Earnings Call: Q3 2019

Nov 7, 2019

Good day and welcome to the CEVA Inc. 3rd Quarter 2019 Earnings Conference Call. All participants will be in listen only mode. Please note this event is being recorded. I would now like to turn the conference over to Richard Kingston, Vice President, Market Intelligence, Investor And Public Relations. Please go ahead. Thank you, Kari. Good morning, everyone, and welcome to CEVA's third quarter 2019 earnings conference call. I'm joined today by Gideon Wertheizer, Chief Executive Officer and Yaniv Arieli, Chief Financial Officer. Gideon will cover the business aspect on the highlights from the third quarter and provide general qualitative data. Yaniv will then cover the financial results for the third quarter and also provide qualitative data for the fourth quarter of 2019. 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 portfolio for wireless connectivity and smart sensing, new agreements with customers in the automotive space, adoption of narrowband IoT, Yolei development's market data about the motion sensor space, and royalties prospects from the recent licensing deals. 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 ability of CEVA's IPs for smarter connected devices to continue to be strong growth drivers for us our ability to realize the benefits from the acquisition of certain assets of Hillcrest Labs Our success in penetrating new markets and maintaining our market position in existing markets the ability of new products incorporating our technologies achieve market acceptance and offset the of the 4glte and 5g Networks and wireless connectivity, AI, narrowband IoT and IoT space in general. 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. CEVA assumes no obligation to update any forward looking statements or information which speak as of their respective dates. In addition to the financial results prepared in accordance with the Generally Accepted Accounting Principles or GAAP will also present certain non GAAP financial measures today. CEVA's management believes that in addition to using GAAP results in evaluating our business, it can be useful to review results using certain non GAAP financial measures. Investors and potential investors are encouraged to review the reconciliation of non GAAP financial measures with their most direct comparable GAAP financial results. Which can be found in the earnings press release issued today. A copy of today's press release for the quarter ended September 30, 2019, and the related financial tables and management commentary, which were included in our current report on Form 8 K filed later today also can be found on the Investor Relations portion of our website following this call. With that said, I will now hand the call over to Gideon Welcome, everyone, and thank you for joining us today. We are pleased to have delivered a robust third quarter on the back of another excellent quarter in licensing and substantial step up in our royalty revenue. Total revenue for the third quarter was $23,500,000, up 28% sequentially and 10% on a year over year basis. License revenue was $11,300,000, up 15% year over year. Royalty revenue was $12,200,000, up 61% sequentially and 5% on a year over year basis. We concluded 4 key agreements in the quarter, of which 13 were for connectivity and 1 for smart sensing. 5 of these agreements were with first time customers. Customer target products include Automotive ADAS, hearing aids smart meters to wireless stereo earbuds and wide variety of IoT devices. Of the deals signed in the quarter, 3 were of strategic importance with more key names. I will elaborate and sign up new customers and to build up the pipeline for new agreements. Our comprehensive portfolio for wireless connectivity and smart sensing intersects with the IP needs of almost every semiconductor company and OEM. Our customer reached Global and we are winning prominent businesses in every geography In the U. S, we are seeing opportunity in smart edge devices for consumer, robotics and automotive. In Europe, digital health and smart city application are strong areas of interest. In APAC, excluding China, we see interest for ADAS and consumer electronics and in China, We are engaging with customer across many verticals, including wireless infrastructure, smartphone, robots and wide variety of IoT devices. Let me take the next few minutes to spend on 3 important licensing agreements signed in the quarter. The first is a comprehensive agreement with the name brand semiconductor incumbent in the automotive market, which is a new customer for CEVA in this space. The customer selected our AI processor technology, which we announced last month, along with our reputable CDNN AI software firmware for its next generation ADAS chips. We are a extremely excited by the engagement with this key player targeting mainstream and high volume ADAS use cases such as automatic emergency braking, which is now mandated by multiple regulatory groups, such as income of Europe. Adaptive cruise control, lane keeping, blind spot detection, surrounding view and law. This design wins anchors our position in the automotive space and add to our already key automotive related customer, which include on semiconductor, the industry leading supplier of ADAS image sensor, and 1 of the world's largest automotive OEM. To this effect, last month, we announced our latest new S AI process that addresses the requirement for data bandwidth efficiencies and performance scalability. We also unveiled and novel extension to our CDNL framework called CDN N Invite API, which allows automotive OEMs or Tier 1 customer to own proprietary AI processor to couple it with our comprehensive CD and M software framework, which saves them costly and complicated development of AI compiler technology. The second agreement that we would like to highlight is sizable Bluetooth low energy IP agreement with 1 of the world's largest manufacturer of hearing instruments products. An industry that is going through a continuous technology innovation involving digitization and wireless integration. Our extremely low power BLE technology will be deploy insight and advanced hearing instrument to enable the user of the device to flawlessly connect with a smartphone and access useful applications and service such as stereo, the streaming, voice transcript and remote tunic. This new comprehensive agreements with our customer exposes us to a growing industry that according to the company research addresses about one billion people that experience hearing difficulties. The 3rd clear agreements in the quarter was with a very large European Semiconductor company we decided to license our comprehensive Dragonfly and the IoT IP initially for smart meter application. It is our first agreement with these large customers who owns Broadwater portfolio and has a diverse customer base and strong synergies with our us throughout the world is progressing beyond China, where the deployment is ongoing, India led by Reliance Geo, is pushing forward an aggressive program. In its recent annual general meeting, the Reliance Chairman stated that Geo aims to connect 1,000,000,000 in the IoT devices within the next two years. You also mentioned that 300,000,000 smart meter need to be connected in India for real time monitoring and to enable consumer with the visibility and full control on costs. In royalty revenue, we had a strong quarter, including 1st time contribution from Hill House, Sales of Fusion Business. Our basement customer benefited from the launch of new premium tier smartphone and market share gain in the low tier of LTE phone targeted for developing economy. In the non baseband segment, we continued the momentum with excellent progress contributing $3,900,000 an all time high with units up 29% sequentially and 27% year over year, reaching also an all time high quarterly a high of 123,000,000 units. During the quarter, we started to reach out customers in regard to our Hilton Slabsence of Fusion Technology that we recently acquired. The feedback has been very constructive on the potential intersection point with customer needs and the potential business goals. The motion sensor space is a big and fragmented market growing to over $6,000,000,000 in MEMS semiconductor content by 2024 according to industry research film YOL Development. Initially, our focus will be around robotics, laptops, mobile headset and advanced remote control. Pislap is a household name with strong technology fundamental and solid customer relationship. This particularly applies to OEMs where our revenue composition will be primarily from royalty based on the device price rather to upfront licensing and purchase quantities that we engage with semiconductor customers. In summary, we had an excellent third quarter both in licensing on the licensing and royalty form. We remain focused on executing licensing agreements and gaining key customer adoption as evidenced across the 1st 3 quarter of this year. Licensing is the precursor for royalty growth and the earning leverage that we outlined in our January investor day. Our royalty revenue reflected a strong uptick in cellular baseband and growing contribution of a non handset segment from new product ramps, new customer getting into production and from Hilton Labs, OEM customers. With that said, I'll now turn the call over to Yaniv who will outline our financials and guidance. Thanks, Ki Bin. Good morning. I'll start by reviewing our results of the operations for the third quarter of 2019. Revenue for the third quarter was $23,500,000, up 10% as compared to $21,400,000 for the same quarter last year. Our revenue breakdown was as follows. Licensing and related revenue was approximately $11,300,000, reflecting 48% of our total revenue, 15% higher as compared to the third quarter of 2018. Rollty revenues were $12,200,000, reflecting 52% of total revenue, up 5% from $11,600,000 for the same quarter last year and up 61% sequentially. Non handset baseband royalty revenue reached an all time record high of $3,900,000 for the quarter. Relty gross margin or 88% on GAAP basis and 89% on non GAAP basis as projected. Our total operating expenses for the third quarter came in at approximately $21,000,000 OpEx also included an aggregate equity based compensation expense of approximately $2,600,000, deal expenses and a write off of an acquired lease associated with our HillcrestLab transaction of $800,000, amortization of the acquired intangible associated with the acquisition of Hillcrest Labs and Immersion investment of $500,000 and the amortization of the acquired intangibles of RivieraAs for $200,000. Our total operating expenses for the 3rd quarter excluding those items were $16,800,000 just below the mid range of our guidance. In the third quarter, we concluded a tax audit Following which, we recorded a tax benefit of approximately $1,000,000 on both GAAP and non GAAP basis. We currently have no for the quarter was $800,000 and diluted earnings per share or $0.03 as compared to $2,500,000 in $0.11 for the third quarter of 2018. Our non GAAP net income and diluted EPS for the third quarter of 2019 were slightly down 2% and 4% to $5,100,000 $0.22. Respectively, from net income and diluted EPS for the third quarter of 2018 of 5,200,000 dollars 23¢ respectively. Other related data, Ship units by CEVA licensees during the third quarter of 2019 were 292,000,000 up 35% sequentially and 11% up from the third quarter of 2018. Of the 292,000,000 units shipped, 169,000,000 units or 58% or for handset base ventures, reflecting a sequential increase of 38% from 100 and 22,000,000 units of baseband shipped in the during the second quarter of 2019. And an increase of 2% from 165,000,000 units a year ago. As Gideon stated earlier, our non handset shipment reached an all time record high of 123 million units, up 27% sequentially and 27% annually. A non handset baseband unit of the handset non handset baseband unit, ninety $2,000,000 were reflected our Bluetooth shipments, which also reached an all time record high for the quarter. As of the end of September, CEVA's cash, cash equivalent balances, marketable securities and bank deposits were 140 $8,000,000 and from $166,000,000 from the prior quarter due to our recent $21,000,000 investments in sensor fusion and wide angle distortion correction technology. As we were focused our attention and financial results and the acquisitions of these technologies in the third quarter, we did not execute any share buyback program during this period. Nevertheless, for 2019 to date, we purchased approximately 194,000 shares for approximately $4,900,000. Moreover, our Board of Directors a year ago approved the expansion of our buyback program And as of the end of September, we have a total of 161,000 shares available for repurchase. Our DSOs for the 3rd quarter improved to 31 days. During the quarter, we generated $3,000,000 net cash from operation. Depreciation was 800,000. Purchased to fixed assets was 1,300,000 and investments in new technology were $21,000,000. At the end of the quarter, our headcount was 383 people, of which 318 were engineers. Including from the Hillcrest clouds, which we welcomed on board in July. Qualitative data specifically for the fourth quarter of 2019. On licensing and related revenue, as Gideon alluded, we continue to experience healthy demand for our technologies across all geographies. On royalties, we forecast a 10% sequential increase after reporting 61 percent sequential growth in the third quarter. This should equate to a new all time high royalty revenue for the fourth quarter. Gross margin is expected to be approximately 89% on GAAP and 90% on non GAAP basis. Excluding an aggregate $200,000 of equity based compensation expenses, and $100,000 for the amortization of expenses associated with our acquired intangibles of the Narrowband IoT technology. Overall, OpEx is expected to be in the range of $20,000,000 to $21,000,000. Of our anticipated OpEx for the 4th quarter, $2,700,000 is expected to be attributed to equity based compensation expenses and $900,000 to amortization of the acquired intangibles of Riviera waves, Hillcrest, and Immersion. Our non GAAP OpEx is expected to be similar to the 3rd quarter level in the range of $16,300,000 to $17,300,000. Net interest income is expected to be around $700,000 for the quarter. Taxes for the quarter, $800,000 on GAAP basis and 0.9 on non GAAP basis. Last and lastly, share count for the 4th quarter is expected to be in a similar level to the 3rd quarter of approximately 23,000,000 shares. Terry, you could now open the floor to the Q And A session. We will now begin session. The first question will come from Matt Ramsay of Cowen. Thank you very much. Afternoon over there guys and good morning everyone. I guess Gideon, I wanted to ask and guess congratulations, first of all, on the progress in the business outside of the handset market. But I wanted to ask a couple of questions about the smartphone market. You mentioned in your prepared comments, some renewed strength in 4G devices some of your licensees. I'm wondering if you might expand on that a little bit. I think there are some concerns with strength at Huawei and Swink with Qualcomm into the 5G cycle next year. I think we're definitely looking to some strength from some of your licensees on 4G? And if you could expand on that, I think that would be helpful. Thank you. Congrats. So the LTE is a dynamic market. By the way, it's also in the base station. We see from different tanker. Number 1, we see still sizable amount of feature phones that are still being shipped in the developing MRT. And when it comes to our customer, and we have also another one that will soon ship there is a whole lot of communities in the developing countries that are now moving to LTE. So what we see now is, it's market share gain because at that pace, our customer has the price advantage and the system advantage and the locality. So the thing that we want people to keep in mind that L. D is still a growing market. And the activities in the 5G, it's a different scope. Got it. That's helpful color. And then just to follow-up on, obviously, the big opportunity at least near term for your company in 5G is on the base station modem side. If you could just give us a little bit of an update about timing and magnitude of royalty revenues over the next few quarters? I know there's been some fits and starts with some of the the rollouts and obviously some of the challenges in China, given the political spectrum, but if you could just update us on where we are in the rollout of some of the base patient products and royalties, that would be really helpful. Thank you. Appreciate it. So speaking about the LP, the base case, First of all, we are, we have customers shipping LTE for base station. And LTE is important because there is speed dynamics as a result in the sensor side, upgrades, updates, improvements, Also, when it comes to 5G, when it's called, what is called non standalone, which is the deployment, the first deployment in 5G will be a non standalone, then LTE is the backbone. So people that are winning LTE deals will have a software upgrade to 5G. Now specifically to 5G, we have customers and people know us about them that are in design. This is budget design, chip design is, very complicated, chip with the latest notes and the IPs. And you have to be in this kind of interest of it. So our customers in design, they are progressing, but we are we don't have the visibility on when they reach the volumes there. We need to be patient, but they are on the way. Matt, let me add one thing about the prior question of LTE units just to you understand the magnitude that we are earnings this year. We've seen it in the past, but these things have their own power. Q1, we powered 41,000,000 LTE phones went up to 52% in Q2 and this quarter of 85%. So within two quarters, we're doubling the volume of LTE. Here, we're talking about LP phones only and some of the high end, some are low end. So this is some of the magnitude we have seen in the market share handsets one of the highest we had in the last couple of quarters of 30%, up from 23% in the prior quarter. So this is some of the magnitude that we have received, some improvement across most of our customers in this space. And for now, we forecast that to continue into the fourth quarter. So, Matt, I want to complete the 5G in broadest scope. So we spoke about the base station, but we do have a play in the handset side. And in China, which is going to be the lead market in terms of adoption definitely next year. And we have a customer that announced chips and certification. And we'll see when this materialized to development, but we are not complete we are not outside of 5GG sits as well. Got it. Thank you very much guys. I appreciate all the color. Thanks, Seth. The next question will come from Mike Walkley of Canaccord Genuity. Great. Thank you. And my congrats also on the strong results and licensing momentum. Yes, just building a little bit on Matt's question as as we look at your different infrastructure customers, how do you see maybe the next 1 to 2 years developing if they start to ship China is going to start building out 5G in a big way. And I imagine your Chinese OEM customers should benefit from that. And then Nokia has made public comments how they need to get their system on ship correct to get their cost structure So assuming they get that fixed in 2020, what could maybe 2021 look like if you get a full year from Nokia along with your other 5G base station customers? So we cannot refer specifically on timing of deployment of 2020. I want to say something about the, our play in 5G. When people say base station, it's not just one product. In when you go to base station, you have in the you have what is called BBU, which is the baseband side, you have ROU, which is the DSP that goes in the antenna. You have small cells, and you have fixed wireless, all these, all these basically bundled in our base station. So we have several customers. Some of them are going into BBUs, some are going ARUs, some are going to small cells. They all will be there or supposed to be there in in due time. The only thing that we can say at this stage that they are all fully committed and have a market strength to win customers once they have the product. So, Mike, to summarize this in different words, the timing and we saw that over the last 2 years, we don't have control, but our plans and the royalty estimates that we had before still hasn't changed. They may have shifted to 'twenty one and beyond, but then if we are in those next generation, we should be there for a long, long time. So think the timing is the more problematic issue. The final goal has not changed. Great. That's helpful. I was just trying to frame it, make sure that targets are still there longer term because 21 should be a year when more of the OEMs got their full product portfolio shipping. And just a follow-up question for me, just given your diversifying customer base nice wins that you talked about on the automotive side. Just given your pipeline you've talked about and the business trends, do you still feel like the business model is tracking with the diversifying customer base to double royalty levels by 2022 from the 2018 level? Yes. No doubt. 5 new customers just in last quarter that have never worked with us. Among which are the automotive and the narrowband IoT guys. So that's very exciting from our point of view. And when you add some of these new technologies that we talked about, both sensor fusion and wide angle distortion, that in a sense, helps us bridge some of the other moving pieces that we have in the model. And we are still very, very committed to our 2022 goals. Of doubling the 2018 last year's royalty revenue and increasing the licensing revenue from there. And we've seen so far pretty nice progress in 2019 on that specific front. So, yeah, we are very focused to work out and make it happen. Last question for me and I'll pass it on. Anything you can maybe share with either qualitatively or give us numbers about how many customers are commercially shipping product today driving royalties and where you could maybe see that in a couple of years based on people working on chips from your licensing side? Yes, I believe that they should be in the neighborhood of 40 to 50 customers, maybe even 1 or 2 new ones that we just saw. Some new initial reports this last quarter. And we probably have more than 60 companies in design, not including even the last recent ones in the last quarter. So, these are on top of them, but The potential for now is north of 100 to 100 and 10 customers that they hopefully followed, make it to market plus the existing ones that is the basis for the royalty growth in the next couple of years. Great. Thank you very much. Sure. Thank you. The next question will come from Suji Desilva of Roth Capital. Hi, Gideon. Hi, Yaniv. Congratulations. I have a strong quarter here. I believe I heard you mentioned a second smartphone baseband customer shipping soon. Is that a new royalty opportunity to see, is that a 5G only opportunity? And what geography is that? Hi, Suji. I was also, I was referring to that question about 5G. I just wanted to say that when we are not outside there in the 5G, one of our customer already announced a product and the certification. And this customer will focus on China and you know, China is going to be very dynamic next year and the prices are going down to already to at least recent tenders for China Mobile. So we speak about $2.80 5G phone. So that's going to be a sweet spot for this customer. Okay. That helps clarify. Thank you, Gideon. And then, on the licensing side, I saw the deferred revenue jump here. Is your visibility increasing Is $10,000,000 per quarter or $11,000,000 per quarter the more reasonable sort of expected run rate going forward? No, no, it's just a technical thing. I mean, I would be happy to copy it every time, but it's just a royalty jumping up from the 7 to 12. And remember that under the new 606 accounting rules, we only get the reports to be closed. So these are revenues that we recognized, but haven't invoiced yet. And this is, this is why it falls into deferred. It's just revenues that will be billed and collected late after the quarter. Okay. Yeah, it is. It happens every once in a while. And on top of that, we also have few deals among them that closed the last of the course, it was a bit back end loaded, but nothing out of the ordinary change of business there around that. Okay. So run rate wise, you need $10,000,000 a quarter or $11,000,000 a quarter. Is that which is more kind of likely kind of forward looking number to think about? On the deferred, do you mean? Licensing, licensing, yes, I mean, this is thing that we've been comfortable for a while with and talked about the $10,000,000 to $11,000,000, the next step function for us after, remember, a few years ago, being in the 'twenty, it's coming to the 'thirty. I think they're back then vision and connectivity, short range connectivity. And with AI and the base station and Hillcrest now, although not contributing directly to licensing yet, That should be for now comfortable and we're very comfortable $10,000,000 to $11,000,000, which will should get us already by the end of the year to a higher a licensing step function versus the 4 years that we had in the last few years. Okay, great. And then last question. Congratulations on the automotive progress here. Can you talk about the competitive landscape and your customer? Is that a new entrant to the auto market or is that an established customers switching over to CEVA from existing solution. Just help us understand where you're slotting into automotive. Thanks. Thank you, Suji. That's a thanks for the question. It's important. The customer is that we managed to win is incumbent. Strong incumbent in this space. And that's why we are focusing leveraging on broad technologies that we're We have, for automotive market, we have vision, we have AI, we have, on sort of, BSP for 5 connectivity. We have customer and offering for V2X. And we also stand by more other elements in the car because, the synergies what we offer in single processing and fencing is a perfect fit. And that agreement is another stakeholder that give us not just business, but also credibility in this space. It has a high entry level. Okay. Thanks guys. Congratulations again. Thank you. Thank you. Question will come from David O'Connor with Maxim BNP Paribas. Great. Good morning gents. Thanks for taking my questions. 1 or 2 from my side. Maybe firstly on the automotive side. Congrats on the new win. Can you give us any idea what geography that customer is in? And also maybe an update on the exact how many design wins you have now across Tier 3, I think, automotive customers and when we can expect the initial ramp up on royalties there? So I David, the customer is a global company. So we cannot pinpoint specific geography. It's a global company that, of course, has a global customer base. The other question about customers that we have in the automotive, I mentioned in the prepared remarks, the 3 anchor customer. We talked about in the past about ON Sema is we talked about a very large OEM that use our technology and the disservice. We do have other customers that approach the automotive customers Not necessarily from the OEM space, but what is called the Tier 1. The value chain in the OEM, in the automotive space is a bit different. You have ODM, you have Tier 1s, you have aftermarket, we have customers that are approaching the aftermarket, these are the equipment that's being after repurchase the talk. So these are other customers that we do. But certainly, the last agreement that we signed and the other 2 that we had before are a big anchor for us in this space. Great. That's quite helpful. And maybe as a follow-up to a previous question, so the 60 companies that you're currently in design How many can you give us any sense on how many of these are going to ramp in 2020? It's an excellent question. If you would help me with that number, that would be even easier and nicer. Need to do this exercise. And this is usually the time in the last 2 months of the year that we planned for the following year check with our sales and the technology guys, field application engineers, where exactly is each customer with different ramp ups or different tape outs and what's the forecast like. I hope to see at least a dozen, but it's really hard to say at this point without diving into it and doing the size, which we do on an annual basis, we don't always get it right. Even if a customer we signed in the past has a chip, it doesn't mess fairly mean that he has the volume ramping up. It depends on when the OEM wants it before holiday season or specific timing or when his competitor comes and he wants to come up a week or 2 before. A lot of moving pieces, even after the chip is ready to go to market, but I think that again, we have seen probably 2 new reports coming out this quarter for first time customers And the markets are really big. In front of us and in front of our customers, I would say that this quarter, for example, out of the 14 deals, 11 were Bluetooth related deals, so really a very, very strong anchor and customer base in this market. Thank you. The next question will come from Tobey Rosner with Barclays. Thanks for taking my questions. Most of them have been asked actually. So I guess I had one you mentioned the entrance into autonomous driving. And I guess looking at industry 4.0, I mean, this is something that we talk about a lot lately in I would assume that you guys would fit quite nicely into the ecosystem given all the smart sensors and or the need for connectivity. Have you been approached by vendors that are operating them and how do you see the addressable market there down down the road? I mean, it's I would have that the industry is open 0 and mid-twenty 25, which is the China version of this one. This means smart manufacturing and the these are areas that we are discussing these customers. This relates to 5G. Keep in mind that when 5G, when I mentioned earlier non standalone, this is more for mobile border for smartphone, but we go for standalone that's a area that relates to industry 4.00 or mid 2025. So we have multiple angles to go into this 1. Certainly, Hillcrest, with all the things that they can do with the sensors, is a it's a good area that we can capitalize on. Then we have 5G. We have all the division and the sound. Also sound is an area that, you're going to use them for detecting main functions of machines, and you're going to install a lot of microphone in necessary that we are specializing in discussing this customer. So industry 4.00 is definitely a nice big thing and we are addressing it and discussing this customer. And with this fine tuning of the product, it's not we would not need a new product line there. Okay. I appreciate the color. And then the last one, I mean, you mentioned having $150,000,000 net cash. Are you looking into any potential acquisitions, anything in your radar how are you looking at the valuation? Any color would be great. Sure. This is not something new for us. We have the look and continue looking for ongoing all the time as technology evolves and trends in the industry that you and Gideon just talked about change and evolve. And we have done a very successful one with the Airways 5 years ago. We have done two very interesting ones and we see the first fruit. I don't know if we mentioned yet, but we have just now in the beginning of fourth quarter, signed our first sense of fusion agreement. We'll talk about it more in next earnings call, but that's the first very nice sign. So that's immediately after the deal was signed a very short period. And we want that to be a very successful add on to CEVA. And from our point of view, if we find technologies that are synergistic to our customer base, sometimes new markets for us and things that we could see, we think it could bring value to the food chain. They will continue to invest that we don't have any restriction in the size or location. And so far, I think we have done the right thing and we'll continue to look and try to do the right thing going forward. Thanks guys and congrats on a good result. Thanks Savi. And this concludes our questions and answer session. I would like to turn the conference back over to Richard for any closing remarks. Thank you, Harry. And thank you everyone for joining us today and for your continued interest in and support of CEVA. As a reminder, the prepared remarks for this conference call will be filed shortly as an exhibit and accessible through the Investors section of our website at investors. Zevadsp.com. With regards to upcoming events, we will be attending in December. These include Barclays Global Technology Conference on December 11, in San Francisco, California. Please visit the Investors section of our website for further information on this and other events and anything else we will be attending. Thank you. The conference has now concluded. Thank you all for attending today's presentation. You may now disconnect your lines.