CEVA Q1 2025 Earnings Call Transcript

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May 7, 2025
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Operator

Good day, and welcome to the CEVA, Inc. First Quarter twenty twenty five Earnings Conference Call. All participants will be in a listen only mode. Please note this event is being recorded. I would now like to turn the conference over to Richard Kingston, Vice President of Market Intelligence and Investor Relations.

Operator

Please go ahead.

Richard Kingston
Richard Kingston
VP, Market Intelligence, Investor & Public Relations at CEVA

Thank you. Good morning, everyone, and welcome to CEVA's First Quarter twenty twenty five Earnings Conference Call. Joining me today are Amir Panouche, 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 regarding our strategy and growth opportunities, market positioning, trends and dynamics, including with respect to significantly expanding market share in wireless communication IP and to momentum in diversifying our royalty customer base, expectations regard regarding demand for and benefits of our technologies and revenues expectations regarding technology innovations, including timeline to revenue generation, our sales pipeline and backlog and our financial goals and guidance regarding future performance.

Richard Kingston
Richard Kingston
VP, Market Intelligence, Investor & Public Relations at CEVA

CEVA assumes no obligation to update any forward looking statements or information which speaks as of their respective dates. 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 Investors Relations website. With that said, I'd like to turn the call over to Amir, who will review our business performance for the quarter and provide some insight into our ongoing business. Amir?

Amir Panush
Amir Panush
Chief Executive Officer at CEVA

Thank you, Richard. Welcome everyone and thank you for joining us today. In the quarter, we delivered solid progress in our licensing business, reinforcing our long term growth strategy and expanding our customer engagement across all of our targeted use cases, connect, sense, and infer, enabling edge AI. Royalty revenue fell short of expectations due to a combination of soft low cost smartphone chip shipments and an industrial customer who had a slower product ramp up than in the prior year. However, by implementing cost control measures, we mitigated some of the revenue impact and achieved profitability close to non GAAP EPS consensus.

Amir Panush
Amir Panush
Chief Executive Officer at CEVA

Importantly, our design wins this quarter not only strengthened our long standing partnership with key connectivity customers, but also expanded our footprint with new customers embracing our sensing and edge AI IPs laying a strong foundation for future growth. Total revenue for the quarter came in at $24,200,000 up 10% year over year. Licensing revenue was $50,000,000 with 11 deals concluded in the quarter, including a number of notable strategic deals, which I will elaborate on now in the context of the three use cases that underpin our business. Connectivity serves as the from the the foundational pillar of Edge AI, enabling seamless seamless communication between devices and data centers. For this use case, we have solidified our market leadership position by securing several strategic agreements with multiple key Bluetooth and WiFi customers, reinforcing our position in their long term roadmap.

Amir Panush
Amir Panush
Chief Executive Officer at CEVA

One of our current highest volume customers with a well established global customer base and who is already shipping in volume single and multi protocol combo chips based on several Bluetooth and WiFi six IP has selected our WiFi seven IP for its next generation product, demonstrating the trust and long term partnership with us. In addition to this customer, we also signed a new long term Wi Fi six deal with another high volume customer, a Bluetooth six Wi Fi six combo deal with a top 10 MCU vendor, And next generation Bluetooth deals with two of our leading audio customers as they continue to expand their connectivity offerings based on CEVA's market leading technology. The second pillar enabling Edge AI is the sensing use case, which includes inputs and outputs that have devices better understand their surroundings and deliver enhanced user experiences, such as improved audio performance. For this use case, we secured multiple deals, most notably an agreement for our real space special audio software, which will be integrated into professional headset and other audio devices from a leading PC OEM. This marks a significant milestone as it validates the quality and robustness of our spatial audio software solution.

Amir Panush
Amir Panush
Chief Executive Officer at CEVA

After sensing data about the environment, inferencing such data enable devices to better interpret their environment and proactively suggest appropriate courses of action. For this use case, we signed an important bill for our high performance, new program, edge AI, NPU with NextChief, a Korean automotive semiconductor for the next generation ADA solutions. Let me explain a bit more about this use case and why we were selected. The overall performance and safety of ADAS systems continue to rapidly advance. Thanks to cutting edge advancements in AI, such as vision transformers.

Amir Panush
Amir Panush
Chief Executive Officer at CEVA

Vision transformers are a way for AI to analyze an image holistically as opposed to traditional convolution neural networks that analyze images pixel by pixel. This brings significant benefits and superior performance for ADAS vision system, including object recognition, segmentation, and free space detection in complex things. The NeoPo AMPS support for vision transformers coupled with its ability to process multiple video streams and AI models all in parallel, make it ideal for next generation AIDA systems. Assistance. We are currently engaged in multiple discussions related to AI influencing using our Newport NPU family, including several automotive players for the next generation platforms that require professors, upgrades to support these latest AI advancements and techniques.

Amir Panush
Amir Panush
Chief Executive Officer at CEVA

In royalties, while overall revenue declined for the reasons previously mentioned, shipments volume remained strong and we remain very positive about the long term potential of our royalty business. Also, we have several notable achievements that highlights other warranty drivers for the business. In this regard, I'm pleased to share that we received the first warranty report from a leading US OEM using our technology in their in house five g model. As I discussed on our last earnings calls, we anticipate this customer will significantly expand our market share in wireless communication IP and generate a meaningful long term royalty stream in the years to come. Additionally, our WiFi royalties grew 183% year over year from a 12% increase in unit shipments.

Amir Panush
Amir Panush
Chief Executive Officer at CEVA

This growth was driven by favorable product mix shift towards WiFi six, which commands a higher royalty ASP compared to previous generations. This is a strong indicator that our WiFi six customers are continuing to gain traction, particularly in the consumer and industrial IoT markets. All in all, our first quarter licensing performance and continued momentum in diversifying our loyalty customer base reinforce the success of our transformation into a highly diversified IP powerhouse. We serve a broad range of end markets with a portfolio of high value products and solutions that enable any smart edge device to connect, send, and infer data. As a reminder, success in the IP licensing business is measured over a horizon of several years.

Amir Panush
Amir Panush
Chief Executive Officer at CEVA

The innovations and technologies our engineers are designing today will reach commercial products and begin to generate royalties within three to five years. This long cycle view underpins how we think and manage our business and shape our strategy focused on accumulated and sustained body creation over time. Our priorities remain clear, continue innovating for our customers, deepen our technology leadership and building a strong future royalty stream while managing expenses with discipline. I'm confident in our ability to navigate the short term volatility while focusing on our mission to be the IP partner of choice for companies, building smart edge devices that connect, sense, and infer data. Now, I will turn the call over to Yaniv for the financials.

Yaniv Arieli
Yaniv Arieli
CFO at CEVA

Thank you, Amir, and good morning. I'll now start by reviewing the results of our operations for the first quarter of twenty twenty five. Revenue for the first quarter increased 10% to $24,200,000 as compared to $22,200,000 from the same quarter last year. The revenue breakdown is as follows. Licensing and related revenues increased 32% to $15,000,000 reflecting 62% of our total revenues as compared to $11,400,000 for the first quarter of twenty twenty four.

Yaniv Arieli
Yaniv Arieli
CFO at CEVA

Royalty revenue decreased 14% to $9,200,000 reflecting 38% of our total revenue, down from $10,700,000 for the same quarter last year. Quarterly gross margins came in 1% lower than forecasted and guided, 86% on GAAP basis and 87 on non GAAP basis. If you recall, we discussed the allocation of design activities for the strategic customer in the satellite modem space. So some R and D costs for these efforts are presented in the cost of revenue and not in the R and D expense line. Total gross operating expenses for the first quarter was at the low end of our guidance range at $25,100,000 Total non GAAP operating expenses for the first quarter, excluding equity based compensation expense and motivation of intangibles and deal costs were $20,700,000 below the low end of our guidance and similar to last year's level.

Yaniv Arieli
Yaniv Arieli
CFO at CEVA

GAAP operating loss for the first quarter was $4,400,000 down from GAAP operating loss of $5,000,000 in the same quarter a year ago. Non GAAP operating margins and income were one percent of revenues and $300,000 compared to operating loss margin of 4% and operating loss of $800,000 recorded for the first quarter of twenty twenty four respectively. Expense monitoring contributed to partially offset lower than expected total revenues. Financial income was $2,100,000 compared to $1,300,000 income for the first quarter twenty twenty four, significantly higher than our estimate and prior year. This was due to a significant increase in value of the euro versus the U.

Yaniv Arieli
Yaniv Arieli
CFO at CEVA

S. Dollar for the first quarter of over 7%, impacting the value of our euro dominated assets, French tax

Yaniv Arieli
Yaniv Arieli
CFO at CEVA

receivables. GAAP and

Yaniv Arieli
Yaniv Arieli
CFO at CEVA

non GAAP taxes were approximately $1,000,000 slightly lower than our guidance and affected by the geographies of the revenue recognized from deals and the royalty revenues. GAAP net loss for the first quarter was $3,300,000 and diluted loss per share was $0.14 as compared to a net loss of $5,400,000 and diluted loss per share of $0.23 for the first quarter of twenty twenty four. Non GAAP net income and diluted earnings per share for the first quarter of twenty twenty five was $1,400,000 and $06 respectively, as compared to a net loss of $1,300,000 and diluted loss per share of $05 reported for the same quarter last year. With respect to other related data, shipped units by CEVA licensees during the first quarter of twenty twenty five were four twenty million units, up 13% from the first quarter of twenty twenty four reported shipments. Of the four twenty million units reported, 49,000,000 or 12% were for mobile handsets for modems.

Yaniv Arieli
Yaniv Arieli
CFO at CEVA

Three thirty seven million units were for consumer IoT markets, up 19% from two eighty four million units in the first quarter of twenty twenty four. '30 '4 million units were for industrial IoT markets, up 26% from 27,000,000 units in the first quarter of twenty twenty four. Bluetooth shipments were two thirty three million units in the quarter, up 15% from two zero two million units in the first quarter of twenty twenty four. Cellular IoT shipments were 48,000,000 units, up 31 year over year. Last WiFi shipments were 35,000,000 units, up 12% from 31,000,000 units a year ago.

Yaniv Arieli
Yaniv Arieli
CFO at CEVA

WiFi royalty revenue, however, were up 183% year over year due to a strong contribution from WiFi six shipments, which carry a higher ASP than the older WiFi four and WiFi five standards. Overall, royalties will be lower than expectations, primarily due to slower smartphone shipped units for the low cost smartphone market and an industrial customer with a slower product ramp up than a year ago. As for the balance sheet items, as of the March, Steve's cash, cash equivalent balances, marketable securities and bank deposits are approximately $158,000,000 Our DSOs for the first quarter were fifty four days, similar to prior quarters. During the first quarter, we used $7,000,000 cash from operating activities. Our ongoing depreciation and amortization was $900,000 and purchase of fixed assets was $300,000 At the end of the first quarter, our headcount was four thirty five people, in whom three fifty four were engineers.

Yaniv Arieli
Yaniv Arieli
CFO at CEVA

Now for the guidance. As we discussed in our prepared remarks, our licensing business continues to perform well with robust interest in our Edge AI portfolio and continued expansion of our wireless leadership. In royalties, we highlight a U. S. Smartphone OEM that reported its first five gs modem royalties to us in the quarter and the ASP uplift in WiFi six as our customers volume shipments increase.

Yaniv Arieli
Yaniv Arieli
CFO at CEVA

As for the global macro environment and tariffs, while we don't see any direct impact from tariffs, the indirect impact on consumer demand among other factors has increased the uncertainty about the year. Given these evolving dynamics and we are lower than anticipated revenues for the first quarter, we're adopting a more cautious outlook for the rest of the year, lowering 2025 revenue guidance from high single digit range to a low single digit range for growth over 2024 annual revenues. On the expense side, we are lowering our overall expense level, cost of revenue and OpEx together from a range of 2% to 6% over 2024 to in line with 2024 or $96,000,000 to $100,000,000 with non GAAP OpEx slightly lower than 2024. Based on these changes, we anticipate a double digit percentage increase in non GAAP operating income, non GAAP operating margin, non GAAP net income and fully diluted non GAAP EPS relative to 2024, but at a lower percentage than our earlier guidance. Specifically for the second quarter of twenty twenty five.

Yaniv Arieli
Yaniv Arieli
CFO at CEVA

On royalties, we expect sequential growth due to the seasonality and expansion of the CEVA powered five gs smartphone modem in the second quarter and beyond. Total revenue is forecasted to be $23,700,000 to $27,700,000 Chemours margin is expected to be similar to the first quarter we just reported. We forecast approximately 86% on non GAAP basis and 87% on non GAAP basis. Excluding an aggregate of $100,000 for equity based compensation expenses of $100,000 amortization of acquired intangibles. GAAP OpEx for the second quarter of twenty twenty five is expected to be in the range of $25,100,000 to $26,100,000 And then, anticipated total operating expenses for the first quarter, '4 point '5 million is expected to be attributed to equity based compensation expense, dollars 200,000.0 for amortization of acquired intangibles and $100,000 for cost associated with business acquisitions.

Yaniv Arieli
Yaniv Arieli
CFO at CEVA

Non GAAP OpEx is expected to be similar to the first quarter level and in the range of $20,300,000 to $21,300,000 also lower than the second quarter twenty twenty four OpEx level. Net interest income is expected to be approximately $1,300,000 taxes for the second quarter expected to be approximately $1,200,000 and the share count for the second quarter is expected to be 25,600,000.0 shares. And Danielle, you could open the Q and A session please.

Operator

Thank you. We will now begin the question and answer session. Please go ahead.

Kevin Cassidy
Senior Research Analyst at Rosenblatt Securities

Yes. Thanks for taking my question. Congratulations on the AI NPU ADAS win. But can you say whether was this just a win with the tier one supplier, or does the tier one supplier have a program at an automotive OEM that's secured?

Amir Panush
Amir Panush
Chief Executive Officer at CEVA

Yes, Kevin, thanks for the question. First, this is a very important design win for us for with the new program. This is really validates the technology and the maturity to go all the way into ADAS automotive market segment. And we believe that also will propel significant additional design wins as we go into q two and the rest of the year. Specifically to your question, this is a design with the tier one.

Amir Panush
Amir Panush
Chief Executive Officer at CEVA

They already have secured so called OEM customers, but it's not going to go into only one specific OEM, but that, they will it will be part of their next generation platform that will go into multiple sockets.

Kevin Cassidy
Senior Research Analyst at Rosenblatt Securities

Okay. Great. Congratulations, Seth. And, you know, you you showed great increase with the, transition to WiFi six. With WiFi seven designs being one now, is there a similar, I guess, increase in ASPs with Wi Fi seven, or is it even greater than the transition from five to six?

Amir Panush
Amir Panush
Chief Executive Officer at CEVA

Yes, thanks for the question, Kevin. So, this is Ramir. So, a few things here to unpack and talk about the whole licensing business that we had this quarter and the impact for us, so called moving forward in the long term. So first, we are really happy to see multiple of our customers that have licensed the previous generation now adding either Bluetooth WiFi or the combination, and we had two new deals of a Bluetooth WiFi six combination this quarter. And but also, we are very happy to see one of our high volume customers of WiFi four that is already migrating to WiFi six now licensing WiFi seven from us.

Amir Panush
Amir Panush
Chief Executive Officer at CEVA

Again, great testimony to see how our customer trust our technology and overall we keep expanding our leadership position in the marketplace. Specifically for ASP as illustrated from the numbers this quarter, while the volume shipments grew by about 12% year year over year, the revenue grew by more than 180%. And this is really contributed to the transition from WiFi four to WiFi six. So with that migration, we would see a major uplift in the average ASP. And on top of that, as customers will migrate in volume production to WiFi seven, we expect to see another uplift.

Amir Panush
Amir Panush
Chief Executive Officer at CEVA

And but, of course, this is that that those design in in production in volume will come later in the future years. And so, already to '25 and as we talked also '26 and beyond, we will see tremendous, so called increase in volume as well as average ASP for WiFi, the transition to WiFi six. And on top of that, WiFi seven will generate another uplift.

Kevin Cassidy
Senior Research Analyst at Rosenblatt Securities

Okay. Great. Thank you.

Yaniv Arieli
Yaniv Arieli
CFO at CEVA

Thank you, Kevin.

Operator

The next question comes from David O'Connor from BNP Paribas. Please go ahead.

David O'Connor
Analyst at BNP Paribas

Yeah, great. Good morning, and thanks for taking my questions. Maybe just carrying on from Kevin's question there, just on the new the ADAS win, Amir, can you kind of give us a sense of the competitive environments that kind of around that win? Kind of what other type of solutions was the customer looking at? Was it kind of internal?

David O'Connor
Analyst at BNP Paribas

Was it other off the shelf solutions? And kind of just the key metrics really that allowed you to kind of get that design win over at the line? And I have another follow-up. Thanks.

Amir Panush
Amir Panush
Chief Executive Officer at CEVA

Yeah. Definitely, David. So if we look overall and and the market right now for AI and PU high end solution for the edge, what is happening is really the migrating to the more advanced models using transformer and that and that specific case vision transformers. And as for the edge, it really requires a combination of extremely power efficient solution, as well as smaller in size or cost structure. And very, very importantly for automotive, extremely low latency.

Amir Panush
Amir Panush
Chief Executive Officer at CEVA

The reaction and so called the the ability to, you know, interrupt the data needs to be in in very, very quickly and nanoseconds or milliseconds. So our technology really, ex excelling those metrics as we put them together coming from ability and history and DNA in edge devices and low power devices. And but on top of that, it's really the combination of the hardware and the software integrated and scalable to go into the different tiers of performance that those customers need. As I mentioned for the last several quarters, we have really built a scalable architecture for NPU that can go from several tops all the way to hundreds of tops and with that all the software stack is supported. And I think this will give us really great advantage in the market and I I strongly believe that we will see more and more design wins so far, a new OEM or high end NPU in the marketplace this year and through the quarters.

David O'Connor
Analyst at BNP Paribas

That's very helpful. Great color there, Amir. Thank you.

Amir Panush
Amir Panush
Chief Executive Officer at CEVA

James. David, one last comment just to remind everyone. We talked about two other, customers that are already going and ramping right now in 2025 based on our Vision AI USB technology. And so not only we are winning designs, but also we see a royalty rent this year.

Yaniv Arieli
Yaniv Arieli
CFO at CEVA

Is that a modest

Amir Panush
Amir Panush
Chief Executive Officer at CEVA

And that's what we expect. Yeah. Thanks.

David O'Connor
Analyst at BNP Paribas

Awesome. Thank you. Thank you, Amir, for that. Maybe just another question. Just on the softness you saw on the kind of low end of the smartphone market, was that kind of anything tariff related in your view?

David O'Connor
Analyst at BNP Paribas

Was it kind of customer product transition? Is that just kind of expectation there, just a one quarter impact you would expect that to recover? Any color around that kind of lower end of the market there that kind of stands out to you guys? And I have one last follow-up. Thank you.

Amir Panush
Amir Panush
Chief Executive Officer at CEVA

Yes, David. Great question. Let me unpack really what happens in q one related to our smartphone customers and just overall how we see the market. And so overall, yeah, in q one, we have seen a slower start than what we expected. And this is an oddity of this customer from Q4 to Q1 dropped more than we anticipated due to some of the supply chain activities that people needs to needed to address in Q1.

Amir Panush
Amir Panush
Chief Executive Officer at CEVA

But after my discussion with the customers and overall my understanding of the market is that overall these customers will be able to ramp on a quarterly sequential volume ramp doing very well and according to basically what we've seen in 2024. So overall, anticipate the customers to contribute nicely the same as we saw in 2024. And the last thing that we mentioned about that is this customer ships the majority of the volume worldwide outside The U. S. So we don't expect direct impacts of tariffs on this customer.

Amir Panush
Amir Panush
Chief Executive Officer at CEVA

And that we expect NITRAV through the year.

David O'Connor
Analyst at BNP Paribas

That's very helpful. Thank you. Thank you for that. And maybe just one for Yaniv, just on the licensing pipeline. How would you kind of describe that?

David O'Connor
Analyst at BNP Paribas

I know you've given the guide for the year, but just kind of over through Q1, are you seeing kind of an acceleration in that in terms of design activity? Any kind of change in customer kind of behavior, pushing out design decisions maybe? Anything kind of along those lines, just kind of with the, an eye on kind of tariffs and macro concern in the background. Any color around that kind of activity and momentum would be much appreciated. Thank you.

Yaniv Arieli
Yaniv Arieli
CFO at CEVA

Sure. So, it's a good question. I think this is a that around many, many companies in the technology space. We haven't seen such decisions in the first quarter or postponing deals or decisions because of the macro. Obviously, this is a concern that is out there and this is why we're taking we decided to take a more cautious approach for the rest of the year.

Yaniv Arieli
Yaniv Arieli
CFO at CEVA

In theory, things like that can happen. When we guide and we have guided last couple of quarters, we don't break out the licensing and the royalties as we don't have the crystal ball ahead of the beginning of the quarter. But the level that we just reported and if you look at the Q3, Q4 of last year, and the average of the first and second quarter of last year, this is a decent more or less plus minus. This is a decent range in the level that we want to continue do with our licensing activity. Obviously, it seems that it looks better than where you think the vascular approach and it seems that will be some concessions that we're by different plans in the industry because of macro that necessarily tariffs directly but just macro overall and there may be some decisions that might have been made.

Yaniv Arieli
Yaniv Arieli
CFO at CEVA

So now we've not seen that happening per se.

Amir Panush
Amir Panush
Chief Executive Officer at CEVA

The other thing David,

Amir Panush
Amir Panush
Chief Executive Officer at CEVA

I will add on that. I think also what we see actually there's an IP supplier. There's also the opportunity so called potentially picking up thanks to the localization and they need to have the technology so called within those specific regions. And so, on a mix, there's definitely risk of headwinds coming with just the softness of the market potentially because of tariffs and consumer demand. On the other hand, the definitely the other tailwinds of our customers looking to have their own access and capabilities to drive their own technology and wasn't processing IP from us.

David O'Connor
Analyst at BNP Paribas

Very helpful color. Thank you guys.

Yaniv Arieli
Yaniv Arieli
CFO at CEVA

Thanks, Katie.

Operator

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

Chris Reimer
Chris Reimer
Analyst at Barclays Capital

Yes. Hi. Thanks for taking my question. I'm sorry if this was asked already. I was cut off earlier and didn't hear the first part of the question.

Chris Reimer
Chris Reimer
Analyst at Barclays Capital

I'm just wondering about the gross margin and this one design customer that you mentioned. Can you give us an idea of maybe what hello?

Yaniv Arieli
Yaniv Arieli
CFO at CEVA

Hello? Are here. We hear you.

Chris Reimer
Chris Reimer
Analyst at Barclays Capital

Yeah. Can give us an idea of what percent that actually is of the overall? And how much longer do you expect to continue with the extra allocation there?

Yaniv Arieli
Yaniv Arieli
CFO at CEVA

Sure. So, last year we talked about really few design wins with five gs advanced solutions, very high end, very sophisticated to many new use cases. Some of it are satellites, are base stations, and not necessarily those new customers and those new spaces know how to deal with the modem and how to build the right use case that they need. And one of the advantages that we could offer is some customization and some help in the design activity of changing or adopting from an off the shelf type of modem to something that fits their use case in a more efficient way. So, we have a group of engineers that are dedicated for that project.

Yaniv Arieli
Yaniv Arieli
CFO at CEVA

It's usually a couple of quarters or anywhere between one a year type of project. And if you look at an example in the first quarter of last year when we recorded 90% gross margin about $2,200,000 the following quarter was $2,500,000 2 point 6 million dollars ish, that's probably a pretty clean quarter without those efforts and probably a $1,000,000 or more above that. This is some of the allocation just from R and D. It doesn't change the overall cost of the company. It just records some of these efforts for a specific customer.

Yaniv Arieli
Yaniv Arieli
CFO at CEVA

This is one of the advantages for us in a very advanced technology like five gs advanced to win new business. Because if not, they would not have taken that risk of such a new and complicated design. And, you know, for few quarters, you could see one or 2% lower margins, but this is still an IP business model with a nine ish plus or plus minus percent gross margin. Every once in a while, if you have these activities, you would have a million, a million and a half. And when that deal is done and the services are done, then we bring them back to the R and D line and focus those cost and new technologies and future developments.

Amir Panush
Amir Panush
Chief Executive Officer at CEVA

Yeah.

Amir Panush
Amir Panush
Chief Executive Officer at CEVA

The other thing I will add on top of that, this is Amir, is that all this customization and enhanced features that we are building, it's all our IP and we intend and can leverage that to other customers as well. So while there is so called a short term impact on potential, one or two like a percentage of the gross margin, at the end the day, this is all helping us to secure those sockets, very high end sockets and driving long term royalties as well as advance the technology overall.

Chris Reimer
Chris Reimer
Analyst at Barclays Capital

Great. Thanks. That's that's really great color. And just touching on shipments, you mentioned the slowness in the smartphone and that the customer would begin ramping up. So given your reduced outlook, is there any other area you're concerned about?

Chris Reimer
Chris Reimer
Analyst at Barclays Capital

Or is it just an overall proactive conservatism?

Yaniv Arieli
Yaniv Arieli
CFO at CEVA

There's two aspects to that question. One, as Anir explained, the low cost smartphone was a bit slower for the beginning of the year. We believe it's just a timing issue. And we believe to see a ramp up in the second quarter and therefore Q3 and Q4, we have seen that trend in for many years. The extent of how the year starts and we said that the fall off from Q4 to Q1 varies from year to year, but Q1 is usually lowest for many for a long, long period of time and then it kicks in with the highest number than volume and royalties for us by the fourth quarter.

Yaniv Arieli
Yaniv Arieli
CFO at CEVA

Now the new design win, another design win that's really going into production, as we all know, didn't have a full quarter, so we'll see much more of that being reported to us and sold on a three month full quarter basis in the second quarter. And that's here to stay for the foreseeable future. So we're looking we're very excited about this opportunity. For sure, Q2 is going to have higher numbers and this is why we guided sequential growth from Q1 to Q2 and that should continue throughout the rest of the year with new volume coming out later in the year. So I think this is the way to look at it from the handset perspective, from the all the other market segments that we talked about, the consumer IP, WiFi, Bluetooth, cellular IP, a very nice start for the year on the volume perspective and also the WiFi ASP.

Yaniv Arieli
Yaniv Arieli
CFO at CEVA

And so if didn't have that timing issue and we wish could have posted a very nice start for the year. But the coming day, the rest of the cost is just due to

Yaniv Arieli
Yaniv Arieli
CFO at CEVA

the market conditions.

Amir Panush
Amir Panush
Chief Executive Officer at CEVA

Yeah. Maybe this is Amir. Maybe I'll I'll unpack it a little bit further and provide more colors. So as we look at Q1, we are very happy to see a very solid licensing execution.

Amir Panush
Amir Panush
Chief Executive Officer at CEVA

And we've actually really solid defining our leadership in wireless communication, as well as penetrating more and and winning in the AI in the AI space. And so overall, we're extremely encouraged by the licensing deals that we got in Q1. That's beyond the royalty that came with our expectation due to the two customers that we mentioned in the prepared remarks. And that's with that said on the on the mobile side, mobile handsets, one with that customers we expect the revenue to pick up nicely through the years and to basically meet what we have seen in 2024, as well as of course demand on top of the new customers overall gaining market share. So that's in mobile.

Amir Panush
Amir Panush
Chief Executive Officer at CEVA

So this is a very strong tailwind for us this year. The other one is on WiFi six that we have talked about for a while, both volume ramp as well as ASP, significant ASP increase. And for those two tailwinds and overall the portfolio that we have in IP to drive licensing we feel good about it and overall perspective for the year. With that said, considering Q1 came short to our expectation on the top line, as well as just the macroeconomics, that have changed quite a bit since our last call three months ago, We believe it's prudent to take more cautious approach for the rest of the year. And with that, we basically guide them down still a growth year, but we guide them down the expectation for the revenue growth.

Amir Panush
Amir Panush
Chief Executive Officer at CEVA

And so all in all, all in all, in terms of our technologies and our ability to go to our growth and success both in 2025 and in the long run, we are very confident about that. But we cannot ignore overall the market sentiment out there and that we have a Q1 that was lower than our expectation on top line. With that we reduced the guidance for the year, still a growth year, but a single digit growth target.

Chris Reimer
Chris Reimer
Analyst at Barclays Capital

Got it. Thanks a lot for the color. That's it for me.

Amir Panush
Amir Panush
Chief Executive Officer at CEVA

Thank you, Chris.

Operator

There's a follow-up question from Kevin Cassidy from Rosenblatt. Please go ahead.

Kevin Cassidy
Senior Research Analyst at Rosenblatt Securities

Yeah, thanks for taking my follow-up. And just as far as customer behavior goes, you know, investors got into a bit of a panic, we'll say about DeepSeq and these other low cost and say smaller LLMs that are coming into the market. Can you say how that's changing your demand for your NPU IT?

Amir Panush
Amir Panush
Chief Executive Officer at CEVA

Yeah, thanks for the question. Actually, this is, that transition is great for us. And, you know, for AI, we have seen the success and the growth mostly on the cloud for now for several few years and that's, of course, we keep going very nicely in the coming few years. But the transition from running the models on the cloud in in case of inference, really running the model on real time. The transition from the cloud to the edge hasn't really a big number started yet.

Amir Panush
Amir Panush
Chief Executive Officer at CEVA

Now it's really happening. It's so called the beginning was 2024 and now moving into the next few years. Models like deep sea and actually what we see right now also from the other Western large LLM companies that building those models, they are all coming with more optimized, LLM models that can be run way more efficiently on edge devices. So we believe that you would see a major transition where smartphone, PC, tablets, automotive systems, other smart edge devices will integrate more and more AI or NPU capabilities and we'll be able to run much more efficiently those models because they will be smaller, more optimized and with that lower latency and lower power. And so actually DeepSea coming with this technology and what's coming now in the Western world as well, extremely encouraging to enable our future growth in the marketplace.

Kevin Cassidy
Senior Research Analyst at Rosenblatt Securities

Okay, great. Thanks for clarifying And

Amir Panush
Amir Panush
Chief Executive Officer at CEVA

with that we are looking to support those models, of course. Yes, sir.

Kevin Cassidy
Senior Research Analyst at Rosenblatt Securities

Right, yep.

Operator

The next question comes from Suji Desilva from ROTH Capital. Please go ahead.

Suji Desilva
Managing Director, Senior Research Analyst at Roth Capital Partners, LLC

Amir. Hi, Yaniv. Can you talk about maybe with the given all the macro and tariff uncertainty, if you're seeing any impact in the licensing environment, if you're seeing any programs that were underway being pushed or if the activity remains unimpacted so far?

Amir Panush
Amir Panush
Chief Executive Officer at CEVA

Yeah. Thanks Suji for the question. So, for just to clarify, we don't see direct impact of tariffs in terms of so called paying taxes. Our customers need to pay taxes on licensing our technology. And the indirect demand in Q1, we've seen very strong demand and then we've definitely we have been able to close both good number of deals as well as very strategic deal for us.

Amir Panush
Amir Panush
Chief Executive Officer at CEVA

And we have very good pipeline for Q2 and the rest of the year. We haven't seen that pipeline decreased. But overall, if when we talk with customers, I would say on average, people are a little bit more cautious out there. And and just more than anything, the the most customers said, we don't know what we don't know and we need to see how things will shape up. And I think that's overall what we hear out there.

Amir Panush
Amir Panush
Chief Executive Officer at CEVA

So with that of course, considering Q1 and what we said, be more prudent with the cautious outlook, we guided lower for the year. But when we go and specifically talk with customers and work on programs that are in the making, we haven't seen an impact.

Suji Desilva
Managing Director, Senior Research Analyst at Roth Capital Partners, LLC

Okay, Amir. Appreciate the the candid response there. And then, looking at your royalty units and Wi Fi, are those wins ramping and tracking to follow the success, the share success you've had with Bluetooth? Is there any impact there as well? Or are those programs coming to market?

Amir Panush
Amir Panush
Chief Executive Officer at CEVA

Actually, that, we are extremely encouraged and we have licensed to tens of customers our WiFi six technology and many many of them are ramping pulling production. And on average, we are really encouraged by our customers able to so called integrated technology, taking the tape out and out taking that into volume production. So we are actually exactly on track to what we want to achieve in terms of the WiFi ramp in the coming few years. And now, of course, we've got the way to be able transition to WiFi seven as well. Although I would say the competitive landscape is such that we are really becoming not only the de facto IP supplier for Bluetooth, but as well as for WiFi.

Amir Panush
Amir Panush
Chief Executive Officer at CEVA

And we get WiFi six and then transition to WiFi seven.

Suji Desilva
Managing Director, Senior Research Analyst at Roth Capital Partners, LLC

Okay. Very good. Thanks, Amir. Thanks, everybody.

Yaniv Arieli
Yaniv Arieli
CFO at CEVA

Thank you.

Operator

This concludes our question and answer session. I would like to turn the conference back over to Richard Kingston for closing remarks.

Richard Kingston
Richard Kingston
VP, Market Intelligence, Investor & Public Relations at CEVA

Thank you, Danielle. And thank you, everybody. As a reminder, the prepared remarks of this conference call are filed as an exhibit to the current report on Form eight ks and accessible through the Investors section of our website. With regards to upcoming events, we will be participating in the following conferences: the JPMorgan fifty third Annual Global Technology Media and Communications Conference, May thirteen and fourteen in Boston, Oppenheimer Twenty Sixth Annual Israeli Conference, May Eighteenth in Tel Aviv, the Stifel Boston Cross Sector one on one Conference, June third and fourth in Boston, the Rosenblatt Fifth Annual Technology Summit, The Age of AI on June 10, being held virtually, fifteenth Annual ROTH London Conference June twenty fourth and twenty fifth in London, and the Northland Growth Conference twenty twenty five on June 25 also being held virtually. For information on these events and all events we will be participating in can be found on the Investors section of our website.

Richard Kingston
Richard Kingston
VP, Market Intelligence, Investor & Public Relations at CEVA

Thank you, and goodbye.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Executives
    • Richard Kingston
      Richard Kingston
      VP, Market Intelligence, Investor & Public Relations
    • Amir Panush
      Amir Panush
      Chief Executive Officer
    • Yaniv Arieli
      Yaniv Arieli
      CFO
Analysts
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Key Takeaways

  • CEVA reported Q1 revenue of $24.2 million, up 10% year-over-year, with licensing revenue rising 32% to $15 million despite a 14% drop in royalties; cost controls helped achieve near consensus non-GAAP EPS profitability.
  • Major design wins spanned all three “connect, sense, infer” pillars, including a top customer licensing Wi-Fi 7 IP, new Bluetooth/Wi-Fi 6 combo deals, spatial audio software for professional headsets, and an Edge AI NPU win for next-generation ADAS.
  • Wi-Fi royalties surged 183% year-over-year driven by a product mix shift to Wi-Fi 6, underscoring growing traction in consumer and industrial IoT markets.
  • For Q2, CEVA forecasts $23.7–$27.7 million in revenue with sequential royalty growth, ~87% non-GAAP gross margin, and reduced operating expenses, reflecting disciplined cost management.
  • Amid macro uncertainty, 2025 revenue guidance was trimmed to low single-digit growth, but CEVA remains focused on long-cycle licensing, technology leadership, and building a diversified future royalty stream.
AI Generated. May Contain Errors.
Earnings Conference Call
CEVA Q1 2025
00:00 / 00:00

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