Ceva (CEVA) 7 Aug 24 2024 Q2 Earnings call transcript

In a recent earnings call, Ceva, Inc. showcased an impressive second quarter performance, surpassing expectations with strong licensing execution and royalty growth driven by market trends in Internet of Things (IoT) and smartphone shipments. The company's focus on developing and licensing leading IPs for smart edge devices is paying off, with a record-breaking 18 billion Ceva-powered smart edge devices shipped to date.

A Strategic Shift Towards AI and Connectivity

Ceva's strategic focus on AI and connectivity is yielding significant results. The company's AI for IoT devices, TinyML, is a growing market that Ceva is well-positioned to capitalize on, with a forecasted CAGR of 48% throughout the rest of the decade. To address this opportunity, Ceva introduced a new NeuPro-Nano NPU, the first fully programmable NPU for TinyML-based AI workloads. This innovative technology, which is currently in evaluation with customers, is expected to drive higher royalties per chip from next-generation products and expand Ceva's customer base in the untapped market of AI.

Moreover, Ceva's focus on connectivity is also evident in its new Ceva-Waves Links multi-protocol solution for wireless connectivity. This solution, which is already in development with a lead OEM customer, is a testament to Ceva's commitment to meeting the evolving needs of its customers, particularly in the growing field of hybrid AI, where AI processing is distributed between the cloud and edge devices.

Strong Financials and Strategic Partnerships

Ceva's financial performance reflects its strategic focus and market opportunities. Second quarter revenue was up 24% year-over-year, with licensing and related revenue up 28%, driven by strong execution and a healthy pipeline of potential deals. Royalty revenue grew 19% year-over-year, fueled by smartphone shipments and growth in IoT markets. The company also reported a net loss of $0.3 million for the quarter, an improvement from the net loss of $4.9 million in the same period last year.

Ceva's strategic partnerships with leading semiconductor and MCU companies have been a significant contributor to its growth. A recent licensing deal with a top 3 U.S. semiconductor company, expanding from sensing to connectivity and AI, is a testament to Ceva's market positioning and the potential for future high-volume shipments.

Looking Ahead: Innovation and Growth

Ceva's outlook for the future is promising, with a focus on innovation and growth. The company expects overall revenues for the year to be at the mid- to high end of its 4% to 8% guidance, with plans to more than double its non-GAAP operating margins and profits for 2024 over 2023. This growth is expected to be driven by a healthy pipeline of potential deals and the ramp of new technologies, particularly in the areas of AI, connectivity, and wireless communication for satellites.

Conclusion

Ceva, Inc.'s second quarter earnings call highlights the company's strategic focus on AI and connectivity, its innovative technologies, and its financial performance. With a strong market position, strategic partnerships, and a focus on innovation, Ceva is well-positioned to capitalize on the growing opportunities in the AI and connectivity markets. The company's strategic moves, including the launch of NeuPro-Nano and Ceva-Waves Links, underscore its commitment to meeting the evolving needs of its customers and driving growth in the years to come.