CEVA earnings call analysis

NASDAQ:CEVA Q1 2026 Earnings Call Transcript Generated on 6/6/2026 Betsy | Conference Operator: Good day, and welcome to the SEVA, Inc. First Quarter 2026 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on a touch-tone phone. To withdraw your question, please press star, then 2. Please note this event is being recorded. I would now like to turn the conference over to Richard Kingston, Vice President of Market Intelligence and Investor Relations.

Please go ahead. Richard Kingston | Vice President of Market Intelligence and Investor Relations

Thank you, Betsy. Good morning, everyone, and welcome to SEVA's first quarter 2026 earnings conference call. Joining me today are Amir Panoush, Chief Executive Officer, and Yaniv Ariyeli, Chief Financial Officer of SEVA. Before handing over to Amir, I would like to remind everyone that today's discussion contains forward-looking statements that involve risks and uncertainties, as well as assumptions that if they materialize or prove incorrect, could cause the results of SEVA to differ materially from those expressed or implied by such forward-looking statements and assumptions. We will also be discussing certain non-GAAP financial measures, which we believe provide a meaningful analysis of our core operating results and comparison of quarterly results. Please see the earnings release we issued this morning for our reconciliations of our non-GAAP financial measures. Our earnings release can be found in the SEC filing 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 and provide some insight into our ongoing business.

Amir. Amir Panoush | Chief Executive Officer

Thank you, Richard, and good morning, everyone. We are pleased to report a strong start to 2026. Building on our momentum from 2025, we exceeded our expectations on both revenues and non-GAAP EPS, including licensing and related revenues of $17.8 million, our strongest licensing quarter in three years, reflecting the strength of our pipeline, customer momentum, and future earnings power. This performance reflects strong executions and alignments with key market trends. including the convergence of edge AI and wireless connectivity, rising system complexity, and growing demand for integrated solutions that accelerate time to market. As the industry faces increasing constraints in scaling centralized AI compute, the reality of shifting towards running inference at the edge and leveraging local resources is becoming more critical. Against this backdrop, intelligence-connected device shipments are expected to exceed 40 billion units annually by 2030, reinforcing the value of our connect, sense, and infer strategy. In the quarter, we signed several multi-technology engagements and three strategically important deals that demonstrate our strategy is translating into results. Starting with connectivity. In early 2025, we introduced our SIVA Waves LINX 200 platform to deliver fully integrated, system-level wireless solutions across RF, basebands, and software, helping customers accelerate time to market. This quarter, we secured a major licensing win for a complete Bluetooth High Data Throughput, or HDT, solution, a foundational capability for the upcoming Bluetooth 7 standard. We license this full solution, including modern software and RF, to a leading US-based semiconductor company. Bluetooth 7 is expected to enable higher throughput and more advanced use cases, including multichannel audio, wireless video, XR and gaming peripherals, and AI-enabled edge devices. Our HDT solution is a key building block enabling this next generation of high-performance wireless and AI-enabled edge devices. This builds on our prior Bluetooth engagement with the same customer, which is now approaching high-volume production, and further expands our footprint through a more integrated RF, modem, and software platform engagement. This also reflects a border shift in the industry from internally developed connectivity to licensing-proven platforms. We believe that moving to a full-stack solution increases value per design for SIVA through higher licensing fees and greater royalty content, while also deepening integration and enabling multi-generation engagement. For the quarter, we expect it to deliver faster time to market and lower development risk, allowing them to focus on their core differentiation while leveraging our proven IP, ultimately driving a stronger return on investment for both parties. Turning now to 5G and satellite communication. During the our Pentagy NTN 5G advanced modern platform, sending our cellular portfolio into satellite communication. Non-terrestrial networks, or NTN, an emerging market expected to scale to billions of devices over the coming decade, as satellite connectivity becomes an integral part of global communications infrastructure, complementing and, in some cases, extending beyond traditional terrestrial 5G networks. This is being driven by a wide range of use cases, including direct-to-direct remote and undeserved area coverage, asset tracking, and industrial IoT, where ubiquitous, always-on connectivity is critical. It is also increasingly important for enabling more resilient and independent communications infrastructure. Customer response has been highly encouraging, with clear momentum building across our pipeline. Building on this, we expanded an existing customer relationship with a satellite OEM from DSP cores to a more integrated baseband processing solution. As with our Bluetooth HDT engagement, this reflects a deepening relationship with an existing customer and an expansion in the scope and value of our IP within their platform. In Ultra Wideband, during the first quarter, we introduced our next generation UWB platform and secured a new customer win with a major US-based MCU provider, augmenting its internal UWB capabilities. With our IPN combining its system expertise with our proven connectivity solution to accelerate development and reduce risk. This engagement also builds on a broader relationship with the customer, who has licensed multiple SIVA technologies over the past two years. We are seeing a transition in UWB towards higher-value industrial, automotive, and enterprise applications, driven by demand for precise, secure location awareness in use cases such as access, asset tracking, and indoor navigation. As the market expands, customers are increasingly choosing to license proven IP to accelerate time to market and reduce development risk. Because of these wins, a clear pattern is emerging. The Bluetooth NTN and UWB engagements we highlighted this quarter are all within existing customers who have expanded their use of SIVA IP over the past two years. More broadly, customers are increasingly adopting more integrated system-level solutions from SIVA, expanding our value-per-design while strengthening long-term royalty and margin potential. Incensing We continue to see growing traction for our special audio solutions as demand for immersive audio experience expands. During the quarter, Lenovo launched its latest ThinkPad headset, powered by our RealSpace special audio with head tracking, building on recent wins with consumer brands like Nothing and Bolt. Finally, in AI, we continue to execute on our strategy to enable efficient, scalable inference at the edge, with AI representing more than 20% of our licensing and related revenues, and the signing of two new licensing agreements in the quarter. We are seeing a structural shift towards hybrid AI, where inference is increasingly moving to the device, while more complex processing remains in the cloud or across connected systems. This right AI model, right place, right time approach enables real-time on-device decision-making while maintaining the flexibility to scale compute as needed. As a result, demand for highly efficient, ultra-low-power solutions is growing across wearables, automotive, industrial, and smart home applications. And IP and AI content per device is increasing as more products require local connect, send, and infer capabilities. We believe the rise of hybrid and agent-based AI will further accelerate the shift towards distributed intelligence at the edge, where devices need to locally sense, infer, communicate, coordinate, and act in real time while selectively leveraging cloud AI resources. This trend is expected to drive growing demand for efficient AGI processing alongside advanced wireless connectivity across increasingly complex connected systems. This is now translating into production. Renaissance R-car V4H platform, which integrates our AI DSP and accelerator, is now in production in the 2026 Toyota RAV4, one of the highest volume passengers vehicle globally, marking our first mass volume automotive AI deployment. We believe this represents the beginning of a meaningful, long-term royalty stream with going AI content per device. We also announced a collaboration with NXP during the quarter, integrating our AI DSPN accelerator into their S32E2 and S32Z2 software-defined vehicle processors, further validating our position in automotive AI. In addition, our Newport Nano NPU won a leading artificial intelligence award at Embedded World 2026, further emphasizing our leadership position. Our AI licensing pipeline remains strong, with multiple evaluation and investment negotiations underway across a broad range of end markets. Stepping back, overall, we signed 14 licensing agreements in the quarter, including two with OEMs. In addition to the deals I highlighted earlier, we secured a Wi-Fi 7 design targeting consumer IoT, a Wi-Fi 6 Bluetooth combo engagement with a leading edge AI SOC platform company, and multiple additional Bluetooth and Wi-Fi winds across our connectivity portfolio. Turning now to royalties. We continue to see encouraging momentum across our diversified smart edge market. with growth in IoT, industrial, and AI-driven applications. While total royalties were flat year-over-year, non-mobile royalties grew 8%, reflecting strengths across our smart edge markets, partially offset by softness in smartphones. Wi-Fi shipments reached an all-time high in the quarter, driven by record Wi-Fi 6 volumes, highlighting the continuing expansion of this market as customers ramp deployments across a broad range of devices. More broadly, Wi-Fi and Bluetooth continue to be durable, multi-year growth drivers. As customers scale current generation technologies, such as Wi-Fi 6 and Bluetooth 6, they are also developing next-generation platforms, including Wi-Fi 7 and Bluetooth 7. These overlapping cycles are expected to support sustained unit growth increase IP content per design, and long-term margin expansion. We expect the continued shift towards combo chips to further reinforce our strategy, as customers integrated multiple SIVA technologies into a single design, increasing value per device and driving stronger overall economics. AI-driven royalties also continue to grow, highlighted by our automotive AI deployment at Toyota and a ramping AI SOC for surveillance, representing early signs of the long-term contribution we expect from edge AI across multiples and markets. Against these tailwinds, first-quarter royalties were impacted by typical seasonal softliness in mobile, combined with near-term effects for memory availability constraints and challenge inventory in the lower tier segments. We view this mobile dynamics as largely timing-related and expect improvements as the year progresses, supported by inventory normalization and typical seasonality, along with what we anticipate will be stronger high-end smartphone royalties in the second half. Overall, this quarter reinforces our ability to execute on our strategy and increase value per design as we move towards more integrated, higher-value engagements. I will now turn the call over to Yaniv for the financials.

Yaniv Ariyeli | Chief Financial Officer

Thank you. I'll now review the financial results for the first quarter, which reflect the strong licensing performance and continued execution Amir just outlined. Revenues for the first quarter increased 11% year-over-year to $27 million. The revenue breakdown is as follows. Licensing and related revenue increased 18% year-over-year to $17.8 million, reflecting 66% of our total revenues. Royalty revenues were $9.2 million, in line with last year, reflecting 34% of total revenues. Gross margins were 86% on GAAP bases and 87% on non-GAAP bases. Our total gap operating expenses for the first quarter were $28.4 million, just over the mid-range of our guidance. Total non-gap operating expenses for the first quarter, excluding equity-based compensation expenses, amortization of intangibles and deal costs, were $23 million, just over the mid-range of our guidance. Gap operating loss for the first quarter was $5.1 million as compared to gap operating loss of $4.4 million in the same quarter last year. Non-gap operating margins and income were 2% of revenues and half a million dollars. Income was $1.9 million compared to $2.1 million for the first quarter of 2025. Taxes were approximately $1.3 million Gap net loss for the first quarter was $4.5 million and diluted loss per share was $0.16 as compared to net loss of $3.3 million and diluted loss per share of $0.14 for the first quarter of 2025. Non-gap net income and non-gap diluted earnings per share for the first quarter of 26 were $1.1 million and 4 cents respectively as compared to non-GAAP net income of $1.4 million and non-GAAP diluted earnings per share of 6 cents for the first quarter of 25. With respect to other related data, we shipped 458 million units of SIVA power devices. up 9% for the first quarter of 2025. Of the 458 million reported, 46 million units, or 10%, were for mobile handset modems, down from 49 million units in the first quarter last year. 394 million units were consumer IoT devices. up from 337 million units for the first quarter last year. 18 million units were for industrial IoT products, down from 34 million units in the first quarter last year. However, associated industrial IoT royalty revenues were up 19% year over year. reflecting a better mix of higher ASP product shipments, including 5G wireless infrastructure and automotive AI. Local shipments were 206 million units in the quarter, down from 233 million units in the first quarter of last year. Cellular IoT shipments were 66 million units, up 38% year-over-year, And Wi-Fi shipments were a record 91 million units, up 158% year-over-year. As for the balance sheet items, our cash equivalent balances, marketable securities, and bank deposits were approximately $216 million, providing strong financial flexibility. We remain focused on disciplined capital allocation, including continued investments in our roadmap and a selective approach for strategic M&A opportunities that can accelerate our growth. Our DSOs for the first quarter of 26 was 59 days. During the first quarter, we used $4.9 million of cash in operating activities. Ongoing depreciation and amortization was $0.9 million. And purchase of fixed assets was $2.3 million, including approximately $1 million related to leasehold improvements. At the end of the first quarter, our headcount was 430 people, of whom 348 were engineers. Moderator: Now for the guidance.

Yaniv Ariyeli | Chief Financial Officer

As Amir highlighted, we delivered a strong start for the year, supported by continuing enhancements to our IP portfolio, solid licensing execution, and growing fundamental for future royalty expansion. From a financial perspective, we continue to view 2026 as a year of growth across multiple dimensions. Reflecting our first quarter performance, we're upgrading our annual outlook towards the higher end of our previously communicated range. For the full year, we now expect total revenue growth to be at the top end of our 8% to 12% range over 2025. With a typical seasonality profile of lower growth in the first half, and stronger growth in the second half, subject to memory pricing dynamics and supply conditions. On the expense side, we maintained focus on cost discipline and operating leverage, while continuing to manage foreign exchange headwinds with the strengthening of the Euro and the Israeli shekel against the U.S. dollars. Overall expenses cost of revenues and OPEX combined are expected to increase approximately 8 percent over 2025. As we continue to invest to support growth, we expect a portion of the incremental revenue to be translated to the bottom line, driving continued improvement in non-GAAP operating income, net income, and EPS. Based on our performance to date and current business momentum, we now expect non-GAAP operating margins and non-GAAP net income to increase by 40 to 50 percent year over year, which is above our prior expectations. Guidelines for the second quarter of 2026. Revenues are expected to be in the range of $26 to $30 million. reflecting continued growth both sequentially and year-over-year. Gross margin is expected to be 87% on GAAP bases and 88% on non-GAAP bases, excluding an aggregate $0.2 million of equity-based compensation expenses and $0.1 million of amortizations of required intangibles. Gap OPEX for the second quarter of 26 is expected to be similar to the first quarter and in the range of $27.7 to $28.7 million. Of our anticipated total OPEX for the second quarter, $5.3 million is expected to be attributed to equity-based compensation expenses, $0.1 of amortizations of required intangibles, and $0.1 million of cost associated with business acquisitions. Non-GAAP OPEX is also expected to be similar to the first quarter and in the range of $22.2 to $23.2 million. Then interest income is expected to be approximately $1.7 million. Taxes for the second quarter is expected to be approximately $1.5 million. And the share count for the second quarter of 26 is expected to be approximately 28 million shares for GAAP and 29.7 million shares for non-GAAP. Moderator: Betsy, we could now take questions, please.

Betsy | Conference Operator

We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question today comes from Ruben Roy with Stifel.

Please go ahead. Operator | Conference Specialist

Ruben, your line is open. You may ask your question now. Sorry, guys.

Ruben Roy | Analyst, Stifel

I was on mute somehow. Hi, Amir. Hi, Yaniv. Congrats on the nice start to the year. I guess to start, Amir, on the Bluetooth HDT win, I'm not sure if you guys had RF wins previous, but it seems to me like that would be a nice step up in your value per design strategy that you've been talking about. So can you maybe just talk a little bit more about what you're doing for the RF? And also, I guess, as part of that, is that sort of an architecture that you can replicate across other areas of the business, eventually Wi-Fi, ultra-wideband, et cetera? and anything you talk about in terms of the royalty rate relative to your traditional Bluetooth licenses.

Thank you. Amir Panoush | Chief Executive Officer

Yeah, Roy, first, thanks a lot for the congratulations. Yeah, definitely, this is a very important win for us. As you pointed out, this is a win of a full system solution, all the way so-called from the antenna up to the full stack and the software, including our own internal developed RF, which is an investment that we've put in the last year or two to really build those system up. The key value here is really that our customers, they can get the full solution. They don't need to do more of the pre-testing validation of those things. And we provide them that as a full solution, then time to market and ability to be successful in the market is much higher. And even more so with this customer and overall other customers, what we see, that really helps them to drive more and more at so-called the mix versus by decision and move away from so-called internal development to a complete solution based on our technology. So we are very happy with that, with the RF, and we expect more of those means to come through the year and then, of course, in the next few years. The other piece that you pointed out, this is definitely a technology that we are planning to expand beyond the Bluetooth HDT. We have multiple other wireless technology with digital IP and the same strategy we are going to basically deploy and apply in the marketplace. More and more integrated solution, complete system around our leadership in wireless connectivity. So we are super, super excited about this momentum and that's what can build for the future. Last piece that you point on the royalty. As I mentioned in the previous course, at the end of the day royalty comes back to what value we bring to our customers. In this case, because it's not just the whole different components of the system, it's the fact that it's fully integrated, our customers definitely appreciate it, and we see meaningfully higher royalty than so-called 1 plus 1 is more than 2, and that will help us to drive much more royalty growth in the future with overall very strong flywheel across our wireless connectivity technologies.

Ruben Roy | Analyst, Stifel

That's great. Thank you, Amir, for all the detail. I guess if I could ask a quick follow-up just on sort of the way the year is playing out. You continue to expect a stronger second half, and I think you gave us a lot of, you know, sort of data points and, you know, kind of visibility into how you're thinking about that. But you do have, you know, some, you know, factors coming into play. You mentioned memory pricing and, you know, you know, overall, you know, sort of macro, you know, sort of dynamics going on. So either Amir or Yaniv, can you maybe just give us a little bit of detail on what you're hearing from customers relative to some of those, you know, impacts that we might see as we kind of go through the year? I think, you know, memory pricing has started to impact some of the end markets. We're hearing from PC guys, et cetera, you know, talk about potential impacts there. Any additional detail on how you're thinking about the second half versus the first half and what you're hearing from customers would be great. And that's all I have. Thank you. Yeah, definitely.

Amir Panoush | Chief Executive Officer

One thing first I would say, just if we look at this quarter, as we started the year, I'm extremely encouraged by the fact that even though so-called mobile hasn't been that strong, considering the challenge with memory allocation and so-called inventory utilization, we still deliver really great results. driven by one, very good execution across the licensing and solution-based offering. And second, we see a very good momentum overall in the border IoT. And going back to what you asked about the memory, if we look at the IoT, it's a market that is less impacted by that. We have a great access across a very diversified set of customers, use cases, and products and technologies. So I think overall we can do so-called better than others in terms of potential impact from memory allocation. And specifically on mobile, with the inventory drawdown that happened this quarter and maybe to some degree through the first half, it probably will put us in a good spot as we go to the second half, which on top of that, of course, what we expect is increased market share in the premium tier. So I think overall we are well-positioned. and going through so-called debt challenges overall in the marketplace. And it goes back to how we execute basically driving our licensing and ensuring that our customers are happy with the ramp-up of our technologies.

Yaniv Ariyeli | Chief Financial Officer

Ruben, maybe we'll add one more thing. Historically, if you look at the volumes of shipments of our royalties, our customer shipments in the second half of every given year in the last three years, you'll see about a 40% increase. And then every year there is some issues, whether it's pricing or inventory or now memory. So with that said, the trend was mainly around 40% sequential growth, second half versus first half. And we are building that in also in our prospects for 2026.

Ruben Roy | Analyst, Stifel

Got it. Thank you, Yannick. Thank you. Thanks, Amir.

Betsy | Conference Operator

Thank you.

Ruben Roy | Analyst, Stifel

Thank you, Roy.

Okay. Betsy | Conference Operator

The next question comes from Suji De Silva with Roth Capital.

Please go ahead. Suji De Silva | Analyst, Roth Capital

Hi, Amir. How are you? Congratulations on the progress here. Thank you. Amir, maybe you can talk about your – as you came in, you talked about sense, connect, and infer. And maybe today you could give us an update on that in terms of the example of traction at the same customer, two of those or three of those versus just one. That would be helpful to understand.

Amir Panoush | Chief Executive Officer

I definitely suggest. I think several names that we mentioned in the past, including this time, we see them basically licensing multiple technologies from us. It can be multiple technologies across Connect, but also we have more and more across multiple technologies of Connect and Infer. And in some cases, the whole thing connects Sense and Infer. And so we see that progression going very well. And we expect more as we keep driving those technologies into the marketplace. But definitely what drives the baseline flywheel or success with our customers is very high appreciation of our wireless connectivity portfolio. And on top of that, our investment and expansion in the AI or Infer, overall portfolio. Other things, as we pointed out, Lenovo with their headset this quarter, we announced that basically They've been using or start ramping with our real space or 3D spatial audio technologies. And they are also a wireless connectivity basically customer to the semi guys that are delivering those solutions to them.

Suji De Silva | Analyst, Roth Capital

Okay. I appreciate that, Amir. Great. And then in the connectivity specifically, Bluetooth is already well penetrated. Can you update us on where Wi-Fi is in the attached curve going up in terms of attachment? And then, will UWB follow a similar path, or is that more of a niche technology?

Thanks. Amir Panoush | Chief Executive Officer

Yes, on the Wi-Fi, and if you can point more into the specific numbers, but we're extremely encouraged with the ramp that we've seen first through all 2025, and now continuing and even more in Q126, where we reach an all-record high volume this quarter, and we expect that to continue with a very nice ramp moving, so-called, from the more legacy Wi-Fi into Wi-Fi 6, And then within a year or two, we'll start seeing the transition into Wi-Fi 7 plus lots of the combos of the Wi-Fi and Bluetooth. So overall from a pattern and penetration in the marketplace, we expect, as we mentioned on other calls, right, that Wi-Fi shipments will reach a very high volume above the half a billion and more as we keep progressing and then basically augment very nicely our penetration with Bluetooth plus the combos. In terms of UWB, this is, I would call it overall, a newer technology. There are lots of very good indication in the marketplace from the use cases. And with that, the potential demand for the technology, we've seen more penetration right now in smartphone from there into different type of edge devices for location-based, for access and control. So we are very encouraged with that. Now we just got a major license deals with a US customer. And there will be more to follow. But overall, from a volume penetration, I'd say we are highly penetrated with Bluetooth. We are getting to the same level with Wi-Fi. And the next to follow will be UWB. Okay, great.

Yaniv Ariyeli | Chief Financial Officer

Thank you. The only comment that I can add for that, Suji, is we talked about, Amir mentioned the combo chips. If you look at the Bluetooth Wi-Fi combo chip year over year, the volume has doubled. We haven't opened that number up yet. We'll do it in due time. But some of the reason also that we mentioned that the Bluetooth is going down because we are counting those combo chips is combo and not Bluetooth necessarily. There is no issue in the market. It's just our count and ASPs for those combo chips are higher than the individual Wi-Fi or Bluetooth solutions in the past.

Suji De Silva | Analyst, Roth Capital

Can you be counting those in Wi-Fi units? Is that what you think?

Yaniv Ariyeli | Chief Financial Officer

The combo of Bluetooth and Wi-Fi units, yeah, double year-over-year for Q1. Moderator: Okay, thank you, thank you.

Betsy | Conference Operator

Sure. The next question comes from Sameek Chatterjee with JP Morgan.

Please go ahead. Sameek Chatterjee | Analyst, JP Morgan

Great, thanks for taking my questions, and congrats on the strong results here. Maybe just another follow-up on Wi-Fi, the 91 million number that you had there, it's pretty strong considering a seasonal sort of, you typically see a seasonal downtick into 1Q. Can you just outline if there was anything in terms of a new customer, volume, et cetera, ramping into 1Q that drove that seasonality? And from this sort of 1Q base, should we expect to see a similar pickup into the second half that you've historically seen from first half to second half perspective in Wi-Fi? Thank you.

And I'm a follow-up. Amir Panoush | Chief Executive Officer

Yes, Amik, this is a great question. And actually, the ramp or the volume in Q1 of our Wi-Fi shipments is not related to seasonality, as you pointed out. It's really the migration of multiple customers adopting our technology. So either migration from Wi-Fi 4 to Wi-Fi 6, or many of them actually new customers that start ramping with the Wi-Fi 6. And I will remind everyone that we talked about more than 30 licenses agreements that we have made in the last two, three years of Wi-Fi technology. And those basically customers are now coming more and more into production. So that momentum, we expect to continue. And actually we should expect second half to be stronger than the first half, both based on the seasonality, plus basically more and more new customers and new program basically ramping in volume for Wi-Fi. So Wi-Fi, we are really still in the ramp up in terms of market penetration. and our customers basically ramping their portfolio and their product line. Correct, correct, correct. And just maybe... And it's true, by the way, Samik, both to industrial and consumer. So we are really doing well on both fronts with our Wi-Fi technology.

Sameek Chatterjee | Analyst, JP Morgan

Okay. Just for a quick follow-up, any updates on how you're thinking about capital allocation, particularly in relation to M&A? given that it's a pretty strong year, you'll generate more cash. How are you thinking about sort of the alternatives in front of you, including if you do go CM&A, what would be the more sort of targeted technology areas that you would look for?

Thank you. Amir Panoush | Chief Executive Officer

Yeah, definitely. This is a key important item within what we're looking to execute and our overall strategy to scale up the company and looking into an M&A option for us. The focus there will be around so-called technologies that complement our success in the smart edge era. We have more focus on IP overall in order to build the scale. So, you know, we talk about connections and infer within those technologies and augmented technologies. I think that's what we are really targeting, and hopefully we'll be able to talk about it as we progress through the year.

Operator | Conference Specialist

Thank you.

Sameek Chatterjee | Analyst, JP Morgan

Thanks for taking my questions.

Operator | Conference Specialist

Thank you. Yeah, thanks for me.

Betsy | Conference Operator

The next question comes from Gary Mobley with Loop Capital.

Please go ahead. Gary Mobley | Analyst, Loop Capital

Hi, guys. Thanks for taking my question. Looking specifically at the SEVA wavelengths, the RF subsystem there, I know the highlight that you put in front of us today is more of a system-level license agreement, you know, including the RF. But if I'm not mistaken, that RF subsystem might be unique to a specific manufacturing process node, TSMC 12 nanometers specifically. Can you speak to how you might move forward in broadening that, I guess, the scope of the RF subsystem across different process nodes and different boundaries and how that might affect the overall licensing for wavelengths?

Amir Panoush | Chief Executive Officer

Yeah, Gary, great question. So yeah, the Lynx 200 that we announced previously was around 12 nanometers TSMC. And overall, what we are executing our strategy is actually to go beyond one process node or one fund B. And also, I think we are well positioned with the access that we have in the market from the number of customers that have licensed our digital IP technology. to have very good sense of where the roadmap is heading in terms of the process node needs, as well as the type of funders that they are looking to partner with. And yeah, we are not going to support all different options out there and permutation, and definitely some customers will build with their own RF, but I'm very confident that we can so-called go and support the majority or the significant portion of where the market is heading in terms of the process need and the funders. So we'll have so-called multiple options there, but we are not going to cover the whole spectrum.

Gary Mobley | Analyst, Loop Capital

For a follow-up, I want to ask in general about the license pipeline. You know, how does it look, you know, compared to maybe a year ago? And if you can give us an update as to what might be recurring in license revenue and what percent still remains, you know, one time in nature.

Amir Panoush | Chief Executive Officer

There are several so-called fundamental trends that encourage us and we feel good with the perspective of our licensing business. One, we see more and more customers, repeating customers coming again, going from one generation to the next. The other one is more customers are coming to license multiple technologies, either by adding additional technology or just from the start go looking for multiple technology. And the last piece is what we are highlighting this quarter, is really coming in licensing solutions, which at the end of the day brings more value to our customers and help us, so-called, to have better economics of the deals, including the licensing portion. When we take all those three into account, overall, we feel good. We feel confident with where we are in terms of the pipeline, our ability to execute our licensing business. And I think the last few quarters have shown that, including this quarter. So I would say overall, we look at the year as a good growth year in licensing. the pipeline really supports as well. Moderator: Thank you. Thank you, Gary.

Betsy | Conference Operator

The next question comes from Josh Buckalter with TD Cowan.

Please go ahead. Josh Buckhalter | Analyst, TD Cowen

Hey, guys. Thanks for taking my question, and congrats on the results. Maybe I wanted to start big picture. You know, we're seeing sort of a lot of positivity in the CPU space as compute resources are moving, you know, increasingly away from or in addition to being complemented by outside of the AI server rack. Could you maybe reflect on where we are on the embedded side in that adoption curve and specifically any updates or major momentum on the MPU side from the quarter you wanted to highlight?

Thank you. Amir Panoush | Chief Executive Officer

Yeah, great question, Joe. So first from the so-called momentum of CPU, And this is what we have been talking about for the last few quarters about so-called the hybrid AI model and things are more moving into the edge. So this is very encouraging to see that that's really happening in the market. And also other customers are able to, other players in the market are able to basically execute to that and show that progress. And we need to keep in mind that when we look at our Connect, Sense and Infer IP portfolio, It actually complements extremely well CPU, whether that CPU based on that architecture or the other RISC-V architecture. So we are really indifferent to that and we can support both. So that puts us in a good position. On the NPU specifically, that's where we are building, again, a portfolio of NPUs that goes along any kind of CPU architecture. And I think that's where we're also uniquely positioned. focusing on NPU technology itself as accelerator to the CPUs that are out there. The more CPU drives more adoption of AI at the edge, the more opportunities we will see with our NPUs. All those things are encouraging so-called activities and potential tailwinds for us as we progress through the year and next year.

Josh Buckhalter | Analyst, TD Cowen

Thank you for the color there. And then maybe I can follow up on the second half outlook. A lot of companies have flagged potential cuts in the second half from the memory headwinds. Have you guys seen anything yet that's impacted your customers? And then I was also hoping you could maybe walk through what are the expectations that you have in your second half outlook for the large North American smartphone customer that has some of your IP on their modem.

Thank you. Yaniv Ariyeli | Chief Financial Officer

Sure. So, you know, we built some of our expectations top down with knowing that the markets in the second half with the seasonality of Christmas and the ramp up for introduction of new products around that timeframe is strong. We'll need to see how the market deals with the memory pricing and shortages. but right now we haven't heard anything specific from our customers other than what we have seen in the mobile space and the low tier phones that we have seen in other companies have talked about Qualcomm ARM in the first quarter of the year with mentioning the recovery going forward. So I don't think we have seen anything yet. I think the market has its way to overcome some of the Hurdles when we get to the high season, and we have built all that in, including the North American OEM that doesn't share its internal plan, that doesn't share exactly the timing of introduction of new products, whether they're based on their own motive or not. And we have our own estimates that we have built in this model. The rest will look and get the royalty reports on a quarterly basis. And based on that, they'd be able to report. Again, historically, and the more we have added the combo chips, like we talked about today with higher ASPs, the more that we have the automotive AI, NXP and Renaissance helping us this year, which weren't around last year with royalty contribution. the more 5G networks that started the year very strong, and then the OEM opportunities in the U.S., it looks like a stronger and promising second half. And this is the reason we took our guidance to the top range of the previous annual guidance of the 8% to 12%.

Operator | Conference Specialist

Thank you. Moderator: Thank you, Joshua.

Betsy | Conference Operator

The next question comes from Madison DiPaolo with Rosenblatt Securities.

Madison DiPaolo | Analyst, Rosenblatt Securities

Please go ahead. Hi, this is Maddie calling on behalf of Kevin Cassidy. I was just wondering which end markets here are expressing the most interest for in the NeuroPro? Moderator: Say that again, Maddie?

Yaniv Ariyeli | Chief Financial Officer

Sorry.

Madison DiPaolo | Analyst, Rosenblatt Securities

Which end markets are expressing the most interest in the NeuroPro?

Amir Panoush | Chief Executive Officer

It's board-based, I would say. We see it in automotive, we see it in some industrial applications, we see it also in smart home and consumer applications. If we look at the 10 plus more deals that we so-called licensed last year, it's really across all those four markets that I mentioned. So I can't point to one that is much more than the others, very significantly. It's nicely distributed and wide-based. So we mentioned also last quarter a PC OEM, so we are in the PC market consumer. Again, smart home surveillance and automotive industry.

Madison DiPaolo | Analyst, Rosenblatt Securities

Okay, thank you.

Operator | Conference Specialist

You're welcome.

Thank you. Betsy | Conference Operator

The last question today comes from Martin Gang with Oppenheimer.

Please go ahead. Martin Gang | Analyst, Oppenheimer

Hi, thank you for taking my question. My first question is on the Bluetooth radio. Is there any plan or intention to extend the IP to other connectivity products, notably Wi-Fi?

Amir Panoush | Chief Executive Officer

Yeah, Martin, good question. Yeah, definitely. So we started and announced this product first. At the end of the day, we have very strong capabilities across the spectrum of wireless connectivity technology. And the intention and the plan is definitely to expand this to so-called a full solution offering across our wireless connectivity portfolio. So starting with Bluetooth, as you mentioned, the next natural thing will be Wi-Fi, and then also UWB and our other technologies. Definitely that's the plan. And overall, also this quarter we announced on the satellite side that we're also moving more into complete so-called basement solutions. not just so-called offering the components like DSP accelerators, but really the whole basement subsystem. And that resonates very, very nicely with customers, especially customers that want to make a decision moving from make to buy, because they need to rely on more of a so-called ready-to-go solution to help them with time to market and success overall.

Martin Gang | Analyst, Oppenheimer

Thanks, Amir. A follow-up on your answer, you mentioned that satellite communication, is that primarily still on the market deployment regarding smartphone with satellite-based messaging capabilities, or are you seeing more emerging applications of that?

Amir Panoush | Chief Executive Officer

No, we're actually seeing much more potential on the emerging applications as well. So if we look at the different types of OEM out there, they're basically moving to provide more and more as a service, and part of the service, they need a complete solution end-to-end, and we are offering the wireless communication both from the terminal side as well as from the satellite side, and then they will build a so-called complete end-to-end offering with the service, and that service is really to be able to have ubiquitous type of connectivity, whether it's for industrial use cases, logistical use cases, and so on, or even places where there is very little coverage of wireless infrastructure, and they want to provide that augmentation. So those are all about system well beyond just mobile.

Operator | Conference Specialist

Thank you. Moderator: Thank you, Morten. Yeah, thanks a lot, Morten.

Betsy | Conference Operator

This concludes our question and answer session. I would like to turn the conference back over to Amir Panoush for any closing remarks.

Amir Panoush | Chief Executive Officer

Thank you. In closing, we believe SIVA is well positioned as the industry continues to evolve towards physical AI. where connectivity, sensing, and inference converge at the edge. Our expanding portfolio, combined with our strategy to deliver more integrated, system-level solutions, is enabling us to increase our value per customer and strengthen our long-term royalty model. We remain focused on executing our strategy, deepening customer relationships, and driving sustainable growth. Thank you for your continued support. Richard, I will hand over to you to wrap it up.

Richard Kingston | Vice President of Market Intelligence and Investor Relations

Thank you, Amir. As a reminder, the prepared remarks for this conference call are accessible through the investor section of our website. With regards to upcoming events, we will be participating in the following conferences. Oppenheimer 27th Annual Israeli Conference on May 18th in Tel Aviv. The JP Morgan 2026 Global Technology, Media and Communications Conference, May 20th in Boston, Massachusetts. TD Cowen's 54th Annual Technology, Media, and Communications Conference, May 27th in New York. DEEPL's Boston Cross-Sector One-on-One Conference, June 2nd in Boston. The 6th Annual Rosenblatt Technology Summit, The Age of AI, June 10th, being held virtually. And the 16th Annual Roth London Conference, June 16th to 18th in London, England. Further information on these events and all events we will be participating in can be found on the Investors section of our website.

Thank you and goodbye. Betsy | Conference Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. jsPDF 3.0.3 D:20260606090041-00'00'

NASDAQ:CEVA Q4 2025 Earnings Call Transcript Generated on 6/6/2026 Operator | Conference Operator: Good day, and welcome to the SEVA Inc. Fourth Quarter and Year-End 2025 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Richard Kingston, Vice President of Market Intelligence and Investor Relations.

Please go ahead. Richard Kingston | Vice President of Market Intelligence and Investor Relations

Thank you, Betsy. Good morning, everyone, and welcome to SEVA's fourth quarter and full year 2025 earnings conference call. Joining me today on the call are Amir Panoush, Chief Executive Officer, and Yaniv Ariely, Chief Financial Officer of SEVA. Before handing over to Amir, I would like to remind everyone that today's discussion contains forward-looking statements that involve risks and uncertainties, as well as assumptions that if they materialize or prove incorrect, could cause the results of SEVA to differ materially from those expressed or implied by such forward-looking statements and assumptions. We will also be discussing certain non-GAAP financial measures, which we believe provide a meaningful analysis of our core operating results and comparisons of quarterly results. Please see the earnings release we issued this morning for our reconciliations of our non-GAAP financial measures. Our earnings release can be found in the SEC filing section of our investor relations website. And with that said, I'd like to turn the call over to Amir, who will review our business performance for the quarter and provide some insight into our ongoing business. Amir?

Amir Panoush | Chief Executive Officer

Thank you, Richard. Welcome, everyone, and thank you for joining us today. 2025 was a landmark year for SIVA. We strengthened our foundation, reinforced our leadership position in wireless connectivity, and accelerated our expansion into AI for the smart edge. Throughout the year, we continued executing on our long-term strategy, partnering closely with customers to solve their most critical technology challenges through a comprehensive best-in-class portfolio of IP platforms that enable smart edge devices to connect, sense, and infer data locally. This strategy matters now more than ever. The shift of AI inference from the cloud to the edge and toward hybrid AI continues to accelerate. And the next wave of innovation is increasingly about physical AI, where devices must connect to and sense their environment, process data locally, and infer in real time to make decisions. Siva is uniquely positioned for the physical AI era. By offering a comprehensive portfolio of IP building blocks spanning connect, sense, and infer use cases, we provide the flexibility our customers need Whether licensed individually or in multi-IP configurations, these technologies drive superior customers' outcomes and strengthen our long-term economic model. Before reviewing the year and our key achievements, I'll first provide an overview of our fourth quarter performance. For the fourth quarter, we delivered the highest quarterly revenue in SIVA's history, which was 7% higher year-over-year excluding the intrinsic design services business, which we divested in 2023. Licensing revenue increased 11%, exceeding our expectation through strong execution across all three of our technology's pillars and reflecting broad demand across multiple end markets. In the quarter, we signed 18 licensing agreements, including three NPU licensing deals, multiple Wi-Fi 7 and combo connectivity wins, and a meaningful software engagement, reinforcing the breadth of our portfolio. Of the 18 deals signed, five were with OEMs. Turning to licensing highlights regarding AI, we reached one of the most significant AI milestones for SIVA to date during the fourth quarter, signing an NPU licensing agreement with one of the world's leading PC OEMs developing its next-generation AI personal compute architecture. Their selection of Civa's Newport NPU portfolio is a strong validation of our technology and represents a breakthrough for on-device AI adoption in the PC category. This win underscores our ability to set the standards for high-performance AI integration into next-generation computing. This partnership is strategically important on two fronts. First, it demonstrates top-tier customers' trust in SIVA's leading and optimized IP foundations to their AI roadmaps, allowing them to focus their engineering talent on software, model optimization, and user experience differentiation. Second, it confirms that the PC ecosystem has reached a tipping point where dedicated NPUs are a baseline requirement for competitive AI performance. As AI features proliferate across operating systems, creative workflows, productivity applications, and local LLM acceleration, the ability to deliver superior performance per watt is the new strategic differentiator, and SIVA is a key player in this transition. Importantly, Our AI momentum is also increasingly reflected in our financial mix as well as deal activity. AI processor licensing represented a meaningful portion of our licensing revenue in 2025. While AI design cycles can be longer than traditional connectivity deployments, disagreements typically carry higher pre-unit and longer-term royalty potential. expanding content per device, and strengthening the durability of our royalty model over time. As for licensing highlights in connectivity, our connectivity business delivered another strong performance in the fourth quarter, highlighting the depth and durability of our wireless franchise. Bluetooth and Wi-Fi IPs continue to see strong demand as customers upgrade to Wi-Fi 7 and Bluetooth high data throughput. This quarter's deals include Wi-Fi 7 for IoT, a multi-use Bluetooth HDT agreement, and three Bluetooth Wi-Fi combo wins. One notable win was with the semiconductor division of one of the world's largest white goods manufacturers, which licensed our Wi-Fi 6 and Bluetooth IP for a combo connectivity chipset, supporting smart home applications. This illustrates a broader trend. Consumer, industrial, and automotive OEMs are increasingly designing their own connectivity silicones to deliver tightly integrated, app-centric experiences, and selecting SIVA as a trusted partner for roadmap critical platforms. As for SendSync, another standout deal in the fourth quarter was a software licensing agreement with a leading TV platform planning to integrate our motion engine technology into its smart TV operating system used by multiple global TV brands. As TVs evolved into interactive experience hubs, motion-based inputs and enhanced user interactions are becoming increasingly important. SIVA's longstanding presence in this market provides deep domain expertise and platform credibility. Now turning to royalties, This was our strongest royalty quarter in more than four years. We also caused our diversified smart edge royalty customers more than offset mobile softness, underscoring the strengths and resilience of our business model. In the fourth quarter, Wi-Fi shipments reached a record high, up 31% year over year, reflecting increased deployment, often as part of combo connectivity chips. Cellular IoT shipments were up 30% year-over-year, driven by smart edge applications, and Bluetooth shipments continue to be our largest volume category. We also saw a recovery from China-based handset customers during the quarter. However, memory pricing and supply constraints continue to impact smartphone shipments. Now turning for the full year 2025 review. For the full year, total revenue increased 2% year-over-year. Licensing and related revenue grew 6%, reflecting strong demand across AI and advanced connectivity. Royalty revenue was down 2%, primarily due to smartphone softness and memory supply shortage impacting overall unit achievement. Importantly, royalties grew sequentially each quarter and we exited the year with our strongest royalty quarter in more than four years. SIVA power devices shipped in 2025 reached a record 2.1 billion units, up 6% year-over-year, with record Wi-Fi shipments, which grew 48% year-over-year, and record cellular IoT shipments, up 42% year-over-year. Overall, we signed 54 licensing agreements in 2025 across our extensive IP portfolio, including 10 OEMs agreements. Importantly, 12 customers licensed multiple SIVA technologies, a clear indication that our strategy to offer a broad portfolio across Connect, Sense, and Infer is resonating and enabling customers to address multiple requirements within a single engagement. Taking a step back, 2025 features several important milestones that reinforce our long-term opportunities. The strength of our connectivity franchise is defined by deep customer integration and scale. During the year, we signed nearly 30 new engagements for our Bluetooth and Wi-Fi IPs, underscoring continuous relevance across smart edge markets. We also secured Wi-Fi 7 agreements with two of our largest connectivity customers, who together have shipped more than 3 billion civil power devices, effectively establishing long-lived royalty engines that we expect to drive billions of units and tens of millions of dollars in royalties over the life of these programs. In addition, our ability to deliver integrated combo solutions continues to differentiate us and improve data economics over time. 2025 was a breakthrough year for SILVA in AI and NPU licensing. During the year, we signed 10 Newport NPU agreements, headlines by comprehensive Newport portfolio license with Microchip and a strategic engagement with a leading global PCOEM, underscoring our attraction across embedded consumer automotive, industrial, and compute markets. This momentum is increasingly reflected not only in deal activity, but also in our financial mix, with AI processor licensing representing a meaningful portion of licensing revenue in 2025. Strategically, the licensing agreements we signed during 2025 are building long-term royalty trajectory and visibility. Based on these science agreements, and our insights into customers' roadmaps, we estimate that they represent an aggregated lifetime royalty potential of $125 million over their expected product life. While this value will be realized over multiple years and is dependent on customers' deployment and market adoption, the magnitude of this opportunity relative to our current royalty base underscores the strength, durability, and accelerating momentum of the licensing and royalty flywheel we are building. In terms of scale and credibility, we celebrated reaching 20 billion cumulative SIVA power devices shipped to date during the year, and in fact, exceeding 21 billion cumulative units by the end of the fourth quarter. These milestones reflect the trust we have built with the industry over decades and positioned SIVA strongly for the physical AI era now underway. A key strength of our business that is often underappreciated is our diversification across smart edge and markets. In 2025, smart edge applications generated 86% of total revenue, driven by market share gains by SIVA-powered customers across consumer, automotive, industrial, and infrastructure markets. As intelligence continued to move into physical devices, this diversified and expanding customer footprint positioned SIVA to evolve naturally from enabling the smart edge to enabling physical AI, where connectivity, sensing, and inference converge to drive the next phase of growth. Entering 2026, we are focused on extending our leadership in established categories and deepening our integration with our customers' roadmaps. By providing a more complete IP stack, we are becoming an even more essential partner to our customers, effectively increasing the value per device. Now, I will turn the call over to Yaniv to review the financials.

Yaniv Ariely | Chief Financial Officer

Thank you, Amir. Good morning. I'll now start reviewing the results of the operations for the fourth quarter of 2025. Revenue for the fourth quarter increased 7% year over year and 10% sequentially to an all-time record high of $31.1 million. The revenue breakdown is as follows. Licensing and related revenue increased 11% year over year and 9% sequentially to $17.5 million, reflecting 56% of our total revenue. Royalty revenue increased 2% year-over-year and 12% sequentially to $13.8 million, reflecting 44% of our total revenue. Quarterly gross margin were 88% on GAAP basis and 89% on non-GAAP basis. Total gap operating expenses for the fourth quarter were $28 million, and total non-gap operating expenses for the fourth quarter, excluding equity-based compensation expenses, amortizations of intangibles, and deal costs, were $22.2 million. Gap operating loss for the fourth quarter was $0.4 million, as compared to gap operating income of $0.1 million for the same period last Non-GAAP operating margins and income were 18% of revenue and $5.7 million and grew 20% and 26% year-over-year, respectively, as compared to non-GAAP operating margins of 15% and non-GAAP operating income of $4.5 million recorded for the fourth quarter of 2024, respectively. Financial income was $1.4 million compared to a net loss of $0.1 million for the fourth quarter of last year. Gap and non-gap taxes were approximately $2.2 million, higher than our guidance of $1.8 million, and affected by the first tax asset write-off associated with the utilization, limitation of withholding taxes, and from a regular geography relocation of revenue recognized from deals and royalty revenues in the quarter. Gap net loss for the fourth quarter was $1.1 million and diluted loss per share 4 cents as compared to a net loss of $1.7 million and diluted loss per share of 7 cents for the fourth quarter of 2024. Non-gap net income and non-gap diluted income per share for the fourth quarter of 25, increased 86 and 71% to $4.9 million and 18 cents year-over-year, respectively. Compared to non-GAAP man income of $2.7 million and non-GAAP diluted income per share of 11 cents for the fourth quarter of 24. With respect to other related data, shipped 606 million units of SIVA power devices, down 3% from the fourth quarter of last year. Of the $606 million reported, 108 million units, or 18%, were for mobile handset modems. 479 million units were for consumer IoT products, up from 459 million for the fourth quarter of last 19 million units were for industrial IoT products, down from 35 million units in the fourth quarter of last year. Bluetooth shipments were 303 million units for the quarter, down from 343 million units in the fourth quarter of 24. IoT shipments were a quarterly record 60 million units, up 30% year-over-year. and our Wi-Fi shipments were a record 86 million units, up 30% year-over-year. As for the year, total unit shipments were a record 20.1 billion devices in 2025, up 6% year-over-year, which is equivalent to approximately 66 SEMA-powered devices sold every second in 2025. Annual modem shipments were down 18% year-over-year to 280 million units, reflecting softness in smartphones. Bluetooth shipments were 1.1 billion units, similar to last year. Annual consumer IoT related shipments were 1.7 billion units, up 14% year-over-year. Annual industrial IoT-related shipments were 87 million units, down 31% year-over-year. Wi-Fi, cellular IoT, and audio AI shipments all showed strong year-over-year growth of north of 40% each. In terms of royalty contributions, Wi-Fi royalties were up 70% year-over-year, reflecting higher volumes and ASPs from our Wi-Fi 6 customers and cellular IoT royalties were up 20% year-over-year. On an annual financial metrics, revenue increased 2% to $109.6 million, in line with our updated outlook we shared in May last year. Non-GAAP gross profit remained strong at 88%. Our non-GAAP net income increased 20% year-over-year, and diluted EPS increased 17% year-over-year, all contributing to sustainable and gradual growth and profitability. As for the balance sheet items, at the end of the year, cash, cash equivalent, balances, marketable securities, and bank deposits were approximately $222 million. In the fourth quarter, we successfully executed a $3.5 million share follow-on offering for approximately $63 million net to strengthen our balance sheet. Our DSAs for the fourth quarter were 57 days. And during the fourth quarter, we generated $8.7 million of cash from operating activities. Our ongoing depreciation and amortization was $1.1 million. And purchase of fixed assets was $1.5 million. At the end of the fourth quarter, our headcount was 424 people, of whom 343 were engineers. Now for the guidance. Amir highlighted our achievements in 2025 and the strong fundamentals we have in place to build long-term growth and profitability. From a financial perspective, this execution translates into solid progress across key metrics with annual non-GAAP net income increasing 20% year-over-year and non-GAAP fully diluted EPS growing 17%. These results were supported by record high revenues in the fourth quarter of 25 and non-GAAP operating margin of 18%, reflecting both operating discipline and improving mix. Building on the consistent progress we have made over the last two years gives us the confidence as we enter into 2026. which we view as another year of growth across multiple financial and business dimensions. In licensing and related revenues, we expect growth to be driven by continued expansion of AI adoption across multiple industries, an increasing mix of higher value, more integrated engagements, and our leadership in wireless connectivity supported by diversified product portfolio of connectivity, AI, and sensing IPs. On the royalty side, we are encouraging momentum across our connectivity product lines, including 5G handset modems, Bluetooth, Wi-Fi, and cellular IoT as deployment broaden and program license in recent years continue to ramp. While we do not have the control and the precise timing of royalty growth and continue to monitor factors such as memory pricing and the broader market condition, the underlining trajectory for our business and our diversified end market exposure positions us well moving into 2022. On an annual basis, our total revenue is expected to grow 8% to 12% over 2025, with lower growth in the first half of the year and higher in the second half, similar to prior years and seasonal trends, and subject to the memory pricing fluctuation and supply challenges. On the expense side, we continue to demonstrate strong cost disciplines and operating leverage. Excluding currency impacts, our overall 2026 non-GAAP expense base, including both cost of goods and operating expenses, is expected to increase in the range of 1% to 3%, significantly below our expected top line growth, reflecting the scalability of our business model, but excluding any FX During the second half of 2025, and so far this year, the strengthening of the Euro and the Israeli shekel against the US dollar has created foreign exchange headwinds across the industry, particularly for companies with global distributed engineering teams. As a result, our non-US dollar-based expenses, which are mainly the research and development teams, in Europe and in Israel are expected to increase by approximately 10 percent year-over-year, representing an incremental impact of around $5 million. Taking both factors into account, modest organic expense growth with FX impact, we expect total non-GAAP expenses in 2026 to be in the range of 104.4 to $108.4 million, with non-GAAP cost of goods sold increasing by approximately half a million dollars, and non-GAAP operating expenses increasing by approximately 6.1 million. Importantly, this outlook reflects our continued focus on disciplined investments, efficiency, and maintaining flexibility as we support growth across our diversified smart edge markets. From the guidance and activities we have just discussed, we anticipate non-GAAP operating income and non-GAAP net income to increase significantly by approximately 35% to 40% year over year. Annual 2026 equity-based compensation expenses is forecasted to be between $22 and $23.5 million, and the amortization of acquired intangibles and costs associated with business acquisition, approximately $0.4 to $0.5 million each. Gross margin is expected to be approximately 88% on GAAP basis for the year. Specifically for the first quarter of 26, with traditional seasonality in shipments of consumer IoT and mobile products post the holiday season, revenues forecasted to be between $24 to $28 million, sequentially lower than the record fourth quarter we just reported, but still significantly higher than the first quarter of 2025 at the middle. Gross margin is expected to be approximately 86% on GAAP bases and 87% on non-GAAP bases due to lower seasonal royalties, excluding an aggregate of $0.2 million of equity-based compensation expenses and $0.1 million of amortization of acquired intangibles. GAAP OPEX for the first quarter is expected to be between the range of 27.6 to $28.6 million, higher than the level we just reported for the fourth quarter of 25, at the midpoint of our guidance range, mainly due to the FX effect that I just walked through. Of our anticipated operating expenses for the first quarter, $5.2 million is expected to be attributed to equity-based compensation expense, $0.1 million for demortization, of acquired intangibles and another $0.1 million of costs associated with business acquisitions. Non-GAAP OPEX is expected to be in the range of $22.2 to $23.2 million. Net income is expected to be approximately $1.7 million. Taxes for the first quarter are expected to be approximately $1.3 million. And the share count for the first quarter of 26 is expected to be approximately 27.7 million shares on GAAP and 29.4 million shares for non-GAAP basis. Betsy, you could now open the Q&A session, please.

Operator | Conference Operator

We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question today comes from Kevin Cassidy with Rosenblatt Securities.

Please go ahead. Kevin Cassidy | Analyst, Rosenblatt Securities

Yes, thanks for taking my question and congratulations on the great results. For your NPU pipeline, can you just give an idea of the scale? How many more engagements do you have right now compared to, say, this time last year, and maybe even what the end market exposures are?

Amir Panoush | Chief Executive Officer

Yeah, Kevin, thanks a lot for congratulating us and for the question. First of all, we started to I'm very, very encouraged by how we executed in 2025 our penetration into the AI. And that was a year of very significant market share gain, as well as more than 10 deals that we have been able basically to capture. With that, we have built a complete portfolio of NPUs for all the different type of smart edge markets and as that transition to the physical AI. So overall, we are well, well positioned right now going to 2026. The pipeline overall keeps growing across pretty much all the different type of sub-market segments that we see across the smart. This is true for consumer, different type of computing devices, different type of embedded MCU type of applications, as well as in the industrial, as well as in automotive. Really, we see a very healthy pipeline across all these sub-markets. Very encouraged with how we have executed and how we see the future going to 2026 on that.

Kevin Cassidy | Analyst, Rosenblatt Securities

OK, great. And just as a follow up, a little clarification on the PCOEM. And congratulations on that. But I just wanted to make it clear. I think you said a dedicated NPU. So is this a separate chip or is it integrated in a CPU package too, like in the same silicon with the CPU?

Amir Panoush | Chief Executive Officer

Yeah, so first, it's definitely a design win or a deal that we're extremely, extremely excited about. This is one of the top PC OEMs out there. And this is for an OEM that decided to build so-called their own internal AI and NPU functionality within so-called the SoC platform that they are integrating into. So basically what we are delivering them is the whole core NPU functionality. And then they integrated into the SOC that they are building.

spk09

So a separate chip. Yeah. A separate chip for a... For NPO.

spk07

For NPO. Okay, great. Thank you. Thank you, Kevin.

Operator | Conference Operator

The next question comes from Ruben Roy with Stifel.

Please go ahead. Ruben Roy | Analyst, Stifel

Thanks, and echo the congrats on a nice end to 25. Amir, maybe I could follow up on Kevin's question and just... talk a little bit more about the NPU win. Can you talk a little bit about the competitive dynamics for that? Because you have others like ARM sort of integrating NPUs. So how should we think about the functionality? Are there going to be multiple NPUs, do you think, in PCs going forward as the AI workloads evolve? Or is this something where you know, from a competitive basis, you guys were able to displace, you know, sort of the, you know, existing solutions maybe that are available to the OEM.

Thank you. Amir Panoush | Chief Executive Officer

Yeah, definitely, Ruben. So first I would say that the way that we see right now the landscape and definitely for the high-end compute devices is that there is stronger and stronger need to really best in class performance. And by that I mean the power per watts that you can generate, the so-called latency or the performance of throughputs per token that you generate. This really requires so-called a co-architecture and flexibility of the co-architecture to deliver best in class, what we call PPA, Power Performance Area, that deliver basically a very competitive landscape for our customers. With this specific OEM, they looked at what is available out there and they want to make sure that they have complete internal integration between the hardware and the software to drive the so-called the high performance that they need. But what they need is the underlying core silicon IP technology with the software's come on top of that, that deliver for them the best in class performance. And I think we are well positioned competitively and that's why they picked us in this specific basically design phase.

Ruben Roy | Analyst, Stifel

Right. Okay. Very helpful. And then as a follow-up, just to go through the guidance again a bit here, you guys talked a little bit about recovery in China from a handset customer, and obviously there's some moving parts with memory pricing, et cetera. So in thinking through sort of the first half or the second half commentary, can you just give us a little bit of a little more detail on how you're thinking about sort of end demand relative to dynamics out of your control, like memory pricing, et cetera, on first half? Is it much different, would you say, from typical seasonality? I mean, if you look at, as Janice said, you're up year over year at the midpoint, and seasonally it looks pretty similar to what you saw last year. So I'm just wondering what some of the assumptions on things out of your control might be in the first half, if that's much different from typical seasonality.

Thank you. Amir Panoush | Chief Executive Officer

Yeah, I would start first that our business, a significant portion of our business is really not so-called dependent on mobile. It's well-ware diversified across the different sub-markets of the smart edge. And in that market, we keep gaining market share. Our customers keep ramping with our different type of technologies. And overall, we expect similar seasonality as we have seen in previous years. But with that seasonality, we keep increasing our market share. Now more specifically on mobile where potentially there is so-called more dependency or can be some impacts related to the memory supply. First again, we are going to see increase in market share thanks to the mobile OEM that is going to integrate more and more the internal modem, at least that's our expectation moving forward. But on a so-called integrated basis, With the other smartphone OEM that we have, definitely, again, there is potential impact coming from the memory shortage. And even there, we do expect meaningful seasonality between the first half and the second half. So on an aggregated basis, we're still expecting quite strong seasonality in 2026 as well, while driven by a market share gain across all the different markets for us.

Yaniv Ariely | Chief Financial Officer

Ruben, I'll maybe add to that that our customer in China that you referred to, most of his sales are export to the rest of the world. India is a big market. Latin America, Africa, Eastern Europe type. So it's not necessarily domestic use. And therefore, the demand, the end demand is good. The question is how they will perform with the memory shortages and prices. That's just a little bit of another anecdote with regards to demand and demand at least for the products. And back to your first question, another reference is to the MPU. We came up with another press release of highlighting the entire, not just Q4, but the entire activity and results and achievements we had with AI. And in that press release this morning, we are saying that six of the NPU customers that have signed with us over the last year to two years should be ready in production by the end of the year and then probably or hopefully a royalty contribution in the beginning of 2027 for us from this relative new product line. So that's quite encouraging and we'll wait and continue to monitor their progress.

Ruben Roy | Analyst, Stifel

That's really helpful, Yaniv. And I guess you just made me think of another question. So apologies, but I just love to follow up on that last point that you made, which is Amir talked about the $125 million in lifetime royalty potential, and you've got a PC and PU deal here. PC design cycles maybe are a little bit quicker than some of the stuff that you might expect from, let's say, a microchip that's much more broad-based into a lot of different markets. So, you know, if we think about the waterfall of the $125 million, it sounds like you're going to start to see some of that in 27. Any way to think about that pipeline relative to, you know, how it'll flow into the model outside of what I just said? You know, PCs may be a little bit faster than some of the broader markets or anything else you can add on the pipeline. That'd be great.

Thank you. Yaniv Ariely | Chief Financial Officer

I think that over time, and not necessarily these first six, part of them, yes, we're going to see on one hand, the high royalty contribution, because as Amir explained, our offering today is both the high end and low end, very sophisticated automotive, PC, type of application as well as the IOT and wearables and the low power type of devices so the most important thing is higher volume for these new royalties but on top of that also higher ASPs on at least the higher end stuff. It's all a mix and this is a little bit more difficult to predict exactly how 2027 will look like and when it's going to hit, whether the first half or the second half. But when we monitor these customers of ours and when we support them in their design cycle, these are the dates and the opportunities we see in front of us. Overall, an increase in dollar revenue content from a new market for us. This is on top of the connectivity. This is on top of the IoT and mobile. It's essentially the third leg of AI. We did very well in licensing. Just over 20% of our licensing revenue for the first time ever in 2025 came out from that market. And potentially in 27, we could see also those royalties start to kick in. Indeed, exciting times.

Amir Panoush | Chief Executive Officer

Yeah, I would just add to that, Ruben, that definitely we are extremely excited and encouraged by the fact that those design wins are going to generate, per our estimation, $125 million in terms of royalty potential. And you pointed out very correctly on that in consumer, PC, and so on, the time to royalty is shorter, and definitely we expect with that market type of design wins that it will also start generating in 2027.

spk10

Perfect.

Thank you. Thank you. Operator | Conference Operator

The next question comes from Sujit Silva with Roth Capital.

Please go ahead. Sujit Silva | Analyst, Roth Capital

Hi, I'm here. Congratulations on the strong year and the progress here. The PCOEM win, just keeping up on that, is it more likely that it was a one-off special case for this OEM, or would you think, on the other hand, there's pipeline potential for additional OEMs to follow suit considering SIVA-based solutions as well?

Amir Panoush | Chief Executive Officer

First, the PC landscape is such that the number of customers, of course, is not super large versus, let's say, the other more diversified IoT market segments that we're addressing as well. But within that landscape, having the ability to internalize the AI capabilities, and with that, the software hardware integration and the specific optimization to the use cases they want to drive, it's a big value add. So definitely there is potential that other will follow suit with the same type of configuration. And regardless of that, of course, we are extremely excited by the fact that after very significant lengthy type of evaluation, we came at the top based on very, very strong performance metrics that we can provide to, in this case, to the PC OEM, but for potentially other PC customers as well as in other high-end compute devices that need the high-performance type of metrics.

Sujit Silva | Analyst, Roth Capital

Thanks, Amir. Very interesting. And then separately, you highlighted in your prepared remarks, Amir, physical AI. I was curious, you know, what pipeline opportunities there are there or current opportunities there are in physical AI that you would call out in terms of apps? And which physical AI app categories are the largest incremental royalty opportunity for you as that ramps up?

Amir Panoush | Chief Executive Officer

I think what is emerging more, and this is so-called the growth area beyond so-called our traditional market segments that you're after, is everything related to robotics. And we're already addressing, we will keep gaining market share in the type of like automotive and under-industrial application and the border IoT. But what is really exciting right now, so-called specifically related to physical AI is is the expansion of those capabilities all across wireless connectivity. They need, of course, to sense and understand the environment and then make an inference or decision based on all that information that really is going to happen across robotics. And now robotics moving so-called from a small volume in, let's say, warehouses to potentially be everywhere and supporting all human beings worldwide. So there is very big potential there. Of course, as the year progresses, we will see the real impact of that.

spk10

Thanks, Amir. Thanks, Julie.

Operator | Conference Operator

As a reminder, if you would like to ask a question, please press star, then 1 to join the question queue. The next question comes from Alec Valero with Loop Capital.

Please go ahead. Alec Valero | Analyst, Loop Capital

Hey, guys. Thank you for taking my questions. This is Alec on for Gary. My first question is on your fiscal 2026 guidance. What specifically would need to improve in fiscal 26 to turn toward the high end of your guidance range or even above the high end of the guide?

Yaniv Ariely | Chief Financial Officer

Yeah, obviously in guidance, you know, you have the two aspects, revenue and expenses. On the revenue front, 8% to 12% was our long-term growth trajectory back from 2010. analyst day that we did back in december of two or so three years ago so that's that's still intact maybe we've been behind in 25 but we're back to back to that stronger licensing obviously it could help us loyalty ramp up for many of these markets that we talked about this year no less or more effect from memory that those are the normal typical events that could influence the royalty level, obviously the timing of different product ramp-ups and things like that. On the expense side, the biggest element for us this year is less associated to the organic plans and running the company. It's more of a macro thing, which I talked about earlier, the currency exchange rate differences between this year and last year. dollar compared to many other currencies around the world. And while most of our R&D is outside the US, this is hurting us. If there will be some type of future change throughout the next six months or so, one way or the other, that could shorten or increase the gap. But on the other hand, we are fully in control to still offset that or enjoy that if it's on the positive side. So I think these are the more or less moving pieces in our business from a cost and management. We came out with a pretty low expense increase and are managing our investment very, very tight and efficient to try to maximize shareholder value.

Amir Panoush | Chief Executive Officer

But maybe just to add on that, Alec, in terms of unpacking Circle, what are the drivers for the top-line growth as we look at 2026? First, definitely our very strong leadership in wireless communication. We see us keep gaining more both on licensing and the royalty keeps increasing very, very nicely across all those different types of sub-markets. And the second, of course, is our momentum in AI. Extremely encouraged about what we have seen in 2025, and we have all the so-called capabilities from a product portfolio and engineering capabilities to drive that momentum even further in 2026. And then last but not least is overall our expectation we'll keep gaining market share both in mobile and Wi-Fi from a royalty basis. Mobile coming from the U.S. mobile OEM and on the Wi-Fi coming from just the continued penetration of our technology and the transition into Wi-Fi 6 and 7 and Bluetooth 7, the driving high royalty per unit.

spk09

Got it. I really appreciate all that color.

Just a quick follow-up. Alec Valero | Analyst, Loop Capital

So with your recent equity capital raise, I believe you are about at $200 million in the balance sheet.

spk09

How do you think about M&A today, and what do you think about the current valuations?

Yaniv Ariely | Chief Financial Officer

I think you guys are the expert for that, right? We wanted to strengthen our balance sheet. We're looking for non-organic growth to grow faster and gap that licensing to royalty 18 to 24 months timeframe. That's the merit in raising that cash. And that's our goal. That's our goal for the next 12 months to find the right fit technology-wise, market-wise, business-wise to increase that. Hopefully when the market, if we do well and continue to execute and the market understands that Siva is a very interesting AI play which I'm not sure we're yet being recognized for that. I see a lot of value for shareholders, but that's your forte, not ours.

We'll manage the business. Amir Panoush | Chief Executive Officer

Yeah, one thing to add, thanks, Yanni. One thing to add, Alec, in terms of the balance sheets or the cash position, I strongly believe we really have built... excellent, excellent IP enterprise in terms of being able to deliver so-called IP licensing across many different markets. And the goal, of course, is to utilize that balance sheet to find additional assets out there in the IP domain that we can take on and expand even further our potential for growth and profitability. And so this really helps us to have the financial strength to go and be able to expand it further.

spk07

Got it. Super helpful. Thank you very much. Well, congrats. This concludes our question and answer session. I would like to turn the conference.

Richard Kingston | Vice President of Market Intelligence and Investor Relations

Yeah, we're back to, I think Amir has some closing remarks.

Amir Panoush | Chief Executive Officer

In closing, I want to thank our employees worldwide for the dedication and execution through 2025. We enter 2026 from a position of strength with a diversified business model and deep customer integration across the market, driving the emergence of physical AI. With leadership in connectivity, accelerating traction in AI, and a portfolio designed to scale across, connect, sense, and infer, we believe SIVA is well positioned to continue building long-term value for our customers and shareholders. Richard, I will hand over to you to wrap it up.

Richard Kingston | Vice President of Market Intelligence and Investor Relations

Thank you, Amir. Thank you, Amir. As a reminder, the prepared remarks for this conference call are accessible through the investor section of our website. And with regards to upcoming conferences, we will be participating in the following events. Mobile World Congress, March 2nd through 5th in Barcelona, Spain. Loop Capital Markets, 7th Annual Investor Conference, March 10th in New York. The Stifel 2026 New York City Technology 101 Conference, March 11th in New York. and the 38th Annual Roth Conference, March 22nd in California. Further information on these events and all events we will be participating in can be found on the Investors section of our website.

Thank you and goodbye. Operator | Conference Operator

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect. jsPDF 3.0.3 D:20260606090042-00'00'