CEVA, Inc.

Good day and welcome to the SEVA Inc. Third Quarter 2023 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 telephone keypad. To withdraw your question, please press star then two. Please note today's event is being recorded. I would now like to turn the conference over to Richard Kingston, Vice President, Market Intelligence, Investor and Public Relations. Please go ahead.

Thank you, Rocco. Good morning, everyone, and welcome to SEVA's third quarter 2023 earnings conference call. Joining me today on the call are Amir Panoush, SEVA CEO, and Yaniv Ariyeli, SEVA CFO. 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 SEVA to differ materially from those expressed or implied by such forward-looking statements and assumptions. Forward-looking statements include statements regarding the benefits and future financial impacts of the divestment of the intrinsic business and related refocusing our core strengths of IP development and licensing, market trends and dynamics, our market position, strategy and growth drivers, including with respect to Wi-Fi 7, demand for and benefits of our technologies, plans with respect to SEVA's share repurchase program, and expectations and financial guidance regarding future performance. SEVA assumes no obligation to update any forward-looking statements or information which speak as of their respective dates. In addition, following the divestment of Intrinsic's business to Cadence, financial results from Intrinsic's were transitioned to discontinued operations 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 at investors.ceva-dsp.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. Amir?

Thank you, Richard. Welcome, everyone, and thank you for joining us today. Before I begin, I would like to address the situation in Israel following the horrifying attacks that took place a month ago. This has been an extremely difficult and heartbreaking time for all of us. and I would like to thank the many of you who have reached out to us for your support. Our priority at this time has been for the safety and well-being of our employees and their families, and we are doing everything we can do to ensure we provide them with the support they need. In the midst of these adversities, our operation in Israel remains largely unaffected, and we continue to drive our business and support our customers globally. I want to thank our employees in Israel and abroad for all their efforts during this difficult time. Turning our attention to the business, since being appointed CEO of SIVA at the beginning of the year, I have emphasized our need to focus our efforts on our key IP pillars, where we have built strong leadership with differentiated offerings and that are best suited to drive scale and synergies across our technologies globally. In the quarter, we took an important step in this strategy with our decision to strategically exit the U.S. aerospace and defense design services industry and divest the intrinsics business. When we acquired the intrinsics business in 2021, our thesis was that it would help increase our presence in the U.S. aerospace and defense industry and expand our offering to co-create IP SOC designs leveraging the intrinsic team. However, what became clear to me after joining is that the A&D industry doesn't offer product volumes that align with the IP royalty business model. And while the Intrinsic team has a legacy in the US aerospace and defense design service capabilities, these were not applicable to our global customer base. The sale of Intrinsic to Cadence closed on October 2nd. For reference, in the first three quarters of 2023, Intrinsic contributed just shy of 10% of overall combined revenues, lower than our internal plan and with lower margins and lack of profitability compared to our core business. We expected the investments of Intrinsic to be accretive for us from day one and return us to the 90% gross margins moving forward. Moreover, these investments will allow us to drive stronger focus on our key strengths namely wireless communications, edge AI, and sensing software IP. Yaniv will elaborate on the financial impacts of the divestment in his section shortly. Deposits from the cells will serve to help us to invest in our future growth, reinforce our leadership position as the world's number one supplier of wireless communication IPs. and pursue the compelling opportunity we see in Edge AI for our DSP and NPU platforms and sensing software IPs. I want to emphasize also that we will continue to offer system design support to customers globally that wish to customize our IPs for their projects as we still see strong demand for chip design expertise from our OEM customers in particular. But we will not focus on a service-only type business model. Turning to our earnings, we deliver solid results with recovery in our IP licensing business, and if not, our deal pipeline is the strongest it has been this year. In royalties, we are encouraged by the second sequential quarter of royalty growth, shipping in half a billion SIVA power devices. This robust level of SIVA power achievement is very encouraging. Its indicator is the strength of our customer base in winning business and taking advantage of the consumer demand recovery during the quarter. Moving on to our licensing and royalty business performance in the quarter. We signed 13 new licensing deals in the third quarter with exceptional demand and contribution from our wireless communications IP portfolio, where our leadership position is unrivaled in the industry. Recently, we reached the important milestone of passing $100 million in licensing revenues for our Bluetooth portfolio since it became a mature product. We added another nine licensing agreements for our Bluetooth IP this quarter alone. Three of these customers also licensed our Wi-Fi IPs to develop wireless combo chips. One of them licensed our new Wi-Fi 7 IP for AccessPoint, which carries a substantial ASP app fleet over the current generation Wi-Fi 6 IP, both for licensing and royalty. Wi-Fi 7 possesses a significant opportunity for us, with ABI research focusing and device shipments of Wi-Fi 7 chipsets to grow at a CAGR of 75% from 2023 to 2028, and to more than 1.5 billion units annually. We have close to 40 Wi-Fi 6 licensing to date We are the de facto IP vendor for Wi-Fi in the industry. Each generation of Wi-Fi becomes even more complex for chip designers. And our ability to have leading edge Wi-Fi IP available in the same timeframe as the Wi-Fi standard is ratified means that we can enable our customers to get to market rapidly with lower risk and more cost effectively. When you add in the fact that we can also provide the latest generation Bluetooth IP that is required in almost every use case today, not to mention our UWB and cellular IoT IPs, our value proposition around wireless communication is exceptional. There is only a handful of companies in the world today that have a leading-edge wireless portfolio as comprehensive as ours, and we are the only IP company amongst the leaders. We are investing to expand our leadership and ensure our customers always receive the best-in-class, latest standards IP to integrate connectivity into their chip designs. We expect 2024 Wi-Fi licensing to be driven by Wi-Fi 7 demand, while Wi-Fi 6 royalties will experience meaningful growth in tandem. We will provide more color around our Wi-Fi 6 and Wi-Fi 7 status and opportunities on our upcoming investor day scheduled for December 6th in New York City. The other two Wi-Fi combo deals signed in the quarter were for Wi-Fi 6 for smart edge devices. One was with a leading platform OEM in the electronic maker community whose devices are widely used in education and prototyping who is expanding his offering by integrating Wi-Fi 6 and Bluetooth. And the second deal was with a major designer and manufacturer of embedded systems. Other notable deals concluded in the quarter included new agreements for our leading edge Bluetooth IP with a global OEM leader in hearing care solutions, and with a leading player for hearables and wearables intelligent chips, and a deal for our DSP targeting the high-growth satellite communications market. Now on the royalties. We reported the second highest volume of civil power device shipments for any quarter in the company history, driven by recovery in consumer demand. As evidenced from the strength of our wireless communications licensing business in the past few years, wireless chips continue to lead the way in terms of device shipments with Bluetooth chips in the quarter surpassing 300 million units and cellular IoT shipments at an all-time high of more than 35 million units. An area of softness in the quarter was wireless infrastructure, where our main customers for 5G RAN reported weaker than anticipated 5G networks builds. For our sensing and AI technologies, shipments of TVs, PCs, and smart edge devices grew sequentially, including good traction for our audio technologies. To conclude, our business performed solidly in the third quarter, and we are encouraged by the healthy licensing pipeline that we are building for this quarter and beyond. In royalties, the half a billion devices shipped in the quarter powered by our IP reflects the ability of our strong customer base to win business and take advantage of the consumer demand recovery. With the sale of Intrinsics, we have taken an important step which will allow us to fully focus on our core strengths of IP development and licensing, which is where we see the greatest opportunities for growth and value creation for our investors. In addition, reinforcing shareholder value, the Board of Directors decided to increase our existing 10b-18 repurchase program by an additional 700,000 shares. Finally, we recently established a corporate strategy function at SIVA and appointed Iri Tranchinsky as our chief strategy officer. Iri is a result-driven semiconductor and technology executive, and his experience and knowledge gained from more than 20 years in the semiconductor industry will be instrumental in defining our future strategy and help drive long-term growth. I look forward to seeing many of you at our Investor Day in New York on December 6th. where we will plan to share our strategy and vision for SEVA and outline the growth drivers and opportunities in the years ahead. Now, let me turn over the call to Yaniv, who will review our third quarter financial results and provide fourth quarter and 2024 guidance.