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spk06: Good day and welcome to the SEVA Inc. Third Quarter 2021 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch-tone phone. To withdraw your question, please press star then two. Please note, today's event is being recorded. I'd now like to turn the conference over to Richard Kingston, Vice President, Market Intelligence, Investor, and Public Relations. Please go ahead, sir.
spk01: Thank you, Rocco. Good morning, everyone, and welcome to SEVA's third quarter 2021 earnings conference call. I'm joined today by Gideon Wertheiser, Chief Executive Officer, and Yaniv Ariely, Chief Financial Officer of SEVA. Gideon will cover the business aspects and the highlights for the third quarter and provide general qualitative data. INEE will then cover the financial results for the third quarter and also provide qualitative data for the fourth quarter and full year 2021. 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 SEVA to differ materially from those expressed or implied by such forward-looking statements and assumptions. Forward-looking statements include statements regarding demand for and benefits of our technologies, expectations regarding market dynamics, including anticipated growth in the cellular IoT market, beliefs regarding benefits and impacts of the intrinsics acquisition, including expansion into the aerospace and defense market, an ability to offer integrated IP solutions and enrich security and assurance products, and guidance and qualitative data for the fourth quarter and full year 2021. 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 scope and duration of the pandemic, the extent and length of the restrictions associated with the pandemic and the impact on customers, consumer demand, and the global economy generally, The ability of SEVA's IPs for smarter connected devices to continue to be strong growth drivers for us. Our success in penetrating new markets and maintaining our 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 and IoT markets. our ability to execute more base station and IoT license agreements, the effect of intense industry competition and consolidation, global chip market trends, including supply chain issues as a result of COVID-19 and other factors, and our ability to successfully integrate intrinsics into our business. EVA assumes no obligation to update any forward-looking statements or information which speak as of their respective dates. With that said, I would now like to hand the call over to Gideon.
spk05: Thank you, Richard. It is an exciting time for CIVA. The need for and the deployment of our technologies for the digital transformation era never been more evident. Wireless solutions that we master are the catalyst for the emergence of new smart devices among which are TWS earbuds and hearing aids, AR glasses, smart watches, smart home products, industry 4.0 factory automation, telemedicine, and more. Our innovative solutions, market reach, and strong execution are the drivers for another outstanding quarter of new licensing agreement and royalty progress. Total revenue for the third quarter of 2021 was record high of $32.8 million, up 31% year-over-year. The licensing environment continues to be robust and came in at $21.6 million, up 74% year-over-year. Our BlueBot product targeted for TWS earbuds, AR glasses, and smartwatch markets, and our Wi-Fi solutions, which are ubiquitous across many IoT devices and access point products, were key contributors. Also in the quarter, our intrinsic team executed very well, signing important design agreements with Lockheed Martin, with a major industrial company in the defense space and with an innovative wearable device company in the medical space. In total, we signed 25 IP licensing and NRA agreements, of which 13 were first-time customers. Royalty revenue came at $11.2 million in the quarter, down 11% over the year. The royalty contribution from our base station and IoT product category was all-time high, driven by secular growth in Bluetooth, computer vision, sensor fusion, and cellular IoT markets. 5G base station run visibility is lower than normal as the space experiences longer lead time due supply chain constraints. In total, royalty unit shipment of SIVA base station and IoT-enabled products were 405 million units in the quarter, up from 200 million units in the third quarter last year. Handset Baseline Royalty this quarter includes the milestone of the first 5G smartphone report we have received of just shy of 3 million units. These gross drivers were muted by larger than expected decline in 2G royalty revenue. We do not see this decline as a market indicator, as the 2G market is still sizable in developing countries and we have experienced this pattern over the years from time to time in Fujiro Eldest. Let me now make few remarks on our business in the third quarter. The first is our Wi-Fi product line, which has become a strong driver for us in recent quarter. The complexity of Wi-Fi technology rises dramatically, when moving to a new generation of the standard. These possess technology challenges that deter a growing number of incumbents or new entrants from developing technology in-house and instead to seek out technology to solidify their time to market. The recent Wi-Fi 6 and Wi-Fi 6E standards are being rapidly adopted in the latest laptops, smartphones, and routers and are expanding to XR headsets, such as the recent Metaverse initiative by Meta, formerly Facebook, and as well as security cameras. Wi-Fi 6 is also expected to have a fundamental role in autonomous car, where it will be used to upload the terabytes of data collected every day to the cloud, where it will be used for AI-based optimizations. CIVA is benefiting from a unique position as the only viable IT supplier that enables semiconductor companies and OEMs to address the diverse and large market that require Wi-Fi 6 or 6E and upcoming Wi-Fi 7 standards. We have now more than 20 Wi-Fi 6 customers and our licensing revenue from this space grew 149% compared to the first nine months last year. We are also seeing good progress in shipped SIVA-based Wi-Fi products, which grew 204% to more than 111 million units versus the first nine months of last year. Second, Our customers' activities have stepped up as we continue to integrate intrinsics into CIVA. As we noted in prior calls, our growth strategy is driven, one, intrinsics experience and customer base in the aerospace and defense market, which we believe will enable us to expand into this lucrative space. And two, our capabilities to offer integrated IT solutions, which combines the SIVA IT portfolio and intrinsic chip design competencies to broaden our impact and to grow our revenue base with strategic customer design. The third quarter was extremely successful in concluding sizable agreements in the defense and medical space. We booked an important and sizable agreement with Lockheed Martin for DARPA's SSITH program. SSITH stands for System Security Interface through Hardware and Firmware. and aims to revolutionize the way electronic systems are protected against different means of exploitation. As part of the SSITH program, CIVA, through our subsidiary Intrinsics, is involved in the development of new hardware security architecture and related design tools to protect against entire classes of vulnerabilities exploited through software and not just specific vulnerability instances. The methodologies being developed as part of this program will enrich our security and insurance IT, offering bringing new levels of protections to connected cars, wireless communication, and other industrial markets. Another project that Intrinsic is concluding during the quarter is with a major U.S.-based defense company for advanced node chiplet design. Chiplet technology is a new wave in semiconductor integration with the goal to cost-effectively assemble multiple dyes or chiplets into one small chip package and by such gain time to market and lower entry barrier to key markets. Chiplet technology is already deploying cloud chips by Intel, Broadcom, AMD, and Marvell. The intrinsics team, with the financial backing of DARPA and its ecosystem partners, is aiming to drive chipless to the defense market and further to proliferate them for commercial applications. And lastly, regarding our activities and market dynamics in cellular IoT. Cellular IoT module is used in a wide variety of verticals among which are logistic, asset tracking, industrial agriculture monitoring, parking, payment system, automotive connectivity, and more. It is a high-volume and fast-growing market, forecasted by ABI to reach to 920 million modules by 2026, growing at a 29% compound annual growth rate. A main segment in the cellular IoT space is NB-IoT, capturing approximately 40% of the volume and growing 44% CAGR between 2019 and 2026. CIVA has strong traction in the Cat1 and NB-IoT spaces, the two standards which dominate the deployments today. During the third quarter, we continue to see strong growth in volume, up 356% compared to the third quarter of last year, and received royalty reports for the first time from a new cellular IoT customer, one of the world's top 10 ranked IC design houses. Europe also prioritizing cellular IoT at the back of its large manufacturing base. We have three widely known European customers that have designed SIVA technology. The first is Nordic Semi, using SIVA for NB-IoT with dozens of customers. The second, Sequance, is using our Pentagy platform for 5G cellular IoT with number of high-profile design wins. The third is an unnamed leading semiconductor who is developing cellular IoT chips targeting its large industrial and smart customer base. So in summary, SIVA is transforming from specialty in DSP core technology to a trusted technology house with the pivotal role in enabling new industries to become connected and smart. Our success is underpinned by our unique strengths to combine DSP, AI, software, analog, and RF designs into a holistic solution for customer and industry needs. We believe we are at an inflection point to scale our business and strengthen our collaborations with key players across a broadening range of industries. Finally, we continue to monitor any possible implications of the ongoing supply chain constraints. As commonly acknowledged, the semiconductor supply chain challenges impact our broad industries in different manners. which may translate to low visibility. With that said, we are on track to meet our target and will continue to work with our customers and partners to mitigate negative impacts. With that said, let me hand over the call to Yaniv for the financials. Thank you, Guillaume. I'll start reviewing our operations for the third quarter of 2021. Revenue for the third quarter was up 31 percent to $32.8 million, our second sequential all-time high as compared to $25 million for the same quarter last year. The revenue breakdown is as follows. Licensing NRE and related revenue is approximately $21.6 million, an all-time high reflecting 66 percent of our total revenue, growth from $12.4 million to the third quarter of 2020, and 39% sequential growth. This is the full first quarter that we recognized NRE revenue, which resulted from our acquisition of Intrinsics back in June. Royalty revenue was down 11% to $11.2 million, respecting 34% of our total revenues. compared to $12.5 million for the same quarter last year. As Divya noted, our consistent growth in base station and IoT and the penetration to 5G smartphones is muted by larger than expected decline in 2G royalty revenue. Quarterly growth margins came in better than expected due to lower allocation of intrinsic NRE costs from the RMD expense line to the cost of goods expense line. Gross margin was 85% on GAAP basis and 87% on non-GAAP basis, as compared to our 81% to 82% guidance. Non-GAAP quarterly gross margin excluded approximately $0.2 million in equity-based compensation expense and $0.2 million for the impact of amortizations. Total GAAP operating expenses for the third quarter was over the high end of our guidance at $26.3 million. Due to lower allocation of intrinsic NRE costs from R&D to the cost of goods, as per our prior quarter's guidance. Such shifts between these two expense deadlines may happen from time to time and are tied to the actual design services performed in the quarter. OPEX also included an aggregate equity-based compensation expenses of $3.2 million and $1.2 million for the different amortizations. Our total non-agreement GAAP optics for the third quarter excluded these items were $21.9 million over the high end of our guidance due to the same reasons I just stated with regards to the GAAP numbers. GAAP operating profit for the third quarter was $1.7 million, up from $2,000 in the same quarter a year ago. Non-GAAP operating profit was $6.5 million up 51% in the third quarter of 2020. For the first nine months of 2021, non-GAAP operating profit was up 69% year-over-year to $15.5 million, illustrating the growing operating leverage we are achieving while we scale the business. Tax expenses for the third quarter was approximately $1.8 million, a bit higher than forecasted, with strong revenue mix and interest for connectivity products originating in France, which have a higher corporate tax rate. U.S. GAAP net loss for the quarter was $0.2 million, and diluted loss per share was 1 cent for the third quarter of 2021, as compared to a net loss of $0.7 million and diluted loss per share of 3 cents for the third quarter of 2020. Non-GAAP net income in diluted EPS for the third quarter of 2021 were $4.7 million and 20 cents, up 29 percent and 25 percent year-over-year, respectively. Non-GAAP net income in diluted EPS for the third quarter of 2020 were $3.6 million and 16 cents, respectively. With respect to other related data, shipped units by CIVA licensees during the third quarter of 2021 was 438 million units, up 26% from the third quarter of 2020 reported shipments. The 438 million units reported 33 million units or 8% were for handset baseband ships. our base station and IoT product shipments were a record 405 million units, up 29% sequentially and 103% year-over-year. Of note, Bluetooth was a new record of 291 million units for the quarter, and cellular IoT also reached a new record high of 26 million units. As for the balance sheet items, as of the end of September 2021, CMS cash, cash equivalent balances, marketable securities, and bank deposits were $145 million. Our DSOs for the third quarter were 43 days, a bit higher than the prior quarter, but at our norm level. During the third quarter, we generated $6.4 million from operating activities, Depreciation and amortization was $1.7 million, and the purchase of fixed assets was $0.2 million. At the end of the third quarter, our headcount, including the forensics team, was 485 people, of which 403 are engineers. Now for the guidelines. Our strong top-line performance in the first nine months of 2021 was outstanding and provides us with a strong confidence in our business and strategy going forward. We therefore are raising our annual revenue guidance up to a new range of $120 to $122 million. Our licensing business and our market reach is expanding. We have good backlog and pipeline for the upcoming quarter. We believe the growth trend in the base station and IoT category, LTE and 5G, will persist into the fourth quarter, with the extent of such growth in the fourth quarter being subject to any near-term supply chain constraints. Specifically for the fourth quarter of 2021, Gross margin is expected to be approximately 82% on GAAP basis and 84% on non-GAAP basis, including an aggregate $0.3 million for equity-based compensation expense and $0.2 million of amortizations. OPEX for the fourth quarter should be slightly lower than the third quarter. For the fourth quarter, gap-based OPEX is expected to be in the range of $25.5 to $26.5 million. On the anticipated total operating expense for the fourth quarter, $3.2 million is expected to be attributed to equity-based compensation and $1.2 million to the different amortizations. Therefore, our non-GAAP OPEX is expected to be in the range of $21.1 to $22.1 million. Net interest income is expected to be approximately $0.3 million. Access for the fourth quarter is expected to be approximately 25% on a non-GAAP basis. And share count for the fourth quarter is expected to be around 23.8 million shares. In a while, we can now open the Q&A session. Thank you. Thank you.
spk06: If you'd like to ask a question, please press star then one on your touch-down phone. If your question has been addressed, you'd like to remove yourself from queue, please press star then two. Today's first question comes from Matt Ramsey at Cowen. Please go ahead.
spk03: Thank you very much. Good afternoon and good morning, everybody. I guess to start off with, congratulations on all the progress in the business and the raising of the guidance and all. I just wanted to understand a bit about what happened in the mobile, I guess, baseband or handset units dropping off in such a big way in the results. And, Gideon, if you could just walk me through the market dynamics or their particular – licensee situation that went on. It was just kind of, or were there some reclassification of numbers as you guys refocused the company on new growth areas? I'm just trying to get my mind around that one a little bit. Thank you.
spk05: Let me find it. Good morning. Let me go to first on the composition of the royalties the way we see. So as we discussed, the base station in IoT category is flourishing and And we have almost all the products that are going, if you look year over year, significantly computer vision, Bluetooth, cellular IoT, sensor fusion. So that's what we plan and aim, and now it's kicking. Base station and IoT, last year we had a very strong quarter. Everybody went out of the lockdown, so that was the first full quarter of coming out of the lockdown. So it's a comparison, but overall it's moving. We see it also in the design wins that they are getting. China Mobile, for example, ZTE got a big chunk there. Mobile, when you look, I would say generally is trending the way we expect it. We see LTE growing. The 5G is growing. The 2G is something that we had in the past. You know, there could be different reasons. I don't think it's a matter of inventory. You don't have inventory these days. It's more like prioritization. We see many priorities. chip companies giving priorities on the allocation that they get to the top tier, to high-end funds, and not to this one. From time to time, we do two-up because last quarter was a very significant one, so we move things between quarters. So I wouldn't, the 2G, I don't see it's a market item. I think next quarter it will come back. That's the reason that we don't change our guidance in as a result. So it's nothing to do with the general trend that we see in the mobile, which is as we expected. And the good thing is that now we are in the 5G. By the way, Matt, when you look at it from a nine-month perspective, smartphones are up year over year for us in volume. And the 2G looks better on a nine-month comparison. It's still lower than last year, but this is due to this Q3 hiccup, and we think it could pick up next quarter.
spk03: Got it. Thank you for that, guys. One quick little follow-up to that and then one more question. I guess the follow-up is, should I take it from the fact that that mobile rent rate came down as much as it is that sort of the headwind from the Intel modem transition in Cupertino is kind of fully behind you guys in the run right now. And then my other question is completely unrelated, but Yaniv, on gross margin, you guys came in well above, and OPEX was higher, too. I just wonder, you guys brought in intrinsics, and I think some of the folks – there might have been categorized in cost of goods versus OpEx that would have been in your old core business. I mean, working with the auditors and whatever, is there any kind of change in the allocation there, and how should we think about gross margin going forward? Thanks.
spk05: Sure. So let's start with the first one. Apple is still selling iPhone 11 and SD, low-cost type of phones, and it's still out there. We don't know until what and how long it stays, but our report for Q3 was stronger than Q2, for example. So it's still there, it's still contributing, and as long as those phones are shipped, we are getting paid, and that's still a contribution, much lower than in the past, but still a positive contribution for us. That's the comment on Apple. It has nothing to do with that design loss to Qualcomm. On the cost of goods, you are right that the service business, when you have projects, and recognize revenues, those expenses are written at the cost of good time. What happened in the last quarter is that not all the people, the R&D guys, were utilized for those deals. Some were still doing R&D per se for intrinsics and not services. And therefore, unlike what we had forecasted originally in the beginning of the quarter of 81% to 82%, This bigger portion of them kept still and did R&D for whether it's security or chiplets or a bunch of other technologies that Intrinsics has today, and we're trying to make an IP business out of that. and to combine it with the ongoing services. So it has nothing to do with auditors whatsoever. This is apparently something that could move from quarter to quarter, less in our control, and it more depends on the timing of closing a deal and the actual start. of an employee or engineer starting to make those design services, and as soon as it does, those costs are recorded in COGS. As long as it's not there, it's in R&D, and that could shift, and we had about a million-dollar shift in our expectation in the third quarter. We think that in the fourth quarter, there'll be more and higher revenues from NRE, and therefore higher expenses in COGS and a little bit lower in the R&D line. So that's That's the shift that could happen from time to time.
spk03: Got it. Just to be clear there, Yaniv, so this is just to set the expectation for investors that this could bounce around a little bit on a quarter-by-quarter basis, but it's not really indicative that anything's changing in the business or the accounting. It's just kind of the way that this business could work as you fold in intrinsics over time. Thank you for taking my questions, guys.
spk05: Yeah, that's exactly the case, Matt. Nothing to do with accounting, just the ramp-up of the product. And I'm sure that when you have fully ramped up and have many more customers and prospects, you may have less of that effect because most people will be involved directly with customers.
spk06: Thank you. And our next question today comes from Tavi Rosner with Barclays. Please go ahead.
spk02: Thanks for taking my questions. Did you break out what the interest and revenue contribution was this quarter? Just to get a sense of what organic growth was.
spk05: Interest income, you said? In physics, no?
spk02: In physics.
spk05: In physics. Right now, we're looking at it as a one business model. We started off last quarter for the first time with just one month. We stated that it was new. But when we bought Intrinsics, it was around the $20 million run rate that we said in the first earnings call there with the combination. And plus minus that, those are the annual run rates. And the idea for us is not to, as Gideon alerted earlier in the prepared remarks, is not just to tackle that market with NRE services, but also with the combination of IPs and of an integrated IP solution. And those are the things that we're working on. And hopefully that one way could be increased when we offer more IPs to their existing and new customers in the future. So I hope I answered your question.
spk02: Yeah, no, definitely. And just following up on that, were you able to quantify the opportunity within our workspace and defense?
spk05: Well, this is a roughly $6 billion market in yield in different chips. And, you know, tens of billions of dollars in R&D projects. And the idea for us is to not just to get and to continue to get larger share in this project, but more to drop in into our IP. And in such a case, you make a combination of IP and services into this one, and that becomes more typical to what we are doing today by licensing of the shelf IP. The other approach is to go outside of the defense to large OEMs and to offer them customization of the IP that we have at SIVA, We call it integrated IT solution. It's a more comprehensive solution to the customer, and the benefit for this is higher overall bill size and wealth. And that's exactly what we are doing in this space.
spk02: I appreciate the call. I'll go back to the queue. Thank you.
spk05: Thank you, David.
spk06: Our next question today comes from Suzy DeSilva at Roth Capital. Please go ahead.
spk07: Hello, Gideon and Eve. Congrats on the progress here and the diversification, certainly. A couple of questions about the Base Station IoT bucket. Now that Bluetooth is this strong, I was curious the non-Bluetooth part of Base Station IoT. Gideon, what do you think are the best growth opportunities over the next several quarters because I think it's going to be an increasingly important segment to talk about, the non-Bluetooth base station IoT segment.
spk05: So in terms of shipment, there is shipment and there are trends in the market that I can expand on this later. So in terms of shipments, We talked about Wi-Fi. Wi-Fi is growing significantly in terms of units. You see, we dramatically cellular IoT. That's another angle. Now that Europe is bringing up this one, and we have three customers there. So that's another one. Computer vision, which comes together with AI. So these are active... then when you look year over year, it's a substantial growth. And that's a driver. Now we have, Excellent product for the TWS market that what we see now in the licensing. This is what we call the blue, but we, we, we, we expanded on that, on the prepared way mark. And we have now, I think three or four licenses just in a very short period. And, uh, and that's, will be driver in my opinion, in the second half of next year.
spk07: Okay. Thanks Gideon. And then on Bluetooth, it's just a large part of your, um, unit to this point. Is the ASP there relatively static, or is there an opportunity to uplift the ASP through products as you go forward?
spk05: Excellent question, Suji. So the market itself is pretty stable there. It's really volume-driven at this point because the price points are obviously the right ones. in order to tackle such a huge market and consumer and industrial and gaming and everything that's connected to Bluetooth. Wi-Fi is making its first steps because of the advantages of the bandwidth and the technology that has really evolved with audio and others. Their ASPs are higher than, obviously, the Bluetooth. But the combination of higher ASPs overall for SIVA is either combo chips, and we have seen those Bluetooth and Wi-Fi together these days. And on top of that, this is what Gideon talked about at TWS, which is adding either audio or audio and sensor fusion, and then the royalties really jump up significantly. So we have really enjoyed all the different... flavors, I would say, of standalone Bluetooth, Bluetooth and Wi-Fi, and these other new technologies. And I think that's sort of the two new deals for TWS, the first one last quarter, and the market is looking very, very hot. It's a nice prospect and achievement for us. Let me give you just an indication on the size of the market. The Bluetooth overall is about 4 billion units a year. and out of which 1.4 billion units is audio Bluetooth, so TWS. And that's exactly where we want to go because we have a unique position that we combine these two positions. That's exactly the reason that we built this BlueBuck, that we can go to the largest market in the Bluetooth market and and and come out with a higher value and as a such the asp will be higher if i could think of one last question is the licensing at this run rate the new new level in eve or how should we think about that thanks no licensing revenues have increased for so for this uh for this product line, and it's a new sort of combination of product for us. It's not a DSP per se. It's not Bluetooth, so we are able to charge a premium for that, and I think it also saves money for the OEM or for the chip vendor because they don't need to deal with two different suppliers and vendors and chips and technologies. You integrate that into one IC, so it's a win-win for both sides, and the licensing activity has been very active. Again, look at SEVA. Overall, for the first time, north of $20 million, $21 million plus, these are numbers that we had never seen before, the old SEVA, and part of it is intrinsics, part of it is the new SEVA of new markets and new opportunities. And what we, you know, another benefit that we see with this licensing is that you get R&D leverage. Because we are talking about 69% over nine months. 69% in operating profit. You know, you saw the world is changing. It's down year over year, but when you look on the operating, you get substantially benefit. Okay.
spk07: Thanks, everybody.
spk06: Thank you, Sujit. We have another question today. Please go ahead. Hi. Good afternoon. Thanks for taking my question.
spk04: First, I wanted to ask about your traction with customers on Wi-Fi 6. And how can you maybe give us more details on how the customers are using Wi-Fi 6 and what are the high growth and market applications you're seeing for Wi-Fi 6?
spk05: Hi Martin, it's Gideon. The way we see it today, Wi-Fi 6 is what is called smart home. Many products could be BTV, could be smart speakers, could be security cameras. These are the main driver Wi-Fi 6. We start seeing automotive. We start seeing the industrial use cases, but smart home is a big driver.
spk04: Got it. Thanks. My second question is, on your traction with smartphone OEMs that are developing their in-house chips. Is there any updates there? And how have they impacted, do you think, they might be developing their own chips in the current environment?
spk05: Your line is not that clear. Did you talk about smartphone or smart OEMs? Smartphone OEMs.
spk04: the Basefire and then license agreement with you.
spk05: Yeah, I mean, in terms of landscape in the smartphone, it's pretty similar to what it used to be. So there are a few OEMs that internalize and do development. We are associated with some of them. Some of them are big also. And there are not that many newcomers into the smartphone market. Now, we have several other angles into the smartphone and also to the 5G. In terms of smartphone, we are getting into the smartphone to our Wi-Fi and Bluetooth technology because all those smartphones need connectivity. So we have several OEMs. that are using our connectivity IP for smartphone and we'll ship and for us it's indifferent whether you do basement or you do connectivity, it doesn't matter. You know, to some extent we're getting higher royalties. So that's one approach. The other approach which I touched in the prepared remote is what is called cellular IoT. Cellular IoT is everything that relates to 5G that is not It's not handset. So it could be smart meter. It could be fixed wireless access, which is a very big market. It could be cellular VTOX in automotive. These are very big markets. And here the opportunities are much more open. The market is much more fragmented. And the need for a company like us that comes with holistic solutions with platform solution not just component there and that can associate it with services that's highly valued in this space and we we we do get customers on that i just mentioned three just in europe that are actively working thank you thank you martin that was
spk06: Ladies and gentlemen, as a reminder, if you'd like to ask a question, please press star than one. Our next question comes from Kevin Cassidy at Rosenblatt Securities. Please go ahead.
spk08: Thank you, and congratulations on the strong results. I'm wondering if you have conversations with your customers about the supply tightness for next year. What kind of increase in unit shipments? Have they given you anything like this?
spk05: Well, you know, Kevin, good morning. It's kind of a $1 million question. People are completely split about the severity of this crisis. I mean, they just don't know. And just to give you an example, it looks like in the third quarter, only chips for iPhone manufacturers. In mobile, Android was put aside. And people that are... And it's completely... between nodes, between markets. I mean, we, for sure, we don't know, but I'm telling you that our customers don't know. Different people have different opinions. So we need to take it step by step, quarter by quarter, and look forward, backward, and see whether, you know, last year we were in a better position and worse position. But the supply chain is real, and it it's unknown to almost everybody. Unless you are a big name and you can change, you know, impact the big families.
spk08: Okay, thanks. And how about visibility into 5G base station deployments? Are you seeing any of that coming in 2022? Probably.
spk05: Let me say, the driver in the market, the demand is there. No doubt that the customers, which is the operator, are waiting for chips, waiting for systems to do it. And when you look on a base station, it's not just where we are, the basement workloads. It's a bunch of other chips. Some of them are RF. Some of them are in the antenna side. There are systems. There are materials getting there. It's become complicated. So some of our customers publicly said, you know, it's become challenging. We think we are on track. That's what they are saying. But it goes back to your previous question about When the supply chain, we can see that we know what's going on. Right now, no. But the good news is that demand is there. Design wins are there, at least from our customer base standpoint. We need to take it quarter by quarter, try to help them as much as we can, and hope for the best. More or less, we're reading the public data that you guys have access to. We don't have yet any specific or special information about 2022 for many of our base station customers or handset customers in that respect.
spk08: Okay. Thank you very much.
spk06: Thank you. Ladies and gentlemen, this concludes the question and answer session. I'd like to turn the conference back over to the management team for any final remarks.
spk01: Thanks, Rocco, and thank you, everybody, for joining us today and for your continued interest in SEVA. As a reminder, the prepared remarks for this conference call are filed as an exhibit to the current report on Form 8K and accessible through the investor section of our website. With regards to upcoming events, we will be participating in the following investor events. The 10th Annual Roth Technology Event, November 17th and 18th. the fifth annual Wells Fargo TMT Summit, November 30th through December 2nd, and Barclays Global Technology Media and Telecommunications Conference, December 7th and 8th. For further information on these events and all events we will be participating in, can be found on the investor section of our website. Thank you and goodbye.
spk06: And ladies and gentlemen, this concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.
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