CEVA, Inc. Q3 FY2025 earnings call

Key Points

• Third quarter exceeded expectations with revenue $28.4 million and non-GAAP EPS $0.11.
• Strategic licensing agreements in AI: Microchip adapted CEVA's NPU portfolio, signed AI DSP agreements broadening reach in consumer electronics and automotive; AI licensing now ~one-third of licensing revenue with higher royalty potential.
• Wireless connectivity had wins in Wi-Fi 7, Bluetooth, driving multiyear royalty ramps; consistent delivery of end-to-end connectivity solutions with sensing and AI IP.
• Royalties up 6% YOY and 16% sequentially, driven by consumer IoT, mobile, Wi-Fi, cellular IoT, and automotive.

Revenue for the third quarter was $28.4 million. Licensing and related revenue totaled $16 million, representing 56% of total revenue, with AI processor licensing contributing roughly one-third of licensing revenue in the second and third quarters. Royalty revenue was $12.4 million, 44% of total revenue, up 6% year over year and 16% sequentially, driven by consumer IoT, mobile, Wi-Fi, cellular IoT, and automotive. Wireless connectivity, a core pillar, had wins in Wi-Fi 7, Bluetooth, etc., cementing multiyear royalty ramps.

Guidance

• Full-year revenue guidance maintained.
• Q4 revenue expected in range of $29 million to $33 million.
• Gross margin expected ~88% GAAP and 89% non-GAAP.
• GAAP OpEx expected $27 million to $28 million, non-GAAP OpEx $22 million to $23 million.
• Net interest income ~$1.5 million, taxes ~$1.8 million.

Risks

• Forward-looking statements involve risks and uncertainties.
• Dependence on key customers and market adoption of technologies.
• Non-GAAP financial measures used, requiring reconciliation.

Q: Describe other segments and ramp-ups A: Amir mentioned Wi-Fi growth, mobile with U.S. OEM, automotive ADAS systems with two customers ramping, V2X with a customer acquired by Qualcomm driving royalty growth Q: Microchip partnership timeline A: Time to market for Microchip partnership is typically between 8 and 24 months from design start to production Q: Microchip product prioritization A: Microchip will use CEVA's NPU portfolio for full spectrum of MPU needs, including embedded MCU and infrastructure/data center solutions Q: Neural Pro integration with connectivity A: There is synergy with customers interested in both, productization ongoing with continued integration of Neural Pro and connectivity IP Q: Microchip win competitive landscape A: CEVA's competitive advantage includes complete NPU portfolio, advanced software stack, and optimization of power/cost/performance across different use cases Q: OpEx for AI growth A: Yaniv said OpEx is managed carefully, with planning for 2026 investments to consider opportunities and potential ROI in the AI market