CEVA, Inc. Q2 FY2025 earnings call

• Strong licensing execution across Connect, Sense, and Infer with 13 license agreements including 5 first-time and 4 OEM customers.
• AI business entered broad adoption phase for Edge AI NPUs, securing 4 strategic NPU customer agreements.
• In automotive, secured 2 strategic agreements: one with Qualcomm post-Autotalks acquisition, and another for a U.S. customer's 4D radar platform.
• Over 20 billion CEVA power devices shipped, positioning CEVA as a foundational technology leader in mobile and IoT areas.
• Royalty business saw sequential rebound driven by increased shipments from consumer and smartphone customers.

Revenue for the second quarter was $25.7 million. Licensing and related revenue totaled $15 million (59% of total revenue), a 13% year-over-year decline. Royalty revenue was $10.7 million (41% of total revenue), with a 16% sequential increase but 5% year-over-year decrease. Shipped units by CEVA's licensees in Q2 2025 were 488 million units. Breakdown: 55 million units (11%) for mobile handset modems, 409 million units for consumer IoT (up 16% from Q2 2024), 24 million units for industrial IoT (down 16% from Q2 2024), Bluetooth shipments 254 million units (down 5% from Q2 2024), cellular IoT shipments 66 million units (up 66% year-over-year), Wi-Fi shipments 62 million units (up 80% from Q2 2024) with Wi-Fi 6 shipments at record high (up 113% year-over-year).

• Revenue guidance maintained; licensing pipeline and Edge AI prospects look healthy.
• Third quarter revenue expected to be between $26 million to $30 million.
• Gross margin expected to be 1% higher than Q2 on GAAP basis (87%) and 88% on non-GAAP basis.
• GAAP operating expenses expected in range of $26 million to $27 million for Q3.
• Non-GAAP operating expenses expected in range of $21 million to $22 million for Q3.
• Net interest income expected to be approximately $1.3 million.
• Taxes expected to be approximately $1.8 million for Q3.
• Share count for Q3 expected to be 25.8 million shares.

Today's discussion contains forward-looking statements that involve risks and uncertainties as well as assumptions that if materialize or prove incorrect, could cause results to differ materially. Forward-looking statements include those regarding strategy, growth opportunities, market positioning, trends, demand for technologies, revenues, financial goals, and guidance. CEVA assumes no obligation to update forward-looking statements.

Q: Congratulations on the great results. As you get an increasing of your licensing in NPUs, would this suggest it's a higher value IC. So would we expect in the future royalty revenues would have higher leverage or see an acceleration?

A: Yaniv Arieli states that NPUs have better economics with higher complexity technology, expecting royalty to have meaningful increase per unit as devices deploy.

Q: And maybe just as the timing for that, I guess, is the time from licensing to royalty longer with this more complex design? And also because the AI market is moving so fast, would we expect that the tail for the royalty, meaning the product life cycle, is that going to shorten compared to your past, especially wireless customers?

A: Amir Panush says typically time between licensing and royalty is 18-24 months; in consumer it can be shorter, and with AI moving quickly, royalty may take similar or slightly faster time, tail depends on end market.

Q: Congratulations on reaching 20 billion units. I'd be curious what the number was when Yaniv joined the company. The royalty stream being stronger in the fourth -- second half, fourth quarter, I presume the flagship smartphone customers is a key part of that. I'm wondering if that number or that contribution would be going up in '26 as the flagship customer continues to mix in its in-house modem? Or do you have any visibility there?

A: Amir Panush says no guidance for '26 yet, but expects technology penetration to ramp up; Yaniv Arieli adds Q4 historically strongest for high-volume, low-cost smartphones.

Q: Congratulations on the strong results. I was wondering if you could talk a bit about the pipeline. You mentioned last quarter that you had several new products coming to the market. Are they already working? And do you have anything else coming new looking toward the end of the year?

A: Yaniv Arieli says AI is pivotal, with new products mid to end of last year, seeing traction, and continuing to invest in new features/technologies.

Q: I want to ask about Bluetooth. That part has been growing pretty consistently year-over-year in the past few quarters. What contributed to this quarter's decline on a year-over-year basis? Anything on customer or market dynamics worth pointing out?

A: Amir Panush says no specific reason this quarter, but expects second half growth; Yaniv Arieli adds it's about mix of customers, Q1/Q2 tend to be slower, and Amir Panush mentions top customers doing well and expecting sequential growth in second half.