CEVA, Inc. (CEVA) Q1 2020 Earnings Report, Transcript and Summary

Good day and welcome to the CEVA, Inc.’s First Quarter 2020 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Richard Kingston, Vice President of Market Intelligence and Investor and Public Relations. Please go ahead, sir.

Thank you, Rocco and good morning everyone. Welcome to CEVA’s first quarter 2020 Earnings Conference Call. I am 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. 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 second quarter of 2020; our anticipated pillars of growth, including 5G, RAN and Wi-Fi stick 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 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 Wi-Fi 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 trends. CEVA assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates. With that said, I will now hand 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 for 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 IP structure is advanced and scalable, which allowed a seamless migration from office to work-from-home. Our ongoing R&D development remains at high level of productivity, and our interactions with customer for sales and support activity is optimum. We continue to monitor government instructions country-by-country, and are taking careful steps to enable our employee’s 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 three were for small cells. Three out of the 13 deals were with first-time customer. Target applications for our technologies include 5G for base station run, 5G fixed wireless access, 5G back-haul, Wi-Fi 6 for IoT devices, true wireless ear-buds, vision and AR for drones, and voice assistance for 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 lock down 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 two growth vectors that are central in our strategy, 5G RAN and Wi-Fi 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 robust remote medical diagnosis and treatments in the future. On 5G 1, 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 chipset 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 power sensor, to be connected to the cloud for aggregation and AI services. URLLC and MMTC will drive the upcoming capital investments in 5G and the focus of our customers with their new RAN design. In this context, a few weeks ago, we unveiled our latest generation DSP, the CEVA XC 16, 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 multi-threading. We are also encouraged by the recent traction our customer ZTE has had in 5G. Today, it has 45 commercial contract and most recently won 29% share of the $5.2 billion contract to deploy 5G base station in China for China Mobile, a substantially bigger share that it had in prior engagement for China Mobile. In Wi-Fi 6, we are experiencing good momentum and customer interest with two new agreements signed during the quarter, targeting a variety of IoT devices ranging from BTV, smart set up boxes, smart speaker to smart door locks. Wi-Fi 6 is the latest Wi-Fi standard also referred to as 802.11ax. According to Cisco forecast, nearly 60% of mobile data traffic worldwide will be offloaded to Wi-Fi network by 2022. According to recent study from ABI Research, Wi-Fi 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 Wi-Fi 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 update for smart manufacturing. 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’ interest 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 customer shipment and we will take prudent step until COVID-19 impact is contained and supply and demand resume some normalcy. We hope you are all safe and look forward to meeting you face-to-face again in the near future at conferences and roadshow. 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 follow: Licensing and related revenue was approximately $14.5 million, reflecting 61% of our total revenue, 32% higher than $11 million for the first quarter of 2019. Royalty revenue was $9.1 million, reflecting 39% of total revenue, 53% higher than $6 million from the same quarter last year. Quarterly gross margin was 88% on a GAAP basis and 90% on 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 intangible. 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 manage. OpEx also included $0.6 million of the amortization of acquired intangibles, $0.9 million allowance for doubtful debt provision associated with liquidity difficulties of one of our customers in the U.S. Total operating expense 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 $4.6 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 and 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 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 have now categorized all of our non-handset baseband chips under the 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 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 net cash from operations. Our 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 continued to execute well in our business strategy during the first quarter and had an excellent first quarter licensing and royalty revenue despite the disruption caused by COVID-19. Although we continue to work diligently toward 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 causes in 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 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 result. We will 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 roadmap 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 cycle, IT companies play crucial role in expediting the semiconductor market recovery and in closing technology gap that such slow down can create, specifically for the second quarter of 2020. Gross margin is expected to be approximately 86% on GAAP and 88% on non-GAAP basis. Excluding the 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 three quarters of 2020 should be lower than the first quarter. The second quarter GAAP-based OpEx is expected to be in the range of $11.2 million to $22.2 million. Our anticipated total operating expenses for the second quarter, $3.7 million, is expected to be attributable to equity-based compensation expense. As I said earlier, thus expenses are higher than originally forecasted due to the accounting treatment of our February 2020 PSC brand 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 in both GAAP and non-GAAP basis. Share count for the second quarter is expected to be 23.2 million shares. And Rocco, you could now open the Q&A session.

Thank you. [Operator Instructions] Today’s first question comes from Matt Ramsay with Cowen. Please go ahead.

Thank you very much. Good afternoon and good morning. 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 have talked more and more about Wi-Fi 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? Thanks.

Yes, I think you’re highlighting two major growth engines for us. It’s the result of two things. One is the market, I think I’ll get into this in a minute; and the second one is the landscape of suppliers. These are two significant technologies that not that many companies have the competency to do it, but they do need to get into this one if they want the benefit of both these technologies are offering. So, if you take the 5G in specifically, and I touched on the one, which is the base station, radio access network and relatedly, there are very few companies that can build a base station today. And those companies, a key elements in their capability or ability to build this one is to use ASP, that is not around anymore. We are the only company that can offer DSP like XC16 that take 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 here in a position as the only viable, proven supplier to take advantage of the 5G. An aspect of this one is what is called now 5G O-RAN, OpenRAN. One of the things in the states are important in order to build independency of, let’s say, Chinese OEMs or dependency is to go to what is called OpenRAN, which is a more disaggregation or deconsolidation of supplier dependency on one top-shop, the big guys that come in and provide full solutions. So, we are the only company that can enable those companies to get into the market and take advantage of O-RAN and provide portion either in the antenna side or in the base station. 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 antenna. And then comes the Wi-Fi, which becomes now a competitor to 5G, especially when it comes to the residents or the enterprise of the fixed side of the big. And the fact that you have today Wi-Fi 6E, which basically doubled – of the Wi-Fi and provide area that is clean of congestion. Let’s take the Wi-Fi 6E beyond that what we know, all of us know, its PC and handset into the access point in the enterprise or at home, people will stay more at home, 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 two anchors of technology that we are the only viable supplier of a technology for those companies that wants to be in this market either through the consumer part of it or through the industrial park of it.

Got it. Thank you for the color there and it sounds like some really good progress. I wanted to, obviously – Yaniv, understand the lack of visibility with the guidance, particularly on smartphone unit. But I think it struck me that if I’m not mistaken that the first quarter were more than half of the royalty unit were non-handset. 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 common base station. But any color you can 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 setting the pace for some decent results there to maybe protect some of the business that – well, we’ll to see what units are in smartphone over time. But any color in that non-smartphone business of a breakdown would be really helpful. Thank you.

Yes, sure. It was an interesting quarter unlike prior year. We did see more than seasonal decline in the Chinese, specifically in the Chinese market and the manufacturing of Chinese phone going through different areas of the globe, offset by a newer low cost, a well-known OEM 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 timeframe in prior years, that’s in the handset side. And you are right. This is probably the first time that our non-handset units for the quarter was $150 million, were stronger than the handset business of $111 million. In the dollar side, it’s not the case yet. We had a 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 has in Q1 in the normal years, has changed a bit. And some segments of the market, of course sensor fusion is new for us, we had 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 seasonal weakest quarter of the year for consumer devices, there maybe some people at home still needing different devices, maybe those specific needs for a different markets, say that still played nicely and we saw the sequential decrease in the new categories that we called out base station and IoT was only 9%. This is overall very low compared to any first quarter we ever had before. This is the combination of delivery. No doubt that this new segment, at least new name of base station and the IoT should continue to help us grow the business and grow the royalty forecast 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 two 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 have mentioned down to $17 million to $18 million for OpEx, I think Q2. Is that just organic sort of belt tightening? Any kind of – I know there has been R&D grants in the past and there is 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? Thanks.

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 and 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. 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. company 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 of that with less travel, less trade shows, more virtual events, what you could see in other companies, we’re also taking measures here and trying to come up with ways to offset any risks in the royalty revenues in the next couple of quarters, if they will be.

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

Hi, thank you and congratulations on the strong results in a tough environment. Just a question from 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 are seeing on the infrastructure side? It certainly seems like the need for broadband that while there is puts and takes overall, infrastructure spending looks to be one of the areas more attractive and maybe the consumer-driven handset market?

Yes. Hi, 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 China Mobile has about $10 billion sizable and they will continue and we see our customer benefiting. It’s a process where from the point you win a deal, until you see it on the financials is about 6 months. So we are encouraged and we will see how it evolves in the coming months.

Great, thanks. And just my follow-up question on the licensing side, it’s great to see you do 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 interactions? Thank you.

Yes, that’s right. I have to agree that we – for us, it came as a surprise, the effectiveness or the productivity that people get when it comes to interaction with customer. If I give, like, example of China, they stop working and they are logging immediately after the Chinese New Year, the coronavirus just was on the peak. And the way licensing works – 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 valuation, Q&A, presentations. And this was smooth and ongoing like people being face-to-face. This was not the personal relationship that people are going out together. But other than this, the practice of licensing was just easier. And the fact that – at least what we saw so far, didn’t slowdown development and planning and wanted even to expedite it. That’s the reason that we see – what we saw in Q1 in the pipeline that we already had.

Great. Thank you. And I do look forward to the day we can all get together again in person. Good luck this year.

Thanks Mike.

And our next question today comes from Suji DeSilva with ROTH Capital. Please go ahead.

Hi, Gideon. Hi, Yaniv. Congratulation 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’s stayed relatively linear in licensing and any signs of recovery in royalty or whether it’s just too hard to say at this point?

Hi, Suji. So let’s go with the licensing. I think other than the fact that I mentioned the hotspots about 5G and Wi-Fi 6, Wi-Fi 6 would be many companies going into and building the product and these are consumer products and access point. It’s just a new cycle of the Wi-Fi and we see more people because we have more smart devices today, BTV is smart – and so that’s Wi-Fi. I would say that in licensing, it’s all across the world. We have the IP portfolio, we have computer vision, we have sound, we have of course Bluetooth, people wants to build a lot of earbuds, hearing aid. So, I cannot say that there is a starter. It’s all over the place. And the uniqueness of CEVA is our synergistic portfolio. The 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 RMU 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 – for small things done. But what we see around us, speaking with customer, is that 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 this year. There are less people buying, on the other they need more stuff while they stay-at-home. And 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, may be L-shape, maybe V-shape, nobody really knows how it will 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, of this lockdown and gradual recovery and the Christmas season at the end of the year.

Okay. Thank you, Gideon. It’s very helpful color, 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 one or two years will still come from the two large customers or are there additional or smaller customers that are coming into the 5G royalty mix in the next year or two? That will be helpful to know. Thank you.

Yes, that’s important question, Suji. We have other customers as well. The 5G RAN market is what is called heterogeneous architecture. So, we have micro sales and we have small sales, and we have fixed wireless access. We spoke – we touched a bit on it on the prepared remarks. So, we have not that many, but few other customers that wants to go into the 5G RAN market. We play there in different form factors.

Okay. And then just quick follow-up here, will the ASPs be similar to the base station ASPs you quoted which are significantly higher than the existing ASPs? Thanks.

They are going to be higher in the base station chips. They are much more expensive and bigger, physically bigger chips with many more ASP implementations inside. So, part of the royalty that we get is based on the check side. 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 pole all the way to the mega-size base stations with dozens of chips inside and dozens of implementation 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, at 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 just a minute ago.

Okay. Thank you, guys.

Thank you.

And our next question today comes from Tavy Rosner with Barclays. Please go ahead. Tavy, your line is open.

Hi, congrats on the strong results. Most of my questions have been asked. I guess – hi, sorry, can you hear me?

Yes, go ahead.

Hi, can you guys hear me?

Yes, Tavy, go ahead.

Yes, I am sorry. Just a follow-up. Last quarter, you mentioned the traction you’re seeing for the automotive and I’m wondering if that’s still the case. And then as a follow-up, just looking at the cross flexibility you have that – if I’m just looking at the 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 with the second question, because I think we answered that and talked about this. We are looking to monitoring closely the cost basis. Some are helpful just because of the COVID less travel, less events, which we are doing and differently virtual like the rest of the world. These are obvious cost savings, less office time, to some extent, and some offices and related to the cost. We are looking at other ways to be more creative and cost efficient. And this is – you could see that as early in the guidance we gave for Q2 and the non-GAAP of $17 million to $18 million for the quarter. So, this already baked some of that into account. And probably in regard to the automotive market, 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 for cars, they 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 deals we signed, the discussion that we had with customers about new design is ongoing.

Great, thanks.

Thank you.

And our next question today comes from David O’Connor with Exane BNP Paribas. Please go ahead. David O’Connor: Hey, good morning, and thanks for taking my question. Maybe one or two kind of follow-up 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 you’re expecting for quarter-over-quarter, then maybe one follow-up from the last question, automotive? In terms of engagement there and 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 on sensor fusion what type of seasonality you’ve seen there in the year, in the past, so we can try and do some kind of modeling around that going forward? Thank you.

Okay, David, I got the first question and the third question. The second question maybe I didn’t hear because I didn’t. We may ask you to repeat it. But the first question was about the 5G royalties. We don’t breakdown specifically on those segments with 5G and IoT in general. But there was disruption in the 5G because people couldn’t go and work and install those base station, but that’s temporary. They will get back to work and then you 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 would be a growth year in this respect. Now, in terms of sensor fusion, sensor fusion is something that IMU, which is the inertia measurement unit, it’s a very broad market. So, there are consumers, there are – we have customer in the PC we have customer on the TV. So, you don’t really can’t talk about seasonality, it’s a highly fragmented market and what we are looking here is just the trend that we are expanding and we are extending 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’s very well. David O’Connor: Thanks for that. And my question was on automotive.

Automotive? What was the question, because I couldn’t hear you, you were broken? David O’Connor: 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? Thank you.

Yes, I don’t think we have change in automotive engagement. I think there was question – before the licensing, when we license something it’s for program that go for 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, we cannot – in a way, we are not impacted from obvious slowdown that we have in the automotive market. David O’Connor: Got it. That’s helpful. Thanks, guys.

Thank you.

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.