CEVA, Inc. (NASDAQ:CEVA) Q4 2023 Earnings Call Transcript

CEVA, Inc. (NASDAQ:CEVA) Q4 2023 Earnings Call Transcript February 14, 2024

CEVA, Inc. beats earnings expectations. Reported EPS is $0.1, expectations were $0.06. CEVA, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good day and welcome to the CEVA, Inc. Fourth Quarter and Year End 2023 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Richard Kingston, Vice President of Market Intelligence, Investor and Public Relations. Please go ahead.

Richard Kingston: Thank you. Good morning everyone and welcome to CEVA’s fourth quarter and full year 2023 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 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 CEVA to differ materially from those expressed or implied by such forward-looking statements and assumptions. These forward-looking statements include statements regarding our market positioning, strategy and growth opportunities, including expectations for expansion into new markets and use cases, as well as expectations regarding our customers’ production of products using our IP, market trends, and dynamics, demand for and benefits of our technologies, and our expectations and 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. In addition, following the divestment of Intrinsix’s business to Cadence, financial results from Intrinsix were transitioned to discontinued operations 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 filings section of our Investor Relations website. With that said, I’d like to turn the call over to Amir, who will review our business performance for the quarter, review the year, and provide some insight into our ongoing business.

Amir?

Amir Panush: Thank you, Richard and good morning everyone and thank you for joining us today. 2023 was the beginning of a transformational journey for CEVA, and I am very pleased with the progress we made in my first year with the company. Following the recent in-depth strategic review to really understand our strengths and technology leadership, we have positioned CEVA as the trusted partner for semiconductor companies and OEMs who need our IP to enable three fundamental use cases for smart edge devices; the abilities to connect, sense and infer data, more reliably and efficiently. We have realigned our business to focus our investments and R&D efforts around these use cases and on mega end markets where we see very strong growth opportunities; consumer, automotive, industrial, and infrastructure.

Even against a difficult business backdrop in 2023 that continues to affect the semiconductor industry and its end markets, we are already seeing evidence that our updated strategy is producing results. Our customer engagements are deeper, across the value chain, across our entire technology portfolio and expanding into new end markets and strategic opportunities. I’ll provide a review of the year shortly, but before that I will review the fourth quarter. For the fourth quarter, our total revenues were in line with our expectations. I am proud of how we have and continue to manage through the challenges in the markets we serve and significantly improve our profitability and earnings power through our focus on operating efficiency. In licensing, while the total licensing revenue recognized in the quarter was lower than usual, the interest in our diversified portfolio and potential new customer opportunities remains solid.

We saw good progress on a number of fronts, including a strategic license deal with a US-based MCU leader for our Wi-Fi 6 IP and a licensing deal with one of our major automotive customers to integrate our AI software compiler into their ADAS chips. In royalties, we saw a return to year-over-year growth for the first time since Q3 2022, with a rebound in mobile and across consumer IoT and industrial IoT, where we have a large and diversified customer base. Both mobile and the IoT markets produced their strongest royalty revenues of the year. Unit volumes in the quarter were up 21% from the fourth quarter 2022 level. Overall in licensing, we signed 17 deals in the quarter, 11 of which were for our IPs enabling connect use cases, where we continue to leverage our broad portfolio of long and short range wireless IPs to build our leadership position and market share in connectivity for smart edge devices.

This is evidenced by agreements spanning Bluetooth, Wi-Fi, UWB, cellular IoT, and 5G RedCap signed in the quarter, as more and more chip designs integrate connectivity as a mandatory requirement. As I mentioned a few moments ago, one of the deals was with a leading US MCU company for our Wi-Fi 6 IP. This company licensed our Wi-Fi 6 IP to augment their internal wireless connectivity development efforts and ensure they have a leading solution for their customers. This is a trend that we are seeing more and more recently, where established companies with internal R&D teams and major investments around wireless connectivity need help to advance their product roadmaps and stay competitive. CEVA is consistently at the leading edge, with the latest standards developed in the same timeframe as the market leaders.

As these technologies become more complex and the demands on the customers to consistently be in the market with the latest features, we are viewed as a trusted partner who can help these companies reach their product development goals, while reducing their risk and time-to-market. This is why we are increasingly being recognized as the de facto choice for wireless connectivity IP globally, which forms the backbone of our smart edge strategy. We also had a good quarter in licensing for our hardware and software IPs for sensing and inference, with six deals signed, highlighted by a licensing deal with one of our major automotive customers to integrate our AI software compiler into their ADAS chips. This customer had already licensed and deployed our AI engine to add high-compute performance in their automotive system on chips product family targeting ADAS and autonomous driving.

These SoCs are now in production and are expected to be deployed in mass-market vehicles by the end of 2024. The licensing deal we completed this quarter with this customer enables automotive Tier 1 suppliers and OEMs direct access to our AI engine in the SoC to deploy their proprietary AI software algorithms and allows them bring value-add functionality and differentiation to the performance of the production vehicle. This is an important milestone for our customer and for CEVA, as the automotive industry is constantly looking for open ADAS architectures as an alternative to closed, vertical solutions that don’t allow for differentiation. We anticipate that we will generate meaningful royalty revenues from automotive SoCs, with initial royalties contributing to our growth in 2024, and continuing to grow in 2025 and beyond.

Other deals in the quarter under this category include customers for our audio AI and sensor fusion AI DSPs and our voice processing software. At CEVA, when we speak about Edge AI and smart edge devices, we are not just focusing on the inference workload that most people associate with these devices. Every one of these devices needs to be connected, in order to get data off the device and connect via the internet. Every one of these devices needs to be able to sense its environment using vision, sound, and motion and generate data. Every one of these devices will increasingly need some inference capabilities to interpret and act upon this data. This is what the smart edge is and we are the only IP company capable of delivering the technology required to address all three use cases.

Turning to royalties for the quarter, we saw a strong recovery in mobile, driven by restocking demand for Android smartphones in emerging markets. In consumer IoT, and the broad Industrial IoT markets, demonstrating our diversified offering and customer base, we recorded our best quarter of the year, with notable strength for our connectivity customers. This was our third consecutive quarter of royalty growth, as we built momentum throughout the year. More significantly, this was the first quarter to surpass $12 million in royalties since Q4 2021, and serves as a strong proof point for our royalty business potential going forward. For the full year 2023, we reported total revenue of $97.4 million, 19% lower than 2022, primarily due to a return to a more normal licensing environment following a couple of years in which we were able to capitalize on a surge in design activity, driven by exceptional consumer end market demand, resulting from post-COVID spending and the shift to work-from-home.

Licensing and related revenue was $57.6 million, down 23%. We signed 53 licensing agreements across our extensive IP portfolio; 10 of those deals were with OEMs who are integrating our IP’s into their end products. In terms of end markets, 29 of the deals target consumer and 23 for industrial IoT, including seven for automotive, and one for other markets. This deal breakdown serves as another indicator of our focus on the end markets with the largest licensing base and the greatest projected growth potential. In full year royalties, despite the slow start to the year, and the soft end markets throughout 2023, royalties grew sequentially each quarter throughout the year, to reach $39.8 million, down 12% year-over-year. The decline is mainly attributable to mobile and 5G RAN-related royalties, which combined to be down 22% year-over-year.

On the positive side and in line with the strength of our connectivity products, royalty revenues related to our Bluetooth, Wi-Fi, and cellular IoT business lines combined to grow 5% year-over-year, mainly due to higher royalty rate contribution from our new Wi-Fi 6 customers. In terms of end markets, consumer IoT was 41% of royalties, followed by mobile at 36%, and the growing industrial IoT end markets at 23%. Looking ahead to 2024, we are excited by the royalty growth potential of our Wi-Fi 6 royalties, the continued momentum in our Bluetooth and cellular IoT customer base across consumer and industrial markets, and the expected initial ramp of automotive ADAS royalties in the second half of the year. Looking back on the year in terms of achievements and milestones, there are a few that I would like to elaborate on.

As I mentioned earlier, we started the year with a strategic review of the business and decided to focus all our efforts on being a pure IP player. This led to the decision to divest the Intrinsix aerospace and defense design services business. In line with this strategy, in April we acquired VisiSonics, a small spatial audio software business, which bolstered our software business and enabled us to address the high-volume headset and earbuds space with value-add software. This culminated with our first spatial audio deal with boAt, India’s number one wearables and hearables OEM and number two worldwide behind only Apple. The strategic review also led to the decision to give the company a brand refresh to better reflect our position as the trusted partner for transformative IP for the smart edge.

Collectively, these efforts have enabled us to align our investments and focus and were implemented in tandem with a stringent plan to control expenses and ensure we create operating leverage for the betterment of our shareholders. All of this culminated in our investor and analyst day in December, where we shared our vision and strategy for the company, [Technical Difficulty]

Operator: Pardon me, it seems like we’ve lost connection with our speaker. Please wait while we reconnect. Pardon me, ladies and gentlemen, we’ve reconnected with our speaker line.

Amir Panush: So, let me continue from where I think we — you stopped hearing us. In terms, of new product launches, we had multiple achievements. For connectivity, we launched our most powerful DSP architecture to date, addressing 5GAdvanced use cases for infrastructure, industrial, mobile and new use cases like 5G satellite communications, and 5G vehicle to everything, our UWB Radar platform for automotive child presence detection; and our Bluetooth solution for Electronic Shelf Labels, an emerging, high volume market. For sensing, we launched our Channel sounding Bluetooth solution, enabling high-accuracy secure positioning for automotive, industrial, and the IoT. For inference, we launched our scalable NPU AI architecture, capable of running generative AI in smart edge devices with industry-leading efficiency.

All of these product introductions demonstrate our commitment to the smart edge and our diversified IP portfolio position, and have been very well-received by our customer base. Moreover, these products will serve our licensing business in 2024, along with recent product introductions like our Wi-Fi 7 IP. Overall, looking across our corporate, product, customer, and end markets milestones in 2023, I am extremely proud of what we have achieved and am excited about what’s ahead for 2024 and beyond. None of this would have been possible without the dedication, passion, and incredible efforts of our employees worldwide, and I would like to take this opportunity to thank them. Looking ahead into 2024, and our expectations, the Semiconductor Industry Association expects the global semiconductor industry to return to healthier growth following a weak 2023.

There still remains, however, some short-term challenging conditions in the industrial and automotive end markets, which are not expected to clear until the second half of the year, and possible inventory buildup that will need be worked down in the first part of the year. Yaniv will provide quantitative guidance shortly. Finally, I want to sincerely wish you and your families a successful and peaceful 2024. I look forward to meeting many of you at conferences, tradeshows and other industry events throughout the year. Now, I will turn the call over to Yaniv for the financials.

Yaniv Arieli: Thank you, Amir. I’ll now start by reviewing the results of our operations for the fourth quarter of 2023. Revenue for the fourth quarter was $24.2 million as compared to $30.3 million for the same quarter last year. The revenue breakdown is as follows; licensing and related revenues were $11.8 million, reflecting 49% of total revenues as compared to $19.4 million in the fourth quarter of 2022. Royalty revenue was $12.3 million, reflecting 51% of total revenues, up 13% from $10.9 million for the same quarter last year. This is a return to year-over-year growth in royalties for the first time since Q3 2022. Quarterly gross margins came slightly better as expected on GAAP and in-line with non-GAAP basis. Gross margins were 91% on a GAAP basis and 92% on non-GAAP basis.

Our total operating expenses for the fourth quarter was in line with the mid-range of our guidance at $24.7 million. Total non-GAAP operating expenses for the fourth quarter, excluding equity-based compensation expenses, amortization, intangibles, and deal costs, were $20.3 million at the lower end of our guidance. GAAP operating loss for the fourth quarter was $2.8 million, down from a GAAP operating profit of $1 million in the same quarter a year ago. Our GAAP taxes were $7.2 million and non-GAAP taxes were $1.4 million. GAAP tax expenses included $1.3 million charges as a result of the completion of a tax audit for prior years, and $4.5 million tax charges, including one-time write-off of a deferred tax asset related to Section 174 of the US tax code.

GAAP net loss for the fourth of 2023 quarter was $8.1 million and diluted loss per share was $0.34 as compared to net income of $4.5 million and diluted income per share of $0.19 for the fourth quarter of 2022. Non-GAAP net income and diluted EPS for the fourth quarter of 2023 were $2.4 million and $0.10, respectively as compared to $7 million and $0.29 reported for same quarter last year. With respect to other related data. Shipped units by CEVA licensees during the fourth quarter of 2023 were 453 million units, up 21% from the fourth quarter of 2022. Of the 453 million units reported, 101 million units, or 22%, were attributed to mobile handset modems. 325 million units were for consumer IoT products, up from 286 million units in Q4 2022.

27 million units were for industrial IoT products, up from 21 million in Q4 2022. Bluetooth shipments were 244 million units in the quarter, up 11% year-over-year. Cellular IoT shipments were a quarterly record high with 45 million units, up 82% year-over-year. Wi-Fi shipments were 31 million units, down 17% year-over-year. However, Wi-Fi royalties were up 86% year-over-year, reflecting the higher per-unit royalty we get for Wi-Fi 6 shipments versus the older generation of Wi-Fi standards. As for the year, our total unit shipped were 1.6 billion units in 2023, down slightly from 1.7 billion in 2022, which estimates — which equates to approximately 50 CEVA-powered devices sold every second in 2023. Annual mobile modem shipments were down 13% year-over-year to 286 million units, reflecting the soft smartphone market in 2023, particularly in the first part of the year.

Annual consumer IoT-related shipments were 1.25 billion units, down just 4% year-over-year. Annual industrial IoT-related shipments were 84 million units, up 17% year-over-year. Cellular IoT and audio AI DSP shipments both experienced strong growth in 2023, up 64% and 56%, respectively from 2022. In terms of royalty contribution highlights, cellular IoT royalty revenues were an all-time record high, up 47% year-over-year, audio AI DSP royalty revenues were up 111% year-over-year and Wi-Fi royalty revenues were up 40% year-over-year. As for the balance sheet items. As of December 31st, 2023, CEVA’s cash, cash equivalent balances, marketable securities, and bank deposits were $166 million. In 2023, we repurchased approximately 279,000 shares for approximately $6.2 million.

And as of today, we have around 700,000 shares that are available for repurchase under the repurchase program as expanded back in November of 2023. Our DSO for the fourth quarter of last year continue to be lower than the norm at 32 days, similar to our prior quarter. During the fourth quarter, we generated $5.5 million cash from operating activities. Our ongoing depreciation and amortizations were $1 million, and purchase of fixed assets was $0.8 million. At the end of the fourth quarter, our headcount was 424 people, of whom 350 were engineers. Now, for the guidance. As we recently presented and shared in our December 2023 Analyst Day, CEVA’s long-term vision is to achieve a four-year revenue growth of 8% to 12% CAGR. This will enable and generate significant earnings power, operating leverage, and net income growth.

Amir highlighted earlier our key 2023 achievements and our new focus on pure IP play, and we are executing this plan one step at a time to address these three pillars of connect, sense, and infer. Our licensing-related revenues business will continue to expand into new markets and use cases in the industrial IoT and consumer IoT, offering connectivity platforms, AI solutions, including AI engines, NPUs, and software, audio AI, and more. On royalties, we expect our connectivity products to continue to show strength in 2024, with royalty revenues related to our Bluetooth, Wi-Fi, and cellular IoT business lines to grow. Smartphones have their seasonality trends and known headwinds. The consumer IoT and industrial IoT markets are large, diversified, and present us with a solid platform for long-term growth.

On an annual basis, our revenue is expected to grow 4% to 8% over 2023, with lower growth in the first half of the year and higher in the second. On the expense side, as we discussed, we implemented cost control measures to plan to keep our 2023 overall expense levels, including both cost of revenue and OpEx flattish, at a range of $93 million to $96 million non-GAAP. On non-GAAP — overall, non-GAAP COGS expense is expected to decrease approximately $1.5 million year-over-year and our non-GAAP OpEx is expected to increase by approximately $2 million year-over-year. Specifically for the first quarter of 2024, with typical seasonality in shipments of consumer IoT and mobile products, post the holiday season, we expect overall revenue to be 2% to 6% lower sequentially, and with a different mix of licensing and royalty revenues than from the quarter we just reported.

Gross margin is expected to be approximately 91% on a GAAP basis and 92% on a non-GAAP basis, excluding an aggregate of $0.2 million of equity-based compensation expenses and $0.1 million amortization of acquired intangibles. Our GAAP OpEx for the first quarter of 2024 is expected to be in the range of $24.5 million to $25.5 million. Of the anticipated total operating expenses for the first quarter, $4 million is expected to be attributable to equity-based compensation expenses, $0.2 million for amortization of acquired intangibles. Therefore, our non-GAAP OpEx is expected to be in the range of $20.3 million to $21.3 million. Net interest income is expected to be approximately $1.4 million, taxes for the first quarter are expected to be approximately $1.2 million, and share count for the first quarter of 2024 is expected to be 25.3 million shares.

We can open the Q&A session please. Betsy?

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Q&A Session

Operator: We will now begin the question-and-answer session. [Operator Instructions] The first question today comes from Suji Desilva with ROTH MKM. Please go ahead.

Suji Desilva: Hi Amir, hi Yaniv. Congrats on the progress here. Maybe we can talk about the guidance and — the first quarter and the full year. Curious what — you talked about the different mix, Yaniv, and the decline 2% to 6%, Curious what the license royalty implications are there? And then for the quarter and the full year, what are the expectations for mobile, maybe even for the full year versus non-mobile, it would be help understand some color there?

Yaniv Arieli: Sure. Good morning. So, overall, we’re talking about 4% to 8% annual revenue growth for 2023. We’re looking at similar start than we had in 2023 that the first half may be a bit more milder and then things will pick up. Some of the products we are in and the consumer side also have that typical seasonality, and we have seen that in the past. So, those are some of the assumptions that we have built in the model. Obviously, licensing is a lumpy type of business. When we look at it on an overall longer basis, that generates the revenues. Although in the last couple of years, we also added software solutions and capabilities, which have a limited licensing, if at all, upfront fee, but a much, much higher royalty contribution.

And the immediate effect on an annual basis, for example, our audio and AI royalties grew more than double in dollars year-over-year, but they don’t necessarily contribute to licensing. So, when we look at the full mix, we’re looking at growth in both of these segments, both licensing and royalties. On a quarterly basis, it’s harder to guess upfront and ASC 606 made our lives more difficult to know in advance how the royalty are going to look like. So, our starting point is coming with the strongest quarter in royalties in 2023 and a gradual improvement from Q1 all the way to Q4, that would probably go down due to the typical seasonality in consumer and mobile that you asked about. And with that said, licensing should be higher Q1 over Q4 for sure.

That is the plan. A lot of moving pieces, but from the product portfolio and the revenue mix, these are sort of the high pieces in the puzzle.

Amir Panush: And maybe I can add a little bit more color here, Suji. First, good morning to everyone. On top of what Yaniv said, so if we look at royalty going to 2024, there are several things that we are very encouraged by and we see as a potential growth in 2024 versus last year. One that we talk about quite a bit is our Wi-Fi penetration and the transition from Wi-Fi 4 to Wi-Fi 6 and with that higher average ASP and volume increase. The other thing that will probably come more towards the end of the year is the automotive AI, some of those products going into production. As well as I would say, overall, our customer base in the consumer and industrial IoT on average are doing quite well, and we expect that to be a good tailwind and a strong for us to go the royalty moving forward.

On the more commuted side, it’s really the situation with the whole 5G installment base. That’s a market that probably in 2024 as far as what we see today is not going to recover significantly, maybe more towards the second half and then probably more in 2025, which is the overall mix. In terms of licensing, we have several new products that will and should generate for us increased licensing in 2024. Wi-Fi 7 that we already start licensing as well as the new AI products that right now in a significant evaluation across multiple potential customers, and we expect to be able to close some of those deals in 2024.

Suji Desilva: Okay, great. And then my other question is on the auto ADAS win. Congrats on that. I just want to understand the circumstances for that. Was that a customer who had their own AI and they swapped it out for yours? What kind of tops — and you talked about seven auto wins, I’m curious if those are all ADAS AI or a variety of products?

Yaniv Arieli: Let’s start with the first. So, the first thing is an existing customer. They like in power technology, the hardware side of it a while back and build their own chip. The nice part — the interesting part for them is that the chip is programmable. The deal that we closed now was to have software capability that also their customers could add different sauces of AI use cases and program the final product to be much more flexible. So, it’s an existing customer that is going into production this year, and they added the software piece on top of the hardware solution that is ready now, and it was a very interesting and a nice achievement that they’re coming back and offering this type of solution in cars today this year. Overall — Amir, you want to talk about the overall?

Amir Panush: Yes, the other seven deals are not AI only. It’s across our product portfolio. Overall, we signed, I believe, four AI deals this quarter, three of them related, let’s call it, more to vision AI capabilities and ADAS and one related to audio AI capabilities.

Suji Desilva: Okay. Thanks guys.

Yaniv Arieli: You’re welcome.

Amir Panush: Thank you.

Operator: The next question comes from Kevin Cassidy with Rosenblatt Securities. Please go ahead.

Kevin Cassidy: Hi. Congratulations on the good quarter. Can you let us know how is the trend for licensing? Are there customer programs that are getting delayed or even being canceled? In this market are you seeing more deals or fewer deals? And what are the issues that your customers are saying?

Amir Panush: Yes, Kevin, a few things I would say. First, if we take a step back and look at 2023 overall, definitely, that was a year that started with lots of inventory corrections that our customers need to go to that so-called more pressure on the business overall. And with that, generally speaking, the customers on average, taking more time to go and launch new products and new programs in place. So, that definitely drove some of the delays in 2023. Specifically, for Q4, we are actually very encouraged with the number of deals that we signed, 17 deals in the quarter. And more specifically, we had at least one deal for each of our product technology category. So, really, across our diversified product portfolio, very good engagement with customers with a good significant number of deals.

Just the mix every quarter can change in terms of the type of deals and the size of deals. And definitely, as we go to 2024, from the first half to the second half, we expected also to see the larger or more meaningful deals also in that mix, which will drive overall with the rest of our deals at the growth between 2023 and 2024. So, overall, I would say, if we look at the different market segments, automotive and industrial are a little bit weaker in the first half, and we expect inventory correction and overall interest to go back in second half. Consumer IoT and consumer overall is holding up very nicely for us. So, that we expect it to be with the same seasonality of typically the Q1 and with that specifically more in mobile. Beyond that, we expect a good growth during the rest of the 2024.

Yaniv Arieli: The last part of Amir’s answer that was related to royalties, not necessarily to the licensing question that you had. So, you got both angle.

Kevin Cassidy: Right. Okay, great. And maybe just geographically, how is China’s licensing opportunities?

Amir Panush: Go ahead.

Yaniv Arieli: China is still an important and big geography for us, a lot of innovation and existing and repeating customers that come back for new generations of different technologies, whether it’s the Bluetooth or Wi-Fi or other connectivity solutions that we have today because I think that we are — we have a very strong portfolio around that. What was very interesting for us this quarter around that US was stronger than usual for us and a very, very strategic deal with an MCU player that we mentioned earlier in Amir’s prepared remark, and that was a positive change for our Q4 revenue mix. It wasn’t just China, but here with an interesting development in the US.

Kevin Cassidy: Great. Okay. Thank you.

Yaniv Arieli: Thank you.

Operator: The next question comes from Martin Yang with Oppenheimer. Please go ahead.

Martin Yang: Thank you for taking my question. Can you first talk about the revenue outlook broken down by consumer IoT and industrial IoT in 2024, which segment should we expect stronger relative trend comparing to your overall revenue growth outlook?

Yaniv Arieli: Great question, Martin. Thanks for that. So, let’s repeat some of the highlights that we ended up 2023. While not a simple year for us, more of a transition year. If we still look and do the analysis now at the end of the year, here is how it looks like. On the audio AI front, the royalty — let’s start with royalties, more than doubled for us. We showed growth both in units, 56%, I believe, we said and revenue was up more than 100%. Look at the cellular IoT, which is one of the top markets that we have continued to show separately from the Modem and the Bluetooth and Wi-Fi. This was the third element that we started breaking down maybe a year or so or two years ago. Units were up 64%, revenues were up 47%, almost 50% in cellular IoT.

So, that has been working well. Bluetooth, sort of, flattish year-over-year, mainly because of this slower start of 2023. So, we are flattish in revenues, which was — were about our units, which were about 1 billion units. If you recall last year, we’re very close to that, but slightly lower. And Wi-Fi continues to be one of the strongest royalty contributor in both licensing and royalties. The units were down year-over-year because it was a transition year also to Wi-Fi 6, which is a newer technology and the new generation. But because of having a new product and new customers that got in, the ASP is much, much higher. And we reached 40% higher revenues for Wi-Fi royalties in 2023. So, four very — or three very strong royalty contributors that should continue in 2024.

We don’t know the pace. We don’t know when it’s going to pick up in what, but we know that the industrial is very strong and all of these different connectivity solutions are addressed to that as much as the consumer side. The low lights, as Amir mentioned, is mainly the mobile, which started very low, but ramped up and corrected itself. Yet to be seen how 2024 looks like on an annual basis, it’s difficult to forecast. But for now, that’s not one of our growth drivers. And the base station market, we’ve suffered not just CEVA, but overall was very muted and lower in 2023, just because 5G didn’t bring for the cellular networks, any key or star use case that will — that happened with deployment or increased deployment. And that’s probably going to be muted also in 2024.

The rest of the technologies and the markets that we target around edge AI should work out well.

Amir Panush: Maybe just another comment to that, Martin. Related to the industrial IoT, I would say overall, we finished this year with 23% of our total revenues. So, this is definitely a significant portion of our revenue also moving forward, we expect it to grow in 2024. And more specifically, if you look at the technologies that we’re offering, we are getting more and more embedded with the MCU ecosystems and specifically in the industrial and automotive MCU ecosystem started with some of our connectivity offering, extended to Wi-Fi more recently, and now also to some audio capabilities and in the future, we expect also infer. And that’s where we see also the synergy of our technology into the smart edge and MCU ecosystem and specifically there for the industrial IoT market space.

Martin Yang: Thank you very much. Next question for mobile. In the longer term, maybe two to three years’ time horizon, do you think mobile could recover back to that 2021 level? Or what should we look at — how should we look at mobile in the longer term in terms of amount contribution to your company?

Yaniv Arieli: So, the mobile market, as everybody knows, has consolidated significantly over the last couple of years. There is a handful of players in that industry, the biggest and well-known ones are the Qualcomms and the MediaTeks. There are a few very successful for many years, lower cost solutions like UNISOC and recent years, ASRs as well. There are still very big markets in the world replacement and new markets for low-cost feature phone. Not everybody goes and buys the $1,000 high-end phone. Those markets, we have very strong penetration and solutions. So, that could continue. The pace of all that is not that clear. Handsets haven’t been that exciting of a market or a use case in recent years. And there’s one other OEM that may change its modem course and maybe things will look different in two to three years, yet to be seen — no, I don’t think anybody has the answer for that piece.