Richard Kingston - IR Gideon Wertheizer - Chief Executive Officer Yaniv Arieli - Chief Financial Officer.

Gary Mobley - Benchmark Matt Ramsay - Canaccord Genuity Joseph Wolf - Barclays Matt Robison - Wunderlich Jay Srivatsa - Chardan Capital Markets Anil Doradla - William Blair.

Good morning and welcome to the CEVA Incorporated First Quarter 2015 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, Vice President, Market Intelligence Investor and Public Relations. Please go ahead..

Thank you. Good morning everyone and welcome to CEVA's first quarter 2015 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 general qualitative data.

Yaniv will then cover the financial results for the first quarter and provide guidance for the second quarter of 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 second quarter of 2015, optimism about our licensing pipeline and royalty revenue growth including optimism of biased LTE ramp up. Increase in the blend of AFP on a year-over-year basis.

Projected return to normal DSOs and exploration of strategic investments 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.

The recovery of the baseband markets, our success in penetrating new markets 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 would now like to turn the call over to Gideon..

Thank you Richard and welcome everyone. We are off to a great start for 2015 with first quarter revenue exceeding the high-end for our guidance range. Our top line growth was primarily driven by strong licensing demand for our product. We also continued to show progress on our royalty from both in revenues and new product launches from our customers.

Total revenue for the first quarter was $13.8 million slightly higher compared to the first quarter of 2014. Licensing dynamics and deal closure continued to be robust. Licensing revenue came in at the high 7.8 million above our guidance.

We signed 12 agreements in total during the first quarter and record high in terms of number of deals signed in a single quarter. Of the 12 agreements signed during the quarter, seven were for the DSP platforms and software and five of the agreements were for our connectivity portfolio.

Ten are non-baseband applications, eight are first time customers for CEVA. Our customer target applications include smartphones, LTE routers, Advanced Driver Assistant Systems ADAS, surveillance cameras, wearable and storage systems. Geographically, five of the deals signed were in the U.S. one was in Europe and six in Asia.

At this stage let me elaborate on four of the agreements signed in the quarter as both are in indicative of the attractiveness of our offering and the broad market opportunities we are exposed. The first of this agreement, is a lead customer for a U.S.

best in breed CEVA-XM4 Intelligent Vision Processor that we announced at the Mobile World Congress earlier this year. Our customer is a well known vertically integrated camera mobile supplier, who designs it's on chips for intelligence camera systems targeting ADAS application for the Tier-1 automotive OEM supply chain.

This marks the first time that our vision technology is targeted to be deployed by automotive OEM system a market known for its very high barrier to entry. The second deal is with a major player in the sizable MEMS market, with plans to incorporate our DSP within an upcoming product.

The combination of DSP and MEMS offer a very attractive ready proposition both in terms of power and cost for smartphones connected car, wearbands and many other smart devices that as of to date require separate discrete chips for those we operate.

The third deal is with high volume analog semiconductor company that China signed up as a lead customer for about [pres 35] next generation Bluetooth 5.0 IP. Our new customer plans to integrate our Bluetooth IP and be ahead in the market for next generation wearband, wireless audio and smart home product.

The Bluetooth 5.0 standout is intended to also substantial improvement in range, bit rate and audio capabilities versus the existing Bluetooth 4.0 standard. And the fourth deal of note is with a major Asian semiconductor company that adopted our CEVA-XC DSP for the LTE router market.

LTE router is small form factor Wi-Fi hotspot that connects multiple devices to the LTE network simultaneously. There are multiple used cases for LTE router such as Verizon MiFi or mobile Internet in public transportations and taxis.

When taking a broader prospective on the driver of for our licensing activities, we can pinpoint two industry related trends that we're capitalizing on.

The first is the proliferation of wireless connectivity in the form of LTE Wi-Fi and Bluetooth, which appeal many different devices, including smartphones, tablets, connected cars, smart home, wearband, surveillance and other variance of the IoT segment.

Along with this our customers are experiencing a dramatic increase in the complexities; arise for new application centered on video, images, speech and audio. These trends play well to our cost trends and product innovation in the following ways.

Our vision product line and in particular our newest CEVA-XM4 Intelligent Vision Processor, set the stage for new era of devices with the ability to learn using advanced android based on UI network.

New product category such as autonomous car intelligence, intelligence surveillance system and drones as well as next generation smartphone, the target perceptual computing will all demand the performance in power metrics that the CEVA-XM4 is able to provide.

Our widely deploying and highly successful CEVA-TeakLite DSP architecture cultivate new uses for speech and audio such as always on contextual environment speech and audio recognition, natural device introduction, audio emulsion and alike.

And our full hardware and software solution for Bluetooth and Wi-Fi connectivity true life and shorter design cycles for those customer looking to innovate in the highly fragmented IoT space.

As a result of those, the level of interest in our product and the caliber of companies that we have engaged with; we are optimistic of our licensing prospect for the remainder of 2016. Our unique technology and value position is broadly recognized aligned us move fast and extend our customer base in future growth royalty revenue foundation.

Turning to our royalty revenue segment, we recorded a 4% year-over-year quarterly increase in royalties. The first time after more three yields of year-over-year decline. This milestone continued to transition and ship the way from feature phones, tower local smartphone.

In Credit Suisse's research overall smartphone market penetration is expected to rise tower 90% over coming years where it was 50% currently with total addressable population in excess of 5 billion by 2017. In addition the machine-to-machine segment is evolving quickly.

For new analysis from GSMA intelligence; these segment is forecasted to reach 1 billion connection by 2020 with verticals as such utilities, smart cities and agriculture. In the last few weeks the baseband landscape has become even more favorable for CEVA as new flagship smartphone OEM release new LTE product enabled by CEVA DSP.

In particular I'd like to highlight the following key development which I am sure manage to catch your attention as well. Xiaomi the largest smartphone vendor in China announced an affordable version of its popular Redmi brand, the Redmi 2A which is available through China Mobile at a retail price starting at $80.

The heart of the Redmi 2A, the [lead] software designed LTE model SoC enabled by CEVA-XC DSP providing cost efficiency and multi-mode support. Samsung in house model design is capturing substantial share in the new Galaxy S6 and S6 Edge.

Recent peel down analysis by Chipwork and iFixit show the Samsung Shannon 333 LTE Advance slim modem enabled by CEVA DSP in Galaxy S6 and S6 Edge model shipping as many operators around the world and so for the first time was AT&T and T Mobile in the U.S.

Intel introduced the Atom x3 processor product family, formally code named SoFIA its first integrated SoC that combines Intel Atom Application Processor and 3G and LTE modems enabled by CEVA DSP.

This integration level allows device manufacturer to deliver full feature 64bit smartphone, tablets and device at affordable prices ranging from $75 for entry level devices up to $200. Intel recently commented that over 45 tablet and smartphone design are in development using the Atom x3 processor.

Intel also revealed its third generation LTE slim modem, XMM7360 supporting advance LTE features such as three component carrier to achieve download speed to 450 megabit per second, this chip is targeted for flagship smartphone models.

[Broadband] continue to gain traction in smartphone across multiple fields and recently introduced two new chips that are already in mass production. The SC9838 is a five-mode PSoC which will allow the price of LTE smartphone to come down as low as $60.

Already the SoC is been certified, with multiple operator in China, India and around the world including China Mobile, China Unicom, Orange and Vodafone.

The SC7731G is 3G Wideband CDMA SoC, it is widely deployed at major brand OEM in product such as Samsung's first Tizen OS based phone the Z1, HTC new Desire 326G dual-SIM smartphone and Huawei new Honor Pad 3G tablet.

In addition to our cellular business shipments, we are still seeing good momentum with the new chips enabled by our Bluetooth technology. Dialog Semiconductor announced new addition to its SmartBond family of BLE chips targeting a range of products such as sport band, wireless charging, wireless remote control and the like.

Xiaomi announced $16 smart weighting scale that tracks your weight and body mass index and share the data via Bluetooth to any smartphone. Action Semi and Beken are deploying our Bluetooth for wireless speaker application.

Overall, our Bluetooth shipments are sizeable; we have more than 20 million Bluetooth chips now shipping each quarter by our customers. We expect this growth to continue. With that said, let me hand the call over to Yaniv to discuss our financials and guidance..

Thank you, Gideon. I’ll start by reviewing the results of our operations for the first quarter of 2015. Revenue for the first quarter was $13.8 million, exceeding our guidance of 12.7 million to 13.7 million, primarily due to strong licensing revenue. The revenue breakdown is as follows.

Licensing and related revenue was 7.8 million reflecting 57% of our total revenue, 1% lower as compared to the comparable quarter of 2013. Royalty revenue was $6 million reflecting 43% of total revenue, up 4% on a year-over-year basis and as Gideon stated the first positive year-over-year comparison in more than three years.

Quarterly gross margins were 91% in GAAP basis and 92% on non-GAAP basis. Non-GAAP quarterly gross margin exclude approximately $35,000 of equity based compensation expenses. Our total OpEx for the first quarter were $12.1 million in the mid-range of our guidance.

Total OpEx for the first quarter include an aggregate equity based compensation expense of approximately $0.8 million and $0.3 million for the amortization of acquired intangibles and other cost associated with the acquisition of RiveraWaves.

Our total operating expenses for the first quarter excluding these items that I stated were $10.9 million in the mid-range of our guidance and similar to the product. Minimal other income was recorded in the quarter, mainly due to the continued devaluation of our euro cash and certain current asset balances of RivieraWaves as the U.S.

dollar strengthened compared to the euro and resulted in FX losses. Our Europe GAAP net income per share -- our net income is about $0.5 million and net income per share was $0.02. Non-GAAP net income and diluted earnings per share for the first quarter was $1.6 million and $0.08 respectively.

Our non-GAAP net income and diluted earnings per share for the first quarter excluded equity-based compensation expenses of $0.8 million, the impact of amortization of acquired intangibles and other costs, net FX of $0.3 million associated with acquisition of RiveraWaves.

Other related data, shipped units by CEVA's licensees in the fourth quarter of 2014 were 243 million, down 9% sequentially and up 10% from the fourth quarter shipments of 2013.

Of the 233 million units shipped 201 million units or approximately 86% were for baseband ships, reflecting a typical sequential decrease of 10% from 223 million units of baseband shipped in the prior quarter and an increase of 5% from 191 million units shipped a year ago.

In non-baseband, volume shipments were flat sequentially and up 55% year-over-year, due to the ramp up of Bluetooth shipments from a number of customers. As of March 31, 2015 28 licensees were shipping products incorporating our technologies, one less than the prior quarter.

Let's go balance sheet items, as of the end of March CEVA’s cash, cash equivalent balances, marketable securities and bank deposits were approximately $128 million. In the first quarter, we paid approximately $3 million at start of the prior commitments in connection with acquisition of RiveraWaves.

In addition we've future pending payments of approximately $4 million in this connection. Our DSOs for the first quarter was higher than normal at 74 days, while they believe this was just [total] as we've already collected more than $7 million out of that outstanding balance.

Regarding our share buyback program, we repurchased approximately 94,000 shares during the first quarter at an average price of $20 per share and approximately $1.9 million. We plan to continue to our stock buyback in 2015 and look for other strategic investments than can reinforce our market leadership via speed and connectivity IP.

CapEx for the quarter was $0.4 million and depreciation was $0.3 million with overall 251 employees at quarter-end. As Gideon discussed earlier we continued to experience healthy demand from customers looking to license our products and solid pipeline for the second quarter.

On the royalty front we expect approximately 5% sequential seasonal decline, on an annual basis second quarter royalty will be up approximately 15% on a year-over-year basis driven by strong progress in LTE shipments and resulting in an overall increase of up to 25% in the blended baseband ASPs on a year-over-year basis.

Note that the impact of new flagship smartphones and chips that Gideon talked about was relatively small in the first quarter and those devices went on sale only in April, meaning production ramp up started late in the first quarter.

We expect these volumes to accelerate significantly in the upcoming quarters and as such maintain our annual royalty revenue growth guidance on 10% to 30%. Our guidance of the second quarter of 2015. Revenue for the second quarter is expected to be in the range of $12.5 million to $13.5 million.

Gross margin is expected to be approximately 90% on GAAP and non-GAAP basis excluding equity based compensation expenses. Our U.S.

operating expenses are expected to be in the range of $11.8 million to $12.8 million, of the anticipated total operating expenses for the second quarter $1 million is expected to be attributed to equity-based compensation expense and $0.3 million to amortization of acquired intangible.

Non-GAAP OpEx is expected to be in the range of $10.4 million to $11.4 million, similar to the prior two quarters. Net interest income is expected to remain low at approximately $200,000. Tax rate for the second quarter is expected to be approximately 10%, share count approximately 21.25 million shares and U.S.

GAAP diluted loss per share is expected to be approximately $0.02 to breakeven. On non-GAAP EPS basis excluding the $1 million for equity-based compensation expenses and 0.3 million for amortization expenses we’re forecasting EPS to be $0.04 to $0.06 per share. Operator you can now open the Q&A session please..

We will now begin the question-and-answer session. [Operator Instructions]. The first question comes from Gary Mobley from Benchmark. Please go ahead. .

I had a question Yaniv about you guide, you mentioned you expect a sequential dip in royalties for the second quarter specifically a decrease of 5% quarter-over-quarter.

Were you referring to units or you're referring to total royalty revenue?.

Royalty revenue, which by the way also is reflected mainly units, this is the major reason because of the seasonality the typical seasonality both in handsets and in the non-baseband segment. And in handsets we see in 2G or feature phones specifically being a lot lower than the average.

And I think overall the market based on their analytics is also looking at about 5% decrease in overall unit shrink. So, on one hand we're seeing strong royalty in smartphone offset by those overall seasonality and lower 2G..

Given what's dynamics for your royalty outlook for 2015, given specifics with the Samsung Galaxy phones and as well as your representation in the various geographies in those phones? Are you more confident that maybe you can be at the high end of your fiscal year '15 royalty growth outlook of 10% to 30%?.

Gary this is Gideon, it's too early to say. What we know is that we are in front of an upstream.

In LTE and also 3G smartphone, in LTE, it's new model, new customer, in 3G Wideband CDMA it's more market share, we're taking share from the media, we're picking share from Qualcomm because the pricing is prohibitive, looks like prohibitive from their standpoint and so that looks very good.

In Q1, there was -- let's call it there was under ship in the 2G feature phone because of backlog and mainly backlog in China is not something that we feel there is something dramatic. One thing that I think it's important to look overall is to take like a broader prospective.

If you compare Q1 to -- let say Q4 shipment to Q1 reporting on royalty versus a year before we showed up, a 4% up on a yearly basis, first time after three years. If you compare Q2 to Q2, you speak about 15% year-over-year growth.

So, there is a momentum going on there when it comes to product also ESP, I mean we're guiding now 25% ESP increase, most in case in baseband only. So overall there are good things coming in, we'll see how the pace of it in the next quarter or maybe the quarters' after..

So the follow up question relating to some of your licensing metrics, your deferred revenue is up again about 24% sequential increase is not a real large percentage of your quarterly licensing revenue.

But is that increase in deferred revenue indicative of maybe -- you trending at the upper end that your quarterly guidance -- license guidance range of 6 million to 7.5 million a quarter and maybe hitting that high-end of that range for the balance of the year.

And then for you two baseband license deals in the quarter were any those for first time licensees specific to that used case?.

So with the deferred revenue, I think the key growth there is not -- there is nothing changing in the business but there is just more deal, the number of deals, for each deal that we signed especially if it's a newcomer, they always take and licensing also, support fees as part of their -- usually rebuild for the whole year in advance and recognize that all the four quarters.

So it's in the last two quarters, as we manage to close high number of deals, 11, 12 deals when we get these upfront payment every time it will be linear and I think, this is the main reason, there is no other specific deal of business that moved it up other than just more support fees that we get paid in advance.

And the baseband customers are -- our existing customers taking another use or another piece of technology or software for the used nothing new but of course they're using our technology to deploy new chips and new products out there, and that's a positive sign..

The next question comes from Matt Ramsay of Canaccord Genuity. Please go ahead..

Gideon, you maybe you could talk a little bit about the trajectory of the year as you see it in the royalty business and maybe into next year a little bit as well with the ramps with Samsung but also the trajectory in China, I mean, you mentioned same positive data points out of Xiaomi wins and also the ramp of CD LTE chips from your partners spread on there.

To get to maybe the midpoint or above of the guidance range for royalty, just may be little bit color on what do you expect the trajectory at year to look like..

I would say that in terms of royalty overall we've two vectors, one is the handset and the other one is what we call non-handset.

When it comes to handset definitely LTE is the, the next gross driver for us and then for the industry and we're hitting utility which is the China and other developing country, we've lot of people need you to go through smartphone, I mentioned statistics about [LTE] moving from 50% deployment to 90% deployment in 2015.

So we have a range of population is about 5 billion that sooner or later will adopt mainly to LTE, but in other regions 3G Wideband CDMA or 3G smartphone.

This is another area that we are -- the opportunities there is different because today in the 3G Wideband CDMA or 3G smartphone, you have two competent players that will compete, this is spread over customers and Mediatek that is user friendly and certain models that they have, not exclusively. And this is a big market and we expect this to grow.

Now that effect is not baseband, we discussed about it a lot in terms of in the licensing part, it's a collection of many use cases vision of the connectivity Bluetooth, Wi-Fi et cetera and our objective here is to get to 700 million to 900 units in 2018.

And the fact that we are getting that many licensing deals, last quarter it was 10 deal from the non-baseband side. So in accumulation, it's very good and we are pretty confident that we can hit this number. Bear in mind that now only in Bluetooth which is one part we have advantage of 20 million unit a quarter, just one quarter [plan] today.

So I hope I address in a broader perspective your question..

On the non-baseband part of the business, I guess two questions; one, how long is the typical design cycle from licensing deal into when you might collect growth, I know probably varies a bit across that business.

But just some perspective on the licensing strength that you have? And then second obviously you guys did the acquisition of RiveraWaves and it looks like some of the RiveraWaves larger licensees were recently acquired by large semiconductor companies that you give those deals even potentially more breadth, any color you could give on the non-baseband trajectory and royalties maybe over the near-term would be really helpful?.

I think there are additional important questions; first of all, in terms of cycle times] from design to royalty payers. So it depends on the product line that we are offering, when it comes to Wi-Fi and Bluetooth because we are offering a package in hardware and software is basically a black box that people can put them.

The second thing can be relatively short, it could be between at about a year, it should compare to the baseband and baseband is usually two year. So it's almost half the fee, we have vision it can be between 12 to 18 months and base station is significantly longer.

But I think when it comes to non-basebands you're going to see Bluetooth and Wi-Fi licenses getting into the market first and then vision and rest of the stuff.

Just remind me what was the second question?.

Just the potential I guess breadth of some market for some of the RiveraWaves licensees, I think couple of them are recently acquired by some pretty large scale semiconductor vendors?.

The yield -- the rationale of acquiring RiveraWaves was to finding a company that has a strong technology focusing on and has big market potential. Basically agnostic to all the different SoC.

And here with connectivity Bluetooth, Wi-Fi relating the 20 billion, 30 billion total addressable market, we have more expectation for now and we see things beyond this, much beyond this.

But we are very extremely happy with this acquisition because it's not just a matter of the businesses that we're making, the things extremely competent and we are working fantastic with them..

And I’ll just sneak one more, for Yaniv.

How do you see OpEx trending not just in the guided quarter balance for the rest of the year as you integrate the acquisition, that'd be really helpful, any color there will be helpful?.

So that I think we might demonstrate the control over the expenses even post the acquisition and if you look at the last three quarters in a row the non-GAAP OpEx were about $10.9 million, I don’t anticipate that to change but to go up it could go maybe for one of the next two -- third quarter and fourth quarter slightly down because of some timing of our [big ramp] payments but other than that, where as for now for this year confident types of level and I think we’ve taken all the measures already and now anticipating surprises from that point of view..

The next question comes from Joseph Wolf of Barclays. Please go ahead..

Thanks for providing the more detail on the non-handset business which is what I wanted to ask about. If I look at the mix of the 60 smartphone 140 feature phone, 32 non-handset and think about your royalty guidance for the year.

Could you just help us triangulate or square the 25% ASP blend with that 10% to 30% royalty? So if we assume the higher-end, do we get higher than the 25% blended mix? Or maybe in a different way if I think about a little bit of growth what would you expect next year's mix of smartphone, feature phone, and non-handsets to be for 1Q '16?.

You need to be almost in adjacent in order to get all these factors and there are quite a few of them both from the industry perspective, market share perspective of our customers and the pace of adoption.

I think we could go and try to tackle this a little bit slower and maybe focus more on the second quarter will give you some data around that, and then see how you could extrapolate that on an annual basis on -- next year. Because I think that’s a bit too much to answer or not to ask but to answer.

For Q2 we’re giving some interesting data, we’re talking about breaking down the baseband and the non-based and why because the non-based and especially Bluetooth are becoming the significant volume.

I think Gideon mentioned earlier last quarter was about 20 million Bluetooth devices next quarter we’re looking for somewhere between 25 million to 30 million. So the pace of growth is pretty significant, the ASP of course is much lower on the base and this is why we’re separating it.

On the baseband standalone, feature phones, smartphone, new LTE design wins that we've talked about Q2 this year versus Q2 last year there will be a 25% growth in ASP just for baseband, why because the mix is more favorable with higher ASPs into the smartphone and view separately there is still the majority of the volume for example this quarter 140 million out of 200 million were feature phones.

So the more we move to smartphones including the LTE that number should increase overtime, and it does increase and it is increasing in the last two quarters quite significantly Q1 8%, Q2 we're talking about 25%.

If I look at the total blended ASP of the company and now adding the low cost but high volume Bluetooth in like devices Q2 year-over-year we’re looking about 10% slightly above 10% improvement in the overall ASP of the company.

To try to guess how this is going to look like by the end of the year it's very difficult because again there are too many factors here we need to break each one down, I think we try to tackle each part of that and the most interesting in the near-term was of course the ramp in the LTE model and the 3G the Wideband CDMA.

I would say let's be smarter little bit smarter in next quarter and we could probably give more guidance and more insights throughout for the upcoming quarter maybe get closer to the year and have a little bit more feeling of the year.

I don't feel comfortable guessing but giving you factual numbers for this next growth based on the royalty report that we've received so far not all of them but a big portion of them..

I guess just as I think about seasonality, it feels like if we go through the model it's hard to actually say what the royalty seasonality looks like anymore, as the Bluetooth gets bigger.

And so how should we be thinking about seasonality? Should we be thinking about putting those two numbers using traditional handset seasonality for the first half and growth in the non-handset just because of where we’re in the cycle? Or is there some seasonality in both businesses?.

This is Gideon, I would anticipate for the coming year to go to a non-baseband and baseband in seasonality by the way non-baseband it's pretty -- could be pretty straightforward at least for the coming years Christmas post Christmas.

In handset you have basically two low seasons, Q1 meaning Q4 this is mainly because this is the time where Samsung P&L and we do -- this was their inventory, they are by the way different than other. And Q1 which is the real post Christmas low season.

Now it become a bit complicated with CEVA because we’re in LTE and 3G outpacing the number outperforming so that’s what happens and becoming this is well our guidance in LTE and 3G we’re outpacing, we’re doing more than the market is doing and it happened to be in 2G it was we did, it was not understood because of inventory in China which could remain in the post Christmas area.

But in general it's framework in terms of reporting on royalty Q1 and Q2 are seasonally weak Q3 is maximum, Q4 is a bit lower than Q3..

The next question comes from Matt Robison from Wunderlich. Please go ahead..

How complete is your data at this point? You had all your major licensees report royalties or how do you go up or just more indications from a couple of them?.

We have pretty good understanding, we don't have all of them but we have I think of pretty good picture on the numbers..

What's happened -- may be you've already this but it seem like some of complicated answers from the other questions.

What's happened to ASPs for non-baseband versus ASPs for baseband?.

You mean to guidance from the Q1?.

Q1..

Q1, overall ASP on a year-on-year basis, we're not just about 10% I believe..

I can get that from the numbers but what's happened for non-baseband versus baseband, I'm trying to get a sense for the influence on ASPs for non-baseband from Riviera among other things?.

It went down, because last year in Q1 we had 3 million Bluetooth devices and this year we have 20 million LTE Bluetooth devices. So that mix changes completely, if you recall last year we had about 20 million to 21 million non-baseband, this year we're looking to 32 million non-baseband.

3 million a year ago Bluetooth, 20 million this year Bluetooth so that takes down ASP for non-baseband quite significantly but as we talked in the past that open drop the markets for billions of units in Bluetooth devices for us, for now hundreds of million over the next couple of years..

Do you think that non Bluetooth that looks like it's declined little bit? How long you think it's going to be before you can get that part of the non-baseband of to start growing again?.

I think we need some of the new markets, those markets like this year, you would remember from year ago like DVD the hard disk drives, that's pretty much did, the new markets of non-baseband other than the ones that Gideon mentioned around connectivity are of course the imaging the vision and the surveillance cameras these have much, much higher ASPs than Bluetooth or even they average of the company for baseband today, to ex that amount more or less and that should kick in at the late of this second half of the year and then more mainly to 2016, the bigger numbers..

Are you including audio in that category?.

Yes, we include audio, the order of non-baseband will be Bluetooth, the license has been, the design cycle is very short than Wi-Fi audio vision and last is base station, they have the longer life cycle -- design cycle and life cycle by the way..

What was the influence of consolidation on licensing this year versus last year? When I say consolidation, I mean that the effect of when your licensees are acquired and the acquiring company having to relicense?.

I'm not sure, I follow the question..

You mean 2015 or '14?.

Yes, you have record licensing in the first quarter of '14, which was few weeks after and until about mine speed and then was there some compound that made that tough comparison related to consolidation, was there similar activity?.

That's a good question because Q1 last year was a spike, because of consolidations of companies, there was two -- if you compare licensing revenue Q1 this year and then last year, which was just flat 1% but it's not a good reflection of the situation last year it was spike quarter we're usually near the 5 million to 6 million now we're thinking about 7.8 million in the licensing in many more deals..

Did you have any M&A related business in this quarter, first quarter?.

No, I don't recall that we have a consolidation….

We have small one -- one of the Bluetooth players..

So on the DSO stretch, I've seen some of it since where you got the more maybe it's currency related but more severe when addressing for the market share companies in this earning season.

Did you -- was that slow payments of that kind of effect or was it back-loaded timing of deals that they caused it to stretch so much?.

I think it was window shopping usually these companies spare some time, we didn't have these types of DSOs that we recall for many, many quarters and this time we've got two weeks after the quarter end.

So I'd think it's something more directing on their end but nobody got out of that 11 million, 7 million have been paid in the first three weeks and that could be my guess..

The next question comes from Jay Srivatsa from Chardan Capital Markets. Please go ahead..

Gideon in terms of the licensing revenues looks like it's clearly tracking better than expected or better than you projected before.

As you look at the rest of the year, where do you expect the majority of the licensing revenues to come from and specifically which segments are you expecting them to fairly materialize?.

That’s a good question, surprisingly we are expecting licensing revenue coming from all over the product line, also in baseband because last quarter we signed company in Asia elaborating the remark LTE routing which is at the Verizon MiFi, I see in China newcomers from SoC, people that want to go to tablet and understand that it should be LTE connectors then they are doing -- looking to integrate LTE, I have seen many companies in China also looking to machine-to-machine cut, which is called Cut vivo and they need LTE.

So I see LTE also as a baseband activity is coming and of course in the non-baseband, Bluetooth and Wi-Fi it's all over the place. We are -- we referred in the prepared remark about Bluetooth 5.0 this time was coming and people who wants to go into this, because it has a substantial feature.

So I cannot pinpoint one area, it's all over the place that’s the reason that we are optimistic..

In terms of China lately seems to be some concerns over the Telco’s actually cutting back on the CapEx related to 4G base stations, does that concern you that this could -- that could slowdown the expansion of the 4G handset business or do you feel that it's more of a temporary pause or something?.

I think it's a temporary pause, I don’t see any other ways for companies for China not to go to LTE big time, I feel Qualcomm rather pushing strong even career obligation for next generation. What we feel the design wins and expectation for the customer is LTE is big time this year..

And then last question for me strategically as you look over the next couple of years, what are some of the areas that you want to invest in and build the non-handset side beyond what you’ve already done, what are the specific core competencies you believe you need to acquire to expand your business from the current levels?.

When it comes to what we are seeing in vision is we see the automotive market is a big potential, it's not just the size of the market and the complexity there, but also we believe that what is going in [area] will dictate next generation feature phones -- smartphone and other areas.

So we are investing in automotive grade type of LTE or ADAS or Vision DSP. We are investing in machine-to-machine which is part of IoT, we believe cut vivo will be big time. We think that [13] of LTE advance for handset is a potential.

We think that our software defined radio approach is something that will appeal even to incumbent; they don’t use our DSP today. So this are more or less the areas that we're looking, few things that we are looking from the M&A side contextual awareness and stuff like this, but we can elaborate this later on..

And the last question for today will be Anil Doradla from William Blair. Please go ahead..

Yaniv and Gideon, we're picking up is with the introduction of 4G handset devices, there is a big reset on 3G ASP handsets and chips, we’re seeing that as much as 30% to 40%. First of all are you seeing that, now I know there is a good mix going forward in 4G and that will help you.

But I just wanted to understand the dynamics between 3G and 4G handset pricing?.

In 3G handset I think the pricing that people are speaking about $30 to $40, it's pretty much the pricing that we’re going to see in [this year] bear in mind Anil one thing, there is no difference between 3G and LTE in terms of the application of the user experience, I know LTE is low end and 3G low end.

So there shouldn’t be, because the screen is pretty much the same, the LTE is the same, we've Wi-Fi and stuff like this, so there shouldn't be that big different between 3G and LTE, and with this pricing it's elastic, meaning volume should go up, Anil just to remind you and everyone that 3G in a sense we sort of mix when Intel went out of it, and Broadcom decided to bailout of that market, the market in China skips the 3G and CMDA, the local 3G and they are all jumping almost from feature phones to LTE and higher-end smartphone, that’s the demand there.

So it's not that we had a big portion of that market and this is headwind for us, all that I think a lot of it is behind us and the now what we’re gaining share is the market share from Qualcomm that cannot compete these prices as you alluded to on the 3G part and the 4G it's all new design wins that we've talked about in the last hour.

So I am not sure we’re that much affected from the 3G market..

And as a follow-up on the ADAS market, you have got some design wins there, can you walk us through how big this could be? Could this be a big enough needle mover for CEVA? And would you compete with on these design wins is it mostly merchant players or is it in house players that would be helpful..

In terms of potential, ASP eventually is higher there and as we've said in the prepared remarks there will be no expectations, is good with this vision technology and ADAS is basically object detection and to expand this or take advantage of it because here is where the activities right now is coming to expand this to smartphones and tablet and medical and robotics and lots of stuff like this.

So that’s one thing.

With whom we’re competing? The competitor is competing out of as well Mobileye, they use their own DSP and we’re partnering with any company that and there are many companies coming from different angle for the sell store side, from SoC side, and they need the Vision DSP, the use of just because of the DSP, because CEVA has and I'll elaborate this on my prepared remarks, we’re also providing the algorithms for ADAS..

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

Thank you. And thank you everybody for joining us today and your continued interest and support at CEVA. We will be attending the following upcoming conferences and invite you to join us there.

On May 10th we will be at the Oppenheimer's Israeli Conference in Tel Aviv and on May 20th we will be at the Benchmark Company One-on-One Investor Conference in Milwaukee. Thank you and good bye..

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect..