CEVA INC Q1 FY2025 earnings call

• Delivered solid progress in licensing business, reinforcing long-term growth strategy. • Royalty revenue fell short due to soft low-cost smartphone shipments and slower industrial customer product ramp, but cost controls mitigated impact. • Design wins strengthened partnerships with key connectivity customers and expanded footprint with new customers in sensing and edge AI IPs. • Connectivity: Secured strategic agreements with key Bluetooth and Wi-Fi customers, including a high-volume customer selecting Wi-Fi 7 IP for next-gen products. • Sensing: Secured deal for RealSpace spatial audio software integrated into professional headsets. • Inferencing: Signed deal for NeuPro-M Edge AI NPU with Nextchip for next-gen ADAS solutions, leveraging support for vision transformers and multi-stream processing.

Total revenue for the quarter was $24.2 million, up 10% year-over-year. Licensing revenue was $15 million, accounting for 62% of total revenue, and royalty revenue was $9.2 million, making up 38% of total revenue. Shipped units by CEVA licensees during the first quarter of 2025 were 420 million units, up 13% from the first quarter of 2024. Wi-Fi royalties grew 183% year-over-year due to a strong contribution from Wi-Fi 6 shipments, which carry a higher average selling price (ASP) than older Wi-Fi standards.

• Lowered 2025 revenue guidance from high-single digits range to low-single digits range for growth over 2024 annual revenues. • Lowered overall expense levels, with non-GAAP operating income, margins, net income, and EPS expected to be double-digit percentage increase relative to 2024 but at a lower percentage than earlier guidance. • Second quarter 2025 revenue forecasted to be $23.7 million to $27.7 million, with margin similar to first quarter.

• Soft low-cost smartphone shipments impacted royalty revenue. • Industrial customer had a slower product ramp-up than prior year. • Macro-economic uncertainties and tariffs posing indirect impact on consumer demand, affecting revenue outlook.

Q: Congratulations on the AI NPU ADAS win, but can you say whether was this just a win with the tier one supplier or does the tier one supplier have a program at an automotive OEM that's secured?

A: This is a design win with a tier one supplier that has secured OEM customers, and it will be part of next-generation platforms for automotive.

Q: Just on the softness you saw in the kind of low end of the smartphone market, was that kind of anything tariff related in your view? Was it kind of customer product transition? Is that just kind of expectation there just a one quarter impact? Do you expect that to recover?

A: Seasonality caused slower start in Q1, but customers are expected to ramp sequentially with volume increasing through the year, and no direct tariff impact on this customer.

Q: Investors got into a bit of a panic we'll say about DeepSeek and this other low cost and say smaller LLMs that are coming into the market. Can you say how that's changing your demand for your NPU IP?

A: Transition from cloud-based AI to edge AI is great for us, as models like DeepSeek are enabling more optimized LLMs for edge devices, driving demand for NPU IP in smartphones, PCs, automotive systems, etc.