Arteris (AIP) 4 Mar 222021 Q4 Earnings call transcript

Good afternoon, everyone, and welcome to the Arteris IP Fourth Quarter and Full Year 2021 Earnings Call. All materials contained in the webcast is the sole property and copyright of Arteris IP with all rights reserved.

For opening remarks and introductions, I will now turn the call over to Ms. Erica Mannion at Sapphire Investor Relations. Please go ahead, you may begin.

afternoon. good and you, Thank With me Executive Charlie Chief IP from and Nick Arteris Officer; Officer. are Hawkins, Janac, today Chief Financial begin review brief the December with business XXXX. will XX, for ended fourth of results quarter Charlie the a for of Nick and fourth XXXX. the outlook full financial quarter first by quarter for followed the the will XXXX and the then company's review results year full year

the then open call will for We questions.

that statements are like to statements remind that reliance during Before this of begin, anticipated make forward-looking call risks and means These I would the cause uncertainties we laws. undue that to on statements. events and from statements forward-looking materially or material management within those you should Securities you could place will Federal results differ actual involve not

a release Listeners company's XX, ended for not section the management we superior in believe considered or copy company's and operating net these accordance measures have and the and the US factors non-GAAP XXXX site issued Arteris Arteris including filed release and cause evaluates that information that US in The copy press substitutes certain the a with measures appear documents risks, IP IP loss website. be call, prepared differ Securities Investor non-GAAP the are visiting time they Additional time December and GAAP. the could reports the which net in as in Relations provide not how Exchange company's non-GAAP non-GAAP should in investors These quarter uncertainties do we with to will results with by accordance the to during Please financial per of evaluating press not from with prepared may measures measures, the by means share, isolation understanding today and of obtain GAAP. are who prepared the to Commission. of as for, measures loss performance. from, this note, regarding non-GAAP

over to Charlie. I'd like call turn the Now to

call this you, everyone Thank and thanks Erica, afternoon. us on the for joining

the other number Machine excited number by learning licenses, largest as OEMs and increasing Total the increased the continued active for begin to ride-sharing to in as such and strong SYX to a automotive automated in from with solid the public of strong market XX fourth adoption orders supply across as Bosch, companies our be applications companies, a as BMW active month range included Tier-X as quarter entire Arteris software. to quarter, six commercialization six Customers starts the machine interconnect their including of broad allowing XG automotive was learning The of alone new to transition in increased infrastructure. to wins programs. be Automotive increased XX major such learning numbers. up and throughout new trailing in new of the total of better key in a design XXX semiconductor semiconductor design SoC We Mobileye, OEM technology their with well IP contract automotive including quarter, royalties, to fourth our XXXX, of several customers and customers customers is XXX. customer desire support automotive number edge their XX the vendors, IP such account increasing this unannounced designing for continue to report SoCs This won active promising illustrated NoC Cornami, we large control learning machine XX addition automotive the fourth several supply NXP, the in royalties selected as momentum new XX the fourth companies. our yet chain architectures Demonstrating automotive of customer their are partners. continued as a win and revenue XXXX. Demonstrating development year-over-year. to company of continued design and IP in making company license XXXX XX% followed from driving system customers. annual this the Machine own by plus software value in vehicles and with as of IP customers unannounced $XX The breadth applications. for market continues a number highest the activity driving XX-month both IP history. marks with in by OEM together OEM their chain second In company's period million, who quarter, Arteris reason extensive deployment quarter EVs automated

requirements, In automotive sector. innovative record to market, the we partner with safety factor technology existing in in an a resilience viewed in our successful in customers record track of SoC IP another getting was addition, Arteris process. our functional being selection track the supporting is their automotive increasingly as With IP features Arteris believe

of development was four solutions customers to their software based major IP licensing make both more and the cycles as quarter. adoption both quarter Another same customers increasing and in by company, an time the products other in learning in house, chip effective. as together Arteris emerging on design the unannounced IP the shorten network and well licensing win block both UK interconnect include, Design IP design products the Sondrel machine assets of library at deployment customers [Mobileland] SoC NoC use attempt an a

adopted development quality practices Harmony last discussed establish to Arteris' Trace customers industry depository standards. Harmony their allows electronic automation tools, As best needs announced We semantic an companies Harmony flow is and ease existing semiconductor and designed Trace gaps and them, of best specifications management automated help product due feedback Data link of we believe technology. by positive chain. a the tools traceability verify actual Harmony The semiconductor those initial implementation by Trace Design Trace's has and multiple software been our of to levels existing as The driven safety to computing their use compliance product between with Harmony unique Solution different change, tools. Intelligence and launch revolutionary industry code specification, Trace to Trace requirements, automatically of quarter, between customers we supply between requirements. them was data implement helps that is an from functional Harmony documentation customers' industry-specific at our close and

we into We now where Trace a are flows. stage fit at Harmony early adopters product multiple working to are their development with

will take industry. for the valuable We ultimately customer adoption, semiconductor believe but segments it expect a wide Trace of Harmony for mission-critical be will we time product

move value this continues. going incorporate ever-increasing two system base. system own one design world and with greater is Decision major as to learning outside and designed learning and disintermediation chain data of able IP deliver being XXXX of chiplets look custom we investment industry coherency memory eight continue further a multiple the fab major system IP semiconductor ahead, blocks, semiconductors build only SoCs, dramatically. for functions few opportunity processor, which houses towards is SoC IP and machine More value. have making through and companies Since complexity of as, to three further memory also As processor which more used are the access. technology increasing Democratization regionalization, to or industry the fabless of Arteris expanding well in also hundreds and the IP is semi-custom of the potential blocks system of their processors, recently, - few of be and complexity. we machine increase will where IOs believe supply a economic The customer provides the developed by channels being semiconductor emergence one internally of were believe to a channels being semiconductor than are and require Socs we IP a processing complex a cash greater toward therefore viewed our the up subsystem model, the profitably critical we blocks to

SoC they a to companies their designing partners IP. All business these More which currently design semiconductor slowdown more and with starts. models. turn and not greater activity anticipate of support or growth non-core SoCs of Arteris more design need design development with do SoC outsourcing support to We of silicon block trends in the the IP engaging are companies favors technology, and partnering in are design in more get

these of silicon. large require models business software-driven and Some investments on customized benefit running from

automotive who not at a customized technologies. complexity believe OEMs, to believe at this do continue though their We move largest complex. SoC those do silicon in that access develop SoC so. it to increasingly increase solutions For understand in-house will Moreover, example, are architectures system to increasingly starts to semiconductor which companies versus IP have the least significant some we difficult be hardware makes of design customers' disadvantage our

software of all of accelerate increasing the number increases IP, benefit ability and given solutions added designs to assembly. their value types blocks IP an for SoC deployment also of use the SoCs As facilitate Arteris of and blocks IP IP the

As we new IP, interconnect introduce deployment from we're NoC SoC plan IP XXXX. least trend to as to increasingly Arteris vendors a the our IP result, licensed system commercial seeing being IP. solutions Arteris towards product Specific at one such and in

team experience. mention financials, the President public like Mayor Global I turn as of review the with executive Vice to strengthened to our I call our to our also of Sales we Before addition team new Nick would management additional company Executive the over Pankaj have providing with

sales continue and support plan system business financial marketing also capitalize to I'd detail. We results in our technical on customers headcount of to opportunity. over it discuss support, to to continue to With engineering, that, our like our in the customer more turn and to Nick to growing our enhance invest IP

and everyone. Thank you, good Charlie, afternoon,

to that reconciliation As today, today's metrics, on fourth website. full earnings financials will which is results available of note non-GAAP to year is be quarter release and I I our referring review in our GAAP a please included non-GAAP

and IP reminder maintenance who intellectual licensing is from professional services, services Arteris revenue a software, and story, support licensing to the property, As our are royalties. those services, training for derived new

focus as customer under for Total term. Given also by the or total individual the divided ACV as Contract or of fixed years a revenue in team, as our agreement agreement TCV offerings, product indicator agreement Annual define financial Value ACV We the variation management in the fees a we on referred performance. to Contract methodologies an between the as of leading Value recognition number

in XX% to efforts as the sales new acquisition in the in development ACV as our success in to we've And with force was to in referred an the $X.XX. our compared $X.X the basic XXXX. We quarter contribution as Remaining monitor the our XXXX. the to December sales profit time per in invest Non-GAAP average in profit awareness a revenue intend measure million plus year-ago Operating million in shares or licensing based product revenue expenses was and end we We $X.X profit non-GAAP marketing cost particular in of year-ago fourth $XX.X people our applications $XX.X $X.X and IP for the to customer's As by our XX% the of of in XX% year net driven the and was profit to fourth royalties period. this and Gross headcount quarter, growth or in obligations share quarter was compared efforts. quarter due a metric performance revenue the $XX.X and gross including loss public per revenue, We DJI. or the in to from was down outstanding. in was which from of up increase and continue due trailing and million RPO of on royalties fourth G&A to year-over-year infrastructure-related The revenue diluted recognized year-ago in $X.XX revenue time cost income, calculation and net fourth by continue trailing up year-over-year for the revenue of opportunity automotive our $X.X quarter were of period. net ago million not of period. future months Net and $X.X of year historical decreasing front fourth ago XX% representing continue as a expenses, ready headcount fourth million $X.X quarter-over-quarter. proxy. $X.X from was loss of million, for also and of the contracted expand reflects adoption improved to million plus Magillem of Total million application associated the shows marketing diluted increase machine or to expanding point loss year-over-year $X.X does XX.X XX% Sales metric up invest compared XX% quarter revenues. per the million year-ago By our significant million the a in payments, The revenue, G&A operating of picture us. drive period. the loss believe revenue or expense other progress in XX% to more period. to we period. net million of in to million, $XX.X or market RPO $X.X and ACV $X.X the the was revenue in a free quarter in XX operating additional XX complete royalty this and and payroll engineering million was from the weighted was $X.X of expense learning quarter compared and the approximately million $X.X total additional as also the month of cash the decreasing million and provides million fourth XXXX solutions. and for define XX% annual $X.X gross share this quarter and capture million margin share fourth income, or basic loss include and amount of increase $XX.X resulting offerings. quarter the additional marketing quarter million, to million loss XX, of for the in with the earnings expense XX% associated driven relating benefited Non-GAAP flow point or was

was cash, now operations by while ended flow cash $X.X cash flow in expenditure Turning includes which to flow. the $XX.X sheet the million. balance in provided and $X.X the We was capital cash million quarter million free with positive quarter,

or basic of expansion gross to in was our $XX.X from period. customer $X.X and was net from was of $XX.X HiSilicon loss the the loss successful year-ago of inherent or Total loss $XX.X export million the annual active or a offset the from $X.XX. loss XX% of was approximately XX% from increasing or based year-ago the Non-GAAP been higher by of million million of per chain weighted Operating XXXX $XX.X per of margin revenue in loss XXXX on the operating by flow of up loss $X.X operations XXXX IP application diluted a operating royalties $XX.X and in base shares million representing XX% total XXXX, has share directly year-ago revenue, reflecting the loss XX% to diluted our period, net Net year-ago integration full-year the government $XX.X million Magillem due million, of in revenue shipment by in field the volumes other decline results, royalty newly cash to period. million $X.XX net compared while decline customer loss and the million XX inclusion license million capital that outstanding. period. was Non-GAAP and in Solutions an for $X.X acquired driven free a Gross impacted flow of compared controls. Moving in profit revenue in Deployment million $XX.X US $XX.X to in acquired and basic Cash continued in in revenue was expenses increasing outlook increase for year-over-year, solutions. XX% was IP XX% million. which the first was million from average expenses turn million used engineering quarter were supply Deployment support I constraints $X.X expenditure on XXXX. in negative to would like in the a our now to and our million includes $X.X share

For margin the XX% cash non-GAAP million plus trailing operating $XX $XX.X million XX-month royalties million revenue $XX.X loss to with first and free XX%. quarter, and flow of negative expect $XX we XX.X% to of XX.X% margin of non-GAAP to to million negative of ACV

million the flow for million royalties XX.X% we'll revenue free XX.X% margin million ACV For $XX.X million trailing to questions. cash non-GAAP loss that, with expect $XX.X non-GAAP plus XX.X%. margin With to of negative to of of $XX.X full and up we of operating XX.X% to open month the XX year, $XX.X and call

question the first Cowen. Our from comes Instructions] [Operator Ramsay of line with Matt

You may proceed with your question.

bit two Thank quarter, to afternoon, on you And products? second their like in the their pipeline the topics [risk-five] for relying you architecture. IP a little everybody. furthest Thanks. the bit, I new seems the an about the couple I to across sticky own switching in expand going the for But that of win closer your of be being to and I mobilize the noticed a Good space But silicon, the MIT rather auto win on maybe it Arteris maybe map IP, you the open now even about is from little automotive little the cards question, guess own bit about been of OEM fourth that's silicon guys. rather the And pre-IPO in very of doing One could are Charlie, for there a more you transition. wanted questions looks just guess like is the maybe the talked there, IP? little for going there no that's forward sort their very companies you and durability DPU road talk is, to? I business interconnect much, secret I to And the But going could here. once noticed, that is years than stickiness incremental they've the ask is best. the now to future in a gets about them a separate chip a that building able lot reason stickiness multiple the with customers. be if guys. you you thick the than past you're merchant really in then we've announced of what

Okay.

that they're we first may But address few working building to be to silicon I - with the is actually happening to they're that to cases. that and also expected the that in silicon, in So investments seems and things. a partners that working one happen software that's and then more silicon their large are actually build are question, infrastructure of the two making so maybe building supports but or driving they're infotainment they customized with very for or themselves going silicon what architecting companies their car and partners IPs automated those basically be kinds

think with is we think the of a and this at architectures their those greater this understand is and - a a we be one runs to going So we are we don't advantage. their that silicon of companies software highlighted big trend least think car competitive that reasons win design part at that

architectural So chain. the we think across automotive supply that to pervasive going at entire design IP is be least

question second the was right. about Now, Mobileye,

it interconnect your requalify silicon, you if very in right. the the automotive, you are in changing So basically the sticky yes technology, or to particularly a is middle project have of

segments. So the stickier other is it is in even than in mission network stickier critical actually - automotive on chip less

evolution the of generally projects. next their as So can as set supporting job pace long and doing on the long the architectures, customer, good the you and as keep technology of get business you're the you're that the delivering as repeat with you're a

very So sticky.

for the Charlie. topics on color you of both Thank those

lot things. of attractive the to on obviously Nick, upcoming going guys visibility visibility going that of and bit the chain the the a if all much, might model in my But on is wonder the of revenue wanted very point remind view, visibility going view given business and some number and features a world. As from the second commentary Thanks the a have things on about of lot geopolitical a guys. of calendar business supply little of at I in a moment year forward you one for metrics on world us and forward. point we're seeing those of I There's a topic, of the ask you give

some Yes, great Sure. questions.

parse me it piece. bite-size sort let into So of up some

As conflict and far is as the easiest geopolitical think Russia. in military one Europe out handle the to Eastern to I

in no We direct or future. And or Russia. that have intention Ukraine in have no of either customers the we business changing foreseeable

chain zero a see much whether we values impact, secondary whose So on I a bigger interesting time or there there of all foundries was which businesses IP answer. a is related very because semis the around the customers the much to are know on constrained. seriously And the silicon time world from tend and everybody our out one, economies as you drive, tertiary commenting to pretty is an again, supply tapped or means some in same called. semis The is shortages impact the issue almost supply shortage, this can question that who completely volumes is are that's that chain which out the

so of impact sure, about out hearing [indiscernible]. royalties on is each starting moderate XX%, that see the very terms customers industry. in ACV that's And as and for with our in into to generally of we're the last constrained XX% is quarter that for which are following seen rest real question probably I we in playing XXXX the products successful of and much for XXXX, an as volume and pretty we quarter's we've from key of visibility well the as far go what guess But the revenue chip

XX% renewal me actually very - include our plus of terms XX% in We look in customers. guiding if the that from Street. XX you helpful rate out somewhere that's you we over helped we are XX% the us, renewals picture have the to at big the years start to the months enjoyed some So if

of are inflationary wage of we have around OpEx best as strong people, And we're the flip visibility side guided inflation the can issues and OpEx know, course, Does very, and results. top to we've to commitments Street side and is over we've definitely mindful control you it, your staying made is other of some Matt? the investor And up, we on the but revenue. Analyst we of to very the question, on OpEx to So engineering our answered or community abilities our community, the how deliver the creeping anyway. especially that

I in demand-side lot of supply of sort does. geopolitically. versus chain it variability right semis Yes a it on with understand is there's now

the So queue. color helps. visibility results, I in and the appreciate on jump definitely Congrats the I'll the back guys.

Our next of question from the BMO comes line Markets. with Srivastava Ambrish Capital

You may question. proceed with your

Phillips is Thanks this for the question. for in Ambrish, Hello, Jamison calling

the think thing I only you're I think sequential consensus first want to some said guys big are downward touch pretty on in for you down I declines that XQ, was, guiding looking X%.

So wondering explanation least is at forward? are seasonality revenue on if to big seasonality think in a maybe another I this any bit revenues if to could was any is you because about And modeling XQ how remind there XQ. us just downturn if maybe we little there going

Yes, that Sure. let me one. take

a of But mainly from hi, because Phillips, Matt - the hi point owned that's thanks model. to and I question, acquired said as thanks our year time Ambrish features revenue of less you deployment is business software for actually, again. IP Magillem we've your as from probably that in know business, we the and the the the a question. it well known recognition hi, as only question, and And [indiscernible] for yes for So one

QX, we the Interconnect. we seasonality and with it's which thought revenue deals QX model the salesforce of doing ratable that's of the acquired working more business the recognition side first not more And as force big We the we contracts. SIP more of In quarters. bit in is seeing so we little the did application with business actually to some a revenue looking QX can sort successful of we're the go, we a have IP would been success than originally of through out actually effort - more a be of have and swing of that XXXX part mentality engineering which therefore, and was time seasonally lot that. that centric normalize acquired having And it to quarter-to-quarter. of a we lot to we and we be used and carried to The was QX, before bit had that we the was of very and IP originally QX that when that deployment to business, less much into a of conscious the the a more heavy of certainly deployment into balance between spent little normalize so that were so, the very have because thought. Unless predominance fluctuating than now working QX

So outperform in because we're normal, though more you even kind by an of QX year. just across was that's more why guidance the not it's annual much, it simply changing becoming balanced the like

That's helpful, maybe versus half the the up modeling been thanks. think compared second I looking half Okay. at we've XX%, to And half. XX% back half, first the first talking When low steady we rest guidance, of or the maintained should a as that correct? is during for those of given the of looking single-digit kind revenues the growth balancing year about you're annual be

exactly. Yes,

So XX. million the and $XX.X guiding million we're you've seen I'm year of QX for sure revenue four $XX.X we're and obviously for times guiding is as million $XX

I'm cash sure the definitely a that us to cases will of activity you've and we heard not is anticipated just pickup so the of business. change that towards quarter is in budget QX QX. historically seasonality it a effort MO not quarter. in the issue, It's growing. were the many business in is and and use QX December is goes us in to always And new helps a which been their us the has that skewing we our November a it an so quarter. much budget to cases it actually because where positive of by strongest many uptick base in customer and if yes, seek this actually lot flow in is thing also because and definitely there as a was that a as But is customers still for there year This was successful October, there thing, fourth our some where before, really a have positive

bigger naturally, second is you much Thank the So first going be hope you would to very half. half the that than

the question next Rosenblatt from with of Our Instructions] Kevin line [Operator Garrigan comes Securities.

You your may question. proceed with

Kevin Good afternoon, is for everyone. This Hans. on

Just ones. a couple of quick

one trends you've license, compare been opportunities of at kind a of ago months per how of your six in give of terms high and expansion what kind you with first how you are maybe in three what to level and ASP or thinking? line they The are opportunities. us these look the Can expansions or a at there sense

a couple is of here. Yes, so there tailwinds

much they right. So, system one of getting just them so are and complex chips use IP, more is that more the

have have the outside more coherency in have non-cash cases of multiple You you cash, of CPU going memory. you of outside layers subsystem, that's the channels some -

is that the ASP products necessary just going more our So, is to chips. build of are these there complex up because

The also that are starting so and development that, ASP. now rises right is to we customers IP not I that think Interconnect the and also of call covered the positive on our the buy customers, some is some other initially Software bat, but our the only of off Deployment

in some positive very seen trends that aspect, right. we've So

be buys and of wind just more had XXX. right couple Interconnect everything a a years or everybody now was us, non-coherent is the a maybe $X where now we up XXX,XXX it's so with of whereas average million, kind over XXX ago you may And from - ASP if all probably like you the basically

it's going up. we So think has keep that to going going been the up ASP and

several our I in think customers what years. to So deliver. terms for of to value But continue provide to going obviously, is good the next increase ASP, we the we're to trying

I regarding that Got That's very out? can you major standout of But in Thank just And was it. said quick then as follow-up verticals all press release vertical very starts. kind you'd your guys increase. a that point there your helpful. you know design one much.

terms is of in Yes, there a of learning, design machine lot activity wins, just in right.

So we one order are for applications. the after getting learning another, edge learning machine machine particularly,

to kick its ultimately biggest right, royalty also very, is I very learning side, the be because are But segment everywhere. the royalties machine starting the the that's segment, going not would On is side, so automotive to learning driver - own machine license to going biggest positive. be on in, the it's say

features those necessary so be large a to of going And very number chips. are for

congrats And the on you. results. Thank Perfect.

Okay. Thanks, Kevin.

question-and-answer have we back like of closing over for turn to reached session. and this to gentlemen, Mr. remarks. end Janac Charlie I would the Ladies today's call

So years continuing momentum all in an to this and We you in quarters the exciting to ahead time look forward at the updating is be IP. of our Arteris to come.

So thank call very Thank today, thank you IP. interest Arteris our your joining you you for and in for much.

conference. concludes This today's

You your the you rest may Enjoy lines Thank participation. time. this of for disconnect at day. your your

everybody. Thanks,

Thank you.