaker 4: And so I would sort of note that the number of design starts in Q3, which was 2022, is basically the same as we had in second quarter. So.
So I would sort of note that the number of design starts in Q3, which was 2022.
Basically the same as we had in second quarter. So.
Speaker 5: you know, while there is some shifts in the non-China market, I think, overall, the effects are, I would say, neutral. Yeah, essentially, it's a pivot away from the startup community to the larger guys, so a chance to serve a number of new customers.
While there is some shifts in the non China market.
I think overall the FX are I would say neutral yes, it's essentially.
Essentially it's a pivot away from the startup community to the to the larger guys. So as John says have a number of new customers.
Speaker 5: is a lot less. We used to get most of our new customers actually from China but as Charlie said, the number of design starts is
That's a lot less we used to get most of our new customers actually from China.
But as Charlie said the number of design starts is is to say one of the other dynamics that.
Speaker 5: is the same. One of the other dynamics that was kind of following on from your question and is really driving the reduction in guide on ACV for the fourth quarter is customers are generally having a look at their aligning their product roadmaps to their design to their expenditure cycle.
What's kind of following on from your question.
And as is really driving the reduction.
<unk> guide on ACB.
For the fourth quarter as customers are generally having a look because they are aligning that.
Product roadmaps to their desire to there.
The expenditure cycles.
Speaker 5: And, in some cases, that's pushing out design or engagements into Q1 from Q4, the same kind of thing as we saw at the end of 22, if you remember. And so there's a number of different vectors going on.
And in some cases thats pushing out.
Design or revenue.
Engagements into Q1 and Q4.
Kind of thing as we saw at the end of 'twenty two if you remember.
And.
So the number of difference.
Vectors going on.
Speaker 5: And in addition, there is a tendency among some of the majors, not many, but there's a tendency among some to take longer to do their designs.
And in addition, there is a tendency among some of the majors not.
Not many but the tendency among some to take long.
Speaker 5: And that has a direct impact on ACV and revenue intensity, it just lasts for longer. So we're okay with that because it demonstrates the stickiness and the importance of our technology to the customer if they're prepared to engage for longer. But in terms of ACV, obviously annual, the A word means the TCV is devised over a longer period.
To do that designs.
That hasnt direct impact on ACB and revenue intensity it just loss for loan got it.
So with with Okay with that because it demonstrates the stickiness and the importance of our technology to the customer.
Pat to engage for longer.
But in terms of <unk> annual.
<unk> maintenance.
PCB is devised over longer periods.
Okay. That's helpful.
Thank you guys.
Speaker 2: Thank you. Your next question comes from Kevin Garrigan, West Park Capital. Kevin, please go ahead.
Thank you. Your next question comes from Kevin Garrigan West Park Capital Kevin. Please go ahead.
Speaker 9: Yeah. Hey guys, thanks for taking my question. Your 22 design starts, I know you had noted that 12 were for AI technologies. Can you give us some color on what markets these design starts were in? And to Hans' question, you had noted automotive was still robust. Any kind of markets that were weak or that surprised you?
Yeah, Hey, guys. Thanks for taking my question.
Your 'twenty two design start starts I know you had noted that 12 or for AI technologies can you give us some some color on what markets.
These design starts were in.
To <unk> question, you had noted automotive was still robust any any kind of market power weaker that surprised you.
Speaker 4: Outside of China, not really.
Outside of China, and not really.
Speaker 10: The, there is a huge amounts of investment in generative AI.
The.
There is a huge amounts of investment in generative AI.
Speaker 11: As we discussed earlier, the query costs are quite high with the existing GPU technologies.
As we discussed earlier.
Clearly costs are quite high with with the existing GPU technologies and so people are investing extensively in.
Speaker 12: And so people are investing extensively in essentially ASICs that are lower power and lower query costs for generative AI.
And essentially a six that are <unk>.
Lower power and lower clearing costs for generative AI. So.
Speaker 13: That's a big tailwind. I think one of those designs that we've talked about is the neurality design in Israel, which is a data center design. So there's a lot of generative AI inference work being done in a data center.
That's a big Big tailwind I think one of those designs that we've talked about is the new reality design.
In Israel, which is a data center data center design. So there's there's a lot of generative saw.
AI inference work being done in the datacenter.
Speaker 14: But we eventually see generative AI being expanded to the edge and to the endpoints, even into things like portable devices like smartphones and things like this.
But we eventually see Germany, they are being expanded to the edge to the endpoint.
Even into things like portable devices like smartphones and things like this.
Speaker 15: So generative AI is a strong, I would say, strong tailwind for new designs. And I think we said on the earnings call that about half of the designs of the 22 were, at least this quarter, were related to machine learning.
So generally there is a.
Strong.
I would say strong tailwind.
For four new designs that I think we said on.
On the earnings call that about half of the designs of the 22 were at least this quarter were related to machine learning.
Speaker 16: bit more than half. I mean, if you look at it, I mean, the complexity is obviously that
Okay.
Fitbit.
I mean.
If you look at it.
As the complexity.
Obviously.
Speaker 17: The AIML is actually horizontal, so we kind of get a bit mixed up in terms of horizontals and verticals sometimes, but if you look at the verticals where we saw the most intensity of design starts in Q3.
The <unk> is actually a horizontal.
So we kind of get a bit mixed up in terms of horizontal and vertical sometimes but if you look at the verticals, where we sold the most intensity of design starts since Q3.
Speaker 18: The enterprise compute actually, which is obviously where a lot of these designs end up, popping up in the vertical sense.
The enterprise compute actually which is obviously where a lot of these these designs and end up pumping.
Popping up in the vertical sense.
Speaker 19: That was the second highest quarter on record in terms of design starts. That's a good indication. The second was actually automotive, but that's fairly typical and there's a lot of machine learning applications within automotive anyway.
That was the second highest quarter on record in terms of.
Of design starts so that's a good indication of this segment was actually automotive, but that's fairly.
Typical and there's a lot of machine learning applications within automotive anyway.
Speaker 20: Okay, got it, got it. That's very helpful. And then just as a quick follow up, at a high level, can you kind of give us a sense of your royalty rates and then the opportunities that you kind of see to increase these rates in the future? And how do you kind of go about having those conversations to basically increase the rates?
Okay got it got it that's very helpful.
And then just as a quick follow up Ken can you at a high level can you kind of give us a sense of your royalty rates and then about the opportunities that you kind of see the to increase these rates in the future and how do you kind of go about having those those conversations.
Basically increase the rates.
Speaker 21: Yeah, I'll take that one, Kevin. So the directionally, royalties are always upwards.
Yes, I'll take that one Kevin.
Directionally royalties.
Our was upwards.
Speaker 22: We don't take lower royalty deals. Any increase in royalty rates can only really follow increased functionality. You don't get a sort of increased royalty rate just because the customer likes you. So we have to actually give them something in terms of functionality.
We don't take lower royalty deals.
<unk> growth is any increase in royalty rates can only really follow increased functionality you don't get sort of encase royalty rate just because the customer likes it. So we have to actually give them something.
In terms of functionality.
Speaker 23: And so over time, you'll see a higher rate of royalties for the newer products.
So over time, you will see more.
Hi, great.
Royalties for the newer products.
Speaker 24: If you remember, automotive is the richest, or certainly a lot richer than, say, consumer, or the old communications like cell phones, smart phones, and automotive is where we're having probably the biggest success, and it now represents about 55%, 60% of the total royalty stream, followed, interestingly, by communications and industrial.
And if you remember automotive is actually this automotive has the richest suddenly a lot richer than say consumer.
Or.
The old consumer communications my cell phones smartphones.
Automotive is where were having probably the biggest success and that represents about <unk>.
<unk>, 560% of the type of royalty stream.
Hello, Interestingly by communications and.
And industrial.
Speaker 25: Okay, got it. Yep, that makes sense.
Okay.
Yes that makes sense, okay perfect. Thank you.
Speaker 26: Thank you. Ladies and gentlemen, as a reminder, should you have a question, please press star 1 on your touchtone phone.
Thank you, ladies and gentlemen, as a reminder, should you have a question. Please press star one on your Touchtone phone.
Speaker 27: Your next question comes from Mark Libizis, Jeffreys. Mark, please go ahead.
Your next question comes from Mark <unk> Jefferies Mark. Please go ahead.
Speaker 28: Hi, thanks for taking my question. I just want to make sure I understood. I had the same.
Hi, Thanks for taking my question I, just want to make sure I understood I had the same.
Speaker 29: question as the previous caller. So was it,
Question as the previous caller so it was it.
Speaker 30: 50 was a 50% of the, the licenses of the last year. We're enabling AI. Is that. Was that the right this quarter this quarter? Yeah, it's just 2, 3, 2, 3.
50%, 50% of the the licensees over the last year, we're enabling AI is that was that the rate.
This quarter this quarter.
Q3 Q3.
Speaker 31: And of all the kind of AI designers you have, I think, Charlie, you started to answer this, but I don't know if you qualified it.
Okay and of all of all of the kind of AI design wins, you have I think Charlie you started to answer this but I don't know if you.
You qualified it.
Our.
Speaker 32: I appreciate that at the end of the day, this is going to come to the end points, but are the design ones that you have, are they four?
I appreciate that at the end of the day. This is going to come to the endpoints, but are the design wins that you have are they for.
endpoint AI applications or are these mostly data centers? I'm just trying to understand what you saw in the last quarter, what you've seen recently, to what extent is the AI workload or application manifesting in the big data center chips versus maybe the smaller chips that would go into IoT devices or cars or something closer to that?
Endpoint AI applications are these are these mostly data centers.
Im just trying to understand.
What you saw in the last quarter, what you've seen recently.
To what extent is the AI workload or application.
Manifesting in the Big data center chips versus the May.
Maybe the smaller.
Chips that would go into Iot devices or cars or so.
Something closer to the end point thank you.
Yeah, so the early generative designs that we've seen are data center designs.
Yes so.
Early generated the designs that we've seen our data center designs.
There's a lot of activity in the hyperscaler community for those designs, so those are going into the data center.
There's a lot of activity.
The Hyperscale community.
Those designs. So those are those are going into the data center.
The neutrality one that we are allowed to talk about is going into data center, but there's others. So those would be high-priced, low-volume chips.
The.
The neutrality one that we are allowed to talk about is going into into data center, but there is others.
So those will be.
High price low volume chips.
But, you know, we think that generative AI is going to expand to the edge, and it's going to expand to the endpoints, and, you know, we're gaining valuable experience working with our customers to be able to provide high-performance system IP that allow people to move incredible amounts of data in these designs.
<unk>.
But we think that generally of AI is going to expand to the edge and it's going to expand to the.
To the endpoints and we're gaining valuable experience working with our customers to be able to provide high performance system IP that a lot of people to move incredible amounts of data in these.
These designs.
One of the things that we did was we created kind of an Excel package because some of these generative AI things need buses or NOCs that are 20-bit, 2048-bit wide because of the amount of data that has to be moved. And so that, again, provides us the ability to slightly increase the ASP for these kinds of very, very demanding applications.
One of the things that we did was a created a kind of a <unk> package four because some of these generative AI things need buses or Nox that our 2020.
<unk> 2048 bit wide because of the amount of data that has to be moved and so that again provides us the ability to slightly increase the ASP.
For these kinds of very very demanding applications.
But generative AI is evolving very, very quickly right now. And people are actually starting to move on from the transformer architectures into some other types of implementations. And so we're just following that. And we're providing the data transport for those projects.
But generally there is evolving very very quickly right now.
People are actually starting to move on from the transformer architectures into some other types of implementations and so we're just following that and we're providing the data transport for those for those projects.
Gotcha. Okay. That's very helpful. And then,
Got you Okay. That's very helpful and then.
You know, and I apologize if I'm asking to repeat this. Yeah, my my line dropped you. I think you started to talk about how the larger customers are starting to shift to your solution from from internal. And I think this has been part of the.
And.
I apologize if I'm asking to repeat this.
My line dropped.
I think you started to talk about how the larger customers are starting to shift to your solution from internal and I think this has been part of the story.
artist's story, you know, longer term anyway. But can you play that back? Is there something about the current macro environment that gives you higher conviction or you're seeing an acceleration of that trend? If you could play that back again, I'd appreciate it. Thanks.
Longer term anyway.
But.
Can you play that back is there was there is there something about the current macro environment that gives you higher conviction are you seeing an acceleration of that trend.
If you can play that back again I appreciate it thank you.
Yeah, I mean, if you look at the investment that it takes to do the next generation system IP, it is, you know, 10s and 10s of millions of dollars, right?
Yes, I mean, if you look at the investment that it takes to do the next generation system IP. It is.
Tens and tens of millions of dollars right.
And so the CFOs of those companies are basically asking, OK, do we want to make that kind of an investment for the number of projects that we do? Or do we want to stick with what we have for existing projects, but for the new technologies, do we want to go to someone like Arteris?
And so the CFO of those companies are basically asking okay. Do we want to make that kind of an investment for the number of projects that we do or.
We want to stick with what we have for existing projects, but for the new technologies do we want to go to someone like our tariffs.
And that's starting to play out. We have, I think, a very nice penetration of some of the companies that have had were 100% internal before. We added one.
And <unk>.
Thats starting to play out.
We have I think a very nice penetration of some of the companies that have had 100% internal before we added one.
We talked about three of them last quarter and there was kind of beachhead deals. We got one of the ones that we did in Q3 was fairly large. That's for a company that was almost 100% internal. And so,
We talked about three of them last quarter Adobe is kind of a beachhead.
Each had deals with.
One of the ones that we did.
Q3 was fairly large.
For a company that was almost 100% internal and so.
You know, that's one of the tailwinds, right, is that people in this macro environment are more willing to outsource the system IP to proven commercial vendors, such as Arteris.
That's one of the one of the tailwind is that people in this macro environment are more willing to outsource the system IP to proven commercial vendors such as our tariffs.
And we're seeing evidence of that.
Great. That's very helpful. Thank you.
Thank you. That concludes our question and answer session. I will now turn the call over to the CEO for closing comments.
Thank you that concludes our question and answer session I will now turn the call over to the CEO for closing comments.
Well, thank you for joining us on the third quarter, our terrorist earnings call, and we look forward to updating you for our future quarters. Thank you very much.
Well. Thank you for joining us on the third quarter are terrorists earnings call and we look forward to updating you in for a future quarters. Thank you very much.
Thank you. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.
Thank you ladies and gentlemen. This concludes your conference call for today, we thank you for participating and ask that you. Please disconnect your lines.