Q4 2024 Earnings Summary
- Strong expected growth in royalty revenues across all product lines in 2025, including Wi-Fi, Bluetooth, mobile, cellular IoT, and potentially 5G RAN, with significant acceleration in the second half of the year. Management is extremely encouraged by the royalty growth and shipment volumes seen in 2024 and anticipates this trend to continue.
- Increasing demand and strategic licensing deals in Edge AI, with CEVA's NeuPro-Nano NPUs and AI DSPs being licensed by customers to accelerate their Edge AI product roadmaps. This positions CEVA to capitalize on the growing trend of AI inference processing shifting from the cloud to the edge, enabling devices to run AI models locally.
- Significant growth opportunity in Wi-Fi and Bluetooth combo chips with higher Average Selling Prices (ASPs) as Wi-Fi 6 adoption accelerates. CEVA has licensed Wi-Fi technology to more than 40 customers in recent years and expects further acceleration of Wi-Fi shipments in 2025, following strong growth in 2024.
- Gross Margin Pressure Due to Customization Work: The company expects gross margins to be slightly lower in upcoming quarters because of ongoing customization work for a large mobile customer that started in Q3 and will continue into 2025. This indicates that gross margins may be under pressure due to these customization efforts.
- Lack of Visibility into Royalty Timing and Volume: Management admitted that they do not have precise visibility into the timing and volume of royalty revenues, especially for their handset and IoT customers. This uncertainty makes it difficult to predict future revenues and could lead to volatility.
- Slower Growth Anticipated in First Half of 2025: The company expects the first half of 2025 to be slower than the second half, following typical seasonality. This suggests that near-term revenue growth may be limited, which could be a concern for investors seeking immediate growth.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +21% (from ~$24.16M in Q4 2023 to ~$29.2M in Q4 2024) | Revenue growth is primarily driven by the overall improvement in both licensing and royalty streams, reflecting a rebound in market opportunities and stronger customer demand compared with the previous quarter. |
Licensing and Related | +155% (from ~$6.16M in Q4 2023 to ~$15.7M in Q4 2024) | A dramatic jump in licensing revenue is due to strategic contract wins and enhanced activity in high-growth areas such as 5G-Advanced and embedded AI, contrasting with the lower base in Q4 2023 where licensing generated modest figures, suggesting timing and improved market momentum played a key role. |
Operating Income (EBIT) | Turnaround from a loss of ~$2,787K (Q4 2023) to a positive ~$74K (Q4 2024) | The shift to positive EBIT reflects that the revenue increases have begun to offset prior operating losses; despite somewhat higher expenses (e.g. equity-based compensation), improved revenue mix and cost management have driven overall operational efficiency relative to the previous period. |
Net Income & EPS | Shift from +$3,769K and EPS of $0.16 (Q4 2023) to -$1,736K and EPS of -$0.07 (Q4 2024) | Margin pressure and possibly additional charges or unfavorable non-operating factors in Q4 2024 have turned net income negative despite higher topline revenue; this contrasts with the previous period’s net gain which may have been buoyed by discontinued operations adjustments. |
United States Revenue | Saw a remarkable shift from -$0.67M (Q4 2023) to +$14.74M (Q4 2024) | The United States revenue experienced a significant improvement driven by renewed and larger-scale licensing and royalty agreements in key U.S. markets, compared to a negative or negligible book impact in Q4 2023 likely due to timing issues or contractual adjustments. |
Asia Pacific Revenue | Maintained strong performance at ~$19.27M in Q4 2024 (previous data not as dynamic) | Asia Pacific continues to be a robust market for CEVA; although the exact YoY percentage change isn’t as dramatic, the solid ~$19.27M figure in Q4 2024 underscores sustained demand in the region, aligning with previous geographic trends and benefiting from stable licensing and royalty contributions. |
Europe and Middle East Revenue | Changed from +$0.58M (Q4 2023) to -$1.74M (Q4 2024) | The reversal in the Europe and Middle East revenue suggests geographic variability inherent in CEVA’s licensing agreements; shifting contract dynamics and possibly contractual adjustments or cancellations have led to a negative impact in this region compared to a modest positive contribution in Q4 2023. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Revenue | Q1 2025 | $26.5 million to $28.5 million | $25.5 million to $27.5 million | lowered |
Gross Margin (GAAP) | Q1 2025 | 88% | 87% | lowered |
Gross Margin (Non-GAAP) | Q1 2025 | 89% | 88% | lowered |
Operating Expenses (GAAP) | Q1 2025 | $25.2 million to $26.2 million | $25.1 million to $26.1 million | lowered |
Operating Expenses (Non-GAAP) | Q1 2025 | $21 million to $22 million | $21 million to $22 million | no change |
Net Interest Income | Q1 2025 | $1.2 million | $1.3 million | raised |
Taxes | Q1 2025 | $1.4 million | $1.2 million | lowered |
Share Count | Q1 2025 | 25.3 million shares | 25.4 million shares | raised |
Revenue Growth | FY 2025 | 7% to 9% | 7% to 11% | raised |
Non-GAAP Operating Income and Margins | FY 2025 | Expected to double compared to 2023 | Approximately 48% to 52% growth | lowered |
Non-GAAP Fully Diluted EPS | FY 2025 | Expected to double compared to 2023 | Approximately 48% to 52% | lowered |
Overall Expense Levels | FY 2025 | no prior guidance | 2% to 6% growth; $99 million to $103 million | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Total Revenue | Q4 2024 | $26.5M–$28.5M | $29.223M | Beat |
Gross Margin (GAAP) | Q4 2024 | ~88% | 88.5% ((29.223M− 3.371M) ÷ 29.223M) | Met |
Operating Expenses (GAAP) | Q4 2024 | $25.2M–$26.2M | $25.78M (8.75M+ 16.88M+ 0.15M) | Met |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Royalty revenue growth (Wi-Fi, Bluetooth, IoT, 5G) | Q1–Q3 2024: Consistent year-over-year increases in royalties and shipments across Wi-Fi, Bluetooth, Cellular IoT, and 5G, with notable highlights such as Wi-Fi growing 50%–100%+ and Cellular IoT up 24%–92%. | Achieved record shipments exceeding 600M units for the first time, with Wi-Fi shipments up 110% and royalties up 175% year-over-year, Bluetooth at 343M units (41% y/y), Cellular IoT up 37%, and 5G RAN also up. | Strong ongoing momentum and bullish outlook, particularly driven by Wi-Fi 6 adoption and cellular IoT demand, suggesting continued growth in royalty revenues. |
Edge AI (NeuPro, NeuPro-Nano) demand and shift from cloud to edge | Q1–Q3 2024: Gradual buildup in demand, with first NeuPro-Nano licensing deals in Q3 and emphasis on performing AI inference on edge devices (lower latency, reduced cost). | Q4 2024: Called a “pivotal year for Edge AI,” introduced NeuPro-Nano, multiple customer wins, and strong push for AI at the edge due to power constraints and privacy needs. | Growing enthusiasm as customers embrace AI at the edge, indicating a bullish long-term trajectory for embedded AI (NeuPro-Nano) across power-sensitive products. |
Customization work impacting gross margins | Q1–Q2 2024: No significant mention; gross margins generally remained near historical levels. | No new customization in Q4, but residual effect from a prior large modem deal continues. Gross margins slightly affected by seasonality and design allocations. | Previously a factor in Q3, now less pressing. Indicates neutral-to-positive impact moving forward, with minimal new customization cost. |
Slower first half vs. stronger second half outlook | Q1–Q2 2024: Management repeatedly noted seasonality, expecting a softer H1 and stronger H2 for 2024. | Q4 2024: Continues to project a slower first half and stronger second half into 2025, aligning with historical seasonality, particularly in consumer IoT. | Consistently acknowledged across periods, signals a cautiously bullish second-half pickup despite some near-term softness. |
Acceleration in Wi-Fi 6 adoption and higher ASP combo chips | Q1–Q3 2024: Early but steadily growing adoption from Wi-Fi 4/5 to Wi-Fi 6; combo chips (Bluetooth + Wi-Fi) mentioned as higher ASP potential. | Q4 2024: Highlighted further acceleration in Wi-Fi 6 (180M units) and opportunities for higher ASP combo chips now gaining momentum. | Strengthening trend each quarter, providing a bullish catalyst for royalty revenue as higher ASP chips ramp across IoT markets. |
Visibility challenges for royalty timing and volume | Q1–Q3 2024: Very limited direct mentions; generally positive on pipeline but acknowledged demand timing uncertainties. | Q4 2024: Management noted lack of “crystal ball” on exact customer ramp timing, referencing unpredictability in near-term volumes. | Newly emphasized challenge, introducing some bearish uncertainty on forecasting short-term royalties but not altering overall positive trajectory. |
Strategic deals in 5G advanced and 5G RAN | Q1–Q3 2024: Multiple strategic partnerships, expansion into 5G advanced, satellite communication, and 5G RAN, though some softness in operator CapEx in Q3. | Q4 2024: Repeat deals with anchor customers, broadened 5G base, notable year-over-year growth in 5G RAN shipments. | Consistent focus on advanced 5G IP and RAN opportunities, indicating a bullish long-term growth vector through strategic licensing and infrastructure partnerships. |
Larger multi-technology licensing deals | Q1–Q3 2024: Emphasis on signing bigger, multi-tech deals (Wi-Fi, Bluetooth, AI, sensing) to extract higher licensing fees and royalties. | Q4 2024: Reiterated strategy of offering more comprehensive IP solutions, securing long-term strategic relationships through multi-technology bundles. | Ongoing strategic approach, viewed as bullish for revenue and margin expansion through value-added solutions. |
Delays in licensing deal closures | Q1 2024: Some delayed deals closed in Q2, viewed as timing shifts rather than lost business. | Q4 2024: No specific mention of deal delays [no Q4 reference]. | Issue highlighted in Q1 but hasn’t resurfaced, suggesting resolution of earlier timing delays. |
Dependency on third-party transceiver partners | Q2 2024: Brief mention of partnering with transceiver vendors to provide flexible, pre-tested solutions. | Q4 2024: Not discussed [no Q4 reference]. | Dropped topic; no further mention, indicating it may no longer be a prominent factor or risk. |
China market demand | Q1 2024: Stabilized demand and sequential strength, a positive sign for IoT shipments. | Q4 2024: Acknowledged strong AI innovation in China, positive for edge AI adoption. | Early bullish comment reappears in Q4 with AI focus; potential for continued growth in the Chinese market. |
Potential shift toward a service-oriented model | Q3 2024: Management clarified no shift to a service model, with customization only for selected strategic deals. | Q4 2024: No mention of service orientation [no Q4 reference]. | Remains off the table; IP licensing approach stays intact, indicating no meaningful pivot in business model. |
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2025 Revenue Growth Drivers
Q: Which markets will drive revenue growth in 2025?
A: CEVA expects significant growth across its Wi-Fi, Bluetooth, mobile, cellular IoT, and potentially 5G RAN product lines in 2025, with a strong acceleration in the second half of the year. They are extremely encouraged by the royalty growth and shipment volumes across all product lines in 2024 and anticipate continued growth moving forward. -
Wi-Fi 6 Penetration and Growth
Q: How will Wi-Fi contribute to growth in 2025?
A: CEVA is in the midst of a transition to Wi-Fi 6, having licensed it to more than 40 customers in recent years. In 2024, they saw strong growth in Wi-Fi shipment volumes and higher ASPs per unit due to this transition. They expect further acceleration in 2025, with Wi-Fi 6 penetrating across all IoT markets. The company aims to increase Wi-Fi shipments from 180 million units in 2024 toward the 1.1 billion Bluetooth devices shipped in 2023 over the next few years. -
AI at the Edge and LLMs
Q: How is CEVA positioned for AI models running at the Edge?
A: CEVA anticipates multiple tiers of AI technologies at the Edge, from simple models to sophisticated LLMs that can run efficiently on Edge devices. Their strategy is to deliver a complete portfolio of AI accelerators and NPUs to support a range of requirements, from low-tier MCUs to high-end applications like mobile, PC, and automotive ADAS systems. They are excited about this opportunity and are prepared to support the evolving market with their technology and portfolio. -
Royalty Revenue Expectations
Q: What are the expectations for royalty revenues in 2025?
A: While CEVA cannot predict exact timings due to the nature of royalties, they are encouraged by positive developments and see exciting growth opportunities in the next couple of years. They acknowledge that the first half of 2025 may be slower, with strong acceleration expected in the second half. -
Cell Phone Modem vs. Wi-Fi Growth
Q: Will cell phone modem revenue grow faster than Wi-Fi in 2025?
A: CEVA cannot specify which market will be stronger in 2025, as half of their business is royalties and ramp-up timing and volumes are uncertain. There are many moving pieces, and it's hard to say which market will end up the strongest this early in the year. -
Impact of Customization on Gross Margins
Q: Will customization in new licensing deals affect gross margins?
A: For this quarter, there is no customization in the new licensing deals; they are all off-the-shelf technologies. However, a large mobile space modem deal from last year will continue into a few quarters of 2025, slightly lowering gross margins. Also, royalties are usually lowest in Q1 due to seasonality, which affects gross margins. -
NeuPro Solution Deals
Q: How many NeuPro solution deals were made this quarter?
A: In the quarter, CEVA secured one deal for the NeuPro and one deal for their DSP, both for AI applications. -
MCU Opportunity with NPUs
Q: Is there an opportunity to integrate NPUs into OEM MCUs?
A: Yes, CEVA sees definite opportunities as MCU players add more AI capabilities. They license their wireless technology and NeuPro-Nano MCUs to top-tier MCU customers, helping them deliver AI capabilities to the market. CEVA positions itself as an enabler for MCU companies to integrate technologies like connectivity and AI.