Q4 2020 CEVA Inc Earnings Call

[music].

Good day and welcome to the CEVA, Inc, fourth quarter and full year 2020 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 CEVA.

After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one. Please note. This event is being recorded I would now like to turn the conference over to Richard Kingston, Vice President of market Intelligence Investor and public relations. Please go ahead.

Thank you cole.

Everyone and welcome to <unk> fourth quarter on full year 2020 earnings conference call on <unk>.

Joined today by Gideon <unk>, Chief Executive Officer on Geneva, really Chief Financial Officer on CEVA.

Gideon will cover the business aspects on the highlights on the fourth quarter on provide general qualitative data.

Yeah, and he will then cover the financial results for the fourth quarter on also provide qualitative data for the first quarter on the full year 'twenty 'twenty one.

I'll 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 CEVA to differ materially from those expressed or implied by such forward looking statements on assumptions.

Forward looking statements include guidance on qualitative data for the first quarter on full year 'twenty 'twenty one opt.

Optimism about five G base station ran deployment in China on relationship with GE on the opportunities presented thereby.

Optimism about the continued momentum in our connectivity sensing on AI technologies.

Ramp up from existing Wi Fi for on five customers on.

Optimism that our Bluetooth technologies will allow us to penetrate the high volume smartphone market.

Our belief for strong licensing revenue in 2021 on potential new licensing engagements.

And our belief that our royalty growth drivers will more than offset the decline in royalties from the five G smartphone supplier switch.

For information on the factors that could cause a difference in our results. Please refer to our filings with the security and Exchange Commission teasing.

These include the scope and duration of the pandemic the extent and length of the restrictions associated with the pandemic on the impact on customers consumer demand on the global economy generally.

The ability of CEVA as Ips for smarter connected devices to continue to be strong growth drivers for us.

Our success in penetrating new markets and maintaining our market position in existing markets.

The ability of new products, incorporating our technologies to achieve market acceptance the.

The speed and extend of the expansion of the five G on Iot markets.

Our ability to execute more non handset baseband license agreements.

The effect of intense industry competition on consolidation on.

Global chip market trends.

CEVA assumes no obligation to update any forward looking statements or information, which speak as of their respective dates on that.

That said I would now like to hand, the call over to Gideon.

Thank you Michelle and good morning, everyone and thank you for joining us today.

When people when he was an excellent.

The COVID-19 pandemic accelerating the adoption of new technologies and usage more than one presenting uncertainty and non.

Operational challenges worldwide.

Notwithstanding.

Net income stand a few minor exception on these.

All time high revenue in both licensing and royalties and substantial market expansion in the five gigawatt wisely.

And automotive spaces.

These developments in more detail later in the call.

Fourth quarter was another excellent quarter with revenue and EPS significantly ahead of our expectations.

Revenue for the fourth quarter of 2020 came in at $28 1 million billable hour.

Second highest revenue.

On a quarterly revenue on record.

The licensing environment continues to be healthy and $12 1 million barrel on for the quarter.

Is it a good demand for on Wifi, Bluetooth audio DSP product.

Cheyenne erratic called equaling 21, new agreements.

<unk> 16 will flow.

<unk> EBIT inside willful small tension.

Seven of those agreements, where we furnished on cash.

Non-GAAP product flow technology include five smartphone gws, but selling people extra tracking and wide variety of Iot devices.

Making the quarter, we signed a comprehensive inc. Targeted their license agreement for our connectivity portfolio.

Key Oems in the more bunch page net in Canada, Inc.

Development, Wifi and Bluetooth technologies.

Intent to deploy all of the connectivity portfolio across all five G smartphone gwa's scale both in.

Smartphone related.

This agreement along with this we are being our pipeline reinforce our belief.

On a stronger and another record year in licensing revenue flow.

Whitney 21.

Royalty revenue came in at.

On starting.

Record high 16 1 million no low.

19% deal really.

These are non strength caused allow us to market and strong shipments.

Paul G smartphones.

The key drivers to day he's excited grateful.

For the second quarter in sequestration, we reported one time high royalty revenue for more Bluetooth Wi Fi and central fusion product.

For the full year 'twenty 'twenty revenue came in a drug called <unk>.

100 <unk>.

About 3 million going on up 15% from 2019.

This marks the first time the fuel hedge growth.

Median.

Annual revenue threshold.

Hey, good solid prediction.

Licensing and related revenue.

Those of you with $50 million to $45 million up 10% from last year.

We continue to expand our customer Inc. With a record.

55 license agreement signed.

They've been seen well first on Kashagan.

Annual royalty revenue came in on time.

And all time high $47 $8 million.

Up 22% as compared to 2019.

Royalty revenue for <unk> base station and Iot products category grew seven 2% to <unk> 22.3 million blown out.

Good momentum.

<unk> <unk> customer base growth.

Multi family end market continues.

Royalty revenue from handset declined slightly below volume down, 3% and 25 five.

$5 million.

<unk> achievement of CEVA based products grew 27% year over year to more than one 3 billion unit.

750 million UNH form on base station and audio day question.

Perfect.

'twenty will be a landmark yields for both CEVA and its industry.

Global pandemic highlight the impact Covid EVP.

Pvp hedge on our ninth and exit as a catalyst for that Pete changed all of the digital transformation.

This presents a unique set of opportunities for CEVA differentiated technology.

Our operational agility.

Particular in four key markets.

Five view on Wifi Gws feel about.

Okay.

Let me take the next few minutes to elaborate on these gross drives live in debt.

Anchored CEVA has already in place in these low cost debt markets.

I G. Ron ideal first data rates and ubiquitous connectivity.

The fast rollout of <unk> networks today is predominantly aimed and smartphone use case.

According to Alex on most recent mobility book by the end of 'twenty plenty over 1 billion or 15% of the worlds population live in five G coverage area.

China in particular is very advanced.

70% of the global <unk> net.

According to GSM Association.

On smartphone.

Also new growth opportunities in regards to you all.

<unk> and Iot applications.

Application will be the center of next generation technology deployment and industrial robotics.

And autonomous car.

The digital transformation and the new application <unk> is present.

Sizable opportunity for CEVA <unk> DRAM technology.

Our existing incumbency in baseband.

These specifically applies to the growing use of equity one day or not.

And new antenna technology that combines a raise of antenna with DSP to process complex algorithms, such as massive mimo and beam forming for more precise Theater, Inc.

They're not seeing them, which getting substantial boost in capacity and energy efficiency.

And then in terms of Orion and <unk>, which aims to transform the telecom industry rely on.

On top I think.

On the limited number hopefully in this aggregate net growth with open interfaces and multitude of merchant chips from incumbents and new supply.

We think we search index.

<unk> opened one to account for 58% of the old the old on Capex spending by 2020.

With our second food non competitive edge in DSP potential, we're able to empower our existing and upcoming customer.

Right and quickly expand their market reach for the remote would be unique and address new opportunities in the non space like guidance.

<unk> says.

Small cells by debt.

Wireless access in <unk>.

We are on college by debt holders VP has made in the five D on space growing its share in the global wind market from 8% to 11% on a year.

On the real data.

It's holding through the low law and we expect other customers of all low to go into production in 2021.

Wildfire.

<unk> is the clothing is over 5 billion smartphone and more than 300 million hotspot two day.

<unk> estimated that more than 50% of the global mobile traffic is ultimately to one thing and this is set to grow to over 70%.

AT&T noted that each network experience 90 people fence wildfire data well.

During the Covid.

The new Wi Fi standard Wifi, six and Wifi six E on.

Substantially higher data rates of up to nine gigabit per second.

This is $1 three gigabits per second in file generation lightly funded loans.

Six of those moving sizeable opportunity beyond smartphone and PC to proliferation of connected Iot devices, such as smart home appliance Smart TV smart speaker on the negative comp and wheel bench.

Our young minds wildfire seek safety.

The forefront of the Wifi six upgrade cycle and the only IV with successive record of accomplishment.

We have signed two day to day more than 10 Wifi six customers.

In our existing wisely falling Wifi fighting estimate on shipment growth.

More than six fold in 'twenty 'twenty, the south a significant expected windfall.

In addition, as I noted earlier.

<unk> seeks a long resolves Bluetooth technologies when gas opportunities.

Dimitry.

High volume out of smartphone.

All Oems are looking to internalize the wireless connectivity technology, Inc.

Well as semi is that look to take advantage of all the leadership in the Wifi six and glucose booming.

Gws Gilbert the TWC on bus market present, a lucrative opportunity for CEVA due to each side.

Loving it.

IDC by 2020, the TWC segment reach.

134 million fit and projected to reach two 400 million debt by.

By 2024.

And presenting a CAGR of 14%.

It's been damning as expedited for distillation of Tw is as low people has to work on the study from home and require the high quality ear buds to ensure good experience.

Additionally, non attention to OEM recently decided to remove complementary ear buds for new forms of packaging.

Leading the way for a larger merchant model kit.

Dws good luck.

CEVA already has a strong presence in dws healbot space with all the other way, it's Bluetooth safety.

On the loan on the Bluetooth technology has been adopted by more than 87 family and today and then installed more than 520 million devices in 'twenty two.

Up 44% year over year.

Furthermore, the future Pizza 1 billion scalable design win progress to really seek.

More functionalities when dealing with the challenges of finance space and battery life.

Among these both functionality on a noise cancellation for a developed environmental conditions voice recognition.

In central for activity in hands free.

Nick.

Which relates to technology that CEVA points.

In the coming weeks, we will officially announce the one first completely empty than open platform for dws deal, but any other bad debt.

We have already started to introduce these high value differentiated day, two lead customers and expect to conclude the first licensing agreement shortly.

Good morning.

One thing the market represents 9% of the global semiconductor growth consumption of $41 billion each day.

Yes selling into this.

<unk> requires overcoming the large entry barrier and it's commonly takes between three to five years for semiconductor Orlando using new technology to quantify designs at tier one OEM before going into production.

With that said.

Soon as production staff.

Debt lifecycle automotive is longer than most other markets Inc.

<unk> statement sales of revenue and profit in place waiting for CEVA R&D investment strategy.

And recently it was the automotive industry has undergone a massive technology transformation.

Given by adoption of Adas and it makes sense.

Yeah.

It does applications such a lengthy departure warm Inc. Emergency braking bulking assisted driving money billing system, we acquired them high performance DSP.

Process essentially data temperatures by coming on our laser lidar and other firm sales surrounding the vehicle.

Automotive electrification is gaining momentum as a result of increased emphasis of government to low oil fields to imation.

Smith of client mentioned, Brazil, small hollow shale stones why.

Inspire.

After re management system in place a key key laws in electrical powertrain and challenge of keeping high efficiency and longer life of the batteries.

Powertrain vendors and Oems have recently started to use DSP a low.

With AI to boost the performance of the battery systems.

For longer drive the charge in a virtual environment and loans condition.

Moving to one 3 million on these treatment clearly setting new DSP and advancement and the collaborative business model that CEVA will close this in the areas of either on policy.

On the latest sales support to DSP architecture. This world for most DSP for sensor processing.

On the Union signed architecture Covid.

Good day morning, billing and AI processing on essentially data extracted from lays out some of our lines centered on <unk> and the highest day ever for one incremental shameful.

Our feeling and then a 28 million to one side tune and optimize new on rates and speed. The newer network inference processing inclusion requirements faster response time of diseases.

We've got technology and competency well diagnosed for two key agreements we signed during 2020 with two of the largest automotive extremities. The plan to use our technology for powertrain and level two plus Asia, we will continue in the coming year.

To strengthen our relationship with.

Our key customers and seek to engage with other stakeholders, there a bit utilizing on coal technologies and ongoing reputation and with the mood.

It also aligned with CEVA strong focus and commitment to environmental improvement technologies and programs.

Before my closing remarks, we would like to it.

Strength, how concern and sympathy.

Those affected by a global pandemic.

The ongoing penetration to exempt us with numerous challenges and we continue to focus on the safety of our employees customers and suppliers.

Oh wait til setting himself fully demonstrate the breadth of our technology portfolio.

<unk> seen the global event.

Primarily on aluminum.

<unk> focus and devotion to maintain and even exceed aggressive targets that we set for free.

As we enter 2021, we look to continue to be at the forefront of the digital transformation and capitalize on our core technologies in past simple diversity to grow market share and maximize our return on growing industry in particular on file.

<unk> wife, ITW is buzzing with the mortgage debt.

Disgusting.

This industry exempt multiyear growth opportunity for <unk>.

Connectivity centric in their technology, and we are well positioned to take advantage of free.

Finally, I would like to take this opportunity to thank.

All of our employees for their hard work innovation and fantastic execution.

And we'd like to extend my thanks to our pulp mill supplier.

Last but not least our investors for their confidence in football.

We sure on healthy happy and prosperous year.

And please stay safe.

With that said I now turn the call all Nokia meaningfully outline on financials and guidance.

Yeah.

Thank you Peter Good morning, everyone I'll start by reviewing the results of our operations for the fourth quarter of 2020.

Revenue for the fourth quarter was $28 $1 million down slightly as compared to $28 3 million in the same quarter last year.

The breakdown is as follows licensing and related revenue was approximately $12 1 million, reflecting 43% of total revenue, 8% lower as compared to the fourth quarter of 2019.

Royalty revenue was a record $16 $1 million, reflecting 57% of our total revenue up 19% from $13 5 million on it.

Same quarter last year.

One 8% sequentially.

Each station and Iot royalty revenue contributed $6 4 million in the quarter up 50% year over year with an all time record royalty contribution from our Bluetooth Wi Fi and sensor fusion product.

Quarterly gross margin was 91% on GAAP and 92% on non-GAAP basis.

Both higher than expected.

Non-GAAP quarterly gross margin exclude approximately <unk> $2 million of equity based compensation expense of <unk> 2 million for the amortization of other assets associated in your vision.

Our total opex for the fourth quarter was $23 2 million just over the high end of our guidance, mainly due to accrued compensation related benefits and commission associated with the higher 2020 revenue.

Capex also included an aggregated equity based compensation expense of approximately $3 4 million amortization of acquired intangible.

As debt associated with the acquisition of Hillcrest and Hemo vision on the European six Neely.

Our total opex for the fourth quarter. Excluding these items were $19 3 million on about half a million above the high end of our guidance due to the same rigor on just highlights.

GAAP net income for the quarter was <unk> 6 million and diluted earnings per share with <unk>.

Compared to net income of $3 1 million and 14 cents for the fourth quarter of 2019.

Non-GAAP net income and diluted EPS for the fourth quarter was $4 $7 million in 'twenty.

Secondly, significantly higher than our internal estimates.

Of note the fourth quarter of 2020 financials include a $2 million tax expense.

Due to withholding taxes, which cannot be utilized in future years.

Other related data.

Shipped units by CEVA licensees during the fourth quarter of 2020.

A record 484 million units up 39% sequentially and 35% for the fourth quarter of 2019 reported.

On the 484 million units shipped.

217 million units for 45% or for handset baseband chips.

Reflecting a sequential increase of 45% from $149 million unit on handset baseband chips.

During the third quarter of last year.

11% increase from 196 million units shipped a year on the.

On a year ago.

Our base station on Iot product shipment reached second sequential all time record high of 268 million units.

Up 44% sequentially and up 63% year over year.

On the 268 million unit.

Was 187 million units, a new all time quarterly record high.

As for the year.

On home shipments increased 27% year over year to over $1 3 billion units, an all time record high.

Good day to approximately 42 CEVA powered devices sold every second.

In 2020.

And we will shipments of handsets were flattish year over year.

Around five.

<unk> hundred 75 million devices.

After a slow start of the year handset shipments from the large China based customers grew significantly in the second half on the.

Base station and Iot product royalty revenue continued to grow and reached a new record high of 22.

<unk> million dollars.

Up from $13 million in 2019, and $8 $9 million in 2018.

In terms of unit base station on Iot.

Shipments were up 60% year over year moving.

On 150 million devices.

Overall, we surpassed the $100 million total revenue milestone for the very first time.

This is a significant accomplishment that was achieved as a result of an all time high licensing and royalty revenue since we have talked.

As for the balance sheet.

As of December 31, 2020 give us cash cash equivalent balances marketable securities and bank deposits were $160 million.

We did not repurchase any shares in Q4 and have approximately 498000 shares available for repurchase.

Our dsos for the fourth quarter was 48 days.

During the fourth quarter, we generated $6 8 million of cash from operation.

Our depreciation and amortization were one $5 billion.

And purchase of fixed assets was zero point formula.

At the end of the year, our head count was 404 people.

With 345 engineers slightly higher than a total of 398 people at the end of September Inc.

Wanted to hire people hire over 382 people at the end.

On 2019.

Now for the guidance.

We expect 2021 to be another growth year for CEVA as the momentum for our business continues.

We are forecasting total revenue to be just over $106 million one on fixed for 2021 with growth in both royalties and licensing.

Specifically in regards to Roku revenue forecast, we're taking a wait and see approach as the semiconductor industry have experienced extended lead times for ship owners and lean inventories, which you expect to last through the first half on the year.

Our licensing business continues to be solid with growing opportunities and finally Wi Fi six.

Dws ear buds and automotive as Gideon elaborated on.

We're targeting another record year for licensing, which will set the stage for additional new streams and royalties in years to come.

On the royalty structure.

We're expecting a decline in royalties from a leading smartphone OEM gross switch to another baseband supplier for its recent launched ISG smartphone line.

That said.

We do maintain our presence for <unk> smartphones and are still expected to ship volume this year.

We also see continued progress for our China based customer who has recently regained good momentum low cost smartphone for emerging market.

And we've also recently launched its first CEVA powered five G ship in China.

Our base case scenario two product categories.

We expect to continue to outgrow the market we are targeting overall.

Overall, we believe that new royalty growth vibrant we were more than offset the decline in royalties.

From the five <unk>.

Supplier switch.

On the expense side.

We forecast approximately $3 million additional expenses in 2021 versus 2020 that relate to the devaluation of the U S dollar compared to other currencies we use.

Mainly the shekel is on the euro.

On the cost of goods, we expect higher non-GAAP expenses of approximately half a million dollars due to more sensor fusion chip sales and other project expenses.

On Opex.

With a strong licensing of confusion in 2020, and EBIT stronger expectation for 2021, we will continue to support these new customers and reinforced our leadership with disciplined investments in R&D.

Overall non-GAAP op income.

<unk> will be approximately $6 million.

Half of it.

$3 million.

Is attributed to the FX I just stated.

Equity based compensation is forecasted to be approximately the same as 2020 around 13.

Million.

Annual gross margins are forecasted to be similar to 2020, and the regional 89% on a GAAP basis, the 91% on non-GAAP basis.

Interest income has forced them to be slightly lower than 2020 due to the lower interest rate environment around $600000 per quarter.

Tax rate is expected to be higher.

On an annual basis due to higher taxes in France for a review on Italy.

Bluetooth and Wifi.

Approximately 22% of pre tax income on a non-GAAP basis.

Compared to 2020 level, excluding $3 million of expenses due to withholding taxes, which we could not be utilized in future years.

Share count for 2021 is expected to be approximately $23 5 million shares.

Specifically for the first quarter of 2021.

Gross margin is expected to be approximately 89% on GAAP and 91% and non-GAAP basis.

Opex for the first quarter is expected to be slightly higher than the fourth quarter of 2020 non.

Non-GAAP Opex is expected to be in the range of 23, 2% to $24 $2 million.

Of our anticipated total operating expenses for the first score of $3 1 million is expected to be attributed to equity based compensation expenses and <unk> six to amortization.

Back on non-GAAP Opex.

For the first quarter is forecasted to be in the range of $19 $6 million to $26 million.

Net interest income is expected to be about $600000 taxes for the first quarter, but higher than explained half a million dollars on both GAAP and non-GAAP basis.

Our accounts for the first quarter ex.

It will be.

On 23 3 million shares.

If you could now open the Q&A session.

Yes.

We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.

If youre using a speakerphone please pick up your handset before pressing the keys.

To withdraw your question. Please press Star then two and at this time, we will pause momentarily to assemble the roster.

And our first question today will come from Matt Ramsey with Cowen. Please go ahead.

Thank you very much and good morning, everybody.

Congratulations guys on on a strong year, which was.

It was challenging from a number of angles I'm obviously.

Gideon I wanted to ask next start.

Over the last few quarters and particularly today.

<unk> talked much more about.

The evolution of Wi Fi.

Hum.

Your business both on licensing on what it might mean for future royalties on I was particularly.

Interested in the comments you made about some large vendors.

Internal.

Our vertically integrated for their connectivity platforms, not just Wi Fi, but other types of connectivity that might bring.

Home accessories wireless ear buds et cetera, maybe.

Maybe you could talk a little bit more about that how pervasive youre seeing that across Oems, what what the merchant suppliers of some of those chips are doing which may also be your customers on just how youre seeing that market evolve and on what kind of.

Royalty contribution are we thinking about four for this business in the next two or three years as it becomes more a material part of your revenue.

Hi, Ed.

I seem to know.

When it comes to Wifi and Bluetooth scenario in general.

Two aspects.

One is what we call internally Iot basically we make a distinction I show other people did the same distinction between Iot and on Iot.

Non io things that basically the DC the smartphone and tablet.

And Iot on the other devices.

Yields.

On smart.

The smart home.

On.

Have you been day download these three categories.

In 2020. This was the first time the non.

The Iot exceeded to surpass the non Iot, meaning debt Yang mall shipment of devices.

It's not.

D C.

<unk> and others.

And tablet.

And you have known and by 2026 day is going to be $30 billion. So thats the landscape there's no growth.

<unk> is that we are targeting in the what we call the Iot.

So a bit.

We have on the <unk>.

Wireless connection we are on <unk> Wi Fi we have Bluetooth.

And we have many cellular Iot all day enablement Iot.

We target royalties Angus and low level of this $30 billion and tried to build a product.

And in fact, we just in terms of connectivity.

Second aspect is.

The smartphone.

We came on smartphone is are these markets well defined market recently become a little bit fragmented in terms of.

Suppliers Oems on building.

And what we found out is the day, Tom plus as part of their internal utilization that we do whether it be in demo day mandate on surplus and model data to us and say, we need you connectivity technology, because we are going to integrate it into our <unk>. We did this.

<unk>, let's integrate those pilots and not be dependent on Qualcomm mediatek.

The other guys do.

Dominate the merchant chip market.

And interestingly enough, it's not just the OEM, we are talking with semiconductor player.

Let's say you know when it comes to Wi Fi, maybe will expedite our Jeremy entrance into this market and we licensed technology because you on it so.

It's another angle, which we all the time trying to be in the mobile space.

Different angle, we have the <unk> we have the.

Vijay we are sound and we have connectivity so.

If we.

Anything that relates to mobile mobile is important to us as well.

No. Thank you. Thank you for the thought there are much appreciate it.

I guess on.

A follow on question in a different market you gave a lot of stats in and.

You did as well in the prepared script about the progress in the base station market with DTE and maybe you could give us a little bit of an update on the timing of how youre expecting the rollout to take place with Nokia.

As we get into 2021 are we on the precipice of that now and is that baked into some of the royalty comments for calendar 2021, if there's any comments you could give us about how big that base.

Base station opportunity is in the royalty expectation for 2021 that would be really helpful. Thank you.

Net.

<unk>, Inc.

So big daily pay to start speaking about specific customer on about that we have.

The two names that you mentioned VP is shipping as it is.

In a stronger position in the in China, and the emerging market debt.

The momentum we don't see any reasons will not continue when it comes to the second customer let's wait.

They are public they speak would be say in the <unk>, but as we say the prepared remark. We we we we think we are in the zone.

Now in the Prime time now.

On the have the platform.

To build this momentum Venezuela.

And how would that in our forecast for this year, we do take most of our key customers in production different.

Timing and different volumes, but we do have debt over the partially baked in in our in our expectations and plans.

Got it thank you and last one for me I noticed that the smartphone units for royalties in the fourth quarter.

We're up.

Year over year on but but.

But the revenue and the revenue per unit was down a bit I presume that was.

Lower units to Intel on some growth from emerging markets, particularly with spreadtrum, making a bit of a rebound is that.

Do I have that right in and what are your expectations for you on where your China based baseband customer on it sounds like some increased momentum there globally is that also baked into your forecast for 'twenty. One. Thank you. Thanks guys.

Sure. So yes, there is no doubt that the year started slow.

Especially for China based customer with Covid and the shutdown and then some of the Indian market was very slow as they got into the shutdown later in Q2, so it had a big effect on us.

And on them throughout the year, the second half of the year was strong.

Both for mental and from the Spreadtrum.

Obviously, we did not have the new iPhone. The 12 in Q4, which we did have a year ago, but the rest of the momentum from the other models.

The Chinese guys.

EBITDA for sub debt units on an annual basis on.

Although we did not have a 100% of the.

The U S Oems, which we did in 2019, we came in flat on overall units in almost in dollars as well so at least for the for last year, we did not feel the head of the change or a change in vendors.

As we said in 2021, we believe that number will decrease.

But overall, we will be able to more than offset it from the base station and Iot type of devices.

Thanks, guys I appreciate it.

Thank you.

And our next question will come from <unk> Desilva with Roth capital. Please go ahead.

Good morning, Gideon you any congratulations on the progress here.

And the Inc.

Maybe you can even the licensing area can you talk about the new kind of quarterly sustainable range would be or annual just to give us a sense of how you think licenses can progress.

Yes, I think we hit a new record both in dollars and number of deals 55 deals.

This quarter was very strong with a 21 deals that we don't necessarily recognize all of those deals specifically in Q4, we had a handful of customers new customers for us some of the startup.

But we were more concerned so whether it's an upfront payment before we released the technology, which we did not recognize every every one of them.

The wrong math to do to take the licensing revenues divided by 'twenty one.

It's a bit of a different number.

That said some of these guys that as soon as they pay US we will deliver and we are able to recognize in Q hopefully in Q1, maybe some will take longer we will see.

But an excellent pipeline to start the year licensing for US right now looking at Q1.

It's strong.

So I hope that.

Adjusted EBITDA color period, you asked about.

Yes, that's very helpful and perhaps a bigger picture bigger picture question on the on the the royalty growth Youre, having as we look ahead to calendar 'twenty. One what are two of the three royalty growth areas that you're most excited about year over year.

Hi.

I think when we say debt.

Cloud and the.

First on gross to net.

Until two net is where the categories outside of the mobile and PC.

Okay.

Whether it's Wi Fi, whether it's new tools, whether its a cellular Iot.

We see it.

Big momentum in terms of product coming really fast.

We also on Trulia.

Product.

If you go to Asia.

On peak of and I cannot think of any electronic products. It doesn't come with connection to the income. It. So that's the excitement and that's what we are going to.

We see a strong impact in the coming year.

The other the other profitability of growth as the <unk> base stations.

I think in China next year this year is going to be strong.

Okay.

The second customer is coming out as well.

What's ahead of us and we don't see the rebound we cannot see it now.

Is the new use cases on <unk> in the prepared remark I mentioned five its net wins.

So many.

Manufacturing day Fac.

Factories with a growing into private network with the hip delorme cellular net well secured and in reliable.

And this month.

Fixed wireless access these are all designed data we see.

The whole out on.

This one but.

When it's.

And I'll be done really mass market could be this year could be next day.

Okay, and then lastly on the connectivity Oh go ahead sorry.

Net.

Selling is when you go to small set by with fixed wireless luxury and speak about volume growth of the mediums.

The product.

Okay, Great and then lastly on connectivity Bluetooth very strong over 500 million units last year, what what's the expectation for Wi Fi units relative to Bluetooth is in Oregon order of magnitude lower with a higher ASP or Canada approach something like a Bluetooth size unit market understand Wi Fi Tam would be helpful.

So I find the growing market for us both for us and overall the world as well and much more used and adopted this last couple of years.

Four or five years ago.

When we bought <unk> back in 2014, nobody was using the IP for Wi Fi will just merchant ships at the time and the whole district has completely changed with.

Dozens of deals that we have signed six fold unit growth in 2020, and I would add debt to give you on this list on your first question on.

Some of the exciting opportunity Wi Fi limit growth in 'twenty and 'twenty, one for sure needs to climb significantly with many more products.

Relative.

Okay. Thanks, guys.

Thank you Susan.

And our next question will come from <unk> <unk> with Barclays.

Please go ahead.

Hi, Thanks for taking my questions and congratulations on the strong results.

I just wanted to get back to the.

Guidance for 2021.

Maybe.

And in your property, but with regards to the royalties forecast.

You mentioned that you guys are taking a wait and see approach on because of some of that.

No slowdown in the semi industry.

I guess do you have a way to normalize that assuming that there is a recovery sooner than expected.

How meaningful would it be to Iraq or your revenue forecast.

Hi, Good morning, So let me one thing correct you were really important there is no slowdown in the semiconductor industry.

<unk> of it there is huge demand in the semiconductor industry all over the place and this what's causing the inventory issue with a very lean inventories and the long lead time. The foundry are fully utilize it. It's a great problem to have if you are in the semiconductor space, it's not a great.

If youre, an OEM and you need to get those chips and you need to build those cars and get them out the door, that's where the problem is so eventually one day when there will be enough.

Sure.

Manufacturing capabilities that not demand to fulfill the demand we should see both our customer ship more for us to recognize more revenue on these royalties. This is what we alluded to you could see that many companies in the semi space that we reported recently, we don't know we know we were not the manufacturer we don't have that crystal ball, but we.

Just see what's going on in the industry and we have placed on exactly what you said the wait and see approach, let's see what comes out but last year's issues of Corona and shutdowns and demand.

At least our Corona or COVID-19 started completely different in the market, where the market is today and the need for much more the generic deflation, which we which we talked about and we are seeing all over the place with a lot of these.

On devices and full production.

Great. Thanks for the clarification.

Sure. Thank you.

And our next question will come from David O'connor with Exane BNP Paribas. Please go ahead.

Great. Good morning, Thanks for taking my questions, one or two from my side, maybe firstly.

One for you <unk> on the <unk>.

Base station on Iot.

Whats the assumption there for 'twenty 'twenty one.

You did 72% in 2020 and 50% in Q4 and is a top 50 percentage is that something you can maintain through 2021 and also can you speak maybe just on the assumptions around the heat and the first half royalty growth versus the second kind of a follow up thanks.

Yeah.

Sure. So we are not breaking down the royalties and licensing this year.

Because it's quite difficult to do and many companies have stopped at all giving guidance or qualitative data. We're trying to help out with the model of them to help out with our best customers.

Understanding of different industries, and Gideon Buffalo with many industries that we play in.

And so it's really hard to put all debt in place we did take growth and overall growth we do believe.

We will be able to grow each one or both of the licensing and the royalty revenue streams for us we bid.

Just too hard for it at this point of time to low to understand on how this will be divided between the two I think we just need to take it one quarter, the volume and see how things progress.

On the royalties again like every day there.

There is ups and downs there is a lot of demand right now I think seasonality in Q1 on the semi theres not going to be like prior years, it could be stronger than in the past.

On the other hand, you have less new.

On the there are introduced usually in the first quarter and more towards spring.

So we stop.

ASC 606 started then we don't report and the readers that we reported for our customers, we really need to ask all the it's a very long list of customers what they flow.

Forecast for Q1 on many of them were not sure enough with EU filed with us. Unfortunately so.

Take it step by step what is under our control and we do though is the licensing at least for the first part on the backlog.

Strong.

Okay understood and then maybe a question for Gideon and the strategic agreement with the top tier smartphone Oems.

Is this a new customer for CEVA or can you give us any more detail on the geography, there and how long.

That's a licensing deal wasn't the work thank you.

Yeah.

Net future new customer placebo rates in Asia, one of the litigation.

Beyond that.

You can do there.

And connect the dots that day.

It's a sizable customer.

And Brandon.

Understood. Thank you on one last one if I could squeeze one in on the open platform he talked to both for the Gws ear Bud.

Can you help us gauge the level of interest from customers and the <unk>.

You did talk about one customer potentially an.

An early adopter there what is the differentiation of the platform versus either Whatsapp.

Merchant guys have or what other competitors. Thank.

Thank you.

Hi, Betsy.

I apologize.

I'm going to come out with this strength products in the coming weeks, so I don't want to.

Take the suppliers out of our marketing people.

Yeah.

The only thing that we say the PWM CEVA.

Complex technology.

On Sunday.

<unk> EBIT.

What sort of central free insight and to find the only company per day in the IP space.

All of these pieces.

The idea is to put them together.

In the end.

I think it's a very unique offering in named IP.

On the and will be discussed with customers on about this product.

Extremely extremely happy about it.

Because the complexity.

Then the product like there of growth.

And the elements and now the market because of the fact that people are.

Yes.

Basically looking for merchant product.

It's a huge volume and EBIT wants to go first into this month to try to differentiate and we do we can give them the baseline.

The trading and local R&D and risk in our budget.

That's helpful. Thanks, guys and congratulations on the strong results.

Thank you ladies and gentlemen.

And our next question will come from Martin Yang with Oppenheimer. Please go ahead.

On a hike Gideon and.

My first question is on your <unk> market, perhaps following up on the previous analyst.

How fast.

Functionality is getting integrated into those headsets and maybe can you help us conceptualize the new dollar content on additional dollar content.

You will be able to secure was more functions are integrated.

Yes.

Yeah.

Question.

A question that we've done to really.

And so on both if you meant the ASB.

In the chip, but the idea is to think on AFP on Bluetooth, which is.

The.

Roughly one sensor even below and too.

By far inclusive.

Because the complexity of the comprehensive use of this technology.

There is much more.

And that's the strategy in place, meaning they took advantage of the strength that we have more of an AP customer doing design in zone.

Connectivity technology.

By combining with other technology to give them higher value and volume.

<unk> Stifel halls.

Yeah.

So a follow up on that can.

Can you maybe help us to understand how fast are you seeing day.

Uh huh.

Two new functionalities will be implemented in the past.

Are you seeing any.

Major customers stopped to start too.

More complex functionality you've seen this year's model so it might be already start talking about.

More on <unk>.

More features for our for future product roadmap.

Usually in connectivity takes about one year.

Two design type debt.

In the depending when we do the license I believe so.

So you'll start seeing.

The second half of 'twenty.

Ex Christmas season, and start to see this product on the market.

Got it.

My final question is on Wifi six.

Based on your.

Current customer engagement what are the new functionalities are you seeing Inc, and product.

As realized my Wifi, six which is not available.

Available in previous generations of products.

1000 <unk>.

As a new standard for connectivity Wifi six is the even the latest one in the.

Yes.

Clearly is to enable customer to grow fast in the customer and their market and what we see in terms of customers growing into new markets. These access points Wi Fi access point and a lot of talk of Iot devices starting from DTC.

Smart speaker.

So the devices and Ethan.

Our teams to do the.

On Wifi index in the cabinet sales.

So those are the customers. These customers are usually customers that are not familiar with connectivity and.

They needed somebody ex payable specialize.

<unk> total solution compliant with the standout Inc.

The whole payable residual device that's something.

CEVA is the only today IP company debt.

The only guy who day in the IP space. If you are looking for IP you don't have any other one debt.

The collective and competent as us.

That's the reason that I can see on this market.

Got it thanks.

Yeah.

Thank you we'll conclude.

A question and answer session I would like to turn the conference back over to Richard Kingston for any closing remarks.

Great. Thank you thank.

Thank you all for joining us today on for your continued interest in CEVA as.

As a reminder, the prepared remarks for this conference call are filed as an exhibit to the current reports on form 8-K on accessible through the investors section of our website.

With regards to upcoming conferences and events, we will be attending.

The following virtual conferences upcoming.

Escrow Hana 10th annual Technology Conference March 9th to 11th on the Ross Virtual conference from March 15 to 17.

Further information on these events on all events that we will participate and can be found on the investors section of our website. Thank you on goodbye.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.

Okay.

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