CEVA, Inc.

Good day and welcome to the CEVA fourth quarter and year-end 2024 earnings conference call. All participants will be in listen-only mode. If 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 enjoy 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 and Investor in Public Relations. Please go ahead, sir.

Thank you, Rocco. Good morning, everyone, and welcome to SEVA's fourth quarter and full year 2024 earnings conference call. Joining me today on the call are Amir Panoush, Chief Executive Officer, and Yaniv Ariyeli, Chief Financial Officer of SEVA. 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 our strategy and growth opportunities, market positioning trends and dynamics including the impacts of the ai super cycle recent advances related to llm large language model efficiency and the and the shift from ai inference processing in the cloud to the edge expectations regarding demand for and benefits of our technologies and revenues from long-term strategic engagements with industry leaders our sales pipeline and backlog and our financial goals and 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 the Intrinsics business, financial results from Intrinsics were transitioned to a discontinued operation beginning in the third quarter of 2023, and all prior period financial results have been recast accordingly. We will also be discussing certain non-GAAP financial measures which we believe provide a more meaningful analysis of our core operating results and comparison of quarterly results. A reconciliation of non-GAAP financial measures is included in the earnings release we issued this morning and in the SEC filing section of our Investors Relations website at investors.ceva-ip.com. 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 the year and provide some insights into our ongoing business for 2025. Amir.

Thank you, Richard. Welcome, everyone, and thank you for joining us today. 2024 was a transformative year for SEMA, marking a year of exceptional execution with double-digit revenue growth increased profitability, and expanded market leadership for the smart edge. Our growth strategy, which we shared during our investor day at the end of 2023, positioned us to exceed our expectation for 2024 while keeping us strategically focused on our long-term goals to maximize shareholder value. Our core strategy of partnering closely with our customers to solve their most critical technology challenges to a comprehensive best-in-class portfolio of IP platforms continues to drive our growth. By enabling smart edge devices to connect, send, and infer data at the edge, we are delivering impactful solutions that drive success for both our partners and our business. In 2024, we have strengthened our leadership and influence around our key technology pillars reinforcing our dominant position in wireless connectivity while expanding our sense and inference product offerings and global customer base. Our large, highly diversified customer base spans across multiple industries and end markets, creating multiple licensing growth engines and strong royalty tagging that are further enhanced by the expansions of AI across industries and everyday life. Before reviewing the year and our key achievement, I will first provide an overview of our fourth quarter performance. For the fourth quarter, I'm pleased to report another stronger quarter with both licensing and royalties combining to deliver 21% year-on-year revenue growth and exceeding market expectations. As we highlighted in recent earning calls, our business momentum is fueled by the AI super cycle with significant investment shifting towards enabling AI inference processing at the edge. This trend perfectly intersects with our industry-leading portfolio of IPs, which enable any edge device to connect wirelessly, sense its environment via vision, sound, or motion, and perform real-time on-device inference enabling faster and more efficient decision making at the edge. We believe that recent advancements related to large language model efficiency with significantly lower training and inference costs and reduced memory requirements will make AI more accessible, efficient, and affordable, particularly at the edge. As LLMs become smaller and less resource intensive, The shift from centralized cloud processing to on-device AI will accelerate, unlocking new opportunities for real-time, edge-based intelligence. In the quarter, we signed several key strategic licensing deals. The first deal to note is with a top-tier global MCU company, which has signed a long-term architecture licensing agreement for our Wi-Fi platform. This partnership will enable our customer to offer end-to-end connectivity solutions across a wide range of IoT and industrial IoT applications. As the market for Wi-Fi connectivity continues to grow, so does the complexity of the standards and the large number of products with different connectivity flavors that NCU companies need to integrate Wi-Fi into. By standardizing on SIVA Wave Wi-Fi platform architecture, this customer will streamline their Wi-Fi efforts and focus on their core key differentiators while benefiting from our IP-to-deliver Benzing Plus connectivity solutions across their MCU portfolio, targeting multiple end markets. The second major strategic deal relates to the mobile market, where we're concluding a long-term licensing agreement with a leading US OEM to use our technology in their in-house 5G model. We anticipate that this agreement will lead to significant market share expansion of our wireless communication IP. We expect this agreement to drive a meaningful long-term loyalty stream in the years to come. These types of long-term strategic engagements with industry leaders serve as a cornerstone of our future growth. By aligning our IP portfolio and the product roadmap, we unlock more opportunities with our partners, create lasting relationships, and improve our long-term profitability. In addition to these two strategic connectivity deals, our AI products achieved key milestones this quarter, including signing important licensing agreements for our AI DSPs and Newport Nano NPUs with a first-time customer to accelerate their edge AI product roadmap and add new sensing-related features, and capabilities. Market interest and demand for our edge AI portfolio continue to accelerate, both from existing and new customers looking to solve the challenge of adding AI to their smart edge products. Our unified NPU portfolio scales from the smallest, most power-sensitive embedded use cases required in MCUs and consumer SOCs up to the multi-engine NPUs for co-pilot, ADAS, and other high-performance use cases, providing customers with a solution that addresses their specific needs. Feedback from our customers has been overwhelming quality, and we are very encouraged by the progress we are making on the Edge AI front. Other engagements in the quarter include a multi-year Bluetooth extension with an existing mobile customer, and multiple deals for our Wi-Fi and Bluetooth 6 and 7 platforms with customers in consumer and industrial end markets. We also signed a software licensing deal with an OEM for our motion engine sensor fusion software targeting mobile products and a wireless communication platform deal with a customer designing a server IoT chip. Overall, we completed 12 deals in the quarter, three of which were with first-time customers and two of which were with OEMs. Now turning to royalties for the quarter, we continued our excellent momentum, delivering our strongest royalty quarter of the year and our fifth consecutive quarter of year-over-year royalty revenue growth. We also achieved an all-time high in royalty shipments, powering 623 million units in the quarter, the first time ever we have surpassed 600 million units in a single quarter. These milestone achievements were driven by record high shipments of both our Wi-Fi and Bluetooth IPs, with Wi-Fi shipments growing 110% year-over-year and Bluetooth shipments up 41% year-over-year. Smartphone shipments were up healthy 27% year-over-year on the back of strong end markets demand for low-end 4G and 5G smartphones. And we saw a notable sequential and year-over-year increase in 5G LAN shipments from our main customers. Our audio and AI-related shipments grew 94% year-over-year as smartwatches, wearables, soundbars, and speakers are adopting our AI DSPs for more powerful chips to deliver immersive experiences for consuming music, gaming, movies, and other multimedia. Likewise, in TVs and PCs, our sensor fusion customer shipments grew sequentially and year-over-year to finish the year strong. Overall, this was our second highest quarter ever for royalty, excluding mobile, reflecting the new royalty growth cycle that we have been highlighting in recent earnings quotes. We are particularly pleased to have achieved this through strength across multiple end markets with multiple technologies and from a diverse array of customers. For the full year of 2024, we finished the year strong, delivering 10% top-line growth exceeding our expectations, reaching $106.9 million. Licensing and related revenue was $60 million, up 4% over 2023. We signed 43 licensing agreements in 2024 across our extensive IP portfolio. Eleven of those deals were with OEMs who are integrating our IPs into their end products. In terms of end markets, 21 of the deals target consumer markets, and 19 for the industrial IoT, with the remainder targeting mobile, including two of our ENCO mobile customers that signed long-term agreements in the fourth quarter. Twelve of the customers licensed multiple technologies from our portfolio, a clear indication that our strategy to offer a broad portfolio of IPs around Connect, Sense, and Infer is synergistic with addressing multiple needs of our customers. In terms of full-year royalties, we delivered strong year-over-year 18% revenue growth and shipped a record 2 billion SIVA-powered units, marking the first time in our history to reach this milestone number. Shipment strength was across the board, with numerous records achieved. To highlight a few of these, we powered a record 1.1 billion Bluetooth devices a record 179 million Wi-Fi devices, a record 170 million cellular IoT devices, 340 million smartphones, and 170 million other smart edge devices powered by our DSPs, air accelerators, and sensor fusion software. In terms of end markets, consumer IoT was 53% of annual royalties, followed by mobile at 32%, and industrial IoT at 16%. Looking ahead into 2025, we anticipate that our Wi-Fi varieties and shipment will continue to grow with a number of high volume Wi-Fi 6 customers getting into production and ramping up. Similarly, we expect continued growth for our Bluetooth and cellular IoT shipments with additional customers coming to market and strengthening our dominant position in these markets. Also, On the back of signing new long-term licensing deals with our two main mobile customers, we expect the royalty contribution for mobile to grow year over year. Now, taking a step back and looking at SEVA in terms of business achievements and milestones, there are many this year, but I would like to highlight a few. In connectivity, we solidified our position as the outstanding leader in this domain in multiple areas. In 5G Server, we completed several repeat long-term deals with our encore customers in mobile and wireless infrastructure, securing our IP and solidifying our position in the roadmap for next generations of products. We broadened our 5G customer base in the satellites and terminal markets while adding multiple new customers for 5G V2X, server IoT, and mobile broadband use cases. This enables us to service a diverse customer base across multiple 5G-related end markets with our unified platform. In the short-range connectivity, we signed significant deals for our recently introduced next-generation Bluetooth 6 and 7 and Wi-Fi 7 platforms and established long-term strategic relationships with multiple global MCU leaders who are standardizing on our connectivity platforms for key areas of the product roadmap. We also launched DivaWave Links, a new family of multi-particle wireless solutions as we look to deliver more value to our customers who increasingly need combo solutions for their designs. This combo solution allows us to secure better deal economics and improved royalties. In sensing, we made significant progress with our special IV embedded application software, reaching production enhances and earbuds with both. and winning new business with a global smartphone OEM for multiple headsets and earbud skews to be launched in 2025. Our Sensing DSP also entered production in the automotive agents markets with one of the world's leading automotive semiconductors companies towards the end of the year, and our audio sound DSP has experienced strong year-over-year growth in wearables, home audio, and wireless speakers, driven by increased demand for advanced audio pre- and post-processing. As special audio and other complex audio and voice cases continue to evolve, our solutions are playing a critical role in enabling these next-generation user experiences. In inference, we introduced Newport Nano, our new embedded AI NPU, targeted at power-constrained devices, and already signed multiple deals with lead customers looking to integrate it into their next-generation SOCs. Overall, 2024 was a pivotal year for Edge AI, with strong end market demand pushing companies to rapidly adapt AI capabilities in their end products, accelerating the refresh cycle. Edge AI is highly synergetic with our connectivity and sensing offerings, which we believe will lead to significant increased interest and 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 revenue growth per deal in the years ahead. 2024 was a landmark year for CISA. Our commitment to operational excellence and disciplined execution delivered exceptional results across many fronts. We hit major R&D milestones launched multiple innovative products like the Newport Nano AGI NPUs, all while doubling our non-gap EPS compared to 2022 and creating shareholder value. The progress we have made sets a strong foundation for an exciting 2025 and beyond. Our success is a testament to the dedication, passion, and incredible efforts of our employees worldwide, and I'm deeply grateful to each and every one of them for their contributions. As for 2025, the shift from AI inference processing in the cloud today continues to generate unprecedented demand for smart edge devices, driven by the need for lower power consumption, reduced latency, and cost savings required to make AI ubiquitous in everyday life. This shift is a pivotal growth driver for us. We are committed to maintaining our leadership in connectivity ensuring that all devices are seamlessly connected and capable of handling multiple protocols. This connectivity is complemented by our sensing DSP and software and edge AI and NPUs, all of which enable the smart edge. Not only are we leading the way with IPs aimed at democratizing AI at the edge, but all of our IPs are inherently low power. Based on our strong heritage of processors and connectivity technologies, designed for battery-powered devices. We have almost 20 billion civil power devices shipped to date, the majority of which are battery-powered. Low power is in our DNA. We continue our focus on improving data economics by delivering greater value to our customers through multi-connect protocols, air accelerators, and software enhancements. Our approach is to offer complete IP solutions rather than just individual components. ensuring that our customers receive integrated, high-value offerings that drive their success and ours. By enabling the smart edge ecosystem, we are positioning ourselves as the forefront of this technological revolution in multiple domains. I personally am incredibly excited for what's ahead for SIVA.