Q4 2023 CEVA Inc Earnings Call

Operator: The Ultimate Parody Site! Copyright 2021-2175, All Rights Reserved. Good day and welcome to the CEVA Inc. 4th Quarter and Year End 2023 Earnings Conference Call. All participants will be in a listen-only mode.

Yes.

Yes.

[music].

Yes.

[music] good day.

And welcome to the CEVA, Inc, fourth quarter and year end 2023 earnings conference call.

All participants will be in a listen only mode.

Operator: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on a touchtone phone.

Should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.

After todays presentation, there will be an opportunity to ask questions.

To ask a question you May press Star then one on a touchtone phone.

Operator: To withdraw your question, please press star then 2. 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.

To withdraw your question. Please press Star then two please.

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.

Richard Kingston: Thank you. Good morning, everyone, and welcome to CEVA's fourth quarter and full year 2023 earnings conference call. Joining me today are Amir Panoush, Chief Executive Officer, and Yaniv Arieli, Chief Financial Officer, CEVA. Before handing the call 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 These forward-looking statements include statements regarding our market positioning, strategy, and growth opportunities, including expectations for expansion into new markets and use cases, as well as expectations regarding our customers' production of products using our IP. Market Trends and Dynamics Demand for and benefits of our technologies, and our expectations and financial goals and guidance regarding future performance. CEVA assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates.

Thank you good morning, everyone and welcome to see this fourth quarter and full year 2023 earnings conference call.

Joining me today are Amir finish Chief Executive Officer, and you've already got a chief financial officer of CEVA.

Before handing the call 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 on assumptions.

These forward looking statements include statements regarding our market positioning strategy and growth opportunities, including expectations for expansion into new markets and use cases, as well as expectations regarding our customers' production of products using our IP.

Market trends and dynamics demand for our benefits all of our technologies.

And our expectations of financial goals and guidance regarding future performance.

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

Richard Kingston: In addition, following the divestment of the Intrinsics business to Cadence, financial results from Intrinsics were transitioned to a discontinued operation beginning in the third quarter 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 filing section of our Investor Relations website. With that said, I'd now 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. I'm here.

In addition, following the divestment of the intrinsic business to cadence financial results, our intrinsic square transitioned to a discontinued operation beginning in the third quarter 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 filing section of our Investor Relations website.

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

Amir: Thank you, Richard, and good morning, everyone, and thank you for joining us today. 2023 was the beginning of a transformational journey for CEVA, and I'm very pleased with the progress we made in my first year with the company. Following the recent in-depth strategic review to really understand our strengths and technology leadership, we have positioned CEVA as a trusted partner for semiconductor companies and OEMs who need our IP to enable three fundamental use cases for smart edge devices, the ability to connect, sense, and infer data more reliably and efficiently. We have realigned our business to focus our investments and R&D efforts around these use cases and on mega-markets where we see very strong growth opportunities. Consumer, Automotive, Industrial, and Infrastructure.

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

23 was the beginning of a transformational journey perceive them and I'm very pleased with the progress we made in my first year with the company.

Following the recent invest strategic review to really understand our strength and technology leadership, we have positioned CEVA as a trusted partner for semiconductor companies and Oems will need our IP to enable the three fundamental use cases for smart edge devices.

The ability to connect sense, an inferred data more reliably and efficiently.

We have realigned our business to focus our investments in R&D efforts around these use cases and on Mega and markets, where we see very strong growth opportunities when humira automotive industrial and infrastructure.

Amir: Even against a difficult business backdrop in 2023 that continues to affect the semiconductor industry and its end markets, we are already seeing evidence that our updated strategy is producing results. Our customer engagements are deeper across the value chain, across our entire technology portfolio, and expanding into new end markets and strategic opportunities. I will provide a review of the year shortly, but before that, I will review the fourth quarter. For the fourth quarter, our total revenues were in line with our expectations.

Even against a difficult business backdrop in 2023 that continues to affect the semiconductor industry and its end markets. We are already seeing evidence that our updated strategy is producing results.

Our customer engagements are deeper across the value chain.

Our entire technology portfolio, and expanding into new end markets and strategic opportunities.

I will provide a review of the year shortly but before that I will review the fourth quarter.

For the fourth quarter, our total revenues were in line with our expectation.

Amir: I am proud of how we have and continue to manage through the challenges in the markets we serve and significantly improve our profitability and earnings power through our focus on operating efficiency. In licensing, while the total licensing revenue recognized in the quarter was lower than usual, the interest in our diversified portfolio and potential new customer opportunities remains solid. We saw good progress on a number of fronts, including a strategic license deal with a U.S.-based MCU leader for our Wi-Fi 6 IP and a licensing deal with one of our major automotive customers to integrate our AI software compiler into their ADAS. In royalties, we saw a return to year-over-year growth for the first time since Q3 2022, with a rebound in mobile and across consumer IoT and Both mobile and IoT markets produced their strongest royalty revenues of the year. Unit volumes in the quarter were up 21% from the fourth quarter 2022 level. Overall, in licensing, we signed 17 deals in court.

Part of how we have and continue to manage through the challenges in the markets, we serve and significantly improve our profitability and the earnings power to our focus on operate operating efficiency.

In licensing while the total licensing revenue recognized in the quarter was lower than usual the interests in our diversified portfolio and potential new customer opportunities remain solid we saw.

So good progress on a number of funds, including a strategic licensing deal with a U S based MCU leader for our Wi Fi six IP and licensing deal with one of our major automotive customers, who integrate our AI software compiler into their Adas chips.

Anyway on the team.

So a return to a year over year growth for the first time since Q3 2022.

We have a rebound in mobile and of course, consumer Iot and industrial Iot.

We have a large and diversified customer base.

Both mobile and Iot markets produced our strongest royalty revenues over the year.

Unit volume in the quarter were up 21% from the fourth quarter 2022 level.

Overall in licensing we signed 17 deals in the quarter.

Amir: 11 of which were for our IPs enabling connect use cases, where we continue to leverage our broad portfolio of long and short-range wireless IPs to build our leadership position and market share in connectivity for smart edge devices. This is evidenced by agreements spanning Bluetooth, Wi-Fi, UWB, cellular IoT, and 5G Red Cap signed in the quarter, as more and more chips designs integrate connectivity as a mandatory requirement. As I mentioned a few months ago, one of the deals was a leading US MCU company for a Wi-Fi 6 IP. This company licensed our Wi-Fi 6 IP to augment their internal wireless connectivity development efforts and ensure they have a leading solution for their customers. This is a trend that we are seeing more and more recently, where established companies with internal R&D teams and major investments in wireless connectivity need help to advance their product roadmaps and stay competitive. CEVA is constantly at the leading edge, with the latest standards developed in the same timeframe as the market leaders.

11 of which were for our IP is enabling connect used cases, where we continue to leverage our broad portfolio of long and short range wireless IP to build our leadership position.

And market share in connectivity for smart edge devices.

This is evidenced by agreements spanning Bluetooth Wi Fi UW be cellular Iot and five G. Red get signed in the quarter as more and more chips designs integrates connectivity is a mandatory requirement.

As I mentioned, a few months ago, one of the deals was a leading U S. MCU company for Wi Fi six IP.

This company licensed our Wifi six AP to augment their internal wireless connectivity development efforts and ensure they have a leading solution for their customers.

This is a trend that we're seeing more and more recently.

Public companies, we have internal R&D teams and major investments around wireless connectivity, you need help to advance their product roadmap and stay competitive.

He's always constantly at the leading edge with the latest standards developed in the same timeframe as the market leaders.

Amir: As these technologies become more complex, and the demand for customers to consistently be in the market with the latest features, we are viewed as a trusted partner who can help these companies reach their product development goals while reducing the risk and time to market. This is why we are increasingly being recognized as the de facto choice for wireless connectivity IP globally, which forms the backbone of our smart edge strategy. We also had a good quarter in licensing for our hardware and software IPs for sensing and inference, with six deal signs highlighted by a licensing deal with one of our major automotive customers to integrate our AI software compiler into their ADAC. This customer has already licensed and deployed our AI engine to add high compute performance to their automotive systems on the cheap product family, targeting ADAS and autonomous driving. These SOCs are now in production and are expected to be deployed in mass market vehicles by the end of 2020.

This technology has become more complex and the demands on the customers to consistently be in the market with the latest features we are viewed as a trusted partner who can help these companies reached a product development goals.

Why do reducing the risk and time to market.

This is why we are increasingly being recognized as the de facto choice for wireless connectivity IP globally, which forms the backbone of our smart edge strategy.

We also had a good quarter in licensing for our hardware and software IP, we're sensing and insurance we see.

X deal signs highlighted by a licensing deal with one of our major automotive customers two inch.

Great our AI software compiler into their Adas chips.

This customer had already licensed and deployed our AI engine to add high compute performance in their automotive system on chip products family targeting Adas and autonomous driving.

These <unk> are now in production and are expected to be deployed in mass market vehicle by the end of 2024.

The licensing deal we completed this quarter with this customer enabled automotive tier one suppliers and Oems direct access to our AI engine index with <unk> to deploy their proprietary AI software algorithms and allowed them to bring value add functionality and differentiation.

Amir: The licensing deal we completed this quarter with this customer enables automotive tier 1 suppliers and OEMs direct access to our AI engine in the SoC to deploy the proprietary AI software algorithm and allow them to bring value-add functionality and differentiation to the performance of the production vehicle. This is an important milestone for our customers and for CEVA as the automotive industry is constantly looking for open ADAS architectures as an alternative to closed vertical solutions that don't allow for differentiation. We anticipate that we will generate meaningful royalty revenues from automotive SOCs, with initial royalties contributing to our growth in 2024 and continuing to grow in 2025 and beyond. Other deals in the quarter under this category include customers for our Audio AI and Sensor Fusion AI DSPs and our voice processing services. At CEVA, when we speak about edge AI and smart edge devices, we are not just focusing on the inference workload that most people associate with these devices. Every one of these devices needs to be connected in order to get data off the device and connect via the internet.

Performance.

The production vehicle.

This is an important milestone for our customers and foreseeable.

The automotive industry is constantly looking for open Adas architectures as an alternative to closed vertical solution that don't allow for differentiation.

We anticipate that we will generate meaningful royalty revenues from automotive <unk>, we have a niche otherwise piece contributing solid growth in 2024, and continuing to grow in 2025 and beyond.

Other deals in the quarter under this category include customers flower audio AI and sensor fusion a idea of speed and our voice processing software.

Yeah.

It's Eva when we speak about edge AI and smart edge devices. We are not just focusing on the influence work load that most people associate with these devices.

Every one of these devices needs to be connected in order to get data off the device and connect via the Internet every one of these devices need to be able to sense, it's environment using vision sound and motion and generate data.

Amir: Every one of these devices needs to be able to sense its environment using vision, sound, and motion and generate data. Additionally, every one of these devices will increasingly need some inference capabilities to interpret and act upon this data. This is what the smart edge is, and we are the only IP company capable of delivering the technology required to address all three use cases. Turning now to royalties for the quarter, we saw a strong recovery in mobile, driven by restocking demands for Android smartphones in emerging markets, in Consumer IoT, and the Broad Industrial IoT Markets, Demonstrating our Diversified Offering and Customer Base. We recorded our best quarter of the year, with notable trends for our connectivity customers. This was our third consecutive quarter of royalty growth as we built momentum throughout the year.

Every one of these devices will increasingly need some influence capabilities.

Therefore and act upon these data.

This is what the smart edge is and we are the only IP company capable of delivering the technology required to address all three use cases.

Turning now to royalties for the quarter, we saw a strong recovery in mobile driven by restocking demand for Android smartphones in emerging market.

In consumer Iot and the broad industrial Iot markets and ones.

Straightening, our diversified offering and customer base, we recorded our best quarter of the year.

Notable trends for our connectivity customers.

This was our third consecutive quarter of Florida to growth as we build momentum throughout the year.

Amir: More significantly, this was the first quarter to surpass $12 million in royalty since Q4 2021 and serves as a strong proof point for our royalty business potential going forward. For the full year 2023, we reported total revenue of $97.4 million. 19% lower than 2022, primarily due to a return to a more normal licensing environment following a couple of years in which we were able to capitalize on a surge in design activity driven by exceptional consumer and market demand resulting from post-COVID spending and the shift to work from home. Licensing and related revenue was $57.6 million, down $23.3 million.

More significantly this was the first quarter surpassed $12 million in loyalty since Q4 2021 and.

And it serves as a strong proof points.

Royalty business potentials going forward.

For the full year 2023, we reported total revenue of 97.4 millions dollars nine.

19% lower than 2022.

I'm really due to a return to a more normal licensing environment. Following a couple of years in which we were able to capitalize on the surge in design activity.

And by exceptional consumer end market demand, resulting from post COVID-19.

And the shift to work from home.

Licensing and related revenue was $57 $6 million down 23%.

Amir: We signed 53 licensing agreements across our extensive IP portfolio. Ten of those deals were with OEMs who are integrating our IPs into their end products. In terms of end market, 29 of these deals target consumers, and 23 for industrial IoT, including seven for automotive and one for other markets. This deal breakdown serves as another indicator of our focus on the end markets with the largest licensing base and the greatest projected growth potential. In full-year royalties, despite the slow start to the year and the soft end market throughout 2023, royalties grew sequentially each quarter throughout the year to reach $39.8 million, down 12% year-over-year. The decline is mainly attributed to mobile and 5G WAN-related work, which combined to be down 22% year-over-year. On the positive side, and in line with the strength of our connectivity products, royalty revenues related to our Bluetooth, Wi-Fi, and cellular IoT business lines combined to grow 5% year-over-year, mainly due to the higher royalty rate contribution from our new Wi-Fi 6 customers.

Signed 53 licensing agreements across our extensive IP portfolio.

10 of those deals where we have Oems, who are integrating our IP into their end products.

Terms of end market 29 of these deal target consumer and 23 point industrial Iot.

Including seven for automotive and one for other markets.

He still breakdown services another indicator.

Our focus on the end market with the largest licensing base and the greatest projected growth potential.

In full year royalties, despite the slow start to the year and the soft end market throughout 2023.

Royalty grew sequentially each quarter throughout the year to reach $39 $8 million down 12% year over year.

The decline is mainly attribute to mobile and <unk> related royalties, which combined to be down 22% year over year.

On the positive side and in line with the trend so power connectivity products, whereas the revenues related to our Bluetooth Wi Fi and cellular Iot business lines.

Combined to grow 5% year over year, mainly due to the higher royalty rate contribution from our new Wifi six customers.

In terms of end market consumer your deal was 40, 41% of warranties, followed by mobile at 36% and the growing industrial Iot end market at 23%.

Amir: In terms of end markets, consumer IoT accounted for 41% of royalties, followed by mobile at 36% and the growing industrial IoT end markets at 23%. Looking ahead to 2024, we are excited by the royalty growth potential of our Wi-Fi 6 royalties, the continuing momentum in our Bluetooth and cellular IoT customer base across consumer and industrial markets, and the expected initial ramp of automotive ADAS royalties in the second half of. Looking back on the year, in terms of achievements and milestones, there are a few that I would like to elaborate on. As I mentioned earlier, we started the year with a strategic review of the business and decided to focus all our efforts on being a pure IP player. This led to the decision to diversify the Intrinsic Aerospace and Defense Design Services. In line with this strategy, in April, we acquired Visisonics, a small special audio software business which bolsters our software business and enables us to address the high-volume headsets and earbuds space we value in software. This culminated in our first special audio deal with both.

Looking ahead to 2024, we are excited by the royalty growth potential of our Wifi six royalties the continuing the momentum in our Bluetooth and cellular Iot customer base across consumer and industrial markets and the expected initial ramp of automotive Adas royalties in the second half of the year.

Looking back on the year in terms of achievements and milestones there.

There are a few that I would like to elaborate on.

As I mentioned earlier, we started the year with a strategic review of the business and decided to focus all our efforts on being a pure IP player.

This led to the decision to divest intrinsic aerospace and defense design services business.

In line with this strategy in Airfreight, we acquired visa Sonics smaller special audio software business, which bolsters, our software business and enable us to address the high volume headsets any ear Bud space, we are value add self drive.

This culminated with our first special how do you deal with both.

Operator: India is the number one wearables and hearables OEM and number two worldwide behind only Apple. The strategic review also led to the decision to give the company a brand refresh to better reflect our position as the trusted partner for transformative IP for the smart edge. Collectively, these efforts have enabled us to align our investments and focus, and they were implemented in tandem with a stringent plan to control expenses and ensure we create operating leverage for the betterment of our shareholders. All of this culminated in our investors and analysts day in December, where we shared our vision and strategy for the company. Pardon me.

India number one wearables in here, both OEM and number two worldwide behind only up.

Strategic review also led to the decision to give the company.

Our brand refresh to better reflect our position.

As the trusted partner.

Once warranty of IP for the smart edge.

Collectively these efforts have enabled us to align our investments and focus.

And were implemented in tandem with the stringent plan to control expenses and ensure we create operating leverage for the betterment of our shareholders.

All of this culminated in our investors and analyst day in December.

What are we shared our vision and strategy for the company.

Pardon me it seems like we've lost connection with our speaker. Please break while we reconnect.

[music].

Operator: It seems like we've lost connection with our speaker. Please wait while we re- The Ultimate Parody Site! .. The Ultimate Parody Site!

Amir: Pardon me, ladies and gentlemen, we've reconnected to our speaker line. Well, let me continue from where I think you stopped hearing us. So in terms of new product launches, we had multiple achievements. For connectivity, we launched our most powerful DSP architecture to date, addressing 5G advanced use cases for infrastructure, industrial, mobile, and new use cases like 5G satellite communication and 5G vehicle-to-weather features. Our UWB radar platform for automotive child presence detection and our Bluetooth solution for electronic shelf labels, an emerging high-volume market. For Sensing, we launched our channel-sounding Bluetooth solution, enabling high-accuracy, secure positioning for automotive, industrial, and IoT.

Okay.

[music].

Pardon me, ladies and gentlemen, we reconnected with our speaker line.

Well, let me continue from where I think where you stopped hearing us though in terms of new product launches, we had multiple achievements for.

For connectivity, we launch our most powerful DSP architecture to date addressing five tier defense use cases or infrastructure industrial mobile and new use cases, like <unk> satellite communication and five <unk> vehicle to everything.

Our UW be radar platform for automotive childs president detection, and our Bluetooth solution for electronic shelf labels and emerging high volume market.

For sensing we launch our channel sounding Bluetooth solution, enabling high accuracy secure positioning automotive industrial and Iot.

Amir: For inference, we launched our scalable NPU AI architecture, capable of running generative AI in smart edge devices with industry-leading efficiency. Moreover, these products will serve our licensing business in 2024, along with recent product introductions like our Wi-Fi 7 IP. Overall, looking across our corporate, product, customer, and end markets milestones in 2023, I'm extremely proud of what we have achieved, and I'm excited about what's ahead for 2024 and beyond. None of this would have been possible without the dedication, patience, and incredible efforts of our employees worldwide. And I would like to take this opportunity to thank you.

Or influence we launch our scalable N P. You AI architecture capable of finding generator of AI and smart edge devices, we have industry leading efficiency.

All of these product introductions demonstrate our commitment to the smart edge and our diversified IP portfolio position and has been very well received by our customer base.

Moreover, these products will serve our licensing business in 2024.

We have recent product introductions like our Wi Fi seven IP.

Although all looking at of course, our corporate product customer and end market milestones in 2023, I'm extremely proud of what we've achieved and I'm excited about what's ahead for 2024 and beyond.

None of this would have been possible without the dedication passion and incredible efforts of our employees worldwide and I would like to take this opportunity to thanks Tim.

Amir: Looking ahead into 2024 and our expectations, the Semiconductor Industry Association expects the global semiconductor industry to return to healthier growth following a weak 2020. There still remains, however, some short-term challenging conditions in the industrial and automotive markets, which are not expected to clear until the second half of 2020. Yaniv will provide quantitative guidance shortly. Finally, I want to sincerely wish you and your families a successful and peaceful 2024.

Looking ahead into 2024, and our expectation for the semiconductor industry Association expects the global semiconductor industry to return to healthier growth following a weak 2023.

There still remains however, some short term challenging conditions in the industrial and automotive end markets, which are not expected to clear until the second half of the year and possible inventory buildup that we need to be worked down in the first part of the year.

Yeah, Neil will provide quantitative guidance shortly.

Finally, I want to sincerely wish you and your families are successful in fiscal 2024, I look forward to meeting many of you at conferences trade shows and other industry events throughout the year.

Yaniv Arieli: I look forward to meeting many of you at conferences, trade shows, and other industry events throughout the year. Now, I will turn the call over to Yaniv for the financials. Thank you, Amir.

Now I will turn the call over to your need for the financials.

Thank you Amit.

Yaniv Arieli: I will now start by reviewing the results of our operations for the fourth quarter of 2020. Revenue for the fourth quarter was $24.2 million, as compared to $30.3 million for the same quarter last year. The revenue breakdown is as follows. Licensing and related revenues were $11.8 million, reflecting 49% of our total revenue as compared to $19.4 million in the fourth quarter of 2022. Royalty revenue was $12.3 million, reflecting 51% of total revenues, up 13% from $10.9 million in the same quarter last year. This is a return to year-over-year growth in royalties for the first time since Q3 of 2020. Quarterly gross margins came slightly better as expected on the gap and in line with the non-gap basis. Gross margins were 91% on the gap and 92% on the non-gap basis.

I'll start by reviewing the results of operations for the fourth quarter of 2023.

Revenue for the fourth quarter was $24 $2 million as compared to $30 3 million for the same quarter last year.

Revenue breakdown is as follows licensing and related revenues were $11 $8 million, reflecting 49% of our total revenue as compared to $19 4 million in the fourth quarter of 2022.

Royalty revenue was $12 $3 million, reflecting.

The 1% of total revenue up 13% from $10 9 million in the same quarter last year.

We returned to year over year growth in royalties.

First volume since Q3 of 2022.

Quarterly gross margins.

Slightly better as expected on gap and in line with non-GAAP basis, gross margin were 91% GAAP and 92% on non-GAAP basis.

Yaniv Arieli: Our total operating expense for the fourth quarter was in line with the mid-range of our guidance at $24.79. Total non-GAAP operating expenses for the fourth quarter, excluding equity-based compensation expenses, amortizations, intangibles, and deal costs, were $20.3 million at the lower end of our guidance. GAAP operating loss for the fourth quarter was $2.8 million, down from GAAP operating profit of $1 million in the same quarter last year.

Our total operating expense for the fourth quarter was in line with the mid range of our guidance at $24.7 million.

Total non-GAAP operating expenses for the fourth quarter, excluding equity based compensation expenses amortization in tangibles and deal costs.

$23 million at the lower end of our guidance.

GAAP operating loss for the fourth quarter was $2 $8 million down from GAAP operating profit of $1 million in the same quarter a year ago.

Yaniv Arieli: Our gap taxes were $7.2 million, and non-gap taxes were $1.4 million. Gap taxes expenses included $1.3 million charges as a result of the completion of a tax audit for prior years. $4.5 million tax charge, including a one-time write-off of a deferred tax asset related to Section 174 of the U.S. Tax Code. Gap's net loss for the fourth quarter of 2023 was $8.1 million, and diluted loss per share was $0.34 compared to net income of $4.5 million and diluted income per share of $0.19 for the fourth quarter of 2020. Non-GAAP, non-income, and diluted EPS for the fourth quarter of 2023 were $2.4 million and 10 cents, respectively, as compared to $7 million and 29 cents reported for the same quarter last year with respect to other related data. Upped units by CEVA licensees during the fourth quarter of 2023 were 453 million units, up 21% from the fourth quarter of 2022. Of the 453 million units reported, 101 million units, or 22%, were attributed to mobile handset mobility.

Our GAAP taxes were $7 $2 million non-GAAP taxes were $1 4 million GAAP taxes expenses included $1 3 million charges as a result of completion of tax audits for prior years and the.

Four and a half million dollar tax.

Tax charge, including a onetime write off of the deferred tax asset related to section 174 of the U S tax code.

GAAP net loss for the fourth quarter.

Of 2023 was $8 1 million and diluted loss per share was <unk>.

34 cents as compared to net income of $4 5 million and diluted income per share of 19.

For the fourth quarter of 'twenty to 'twenty two.

non-GAAP net income and diluted EPS for the fourth quarter of 2023 were $2 $4 million.10.

Actively as compared to $7 million.29 reported for the same quarter last year.

With respect to other related data.

Shipped units by CEVA licensees during the fourth quarter of 2023 were 453 million units up 21% from the fourth quarter of 2022.

Of the 453 million units reported $101 million of units with 22% were attributed to mobile handset modems.

325 million units were for consumer Iot products up from 286 million units in Q4 of 2022.

Yaniv Arieli: 325 million units were for consumer IoT products, up from 286 million units in Q4 of 2022. 27 million units were for industrial IoT products, up from 21 million a year ago. Bluetooth shipments were 244 million units in the quarter, up 11% year over year; cellular IOT shipments were a quarterly record high with 45 million units, up 82% year over year; Wi-Fi shipments were 31 million units, down 17% year over year.

One 7 million units were for.

Real Iot products up from $21 million a year ago.

Bluetooth shipments were 244 million units in the quarter up 11% year over year.

Hello, or Iot shipments were a quarterly record high with 45 million units up 82% year over year.

Wi Fi shipments were 31 million units down 17% year over year.

Yaniv Arieli: However, Wi-Fi royalties were up 86% year over year, reflecting the higher per unit royalty we get for Wi-Fi 6 shipments versus the older generation of Wi-Fi. That's for the year. Our total unit shipments were 1.6 billion units in 2023, down slightly from 1.7 billion in 2022, which equates to approximately 50 CEVA-powered devices sold every second in 2023. Annual mobile modem shipments were down 13% year-over-year to 286 million units, reflecting the soft smartphone market in 2023, particularly in the first part. Annual consumer IoT-related shipments were 1.25 billion units, down just 4% year-over-year. Our annual IoT, industrial IoT-related shipments were 84 million units, up 17%. Delaware IoT and Audio AI DSP shipments both experienced growth in 2023, up 64% and 56%, respectively, from 2022. In terms of royalty contribution highlights,

However, Wifi royalties were up 86% year over year, reflecting the higher per unit royalty, we get for Wi Fi six shipments versus older generation of Wi Fi tablets.

As for the year.

Our total units shipped were $1 6 billion units in 2023 down slightly for $1 7 billion in 2022.

<unk> estimate, which equates to approximately 50 CEVA powered devices sold every second in 2023.

Annual mobile modem shipments were down 13% year over year to 286 million units.

Reflecting the soft smartphone market in 2023, particularly in the first part of the.

Annual consumer Iot related shipments were $1 25 billion units down just 4% year over year.

And our annual Iot related industrial Iot related shipments were 84 million units up 17% year over year.

The level of Iot in audio.

<unk> DSP shipments both experienced growth in 2023 up 64, and <unk>, 56% respectively.

2022.

In terms of the royalty contribution highlights.

Yaniv Arieli: Cellular IoT royalty revenue was at an all-time record high, up 47% year-over-year. Audio AI DSP royalty revenue was up 111% year-over-year, and Wi-Fi royalty revenue was up 40% year-over-year. I look for the balance sheet items. As of December 31st, 2023, CEVA's cash, cash equivalent balances, marketable securities, and bank deposits were $166 million.

Lora Iot royalty revenue were at all time record high up 47% year over year.

Audio AI DSP royalty were up 111% year over year, and Wi Fi royalty revenue were up 40% year over year.

I look for the balance sheet items as of December 31, 2023, Cmos cash cash equivalent balances marketable securities and bank deposits were $166 million.

In 2023, we purchased approximately 279000 shares for approximately $6 $2 million and as of today. We have around 700000 shares that are available for repurchase under the <unk>.

Yaniv Arieli: Our DSOs for the fourth quarter of last year continue to be lower than the norm at 32 days, similar to the prior year. During the fourth quarter, we generated $5.5 million in cash from operating activities. Our ongoing depreciation and amortization were $1 million, and the purchase of fixed assets was $0.8. At the end of the fourth quarter, our headcount was 424 people, of whom 350 were engineers.

Repurchase program has expanded back in November of 2023.

Our dsos for the fourth quarter of last year continued to be lower than the norm at 32 days similar to the prior quarter.

During the fourth quarter, we generated by $5 million cash from operating activities.

Our ongoing depreciation and amortization were $1 million and purchase of fixed assets was <unk> 8 million.

At the end of the fourth quarter, our head count was 424 people of whom 350.

<unk> engineers.

Now for the guidance.

Yaniv Arieli: Now for the guidance. As we recently presented and shared in our December 23 Analysts' Day, CEVA's long-term vision is to achieve a four-year revenue growth of 8% to 12% KPI. This will enable and generate significant earnings power, operating leverage, and net income, as Amir highlighted earlier.

As we recently presented and shared in our December 'twenty three analyst day. She was long term vision is to achieve a four year revenue growth of 8% to 12% CAGR.

This will enable and generates significant earnings power operating leverage and net income growth.

Amir highlighted earlier.

Yaniv Arieli: Our Key 2023 Achievements, and our new focus on Pure IP Play. And we are executing this plan one step at a time to address these three pillars of connect, sense, and infer. Our licensing and related revenue business will continue to expand into new markets and use cases in the industrial IoT and consumer IoT, NPUs and SOFs, audioAI, and more.

Our key 2023 achievements.

And our new focus on pure IP play and we are executing this plan one step at a time to address these three pillars of connect and.

And in <unk>.

Our licensing and related revenue business will continue to expand into new markets and use cases in the industrial Iot and consumer Iot.

Offering connectivity platform AI solutions, including AI engine.

And <unk> and.

And software.

Audio AI and more.

Yaniv Arieli: On royalties, we expect our connectivity products to continue to show strength in 2024, with the royalty revenue related to our Bluetooth, Wi-Fi, and cellular IoT business lines to grow. Smartphones have their seasonality, trends, and known headwinds. The consumer IoT and industrial IoT markets are large, diversified, and present us with solid platforms for long-term growth. On an annual basis, our revenue is expected to grow 4% to 8% over 2023, with lower growth in the first half of the year and higher in the second. On the expense side, as we discussed, we implemented cost control measures to plan and keep our 2023 overall expenses, including both costs of revenues and OPEX, flattish at a range of $93 to $96 million.

On royalties, we expect our connectivity products to continue to show strength in 2024 with the royalty revenue related to a Bluetooth Wi Fi and cellular Iot business lines to grow.

Smartphone have their seasonality trends and known headwinds the consumer Iot and industrial Iot markets are large diversified and presents us with a solid platform for long term growth.

On an annual basis, our revenue is expected to grow 4% to 8% over 2023.

With lower growth in the first half of the year and higher in the second half.

On the expense side as we discussed.

We implemented cost control measures to plan and keep our 2023 overall expenses, including both cost of revenues and Opex flattish at a range of $93 million to $96 million non-GAAP.

On a non-GAAP.

Yaniv Arieli: On the non-GAAP, overall non-GAAP COGS expense is expected to decrease approximately one and a half million dollars, year-over-year, and our non-GAAP OPEX is expected to increase approximately $2 million year-over-year, specifically for the first quarter of 2026. With typical seasonality in shipments of consumer IoT and mobile products post the holiday season, we expect overall revenues to be 2-6% lower sequentially and with a different mix of licensing and royalty revenues than from the quarter we just saw. Gross margin is expected to be approximately 91% on a gap basis and 92% on a not-gap basis, excluding and aggregates $0.2 million of equity-based compensation expenses and $0.1 million of amortization of acquired income. Our GAAP OPEX for the first quarter of 2024 is expected to be in the range of $24.5 to $25.5 million. The anticipated total operating expenses for the first quarter, $4 million is expected to be attributed to equity-based compensation expenses, and $0.2 million for amortization of acquired... Therefore, our non-GAAP OPEX is expected to be in the range of $20.3 to $21.3 million. That interest income is expected to be approximately $1.4 million. Taxes for the first quarter are expected to be approximately $1.2 million.

Overall, non-GAAP Cogs expense is expected to decrease approximately $1 $5 million.

Year over year, and our non-GAAP Opex is expected to increase of approximately $2 million year.

Year over year.

Specifically for the first quarter of 2024.

With typical seasonality and shipments of consumer Iot and mobile products post the holiday season, we expect overall revenues to be 2% to 6% lower sequentially.

And with a different mix of licensing and royalty revenues than from the quarter. We just reported.

Gross margin is expected to be approximately 91% on GAAP basis, the 92% of non-GAAP basis, excluding an aggregate zero point $2 million of equity based compensation expenses of <unk> 1 million.

Amortization of acquired intangibles.

Our.

GAAP Opex for the first quarter of 'twenty four is expected to be in the range of 24, 5% to $25 $5 million.

Of the anticipated total operating expenses for the first quarter $4 million is expected to be attributed to equity based compensation expense of.

0.2 million for amortization of acquired intangibles.

For our non-GAAP Opex is expected to be in the range of 23 to $21 3 million.

Net interest income is expected to be approximately $1 4 million.

Taxes for the first quarter is expected to be approximately $1 2 million.

Operator: And the share count for the first quarter is expected to be approximately 25.2%, million shares. And we could now open the Q&A session. Let's see. We will now begin the question and answer session. To ask a question, you may press star and one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing.

And share count for the first quarter is expected to be approximately 25 points.

Million shares.

And we can now open the <unk>.

Q&A session. Please.

Let's see.

We will now begin the question answer session.

Ask a question you May press Star then one on your Touchtone phone.

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

Operator: If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question today comes from Suji DeSilva with Roth MKM. Please go ahead.

Is it any time your question has been addressed and you would like to withdraw your question. Please press Star then two.

At this time, we will pause momentarily to assemble our roster.

The first question today comes from <unk> Desilva with Roth N. K M. Please go ahead.

Yaniv Arieli: Hi Yaniv, going back to the progress here, maybe we can talk about the guidance and the first quarter and the full year. Curious, you know, you talk about the different mix Yaniv in the decline 2 to 6, curious what the license royalty implications are there, and then for the quarter and the full year, what are the expectations for mobile, maybe even for the full year, versus non-mobile? It would be helpful to understand some color there. Sure. Good morning.

Hi.

Congrats on the progress here, maybe you could talk about the guidance and the <unk>.

First quarter and the full year.

Just curious you know what you're talking about the different mix you need and the decline to the six I'm curious what the license royalty.

Implications are there and then for the.

Quarter on a full year, what are your expectations for mobile and maybe even for the full year versus non mobile will be helping us helping understand some color there.

Sure.

Yaniv Arieli: So, overall, we're talking about 4 to 8% annual revenue growth for 2023. We're looking at a similar start than we had in 2023, that the first half may be a bit milder, and then things will pick up. Some of the products we are in on the consumer side also have that typical seasonality, and we've seen that in the past. So, those are some of the assumptions that we have built into the model.

Good morning so.

Overall, we're talking about 4% to 8% annual revenue growth for 2023.

We're looking at similar a similar start then we added 23 that the first half.

<unk> be a bit more milder than things will pick up some of the products. We are in and the consumer side also have that typical seasonality and we have seen that in the past. So those are some of the assumptions that we have built in the model.

Yaniv Arieli: Obviously, licensing is a lumpy type of business. When we look at it on an overall, longer basis, that generates revenues. In the last couple of years, we also added software solutions and capabilities, which have a limited licensing, if at all, upfront fee but a much, much higher contribution rate. The immediate effect on an annual base, for example, of audio and AI royalties grew more than doubled in dollars year over year, but they don't necessarily contribute to licensing. When we look at the full mix, we're looking at growth in both of these segments, both licensing and royalties. On a quarterly basis, it's harder to guess up front, and AST 606 made our lives more difficult to know in advance how the royalties are going to look.

Obviously licensing them.

It is a lumpy type of business when we look at it overall longer bases that generates the revenue.

Although in the last couple of years. We are also added software solutions in the <unk>.

Capabilities, which have limited licensing if it all upfront fee, but a much much higher royalty contribution.

The immediate effect on an annual base for example, or audio AI royalties grew more than double in dollars year over year, but they don't necessarily contribute to licensing. So when we look at the full mix.

We're looking at growth in both of these segments, both licensing and royalties.

Quarterly basis, it's harder to guests upfront in ASC 606 made our lives more difficult to know in advance how the royalties are going to look like so our starting point is coming with the strongest quarter in royalties in 2023, and a gradual improvement from Q1, all the way to Q4.

Yaniv Arieli: So our starting point is coming in with the strongest quarter in royalties in 2023 and a gradual improvement from Q1 all the way to Q4. That would probably go down due to the typical seasonality in consumer and mobile that you asked about. And with that said, licensing should be higher in Q1 over Q4 for sure. That is the plan. A lot of moving pieces, but from the product portfolio and the revenue mix, these are sort of the high... Pieces in the puzzle.

That would probably go down due to the typical seasonality in consumer and mobile that you asked about.

And would.

With that said licensing should be higher Q1 over Q4 for sure. That's the that is the plan a lot of moving pieces, but.

From a product portfolio and the revenue mix. These are sort of the high.

And pieces in the puzzle.

And maybe I can add a little bit more covenants here soon.

Good morning to everyone and on top of what you've said so if we look at royalty going into 2024.

All the things that we are very encouraged by and then and we see as a potential growth in 2024 versus last year and one that we talk about quite a bit is our Wi Fi penetration in a transition from Wifi for Wi Fi six and with that higher average ASP and volume increase and the other thing that will probably come more tour.

Yaniv Arieli: On the more so-called muted side, it's really the situation with the all 5G installment base. That's a market that probably, in 2024, as far as we see today, is not going to recover significantly, maybe more towards the second half, and then probably more in 2024. In terms of licensing, we have several new products that will and should generate increased licensing revenue for us in 2024. Wi-Fi 7 that we have already started licensing as well as the new AI products that are right now under significant evaluation across multiple potential customers, and we expect to be able to close some of those deals in 2021. Great. And then my other question is on the ADAS win. Congratulations on that. I just want to understand the circumstances for that win. Was that a customer who had their own AI, and they swapped it out for yours? What kind of tops?

At the end of the year is delta Monty the AI some of those products are going into production.

As well as I would say overall, our customer base and the consumer Iot and industrial Iot.

On average are doing quite well and we expect that to be a good tailwind is strong for us to go they are already moving forward.

On the morass of corn muted side, and it's really the situation we had all five G.

The installment base and that's a market that's probably in 2024 as far as what we see today is not going to recover significantly maybe more towards the second half and then probably more in 2025.

So Doug on mix.

In terms of licensing we have several new products that are.

It will and should generates for us increased licensing in 2024, and Wi Fi seven that we already start licensing as well as the new AI.

Oh, that's right now and the significant evaluation across multiple potential customers and we expect to be able to close some of those deals in 2024.

Okay, Great and then my other question is.

On the auto Adas when congrats on that.

I just want understand the circumstances for that win was that a customer who had their own AI and they swapped out for yours, what kind of tops.

Yaniv Arieli: And you talked about seven auto wins. I'm curious if those are all ADAS, AI, or a variety of products. Let's start with the first.

You talked about seven auto wins I'm curious if those are all adas AI or a variety of products.

Let's start with the first.

Yaniv Arieli: So the first thing is an existing customer. They licensed our technology, the hardware side of it, a while back and built their own chip. The nice part, and the interesting part for them, is that the chip is programmable.

So the first thing is an existing customer they licensed our technology the hardware side of it.

A while back and build their own chip.

The nice part the interesting part for them is that the chip is programmable the deal that we closed now has the added software capabilities that also their customers could add different sources of AI use cases and program.

Yaniv Arieli: The deal that we closed now is to add software capability so that their customers can also add different sources of AI use cases and program the files of products to be much more flexible. So it's an existing customer that is going into production this year. And they added the software piece on top of the hardware solution that is ready now. And it was a very interesting and nice achievement that they're coming back and offering this type of solution in cars today.

The final product to be much more flexible so it's an existing customer that is going into production. This year they've added the software piece on top of the hardware solution that is ready now.

It was a very interesting.

Nice achievement that they're coming back in.

And offering this type of solution in cars today.

Year.

So the overall EMEA you want to talk about the overall the other seven delta are not they're not.

Yaniv Arieli: Overall, Amir, you want to talk about the overall picture? Yeah, the other seven deals are not AI only, it's across our product portfolio. And overall, we signed four AI deals this quarter, three of them related, let's call, more to vision AI capabilities and ADAS, and one related to audio AI capabilities. Okay. Thanks, guys. Thank you. You're welcome. The next question comes from Kevin Cassidy with Rosenblatt Securities.

Honestly, it's across our product portfolio and although we science I believe for AI deals this quarter.

Three of them related, let's close or two vision AI capabilities in Adas and in one related to ideal.

Capabilities.

Okay. Thanks, guys.

Well thank you.

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

Yaniv Arieli: Hi, congratulations on a good quarter. Can you let us know how the trend for licensing is, are there customer programs that are getting delayed or even being cancelled in this... The market? Are you seeing more deals or fewer deals? And you know, what are the issues that your customers are saying? Yes, Kevin, there are a few things I would say.

Hi, congratulations on a good quarter.

Can you.

Let us know how is the trend for licensing our there.

Customer programs that are getting delayed or even being canceled.

Market Alright.

Are you seeing more deals or fewer deals and you know what.

What are the issues that your customers are saying.

Yeah, Kevin a few things I would say its first if we take a step back and look at 2023 overall.

Yaniv Arieli: First, if we take a step back and look at 2023 overall, definitely that was a year that started with lots of inventory corrections that our customers needed to go through, with that so-called more pressure on the business overall. And with that, generally speaking, customers were, on average, taking more time to go and launch new products and new programs in place. So that definitely drove some of the delays in 2023.

Definitely that was a year that started with lots of lots of inventory corrections at our customer I need to go through.

Is that a so called more pressure on the business overall and we have that generally speaking the customers on average taking more time to go and launch new products and new programs in place. So that's definitely drove some of the delays in 2023.

Yaniv Arieli: Specifically for Q4, we're actually very encouraged with the number of deals that we signed, 17 deals in the quarter. And more specifically, we had at least one deal for each of our product technology categories. So really, across our diversified product portfolio, very good engagement with customers, with a good number of deals. And just the mix every quarter can change in terms of the type of deals and the size of deals.

Specifically for Q4, we're actually very encouraged with the number of deals that we signed 17 deals in the quarter.

More specifically, we had at least one deal for each of our product technology category, So really across our diversified product portfolio very good engagement with customers.

A good significant number of deals and just the mix every quarter can change in terms of the type of deals and the size of deal.

Yaniv Arieli: And definitely, as we go to 2024, from the first half to the second half, we expect also to see larger or more meaningful deals in that mix, which will drive overall with the rest of our deals as they go off between 2023 and 2024. Overall, I would say, if we look at the different market segments, automotive and industrial are a little bit weaker in the first half, and we expect inventory correction and overall interest to go back in the second half. Consumer IoT and consumer overall is holding up very nicely for us, so that's what we expect it to be. With some seasonality of typically the Q1, and with that specifically more in mobile, beyond that, we expect good growth during the rest of 2020. The last part of Amir's answer, though, was related to royalties, not necessarily the license. You've got both angles.

And definitely as we go through 2024 and for the first half to the second half we expect it also to see the the larger and more meaningful. This is also in that mix, which will drive overall with the rest of our deals.

Ross.

Between 2023 and 2024.

<unk>.

Well overall I would say if we look at the different market segments automotive and industrials are a little bit weaker in the first half and we expect inventory correction and overall interest.

To go back and second half consumer Iot and consumer overall is holding up very nicely for us and that's we expect it to be with some seasonality typically the Q1 and we did that specifically more in mobile beyond that we will we expect a good growth.

During the rest of the 2024.

Last part of the mirrors answer the world related to royalties not necessarily to the licensing question that you had so you got both angles.

Right, Okay, great and.

Yaniv Arieli: Right. Okay, great. And maybe just geographically, how is China's licensing opportunity? Now, Simon, it's still an important and big geography for us.

Maybe just.

Geographically.

How is China licensing opportunities.

No go ahead.

Finally, the still still an important than the big.

Yaniv Arieli: A lot of innovation and existing and repeating customers that come back from newer generations of different technologies, whether it's Bluetooth or Wi-Fi or other connectivity solutions that we have today, because I think that we have a very strong portfolio around that. What was very interesting for us this quarter round was that the U.S. was stronger than usual for us, and we did a very, very strategic deal with an MCU player that we mentioned earlier in Amir's prepared remark, and that was a positive change in the Q4 revenue mix. It wasn't just China, but there was an interesting development in the U.S. Great, okay, thank you. Thank you. The next question comes from Martin Yang with Oppenheimer. Please go ahead.

Geography for us a lot of.

Innovation on existing and repeating customers they'll come back for newer generations of different technologies, whether its the Bluetooth or Wi Fi or other connectivity.

The solutions that we have today, because I think that we are we have.

Very strong portfolio around that.

It was very interesting for us this quarter around is that the U S was stronger than usual for us and very very strategic deal with with an MCU player that we mentioned earlier on the mirrors the prepared remark in the that was the positive change for Q4 revenue mix.

It wasn't.

Sunshine about year was.

Interesting.

Development in the U S.

Right. Okay. Thank you.

Thank you.

The next question comes from Martin Yang with Oppenheimer. Please go ahead.

Thank you for taking my question can you first talk about the revenue outlook.

Yaniv Arieli: Thank you for taking my question. Can you first talk about the revenue outlook? Break it down by consumer IOT and industrial IOT in 24 hours, you know, which segment should we expect to be stronger, Stronger Rather Than Stronger, owing to your overall revenue? A great question, Martin.

Break broken down by consumer Iot and industrial Iot in 'twenty, four which segment should we expect.

Stronger relative shrimps comparing to your overall revenue growth outlook.

A great question, Mark and thanks for that so let's repeat some of the highlights that we ended up 2023.

Yaniv Arieli: Thanks for that. So let's repeat some of the highlights that we ended up with in 2023. So not a simple year for us and more of a transition year. If we still look at it and do the analysis now at the end of the year, here is how it looks on the audio AI front. The royalty, let's start with royalties, was more than doubled. We showed growth both in units, 56%, I believe we said, and revenue was up more than 100%. Look at Cellar IoT, which is one of the top markets that we have continued to show separately from the modem and Bluetooth and Wi-Fi. This was the third element that we started breaking down maybe a year or so or two years ago.

10 full year for us in more of a transition year, if we still booked in <unk>.

Do that analysis now at the end of the year. He was how it looks like on the audio AI front.

The royalty, let's start with royalties.

More than doubled for us showed growth both in units.

56% I believe we said and the revenue was up more than 100%.

If you look at the sell of Iot, which is one of the top.

A market that we have continued to.

Show separately.

From the modem and the Bluetooth and Wi Fi. This was the third element that we started breaking down.

Maybe a year or so two years ago units were up 64% revenues were up 47, almost 50% and seller of Iot. So that has been working well Bluetooth sort of flattish year over year, mainly because of the slower start of the 2023. So we were flattish in red.

Yaniv Arieli: Units were up 64%. Revenues were up 47%, almost 50%, and Stellar IoT. So that has been working well.

Yaniv Arieli: Bluetooth, sort of, flattish year-over-year, mainly because of the slower start of 2023. So we are flattish in revenues, which were about, or units, which were about a billion units, if you recall last year. We're very close to that, but slightly lower.

<unk>, which were about or units, which were about 1 billion units.

If you recall last year, we are very close to that but slightly lower than Wi Fi continues to be one of the strongest.

Yaniv Arieli: And Wi-Fi continues to be one of the strongest royalty contributors, both licensing and royalties. The units were down year-over-year because it was a transition year also for Wi-Fi 6, which is a newer technology and a new generation. But because of having a new product and new customers that got in, the ASP is much, much higher, and we reached 40% higher revenues for Wi-Fi royalties in 2023. So three very strong and Rodney Contributors.

Royalty contributors, both licensing and royalty.

The units were down year over year, because it was a transition year also to Wi Fi six.

Which is a newer technology and the new generation, but because of having.

A new product or new customers that got in.

The ASB is much much higher.

And we reached 40% higher revenues for Wifi royalties in 2023 so.

A four very <unk> very strong.

Royalty contributed that should continue in 2024, we don't know the pace, we don't know when it's going to pick up and what we know that the industrial.

Yaniv Arieli: That should continue in 2024. We don't know the pace, we don't know when it's going to pick up and what, but we know that the industrial sector is very strong, and all of these different connectivity solutions are addressed to that as much as consumer services. The lowlights, as Amir mentioned, are mainly the mobile, which started very low but ramped up and corrected itself. It's yet to be seen how 2024 looks on an annual basis. It's difficult to forecast the weather.

Is very strong in all of these different connectivity solutions.

Our address to that as much.

Consumer site.

No lights, and Amir mentioned, mainly.

Mainly the mobile which started very low, but ramped up and corrected itself yet to be seen how 2024 look cycled on annual basis, its difficult to forecast but.

Yaniv Arieli: But for now, that's not one of our growth drivers. And the base station market, which suffered, not just CEVA but overall, was very muted and lowered in 2023, just because 5G didn't bring any key or star use cases that happened with deployment or increased deployment. So that's probably going to be muted also in 2024.

But for now that's not one of our growth drivers.

The.

Base station market, which suffered a receiver but overall was very muted and lowered 2023, just because <unk> didn't break for the cellular networks any.

Key or star use case that will happen.

It happened with deployment of a increased deployment, that's probably going to be muted also in 2020 for the rest of the.

Yaniv Arieli: The rest of the technologies and the market that we target around edge AI should work out. Maybe just add a comment to that, Martin, related to industrial IoT. I would say overall, you know, we finished this year with 23% of our total revenue, so this is definitely a significant portion of our revenue. Also, moving forward, we expect it to grow in 2024. And more specifically, if you look at the technology that we're offering, we're getting more and more embedded in the MCU ecosystems, and specifically the industrial and automotive MCU ecosystems. Starting with some of our connectivity offering, extended to Wi-Fi more recently, and now also to some audio capabilities, and in the future, we expect Infer as well. And that's where we see also the synergy of our technology into the smart edge and MCU ecosystem, and specifically there for the industrial IoT market. Thank you very much, for mobile.

Technologies in the market that we target around the edge AI.

Should work out well.

Maybe just one other comment to that market related to the industrial Iot I would say overall.

Finished this year was 23% of our total revenue. So this is definitely a significant portion of our revenue also moving forwards we expect it to grow in 2024.

And more specifically if you look at the technologies that we're offering so we're getting more and more embedded with the MCU ecosystem and specifically in the industrial and automotive and MCU ecosystem.

With some of our connectivity offering.

And extended to Wi Fi more recently and now also through some audio capabilities and in the future. We expect to also infer and that's why we see also the synergy of our technology into the smart edge and MCU ecosystem and specifically there for the industrial air.

Iot markets market space.

Thank you very much.

Next question.

Paul.

Yaniv Arieli: In the longer term, maybe, two to three years' time horizon. Do you think mobile could recover back to that 2021 level? What should we look at?

In the longer term maybe.

Two to three Years' time Horizon, do you think mobile could recover.

Back to the 2021 level.

But where should we look at how should we look at mobile in the longer term.

Yaniv Arieli: How should we look at mobile in the longer term? You know, the mobile market, as everybody knows, has consolidated significantly over the last couple of years. There are a handful of players in that industry. The biggest and well-known ones are Qualcomm and MediaTek. There are a few very successful for many years lower-cost solutions like Unistock and, in recent years, ASR as well.

Amount of contribution to your company.

The mobile market as everybody knows has consolidated significantly over the last couple of years, there was a handful of players in that industry.

The biggest and well known ones.

Welcome to the Mediatek.

A few very successful for many years, our lower cost.

Solutions like unit stock in recent years.

<unk> as well.

Yaniv Arieli: There are still very big markets in the world, replacement and new markets for low-cost future phones. Not everybody goes and buys a $1,000 high-end phone. Those markets, we have very strong penetration and solutions, so that could continue. The pace of all that is not that clear because handsets haven't been that exciting in the market or use cases in recent years. There is one other OEM that may change its modem course, and maybe things will look different in two to three years. But that is yet to be seen. No, I don't think anybody has the answer to that piece.

We're still very big markets in the world replacement and new markets for low cost feature phone not everybody calls the $5000.

High end phone.

Those markets, we have very strong penetration in the end solution. So that could continue the pace of all of that is not that clear to handset haven't been that exciting of noma market or use case in recent years.

And there is one other Oems that they may change its the modem cores Navy figures will look different in two to three years yet to be seen.

No I don't think anybody has the answer for that for that piece. The other use cases of <unk> and connectivity have gone into other segments and other markets and there we have seen licensing activity over the last two to three years.

Yaniv Arieli: The other use cases of 5G and connectivity have gone into other segments and other markets. We have seen licensing activity over the last two to three years, and royalties should also come from that. Not the handset market per se, but PrivateRAN and lots of other markets, solutions that could use a fiber.

Royalties should also come from that not the handset market per se, but.

Private run in lots of other.

Solutions that could use a <unk>.

Yaniv Arieli: Hopefully, that helps to answer the question. Right now, the last three or four years, if we looked at the slides we presented also on Analyst Day, you could see that the overall revenue of CEVA in the last five years doubled from just shy of $50 million to more than double $100 million coming from smart AI devices versus mobile devices. So mobile is still there, but the big growth has come from the newer market. Yeah, and just more specifically on that, Martin, specifically on Serolo IoT, that is an extension of 5G and mobile, that's where we've seen already this year very significant growth, both in consumer, industrial consumer, more in smart watches and those type of things where 5G or other types of technologies, other technologies are getting more and more embedded. And in the industrial space, also for all the different types of logistics, logistic tracking, smart tracking, and other so-called industry 4.0 use cases and beyond as we move towards this year and the next year, also for different types of satellite-based use cases where 5G, 5G advanced will also propagate.

Hopefully that helps to answer the question right now unless we have for years, we looked at the slides. We presented also at the analyst day.

You could see that the overall revenue of Steve over the last five years double.

Just shy of $50 million to more than double the over $100 million coming from Ajay Smart AI edge devices versus the mobile devices mobile is still there, but the big growth come from the newer markets that we've added.

And just more specific at Martin specifically on furlough Iot that is extension of the <unk> mobile that's where we have seen already this year very significant growth both in consumer and industrial consumer law, and smart smart watches and those type of things where <unk> are the type of technology. So that technology is getting more and more embedded and in the industrial.

Aerospace also for all the different type of logistical logistics tracking smart tracking gay anhydrous alcohol in the <unk>.

Industry for all use cases and beyond as we move towards this year and the next year also for different type of satellite type of use cases, where <unk> advance will also propagate.

Yaniv Arieli: We believe we can create a nice growth trajectory moving forward............................ You're very welcome, my dear. The next question comes from Chris Reimer with Barclays. Please go ahead.

And we believe we can create for us a nice growth trajectory moving forward.

Got it.

Great color. Thank you that's all for me.

Okay welcome like a good one.

The next question comes from Chris <unk> with Barclays. Please go ahead.

Chris Reimer: Yeah, hi, thanks for taking my question and congratulations on the strong results. I wanted to ask about your long-term guidance for operating margin. I think at the conference recently you gave a target of 20% operating margin. I'm just wondering, I realize it's a long-term target, but I'm just wondering what the constellation, what's the makeup of actually getting there? Does that consist of increasing or expanding gross margins, or is that specifically no expense expansion whatsoever? I'm just wondering what the moving parts around that are to get to that number. Deep magic, that's the way we do it.

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

Wanted to ask about your long term.

Around operating margin I think at the conference recently, you gave a target of 20% operating margin and I'm.

I'm just wondering I realize it comes from long term target, but I'm just wondering what.

How are you what's the constellation what's the makeup of actually getting there does that consist of increasing it.

Expanding gross margins or is that specifically.

No.

<unk> expense and expansion whatsoever, I'm, just wondering what the moving parts around that or can you get to that number.

Deep magic.

That's the way how to do it.

Yaniv Arieli: One step at a time, with much more focus, and this is what Amir undertook last year, and we have shared with you in the prepared remarks. If you look at the overall non-gap operating margin for the year, we ended up with about 4%. It was stronger in the second half, 7-8% in Q3 and Q4, and when you look into 2024, based on the guidance that we gave, we are planning to probably double it, maybe slightly do even better than doubling it for 2024. So that's one milestone; if you reach the revenue levels that we talked about, if we execute our R&D plans and focus on the expense, with the right expense levels that we have talked about, that's what that milestone will get you to, and if that continues over a few years, that's how we could, and with more royalties, which have very high gross margins and fall to the pre-tax line, that could get us So hopefully, that gave you a little bit more color on the timeline. Maybe just to add to that, just from the top level strategic view of that.

Yeah.

One step at a time.

Yes.

With much more focus on this as this is what the EMEA undertook last year and we have shared with you over the in the prepared remarks, if you look at the overall non-GAAP operating margin of the year.

We ended up with about 4%.

It was stronger in the second half, 7%, 8% in Q3, and Q4 and when we look into 2024 based on the guidance that we gave.

We are planning to probably double that banks may be slightly do even better than doubling it for 24. So thats one milestone if you reach the revenue levels that we talked about if we execute our R&D plans and focused on the expense with the right expense level that we have talked about that.

What that milestone we will get you to and if that continues over few years, that's how we could and with more royalties which bear.

Very high gross margins and fall to the pretax line.

That could get us to the next milestone or few months, but it's not going to happen overnight.

Taking that.

Next stage to 20% non-GAAP operating.

Yes.

So hopefully that gives you a little bit more color on the on the timeline and maybe just to add on.

On that just from the top level strategically of debt. So first this year. We are <unk> sorry last year 2023, we can back to a pure IP business model. After the divestments of intrinsic and with that we guided will be 90% or above gross margin.

Yaniv Arieli: So first this year, sorry, last year, 2023, we came back to a PYP business model after the divestment of intrinsics. And with that, we guided, we would be 90% or above gross margin. And so that's on the gross margin. On the operating margin, it's really twofold.

And so thats on the gross margin on the operating margin. It is really twofold, one is continuous improvement and growth in our top line or the guide I think Jeff gave for this year and from that on the long term model that we gave in the analyst day.

Yaniv Arieli: One is continuous improvements and growth in our top line, where the guidance is just good for this year. And from that, on the long-term model that we gave at analyst day. And then on the OPEC side, it's really maintaining strong focus on where we see potential for long-term growth. And one example of that is also the acquisition that we did last year of Visisonic for 3D special audio software capabilities.

And then on the Opex side is really maintaining strong focus on where we see them, where we believe we will see a long term growth potential.

One example of that is also the acquisition that we did last year. This is sonic.

<unk> special audio software capabilities, and very quickly, we'll be able to convert it into.

Yaniv Arieli: And very quickly, we'll be able to convert it into licensing agreements and royalty-bearing contracts with the customer, which overall has been very synergetic on the OPEC side. And with that, bringing very good profitability moving forward to our business. So both organically and unorganically, we are heavily focusing on the bottom line of how we can drive that. Got it. Thanks. That's a great color.

Licensing agreements and royalty bearing.

With a customer, which overall has been very synergetic on the opex side, and and we have that bringing a very good profitability moving forward to two hour business. So.

Both organically and Inorganically, we're heavily focusing on the bottom line of how we can drive that.

Synergy as well as the operational margin leverage as we move forward.

Chris Reimer: Oh, that's it for me. Thank you. The next question comes from Gus Richard with Northland. Please go ahead. Yes, good morning or afternoon.

Got it thanks, that's great color that's it for me.

Thank you.

The next question comes from Gus Richard with Northland. Please go ahead.

Yes, good morning or afternoon.

Gus Richard: Thank you for taking the question. I just want to make sure I understand the revenue guidance for the full year. Does the comp include intrinsic revenue, or is it just continuing operations in terms of the growth expectation? No, no, continuing. It's just the CEVA IT part of it.

Thank you for taking the question I just wanted to make sure I understand the revenue guidance for the or.

For the full year.

Does the comp.

Include intrinsic revenue or is it just continuing ops in terms of <unk>.

Growth expectation.

Hello continue in it just to see the IP part of it in transits, we took that out last quarter and discontinued operation is in your top line. It's not on your expense, it's adjusting the GAAP play one line.

Yaniv Arieli: Intrinsics, we took that out last quarter, and this continued operation. It's not in your top line. It's not at your expense, just in the gap, one line, before the end there, or just continue the operation.

Before the end of their of discontinued operation.

Yaniv Arieli: So, it's not included in the numbers. The numbers, the revenue, overall net revenue numbers for last year were 97.4, and that is the basis for the growth and the percentages of the growth. That was the number I needed.

So it's not included in the numbers the numbers the revenue and overall net revenue numbers for last year were 97, four and that is the basis for the growth percentages that we gave.

That was the number I needed. Thank you so much.

Gus Richard: Thank you so much. No problem. Sure. The next question comes from David O'Connor with BNP Paribas. Please go ahead.

No problem.

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

David O'Connor: Great. Good morning, afternoon, gentlemen, and thanks for taking my questions. Just one or two from my side.

Great. Good morning afternoon, gentlemen, and thanks for taking my questions just one or two from my side.

Amir: Maybe, Amir, firstly, one for you. Given the excitement that we're hearing around the AI PC and the AI smartphone, just wondering, with your strong positioning at the edge and around IoT devices, do you think there is a wave of AI licensing that's in front of you that has yet to happen, and you just haven't seen that yet? That's my first question. Then maybe for Yaniv, just on the model again for that 6% sales growth for 2024, can you rank for us licensing versus royalties, which is higher or lower than that 6%, just to get an idea of the trend there? Also, do you expect to grow revenues on a quarterly basis through 2024? Thanks, guys. Can you repeat the question, David? Sorry for that.

Maybe a mirror firstly one for you.

Given the excitement we're hearing around the IPC in the smartphone.

Just wondering what your strong positioning at the edge and around Iot devices. Do you think there is a wave of agi licensing that's in <unk> that is yet to happen and just haven't kind of seen that Jess.

My first question and then maybe for you any even just.

Just on the model again for.

That 6% sales growth for 2024.

Can you rank for us kind of licensing versus royalties, which is higher or lower than that 6% just to get an idea of the.

The trend there.

And also do you expect to grow revenues on a quarterly basis through 2024. Thanks.

Thanks, guys.

Sure David I'll take the first one and good morning.

Yeah.

Okay.

Sorry can you repeat the question David sorry for that.

David O'Connor: Yeah, sure. So with the excitement around the AI PC and AI smartphone and your positioning at the edge, I'm just thinking, you know, is there a wave of licensing at the edge that has yet to happen? Because you said in your opening comments that that kind of licensing is a bit lumpy. So just trying to put that in context with all the what we're hearing around AI. Yeah, so definitely, David.

Yeah sure so I'm just.

Just with the excitement around the AIP Sea and air.

Yes.

We are positioning at the age I'm just thinking.

Is there a wave of licensing at DHS has yet to happen because you talked in your opening comments that kind of licensing is a bit lumpy.

Just trying to put that in context was all the what we're hearing around that.

Alright.

Yes, yes.

Yes, that's something maybe so first this is a focus area for us in 2024.

Amir: So first, this is a focus area for us in 2024, basically delivering our NPU and overall AI portfolio into the smart edge market segment, including automotive, industrial, consumer IoT, and later also into infrastructure. We already have several customers that are evaluating our technology in very deep evaluations, and we expect to be able to close some of those deals during 2024. So that's definitely part of our target and also part of our expectation in terms of revenue growth in 2020. And with regard to the model, we don't break out. We never did.

Basically delivering our NPA and overall air portfolio and into the smart edge.

Market segments, including automotive industrial consumer Iot later also into the infrastructure and we have already several customers that are evaluating our technology and very deep evaluation and we expect to be able to close some of those deals during 2024, but that's definitely part.

Of our targets and also part of our expectation in terms of the revenue growth in 2024.

And with regards to the model.

We don't breakout we never did again, because we don't have that crystal ball and royalties and volumes.

Yaniv Arieli: Again, because we don't have that crystal ball in royalties and volumes between licensing and royalties on an annual basis, we believe both could grow year over year. So again, if you look at the numbers, excluding intrinsic, that's why we were just asked about $57.6 million in licensing and related revenue for 2023. We believe it should go higher and be higher in 2024. And the $39.9 million in royalties, which fell year over year, mainly because of the base station market that we talked about earlier, should also be the basis for growth. Not sure where it's going to end up, but both of them, we have them growing.

Between licensing and royalty is on an annual basis, we believe.

Both could grow year over year. So again, if you look at the numbers.

Excluding intrinsic value.

Were just asked about $57 6 million.

Licensing and related revenue basis from 'twenty to 'twenty three we believe it should go higher it would be higher in 2024, and the $39 $9 million of royalties.

Software year over year, mainly because of the base station market that we talked about earlier should also be the basis for the growth I'm not sure where it's going to end up both we have them growing all remodeled shows incremental growth on the overall quarter by quarter in the year.

David O'Connor: Our model shows incremental growth on the overall quarter by quarter as the year progresses, with Q1 being the lowest because of the seasonality of modems and consumer devices. In royalties, here, we have a little bit more insight because we have seen that trend in recent years. And I hope I answered the question. That's how high-level we see the models this year.

Progresses, with Q1 being the lowest because of the seasonality of the modem in consumer devices in royalties here, we are a little bit more insight because we have seen that trend in recent years and I hope I answered. The question. That's the high level of how we see the model for next year this year.

David O'Connor: Yeah, that's very clear. Thanks, guys. Thank you. This concludes our question and answer session. I would like to turn the conference back over to Richard Kingston for any closing remarks. Thank you, Betsy, and thank you, everyone, 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 report on Form 8K and are accessible through the investor section of our website. And with regard to upcoming events, we will be participating in the following conferences. Mobile World Congress from February 26 to 29 in Barcelona, Spain. The Loop Capital Markets 5th Annual Investor Conference, March 12, in New York. 36th Annual Roth Conference, March 18 and 19, in Dana Point, California; and the Mizzou Americas Israel Growth Conference, March 25, in New York. For further information on these events and all events we will be participating in, can be found on the investors section of our website. Thank you all and goodbye. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. BF-WATCH TV 2021 BF-WATCH TV 2021

Yes, that's very clear thanks, guys.

Thank you.

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

Thank you Betsy and thank you everyone 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 report on form 8-K accessible through the investors section of our website.

And with regards to upcoming events, we will be participating in the following conferences.

<unk> World Congress from February 26 to $29 in Barcelona, Spain the.

The loop capital markets fifth annual Investor Conference March 12 in New York.

36th Annual Roth Conference March 18, and 19 in Dana point, California, and the Mizuho Americas, Israel growth Conference March 2015 in New York for further information on these events in all events, we will be participating in can be found on the investors section of our website. Thank.

Thank you all and goodbye.

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

[music].