Earnings Call: Q4 2019

Feb 18, 2020

Good day, and welcome to the CEVA Inc. Fourth Quarter And Full Year 2019 Earnings Conference Call. All participants After today's presentation, there will be an opportunity Please note today's event is being recorded. I would now like to turn the conference over to Richard Kingston, Vice President, Market Intelligence And Investor And Public Relations. Please go ahead, sir. Thank you, Rocco. Good morning, everyone, and welcome to CEVA's 4th Quarter and Full Year 2019 Earnings Conference Call. I'm joined today by Gideon Wertheizer, Chief Executive Officer and Yuneve Arieli, Financial Officer, ObsEva. Gideon will cover the business aspects and highlights from the fourth quarter full year 2019 and provide general quality of data. Yaniv will then cover the financial results for the fourth quarter full year 2019 and also provide qualitative data for the 1st quarter full year 2020. I will start with the forward looking statements. Please note that today's discussion contains forward looking statements that involve risks and uncertainties as well as assumptions that if they materialize or prove incorrect, could cause the results of CEVA to differ materially from those expressed or implied by such forward looking statements and assumptions. Forward looking statements include our assessment of the overall licensing market in the first quarter of 2020, our annual 2020 1st quarter 2020 guidance our anticipated pillars of growth and optimism about achieving such growth objectives, reaffirmation of our 2022 Royalty Goals, higher R and D expenses in 2020 and market data by Del Arrow. 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 ability of CEVA's IP for smarter connected devices to continue to be strong growth drivers for us. Our success incorporating our technologies to achieve market acceptance, the speed and extent of the expansion of the 5G Wi Fi contextual awareness and IoT markets, our ability to execute more non handset baseband license agreements, the effect of trade tariffs and political tensions, the effect of intense industry competition and consolidation and global chip market trends. Eva assumes no obligation to update any forward looking statements or information which speak as of their respective dates. With that said, I'll now hand the call over to Gideon. Thank you, Richard. Good morning, everyone, and thank you for joining us today. We were delivered an outstanding fourth quarter an overall excellent year with revenues and EPS both surpassing straight expectations. Moreover, our strong performance in particular on the licensing front sets the stage for continued growth in 2020 as will be reflected in the annual guidance that Yaniv will share with you shortly. I will elaborate in my prepared remarks on the gross pillars and the underlying technology that are driving this performance. Total revenue for the fourth quarter of 2019 came in at 28,000,000 $28,300,000, an all time record high and significantly ahead of street expectation. A brisk licensing environment along with a strategic customer agreement led to $14,800,000 in licensing revenue, an all time record high for quarterly licensing revenue We signed a record 21 new agreements of which 15 were for connectivity and 6 well for smart sensing, and out of the 21 bills well with first time customers. Target uses for our technologies, our baseband processing for 5G base stations, smartphone and cellular IoT devices, AI and computer vision for consumer electronic, surveillance and automotive, audio and Bluetooth connectivity for true wireless earbuds, sensor fusion for smart TV control, light of MPC peripherals and Bluetooth and Wi Fi connectivity for a wide variety of IoT devices. Of note, during the quarter, we signed a sizable and strategic agreement with a very large smartphone OEMs who license our technology for its in house cellular modem chip development, planned to be deployed in its future smartphone. We are extremely excited and committed to this new engagement and looking forward to capitalize on this opportunity for greater market share expansion and royalties for future 5G smartphones. LNG revenue for the fourth quarter was $13,500,000 and hold time record high. Seasonal strength and new production ramps led to 360,000,000 CEVA powered devices shipped in the quarter, also a record high. Royalty revenue for Conting a record $4,300,000 and a record 164,000,000 units in the quarter. For the full year of 2019, revenue came in at $87,200,000, up 12% from last year. Licensing and related revenue was a record $47,900,000 up 18% from last year. We continue to strengthen our customer base with the record 52 license agreements signed during the year, of which 23 well with first time customers. NER royalty revenue was $39,300,000, up 5% as compared to last year. Shipment of CEVA based products grew by 12% year over year, to more than 1,000,000,000 units. Handset basedband achievements were up 3% year over year, with a strong second half of the year, driven by product launches across all phone peers. Non handset baseband continues to expand with annual royalty revenue up 49% to $13,000,000 and units up 25 percent to a total of 469,000,000 units. Looking ahead to fiscal year 2020, we are setting 3 key priorities. IOT1, capitalizing on our recent momentum in licensing to continue to grow our revenue and a spend our customer base. Licensing agreement trigger a virtuous circuit, where new licensees drive royalties, which then free up additional R and D funds for further technology investment we drive further growth in licensing and royalty momentum. This is where our strategy to synergies broaden our product portfolio for organic investments and M and A played out so well in the last few years. This was culminated in the step up in licensing revenue and sustainable growth in royalties from non handset basement segment that we are experiencing. In this end, we anticipate 3 gross pillars The first pillar is 5G. 5G presented greater growth opportunity than we had with 4G LTE. To our CEVAICC high performance DSPs family, we are set to benefit from the new 5G CapEx investment which is forecasted to grow by 159 percent CAGR between 2018 through 2023. According to research published by the law. Another growth opportunity we are addressing with regard to 5G is cellular IoT, which applies to massive connected devices for industrial automation, autonomous transportation, smart cities, medical, AR, and VR. According to recent Ericsson Mobility Report, It is expected that there will be 5,400,000,000 cellular IoT connections by 2025. With our PEMPERGY and Dragonfly modern platform, we are set to serve this demanding requirements and diverse market. The 3rd 5G opportunity is handsets. As I mentioned a few minutes ago, We have engaged in the last quarter with a top tier smartphone vendor maker and have few others in our pipeline. This engagement reflect a deconsolidation in the cellular basement supply landscape, where the large OEMs are looking to internalize SOC design that incorporate basement processes to gain cost saving and differentiation. These customers are telling to us to take advantage of our broad portfolio of DSP and platform. The second pillar is Wi Fi Six. Wi Fi Six upgrade cycle represents a substantial opportunity due to the fast holiferation of connected IoT devices for smart home appliances such as smart TV, smart speaker, connected light bulbs, thermostats, and we are there. Our Jira waves, 82211ax IP, is at the forefront of this upgrade cycle and use as the reference vehicle for certification by the Wi Fi Alliance. With no old and half a dozen licensee already designing Wi Fi Six product, and low power IP available for all different segments in the space, we are well positioned to capitalize on the upgrade cycle to WiFi 6 to further expand our footprint. The third pillar is contextual awareness. Contextual awareness refers to the ability of IoT device to collect and process data from its surrounding and adapt its operation to the context. Today, IoT devices incorporate different classes of sensors, such as camera, inertial measurement unit, microphone, time of light sensors and radars. The data captured from sensor can then diffuse to extract device context, such as activity type, intent, proximity, location, and handful of other experiences. Context and Wealth features are quickly becoming a key differentiator for OEM in smartphones, PC, Hirobel, Hirobel, AR and VR headsets. Robots and other IoT devices. CEVA is in a unique position to be a one stop shop for contextual awareness IP as a result of our recent organic R and D investment in voice and DSP technology and the acquisition of Riviera Waste And the Hilton Labs business. Priority 2, royalty growth tower our 2022 goal of doubling our 2018 was delivered. We believe 2019 was a progressive year. Tower reaching this goal in terms of new while the push out of production rollout by one of our base stations customer and partial switch to a non CEVA modem supplier, by large smartphone OEM in Paciva in the short term, we believe that by 2022, we will reach the customer K and the CEVA power unit shipment aligned with our royalty target. The strong licensing performance and the contribution of Intelsla's sense of Fusion OEM Business further reinforce our belief in reaching the target. We are closely monitoring and working side by side with our customers to deploy our technologies in their SoC or product and take it to production. Priority 3, efficiently utilize R and D expenditure for new technology development and working closely with customers to expedite product development. We are choosing our R&D investment prudently and be agile and responsive to lucrative and strategic opportunities. For this year, due to the step up in licensing revenue and customer engagement, including engagement with a top tier handset player We plan to increase R and D expenditure by approximately $6,700,000 non GAAP versus last year, which will also include a full year of R And D expenditure for our Hiper Slab team. So in summary, I am very pleased with our achievement in 2019. We will determine and consistent with customer engagement and innovative with our product development, which resulted in an exceptional growth year our annual licensing revenue ahead of the target we set at our 1st Analyst Day in January 2019. We are on a solid path for this momentum to continue into 2020. This strong licensing performance and the strategic engagement we have formed with top tier companies set the foundation for our royalty growth target in 2022. We will continue to come up with differentiated solution with an unmatched level of integration like our Samsung contextual awareness platform or CDNN invite that expand our footprint in AI. Finally, I would like to take this opportunity to thank all of our employees for their hardware innovation and fantastic execution, which has made us a top industry name for connectivity and smart sensing technologies for the IoT industry. I would like also to extend my thanks to our partners, supplier, and last but not least, our investors for their support. We wish you all a happy and prosperous year. With that said, I'll now turn the call over to Yaniv who will outline the financials and the guidance. Thank you, Gideon. I'll start by reviewing the results of our operations for the fourth quarter of 2019. Revenue for the third quarter was $28,300,000, up 32% as compared to $21,400,000 for the same quarter last year. Revenue breakdown is as follows: licensing and related revenue was approximately $14,800,000, reflecting 52% of our total revenue. 40% higher as compared to the fourth quarter of 2018 and up 31% sequentially. Royalty revenue was $13,500,000, reflecting 48% of total revenue, up 24% from $10,900,000 for the same quarter last year and up 11% sequentially. Non handset baseband royalty revenue reached an all time record high of $4,300,000 in the quarter. Quarterly gross margins was 9% on GAAP basis and 91% on non GAAP basis. Total operating expenses for the 4th quarter were $22,000,000, a $1,000,000 above the high end of our guidance. Mainly due to accrued compensation related benefits and commission expenses associated higher 2019 revenues and some provision for doubtful debt. OpEx also included an aggregate equity based compensation expense of approximately $2,700,000, amortization of the acquired tangible associated with the acquisition of HillcrestLab and Immersion business of 700,000. We concluded during the quarter, the amortization of the acquired intangibles of Riviera waves in which we invested in 2014. Total operating expenses for the fourth quarter, excluding these items, were 18.6 $1,000,000, also above the high end of our guidance due to the same reasons I just highlighted. U. S. GAAP net income for the quarter was $3,100,000 and diluted earnings per share were 0.14 dollars. Compared to net income of $2,300,000 Non GAAP net income and diluted EPS for the 4th quarter came up significantly 29% 30% to $6,800,000 $0.30, respectively, of net income and EPS for the fourth quarter of 2018 of $5,200,000 and $0.23, respectively. Other related data. Shipped units by CEVA licensees during the fourth quarter of 2019 were a record of 360,000,000 units, up 23% sequentially and up 45% from the fourth quarter of 2018 reported shipments. Of the 360,000,000 units shipped, 196,000,000, a shy of 200, or 54% were for handset baseband chips, reflecting a sequential increase of 16% from 169,000,000 handset baseband shift during third quarter of 2019 45% increase from 134,000,000 units shipped a year ago. Our non handset baseband shipments reached a new all time record high of 164,000,000 units, up 33% sequentially and 44% on a year over year basis. As for the year, our total shipments increased 12% year over year to over a billion units. Up 5% from 2018, which equivalents to approximately 33 Siva powered devices sold every second in 2019. Annual shipments of handsets increased by 3% year over year due to a strong second half with units up 21% year over year for that period. Non handset based on royalty revenue continued to grow and reached an all time record of $13,000,000, up from $8,700,000 in 20 18 and $8,100,000 in 20 17. In terms of units, non handset baseband units, shipments were up 25% year over year to a record 469,000,000 units. Just for the balance sheet items. As of December 31, 2019, CEVA's cash and cash equivalents balances, marketable securities, bank deposits, work $150,000,000. We continued our active buyback plan, repurchasing approximately 161 1000 shares during the quarter for approximately $4,300,000. Overall, in 2019, We repurchased approximately 355,000 shares for about 9.1 $1,000,000 and fully utilize the share authorized by our repurchase plan from May 2018. Earlier this week, our Board of Directors approved a new expansion to the buyback plan by a total of 700,000 shares of common stock available for repurchase. Last, our adjusted to ASC 606 DSOs for the fourth quarter continues to be low as 36 days. During the fourth quarter, we generated $8,300,000 of net cash from operation, Depreciation and amortizations were $1,800,000 and purchase of fixed assets were $800,000. At the end of the year, our headcount was 3 82 people, of which 3 13 were engineers. Up from a total of 3.41 people at the end of 2018. Now for the guidance, as Gideon described, our strong and broad IT portfolio highly correlates with the needs of the semiconductor companies and OEMs looking to expand into IO and 5G. In 2019, we set a new record high in licensing of approximately $48,000,000. 2 years ahead of the target we set our Analyst Day in January a year ago. By licensing revenue tend to be lumpy. We believe this momentum continues into 2020, and we expect another step up in licensing revenue in the range of 2 to $4,000,000. Growalties, we are expecting annual royalty growth in the range of 10 our projections take into consideration a lower share at the flagship smartphone OEM. However, the lower from non handset basement products, including our Hillcrest lab sensor fusion business. With regard to the recent coronavirus outbreak, we are closely monitoring developments with our royalty customers in China, who may be temporarily affected. Our annual guidance assumes a return to normal business and catching up on the yearly basis of this disruption that may take place in the first quarter. On licensing, we do not see any issues and now expecting a healthy and solid licensing environment in the first quarter of the year. On cost of goods, we expect higher non GAAP expenses of approximately $141,400,000 due to a full year of Hillcrest Labs on board in R&D customization work related expenses from 2 known projects that will be allocated with our strong licensing execution in 2019 and even stronger expectations for 2020 We will continue to support these new customers and reinforce our leadership with disciplined investments in R&D. Telcrust Labs will also contribute its share to the 2020 OpEx on a full year basis. Overall, our non GAAP OpEx increase will be approximately Equity based compensation expenses are forecasted to be about a $1,000,000 higher than 2019 and just shy of $12,000,000. Annual gross margin forecasted to be in the region of 88% to 90%. Forecasted to be slightly lower than 2019 at $75,000,000 per quarter. Exes are expected to be approximately $1,000,000 in GAAP basis and 15% of pretax income on non GAAP basis and share count for 20 is expected to be in the range of 23,000,000 to 23,500,000 shares. Specifically, for the first quarter of 2020. Gross margin expected to be approximately 88% on GAAP basis and 89% on non GAAP basis, excluding an aggregated $200,000 of equity based compensation expenses and 100,000 of amortizations of other assets associated with the Immervision investments. OpEx for the 1st and second quarter of 2020 should be quite flat and higher than first and then the third quarter due to the timing of R and D grant payments and was expected to be in the range of $21,400,000 to $22,400,000. If our anticipated total OpEx For the first quarter, $2,600,000 is anticipated to be attributable to equity based compensation and $700,000 to the amortization of acquired intangibles. Non GAAP OpEx is expected to be in the range of 18.1 to 19.1, also quite similar to the 2nd and 4th quarters of the year. Net income, interest income is expected to be approximately $75,000,000 for the quarter, taxes for the 4th for the first quarter is $200,000, both on GAAP and non GAAP basis and share count for the first quarter approximately 23,000,000 shares. Okay, Rocco, with that, you could open the Q and A session. Thank you. Thank you, sir. Questions. And today's first question comes from Mike Wakeley of Canaccord Genuity. Please go ahead. Hi, this is Anthony on for Mike. Thanks for taking the question and congrats on strong results and the new deal signed. With the 21 new deals, including the large strategic agreement with the handset OEM, any color you can provide on specifically on the size of the large license agreement? And then any sense for how we should think about the timing of these new deals ramping this year and towards your royalty outlook for 2022? Sure. So usually we don't break down the size of the deals in our business We have the 2 flavors of licensing deals. It could be for single use, we call it, one use on a chip. For a specific product and a specific market. And then multiuse, which covers the same type of technology for, but for a wider use. These wider, bigger deals usually are term based So it could be 3 or 5 years. And then you have no limitation of the number of views that you are allowed to use our technology. In a single use, the customer comes back every 6 months to a year, a year and a half, and it wants to design its next shift, these deals tend to be smaller in size and the bigger deals are the time based which are in the 1,000,000 of dollars per deal. We have a combination. Every year, we have few of these larger deals or sometimes you have renewals. It could be 1, 2, 3 high deals like that a year. Depends. So for sure, we'll have, we had one larger deal in this quarter and then many other, half of the deals are newcomers that you can see for the first time ever. So I didn't answer your question specifically on that. The specific customer, of course, but overall, we had larger deals and smaller deals in the quarter. And they're all different. So what's interesting is that we expanded our business model. If you remember, we talked about Hillcrest Labs and adding different flavor of royalties and deals to CEVA. We signed 3 deals for the first time using our sensor fusion technology. These deals tend to have less or no upfront license fee But because we are dealing with OEMs and not chip vendors, their chips, a deal that we closed in October, is now already in production in the beginning of this year. So within few months, 5 years to we could see revenue coming from ROPIS in a very, very quick ROI for this type of technology. So that also helps us with our guidance for growth in 2020 relative basis. Got it. Great. Thank you. And then, with Nokia showing some progress on this reef shark execution and you, I believe mentioning working closer with them on the development, how has that changed, if anything, you're expectations or on the clarity or the timing of how they will ramp this year into 2021? So we need it to them. I mean, we are, we are following them as you are probably and as soon as they have the silicon part of their business set up and in mass production, we should be enjoying that. We have another customer ZTE that is using us and is in production with 4G ramping up now with 5G solution and we are waiting for another one to be more hopefully more aggressive this year, probably towards the later part as much as we know but we also get our inputs from the publicly from their announcements and follow their development. They They have a lot of very interesting design wins and we are waiting to see the royalty reports come in. Got it, great. Thanks again. Thank you. And our next question today comes from Tavy Rosner of Barclays. Please go ahead. Hi, this is Peter Zepzky on for Tavy. Congratulations on the quarter. I just wanted to ask about Hillcrest and Immersion taking those 2 to together. Are royalties in the back half of the year still tracking at what you had previously expected? And then has there been any licensing contribution from those two businesses? And then also as a follow-up, if you could maybe provide an update on some of the traction you had last quarter in the automotive space? Yes, okay. Hi, it's Gileon. Let me take 1st of all, the sense of fusion, the Heter slot contribution. You need the sponsor before, and believe the distinction between the Hecres business, which is OEM centric, meaning addressing to the end customer and the CEVA other businesses, which is hardware that goes to Semiconductor. So the impact, usually impact of of the sense of fusion business is in the royalty and less on the licensing. So when we said we license three agreements in the fourth quarter. That's very good news for the royalties. And in terms of royalties, the sense of using business tracking according to our expectation and to some extent, a bit better. This group of filters lab give us very good access to companies in the robo vacuum cleaner, which is a very fast growing market in PC, in, in the BTV, remote and the many other segments that we will not expose it with our DSP slash other platform connectivity platform. So the integration with our sales force going smoothly and we are happy, very happy. You mentioned Immersion. Eurovision is the investment that we made in a very small company. We are engaging with customer, but these are early days in this front. Now you had another question, which I forgot. If you can remind me, Oh, it was just on the traction that you saw last quarter in the automotive space. If you give us an update on that industry. Yes. I'm very happy of our traction in automotive space. I'd submit that it came faster than I anticipated because this is, as you know, very high antibody market and with lot of conservatism. But we are engaged with a very large OEM in automotive. They took our AI technology, a lot quarter we talked about, one of the largest semiconductor player there that also adopted our AI technology. Usually, these deals are extremely comprehensive and the different clock speed than a consumer. I, if you, if I try to understand your question, I think that by 2022, 2023, we will have, our product in cars. Okay. Thank you for the color. And our next question comes from Matt Ramsay of Cowen. Please go ahead. Thank you very much. Good morning guys. I guess, a lot of different questions around the the guidance, but I think long term Gideon, I was interested that you called out Wi Fi Six as sort of one of the big pillars of longer term growth for the company. I'm sure you guys saw that recently the guys at Broadcom sort of deemed their smartphone Wi Fi business as non core to the company. And it's interesting that that's a place where it seems like you guys are leaning in Gideon, maybe you could step back and talk about your WiFi business and particularly WiFi 6, the traction of licensing, the breadth of it, who potentially the partners are and give a little bit of update as to how big of a piece of the royalty growth over the next 3 or 4 years that could potentially be? Thank you. Yes. Wi Fi Six is now a new cycle from Wi Fi Wi Fi Five, which is to be called 8 to 11ac. So our focus since you mentioned dotcom is not in the smartphone. I think in the smartphone, it's pretty consolidated there. I mean, if customers, we do have Dustin are asking us about it, but our place in the IoT. And IoT is a it's a big collection. And I mentioned in my prepared remarks, and the smart home. So although smart speaker, that by itself, it's more than 100,000,000 units so far and growing fast, on smart TV, going to adopt the aches because there is a clear trend of going over the top. And things that are going into the kitchen, the appliances, We are seeing also people are taking our Wi Fi Six and modifying it lower late wants to modify for lower latency for AR. So we see also the AR angle, which in my opinion, will be big, coming to our Wi Fi Six. We have now 6 deals, the 5th customer that are working in those markets. Our pipeline is full with customers that wants to do it. And we win the Wi Fi Six different product line. We have for the very low bit rate, the low end side of it and up to access point, where you start speaking about residential gateway, enterprise gateway is 8x8 and stuff like this. So That's a 1,000,000,000 units opportunity for us. Got it. Thanks for the color there. Understood on the IoT focus. As my follow-up, I wanted to ask, I mean, obviously, there's fluid and unfortunate situation with the coronavirus, near term, I think we're all trying to sort of understand impacts to companies. But I noticed in your fourth quarter results, the non smartphone business, for royalty unit was up significantly. I know there's been some fits and starts over the last 2 or 3 years with, Spreadtrum and Xinguac gaining and losing share. And on their roadmap, if you guys could just give us an update as to the 3G and 4g non smartphone business in China, royalty opportunity in the near term? And what drove that big upside in the 4th quarter? And it something that's sustainable and how should we think about that in the context of the coronavirus situation? Thanks guys. When it comes end devices, we don't make, you know, officially distinction between machine to machine, let's call it, and the handsets. You mentioned a spread or more units of and definitely and we see the progress and we believe that they will make a progress continue to make the progress. They lost a key customer, but there are many other ODMs in China, targeting India and other areas. And we see their volume up. So if you ask me what we expect in this year about in the handset space, So for this will be substantial. And, I would say, going and it will be for the coming year. And then 5G, we'll get our shot. The spud is advancing this respect and we find a deal now in 5G that will materialize sometime. So we will be in 5G as well. I'll give you more color. In Q4, this is maybe pre virus. This is one of the strongest seasonal quarters we have, both handset and in the consumer stuff. So this is coming from very strong centrifuge. This is coming from very strong vision, Bluetooth, AI, royalties. So we're really, it's a strong for us and all the different markets worked out well for us in Q4. I still don't think that that piece is associated with the virus. Q1 and many companies including us will probably see both the typical seasonality of post Christmas both Chinese New Year and with the virus kicking in with the people working from home and not in fully utilization. So that's where you see more. With that said, our licensing, because it's not coming only from China, we're still looking very healthy on a worldwide basis. Thank you, Matt. And our next question today comes from Suji Desilva of Roth Capital. Please go ahead. Hi, Gideon. Congratulations on the strong results here. And the Tier 1 as well, yeah, baseband, in that, along those lines, the smartphones, the remaining Tier 1 OEMs, what's the trend here terms of their own baseband versus merchant? And when a dialect, the one you just, one, ramps up their own baseband, what kind of in house versus merchant baseband would you expect half half or is there a different strategy and dynamic plan here? In terms of merchants versus in house, it's hard to know, but we speak with companies, the big ones eventually, and they see what other people are doing and how they benefit from there. And there is, they all want to do it. With that said, it's a complex stuff and you need to do a substantial investment But it does give you the advantages of and controlling, especially when it comes to 5G that you can come out with all sorts of different flavors of it. Okay. So more control of the pipeline there. Okay, great. And then for the royalty guidance more generally in 2020, the growth guidance you have, what are the drivers of visibility or how much of it is much of this Hillcrest layering on versus other segments? And what kind of mix of baseband, non baseband would you expect exiting 'twenty, just to understand how to ramp? Yes. So on the handset side, we have seen over the couple of years, there are many moving parts, hard to control. Sometimes OEMs change vendors along the way. Sometimes different segments, the high end, low end, is the key driver of the industry overall, the replacement cycle is a bit longer and the market is more mature, enhanced. So we're not with one of the bigger OEMs changing vendors in 5G, we're not accounting for growth in our handset basement for this year. It may go up a few years from different aspects, but for 2020, that's where we see in the last couple of years is a gradual decline but control of that market. Deposit side, which we have seen over the last couple of years, started off from 20 16, I believe, 17, when our first non handset baseband became more significant. We started at the time with 10% $4,000,000, I recall, and then went up to up to 8 and doubled it. And this year, another 50% growth to 13. I envision us exiting 2020 with north of $20,000,000 coming from non handset basements. So this is one of the key drivers we talked about a year ago in our Analyst Day. This is the our the way to double the 2018 royalty level that Gideon mentioned in our prepared remarks and this coming from a lot of these newer markets. Bear in mind, and we were asked about the later, but we still don't have all of the customers not in the base station reporting to us royalties, not in Bluetooth 20 deal that we signed us last year. These guys need to get into production. Hillcrest is just for the first time contributing to us royalties for a full year and not only for five and a half months. And we're seeing more and more progress and faster than Gideon said, faster than we anticipated coming from that portion. So all these are the positive aspects of the royalties growing 10% to 14% for this year. And there are more drivers to come, but we don't have exactly the timing and the magnitude of all these other deals. Very helpful color. Thank you guys. Thanks, Susan. Our next question comes from David O'Connor at Exane PNP Paribas. Please go ahead. Great. Good morning, gents. Thanks for taking my question. Maybe firstly, just some follow-up on the last question. What's the expectation for the kind of the royalty weighting H1 versus H2 in 2020? That's my first question. I have a follow-up. Yes, good question. Thanks for asking. I don't think we gave too much color about that yet. But if you look at the last 2 years, Steve, We have a relatively low first half seasonal wise, both on the handset side. And then the consumer that's typical, the second half is stronger. This year for the first time, although we have the coronavirus hitting stronger in Q1, nobody yet know the effects in the second quarter, With that said, we believe that we'll have a positive year over year comparison and top line in royalties and in licensing, by the way, as well, and bottom line as well. So we are starting the year with a positive momentum with some concerns, macro concerns, mainly around the virus. In the second half of the year, we will see what what new products like we saw in the second half, especially in the fourth quarter, what other customers get into production, what magnitude a little bit more moving pieces and overall, still growth both, on licensing and royalties for the year. Yes, David, let me just This is Gideon. Last year, we came out with 5% year over year growth in royalties. This year, we forecast 10% to 14% year over year goal. So it's more than double than it was last year and this is still without Not all the feeling there's firing, like, and we mentioned base stations, 5G base stations and all those deals that we signed last year and that still need to gradually get into production. So, what we like about 2020 focused is there is this diversification and more resiliency to to specific customer or specific segment. Great, that's helpful. And then maybe as my follow-up, mentioned, you released a license for based on processing for 5G base station. I'm just wondering, is this one of your existing base station customers renewing their license or taking some different IP. If you could get some detail on that, it would be very helpful. Thanks guys. It is David, say that again. Quality of voice is not that good. And we could licensing on base station. That's the question. Yes, the question was around that you mentioned in the release 5G base station, one of the licenses there. Just wondering if that existing base station customers renewing maybe their existing licenses or just if you can give some color around that? Thanks. About the base station's customer, you mean? Yes. So, okay. So, we have 2 I would say 2 very active customers. 1 of them is already production NLP, and this is a China based. The other one is from Europe. They are pretty open about their status and we are following what they are saying. Do have other base stations, customer that I would consider them tier 2. And they are progressing in their market. And but the 2 main customer totally can go up to 30% of the market. Specifically about the deal that you mentioned that you are asking about Q4 with a new cost customer. Maybe 2nd tier, as Gideon said, but the new customer that has never worked with CEVA in with any of its technologies Emma. Got it. That's very helpful. Thanks guys. Thank you. And our next question comes from Gus Richard in Northland. Please go ahead. Yes. Congratulations on the quarter and the outlook and thank you for taking my questions. Is there a geographic breakdown to the licensing in the current quarter? Yeah. We usually give it. Let me see. Let me open the press release for a second. And, yeah, here we have 10 deals were in China, 5 in the U. S, very strong quarter for our U. S. Team. In Europe, 4 in APAC, including Japan. So pretty nice spread over all over the world. Got it. And then in terms of the strategic deal with the large handset OEM, When would you expect that to result in royalty? Is that a 2021, or 2022? Do you have any sense as to how long that would take to get into production? I wish I could buy the crystal ball on this one. We have seen different examples of sometimes things take longer than you anticipate. It's a complex technology, the complex market. I would probably say a few years. Hopefully not 5, but probably 3 years is very reasonable. Got it. All right. That's very helpful. Thank you. If we could do anything to expedite This is part of the R and D investments that we are continuing to invest over the years and we are trying to help our customers do it faster, but it's never It's never that simple in some of these more difficult markets. Thank you. This concludes our question and answer session. I'd like to turn the conference back over to Richard Kingston for any final remarks. Thank you, Rocco. And thank you all for joining us today and for your continued interest in and support of CEVA. As a reminder, the prepared remarks for this conference call are filed as an exhibit to and accessible through the Investors section of our website. With regards to upcoming events, we will be attending these include the Susquehanna technology conference on March 12 in New York and the Roth Annual Conference March 15 through 17 in Orange County, California. Please visit the Investors section of our website for further information on these events and other events we will be attending. Thank you, and goodbye. Thank you, sir. Today's conference has now concluded. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.