CEVA, Inc. (NASDAQ:CEVA) Q3 2019 Earnings Conference Call November 7, 2019 8:30 AM ET

Company Participants

Richard Kingston - Vice President of Market Intelligence and Investor Relations
Gideon Wertheizer - Chief Executive Officer
Yaniv Arieli - Chief Financial Officer

Conference Call Participants

Matthew Ramsay - Cowen, Inc.
Mike Walkley - Canaccord Genuity Group Inc.
Suji DeSilva - ROTH Capital Partners, LLC
David O’Connor - Exane BNP Paribas
Tavy Rosner - Barclays Capital

Operator

Good day and welcome to the CEVA, Inc. Third Quarter 2019 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation there will be an opportunity to ask questions. [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, Investor and Public Relations. Please go ahead.

Richard Kingston

Thank you, Carrie. Good morning, everyone, and welcome to CEVA’s Third Quarter 2019 Earnings Conference Call. I’m joined today by Gideon Wertheizer, Chief Executive Officer; and Yaniv Arieli, Chief Financial Officer.

Gideon will cover the business aspects and the highlights from the third quarter and provide general qualitative data. Yaniv will then cover the financial results for the third quarter and also provide qualitative data for the fourth quarter of 2019. I will start with the forward-looking statements.

Please note that today’s discussions 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 optimism about our IP portfolio for wireless connectivity and smart sensing, new agreements with customers in the automotive space, adoption of NarrowBand-IoT, Yole development’s market data about the motion sensor space, and royalties prospectus from recent licensing deals.

For information on the factors that could cause a difference in our results, please refer to our filings with the Security and Exchange Commission. These include the ability of CEVA’s IPs for smarter, connected devices to continue to be strong growth drivers for us; our ability to realize the benefits from the acquisition of certain assets of Hillcrest Labs; 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 and offset the maturity of the handset market; the speed and extent of the expansion of the 4G LTE and 5G networks and wireless connectivity, AI, NarrowBand-IoT and IoT space in general; our ability to execute more non-handset baseband license agreements; the effect of trade tariffs and political tensions; 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. In addition to the financial results prepared in accordance with generally accepted accounting principles or GAAP, we will also present certain non-GAAP financial measures today.

CEVA’s management believes that in addition to using GAAP results in evaluating our business, it can be useful to review results using certain non-GAAP financial measures. Investors and potential investors are encouraged to review the reconciliation of non-GAAP financial measures with their most direct comparable GAAP financial results, which can be found in the earnings press release issued today.

A copy of today’s press release for the quarter ended September 30, 2019 and the related financial tables and management commentary, which were included in our Current Report on Form 8-K filed later today, also can be found on the Investor Relations portion of our website following this call.

With that said, I will now hand the call over to Gideon.

Gideon Wertheizer

Thank you, Richard. Welcome, everyone, and thank you for joining us today. We are pleased to have delivered a robust third quarter on the back of another excellent quarter in licensing and substantial step-up in our royalty revenue.

Total revenue for the third quarter was $23.5 million, up 28% sequentially and 10% on a year-over-year basis. License revenue was $11.3 million, up 15% year-over-year. Royalty revenue was $12.2 million, up 61% sequentially and 5% on a year-over-year basis.

We concluded 14 agreements in the quarter, of which 13 were for connectivity and 1 for smart sensing. 5 of these agreements were with first-time customers. Customers’ target products include automotive ADAS, hearing aids, smart meters, true wireless stereo earbuds and a wide variety of IoT devices.

Of the deals signed in the quarter, 3 were of strategic importance with marquee names. I will elaborate on these shortly. Overall, we continue to show consistent execution in signing up new customers and to build up the pipeline for new agreements. Our comprehensive portfolio for wireless connectivity and smart sensing intersects with the IP needs of almost every semiconductor-company and OEM.

Our customer reach is global and we are winning prominent businesses in every geography. In the U.S., we are seeing opportunities in smart edge devices for consumer, robotics and automotive.

In Europe, digital health and smart city applications are strong areas of interest. In APAC, excluding China, we see interest for ADAS and consumer electronics. And in China, we are engaging with customers across many verticals including wireless infrastructure, smartphone, robots and a wide variety of IoT devices.

Let me take the next few minutes to expand on 3 important licensing agreements signed in the quarter.

The first is a comprehensive agreement with a name brand semiconductor incumbent in the automotive market, which is a new customer for CEVA in this space. The customer selected our AI processor technology, which we announced last month along with our reputable CDNN AI software framework for its next generation ADAS chips.

We are extremely excited by the engagement with this key player, targeting mainstream and high-volume ADAS use cases, such as automatic emergency braking, which is now mandated by multiple regulatory groups such as NCAP of Europe, adaptive cruise control, lane keeping, blind-spot detection, surround view and more.

This design win anchors our position in the automotive space and adds to our already key automotive related customer, which include ON Semiconductor, the industry leading supplier of ADAS image sensor and one of the world’s largest automotive OEM.

To this effect, last month, we announced our latest NeuPro-S AI processor that addresses the requirement for data bandwidth efficiencies and performance scalability. We also unveiled a novel extension for our CDNN framework, called CDNN-Invite API, which allows automotive OEMs or Tiers 1 customers who own proprietary AI processor to couple it with our comprehensive CDNN software framework, which saves them costly and complicated development of AI compiler technology.

The second agreement that we would like to highlight is a sizeable Bluetooth Low Energy IP agreement with one of the world’s largest manufacturer of hearing instrument products, an industry that is going through continuous technology innovation involving digitization and wireless integration.

Our extremely low power BLE technology will be deployed inside an advanced hearing instrument, to enable the user of the device to flawlessly connect with smartphones and access useful applications and services, such as stereo audio streaming, voice, transcript and remote tuning.

This new comprehensive agreements with our customer, exposes us to a growing industry that according to the company research addresses about 1 billion people that experience hearing difficulties.

The third key agreement in the quarter was with a very large European semiconductor company who decided to license our comprehensive Dragonfly NB-IoT IP, initially for a smart meter application. It is our first agreement with this large customer, who owns a broad product portfolio, and has a diverse customer base, and strong synergies with our broader product lines.

The adoption of NarrowBand-IoT by cellular operators throughout the world is progressing. Beyond China, where the deployment is ongoing, India, led by Reliance JIO, is pushing forward an aggressive program. In its recent annual general meeting, the Reliance Chairman stated that JIO aims to connect 1 billion NB-IoT devices within the next two years. He also mentioned that 300 million smart meters need to be connected in India for real-time monitoring and to enable consumers with visibility and full control on costs.

On royalty revenue, we had a strong quarter, including first time contribution from the Hillcrest Labs sensor fusion business. Our baseband customers benefitted from the launch of new premium tier smartphones and market share gain in the low tier of LTE phones targeted for developing economies. In the non-baseband segment, we continued the momentum with excellent progress, contributing $3.9 million, an all-time high with units up 29% sequentially and 27% year-over-year, reaching also an all-time high quarterly high of 123 million units.

During the quarter, we started to reach out to customers in regards to our Hillcrest Labs sensor fusion technology that we recently acquired. The feedback has been very constructive on the potential intersection points with customers’ needs and the potential business growth. The motion sensor space is a big and fragmented market, growing to over $6 billion in MEMS semiconductor content by 2024 according to industry research firm Yole Developpement. Initially, our focus will be around robotics, laptops, mobile headset, and advanced remote controls.

Hillcrest Labs is a household name with strong technology fundamentals and solid customer relations. This particularly applies to OEMs where our revenue composition will be primarily from royalties based on the device price rather than upfront license fees and per-chip royalties that we engage with semiconductor customers.

In summary, we had an excellent third quarter both in licensing – on the licensing and royalty fronts. We remain focused on executing licensing agreements and gaining key customer adoption, as evident across the first 3 quarters of this year. Licensing is the precursor for royalty growth and the earnings leverage that we outlined in our January Investor Day. Our royalty revenue reflected a strong uptick in cellular baseband, and a growing contribution from the non-handset segment from new product ramps, new customers getting into production and from Hillcrest Labs’ OEM customers.

With that said, I’ll now turn the call over to Yaniv, who will outline our financials and guidance.

Yaniv Arieli

Thanks, Gideon. Good morning. I’ll start by reviewing our results for the operations for the third quarter of 2019. Revenue for the third quarter was $23.5 million, up 10% as compared to $21.4 million for the same quarter last year. The revenue breakdown is as follows: licensing and related revenue was approximately $11.3 million, reflecting 48% of our total revenue, 15% higher as compared to the third quarter of 2018; royalty revenue was $12.2 million, reflecting 52% of total revenue, up 5% from $11.6 million for the same quarter last year and up 61% sequentially; non-handset baseband royalty revenue reached an all-time high of $3.9 million in the quarter.

Quarterly gross margin was 88% on a GAAP basis and 89% on a non-GAAP basis, as projected. Our total operating expenses for the third quarter came in at approximately $21 million. OpEx also included an aggregate equity-based compensation expense of approximately $2.6 million, deal expenses and write-off of an acquired lease associated with our Hillcrest Labs transaction of $0.8 million, amortization of acquired intangibles associated with the acquisition of the Hillcrest Labs and Immervision investment of $0.5 million, and the amortization of acquired intangibles of RivieraWaves of $0.2 million.

Our total operating expenses for the third quarter, excluding those items were $16.8 million, just below the mid-point of our guidance. In the third quarter, we concluded a tax audit, following which, we recorded a tax benefit of approximately $1 million on both GAAP and non-GAAP basis. We currently have no other pending tax audits. U.S. GAAP net income for the quarter was $0.8 million, and diluted earnings per share was $0.03 as compared to $2.5 million and $0.11 for the third quarter of 2018.

Our non-GAAP net income and diluted EPS for the third quarter of 2019 were slightly down 2% and 4% to $5.1 million and $0.22, respectively, from net income and diluted EPS for the third quarter of 2018 of $5.2 million and $0.23, respectively.

Other related data. Shipped units by CEVA licensees during the third quarter of 2019 were 292 million units, up 35% sequentially and 11% up from third quarter of 2018. Of the 292 million units shipped, 169 million units, or 58%, were for handset baseband chips, reflecting a sequential increase of 38% from 122 million units of baseband chips shipped during the second quarter of 2019 and an increase of 2% from 165 million units a year ago.

As Gideon stated earlier, our non-handset shipments reached an all-time record high of 123 million units, up 27% sequentially and up 27% annually. Our non-handset baseband units – of the handset, non-handset baseband units 92 million were reflected our Bluetooth shipments, which also reached an all-time record high for the quarter.

As for the balance sheet. As of the end of September, CEVA’s cash, cash equivalent balances, marketable securities and bank deposits were $148 million, down from $166 million in the prior quarter, we saw recent $21 million investments in sensor fusion and wide-angel distortion correction technologies. As we were focused our attention and financial resources on the acquisition of these technologies in the third quarter, we did not execute any share buybacks program during this period.

Nevertheless, for 2019 to date, we repurchased approximately 194,000 shares for approximately $4.9 million. Moreover, our Board of Directors a year ago approved the expansion of our buyback program and as of the end of September, we had a total of 161,000 shares available for repurchase.

Our DSO’s for the third quarter improved to 31 days. During the quarter, we generated $3 million of net cash from operations; depreciation was $0.8 million; purchase of fixed assets was $1.3 million and investments in new technologies were $21 million. At the end of the quarter, our headcount was 383 people, of which 318 were engineers, including from the Hillcrest Labs, which we welcomed on board in July.

Qualitative data specifically for the fourth quarter of 2019. On licensing and related revenue, as Gideon alluded, we continue to experience healthy demand for our technologies across all geographies. On royalties, we forecast a 10% sequential increase after recording 61% sequential growth in the third quarter. This should equate to a new all-time high royalty revenue for the first quarter.

Gross margin is expected to be approximately 89% on GAAP and 90% on non-GAAP basis, excluding an aggregate of $0.2 million of equity-based compensation expenses and $0.1 million of amortization expense associated with our acquired intangibles of Narrowband-IoT technologies.

Overall, OpEx is expected to be in the range of $20 million to $21 million. Of our anticipated OpEx for the fourth quarter, $2.7 million is expected to be attributable to equity-based compensation expenses, and $0.9 million to amortization of the acquired intangibles of RivieraWaves, Hillcrest and Immervision.

Our non-GAAP OpEx is expected to be similar for the third quarter level in the range of $16.3 million to $17.3 million. Net interest income is expected to be around $700,000 for the quarter. Taxes for the quarter $0.8 million on GAAP basis and 0.9% on non-GAAP basis.

Last and not least, share-count for the fourth quarter is expected to be in the similar level to the third quarter of approximately 23 million shares.

Carrie, you can now open the floor to the Q&A session.

Question-and-Answer Session

Operator

We will begin the question-and-answer session. [Operator Instructions] The first question will come from Matt Ramsey of Cowen.

Matthew Ramsay

Thank you very much. Good afternoon over there, guys, and good morning, everyone. I guess, Gideon, I wanted to ask, and I guess, congratulations first of all, on the progress in the business outside of the handset market. But I wanted to ask a couple of questions about the smartphone market.

You mentioned in your prepared comments some renewed strength in 4G devices from some of your licensees. I wonder if you might expand on that a little bit. I think there are some concerns with strength at Huawei and strength with Qualcomm into the 5G cycle next year, where I think we’re definitely looking to see some strength from some of your licensees on 4G. And if you could expand on that, I think that would be helpful. Thank you.

Gideon Wertheizer

Yeah, hi, Matt. Thanks for the congrats. So the LTE is a dynamic market. By the way, it’s also in the base station. We see it from different angle. Number one, we see still sizable amount of feature phones that are still being shipped in the developing end-markets.

And when it comes to our customers, and we have also another one that will soon ship, a whole lot of communities in the developing countries that are now moving to LTE. So what we see now is its market share gain, because at that space, our customer has the price advantage and the system advantage and the locality. So the thing that we want people to keep in mind that LTE is still a growing market and the activities in the 5G, it’s a different scope.

Matthew Ramsay

Got it. That’s helpful color. And then, just a follow-up on, obviously, the big opportunity at least near-term for your company in 5G is on the base station modem side. If you could just give us a little bit of an update about timing and magnitude of royalty revenues over the next 2 quarters. I know there’s been some fits and starts with some of the rollouts and, obviously, some of the challenges in China, given the political spectrum.

But if you could just update us on where we are in the rollout of some of the base station products and royalties that would be really helpful. Thank you. I appreciate it.

Gideon Wertheizer

Yeah. So, speaking about the LTE, the base station, first of all, we are – we have customers shipping LTE for base station. And LTE is really important, because there is still dynamics as I referred in the handset side, upgrades, updates, improvement. Also, when it comes to 5G when it’s called – what is called non-standalone, which is the deployment – the first deployment of 5G will be a non-standalone, then the LTE is the backbone. So, people that are winning LTE deals will have a software upgrade to 5G.

Now, specifically to 5G, we have customers, and people know about them, that are in design. This is 5G design, chip design is a very complicated chip with the latest nodes and the IPs. And you have to be in this kind of things risk of that. So our customers in design, they are progressing. But we don’t have the visibility on when they reach the volumes there. We need to be patient, but they are on the way.

Yaniv Arieli

Matt, Let me add one thing about the prior question about the units, as to you understand the magnitude that we experienced this year. We’ve seen it in the past, but these things have their own power. Q1, we powered 41 million LTE phones, went up to 52 million in Q2, in this quarter 85 million. So within 2 quarters, we’re doubling the volume of LTE.

We’re talking about LTE phones only and some are high-end, some are low-end. So this is some of the magnitude we have seen in the market share. And handsets is one of the highest we had in the last couple of quarters, almost 30%, up, from 23% in the prior quarter. So this is some of the magnitude that we have been seeing some improvements across most of our customers in this space. And for now, that we forecast that to continue into the fourth quarter.

Gideon Wertheizer

Well, Matt, I want to complete the 5G in broader scope. So we spoke about the base station. But we do have a play in the handset side and in China, which is going to be the lead market in terms of adoption definitely next year. And we have a customer that announced chips and certification, and we’ll see when this materializes to development. But we are not outside of the 5G handset as well.

Matthew Ramsay

Got it. Thanks. Thank you very much, guys. I appreciate all the color.

Yaniv Arieli

Thanks, Matt.

Operator

The next question will come from Mike Walkley of Canaccord Genuity.

Mike Walkley

Great. Thank you. And my congrats also on the strong results and the licensing momentum. Yeah, just building a little bit on Matt’s question. As we look at your different infrastructure customers, how do you see maybe the next 1 to 2 years developing if they start to ship? China’s going to start building out 5G in a big way, and I imagine your Chinese OEM customers should benefit from that. And then Nokia has made public comments how they need to get their system-on-chip correct to get their cost structure right. So assuming they get that fixed in 2020, what could maybe 2021 look like if you get a full year from Nokia, along with your other 5G base station customers?

Gideon Wertheizer

So we cannot refer specifically on timing of deployment of 2020. I want to say something about – outline 5G. When people say base station, it’s not just 1 product. When you go to base station, you have in the – what is called BBU, which is the baseband side, then you have RRU, which is the DSP that goes in the antenna. You have small cells and you have fixed wireless, all these basically bundled in our base stations. So we have several customers. Some of them are going into BBU. Some are going RRU. Some are going to small cells. They all will be there or supposed to be there in due time. The only thing that we can say at this stage that they are all fully committed and have a market strength to win customers once they have the product.

Yaniv Arieli

So Mike, to summarize this in different words, the timing, and we saw that over the last 2 years, we don’t have control, but our plans and the royalty estimate that we had before still hasn’t changed. They may have shifted to 2021 and beyond, but then if we are in those next generations, we should be there for a long, long time. So I think the timing is the more problematic issue. The final goal has not changed.

Mike Walkley

Great. That’s helpful. I was just trying to frame it of making sure that targets are still there longer term, because 2021 should be a year when more of the OEMs got their full product portfolio shipping. And just a follow-up question for me. Just given your diversifying customer base, nice wins that you talked about on the automotive side, just given your pipeline you’ve talked about in the business trends, do you still feel like the business model is tracking with the diversifying customer base to double royalty levels by 2022 from the 2018 level?

Gideon Wertheizer

Yeah, no doubt, 5 new customers just in last quarter that has never worked with us, among which are the automotive and the Narrowband-IoT guys. So that’s very exciting from our point of view. And when we add some of these new technologies that we talked about, both sensor fusion and wide-angle distortion that in a sense, helps us to bridge some of the other moving pieces that we have in the model. And we are still very, very committed to our 2022 goals of doubling the 2018 last year’s royalty revenue and increasing the licensing revenue from there. And we’ve seen, so far, pretty nice progress in 2019, on that specific front. So, yeah, we are very focused to work out and make it happen.

Mike Walkley

And last question for me, and I’ll pass it on. Anything you can maybe share, either qualitatively or give us numbers about how many customers are commercially shipping product today, driving royalties and where you could maybe see that in a couple of years based on people working on chips from your licensing side?

Gideon Wertheizer

Yeah. I believe that they should be in the neighborhood of 40 to 50 customers, maybe even 1 or 2 new ones that we just saw, some new initial report this last quarter. And we probably have more than 60 companies in design, not including even the last recent ones in the last quarter. So these are on top of them. But the potential for now is north of 100 to 110 customers that they hopefully make it to market, plus the existing ones. That is the basis for the royalty growth in the next couple of years.

Mike Walkley

Great. Thank you very much.

Gideon Wertheizer

Sure. Thank you.

Operator

The next question will come from Suji Desilva of Roth Capital.

Suji DeSilva

Hi, Gideon. Hi, Yaniv. Congratulations on the strong quarter here. I believe I heard you mention a second smartphone baseband customer shipping soon. Is that a new royalty opportunity to CEVA? Is that a 5G only opportunity and what geography is that?

Gideon Wertheizer

Suji, I was also – I was referring to Matt’s question about 5G. I just want – I wanted to say that we are not outsider in the 5G. One of our customers already announced products and certification. And this customer will focus on China. And we know China is going to be very dynamic next year, and the prices are going down to – already to at least recent tenders for China Mobile. So we speak about $280 5G phone. So that’s going to be a sweet spot for this customer.

Suji DeSilva

Okay. That helps to clarify. Thank you, Gideon. And then on the licensing side, I saw the deferred revenue jump here. Is your visibility increasing? Is $10 million per quarter or $11 million per quarter the more reasonable sort of expected run rate going forward?

Gideon Wertheizer

No, no. It’s just a technical thing. I mean, I would be happy to copy it every time, but it’s just the royalty jumping up from the 7 to the 12. And remember that under the new 606 accounting rules, we only get the reports after we close. So these are revenues that we recognize, but haven’t invoiced yet. And this is why it falls into deferred. It’s just revenue that will be billed collectively after the quarter.

Suji DeSilva

Okay. So that’s really the licensing – yeah, okay.

Gideon Wertheizer

Yeah, it happens every once in a while. And on top of that, we also have few deals among them that close at the last part of the quarter. So it was a bit backend loaded, but nothing out of the ordinary in change of business around that.

Suji DeSilva

Okay. So run rate wise, you need $10 million a quarter or $11 million a quarter? Is that – which is more kind of likely kind of forward-looking number to think about?

Gideon Wertheizer

On the deferred you mean?

Suji DeSilva

Licensing, Licensing revenue.

Gideon Wertheizer

Yeah, licensing. Yes, I mean, this is something that we have been comfortable for a while, and we’ve been talked about the $10 million to $11 million. The next step function for us, after remember, a few years ago, being in the 20, coming to the 30, having the backend vision and connectivity, short-range connectivity. And with AI and the base station and the Hillcrest now, although not contributing directly to licensing yet, that should be for now comfortable – in a very comfortable $10 million to $11 million, which will – should get us already by the end of the year to a higher licensing step function versus the 4 years that we have in the last few years.

Suji DeSilva

Okay, great. And then last question, congratulations on the automotive progress here. Can you talk about the competitive landscape and your customers? Is that a new entrant to the auto market? Or is that an established customer switching over to CEVA from an existing solution? Just help us understand where you are slotting into automotive. Thanks.

Gideon Wertheizer

Thanks, Suji. That sort of question, it’s important. The customer that we managed to win is incumbent, a strong incumbent in this space. And that’s why we are focusing leveraging on broad technologies that we have. We have – for automotive market, we have vision. We have AI. We have all sort of DSP for 5G connectivities. We have customer and offering for V2X. And we also as times goes by explore other elements in the cloud because the synergies, what we offer in signal processing and sensing is a perfect fit. And that agreement is another stakeholder that give us not just business, but also visibility in this space, which has an high entry barrier.

Suji DeSilva

Okay. Thanks, guys. Congratulations again.

Gideon Wertheizer

Thank you.

Operator

[Operator Instructions] The next question will come from David O’Connor with Exane BNP Paribas.

David O’Connor

Great. Good morning, gents. Thanks for taking my questions. 1 or 2 from my side. Maybe, firstly, on the automotive side. Congrats on the new win. And can you give us any idea of what geography and that customers in, and also maybe an update on exactly how many design wins you have now across your 3, I think, automotive customers, and when we can expect the initial ramp-up in royalties there? Thanks.

Gideon Wertheizer

So – hi, David. The customer is a global company, so we cannot pinpoint specific geographies. It’s a global company that, of course, has a global customer base. The other question about customers that we have in the automotive. I mentioned in the prepared remarks the 3 anchor customers. We talked about in the past about on premise. We talked about a very large OEMs that use our technology and [the server] [ph]. We do have other customers that approach the automotive customers not necessarily from the OEM space, but what is called the Tier 1.

The value chain in the OEM in the automotive space is a bit different. You have Tier 1. You have aftermarket. You have customers that are approaching the aftermarket. These are the equipments that’s being installed after we purchase the cloud. So these are other customers that we do. But certainly, the last agreement that we signed and the other 2 that we had before are big anchors for us in this space.

David O’Connor

Great. That’s quite helpful. And maybe as a follow-up to a previous question. So the 60 companies that you’re currently in design, how many – can you give us any sense on how many of these are going to ramp in 2020?

Yaniv Arieli

Yeah, it’s an excellent question. If you would help me with that number, that would be even easier and nicer. We need to do this exercise. And this is usually the time in the last 2 months of the year, that we plan for the following year, check with our sales and technology guys, our field application engineers, where exactly is each customer with different ramp-ups or different papers, and what’s the forecast like.

I hope we’ll see at least a dozen, but it’s really hard to say at this point without diving into it and doing this exercise, which we do on an annual basis. We don’t always get it right. Even if a customer we signed in the past has a chip, it doesn’t necessarily mean that he has the volume ramping up. It depends now when the OEM wants it, before holiday season or a specific timing or when its competitor comes in and he wants to come up a week or two before.

A lot of moving pieces even after the chip is ready to go to market. But I think that, again, we have seen probably two new reports coming out this quarter for first-time customers. And the markets are really big, in front of us and in front of our customers. I would say that this quarter, for example, out of the 14 deals 11 were Bluetooth-related deals, so really a very, very strong anchor in the customer base in this market.

David O’Connor

That’s helpful. Thanks, guys.

Yaniv Arieli

Thank you.

Operator

The next question will come from Tavy Rosner with Barclays.

Tavy Rosner

Thanks for taking my questions. Most of them have been asked actually. So, I guess, I had one. You mentioned the entrance into autonomous driving. And I guess looking at Industry 4.0., I mean, this is something that we talk about a lot lately. And I would assume that you guys would fit quite nicely into the ecosystem, given all the smart sensors and all the need for connectivity.

Have you been approached by vendors that are operating them? And how do you see the addressable market there down the road?

Gideon Wertheizer

I mean, lately, I would ask if Industry 4.0 and MIC 2025, which is the China version of this one. This means smart manufacturing and these are areas that we are discussing with customers. This relates to 5G. Keep in mind the 5G, when I mentioned earlier non-standalone, this is more of a mobile broadband for smartphone. But you go for standalone that area that relates to Industry 4.0 or MIC 2025.

So we have multiple angles to go into this one. Certainly, Hillcrest, with all the things that they can do with the sensors, it’s a good area that we can capitalize on. Then we have 5G. We have all the vision and the sound. Also, sound is an area that you’re going to use them for detecting malfunctions of machines.

And you’re going to install lot of microphone. And this is an area that we are specializing and discussing with customers. So Industry 4.0 is definitely the next big thing and we are addressing it and discussing with customer. And with this fine-tuning of the product, it’s not – we will not need a new product line there.

Tavy Rosner

Okay. I appreciate the color. And then the last one, I mean, you mentioned having $150 million net cash, right. Are you looking into any potential acquisitions, anything in your radar? How are you looking at valuation? Any color would be great.

Yaniv Arieli

Sure. This is not something new for us. We have been looking and continue looking for ongoing all the time as technology evolves and trends in the industry that you and Gideon just talked about change and evolve. And we have done a very successful one with RivieraWaves 5 years ago.

We have done two very interesting ones and we see the first fruit. I don’t know if we mentioned yet, but we have just now in the beginning of the fourth quarter signed our first sensor-fusion agreement. We’ll talk about it more in next earnings call, but that’s the first very nice sign. So that’s immediately after the deal was signed, a very short period and we want that to be a very successful add-on to CEVA.

And from our point of view, we find technologies that are synergetic to our customer base, sometimes new markets for us and things that we think that we could see – we think that could bring value to the food chain. They will continue to invest. We don’t have any restriction in the size or location. And, so far, I think we have done the right thing. And we’ll continue to look and try to do the right thing going forward.

Tavy Rosner

Thanks, guys and congrats on the good result.

Yaniv Arieli

Thanks, Tavy.

Operator

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

Richard Kingston

Thank you, Carrie. And thank you, everyone, for joining us today and for your continued interest in and support of CEVA.

As a reminder, the prepared remarks for this conference call will be filed shortly 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’ll be attending in December, these include Barclays Global Technology Conference on December 11 in San Francisco, California. Please visit the Investors section of our website for further information on this and other events and anything else we will be attending. Thank you and goodbye.

Operator

Thank you. The conference is now concluded. Thank you all for attending today’s presentation. You may now disconnect your lines. Have a great day.