CEVA, Inc.

Good day and welcome to the SEVA Inc. Second Quarter 2021 Earnings Conference Call. All participants will be in listen-only mode. 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 one on your touch-tone phone. To withdraw your question, please press star then two. Please note, today's event is being recorded. I'd now like to turn the conference over to Richard Kingston, Vice President, Market Intelligence, Investor and Public Relations. Please go ahead, sir.

Thank you, Rocco, and good morning, everyone. Welcome to SEVA's second quarter 2021 earnings conference call. I'm joined today by Gideon Wertheiser, Chief Executive Officer, and Yaniv Ariely, Chief Financial Officer of SEVA. Gideon will cover the business aspects and highlights from the second quarter and provide general qualitative data. and he will then cover the financial results for the second quarter and also provide qualitative data for the third quarter and full year 2021. I will start with the forward-looking statements. Please note that today's discussion contains forward-looking statements that involve risks and uncertainties, as well as assumptions that if they materialize or prove incorrect, could cause the results of SEVA to differ materially from those expressed or implied by such forward-looking statements and assumptions. Forward-looking statements include statements regarding demand for and benefits of our technologies and related deal flow, including increased revenues from our Chinese wireless customer, expectations regarding market dynamics, including growth in the 4G and 5G handset space and true wireless stereo earbud space, beliefs regarding benefits and impacts of the intrinsics acquisition, and guidance and qualitative data for the third quarter and full year 2021. For information on the factors that could cause a difference in our results, please refer to our filings with the Security and Exchange Commission. These include the scope and the duration of the pandemic, the extent and length of the restrictions associated with the pandemic and the impact on customers, consumer demand, and the global economy generally, the ability of SEVA's IPs for smarter connected devices to continue to be strong growth drivers for us, our success in penetrating new markets and maintaining our market position in existing markets, the ability of new products incorporating our technology to achieve market acceptance, the speed and extent of the expansion of the 5G and IoT markets, our ability to execute more base station and IoT license agreements, the effect of intense industry competition and consolidation, global chip market trends, including supply chain issues as a result of COVID-19, and other factors, and our ability to successfully integrate intrinsics into our business. DIVA assumes no obligation to update any forward-looking statements or information which speak as of their respective dates. And with that said, I would like to now hand the call over to Gideon.

Thank you, Richard. Our second quarter results were exceptional and demonstrate the momentum in our business. Our customer play high value on our product in conjunction with their 5G and IoT roadmaps. And we are continually experiencing successful rollout of new SIVA-enabled products. Our revenue and earning came in significantly ahead of our expectation of the back of solid overall business environment, despite industry-wide challenges with respect to the semiconductor supply. Revenue in this quarter also incorporated royalty payment owed to us after we constructively resolved a disagreement on royalty rates with the customer on past shipment. Late in the quarter, we concluded the acquisition of Intrinsics, a leading chip design specialist and security IP, which expands our market reach to the large aerospace and defense space and enable us to offer compelling proposition of optimized IP solution to our customers. Total revenue for the second quarter of 2021 was an all time record high, $30.5 million, up 29% year over year. The licensing environment continues to be strong, with good diversity of IP adoptions and targeted markets. Licensing revenue came at $15.5 million, up 15% year-over-year, and included for the first time non-recurring engineering or NRE revenue from intrinsic business after we finalized the acquisition late last quarter. We signed 17 new agreements, of which six were with first-time customers. Customer target market reflects a brief design activity in the true wireless stereo or TWS earbud space. The growing adoption of Wi-Fi 6 and 5G in telecom, enterprise, and industrial market, and a range of applications for IoT. consumer and medical. In addition, we signed a SensePro2 computer vision and AI DSP license agreement with a key customer that recently won design with one of the largest China-based surveillance camera OEM, displacing Huawei HiSilicon with a SIVA-based solution. Also, at the beginning of the third quarter, we signed a comprehensive and sizable portfolio agreement with a key semiconductor player in the mobile market in China. The agreement extends our footprint and provides us with additive royalty opportunities on LTE and 5G handset treatment derived from our connectivity IPs. Based on recent reports from senior research in China, this customer managed to penetrate the top five list of smartphone chip suppliers in China in May for the first time, as its latest chips are adopted by top tier OEMs such as Honor and Realme. Wealthy revenue came in at $14.9 million in the quarter. up 48% year-over-year. Royalty unit shipments were $451 million on the back of strong demand for SIVA-powered Bluetooth Wi-Fi and cellular IoT devices. Base station 5G-run royalty grew substantially on a quarterly basis, reflecting share gains and the resumptions of capital investment in 5G networks by Chinese operators. In hindsight, our Chinese semiconductor customers continues to expand in the 4G and 5G markets as it successfully penetrates top tier Chinese OEM. This growth was offset by slightly lower than expected shipment by our tier one US base OEM, which we believe is largely attributed to supply constraints and softness in India due to the pandemic. As noted earlier, the royalty revenue for the second quarter incorporates approximately $3.3 million due to us following a resolution of a disagreement on royalty rates. Let me now provide some details on the market dynamics we are experiencing in our main market, namely TWS earbuds. TWS earbuds are expected to be the second largest category after smartphones in terms of unit volume. Its mass adoption has driven down the prices, making TWS earbuds affordable even in developing countries such as India. The technology is systematically progressing toward becoming an AI-based smart voice assistant, like smart speaker, and a health monitoring device to measure things like PPG, ECG, temperature, glucose level, and fitness. The recent executive order by President Biden to allow Americans to buy hearing aids over the counter serve to diversify and expand the use of TWS into this very large and lucrative space. Our recently announced BlueBud platform is a key enabler for the smartification and diversification of TWS usages. It offers a comprehensive integration of the most prominent common denominators in all TWS earbuds, this being wireless connectivity, audio, and sensor processing. Our Riviera Waves Bluetooth 5.2 controller and the SIVA BX1 DSP are the two widely used and reputable technologies that successfully address the inherent challenges of low power, audio performance, and cost. Furthermore, the BlueBud platform is enriched with a range of key software technologies from SIVA, among which are SenseLink, a software framework to seamlessly integrate the software and AI application of different sensors, our ClearVox and Wisport technologies for AI-based voice assistant capabilities, and our Motion Engine for a range of UI and fitness applications. BlueBuds' unique proposition puts SIVA in a position to become the de facto standard in transforming earbuds from an audio-only device to a smart wireless device, empowering advanced services such as AI-based virtual assistant and health-related features. On the intrinsic front, the integration is underway and progressing smoothly. We are getting constructive feedback from customer in the defense and industrial spaces and have already started to reach out additional customers with our combined propositions. Intrinsic chip design and IP capabilities have a pivotal role to play in the expansion of SIVA business from licensing standardized IP toward the licensing of highly integrated IP-based solutions powered by our portfolio of DSP, connectivity, security, and signal IP. In capitalizing on intrinsic technologies and expertise, SIVA is in an excellent position to move up in the value chain to address the needs of system and semiconductor companies for an optimized and differentiated chip design that take advantage of SIVA high-valued IP. This proposition in turn creates strongest ties with customers and larger revenue opportunities. So in summary, we continue to leverage on our diverse and high-value technology portfolio to deepen engagement with customers and to capture the exploding demand for smart and connected devices. We are encouraged by our penetration in the 5G handset space where we can address, in addition to basement processing, additional business vectors such as wireless connectivity and audio. The TWS space and its evolution toward smart wearable devices presents a huge market opportunity where we can capitalize on our unique excellence to combine audio and wireless connectivity. Last but not least, with the Intrinsics team on board, we are in early stage of secular growth trajectory where our enriched proposition provide us with access to new market and lucrative customers' engagement. On the supply storage, we are working hard shoulder to shoulder with our customers and suppliers to meet the outstanding demand for chips enabled by our OEP. We hope supply constraint will not last much longer. With that said, let me hand over the call to Yaniv for the financials.