CEVA Inc (CEVA) 2020 Q1 法說會逐字稿

Good day and welcome to the CEVA, Inc. First Quarter 2020 Earnings Conference Call. (Operator Instructions). Please note, this event is being recorded. I'd now like to turn the conference over to Richard Kingston, Vice President of Market Intelligence, Investor and Public Relations. Please go ahead, sir.

Thank you, Rocco, and good morning, everyone. Welcome to CEVA's First Quarter 2020 Earnings Conference Call. I'm joined today by Gideon Wertheizer, Chief Executive Officer; and Yaniv Arieli, Chief Financial Officer of CEVA. Gideon will cover the business aspects and highlights from the first quarter and provide general qualitative data. And Yaniv will then cover the financial results for the first quarter and also provide qualitative guidance and data for the second quarter and full year 2020.

I will start with the forward-looking statements. Please note that today's discussion contains forward-looking statements that involve risks and uncertainties as well as assumptions that if they materialize or prove incorrect, could cause the results of CEVA to differ materially from those expressed or implied by such forward-looking statements and assumptions. Forward-looking statements include guidance for the second quarter of 2020; our anticipated pillars of growth, including 5G RAN and WiFi 6 and optimism about achieving such growth objectives; optimism about certain of our customers gaining market share in 5G; our ability to manage our non-GAAP expense level to mitigate the adverse impact of the pandemic in the coming months; and market data by Cisco and ABI Research.

For information on the factors that could cause a difference in our results, please refer to our filings with the Securities and Exchange Commission. These include the duration of the COVID-19 pandemic; the extent and length of the shelter-in-place and other restrictions associated with the COVID-19 pandemic and the impact on customers, consumer demand and the global economy generally; the ability of CEVA's IP for smarter connected devices to continue to be strong growth drivers for us; our success in penetrating new 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 5G WiFi and IoT markets; our ability to execute more non-handset baseband license agreements; the effect of intense industry competition and consolidation; and global chip market trend. CEVA assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates.

With that said, I'll now turn the call over to Gideon.

Thank you, Richard. Good morning, everyone, and thank you for joining us today. Firstly, our heartfelt sympathies are with those around the world that have lost their loved ones or their jobs due to the COVID-19 pandemic. We are all hopeful that the measures taken by governments around the world will lead to a sustainable recovery.

At CEVA, we are taking proactive steps to protect all our employees' health and adjust our operation to work from home. Our IT infrastructure is advanced and scalable, which allowed a seamless migration from office to work-from-home. Our ongoing R&D developments remain at high level of productivity and our interactions with customers for sales and support activities are smooth. We continue to monitor government instructions country by country, and are taking careful steps to enable our employees to return to our offices.

Against this backdrop, we have an excellent quarter with revenue of $23.6 million, up 39% year-over-year. The licensing environment continues to be robust, and we recorded $14.5 million in licensing revenue, up 32% year-over-year. We signed 13 new agreements, of which 10 were for connectivity and 3 were for smart sensing. 3 out of the 13 deals were with first time customers. Target applications for our technologies include 5G for base station RAN, 5G fixed wireless access, 5G backhaul, WiFi 6 for IoT devices, True Wireless earbuds, Vision and AI for drones, and voice assistants for a range of smart home and IoT devices.

Royalty revenue came in at $9.1 million, up 53% year-over-year. Above seasonal weakness in the Chinese handset market resulting from the COVID-19 lockdown in China was more than offset by solid IoT-based product shipments and the introduction of new low-cost model from a leading smartphone company.

Let me take the next few minutes to provide you with additional perspective on 2 growth vectors that are central in our strategy: 5G RAN and WiFi 6. These spaces represent secular trends and are expected to come increasingly into focus on the back of COVID-19, as they are key to enabling better work-from-home practices and support the proliferation of the use of robots, remote medical diagnosis and treatments in the future.

On 5G RAN, our largest 5G OEM customer extended the use of our technologies and signed new licensing agreements during the quarter for development of next-generation 5G chipsets to address the 5G Phase 2 network services. These services include Ultra-Reliable Low Latency Communication, URLLC, targeting robotics, smart manufacturing, automotive, medical and Massive Machine Type Communication, mMTC, that enables billions of low powered sensors to be connected to the cloud for aggregation and AI services.

URLLC and mMTC will drive the upcoming capital investments in 5G and are the focus of our customers with their new RAN designs. In this context, a few weeks ago, we unveiled our latest generation DSP the CEVA-XC16. This is the most advanced and powerful DSP platform available today, offering unprecedented performance and state-of-the-art architecture, innovation in operating speed, parallel processing and multithreading. We are also encouraged by the recent traction our customer, ZTE, has had in 5G. To date, it has 45 commercial contracts and most recently won 29% share of a $5.2 billion contract to deploy 5G base station in China Mobile -- for China Mobile, a substantially bigger share than it had in prior engagements for China Mobile.

On WiFi 6, we are experiencing good momentum and customer interest with 2 new agreements signed during the quarter, targeting a variety of IoT devices, ranging from DTV, smart set-top boxes, smart speakers to smart door locks. WiFi 6 is the latest WiFi standard, also referred to as 802.11ax. According to Cisco forecasts, nearly 60% of mobile data traffic worldwide will be offloaded to WiFi networks by 2022. According to recent study from ABI Research, the WiFi 6 market is forecasted to reach 2.2 billion units by 2024, as compared to less than 300 million in 2019. The recent FCC approval to free up additional spectrum at the 6 gigahertz band will enable compliant WiFi 6E devices to achieve speeds comparable to 5G mobile network, support low latencies required for application like virtual and augmentation reality in mobile gaming and is also expected to boost the Industry 4.0 uptake for smart manufacturing.

So in summary, our thoughts are with those people suffering from the impact of COVID-19. While the situation is still dynamic, we are encouraged by the persistent design activities of our customers and interests in our product. We are laser-focused to continue to expand our business to capitalize on the momentum we gained last year. We are closely monitoring the dynamics and developments concerning our customers' shipments and will take prudent steps until COVID-19 impact is contained and supply and demand resume some normalcy.

We hope you all safe and look forward to meeting you face-to-face again in the near future at conferences and roadshows.

With that said, I hand over the call to Yaniv for financials and guidance.

Thank you, Gideon. Good morning. I'll start by reviewing the results of our operations for the first quarter of 2020. Revenue for the first quarter was up 39% to $23.6 million, as compared to $17 million for the same quarter last year.

Revenue breakdown is as follows: licensing and related revenue was approximately $14.5 million, reflecting 61% of our total revenues, 32% higher than $11 million for the first quarter of 2019. Royalty revenue was $9.1 million, reflecting 39% of total revenues, 53% higher than $6 million from the same quarter last year. Quarterly gross margin was 88% on a GAAP basis and 90% on a non-GAAP basis, slightly better on non-GAAP than we originally forecasted. Non-GAAP quarterly gross margin excluded approximately $0.2 million of equity-based compensation expense and $0.2 million of the impact of amortization of acquired intangibles.

Total GAAP operating expense for the first quarter was at the higher end of our guidance at $22.5 million. OpEx also included an aggregate equity-based compensation expense of approximately $2.9 million, higher than forecasted due to the accounting associated with the February 2020 PSU grants to management. OpEx also included $0.6 million for the amortization of acquired intangibles and $0.9 million allowance for doubtful debt provision associated with liquidity difficulties for one of our customers in the U.S. Total operating expenses for the first quarter, excluding equity-based compensation expenses and amortizations of intangibles were $19 million, also at the higher end of our guidance.

U.S. GAAP net loss for the quarter was $1.2 million and diluted loss per share was $0.05 for the first quarter of 2020, as compared to a net loss of $2.3 million and diluted loss per share of $0.10 in the first quarter of 2019. Our non-GAAP income and diluted EPS for the first quarter increased by 9.5 fold and 11 fold, respectively, to $2.6 million and $0.11.

Other related data. Shipped units by CEVA's licensees during the first quarter of 2020 were 261 million units, down 27% sequentially, but up 50% from the first quarter of 2019 reported shipments. Of the 265 million units shipped, 111 million units, or 43%, were for handset baseband chips, reflecting a sequential decrease of 43% from 196 million units of handset baseband chips shipped during the fourth quarter of 2019, but a 25% increase from 89 million units shipped a year ago.

Our base station and IoT product shipments were 150 million units, down only 9% sequentially and up 76% year-over-year. We've now categorized all of our non-handset baseband chips under umbrella of base station and IoT products.

As for the balance sheet. As of March 31, 2020, CEVA's cash, cash equivalent balances, marketable securities and bank deposits were $151 million. We continued our buyback plan this quarter, repurchasing approximately 202,000 shares for approximately $4.8 million. In February, our Board of Directors approved the new expansion of the buyback plan by a total of 700,000 shares available for repurchase. And as of today, 498,000 shares are available for repurchase.

Our adjusted ASC 606 DSOs for the first quarter of 2020 were 63 days. During the first quarter, we generated $6.4 million in net cash from operations, while depreciation and amortizations were $1.5 million and the purchase of fixed assets were $0.8 million. At the end of the first quarter, our headcount was 391 people, of which 324 were engineers, up from a total of 382 people at the end of 2019.

Now for the guidance. As mentioned by Gideon, we continue to execute well on our business strategy during the first quarter. We have had an excellent first quarter in licensing and royalty revenue despite the disruption caused by COVID-19. Although we continue to work diligently towards our goals of meeting annual revenue guidance given on the last earnings call, the spread of COVID-19 around the world and the extent of the disruption it poses on the supply chain and on the consumer demand cannot be fully assessed at this point. Given this uncertainty, as a matter of prudency, we have decided to withdraw our annual royalty revenue guidance at this stage. On the other hand, our licensing and related revenue business remains robust and we are maintaining our annual forecast of growth of $2 million to $4 million over 2019 record annual results.

We'll also continue to monitor closely our non-GAAP expense levels to mitigate any adverse impact of the pandemic in the coming months. This will not affect our research and development plans, technology road map or customer support, as we are firmly committed to those areas and believe those technology investments will pay dividends in the future. As we have seen from prior cycles, IP companies play a crucial role in expediting the semiconductor market recovery and with closing technology gap that such slowdowns can create.

Specifically for the second quarter of 2020. Gross margin is expected to be approximately 86% on GAAP and 88% on a non-GAAP basis, excluding an aggregate of $0.2 million of equity-based compensation expenses and $0.2 million of amortization of other assets associated with the Immervision investment.

OpEx for the next 3 quarters of 2020 should be lower than the first quarter. For the second quarter, GAAP-based OpEx is expected to be in the range of $21.2 million to $22.2 million. Of our anticipated total operating expenses for the second quarter, $3.7 million is expected to be attributed to equity-based compensation expense. As I said earlier, such expenses are higher than originally forecasted due to the accounting treatment of our February 2020 PSU grants to management. And $0.6 million will be attributed to amortization of acquired intangibles. Therefore, our non-GAAP OpEx is expected to be in the range of $17 million to $18 million.

Net interest income is expected to be approximately $0.75 million.

Taxes for the second quarter are expected to be approximately $0.3 million on both GAAP and non-GAAP basis. And share count for the second quarter is expected to be 23.2 million shares.

And Rocco, you could now open the Q&A session.

(Operator Instructions) Today's first question comes from Matt Ramsay with Cowen.

Gideon, it's really nice to see the momentum in the licensing business continue. And I noticed over the last couple of earnings calls, you've talked more and more about WiFi 6 and also expanding your 5G portfolio beyond just the baseband but to some additional areas as well. Maybe you could expand a little bit more than you did on your prepared comments, just the footprint that you see in terms of licensing momentum with 5G and how that may continue for several years versus just the initial product with a couple of the OEMs that you should be rolling out here in the next couple of quarters?

Yes. I think you're highlighting 2 major growth engines for us. It's the result of 2 things: one is the market, I'll get into this in a minute; and the second one is the landscape of suppliers. So these are 2 significant technologies that not that many companies that have the competency to do it, but they do need to get into this one if they want the benefit of what these technologies are offering. So if you take the 5G specifically, and I touched on the RAN, which is the base station, Radio Access Network, and the related things, there are very few companies that can build a base station today. And those companies, a key element of -- in their capability or ability to build this one is to use DSP that is not around anymore. We are the only company that can offer DSP like XC16 that takes you not just to what people are thinking today about 5G, which is the mobile broadband, the smartphone, but also the next generation of the phase 2, where people start putting into place autonomous driving, smart manufacturing, remote medical things that we start seeing today at the back of the coronavirus. So we are clearly in a position as the only viable proven supplier that can take advantage of the 5G. An aspect of this one is what is called now 5G ORAN, OpenRAN, one of the things in the states are important in order to build independency of, let's say, Chinese OEMs or dependencies to go to what is called OpenRAN, which is more desegregation or deconsolidation of supplier dependency on one-stop shop, the big guys coming and provide full solution. So we are the only company that can enable those companies to get into the market and take advantage of ORAN and provide portion either in the antenna side or in the base station side. So that's about the 5G RAN in general, which is we build throughout the year, a big entry barrier for any company, including those that wants to build it. And then comes the WiFi, which becomes now a competitor to 5G, especially when it comes to the residence on the enterprise of the fixed side of the big and the fact that you have today, WiFi 6E, which basically double the -- of the WiFi and provide area that is clean of congestion. That's take the WiFi 6E beyond that what we know. All of us know, it's PC and the handset into the access point in the enterprise or at home. People will stay more at time, they need faster network. And going into Industry 4.0, which require -- robotics require this kind of fast and reliable access to the web. So these are 2 anchors of technology that we are the only viable supplier of technology for those companies that wants to be in this market either through the consumer part of it or through the industrial part of it.

Got it. Sounds like some really good progress. I wanted to -- obviously, Yaniv, I understand the lack of visibility with the guidance on -- particularly on smartphone units. But the thing that struck me that if I'm not mistaken, this is the first quarter where more than half of the royalty units were non-handsets. So we've seen a shift there. And I know a number of years ago, you guys talked about some targets about some big numbers of non-smartphone baseband units. And it seems like the IoT franchise is really starting to come together as we all kind of wait for the bigger 5G units to come in base station. But any comment -- color you could give on the breakdown of some of the technologies within the non-smartphone business and just the momentum that you're seeing there? Because that was quite a bit stronger than at least we had modeled it, and it seems like a setting the pace for some decent results there to maybe protect some of the business that -- we'll all have to see what units are in smartphone over time. But any color in that non-smartphone business of a breakdown would be really helpful.

Yes. Sure. It was an interesting quarter. Unlike prior years, we did see more than seasonal decline in the Chinese, specifically, in the Chinese market and manufacturing of Chinese phones going to different areas of the globe, offset by newer low-cost, well-known OEMs that came out with a lower series in a different interesting timing, which usually is not in the beginning of the year, but usually in the September time frame in prior years, that too on the handset side. And you are right that this is probably the first time that our non-handset units for the quarter was 150 million, which were stronger than the handset business of 111 million. And the dollar side is not the case yet. We have the nice number of $3.7 million coming from non-handset. Last quarter, if you recall, it was our all-time record high of $4.3 million. And that shows that even the typical seasonality that we have -- that the industry had in Q1 in normal years has changed a bit. In some segments of the market, of course, sensor fusion is new for us. We had it this quarter, we didn't have it a year ago, so that was helpful. But even among the other traditional markets for us, like Bluetooth, for example, it was a very strong quarter, although it was the seasonally weakest quarter of the year for consumer devices. So maybe some people at home still needed different devices, maybe it was specific needs for different markets that still played nicely. And we saw that the sequential decrease in the new category that we called our base station and IoT was only 9%. This is overall very low compared to any first quarter we ever had before. But this is the combination of delivery. And no doubt that this new segment, at least new name of base station and IoT, should continue to help us grow the business and grow the royalty forecasts that we have. With this strange limitation this year that it's not traditional seasonality anymore, it's not traditional second half, which in the last 2 years were stronger than our first half, it may be the case, but we just need to wait and see due to the coronavirus effect.

Got it. And just one last quick one. You've mentioned down to $17 million to $18 million for OpEx in Q2. Is that just organic sort of belt tightening? Any kind of -- I know there's been R&D grants in the past, and there's been some different government funding things that have moved around since we've had the coronavirus situation. So anything unusual in the OpEx? Or is that just a run rate we should expect going forward?

Sure. So we said that in the prepared remarks, we are sort of monitoring that and trying to tighten whatever we can from the expense side without hurting the R&D. You're right that in Q1, the grants were much smaller as some of the government agencies were closed, and we didn't get as much payments. Q4 to Q1, there was a decrease of $1 million in grants, for example. So it's a big number. It will play around, let's say, the year and that's why the next couple of quarters are lower than the first quarter. We also had an unusual effect for us of some doubtful debt and some U.S. companies that got into financial difficulties in liquidity with corona and related. So we had a bigger provision of $0.9 million in the first quarter. All that with less travel, less trade shows, more virtual events and what you could see in other companies, we are also taking measures here and trying to come up with ways to offset any risk in the royalty revenues in the next couple of quarters, if there will be.

And our next question today comes from Mike Walkley with Canaccord Genuity.

Congratulations on the strong results in the tough environment. Just a question for me on the base station or wireless infrastructure market. With Nokia starting to highlight the progress of ReefShark shipments picking up quarter-over-quarter and expected to do so through year-end and ZTE doing quite well on 5G contract, can you just talk about maybe -- I know you're pulling royalty guidance just because there's so much uncertainty in the world, but can you talk maybe what you're seeing on the infrastructure side? Is it certainly seems like the need for broadband that while there's puts and takes overall, infrastructure spending looks to be one of the areas more on track than maybe the consumer-driven handset market?

Mike, it's Gideon. You're right. It looks to us that the 5G infrastructure is somehow resilient to the impact of the coronavirus. This is an infrastructure investment. Contracts are being out, the tender -- the China Mobile had about $10 billion sizable, and they will continue. And we see our customers are benefiting. It's a process where -- from the point you win a deal until you see it on the financial, it's about 6 months. So we are encouraged, and we'll see how it evolves in the coming months.

And just my follow-up question on the licensing side. It's great to see you still expect to increase $2 million to $4 million this year. Can you just talk about -- with so much travel restriction and work from home, how your team is able to virtually work with your clients to ensure that you can execute on this licensing structure, given a lot of restrictions on face-to-face interaction.

That I have to admit that we -- for us, it came as a surprise. The effectiveness or the productivity that people get when it comes to interaction with customers. If I give -- take example of China, they start working and they are logging immediately after the Chinese New Year that -- where the coronavirus just was on the peak. And the way licensing works, it's there are different things that you can show to the customer about demonstration, and that's something that you can do from a remote late access. But most of the work is evaluation, Q&A, presentation. And this was smooth and ongoing like people are doing face-to-face. This was not the personal relationship that people are going out together. But other than this, the practice of licensing was as usual. And the fact that at least what we saw so far, people didn't slow down development and planning and wanted even to expedite it. That's the reason that we see -- what we saw in Q1 and the pipeline that we have ahead.

Our next question today comes from Suji Desilva with Roth Capital.

Gideon, Yaniv, congratulations on the execution in a tough environment, certainly. Can you talk about the activity you've seen in licensing and royalty quarter-to-date? The linearity in the activity, whether it stayed relatively linear in licensing? And any signs of recovery in royalty or whether it's just too hard to say at this point?

Suji, so let's go with the licensing. Licensing, other than the fact that I mentioned the hotspots about 5G and WiFi 6. WiFi 6, we see many companies going into building products and these are consumer products and access points. It's just a new cycle of the WiFi, and we see more people because we have more smart devices today, DTV, smart door locks. And so that's WiFi. But I would say that in licensing, it's all across the world. We have AI portfolio. We have computer vision. We have sound. We have, of course, Bluetooth. People wants to build a lot of earbuds, hearing aids. So I cannot say that there is a starter. It's all over the place. And the uniqueness for CEVA is our synergistic portfolio that people that are building any connected device, they need connectivity, they need some form of sensing, whether it's a camera sensor or microphone sensor or IMU sensor, they need something and they find it in one stop when it comes to us.

Now when it comes to the linearity of the royalties, it's hard for us because we don't get orders from customers. We just get reports of what more can be done. But what we see around us speaking with customers is that the -- what we call now IoT and base station, this is something that more or less goes according that we -- or expected to be more or less as we anticipated in this year. There are less people buying. On the other, they need more stuff while they stay at home. And then of course, the 5G is ongoing. The question mark is about smartphone. People are saying that Q2 will be weaker than Q1 and then there will be some gradual recovery, maybe L-shape, maybe V-shape, nobody really knows how to go there. But I think generally, Q2 will be weaker than Q1 primarily as the make of smartphones and then depending of the release and how countries will go out of this virus or this lockdown. A gradual recovery for the Christmas season and at the end of year.

Okay. Gideon, it's very helpful color. I appreciate that. And then on 5G wireless infrastructure, you have a series of licensing wins here and seems to be more activity there. Should we expect that your royalties in the next 1 or 2 years will still come from these 2 large customers? Or are there additional or smaller customers that are coming into the 5G royalty mix in the next year or 2? That would be helpful to know.

Yes. That's an important question, Suji. We have other customers as well. The 5G RAN market is what is called heterogeneous architecture. So you have macro cells and you have small cells and you have fixed wireless access. We spoke -- we touched on this in the prepared remarks. So we have not that many, but few other customers that want to go into the 5G RAN market and play there in different form factors.

Okay. And then just a quick follow-up there, Gideon. Will the ASPs be similar to the base station ASPs you have quoted, which are significantly higher than the existing ASPs?

They are going to be higher in the base station chips, you have -- they're much more expensive and bigger, physically bigger chips with many more DSP implementations inside. So part of the royalty that we get is based on the chip size. And here, it's a question if it's smaller hotspot for home or a bigger base station or what type of base station, it could have multiple discipline from a light bulb, all the way to mega size base stations with dozens of chips inside and dozens of implementations inside. So I think we'll have lots of different flavors. Right now, we have one customer in production. We are waiting for the other one to kick in later this year or the beginning of next year. And then the newer ones that joined in the last probably 12 to less than 24 months.

And these were the ones that Gideon mentioned there just a minute ago.

Our next question today comes from Tavy Rosner with Barclays.

Congrats on the strong results. Most of my questions have been asked. I guess -- sorry, can you hear me?

Yes. Go ahead.

Can you guys hear me?

Yes, Tavy. Yes. Go ahead.

Sorry. Yes, just a follow-up. Last quarter, you mentioned the traction you were seeing for the automotive, and I'm wondering if that's still the case. And then as a follow-up, just looking at the cost flexibility you have, if I'm just looking at a worst-case scenario where we would see a second wave of COVID and some pressure on your revenues, do you have any flexibility to kind of decrease costs temporarily on some of your non-R&D spend?

Sure, Tavy. I'll start today with the second question because I think we answered that and talked about this. We are looking -- monitoring closely the cost basis. Some are helpful just because of the COVID, less travel, less events, which we're doing indifferently virtual like the rest of the world. These are obvious cost savings, less office time to some extent in some offices and related costs. We are looking at other ways to be more creative and cost efficient. And this is -- you could see that as earlier, the guidance we gave for Q2 on the non-GAAP of $17 million to $18 million for the quarter. So this already baked some of that into account.

Now Tavy, in regard to the automotive market, we are -- when we do the licensing automotive and we speak about traction, about licensing, we don't have yet royalties coming from automotive space. These are long program. When we start -- when we sign a deal, it's for cars to go into the market in 2024 at the earliest. So one quarter here and there is not that substantial. But so far, in terms of this design, the discussion with the customers about new designs is ongoing.

Our next question today comes from David O'Connor with Exane BNP Paribas.

Maybe 1 or 2 kind of follow-ups from my side. Maybe firstly, on the -- Yaniv, on the base station royalty in Q1. Any color there and how much that was or the change versus Q4 quarter-over-quarter? Then maybe one follow-up from the last question on automotive. In terms of engagement there, due to the COVID-19, any change in kind of the interaction on the licensing side? And then maybe a third one on the sensor fusion. Can you remind us the -- on sensor fusion, what type of seasonality you've seen there in the past so we can try and do some kind of modeling around that going forward?

Okay. David, I got the first question. And the third question. The second question, maybe Yaniv heard because I didn't. But we may ask you to repeat it. But the first question was about the 5G royalties. We don't break down specifically on those segments. We have 5G and IoT in general. But there was a disruption in the 5G because people couldn't go and work and install those base stations. But that's temporary. They will get back to work and then we'll see. So far, we maintain what we thought that when it comes to 5G base station, it's the same. We don't see any change for what we thought at the beginning, that this will be a growth year in this respect.

Now in terms of sensor fusion. Sensor fusion is something that, IMU, which is the inertial measurement unit. It's a very broad market. So there are consumers, there are customers in the PC. We have customers on DTV. So we don't really can talk about seasonality. It's a highly fragmented market. And what we are looking here is just the trend that we're expanding, and we are expanding our customer base and the addressable market. So overall, it's one segment out of our IoT segment and so far when it comes to what we see so far in terms of interest it is very well. And what's your second...

And my question was on automotive.

Automotive. And what was the question because I couldn't hear, you were broken.

Yes. Sorry about that. Just to repeat on the automotive side, any change on the licensing of automotive in terms of engagement you're seeing in Q1?

I don't think we have a change in the automotive engagement. I think there was a question with -- before on the licensing -- when we license something, it's for programs that go through -- until 2024 at the earliest. So a quarter here and there is not something that change people, especially when it comes to design. And that's what we see in terms of design activity, prospective customers, there is no change. And since we don't have royalty there, so we cannot -- in a way, we are not impacted from obvious slowdown that we have in the automotive market.

And ladies and gentlemen, this concludes the question-and-answer session. I'd like to turn the conference back over to Mr. Kingston for any final remarks.

Thank you, everybody, for joining us today and for your continued interest in CEVA. As a reminder, the prepared remarks for this conference call are filed as an exhibit to the current report on Form 8-K and accessible through the Investors section of our website at investors.ceva-dsp.com.

With regards to upcoming events, we will be participating in the following events shortly: The Cowen 2020 Virtual TMT Conference running from May 26 through 29. And for further information on this event and all events we will be participating in can be found on the Investors section of our website. Thank you, and goodbye.

Thank you, sir. This concludes today's conference call. You may now disconnect your lines, and have a wonderful day.