CEVA Inc (CEVA) 2025 Q3 法說會逐字稿

Good day, and welcome to the CEVA third-quarter 2025 earnings conference call. (Operator Instructions) 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. Please go ahead, sir.

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.

Before handing over to Amir, I would like to remind everyone that today's discussion contains forward-looking statements that involve risks and uncertainties and 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.

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, 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. 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. A reconciliation of non-GAAP financial measures is included in the earnings release we issued this morning and in the SEC filings section of our Investor Relations website at investors.ceva.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, and good morning, everyone. We are pleased to report a third quarter that exceeded our expectations on both revenue and non-GAAP EPS, with revenue of $28.4 million and non-GAAP EPS of $0.11. In licensing, we secured several strategic agreements that reinforce our market-leading position in wireless connectivity and accelerate our expansion in AI. This quarter was marked by strong execution across our core pillars; connect, sense and (inaudible) and highlights the breadth and strength of our IP solution portfolio.

The most significantly in this quarter was in we are 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, adopted our full NeuPro NPU portfolio for its future road map. This win is a strong proof point of a broad industry trend, major MCUs and semiconductor vendors are embedding AI capabilities across their product lines, bringing more on-device intelligence or performance, user experience, privacy and costs.

Selecting CEVA gives Microchip a complete portfolio of AJI inference solutions for ultra low power inference for MCUs to high-performance AI in advanced systems, all under a unified software stack. This flexibility allows them to standardize AI deployments across industrial, automotive, consumer, communications and compute market without compromising on power or costs. Let me take a moment to talk about the role of NPUs in the boiler AI ecosystem. At the end of the day, an NPU is optimized compute engine for AI inference, just as CPUs orchestrate system control and GPUs accelerate graphics. Companies rarely reinvent CPUs or GPUs, they license, proven process of IP and focus on system integration and software differentiation.

We believe MPUs will follow the same path, licensing, a proven and scalable NPC texture delivers the performance and scalability customer needs while bring resources to focus on optimized model and application-specific experiences. CEVA is uniquely positioned to lead this transition. We have a full-range NPO portfolio, a unified software framework and tools and a strong partner ecosystem. This enables customers to focus on differentiated model and experiences while we provide the scalable proven technology foundation. Our recent NeuPro engagement with a leading MCU vendor is a powerful validation of this approach.

Beyond the NeuPro 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 and any (inaudible) voice contextual awareness in connected devices. Second, a high-profile automotive customer expanded its use of CEVA AI DSPs and accelerators for (inaudible) compute platforms now entering production. And new engagements 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 a third of the licensing revenue in both the second and third quarters.

The first time AI has had such a significant impact on our licensing mix. In addition, this AI agreement typically carry a higher royalty potential than our traditional licensing business. further enhancing long-term value.

Moving now on to wireless connectivity, which represents a core pillar of our growth strategy and a powerful hotel engine into AI. We had another impactful quarter. We delivered wins in both established standards like WiFi 6 and Bluetooth 5 and next-generation standard. This quarter, a long-term customer licensed our latest WiFi 7 and Bluetooth high data throughput IP for upcoming road maps. These standards offer higher throughput, lower latency and improved power efficiency, which are essential for advanced audio, wearables, robotics and border physical AI use cases.

These transitions are not one-off wins. They cement multiyear royalty ramps as customers build on power generation and continue forward with CEVA technologies as core, enablers of connectivity and AI. By consistently delivering end-to-end multi-standard connectivity solution, together with advanced sensing an AI IP, we provide a unified foundation for intelligent connected devices. This positions us as the de facto partner for next-generation connectivity and strengthen our leadership as AI and sensing adoption expense across markets.

Now turning into royalties. We delivered street 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 wire. Our 5G ran infrastructure customers also had a strong quarter with revenues up 91% compared to last year. In automotive, two large semiconductor customers continue to ramp up volume shipments for ADAS solution 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, driven by recovering low-end smartphone segment. At the high end, our U.S. OEM customers launched a second smartphone model, featuring its in-house 5G model with CEVA technology. 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 berth and scalability of our IP across Sense, Connect and infer.

These wins strengthen our pipeline, increased visibility into future revenues and reinforce CVA wall as a foundational technology provider for intelligence, connected and increasingly physical AI devices.

Now I will hand the call over to Yaniv for the financials.

Good morning. Thank you, Amir. I will now start by reviewing the results of our operations for the third quarter of 2025. Revenue for the third quarter was $28.4 million up 4% compared to $27.2 million for the same quarter last year and up 11% sequentially. The revenue going down is as follows.

Licensing and related revenue totaled $16 million, representing 56% of our total revenue for the quarter. 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 '24. As Amir noted, this growth preliminary represents strong traction in AI following multiple significant design win 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.

Tesco to the importance of our NeuPro 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, a 16% sequential increase and a 6% increase year-over-year. Consumer IoT is a key driver with posted 9% year-over-year growth supported by record shipments in cellular IoT and WiFi.

Gross margin came slightly better than our guidance, 88% on GAAP basis and 89% on non-GAAP basis, compared to 85% and 87%, respectively, a year ago. Total operating expenses for the third quarter were $27.1 million at the higher end of our guidance. Our total non-GAAP operating expense for the fourth the third quarter, excluding equity-based compensation expenses, amortization of intangibles and related acquisition costs for $22.1 million, at the higher end of our guidance as well, mainly due to higher employee benefit provisions associated with better financial results.

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, also higher than 80% and $2.1 million recorded in the third quarter of last year. GAAP operating loss in the third quarter was $2.1 million as compared to GAAP operating loss of $2.6 million for the same period in 2024. GAAP and non-GAAP taxes were $1.7 million, just below our guidance. GAAP and not the admitted loss for the third quarter of 2025 was $2.5 million, (inaudible) loss per share was $0.10 as compared to a net loss of $1.3 million and then loss per share of $0.06 for the same period last year. Our net GAAP income -- non-GAAP net income and diluted income per share for the third quarter of '25 was $2.7 million and 11%, respectively, representing $0.01 over street estimates.

In the same period last year, net income was $3.4 million and diluted income per share was $0.14. With respect to other related data, shifts units by CEVA sbe licensees during the third quarter of 2025 and 559 million units. -- up 19% sequentially and 11% up year-over-year. Of these, 69 million units or 12% were mobile handset volumes. -- a record 10 million units were for IoT, up 13% year-over-year with consumer IoT reaching 500 million units and industrial IoT totaling 10 million units.

Net shipments were 303 million units in the quarter, down 1% from $306 million in the third quarter of 2024.

Cellular (inaudible) were all-time record high with 69 million units, up 41% year-over-year. While price shipments also reached an all-time high of 82 million units, up 73% from 47 million units a year ago. WiFi 6 shipments also set a new record, up 194% year-over-year as customers continue to ramp up deco. Our wireless IP portfolio, which includes Bluetooth, WiFi, UWB and cellular IoT achieved its strongest royalty revenue quarter on record. These shipments and loyalty trends reinforce the adoption of next-generation connectivity standards. We serve the foundation for AI embedded devices and position CEVA for multiyear royalty growth.

For the balance sheet items. As of September 30, 2025, sales cash, cash equivalent balances, marketable securities and bank deposits were approximately $162 million. In the third quarter, we purchased about 40,000 shares for approximately $1 million. all of 2025 repurchased approximately 40,000 shares for approximately $7.2 million. And today, around 684,000 shares are available for repurchase under the repurchase program, which was extended in November of last year.

Our DSOs for the third quarter of this year, 47 days, a bit higher than the last quarter, but in line to our norm in prior quarters.

During the third quarter, we used $5.9 million of cash flotation activity. Ongoing depreciation and amortization was $1.2 million in the purchase of fixed assets was $0.4 million. At the end of the third quarter, our headcount was 434 people improved $35 million our engineers.

Now for the guidance. Our licensing business remains strong. supported by robust pipeline and deal flow across our three core billions, connect, send and insure. We delivered the sixth consecutive quarters with licensing revenue above $15 million, underscoring consistent execution. Royalty revenue typically strengthen in any given second half and third quarter reflects this trend with 16% sequential growth and 6% year-over-year.

Looking ahead, we expect continued seasonal momentum in the fourth quarter driven by share gains and a U.S. OEM smart for customers using our technology and its in-house 5G modem and by strong ramps, WiFi and cellular IoT. We're maintaining our full year revenue guidance as previously discussed and aligned with Street estimates for the year. As for the fourth quarter, total revenue is expected to be in the range of $29 million to $33 million. Gross margin is expected to remain high and at the same level of Q3, approximately $0.88 of GAAP basis and 89% on non-GAAP basis, exclude aggregate of $0.2 million for equity-based compensation expenses and $0.1 million of amortization of acquired intangibles.

OpEx is expected to be higher than third quarter in the range of $27 million to $28 million. Of our anticipated total operating expenses for the third quarter $4.7 million is expected to be attributable to equity-based compensation expenses, $0.2 million for amortization of acquired intangibles and $0.1 million for expenses related to a business acquisition. Non-GAAP OpEx is also be expected to be higher than the third quarter in the range of $22 million to $23 million. Net interest income is expected to be approximately $1.5 million. Taxes for the third quarter are expected to be approximately $1.8 billion and the share count for the third quarter is expected to be approximately 25.8 million shares.

Rocco, we can now open the Q&A session, please.

(Operator Instructions) Chris Reimer, Barclays.

Congratulations on the strong quarter. Looking at shipments, you mentioned the strong momentum in the smartphone customer that was driving the royalties. I was wondering if you could describe any of the other segments and how they're doing, if there might be any other ramp-ups coming to market in the near term?

Yes, Chris, this is Amir. Thanks for the question. Definitely, we see growth momentum in terms of our royalty book in terms of seasonality and overall coming from basically a multiple different opportunities. One, of course, is the mobile that we mentioned with the large U.S. OEM.

The other thing, from a seasonality point of view in mobile, the low-tier customers, which we have in mobile, we expect them to continue basically the sequential growth as we go through the year.

The other things that we mentioned and when we see more and more that's happening is basically the WiFi shipment volume growth and the transition from WiFi (inaudible) to the more latest standard WiFi 6 which on its own also basically goes with higher ASP per unit. And with that, will drive higher royalty overall. In addition to that, we see the cell of IoT keeps growing very nicely and we had another record high this quarter, like the (inaudible) shipments. And the last year that we mentioned things related to automotive ADAS system. We have now two customers that started to ramp in volume for , and we expect that to continue to grow in Q4 and for the next few years as well.

And additionally, in (inaudible) we had a customer that was acquired by Qualcomm and this is also growing and ramping right now, and we expect that to continue to drive additional work -- so all in all, for significant WiFi growth, (inaudible), gaining more market share in mobile and doing better in automotive, all these will drive votes we move forward.

Yes, that's great color. Just touching on the Microchip partnership and -- in addition, with the other NPU deals that you're making, is there any change in the time line to development and getting products into the market? And is there any change in the types of flex? Just wondering about any color there?

Thanks, Chris. So first, we are super excited about this opportunity where Microchip decided licensed our complete portfolio of NPUs all the way from the lower power performance type of MCU needs all the way to more high-end type of influence needs in infrastructure and data centers. So this is really great opportunity to collaborate with a great company like Microchip. n

In terms of the time to market, it's similar to to the most part, other technology that we see, which particularly it's between 18 and 24 months from the time that we started design until our customers basically go to production and start to ramp up. So overall, I would say this is not different than much for many of the other design wins that we have had.

Got it. Got it. That's it for me. I'll jump back.

(Operator Instructions) Madison De Paola, Rosenblatt Securities.

This is (inaudible) calling on behalf of Kevin Cassidy. I was just wondering when can we expect to see the Microchip shipments hit CEVA's royalty revenue? And what is the time frame of the license?

Yes. It's a typical license agreement is a 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 a licensing deal. And royalty, I think Amir mentioned that we don't see the NPU or AI business line any differences or significant differences versus the other IoT and we connected the die, usually design cycle of the chip run anywhere between one to two years and then productization and ramp up. So anywhere between the two years to three years, you usually find and see the royalty stream, especially for big and a successful company, that's the norm that we have seen in recent years. So we don't think AR is any different than the other IP that we license.

Maybe one more comment I will add. This is Amir. First, in terms of the deal itself, this is a multiyear deal. So this is really to provide great access to our technology to Microchip to element that they cause all the product line, and we are very excited with that. but also definitely, AI is the markets where technology in terms of innovation and new needs coming very quickly.

So we do expect, especially in the AI domain that the cycle of innovation and speed towards innovation will drive a renewal of those deals of additional capabilities to come on a regular basis of every year or 2. So definitely, there is more opportunity to keep upsell the technology as we drive more of that development.

(Operator Instructions) Zhihua Yang, Oppenheimer.

Can you maybe go into more details on which Microchip product family or verticals will be prioritized initially? Is it industrial, automotive, any other data centers? And how do you think about the attractive of those end markets, respectively, based on when or which goes to market first?

Yes. So Martin, thanks great question. Again, to clarify, in terms of the deal itself, this is to provide full access for all the different ranges of needs of NPUs to all the different markets that Microchip have business at -- in terms of which will come first, we can't really go into the details of what our customers is planning to do, but it will definitely be on so-called the full spectrum of that range. So we do expect -- we have multiple programs where some of them are more, I would call it, the embedded entry product lines, and some of them are more towards the infrastructure and the data center type of solutions.

One more question. How do you think about the process that of getting new Pro integrated with your connectivity IP. Is there a strong interest by customers for both of those? And if so, how far along with productization and mass production?

Yes, that's a great question. First, with this specific customer, for example, yes, we have, in the past, license connectivity and very likely to continue licensing additional connectivity technology as we move forward. So we definitely see a good synergy or the ability to license both connectivity technology and NPL technology. And then as you go towards more the embedded system, that's where the integration of the two technologies makes lots of sense and provide additional time-to-market advantage, cost and power efficiency of the solution.

And those are the things that we typically really master very well and can enable our customers to compete very successfully in the marketplace. So that combination will play to our strengths as we keep moving forward in the previous quarter. We talked about several deals of NPU coming together with one and that trend will continue. So we are very, very informed with what we have seen so far, really building on the wireless connectivity leadership. And then on top of that, we are now driving very good access in terms of design wins and accessing the markets with our AI solution.

David O'Connor, BNP Paribas.

Yes, thanks so much for letting ask a question. Maybe, Amir, just firstly on -- again, sorry to go back to the Microchip deal. 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 IP that you were competing against -- was there a lot of kind of anything you can share around what that led to that? And why exactly now?

I mean, you for itself, you guys have been developing for some time. Why exactly now did the Microchip license NeuPro? And also, maybe as a follow-on, can you talk as well around the sustainability of that kind of AI looking forward. So when we look in the bike how does that look? Is there other potential microchip? Any kind of color you can share on that would be helpful.

Yes. Thanks, David. Really like three different questions. I'll try to address each of them. So first, from a competitive landscape, this is also what I mentioned in the prepared remarks related specifically to NPU.

NPU feel like we believe like other processors, whether it's a CPE or a DSP or GP -- 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 good opening and opportunity ahead of us to license NPU technology.

And the same then they apply to the customer, which we competed with other potential ice vendors rather than the mix versus pipe. And we believe, again, that's a great opportunity for us. The reason that we have won in this account, and now we're seeing the momentum, which is, honestly, it's not just now, it's for the last two quarters in bigger numbers. And for the last four quarters, we're really starting gaining the momentum. It's because we are delivering three major ingredients, but each of them is quite unique to us, and all of them is extremely unique of what we can offer.

One is now a complete portfolio of NPUs, starting again from the low end to the higher end of the spectrum for inference use cases. So again, folly. Second is combined software stack that can support all the different hardware configuration underneath and one that can quite easily get integrated by our customers into their whole software stack. So again, very after state supports all our combined portfolio. And the last piece is that within each of those different configuration, we believe that we have one of the best, if not the best, optimization in terms of the architecture and technologies with an order of the head of between power, cost, size and performance.

So again, extremely competitive offering on each ingredient on its own on top of the portfolio and then the software aspect that comes on top of it. And we believe all those three ingredients coming together provide us a very good competitive advantage in the marketplace.

The last is about the sustainability of the business. And then when we look at pipeline ahead of us, it aligns quite nicely with the momentum that we have generated in the last two quarters. So a significant portion of the pipeline comes from AR NPU product line, that, 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 fees 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. That's great color. And maybe just following on from that one for Yaniv, on the OpEx side of things. Given the kind of interest and acceleration you're seeing on the new Pro AI side of things, can you just speak to the OpEx? Is that in the base? Or can we expect maybe a step-up in optics required there to support that growth that you're seeing? Anything around the OpEx related to new pool (inaudible)?

Yes, sure, David. Two things on that. One, definitely, as you have seen for the last few years, we definitely manage very fully expenses, and we would like to drive continued momentum on the bottom line. Having said that, definitely, we see a significant opportunity ahead of us, both actually on keep expanding our wireless connectivity leadership as on the AI that now we really have the proof points and the success in the marketplace.

So when I take these two points into consideration, definitely, we look how we can keep investing and adding the capabilities to drive revenue growth. all while at the end of day stay quite disciplined on how we invest our money.

So for lab, for Q4, we gave the specific guidance. You won't see big changes in OpEx in R&D investments. Going forward, we need to do planning and discussion and probably we'll do it later or early next year about 2026 investments and how we see the opportunities and the potential ROI in this specific very, very exciting market. see that we have managed to penetrate into and something the sign some very, very interesting and lucrative deals.

Yes. And overall, David, I would just conclude, we're really excited about the momentum that we are seeing right now and the competitiveness of our technology. Again, both on AI and overall, the ones connectivity leadership with the volume keeps going up quarter-over-quarter. Great color.

And that concludes our question-and-answer session. I'd like to turn the conference back over to pause for any closing remarks. Please go ahead.

That's fine. I'll take it here. Thanks very much, Rocco. On behalf of the CEVA 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 -- 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 8-K and accessible through the Investors section of our website. With regards to upcoming conferences, we will be participating in the following conferences the 14th Annual ROTH Technology Conference, November 19 in New York, the UBS Global Technology and AI Conference, December 2 in Scottsdale, Arizona; and the Northland Growth Conference, December 16 being held virtually. Further information on these events and all events we will be participating in can be found on the Investors 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.