Financial Performance Overview

Ceva Inc., a leading provider of innovative silicon and software IP solutions, reported strong financial results for the year ended December 31, 2024. The company’s total revenues grew 9.8% year-over-year to $106.9 million, driven by robust performance across its key business segments.

Licensing and related revenue, which accounted for 56.1% of total revenues, increased 4.2% to $60.0 million. This was attributed to the company signing 43 new licensing agreements, including 11 deals with OEMs integrating Ceva’s IP into their end products. The company saw increased licensing activity in the U.S. market as well as strong demand for its advanced 5G cellular, Wi-Fi, and Bluetooth technologies.

Royalty revenues, which made up 43.9% of total revenues, grew 17.8% year-over-year to $46.9 million. This was driven by record shipments of 2 billion Ceva-powered units, including 1.1 billion Bluetooth devices, 179 million Wi-Fi devices, and 170 million cellular IoT devices. The company expects its royalty business to continue growing, particularly from its Wi-Fi, Bluetooth, and 5G mobile offerings.

From a geographic perspective, Ceva saw its revenues diversify, with the U.S. and Europe/Middle East regions increasing their contribution to 19.0% and 12.0% of total revenues, respectively, in 2024. The Asia Pacific region, including China, remained the largest revenue contributor at 69.0%, though this was down from 77.7% in the prior year.

Profitability and Expenses

Ceva’s gross profit margin remained strong at 88.1% in 2024, compared to 88.0% in 2023 and 87.5% in 2022. The company was able to maintain its high profitability despite a 9.6% increase in cost of revenues, which was primarily due to higher customization work for strategic 5G-Advanced deals.

Total operating expenses increased 2.5% year-over-year to $101.7 million in 2024. This was mainly driven by a higher allowance for credit losses, which offset lower research and development (R&D) expenses. R&D expenses, net of government grants and tax credits, decreased 1.5% to $71.6 million, representing 67.0% of total revenues compared to 74.6% in the prior year. The company continues to invest heavily in R&D to drive innovation and maintain its technology leadership.

Sales and marketing expenses increased 14.3% to $12.6 million, while general and administrative expenses rose 13.2% to $16.9 million. The increases in these expense categories were primarily due to higher commission expenses, salaries, and the aforementioned credit loss allowance.

Despite the increase in operating expenses, Ceva was able to improve its profitability, with operating loss narrowing to 7.1% of revenues in 2024 from 13.8% in 2023. This was further supported by a decrease in the company’s effective tax rate to 5.6% in 2024 from 10.5% in the prior year.

Liquidity and Capital Resources

As of December 31, 2024, Ceva had a strong liquidity position, with $163.6 million in cash, cash equivalents, short-term bank deposits, and marketable securities. This represents a slight decrease from the $166.5 million balance at the end of 2023, primarily due to $8.5 million used for share repurchases, partially offset by cash generated from operations.

The company’s cash flow from operating activities was $3.5 million in 2024, compared to cash used in operations of $6.3 million in 2023. This improvement was driven by higher net income and better management of working capital. Ceva used $2.4 million in net cash for investing activities in 2024, mainly for purchases of marketable securities and capital expenditures, compared to net cash provided by investing activities of $10.8 million in the prior year.

Ceva’s management believes the company’s current cash and liquidity position, along with expected cash flow from operations, will provide sufficient capital to fund its operations for at least the next 12 months. The company may also seek additional financing, if necessary, to support potential acquisitions or strategic investments as part of its growth strategy.

Key Growth Drivers and Outlook

Ceva’s management highlighted several key growth drivers that are expected to fuel the company’s long-term success:

1. Wireless Connectivity Leadership: Ceva’s broad portfolio of Bluetooth, Wi-Fi, Ultra-Wideband (UWB), and cellular IoT IP solutions positions the company to capitalize on the growing demand for connectivity in the IoT, industrial, consumer, and smart home markets. The company’s market share leadership in Bluetooth and Wi-Fi, along with new design wins for its latest-generation Wi-Fi 7 and Bluetooth ⁶⁄₇ technologies, are expected to drive continued royalty revenue growth.

2. 5G and 5G-Advanced Expansion: Ceva’s comprehensive 5G baseband IP platform, including the PentaG2 and PentaG RAN solutions, is expected to benefit from the increasing adoption of 5G and 5G-Advanced technologies in a wide range of applications, from fixed wireless access and satellite communications to industrial IoT and autonomous vehicles.

3. Edge AI and Sensor Fusion: The company’s SensPro2 sensor hub AI DSPs and NeuPro-M AI NPUs are designed to address the growing demand for efficient, high-performance signal processing and AI inference in edge devices across various industries, including smartphones, automotive, drones, robotics, and industrial IoT.

4. Embedded AI and TinyML: Ceva’s recently announced NeuPro-Nano family of AI NPUs is positioned to capitalize on the emergence of embedded AI and tiny machine learning (TinyML) models, which enable small AI networks to be embedded in IoT devices for sensing applications.

5. Sensor Fusion and Spatial Audio Software: Ceva’s MotionEngine software and other sensor fusion and spatial audio application software allow the company to address an important technology piece used in a wide range of smart edge products, from personal computers and robotics to true wireless stereo earbuds and smart TVs.

Looking ahead, Ceva expects its overall revenue to grow 7%-11% in 2025, driven by continued strength in its licensing and royalty businesses. The company anticipates that its expenses will increase at a significantly lower rate than its top-line growth, in the range of 2%-6%, as it continues to focus on operational efficiency and leverage its investments in R&D.

Strengths and Weaknesses

Strengths:

• Dominant market position in wireless connectivity IP, with leading market share in Bluetooth and Wi-Fi
• Comprehensive portfolio of technologies addressing the key trends of 5G, edge AI, embedded AI, and sensor fusion
• Diversified customer base across multiple end markets, including consumer IoT, automotive, industrial, and infrastructure
• Strong financial position with a healthy balance sheet and cash flow from operations
• Consistent investment in R&D to maintain technology leadership

Weaknesses:

• Concentration of revenues from a limited number of customers, with the top five royalty-paying customers accounting for 61% of total royalty revenues in 2024
• Dependence on the Asia Pacific region, particularly China, which accounted for 69% of total revenues in 2024
• Potential exposure to geopolitical tensions and macroeconomic uncertainties that could impact the company’s operations and customer demand

Outlook and Conclusion

Ceva’s financial performance in 2024 demonstrates the company’s ability to capitalize on the growing demand for its innovative silicon and software IP solutions. The company’s leadership in wireless connectivity, edge AI, and sensor fusion technologies, coupled with its diversified customer base and end markets, position it well for continued growth.

Looking ahead, Ceva’s management is optimistic about the company’s prospects, with a robust pipeline of new design wins and a strong focus on operational efficiency. The company’s investments in R&D and its ability to adapt to evolving industry trends are expected to drive sustainable long-term growth.

However, Ceva’s reliance on a limited number of customers and its geographic concentration in the Asia Pacific region, particularly China, remain potential risks that the company will need to manage. Additionally, the company’s exposure to macroeconomic and geopolitical uncertainties could impact its future performance.

Overall, Ceva’s financial results and strategic positioning suggest the company is well-equipped to navigate the challenges and capitalize on the opportunities in the rapidly evolving semiconductor and IoT industries. With its innovative product portfolio, strong customer relationships, and disciplined financial management, Ceva appears poised to deliver long-term value for its shareholders.