Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- CEVA Inc (CEVA, Financial) reported a 13% year-over-year increase in total revenue for the third quarter, reaching $27.2 million.
- Licensing revenue grew by 12% year-over-year, with 10 deals completed across various geographies and OEM customers.
- Royalty revenue increased by 15% year-over-year, marking the fourth consecutive quarter of growth.
- The company achieved significant milestones in licensing, including the first deal for its NeuPro-Nano embedded AI NPU and multiple deals for its PentaG2 5G platform.
- CEVA Inc (CEVA) raised its full-year 2024 guidance, reflecting confidence in its business momentum and pipeline.
Negative Points
- Gross margin came in below guidance at 85% on a GAAP basis, primarily due to customization work for key 5G advanced deals.
- Total operating expenses were at the higher end of guidance due to increased equity-based compensation expenses.
- The number of licensing deals in the quarter was slightly lower than the typical run rate, raising questions about potential deal slippage.
- Smartphone shipments were down moderately on a sequential and year-over-year basis, reflecting a softer environment for 5G operator OpEx.
- The company experienced a GAAP operating loss of $2.6 million for the third quarter, similar to the loss in the same period last year.
Q & A Highlights
Q: Can you clarify the impact of engineering time on gross margins due to customization for the 5G modem platform? Will this affect future quarters, and will this platform become a standard device for licensing?
A: The customization work for the 5G modem platform is strategic and involves reallocating R&D resources, which affects gross margins temporarily. This is not an increase in overall expenses, and margins should stabilize around 89-90% annually. The platform will be expanded and offered to other customers, enhancing long-term licensing and royalty economics. (Unidentified Company Representative)
Q: The number of licensing deals this quarter was lower than usual. Is this significant, or are there deals slipping into the next quarter?
A: The number of deals can vary quarterly, but we are satisfied with the quality and type of deals, which include multiple OEMs and advanced wireless connectivity solutions. The focus is on the quality and adoption of our technology rather than the quantity of deals. (Unidentified Company Representative)
Q: How does the current pipeline and backlog compare to the beginning of the year?
A: The pipeline is the strongest since early 2023, aligning well with market needs for connectivity and AI technologies. The backlog for Q4 is strong, leading to raised annual guidance. Execution is progressing well. (Unidentified Company Representative)
Q: Are you seeing increased demand for customization beyond 5G advanced, especially as more OEMs build their own chips?
A: While customization is not the primary focus, offering pre-integrated IP with software adds value, especially for OEMs with design gaps. This strategy is resonating well, leading to higher value deals. Customization is limited to a few deals annually. (Amir Panush, CEO)
Q: Can you provide more details on the strong Wi-Fi shipment quarter and its sustainability?
A: Wi-Fi shipments are part of a broader strategy in connectivity. We are early in the ramp, with significant growth expected as more customers reach production. The trend is positive, driven by market share gains and increased platform shipments. (Amir Panush, CEO; Richard Kingston, VP Market Intelligence)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
