Richard Kingston - IR Gideon Wertheizer - CEO Yaniv Arieli - CFO.

Gary Mobley - Benchmark Suji De Silva - Topeka Joseph Wolf - Barclays Matt Robison - Wunderlich Securities John Smith - William Blair Jay Srivatsa - Chardan Capital Markets.

Good morning and welcome to the CEVA Inc’s Q4 and Year-End 2014 Earnings Conference Call. All participants will be in listen-only mode. (Operator Instructions) After today's presentation, there will be an opportunity to ask questions. (Operator Instructions) Please note, this event is being recorded.

I would now like to turn the conference over to Richard Kingston. Mr. Kingston, please go ahead..

Thank you and good morning everyone. Welcome to CEVA's fourth quarter and annual 2014 earnings conference call. I'm joined today by Gideon Wertheizer, Chief Executive Officer of CEVA and Yaniv Arieli, Chief Financial Officer of CEVA.

Gideon will cover the business aspects and the highlights from the quarter and Yaniv will then cover the financial results for the fourth quarter and annual 2014 and will provide guidance for the first quarter of 2015 and general qualitative data for 2015. I will start with the forward-looking statements.

Today's conference call 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, our financial guidance for the first quarter of 2015, time-table for initial shipments of products incorporating [RIP] by customers.

The lease CEVA’s IP will power 700 million to 900 million non-baseband devices annually by 2018, optimism of that our licensing pipeline in royalty revenue growth in mobile Internet on the IoT space, optimism about market dynamics favoring based on royalty growth in 2015 and beyond including higher AFPs and include shipment volumes, less adverse financial impact in relation to market exist of growth comp, Intel and STE, level of expenses for the RivieraWaves retention scheme and continuation of our buyback program.

The risks, uncertainties and assumptions include the ability of the CEVA DSP cores to continue to be strong growth drivers for us.

Recovery of the baseband market, our success in penetrating new market specifically non-baseband markets and maintaining our market position in existing markets, our ability to successfully integrate the RivieraWaves business.

The ability of new products incorporating our technologies to achieve market acceptance, the speed and extend of the expansion of the 3G and LTE networks and the IoT space, the effect of intense industry competition and consolidation, global chip market trends, and general market conditions and other risks relating to our business, including but not limited to those that are described from time-to-time in our SEC filings.

CEVA assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates. With that said, I’ll now hand the call over to Gideon..

Good morning everyone and thanks for joining us today. I am very pleased to report a strong fourth quarter results timing at the high-end for our guidance due to continuation of continued strong licensing environment and 20% sequential growth in our royalty revenue.

Total revenue for the fourth quarter was $13.8 million, licensing and other revenue was $7.4 million and royalty revenue was $6.4 million. We signed 11 new license agreement in the quarter, six of the agreements were for CEVA DSP cores, platforms and software, and five were for our connectivity products mainly Wi-Fi and Bluetooth.

And the deal sign here for non-baseband applications and one deal was for LTE baseband processing in handsets.

Six are first time CEVA customer, with regard to the baseband deal signed during the quarter it was a comprehensive agreement for leading-edge DSPs signed with a new semiconductor company which is associated with is associated with leading Tier 1 OEM. At this stage we are unable to elaborate further of this on these deals.

The non-baseband deal signed during the quarter are with customers targeting a wide range of growing market including smartphone tablet, advanced driver assistance systems, surveillance systems, satellite communications, G.fast, advanced hearing aids, game consoles and more.

Geographically, two of the agreements were in the U.S., two were in Europe and seven were in Asia, including Japan. On royalties our LTE shipments were up both sequentially on a year-over-year basis and in fact the quarterly LTE shipment exceeded the entire annual shipments of 2014.

We also experience an increase shipment in 3G wide CDMA smartphone and in future phone. The LTE and 3G wider CDMA segment have remain growth sector of handsets base overall and the year our core strength results.

Let me take the next few minutes to provide the desired perspective on the business front we experience in 2014 both in licensing and royalty front. Overall in 2014 we signed 36 license agreement, 32 of which are non-baseband applications and 17 are with cell type CEVA customers.

The combination of advanced technologies and complementary software of our new non-baseband technology led to a strong licensing dynamic in revenue growth of 27% year-over-year. It clearly illustrates the success of our strategy to expand our market rates and licensee base beyond the baseband market.

In light of this diversification and the change business model of one of our U.S. key customer, we decided to write off a deferred tax asset in the year of $3.4 million, which shows a total [life] cost of the deferred tax asset and therefore [indiscernible].

In general we see substantial growth opportunities derive from the ongoing revolution of the Internet cover mobile Internet and the Internet of Things. To address these opportunities in high volume, we are basing our strategy on three product plans, vision, voice audio and sensing and connectivity.

Vision processing technologies are increasingly being deployed to enrich the experience in smartphone, car, cameras and many more applications.

Our third generation DSP CEVA MM3101 or MM3K for short is regarded the most advanced and mature technology for vision processing and also in power consumption at a fraction of what CPU or GPU can achieve for vision in these cases, which is currently deployed in SoC targeting smartphone, action cameras and DSLR camera to enhance performance in regard to video stabilization and zoom, low light environment and more.

Also in the emerging advanced driver assistance safety or ADAS market MM3K is a central piece with [elite] cars now becoming exceedingly autonomous. Beyond that, the MM3K technology applies to drones, surveillance, medical and numerous other industrial applications.

We have signed up so far more than dozen licensing and more than 30 ecosystem partners to support this technology. We already have customer sampling chip and expect initial shipment in the later part of the year.

The voice audio and sensing product line leveraging on our very successful CEVA TeakLite DSP franchise, with this types of DSP architecture in the mobile space, a later generation TeakLite-4 is targeted for extremely low power applications like always-on voice control smartphone, wearband and smarthome and the like.

We have accumulated more than a dozen customer in this spaces some are expected to be in the market during this year. Our third product pillar is connectivity which include Bluetooth and Wi-Fi technology the connectivity space reserving in it and fast growing both in terms of new technologies and end product.

Through our acquisition of RivieraWaves we are at the forefront of this revolution already offering the latest standard for Bluetooth low energy and Wi-Fi 802.11ac including the highly complex 4x4 MIMO technology using access point and small cells. I am extremely happy with how the integration of RivieraWaves is progressing.

We have excellent strategy its competitive product roadmap and have already signed 11 new licensing agreements in the last six months and have a good visibility going forward. These three product pillars are the foundation on which we are successfully implementing our strategy for future royalty growth beyond baseband.

In this regard I would like to reiterate our mid-term expectation for royalty revenue growth from non-handset baseband products to ship in the region of 700 million to 900 million units by 2018. Let me now turn to the royalty part of our business the majority of which relates to baseband processing chips for handsets.

After two years of turbulence in the chip supplier landscape and with chip pricing things appear to be stabilizing and turning to favor CEVA and its existing customer base. There are three key factors that have the potential to drive baseband’s royalty growth in 2016 and beyond.

LTE unit shipment growth powered by CEVA the replacement of future phones with lost cost smartphones, the expansion of cellular [amazing] devices beyond handsets into other areas including tablets, PC, connected car and other machine type communication. The following are few data points that provide perspective on the magnitude of these factors.

According to GSMA intelligence the token number of LTE connection across the world will increase to 400 million today to 2.5 billion by 2020 and 60% of these connections will come from developing regions out of whom only 5% in 2014. According to [GSMA] more than 8 billion smartphone are focused to be shipped by 2020.

2X the [standard] as of today, the maturity of this relates to first times smartphone user migrating future phone. In addition, non-handset cellular enable desired shipments are expected to grow at the [AGL] 19% between 2014 and 2018 to a propel of 450 million unit in 2018 according to ABI Research.

We now set to be a primary beneficiary of these trends as evident in our recent filled report. Our key basement customers such Samsung, Intel, Leadcore and all had commercial chip and design wins in the LTE space.

Our strong position in the future phone space is approximately 75% worldwide market-share provide us the technology foundation and customer relationship that’s turn to be leverage as the marketing grades to smartphone. We are all gradually expanding our license fee based in the baseband space.

In 2013 we added two new semiconductor customer, saw baseband and believe more new entrance will emerge as the use of LTE expands to application as connected car, smart CT and higher IoT in general.

All in all we believe we are at the beginning of royalty revenue growth trajectory characterize by higher ASP and growth unit device from consumer immigration to see the power LTE and local smartphone.

In conclusion, CEVA is relentlessly focus on delivering best in great innovative cost effective solution to these increasingly diversifying customer base. We are determined to use our inventiveness and unparallel commitment to capture any DSP or connectivity related opportunities.

We are geared on creating value for our shareholders, we have growth in our business and capital return as we have showed last year with 27% year-over-year in licensing and approximately $19 million in share buybacks.

Finally, I like to take this opportunity and thank our employees including our new team in France, our old customers will benefit from this. With that said, I’ll now turn the call over to the Yaniv to outline our financial and guidance..

Thank you, Gideon. I will start by reviewing the results of our operations for the fourth quarter 2014. Revenue for the fourth quarter was $13.8 million at the higher end of our range, primarily due to strong licensing revenue and 20% sequential increase in royalty revenue. The revenue breakdown is as follows.

Licensing related revenue was $7.4 million reflecting 53% of our total revenue, 1% higher as compared to the quarter in 2013. Royalty revenue was $6.4 million reflecting 47% of total revenue, up 20% sequentially after recording 10% sequential in the third quarter, but is still down 4% on a year-over-year basis.

Quarterly gross margin was 91% in both GAAP and non-GAAP basis. Non-GAAP basis excluding approximately $37,000 for equity based compensation expenses. Our total operating expenses for the quarter were $12.2 million along the mid-range of our guidance. Total OpEx for the fourth quarter included the required the RiveraWaves expansion.

OpEx also included an aggregate equity based compensation expense of $1 million, the RiveraWaves related retention expenses of 0.7 million, $0.3 million for the amortization of acquired intangible all associated with acquisition of RiveraWaves.

Our total operating expenses for the fourth quarter excluding equity based compensation and amortization were $10.9 million slightly above the mid-range of our guidance.

Other income was 0.1 million following mainly due to the devaluation of the euro cash balances of RivieraWaves as the dollar strengthened significantly compared to the euro and resulted in FX losses for the quarter.

Taxing included a one-time write-off of certainly deferred tax asset of approximately $3.4 million, due to the change in the business model by one of our key U.S. customer that decided to exit the baseband space. The non-GAAP FX for this quarter was a tax expense of $1.2 million. U.S.

GAAP loss for the quarter was 1.9 million and diluted loss per share was $0.10. This compares to net income of $3.1 million and fully diluted net income per share of $0.13 for the fourth quarter of 2013.

Non-GAAP net income and diluted earnings per share for the first quarter of 2014 were $1.7 million and $0.08 respectively representing a decrease of 61% and 60% over $4.5 million and $0.20 reported for the fourth quarter of 2013 respectively.

Non-GAAP net income and diluted earnings per share for the fourth quarter excluded equity based compensation expenses of $1 million, the impact of amortization as acquired in tangibles, net of tax of 0.2 million associated with acquisition of RiveraWaves, 0.1 million is cost associated with the acquisition cost and one-time write off of the deferred tax asset related to stock based compensation of approximately $2.2 million.

Our non-GAAP net income and diluted earnings per share for the fourth quarter of 2015 excluded an aggregate equity based compensation expense of $1.3 million. Other related data, shipped units by CEVA licensees during the fourth quarter of ’14 were 265 million up 18% sequentially and 4% for the fourth quarter shipments of 2013.

Of the 265 million units shipped 223 million or approximately 87% were for baseband ships reflecting a sequential increase of 15% from 195 million units of baseband shipped an increase of 4% from 2015 [million] unit shipped a year ago.

In the non-baseband volume shipment increased approximately 55% sequentially primarily driven by initial ramp up in the Bluetooth shipment from a number of our customers. As of December 31, 2013 29 licensees were shipping products incorporating our technology.

Next to the balance sheet, at year end CEVA’s cash, cash equivalents balances, marketable securities and bank deposits were approximately $130 million. In the fourth quarter we paid approximately 0.4 million as start of the prior commitment from acquired RiveraWaves.

In addition, we have further pending payments of approximately $3.6 million in connection with this acquisition. Our DSOs for the fourth quarter were similar to the third quarter level at around 55 days.

On buyback during 2014, we successfully purchased 2 million shares of our common stock at an aggregated consideration of $31 million and concluded the plan. Our Board of Directors approved last October a new repurchase plan for additional 1 million shares.

We plan to continue our stock buyback activities in ’15 and look for other strategic investments that can reinforce our market leadership in DSP and in connectivity IP. Now for the guidance, our licensing, our non-baseband product lines of vision, audio and connectivity are experiencing healthy demand from diversified customer base.

We’re therefore reiterating our commentary made last year on 25% increase in annual licensing revenue range from our historical annual license revenue of about $22 million.

On a quarterly basis our licensing revenue can fluctuate due to the timing of deal closures we believe that the quarterly licensing revenue of $6 million to $7.5 million per quarter is our new comfort range.

On royalty as Gideon just explained we believe that we are set to grow to benefit from growth factors in the handset space primarily in the expected LTE ramp up from a number of our customers beginning this year and that’s in both Chinese LTE expansion and the global LTE smartphone market as well as from the adoption of low cost smartphone in particular in 3G WCDMA by first prime users in developing countries.

We also expect less adverse finance impact from the ongoing unit reduction of legacy feature phones at Broadcom, Intel and ST-Ericsson as the majority of such reduction will be in place by other stream of customers.

We are therefore expecting our royalty revenue for the year to grow in the range of 10% to 30% subject to the pace of progress by our customers that we’ll make in the smartphone market as I just discussed. Our guidance for the first quarter, revenue for the first quarter is expected to be in the range of $12.7 million to $13.7 million.

Gross margin is expected to be approximately 91% on both GAAP and non-GAAP basis. U.S. GAAP operating expenses are expected to be in the range of $11.5 million to $12.5 million.

As I anticipated total operating expense for the first quarter a $1 million is expected to be attributed to equity based compensation expenses and 0.3 million to amortization of acquired intangible. Our non-GAAP OpEx is expected to be in the range of $10.3 million to $11.3 million.

Net interest is expected to remain low and is anticipated to be around $300,000 due to lower cash balances in the year. Tax rate for the first quarter is expected to be approximately 14% on non-GAAP basis. Share count for the first quarter in the range of 20.9 million to 21.1 million shares. U.S.

GAAP fully diluted earnings per share is expected to be approximately $0.00 to $0.02 and non-GAAP EPS forecast excluding aggregated $1 million for equity based compensation expenses, net of tax and amortization tax expenses of 0.3 million is expected to be in the range of $0.06 to $0.08 per share. Operator, you could now open the Q&A session..

Yes, thank you. We will now begin the question-and-answer session. (Operator Instructions). And the first question comes from Gary Mobley with Benchmark..

A question relating to your outlook for non-baseband royalty units, just to clarify and Gideon did you mentioned that you anticipate generating royalty revenue from non-baseband units in the range of 700 million to 900 million by 2018 and I think in consideration of that do you expect your non-baseband royalty units grow in 2015 or does that have to wait until 2016?.

As I said in my prepared remarks, we’re going to see new products coming into the market, we wouldn’t know yet exactly what’s the magnitude of that, but if you're asking about how is going to -- these 700 million, 900 million units going to shape up between now and 2018, it will start slow, but we’re going to see more noticeable impact in I believe 2016 to 2017, bear in mind how it work, you need to accumulate a cut license fees in these conserve market you have to accumulate bunch of licenses you see this [indiscernible] and that’s the amount of units is that we are expecting between seven to 10 bills every quarter lot of them are new customers and by they’re trying to market these quick response, if you wear the Bluetooth to Wi-Fi technology these guys can turn out product in nine months to 12 months.

So overall, 2015 -- I’m not expecting a noticeable effect but we’re going to see product coming to the market 2016 and will become minimal..

I notified your royalty rate per unit in the fourth quarter increased not a low single-digit percent quarter-over-quarter was that all attributable to a greater mix of 4G related of baseband royalty units and can you clarify the amount of 4G related royalty units you had in the fourth quarter? I think you mentioned that it was higher in the fourth quarter compared to all of 2013 is that how you summed it up?.

Again low earnings I’ll try to answer, on LTE this is for the highest quarter we’ve ever had just shy of 7 million units that we powered and of course much higher [AFTs] in the north so that help. So it's still a smaller fraction out of 255 million units overall, so it's a helpful, it's a good timing for us, but still not huge magnitude.

On top of that it can also be said that this quarter for the first time if you look at the unit volume usually it's a long time ago 90% baseband, 10% non-baseband, this last quarter we are looking more at 17% non-baseband and 13% baseband.

So there is still just initial ramp up of what we had mentioned in around Bluetooth specifically over the half of the now in the last quarter, Gidion I would add also 3G wideband CDMA, we are accumulating very fast volume there between 3G wideband CDMA, I think it's only between Mediatek and [Exynos] those guys are taking over all the -- they spread overseas, shipments in India and Indonesia and on those places..

You mentioned in your press release a license deal with a baseband supplier tied specifically to a VD and handset OEM you refer to the licensee as a new chip company to clarify is this a -- the first time you licensed with those particular chip company?.

Yes and that’s it, basically no more information about it..

Last I wanted to touch base of you on a development this week related to one of your licensees that also supplies capped silicon for some of the leading edge smartphones, as my understand that Samsung is going to favour it's Exynos processor in maybe some of its flagship smartphones and perhaps that has a function of them being more compitant about their captive solution manufacture on the 14 nanometer process and if in fact they think it’s a superior solution versus some of the merchant solutions, do you anticipate benefitting from more usages of the Exynos processor looking down to 2015 and beyond?.

You see the -- we cannot confess basically to all those other market rumor, if it talks about doing -- in general we know that Samsung is using our technology, there are others in here and we’ll see how the year progresses and I think everybody will know about it..

Thank you. And our next question comes from Suji De Silva with Topeka..

Hi guys congratulations on the year and also getting royalty units back on track from cash level.

So couple of questions here on the fourth quarter in China can you talk about the smartphone inventory conditions I know there was concerns about inventory into the end of ’14 for coming out of those into ’15 and what do you see resumptions of growth in that area?.

I think if you look at our overall guidance with [indiscernible], first for Q1 we are expecting the normal seasonal decline in royalty we will see somewhere between 5% to 10% from Q4 you’ve seen it for the last couple of years it’s nothing new to us and I think that addresses your question because lot of OEMs are holding back and waiting for post Barcelona and [indiscernible] March-April time frame to come up with a new 2015 model.

With that said we believe in our model that the first quarter royalty revenue for Q1 2015 will be higher and year-over-year comparison so we have to face seasonality and the current effects that you just mentioned but with that said and a dollar base and a unit basis we will better in 2015..

Okay, great that’s helpful and then for the feature phone unit at this point should I think of its stable or are they mixing up to 3G so that would decline, how should that progress?.

First of all in feature phone what we are seeing today is all those units that are less stronger by SP and the Broadcom and to some extent Intel being taken there over by, other majority of people who are our customers.

So overall I see market analysis saying that if you look between now and 2019 feature phone is expected to be decline by minus 1% and the explanation for this one there are still places in the world that don’t take phones.

So overall we are expect feature phone in terms of pricing to be more or less stable and units will be high but no doubt that if you take India and Indonesia in these places they’re going for 3G very fast..

And on LTE how would you characterize the growth expectation for 2015 in the going kind of mid market versus high end where it can be a significant unit growth opportunity or just the steady high end unit growth opportunity how do you characterize LTE?.

We saw markets that I think that in China the places that we’re going to see LTE growing fast is in China they’re speaking growing from 100 million this year to -- last year, to 330 million this year basically 66% of the phone smartphone in China will be LTE and that will be a near to low end side with the [indiscernible] now $65 over LTE with quad core with ARM so that’s the point that we are hitting I mean that’s where we are expecting to get the volumes the sweet spot..

Thank you. And the next question comes from Joseph Wolf of Barclays..

With these all moving parts in the business now as you move towards a more broad based source of royalties, but right now licensing stage moving stage could you just review for us kind of what the to the extent that you can the ASPs that we should be expecting across as we try and build the model for 2015-16 so now if we look at all the feature phones the 3G, LTE and then in the non-handset business talking about Bluetooth and some of your newer application and then some end markets where we could expect to see the first winds in terms of royalty volume?.

Yes, that’s nice question that’s a serious question. You’re right that there are lots of moving pieces and therefore we need to look at more average and market segments let’s start with the baseband and then move on.

The baseband, the most interesting the near term opportunities around the LTE we’ve waited or that for the last two years and I think based on the number of LTE units shipped we’re up from 4 million units in 2013 to 11 million in 2014 and that’s rounding up the numbers, [2 million].

The opportunity here potentially could be in the 10s of millions Gideon talked about 330 million units just in China and of course I think our customer base there all around the Intel, the Spreadtrum, the Samsung, and the lead core of the world are aiming into that growth market with us powering a lot of or all of these devices.

So that’s the biggest opportunity for us and average LTE would be 3x the run rate the average run rate we have from today, 3x to 4x even.

If you look at the change from feature phone to smartphone and Gideon talkedabout the emerging economy, we have around 65% to 75% market-share in the core, but the majority of the market is see the pile these days we can see 2x increase of that market and those people using a very simple feature phone will change their phone to low cost smartphone, but anyway low cost smartphone today in the market are in the range of $40 to $50.

As Gideon mentioned, that LTE starts $65 to $80. So we will decide if the products more expenses than future phone therefore the [indiscernible] 2x.

If you look at the connectivity the market 10 time larger and instead of talking about 3 billion or 4 billion units a year, we’re talking in a serious time in 25 billion, each market and this is what we stated in the press release and in this call earlier that we want to have -- that we want to be in 700 million to 900 million new non-baseband devices by 2018, you have a one central powered device type of ASP for Bluetooth device, it could be hearing aid, it could be a portable mouse, keyboard and a bunch of home connectivity type of devices, again in different product line, wearables and intuitive thing that could be Wi-Fi in the same way that we see today some of between 10x to 2x depends on the application in the market and it could be that Samsung and the new market of vision and audio and DSLR camera that we could be looking of 2x to 3x the average of where ASP lies today.

So sorry for this long answer, but maybe as you mentioned part to this model the key of that is the lasting volume growth rate for the last three quarters and roughly dollar amount increasing and pretty like potentially the lease of royalties in 2015 could grow in the range of 10% to 30%..

If you look at that Bluetooth revenue that RivieraWaves is providing you, can you just give us kind of a break-down maybe in percentages of what your old connectivity Bluetooth business or that CEVA owned, what Riviera adds and where these applications are if we think about the end markets for RivieraWaves being success?.

We don’t break value, I think for the fact that for the first time 17% of our volume is non-handset and this is by far due to nice contribution in Bluetooth, I think you could take into account that the majority of that, we’re talking about the 30 million versus your 220 million in non-baseband, 30 million you haven’t seen for a long, long time.

And I won’t even talk about and touch about the applications that we see today in these tens of millions of devices.

Bluetooth produces pickups really high volume because of what is call Bluetooth early low energy and the think about all the real devices in home, we have now customers bring remote controls for TV, for set-top box, wearing hearing aids application numerous things, I mean there is not any -- of course smartphone tablets and all areas, wireless speaker and then they just remind me, so there is not -- the unique think about Bluetooth is that every device, almost every device that is portable or niche, low power Bluetooth is the defacto standard of the default product.

So we go to the customers. For us we are completely agnostic because we are giving a good solution hardware and software and basically we are -- we don’t care what is the end product..

Just one last question, I know you want to hang up on me is cash, you announced the new buyback, so what’s your timing on that in terms of upfront just quick study across the 1 million shares of no reason to accelerate here?.

You are right, we haven’t done -- the buyback activity in Q4 that we did initially to new plan last quarter of a 1 million shares and I think on one hand it's fair to say that it does depend on the stock price and from time-to-time we set payment and buy and if you look at the last year then this is maybe a good comparison, you could see that on average with that several of the major $20 million plus, minus every year in the last few years.

So I believe we can cam start to change that and we’ll continue to be active against from time-to-time, I would not [indiscernible] specifically has drop, so we will continue to use our cash partially for that and partially to look for other ideas that we have done so successfully with having Bluetooth and Wi-Fi connectivity..

Thank you. And the next question comes from Matt Robison with Wunderlich Securities..

Yaniv, I’ll ask you for CapEx depreciation operating cash before we get to housekeeping stuff Gideon did you mentioned on your new semiconductor licensee that that was for an LTE application?.

Yes..

And can you talk a little bit about the fragmentation in LTE,the different variations and how you’re enabling your licensees to address those challenges?.

You see the market is when it comes to handset it’s pretty consolidated on how to change from our concerns so there are three areas that we can expand in the baseband side one is the tablets we see more and more tablets company or chip company in the low end that are coming or tablets around communication IP maybe that I have -- Intel saying that they are speaking about one third of the tablet will be with LTE or 3G.

The other areas that we are very excited on LTE there is lot of entrance is what is called MTC, Machine Type Communication.

This is almost LTE module to mobiles the goes through automotive and smart city and IoP in general, but there is in process a new version of the LTE that is called Cat-0 that will be powered to produce [13] of LTE, LTE Advanced and the once this is ratified there will be lot of companies that we’ll be looking towards this one.

So when it comes to handsets it’s opportunistic around the -- it has all advantages in technology wise. But it depends rather base in common so we will likely to make them in house to outsource. But when it comes to tablet and the LTC we think that there is lot of focus onto shareholder side.

Now on the technical side you asked on depreciation like prior calls 0.2 million on an annual basis 0.8 CapEx was 0.65 and then on annual basis 1.4 million and cash from operating activities 3 million for the quarter and 9 million for the year..

Thank you. And the next question comes from Anil Doradla from William Blair..

This is John Smith on for Anil, thanks for taking my questions.

First one just on the licensing front as we look out to 2015 could you just give a little bit more color on the pipeline that you’re seeing on both the baseband and non-baseband side?.

The pipeline looks it is very solid we have excelled and we have no product to sell in the non-baseband side region and connectivity on drops off this area also we’ve seen most of the interest.

Audio and sensing [indiscernible] line interest in this area and the even in this quarter find license agreement for our audio is one of the key advanced company so that’s going to work in the baseband side we have handset and we have base station in base station we have opportunities and we are optimistic about design wins -- coming design wins and when it comes back to video I said to handset to make when it comes to handset it’s opportunistic the standouts are going very fast speaking about LTE Advanced, LE14.

These are more complicate and thinking the question other than incumbents keep using the in house DSP or move to our superior technology in the baseband side we don’t know.

I also mentioned to Matt two evolving areas in the LTE in general tablets and the Machine type communication the three we expect new entrance new companies coming and looking for technologies and here we are ready to providing this technology..

Great, thanks.

And then last one from me just strength of the dollar recently could you talk about any hedging strategies that you guys have implemented or just how we should be thinking about the FX impact on expenses as we progress throughout 2016?.

Overall our hedging strategy enables us to go out six to nine months this year there is a big benefit on non-dollar dominated expenses and I think we are going to see a benefit from that both in our budget and our number and overall plan it could overall expand due to that we’ll benefit on annual basis compared to 2014 and we do take that into consideration and in fact we will benefit from it.

With that said bear in mind there is expense was on the box were six months because we bought in the beginning of July next year that will be on annual basis. But so that helps and we are taking advantage with the hedging of the dollar versus other currency that will expense this year..

Thank you. And last question comes from Jay Srivatsa from Chardan Capital Markets..

Thanks for taking my question, Gideon looks like the non-baseband side is clearly starting to pick up for you on the royalty side of the business, if you were to predict out two or three quarters as you exit 2015, what is your expectation for the non-baseband business relative to the baseband business in the royalty side, just on a percentage basis?.

I cannot go to percentage basis, but I think I answered at the beginning in early that in 2015 I will be happy if we’re going to see starting of production in this one. We are now assembling all our chips envision definitely Bluetooth, Wi-Fi, audio, there assemblies and I want to go, them to go into production.

Once you go to production, you start to see the pattern and then it will be easy to forecast and also provide color for what’s going on rest of the way. I think 2015 the LTE and 3G wideband CDMA this is we’re going to see the growth.

The [analysis] of the last quarter we just came out of the 30 million and compare to 90 million non-baseband units that we have last year even slightly shy of 90, we’re already seeing the 33% increase in the non-baseband devices and this is just the beginning of the year, so hopefully that’s going to ramp up even better as we progress..

Got it.

Given if outline from pretty lastly goals for the non-baseband had in 2018 in terms of total unit volume, that you think the potential be available to you, what are some of the IP spreads you potentially need to add to your existing portfolio to address that, we believe you have all of them or we believe there is still better IPs that you need to add to your portfolio to address that market successfully?.

The 700 million to 900 million unit that we said is with the listing IP, the designing that we are signing today, we don’t need further IP to reach to these target, if we do something in terms of M&A or stuff like this it would be additional to pick up to the next another level in this one.

700 million to 900 million unit means lot, but we are speaking about 25 billion - 30 billion unit in that freights for IP, we are taking 700 million to 900 million mobile, but because we are starting we want to be modest at this stage..

Thank you. And as there are no more questions at the present time, I would like to turn the call back over to management for any closing comments..

Sure. Thank you very much everybody for joining us today and for your continued interest in and support to CEVA. We will be attending Mobile World Congress in Barcelona, March 2nd to March 5th during the first quarter and we invite you to join us there. Thank you and good bye..

Thank you. The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect..