CEVA Inc (CEVA) 2016 Q2 法說會逐字稿

Good day, and welcome to the CEVA Inc second quarter 2016 earnings conference call. (Operator Instructions). Please note, this event is being recorded. I would now like to turn the conference over to Richard Kingston, Vice President, Market Intelligence and Investor and Public Relations. Please go ahead.

Thank you, and good morning, everyone. Welcome to CEVA's second quarter 2016 earnings conference call. I am joined today by Gideon Wertheizer, Chief Executive Officer of CEVA, and Yaniv Arieli, Chief Financial Officer of CEVA.

Gideon will cover the business aspects and the highlights for the quarter and general qualitative data. Yaniv will then cover the results for the second quarter and provide guidance for the third quarter of 2016. I will start with the forward-looking statements.

Today's conference call contains forward-looking statements that involve risks and uncertainties as well as assumptions that, if they materialize or prove incorrect, could cause the results of CEVA to differ materially from those expressed or implied by such forward-looking statements and assumptions.

Forward-looking statements include our financial guidance for the third quarter of 2016; optimism about the licensing pipeline; the drivers of our business and our ability to capitalize on emerging market opportunities, including Bluetooth 5, machine vision, and deep learning technologies, wireless connectivity, LTE, and 5G.

The risks, uncertainties, and assumptions include the ability of the CEVA signal processing IPs to continue to be strong growth drivers for us; our success in penetrating new markets, specifically non-baseline markets, and maintaining our market position in existing markets; the ability of new products incorporating our technologies to achieve market acceptance; the speed and extent of the expansion of the 3G, LTE, and 5G networks, Bluetooth 5, and the IoT space; the effect of intense industry competition and consolidation; global chip market trends; and general market conditions and other risks relating to our business including, but not limited to, those that are described from time to time in our SEC filings.

CEVA assumes no obligation to update any forward-looking statements or information which speak as of their respective dates. With that said, I would now like to turn the call over to Gideon.

Thank you, Richard, and welcome, everyone. Before going through the highlights for the quarter, I would like to draw your attention to a development that will have a positive impact on our financial guidance for the remainder of 2016.

As you have witnessed from the first half of 2016 and based on the initial [relative] reports we've received for the third quarter, we are now experiencing royalty trajectory that exceeds our initial expectations and, as such, are raising our full-year gross range for royalties. Yaniv will elaborate more on this when he reviews the financial results for the quarter later on.

Turning back to our second quarter results, we are very pleased to report another robust quarter with all-time record high revenues derived from strong growth in royalties and solid execution in licensing.

Total revenue came at a record high $17.1 million, up 28% year over year. Royalty revenue came at $9.6 million, up 69% year over year, primarily as a result of strong LTE unit shipment, which grew more than 400% year over year to reach a record quarterly shipment total of 56 million units.

Licensing and related revenue came at $7.5 million on the back of good licensing demand for our Bluetooth IP as customer-expedited product design based on the next-generation Bluetooth 5 standard.

We also ended the quarter with stronger-than-normal licensing pipeline due to a number of comprehensive agreements with key customers that are in process. These agreements involve broad access to our entire technology portfolio and customization of certain technologies for their product lines.

We perceive this new engagement as an acknowledgment to our unique technology portfolio in addressing some of the most exciting areas of growth in the semiconductor industry and as an opportunity to solidify long-term collaborative relationships with key industry players.

During the second quarter, we concluded 10 new licensing deals, four of which were for CEVADSP cores and platform and six for connectivity products. Of the deals signed, three were with first-time customers, and all were for non-handset baseband, include a first-time customer intending to use our vision solution for a virtual reality product, 5G base stations, Bluetooth low energy for IoT, including the upcoming Bluetooth 5 standard, voice processors, and storage drives.

Geographically, four of the deals signed were in the US, four in the APAC region, and two in Europe.

The second quarter achievement in licensing emphasizes four key market drivers that we are capitalizing on. First, the demand for very sophisticated baseband ASPs and platforms, technologies for handset and base station as the (inaudible) industry is looking for increased data rate and overall capacity as part of LTE-Advanced Pro and 5G standard.

Second, the proliferation of connected devices enabled by short-range wireless connectivity, such as Bluetooth and Wi-Fi, along with the emergence of voice as the primarily -- as primary user interface within these devices.

Third, the growing number of products and applications that are centered around embedded vision and machine learning.

Fourth, the expedited and [BTF] deployment of cellular machine to machine on the heels of the 3GPP finalizing the specs for ultralow-power LTE for the Internet of Things. Ericsson predicts in its latest mobility report that IoT will overtake mobile phones as the largest category of cellular connected devices by 2018.

These four big industry drivers are the foundation for our product portfolio strategy and will lead to new royalty streams in the mid and long term. Our recent achievement in licensing as well as ongoing customer discussion give us high confidence in our ability to capitalize on these opportunities and in our long-term growth prospects.

As I mentioned, we are seeing industry-wide demand for connectivity IP and in particular the new Bluetooth standard, Bluetooth 5, which was formally announced by the SIG in late June.

Bluetooth 5 offers substantial features enhancement versus its predecessor Bluetooth 4.2, including higher date rates of 2 megabit per second and longer range of up to 300 meters. It extends the Bluetooth market reach from devices like smartphones and PCs to the Internet of Things, where it will be used for the smart home, connected home, networking, automotive, and more.

We have already signed five customers that are early adopters for the Bluetooth 5 technology. We have never had that many early adopters for technology that is yet to be ratified.

In vision, the potential of machine learning and deep neural networks were the highlights in all recent events conducted by Google, Amazon, Facebook, Apple, Microsoft, Baidu, and others. The data provided at the recent Code Conference, half of the Internet searches in 2020 will come from image and voice.

In conjunction with this, much more intelligence will be required at the edge of the network in devices such as smartphone surveillance camera, autonomous car, VR and AR devices, robots, and more. This is where we see CEVA benefiting and leveraging its competency in computer vision and machine learning.

A few weeks ago, we announced our second-generation software framework for the deep network called CDNN2. CDNN2 essentially frees up the customer from the burden of embedded software programming on the vision processor. It therefore allows customers, partners, researchers, and even students to integrate deep network-based applications in the Cloud and seamlessly get the outright use of it on products based on CEVA vision processor.

In the second quarter, we signed a first-time customer, a widely known player in the imaging space that uses our vision ASP and deep learning software for a chip to power virtual reality products.

On royalties, we continue to gain share in the LTE space. According to the latest market data from market research firm Strategy Analytics, our market share in LTE is 19% in Q1 2016 compared to just 5% a year earlier.

LTE is the primary reason for the huge year-over-year royalty revenue growth of 69%. Moreover, this momentum more than offset the traditional seasonal weakness we normally experience in Q1 royalties, which are based on the post-holiday season Q1 shipment. For the first time in numbers of year, we recorded a sequential increase in royalties of 23%.

Also, in other segment of the cellular space, we continue to maintain high market share. In 2G, we power about two-thirds of the market. And in 3G, our market share has grown to 39% based on Q1 shipments.

We aim to continue to capitalize on LTE smartphone shipments where we are consistently gaining market share and growing unit shipment and where we benefit from higher royalty ASP than we get from 2G, feature phone, and 3G smartphones.

Looking ahead, as the Internet becomes increasingly wireless, we are experiencing greater diversity of product and supplier that take advantage of LTE and 5G to connect to the Internet. This includes products like car, wearables, security and surveillance camera, drones and smart [city] infrastructure.

We continue to invest in new technologies addressing this space and plan to introduce new products in the coming months that will be specifically designed to cover LTE IoT space.

So, in summary, our good traction in LTE smartphone in 2016 compared to prior years and our diversified product line targeting intelligent and connected devices provide us solid foundation for prolonged growth.

I am very pleased by the resilience of our financial model this year, despite the known market challenges and the maturity of the smartphone space. We will continue to innovate and work closely with our customers, our mutual success as the industry expands to new classes of products and services.

With that said, let me turn the call over to Yaniv to discuss our financials and guidance.

Thank you, Gideon. I will start by reviewing the results of operations for the second quarter of 2016. Revenue for the second quarter was $17.1 million, an all-time record high. This was 28% higher on a yearly basis and the second consecutive quarter that we have reached the milestone of all-time record high revenues.

The revenue breakdown is as follows. Licensing and related revenue was $7.5 million, reflecting 44% of our total revenue, 3% lower as compared to the comparable quarter of 2015.

Royalty revenue was $9.6 million, reflecting 56% of our total revenue, an impressive increase of 69% on a year-over-year basis. And this would be the sixth successful quarter that we delivered year-over-year royalty growth.

Quarterly gross margins were 92% on both US GAAP and non-GAAP basis. The non-GAAP basis excludes approximately $53,000 of equity-based compensation expenses.

Our total operating expenses for the quarter were flat as compared to the first quarter at $13.1 million, below the midrange of our guidance. OpEx also includes an aggregated equity-based compensation expense of approximately $1.6 million and $0.3 million for the amortization of acquired intangibles of RivieraWaves.

Our total OpEx for the second quarter, excluding these two items, were $11.2 million, also below the midrange of our guidance and slightly lower than the first quarter.

US GAAP net income for the quarter increased 16-fold from $0.2 million to $2.7 million in the second quarters of 2015 and 2016, respectively. Diluted EPS increased 13-fold from $0.01 to $0.13 for the same periods.

Non-GAAP net income and diluted EPS for the second quarter of 2016 increased 263% and 250% year over year to reach $4.6 million and $0.21 per share, respectively. Non-GAAP net income and diluted EPS for the second quarter of 2015 were $1.3 million and $0.06, respectively.

These figures for the second quarters of 2016 and 2015 exclude equity-based compensation expenses of $1.6 million and $0.8 million, respectively, and the impact of the amortization of acquired intangibles of RivieraWaves of $0.3 million for both years.

Other related data: shipped units by CEVA licensees during the second quarter were 225 million units, down 2% sequentially, but up 9% from the second quarter shipments of 2015. Of the 225 million units shipped, 191 million units, or 85% of the volume, were for baseband chips, reflecting a sequential increase of 4% from 185 million basebands shipped last quarter and 14% increase from 167 million basebands shipped a year ago.

In non-baseband, volume shipments decreased 26% sequentially and 12% year over year. The decrease can be attributed to an industry-wide decline in Bluetooth shipments in Q1, which was partly offset by increase in shipments of always-on processors in smartphones and wearables.

The quarterly handset baseband royalty ASP continues to increase. It was up 18% sequentially and 53% on a year-over-year basis due to the growing product mix of LTE devices. Our overall corporate blend royalty ASP increased 26% sequentially and 54% on a year-over-year basis.

As for the balance sheet items, as of the end of June, our cash, cash equivalent balances, marketable securities, and bank deposits were approximately $138 million.

Our DSOs for the second quarter was 57 days, back to normal levels, up from the first quarter of lower-than-normal levels of 37 days.

This last quarter, we used $1.5 million of net cash in operations. Depreciation and fixed assets were $0.3 million each. And at the end of June, our headcount was 273 people, of which 216 were engineers.

Now, for the guidance, as Gideon noted earlier, we continued to benefit from good momentum in the smartphone market and expect further expansion as the smartphone space gets ready for the holiday season with ramps of new flagships and SKUs.

In non-baseband shipments, we expect a new record high in terms of unit volume for the year. And as such, we are raising our full-year guidance from an earlier range of 20% to 40% growth in royalties to a higher range of 35% to 45% growth in 2016.

Our guidance for the third quarter of 2016 is as follows. Revenue for the third quarter is expected to be in the range of $17.2 million to $18.2 million. This is the highest quarterly revenue guidance in the Company's history. Gross margin is expected to be approximately 92% on both GAAP and non-GAAP basis.

Overall expenses should be quite similar to the expense levels we recorded in the first two quarters of the year. US GAAP operating expenses are expected to be in the range of $12.5 million to $13.5 million.

Of the anticipated total OpEx for the third quarter, $1.6 million is expected to be attributed to equity-based compensation expenses, and $0.3 million to the amortization of acquired intangibles.

So, our non-GAAP OpEx is expected to be in the range of $10.6 million to $11.6 million. Net interest income is expected to be approximately $0.5 million, tax rate for the quarter on a non-GAAP approximately 13%, and the share count for the third quarter expected to be approximately 22.2 million shares.

US GAAP fully diluted EPS is expected to be in the range of $0.14 to $0.16 per share. And our non-GAAP EPS, excluding the aggregate compensation expenses of $1.7 million and $0.3 million for the amortization of expenses, is expected to be in the range of $0.21 to $0.23 per share.

Andrew, you may now open the floor for Q&A session, please.

(Operator Instructions). Joseph Wolf, Barclays Capital.

Thank you. I had a couple of questions. On the licensing side, there were no handset deals. But, then, Gideon, you referenced some large engagements that you're expecting in the second half of the year. Are those for the handset business, or is there a refresh cycle going on in the handset business, or is most of the licensing in the second half going to continue to come from the non-handset side of the business?

Hi, Joseph. Thanks for the question because we -- usually, we don't refer or elaborate in any color about the pipeline. But, the reason we mention is it's a unique situation that we are -- as you know, in the last few years, we become more and more specialized in our product line, including the handsets, which we -- is our bread and butter, but went vertically to more software and system architecture and modem architecture.

Now, same goes to the vision. Same goes to the connectivity, which we offer total solutions. And so, it looks like customers acknowledge this specific specialization. And they are coming to us with suggestions to have a more, I would say, exclusive relationship, not in terms of -- not allowing this product to be licensed to other, but go customizations and, in some cases, offering a portfolio arrangement.

So, this kind of -- these are prospective customers. It's in process. One of them, by the way, was closed very late. And I refer to it in my prepared remarks. It's for 5G base stations. So, these are in work. And we are going to conclude and exclude also handset baseband type of application because the market is going into now to 5G.

So, overall, it's a unique situation. It's in process. It's in work. But, we are very happy of these kinds of suggestions because it solidifies the relationship that we have with customers. And these are all [amid] customers in the space.

Okay. On the LTE side, which has been strong, I'm assuming you expect that to continue. Could you give us a geographic spread of that business right now, where you see strength, and how you see that continuing into the second half, based on what you're seeing right now?

Well, in the LTE space in particular, it's known that the active areas are in the low-midrange type of phones. And this is in China, where there is strong drive by operators to subsidies to convert people from 3G to LTE and to go to a more powerful LTE form; and India, where LTE penetration now is just 1%.

So, these are the areas that we see activities and where we see unit growth. Keep in mind also that CEVA is not just in this space. We are extending also in the flagship models. And our appearance is all around the areas in the flagship models, more like penetration and market -- and expanding market share and the low-midrange. It's just [enhance that carrier]. And we see a lot of unit growth there.

All right. Perfect. I will let other people ask some questions. Thank you.

Thanks, Joseph.

Matt Ramsay, Canaccord Genuity.

Thank you very much for taking my questions. I have a couple. I guess, Gideon, the guidance for Q3, and obviously raising the full expectations for the year, there's a lot of moving parts within the LTE market right now. Obviously, this quarter that you're guiding to will be the first quarter that reflects I guess the redistribution of share at Samsung with Qualcomm getting back in there for the S7 and looks like for the Note as well.

But, given you guys are raising the outlook for the full year, it would suggest to me that there's some strength that you're going to see in LTE numbers outside of Samsung in particular for the fourth quarter. Maybe you could talk about some of the ramps there potentially. I don't know if that's at Xiaomi or at other guys in China that are going to be -- and with Spreadtrum ramping as well, it seems like there's an inflection coming in the non-Samsung business in the fourth quarter and going into next year.

Hi, Matt. So, this is Yaniv. I'll try to add onto what Gideon talked about a minute or two ago with the LTE penetration that we're after. If you look back to last year, we powered about 70 million LTE phones at the time. And this took us a few years to get there. And of course, we started small with less customers shipping products. And the engine started. As we went throughout the year and started this year, we are seeing more and more players and not just necessarily Samsung kick in and start pushing their LTE designs in mass production.

So, one thing that is completely different this year, and this is the guidance of almost three times the volume from last year, is that we have more players. It's not only Samsung. It's coming from Spreadtrum. It's coming from Leadcore. It's coming from Intel. It's coming from a bunch of our existing customers that had these products for a while but couldn't get into mass production. And today, they are much more successful on that.

So, I think that's one strong element to mention. And the way we see the LTE today is more of a structural growth going forward and not necessarily seasonal and not necessarily one quarter differs from the other. It's a lot about the timing and of new SKUs. It's about the timing of product management and different OEMs and chip vendors there.

So, it's a mix. But, I think, if you put it all together, that gives us the confidence on some new models that will be introduced close to the holiday season. Some will have effect this year, in Q4, for example. Some will already have effect in 2017. But, I think, to answer your question, it's the variety of all of these factors, not just the market, but also the players that are pushing those LTE sockets into phones, that are helping us to increase the guidance and be optimistic about future growth in LTE for us.

Gotcha. Gotcha. No, that -- thank you. And that's really helpful perspective. I think it's good to see the new growth engine there and the baseband side diversifying. If we flip over to the non-baseband business, I think you talked about in the prepared remarks a bit of an inventory correction industry wide in the Bluetooth space and still being up for the year in non-baseband units. Maybe you could talk about that dynamic a little bit.

And then secondly, from some work we've done on the opportunity for base station, to me, it seems like a pretty large potential for you guys, maybe not huge in terms of units, but from some work we've done, that could be $5 million, $10 million long term in royalties for the Company on an annual basis. And I just wanted to know how that business was progressing and what kind of visibility you see to win that, get -- start to deliver some real royalty to the Company in terms of revenue. Thank you.

Yes, hi, Matt. It's Gideon. So, let me address your two questions one by one. When it comes to non-handset baseband application and [status], as you know, this is composed of variety of products and markets that should be as a result of deals that we signed in the last, I would say, two years.

So, at this stage, I think what we put a focus, and this is the reason that we mentioned units, is to see that we are progressing in terms of units. We are monitoring it by royalty reports. We are monitoring customers' progress specifically. So, in summary, this progresses according to our expectations. The fact that we're going to have another or expect to have another record year in units, it's according to our expectation, and that makes us satisfied [with] the situation.

Base station, indeed, as you mentioned, it's a lucrative space. The timeline, it's different. But, we expect noticeable royalties coming today. It could be more towards the end of 2017, early 2018, but it's moving. We are working closely with the two key customers that we have there. And they are -- one thing that I want to mention -- maybe, Yaniv, you can take it?

Yes, one more thing I wanted to add to Gideon's earlier comment is that we expect -- and I think we mentioned that in the prepared remarks. We expect Q3 to bounce back with the Bluetooth volume especially, but all the non-baseband, to a new record high. Probably, we didn't get all the royalty reports. We're probably looking at about 60 million devices next quarter. So, that's going to be the highest. And that's yet before the seasonal strong quarter of Q3, which we report in Q4, the pre-holiday type of ramp up. Thanks.

No, thank you, guys. I think that does it for my questions. I'll get back in the queue. That color was really helpful. Thank you.

Gary Mobley, The Benchmark Company.

Hi, guys. Let me extend my congratulations on another solid quarter and some good execution over the past couple years. Wanted to start with a question about your ASPs, specifically on 4G/LTE royalty units.

If my math is correct, it looks like you might've actually had a boost in your average 4G/LTE royalty rate. And I was wondering if I'm correct in that assumption. And if so, was it the diversity of the royalty contributors that drove the increase?

Yes, so, I think -- morning, first, and thanks for the kind words. If you look at the overall ASP of the Company, it is very high this last quarter and a great achievement. I wanted to take into consideration that it does have less on handsets, like Bluetooth, because of the seasonality we just talked about and much more LTE units. And then the overall ASP, of course, improves just mathematically.

I think we've always said that the ASP is not a target for us. But, it's a nice thing to grow if you can. But, the mix was due this quarter because of much, much higher volume in LTE, which has the higher royalty rates. I think, for the first time, the information we got from Richard and the infographics, it shows the first time in our history that smartphone shipments last quarter were higher than feature phones. It's not by far, but I think we're talking about 102 million versus 98 million. The 98 million is still 100 million a quarter, which are -- we're powering feature phones.

So, as soon as these guys, whether some of it or completely all of it, a year or two timeframe, will move to smartphones, we could double or maybe even triple that royalty contents to these 100-ish million units a quarter. And that's going to continue to improve the overall ASP. So, I don't think anything special happened in LTE other than just product mix and then what I just explained.

Okay. Extending the question, I guess there's been some speculation that one of your licensees might get some traction with its CEVA-based thin modem in a flagship smartphone. And so, I'm not asking you for confirmation on that front. You probably don't even know if it's true or not. But, can you tell me if there's a notable royalty rate per unit difference between a thin modem versus one that's integrated?

Not sure if we could go into that much specific details about the specific customer. I think we'll all wait and see and see how this progresses. We usually don't try or try not to guess before one gets into production with a specific SKU or a flagship model. As soon as it happens, we'll have more color and could look at the royalty contribution if that happens and give a little bit more color.

It's a bit premature. For now, I think the right way to look at it is just the whole basket of LTE devices versus the 2G devices or Internet of Things device. And we think that's easier to model and to comment on at this point of time.

Okay. Fair enough. Thanks, Yaniv. I did -- one additional follow-up question. In your prepared remarks, you talked about a few comprehensive deals in the pipeline. And it sounds a lot like a subscription license agreement in the way perhaps ARM Holdings bundles its intellectual property.

Am I thinking about that correctly? And could you be entering an era in which you are recognizing license engagements over a prolonged subscription period?

Let me try to help you. First of all, as Gideon said, it's not done yet. It's an idea, or it's a deal that is in the works. I don't think, from the revenue recognition, it's going to be a model of a subscription. But, it is going to have the same idea, as Gideon explained, that that specific customer, there may be more in the future, will have a much more flexible capability to choose different technologies for different markets or different product cycles for them and not come back on each special deal, standalone deal, that'll have the variety of [back or IT] that they could use.

So, it has some type of -- that idea behind the subscription with much more flexibility to use our IP. But, we're not going to recognize the revenue based on that, but based on actual usage of the different technologies that they will take over time.

All right. That's it for me. Thanks, guys.

Matt Robison, Wunderlich Securities.

All right. Thanks. Nice quarter. Gideon, I was hoping you could maybe talk a little bit about vision. And I guess there's two areas that I'm curious if you can kind of characterize the licensing you've done and the mix of applications between ADAS, specifically automotive, and other types of vision usage.

And then since there's been a bit of controversy on the topic on the automotive side, how do you see things unfolding with new entrants, especially on the sensor processor portion, with licensees and the timeframe you think you might see some of these guys getting in the market, where they are in terms of whether they're tier one or more traditional semiconductor licensees or something else?

Hi, Matt. First of all, when it comes to vision, the way I see it is the educated -- vision, it's a relatively new market or new -- relatively new use case in the industry overall. So, so far, the most educated market to use vision processor like we offer and the basket of things that we offer there is surveillance. Surveillance is a big market. It's around the world, security cameras, surveillance cameras, either at home or enterprises looking to put intelligence into this camera.

Coming next is smartphone. Today, only Qualcomm has a processor that do vision. But, others are still using also other, I would say, bypasses. But, they are getting into things. Application like the Google AR and -- what's the name of the game -- Pokemon GO, these are the things that show how to use vision, how you can take advantage of the camera in the smartphones.

We believe the next in line in terms of adopting vision and the already licensed technologies are in the smartphone. And that's good because we speak here on huge amount of volume and a lucrative space.

On top of it, you have a market that are less in sizes. But, still, when you accumulate them, they become sizable, virtual reality sales, action cameras, robots down the line, and things like this. Now, when it comes about, it's definitely vision is part of the ADAS space. Autonomous car will have to have multiple cameras, no doubt about it. They are more advanced in adopting deep network and computer vision in general.

With that said, it's a market that has its different timelines. And what we are doing in this space is that we have a plan, action plan, that we're following. And we have tier-one customers that we are discussing. And we have sensor guys that we are evaluating and informing. And we have the few deals that we've signed so far. And there are a few things that are in the short term and other.

If you summarize the perception that people have about our technology, ADAS, it's the right technology. It's a viable technology. And we are basically today the only viable alternative other than MobileEye, which comes with their own chip and software, and it's [close]. So, overall, when it comes to ADAS, we have to adhere to the timeline and the milestone, the vehicular (inaudible), but we are -- I think we are in the right track.

Thanks, Gideon.

David O'Connor, Exane.

Great. Thanks for taking my question, guy. Question from my side, we're hearing some chatter on China telcos that they may begin to push LTE Cat-7 maybe in the latter half of this year. Just wondering, how well do you see your -- you guys positioned in China if the market begins to shift from, say, an LTE Cat-4 to kind of Cat-7? That's my first question.

Second question, again, on the significant licensing opportunity you mentioned in your prepared remarks, what type of applications are we seeing there, so second question?

And the last question is on the -- you mentioned 5G license for base station. Is this a new customer? And how does it tie in, or is it different to your existing to kind of base station customer? Thanks.

Okay. So, let me address one by one. When it comes to Cat-7 LTE, all our customers offer this one. So, I don't see any stumbling issue there when it comes to Cat-7. That's one thing.

The second question, just to remind me, what was -- because the third one was base station. Can you remind me the second question?

Yes, the second question was the significant licensing opportunity that you mentioned in your prepared remarks. Just wondered, what type of applications are we talking about?

Okay. So, that's across all the product lines. It's not a specific product line that we are speaking about. We speak about multiple customers that (inaudible) came to us with different strategic suggestion, and it's across all the product line.

The third question is the base station. It's the deal that we -- that I speak -- spoke about in prepared remarks. It's with existing base station customer, a key customer. The prior deal was 4G/LTE/LTE-Advanced. And this is the next generation which eventually will require different ASP for 5G. And it's more like the 2020, 2021 timeline.

Okay. Great. And if I could squeeze in one more, sorry about this. You mentioned -- there's a question previously on the LTE and the kind of -- some of the moving parts there. And you also spoke about having multiple LTE customers, which you flagged before the second half here. Will the LTE ASP, is that going to move up or down, given the mix when you look at the second half? Thanks.

Hi. It's Yaniv. No, I think we're looking at more or less the same ASPs that we have talked about for this year. Anywhere in the neighborhood from $0.08 to $0.09 in the LTE space is a good number to use for this amount. And we don't see a change. Of course, we would like to see more volume and, therefore, higher royalty revenues that derive from that. I think that's the LTE.

Okay. Great. Thank you.

Sure. Thank you.

Suji Desilva, Roth Capital.

Hi, good evening. Congratulations on the stellar results. I can see the hard work paying off there. On the large customer comprehensive deals, I'm curious if you can be more specific on the number of opportunities you have there and whether those deals might represent the largest in the Company's history, just to understand the magnitude here.

Sure. No, it is, of course, a nice deal. The idea is that we're offering the same technology that we have today, but because of the nature and ARM has been doing that for many years, these are large customers. We would -- we're trying to simplify the engagement with these types of players, at least for one we're dealing with actually right now. Maybe others will follow, and giving them an access to different technologies.

I think Gideon mentioned that it could be connectivity. We'll talk about Bluetooth technologies, Wi-Fi. It could be DSPs for audio and vision. It could be different software packages for a complete solution. It could be LTE. It could be Internet of Things and a very small form factor for these devices, like we've announced a new product just a few months ago.

So, the idea is to have a list or have a basket of these IPs with much easier access to large companies to choose. They just need to choose and pick and start a design. Of course, the royalties will be similar to what we have today from any customer. That doesn't change. But, the licensing engagement with these multiple type of technologies across every market, it just depends what they want to use and what we could convince them to use because it makes sense for them. That will enrich the relationship and, hopefully, the use of our technologies across not just one division or one product line, but potentially many more because of the easier access.

I think that's the idea. Dollar wise, it's not eat as much as you can. But, it depends what they want to use. The more they want to use it, the bigger the deal could be. So, we have a basic platform for that. Again, I think we'll be more comfortable to talk about it after the deal is actually closed, which is not the case, but the idea that it's some basic usage. And then on top of that, they could add much more that go along, and then the deal could increase as well in volume.

That's helpful color, Yaniv. And then on -- with the 4G market and upgrade cycle being so strong here and the premium to 3G phones being smaller, is the 3G phone unit market still a growth market, is that stable, or is it starting to decline?

3G, so, the overall -- the 3G is a declined market, but in more modest rate than 2G. Our play there is market share gain. We have a customer that's focused on this market and gaining share. I think, last quarter, honestly, if you look on a sequential basis, it was about 5% market share gain. And we expect to get to the level. So, it's a sizable market. And [in places of India and] (inaudible), there is -- there are still 3G network. And we want to benefit out of it.

That's great. And then one last quick question on the full-year range updated, 35% to 45%, is that just the range there, just general market demand, or are there any customer-specific events that might tilt you towards the high end versus the low end? Thanks, guys.

No, I think it's just acceptance in the market of different phones. If there's some more activity and the volume increases because of good marketing positioning or good phone or if it's the low cost, it's just a ramp up. I don't think there's one specific driver for being in the higher end or the lower. It's -- it doesn't rely on the one tier, one customer, but a whole bunch of different -- both markets and players, like we alerted earlier. It's a good question, but I don't think it's a one-off type of answer, but a combination.

Thanks, guys. Congrats, again.

Thanks, Suji.

This concludes our question-and-answer session. I would like to turn the conference back over to Richard Kingston for any closing remarks.

Thank you, all, for joining us today and for your continued interest and support in CEVA. We will be attending the following upcoming conferences and invite you to join us there: the Oppenheimer Annual Technology, Internet, and Communications Conference on August 9th in Boston; the Canaccord Genuity Global Growth Conference on August 10th in Boston; the Drexel Hamilton Telecom Media and Technology Conference on September 7th in New York; Deutsche Bank 2016 Technology Conference on September 14th in Las Vegas; and Dougherty and Company Institutional Investor Conference on September 28th in Minneapolis. For further information on these events, including Webcasts and a complete calendar of other conferences we'll be attending, you can visit our Website at investors.ceva-dsp.com. Thank you, and goodbye.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.