Feb 06, 2018 • 08:30 am ET

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Presentation
Executive
Gideon Wertheizer

across multiple industries due to the substantial benefits it presents. Initial products adopting AI include surveillance camera, drones, AR and VR headset, ADAS, and smartphone. In relation to smartphone, according to Gartner, 80% of all smartphone will incorporate AI processor by 2020. We are very optimistic about the prospects of device-based AI going forward and the growth opportunity it poses to CEVA.

Royalties for the fourth quarter came in at $12.6 million, up 26% on a sequential basis and down 2% on a year-over-year basis. It reflects a combination of continued growth of non-handset baseband shipments that for the first time exceeded 20% of our total revenue mix and seasonal strength in handset. It also included $0.9 million royalty catch up following customer audit.

For the full year 2017, total revenue came in at $87.5 million, a record high, up 20% year-over-year. Licensing came in at $42.9 million, up 35% versus 2016 on the back of strong demand throughout the year for our products, in particular vision, deep neural network, 5G base stations, Bluetooth 5, and cellular IoT. I am extremely pleased with this achievement in licensing as it is the key metric for the sustainability of an IP company and the precursor for a lucrative royalty stream.

Four years ago, we embarked on an ambitious diversification strategy, which was aimed to expand our business beyond the handset baseband processing market. Through successive technology investment and innovation, we launched new product lines for LTE and 5G cellular base stations, cellular IoT, computer vision, connectivity, voice, and our recent AI processor line for edge devices. This strategic move and timely execution have resulted in licensing momentum which has grown at almost 20% CAGR since 2014. In the past four years, we added more than 60 first-time customer and signed more than 150 deals outside of the handset baseband space. 96% of the deals signed in 2017 were for these new product line targeting broad markets and applications. Consequently, we are also experiencing substantial uptick in non-handset baseband royalty revenue, which more than doubled in 2017.

Let me take the next few minutes to discuss the key success factor for our licensing achievement in 2017. 5G base station, we signed during the year, agreement for our latest XC12 DSP platform with three top tier OEMs, who are going to base their 5G Radio Access Network, or RAN solutions, on this technology. The RAN sector possess an explosive growth opportunity for CEVA, where we have uniquely taken advantage of our signal processing technologies and competencies to develop long-term collaboration and sustainable royalty streams. Our CEVA-XC12 DSP platform present an indisputable performance advantage over incumbent platforms. It efficiently supports all the primary 5G defined use cases, such as Gigabit transmission speed, massive IoT and ultra-reliability and low latencies for mission critical applications. The performance envelope of the XC12 applies to all different RAN architectures of cellular operators such as heterogeneous Macro cells and Small cells, Cloud RAN, Backhaul, Fixed wireless and 802.11AX Wi-Fi.

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