Arteris Inc (AIP) 2022 Q1 法說會逐字稿

Good afternoon, everyone, and welcome to the Arteris IP First Quarter 2022 Earnings Call. All material contained in the webcast is the sole property and copy of Arteris IP with all rights resolved. For opening remarks and introductions, I will now turn the call over to Erica Mannion at Sapphire Investor Relations. Please go ahead.

大家下午好，歡迎參加 Arteris IP 2022 年第一季度收益電話會議。網絡廣播中包含的所有材料均為 Arteris IP 的專有財產和副本，並具有所有權利。對於開場白和介紹，我現在將把電話轉給 Sapphire 投資者關係部的 Erica Mannion。請繼續。

Thank you, and good afternoon. With me today from Arteris IP are Charlie Janac, Chief Executive Officer; and Nick Hawkins, Chief Financial Officer. Charlie will begin with a brief review of the business results for the first quarter ended March 31, 2022. Nick will then review the financial results for the first quarter, followed by the company's outlook for the second quarter and full year of 2022. We will then open the call for questions.

謝謝你，下午好。今天和我在一起的是來自 Arteris IP 的首席執行官 Charlie Janac；和首席財務官尼克·霍金斯。查理將首先簡要回顧截至 2022 年 3 月 31 日的第一季度的業務業績。然後尼克將回顧第一季度的財務業績，然後是公司對 2022 年第二季度和全年的展望。我們將然後打開提問環節。

Before we begin, I'd like to remind you that management will make statements during this call that are forward-looking statements within the meaning of the federal securities laws. These statements involve material risks and uncertainties that could cause actual results or events to differ materially from those anticipated, and you should not place undue reliance on forward-looking statements. Additional information regarding these risks and uncertainties and factors that could cause actual results to differ appear in the press release, Arteris IP issued today and in the documents and reports filed by Arteris IP from time to time with the Securities and Exchange Commission.

在我們開始之前，我想提醒您，管理層將在本次電話會議中發表聯邦證券法含義內的前瞻性聲明。這些陳述涉及重大風險和不確定性，可能導致實際結果或事件與預期存在重大差異，您不應過度依賴前瞻性陳述。有關這些風險和不確定性以及可能導致實際結果出現差異的因素的更多信息，請參閱 Arteris IP 今天發布的新聞稿以及 Arteris IP 不時向美國證券交易委員會提交的文件和報告。

Please note, during this call, we will cite certain non-GAAP measures, including non-GAAP net loss, non-GAAP net loss per share and free cash flow, which are not measures prepared in accordance with U.S. GAAP. These non-GAAP measures are presented as we believe that they provide investors with the means of evaluating and understanding how the company's management evaluates the company's operating performance. These non-GAAP measures should not be considered in isolation from, as substitutes for or superior to financial measures prepared in accordance with U.S. GAAP. A reconciliation of these non-GAAP measures to the nearest GAAP measure can be found in the press release for the quarter ended March 31, 2022.

請注意，在本次電話會議中，我們將引用某些非 GAAP 衡量標準，包括非 GAAP 淨虧損、非 GAAP 每股淨虧損和自由現金流，這些衡量標準並非根據美國 GAAP 制定。提出這些非公認會計原則措施是因為我們相信它們為投資者提供了評估和理解公司管理層如何評估公司經營業績的方法。這些非公認會計原則措施不應孤立地視為根據美國公認會計原則制定的財務措施的替代品或優於其。這些非 GAAP 衡量標準與最接近的 GAAP 衡量標準的調節表可在截至 2022 年 3 月 31 日的季度新聞稿中找到。

In addition, for a definition of certain key performance indicators used in this presentation such as annual contract value, design starts, active customers and remaining performance obligations, please see the press release for the quarter ended March 31, 2022.

此外，有關本演示文稿中使用的某些關鍵績效指標的定義，例如年度合同價值、設計開工率、活躍客戶和剩餘履約義務，請參閱截至 2022 年 3 月 31 日的季度新聞稿。

Listeners who do not have a copy of the press release for the quarter ended March 31, 2022 may obtain a copy by visiting the Investor Relations section of the company's website. Now I'd like to turn the call over to Charlie.

沒有截至 2022 年 3 月 31 日的季度新聞稿副本的聽眾可以通過訪問公司網站的投資者關係部分獲取副本。現在我想把電話轉給查理。

Thank you, Erica, and thanks to everyone for joining us on the call this afternoon. We're excited to report a strong first quarter to start 2022 with annual contract value plus trailing 12-month royalties of $52.8 million, up 26% year-over-year. Demonstrating our continuing momentum, our active customers increased by 7 new system IP customers in the quarter. Total customer design starts in the quarter were 19 SoC projects. Major new customer deals, including IP licenses to Cambricon, Rapid Silicon and Socionext. Cambricon selected our Arteris IP NoC interconnect solution based on our strong technology track record for automotive machine learning applications.

謝謝你，艾麗卡，也感謝大家今天下午加入我們的電話會議。我們很高興地報告，2022 年第一季度業績強勁，年度合同價值加上過去 12 個月的特許權使用費為 5,280 萬美元，同比增長 26%。本季度我們的活躍客戶增加了 7 個新系統 IP 客戶，這證明了我們的持續發展勢頭。本季度啟動的客戶設計總數為 19 個 SoC 項目。主要新客戶交易，包括 Cambricon、Rapid Silicon 和 Socionext 的 IP 許可。寒武紀選擇我們的 Arteris IP NoC 互連解決方案是基於我們在汽車機器學習應用方面的強大技術記錄。

We also signed a key new deal with a major ridesharing company in the quarter and announced that BMW licensed Arteris IP for a neural network accelerator project. Additionally, Sondrel deployed Arteris IP for their next-generation automotive AI/ML SoCs. We believe these relationships underline that SoC creation is occurring at all stages of the automotive supply chain from semiconductor companies to Tier 1 vendors, automotive OEMs and ridesharing companies as electrification, automated driving and ECU consolidation revolutionize the industry. Besides the progress in automotive, we also continued the strong momentum in AI/ML, consumer electronics, enterprise and 5G communication market segments.

我們還在本季度與一家大型拼車公司簽署了一項重要的新協議，並宣布寶馬授權 Arteris IP 用於神經網絡加速器項目。此外，Sondrel 還為其下一代汽車 AI/ML SoC 部署了 Arteris IP。我們相信，這些關係表明，隨著電氣化、自動駕駛和 ECU 整合徹底改變了行業，從半導體公司到一級供應商、汽車 OEM 和拼車公司，SoC 的創建正在汽車供應鏈的各個階段進行。除了在汽車領域取得進展外，我們還在人工智能/機器學習、消費電子、企業和 5G 通信細分市場保持強勁勢頭。

We continue to close new deals addressing AI/ML technology during the first quarter across numerous verticals. The market for machine learning at the edge continues to be promising with continued addition of new customers and a broad range of applications.

我們在第一季度繼續在眾多垂直領域完成涉及人工智能/機器學習技術的新交易。隨著新客戶的不斷增加和廣泛的應用程序的不斷增加，邊緣機器學習市場繼續充滿希望。

On the product front, in the first quarter, we continued our strong investment in engineering new system IP products and are confident that we will continue our multiyear track record of delivering at least 1 new major system IP product in 2022. Democratization of SoC design as well as disintermediation of the semiconductor supply chain, we believe, is driving a strong need for automation of system IP solutions in order to compensate for a shortage of SoC architects and skilled interconnect IP engineers. While we are seeing strong demand for our products, we're also seeing worldwide inflationary pressures in terms of employee compensation and service provider pricing.

在產品方面，第一季度，我們繼續對新系統 IP 產品的設計進行大力投資，並有信心繼續保持多年的良好記錄，在 2022 年交付至少 1 個新的主要係統 IP 產品。SoC 設計的民主化我們相信，半導體供應鏈的去中介化正在推動對系統IP 解決方案自動化的強烈需求，以彌補SoC 架構師和熟練互連IP 工程師的短缺。雖然我們看到對我們產品的強勁需求，但我們也看到了全球範圍內員工薪酬和服務提供商定價方面的通脹壓力。

As we discussed in our prior conference call, we are seeing the regionalization of the semiconductor industry. However, the troubling events in Ukraine are driving the United States and Europe together into a more cohesive block than previously predicted. I should mention that Arteris IP has no current exposure to either Ukraine or Russia. We believe that it is important, however, for Arteris IP to continue to expand its multiregional presence in order to be a global system IP provider.

正如我們在之前的電話會議中討論的那樣，我們正在看到半導體行業的區域化。然而，烏克蘭發生的令人不安的事件正在促使美國和歐洲結成比之前預期更加團結的聯盟。我應該指出的是，Arteris IP 目前沒有涉足烏克蘭或俄羅斯。然而，我們認為，Arteris IP 繼續擴大其多區域業務以成為全球系統 IP 提供商非常重要。

Lastly, in the first quarter, we continued to strengthen our management team by adding Michal Siwinski as our Chief Marketing Officer. Michal joins us following a 22-year career at Cadence Design Systems, including leadership roles in product strategy, solutions and customer engagement, culminating as a Corporate Vice President, Marketing and Business Development. With Michal's addition, we now have a complete top management team with significant public company experience for our next stage of growth.

最後，在第一季度，我們繼續加強我們的管理團隊，任命 Michal Siwinski 為首席營銷官。 Michal 加入我們之前，曾在 Cadence Design Systems 工作了 22 年，包括在產品戰略、解決方案和客戶參與方面擔任領導職務，最終擔任營銷和業務開發公司副總裁。隨著 Michal 的加入，我們現在擁有了一支完整的高層管理團隊，他們擁有豐富的上市公司經驗，可以幫助我們下一階段的發展。

With that, I'll turn it over to Nick to discuss our financial results in more detail.

接下來，我將把它交給尼克，更詳細地討論我們的財務業績。

Thank you, Charlie, and good afternoon, everyone. As I review our first quarter results today, please note, I'll be referring to non-GAAP metrics. A reconciliation of GAAP to non-GAAP financials is included in today's earnings release, which is available on our website.

謝謝你，查理，大家下午好。請注意，當我今天回顧第一季度業績時，我將指的是非公認會計準則指標。今天的收益報告中包含了 GAAP 與非 GAAP 財務數據的調節表，可在我們的網站上查看。

Total revenue for the first quarter was $11.8 million, up 77% year-over-year. As a reminder, those of you who are new to the Arteris IP story, our revenue is derived from licensing intellectual property, licensing software, software and maintenance services, providing professional services, training services and royalties. Given the variation in revenue recognition methodologies between our product offerings, as a management team, we focus on annual contract value, or ACV, as a leading indicator of financial performance. We define ACV for an individual customer agreement as the total fixed fees under the agreement also referred to as the TCV, or total contract value, divided by the number of years in the agreement term. As this calculation does not include the contribution from royalty payments, we also referred to ACV plus trailing 12-month royalties as a metric, which provides a more complete picture of our total revenues.

第一季度總收入為 1180 萬美元，同比增長 77%。提醒一下，那些剛接觸 Arteris IP 故事的人，我們的收入來自許可知識產權、許可軟件、軟件和維護服務、提供專業服務、培訓服務和版稅。鑑於我們提供的產品之間的收入確認方法存在差異，作為管理團隊，我們重點關注年度合同價值 (ACV)，將其作為財務業績的領先指標。我們將個人客戶協議的 ACV 定義為協議下的總固定費用（也稱為 TCV）或總合同價值除以協議期限的年數。由於此計算不包括特許權使用費的貢獻，因此我們還參考了 ACV 加上過去 12 個月的特許權使用費作為指標，這可以更全面地了解我們的總收入。

We monitor this metric to measure our success and believe that the historical increase shows our progress in expanding our customers' adoption of our solutions. At the end of the first quarter, ACV plus trailing 12-month royalties and other revenue was $52.8 million, up 26% year-over-year driven in particular by growth in automotive, AI/ML, consumer electronics, enterprise and 5G communication market segments and up 5% quarter-over-quarter. Remaining performance obligations, or RPO, was $60.5 million, up 28% year-over-year as of March 31, 2022. We define RPO as the amount of contracted future revenue.

我們監控這一指標來衡量我們的成功，並相信歷史增長表明我們在擴大客戶對我們解決方案的採用方面取得了進展。截至第一季度末，ACV 加上過去12 個月的特許權使用費和其他收入為5280 萬美元，同比增長26%，特別是在汽車、人工智能/機器學習、消費電子產品、企業和5G 通信市場增長的推動下細分市場，環比增長 5%。截至 2022 年 3 月 31 日，剩餘履約義務（RPO）為 6050 萬美元，同比增長 28%。我們將 RPO 定義為合同未來收入金額。

Gross profit in the quarter was $10.9 million, representing a gross margin of 92% and compared to $5.8 million or 87% in the prior year period. R&D expense for the first quarter was $8.2 million or 70% of revenue compared to $6.3 million in the prior year period. The increase was primarily driven by additional head count in our 4 R&D centers and payroll expense as we continue to invest in developing new and improved product offerings.

本季度毛利潤為 1,090 萬美元，毛利率為 92%，而去年同期毛利潤為 580 萬美元，毛利率為 87%。第一季度的研發費用為 820 萬美元，佔收入的 70%，而去年同期的研發費用為 630 萬美元。這一增長主要是由於我們繼續投資開發新的和改進的產品而增加了 4 個研發中心的人員數量和工資支出。

Sales and marketing expense for the first quarter was $3.6 million or 31% of revenue compared to $2.4 million in the year ago period. We continue to invest in sales and marketing as we work to continue to drive awareness of the benefits of our solution in the market and expand our sales and application engineering force and marketing efforts to harness the significant potential in front of us.

第一季度的銷售和營銷費用為 360 萬美元，佔收入的 31%，而去年同期為 240 萬美元。我們繼續投資於銷售和營銷，努力繼續提高市場對我們解決方案優勢的認識，並擴大我們的銷售和應用工程力量以及營銷工作，以利用我們面前的巨大潛力。

G&A expense for the first quarter was $3.2 million or 27% of revenue compared to $3.0 million in the year ago period. G&A reflects an increase in people and infrastructure-related expenses associated with our transition to being a public company.

第一季度的一般管理費用為 320 萬美元，佔收入的 27%，而去年同期為 300 萬美元。一般管理費用反映了我們向上市公司轉型過程中與人員和基礎設施相關的支出的增加。

Operating loss for the first quarter was $6.6 million or 56% of revenue compared to a loss of $6.4 million in the year ago period. Non-GAAP operating loss was $4.2 million or 36% of revenue compared to a loss of $5.8 million in the year ago period.

第一季度運營虧損為 660 萬美元，佔收入的 56%，而去年同期虧損為 640 萬美元。非 GAAP 運營虧損為 420 萬美元，佔收入的 36%，而去年同期虧損為 580 萬美元。

Net loss for the quarter was $6.8 million or net loss per share, basic and diluted, of $0.22. Non-GAAP net loss for the quarter was $4.4 million or net loss per share, basic and diluted, of $0.14 based on approximately 31.6 million weighted average diluted shares outstanding.

本季度淨虧損為 680 萬美元，基本每股淨虧損和稀釋後每股淨虧損為 0.22 美元。根據約 3160 萬股加權平均稀釋後流通股計算，本季度非 GAAP 淨虧損為 440 萬美元，基本虧損和稀釋每股淨虧損為 0.14 美元。

As a reminder, our IPO lockup expired on April 25, 2022. When the lockup expired, former employees, current employees and other stockholders held approximately 9.8 million shares, which are no longer subject to the lockup and can be freely sold subject to normal restrictions, such as having material nonpublic information, or MNPI. Additionally, current and former employees and directors held approximately 8.3 million shares when the lockup expired that are either subject to outstanding options or reserve for future issuance pursuant to restricted stock unit grants as part of our employee incentive programs. These shares, assuming they satisfy the various vesting conditions can also be sold subject to normal restrictions.

提醒一下，我們的IPO禁售期已於2022年4月25日到期。禁售期滿後，前員工、現任員工和其他股東持有約980萬股，這些股票不再受禁售，可以在正常限制下自由出售，例如擁有重大非公開信息或 MNPI。此外，現任和前任員工及董事在禁售期滿時持有約830 萬股股票，這些股票要么受到未行使期權的約束，要么根據作為我們員工激勵計劃一部分的限制性股票單位授予的未來發行儲備。假設這些股份滿足各種歸屬條件，也可以在受到正常限制的情況下出售。

Turning to the balance sheet and cash flow. We ended the quarter with $82.2 million in cash. Cash flow used in operations was $1.4 million in the quarter while free cash flow, which includes capital expenditure was negative $1.5 million.

轉向資產負債表和現金流量。本季度結束時，我們擁有 8220 萬美元現金。本季度運營使用的現金流為 140 萬美元，而包括資本支出在內的自由現金流為負 150 萬美元。

I would now like to turn to the outlook for the second quarter and the full year 2022. For the second quarter, we expect ACV plus trailing 12-month royalties of $49.5 million to $51.5 million and revenue of $11.5 million to $14.5 million with non-GAAP operating loss margin of 19.4% to 34.4% and non-GAAP free cash flow margin of negative 29.4% to negative 44.4%.

我現在想談談對2022 年第二季度和全年的展望。對於第二季度，我們預計ACV 加上過去12 個月的特許權使用費為4950 萬美元至5150 萬美元，收入為1150 萬美元至1450 萬美元，非 - GAAP 運營虧損率為 19.4% 至 34.4%，非 GAAP 自由現金流率為負 29.4% 至負 44.4%。

For the full year, we expect ACV plus trailing 12-month royalties of $51.6 million to $55.6 million and revenue of $48 million to $52 million, representing an increase from the prior guidance of $47 million to $51 million. Non-GAAP operating loss margin of 24.9% to 39.9% similar to prior guidance of non-GAAP operating loss margin of 25.6% to 40.6%, reflecting the impact of wage inflation on our operating expenses, and non-GAAP free cash flow margin of negative 10.5% to negative 25.5%, similar to prior guidance of negative 10.9% to negative 25.9%.

對於全年，我們預計ACV 加上過去12 個月的特許權使用費為5160 萬美元至5560 萬美元，收入為4800 萬美元至5200 萬美元，較之前指導的4700 萬美元至5100 萬美元有所增加。非 GAAP 營業虧損率為 24.9% 至 39.9%，與之前指導的非 GAAP 營業虧損率為 25.6% 至 40.6% 類似，反映了工資上漲對我們營業費用的影響，以及非 GAAP 自由現金流利潤率負10.5 %至負25.5%，與之前指導的負10.9%至負25.9%類似。

With that, we'll open up the call for questions. Over to you, operator.

至此，我們將開始提問。交給你了，接線員。

(Operator Instructions)

（操作員說明）

Our first question is from Matt Ramsay with Cowen.

我們的第一個問題來自考恩的馬特拉姆齊。

This is Josh Buchalter on behalf of Matt. Congrats on the results. First thing I wanted to ask about was the guidance. It calls for a sequential decline of ACV plus trailing 12 months royalty revenue. Obviously saw that you maintained the full year guidance, but I was wondering what would normal seasonality look like. And was there any impact in the short term related to China shutdowns, whether a contract signed at customers or royalty shipments?

我是喬什·布查爾特 (Josh Buchalter)，代表馬特 (Matt)。祝賀結果。我想問的第一件事是指導。它要求 ACV 加上過去 12 個月的特許權使用費收入連續下降。顯然看到你們維持了全年指導，但我想知道正常的季節性會是什麼樣子。無論是與客戶簽訂的合同還是特許權使用費，在短期內是否會對中國的關閉產生任何影響？

Yes. Let me take that one. This Nick here. It's a great question. I mean you already know because we've spoken to you many times that we have a headwind in Q2, which is already sort of built into our prior guidance. But just so everybody else knows who's not familiar with this, but there was a very substantial deal with HiSilicon in May of 2019, the end dates in this month. That creates a sort of a headwind of around $3.3 million in Q2. That's not something new, but it is a headwind, nevertheless. The other point you make, which is the -- a slight decline in ACV guidance for Q2 plus royalties is 2 things really. One is, as you know, we do have a little bit of seasonality with our IPD business. And generally, our sort of bookings as well. And sometimes, we can end up with a big deal falling into the end of 1 quarter or the beginning of another quarter. We are seeing a few Chinese deals, for example, falling out of the end of June into the beginning of July, and that creates sort of an instant ACV hit, which then picks back up again the next quarter, which is why you're seeing the full year not moving.

是的。讓我拿走那個。這位尼克在這裡。這是一個很好的問題。我的意思是，您已經知道，因為我們已經多次與您交談過，我們在第二季度遇到了阻力，這已經納入我們之前的指導中。但其他人都知道誰不熟悉這一點，但 2019 年 5 月與海思达成了一項非常重大的交易，即本月的結束日期。這給第二季度帶來了約 330 萬美元的阻力。這不是什麼新鮮事，但仍然是一個阻力。您提出的另一點是，第二季度 ACV 指導值略有下降加上特許權使用費確實是兩件事。一是，如您所知，我們的 IPD 業務確實有一點季節性。一般來說，我們的預訂也是如此。有時，我們可能會在一個季度末或另一個季度初完成一筆大交易。例如，我們看到一些中國交易從 6 月底一直持續到 7 月初，這造成了 ACV 的即時衝擊，然後在下個季度再次回升，這就是為什麼你眼看一整年都不動。

The second issue is the royalties, the TTMR, part of ACV plus TTMR. We are seeing supply chain constraints hitting our customers no less. Obviously, it's hitting our customers. And this is everything from sort of fab capacity, generally foundry capacity, and things like noble gases, which are constrained by Russia. And that's reducing our customers' ability to ship volumes and that then puts a dent in near-term royalties that won't impact longer-term royalties, but it does impact the near term. Does that sort of give a fulsome answer to the question?

第二個問題是特許權使用費，即 TTMR，是 ACV 加上 TTMR 的一部分。我們看到供應鏈限制對我們的客戶造成的影響同樣巨大。顯然，這對我們的客戶造成了打擊。這包括各種晶圓廠產能、一般鑄造產能，以及受俄羅斯限制的稀有氣體等。這降低了我們客戶發貨量的能力，從而削弱了近期的特許權使用費，雖然不會影響長期特許權使用費，但確實會影響短期。這是否給了這個問題一個完整的答案？

Yes, that was perfect. I appreciate all the color there. And then for my follow-up, all throughout this earnings season and frankly, the past several, we've heard about supply constraints impacting auto units. That said, there's clearly an improving mix of premium in [SUVs], which come with the associated increase in semiconductor content. I was wondering if you could help us parse out this net exposure from both the mix shift to higher semis content versus lower overall unit and how this result -- how this impacts your overall near-term results, but more importantly, long term, given the increased complexity of SoCs that are going into vehicles?

是的，那太完美了。我欣賞那裡的所有顏色。然後，對於我的後續行動，在整個財報季，坦率地說，在過去的幾個財報季，我們聽說了影響汽車銷量的供應限制。也就是說，隨著半導體含量的增加，[SUV] 的高端產品組合明顯有所改善。我想知道您是否可以幫助我們從混合轉向更高的半成品含量與更低的整體單位中解析出這種淨暴露，以及這個結果如何影響您的整體近期結果，但更重要的是，長期來看，考慮到汽車中的 SoC 的複雜性是否會增加？

Yes. I mean -- this is Charlie. I'll take that one. So the automotive business continues to be robust. We're not seeing any slowdowns in design cycles. There are more members of the -- or more participating companies of the automotive ecosystem that are designing SoCs and those -- these are increasingly complex. So that all favors our tariffs as far as we can see. The only sort of headwind that could arise is that the semiconductor manufacturing capacity constraints could impact royalties. But people are building fabs at pretty robust rate. And we think that the constraints in the semiconductor manufacturing are going to be over at some point. We don't know exactly when, but could be second half of this year, could be early next year. But there's just a lot of very interesting design activity that's taking place and the automotive chain is one of the -- one of the things that looks particularly promising. I should also add that we're going to see an increase in military spending, and that may also translate into additional SoC design starts.

是的。我的意思是——這是查理。我會接受那個。因此，汽車業務繼續強勁。我們沒有看到設計週期有任何放緩。汽車生態系統中有更多的成員或更多的參與公司正在設計 SoC，這些都變得越來越複雜。因此，據我們所知，一切都對我們的關稅有利。唯一可能出現的阻力是半導體製造能力的限制可能會影響特許權使用費。但人們正在以相當強勁的速度建造晶圓廠。我們認為半導體製造的限制將在某個時候結束。我們不知道具體時間，但可能是今年下半年，可能是明年初。但目前正在發生許多非常有趣的設計活動，而汽車連鎖店就是其中之一——看起來特別有前途的事情之一。我還應該補充一點，我們將看到軍費開支的增加，這也可能轉化為額外的 SoC 設計啟動。

Yes. Just one additional comment, this is Nick, on the automotive side on the kind of more of the longer term. You may remember that we published some data, some third-party data, that talk exactly about the issue you're referencing there, which is the number of SoCs per vehicle is growing from around sort of 3% to 4% in 2020 up to the low 20s, something around 23 per vehicle and this is for sort of L2 plus by 2026. And that is exactly the issue that you're referencing there, but that's more of a longer-term trend. It doesn't really make a massive difference from sort of quarter-to-quarter.

是的。只是一個額外的評論，這是尼克，在汽車方面的更長期的觀點。您可能還記得我們發布了一些數據，一些第三方數據，這些數據準確地討論了您在那裡提到的問題，即每輛車的 SoC 數量從 2020 年的 3% 到 4% 左右增長到20 左右，每輛車大約23 個，這是到2026 年L2+ 的情況。這正是您在那裡提到的問題，但這更像是一個長期趨勢。每個季度之間並沒有真正產生巨大的差異。

Our next question is from Mark Lipacis with Jefferies.

我們的下一個問題來自 Jefferies 的 Mark Lipacis。

I don't know for Charlie or Nick. You referenced higher compensation expenses. Is that just in new product development? And I guess, can you talk about how that -- if it's manifesting also in your customers' willingness or eagerness to reach to you guys to help potentially offset that same challenge that they may be having.

我不知道查理或尼克。您提到了更高的補償費用。這只是新產品開發嗎？我想，您能否談談這是如何實現的——是否也體現在您的客戶願意或渴望與你們聯繫，以幫助潛在地抵消他們可能面臨的同樣的挑戰。

So let me take the first half of that. I was going to -- let me take the first half, and then I'll pass over to Charlie for the sort of the more commercial and industrial sort of part of -- the second part of your question, Mark. So I mean, in general, you won't be surprised to hear that we're seeing primary and secondary inflation across, which is 75% of our OpEx roughly is people. And another significant portion is services and services is basically people. And that's happening in U.S., Europe and Asia Pacific, particularly China, and you know what the wage inflation rates are running out, they're pretty high. So we're trying to contain them as much as possible. But there is, without question, sort of upward pressure, which we're seeing. As far as the -- and by the way, it's not just R&D, it's the -- accountants pay more, lawyers have paid more, marketing people have paid more. And it's more difficult, you have to compete harder to get good people. As far as the willingness of our customers, a great question. Willingness of customers to do business with us and whether they want us to share the pain by some sort of cost reduction, I would guess that really as a straight down the wheelhouse. So Charlie?

讓我先講前半部分。我本來打算——讓我先講前半部分，然後我將把你的問題的第二部分的更商業和工業的部分交給查理，馬克。所以我的意思是，總的來說，當你聽到我們看到初級和次級通脹時，你不會感到驚訝，我們的運營支出大約有 75% 是人。另一個重要部分是服務，而服務基本上就是人。這種情況正在美國、歐洲和亞太地區發生，特別是中國，你知道工資通脹率已經達到了極限，它們相當高。所以我們正在努力盡可能地遏制它們。但毫無疑問，我們看到了某種上行壓力。就——順便說一句，這不僅僅是研發，而是——會計師支付更多，律師支付更多，營銷人員支付更多。而且這更困難，你必須更加努力地競爭才能找到優秀的人才。就我們客戶的意願而言，這是一個很好的問題。客戶是否願意與我們做生意，以及他們是否希望我們通過某種成本削減來分擔痛苦，我想這確實是一個直接的問題。那麼查理呢？

Yes. Yes, we're not seeing any -- I wouldn't say that we're seeing particular margin pressures on our product. Our products generate a lot of value. They save customers a lot of money. And so we're not seeing price pressure or margin pressure on our products at this time.

是的。是的，我們沒有看到任何——我不會說我們的產品面臨特殊的利潤壓力。我們的產品產生很多價值。他們為客戶節省了很多錢。因此，目前我們的產品並未面臨價格壓力或利潤壓力。

And I guess I was tackling this from the standpoint of -- it seemed to me like if your customers are seeing similar wage pressures than given the prices of your licenses that it actually may make it easier for your customers to make a decision, if they're in a make-or-buy decision, that they're seeing the wage pressures and labor shortages they may reach a few more often. And I was wondering if that was manifesting in your pipeline or not.

我想我是從這樣的角度來解決這個問題的——在我看來，如果您的客戶看到的工資壓力與您的許可證價格相似，那麼實際上可能會讓您的客戶更容易做出決定，如果他們正在做出自製或外購的決定，他們看到了工資壓力和勞動力短缺，他們可能會更頻繁地遇到這些問題。我想知道這是否在你的管道中體現出來。

Yes. I think that's absolutely correct. The fact that our customers are also having difficulty finding some (inaudible) labor and that labor is expensive for them as well. It basically means that automation is something that is going to get very good reception both near term, medium term and long term, so that it does expand the opportunity for Arteris IP product adoption versus internal solutions.

是的。我認為這是絕對正確的。事實上，我們的客戶也很難找到一些（聽不清）勞動力，而且勞動力對他們來說也很昂貴。這基本上意味著自動化在短期、中期和長期都會得到很好的接受，因此與內部解決方案相比，它確實擴大了 Arteris IP 產品採用的機會。

Our next question is from Hans Mosesmann with Rosenblatt Securities.

我們的下一個問題來自羅森布拉特證券公司的漢斯·摩西曼。

Congratulations guys. Good execution. Just a question on the royalty, the headwind. What end market is driving that? Is that wireless, if there is a headwind?

恭喜你們。執行力好。只是關於版稅和逆風的問題。是什麼終端市場推動了這一趨勢？如果有逆風，那是無線的嗎？

So yes, I mean, I don't know, Nick, if you want to take this or if you want me to take it. But basically, the smartphone royalties have been declining and the automotive royalties have been rising, right? So as sort of the automotive adoption takes place and more of the existing designs make it into cars and get shipped in volume, that will lead the rise of additional royalty revenues. So we think on a long-term basis, we feel pretty confident in our royalty stream as the automotive royalties takeover from the smartphone royalties. And ultimately, there will be some of the machine learning designs, which are quite numerous recently, will actually reach production and start generating volume.

所以，是的，我的意思是，我不知道，尼克，你是想接受這個還是想讓我接受。但基本上，智能手機特許權使用費一直在下降，而汽車特許權使用費一直在上升，對嗎？因此，隨著汽車的採用以及更多現有設計進入汽車並批量發貨，這將導致額外特許權使用費收入的增長。因此，我們認為，從長遠來看，隨著汽車特許權使用費取代智能手機特許權使用費，我們對我們的特許權使用費流非常有信心。最終，一些機器學習設計（最近數量相當多）將真正達到生產並開始批量生產。

Yes. I mean exactly, you said it right. There are other actually big rising stars in our royalty stream. One is consumer, interestingly. And the other is more sort of industrial, and those are sort of growing very nicely. The HiSilicon that we can actually put a name to it. On the mobility side, has still not declined to 0, but it's getting close, but it is a decline quarter-over-quarter over time. But for sure, automotive remains the mainstay and we're in 35-plus customers, 60-plus designs. And so we have a good spread there across all the different players, different layers, whether it be semiconductor or Tier 1s or OEMs. We have a good spread across all of the (inaudible) class, all the subverticals as well. So it's a nice position to be in, but we do have broad brush or broad-based royalty streams coming in from other sectors as well.

是的。我的意思是，你說得對。我們的版稅流中還有其他真正的後起之秀。有趣的是，其中之一是消費者。另一個是工業化的，而且這些增長得非常好。我們實際上可以給它起個名字的海思。在流動性方面，仍然沒有下降到 0，但已經接近於 0，但隨著時間的推移，它是逐季度下降的。但可以肯定的是，汽車仍然是中流砥柱，我們擁有 35 多個客戶、60 多個設計。因此，我們在所有不同的參與者、不同的層面上都有很好的分佈，無論是半導體、一級供應商還是原始設備製造商。我們在所有（聽不清）類別以及所有垂直行業都有很好的分佈。因此，這是一個很好的位置，但我們也確實有來自其他行業的廣泛的或基礎廣泛的特許權使用費流。

That's very helpful. And just as a follow-up question, on the BMW win, on the neural network accelerator project, can you comment on who was the competition in that project or projects that are similar to that? Are those in-house efforts? Or are there other players that are kind of coming out there that are challenging you guys with this IT?

這非常有幫助。作為一個後續問題，關於寶馬的勝利，關於神經網絡加速器項目，您能否評論一下該項目或類似項目的競爭對手是誰？這些是內部努力嗎？或者是否還有其他玩家正在用這個 IT 來挑戰你們？

Yes. I mean the -- we kind of have 2 classes of competitors. Obviously, one is [Arm] and I don't know if there is a competitor on this particular situation. And the other one is internal, right? But I think internal interconnect is becoming increasingly expensive and difficult to develop because of the shortage of interconnect engineers, right? So I think that our main challenge in these kinds of sales cycles is to prove out that we're suitable for the customers acquisition -- for applications for what they're really trying to do. And so that's really the main hurdle that we have to get over for these kinds of designs, but I don't think the competitive situation of Arteris, whether it's on the BMW deal or some other places is it's pretty favorable.

是的。我的意思是——我們有兩類競爭對手。顯然，其中一個是[Arm]，我不知道在這種特殊情況下是否有競爭對手。另一個是內部的，對嗎？但我認為由於互連工程師的短缺，內部互連變得越來越昂貴且難以開發，對吧？因此，我認為我們在此類銷售週期中的主要挑戰是證明我們適合獲取客戶——適合他們真正想做的事情的應用程序。因此，這確實是我們必須克服此類設計的主要障礙，但我認為 Arteris 的競爭狀況，無論是在寶馬交易還是其他一些地方，都不是相當有利。

Our next question is from Ambrish Srivastava with BMO.

我們的下一個問題來自 BMO 的 Ambrish Srivastava。

I had a question on -- Nick, you mentioned seasonality for ACV and TTM royalties. Could you just explain how we should be thinking about it on a go-forward basis? And then the second kind of related question. You talked about China deals moving from end of quarter to the other, is that largely because of the shutdowns, that very well-publicized shutdowns in China? Or is there something else going on there? And then I had a very quick follow-up after that, Nick, sorry.

我有一個問題 - 尼克，您提到了 ACV 和 TTM 版稅的季節性。您能否解釋一下我們應該如何在未來的基礎上考慮這個問題？然後是第二類相關問題。您談到中國的交易從季度末轉移到另一個季度，這主要是因為停工，中國廣為人知的停工嗎？或者還有其他事情發生嗎？然後我很快就跟進了，尼克，抱歉。

Well, Ambrish, great to speak with you again. I hope you well. But yes, in terms of the China situation -- or I'll take the -- I'll take them in order. So the seasonality question first. Generally speaking, as you -- as I think you know, the ACV plus TTMR is kind of designed to be something which is relatively steady. It doesn't move around such as sort of point-in-time revenue does and that's part of the reason we adopted it as one of our metrics. It does, however, it can suffer from deals -- large licenses shifting from being signed and actually the software delivered by the end of -- like the last week of a quarter or the first week of the second quarter. And that's usually outside of our control, in fact, it's totally outside of our control because it's -- we're customer-driven. They ask for it on day X, then we provide on day X. If they ask it on a day Y, then it goes on day Y. So the seasonality is still fairly steady. It's always ACV plus TTMR. It always gets a bit of a boost in Q4 because it's a quarter when we have a particularly strong set of bookings. But of course, they get spread over the subsequent years, depending on the contract.

嗯，安布里什，很高興再次與你交談。我希望你一切都好。但是，是的，就中國的情況而言——或者我會採取——我會按順序處理它們。首先是季節性問題。一般來說，正如您所知道的那樣，ACV 加 TTMR 的設計目的是相對穩定的。它不會像時間點收入那樣移動，這也是我們採用它作為指標之一的部分原因。然而，它確實可能會受到交易的影響——大量許可證從簽署到實際交付的軟件在年底前交付——比如一個季度的最後一周或第二季度的第一周。這通常是我們無法控制的，事實上，它完全超出了我們的控制範圍，因為我們是客戶驅動的。他們在 X 天要求，然後我們在 X 天提供。如果他們在 Y 天要求，那麼我們在 Y 天提供。所以季節性仍然相當穩定。始終是 ACV 加 TTMR。第四季度的銷量總是會有所提升，因為在這個季度我們的預訂量特別強勁。但當然，根據合同，它們會在接下來的幾年中分散。

The China question is slightly unique. And yes, it is totally a COVID issue because the epicenter of our customers. There's also the epicenter of the COVID shutdown and that has been quite severe. The reaction by the Chinese authorities to this is they really want to stamp it out, and you probably know it's quite difficult for people to get to work and collaborate and what have you. So we have no doubt that those deals have not gone away. They're just maybe taking -- there are literally situations where people cannot get to offices to put their chop on our license. It's as basic as that because in China, the chop is everything you should probably know if you follow of the Arm situation. So anyway, that's what's really moving China around.

中國問題有點獨特。是的，這完全是一個新冠病毒問題，因為這是我們客戶的中心。這裡也是新冠疫情封鎖的中心，情況相當嚴重。中國當局對此的反應是他們真的想消滅它，你可能知道人們很難去工作和合作等等。因此，我們毫不懷疑這些交易並沒有消失。他們只是可能會拿走——確實存在人們無法前往辦公室在我們的執照上蓋章的情況。這是很基本的，因為在中國，如果你關注 Arm 的情況，你可能應該知道的一切。所以無論如何，這才是真正推動中國發展的因素。

And the other to just sort of to add a lot -- some color to the color. The revenue, of course, is much more smooth. The GAAP revenue is much more smooth when it's an interconnect sale because that's spread evenly over the number of days in the license. So if it's 3 years, it'd be 3 times 365 days spread. So you automatically get that. So it doesn't have the same sort of lumps unless it's a point-in-time revenue, which is more of an IPD software deal. Sorry, you have another question.

另一個只是添加很多東西——為顏色添加一些顏色。收入當然就順暢多了。當進行互連銷售時，GAAP 收入要平穩得多，因為它均勻分佈在許可證的天數內。所以如果是 3 年，那就是 365 天的 3 倍。所以你會自動得到它。因此，除非是時間點收入（更多的是 IPD 軟件交易），否則它不會出現同樣的情況。抱歉，您還有一個問題。

Yes. Actually, just -- and I'm glad you answered that because the seasonality comment did surprise me because the whole reason which made sense to not focus on bookings and go to ACV and TTMR because bookings do tend to be lumpy. But your explanation makes sense. We should be thinking of it more as a 4Q seasonality then through the course of the year, correct? Is that (inaudible)?

是的。事實上，我很高興你回答了這個問題，因為季節性評論確實讓我感到驚訝，因為不關注預訂而轉向 ACV 和 TTMR 的整個原因是有意義的，因為預訂確實往往是不穩定的。但你的解釋很有道理。我們應該將其更多地視為第四季度的季節性，而不是全年的季節性，對嗎？那是（聽不清）嗎？

Correct. It's exactly right. Exactly right.

正確的。這是完全正確的。非常正確。

Got it. Okay. And then my quick follow-up was the royalty revenues would be -- are being impacted by the supply chain being gummed up. But do you feel pretty comfortable with the annual guide that it should be -- I mean it's a small number, but do feel pretty comfortable that, that situation should be alleviated by then?

知道了。好的。然後我快速跟進的是，特許權使用費收入將受到供應鏈混亂的影響。但是你對年度指南感到滿意嗎——我的意思是這個數字很小，但是到那時這種情況應該會得到緩解嗎？

Yes. I mean we're not putting ourselves out of experts on the silicon supply chain. There are much, much smarter people than me to give that sort of analysis. But the general sense, we do follow what's going on and we speak to our customers and the foundries. And our sense, generally, is it's probably a 2023 solution to get that completely ungummed. But we are still -- we're still signing contracts. All the interconnect contracts still have royalties. The royalty rates are generally sort of strong to increasing. So there's nothing changing in our model from that perspective. The only variable right now is the units out from our customers, which is -- I mean, actually, if you look at the first quarter, it was pretty strong. But we're a little cautious on how that's going to play out in the next couple of quarters for those (inaudible).

是的。我的意思是，我們並沒有把自己排除在矽供應鏈專家之外。有很多比我聰明得多的人可以做出這樣的分析。但一般來說，我們確實關注正在發生的事情，並與我們的客戶和鑄造廠交談。總體而言，我們的感覺是，這可能是 2023 年的解決方案，可以徹底解決這個問題。但我們仍然——我們仍然在簽署合同。所有互連合同仍然有特許權使用費。特許權使用費通常呈強勁增長趨勢。因此，從這個角度來看，我們的模型沒有任何變化。現在唯一的變量是我們客戶的出貨量，我的意思是，實際上，如果你看看第一季度，就會發現它相當強勁。但我們對未來幾個季度的情況持謹慎態度（聽不清）。

(Operator Instructions) Our next question is from Auguste Richard with Northland.

（操作員說明）我們的下一個問題來自 Northland 的 Auguste Richard。

Yes. I'm seeing Qualcomm make good progress in getting in the automotive market, and I know they have their own network on a chip IP. And I'm just wondering is Qualcomm displacing any of the OEM designs that you would expect or having any other impact on any of the design activity that you're working on?

是的。我看到高通在進入汽車市場方面取得了良好進展，而且我知道他們擁有自己的片上網絡 IP。我只是想知道高通是否會取代您所期望的任何 OEM 設計，或者對您正在進行的任何設計活動產生任何其他影響？

Yes. I mean Qualcomm is a very nimble organization with their internal network on chip technology. So they're definitely a worthy competitor in the automotive market. But as Nick mentioned, our projections is that there's going to be 20, 23 SoCs in every car as the electrification and the automated driving and these 2 consolidation unfold. And so Qualcomm is going to capture some of those, but the existing players such as Mobileye, NXP, Bosch and others will be able to defend their turf. And so Qualcomm will take their share, but they're unlikely to drive other players out of the market at least in the foreseeable future, right? So they'll get their share. But I think the impact on our tariffs is probably not going to be major given how many SoCs there are per vehicle.

是的。我的意思是高通是一個非常靈活的組織，擁有內部芯片網絡技術。因此，他們絕對是汽車市場上值得競爭的競爭對手。但正如 Nick 提到的，我們的預測是，隨著電氣化和自動駕駛以及這兩個整合的展開，每輛車中將有 20、23 個 SoC。因此，高通將佔領其中一些市場，但 Mobileye、NXP、博世等現有參與者將能夠捍衛自己的地盤。因此，高通將佔據他們的份額，但至少在可預見的未來，他們不太可能將其他參與者趕出市場，對吧？所以他們會得到他們的份額。但我認為，考慮到每輛車有多少個 SoC，對我們關稅的影響可能不會很大。

Got it. That's very helpful. And then turning to China, there's the Arm situation, which I'm curious if that's impacting potential customers in China in terms of their choice of interconnect. And also as China pulls away from the U.S. and going to self-sufficiency, are there any EDA players rising there that could be a challenge and/or it's too early to know about sanctions, but any thoughts along sort of those dynamics?

知道了。這非常有幫助。然後轉向中國，Arm 的情況，我很好奇這是否會影響中國潛在客戶對互連的選擇。此外，隨著中國脫離美國並走向自給自足，是否有任何 EDA 參與者崛起，這可能是一個挑戰和/或現在了解制裁還為時過早，但對這些動態有什麼想法嗎？

Yes. So I mean, -- we're not -- I would not classify our tariffs as the EDA company. I mean, we're a semiconductor IP company. The technology that we have is quite complex, and we're not seeing any alternatives in the market that would be indigenously coming from the China market. So we're continuing to see a robust activity in China with the caveat that Nick mentioned, which is customers, particularly in Shanghai, can get access to their chops to validate some contracts. But that's a temporary effect. So we're not seeing anything right now that will be coming from China that will be threatening the Arteris IP position in the system IP space.

是的。所以我的意思是，我們不會將我們的關稅歸類為 EDA 公司。我的意思是，我們是一家半導體 IP 公司。我們擁有的技術相當複雜，而且我們在市場上沒有看到任何來自中國市場的替代品。因此，我們繼續看到中國的強勁活動，但尼克提到的警告是，客戶，特別是上海的客戶，可以使用他們的印章來驗證一些合同。但這只是暫時的影響。因此，我們目前沒有看到任何來自中國的產品會威脅到 Arteris IP 在系統 IP 領域的地位。

Got it. Helpful. And sorry for mischaracterizing your business.

知道了。有幫助。對於錯誤描述您的業務，我們深表歉意。

Oh, yes. Yes. I mean -- we're -- we have lots of software that allow people to make our IP work. But the value over their get is actually from us helping them get the chip out and actually being in the chip and being the communication part or IP being a communication part of the chip.

哦是的。是的。我的意思是——我們——我們有很多軟件可以讓人們讓我們的知識產權發揮作用。但他們獲得的價值實際上來自於我們幫助他們將芯片取出並實際放入芯片中並成為通信部分或 IP 成為芯片的通信部分。

Thank you. Ladies and gentlemen, we have reached the end of the question-and-answer session. And I would like to turn the call back to Charlie Janac for closing remarks.

謝謝。女士們、先生們，問答環節已經結束。我想將電話轉回給查理·賈納克（Charlie Janac），讓他發表結束語。

Yes. So this is an exciting time to be at Arteris IP, and we look forward to continuing our momentum in the years ahead, and updating all of you in the quarters to come. Thank you for joining our call today and for your interest in our Arteris IP. Thank you very much.

是的。因此，對於 Arteris IP 來說，這是一個激動人心的時刻，我們期待在未來幾年繼續保持我們的勢頭，並在未來幾個季度向大家通報最新情況。感謝您今天加入我們的電話會議以及對我們的 Arteris IP 的興趣。非常感謝。

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

謝謝。今天的會議到此結束。此時您可以斷開線路。感謝您的參與。