Q3 2025 CEVA Inc Earnings Call
Speaker #1: Good day and welcome to the CEVA INC third quarter 2025 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please send a conference specialist by pressing the star key followed by zero.
Speaker #1: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad and to withdraw your question, please press star then two.
Speaker #1: Please note today's event is being recorded. I'd now like to turn the conference over to Richard Kingston, Vice President of Market Intelligence and Investor Relations.
Speaker #1: Please go ahead, sir.
Speaker #2: Thank you, Rocco. Good morning, everyone. And welcome to CEVA's third quarter 2025 earnings conference call. Joining me today on the call are Amir Panush, Chief Executive Officer, and Yaniv Arieli, Chief Financial Officer of CEVA.
Speaker #2: Before handing over to Amir, I would like to remind everyone that today's discussion contains forward-looking statements that involve risks and uncertainties as well as assumptions that if they materialize or prove incorrect, could cause the results of CEVA to materially differ from those expressed or implied by such forward-looking statements and assumptions.
Speaker #2: Forward-looking statements include statements regarding our market position and industry trends, including with respect to embedding of AI across customer product lines and customer licensing of NPUs for AI interfacing, statements regarding demand for and benefits of our technologies, expectations regarding revenues, including higher royalty potential for AI agreements, and our financial goals and guidance regarding future performance.
Speaker #2: CEVA assumes no obligation to update any forward-looking statements or information which speak as of their respective dates. We will also be discussing certain non-GAAP financial measures which we believe provide a more meaningful analysis of our core operating results and comparison of quarterly results.
Speaker #2: A reconciliation of non-GAAP financial measures is included in the earnings release we issued this morning, and in the SEC filings of section of our investor relations website.
Speaker #2: As investors, dot CEVA hyphen IP dot com. With that said, I'd like to turn the call over to Amir, who will review our business performance for the quarter and provide some insight into our ongoing business.
Speaker #2: Amir?
Speaker #3: Thank you, Richard. And good morning, everyone. We are pleased to report a third quarter that exceeded our expectations on both revenue and non-GAAP EPS.
Speaker #3: With revenue of 28.4 million dollars and non-GAAP EPS of 11 cents. In licensing, we secured several strategic agreements that reinforce our market-leading position in wireless connectivity, and accelerate our expansion in AI.
Speaker #3: This quarter was marked by strong execution across our core pillars, connect, sense, and infer. And highlights the breadth and strength of our IP solution portfolio.
Speaker #3: The most significant win this quarter was in AI, where microchip, one of the world's leading microcontroller and connectivity providers, and whose products power billions of devices across industrial, consumer, automotive, and other end markets, adapted our full and new NPU portfolio for its future roadmap.
Speaker #3: This win is a strong proof point of a broader industry trend. Major MCUs and semiconductor vendors are embedding AI capabilities across their product lines.
Speaker #3: Bringing more on-device intelligence for performance, user experience, privacy, and cost. Selecting CEVA gives microchip a complete portfolio of edge AI inference solutions. From ultra-low power inference for MCUs to high-performance AI in advanced systems.
Speaker #3: All under a unified software stack. This flexibility allows them to standardize AI deployments across industrial, automotive, consumer, communications, and compute markets without compromising on power or cost.
Speaker #3: Let me take a moment to talk about the role of NPUs in the broader AI ecosystem. At the end of the day, an NPU is an optimized compute engine for AI inference, just as CPUs orchestrate system control and GPUs accelerate graphics.
Speaker #3: Companies rarely reinvent CPUs or GPUs. They license proven processor IP and focus on system integration and software differentiation. We believe NPUs will follow the same path; licensing a proven and scalable NPU architecture delivers the performance and scalability customers need while freeing resources to focus on software-optimized models and application-specific experiences.
Speaker #3: CEVA is uniquely positioned to lead this transition. With a full range NPU portfolio, a unified software framework, and tools, and a strong partner ecosystem.
Speaker #3: This enables customers to focus on differentiated models and experiences while we provide the scalable, proven technology foundation. Our recent Newport engagement with a leading MCU vendor is a powerful validation of this approach.
Speaker #3: Beyond the new portfolio win, we signed three AI DSP agreements that broaden our reach across consumer electronics and automotive. First, a leading global electronics brand is integrating our AI DSP into its next-generation edge SOC family for home appliances.
Speaker #3: Enabling vision, voice, and contextual awareness in connected devices. Second, a high-profile automotive customer expanded its use of CEVA AI DSPs and accelerators for centralized compute platforms now entering production.
Speaker #3: And a new engagement with an innovative ADAS chipless architecture company strengthening our position in automotive. AI processor licensing is now a very meaningful and growing part of our business, contributing roughly one-third of the licensing revenue in both the second and third quarters.
Speaker #3: The first-time AI has had such a significant impact on our licensing mix. In addition, this AI agreement typically carries a higher royalty potential than our traditional licensing business.
Speaker #3: Further enhancing long-term value. Moving now on to wireless connectivity. Which represents a core pillar of our growth strategy. And a powerful cross-sell engine into AI.
Speaker #3: We had another impactful quarter. We delivered wins in both established standards like Wi-Fi 6 and Bluetooth 5, and next-generation standards. This quarter, a long-term customer licensed our latest Wi-Fi 7 and Bluetooth high data throughput IP.
Speaker #3: For upcoming roadmaps, these standards offer higher throughput, lower latency, and improved power efficiency, which are essential for advanced audio, wearables, robotics, and broader physical AI use cases.
Speaker #3: This transitions are not one-off wins. They cement multi-year royalty ramps as customers build on prior generations. And continue forward with CEVA technologies as core.
Speaker #3: Enablers of connectivity and AI. By consistently delivering end-to-end, multi-standard connectivity solution, together with advanced sensing and AI IP, we provide a unified foundation for intelligent, connected devices.
Speaker #3: This positions us as the de facto partner for next-generation connectivity. And strengthens our leadership as AI and sensing adoption expands across markets. Now turning into royalties.
Speaker #3: We delivered solid growth across most of our markets. With royalties up 6% year over year, and 16% sequentially. Consumer IoT was a key driver, posting 9% year over year growth, supported by record shipments in cellular IoT and Wi-Fi.
Speaker #3: Our 5G WAN infrastructure customers also had a strong quarter. With revenues up 91% compared to last year. In automotive, two large semiconductor customers continued to ramp up volume shipments for ADAS solutions.
Speaker #3: Based on our AI DSP. Contributing to overall royalty growth in the quarter and beyond. Mobile royalties grew 4% year over year, and 7% sequentially.
Speaker #3: Driven by a recovering low-end smartphone segment. At the high end, our US OEM customers launched a second smartphone model featuring its in-house 5G modem with CEVA technology.
Speaker #3: And as this model expands into more markets in fourth quarter, we expect further royalty growth. In summary, this quarter's AI-led licensing momentum and continued progress in wireless connectivity highlights the breadth and scalability of our IP across sense, connect, and infer.
Speaker #3: These wins strengthen our pipeline, increase visibility into future revenue streams, and reinforce CEVA's role as a foundational technology provider for intelligent, connected, and increasingly physical AI devices.
Speaker #3: Now I'll hand it to the call over to Yaniv for the financials.
Speaker #2: Good morning. Thank you, Amir. I'll now start by reviewing the results of our operations for the third quarter of 2025. Revenue for the third quarter was $28.4 billion, up 4% compared to $27.2 million for the same quarter last year.
Speaker #2: And up 11% sequentially. The revenue breakdown is as follows: licensing and related revenue totaled $16 million, representing 56% of our total revenue for the quarter.
Speaker #2: This reflects a 3% year-over-year increase, and a 7% sequential increase. Licensing revenue for the first three quarters of '25 reached $46.1 million, a 4% increase compared to $44.3 million for the same period of 2024.
Speaker #2: As Amir noted, this growth preliminary represents strong traction in AI, following multiple significant design wins for NPUs and AI DSPs. AI processor licensing contributed roughly a third of the licensing revenue, in both the second and third quarters, demonstrating solid momentum and strategic progress.
Speaker #2: These wins encore the importance of our new pro NPU portfolio and AI DSP offerings as key growth drivers going forward. Royalty revenue for the third quarter was $12.4 million, reflecting 44% of total revenue.
Speaker #2: A 16% sequential increase and a 6% increase year over year. Consumer IoT was a key driver, posting 9% year-over-year growth, supported by a record shipments in cellular IoT and Wi-Fi.
Speaker #2: Gross margin came slightly better than our guidance, at 88% of gap basis and 89% of non-gap basis, compared to 85% and 87% respectively a year ago.
Speaker #2: Total operating expenses for the third quarter were $27.1 million, at the higher end of our guidance. Our total non-gap operating expenses for the first third quarter excluding equity-based compensation expenses and amortization of intangibles and related acquisition costs were $22.1 million, at the higher end of our guidance as well, mainly due to higher employee benefit provisions associated with better financial results.
Speaker #2: Non-GAAP operating margins and net income improved significantly over the first and second quarters of 2025, reaching 11% of revenue and $3.1 million. This is also higher than any percentage and $2.1 million recorded in the third quarter of last year.
Speaker #2: GAAP operating loss for the third quarter was $2.1 million, as compared to a GAAP operating loss of $2.6 million for the same period in 2024.
Speaker #2: Gap and non-gap taxes were $1.7 million, just below our guidance. Gap net loss for the third quarter of 2025 was $2.5 million, loss per share was $0.10, as compared to a net loss of $1.3 million, and the new loss per share of $0.06 for the same period last year.
Speaker #2: Our net gap income and non-gap net income and diluted income per share for the third quarter of 2025 was $2.7 million and 11%, respectively.
Ongoing depreciation and amortisation was 1.2 million in the purchase of fixed assets for 0.4 million.
At the end of the third quarter,
353.
Our engineers.
Now.
For the guidance.
Our licensing business remains strong.
Supported by robust Pipeline and Deals flow across our 3 core pillars connect, send and infer.
we delivered, 6 consecutive quarters with licensing, Revenue above, 15 million dollars, underscoring, consistent, execution,
Basically strengthen in any given second half.
and third quarter, reflects this this trend, the 16% sequential growth and 6% year-over-year growth
Looking ahead. We expect continued seasonal momentum in the fourth quarter.
driven by share gains at a US OEM smart for customer using our technology and its in-house 5G modem and by strong ramps in Wi-Fi and seller iot
We are maintaining our full year Revenue guidance as previously discussed and aligned with Street estimates for the year.
as for the fourth quarter,
total revenue.
1, 199 to 33 million.
Gross margin is expected to remain high and on the same level of Q3 approximately 88% of the Gap, bases, and 89%. The non-gaap basis, excluding aggregate of 0.2 million for Equity based compensation expenses and 0.1, million of the merchants of acquired intangible.
Gas office is expected to be higher than the third quarter in the range of 27 to 28 billion dollars.
Of our anticipated total operating expenses for the third quarter. 4.7 million is expected to be attributable to equity, based compensation expenses, 0 to 0.2 million, for a motivation required, intangibles and 0.1 million for expenses related to a business acquisition.
Non-gaap topics is also be expected to be higher than the Third.
In the range of 22 to 23 million.
Net, interest income is expected to be approximately 1 and a half million dollars.
Taxes for the third quarter are expected to be approximately 1.8 million dollars.
And the share count in the third quarter is expected to be approximately 25.8 million shares.
Rocco. We can now open the Q&A session, please.
Yes, sir. As a reminder, if you'd like to ask a question, please press star 1 on your telephone keypad,
If your question has already been addressed, you'd like to remove yourself from Q. Please. Press star, then 2
once again, that's starter than 1, if you have a question
Today's first question comes from Chris Reamer with Burke's. Please, go ahead.
Oh, hi. Thanks for taking my questions and congratulations on this strong quarter. Um, looking at shipments, you mentioned the strong, uh, momentum in the, uh, with the smartphone, uh, customer. Um, that was driving the royalties. I was wondering if you could describe any of any, any of the other segments um and how they're doing, if there might be any other ramp UPS uh coming to Market in the near term.
Yeah. Chris, this is air and thanks for the question. Uh, definitely. We see growth momentum in terms of our worthy both in terms of seasonality and overall coming from uh basically a multiple different opportunities. 1 of course, is the mobile that we mentioned uh with the large US OEM the other things from this seasonality point of view and mobile at the low, to your customers that we have in Mobile. We expect them to continue basically the sequential growth as we go through the year and the other things that we mentioned. And right now we see more and more that's happening is
Basically, the Wi-Fi shipment volume growth and the transition from Wi-Fi 4 to the more recent standard, Wi-Fi 6, which on its own also goes with higher ASP per unit, will drive higher royalty overall. In addition to that, we see the seller IoT continuing to perform very nicely, and we had another record high this quarter, similar to the Wi-Fi shipment growth.
Also going and ramping right now, and we expect that to continue to drive additional work with.
You so all in all a form significant Wi-Fi growth, so iot gaining more market, share in Mobile and doing better in automotive. All those, all this will drive work with you before.
Thanks. Yeah, that's great color. Um, just touching on the microchip partnership.
Um, and
in addition in with, with the other, uh, npu deals that you're making, is there any change in the timeline to development and getting products into the market? And isn't there, is there any change in the types of products?
Um, just wondering about any color there.
Sure, thanks Chris. So first, we are super excited about this opportunity, uh, where uh, microchip decided to license our complete portfolio of npos. All the way from the lower, the lower power performance, type of M, MCU needs all the way to more high-end, uh, type of inference needs in infrastructure and data centers. So this is really great opportunity to collaborate with great company, like microchip. And in terms of the time to Market, it's similar to all to the most part other technology that we see which is typically, it's between 18 and 24 months from the time that we started design until our customers basically.
Go to production and start your ramp up.
So overall, I would say this is not that different from many of the other design works that we've had.
Got it, got it. Thanks for that. Um, that's it for me. I'll jump back.
Thank you, Chris.
Thank you. And as a reminder to ask a question, please press star, then 1. Our next question comes from Madison Depp Paulo with Resin Blot Securities. Please go ahead.
Hi, this is Madison calling on behalf of Kevin Cassidy. I was just wondering when we can expect to see the microchip MPU shipments hit CA's royalty revenue. And what is the time frame of the license?
Yeah you know a typical license agreement is few years and then usually a customer come and licenses the Next Generation or different enhancements and new features that we come up and develop over the years. That's our normal life cycle of the licensing deal and royalties. I think Amir mentioned that we don't see in the NP or AI business line.
Any differences or significant differences versus the other iot and be connected devices. Usually design cycle, legit runs anywhere between 1 to 2 years and then productization and and ramped up. So anywhere between the 2 years to 3 years, you usually find
Mind and see the worldly stream, especially for a big and and successful company. That's the norm that we have seen in recent years. So we don't think AI is any different than the other IPS that we license.
Maybe 1 more comment. I will add. This is are and
First, in terms of the deal itself, this is a multi-year deal. So this is really to provide direct access to our technology to Microchip to enable that the cost of all the product line. And we are very excited about that. But also, definitely AI is a market where technology in terms of new innovation and new needs is coming very quickly. So we do expect, especially in AI domains, that the cycle of innovation and speed towards innovation will drive the renewal of those deals with additional capabilities to come on a good regular basis of every year or two. So definitely, there is more opportunity to keep upselling the technology as we drive more of that development.
Okay, thank you.
Sure, thank you.
And once again to ask a question, please press star 1. All right. Next question comes from Martin Yang in Oppenheimer. Please go ahead.
Hi. Thank you for taking my question. Uh, can you maybe go into more details on which microchip product family or verticals will be prioritized initially? Is it, uh, industrial, automotive, any other data centers? And, uh, how do you think about, uh, the attractiveness of those end markets respectively, based on when or which goes to market first?
Yes, so Martin, thanks. Great question, and...
Markets that microchip uh, uh, have business at in terms of which will come first. Uh, we can't really go into the details of what our our customers is planning to do, but it will definitely be on So-Cal, the the full spectrum of that range. So we do expect to have multiple programs, where some of them are more, I would call it the embedded MCU product line and some of them are more towards the the infrastructure and the data center type of uh, solution
Thank you, Mia. Uh, 1 more question. How do you think about the process that of, uh, getting newer Pro integrated with your connectivity? It is, is there a strong interest by customers from both of those? And if so, um, how far along with, uh, productization as and mass production?
That's a great question. Um, first with this specific customer, for example. Yeah, we have in the past licensed connectivity and very likely to continue licensing additional, uh, connectivity technology as we move forward. So, we definitely see a good Synergy of the ability to license, both connectivity, technology and and build technology and definitely as you go towards more, the embedded system, that's where the integration of the 2 Technologies. Make a lot of sense and provide additional time to Market advant.
Age course, and power efficiency of the solution. And those are the things that we typically really must have very well and can enable our customers to compete very successfully in the marketplace. And so that combination will play to our strengths as we keep moving forward in the, in the previous quarter, we talked about several deals of npu coming together with connectivity and that Trends will continue. So we are very, very encouraged with what we have seen. So far, really building on the wireless connectivity leadership. And then on top of the within now driving, very good success in terms of design wins and accessing the market with our AI solution.
Thank you. That's it for me.
Thanks Mark.
Yeah, the next question comes from David Conner at BNP Perry Barr. Please go ahead.
Yeah, great good morning and um, thanks so much for letting me ask you a question. Um, maybe are just firstly on again, sorry to go back to the microchip deal. Um, but if you could give us just a bit more color around, what the competitive landscape looks like for you to kind of secure that win, was it mainly internal? Um, IP that you will competing against? Was there a lot of kind of um, anything you can share around what does led to that and why exactly? Now um, I mean new Pro itself, um, you guys have been developing for for some time, why? Exactly, now
These um microchip uh licensed neutral and um, also maybe as a follow on, uh can you talk as well around the sustainability of that kind of AI looking for. So when you look in the pipeline, how does that look? There are other potential, big microchip, any kind of color, you can share around, that will be helpful. Thank you.
Yeah, thanks a lot, David so really like, 3 different question. I'll try to address each of them. So first, from a competitive landscape,
This is also what I mentioned in the paper remarks related specifically to npu.
And feel like we believe like other processors, whether it's a CPU or a DSP or GPU.
We believe that the majority of the companies out there are not going to build on their own or make on their own and they will go and license this the technology
So we believe there is a greater uh opening and opportunity ahead of us to license and view technology and the same and then they apply to to the to the customer which we competed with other potential IP vendors rather than the next versus by. And we believe again that that's great opportunity for us. And the reason that we have won in in this account and how why? Now we're we're seeing the momentum, which is honestly, it's not just now, it's for the last 2 quarters in bigger numbers. And for the last 4 quarters, we really starting gaining the momentum.
It's because we are delivering 3, major ingredients.
That can support all the different Hardware configuration underneath and 1 that can quite easily get integrated by our customers into their own software stack. So, again very Advanced software stack that supports all our, our combined portfolio.
And the last piece is that within each of those different configuration, we believe that we have 1 of the best, if not the best.
H optimization in terms of the architecture and Technology, we can offer.
Of the trade-off between power, cost, size, and performance. So again, an extremely competitive offering on each ingredient on its own, on top of that, the portfolio, and then the software stack that comes on top of that. We believe all those three ingredients coming together provide us a very good competitive advantage in the marketplace.
The last piece about the sustainability of the business.
And then, then when we look at,
Pipeline ahead of us. It aligns quite nicely with the momentum that we have generated in the last 2 quarters. So significant portion of the pipeline comes from AI or npu product line.
As you mentioned, we have invested in that for the last few years, and now we really see that materializing nicely. So, I cannot say that on a quarterly basis that's exactly going to be the revenue recognition. Things can vary on a quarterly basis, but it's a long-term trajectory. Our pipeline definitely supports this level of revenue and potentially even above it.
Very helpful. Thanks are, that's great color, and maybe just following on from that 1 for any on the office side of things, given the kind of, um, interest and acceleration. You're seeing on the new Pro, AI side of things. Can you just speak to the offices? Um, you know, is that in the base, or can we expect maybe a step up in Optics required there to support? Um, that growth that you're seeing anything around the Optics relates to new protocols. Thanks guys.
Yeah, sure, David and 2 things on that 1 is is you have sent for the for the last few years. Uh we definitely managed very carefully expenses and we would like to drive Continuum momentum on the bottom line. Uh, having said that definitely. We see a significant opportunity ahead of us.
Both actually on keep expanding our wireless connectivity leadership, as well as on the AI that now, we really have the proof points and the success in the marketplace.
So, when I take these 2 points into consideration, definitely, we look how we can keep investing and adding the capabilities to drive, uh, Revenue growth all while at the end of the day, stay quite disciplined of how we invest our money.
So for allow, you know, for Q4, we gave this specific guidance, you won't see big changes in in the Opex and in R&D Investments going forward, we need to do uh our planning and and and discussions. Probably will do it later in the early next year, about 2026 Investments. And how we see the the opportunities and the potential Roi in this specific very, very exciting Market. That seems that we've managed to penetrate into and and some sense that their science and very, very interesting and lucrative deals
Yeah, and overall on that David, I would just conclude we, we really excited about the momentum that we are seeing right now and the competitiveness of our technology again, both on AI and overall, the wireless connectivity leadership with the volume keeps going up quarter of a quarter.
Gray color. Thanks so much guys.
This is a question and answer session.
I'd like to turn the conference back over to are produce for any closing remarks.
Hello.
Hello. Hello. I'm here.
Hello, I'd like to turn the call over to Amir Panos. Please go ahead.
That's fine. I'll take it here.
Thanks very much, Rocco on behalf of the Sea of a team. Thank you for joining us today with AI. Now, contributing over a third of Licensing, revenue and connectivity, shipments hitting record highs. We are well positioned for sustainable growth and expanding, our role as a foundational technology, provider for intelligent connected devices.
We look forward to meeting many of you at the third during the third quarter at investor conferences.
As a reminder, the prepared remarks, for this conference call are filed as an exhibit to the current report on Form 8K and accessible through the investor section of our website.
The 14th Annual Roth Technology Conference will be held on November 19th in New York.
The UBS global technology and AI conference December 2nd in Scottsdale Arizona and the Northland growth conference. December 16th being held virtually.
Further information on these events and all events we will be participating in can be found in the investor section of our website.
Thank you and goodbye.
Thank you, that concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.