Release Date: November 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Arteris Inc (AIP, Financial) achieved a record annual contract value plus royalties of $60.5 million in the third quarter of 2024.
- The company delivered positive free cash flow of $1.1 million, marking the third consecutive quarter of positive free cash flow.
- There is growing demand for AI-driven enterprise computing and automotive SOC solutions, contributing to the company's success.
- Arteris Inc (AIP) expanded its customer base, including a top five global technology company and Neo, a leader in the smart electric vehicle market.
- The company announced new product innovations, such as NOC tiling, to enhance AI SOC design capabilities, which have been well-received by customers.
Negative Points
- Despite positive results, Arteris Inc (AIP) faces a challenging market environment with potential headwinds from global economic conditions.
- The company reported a GAAP operating loss of $7.9 million for the third quarter, although this was an improvement from the prior year.
- There are concerns about the impact of geopolitical tensions, particularly in the Chinese automotive market, which could affect future growth.
- The average selling prices (ASPs) for microcontroller market deals are lower compared to complex SOCs, potentially impacting revenue.
- Revenue recognition for new products, such as the tiling and mesh network features, has not yet commenced, indicating a delay in revenue realization.
Q & A Highlights
Q: How does the current global automotive market, particularly China's growing share, impact Arteris?
A: K. Charles Janac, CEO, explained that Arteris benefits from being involved in numerous projects across various regions, including China. Despite market share shifts, Arteris maintains a strong presence in the Chinese automotive market, with companies like Nio using their technology. Nick Hawkins, CFO, added that while Mobileye faces headwinds, it remains strong, and the impact on Arteris' revenue is minimal.
Q: Can you provide more details on the enterprise computing design wins and future prospects?
A: K. Charles Janac, CEO, noted that enterprise computing remains a significant revenue contributor, driven by AI elements. Arteris is expanding into the microcontroller market, which opens new opportunities. Nick Hawkins, CFO, added that enterprise computing slightly leads automotive in revenue contribution, with AI/ML contributing to about 40% of total revenue.
Q: Are you seeing increased design activity in the Chinese EV market compared to other regions?
A: K. Charles Janac, CEO, confirmed robust design activity globally, including in China. Automotive chip design cycles are long, and companies are designing for future model years, which sustains design activity despite shipment volume impacts.
Q: How do licensing deals in the microcontroller market compare to those in complex SOCs in terms of ASPs?
A: K. Charles Janac, CEO, stated that ASPs are typically lower in the microcontroller market, but the high volume of royalties and numerous designs compensate for this. The strategy is to engage with large microcontroller suppliers to capture entire generations of microcontrollers.
Q: What is the customer feedback on the newly announced NOC tiling product?
A: K. Charles Janac, CEO, mentioned that the product is just being released, with significant customer interest. It addresses the need for replicating verified sections across chips to build larger clusters, particularly for AI applications. Revenue impact is expected to start next year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
