Good day. Welcome to the CEVA, Inc. First Quarter 2023 Earnings Conference Call. All participants will be in 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 touchtone phone. To withdraw your question, please press star then two. Please note today's event is being recorded. I would now like to turn the conference over to Richard Kingston, Vice President, Market Intelligence, Investor and Public Relations. Please go ahead, sir. Thanks, Rocco. Good morning, everyone, and welcome to CEVA's first quarter 2023 earnings conference call. Joining me today on the call are Amir Panush, Chief Executive Officer, and Yaniv Arieli, Chief Financial Officer of CEVA. Before handing over to Amir, I would like to remind everyone that today's 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 CEVA to differ materially from those expressed or implied by such forward-looking statements and assumptions. Forward-looking statements include statements regarding market trends and dynamics, opportunities for Wi-Fi and 5G, our market position, strategy, and growth drivers, including with respect to potential benefits of our acquisition of the 3D Spatial Audio business from VisiSonics, demand for and benefits of our technologies, expectations and financial guidance regarding future performance, including guidance for the second quarter of 2023, and our plans for attending investor events. For information on the factors that could cause a difference in our results, please refer to our filings with the Securities and Exchange Commission. These include consumer demand and the global economy generally, the ability of CEVA's IPs for smarter connected devices to continue to be strong growth drivers for us, our success in penetrating new markets and maintaining our market position in existing markets, the ability of new products incorporating our technology to achieve market acceptance, the speed and extent of the expansion of the 5G and IoT markets, our ability to execute more base station and IoT license agreements, the effect of intense industry competition and consolidation, global chip market trends, and our ability to successfully integrate Intrinsix into our business. CEVA assumes no obligation to update any forward-looking statements or information which speak as of their respective dates. In addition, we will be discussing certain non-GAAP financial measures, which we believe provide a more meaningful analysis of our core operating results and comparison of quarterly results. A reconciliation of non-GAAP financial measures is included in the earnings release we issued this morning and in the SEC filings section of our investor relations website at investors.ceva-dsp.com. 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? Thank you, Richard. Welcome everyone, thanks to you for joining us today. Our first quarter results show continuous progress in diversifying and expanding our licensing business. Royalties were impacted by customer inventory adjustments and prolonged weak demand for smartphone and PCs. Looking at licensing in more detail, thanks to the hard work and efforts of our team, we signed 13 new licensing and NRE agreements in the quarter. We continue to have excellent traction across our wireless connectivity portfolio, in particular, where our 5G and Wi-Fi 6 platforms are in strong demand. Of note, three of the licensing agreements we signed in the quarter are of strategic significance. One for our DSPs with a leading Android smartphone OEM for their in-house 5G modem efforts, one for our PentaG2 platform for Broadband IoT, and one for our Wi-Fi 6 access point IP with a Global OEM who is one of the leading providers of Wi-Fi access points and other networking devices. I will expand on this deal shortly. Other deals signed in the quarter target Bluetooth connectivity for TWS earbuds, consumer IoT and industrial devices, Wi-Fi 6 for access points and mesh use cases, sensor fusion for robot vacuum cleaners, and AI for automotive ADAS. In royalties, the magnitude of the decline in smartphone and PC related royalties was primarily driven by a pull-in of handset baseband shipments in the fourth quarter, which, combined with the traditional seasonality, resulted in a correction in the first quarter due to inventory build-up. Following conversation we have had with customers and others in the supply chain, we understand the demand has resumed and expect a return to more normal levels as early as the second quarter. Outside of smartphone, we saw excellent growth in our Wi-Fi and cellular IoT royalties, both of which contributed all-time high royalty revenue in the quarter. Wi-Fi royalties more than doubled sequentially, thanks in part to three new royalty paying customers that reported Wi-Fi 6 shipments to us for the first time. Bluetooth also continued to perform well across the broad consumer IoT markets, where we have a large presence, while Bluetooth royalties from smartphones were affected by the correction I spoke of. Overall, handset royalties declined 64% sequentially and 71% year-over-year, while base station and IoT royalties declined just 4% sequentially and 7% annually. On our last earnings call, I outlined three areas I identified as key growth driver for CEVA, which align with the longer-term global mega-trends. I want to make the opportunity now to update you on our progress in relation to this. The first is Wi-Fi, where we saw excellent progress in both licensing and royalties during the first quarter. In licensing, we signed three new customers in the quarter, bringing our total number of Wi-Fi 6 licensees to more than 35. While Wi-Fi 6 has achieved a high penetration rate in smartphone and PC to date, the adoption of Wi-Fi 6 in industrial and the broad consumer IoT markets such as TVs, set-top boxes, and other smart home devices is still nascent. This is the market opportunity that many of our Wi-Fi 6 licensees are targeting. Following strong licensing activities among IoT devices customers in the past two years, we are now also engaging with customer licensing our Wi-Fi 6 and 6E solutions for access points, including with the strategic customer that I mentioned earlier. This is a significant development as access points are an uncharted market for us with minimal exposure and traditionally dominated by the incumbent Wi-Fi chipset providers. There is a strong appetite for new chipset providers to enter this market and they are able to accelerate their design activities with our industry-leading Wi-Fi 6 IP. These new Wi-Fi chip customers include network equipment OEMs and semiconductor companies such as the Global OEM I alluded to earlier. Moreover, the royalty associated with access points are higher than those from consumer IoT devices, providing a new potentially lucrative royalty stream. As our customer base expands, our future royalty opportunity for Wi-Fi 6 continue to grow. Market research firm Techno Systems Research forecast that Wi-Fi 6 device shipments will reach 2.8 billion devices annually by 2027, growing at a CAGR of 25%. As we have discussed previously, we believe the market opportunities for us in Wi-Fi 6 based on our customer design wins is as big as Bluetooth, but with greater royalty revenue potential. Our action this quarter only serve to reinforce my belief that our Wi-Fi business will be a key royalty growth contributor in the coming years. The second area I would like to update you on is 5G, where we signed two important agreements in the quarter. The first of this is a strategic deal with one of the world's leading Android smartphone OEMs. This OEM licensed our DSPs for the first time as they begin their own in-house 5G modem efforts aimed at reducing their reliance on the 5G merchant semiconductor companies. This trend of OEM designing chips for their own devices bodes very well with semiconductor IP companies like CEVA. OEMs do not have the in-house capabilities to design all aspects of a chip and turn to IP licensors to get many key components of their chip, reducing the risk and allow them to focus on areas of the chip where they can achieve differentiation and utilize their in-house expertise. In late 2020, this OEM also licensed our Bluetooth and Wi-Fi IPs, the first chips of which are expected to be in production shortly. If they are successful with their connectivity and 5G chips, this smartphone OEM has the potential to become a key royalty customer for CEVA in the coming years. The second 5G deal we signed in the quarter was for a customer looking to develop a 5G Broadband IoT modem targeting a wide variety of end markets requiring high data throughput, low latency, and large data volumes. These end markets include connected cars, wearables, smart grid, surveillance, AR/VR devices, industrial automation, and more. According to the latest Ericsson Mobility Report, there will be more than three billion 5G Broadband IoT connection worldwide by the end of 2028. This is an exceptional market opportunity. These customers license our PentaG2 platform specifically designed for 5G Broadband IoT, which would allow them to seamlessly develop their 5G RedCap-enabled chip with reduced risk thanks to our integrated platform offering, which provides the key building blocks of a 5G modem. Also, at Mobile World Congress in February, we announced our most powerful and efficient DSP architecture to date, the CEVA-XC20. The CEVA-XC20 addresses the massive compute requirements of 5G Advanced and beyond and can scale to fit customers' requirements from smartphone SoC through to the Wi-Fi 5G Advanced ASICs for base stations, private networks, O-RAN, and other wireless infrastructure. We believe there is a strong demand for new 5G chips across the wireless industry and among many equipment OEMs. CEVA-XC20 can help to significantly lower the entry barriers for new entrants and incumbents who wish to accelerate their chip designs for these lucrative market opportunities. The third area is application software for embedded system. In addition to earnings, we also announced our acquisition of the 3D spatial audio business from VisiSonics today. Spatial audio is emerging as one of the most interesting areas in audio, enabling a real-world audio experience within the digital world. This is increasingly becoming a feature of headsets and TWS earbuds to enhance the user experience for watching movies, gaming, listening to music, podcasts, and even conference calls. VisiSonics has been our partner for 3D spatial audio for the past year, and we develop and joint products which combine their spatial audio software with our head tracking technology to deliver a complete spatial audio experience. This joint solution, known as the RealSpace, is now going into production with our first joint customer, boAt, India's first hearable and wearable company. THX, the world-class audio and video certification and technology company, is already an existing customer, a testament to the quality of this software. Following on from the success of the collaboration with boAt and understanding the significant opportunity for spatial audio across end markets, we made a decision to acquire the business and own the complete spatial audio software solution. Initially, with our dominant presence in TWS earbuds market through our Bluetooth and audio DSP customers, we intend to offer headphones and earbuds OEM the capability to seamlessly add spatial audio to enhance their product lineups. We can also address a broad set of other markets where spatial audio is being adopted, including AR/VR, audio conferencing, healthcare, automotive, and media entertainment. Market research firm Future Market Insights estimate that 3D audio revenue will grow 4.1x from 2022 to 2032, reaching nearly $31.9 billion in 2032, indicative of the significant market opportunity that spatial audio possesses. The team is located next to our sensor fusion R&D team in Rockville, Maryland, making the integration of this team straightforward. We believe this modest acquisition provides excellent potential to increase our application software royalty opportunity in the coming years as spatial audio becomes a master feature of wireless audio devices. In summary, despite market challenges this quarter, I believe the opportunities we have in front of us continue to grow. We have an outstanding portfolio of wireless connectivity and smart sensing technology, and have fostered strong relationship around the world with leading fabless companies and OEMs. I met with a number of key customers around the world in the quarter, and I'm encouraged by their appetite to expand their relationship with us. Finally, the VisiSonics spatial audio business acquisition we announced today is an additional step in building our future strategy, bolstering our application software licensing business. Now I will turn the call over to Yaniv for the financials. Thank you, Amir, and good day to all. I'll start now to review the results of our operations for the first quarter of 2023. Revenue for the first quarter was $28.7 million as compared to $34.4 million for the same quarter last year. The revenue breakdown is as follows: Licensing and NRE-related revenue, reflecting 72% of our total revenue, was $20.7 million as compared to $22.4 million for the first quarter of 2022. Royalty revenue, reflecting 28% of our total revenues, was $8 million as compared to $12 million for the same quarter last year. Quarterly gross margin came as expected on GAAP and slightly lower on non-GAAP basis due to low royalty revenue in the quarter. Gross margin was 82% on GAAP basis and 84% on non-GAAP basis compared to our 82% and 85% guidance on GAAP and non-GAAP, respectively. Our non-GAAP quarterly gross margin excluded approximately equity-based compensation expenses of $0.4 million and amortization of acquired intangibles of $0.3 million. Total GAAP operating expenses for the first quarter was above the high end of our guidance at $28.2 million due to the timing of the Israel Innovation Authority grants received, lower allocation of Intrinsix NRE cost from NRE to the cost of revenues, and higher professional fees. Total non-GAAP operating expenses for the first quarter excluded equity-based compensation expense and amortizations of intangibles and holdback expense were $24.1 million, also above the high end of the guidance due to the same reasons I just explained. GAAP operating profit loss for the quarter was $4.8 million, down from GAAP operating profit of $0.5 million in the same quarter a year ago. GAAP quarterly operating profit included equity-based compensation of $3.9 million, the impact of amortization of $0.7 million associated with an acquisition, the Intrinsix and Hillcrest business, and $0.3 million associated with the Intrinsix acquisition. Our non-GAAP operating profit was $0.1 million, lower than the first quarter of 2022 of $5.5 million. GAAP tax expenses were $1.4 million, mainly associated to withholding tax deducted by our customers that could not be utilized and were expensed. Our GAAP loss was $4.9 million, and diluted loss per share was $0.21 for the first quarter of 2023, compared to a net loss of $1.7 million and diluted loss per share of $0.07 for the first quarter of 2022. With respect to other related data. Shipped units by CEVA licensees during the first quarter were 297 million units as compared to the fourth quarter of 2022 reported shipments of 375 million units, primarily for the following reasons Amir discussed earlier. Of the 297 million units reported, 27 million units or 9% were for handset baseband chips. Our base station IoT product shipments were 270 million units as compared to 308 million for the fourth quarter of 2022 and 531 million units for the first quarter of 2022. Bluetooth shipments were 190 million units in the quarter as compared to 220 million units for the fourth quarter of 2022, mainly due to lower shipments from Bluetooth smartphone customers associated with the inventory correction. Cellular IoT units were 19% up sequentially to an all-time record high of 29 million units. Wi-Fi shipments were 21 million units as compared to 37 million for the fourth quarter of 2022. We're encouraged by the Wi-Fi product mix as it starts to shift towards Wi-Fi 6, which commands a higher average selling price, resulting in higher royalties. This positive trend reflects the long-term Wi-Fi royalty opportunity for us. Other shipments under the base station IoT umbrella totaled 30 million units for the quarter. This includes our computer vision, AI, audio, sensor fusion, 5G RAN, and DSPs for non-cellular communications. As Amir stated, both Wi-Fi and cellular IoT contributed all-time record high in this category for royalty revenues in the quarter. Wi-Fi royalties more than doubled from the last quarter, thanks in part to three new royalty paying customers that reported Wi-Fi 6 shipments for the very first time and have started the Wi-Fi 6 royalty cycle for us. Of the balance sheet items. At the end of the quarter, our cash equivalent, balances, marketable securities, and bank deposits were approximately $145 million. Our DSOs for the first quarter increased to 69 days from 34 days in the prior quarter. During the quarter, we used $5.1 million cash from operation activities. Ongoing depreciation and amortization were $1.4 million, and the purchase of fixed asset was $0.1 million. At the end of the first quarter, our headcount was 497 people, of whom 413 were engineers. This is up from a total of 487 people at the end of 2022. Turning to our outlook. As Amir Panush discussed, the smartphone and PC markets continue to experience soft demand. However, within the handset and base station customer mix, we expect strong chip shipments recovery in the second quarter. Our licensing and NRE-related revenue business continue to generate customer traction across our diversified portfolio. In royalties, with several new customers that recently started production and with the expectation for a meaningful higher shipment volumes of our handset and base station customers in the second quarter, we forecast sequentially higher royalties. The strength of our wireless connectivity markets and customers will continue throughout the year. In light of the macroeconomic environment, we continue to monitor our expenses closely, and we'll take all appropriate steps as we see fit. In this regard, we're currently planning for non-GAAP OpEx to be slightly lower than the first quarter level in each of the following quarters of the rest of the year. Specifically for the second quarter, gross margin is expected to be similar to the first quarter level of approximately 82% on GAAP basis and slightly higher sequentially on non-GAAP basis to 85%, excluding an aggregated base compensation expense of $0.4 million and $0.3 million for amortizations of intangibles. OpEx for the second quarter is expected to be flattish with the first quarter. In the range of $27.7 million-$28.7 million, excluding an expected $4.1 million of equity-based compensation, $0.2 million for Intrinsix holdback related expenses, and $0.3 million for amortizations of acquired intangibles. Our non-GAAP OpEx is expected to be slightly lower than the first quarter in the range of $23.1 million-$24.1 million. Net interest income is expected to be approximately $0.7 million. Taxes for the second quarter is expected to be flattish at $1.4 million, again derived mainly from withholding taxes. The share count for the second quarter is expected to be approximately 24.4 million shares. Rocco, we could now open the Q&A session, please. Thank you. If you'd like to ask a question, please press Star then one. If your question has already been addressed and you'd like to remove yourself from queue, please press Star then two. Today's first question comes from Matt Ramsay with TD Cowen. Please go ahead. Good afternoon. Good morning, everybody. Thanks, guys, for taking my question. I guess in the, in the short term, Amir Panush, I just want to see if I can characterize this correctly. It seems to me that all the long-term business trends are the way that you guys hope they would be, and the licensing momentum diversifying and very strong. There were just a couple of inventory corrections, one in China handset modems with the well-known weakness there, with your sort of large customer in China and the other one in Bluetooth in Scandinavia. Is that really all that's gone on here in the short term that affected royalties and everything else is kind of, I don't know, running as expected on the broader business? Thanks for the question. I would say in high level, this is very correct, but I will add a little bit more color on a few things just to make sure this is clear. First, in terms of the overall trends, as you pointed out, we are very encouraged by the type of deals that and licenses that we got this quarter. Really some of them will drive very strong long-term royalty potential for us and continued great momentum for our Wi-Fi and 5G opportunities overall. In terms of the royalty this quarter, definitely as you pointed out that, with that one key customers in China, the corrections in the smartphone, and specifically in Q1, we expect a meaningful and strong recovery sequentially from Q1 to Q2 in regards to that one specifically. Then I would say about Bluetooth, it's really to the most part, the impact from the same smartphone impact of the Bluetooth. If we look at our Bluetooth outside that, it actually has been very solid and continue with the trend. On top of that, of course, what we mentioned about Wi-Fi and Narrowband IoT, all-time high, and we see basically the continued growth of these two technologies with more companies are basically shipping our products. Got it. No, no, that's really helpful. I'm sure that stuff will just work its way through the system. We're noticing that with many of your peer companies in the ecosystem as well. For my follow-up question, I wanted to change gears a little bit and talk about some M&A that's happened in and around your company and by your company. I think the first one is you guys announced the VisiSonics deal today alongside of the earnings. I wonder if you might expand on the technologies, the people a little bit more and what your plans are for that business. On the flip side, I did notice that one of your customers in a particularly interesting area around automotive called Autotalks was acquired by Qualcomm, and I believe that is an important licensee for CEVA. The Qualcomm guys, it's a small deal, a tuck in for them, and they've not said too much about what they plan to do with it. If you could talk a little bit about what the technology stacks there are and potentially for that being an entry into a new market for CEVA royalties, that would be really helpful. Thanks, guys. Yeah. First on the VisiSonics deal, as I mentioned in prepared remarks, we basically three pillars of growth that I've highlighted, the Wi-Fi, the 5G, and software-embedded application. We have already licensed to some of those customers, and some OEMs, our sensor fusion. With partnership with VisiSonics, we basically combined into a complete 3D spatial audio solution. What we've seen in the market for TWS earbuds and many and so on, really very strong demand for 3D spatial audio. We see it as one of the key emerging technology for that space. With this technology, which is really state of the art for those type of capabilities, we are looking to expand it significantly into additional customer base. We recently announced, basically the customers bought as licensing this technology, and now we can offer that as a complete solution. Also, from integration point of view, this is a so-called, seamless integration as both the location and the technology and the roadmap that we have worked together is already in place, and we basically continue that as a one team. The last piece on that, I would say it's also going to be accretive, as a non-GAAP within 2023. All along, we see it as a great deal to keep expanding our software-embedded, application technologies and be able to provide more innovation and differentiation to our OEM customers in the ecosystem. In terms of the other deal, Yeah. Yeah, please. Sure. We have a long relationship and history with Autotalks. You know, this is the benefit of being an IP company, you could have helped the small ones that don't have the capabilities, especially around cellular and communication, which is quite complex, to come up with an interesting product and later on to be acquired by the giants and the leaders in the space. Obviously we know them and helped them out from day one as a start, young startup with the communication skills and technology that we brought. They're already starting to ship products last year, and we got the initial royalty reports from them. In this market, when a bigger company acquires you as a customer, first you start a relationship, and it needs to bypass or work with you on the way to integrating the product and getting the rights. That's an interesting opportunity for us, and we'll see where it takes us to the next step. It would be nice to be in their product line in the future. If not, this is part of the startup world and part of our add-ons as IP company to help the smaller companies. Sometimes we make and build the relationship with the bigger companies and continue with them and show them and give them other products that we can in the future. Sometimes it ends with at least in the near term, some nicer royalty opportunity for us coming from a bigger company. I would add on that is that, in the past, again, when people thought about 3G, 4G and 5G, the technology to enable so-called smartphone communication, we have for a while talked about really how we will have the ecosystem and our customer base basically to enable the new use cases that 5G really bring to the table, right? This is a great example when we have innovators in the market to come with the new use cases and technologies that 5G enables. From there basically to help expand for us the warranty base and technology and the innovation to be deployed in the marketplace. Vehicle to infrastructure, vehicle to vehicle, so-called V2X, is a great technology which we believe will expand nicely in the markets in the future years. We believe there are also many other 5G use cases and opportunities for us to enable in the market and expand the technology and the business. Thank you very much, guys, for the detail. Really appreciate it. Thank you. Thank you. Our next question today comes from Kevin Cassidy at Rosenblatt Securities. Please go ahead. Yes, thanks for taking my question. On the, just to follow up on the 5G modem application, will that include mmWave? Which data spike do you mean? In general, the offering or the specific customer? Yeah, the specific customer. I guess the- It's the Autotalks? Yes. About Autotalks you're asking? Yes, I think so. Whether it's gonna be, you know, just the sub 6G or is it, you know... I would say, you know, in general, we provide the DSP as quite agnostic, so-called to the radio technology, and our customers basically tune it to their needs. Specifically about their product releases and plans, I will defer that as they announce more about their product releases. Okay. I understand. It's up to the customer. And on the. Yes. Wi-Fi. The ASP increase with Wi-Fi 6. You know, I guess I'm just trying to gauge, you know, how large that market can be for you. You know, does it double your TAM or, and if the units stay the same or do you see Wi-Fi 6 units far exceeding previous generations? That's a great question, Kevin. There are two aspects here, maybe even three. One is the volume. Last year, we managed to power one billion Bluetooth devices, and we only started to ramp up our Wi-Fi. It was just shy of 200 million, I believe. There is no reason that the volumes of Wi-Fi shouldn't reach over a short period of time, the Bluetooth type of volumes or even surpass that as they go along because of the use cases, the much wider use cases that Wi-Fi has. That's one. The volume is a big push for us, and we saw the new customers, three out of 35 customers that have licensed Wi-Fi 6. The potential with volumes from existing and new customer is the answer of why those volumes should increase. Second, ASP, because of the use cases that the Wi-Fi 6 is in, are higher end, are industrial, are medical, are lots of other devices that ASPs overall of the chips and the solution is higher, then we get a larger portion. It could be two-3x of what you are getting from a Bluetooth device, and those are the ratios of the chip prices. Number three, a lot of our customers are combo customers that want both Wi-Fi and Bluetooth today or in the future. Therefore, the overall added value for us and ASP is higher if we could provide two technologies and charge for two instead of one. We have a lot of very good aspects working in our favor, and it's a significant, very short-term opportunity. Look at the numbers from Q4 to Q1. With all the inventory issues and all the slowdown that we are reading and seeing, we have doubled our Wi-Fi revenue from Q4 to Q1 this year in $. I would add to that, there is basically, as you look at that, so-called, there is the so-called, we call it the simple client Wi-Fi. There was now we are going through the upgrades from Wi-Fi 4 to Wi-Fi 6. That on its own, of course, in general, speaking, the same as in the market, the value of a Wi-Fi solution is higher than Bluetooth. On top of that, what you have is the more sophisticated enhanced throughput Wi-Fi 6 client. On top of that, you have the Wi-Fi 6 access point that we are just now basically are going to start ramping more and more. I would say as the market, typically the different pricing in the market for those solution as a silicon solution out there, you can draw basically analysis of our potential from an ASP point of view. It's meaningfully and very significantly above what you would expect on average from a Bluetooth solution on a mixed basis. Okay, great. Thank you for those answers. Just a quick question on the acquisition. Does this include engineers? Yes. It includes a small number of engineers, that basically located in the same place, and they will join us immediately after the close. Okay, great. Thank you. Thank you. Thank you. Our next question today comes from Martin Yang at Oppenheimer. Please go ahead. Hi. Good morning and good afternoon. Thank you for taking my question. My first question on spatial audio is, you know, maybe can you give us more details to help us understand the competitive dynamics in that market? Who are we competing with, and where are the competitors positioned in terms of, market verticals? A competitive dynamics. I can take that. Sure. Hi, Martin. It's Richard here. You know, when you look at the spatial audio market, it's pretty nascent, and we're still in the beginnings of it. In the smartphone space, it was really Apple that seeded the market, and they have their own internal solution. Obviously Dolby is playing there as well with some other players. Really, the difference between what we're bringing to market here versus what these other guys are is normally you have to have a link between the handset and the earphones. They both have to have technology on them in order to make this work. With the solution that we're bringing to market for spatial audio with VisiSonics, this is only on one side, so it's only in the headset. You don't need any particular codecs or any particular software on the handset for this to work. This is a game changer for the, we would say, the low to mid-end of the earbud and headset market, where today spatial audio is not really playing. When we think about the opportunity, there's probably 400 million mid-range TWS headsets a year. You've got the gaming headsets and all these other opportunities there where we feel there's a very good opportunity for us to double down on our strong presence in the headset market that we already have today. We know the customers, we know the industry there, and we can take the spatial audio solution into these markets, the much broader mid-range and lower range of the market, and address it with the spatial audio solution that we have. Something that today is not really available or there. That's our focal point and target. It's not so much competing with Dolby and Apple at the higher end of things. It's going for the mass market option here. The other thing to enhance on what Richard said is that what's unique also about our technology is really to develop that such that it can get into a very small form factor, very optimized in terms of size and power, which really can enable these use cases to penetrate more and more the mid and the low-end markets of the TWS also where the volume is very high. Thank you. Ladies and gentlemen, our next question today comes from Suji Desilva at Roth MKM. Please go ahead. Hi, Amir. Hey, Yaniv. On Wi-Fi 6, it's good to see that coming out of the gate. What do you expect to be the pace of unit adoption here relative to other Wi-Fi standards in the past? What end markets are initially driving the Wi-Fi 6 units? I would say Wi-Fi 6, the replacement from Wi-Fi 4 to Wi-Fi 6 is very, very strong. We definitely see it first on the client side. I would say in the consumer, it started first in smartphones and PCs, and now it's propagating so-called to the all IoT consumer client devices around us. Then from there, of course, more and more penetrating the access point field as well. The pace, you know, again, I'm not sure if we could continue with doubling like we did from Q4 to Q1, but the pace, no doubt, it should be now with more players starting to really ship Wi-Fi 6. These are the first ones in that have joined the team. The potential, as I said earlier, from 35 customers is quite big. We think it's gonna be one of the faster growth driver for us this year when looking at all the different segments and product lines we have. Overall, I would say the expectation in terms of the transition, if we look at the history of Wi-Fi, right? The fastest and the strongest transition was from 11g to 11n back then in terms of performance and capabilities. Now it's basically into 11ax and Wi-Fi 6, right? This is really the biggest one in the last few years in terms of transition of Wi-Fi technology. We are well established right now across the ecosystem. With our IP embedded, into our customer, product line. I would expect it to really grow very, very nicely through the years and continuing through 2024, 2025. Good. It sounds like you're well-positioned there. My second question is on the acquisition. It seems to be a software licensing model. Can you just remind us how many products you guys have now that are software licensing versus, you know, typical license royalty? What% of revenue could that be as a mix, part of the mix in one to two years as part of your strategic plan? A great question. Thank you, Suji. This brings us back to what we talked about even last earnings call of the three pillars of growth for us. One of them was an embedded software. We started three years ago, to remind you, with the Hillcrest acquisition, sensor fusion. We got into TVs, laptops, vacuum cleaners. Electronic fans. Electronic fans. Yes, correct. This is how it started. We added in the last two or three years, different audio, two different audio solution, now this is probably the fourth. If I'm counting just the standalone pieces of software, embedded software that we are licensing, trying to target sometimes the OEMs. The value there and the proposition is much higher, both for us and as a differentiator for the OEMs, and it's worked extremely well. Very high margins of that. We have more than doubled the revenues of some of those aspects when we three years ago acquired and got into the business. On top of that, we are also starting to add AI software packages on top of the processor and the solution itself. I'm not sure if I have a number as a% of revenue, but, for sure, this is one of the strategic avenues for us to go after. I think we know how to run these types of businesses, and this recent acquisition from today, enforces that. Okay. All right. Thanks, guys. Thank you. Ladies and gentlemen, as a reminder, if you'd like to ask a question, please press Star then one. Today's next question comes from Chris Reimer of Barclays. Please go ahead. Hi. Thanks for taking my questions. Actually, most of the topics have already been addressed. Just one, touching on China, have you seen any changes in the dynamics there, maybe impacts from the reopening? When you mentioned that demand has resumed, are you talking about that area or are you talking about in general? Thanks for that, Chris. It's good to emphasize that a lot of our business and customers in China are well-known chip vendors to top guys or OEMs around the world, all over the world. They, in most cases, ship mainly outside of mainland China. The manufacturing, the design is there, but the products and the end markets are all around the world. That's true for the Bluetooth and Wi-Fi and the sound and even modem, even the handset modem. Most of it goes out to the emerging economies in India and other large countries for the low and mid-range phones. When we talk about demand, it's not necessarily for mainland China, but throughout the world and all the different segments I think we've mentioned we talked about earlier. I would add also that the reduction that we've seen these quarters from the handsets market and our key customers there, I would say in terms of we already see indication of restocking that started in March and will continue through April and now beyond it. Overall, we are quite confident or very confident that basically we'll see a sequential recovery quarter-over-quarter. Again, the demand is global demand and specifically also in the different emerging markets where our customers serve quite strongly. We start seeing a strong recovery and restocking of the inventory. I may add one thing that we didn't talk about. If you ask about the licensing and not the royalty or remove to the licensing, we see no slowdown whatsoever in China. There's still good demand for technology development, didn't see any really change in the last two quarters coming from China. One of the interesting changes that we have seen globally is coming from Europe, this is a lot of new money coming from governments of the EU to develop their semiconductor company and the markets. This is a brand new opportunity for CEVA as being an IP company. We talked about Autotalks as one of the nice example, there are many, many others. As soon as money flows in, we've seen the trend in China for the last decade. The US has started with their CHIPS Act, and we see a lot of potential there for us. Last but not least, maybe two or three weeks ago was this new, stronger trend of investments in Europe, and we are there to try to make the best of it. From a licensing perspective, the contrary, there's a lot of money that's being put in around the world, to do the Arm chip designs. The IP model fits exactly that avenue. Great. Thanks for the color. That's it for me. Thank you. Thank you. Our next question comes from David O'Connor at BNP Paribas Exane. Please go ahead. Great. Thanks for taking my questions. Maybe, Yaniv, on the topic of licensing, following on from your commentary there, any reason that you can't get back to year-over-year growth this year on licensing? Then on royalties, maybe also for you, Yaniv, any additional color on the kind of how we should think about the year-over-year growth on royalties, that quarter-over-quarter recovery you talked about, you know, How strong is that going to be and sustainable through the rest of the year? Thanks. Yeah, sure. You won't be mad at me if I restate the first question. I don't see a drop in the licensing. We do see a drop in the royalties, and we explained why. In licensing, as we know this business and have been in this business for a long time, $1 million up or down doesn't change the trends. It doesn't change the outlook or anything around that. Yeah, maybe we're a little bit short of the typical 21 to 22-ish, but it's not nothing that we are concerned about and nothing that has changed. We mentioned specifically the quality of the deals in Q1, and this is not... We can't say that in any every quarter 'cause sometimes we license to startups, and we have no idea how successful and when they'll come up with a product and if the product will go into mass market. The design wins that we have licensed, and Amir talked about this earlier, in Q1 could get us to a single double-digit royalty contribution annually from those deals. From licensing, I don't see a problem. On the royalty front, Q1 was an anomaly. We understand in the high side why the handset market did take a beating, as you said, and the numbers did drop there. We think it's a short term. We talked about the correction into the second quarter. When you look at the rest of the business and what has been growing at CEVA for the last couple of years dramatically, this is the base station and IoT royalties, there was only a 4% sequential decrease from Q4 to Q1. Even if I compare to last year's first quarter, and obviously it's a different environment to many companies and the demand and inventory levels are different, we're only down 7%. Some of the internal markets there, like Wi-Fi and cellular IoT, did extremely well. We think those trends will continue throughout the year. We believe that the second quarter should be sequentially higher with high magnitude, maybe not to the same norm that we were used to a year ago in handset, but they should start correcting themselves nicely in the second quarter. Could we make up the loss of the handset royalties in the first quarter throughout the year? That's the question. It's harder for us to answer. We don't usually give guidance on royalties because we don't have the insight of exactly how much each customer could ship and when. We have never done that. I don't think we are changing our methodology because nothing has happened, or we don't get the royalty reports ahead of time from the OEMs. The trends of Wi-Fi 6, higher ASPs, multiple products, more embedded software that also possesses higher ASPs and the ramp-up in some of these end markets that we talked about, that's something that we are very positive and do believe that they will continue. Have we seen that growth also happening in Q1? Try to answer the different sides of your question. Hopefully, I didn't miss anything. No, that's super helpful. Thank you, Yaniv. Maybe just one follow-on from Amir on the strategic agreement with the Chinese OEM and 5G smartphones. They're coming to market now with their Bluetooth and Wi-Fi chip that they licensed from you guys three years ago. You know, how meaningful is that going to be this year? Is that kind of three-year timeframe about right, how we should think about them to come to market with a 5G modem? Thank you. Yeah, sure. Sure. In regards to the Wi-Fi, Bluetooth, again, we expect production to start this year. The exact magnitude, it's hard to know because it depends really on the level of penetration they will use this technology across their product line and how they will propagate it there. I would say the significant portion of that upside will come over the second half of the year and then next year. In terms of their deployment of the so-called the 5G solution, I would say it's I wouldn't say two years, but probably in the range of 2025 ramp as we see it today. Very helpful. Thanks, guys. You're welcome. Thank you. Thank you. Our final question today comes from Martin Yang at Oppenheimer. Please go ahead. Thanks. I have just one follow-up regarding spatial audio. Is it right to assume that RealSpace technology always integrates with Hillcrest Sensor Fusion, or does it always have some elements of motion tracking either from you or from someone else? Yeah, Richard, do you wanna? Sure. Yeah, you can do spatial audio with or without head tracking, but it's much more effective with head tracking. The solution that we offer into the market is Hillcrest Sensor Fusion integrated with the RealSpace into a single product, which we'll call RealSpace going forward. That's the technology. It's much more attractive to OEMs that way. It gives a much better spatial audio experience, that's the avenue we're going down. With that said, Martin, with that said, part of the acquisition was also to bring on THX, a well-known audio solution provider. This is a VisiSonics customer, now a CEVA customer, and they've used the VisiSonics standalone solution in their use cases. As Richard said, it could go both ways, but we also already have customers in production, both in India and in the U.S., with this technology and in these two avenues, one on standalone basis and the second with the CEVA Hillcrest technology. Maybe I will add on top of that, with just those comments. Generally speaking, again, if there are OEMs that would like to see some portion of our technology and that would make sense, we can definitely support it. The real value of the technology, and that's why strategically also from a technology point of view, we decide to go ahead, is that we have best-in-class sensor fusion technology that is really, I wouldn't say massive, but very important components to make 3D spatial audio a good solution. VisiSonics brings really great algorithms and capabilities on the audio domain related to that. As you combine these two together, it's that brings to bear basically a top-notch 3D spatial audio solution. As I mentioned in previously, it's also the way that we combine it into embedded code that is small in size and very low power. It's a great fit to the TWS market, and to help penetrate these features from the top tier all the way to the mid and low tier of that market. Thank you, Amir. Yeah, sure. Thank you. Ladies and gentlemen, this concludes our question and answer session. I'd like to turn the conference back over to Richard Kingston for closing remarks. Thanks, Rocco. Thank you everyone for joining us today and for your continued interest in CEVA. As a reminder, the prepared remarks for this conference call are filed as an exhibit to the current report on Form 8-K and accessible through the investor section of our website. With regards to upcoming events, we will be participating in the following conferences: the TD Cowen Israel Investor trip on May 16th in Israel, Oppenheimer's 24th Annual Israeli Conference May 21st in Israel, and Cowen's 51st annual TMT conference May 31st and June 1st in New York. Further information on these events and all events we will be participating in can be found on the investor section of our website. Thank you and goodbye. Thank you, sir. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.