Q4 2024 CEVA Inc Earnings Call
Speaker Change: Before handing over to Amir I would like to remind everyone that today's discussions contain forward looking statements that involve risks and uncertainties as well as assumptions that if they materialize or prove incorrect could cause the results of CEVA to differ materially from those expressed or implied by such forward looking statements and assumptions.
Speaker Change: Forward looking statements include statements regarding our strategy and growth opportunities market positioning trends and dynamics, including the impacts of the AI Super cycle recent advances related to L. L. M. Large language model efficiency on the on the shift from AI inference processing in the cloud to the edge.
Speaker Change: Expectations regarding demand for our benefits all of our technologies on revenues from long term strategic engagements with industry leaders.
Speaker Change: Our sales pipeline and backlog and our financial goals and guidance regarding future performance.
Speaker Change: CEVA assumes no obligation to update any forward looking statements or information, which speak as of their respective dates.
Speaker Change: In addition, following the divestment of the intrinsic business financial results from intrinsic to our transition 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.
Speaker Change: Meaning full analysis of our core operating results and comparison of quarterly results a.
Speaker Change: 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 investors relations website at investors CEVA heightened IP dot com.
Speaker Change: With that said I'd like to turn the call over now to Amir who will review our business and performance for the quarter and on the year I'll provide some insights into our ongoing business and for 2025.
Speaker Change: Sure.
Speaker Change: Yeah.
Speaker Change: Thank you Richard welcome everyone and thank you for joining us today 'twenty 'twenty four it was a transformative year for CE, marking a year of exceptional execution with double digit revenue growth.
Profitability and expand its market leadership for the smart edge.
Speaker Change: Well strategy, which I shared during our Investor day that the 2023.
Speaker Change: Our state to state our expectation for 'twenty, if I keep all while keeping a strategically focused on our long term goals to maximize shareholder value.
Speaker Change: Our core strategy of partnering closely with our customers to solve their most critical technology challenges.
Speaker Change: Appreciate it and best in class, but part of I think Blackstone continues to drive our growth right.
Speaker Change: By enabling smart edge devices to connect any current data at the edge, we are delivering powerful solutions that drive success for both our partners and our business.
Speaker Change: In 2024, we have strengthened our leadership and influence era.
Speaker Change: One of our key technology in Paris, we enforcing our dominant position in wireless connectivity, while expanding our San Phan in for its product offerings and global customer base.
Speaker Change: Our large highly diversified customer base.
Speaker Change: And across multiple industries and market, creating multiple licensing books at Ges and.
Speaker Change: Strong royalty headwind that that was further enhanced by the expansion of AI across industries and everyday life.
Speaker Change: Before reviewing the year and our key achievements I will first provide an overview of our fourth quarter performance.
Speaker Change: For the fourth quarter I'm pleased to report another strong quarter with both licensing and royalties combining to deliver 21% year over year revenue growth and exceeding market expectations.
Speaker Change: He hired outstanding in recent earnings calls our business momentum is fueled by the.
Speaker Change: AI Super side, Kevin with significant investment shifting towards enabling AI inference processing at the edge.
Speaker Change: These trends perfectly intersects with our industry, leading portfolio of IP, which enabled edge device.
Speaker Change: Neck wirelessly sensitive environments, Yeah vision silence homeownership and perform real time on device infrared, enabling faster and more efficient decision, making at the edge.
Speaker Change: We had been native Dutch we send that advancements related to large language model efficiency, we've significantly lower training and inference costs and reduce memory requirements will make a more accessible efficient and affordable, particularly at the edge.
Speaker Change: L M becomes smarter and less resource intensive the shift from centralized cloud processing to own device AI will accelerate.
Speaker Change: Looking at new opportunities for real time edge based intelligence.
Speaker Change: In the quarter, we signed several key strategic licensing deals there.
Speaker Change: The first thing to note is we are a top tier global MCU company, which had signed a long term architecture licensing agreement for our Wi Fi platform. This partnership will enable our customers to offer end to end connectivity solutions across a wide range of Iot and industrial Iot applications.
Speaker Change: As the market for Wifi contain connectivity continues to grow so does the complexity of the standards and the large number of products with different connectivity flavors and few companies needs to integrate twice as likely to buy.
Speaker Change: By standardizing on CS body weight Wifi platform architecture, this customer with streamline their Wi Fi at airports and foreclose on their call key differentiators, while benefiting from our IP to deliver best in class connectivity solutions across their entire portfolio targeting multiple end markets.
Speaker Change: The second major strategic does it relates to the mobile market, where we concluded a long term licensing agreement with a leading U S. OEM to use our technology in their henao five she bought it we.
Speaker Change: We anticipate that these agreements will lead to significant market share expansion will follow wireless communication IP. We expect this agreement to driving meaningful long term royalty stream in the years to come.
Speaker Change: These types of long term strategic engagements with industry leaders fair as a cornerstone of our future growth by aligning our IP portfolio and their product Roadmaps, we unlock more opportunities with all our partners.
Speaker Change: Lasting relationships and improve our long term profitability.
Speaker Change: In addition to these two strategic point excuse with U T is our AI product achieved key milestones this quarter, including signing important licensing agreements for our AI DSP and Newport nine O M. P. S. We the first time customer to accelerate their edge AI for the roadmap and Ed.
Speaker Change: Same thing related features and capabilities.
Speaker Change: Market interest and demand for our edge AI portfolio continued to accelerate both from existing and new customers looking looking to solve the challenge of adding AI smart edge products.
Speaker Change: Our unified N P O portfolio scarce from the smallest most power sensitive embedded use cases, requiring an MCU and cause July opt.
Speaker Change: Optical multi engine Apu combine on Adas and other high performance use cases.
Speaker Change: But I think that's the right way the solutions that address their specific needs.
Speaker Change: Next from our customers has been overwhelming quantity and we are very encouraged by the progress we are making on the edge AI in front.
Speaker Change: Other engagements in the quarter and includes a multiyear Bluetooth extension of an existing mobile customer.
Speaker Change: And multiple data for Wi Fi Bluetooth fixed seven platform with customers.
Speaker Change: Alright, and industrial end market.
Speaker Change: We also signed the software licensing deal whereby we then and the OEM for a motion engine sensor fusion software targeting mobile products and in wireless communication platform deal with a customer and you're finding that settled all Iot cheap.
Speaker Change: Although we completed 12 deals in the quarter three are for each well when he first time customers and two of which where we have Oems.
Speaker Change: Now turning to royalties for the quarter, we continued our excellent small apparel, our excellent momentum delivering our strongest quarter of the year and our fifth consecutive quarter of year over year royalty revenue.
Speaker Change: We also achieved an all time high in order to shipment powering 623 million units in the courtyard. The first time ever we are suppressed 600 million units and it seemed that a court case.
Speaker Change: This milestone achievement was driven by record high shipments of both our Wi Fi and Bluetooth IP weight Wi Fi she had been growing 110% year over here and rooftop shipments up 41% year over year.
Speaker Change: Smartphone shipments were up a healthy 27% year over year on the back of strong end market demand for low end forging and finally smartphone and we saw another both sequential and year over year increase in five U N shipment from our main customers.
Speaker Change: Or are you in a relationship that's grew 94% year over year, our smart watches wearables Sunpower and speakers are adopting our AI use piece for more powerful chips to deliver an immersive experiences for consuming yesterday gaming movies and other multimedia.
Speaker Change: Likewise in D V. D. C is our sensor fusion customers. She plans grew sequentially and year over year to finish the year strong.
Speaker Change: This was our second highest quarter ever for LTE exploding mobile, reflecting Dan you're right I think the upside given that we have been highlighting in recent earnings calls.
Speaker Change: We have a particular, particularly pleased to have achieved this through strength across multiple end market with multiple technologies and form a diverse array of customers.
Speaker Change: For the full year of 2024, we finished the year strong delivering 10% topline growth exceeding our expectations, reaching $106 $9 million.
Speaker Change: Licensing and related revenue was $60 million up 4% over 2022, we signed 43 licensing agreements in 2024 of course, our extensive IP portfolio.
Speaker Change: 11 of those bids where we've Oems who are integrating our ids into their end products.
Speaker Change: In terms of end market 21 of the deals target consumer market and 19 for the industrial Iot with the remainder targeting mobile, including jewelry, Barbara and cool mobile customers that sign long term agreements in the fourth quarter.
Speaker Change: 12, 40 customers licensed technology from World portfolio, a clear indication that our strategy to offer a broad portfolio of IP is Iran. Connect fans to infer eastern energetic way of addressing what is it for the needs of our customers.
Speaker Change: In terms of full year royalties, we delivered strong year over year, 18% revenue growth and shipped a record 2 billion CEVA powered yeti, marking the first time in our history to reach this milestone number.
Speaker Change: Shipment strength was across the board with numerous numerous records achieved.
Speaker Change: To highlight a few of these we've powered a record $1 1 billion, a Bluetooth devices and a record 179 million Wifi devices, a record 117 billion cellular Iot devices.
Speaker Change: 314 million smartphones, and 117 billion of other smart edge devices.
Speaker Change: Led by our DSP accelerators and sensor fusion itself.
Speaker Change: In terms of end market consumer Iot was 53% to find out who is being followed by mobile at 32% and industrial Iot at 16%.
Speaker Change: Looking ahead into 2025, we anticipated that with Wi Fi royalties and shipment will continue to grow we have a number of high volume Wifi six customers getting into production and ramping up. Similarly, we expect continued growth fall for our Bluetooth and cellular Iot ship that we have additional cash.
Speaker Change: Customers are coming to market and strengthening our dominant position in this market.
Speaker Change: Also on the back of signing a new long term licensing deals with our two main mobile customers. We expect the royalty contribution from Mumbai to grow year over year.
Speaker Change: Now, taking a step back and looking at CEVA intensive business achievements and milestones. There are many of these years, but I would like to highlight a few of them.
Speaker Change: In connectivity, we solidified our position as the outstanding leader in this domain and went into other areas.
Speaker Change: She said what are we completed several of these long term deals with a handful of customers in mobile and wireless infrastructure, securing our ideas solidifying our position in the roadmap for next generation of products.
Speaker Change: We bought in our five key customer base and the satellites and chairman of the market, while adding new customers for five G V to X gene.
Speaker Change: In mobile broadband use cases.
Speaker Change: Decent neighborhood, it's awesome service and diverse customer base across multiple 50 related end market, we bought a unified platform.
Speaker Change: In the short range connectivity, we signed significant deals for our recently introduced next generation thinks unfair then at Wifi set of platforms and establish long term strategic relationships. We want to talk a lot about excuse me Dennis who are standardizing on our connectivity platform for key area moved up quite a lot of it we.
Speaker Change: Also launch seatbelt wavelengths and new family of multi party called wireless solutions as we look through the neighborhood mall talking to all of the cost of labor.
Speaker Change: Recently, we need Congress solutions for Jive designed these combo solution allows us to secure better economics and important royalties.
Speaker Change: In sensing we made significant progress we've always specialized your embedded application software, reaching production handsets and ear buds, we've boat and winning new business with a global smartphone OEM for multiple headwinds here, but skus to be launched in 2025.
Speaker Change: Our sensing you also had some production I need automotive Adas market. We won the award is gaining automotive semiconductors companies towards the end of the year and our I just found GSP experienced strong year over year golf Wearables home on video and wireless because driven by increased demand for advanced audio post processing.
Speaker Change: Especially I'd argue or at other complex I've got voice cases continue to evolve our solutions are playing a critical role in our neighborhood named these next generation user experiences.
Speaker Change: And in France, We introduced me upon Oh, and you have embedded a N P. M targeted at power constrained devices that have already signed multiple lead customers looking to integrate it into their next generation penalties.
Speaker Change: Well there are 2024 was a pivotal year for edge AI with strong end market demand pushing companies draupadi adopt AI capabilities in their end products.
Speaker Change: Writing a refresh cycle.
Speaker Change: <unk> is a highly synergistic with our connectivity and sensing offerings, which we believe will lead to significantly increased interest in demand for our edge AI portfolio from new and existing customers. These synergies are another strategy to drive larger deals with better economics for both licensing and royalties paving the way for <unk>.
Speaker Change: Revenue growth for a deal in the years ahead.
Speaker Change: 'twenty 'twenty four was a landmark year for say placebo, our commitment to operational excellence and disciplined execution. The neighbor exception I want your thoughts across many fronts. We hate the major R&D milestones lunched won't get those innovative products like the new appointment or a J I N. P is all while doubling our non-GAAP EPS.
Speaker Change: Compared to 2022, and creating shareholder they will probably be at the progress we've made and sets a strong foundation for an exciting 2025 and beyond.
Speaker Change: Our success is a testament to the vacation fashion any credible airports or following plays worldwide and I'm deeply grateful to each and every one of them for their contributions.
Speaker Change: As for 2025, the shift from the AI inference processing in the cloud to the edge with genius to generate unprecedented demand for smart edge devices, driven by the need for lower Baldwin assumption reduce latency and cost savings required to make a I b q's and everybody that everyday life did.
Speaker Change: Shift is a pivotal growth driver for us we are committing committed to maintaining our leadership in connectivity ensuring that all devices are seamlessly connected and capable of friends and analytical protocols.
Speaker Change: These connectivity is complemented by our sensing DSP in software and a J I a N N P is all of which enable the smart edge.
Speaker Change: The only I'll be leading the way with Ip's aimed at Democrats design AI at the edge, but all of our IP is an inherently low power based on our strong heritage of processors and connectivity technologies designed for battery powered devices. We've almost 20 billion CEVA powered devices shipped to date then.
Speaker Change: Majority of which are battery powered low power is in our DNA.
Speaker Change: We continue our focus on improving data economics by delivering greater value to our customers through multi cloud connect particle accelerators and software enhancements.
Speaker Change: Rogers to offer complete IP solutions, rather than just give each other components, ensuring that our customers receive integrated high value offerings that drive their success and ours.
Speaker Change: By enabling the smart edge ecosystem.
Speaker Change: Physician hours that we are positioning ourselves as the fall fun of this technological evolution and multiple domains.
Speaker Change: I personally I'm incredibly excited for what's ahead placebo.
Speaker Change: Now I will turn the call over to get in April they financed.
Speaker Change: Yeah.
Amir: Thank you Amir.
Speaker Change: I'll start by reviewing the results of operations for the fourth quarter of 2024.
Speaker Change: For the fourth quarter increased 21% to $22 million.
Speaker Change: The $24 2 million for the same quarter last year.
Speaker Change: The revenue breakdown is as follows licensing and related revenue increased 33% to $15 7 million.
Speaker Change: <unk>, 54% of our total revenues as compared to $11 8 million for the fourth quarter of 2023.
Speaker Change: <unk> revenue increased 9% to 13, and a half million dollars, reflecting 46% over total revenues up from $12 3 million for the same quarter last year.
Speaker Change: This is the fifth sequential year over year growth in there.
Speaker Change: Quarterly gross margin came in as forecasted and guided at 88% on GAAP basis that 89% of loans get basis.
Speaker Change: Total GAAP operating expenses for the fourth quarter was the midrange of our guidance range of $25 8 million.
Speaker Change: Total non-GAAP operating expenses for the fourth quarter, excluding equity based compensation expenses amortization of intangibles and deal cost and 21 $6 million also at the midrange of our guidance.
Speaker Change: GAAP operating income for the fourth quarter in Brazil, 1 million. The first GAAP positive quarter in 2024 up from a GAAP operating loss of $2 8 million in the same quarter a year ago.
Speaker Change: They don't get the operating margins and net income was 15% of revenues for the half a million dollars, 88% and 130% higher than operating margin of 8% and operating income of $1 9 billion recorded.
Speaker Change: In the fourth quarter of 2023, respectively.
Speaker Change: <unk> been executing.
Speaker Change: Houston and expense monitoring.
Speaker Change: <unk> due to increased growth and profitability.
Speaker Change: Financial income net was negative <unk> 1 million compared to $1.8 million.
Speaker Change: Income for the fourth quarter of 2023 significantly lower than our estimated $1 2 billion.
Speaker Change: This was due to a significant fall in the value of the euro versus the U S. Dollar in the fourth quarter of over 7% impacting the value of our euro dominated assets, especially French related tax receivables.
Speaker Change: GAAP and non-GAAP taxes were approximately one $7 million slightly higher than our guidance and affected by Geographics revenue recognized from deal and royalty revenues.
Speaker Change: GAAP net loss for the fourth quarter was $1 7 million.
Speaker Change: Diluted loss per share was seven cents as compared to a net loss of $8 1 million and a loss per share.
Speaker Change: 34 cents for the fourth quarter of 2023.
Speaker Change: non-GAAP net income and diluted earnings per share for the fourth quarter of 2024 increased by 12% and 10% to $2 $7 million in 11 cents, respectively as compared to net income of $2 $4 million and diluted income per share was 10 says reported from this.
Speaker Change: <unk> periods last year.
Okay.
Speaker Change: With respect to other related data.
Speaker Change: <unk> units by CEVA licensees during the fourth quarter of 24 623 million units up 38% from the fourth quarter 23 reported shipments.
Speaker Change: Of the six seven and 23 million units reported 129 billion units or 21% were for mobile handsets modems.
Speaker Change: 459 billion units were for consumer Iot products.
Speaker Change: From 325 million units in Q4 of last year.
Speaker Change: 35 million units were for industrial Iot products up from 27000 units last year.
Speaker Change: Leadership bids for a record high.
343 million units in the quarter.
Speaker Change: 41% year over year.
Speaker Change: Hello, I N T shipments were 46 million units.
Speaker Change: 37% year over year.
And our Wifi shipments were a record 66 million units of how many 10% year over year.
Speaker Change: [noise] wife by royalties were up 175% year over year, driven by the higher royalty for Wifi six products.
Speaker Change: As shipping volumes continued to ramp up.
Speaker Change: That's for the year.
Speaker Change: Our total unit shipments were 2 billion in 2024 up 22% year over year, which is equivalent to more than 60 CEVA powered devices sold every second in.
Speaker Change: 2024.
Speaker Change: Any other mobile modem shipments were up 19% year over year to 340 billion units, reflecting robust demand for low end smartphones, which offer similar feature sets to more expensive midrange phones.
Speaker Change: Any other consumer Iot related shipments, where we wanted to have billions of units.
Speaker Change: 21% year over year.
Speaker Change: Annual industrial Iot related shipments were 126 million units up 60% year over year.
Speaker Change: Wifi stellar royalty and arguably I shouldn't means all showed strong year over year growth.
Speaker Change: 71%, 31% and 36% respectively from 2023.
Speaker Change: In terms of the royalty countries the true highlights.
Speaker Change: Royalties were up 54% year over year, reflecting a steep uplift for newer generations of Bluetooth shifting with better royalty economics.
Speaker Change: On the annual financial metrics revenue increased 10%.
Speaker Change: For two 8% initial guidance for the year.
Speaker Change: non-GAAP gross profit remains strong at 89%.
Speaker Change: non-GAAP operating margin and operating income more than doubled to 9% and $10 million.
Speaker Change: And net income and diluted earnings per share also doubled to $9 million.36.
Speaker Change: Last year, all demonstrating and contributing to increase shareholders value.
Speaker Change: As for the balance sheet as of December 31, 2024 C level, Ken I wish cash equivalent balances marketable securities and bank deposits were approximately $164 million.
Speaker Change: In the fourth quarter, we purchased approximately 72000 shares for approximately $1 billion and for the year, we repurchased approximately 375000 shares for approximately eight and a half million dollars.
Speaker Change: As of today about 1 million shares are available for repurchase under the repurchase program has expended in November of last year.
Speaker Change: Our DSO for the fourth quarter of 2024 was around 50 days similar to the prior quarters.
Speaker Change: During the quarter, we generated $8 million of cash from operating activities ongoing depreciation and amortization was $1 $1 million and purchase of fixed assets was $1 million.
Speaker Change: At the end of the fourth quarter, our head count was 428 people with whom.
Speaker Change: 349 were engineers.
Speaker Change: Now for the guidance.
Speaker Change: EMEA were highlighted our 2024 achievements and our strong building blocks, so longer term growth and profitability and we continue to execute on our strategy would that be.
Speaker Change: First presented.
Speaker Change: December 23 analyst day Investor Day.
Speaker Change: In 'twenty 'twenty, four we managed to execute better than our plan and achieved important milestone.
Speaker Change: This process. This progress has enabled us.
Speaker Change: We project 2025 is another year of growth for multiple financial and business ethics.
Speaker Change: We have a healthy backlog and promising pipeline of prospects as well as several positive trends and pay latest with regards to continued market penetration for our Bluetooth Wi Fi cellular Iot and smart phone technologies.
Speaker Change: On an annual basis.
Speaker Change: Total revenue is expected to grow 7% to 11% over 2024 with lower growth in the first half of the year and higher in the second half similar to prior years.
Speaker Change: Seasonal trends.
Speaker Change: On the expense side.
Speaker Change: We plan to increase our 2025 overall expense levels, including both cost of revenue and Opex at a significantly lower growth rate than our topline growth in the range of 2% to 6% or $99 million to 183.
Speaker Change: Millions of dollars.
Speaker Change: For next year.
Speaker Change: Overall, non-GAAP Cogs and expense is expected to increase by approximately $2 million and our non-GAAP Opex is expected to increase by approximately $2 million.
Speaker Change: Yeah.
Speaker Change: From the guidance and activities, we have just discussed.
Speaker Change: We anticipate non-GAAP operating income and operating margins.
Speaker Change: As well as non-GAAP net income and fully diluted EPS to grow significantly year over year by approximately 48% to 52%.
Speaker Change: Specifically for the first quarter of 2025.
Speaker Change: Yeah.
Speaker Change: With typical seasonality and shipments of consumer Iot and mobile products post the holiday season, we expect overall revenues to be sequentially lower.
Speaker Change: In language Street estimates.
Speaker Change: Still significantly higher than the first quarter of 2024.
Speaker Change: Revenue is forecasted to be 25, and a half to $27 million.
Speaker Change: Gross margin is expected to be slightly lower than what we just reported for the fourth quarter due to lower seasonal royalty revenue and the location of design activity for strategic customer.
Speaker Change: We forecast.
Speaker Change: 87% on GAAP basis, and 88% a non-GAAP basis.
Speaker Change: Excluding an evergreen we gave them zero point $1 billion of equity based compensation expenses in Europe, and $1 million for amortization of acquired intangibles.
Speaker Change: GAAP Opex for the first quarter is expected to be in the range of 21, 25, 1% to $26 $1 million a bit lower than the level. We just reported for the first quarter.
Speaker Change: Although we anticipated total operating expenses for the fourth first quarter $4 million is expected to be attributed to equity based compensation expense 0.2 million for amortization of acquired intangibles and 0.1 billion.
Speaker Change: Costs associated with business acquisition.
Speaker Change: Our non-GAAP opex.
Speaker Change: It is expected to be in the range of $21 million to $22 million also just bingo the fourth worked toward in 24 months.
Speaker Change: That is.
Speaker Change: Expected to be approximately $1 3 million.
Speaker Change: Taxes for the first quarter are expected to be approximately $1 $2 million and share count for the first score is expected to be 25.4.
Speaker Change: Before we get on these ships.
Speaker Change: Well call you could open the Q&A session. Please.
Speaker Change: Okay.
Speaker Change: Thank you well now begin the question and answer session.
Speaker Change: That's a question you May press Star then one on your telephone keypad.
Speaker Change: As yourself from Hugh Please press Star then two.
Kevin Cassidy: Today's first question comes from Kevin Cassidy of Rosenblatt Securities. Please go ahead.
Speaker Change:
Speaker Change: Yeah. Thanks for taking my question and congratulations on the great year, good quarter and ending the year.
Speaker Change: Just my question on the M C U E.
Speaker Change: Hey, I'm moving to the edge.
Speaker Change: More and more of the processors need to have integrated MTS. So with your license agreement with the MCU player or maybe just in general the MCU players in the market.
Speaker Change: Is there an opportunity not only for your wireless but for the M. P U to get integrated into these OEM empties.
Speaker Change: Yeah, Kevin Thanks for the question because there's no merit yeah, yeah definitely.
Speaker Change: In this case, we highlight that basically our wireless knowledge is there is a license like most devotes the M C.
Speaker Change: Cost to us, but in addition to that definitely as we mentioned we license it not just at our Newport nano and to use and it goes very nicely.
Speaker Change: Alongside our wireless connectivity and sensors.
Speaker Change: Technology corridor.
Speaker Change: All those different MCU merit.
Speaker Change: We definitely see the trend.
Speaker Change: With all that there's no I think more and more AI capabilities, we have.
Speaker Change: That's in that level of investment.
Speaker Change: There is a different level of skepticism why don't you need because we need for Matson com and has been quickly bring to market.
Speaker Change: And overall, what we see on the surface as the.
Speaker Change: The player that can enable that.
Speaker Change: MCU market place, we integrate different type of technologies from connectivity.
Speaker Change: Okay great.
Speaker Change: I Wonder if you could provide any detail on your.
Speaker Change: U S mobile OEM with their in house five G modem of when the royalty revenues start and then maybe kind of what the run rate looks like them.
Speaker Change: Increases overtime.
Speaker Change: Okay.
Speaker Change: This morning, we.
Speaker Change: You cannot extend beyond what he said to me every morning.
Speaker Change: Other than the fact that you haven't decided.
Speaker Change: Yes.
Speaker Change: There's an opportunity to stay with us.
Speaker Change: Is it real well.
Speaker Change: So like any other customer it's Mike.
Speaker Change: I'll do some pull up the bandwidth.
Speaker Change: It set the tone and the timing and the ramp up the volume, but then when we get the royalty reports, we will have a better idea, but from other customers, including this this one thing and that's true for others as well so it's an exciting opportunity and we're looking forward to it.
Speaker Change: And then the next for the next couple of years.
Speaker Change: Okay, great Thanks, and congratulations again.
Speaker Change: Yeah Yeah.
Susan Silver: Thank you and our next question comes from Susan Silver with Roth Capital. Please go ahead.
Susan Silver: Hi, I'm here you need congratulations on the strong, California, Florida for my for me as well. So maybe you could talk a little bit about the AI news recently about the deep seek model in China, and the lower potential footprint for L. O EMS.
Susan Silver: No it spanning the edge opportunity and maybe you can talk about you know if that if you see deep sea is helping accelerate your opportunity and if you've seen China Ah kind of infer activity picking up around this.
Susan Silver: Yeah definitely definitely Fuji and if this is a mere two comments here one the first one the so called the different region and innovation, we see both for the U S market in the western World as well as China really innovating a lot in.
Susan Silver: Lucky and the AI domain and decided it was really great opportunity for us across the globe in terms of the new models that are coming out. This is exactly what we were looking for and anticipating that will come with that which basically means and much more optimized models that can run with a smaller footprint.
Susan Silver: And can drive lowest power type of devices, enabling the N and M to run locally and once we have talked about for a while the smart edge. So we definitely see that as an accelerator of them two to enable the different devices. They wanted us to be able to run different type of Atlanta and alright, great.
Susan Silver: Type of excess liability and lower cost structure.
Susan Silver: Drive higher volume and adoption I called the edge devices. So fast it is and we were very happy to say that the innovation and the progress globally as well as we had this specific case.
Susan Silver: Okay.
Susan Silver: With that I would say that the if we look at our activities today overall.
Susan Silver: And what we are saying is even more velocity and further increase.
Susan Silver: Demand and interest will follow up with photo fun to use and overall the ability to run AI models some niche.
Speaker Change: Okay. Thanks, Amir and then on Wi Fi It seems like that's gonna be a strong growth driver for 25, I'm wondering if we should expect the penetration to kind of hit an S curve, where your penetration is today and if it hits an S curve similar to Bluetooth or whether it be whether it be a steady kind of penetration increase and if you could just touch on which end markets.
Speaker Change: Wifi will will drive Wi Fi growth of 25 that would be helpful. Thanks.
Speaker Change: Yeah. So we are right now really in the midst of that transition from their Wi Fi for Fox Wi Fi six we license to do more than 40 different customers in the last few years. So this is really where we started seeing that acceleration and already 2024 was a very strong warfare philosophy in terms of wisely shipment volume.
Speaker Change: Atlanta has higher ASP per unit is that true.
Speaker Change: They should do Wifi six.
Speaker Change: As we alluded to already in the analyst day on the analyst day.
Speaker Change: It was 2023 and we used that 2025, we definitely expect to see even further acceleration of that growth.
Speaker Change: Yeah.
Speaker Change: And as well as you ask about the use cases and the proliferation. The widespread seeks the strongest technology industrial penetration across all the different Iot market and sub market. This is the standard that really help to not only increase throughput in terms of data and data throughput, but also.
Speaker Change: Increased capacity and better utilization of the spectrum on the edge of so called Iot devices and so this is really weird Nathan and really in the acceleration of the transition of our customer base moving to likely six.
Speaker Change: I would have maybe a little bit more of a history, you'll remember when we started in 2022 license due to a few years of licensing activity and then into seniors to ramp up in D. C. And we've reached $1 1 billion devices in 2023, two years ago about 50% of the Bluetooth.
Speaker Change: As a whole.
Speaker Change: The Wifi and Bluetooth combo chip and this year, we reached the one almost a $180 billion a unit.
Speaker Change: That's for like five so the opportunity in the next couple of years.
Speaker Change: For Wifi, and Bluetooth combo chip when high raise speeds as we saw just starting to pick up in 2024. It was really a subtlety in very very exciting.
Speaker Change: Growth opportunities in the next couple of years.
Speaker Change: Anywhere in between that that's 180 million for Wifi into the $1 1 billion at the Bluetooth devices is where are we going to see ourselves in a few years.
Speaker Change: And Dave just to clarify if you sell a combo you counted as one Bluetooth and Wifi.
Speaker Change: Yeah, that's correct, okay, great. Thanks, guys. Thanks Amir.
Speaker Change: Thank you.
Speaker Change: And our next question today comes from Gus Richard with Northland. Please go ahead.
Gus Richard: Yes, thanks for taking my questions and congratulations on great results I'm just in terms of modeling that you've done for the year and sort of your expectations do you expect your hum.
Gus Richard: You know a cellphone modem revenue to grow faster than than your Wi Fi or you know Wi Fi outstrip that just relative growth rates would be helpful.
Gus Richard: Yeah.
Gus Richard: You know I wish we would have known there what's the answer here, but you'll have a lot of business in royalties royalties and those royalties we understand the trends we know the players in the industry of each of the industries, we play and we have very good relationships with many of them, but what we don't have that.
Gus Richard: Crystal ball is really into their ramp up timing and to the volume of any player. It could be a handset players could be a wildfire or where they are you are in automotive display, which we have the added late last year for the first time. After many many years and that's a piece of that is missing for a module.
Gus Richard: The longer term basis and as soon as we've seen several of our new customers starting to shake that gives us new information that we could build them in and then build our models for them, but sometimes until the first thing that should start to ease.
Gus Richard: Don't have it exactly that of course, but also a lot of them.
Gus Richard: Good moving the pieces are looking into 2025 hard to say exactly because of Q1 or Q2 or Q4, usually the seasonality of some of the consumer Iot lessened the industrial Iot.
Gus Richard: Secondly.
Gus Richard: They can have their loaded that's historically been the case, but that could change if any big enough customer or customers or markets pick up for whatever reason or earlier in the year. So a lot of moving pieces. It all looks quite positive, but the count and tells you what's market today in February will then.
Gus Richard: The strongest the for 2025.
Gus Richard: I would add to.
Gus Richard: This just to watch it.
Gus Richard: Yeah, well that to us.
Gus Richard: And he said.
Gus Richard: Right.
Gus Richard: Oh go ahead sorry.
Gus Richard: Okay. Thanks, Yeah, I would add that in addition to what you need to set an overall we are extremely encouraged with the.
Gus Richard: The royalty girlfriend Devonian achievement that we have seen in 2020 for literally a close all of our product lines and market and we have that we expect a significant growth also continued in 2025 to close our Wi Fi Bluetooth.
Gus Richard: Mobile so in Iot and even potentially in five G van.
Gus Richard: So all in all we see that it's really positive for us moving forward with that in mind.
Gus Richard: Generally speaking, we see the first half so called slower than the second half and the really strong acceleration in the second half.
Gus Richard: Got it and then just a quick question on on AI.
Gus Richard: The the models seem to be bifurcated between large language models and recently language models or train of thought and it sounds like you end up raising miles need more compute more memory you use the edge is going to be dominated by LMS War.
Gus Richard: Is there an opportunity for the reasoning models sort of how do you think about the market as it evolves and you know are you positioned to capture both or just one just not matter.
Gus Richard: Yeah.
Gus Richard: Yeah. So first of all in market. So how much fixation, that's where you'll see that there's multiple tiers of technologies kicked it but it is only a detrimental the technologies. So we will see that vary.
Gus Richard: The low tiers simple simple models, all the way to somewhat more sophisticated and a land that still can be efficient and cost power and size wise to be able to be run on the edge from our perspective of course, our strategy is to be able to deliver the complete portfolio.
Gus Richard: Yeah, Hi, accelerators of N P use that can support all the way from the hundreds of so called G. Ops operation that typically goes with the low meet your M to use all the way to the high end hundreds of tops up requirements or the hedge for more sophisticated. It's we'll see that you can see in the mobile T C L.
Speaker Change: The monkey data systems and somewhat so we definitely see that fabrication kind of happening on the edge and with that our technology was part of it was appointed.
Speaker Change: And I guess just about smoking.
Speaker Change: Yep.
Speaker Change: Thanks.
Speaker Change: Thank you and as a reminder, if you'd like to ask a question. Please press Star then one.
Speaker Change: Question comes from Chris <unk> with Barclays. Please go ahead.
Chris: Yeah, Hi, Thanks for taking my questions and congratulations on the strong quarter.
Chris: I wanted to ask about any of the new licensing deals.
Chris: Whether they might also.
Chris: <unk> include some of the consternation that eastern Quebec.
Chris: Last quarter and this quarter that was.
Kind of just eat.
Chris: The gross margin a little bit I'm, just wondering going forward.
Chris: You mentioned that due to seasonality of the gross margin in the next quarter would be I don't know.
Chris: But.
Chris: Are we going to see any more of that customization come in with new licensing deals or do you have any visibility on that.
Chris: Yeah, Great question. Thanks for that so the answer for this quarter is no. We don't have any customization and the roll off the shelves.
Chris: The technologies that we already have.
Chris: To offer and deliver to our customers immediately.
Chris: Leftovers from last year's deal that they very thorough and ship.
Chris: Mobile is space modem type is going to continue a few quarters into 2025 and started new deals from Q4, but it's still the deals from Q3 that we saw and started to pick up a little bit now in Q4, but the most of the work will happen now.
Chris: In 2025, and those are the leftovers and well just a notch lower.
Chris: Gross margin also for Q1, because the royalties are usually the lowest quarter of royalties just because of the seasonality.
Chris: That will change over the year.
Chris: Got it thanks, and just regarding the new CRO.
Chris: <unk> did you say earlier that that every cubic views on the quarter.
Chris: And in the quarter, we had one day of Newport, and I know in one of our DSP ballpoint application.
Chris: Oh, Okay. Thank you that's.
Chris: That's clear.
Chris: For example.
Chris: Thank you.
Speaker Change: Thank you and our next question is a follow on from Kevin Cassidy Rosenblatt Securities. Please go ahead.
Kevin Cassidy: Oh, I'm, sorry, I didn't mean to ask for a follow up sorry.
Speaker Change: No problem at all.
Speaker Change: This concludes the question and answer session I'd like to turn the call.
Speaker Change: Back over to the mirror produced for closing remarks.
Speaker Change: Thank you on behalf of Zebra team and thank you for joining US today, we are proud to have delivered strong year over year growth in our licensing and royalty businesses capping off a successful year with a compelling roadmap of innovative IP enabled edge devices to connect sense any further data we have.
Speaker Change: Confidence in our ability to drive long term shareholder value in the smart edge era.
Speaker Change: We continue into 2025, I wish you and your families a happy and prosperous year.
Speaker Change: I look forward to connecting with many of you at upcoming industry events and conferences throughout the rest of the year reach out and I will hand over to you to wrap it up.
Amir: Thank you Amir.
Amir: Thank you everybody as a reminder, the prepared remarks for this conference call are filed as an exhibit to the current reports on form 8-K and accessible through the investors section of our website.
Amir: With regards to upcoming events, we will be participating in the following conferences mobile World Congress 2025 from March 3rd to 6th in Barcelona, Spain Loop capital Sixth annual Investor Conference March 11th in New York.
Amir: The 37th annual Roth Conference March 17, and 18 in Dana point, California.
Amir: Further information on these events on all events, we will be participating in can be found on the investors section of our website. Thank you and goodbye.
Speaker Change: Thank you. This is also this conference call.
Speaker Change: Thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.
Speaker Change: [music].
Speaker Change: Yeah.
Speaker Change: Yeah.