CEVA
#So since you ask about specifically LTE, we are basically all of ---+ all the tiers, so you mentioned Samsung which is a premier model, we are at the mid low end, that's a very active and dynamic area as we see today, growing very fast mainly in China where people are replacing the 3G on the high-ends is almost done, but in the low mid-tier there is ---+ it's an untapped area and that's one area, this one elements of it.
We are seeing tablets with LTE connection coming in.
We see also by the way 3G there, but we see tablets as well.
So basically we are in presence in all the different LTE tiers today.
And on top of that I would add that Samsung is planning on introducing few different other models later this year, this year starting from next month more or less and that could be the Note 5, that could be some other model that will be also designed in.
So we're not counting only in one socket as <UNK> ---+ as <UNK> just explained, but multiple sockets both within Samsung and within Xiaomi tablets and many others.
And it's a market share story for us.
And I think we're not building our business model and growth in LTE on a specific socket or in specific success of one design or the other, but more the trend across the industry.
In 2G, right, the market is declining and that's a positive move from our standpoint.
Bear in mind that there are still significant amount of holders of 2G feature phone.
I think in my prepared remarks, I put about 58%.
Still out of the 7 billion connection are still holding 2G and this is the potential for us to grow when those people are moving to smartphones.
Now when it comes to 3G what we see today, good dynamics in India.
The 3G phones going there are relatively pretty much advanced in terms of the processing power that they offer.
Spreadtrum has a quadcore offering there.
That's where we see good demand and growth.
Another area for 3G which I mentioned in my previous ---+ in my answer to the previous question is tablet.
Rockchip and Intel are progressing very nicely on the 3G tablets and we have other customers getting there from the smartphone going to the tablet.
By the way, in emerging markets today or tablets for emerging market, most of them are cellular connected and this is how the landscape is changing, well, Chinese companies like Rockchip or Spreadtrum or MediaTek are getting share there.
Sure.
So I think we've been able to demonstrate over the last three years ---+ or three quarters or so that we are somewhere around $10.9 million non-GAAP OpEx per quarter.
At least for Q3, I guided about $100,000 lower than that, the mid-range, and I think somewhere around that neighborhood is something that we are very comfortable with and at least for this year see it as very reasonable and we'll aim to maintain these types of level.
Next year I leave it a quarter or two from now to look into next year and see what other ideas and investments we want to invest in and what are the opportunities for us, but I think we're very comfortable and have been for a while in this type of expense level.
So here in licensing, we ---+ it's a good environment.
You're right that in the last four or five quarters we are exceeding high end of our guidance model which is at the high end, $7.5 million per quarter.
Whether it's sustainable as you know licensing is a lumpy business, it could go up and down in a specific quarter, but in general the licensing environment is very strong.
You can see it from the numbers, you can see for the numbers of this that we are able to conclude every quarter.
By the way, the way we built it is that we used this average in the mid-range of the guidance that you refer to as the base and whenever things pop-up or we see different opportunities flowing in, in specific quarter, of course we guide either higher or lower and have been higher recently like the guidance now for Q3.
But I would keep Q4 in the normal range that we are comfortable with and if things evolve it will give more color that we could either be higher like we're referring to specifically about Q3 or take it one step at a time and see what deals could go through and hopefully be on the better side of the guidance.
See Q4, which is Q3 shipment, is our strongest growth quarter from seasonal standpoint.
It's post ---+ pre-Christmas is really Q3 is our ---+ Q4 royalty is the highest from our standpoint, and we believe that this year it will be same.
I mean the pace of it is yet of no doubt good sign.
If you think as people mentioned Samsung Galaxy S6 and they post the results yesterday and they say that one of the reason that they want to fix now is putting mobile [phone] and on S6 Edge which is they see high demand for this one and they were unable to supply what people wanted.
They are going to come out even earlier with Note 5, S6 Mini.
That's one thing we believe in China the momentum will continue, there is a demand.
So overall we believe Q4 ---+ our Q4 royalty will be sequentially higher, how much is it, we'll have to see.
They exceed our expectations.
There is ---+ people are speaking about IoT.
It's not just talking.
There is a demand, lot of companies coming, trying to build IoT devices, whether it's a Wi-Fi, whether it's Bluetooth, low energy stuff.
And RivieraWaves is the incumbent.
I mean they are the leader in this space.
I mean people are not questioning the technology competency.
So there is a demand for Riviera in licensing.
We stopped seeing shipments coming in, royalties coming from [older bills] of Riviera.
So things look very promising.
Thanks <UNK>.
Let's start with the last.
No, the last quarter Q2 that we just reported, we had a bit more design activity and therefore moved some R&D expenses somewhere between close of $200,000 from R&D to cost of goods, and that's the reason for the slightly lower OpEx.
It's just the presentation, but the overall expenses are at same level as before.
So that's the reason for ---+ it should continue also into next quarter or two because these agreements and these design cycles usually take two to three quarters and then get back to normal, but again it's a small amount, but it does effect by 1% or 2%.
No, just because of the simple revenues that are significantly higher than the prior quarter.
The $15 million to $16 million will get you to pretty nice ---+ the 92% more or less margin with those same expenses that I just referred to [inside] already included.
Regarding the questions about TD LTE, I would say the following.
First of all, all our key customers, <UNK> mentioned four currently shipping, all of them are shipping what is called five-mode, I mean have solution that is five-mode available for mass production.
Whether ---+ today I think three-mode TD LTE is China Mobile.
We don't know the extent to get to that granularity how many of the customers that ship China Mobile are disabling the other two modes and stay with the three-mode.
But in general the shipments, the desire for the chips in production are all five-mode.
Thirty million were Bluetooth devices, so quite robust compared to previous quarters in prior years.
Those legacy is something we have talked about a year ago and that's declining from one quarter to the other, eventually disappear.
And then the idea is that over the next ---+ whether it's couple of quarters or whether it's a couple of years depends on what products and what design wins that we have signed over the last couple of years, two years or so in the non-handset base will kick in.
So I don't think we'll see a big change this year, maybe in Q4 something, but maybe beginning of next year, but we for sure if our target is to reach 700 million to 900 million including Bluetooth, but it's not going to be only Bluetooth, that will kick in as we go.
Of course, every single one.
It's hard to say in LTE right ---+
No, what we report in the 30 million devices that we get paid on and improved device, whether it's a fixed cent or a percentage more or less around the cent or so and lower than LTE rates of course, but still huge market opportunities in the tens of billions over time.
Well, we don't have statistics about it.
The only thing that I can say is that there is a strong growth there, strong demand of ---+ at the mid and low tier and I'm saying this between $100 down to $48 now and these are ---+ don't misunderstand it, these are very advanced phone.
I mean LTE, it's got four processor, right now it's still [815] (inaudible) and they will go to 64 bits very soon.
So this is good phones.
Yes, it's ---+ there is a big difference between the Cordio, ARM Cordio offering and the offering that Riviera has.
Cordio is one-size-fits-all.
It's a solution based on our ---+ all TSMC 55 nanometer and that's it.
If you want to go another foundry or another process, it doesn't fit.
If you want to get an upgrade to 5.0, it's not.
The RivieraWaves is RF agnostic.
We work with many other partners or customers so far are doing their own RF and their own process whether they integrate it on a big SOC on like application processor or they do a single chip IoT device.
I mean we're agnostic in this respect.
That's one thing.
The other thing is we are more advanced in terms of looking into the next generation, Bluetooth 5.0.
We have customers for this already.
And the second and the third one which is more important is that we are offering what is called dual mode or people are using the smart ready.
70% of today Bluetooth market is dual mode where you have both data and voice or audio supported.
So all the headsets and all the smartphones, it's all fall into the dual mode thing.
ARM does not offer this one.
This is much more complicated technology to deal with.
On the guidance for Q3.
Sure.
I think that we are comfortable, the $30-ish million non-baseband type of numbers.
They will probably continue to increase next quarter, but the bulk of the royalties and the dollar figures for sure is coming from the LTE, this mix that we have been talking about of more than doubling sequentially the amount of LTE chips, the gaining market share from existed incumbent players in the industry which are hurting and suffering because of their offering and pricing in the market.
And our customers that are gaining the market share because as <UNK> said, they already have the working solution, something that we have been waiting for, for the last two years for them to catch up.
So for us the main theme, short theme in royalty growth is all about the handset.
We're back to handset business.
And on top of that, but I would say in the second gear ---+ this is first gear ---+ the second gear of growth will come from non-baseband with much, much higher type of numbers a year or a year-and-half from now.
But right now, we could focus and put the magnifying glass on the handset.
And with that said, let's take the $30 million and annual ---+ $40 million and annualize that and you are already to shy a run-rate of $200 million non-baseband.
The majority for now is Bluetooth.
It's too early to say at this stage how we see it.
From what we ---+ the trend that we see today, it looks like that in the pricing point today in LTE and the need from the consumer to have a better Internet experience, the challenge that they face there, whether it's in the stock market or in general, does not really imply at this stage.
The value proposition that companies are coming now in China is very substantial and there is strong interest in China.
We ---+ for now, we don't see too much of LTE going there.
3G is coming in a very fast pace.
Today the only two companies that really competent to supply ---+ it's a very price-demanding market.
The only two companies that are paying in this field are Spreadtrum and MediaTek.
Thanks <UNK>.
Hi <UNK>, it's <UNK>.
Let me take this question.
First of all, since you ask a long-term question and long term for us is between now and 2018, Bluetooth is not just one of them, Bluetooth is evolving now.
But what we see is vision.
We have several, I think 15 licenses which are ---+ 15 licenses that are designing us in vision.
This is a very lucrative space and we are expecting to see growing contribution from vision.
All sort of ---+ just the last quarter, an example of DSLR cameras, smartphones, automotive (inaudible), these are areas that our vision gets into.
We have Wi-Fi, lot of activities, and now they're very lucrative space.
Small sales activities, audio activities, audio mails, also audio and all sort of sensors, and of course the Bluetooth area.
So CEVA today is not as we use to be back in 2011 that you mentioned, kind of a one-trick pony, one company that rely on the baseband market in the handset market.
Well, we have much broader portfolio and we have much broader customer-base in the quarter.
The second quarter results is a good example where you have 14 days of which 13 of them are not handset market.
So going to summarize your question, we are expecting OLT revenues in the next few years coming from different vectors, not just Bluetooth or cellular.
I don't think ---+ CEVA offering is completely different than what ARM is offering.
I mean they can ---+ we meet them in few occasion, but we are among cooperating with them than competed.
Our offering is more vertically integrated.
We are offering platform, we are offering hardware and software.
ARM is offering a CPU and ecosystem.
And number one, with CPU you cannot do things in vision or Wi-Fi that you do with CPU.
Number two, people want one-stop solution and not start paying twice for ARM and for another third-party that provide the software.
So in terms of competitive landscape because CEVA is so diversified in every segment, we have different competitors.
We compete with Imagination in Bluetooth and connectivity.
We compete with Cadence in audio and vision.
All of the ---+ we compete with other companies in Bluetooth.
It's ---+ in every market we have the different, but you know as when we do something we always want to be number one, the clear leader.
And we're offering one high-quality and full solution.
So just a ---+
Yes, go ahead.
In China, it's very interesting market in these days.
Number one, there is the incumbents that you mentioned, Spreadtrum and also Intel is active there and of course MediaTek.
But there are newcomers getting into this market because they see not just the handset market, but other segment of the market machine to machine, tablet.
Rockchip is there which is a newcomer.
Even this quarter, we licensed to a company that is associated with eventually a newcomer to this phase.
They are small mid-range companies that are looking.
So I think in general when you look on the cellular market, it's not just handset.
There are usage models, machine-to-machine and tablets that are evolving.
And Chinese market find room to get into this one.
And in the handset space, also one example is Leadcore.
It's a company that can take also significant share in this market by specializing in one of the segments there.
Thank you.
Thanks.
Thank you Emily and thank you everyone for joining us today and for your continued interest in CEVA and in support of the Company.
We will be attending the following upcoming conferences in August, the Oppenheimer 18th Annual Internet & Communications Conference on August the 11th in Boston and Canaccord Genuity's 35th Annual Growth Conference on August 12th also in Boston.
Please visit the Investor Relations section of our website for more information and additional conferences and events that we will be attending.
Thank you and goodbye.
