Earnings Call: Q3 2018

Nov 8, 2018

Good morning, and welcome to the CEVA Incorporated Third Quarter 2018 Conference Call. All participants will be After today's presentation, there will be an Please note this event is being recorded. I would now like to turn the conference over to Richard Kingston, Vice President of Market Intelligence And Investor And Public Relations. Please go ahead, sir. Thank you, Rocco and good morning, everyone, and welcome to Siva's 3rd Quarter 2018 Earnings Conference Call. I'm joined today by Gideon Wertheizer, Chief Executive Officer of CEVA, and Yuneve Arieli, Chief Financial Officer of CEVA. Gideon will cover the business aspects and 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 remainder of 2018. 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 through 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 financial guidance for the fourth quarter full year 2018 optimism about a strong momentum and Steve's ability to capitalize on trends associated with wireless based connectivity and NB IoT product and 5G healthy licensing environment and demand for CEVA's product optimism about sustained growth in non handset baseband product lines customer production ramp ups and positive forecast from IC Insights and Ericsson Mobility. 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 signal processing IPs for smarter connected devices to continue to be strong growth drivers for us, subtraction with edge technology for AI, our success in penetrating new markets and maintaining our position in existing markets, the ability of new products incorporating our technologies to achieve market acceptance and offset the maturity of the handset market. The speed and extent of the expansion of the 5G network and wireless connectivity, artificial intelligence, LTE IoT, and the IoT space generally, our ability to execute more broad portfolio license agreements and customer ramp up and scheduled that impact on royalty revenues. CEVA assumes no obligation to up to update any forward looking statements or information, which speak as of their respective date. In addition to the financial results prepared in with the Generally Accepted Accounting Principles or GAAP, we will also present certain non GAAP financial measures today. Steve's management believes that in addition to using GAAP results in evaluating our business, it is also 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 third quarter ending September 30, 2018 and the related financial tables and management commentary, which were included in our current report on Form 8 K filed today, also can be found on the Investor Relations portion of our website shortly. Before handing the call over to Gideon, I'd like to remind you that Asteva adopted the new revenue accounting standards known as ASC 606 as of January 1, 2018. Under the new standard, our royalty revenue represents what our customers shipped during the third quarter of 2018 or our best estimates for such shipments. The numbers stated on this call for the third quarter are based on ASC 606 unless otherwise stated. However, as our Q3 2018 financial results are not directly comparable to our Q3 3, 2017 financial results, which were reported under the old revenue recognition accounting standard, known as ASC 605, We will also provide you today our Q3 2018 financial results as reported under ASC 605 to allow for an apples to apples comparison on a year over year basis. We will have this dual reporting approach throughout 2018 as required by the Financial Accounting Standards Board. With all of that said, I will now hand the call over to Gideon. Thank you, Richard, and welcome everyone. Our third quarter revenue came in line with our expectations demonstrating strong royalty revenue recovery and solid execution in licensing. Total revenue was $21,400,000, of which licensing and related revenue was $9,800,000 and royalty revenue was $11,600,000. Royalty revenue reflected strength across the board with a step up in contribution from a wide deployment of our advanced DSP technology We've recently launched flagship smartphone and the continued growth of shipments in the non handset category as new and existing customers roll out new products into the market. The strength of our technology portfolio led to another quarter of sustained licensing revenue with 13's agreements executed across multiple end markets included including in the 2 strategic ADAS space. China in particular showed good dynamics with 9 agreements out of the 13th deal concluded in the quarter with vibrant Chinese semiconductor companies targeting variety of IoT devices for consumer and industrial applications. According to recent analysis from research firm IC Insights, China based fabless IC Firms are expected to account for 19% up from 9% in 2016 from about 14% last year. We are experiencing, in particular, strong demand for our Wi Fi Bluetooth and cellular product as wireless IP expertise is carrots in China and must have 4 IoT products. Let me take on the wireless space. The opportunity, opportunities and the customer engagement we have experienced authentic indicators of product trends and the details of our new royalty revenue stream. According to the latest Ericsson Mobility report, short range connected devices are expected to increase from $6,000,000,000 in 20.17 to $17,000,000,000 in 2023. And long range IoT from $600,000,000 to $2,400,000,000, a total installed base of $20,000,000,000 by 2023. Short French IoT devices are primarily smart home and office product using Bluetooth, Wi Fi, NLI. Long range IoT include devices that connect to the internet, via cellular IoT, products such as NBIT. CEVA is a prime supplier of wireless technologies for IoT. Our offering is comprehensive, vertically integrated and include both short range and cellular technology. We are benefiting currently from the proliferation of new consumer oriented wirelessly connected products like headphone, smart watches, smart speaker, and range of wirelessly connected home appliances and home entertainment devices. The scope of short range wireless connectivity extends beyond consumer and peer to peer communication to indoor navigation, asset tracking and control, which almost doubled the total addressable market. With our NB IoT solution, our market reach extend to emerging verticals such as automotive, smart cities, industrial driven by national initiatives like industry 4.00 and China Mick 2025. To foster the NB IoT opportunity and development, we launched recently our 2nd generation, full solution, the Dragonfly NV2. Dragonfly NV2 complies with the latest 3GPP standard released 14 and is software upgradable to 5G. It incorporates in one platform All the different disciplines required for MD IoT solution, including our latest CEVA X1 DSP, hardware acceleration block GPS, protocol state, and software and RF IP. The Dragonfly NBT platform reduces dramatically. The entry barriers for companies looking to get into the cellular IoT space enabling them to focus on As for 5G, the scale of activities of operator and equipment deployment and launches of services significantly expedited in the last few months indicating transition trade similar to how procured. The FCC published recently a 5G action plan with the mission to place the US at the forefront of developing and deploying 5G technology. GAAP the 5G fast plan, it contains policies to streamline spectrum and infrastructure build out the key hurdles for fast deployment. In efficient earning call, Nokia CEO said that they see excellent order intake, reflecting growing market demand, which implies a 30% growth in backlog compared to the beginning of the year. And also mentioned that AT and T selected Nokia as well as their 5G supplier. He also commented that the deployment of the cost efficient free chip enabled our DSP platform will pave the way for higher operating margins for Nokia Networks. ZP using our technology, achieved successful test results from the 3rd phase of national testing. The 1st phase is seen as the last step before ZTE can proceed with its 5G commercialization plan. The China Ministry of Industry and information technologies, MIIT, commented that 5G devices will be ready for commercial use in China in 2019. To capitalize on 5g both the base station run and within the devices. 5g revolutionizes the network architecture and design. It requires much denser base station with as many as 4 to 8 times more cell tower per square kilometer in comparison to 4G. On the device side, 5G enables new usage models in car manufacturing, health and mold. We are experiencing a solid licensing pipeline composed of both income then that did not use our technologies for LTE, and newcomers that can make use of cellular technology to reduce tariffs to market. In summary, the 3rd quarter financial results and business execution reflect the healthy demand for our product and successful production ramps by our customers. We continue to expand our design wins and pipeline capitalizing on the rapid proliferation of wirelessly connected IoT devices, in particular in China. These wins are across multiple verticals and pose high volume based royalty opportunities. Together with our 5G end to end offering, we are a one stop shop to any newcomer or incumbent for wireless technology. Our sensing and AI technologies for computer vision voice are complementary to our wireless technologies and provide us with increased on royalties, we returned to sequential growth to the successful launch of the latest smartphone product line from prominent OEM and the sustained growth in shipments within our mineralized basement product line. With that said, let me turn the call over to Yumi to discuss our financials and guidance. Thank you, Bill. I'll start by reviewing the results of our operations for the third quarter of 2019. Revenue for the third quarter based on ASC 606 was 21,400,000 The revenue breakdown is solid. Licensing and related revenue was $9,800,000, reflecting 46% of our total revenue, 30% lower as compared to the 3rd quarter's 2017 all time record highs. Royalty revenue was $11,600,000, reflecting 64% of our total revenue, a decrease of 8% on a year over year basis compared to $12,600,000 for the 3rd quarter actual shipment that were reported in fourth quarter of 2017 following the revenue rules under ASC 606. As a reminder, the $12,600,000 and record highs included a one time catch up fee of $900,000 due to a customer audit. Quarterly gross margins were 91% on year GAAP basis and 92% a non GAAP basis. Our total operating expenses for the quarter was below our guidance. At $17,300,000 due to lower SG and A costs associated with marketing activities and comp related provisions. OpEx included an aggregate equity based compensation expense of approximately $2,300,000 $200,000 for the amortization of acquired intangibles of Riviera White. Our total operating expenses for the 3rd quarter excluding these were $14,700,000, also below our guidance. Gross GAAP net income and diluted EPS for the 4th quarter were $2,500,000 $0.11 respectively. Our non GAAP non income and diluted EPS for the third quarter of 2018 were $5,200,000 $0.23, respectively. Ugly later data. Shipped units by CEVA's licensees during the third quarter of 2018 were approximately 263,000,000, up 19% sequentially and down 8% from Q3 2017 actual shipments reported in the fourth quarter of 2017. Of the approximately 263,000,000 units shipped, $165,000,000 or 63 percent were for handset baseband chips. Reflecting a 24% sequential increase and a 19% decline on a year over year basis. Non baseband volume shipments reached another record of 98,000,000 up 11% sequentials and 22% on a year over year basis. As the Bluetooth shipments continue to be strong and broke another record with 83,000,000 units shipped in the quarter. Thanks for our balance sheet items. As of September 30, 2018, we see that cash, cash equivalent balances, marketable securities and bank deposits were approximately 167,000,000. We continued our active buyback program and repurchased about 216,000 shares during the quarter for approximately 6 $300,000. During the second quarter, our Board of Directors approved the expansion of the existing buyback plan. And as of September 30, we have approximately 500,000 shares available for repurchase. Last, our adjusted ASC 606 DSOs for the third quarter of 2018 continued to be low at 41 days from prior quarter level of 48 days. During the third quarter, we generated $300,000 of net cash from operations, The depreciation was $700,000 and purchase of fixed assets was 700,000. At the end of September, our headcount was 329 people, of which 266 were engineered. Now for the guidance for the rest of the year. On royalties, as we forecasted early and even slightly better results, we managed to record an impressive 66 percent sequential growth in the 3rd quarter and believe that the 4th quarter royalty revenue is estimated to be similar, slightly better. On licensing and related revenue, we continue to experience healthy demand for our products and we'll keep the same pace quarterly targets past growing target as we've demonstrated over the last 2 years. Specifically, for the fourth quarter of 2018, Gross margin is expected to be similar to the 3rd quarter level with approximately 91% on GAAP and 92% on non GAAP basis. Overall, OpEx is expected to be lower than the third quarter level and lower than the 1st 2 quarters of the year and is anticipated to be in the range of $16,400,000 to $17,400,000. Of the anticipated OpEx for the fourth quarter, $2,400,000 is expected to be attributable to equity based compensation expenses, and $200,000 for the amortization of acquired intangibles. Our non GAAP OpEx is also expected to be lower than prior quarter level in the range of $13,800,000 to $14,800,000. Net interest income is expected to be approximately $800,800,000. Tax rate for the 4th quarter approximately 17% on GAAP basis and 11% on non GAAP basis. Share count for the 4th quarter is expected to be in a similar level to the 3rd quarter number. Operator, you could now open the floor for the Q And A session, please. You. Today's first question comes from Gary Mobley of Benchmark. Please go ahead. Good morning, guys. Good afternoon. I want to start with a question about the China mobile handset market. What's your sense of your market position in China through your largest license relationship in particular with Spectrum? So, the only when it comes to China in the last few, in the last 2 or 3 quarters, we we iterated, we said that there is softness within these specific customers, This is not over, although we saw improvement in this quarter. The target market for this customer is the low tier in China and in India. And so far, we see some I mean, the button is over behind us, but we would like to see much better. Okay. My sense is that you saw a nice contribution or at least some contribution from 5G cellular base station SOC in your royalty and can you share with us what the unit contribution was, what's your non mobile handset baseband royalty unit rate was in the quarter with that contribution in which your outlook is for contribution from your 2 main 5G base station that's associated with licensing? So, about the SVR, let me ask you to comment about the we don't get we don't see today, a meaningful 5G base station royalty. As I said, when it comes to VPE, they passed a very advanced stage which will allow them to start commercializing, meaning installing the base station in in a, in a more substantial way. Up till now, they were investing the deployment and stuff like this, Nokia, as we said, and they are saying, the reshuffle and this is where our entry point there is a key for their operating margins there. And so far, they are not installing. It's not just dependent of the product. It depends, as you know, in many parameters, operator, deployment, to me, it looks like more 2019. We'll start seeing a few things and to more extent, 2020. Okay. And with respect to your license pipeline, can you share with us what has been recently made generally available in your new product development such as NewPro, is that generally available? You're able to recognize some license revenue. And I noticed that your crude revenue $16,500,000 was up substantially on a quarter over quarter basis. Does that have to is that an indication of the license revenue backlog? Hey, hi, Gary. Let me start with the technicalities. No, not necessarily. 2 things increased. 1 is higher royalties. Because of the new rules, all the $11,600,000 that we recorded were all reported after the quarter and we did not invoice our customers in September, but in late October, November, and this is why they're improved. So that number, of course, is higher than the 1st 2 quarters of the year. And on top of that, we have few deals that were very back end loaded and we only invoiced in October after the quarter ended. So This is just a technical number. It will continue to follow with us on the, on the loyalty side. And the licensing is just a question if the invoices or the timing of the invoices. In this case, it was just a bit of a back end loaded quarter from that. Aspect. So it has nothing to do with the newer technologies that Gideon mentioned in his prepared remarks. And We are developing them. We're offering them. We have licensed already few agreements around those technologies and we continue to be quite excited about their opportunities both on the licensing and later on on the royalty side. Okay. All right. Thank you guys. Thank you. And this next question comes from Mike Walkley of Canaccord Genuity. Please go ahead. Great, thank you. Congratulations on the strong sequential royalty growth. My question is just on the Q4 for flattish royalty growth. Can you kind of walk us through your thought process and the puts and takes with Nokia, expect to have a very strong shipment for new base stations with reef shark. I would have thought that might have helped along with maybe the seasonality for the new iPhones. Can you kind of just walk us through puts and takes while you see Q4 flattish with Q3 for royalties? Yes, sure. So in our expectations for the fourth quarter, surprisingly enough, we do not take into consideration the range any revenues from the Nokia yet. Yes, they have a lot of interesting opportunities pipeline deals closed. We follow them, but we do not know yet to specifically estimate how many chips translate on a quarterly basis and even at this point on an annual basis and we are waiting for these new royalty reports to kick in. So I'm not sure if you answered Gary in the prior question. This also implies for the third quarter. So We are still waiting for that ramp up. We believe it is going to come. We build more of the magnitude and we don't know exactly the timing of the reef shark chest. And as soon as we get those reports, the first report, of course, we'll be happy to share that and to add it to our either numbers or estimates going forward. So Q4 is really built on the existing interesting dynamics that happened this year for us. Some in the positive side like the well known U. S. High end devices that were launched recently with Intel and CEVA power. And then the other hand, the softness in the some of our largest customers in China, not necessarily to the Chinese market, to the world and India that they shipped into in other parts and they continue to They continue to be out there with some improvements, but not at the same level that we have experienced over the last couple of years. So we that that will again kick in at the later stage. For now, we have bundled all that. We do add into consideration. I think it's didn't mention ZTE, which is already in production. It is very fast and the financial report. And we are sure now that Q4 will have a base station revenue coming from them. We don't have that same indication yet from the Nokia stands like. So we're very happy that after two quarters of $7,500,000 and different explanations around that. We are back to how we started the year with a different allocation of royalties. 2nd half is probably not stronger than the first half. And we believe that that level could be even stronger than in Q3, but not yet with the full engines and royalties kicking in for us. That's not happening yet in Q4, though. We better estimates from land value baseband from base stations now back to business or partially back to business and from the handset side to some degree. Thank you. And just a quick follow-up question for me. How do you see maybe the annual base station opportunity into 2019 2020 from your current licensees? Thank you. Well, it's hard to answer this kind of question at this stage because it's not depends. It depends on primarily, the deployment or the investment that the operator are going to make in commercializing. A lot of operators are speaking about, 5G and, signing contracts. But the question is when they will do and to what extent how fast it's going to be. So what we have today is it's basically the revenue that we are collecting, and as mentioned, is 4G. We know better, in my opinion, in 2019, could be first half, we start seeing things. But when this when we start rolling, it will roll, it could roll fast. Okay. Thank you. Thanks. And our next question today comes from Matt Ramsay of Cowen. Please go ahead. Hey, this is Josh Buckhalter on behalf of Matt. Thanks for taking my question and congrats on the results. I guess I'll try to ask the previous question in a slightly different way. If we think about some of the qualitative commentary you've heard on 5G this quarter, it seems like there's a lot of activity picking up Can you maybe help us understand, how you would view the cadence of your customer's products and how they would shift versus some of the things we've seen built so far? Thank you. Hi, I'm sorry. So I basically was just asking, given some of the commentary of pick up and build this recent quarter. Could you help us understand like the cadence and how your customers' products would shift in relation to those maybe versus some of the long haul infrastructure being laid down? I hope I understood your question, but I believe you referred to 5G, right? Sorry. Yes, that's correct. Yes, that's correct. Okay. The play, our play in 5G, as you know, is in both and it's in, in the base station side and in the handset, in the devices. Now what we we see today is the benefits in the base station side are more advanced they have the product, they sign contract. And now it's a matter of the pace of, commercial deployment because our technology is going into commercial deployment. When you have all those testing and initial decline and these are not where our products are going. Our product providing power efficiency and cost efficiency and people are putting in when they get the commercial deployment. We at this stage, we don't get a notice from this pattern of deployment. And we believe we're going to see this coming in 2019 based on what we are discussing, these customers based on what we see from a public announcement. On the device side, I think they are behind that. We are we do have customers that use our 5g Technologies called 5g, whether it's going to be meaningful deployment in 2019. I saw just recently analysis that they say only 1% of the total handset market will be 5G next year, and will be 20% in 2020. So, so that's, I believe, give you colors of what to expect from 5G on the handset side, on the handset side. Okay, that was helpful. I'm sorry for the confusion. And then my follow-up, if we sort of back into the royalty per unit number in your royalty revenue this quarter. It looked like there was a nice sequential step up. Could you maybe talk about some of the drivers of that and how we should think about that going forward? Thank you. That could change, of course, to 1 quarter to the other and we continue and explain that we look at the total dollar value strong and the key indicator of the healthiness of our royalty. And as long as the dollar increases, that's a good we were happy with that. With that said, this quarter specifically is a different mix between high end phones and newer technology versus lower end devices with the lower ASPs, And what we've witnessed in the beginning of 2018, which will continue throughout the year is lower volume shipments from our key customers in one of the key customers specifically in China. And this is more lower mid range type phone versus a very strong pickup from September this year. And the pre order for that segment, which had newer technologies inside higher ASPs and higher content from our point of view. So the mix was favorable this time around due to, of course, how much higher volume or the highest we ever had offset that as an average, but on the other hand, add more dollars to the dollar overall the content of the royalty. So think we're going to have mixed numbers or calculations around that. And as soon as the 5G stuff and the base station that Gideon talked about kicks in. And as we said, the ball is rolling, not just starting to roll, but it's rolling down. And then those ASPs are much, much higher because we're talking about much more expensive type of chips that we will be in that have the selling price of $100,000,000, $155,000,000 and that's a much different ASP than what we have been used to in the past. Thanks very much. Today's next question comes from Suji Desilva of Roth Capital. Please go ahead. Hi, Gideon. How are you, Steve? Can you help us first of all, in terms of looking ahead to 2019, perhaps the royalty growth, what the opportunities are, how you'd rank smartphone versus wireless infrastructure versus IoT connectivity, video imaging voice, just to give a sense of where you think the pockets of growth will be in 2019? Hi, Suji. Good morning. So when it comes to 2018 of course, we cannot, we will not quantify it. We still need to do the work, but we are not firing in all the cylinders that we can in terms of the product that's coming. So base station, we expect to see event next year, again, the timing and the pace is something that we will have to see, but that's waiting for prime time, I should say. Then we have the non handset baseband. And you mentioned computer vision, you mentioned, I mean, there will be AI Bluetooth, Wi Fi. I mean, the way we see it is a one big basket that the good news is they are all different industries, different customers and we are not virus to one trend or one crisis in the market. The idea is to collect as many, and that's the importance licensing. And the fact that we have 13 agreements means that we have more than 13 new projects starting, some of them could be in 9 to 12 months in the market. And so basically, we're going to see new skills coming from existing ones, whether it's going to be considered the industrial glisters. I mean, all of them should come together and continued, I mean, like the nice ramp that we see almost every quarter. So this will continue at the pace, whether it's a stronger patient today or what pace we will have to see and we'll do the work by the end of the year. And then the flagship model that we do, we are there, that's an important contribution for us and the fact that it's basically It's one supplier there. That's a dramatic change for us and we'll have see because they have different older pattern than others, but that's a dramatic change for us and we hope to capitalize it. Okay. And then specifically on the wireless infrastructure, I recall you had a third customer as well. Just remind me if that's correct. And if so, what's the status of that third customer relative to ZTE and Nokia? It's a 5G design. Good morning. And as we talked about earlier, that but not yet in production or in deployment. So that's a little bit of a later on not even sure 2019 that could be a 2020 type of event for us. And back to the original question about 2019 royalties, I think what did you explain on a product by product basis that we have all the interesting licensing activity that we had over the last year working well for us. I don't think we have done yet the homework for 2019 and we'll do it in the next earnings call. And try to give more color of how this all plays out and what quarters and what product lines. So I think we just lined them up and then gave each one the explanation of the opportunity, but It's a bit early to quantify the contribution from each one at this point. Okay. Appreciate the color. Thanks guys. Thank you. And our next question comes from David O'Connor of Perabas. Please go ahead. Yes, good morning guys. Thanks for taking my question. Maybe getting firstly, one on China and Spreadtrum in particular. When China rebound, excuse me, from the soft, had the trend just in currently, do you expect the customers like Spectrum to have a similar market share, but do you think they could be losing share as well and the dynamics of any rebound could be different to what we've seen in the past? Thanks. The handset market is very dynamic. One thing I can tell you, Stogen is a very powerful company and they are in a position to compete with MediaTech and Qualcomm And almost all the peers, the other than, of course, the high end staff. So they had a customer loss and they are now in a way we see all those new announcements that are recovering, but we will have to see. Now overall, we cannot ignore, and it's not the overall handset market, the growth there is muted. So the fact that they're on fight. It's all about gaining share. So it's a 0 sum game. But as I said, Spectrum is extremely determined and very powerful to to win larger shareholders today. That's clear. Thanks for that. And maybe just a follow-up on Neupro. Can you talk a little bit about, the licensing playbook of Neupro in particular and has that changed from the last quarter? What type of customers you're engaged with their things? Yes, that's a good question because when people are, I believe that people are looking on the air in the general, they'll get confused. So many players, so many bugs that have been used to make architecture. Now the way we see it there is the 1st wave of AI customer. And those are those AI customers are those companies that are vertically integrated, meaning they can develop not just the chief, but also can develop the application that runs the AI application. They are not that many. And then I'm talking about the edge side and the added side, not the cloud. The cloud is completely different and we don't play in the cloud for now. With our companies in the automotive space, our company in the digital camera, there are companies in the drums. I mean, these are you have those companies that are, you know, they know how to develop applications. In this space, meaning AI vertically in particular that they know they understand the not understand, but can develop their application fever position is very strong. People are using our technology is not just at the context of the Lipper, which is how they are based technology, but also in our DSP. We gain with this customer a lot of experience, especially on the software that we call Fidian and just a big example, what does it mean? One of our competitors announced in a recent technology event, the performance metric about his AI engine. And our performance is 3 times better than this competitor. So that's the first wave of customers we are engaging with and some of them are basically upgrading from the initial DSP base to the vehicle area. And now we are now see a lot of newcomers, people that see AI as an adjusted block in their chip, which they rely on anybody else from their customer to develop their application. Here's the the expectation that 90% of the SoC in the world will have a discounted air engine. Those companies are a bit slow in their decision making, but, they are catching up And we see, going forward, when it comes to NIPO developing, we see all those companies that see AI as as an engine and don't see themselves developing the application. And if you ask me how the pipeline is composed, so you see all those newcomers coming. And, and here again, our software becomes very critical because without having the software, their and we cannot develop such applications. And ladies and gentlemen, this concludes our question and answer session. I'd like to turn the conference back over to Richard Kingston for any closing remarks. Great. Thank you for joining us today, everybody, and for your continued interest in and support of CEVA. We will be attending the following upcoming event and invite you to meet us there. The benchmark discovery 1 on 1 conference in Chicago on November 29th and Barclays Global TMT Conference in San Francisco on December 5th. Please visit the Investors section of our website for further information on these events 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.