Ceva Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
May 9, 2024

Key Takeaways

  • CEVA reported 33% year-over-year royalty revenue growth in Q1 with 25% higher shipment volumes across all end markets, while licensing revenue was lower than expected due to timing of deal closures.
  • In licensing, CEVA closed 11 Smart Edge IP deals in Q1—including new Bluetooth 6 and Wi-Fi 7 agreements—and has since signed a multimillion-dollar Q2 deal, bolstering its pipeline and backlog.
  • CEVA expanded its portfolio by launching a new UWB IP for consumer devices and partnering with Arm on 5G advanced infrastructure and non-terrestrial networks to strengthen its ecosystem.
  • On sensing and inference, CEVA’s generative AI NPU IP is under evaluation by strategic customers, and the first headset featuring CEVA’s RealSpace audio software has hit the market.
  • For Q2 2024, CEVA expects 6%–16% sequential revenue growth, stable ~90% non-GAAP gross margins, and flat operating expenses, reaffirming its full-year revenue and profitability targets.
AI Generated. May Contain Errors.
Earnings Conference Call
Ceva Q1 2024
00:00 / 00:00

There are 8 speakers on the call.

Operator

Good day, and welcome to the CEVA Incorporated First Quarter 20 24 Earnings Conference Call. All participants will be in listen only mode. After today's remarks, there will be an opportunity to ask questions. Please note this event is being recorded. I'd now like to turn the conference over to Richard Kingston, Vice President, Market Intelligence, Investor and Public Relations.

Operator

Please go ahead.

Speaker 1

Thank you, Jason. Good morning, everyone, and welcome to CEVA's Q1 2024 Earnings Conference Call. Joining me today on the call are Amir Panush, Chief Executive Officer and Yaniv Arieli, Chief Financial Officer of CEVA. Before handing over to Amir, I would like to remind everyone that today's discussion contains forward looking statements that involve risks and uncertainties as well as assumptions that if they materialize or prove incorrect could cause the results of CEVA to differ materially from those expressed or implied by such forward looking statements and assumptions. Forward looking statements include statements about our market positioning, strategy and growth opportunities market trends and dynamics CEVA's ability to execute on backlogs deals in the Q2 and to reach total revenue target for the year expectations regarding demand for and benefit of our technologies and our expectations and financial goals and guidance regarding future performance.

Speaker 1

CEVA assumes no obligation to update any forward looking statements or information, which speak as of their respective dates. In addition, following the divestment of the Intrinsics business, financial results from Intrinsics were transitioned to a discontinued operation beginning in the Q3 of 2023, and all prior period financial results have been recast accordingly. We will also be discussing certain non GAAP financial measures, which we believe provide a more meaningful analysis of our core operating results and comparison of quarterly results. A reconciliation of non GAAP financial measures is included in the earnings release we issued this morning and in the SEC filings section of our Investor Relations website at investors. Cevaip.com.

Speaker 1

With that said, I'd like to turn the call over to Amir, who will review our business performance for the quarter, review the year and provide some insight into our ongoing business. Amir?

Speaker 2

Thank you, Richard. Good morning, everyone, and thank you for joining us today. CEVA delivered 1st quarter results that reflected solid royalty trends with good year over year growth, while licensing was lower than we anticipated. Some deals we expected to close in the Q1 were delayed. I continue to be very encouraged by our diversified licensing pipeline and stronger backlog.

Speaker 2

We closed a significant multimillion dollar deal with a strategic customer in the beginning of Q2 and there is strong demand for our next generation IPs that are currently in development and are being licensed by early adopters who are looking to gain an advantage in the market. I will elaborate more on our expectations for our licensing business for the rest of the year shortly. First, looking at the licensing business we concluded in the quarter in more detail, we continue to expand our leadership in Smart Edge IP, completing 11 licensing deals across all of our key target markets, namely consumer, automotive, industrial and infrastructure. These deals range from Bluetooth connectivity for wearables and IoT, 5 gs for Redcap and cellular V2X, Wi Fi for access points, UWB for consumer devices and audio for smartphone. Most significantly in the quarter, I'm very pleased to report that we signed deals for our next generation Bluetooth 6 and Wi Fi 7 IPs.

Speaker 2

Design activity around our Wi Fi 7 IP is experiencing strong traction with both new and established wireless players and represents a positive catalyst of our licensing activities in 2024 and beyond. In the quarter, we're concluding a Wi Fi deal with a strategic customer who is already in mass production with a combo chip based on our Wi Fi 6 and Bluetooth 5 IP. These customers has managed to successfully compete with the largest incumbents in the wireless combo chip space for consumer, enterprise and automotive and is now beginning to design their next generation Wi Fi 7 Chips to gain further market traction for the broad consumer devices that will require Wi Fi 7 connectivity, including smartphone, tablets, laptops, wearables and smart home devices. In terms of market size, ABI Research forecasts that Wi Fi 7 shipments will exceed 1,700,000,000 units annually by 2028. As we have stated previously, due to its technical complexity, our Wi Fi 7 IP commands a higher license fee and royalty rate than previous generations of Wi Fi, which in turn drives ASP growth and enable us to drive more value per customer.

Speaker 2

Moreover, the large market size entices new entrants to the Wi Fi market, while the complexity of the technology possesses challenges to many of the existing wireless players to develop this technology internally. As the only IP company in the market today offering licensable Wi Fi technology and the ability to license it together with our Bluetooth and UWP technologies, we are in an excellent position to repeat our success in the Wi Fi 6 market for Wi Fi 7. In Bluetooth, we have added a new Bluetooth 6 customers in the quarter, who is a first time customer for CEVA and a world leader in wireless audio. This customer decided to take advantage of our IP to accelerate their product development for the next generation of Bluetooth audio. Although the Bluetooth 6.0 standard is not yet ratified, we are among a small number of leaders and the sole IP licensing company that has the expertise and skills to develop next generation wireless technologies ahead of the market and ahead of the standard itself.

Speaker 2

We have successfully achieved this for a number of generations of both Bluetooth and Wi Fi standards and have built an unrivaled position as the industry leader and trusted partner for wireless IP over many years. We have more than 100 customers and 1,000,000,000 of devices shipped. Finally, on licensing. In relationship to the licensing pipeline for the remainder of the year and our ability to extract more revenue per deal, I would like to share a few thoughts and data points. CEVA is one of the few select companies that have the technical capabilities, talent and unique know how to develop wireless, sensing and AGI IP to the level required by most demanding customers.

Speaker 2

I firmly believe that we can command higher licensing fee and royalties for our leading edge products, and many of our ongoing customer discussions reinforce this belief. While a few deals that we had anticipated closing in the Q1 were delayed to later quarters, those deals remain in our sales pipeline and some have already been signed since the Q1. Our value proposition around the 3 major smart edge use cases, Connect, Sense and Infer, is clear and well understood by our customers and partners. In addition, we have already closed a meaningful multimillion dollar deal in the Q2 with a strategic customer for next generation IP that we are currently developing. I will update you more on this deal in the next earnings call, but wanted to share that this deal reinforces our strategy to extract higher value for our technology due to our unrivaled technical leadership and the ROI gains that can be achieved when partnering with us.

Speaker 2

We believe this in turn will serve to increase shareholder value through higher revenues, margins and profits over time. We are laser focused on this value add strategy, leveraging our strong board portfolio Smart Edge IP offering. Turning now to royalties. We are pleased with our start to the year with a robust quarter, showing an impressive 33% revenue growth year over year and just a 14% seasonal sequential decline compared to a 28% sequential decline a year ago. We saw shipments volume up 25% year over year, an increase in every end markets we serve, as restocking continue across the broad IoT markets.

Speaker 2

Smartphone units, while up year over year, were down quite sharply from the 4th quarter, a similar trend to what we saw last year. Also, the infrastructure market remains soft, reflecting low CapEx for 5 gs Networks globally. On conversation with our customers, we expect smartphone to improve in the Q2 and throughout the year. Overall, the Q1 shipments increased our confidence that we are well positioned to grow our royalty business in 2024, augmented during the year by new customer ramps deploying our portfolio of wireless IPs for consumer and industrial devices and our embedded application software for special audio in the headphones and sensor fusion software for intelligence robots. Now some commentary regarding developments in the quarter.

Speaker 2

In the Q1, we also invested further in cementing our market leadership, expanding our product offering and strengthening our ecosystem. We announced a new UWB wireless IP for consumer devices, one that builds on our success in UWB solution for automotive and which we already licensed successfully to a customer this quarter. VWB is primed for takeoff in the consumer market as the majority of smartphone OEM are now integrating this technology into their latest devices, which is a precursor to mass market deployment in endpoint devices. ABI Research forecasts that the global market of UWB enabled device shipments will grow at a compound annual growth rate of 14% over the next 5 years. From 435,000,000 units in 2023 to nearly 1,300,000,000 units by 2028.

Speaker 2

We are ideally positioned to leverage this market opportunity as it develops, already having a mature IP available for licensing and the ability to license it integrated with our Bluetooth Low Energy IP. In terms of our ecosystem, we announced a new partnership with ARM targeting 5 gs advanced infrastructure and non terrestrial networks, NTN, aimed at lowering the barriers to entry or developing products targeting these 2 large markets. NTN or satellite communication is a hotbed of innovation these days. And together with Arm, we can deliver the processing power required by satellite companies and new entrants to bring 5 gs advanced networks to orbit, enabling the promise of global broadband connectivity and a host of new use cases on earth that can leverage truly ubiquitous connectivity. We continue to gain market share in wireless connectivity with an unrivaled portfolio of wireless IP, spanning the most common startups like Bluetooth, Wi Fi and 5 gs through to emerging startups like UWB and Matter.

Speaker 2

Connectivity is no longer considered a feature for electronic devices. Moreover, it's a very foundation of innovation that allows AI to be deployed and accessed by edge devices. Without connectivity, there is no AI. We're incredibly part of our central role in the industry, enabling the connectivity in more than 1,000,000,000 devices annually that allows them to interact with AI and improve our daily lives. On sensing and inference, we continue to experience strong demand for our software and hardware products targeting these use cases.

Speaker 2

Our generative AI NPU scalable IP portfolio with market leading performance is undergoing intense evaluation with a number of customers that we have identified as strategic design partners for this technology and we will update you as this deal comes to fruition. Our embedded application software, particularly around special audio, is also experiencing significant traction, and we reached an important milestone in this quarter. We have the 1st headset integrating our RealSpace special audio and head tracking software going on sale to the public. The Nirvana Etopia Headphones from India's number 1 wearables and hearable OEM, both also features our Bluetooth and Audio AI DSP, making this product a perfect illustration of our connect, sense and infer strategy, where we can provide multiple IPs to a single product and work directly with the OEM to bring the product to market. Overall, we are very excited about our product lineup targeting Smart Edge devices.

Speaker 2

Our dialogue with customers is very open, and we understand the recurring pain points that our customers share with us when discussing their Smart Edge roadmaps. With AI set to transform every industry and technology, semiconductors and OEMs needs to define their strategies, not just to deal with the inference workload, but also how to connect their devices and enable them with the ability to use sensors for voice, sounds, vision and motion. Without these three use cases being addressed in every Smart Edge device from smart MCUs all the way to autonomous vehicle and 6 gs virtual ramp equipment, companies will not be able to compete in the Smart Edge era. We are ideally positioned to fill the knowledge and R and D gaps at companies that lack the ability to excel in all of these areas. Our portfolio of IP for Connect Sense and Infer use cases is highly synergetic with a broad range of semi and OEM customers across multiple industries, including the high volume MCU players, where we already have significant traction for our connectivity IPs and the TWS and wireless headphone markets, where we estimate our Bluetooth customers to have between 45% 50% market share today, excluding Apple products.

Speaker 2

We intend to fully exploit our leadership in wireless connectivity to offer additional IP for Sense and Infer as the use cases for Smart Edge devices grow, driving larger licensing deals and higher royalty fees per unit. In summary, we have begun 2024 with royalty bearing shipments up across all the end markets we serve, and we have a solid pipeline of new customers set to reach production as the year progresses. In licensing, the first quarter was challenged with a few

Operator

Pardon me, ladies and gentlemen, it appears we have lost the connection to our speaker. Stand by while we reconnect. We thank you for your patience. Ladies and gentlemen, we have reconnected with the speakers. You may proceed.

Speaker 3

Sure. Did Amir finish his prepared remarks before we got disconnected?

Speaker 1

No, I think the best thing to do just to repeat the summary paragraph.

Speaker 2

Okay. Thanks, Richard.

Speaker 3

Thanks.

Speaker 2

In summary, we have begun 2024 with royalty bearing shipments up across all the end markets we serve, and we have a solid pipeline of new customers set to reach production as the year progresses. In licensing, the Q1 was challenged with a few licensing agreements delayed until later in the year. But overall, the quality of licensing deals signed and the overall demand for our next generation IPs is very encouraging. We have the portfolio of technologies that meet some of the critical pain points of semiconductors and OEMs for their smart edge roadmaps, and I'm confident that we can meet our total revenue targets for the year and we have built a healthy backlog, which reinforces my belief on this. Overall, I remain very positive that 2024 will be a growth year for CEVA and will set up us to reach our longer term revenue, margin and profitability targets.

Speaker 2

I look forward to meeting with many of you at conferences and roadshows during the quarter. Now I will turn the call over to Yaniv for the financials.

Speaker 3

Thank you, Amir. I'm sorry about this I will now start with a review of the results of our operations for the Q1 of 2024. Revenue for the Q1 was 22.1 $1,000,000 as compared to $26,300,000 for the same quarter last year. The revenue breakdown is as follows. Licensing and related revenue was $11,400,000 reflecting 52% of our total revenue as compared to $18,200,000 for the same quarter last year.

Speaker 3

Multi revenue was $10,700,000 reflecting 48% of our total revenue as compared to $8,000,000 for the same quarter last year. This represented an impressive 33% revenue growth year over year and just a 14% seasonal decline compared to a 28% seasonal decline a year ago. Gross margin was 89% on GAAP and 90% on non GAAP basis compared to 87% and 88% on GAAP and non GAAP basis, respectively, a year ago. Total GAAP operating expenses for the Q1 were $24,500,000 at the lower end of our range. Total non GAAP operating expenses for the Q1 excluding equity based compensation expenses, amortization of intangibles and deal costs were 20 point $7,000,000 below the mid range of our guidance due to specific cost monitoring and cost and controls, as we talked about in prior earnings call.

Speaker 3

GAAP operating loss for the Q1 of 2024 was $5,000,000 as compared to GAAP operating loss of $2,600,000 for the same period in 2023. GAAP and non GAAP taxes were $1,700,000 above our estimates due to the geographies of deals signed. GAAP net loss for the Q1 of 2024 was $5,400,000 and diluted loss per share was $0.23 as compared to net loss of $2,700,000 and diluted loss per share of $0.12 for the same quarter last year. Non GAAP net loss and diluted loss per share for the Q1 of 20 24 were $1,300,000 and $0.05 respectively, as compared to net income of $1,200,000 and diluted income per share of $0.05 reported for the same quarter last year. With respect to other related data, shipped units by CEVA's license fees during the Q1 of 2024 were 371,000,000 units, up 25% from the Q1 23 reported shipments.

Speaker 3

The 371,000,000 units shipped, 61,000,000 units or 16% were for mobile handset modems. 283,000,000 units were for consumer IoT products, up from 250,000,000 units for the Q1 of last year. 27,000,000 units were for IIoT products, up from 18,000,000 for the 1st year of 2023. Bluetooth shipments were $202,000,000 for the quarter, up 6% year over year. Cellular IoT shipments were 30 6,000,000 units, up 24% year over year.

Speaker 3

WiFi shipments were 31,000,000 units, up 50% year over year. As Amir mentioned earlier, shipments were up year over year across all our end markets. In total, the royalty revenues, excluding mobile handset modems, was the highest quarter since Q3 of 2022 suppressing $8,000,000 As for the balance sheet items. As of March 31, 2024, CEVA's cash, cash equivalents, balances, marketable securities and bank deposits were approximately $159,000,000 In the Q1 of 2024, we purchased approximately 57,000 shares for approximately $1,300,000 As of today, around 643,000 shares are available for repurchase under the repurchase program as expanded back in November of last year. Our DSOs for the Q1 was at 58 days back to its normal levels and higher than the prior quarter's 32 days.

Speaker 3

During the quarter, we used $7,300,000 cash from operation activities. Ongoing depreciation and amortization was $1,000,000 and the purchase of fixed assets was $900,000 At the end of the first quarter, headcount was 433 people, of whom 356 are engineers. Now for the guidance of the Q2 of 2024. As Amir stated earlier, we've signed a number of deals at the start of the second quarter and also have good visibility into the second quarter potential deal flow for a wide range of technologies and markets. On royalties, we expect year over year growth in the Q2 and are monitoring the timing of new product introductions from our customers.

Speaker 3

All in all, we forecast sequential growth in overall revenues for the Q2 of 6% to 16%, primarily from licensing. Gross margin is expected to be similar to the Q1, approximately 88% on GAAP basis and 90% on non GAAP basis, excluding an aggregate of $200,000 of equity based compensation expenses of $100,000 of amortization of acquired intangibles. GAAP OpEx for the Q2 is expected to be in the range of $24,500,000 to 20 $5,500,000 slightly higher than the Q1 and in line with our annual plans. Of our anticipated total operating expense for the Q2, dollars 3,800,000 is expected to be attributed to equity based compensation expenses and $500,000 for the amortization of the acquired intangibles. Our non GAAP OpEx is expected to be at the same level as the Q1 in the range of $20,200,000 to $21,200,000 We'll continue to monitor our expenses closely and look for ways to further improve our operating efficiency.

Speaker 3

Net interest income is expected to be approximately $1,300,000 Taxes for the quarter are expected to be approximately $1,700,000 and the share count for the 2nd quarter is expected to be around 25,000,000 shares. Jason, you could open the Q and A session, please.

Operator

Thank you. We will now begin the question and answer session. And our first question comes from Matt Ramsay from TD Cowen. Please go ahead.

Speaker 4

Thank you very much everybody. Good afternoon, good morning. I have a few questions. I guess as the first one on licensing guys, it's totally normal for deals to sort of flip around across quarterly boundaries. But I know you mentioned in the script there were some deals that might have you might have expected to sign that got pushed a little bit.

Speaker 4

But it didn't sound super clear to me whether all of those things that slipped out of Q1 were just kind of across the quarterly boundary and going to get done in Q2 or if they might have been slipped a little bit longer than that. And if it's the latter, maybe you could just kind of talk about what's going on in the environment that might be delaying a few of the deals longer than would be typical? Thanks.

Speaker 2

Yes. Thank you, Matt. I would say first some of the deals as we also mentioned in the prepared remarks is that we already signed in Q2. And then we expect also some of the other deals to still sign Q2, which is but also there are some deals that got delayed more towards the next quarter after that. And as part of the overall evaluation, that takes longer in some cases, especially for the more complicated system that our customers need to evaluate it sometimes all the way into the hardware capabilities of their own system.

Speaker 4

Got it. So it sounds like nothing atypical or different in the environment, just kind of normal course of business type stuff. Is that fair?

Speaker 1

That's fair.

Speaker 2

I would say that the one thing that we highlight more specifically for this quarter was the strategic deal with the customers that customers who already have a multimillion dollar deal that we expected to close in this quarter in Q1. And the evaluation of the technology, the agreements on both technology and the commercial agreements was all set within the quarter. But the process signature of the customer took longer than anticipated and this deal was already closed. Because of the timing and the magnitude of the deal we mentioned that specifically.

Speaker 4

Got it. Thanks for all that. I guess for me on to some maybe more important technology questions. I wanted to ask about sort of 2 emerging technologies that you guys seem to be investing in a lot and are well positioned for. I guess the first one is Wi Fi 7 and the second one is UWB.

Speaker 4

So on Wi Fi 7 maybe you could give us a little bit more on expected pace of adoption of the technology and what the both the licensing and royalty economics look like for your company relative to Wi Fi 6? And UWB, I'd be sort of interested in hearing about what the breadth of different relationships and, I guess, what the pipeline looks like for UWB deals, both breadth and timing, because these are both sort of exciting new technologies. I'm kind of interested to hear where you guys are in the progression on each one. Thank you.

Speaker 2

Yes, definitely. Actually, I'll start with the WiFi and take even a step back before WiFi 7. Even with Wi Fi 6 in terms of royalty overall, we are still early so called in the cycle of our customer transitioning from Wi Fi 4 to Wi Fi 6 in the high volume. And so we expect it to be a very good tailwind as we go through the rest of the year on the royalty side. In terms of licensing, definitely we are extremely encouraged to see some of our existing customers as well as new customers licensing Wi Fi 7.

Speaker 2

This is specifically, as you mentioned, as we signed this quarter was about a customer that already licensed in the past Wi Fi 6 and Bluetooth from us. It's really encouraging to see that the trust that we have in the market place and the performance that we achieve to our customer that they repeat and come back to us. Penetration of Wi Fi 7 in terms of licensing and development of those technologies is really right now ramping up quite nicely through 2024. It started as an access point. Now we see it more also on the client side.

Speaker 2

It is high performance, high throughput type of technology. So the propagation starts more from the high end and then over time will propagate lower in terms of the different tiers of the market. But also for us, the transition from Wi Fi 4 to Wi Fi 6 and Wi Fi 7, it's a great tailwind in terms of the average deal size as well as the average royalty that we get per device as we really provide more value, more sophistication and time to market advantage to our customers. So although this is a very strong trend, and we're encouraged to see also the Wi Fi volume increase very nicely year over year this quarter. Going to the UWB questions, definitely Qualcomm announcements and coming to market with the UWB combo with data technology for their mobile devices.

Speaker 2

This is a very important precursor for the UWB to penetrate beyond automotive into the consumer. And most of the previous deals that we talked about were in the automotive. Now this quarter, we have a very nice deal in the consumer space. And we definitely see the Qualcomm announcement, the penetration into mobile phones and overall the understanding of more of the use cases of UWB and Fira 2.0 certification body also really ratifying their solution and putting a very good tailwind for the demand in the marketplace. Having said that, overall, I would say UWB technology penetration rate is going to be on average smaller or lower than what you typically see with the more incumbent Bluetooth for Wi Fi technologies out there.

Speaker 2

The other piece, of course, for UWB, a lot of demand for UWB with Bluetooth technology and in the more high end devices even with Wi Fi is combo. So again, we are well positioned to take advantage of that trend.

Speaker 4

No. Thank you for all the details, Amir. I'll jump back in the queue. Thanks, guys.

Speaker 3

Thank you.

Operator

The next question comes from Kevin Cassidy from Rosenblatt Securities. Please go ahead.

Speaker 5

Yes. Thanks for taking my question. Just as you're writing more licenses, I get coming up with agreements with licenses that include more technology as you mentioned the strategies to sell sensing connectivity and the processing. Is that considered one license now or is there going to be a change as the value of the license goes up and there'll be fewer numbers when you report each quarter? Or are they still going to be considered separate licenses, but just in one design?

Speaker 3

Good question, Kevin. We count them separately. If they use different technologies in order to keep pace of Wi Fi, Bluetooth socket and a UWB, we will cut them multiple deals if they are indeed planned to be combined in a single product. On the product itself, the agreement is one agreement that includes all whatever type of technologies the customer would like to license and partner with us for. Of course, it's integrated in a single chip.

Speaker 3

The royalty will be applied on the entire chip price, either as a percentage of the chip or cents per chip, and we'll take into account that usually those chips are higher priced, ASPs would be higher. Our take of that, whether it's cents or percentage, would be higher because of the knowledge and the expertise and the advantage we are bringing to the table by combining multiple technologies.

Speaker 2

Yes. And to add on that, Jenny, thanks. It's basically Kevin, what we announced on the CEVA Wavelengths, where we provide added value of those combined technologies if our customers need that support and we would like to license that. Overall, I would say, as we look historically into our deals and connectivities, as we propagate into the more advanced releases of the technology from Bluetooth 4.0 to all the way now in the future 6.0, adding Wi Fi and going for Wi Fi 6 and 7, then the combination, we really see on average that the deal size is growing as well as the potential royalty that comes with it.

Speaker 5

Okay. Thanks for those details. And just in general, China has been a big market for you. And have the U. S.

Speaker 5

Sanctions, is it getting worse for you or are there fewer new designs starting in China? Maybe just give us the landscape of what's happening in China.

Speaker 2

1st on regulation, actually, we haven't seen any material change

Speaker 3

or any meaningful

Speaker 2

change this quarter or broadly quite recently. So no impact at all in terms of any change. I would say still China is important market for us in terms of lots of innovation in the semiconductor industry and overall for all the different type of technologies. And we're actually encouraged to see that this quarter, I would say, overall, the market condition in China, I think, has stabilized and there is a very good innovation and demand for technology. I think from the royalty report that we provided, on average, our customer base are doing quite well in the market.

Speaker 2

So this is also a very positive indication for us as we will continue through the year.

Speaker 3

Kevin, I'll add to that. This is the first time in many years that we have seen sequential flattish revenue from many of our Chinese customers in IoT space reporting from Q4 to Q1, not a down quarter like it usually was, but really a flat or even a stronger quarter in some cases. So it was very encouraging.

Speaker 5

Okay, great. Thank you.

Speaker 2

Thank you. Maybe

Operator

Our next question comes from Chris Reimer from Barclays. Please go ahead.

Speaker 6

Hi. Thanks for taking my questions. Can you talk just a little bit about the path to achieving the year end guide? I believe you were projecting 4% to 8% top line growth back in 4Q. If you could just kind of remind us how sequentially that should take place?

Speaker 6

And then on the partnership side, if you could talk about the kind of exposure you have with your partnerships, especially with the boat and what kind of products are working with you there?

Speaker 3

Hi, Chris. I will start with the first part and then Amir will take over for the second. So we did guide in the beginning of the year a 4% to 8% top line growth. We did talk about flattish non GAAP OpEx and gave a range of $93,000,000 to $96,000,000 for the year. We're not changing that those two numbers today.

Speaker 3

We also said at the beginning of the year that the second half will be stronger than the 1st year. So with all that said, nothing has really changed our plans. Yes, we talked about the deal being delayed, a few deals being delayed. We also mentioned that some of those deals were signed in Q2, so maybe it's just some shift between those two quarters. But the way we're seeing it with a pretty strong Q1, much stronger than historical seasonality trend and growth in all the different product volumes on a year over year basis, which is also something quite remarkable, we haven't seen that for a long time, We're feeling well with the rest of the year.

Speaker 3

Licensing royalties, each one of them have different trends and deals can from time to time get delayed. But our plans are not changing from not from the expense point of view of trying to manage this carefully. The guidance for 2nd quarter is exactly the same, 90% gross margins and non GAAP and the same range of expenses on OpEx. And with more revenue flowing in, we should have the leverage to reach our targets. That's the way we see it today.

Speaker 3

Obviously, things could change, but this is what we are focused on achieving

Speaker 6

4. Got it.

Speaker 2

And as for the partnership with Boat, so BOT is the number 1 Indian hearable, wearable OEM in the marketplace, and we believe they are number 2 to Apple worldwide. We have a very, very good partnership with them, working with them directly as an OEM. We offer them basically a combination of the silicon that they're using that we've in there. There is the IP our connectivity IP as well as the DSP AI IP. And on top of that, we provide them a software IP to run 3 d special audio for hearable and wearable devices.

Speaker 2

And then they've just launched the first product using this type of all these three technologies combined in their device that I shared in my remarks. And we will see that keep penetrating across the product line.

Speaker 6

Got it. Okay. Thanks for that. That's it for me.

Speaker 2

Thank you, Chris. Thanks, Chris.

Operator

There are no more questions in the queue. This concludes our question and answer session.

Speaker 3

So, Jason, I think Kevin David is there.

Operator

Sorry about that. Yes, next question comes from David O'Connor from BNP Paribas. Please go ahead.

Speaker 7

Awesome. Good morning. Thanks for squeezing me in guys. Maybe just one or two follow ups on my side. So firstly, just the flattish revenues in China customers Q4 to Q1, Can you give us a bit more color?

Speaker 7

Was that due to kind of units or was it just more content? Is your sense in that was inventory replenishment in those end markets or just new products coming to the market at those higher ASPs that you talked about? And I have a follow-up.

Speaker 3

Yes. Usually the seasonality in IoT devices, mobile hasn't been the case for many, many years. The Q1 is lower in volume and new phone introduction than the Q4 and the Christmas holiday season. What we saw this quarter with 25 percent unit growth year over year and sequentially some of our customers, which may be Chinese customers, but they're shipping on a worldwide basis. And Amir mentioned earlier headsets, earbuds, we are probably 45% to 50% worldwide market share our technology is embedded in, excluding Apple.

Speaker 3

So in some of these devices and the overall IoT devices that were shipped, we saw flattish units. We didn't see a decline, and that's probably from inventory build out and fill in the channels with a pretty strong start for the year. Does that answer your question?

Speaker 7

Yes, that's very helpful. And then maybe just one on the kind of higher value deals that you're signing and licensing and higher royalty rate. Can you give us any kind of framework how to think about those kind of higher royalty rates versus your kind of classic rates? And also the licensing deal, can help as well kind of give us just a sense of kind of what how big they are versus your classic kind of licensing deals? I know every deal is different, but just kind of how to think about that from a kind of numbers perspective, that would be helpful.

Speaker 7

Thanks guys.

Speaker 3

Yes. Not sure we could help that much. I mean, when we talk about multimillion dollar deals, these are bigger deals and larger deals in volume than we had in the past. So it could be few $1,000,000 for a specific deal, depends on the technology and the market segment. Maybe historically in the past, those were few 100,000 for single use up to 1,000,000 and today depends on that technology and how many technologies we integrate into an agreement, it could be much higher numbers than that.

Speaker 3

Maybe that's a little bit of the flavor. And the same goes with ASP. The percentages, if it's multiple technologies are higher than just a standalone Bluetooth deal that we licensed 5 years ago. I think that's what we're referring to that the more content we add to these agreements, multiple technologies, newer technologies that come into play and that's true across the newer WiFi, Bluetooth, UWB as well as AI and then softer packages that we have an offering that we have today, we are able to charge higher percentages of the chip price at the end of the day or higher chips, higher cents per chip.

Speaker 2

Maybe David, just to complement on Yaniv comments regarding the royalty in China. Generally speaking for this quarter, we are really encouraged actually with our customers worldwide and as well as in China in terms of their volume shipments. And part of that is the tailwinds that we discussed last year, where we see basically Wi Fi penetrating more and more. We see the combination of the different technologies, the higher ASP with those different product mix that goes to market as well as more and more new customers that are ramping either Bluetooth or Wi Fi and in the future our UWP technology as well as the now open IoT or 5 gs for RedCap. So all in all for this quarter, which typically is in consumer market seasonally lower than Q4, we have seen really great year over year growth as well as on a quarter over quarter basis, a very strong demand from our customer base.

Speaker 7

Awesome. Thanks guys.

Speaker 3

Thank you.

Operator

This concludes our question and answer session.

Speaker 3

I

Operator

would like to turn the conference back over to Richard Kingston for any closing remarks.

Speaker 1

Great. Thank you all for joining us today and for your continued interest in CEVA. As a reminder, the prepared remarks for this conference call are filed as an exhibit to the current Form 8 ks and accessible through the Investors section of our website. With regards to upcoming events, we will be participating in the following conferences: Oppenheimer 25th Annual Israeli Conference, May 26th in Tel Aviv, Cowen 52nd Annual TMT Conference, May 29th in New York the Mizuho Technology Conference, June 12th in New York and Rosenblatt's 4th Annual Virtual Tech Summit 2024, June 13th, that will be held virtually. Further information on these events and all events we will be participating in can be found on the Investors section of our website.

Speaker 1

Thank you and goodbye.

Operator

Conference has now concluded.

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