Earnings Call: Q1 2020

May 11, 2020

Good day, and welcome to the CEVA First Quarter 2020 Earnings Conference Call. Call. At today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I'd now like to turn the conference over to Richard Kingston. Vice President of Market Intelligence, Investor And Public Relations. Please go ahead, sir. Thank you, Rocco, and good morning, everyone. Welcome to CEVA's 1st Quarter 2020 Earnings Conference Call. I'm joined today by Gideon Veritizer, Chief Executive Officer and Yani Varelli, Chief Financial Officer of CEVA. Gideon will cover the business aspects and highlights from the first quarter and provide general qualitative data. And Yaniv will then cover the financial results for the first quarter and also provide qualitative guidance and data for the second quarter and full year 2020. I will start with the forward looking statement. Please note that today's discussion contains forward looking statements that involve risks and uncertainties as well as assumptions that if they materialize or prove incorrect could cause the results of CEVA to differ materially from those expressed or implied by such forward looking statements and assumptions. Forward looking statements include guidance for the second quarter of 2020, Our anticipated pillars of growth, including 5G Ran and Wi Fi Six, and optimism about achieving such growth objectives, optimism about certain of our customers gaining market share in 5G, our ability to manage our non GAAP expense levels to mitigate the adverse impact of the pandemic in the coming months and market data by Cisco and ABI research. 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 duration of the COVID-nineteen pandemic the extent and length of the shelter in place and other restrictions associated with the COVID-nineteen pandemic and the impact on customers' command and the global economy generally, the ability of CEVA's IP for smarter connected devices to continue to be strong growth drivers for us. Our success in penetrating new markets and maintaining our market position in existing markets, the ability of new products incorporating the 5G, Wi Fi and IoT markets, our ability to execute more non handset baseband license agreements, the effect of intense industry competition and consolidation and global chip market trend. Steve assumes no obligation to update any forward looking statements or information, which speak as of their respective date. With that said, I'll now turn the call over to Gideon. Good morning, everyone, and thank you for joining us today. Firstly, our heartfelt synthesis are with those around the world that have lost their loved ones, older jobs due to the COVID-nineteen pandemic. We are all hopeful that the merger taken by governments around the world will lead with sustainable recovery. At CEVA, we are taking proactive steps to protect all our employees' health and adjust our operation to work from home. Our IT infrastructure is advanced and scalable, which allowed a seamless migration from office to work from home. Our ongoing R and D development remained at high level of productivity, and our interactions with customers for sales and support activities at Smooth. We continue to monitor government instructions country by country and are taking careful steps to enable our employee to return to our offices. Against this backdrop, we have an excellent quarter with revenue of $23,600,000, up 39% year over year. The licensing environments continued to be robust and we recorded $14,500,000 in licensing revenue, up 32% year over year. We signed 13 new agreements of which 10 were for connectivity and 3 were for small sensing. We out of the 13 deals where we first time customers. Now the computation for technologies include 5G for base station run, 5g fixed wireless access, 5g backhaul, Wi Fi, 6 for IoT devices, through wireless earbuds, vision and AI for drones, and voice assistants for a range of smart home and IoT devices. Royalty revenue came in at $9,100,000, up 53% year over year. Above seasonal weakness in the Chinese handset market resulting from the COVID-nineteen lockdown in China was more than offset by solid IoT based product shipments and the introduction of new low cost model for a leading smartphone company. Let me take the next few minutes to provide you with additional perspective on 2 growth vectors that are central in our strategy. 5G run and Wi Fi Six. These spaces represent secular trends in Rx expected to come increasingly into focus on the back of COVID-nineteen as they are key to enabling better work from home practices and support the proliferation of the use of robots remote medical diagnosis and treatments in the future. On 5G1, our largest 5G OEM customer extended the use of our technologies and signed new licensing agreements during the quarter for development of next generation 5g Chipset to address the 5G Phase II network services. These services include ultra reliable low latency communication, UR LLC, targeting robotics, smartmanufacturing, automotive, medical, and massive machine type communication, MTC, that enables billions of low powered sensors to be connected to the cloud for aggregation and AI services. U. R. L. C. And MMPC will drive the upcoming capital investment in 5G and are the focus of our customers with their new LAN design. In this context, a few weeks ago, we unveiled our latest generation DSP, the CEVA XC16, This is the most advanced and powerful DSP platform available today, offering unprecedented performance and state of that architecture, innovation in operating speed parallel processing and multi setting. We are also encouraged by Today, it has 45 commercial contracts and most recently 129% share of a $5,200,000,000 contract to deploy 5G base station in China Mobile or China Mobile. A substantially bigger share that it had in prior engagement for China Mobile. On Wi Fi Six, we are experiencing good momentum and customer interest with 2 new agreements signed during the quarter, targeting a variety of IoT devices ranging from BTV, smart set top boxes, smart speaker to smart door locks. Wi Fi Six is the latest Wi Fi standard, also referred to as 82211ax. According to Cisco forecast, nearly 60% of mobile data traffic worldwide with the offloaded to Wi Fi network by 2022. According to recent study from ADI Research, the Wi Fi Six market is forecasted to reach 2,200,000,000 units by 2024. As compared to less than $300,000,000 in 2019. The recent FCC approval to free up additional spectrum key devices to achieve speeds comparable to 5g Mobile Network support low latencies required for application like virtual and augmentation reality and mobile gaming and is also expect to boost the industry 4.0 update for smart Manufacturing. To summary, our thoughts are with those people suffering from the impact of COVID-nineteen. While the situation is still dynamic, we are encouraged by the persistent design activities of our customers interest in our product. We are laser focused to continue to expand our business to capitalize on on the momentum we gained last year. We are closely monitoring the dynamics and developments concerning our customer shipment and we take prudent steps until COVID 19 impact is contained and supply and demand resume some normalcy. We hope you are all safe and look forward to meeting you face to face again in the near future at conferences and virtual. With that said, I hand over the call to Yaniv for financials and guidance. Thank you, Quintin. Good morning. I'll start by reviewing the results of our operations for the first quarter of 2020. Revenue for the first quarter was up 39 percent to $23,600,000, as compared to $17,000,000 for the same quarter last year. Revenue breakdown in its fall licensing and related revenue was approximately $14,500,000, reflecting 61% of our total revenue. 32% higher than $11,000,000 for the first quarter of 2019. Realty revenue was $9,100,000, reflecting 39 percent of total revenue, 53 percent higher than $6,000,000 from the same quarter last year. Corporate gross margin was 88% on a GAAP basis and 90% on non GAAP basis. Slightly better on non GAAP than we originally forecast. Non GAAP quarterly gross margin excluded approximately $200,000 of equity based compensation expense and $200,000 of the impact of amortization of acquired intangible. Total GAAP operating expense for the first quarter was at the higher end of our guidance at $22,500,000. OpEx also included an aggregate equity based compensation expense of approximately $2,900,000, higher than forecasted due to the accounting associated with the February 2020 PSU grants to manage. OpEx also included 600,000 the amortization of acquired intangibles and $900,000 allowance for doubtful debt provision associated with liquidity difficulties or one of our customers in the U. S. Total operating expense for the first quarter, excluding equity based compensation expenses and amortizations of intangibles, were $19,000,000, also at the higher end of our guidance. U. S. GAAP net loss for the quarter was 1,200,000 and diluted loss per share was $0.05 for the first quarter of 2020 as compared to a net loss of $2,300,000 and diluted loss per share of $0.10 in the first quarter of 2019. Our non GAAP income and diluted EPS for the first quarter increased by 9.5 fold and 11 fold, respectively, to $12,600,000 $11. Other related data. Ship units by CEVA's licensees during the first quarter of 2020 were 261,000,000 units, down 27% sequentially but up 50% from the first quarter of 2019 reported shipping. Of the 265,000,000 units shipped, 111,000,000 units or 43% were for handset based benches, reflecting a sequential decrease of 43% from 196,000,000 units of handset baseband chips shipped during the fourth quarter of tool on a 2019, but a 25% increase from 89,000,000 units shipped a year ago. Our base station and IoT product shipments were 150,000,000 units, down only 9% sequentially, up 76% year over year. We've now categorized all of our non handset basement chips under the umbrella of base station and IoT products. It's for the balance sheet. As of March 31, 2020, you see that cash, cash equivalent balances, marketable securities and bank deposits, for $151,000,000. We continued our buyback plan this quarter repurchasing approximately 202 Alvin shares for approximately $4,800,000. In February, our Board of Directors approved a new expansion of the buyback plan by a total of 700,000 shares. Available for repurchase. And as of today, 498,000 shares are available for repurchase. Our adjusted ASC 606 DSOs for the first quarter of 2020 were 63 days. During the first quarter, we generated $6,400,000 net cash from operation, or depreciation and amortizations were $1,500,000 and the purchase of fixed assets were 800,000. The end of the first quarter, our headcount was 3 91 people, which 324 were engineers, up from a total of 382 people at the end of 2019. Now for the guidance. As mentioned by Gideon, we continue to execute well in our business strategy during the first quarter and has had an excellent first quarter in licensing and royalty revenue despite the disruption caused by COVID-nineteen. Although we continue to work diligently, towards our goals of meeting annual revenue guidance given on the last earnings call, the spread of COVID-nineteen around the world and the extent of this disruption it poses in the supply chain and on the consumer demand cannot be fully accessed at this point. Even this uncertainty, as a matter of prudency, we have decided to withdraw our annual royalty revenue guidance at this stage. On the other hand, our licensing and related revenue business remains robust and we're maintaining our annual forecast of growth of $2,000,000 to $4,000,000 over 2019 record annual results. We've also continued to monitor closely our non GAAP expense levels to mitigate any adverse impact of the pandemic in the coming months. This will not affect our research and development plans, technology roadmap or customer support as we are firmly committed to those areas and believe those technology investments will pay dividends in the future. As we have seen from prior cycle, IT companies play a crucial role in expediting the semiconductor market recovery in this closing technology gap that such slowdowns can create. Specifically for the second quarter of 2020. Gross margin is a expected to be approximately 86% on GAAP and 88% on non GAAP basis. Excluding aggregate of $200,000 of equity based compensation expenses and $200,000 of amortization of other assets associated with the Immersion Index. OpEx for the next 3 quarters of 2020 should be lower than the 1st quarter For the second quarter, GAAP based OpEx is expected to be in the range of $21,200,000 to $22,200,000. Over anticipated total operating expenses for the 2nd quarter, $3,700,000 is expected to be attributed to equity based compensation expense. As stated earlier, less expenses are higher than originally forecasted due to the accounting treatment of our February 2020 PSU grants to manage. And $600,000 will be attributed to amortization of acquired intangibles. Therefore, our non GAAP OpEx is expected to be in the range of $17 to $18,000,000. Net interest income is expected to be approximately $750,000. Tax sales for the second quarter expected to be approximately $300,000 in both GAAP and non GAAP basis. The share count for the 2nd quarter is expected to be at 23.2 1,000,000 Today's first question comes from Matt Ramsay with Cowen. Please go ahead. Thank you very much. Good afternoon and good morning. Gideon, it's really a nice see the momentum in the licensing business continue? And I noticed over the last couple of earnings calls, you've talked more and more about Wi Fi Six and also expanding your 5G portfolio beyond just the baseband but to some additional areas as well. Maybe you could expand a little bit more than you did on your prepared comments is just the footprint that you see in terms of licensing momentum with 5G and how that may continue for for several years versus just the initial product with a couple of the OEMs that you should be rolling out here in the next couple of quarters? Thanks. Yes, I think you're highlighting 2 major growth engines for us. It's a result of 2 things. 1 is the market. I'll get into this in a minute. And the second one is the landscape of suppliers. So these are 2 significant technologies that are not that many companies that have the competency to do it, but they do need to get into this one if they want to benefit of what these technologies are offering. So if you take the 5G in specifically I touched on the 1, which is the base station, radio access network. And the related things. There are very few companies that, that can build a base station today. And those companies, a key element of, in their capability or ability to build this one is to use ESP that is not around anymore. We are the only company that can offer BSP like exit 16 that takes you not just what people are thinking today about 5G, which is the mobile broadband, the smartphone, but also the next generation of the phase 2 where people start putting into place autonomous driving, smart manufacturing, remote medical things that we start seeing today at the back of the coronavirus. So we are here in a position as the only viable proven supplier that I can take advantage of the 5G. And aspect of this one is what is called now 5g01 Open Run. 1 of the things in the states are important in order to build independently of, let's say, Chinese OEMs or dependency is to go to what is called Open Run, which is a more desegregation or disconsolidation of supplier of dependency on one stop shop, the big guys that come in and provide full solution. So we are the only company that can enable those companies to get into the market and take advantage or run and provide caution either in the antenna side or in the base station. So that's about the 5G run-in general, which is we build throughout the year a big entry barrier for any company, including those that wants stability now. And then comes the Wi Fi, which becomes now a competitor to 5G, especially when it comes to the residents on the enterprise on the fixed side of the thing. And the fact that you have today Wi Fi Sixe, which basically doubled the of the Wi Fi and provide area that is clean of congestion, let's take the Wi Fi succeed beyond that what we know all of us know, it's PC and the handset into the access point in the enterprise or home, people will stay more at home. They need faster network and going into industry 4.0 which require robotics require this kind of fast and reliable access to the web. So these are 2 anchors of technology that we are the only viable, and alter supplier of a technology for those companies that wants to be in this market either through the consumer part of it or through the industrial part. Got it. Thank you for the color there. And sounds like some really good progress. I wanted to Obviously, Yaniv, I didn't understand the lack of visibility with the guidance on particularly on smartphone units, but I think it struck me that So I'm not mistaken. It's the 1st quarter where more than half of the royalty units were non handset. So we've seen a shift there. And I know a number of years ago, you guys talked about some targets about some big numbers of non smart phone based band units. And it seems like the IoT franchise is really starting to come together as we all kind of wait for the bigger 5G units the common base station. But any color you could give on the breakdown of some of the technologies within the non smartphone business? And the momentum that you're seeing there because that was quite a bit stronger than at least we had modeled it and it seems like setting the pace for some some decent results there to maybe protect some of the business that will have to see what units are in smartphone over time. But any color in that non smartphone business of a breakdown would be really helpful. Thank you. Yes, sure. It was an interesting quarter unlike prior year. We did see more than seasonal decline in the Chinese, specifically in the Chinese market and manufacturing of Chinese phones going to different areas of the globe. Offset by a lower low cost, a well known OEM that came out with a lower a different interesting timing, which usually is not in the beginning of the year, but usually in the September timeframe, in prior years. That's within the handset side. And you are right that this is probably the first time that our non handset units for the quarter was $150,000,000 were stronger than the handset business of $111,000,000. And the dollar side, it's not the case yet. We have the nice number of $3,700,000 coming from non handset. Last quarter, if you recall, it was our all time record high in 4.3. And that shows that even the typical seasonality that we have, that the industry has in Q1 in the normal years has changed it. In some segments of the market, of course, centrifuge and is new for us. Had it this quarter. We didn't have it a year ago, but that was helpful. But even among the other traditional markets for us, like Bluetooth, for example, it was a very strong quarter, although it was the seasonal weakest quarter of the year for consumer devices, maybe some people at home still needed different devices. Maybe, there was specific needs for different markets that still played nicely. And we saw that the sequential decreased in the new category that we called out base station and IoT was only 9%. This was this is overall very low compared to any first quarter we ever had before, but this is the combination of the rebound and no doubt that this new segment at least your name or base station and the IoT should continue to help us grow the business and grow the loyalty forecast that we have. With this strange limitation this year that it's not traditional seasonality anymore. It's not traditional second half in the last 2 years were stronger than our first half. It may be the case, but we just need to wait and see due to the coronavirus effect. Got it. And just one last quick one. You mentioned, down to $17,000,000 to $18,000,000 for OpEx. I think you do Is that just organic sort of belt tightening? Any kind of I know there's been R and D grants in the past and there's been specific government funding things that have moved around since we've had the coronavirus situation. So, anything unusual in the OpEx or is that just a run rate we should expect going forward? Sure. So we said that in the prepared remarks, we are sort of monitoring that and trying to tighten whatever we can from the spend size without hurting the R and D, you're right that in Q1, the grants were much smaller, at some the government agencies were closed and we didn't get as much payments in Q4 to Q1. There was a decrease of $1,000,000 in for example, it's a big number. It will play around the year, and that's why the next couple of quarters are lower than the first quarter. We also had an unusual effect for us of some doubtful debt and some U. S. Company that got into financial difficulties and liquidity with Corona and related. And so we had a bigger provision of $900,000 in the first quarter. All that with less travel, less trade shows, more virtual events than what you could see in other companies. We are also taking the measures here as they're trying to come up with ways to offset any risk in the royalty revenues in the next couple orders if if there will be And our next question today comes from Mike Walkley with Canaccord Genuity. Please go ahead. Thank you and congratulations on the strong results in the tough environment. Just a question for me on the base station or wireless infrastructure market. With Nokia starting to highlight the progress of reef shark shipments, picking up quarter over quarter and expected to do so through year end. And ZTE doing quite well on 5G contracts. Can you just talk about maybe I know you're pulling royalty guidance because there's so much uncertainty in the world. But can you talk maybe what you're seeing on the infrastructure side? Is it certainly seems like the need for broadband that bothers puts and takes overall infrastructure spending looks to be one of the areas more on track than maybe the consumer driven handset market? Hi, Mike. It's Gideon. You're right. The it looks to us that the 5 gs infrastructure is somehow resilient to the the impact of the coronavirus. This is the an infrastructure investment, a contract are being out, the tender, the China mobile had about $10,000,000,000 sizable and they will continue. And then and we see our customer are benefiting you know, it's a process where, on the point, you win a deal until you see it on the financial. It's about 6 months. So we are encouraged and we'll see how it evolves in the coming month. Great. Thanks. And just my follow-up question on the license, I mean, on the licensing side, it's great to see you still expect to increase $2,000,000 to $4,000,000 this year. Can you just talk about, with so much probable restriction work from home? How your team is able to virtually, work with your client to ensure that you can execute on this licensing structure given a lot of restrictions on face to face interactions? Thank you. That's right. I have to admit that to be, for us, it can be a surprise the effectiveness of the productivity that people get when it comes to interaction with customer. And so again, take example of China, they start working and they are logging immediately after the Chinese New Year. That the coronavirus just was one of the big And the the the way licensing works, it's a it's a Dell different things that you can show to the customer about demonstration. And that's something that you can do from a remote, late access, but most of the work is evaluation, Q And A, presentations. And this was smooth and ongoing like people are doing face to face. This was not the personal relationship that people are going out together. But other than this, the practice slicensing was as usual. And the fact that, at least what we saw so far, people didn't slow down development and planning and wanted even to expedite it, that's the reason that we see what we saw in Q1 and the pipeline that we have ahead. Great. Thank you. And I too look forward to the day we can all get together again in person. Good luck this year. Hi, Craig. Thank you. And our next question today comes from Suji Desilva with Roth Capital. Go ahead. Hi, Gideon. Hi, Geneva. Congratulations on the execution in a tough environment, certainly. Can you talk about the activity you've seen in Lice and royalty quarter to date, the linearity in the activity, whether it stayed relatively linear in licensing? And any signs of recovery in royalty or whether it's just too hard to say at this point? Suji, so let's go with the licensing. I think other than the fact that I mentioned the hot thoughts about 5G and Wi Fi Six, Wi Fi Six, you see many companies going into and building a product And these are consumer products and access point. It's just a new cycle of the Wi Fi. And we see more people because we have more smart devices today, the TV, smart door locks. And so that's why I would say that in line think it's all across the world. We have AI portfolio. We have computer vision. We have sound. We have, of course, Bluetooth people want to build a lot of earbuds hearing aid. So I cannot say that there is a starter. It's all over the place. And the uniqueness of CEVA is our synergistic portfolio. The people that are building any a device, they need connectivity, they need sound form of sensing, whether it's a terminal sensor or microphone sensor or a mirror sensor. They need something and they find it in one stop when it comes to us. Now when it comes to the linearity of the world is it's hard for us because we don't get orders from customers. We just get reports of what was more than done. But what we see, around us, speaking with customer is that the, the, what we call now, IoT and base station, this is something that, more or less goes according that we or expected to be more or less as we anticipated in this year. There are less people buying on the other, they need more up while they stay at home. And then of course, the 5G is ongoing. The question mark is about a smartphone. People are saying that Q2 will be weaker than Q1. And then there will be some gradual recovery, maybe L shaped, maybe vicious. Nobody really knows how to go there. But I think the Generally, Q2 would be weaker than Q1, primarily at the break of smartphones and then in depending of the delays and how countries will go out of this virus, of this lockdown, gradual recovery, how the the Christmas season and the end of the year. Okay. You, Gideon. It's a very helpful color. Appreciate that. And then, on 5G wireless infrastructure, you have a series of licensed wins here and seems to be more activity there. Should we expect that your royalties in the next 1 or 2 years will still come from the 2 large customers? Or are there additional or smaller customers that are coming into the 5G royalty mix in the next year or 2? That would be helpful to know. Thank you. We have other customers as well. The 5G run market is, is what is called heterogeneous. Architecture. So you have macro cells and you have small cells and you have fixed wireless access we spoke with touch on this slide on the on the on the preferred remarks. So, we have Not that many, but few other customers that wants to go into the 5G run market. Play there in different form factors there. Okay. And then just a quick follow-up there, Kenny, will the ASPs be similar to the base station ASPs you've quoted, which are significantly higher than the existing ASPs? Thanks. They are going to be higher in the base station chips you have, they're much more expensive and bigger, physically, bigger chips with many more EST implementations inside. So part of the royalty that we get is based on the chip style. And here's a question, if it's a smaller hot spot for home or a bigger base station or what type of base station it could have multiple discipline from the light all the way to to mega size the base stations with dozens of chips inside and dozens of implementations inside. So think we'll have lots of different flavors. Right now, we have one customer in production. We're waiting for the other one to kick in later this year, the beginning of next year. And then the newer ones that joined in the last probably 12 to less than 24 months. And these were the ones that Gideon mentioned just a minute ago. Okay. Thank you, guys. Thank you. And our next question today comes from Tobey Rosner with Barclays. Please go ahead. Hi. Congrats on the strong results. Most of my questions have been asked, I guess. Alright. Sorry. Can you can you hear me? Yes. Go ahead. Hi. Can you guys hear me? Hi, sorry. Yes, just a follow-up. Last quarter, you mentioned the traction you were seeing for the automotive. And I'm wondering if that's still the case? And then as a follow-up, just looking at cost flexibility you have if I'm just looking at the worst case scenario where we would see a second wave of COVID and some pressure on your revenue. Do you have any flexibility to kind of decreased cost and priority and on some of your non R and D spend. Sure, Thiago. I'll start today with the second question because I think we answered that and talked about this. We are looking to monitoring closely the cost basis. Some are helpful just because of the COVID less travel less events, which we're doing and differently virtually like the rest of the world. These are obvious to cost savings, less office time to some extent and some offices and related costs. We are looking at other ways to be more creative and then cost efficient. And this is, you could see that as early as the guidance we gave for Q2 and the non GAAP of 2017 to to $18,000,000 for the quarter. So this already baked some of that into account. Tavi, in regard to the automotive market, we are renewed the license with automotive and we speak about traction about licensing. We don't have yet royalties coming from Automotive Space. These are long program when we start when we sign a bill for cars that go into the market in 2024. At the earliest. So, one quarter or here and there is not that substantial, but so far, in terms of design, the discussion that we have with the customer about new, new designs is ongoing. Great. Thanks. And our next question today comes from David O'Connor with Exane BNP Paribas. Please go ahead. Great, good morning and thanks for taking my question. Maybe 1 or 2 kind of follow-up from my side. Maybe firstly on the, Yaniv on the base station royalty in Q1, Any color there and how much that was or the change relative to Q4 quarter over quarter? Then maybe one follow-up from last question on automotive. Terms of engagement there, due to the COVID-nineteen, any change in kind of the interaction on the licensing side? And then maybe a third one on the sensor fusion, Can you remind us the, on the execution, what type of seasonality you've seen there in the past? So we can try and do some kind of modeling on that going forward Thank you. Okay, David. I got the first question. And the third question, the second question, maybe I need help because I didn't but we may ask you to repeat it. But the first question was about the 5G royalties. We don't break down specifically on those segments. We have 5G and IoT in general, but there was a disruption in the 5G, because people couldn't go and work and install those base station. But that's a temporary that we get back to work and then we'll see. So far, we maintain what we thought that when it comes to 5G, base station, it's, it's the same. We don't see any change for what we thought at the beginning that this would be a growth year in this Now, in terms of TransoFusion, TransoFusion is something that IMU, which is the measurement unit, It's a very broad market. So they are consumer. They are we have customer in the PC. We have customer on the TV. So you don't really can talk about the seasonality. It's a highly fragmented market and What we are looking here is just the trend that we are expanding and we are expanding our customer base and the addressable market. So overall, it's one segment out of our IoT segment and so far when it comes to what we see so far in terms of interested. Thanks for that. My question was on automotive. And what was the question? Because I you were broken. Yes, sorry about that. Just to repeat on the automotive side. Any change on the licensing of automotive in terms of engagements you're seeing in Q1? Thank you. I don't think so. I don't think we have a change in the automotive engagement. I think there was question with before, the licensing when we license something, it's for programs that go for until 2024 at the earliest. So a quarter here and there is not something that change people, especially when it comes to design. And that's what we see in terms of design activity, prospective customers, there is no change. And since we don't have royalty there, so we cannot, in a way, we are not impacted from obvious slowdown that we have in the automotive market. Got it. That's helpful. Thanks guys. And ladies and gentlemen, this concludes the question and answer session. I'd like to turn the conference back over to Mr. Kingston for any final remarks. Thank you everybody 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 at investors. Xiva.com. With regards to upcoming events, we will be participating in the following event shortly. The Cowen 2020 virtual TMT Conference running from May 26 through 29th. And for further information on this event and all events, we will be participating in can be found on the Investors section of our website. Thank you, and goodbye. Thank you. So, this concludes today's conference call. You may all disconnect your lines and have a wonderful day.