Ceva Inc: Form 10-K for the period ended Dec 31, 2024

Company Overview

We are the leader in innovative silicon and software intellectual property (IP) solutions that enable smart edge products to connect, sense, and infer data more reliably and efficiently. Commanding 67% of the wireless connectivity market share based on IP design revenues in 2023, according to IPnest, we believe we have the industry’s broadest portfolio of comprehensive wireless communications and processor IP platforms and embedded software solutions for the deployment of artificial intelligence (AI) algorithms and models directly onto local edge devices (Edge AI). We power the connectivity, sensing, and inference capabilities in today’s most advanced smart edge products across four large, diversified markets with significant opportunity for long-term growth, consumer Internet-of-Things (IoT), automotive, industrial and infrastructure, as well as in the mobile and personal computing (PC) markets where we have well-established customers and presence, which based on our research we believe will represent a $5 billion total addressable market by 2027. Since 2003, more than 19 billion of the world’s most innovative smart edge products from AI-infused smartwatches, IoT devices and wearables to autonomous vehicles, 5G mobile networks and more have been shipped with Ceva IP, with approximately 2 billion shipped in 2024 alone.

For more than three decades, we have been a trusted partner to hundreds of leading semiconductor and original equipment manufacturer (OEM) companies servicing not just our largest target growth and incumbent markets, but also a wide variety of other end markets and applications, including smart-home, surveillance, robotics and medical. Our transformative semiconductor IP and embedded software offerings are incorporated by customers into application-specific integrated circuits (ASICs) and application-specific standard products (ASSPs) to enable power-efficient, intelligent, secure and connected devices that connect, sense, and infer - the three critical pillars of the rapidly evolving era of AI-enabled smart edge.

We have established leadership positions in key technology areas, including reliable and secure wireless connectivity for use in both infrastructure and end points across multiple end markets, low-power and highly efficient audio and video/vision sensing and interface solutions and scalable neural-network-based AI processing.

We are a sustainability and environmentally conscious company. We have adopted both a Code of Business Conduct and Ethics and a Sustainability Policy, in which we emphasize and focus on environmental preservation, recycling, the welfare of our employees and privacy – which we promote on a corporate level. At Ceva, we are committed to social responsibility, values of preservation and consciousness towards these purposes.

Our revenue mix primarily comprises IP licensing fees and related revenues and royalties generated from our customers’ shipments of smart edge products deploying our IP. Related revenues include revenues from post contract support, training and sale of development systems and chips.

We were initially incorporated in Delaware on November 22, 1999 under the name DSP Cores, Inc. Our current company was created through the combination of the DSP IP licensing division of DSP Group, Inc. and Parthus Technologies plc (Parthus) in November 2002.

With a global team of more than 400 development, support and sales professionals, we are headquartered in Rockville, Maryland, with research and development facilities in France, Greece, Ireland, Israel, Serbia, the United Kingdom and the United States and sales and support offices throughout Asia Pacific (APAC), Sweden, France, Israel, United Kingdom and the United States. We are committed to our customers’ success and intend to continue to drive innovation in smart connected systems in the AI era.

Industry Background

Short Range Wireless IP

Wi-Fi, Bluetooth and ultra-wideband (UWB) are key enabling technologies for any company looking to address the consumer IoT, automative, industrial, mobile, and PC end markets with Edge AI and IoT use cases. Moreover, many companies wish to integrate these connectivity technologies into System-on-Chip (SoC) designs rather than provide connectivity through an additional chip in the system. Yet, Wi-Fi and Bluetooth standards are constantly evolving, and the many new end applications are looking to benefit from these enhancements, which put further time-to-market pressure on systems and chip companies. In many cases, companies need to support multiple wireless standards in a device, which further increases the complexity. The advent of Artificial Intelligence of Things (AIoT) and the push to add embedded AI capabilities to almost every device has resulted in significant demand for connectivity IP that address this growing market, which includes smart True Wireless Stereo (TWS) earbuds, wearables, health monitoring, smart speakers, smart home appliances, white goods, and many other consumer and IoT devices. By licensing from us rather than developing these technologies in-house, our customers aim to access the latest standards, profiles and state-of-the-art radio frequences (RF) and to improve their time-to-market without undertaking the expensive research and development costs required to develop these technologies internally.

Cellular IoT IP

Cellular IoT, and specifically Narrowband IoT (NB-IoT), LTE Cat-1 and 5G RedCap standards, have become key technologies for companies wishing to connect low power IoT devices over long distances using cellular networks. By its nature, cellular is a very complex technology, with most of the industry knowledge held by a few large companies. By providing low power cellular digital signal processing (DSP) cores and platforms, we help our customers overcome the entry barriers to the cellular IoT market without undertaking the complex and expensive research and development process to develop these technologies internally.

5G/5G Advanced User Equipment and Infrastructure IP

As 5G and the upcoming 5G-Advanced standards continue to be deployed globally, new use cases and applications that leverage the standard’s enormous bandwidth and ultra-low latency are emerging, including fixed wireless access, private networks, Low Earth Orbit (LEO) satellite networks and vehicle-to-everything (V2X) communications. Our latest generation Ceva-XC20 family of DSPs and PentaG2 platform IP effectively lower the high entry barriers for network equipment manufacturers, IoT companies, satellite OEMs and newcomers who wish to address these market opportunities by providing comprehensive IP on which to build their 5G/5G Advanced SoC and ASICs, while helping reduce the time-to-market, risk, effort and associated cost.

Sensor Fusion

Inertial and environmental sensors based on micro-electromechanical systems (MEMS) are used in an increasing number of devices, including smartphones, laptops, robots, TWS earbuds, spatial audio headsets, smart TVs, remote controls, AR and VR headsets, drones and many other consumer and industrial devices. The software required to process the sensor data and fuse the data from multiple sensors is complex and requires unique specialization. By licensing our IP rather than developing this sensor processing software in-house, our customers can focus their efforts developing the applications that utilize the processed sensor data to create differentiated, contextually aware devices. In addition, the processors required to combine the data from these sensors and run the applications are performance intensive and increasingly require specialized architectures that can handle a combination of traditional DSP processing and AI processing. Our SensPro sensor fusion AI DSPs offer a combination of high performance single and half precision floating-point math for powertrain and Radar applications along with a large amount of 8- and 16-bit parallel processing capacity required for deep neural network (DNN) inference processing.

NPUs

Neural processing units (NPUs) are specialized processors designed to accelerate neural network computations, such as machine learning (ML) and AI. NPUs are optimized for performing complex mathematical operations required by neural networks, such as matrix multiplications and convolutions, much more efficiently than traditional processors like central processing units (CPUs) or graphics processing units (GPUs). Our family of NeuPro NPUs are tailored to meet the full scale of AI applications, from tinyML and embedded AI through to Small Language Models, Large Language Models and Time Test Compute. These NPUs are specifically architected to provide the AI performance combined with optimal DSP for filtering data from sensor inputs, all running in real-time, on device with minimal power consumption. This makes the NeuPro NPU family ideal for a wide range of smart edge devices, including smartphones, automotive advanced driver-assistance systems (“ADAS”), next generation AI PC, intelligent microcontroller units (MCUs) for consumer and industrial markets, wireless audio SoCs, smart cameras and other AIoT devices.

Design Gap

The demand for smart edge devices in the consumer IoT, automotive, industrial, infrastructure, mobile and PC markets continues to grow. These devices require faster and lower power connectivity, with richer user experience that is aware and predictive. Semiconductor manufacturers face ever growing pressures to make smaller, feature-rich integrated circuits that are more reliable, less expensive and have greater performance. These two trends are occurring concurrently in the face of decreasing product lifecycles and constrained battery power. The advent of wireless connectivity technologies like 5G-Advanced, Wi-Fi 7 and Bluetooth 6/7 and the diverse sensor related workloads required to make a device smart, such as advanced image enhancement, computer vision, AI inferencing, voice and audio pre- and post- processing, spatial audio and motion sensor fusion have further increased these pressures. While semiconductor manufacturing processes have advanced significantly to allow a substantial increase in the number of circuits placed on a single chip, resources for design capabilities have not kept pace with the advances in manufacturing processes and the increasingly rapid design cycle expectations, resulting in a growing “design gap” between the increasing manufacturing potential and the constrained design capabilities.

Our Business

We address the requirements of the consumer, industrial, infrastructure, automotive, mobile and PC markets by designing and licensing a broad range of robust processors, platforms, software and solutions which streamline the design of products for developing a wide variety of application specific solutions that address the connect, sense and infer use cases of smart edge devices.

Given the “design gap,” as well as the increasing complexity and the unique skill set required to develop a smart edge SoC, many semiconductor design and manufacturing companies increasingly choose to license proven IP, such as processor cores (e.g., DSP, CPU, GPU and NPU), connectivity platforms (e.g., Bluetooth, Wi-Fi, UWB, 5G) and embedded software algorithms (e.g., sensor fusion, sound, spatial audio) and memory and physical IP from silicon IP companies like Ceva to complement their in-house development or to replace their internal development efforts for these technologies. With increasingly complex designs and shorter time-to-market demands, it is becoming progressively more challenging and less cost-efficient for most semiconductor companies to develop the full range of wireless standards in-house alongside maintaining DSP and NPU platforms for their sensing and AI needs. As a result, companies increasingly seek to license this IP from a third-party developer, such as Ceva.

Our Business Model

Our mission is to be the partner of choice for transformative IP solutions for the smart edge. Our platforms for connect, sense and infer use cases in smart edge devices enables us to address the high-volume markets of consumer IoT, automotive, industrial, infrastructure, mobile and PC. We license our technologies on a worldwide basis to semiconductor and OEM companies that design and manufacture products that combine Ceva-based solutions with their own proprietary technology.

We believe our business model offers us some key advantages. By not focusing on manufacturing or selling silicon products, we are free to widely license our technology and focus most of our resources on research and development. By choosing to license our IP, manufacturers have the advantage of being able to solely focus on creating their own differentiated solutions and developing their own unique product roadmaps. Through our licensing efforts, we have established a worldwide community developing Ceva-based solutions, and therefore we can leverage their strengths, customer relationships, proprietary technology advantages, and existing sales and marketing infrastructure. In addition, as our IP is widely licensed and deployed, system OEM companies can obtain Ceva-based chipsets from a wide range of suppliers, thus reducing dependence on any one supplier and fostering price competition, both of which help contain the cost of Ceva-based products.

We operate a licensing and royalty business model. We typically charge a license fee for access to our hardware technology and a royalty fee for each unit of silicon which incorporates our hardware or software technology.

License and related fees are invoiced in accordance with agreed-upon contractual terms. Royalties are reported and invoiced quarterly and generally based on a fixed unit rate or a percentage of the sale price for the Ceva-based silicon product.

Strategy

We believe there is a growing demand for IP that enables smart edge devices to connect, sense and infer data more reliably and efficiently. These devices are becoming more complex, integrating multiple technologies and standards into a single SoC. We also recognize chip design skills and expertise are scarce nowadays and more systems companies and OEMs are deciding to develop chips in-house, creating an even greater demand for IP.

We have strategically aligned our IP portfolio to allow us to exploit the most lucrative “design gaps” in the demand for smart edge devices, which, based on our research, we expect will grow at an 8% compound annual growth rate from 2022 to 2027. We offer expertise developing complete solutions in a number of key growth end markets, including consumer IoT, automotive, industrial, infrastructure, mobile and PC. For these markets, we offer IP solutions that include various types of specialized platforms for 5G-Advanced, satellite communications, multi-standard wireless connectivity (incorporating Wi-Fi, Bluetooth, UWB, 802.15.4), wireless RF, cellular IoT, sensor fusion and spatial audio. To capitalize on this industry shift, we intend to:

• develop and enhance our NPU product lines for Edge AI to meet our customers’ evolving requirements
• develop and enhance our DSP platforms with additional features, performance and capabilities;
• develop and expand our short-range wireless IP and customer base, providing the newest standards, new IP blocks like RF and multi-protocol solutions to streamline our customers’ deployments;
• continue to develop new generations of high-performance platforms incorporating processors NPUs, wireless connectivity standards and embedded application software to pursue opportunities and grow our footprint in the smart edge markets.
• go up the “value chain” by adding and charging for software for our wireless, AI, voice, spatial audio and Inertial Measurement Unit (IMU) products;
• continue to prudentially invest in strategic technologies that enable us to strengthen our presence in existing market or enter new addressable markets;
• capitalize on our relationships and leadership position within our worldwide community of semiconductor and OEM licensees who are developing Ceva-based solutions;
• capitalize on our technology leadership in the development of advanced processor technologies, connectivity IP and sensor fusion software to create and develop new, strategic relationships with OEMs and semiconductor companies to replace their internal solutions with Ceva-based solutions; and
• capitalize on our IP licensing and royalty business model which we believe is the best vehicle for a pervasive adoption of our technology and allows us to focus our resources on research and development of new licensable technologies and applications.

Products

We are the leading licensor of wireless interface silicon and software IP that enables smart edge devices to connect, sense and infer data more reliably and efficiently. Our wireless communications, sensing and Edge AI technologies are at the heart of some of today’s most advanced smart edge products. From Bluetooth connectivity, Wi-Fi, UWB and 5G platform IP for ubiquitous, robust communications, to scalable Edge AI NPU IP, sensor fusion processors and embedded application software that make devices smarter, we believe we have the broadest portfolio of IP to connect, sense and infer data more reliably and efficiently.

Our categories of products include the following:

1) Connect

• 5G/5G-A Baseband Platform – PentaG2 – a complete IP platform for implementing a wide range of user-equipment and IoT cellular modems;
• OpenRAN Platform – PentaG-RAN – a modular, optimized hardware and software IP for implementing L1 PHY baseband processing in 5G and 5G-A base station and other cellular infrastructure SoCs;
• Communication Vector DSPs – Ceva-XC20 vector DSPs for 5G-A handsets, 5G-A RAN, and general purpose baseband processing;
• Baseband Processor – the Ceva-BX2 baseband processor IP handles both signal-processing and control workloads with up to 16 GMACs per second performance and high-level-language programming;
• Bluetooth Platform – Ceva-Waves Bluetooth – a comprehensive set of hardware IP, software modules, and radios addressing a broad choice of processes and nodes, to implement highly efficient Bluetooth and 802.15.4 connectivity in SoCs based on the latest standards;
• Wi-Fi Platform – Ceva-Waves Wi-Fi – a comprehensive selection of hardware IP and CPU-agnostic host software for energy-efficient SoC implementation of any of a wide range of Wi-Fi subsystems, from Wi-Fi 4 to Wi-Fi 7, for both client devices and access points;
• Ultra-Wideband Platform – Ceva-Waves UWB – optimized MAC and PHY hardware IPs and supporting software for secure and accurate ranging, and Doppler Radar presence detection applications;
• Multi-protocol Solutions – Ceva-Waves Links – provides preconfigured, optimized solutions for SoCs requiring multiple connectivity standards. All Ceva-Waves Links configurations are based on field-proven Ceva-Waves hardware IP and software stacks. Unique Ceva coexistence algorithms ensure efficient and interference-free operation of multiple connections while sharing one radio;
• Cellular IoT – Ceva-Waves DragonFly – turnkey platform with optimized, low-power hardware IP and protocol software for implementing NB-IoT cellular modem SoCs. Extensions provide support for GNSS such as GPS and BeiDou and for sensor-fusion applications;

2) Sense

• Vision / AI DSP – Ceva-SensPro is a family of DSP cores architected to combine vision, Radar, and AI processing in a single architecture;
• Audio and Control DSP – the Ceva-BX1 audio digital signal controller IP handles both modest signal-processing and control workloads with up to 8 GMACs per second performance and high-level-language programming;
• Neural-network-based noise cancellation – Ceva-ClearVox ENC software features a neural-network-based ENC algorithm with small memory and processing requirements to embed ENC into even tiny systems;
• Spatial Audio & Head Tracking – Ceva-RealSpace is a complete Spatial Audio software solution combining precise 3D rendering and accurate, low-latency head tracking;
• High-accuracy Sensor Fusion – Ceva-MotionEngine software combines high-accuracy 6 and 9 axis IMU sensor fusion algorithms, dynamic sensor calibration and many applications specific features such as cursor control, gesture recognition, activity tracking, context awareness, and AR/VR stabilization;

3) Infer

• NPU IP for Generative AI – Ceva-NeuPro-M – a scalable NPU architecture, ideal for transformers, Vision Transformers (ViT), and generative AI applications, with an exceptional power efficiency;
• NPU IP for Embedded AI – Ceva-NeuPro-Nano is a highly efficient and self-sufficient edge NPU designed for Embedded ML applications, delivering the optimal balance of ultra-low power and high performance in a small area to efficiently execute Embedded ML workloads across AIoT product categories, including Hearables, Wearables, Home Audio, Smart Home, Smart Factory, and more​; and
• AI SDK – Ceva-NeuPro Studio – a comprehensive software development environment designed to streamline the development and deployment of AI models on the Ceva-NeuPro NPUs. It offers a suite of tools optimized for the Ceva NPU architectures, providing network optimization, graph compilation, simulation, and emulation, ensuring that developers can train, import, optimize, and deploy AI models with highest efficiency and precision.

We deliver our platforms, AI and sensor fusion DSPs and NPUs in the form of a hardware description language definition (known as a soft core or a synthesizable core). All our hardware IP can be manufactured on any process using any physical library and comes with a complete set of tools and an integrated development environment. An extensive third-party network supports Ceva platforms, AI DSPs and NPUs with a wide range of complementing software and platforms. In addition, we provide development platforms, software development kits and software debug tools, which facilitate system design, debug and software development.

To reduce the cost, complexity, and risk in bringing products to market, we have developed a suite of system platforms and solutions. These platforms and solutions combine the hardware and software elements that are essential for designers deploying Ceva’s state-of-the-art platforms, AI DSP cores and NPUs. Our family of platforms are targeted for baseband processing within mobile, cellular IoT devices and base station RAN, satellite communications, advanced imaging, computer vision, radar application and deep neural networks, and audio, voice and sensing and Internet-of-Things related applications.

Customers

We have licensed our platforms, AI DSPs, NPUs and wireless connectivity IP to leading semiconductor and OEM companies throughout the world, including seven of the world’s top 10 MCU players. These customers incorporate our IP into application-specific chipsets or custom-designed chipsets that they manufacture, market and sell to consumer electronics companies. We also license our technologies to OEMs directly. Included among our licensees are the following customers: Actions, Ambiq, AIC Semi, Alif, ASPEED, ASR Micro, Atmosic, Autotalks, Beken, Bestechnic, boAt, Broadcom, Ceragon, Cirrus Logic, Espressif, ESWIN, FujiFilm, Goodix, iCatch, ICOM, InPlay, Intel, iRobot, Itron, LG Electronics, LifeSignals, Mediatek, Microchip, MorningCore, Nations, Nextchip, Nokia, Nordic Semi, Novatek, NXP, onsemi, Synaptics, Oticon, Panasonic, Renesas, Rockchip, Rohm, Samsung, SatixFy, Sharp, SiFlower, SigmaStar, Socionext, Sony, Sonova, STMicroelectronics, THX, Toshiba, Unisoc, Vatics, Winner Micro and Yamaha.

International Sales and Operations

Customers based in Europe and Middle East (EME) and Asia Pacific (APAC) accounted for 81% of our total revenues for 2024, 90% of our total revenues for 2023 and 88% of our total revenues for 2022, with customers in China accounting for 49%, 59% and 63% of total revenues for 2024, 2023 and 2022, respectively. Additional information on the geographic breakdown of our revenues and location of our long-lived assets is contained in Note 12 to our consolidated financial statements, which appear elsewhere in this annual report.

Sales and Marketing

We license our technology through a direct sales force. As of December 31, 2024, we had 34 employees in sales and marketing. We have sales offices and representation in APAC region, Sweden, France, Israel, United Kingdom and the United States.

Maintaining close relationships with our customers and strengthening these relationships are central to our strategy. From time to time, we develop new signal processors, platforms, software solutions or connectivity products in close alignment with several tier-one industry players, which signifies to the market that we are focused on viable applications that meet broad industry needs or try to get similar inputs and insight for our new developments from our marketing team. Generally, these industry leaders become licensees for these products which allows us to create a roadmap for the future development of existing cores and application platforms and connectivity products and helps us to anticipate the next potential applications for the market. We seek to use our customer relationships to deliver new products in a faster time to market.

We use a variety of marketing initiatives to stimulate demand and brand awareness in our target markets. These marketing efforts include contacts with industry analysts, presenting at key industry trade shows and conferences, and a comprehensive digital marketing program aimed at developing and nurturing relationships with potential customers. Our marketing group runs competitive benchmark analyses to help us maintain our competitive position.

Technical Support

We offer technical support services through our offices in Israel, APAC region, France and the United States. As of December 31, 2024, we had 26 employees in technical support. Our technical support services include:

• assistance with implementation, responding to customer-specific inquiries, training and, when and if they become available, distributing updates and upgrades of our products;
• application support, consisting of providing general hardware and software design examples, ready-to-use software modules and guidelines to our licensees to assist them in using our technology; and
• design services, consisting of creating customer-specific implementations of our signal processing IP and application platforms.

We believe that our technical support services are a means to assist our licensees to embed our cores and platforms in their designs and products. Our technology is highly complex, combining sophisticated signal processing IP core architectures, integrated circuit designs and development tools. Effective customer support in helping our customers to implement our solutions enables them to shorten the time to market for their applications. Our support organization is made up of experienced engineers and professional support personnel. We conduct technical training for our licensees and their customers and meet with them from time to time to track the implementation of our technology.

Research and Development

Our research and development team focuses on improving and enhancing our existing products, as well as developing new products to broaden our offerings and market opportunities. These efforts are largely driven by current and anticipated customer and market needs.

Our research and development team consists of 323 engineers as of December 31, 2024, working in seven development centers located in France, Greece, Ireland, Israel, Serbia, the United Kingdom and the United States. Our engineers possess significant experience in developing AI and sensor fusion DSP cores, NPUs and tools for 5G, computer vision, AI, connectivity products (Wi-Fi, UWB and Bluetooth), NB-IoT, and sensor processing and sensor fusion software. In addition, we engage third party contractors with specialized skills as required to support our research and development efforts.

We encourage our research and development personnel to maintain active roles in various international organizations that develop and maintain standards in electronics and related industries. This involvement allows us to influence the development of new standards, keeps us informed as to important new developments regarding standards and allows us to demonstrate our expertise to existing and potential customers who also participate in these standards-setting bodies.

Competition

The markets in which we operate are intensely competitive. They are subject to rapid change and are significantly affected by new product introductions. We compete with other suppliers of licensed signal processing IP. We believe that the principal competitive elements in our field are signal processing IP and NPU performance, overall chip cost, power consumption, flexibility, reliability, communication and multimedia software and algorithms availability, design cycle time, tool chain, customer support, financial strength, name recognition and reputation. We believe that we compete effectively in each of these areas but can offer no assurance that we will have the financial resources, technical expertise, and marketing or support capabilities to compete successfully in the future.

The markets in which we compete are dominated by large, highly competent semiconductor companies that have significant brand recognition, a large installed base and a large network of support and field application engineers. The following industry players and factors may have a significant impact on our competitiveness:

• we compete directly in the signal processing cores space with Verisilicon, Cadence and Synopsys;
• we compete with CPU IP or configurable CPU IP (offering DSP configured CPU and/or DSP acceleration and/or connectivity capabilities to their IP) providers, such as Arm, Synopsys and Cadence and the RISC-V open source;
• we compete with custom ASIC providers and internal engineering teams at companies such as Marvell, Broadcom, ST and NXP that may design programmable DSP core products and signal processing cores in-house and therefore not license our technologies;
• we compete in the short-range wireless markets with Mindtree and internal engineering teams at companies such as Infineon, Silicon Labs and NXP;
• we compete in embedded imaging and vision market with Cadence, Synopsys, Videantis, Arm and Verisilicon;
• we compete in AI processor market with AI processor and accelerator providers, including Arm, Cadence, Synopsys, Cambricon, Digital Media Professionals (DMP), Expedera, Imagination Technologies, Nvidia open source NVDLA and Verisilicon;
• we compete in the audio and voice applications market with Arm, Cadence, Synopsys and Verisilicon; and
• we compete in the embedded 3D spatial audio and Motion Sensing software market with Waves, Dolby and CyweeMotion.

In addition, we may face increased competition from smaller, niche semiconductor design companies in the future. Some of our customers also may decide to satisfy their needs through in-house design. We compete based on signal processing IP performance, first-to-market availability for latest generation wireless standards, overall chip cost, power consumption, flexibility, reliability, communication and multimedia software availability, design cycle time, tool chain, customer support, name recognition, reputation and financial strength. Our inability to compete effectively on these bases could have a material adverse effect on our business, results of operations and financial condition.

With respect to certain large potential customers, we also compete with internal engineering teams, which may design wireless connectivity or programmable signal processing IP core products in-house. Companies such as NXP, Renesas and STMicroelectronics license our designs for some applications and use their own proprietary cores for other applications. These companies also may choose to license their wireless connectivity or proprietary signal processing IP cores to third parties and, as a result, become direct competitors.

Proprietary Rights

Our success and ability to compete are dependent on our ability to develop and maintain the proprietary aspects of our technology and to operate without infringing the proprietary rights of others. We rely on a combination of patent, trademark, trade secret and copyright laws and contractual restrictions to protect the proprietary aspects of our technology. These legal protections afford only limited protection of our technology. We also seek to limit disclosure of our IP and trade secrets by requiring employees and consultants with access to our proprietary information to execute confidentiality agreements with us and by restricting access to our source code and other IP. Due to rapid technological change, we believe that factors such as the technological and creative skills of our personnel, new product developments and enhancements to existing products are more important than obtaining statutory protections for our technology in establishing and maintaining a technology leadership position.

We have an active program to protect our proprietary technology through the filing of patents. Our patents relate to our signal processing IP cores and application-specific platform technologies. As of December 31, 2024, we held 50 patents in the United States, eight patents in Canada, 90 patents in the Europe and Middle East (EME) region and 10 patents in the Asia Pacific (APAC) region, totaling 158 patents, with expiration dates between 2025 and 2041. In addition, as of December 31, 2024, we had six patent applications pending in the United States, nine pending patent applications in the EME region, three pending global Patent Corporation Treaty (PCT) patent applications and eight pending patent applications in the APAC region, totaling 26 pending patent applications.

We actively pursue foreign patent protection in countries where we feel it is prudent to do so. Our policy is to apply for patents or for other appropriate statutory protection when we develop valuable new or improved technology that is eligible for protection. The patent prosecution process involves complex legal and factual questions, and the breadth of claims allowed is uncertain. Accordingly, there are no assurances that any patent application filed by us will result in a patent being issued, or that our issued patents, and any patents that may be issued in the future, will afford us adequate protection against competitors with similar technology; nor can we be assured that patents issued to us will not be infringed or invalidated, or that others will not design around our technology. In addition, the laws of certain countries in which our products are or may be developed, manufactured or sold may not protect our products and IP rights to the same extent as the laws of the United States. We can provide no assurance that our pending patent applications or any future applications will be approved or will not be challenged by third parties, that any issued patents will effectively protect our technology, or that patents held by third parties will not have an adverse effect on our ability to do business.

The semiconductor industry is characterized by frequent litigation regarding patent and other IP rights. Questions of infringement in the semiconductor field involve highly technical and subjective analyses. In addition, patent infringement claims are increasingly being asserted by patent holding companies (so-called patent “trolls”), which do not use technology and whose sole business is to enforce patents against companies, such as us, for monetary gain. Because such patent holding companies do not provide services or use technology, the assertion of our own patents by way of counterclaim may be ineffective. Litigation may in the future be necessary to enforce our patents and other IP rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights of others, or to defend against claims of infringement or invalidity. We cannot assure you that we would be able to prevail in any such litigation or be able to devote the financial resources required to bring such litigation to a successful conclusion.

In any potential dispute involving our patents or other IP, our licensees also could become the targets of litigation. We are generally obligated to indemnify our licensees under the terms of our license agreements. Although our indemnification obligations are typically subject to a maximum amount, these obligations could nevertheless result in substantial expenses. In addition to the time and expense required for us to indemnify our licensees, a licensee’s development, marketing and sale of products embodying our solutions could be severely disrupted or shut down as a result of litigation, and we could be liable to such licensees for additional amounts.

We also rely on trademark, copyright and trade secret laws to protect our IP. We have registered trademarks in the United States for our name Ceva and the related Ceva logo, and currently market our signal processing cores and other technology offerings under this trademark.

Human Capital Resources

The table below presents the numbers of our employees as of December 31, 2024 by function and geographic location.

We believe we are a respected employer in the countries where we have operations, and, with the help of our employees, we strive to be a responsible global corporate citizen and a more sustainable company. Our Code of Business Conduct and Ethics sets the standards of conduct of our directors, officers and employees. In addition, in 2020, we adopted a Sustainability Policy that addresses matters related to our employees as well as data privacy and security, resource conservation and recycling, and other environmental matters. Our Sustainability Policy reflects our commitment to diversity and equal opportunity, a harassment-free workplace, training, development and employee engagement, and human rights, health and safety, and other matters relevant to employee well-being and the Ceva culture. The code is reviewed and updated periodically by our Board or Directors, and both the code and our Sustainability Policy are available on our website at www.ceva-ip.com (http://www.ceva-ip.com).

Our employees are not represented by any collective bargaining agreements, however, certain provisions of Israeli law and the collective bargaining agreements between the Histadrut (General Federation of Labor in Israel) and the Coordination Bureau of Economic Organizations (the Israeli federation of employers’ organizations) apply to our Israeli employees. We have never experienced a work stoppage. We believe our employee relations are good, as is their general well-being, which is one of management’s top priorities.

Available Information

Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to reports pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are available, free of charge, on our website at www.ceva-ip.com (http://www.ceva-ip.com), as soon as reasonably practicable after such reports are electronically filed with the Securities and Exchange Commission and are also available on the SEC’s website at www.sec.gov (http://www.sec.gov).

Our website and the information contained therein or connected thereto are not intended to be incorporated into this Annual Report on Form 10-K.

We caution you that the following important factors, among others, could cause our actual future results to differ materially from those expressed in forward-looking statements made by or on behalf of us in filings with the Securities and Exchange Commission, press releases, communications with investors and oral statements. Any or all of our forward-looking statements in this annual report, and in any other public statements we make, may turn out to be wrong. They can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties. Many factors mentioned in the discussion below will be important in determining future results. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make in our reports filed with the Securities and Exchange Commission.

Summary Risk Factors

Risks Related to Our Industry and Markets

• The markets in which we operate are highly competitive, and as a result we could experience a loss of sales, lower prices and lower revenues.
• Because our IP solutions are components of end products, if semiconductor companies and electronic equipment manufacturers do not incorporate our solutions into their end products or if the end products of our customers do not achieve market acceptance, we may not be able to generate adequate sales of our products.
• We depend on market acceptance of third-party semiconductor intellectual property.
• If we are unable to meet the changing needs of our end-users or address evolving market demands, we may not be able to expand our current market positions and penetrate new markets, and our new products may not achieve widespread market acceptance, which may limit our additional revenue opportunities and harm our business may be harmed.
• Our operating results are affected by the highly cyclical nature of and general economic conditions in the semiconductor industry, including as a result of significant supply chain disruptions.

Risks Related to Our Global Operating Business

• Our quarterly operating results fluctuate from quarter to quarter due to a variety of factors, including our lengthy sales cycle, and may not be a meaningful indicator of future performance.
• We rely significantly on revenues derived from a limited number of customers who contribute to our royalty and license revenues.
• Our business is dependent on IP licensing and related revenues, which may vary from period to period.
• Royalty and other payment rates could decrease for existing and future license agreements and other customer agreements, which could materially adversely affect our operating results.
• Because we have significant international operations, with a significant concentration of revenues in China, we may be susceptible to political, economic and other conditions relating to our international operations that could increase our operating expenses and disrupt our revenues and business. In addition, new tariffs, trade measures and other geopolitical risks and instability could adversely affect our consolidated results of operations, financial position and cash flows.
• Our success will depend on our ability to successfully manage our geographically dispersed operations.
• Our operations in Israel may be adversely affected by instability in the Middle East region, including with respect to the war between Israel and Hamas that began on October 7, 2023 or the subsequent war in the north with Hezbollah in Lebanon. In addition, terrorist attacks, acts of war or military actions and/or other civil unrest may adversely affect the territories in which we operate, and our business, financial condition and operating results.
• Our research and development expenses will increase relative to past periods due to our receiving fewer grants from the Israeli government and the EU.
• We face a highly competitive employment market and depend on a limited number of key personnel who would be difficult to replace, and changes in our management and sales teams may adversely affect our operations.
• The sales cycle for our IP and related solutions is lengthy, and even approved projects may have structured payment terms, which makes forecasting of our customer orders and revenues difficult.
• We may seek to expand our business in ways that could result in diversion of resources and extra expenses, and our product development efforts may not generate an acceptable return, if any.
• Because our IP and related solutions are complex, the detection of errors in our products may be delayed, and if we deliver products with defects, our credibility will be harmed, the sales and market acceptance of our products may decrease and product liability claims may be made against us.
• We may not be able to adequately protect our IP, and our business will suffer if we are sued for infringement of the IP rights of third parties or if we cannot obtain licenses to these rights on commercially acceptable terms.
• Cybersecurity threats or other security breaches could compromise sensitive information belonging to us or our customers and could harm our business and our reputation.

Risks Related to Finance, Accounting and Taxation

• The nature of our business requires the application of complex revenue recognition rules. Significant changes in U.S. generally accepted accounting principles, or GAAP, including the adoption of the new revenue recognition rules, could materially affect our financial position and results of operations.
• Changes in our tax rates or exposure to additional income tax liabilities or assessments could adversely impact our cash flow, financial condition and results of operations.
• The Israeli and French and Greece tax benefits that we currently receive and the government programs in which we participate require us to meet certain conditions and may be terminated or reduced in the future, which could increase our tax expenses.
• We are exposed to fluctuations in currency exchange rates.
• Royalty reporting by our licensees may be inaccurate or understated.
• We are exposed to the credit and liquidity risk of our customers, and to credit exposure in weakened markets, which could result in material losses.
• If we determine that our goodwill and intangible assets have become impaired, we may incur impairment charges, which would negatively impact our operating results.

Risks Related to Ownership of Our Common Stock

• The anti-takeover provisions in our certificate of incorporation and bylaws could prevent or discourage a third party from acquiring us.
• Our stock price may be volatile so you may not be able to resell shares of our common stock at or above the price you paid for them.

Risks Related to Our Industry and Markets

The markets in which we operate are highly competitive, and as a result we could experience a loss of sales, lower prices and lower revenues.

The markets for semiconductors in general, and for the products in which our technology is incorporated in particular, are highly competitive. Aggressive competition could result in substantial declines in the prices that we are able to charge for our IP or the loss of design wins to competitors. Many of our competitors are striving to increase their share of the NPU, signal processing IP and wireless connectivity markets and are reducing their licensing and royalty fees to attract customers. The rapid pace of technological change, including as a result of the proliferation of AI and high demand for AI-related products and services, can create opportunities for our competitors and harm our competitiveness in the market if our products do not evolve or we are unable to effectively keep up with such changes. The following industry players and factors may have a significant impact on our competitiveness:

• we compete directly in the signal processing cores space with Verisilicon, Cadence and Synopsys;
• we compete with CPU IP or configurable CPU IP providers (offering DSP configured CPU and/or DSP acceleration and/or connectivity capabilities to their IP), such as Arm, Synopsys and Cadence and the RISC-V open source;
• we compete with custom ASIC providers and internal engineering teams at companies such as Marvell, Broadcom, ST, and NXP that may design programmable DSP core products and signal processing cores in-house and therefore not license our technologies;
• we compete in the short-range wireless markets with Mindtree, IMEC and internal engineering teams at companies such as Infineon, Silicon Labs and NXP;
• we compete in embedded imaging and vision market with Cadence, Synopsys, Videantis, Arm and Verisilicon;
• we compete in the edge AI (NPU) processor market with AI processor and accelerator providers, including Arm, Cadence, Synopsys, Cambricon, Digital Media Professionals (DMP), Expedera, Imagination Technologies, Nvidia open source NVDLA and Verisilicon, and with internal engineering teams at companies such as Infineon, Silicon Labs and NXP;
• we compete in the audio and voice applications market with Arm, Cadence, Synopsys and Verisilicon; and
• we compete in the Spatial Audio and Motion Sensing software market with Waves, Dolby, and CyweeMotion and internal engineering teams at companies such as Apple.

In addition, we may face increased competition from smaller, niche semiconductor design companies in the future. Some of our customers also may decide to satisfy their needs through in-house design. We compete on the basis of signal processing IP performance, NPU efficiency, first-to-market availability for latest generation wireless standards, overall chip cost, power consumption, flexibility, reliability, communication and multimedia software availability, design cycle time, tool chain, customer support, name recognition, reputation and financial strength. Our inability to compete effectively on these bases could have a material adverse effect on our business, results of operations and financial condition.

Because our IP solutions are components of end products, if semiconductor companies and electronic equipment manufacturers do not incorporate our solutions into their end products, or if the end products of our customers do not achieve market acceptance, we may not be able to generate adequate sales of our products.

We do not sell our IP solutions directly to end-users; we license our technology primarily to semiconductor companies and original equipment manufacturers, who then incorporate our technology into the products they sell. As a result, we rely on our customers to incorporate our technology into their end products at the design stage. Once a company incorporates a competitor’s technology into its end product, it becomes significantly more difficult for us to sell our technology to that company because changing suppliers involves significant cost, time, effort and risk for the company. As a result, we may incur significant expenditures on the development of a new technology without any assurance that our existing or potential customers will select our technology for incorporation into their own product and without this “design win,” it becomes significantly more difficult to sell our IP solutions. Moreover, even after a customer agrees to incorporate our technology into its end products, the design cycle is long and may be delayed due to factors beyond our control, which may result in the end product incorporating our technology not reaching the market until long after the initial “design win” with such customer. From initial product design-in to volume production, many factors could impact the timing and/or amount of sales actually realized from the design-in. These factors include, but are not limited to, changes in the competitive position of our technology, our customers’ financial stability, and our customers' ability to ship products according to our customers’ schedule. Moreover, adverse changes in global or regional economic conditions and geopolitical uncertainty may further prolong a customer’s decision-making process and design cycle.

Further, because we do not control the business practices of our customers, we do not influence the degree to which they promote our technology or set the prices at which they sell products incorporating our technology. We cannot assure you that our customers will devote satisfactory efforts to promote their end products which incorporate our IP solutions.

In addition, our royalties from licenses and therefore the growth of our business, are dependent upon the success of our customers in introducing products incorporating our technology and the success of those products in the marketplace. The primary customers for our products are semiconductor design and manufacturing companies, system OEMs and electronic equipment manufacturers. All of the industries we license into are highly competitive, cyclical and have been subject to significant economic downturns at various times. These downturns are characterized by production overcapacity and reduced revenues, which at times may encourage semiconductor companies or electronic product manufacturers to reduce their expenditure on our technology. If we do not retain our current customers and continue to attract new customers, our business may be harmed.

We depend on market acceptance of third-party semiconductor intellectual property.

The semiconductor intellectual property (SIP) industry is a relatively small and emerging industry. Our future growth will depend on the level of market acceptance of our third-party licensable IP model, the variety of IP offerings available on the market, and a shift in customer preference away from in-house development of proprietary signal processing IP towards licensing open signal processing IP cores and platforms. Furthermore, the third-party licensable IP model is highly dependent on the market adoption of new services and products with standards that continue to advance, such as ubiquitous connectivity, and the increased use of advanced audio, voice, vision and motion sensing in conjunction with AI in the consumer, industrial, infrastructure, automotive, mobile and PC markets in which we participate. Such market adoption is important because the increased cost associated with ownership and maintenance of the more complex architectures needed for the advanced services and products may motivate companies to license third-party IP rather than design them in-house.

The trends that would enable our growth are largely beyond our control. Semiconductor customers also may choose to adopt a multi-chip, off-the-shelf chip solution versus IP licensing or using highly-integrated chipsets that embed our technologies. If the above referenced market shifts do not materialize or third-party SIP does not achieve market acceptance, our business, results of operations and financial condition could be materially harmed.

If we are unable to meet the changing needs of our end-users or address evolving market demands, our business may be harmed.

The markets for our IP solutions are characterized by rapidly changing technology, emerging markets and new and developing end-user needs, requiring significant expenditures for research and development. We expect that the market for our products will continually evolve and will be subject to rapid technological change. For example, new products and disruptive technologies are being developed, and companies with which we compete have implemented AI strategies for products and service offerings. We cannot assure you that we will be able to introduce systems and solutions that reflect prevailing industry standards on a timely basis, meet the specific technical requirements of our end-users, or avoid significant losses due to rapid decreases in market prices of our products, the failure of which could seriously harm our business. Further, we cannot assure you that the markets we chose to invest in will continue to be significant sources of revenue in the future. For example, while in May 2023, we acquired VisiSonics’ spatial audio business to bolster our position in wearables, we may not realize the benefits from this acquisition. In January 2024, we acquired an RF design group in Greece, as part of our Ceva-Waves Links new product offering for BT & WiFi radio technologies. The first product we launched out of this group was announced in January 2025 at the CES trade show, but we are yet unsure of its commercial success.

Our operating results are affected by the highly cyclical nature of and general economic conditions in the semiconductor industry, including in connection with significant supply chain disruptions.

We operate within the semiconductor industry, which experiences significant fluctuations in sales and profitability. Downturns in the semiconductor industry are characterized by diminished product demand, excess customer inventories, accelerated erosion of prices and excess production capacity. The semiconductor industry may be negatively impacted by factors such as decreased consumer spending, macroeconomic uncertainty and slow or negative economic growth. Each of these factors could decrease consumer spending and business investment in technologies and products that contain semiconductors. We have previously experienced a reduction in revenue and operating losses during downturns in the semiconductor industry, and current macroeconomic factors affecting customer demand have been aggravated by certain factors such as high interest rates and geopolitical instability. During such downturns, we typically experience new design start push outs, greater pricing pressure and shifts in product and customer mix, which can adversely affect our gross margin and net income. Furthermore, any future upturn in the semiconductor industry could result in increased competition for market share in the growing signal processing IP and wireless connectivity markets. The semiconductor industry is also affected by seasonal shifts in demand, and as a result, we may experience short-term fluctuation in our results of operations from one period to the next. We are unable to predict the timing, duration or severity of any current or future downturns in the semiconductor industry.

We have also been subject to industry-wide supply constraints and inflationary price pressures, which have resulted in long lead times for new designs and supply chain disruptions for selling integrated circuits containing our technologies. For example, the semiconductor industry faced significant global supply chain disruptions as a result of the COVID-19 pandemic, both as a consequence of increased demand for devices enabling wireless connectivity and remote environments and supply constraints arising from the imposition of government restrictions on staffing and facility operations, and has more recently experienced disruptions and uncertainty due to cross-border tariffs. Further, the high interest rate environment, macroeconomic trends and geopolitical concerns, including ongoing conflict between Russia and Ukraine, unrest in the Middle East, and economic slowdown in China, among other things, can negatively impact general consumer and IoT demand, chill the market for new technology investments and adversely affect our revenues. To the extent the impact of such disruptive events and adverse economic trends continue or worsen, we anticipate having greater difficulty obtaining, or waiting longer to obtain, certain equipment, supplies and other materials necessary for performance of the services we provide to our customers, leading to volatility or declines in the semiconductor industry which could cause substantial fluctuations or declines in our revenues and results of operations.

Risks Related to Our Global Operating Business

Our quarterly operating results fluctuate from quarter to quarter due to a variety of factors, including our lengthy sales cycle, and may not be a meaningful indicator of future performance.

In some quarters our operating results could be below the expectations of securities analysts and investors, which could cause our stock price to fall. Factors that may affect our quarterly results of operations in the future include, among other things:

• the gain or loss of significant licensees, partly due to our dependence on a limited number of customers generating a significant amount of quarterly revenues;
• any delay in execution of any anticipated IP licensing arrangement during a particular quarter;
• delays in revenue recognition for some license agreements based on percentage of completion of customized work or other accounting reasons;
• the timing and volume of orders and production by our customers, as well as fluctuations in royalty revenues resulting from fluctuations in unit shipments by our licensees;
• royalty pricing pressures and reduction in royalty rates due to an increase in volume shipments by customers, end-product price erosion and competitive pressures;
• earnings or other financial announcements by our major customers that include shipment data or other information that implicates expectations for our future royalty revenues;
• the mix of revenues among IP licensing and related revenues, and royalty revenues;
• the timing of the introduction of new or enhanced technologies by us and our competitors, as well as the market acceptance of such technologies;
• the discontinuation, or public announcement thereof, of product lines or market sectors that incorporate our technology by our significant customers;
• our lengthy sales cycle and specifically in the third quarter of any fiscal year during which summer vacations slow down decision-making processes of our customers in executing contracts;
• delays in the commercialization of end products that incorporate our technology;
• currency fluctuations, mainly the Euro and the New Israeli Shekel versus the U.S. dollar;
• fluctuations in operating expenses and gross margins associated with the introduction of, and research and development investments in, new or enhanced technologies and adjustments to operating expenses resulting from restructurings;
• the approvals, amounts and timing of Israeli research and development government grants from the Israeli Innovation Authority of the Ministry of Economy and Industry in Israel (IIA), EU grants and French research tax credits;
• the impact of new accounting pronouncements, including the new revenue recognition rules;
• the timing of our payment of royalties to the IIA, which is impacted by the timing and magnitude of license agreements and royalty revenues derived from technologies that were funded by grant programs of the IIA;
• statutory changes associated with research tax benefits applicable to French technology companies;
• our ability to scale our operations in response to changes in demand for our technologies;
• entry into new end markets that utilize our signal processing IP, software and platforms;
• changes in our pricing policies and those of our competitors;
• restructuring, asset and goodwill impairment and related charges, as well as other tax write-offs and tax and accounting changes or adjustments, such as the fourth quarter 2023 tax charges related to Internal Revenue Code (“IRC”) Section 174;
• geopolitical conditions, including global trade competition and regulatory enhancements resulting from tariffs and business restrictions imposed by government entities[, such as the restricted party lists promulgated, expanded and updated by the U.S. government during the last several years], and further tightening of restrictions on the transfer to China of certain advanced AI chips, semiconductors and supercomputing items, as well as other regulatory actions and changes that may adversely affect the business environment;
• general economic conditions, including the current economic conditions, and its effect on the semiconductor industry and sales of consumer products into which our technologies are incorporated;
• delays in final product delivery due to unexpected issues introduced by our service or EDA tool providers;
• delays in ratification of standards for Bluetooth, Wi-Fi, UWB or cellular standards that can affect the introduction of new products;
• constraints on chip manufacturing capacity due to high demand or shutdowns of semiconductor fabrication plants and other manufacturing facilities; and
• reductions in demand for consumer and digital devices due to lockdowns or overall financial difficulties caused by future pandemic outbreaks or public health threats.

Each of the above factors is difficult to forecast and could harm our business, financial condition and results of operations. Also, we license our technology to OEMs and semiconductor companies for incorporation into their end products for consumer, mobile and industrial products. The royalties we generate are reported by our customers.

Our royalty revenues are affected by seasonal buying patterns of consumer products sold by OEMs, partially by our direct customers and partially by semiconductor customers that incorporate our technology into their end products and the market acceptance of such end products. The first quarter in any given year is usually a sequentially down quarter for us in relation to royalty revenues as this period represents lower post-holiday fourth quarter consumer and mobile product shipments. However, the magnitude of this first quarter decrease varies annually and has been impacted by global economic conditions, market share changes, exiting or refocusing of market sectors by our customers and the timing of introduction of new and existing mobile devices powered by Ceva technology sold in any given quarter compared to the prior quarter. While the high interest rate environment and macroeconomic concerns related to slowdowns experienced in 2023 and 2024 have largely abated, these conditions continue in certain areas, and distort more traditional seasonality trends.

Moreover, the semiconductor and consumer electronics industries remain volatile, which makes it extremely difficult for our customers and us to accurately forecast financial results and plan for future business activities. As a result, our past operating results should not be relied upon as an indication of future performance.

We rely significantly on revenues derived from a limited number of customers who contribute to our royalty and license revenues.

We derive a significant amount of revenues from a limited number of customers. Sales to UNISOC (formerly Spreadtrum Communications, Inc.), accounted for 15%, 13% and 16% of our total revenues for 2024, 2023 and 2022, respectively. With respect to our royalty revenues in particular, a small number of customers ship substantial volumes of products and thus pay outsized royalty revenues, with two royalty paying customers each representing 10% or more of our total royalty revenues for 2024, and collectively representing 46% of our total royalty revenues for 2024. Two royalty paying customers each represented 10% or more of our total royalty revenues for 2023, and collectively represented 45% of our total royalty revenues for 2023. Two royalty paying customers each represented 10% or more of our total royalty revenues for 2022, and collectively represented 46% of our total royalty revenues for 2022. We expect that a significant portion of our future revenues will continue to be generated by a limited number of customers. The loss of any significant royalty paying customer could adversely affect our near-term future operating results. Furthermore, consolidation among our customers may negatively affect our revenue source, increase our existing customers’ negotiation leverage and make us further dependent on a limited number of customers. Moreover, the discontinuation of product lines or market sectors that incorporate our technology by our significant customers or a change in direction of their business and our inability to adapt our technology to their new business needs could have material negative implications for our future royalty revenues.

Our business is dependent on IP licensing and related revenues, which may vary period to period.

License agreements for our IP products and platforms have not historically provided for substantial ongoing license payments, so past IP licensing revenues may not be indicative of the amount of such revenues in any future period. Significant portions of our anticipated future revenues, therefore, will likely depend upon our success in attracting new customers or expanding our relationships with existing customers. However, revenues recognized from licensing arrangements vary significantly from period to period, depending on the number and size of deals closed during a quarter, and are difficult to predict. Our ability to succeed in our licensing efforts will depend on a variety of factors, including the performance, quality, breadth and depth of our current and future product portfolio as well as our sales and marketing skills. In addition, some of our licensees may in the future decide to satisfy their needs through in-house design and production. Our failure to obtain licensing customers could impede our future revenue growth and materially harm our business.

Royalty and other payment rates could decrease for existing and future license agreements and other customer agreements, which could materially adversely affect our operating results.

Royalty payments to us under existing and future license agreements could be lower than currently anticipated for a variety of reasons. Average selling prices for semiconductor products generally decrease over time during the lifespan of a product. In addition, there is increasing downward pricing pressures in the semiconductor industry on end products incorporating our technology. As a result, notwithstanding the existence of a license agreement, our customers may demand that royalty rates for our products be lower than our historic royalty rates. We have in the past and may be pressured in the future to renegotiate existing license agreements with our customers. In addition, certain of our license agreements provide that royalty rates may decrease in connection with the sale of larger quantities of products incorporating our technology. Furthermore, our competitors may lower the royalty rates for their comparable products to win market share which may force us to lower our royalty rates as well. As a consequence of the above referenced factors, as well as unforeseen factors in the future, the royalty rates we receive for use of our technology could decrease, thereby decreasing future anticipated revenues and cash flow. Royalty revenues were approximately 44%, 41% and 38% of our total revenues for 2024, 2023 and 2022, respectively. Therefore, a significant decrease in our royalty revenues could materially adversely affect our operating results.

Furthermore, royalty rates may be negatively affected by macroeconomic trends or changes in products mix, and consolidation among our customers may increase the negotiation leverage of our existing customers. Moreover, changes in products mix such as an increase in lower royalty bearing products shipped in high volumes, like Bluetooth-based and cellular IoT products, in lieu of higher royalty bearing products like embedded application software could lower our royalty revenues.

Because we have significant international operations, with a significant concentration of revenues in China, we may be susceptible to political, economic and other conditions relating to our international operations that could increase our operating expenses and disrupt our revenues and business.

Approximately 81% of our total revenues for 2024, 90% for 2023 and 88% for 2022 were derived from customers located outside of the United States. Revenues from customers located in the Asia Pacific (APAC) region account for a substantial portion of these revenues, with significant concentration of revenues in China, which accounted for 49%, 59% and 63% of total revenues for 2024, 2023 and 2022 respectively. We expect that international customers generally, and sales to the APAC region and China in particular, will continue to account for a significant portion of our revenues for the foreseeable future. While we anticipate that we can expand our customer base and revenues in Europe and the U.S., the present concentration of revenues from a single country significantly increases our risk profile, and the occurrence of any negative international political, economic or geographic events, including any financial crisis, trade restrictions or disputes or other major event causing business disruption in China, such as the heightening of tensions between China and Taiwan, the broader APAC region and other international jurisdictions, or increased pressure within China on using domestic over foreign technology, could result in significant revenue shortfalls. These shortfalls could cause our business, financial condition and results of operations to be harmed. Some of the risks of doing business internationally include:

• unexpected changes in regulatory requirements;
• fluctuations in the exchange rate for the U.S. dollar;
• imposition of tariffs and other barriers and restrictions, including trade tensions such as U.S.-China trade tensions;
• burdens of complying with a variety of foreign laws, treaties and technical standards;
• uncertainty of laws and enforcement in certain countries relating to the protection of IP;
• multiple and possibly overlapping tax structures and potentially adverse tax consequences;
• political and economic instability, including military activities, terrorist attacks and protectionist policies; and
• changes in diplomatic and trade relationships.

For example, in October 2023, December 2024 and January 2025, the U.S. Department of Commerce Bureau of Industry and Security tightened export controls, restrictions and compliance burdens on the transfer to China of certain advanced computing chips, semiconductors and supercomputing items, software and technology subject to U.S. export controls, including certain non-U.S. origin items, in addition to restricting transactions with certain semiconductor fab facilities in China. Moreover, restrictions were implemented on U.S. persons’ activities in support of the transfer of certain items not subject to U.S. export controls. We continue to assess the potential impact of these restrictions on our operations, and these restrictions are in addition to existing license requirements and company-specific designations affecting trade in the APAC region. Actions of any nature, including future new trade controls, could affect specific customers, industries and technologies produced inside and outside the United States, and may reduce our revenues and adversely affect our business and financial results.

New tariffs, trade measures and other geopolitical risks and instability could adversely affect our consolidated results of operations, financial position and cash flows.

Tensions between the U.S. and China have been escalating since 2018, and a number of factors may exacerbate these tensions in the future, including the change in the U.S. administration this year. In addition, Russian military activities in Ukraine have resulted in increased sanctions and export controls against Russia and Belarus, and could also increase China/Taiwan political tensions and a worsening of U.S./China trade and other relations. Trade tensions between the U.S. and China and other geopolitical instabilities have resulted, and could in the future result, in significant tariff increases, sanctions against specified entities, and the broadening of restrictions and license requirements for specified transfers and uses of products. For example, the ongoing geopolitical and economic uncertainty between the U.S. and China, the unknown impact of current and future U.S. and Chinese trade regulations and other geopolitical risks with respect to China and Taiwan, may cause further disruptions in the semiconductor industry and its supply chain, decreased demand from customers for the ultimate products using our IP solutions, or other disruptions which may, directly or indirectly, materially harm our business, financial condition and results of operations.

In addition, critical metals and materials used in semiconductors, such as Palladium, are sourced in Russia, and sanctions against Russia could impact the semiconductor supply chain. While tariffs and other retaliatory trade measures imposed by other countries on U.S. goods have not yet had a significant impact on our business or results of operations, our revenues are increasingly concentrated in China and the broader APAC region, and we cannot predict further developments. Thus, existing or future tariffs could have a material adverse effect on our consolidated results of operations, financial position and cash flow. Further changes in U.S. trade policy could trigger retaliatory actions by affected countries, which could impose restrictions on our ability to do business in or with affected countries or prohibit, reduce or discourage purchases of our products by foreign customers, and higher prices for our products in foreign markets. For example, there are risks that the Chinese government may, among other things, require the use of local suppliers, compel companies that do business in China to partner with local companies to conduct business and provide incentives to government-backed local customers to buy from local suppliers. Changes in, and responses to, U.S. trade policy could reduce the competitiveness of our products and cause our sales and revenues to drop, which could materially and adversely impact our business and results of operations.

Our success will depend on our ability to successfully manage our geographically dispersed operations.

Most of our research and development staff is located in Israel. We also have research and development teams in Greece, France, Ireland, Serbia, the United Kingdom and the United States. Accordingly, our ability to compete successfully will depend in part on the ability of a limited number of key executives located in geographically dispersed offices to manage our research and development staff and integrate them into our operations to effectively address the needs of our customers and respond to changes in our markets. If we are unable to effectively manage and integrate our geographically dispersed operations, our business may be materially harmed.

Our operations in Israel may be adversely affected by instability in the Middle East region.

One of our principal research and development facilities is located in Israel, and most of our executive officers and some of our directors are residents of Israel. Although substantially all of our sales currently are made to customers outside of Israel, we are nonetheless directly influenced by the political, economic and military conditions affecting Israel, including Israel’s war with Hamas that began on October 7, 2023 or the subsequent war in the north with Hezbollah in Lebanon and the attacks from Iran and Yeman. For example, certain of our employees are currently obligated to perform annual reserve duty in the Israel Defense Forces and are subject to being called to active military duty at any time. It is possible that our operations could be disrupted if this situation continues for a significant period of time or further deteriorates, including if hostilities expand from other fronts, which could harm our business.

Our insurance does not cover losses that may occur as a result of an event associated with the security situation in the Middle East or for any resulting disruption in our operations. Although the Israeli government has in the past covered the reinstatement value of direct damages that were caused by terrorist attacks or acts of war, we cannot be assured that this government coverage will be maintained or, if maintained, will be sufficient to compensate us fully for damages incurred and the government may cease providing such coverage or the coverage might not suffice to cover potential damages. Any losses or damages incurred by us could have a material adverse effect on our business.

Terrorist attacks, acts of war or military actions and/or other civil unrest may adversely affect the territories in which we operate, and our business, financial condition and operating results.

Terrorist attacks and attempted terrorist attacks, military responses to terrorist attacks, other military actions, including illegal invasion of sovereign countries, or governmental action in response to or in anticipation of a terrorist attack or civil unrest or foreign invasion, may adversely affect prevailing economic conditions, resulting in work stoppages, reduced consumer spending or reduced demand for end products that incorporate our technologies. These developments subject our worldwide operations to increased risks and, depending on their magnitude, could reduce net sales and therefore could have a material adverse effect on our business, financial condition and operating results.

Our research and development expenses will increase relative to past periods due to our receiving fewer grants from the Israeli government and the EU.

We currently receive research grants mainly from programs of the IIA and to some extent from the EU. In 2023 and 2024, such grants decreased significantly as compared to 2022 and previous years due to changes in the criteria adopted by the IIA regarding larger and better funded corporations, in light of the high interest rate environment and difficulties for smaller companies to raise money, and we expect to receive fewer grants from the IIA in the future relative to past periods as well. We recorded aggregate research grants of $1,407,000, $1,668,000 and $4,850,000 in 2024, 2023 and 2022, respectively. To remain eligible for the grants we have received, we must meet certain development conditions and comply with periodic reporting obligations. Although we have met such conditions in the past, should we fail to meet such conditions in the future our research grants may be repayable, reduced or withheld. The repayment or reduction of such research grants may increase our research and development expenses which in turn may reduce our operating income. Also, the timing of such payments from the IIA may vary from year to year and quarter to quarter, and we have no control on the timing of such payments.

We face a highly competitive employment market and depend on a limited number of key personnel who would be difficult to replace, and changes in our management and sales teams may adversely affect our operations.

We face a highly competitive employment market and are dependent upon our ability to identify, attract, motivate and retain qualified engineers with the requisite educational background and industry experience. In addition, as we continue to expand our global presence, our success will increasingly depend to a significant extent upon certain of our key employees, senior management and core sales and marketing personnel, the loss of whom could materially harm our business. In the current environment where many employees have become accustomed to remote work environments and frequent job changes, integration of employees into our company culture and retention of employees is becoming increasingly difficult. The loss of any of our senior management team or a significant number of our engineers could significantly disrupt our development efforts or business relationships and our ability to continue to innovate and to meet customers’ needs.

The sales cycle for our IP and related solutions is lengthy, and even approved projects may have structured payment terms, which makes forecasting of our customer orders and revenues difficult.

The sales cycle for our IP and related solutions is lengthy, often lasting three to nine months. Our customers generally conduct significant technical evaluations, including customer trials, of our technology as well as competing technologies prior to making a purchasing decision. Purchasing decisions also may be delayed because of a customer’s internal budget approval process. In addition, given the current market conditions, we have less ability to predict the timing of our customers’ purchasing cycle and potential unexpected delays in such a cycle. Because of the lengthy sales cycle and potential delays, our dependence on a limited number of customers to generate a significant amount of revenues for a particular period and the size of customer orders, if orders forecasted for a specific customer for a particular period do not occur in that period, our revenues and operating results for that particular quarter could suffer. Furthermore, even approved projects may be subject to tranche or milestone-based payment structures, rather than upfront payments, which may cause delays in our performance of the relevant work and revenue recognition. Moreover, a portion of our expenses related to an anticipated order is fixed and difficult to reduce or change, which may further impact our operating results for a particular period.

We may seek to expand our business in ways that could result in diversion of resources and extra expenses.

We may in the future pursue acquisitions of businesses, products and technologies, establish joint venture arrangements or make minority equity investments to expand our business. We are unable to predict whether or when any prospective acquisition, equity investment or joint venture will be completed. The process of negotiating potential acquisitions, joint ventures or equity investments, as well as the integration of acquired or jointly developed businesses, technologies or products may be prolonged due to unforeseen difficulties and may require a disproportionate amount of our resources and management’s attention. We cannot assure you that we will be able to successfully identify suitable acquisition or investment candidates, complete acquisitions or investments, or integrate acquired businesses or joint ventures with our operations. If we were to make any acquisition or investment or enter into a joint venture, we may not receive the intended benefits of the acquisition, investment or joint venture or such an acquisition, investment or joint venture may not achieve comparable levels of revenues, profitability or productivity as our existing business or otherwise perform as expected. The occurrence of any of these events could harm our business, financial condition or results of operations. Future acquisitions, investments or joint ventures may require substantial capital resources, which may require us to seek additional debt or equity financing.

Future acquisitions, joint ventures or minority equity investments by us could result in the following, any of which could seriously harm our results of operations or the price of our stock:

• issuance of equity securities that would dilute our current stockholders’ percentages of ownership;
• large one-time write-offs or equity investment impairment write-offs;
• incurrence of debt and contingent liabilities;
• difficulties in the assimilation and integration of operations, personnel, technologies, products and information systems of the acquired companies;
• inability to realize cost efficiencies or synergies, thereby incurring higher operating expenditures as a result of the acquisition;
• diversion of management’s attention from other business concerns;
• contractual disputes;
• risks of entering geographic and business markets in which we have no or only limited prior experience; and
• potential loss of key employees of acquired organizations.

Because our IP and related solutions are complex, the detection of errors in our products may be delayed, and if we deliver products with defects, our credibility will be harmed, the sales and market acceptance of our products may decrease and product liability claims may be made against us.

Our IP and related solutions are complex and may contain errors, defects and bugs when introduced. If we deliver products with errors, defects or bugs, our credibility and the market acceptance and sales of our products could be significantly harmed. Furthermore, the nature of our products may also delay the detection of any such error or defect. If our products contain errors, defects and bugs, then we may be required to expend significant capital and resources to alleviate these problems. This could result in the diversion of technical and other resources from our other development efforts. Any actual or perceived problems or delays may also adversely affect our ability to attract or retain customers. Furthermore, the existence of any defects, errors or failure in our products could lead to product liability claims or lawsuits against us or against our customers. A successful product liability claim could result in substantial cost and divert management’s attention and resources, which would have a negative impact on our financial condition and results of operations.

Our product development efforts are time-consuming and expensive and may not generate an acceptable return, if any.

Our product development efforts require us to incur substantial research and development expenses. Our research and development expenses were approximately $71.6 million, $72.7 million and $70.3 million for 2024, 2023 and 2022, respectively. We may not be able to achieve an acceptable return, if any, on our research and development efforts.

The development of our products is highly complex. We occasionally have experienced delays in completing the development and introduction of new products and product enhancements, and we could experience delays in the future. Unanticipated problems in developing products could also divert substantial engineering resources, which may impair our ability to develop new products and enhancements and could substantially increase our costs. Furthermore, we may expend significant amounts on research and development programs that may not ultimately result in commercially successful products. Our research and development expense levels have increased steadily in the past few years. As a result of these and other factors, we may be unable to develop and introduce new products successfully and in a cost-effective and timely manner, and any new products we develop and offer may never achieve market acceptance. Any failure to successfully develop future products would have a material adverse effect on our business, financial condition and results of operations.

We may not be able to adequately protect our IP.

Our success and ability to compete depend in large part upon the protection of our proprietary technologies. We rely on a combination of patent, copyright, trademark, trade secret, mask work and other IP rights, confidentiality procedures and IP licensing arrangements to establish and protect our proprietary rights. These agreements and measures may not be sufficient to protect our technology from third-party infringement or protect us from the claims of others. As a result, we face risks associated with our patent position, including the potential need to engage in significant legal proceedings to enforce our patents, the possibility that the validity or enforceability of our patents may be denied, the possibility that third parties will be able to compete against us without infringing our patents and the possibility that our products may infringe patent rights of third parties.

Our trade names or trademarks may be registered or utilized by third parties in countries other than those in which we have registered them, impairing our ability to enter and compete in those markets. If we were forced to change any of our brand names, we could lose a significant amount of our brand identity.

Our business will suffer if we are sued for infringement of the IP rights of third parties or if we cannot obtain licenses to these rights on commercially acceptable terms.

We are subject to the risk of adverse claims and litigation alleging infringement of the IP rights of others. There are a large number of patents held by others, including our competitors, pertaining to the broad areas in which we are active. We have not, and cannot reasonably, investigate all such patents. From time to time, we have become aware of patents in our technology areas and have sought legal counsel regarding the validity of such patents and their impact on how we operate our business, and we will continue to seek such counsel when appropriate in the future. In addition, patent infringement claims are increasingly being asserted by patent holding companies (so-called patent “trolls”), which do not use technology and whose sole business is to enforce patents against companies, such as us, for monetary gain. Because such patent holding companies do not provide services or use technology, the assertion of our own patents by way of counter-claim may be ineffective. Infringement claims may require us to enter into license arrangements or result in protracted and costly litigation, regardless of the merits of these claims. Any necessary licenses may not be available or, if available, may not be obtainable on commercially reasonable terms. If we cannot obtain necessary licenses on commercially reasonable terms, we may be forced to stop licensing our technology, and our business would be seriously harmed.

Cybersecurity threats or other security breaches could compromise sensitive information belonging to us or our customers and could harm our business and our reputation.

We rely on computer systems, hardware, software, technology infrastructure and online sites and networks for both internal and external operations that are critical to our business (collectively, “IT Systems”). We own and manage some of these IT Systems but also rely on third parties for a range of IT Systems and related products and services. We and certain of our third-party vendors store and process sensitive data, including IP, proprietary business information and information about individuals such as our customer and employees (collectively, “Confidential Information”). Despite our security measures, our IT Systems may be vulnerable to attacks by hackers and hacktivists, as well as through diverse attack vectors, such as social engineering/phishing, malware (including ransomware), or breached due to employee error, malfeasance or other disruptions that could result in unauthorized access to, disclosure or loss of sensitive data. Because the techniques used to obtain unauthorized access to networks, or to sabotage systems, change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures.

Cyberattacks are expected to accelerate on a global basis in frequency and magnitude as threat actors are becoming increasingly sophisticated in using techniques and tools—including artificial intelligence—that circumvent security controls, evade detection and remove forensic evidence. As a result, we may be unable to detect, investigate, remediate or recover from future attacks or incidents, or to avoid a material adverse impact to our IT Systems, Confidential Information or business. There can also be no assurance that our cybersecurity risk management program and processes, including our policies, controls or procedures, will be fully implemented, complied with or effective in protecting our IT Systems and Confidential Information.

Any adverse impact to the availability, integrity or confidentiality of our IT Systems or Confidential Information can result in legal claims or proceedings (such as class actions), regulatory investigations and enforcement actions, fines and penalties, negative reputational impacts that cause us to lose existing or future customers, and/or significant incident response, system restoration or remediation and future compliance costs. Any or all of the foregoing could materially adversely affect our business, results of operations, and financial condition. Finally, we cannot guarantee that any costs and liabilities incurred in relation to an attack or incident will be covered by our existing insurance policies or that applicable insurance will be available to us in the future on economically reasonable terms or at all.

Any actual or perceived failure to comply with new or existing laws, regulations and other requirements relating to the privacy, security and processing of Personal Information could adversely affect our business, results of operations, or financial condition.

In connection with running our business, we receive, store, use and otherwise process information that relates to individuals and/or constitutes “personal data,” “personal information,” “personally identifiable information,” or similar terms under applicable data privacy laws (collectively, “Personal Information”), including from and about actual and prospective customers, as well as our employees and business contacts. We are therefore subject to a variety of federal, state and foreign laws, regulations and other requirements relating to the privacy, security and handling of Personal Information.

The application and interpretation of such requirements are constantly evolving and are subject to change, creating a complex compliance environment. In some cases, these requirements may be either unclear in their interpretation and application or they may have inconsistent or conflicting requirements with each other. Further, there has been a substantial increase in legislative activity and regulatory focus on data privacy and security in the United States and elsewhere, including in relation to cybersecurity incidents. In addition, some such requirements place restrictions on our ability to process Personal Information across our business or across country borders.

It is possible that new laws, regulations and other requirements, or amendments to or changes in interpretations of existing laws, regulations and other requirements, may require us to incur significant costs, implement new processes, or change our handling of information and business operations, which could ultimately hinder our ability to grow our business by extracting value from our data assets. In addition, any failure or perceived failure by us to comply with laws, regulations and other requirements relating to the privacy, security and handling of information could result in legal claims or proceedings (including class actions), regulatory investigations or enforcement actions. We could incur significant costs in investigating and defending such claims and, if found liable, pay significant damages or fines or be required to make changes to our business. These proceedings and any subsequent adverse outcomes may subject us to significant negative publicity and an erosion of trust. If any of these events were to occur, our business, results of operations, and financial condition could be materially adversely affected.

Risks Related to Finance, Accounting and Taxation

The nature of our business requires the application of complex revenue recognition rules. Significant changes in U.S. generally accepted accounting principles, or GAAP, including the adoption of the new revenue recognition rules, could materially affect our financial position and results of operations.

We prepare our financial statements in accordance with GAAP, which is subject to interpretation or changes by the Financial Accounting Standards Board, or FASB, the SEC, and other various bodies formed to promulgate and interpret appropriate accounting principles. New accounting pronouncements and changes in accounting principles have occurred in the past and are expected to occur in the future, which may have a significant effect on our financial results. Recognizing royalty revenue on a lag time basis is not permitted. As a result, the royalties we generate from customers is based on royalty of units shipped during the quarter as estimated by our customers, not a quarter in arrears that we previously report. Adoption of this standard and any difficulties in implementation of changes in accounting principles, including uncertainty associated with royalty revenues for the quarter based on estimates provided by our customer, could cause us to fail to meet our financial reporting obligations, which could result in regulatory discipline and harm investors’ confidence in us.

Changes in our tax rates or exposure to additional income tax liabilities or assessments could adversely impact our cash flow, financial condition and results of operations.

We are subject to income taxes in the United States and various foreign jurisdictions. In addition to our significant operations in Israel, we have operations in Ireland, France, the United Kingdom, Serbia, China, Japan and starting from January 2024, in Greece. Significant judgment is required in determining our worldwide provision for income taxes and other tax liabilities. In the ordinary course of a global business, there are many intercompany transactions and calculations where the ultimate tax determination is uncertain. Due to the potential for changes to tax laws and regulations or changes to the interpretation thereof, the ambiguity of tax laws and regulations, the subjectivity of factual interpretations, the complexity of our intercompany arrangements, uncertainties regarding the geographic mix of earnings in any particular period, the potential decision or need to transfer cash or other assets from one jurisdiction to another, potential for tax authorities to challenge the manner in which our subsidiaries’ profits are currently recognized, and other factors, our estimates of effective tax rate and income tax assets and liabilities can be incorrect, we could lose the ability to use certain deferred tax assets, we could incur significant additional taxes in connection with a specific transaction, our overall tax expenses could increase, and our business, cash flow, financial condition and results of operations could be materially adversely affected. The impact of the factors referenced in this paragraph may also be substantially different from period-to-period.

For example, a substantial portion of our taxable income historically has been generated in Israel, as well as France starting in 2020. Although our Israeli and Irish subsidiaries historically, and starting in 2022 our French subsidiary, are taxed at rates lower than the U.S. tax rates, the tax rates in these jurisdictions could nevertheless result in a substantial increase as a result of withholding tax expenses with respect to which we are unable to obtain a refund from the relevant tax authorities. If our Israeli, French and Irish subsidiaries were to no longer qualify for these lower tax rates or if the applicable tax laws were rescinded or changed, our operating results could be materially adversely affected. A mix of our revenues in each of these locations may change the mix of our taxable income, and as a result, our overall tax rate may increase, as we encountered in 2021, specifically due to higher taxes in France, or in the third quarter of 2022, due to our recording a $15.6 million expense as a result of a valuation allowance for certain deferred tax assets in Israel.

U.S. tax regulations are also implicated by our international operations. For example, certain of our taxes may be “double taxed” in both foreign jurisdictions and the U.S., including with respect to our taxes on our Irish and Israeli interest income. While we have elected to account for global intangible low-taxed income (GILTI) as a current-period expense when incurred, legislation and clarifying guidance are expected to continue to be issued by the U.S. Treasury Department and various states in future periods, which could have a material adverse impact on the value of our U.S. deferred tax assets, result in significant changes to currently computed income tax liabilities for past and current tax periods, and increase our future U.S. tax expense. We could also incur significant additional tax expenses as a result of moving off-shore cash to our U.S. entity. Out of total cash, cash equivalents, bank deposits and marketable securities of $163.6 million at year end 2024, $135.1 million was held by our foreign subsidiaries, with only $28.5 million held in the U.S., which could make capital expenditures to expand operations in the U.S., or our conducting strategic transactions in the U.S., more expensive. In addition, beginning in our fiscal year 2022, the Tax Cuts and Jobs Act of 2017 eliminates the option to deduct research and development expenditures in the year incurred, requiring amortization in accordance with Internal Revenue Code (IRC) Section 174. If this requirement is not repealed or otherwise modified, it will potentially materially increase our effective tax rate and reduce our operating cash flows in future years.

Furthermore, several countries, including the U.S. and Ireland, as well as the Organization for Economic Cooperation and Development have reached agreement on a global minimum tax initiative. Many countries are also actively considering changes to existing tax laws or have proposed or enacted new laws that could increase our tax obligations in countries where we do business or cause us to change the way we operate our business.

Finally, our determination of our tax liability in the U.S. and other jurisdictions, including our intercompany transfer pricing, is subject to review by applicable domestic and foreign tax authorities. Although we believe that our tax estimates are reasonable, due to the complexity of our corporate structure, the multiple intercompany transactions and the various tax regimes, we cannot assure you that a tax audit or tax dispute to which we may be subject will result in a favorable outcome for us. If taxing authorities do not accept our tax positions and impose higher tax rates on our foreign operations, our overall tax expenses could increase.

The Israeli and French tax benefits that we currently receive and the government programs in which we participate require us to meet certain conditions and may be terminated or reduced in the future, which could increase our tax expenses.

We enjoy certain tax benefits in Israel, particularly as a result of the “Approved Enterprise” and the “Benefited Enterprise” status of our facilities and programs through 2019, and the “Technological Preferred Enterprise” status of our facilities and programs since 2020. To maintain our eligibility for these tax benefits, we must continue to meet certain conditions, relating principally to adherence to the investment program filed with the Investment Center of the Israeli Ministry of Industry and Trade and to periodic reporting obligations. Should we fail to meet such conditions, these benefits would be cancelled and we would be subject to corporate tax in Israel at the standard corporate rate (23% in 2024) and could be required to refund tax benefits already received. Additionally, if we increase our activities outside of Israel, for example, by acquisitions, our increased activities may not be eligible for inclusion in Israeli tax benefit programs. The termination or reduction of certain programs and tax benefits or a requirement to refund tax benefits already received may seriously harm our business, operating results and financial condition.

Our French subsidiary is entitled to a tax benefit of 10% applied to specific revenues under the French IP Box regime. The French IP Box regime applies to net income derived from the licensing, sublicensing or sale of several IP rights such as patents and copyrighted software, including royalty revenues. This elective regime requires a direct link between the income benefiting from the preferential treatment and the research and development expenditures incurred and contributing to that income. Qualifying income may be taxed at a favorable 10% CIT rate (plus social surtax, hence 10.3% in total). This French IP Box regime was enacted into the French tax law as of January 1, 2019, and the final version of the Official guidance of the French tax authorities (FTA) was published on April 22, 2020. Since the French IP Box regime was enacted recently, there is little to no French case law on this subject at this time and French companies do not yet have any feedback on the ongoing tax audits and on the FTA’s tendency in this matter. Different interpretations of the French law by the French tax authorities regarding the French IP Box regime may impose higher tax rates on our French operations and our overall tax expenses could increase.

We are exposed to fluctuations in currency exchange rates.

A significant portion of our business is conducted outside the United States. Although most of our revenues are transacted in U.S. dollars, we may be exposed to currency exchange fluctuations in the future as business practices evolve and we are forced to transact business in local currencies. Moreover, the majority of our expenses are denominated in foreign currencies, mainly New Israeli Shekel (“NIS”) and the Euro, which subjects us to the risks of foreign currency fluctuations. Our primary expenses paid in currencies other than the U.S. dollar are employee salaries. Increases in the volatility of the exchange rates of currencies other than the U.S. dollar versus the U.S. dollar could have an adverse effect on the expenses and liabilities that we incur in currencies other than the U.S. dollar when remeasured into U.S. dollars for financial reporting purposes. We have instituted a foreign cash flow hedging program to minimize the effects of currency fluctuations. However, hedging transactions may not successfully mitigate losses caused by currency fluctuations, and our hedging positions may be partial or may not exist at all in the future. We also review our monthly expected non-U.S. dollar denominated expenditure and look to hold equivalent non-U.S. dollar cash balances to mitigate currency fluctuations. However, in some cases, we expect to continue to experience the effect of exchange rate currency fluctuations on an annual and quarterly basis. For example, our EURO cash balances increase significantly on a quarterly basis beyond our EURO liabilities from the Crédit Impôt Recherche (CIR), which is generally refunded every three years. This has resulted in a foreign exchange loss of $1.01 million (due to the devaluation of our Euro cash balances as the U.S. dollar strengthened significantly during this period as compared to the Euro), a foreign exchange gain of $0.69 million and a foreign exchange gain of $0.07 million for 2024, 2023 and 2022, respectively.

Royalty reporting by our licensees may be inaccurate or understated.

We generate licensing revenue primarily from original equipment manufacturers and semiconductor companies who license our technologies and incorporate those technologies into their products. Our license agreements generally obligate our licensees to pay us a specified royalty for every product they ship that incorporates our technologies, and we rely on our licensees to report their shipments accurately. However, it is inherently difficult to independently determine whether our licensees are reporting shipments accurately, particularly with respect to software incorporating our technologies because unauthorized copies of such software can be made relatively easily. A third party may disagree with our interpretation of the terms of a license agreement or, as a result of an audit, a third party could challenge the accuracy of our calculation. We are regularly involved in discussions with third party technology licensees regarding license terms. Most of our license agreements permit us to audit our licensees’ records, and we routinely exercise these rights, typically by using an independent third party auditor. For example, in 2024, an OEM customer paid a catch-up royalty amount after being audited and determined to have underreported with respect to a product line which the customer failed to note incorporated our software technology. Such audits are generally expensive, time-consuming, and potentially detrimental to our ongoing business relationships with our licensees. In the past, some licensees have understated or failed to report the number of products incorporating our technologies that they shipped, and we have not been able to collect and recognize revenue to which we were entitled. We expect that we will continue to experience understatement and non-reporting of royalties by our licensees. We have been able to obtain certain recovery payments from licensees (either in the form of back payments or settlements), and such recoveries have become a recurring element of our business; however, we are unable to predict with certainty the revenue that we may recover in the future or our ability to continue to obtain such recoveries at all.

We are exposed to the credit and liquidity risk of our customers, and to credit exposure in weakened markets, which could result in material losses.

As we diversify and expand our addressable market in geographically dispersed regions, we will enter into IP licensing arrangements with first-time customers where we do not have full visibility of their creditworthiness. Furthermore, the instability of market conditions in certain areas in which we have expanded our business, including parts of the Asia Pacific region, drives an elevated risk of uncollectable accounts receivable and inability to recognize revenue from deals involving customers that may be in financial distress. Further, to the extent one or more of our customers commences bankruptcy or insolvency proceedings, contracts with these customers may be subject to renegotiation or rejection under applicable court proceeding. Although we monitor and attempt to mitigate credit risks, there can be no assurance that our efforts will be effective. While losses to date relating to the credit exposure of our customers have not been material, future losses, if incurred, could harm our business and have a material adverse effect on our operating results and financial condition.

If we determine that our goodwill and intangible assets have become impaired, we may incur impairment charges, which would negatively impact our operating results.

We hold significant goodwill on our balance sheet related to a number of strategic transactions over the years, including, for example, with respect to Parthus Technologies plc, our RivieraWaves business, Hillcrest and Spatial Audio assets, and, most recently, a design team in Greece. Goodwill represents the excess of cost over the fair value of net assets acquired in business combinations. Under accounting principles generally accepted in the United States of America, we assess potential impairment of our goodwill and intangible assets at least annually, as well as on an interim basis to the extent that factors or indicators become apparent that could reduce the fair value of any of our businesses below book value. Impairment may result from significant changes in the manner of use of the acquired asset, negative industry or economic trends and significant underperformance relative to historic or projected operating results. For example, in the third quarter of 2022, we recorded $3.6 million of impairment of intangible assets with respect to Immervision technology acquired in August 2019, as we decided to cease the development of this product line. If we determine that our goodwill and intangible assets have become impaired, we may incur impairment charges, which could negatively impact our operating results.

Risks Related to Ownership of Our Common Stock

The anti-takeover provisions in our certificate of incorporation and bylaws could prevent or discourage a third party from acquiring us.

Our certificate of incorporation and bylaws contain provisions that may prevent or discourage a third party from acquiring us, even if the acquisition would be beneficial to our stockholders. Our board of directors also has the authority to fix the rights and preferences of shares of our preferred stock and to issue such shares without a stockholder vote. Our bylaws also place limitations on the authority to call a special meeting of stockholders. We have advance notice procedures for stockholders desiring to nominate candidates for election as directors or to bring matters before an annual meeting of stockholders. In addition, these factors may also adversely affect the market price of our common stock, and the voting and other rights of the holders of our common stock.

Our stock price may be volatile so you may not be able to resell your shares of our common stock at or above the price you paid for them.

Announcements of developments related to our business, announcements by competitors, quarterly fluctuations in our financial results, changes in the general conditions of the highly dynamic industry in which we compete or the national economies in which we do business, and other factors could cause the price of our common stock to fluctuate, perhaps substantially. For example, if we fail to achieve our near-term financial guidance, or fail to show overall business growth and expansion, our stock price may significantly decline. In addition, in recent years, the stock market has experienced extreme price fluctuations, which have often been unrelated to the operating performance of affected companies. These factors and fluctuations could have a material adverse effect on the market price of our common stock.

Cybersecurity represents an important component of our overall approach to enterprise risk management (“ERM”) and is one of the key risks identified for oversight by the Board through our annual ERM assessment. Our ERM approach generally, and our cybersecurity practices in particular, are based upon industry standards and implemented using managed security applications. We generally approach cybersecurity threats through a cross-functional approach which endeavors to: (i) prevent and mitigate cybersecurity threats to the Company; (ii) maintain the confidence of our customers, clients and business partners; (iii) preserve the confidentiality of our employee’s information; and (iv) protect our IP.

Risk Management and Strategy

Our cybersecurity program focuses on the following areas:

• Vigilance: We maintain 24/7 cybersecurity threat operations designed to rapidly detect, contain and respond to cybersecurity threats and incidents.
• Systems Safeguards: We deploy technical safeguards that are designed to protect our information systems from cybersecurity threats. These safeguards include firewalls, intrusion prevention and detection systems, anti-malware functionality, access controls and ongoing vulnerability assessments.
• Third-Party Management: We screen vendors, service providers and other third parties that may gain access to our systems based on their expertise, reliability, reputation and industry credentials, and have implemented measures to further enable us to identify and oversee cybersecurity risks presented users of our systems.
• Education: All of our employees are trained at least annually on cybersecurity threats and our information security procedures, which reinforces our information security policies, standards and practices.
• Incident Response Planning: We have established and continue to maintain an incident response plan that addresses our response to a cybersecurity incident.
• Communication and Coordination: We utilize a cross-functional approach to address the risk from cybersecurity threats, involving management personnel from the technology, operations, legal, risk management, internal audit and other key business functions, as well as including our board of directors in an ongoing dialogue regarding cybersecurity threats and incidents.
• Governance: Our board of directors’ oversight of cybersecurity risk management is supported by our Chief Financial Officer and Compliance Officer, who interacts directly with, and is provided relevant information by, our cybersecurity team. While our board of directors has the ultimate oversight responsibility over the management of cybersecurity risk, our audit committee reviews the risk management process relating to cybersecurity on a regular basis.

We evaluate the effectiveness of our cybersecurity threat risk management through the assessment and testing of our processes and practices. We periodically engage consultants, auditors and other third parties to perform assessments on our cybersecurity measures. The assessments include information security maturity evaluations, independent environmental security control reviews, operating effectiveness and penetration testing. We make adjustments to our cybersecurity processes and practices as necessary based on the information provided by the third-party assessments and reviews.

Governance

Our board of directors as a whole is responsible for overseeing the management of risks pertaining to cybersecurity threats. Our board periodically receives presentations and reports from the management team on information regarding the policies, processes and practices that we implement to address risks from cybersecurity threats including, for example, discussion of recent developments, evolving standards, third-party and independent reviews, the threat environment and technological trends. Additionally, to the extent we identify any cybersecurity incident that could pose a significant risk to the Company, the board will receive prompt and timely information regarding the incident and ongoing updates until such incidents have been addressed.

Our cybersecurity team is composed of the global head of Information Technology & Management Information Systems, the Chief Information Security Officer (“CISO”) and deputy CISO. This cybersecurity team, along with internal security stakeholders, are the team members principally responsible for overseeing and implementing our cybersecurity risk management program. Our cybersecurity team members each possess 15-35 years of cybersecurity experience, with strong educational qualifications including post-secondary education, industry certifications and other relevant developmental training.

The cybersecurity team works collaboratively across the Company to implement customized programs designed to protect and respond to cybersecurity threats and to promptly respond to any cybersecurity incidents. To facilitate the success of this program, multi-disciplinary teams throughout the Company are deployed to address cybersecurity threats and to respond to cybersecurity incidents in accordance with our incident response plan. Chief concerns are reported to our broader management team when appropriate.

We have not previously experienced any material cybersecurity incidents. In addition, cybersecurity threats have not materially affected, and we do not believe they are reasonably likely to affect, the Company, including our business strategy, results of operations, or financial condition.

Our headquarters are located in Rockville, Maryland, where we conduct research and development and administration activities in a 9,913 square foot facility under a lease expiring in 2028. We also have principal offices where we conduct research and development, sales and marketing and administration activities in Herzliya, Israel, where have a 57,425 square foot facility lease expiring 2025; and Sophia Antipolis, France, where we have a 10,823 square foot facility lease expiring in 2031.

We also lease 10 other buildings for our main additional engineering, sales, marketing, administrative, support and operations, including two other facilities located in China, three other facilities located in Greece and one other facility located in each of the U.S., U.K., Ireland, Serbia and Japan. Together with our principal offices, these 13 facilities cover an aggregate of approximately 103,600 square feet, ranging from 1,079 square feet to 57,425 square feet, with lease terms expiring from 2025 to 2034.

We are subject to legal proceedings and claims that have not been fully resolved and that have arisen in the ordinary course of business. As of December 31, 2024, these matters have resulted in provision of approximately $300,000 on the consolidated balance sheet. We are not a party to any other legal proceedings, the adverse outcome of which, in management’s opinion, would have a material adverse effect on our results of operations or financial position.

You should read the following discussion together with the consolidated financial statements and related notes appearing elsewhere in this annual report. This discussion contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those included in such forward-looking statements. Factors that could cause actual results to differ materially include those set forth under “Risk Factors,” as well as those otherwise discussed in this section and elsewhere in this annual report. See “Forward-Looking Statements and Industry Data.”

BUSINESS OVERVIEW

The following discussion and analysis is intended to provide an investor with a narrative of our financial results and an evaluation of our financial condition and results of operations. The discussion should be read in conjunction with our consolidated financial statements and notes thereto for the year ended December 31, 2024, both appearing elsewhere in this annual report.

We are the leader in innovative silicon and software IP solutions that enable smart edge products to connect, sense, and infer data more reliably and efficiently. Commanding 67% of the wireless connectivity market share based on IP design revenues in 2023, according to IPnest, we believe we have the industry’s broadest portfolio of comprehensive wireless communications and Edge AI IP platforms and embedded software solutions. We power the connectivity, sensing, and inference capabilities in today’s most advanced smart edge products across four large, diversified markets with significant opportunity for long-term growth, consumer IoT, automotive, industrial and infrastructure, as well as the mobile and PC markets where we have well established customers and presence, which based on our research we believe will represent a $5 billion total addressable market by 2027. Since 2003, more than 19 billion of the world’s most innovative smart edge products from AI-infused smartwatches, IoT devices and wearables to autonomous vehicles, 5G mobile networks and more have been shipped with Ceva IP, with approximately 2 billion shipped in 2024 alone.

For more than three decades, we have been a trusted partner to hundreds of leading semiconductor and original equipment manufacturer (OEM) companies servicing not just our largest target growth and incumbent markets, but also a wide variety of other end markets and applications, including smart-home, surveillance, robotics and medical. Our transformative semiconductor IP and embedded software offerings are incorporated by customers into application-specific integrated circuits (ASICs) and application-specific standard products (ASSPs) to enable power-efficient, intelligent, secure and connected devices that connect, sense, and infer - the three critical pillars of the rapidly evolving era of AI-enabled smart edge.

Our wireless communications, sensing and edge AI technologies are at the heart of some of today’s most advanced smart edge products. Our comprehensive portfolio includes:

• Advanced wireless connectivity solutions: Bluetooth, Wi-Fi, Ultra-Wideband (UWB), and 5G-Advanced platform IP for ubiquitous and robust communication;
• Scalable Edge AI capabilities: neural processing unit (NPU) IP to enable AI, on-device; and
• Sensor fusion processors and embedded application software that make devices smarter and more responsive.

We license our portfolio of wireless communications and scalable Edge AI IP to our customers, breaking down barriers to entry and enabling them to bring new cutting-edge products to market faster, more reliably, efficiently and economically.

We are a sustainability and environmentally conscious company. We have adopted both a Code of Business Conduct and Ethics and a Sustainability Policy, in which we emphasize and focus on environmental preservation, recycling, the welfare of our employees and privacy – which we promote on a corporate level. At Ceva, we are committed to social responsibility, values of preservation and consciousness towards these purposes.

We believe our portfolio of wireless communications, sensing and Edge AI technologies address some of the most important megatrends, including 5G expansion, generative AI, embedded AI, industrial automation and vehicle electrification. We continue to experience strong interest across our IP portfolio due to these trends, in both traditional and new areas. In the fourth quarter of 2024, we concluded twelve IP licensing deals for a range of wireless and smart sensing use cases, including two notable strategic licensing deals. The first was with a top-tier global MCU company, which has signed a long-term architecture licensing agreement for our Wi-Fi platform to be used across their product portfolio. The second major strategic deal relates to the mobile market, where we executed a long-term licensing agreement with a leading U.S. OEM to use our technology in their in-house 5G modem. In relation to the second deal, we anticipate that this agreement will lead to significant market share expansion of our wireless communication IP, and we expect this agreement to drive a meaningful, long-term royalty stream in the years to come.

We believe the following key elements represent significant growth drivers for the company:

• Our broad Bluetooth, Wi-Fi, UWB and cellular IoT IP allow us to address the high volume IoT industrial, consumer and smart home markets. Our addressable market size for Bluetooth, Wi-Fi, UWB and cellular IoT is expected to be more than 16.5 billion devices annually by 2029 based on research from ABI Research. In the fourth quarter of 2024, we signed multiple licensing deals for our range of wireless connectivity IP, including a Wi-Fi architecture licensing agreement with one of the world’s leading MCU companies. We also signed deals for our latest generation Wi-Fi 7 and Bluetooth 6 and next generation 7 IP, underscoring the leadership we command in this space. We also reached multiple shipment milestones in the quarter, reporting a record 343 million Bluetooth units and a record 66 million Wi-Fi units. These record volumes reflect our market leadership in IP in these markets, where we already command more than 30% of the Bluetooth market share worldwide, excluding mobile. In addition, we believe that Wi-Fi continues to present a significant royalty revenue opportunity, given our leading market position in licensing Wi-Fi 6 with more than 40 customers to date and leadership position in Wi-Fi 7 IP.
• We believe our PentaG2 platform and digital signal processors (DSPs) for 5G mobile broadband and 5G RedCap is one of the most comprehensive baseband IP platforms in the industry today and provides newcomers and incumbents with a comprehensive solution to address the need for 5G processing for fixed wireless access, satellite communications and a range of connected devices such as robots, cars, smart cities and other devices for industrial applications. Indicative of the demand for our 5G IP, in the fourth quarter of 2024, we signed another deal for 5G and 5G-Advanced new use cases with a new licensee targeting the fast-growing cellular market.
• Our PentaG RAN platform for 5G RAN, including the recently announced Ceva-XC22 multi-thread DSP, ensures we offer one of the most comprehensive baseband processor IP platforms in the industry today. Our 5G IP provides newcomers and incumbents with a customizable solution to address the need for 5G, 5G Advanced and other communications in data centers and infrastructure.
• The high-volume consumer audio markets, including True Wireless Stereo (TWS) earbuds, smartwatches, AR and VR headsets, and other wearable assisted devices, offers an incremental growth segment for us for our Bluetooth, Audio AI DSPs and software IP. For OEMs to better address this market, our RealSpace Spatial Audio & Head Tracking Solution and ClearVox voice input software are available to enhance the user experience and offer premium features. In the fourth quarter, we signed a licensing deal with a mobile device OEM to incorporate our MotionEngine solution in their upcoming tablet peripheral device.
• Our SensPro2 sensor hub AI DSP family is designed to address the growing demand for efficient, high-performance signal processing in sensor-based applications across various industries and applications such as smartphones, automotive safety (ADAS), autonomous driving (AD), drones, robotics, security and surveillance, augmented reality (AR) and virtual reality (VR), natural language processing (NLP) and voice recognition. Research from Bloomberg Intelligence forecasts that hardware revenue associated with computer vision AI products and conversational AI devices will reach $58 billion and $110 billion, respectively by 2032, indicating the size of the market opportunity. This sensor hub AI DSP enables us to address the transformation in devices enabled by these applications, and expand our footprint and content in smartphones, drones, consumer cameras, surveillance, automotive ADAS, voice-enabled devices and industrial IoT applications.
• Transformer and classic neural networks are increasingly being deployed in a wide range of devices to make these devices “smarter.” Our newest generation family of NeuPro-M AI NPUs present a highly efficient and high-performance architecture to enable generative and classic AI on any device including communication gateways, optically connected networks, cars, notebooks and tablets, AR/VR headsets, smartphones, and any other cloud or edge use case from the edge all the way to the cloud. Per research from Research and Markets, more than 6 billion Edge AI hardware units will ship annually by 2030, illustrating the huge potential of the market.
• AI is rapidly making its way into IoT devices, thanks in part to the emergence of embedded AI, including tiny machine learning (TinyML) models, which enable small AI networks to be embedded in AIoT devices for sensing use cases including sound, vision, vibration and health monitoring. Our recently announced NeuPro-Nano family of AI NPUs present a compelling proposition to add a cost- and power-efficient processor to microcontroller units and SoC designs to handle the complete AI workloads, on-device. Per ABI Research, by 2030, over 50% of TinyML shipments will be powered by dedicated embedded AI hardware such as NeuPro-Nano, representing billions of devices annually. In the fourth quarter, we added another design win for our NeuPro-Nano NPU with a first-time customer, engaged in developing Edge AI processors targeting consumer electronics.
• Our sensor fusion and spatial audio application software allows us to address an important technology piece used in personal computers, robotics, TWS earbuds, smart TVs and many other smart sensing IP products, in addition to our existing portfolio for camera-based computer vision and AI processing, and microphone-based sound processing. MEMS-based inertial and environmental sensors are used in an increasing number of devices, including robotics, smartphones, laptops, tablets, TWS earbuds, spatial audio headsets, remote controls and many other consumer and industrial devices. Our innovative and proven MotionEngine software supports a broad range of merchant sensor chips and is processor-agnostic to address the requirements of any OEM or semiconductor company that wishes to enhance their customer user experience. The MotionEngine software has already shipped in more than 400 million devices, indicative of its market traction and excellence. Along with our SensPro sensor hub AI DSPs, our licensees now benefit from our capabilities as a one-stop-shop for processing many types of sensors.

As a result of our focus on silicon and software IP solutions that enable products to connect, sense, and infer data, we believe we are well positioned for long-term growth in shipments and royalty revenues derived from smart edge products. Royalty rates from these products comprise a range of ASPs, from high volume Bluetooth and Wi-Fi to high value sensor fusion and base station RAN. The royalty ASP of our other products will be in between the two ranges.

CURRENT TRENDS

We believe that with digital transformation being a long-term trend that continues to drive industries to become connected and intelligent, our ubiquitous technology and collaborative business model present a significant and secular growth prospect. We intend to continue to capitalize on the semiconductor momentum with our portfolio of technologies to enable three main use cases associated with smart edge devices: connect, sense and infer. We focus on four main markets, which are consumer IoT, automotive, industrial and infrastructure, which we believe are large, diversified and represent the greatest opportunities for long-term growth. We will also continue to serve the mobile and PC markets where we have established customers and market presence. We believe our key customers are keenly receptive to our products roadmap around connect, sense and infer, and that they are willing to expand the scope of engagements with us as our roadmap aligns with their technology needs. Furthermore, we anticipate that we complement our strong presence in the APAC region by further expanding our customer base and revenues in Europe and the U.S., as evidenced by our increasingly diversified revenue split by geography from 2022 through 2024.

Our strategy has returned us to year-over-year revenue growth 2024, with overall revenue growing 10% over 2023, versus the 4% to 8% we expected at the beginning of the year. We believe that our growth will continue in 2025, with overall revenue expected to grow 7%-11% for 2025. In 2025, we expect our licensing and related revenues business will continue to expand into new markets and use cases for industrial IoT (IIoT) and consumer IoT devices, offering connectivity platforms, sensing platforms and software, AI solutions (including AI engines, NPUs and software) and more. On royalties, we expect our connectivity products to continue to show strength in 2025, particularly related to our Bluetooth, Wi-Fi and cellular IoT business lines which enjoyed record shipments in 2024 and with the initial ramp of an in-house 5G modem powered by our cellular DSP from a leading U.S. mobile OEM expected to launch its first smartphone based on the modem in the first quarter.

Instability in the Middle East

Our operations in Israel remain largely unaffected by the war between Israel and Hamas that began on October 7, 2023 and escalated to conflicts with Lebanon and Hezbollah, and we continue to drive our business and support our customers globally. However, a portion of our employees in Israel have been or are called to active reserve duty and additional employees may be called in the future, if needed. The Company has executed its business continuity plan with respect to those employees. It is possible that some of our operations in the region may be disrupted if this continues for a significant period of time or if the situation further deteriorates.

CRITICAL ACCOUNTING POLICIES, ESTIMATES AND ASSUMPTIONS

Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP). These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenues and expenses during the periods presented. To the extent there are material differences between these estimates, judgments or assumptions and actual results, our financial statements will be affected. The significant accounting policies that we believe are the most critical to aid in fully understanding and evaluating our reported financial results include the following:

• revenue recognition;
• equity-based compensation; and
• credit losses.

In many cases, the accounting treatment of a particular transaction is specifically dictated by U.S. GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting among available alternatives would not produce a materially different result.

Revenue Recognition

Significant management judgments and estimates must be made and used in connection with the recognition of revenue in any accounting period. Material differences in the amount of revenue in any given period may result if these judgments or estimates prove to be incorrect or if management’s estimates change on the basis of development of business or market conditions. Management’s judgments and estimates have been applied consistently and have been reliable historically.

The following is a description of principal activities from which we generate revenue. Revenues are recognized when control of the promised goods or services are transferred to the customers in an amount that reflects the consideration that we expect to receive in exchange for those goods or services.

We determine revenue recognition through the following steps:

• Identification of the contract with a customer;
• Identification of the performance obligations in the contract;
• Determination of the transaction price;
• Allocation of the transaction price to the performance obligations in the contract; and
• Recognition of revenue when, or as, we satisfy a performance obligation.

We enter into contracts that can include various combinations of products and services, as detailed below, which are generally capable of being distinct and accounted for as separate performance obligations.

We generate our revenues from (1) licensing intellectual properties, which in certain circumstances are modified for customer-specific requirements, (2) royalty revenues and (3) other revenues, which include revenues from support, training and sale of development systems and chips. We license our IP to semiconductor companies throughout the world. These semiconductor companies then manufacture, market and sell custom-designed chipsets to OEMs of a variety of consumer electronics products. We also license our technology directly to OEMs, which are considered end users.

We account for our IP license revenues and related services, which provide our customers with rights to use our IP, in accordance with ASC 606, "Revenue from Contracts with Customers" (ASC 606"). A license may be perpetual or time limited in its application. In accordance with ASC 606, we recognize revenue from IP license at the time of delivery when the customer obtains control of the IP, as the IP is functional without professional services, updates and technical support. We have concluded that our IP licenses are distinct as the customer can benefit from the licenses on their own.

Most of our contracts with customers contain multiple performance obligations. For these contracts, we account for individual performance obligations separately, if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. Stand-alone selling prices of IP licenses are typically estimated using the residual approach, since the selling price is uncertain. Stand-alone selling prices of services are typically estimated based on observable transactions when these services are sold on a standalone basis. Standalone selling prices of significant customization of our IP to customer-specific specifications are typically estimated based on expected cost plus normal profit margin approach.

Revenues from contracts that involve significant customization of our IP to customer-specific specifications are considered as one performance obligation satisfied over-time. Revenue related to these projects is recognized over time, usually based on a percentage that incurred labor effort to date bears to total projected labor effort. Incurred effort represents work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer. When total cost estimates for these types of arrangements exceed revenues in a fixed-price arrangement, the estimated losses are recognized immediately. Significant judgment is required when estimating total labor effort and progress to completion on these arrangements.

Revenues that are derived from the sale of a licensee’s products that incorporate our IP are classified as royalty revenues. Royalty revenues are recognized during the quarter in which the sale of the product incorporating our IP occurs. Royalties are calculated either as a percentage of the revenues received by our licensees on sales of products incorporating our IP or on a per unit basis, as specified in the agreements with the licensees. Royalty revenues are recognized during the quarter in which we receive the actual sales data from our customers after the quarter ends and accounts for it as unbilled receivables. When we do not receive actual sales data from the customer prior to the finalization of our financial statements, royalty revenues are recognized based on our estimation of the customer’s sales during the quarter. This estimation process for the royalty revenue accrual is based on inputs and estimations received from our customers, as well as sales trends and various market factors. Adjustments to royalty revenues are made in subsequent periods to reflect updated estimates as soon as the final royalty reports are sent to us. We may engage a third party to perform royalty audits of our licensees, and if these audits indicate any over- or under-reported royalties, we account for the results when the audits are resolved.

Contracts with customers generally contain an agreement to provide for training and post contract support, which consists of telephone or e-mail support, correction of errors (bug fixing) and unspecified updates and upgrades. Fees for post contract support, which takes place after delivery to the customer, are specified in the contract and are generally mandatory for the first year. After the mandatory period, the customer may extend the support agreement on similar terms, usually on an annual basis. We consider the post contract support performance obligation as a distinct performance obligation that is satisfied over time, and as such, we recognize revenue for post contract support on a straight-line basis over the period for which technical support is contractually agreed to be provided to the licensee (typically 12 months, since the services have a consistent continuous pattern of transfer to the customers). Revenues from the sale of development systems and chips are recognized when control of the promised goods or services are transferred to the customers.

When contracts involve a significant financing component, we adjust the promised amount of consideration for the effects of the time value of money if the timing of payments agreed to by the parties to the contract (either explicitly or implicitly) provide the customer with a significant benefit of financing, unless the financing period is under one year and only after the products or services were provided, as we elected to use the practical expedient under ASC 606.

Deferred revenues, which represent a contract liability, include unearned amounts received under license agreements, unearned technical support and amounts paid by customers not yet recognized as revenues.

We capitalize sales commission as costs of obtaining a contract when they are incremental and, if they are expected to be recovered, amortized in a manner consistent with the pattern of transfer of the good or service to which the asset relates. If the expected amortization period is one year or less, the commission fee is expensed when incurred.

Equity-Based Compensation

We account for equity-based compensation in accordance with FASB ASC No. 718, “Stock Compensation” which requires the recognition of compensation expenses based on estimated fair values for all equity-based awards made to employees and non-employee directors. Equity-based compensation primarily includes restricted stock unit (RSUs), as well as options, stock appreciation right (SAR), performance-based stock units (PSUs) and employee stock purchase plan awards.

We use the straight-line recognition method for awards subject to graded vesting based only on a service condition and the accelerated method for awards that are subject to performance or market conditions. The fair value of each RSU and PSU (excluding PSUs based on market condition awards) is the market value as determined by the closing price of the common stock on the grant date. We estimate the fair value of PSU based on market condition awards on the date of grant using the Monte Carlo simulation model. We estimate the fair value of stock option awards on the date of grant using the Black & Scholes model.

Credit Losses

Marketable securities consist mainly of corporate bonds. We determine the appropriate classification of marketable securities at the time of purchase and re-evaluate such designation at each balance sheet date. In accordance with FASB ASC No. 320, “Investments Debt Securities,” we classify marketable debt securities as available-for-sale. Available-for-sale securities are stated at fair value, with unrealized gains and losses reported in accumulated other comprehensive income (loss), a separate component of stockholders’ equity, net of taxes. Realized gains and losses on sales of marketable securities, as determined on a specific identification basis, are included in financial income, net. The amortized cost of marketable securities is adjusted for amortization of premium and accretion of discount, both of which, together with interest, are included in financial income, net. We have classified all marketable securities as short-term, even though the stated maturity date may be one year or more beyond the current balance sheet date, because these securities are available to support current operations, and we may sell these debt securities prior to their stated maturities.

We determine realized gains or losses on sale of marketable securities on a specific identification method and record such gains or losses as financial income, net.

For each reporting period, we evaluate whether declines in fair value below the amortized cost are due to expected credit losses, as well as our ability and intention to hold the investment until a forecasted recovery occurs, in accordance with ASC 326. Allowance for credit losses on available for sale debt securities are recognized as a charge in financial income on the consolidated statements of income, and any remaining unrealized losses, net of taxes, are included in accumulated other comprehensive income (loss). For the years ended December 31, 2024, 2023 and 2022, credit losses were immaterial.

Our trade receivables are geographically diverse, mainly in the Asia Pacific region, and also in the United States and Europe. Concentration of credit risk with respect to trade receivables is limited by credit limits, ongoing credit evaluation and account monitoring procedures. We perform ongoing credit evaluations of our customers. We make estimates of expected credit losses based upon our assessment of various factors, including historical experience, the age of the trade receivable balances, credit quality of our customers, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect our ability to collect from customers.

For the years ended December 31, 2024 and 2023, allowance for credit losses amounted to $2,626 and $288, respectively. The increase in the credit loss allowance as of December 31, 2024 is due to a specific credit loss provision recorded during the year ended December 31, 2024 for a customer that has experienced financial difficulties.

Accounting Standards

In June 2022, the FASB issued ASU No. 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions, which clarifies the guidance when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security and introduces new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820. The guidance is effective for annual periods beginning after December 15, 2023, with early adoption permitted. We adopted ASU 2022-03 as of January 1, 2024. The adoption did not result in a material impact on our financial statements.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires public entities to disclose information about their reportable segments’ significant expenses and other segment items on an interim and annual basis. Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosures and reconciliation requirements in ASC 280 on an interim and annual basis. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. We adopted ASU 2023-07 as of December 15, 2024.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires public entities, on an annual basis, to provide disclosure of specific categories in the rate reconciliation, as well as disclosure of income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the impact of adopting ASU 2023-09.

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosure (Subtopic 220-40), Disaggregation of Income Statement Expenses, which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. In addition, it provides new segment disclosure requirements for entities with a single reportable segment. We adopted this guidance for the annual period beginning January 1, 2024.

RESULTS OF OPERATIONS

The following table presents line items from our consolidated statements of loss as percentages of our total revenues for the periods indicated:

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Discussion and Analysis

Below we provide information on the significant line items in our consolidated statements of loss for each of the past three fiscal years, including the percentage changes year-on-year, as well as an analysis of the principal drivers of change in these line items from year-to-year.

Revenues

Total Revenues

For 2024, we reported total revenue of $106.9 million, 10% higher than 2023. In 2024, we strengthened our leadership and influence around our key technology pillars, reinforcing our dominant position in wireless connectivity while expanding our sense and inference product offerings and global customer base. We also launched multiple innovative products like the NeuPro-Nano Edge AI NPUs. Highlights for 2024 included several key and large design wins in the cellular communication markets for satellite, base station and handset advanced technology use cases, which drove overall revenues higher than 2023.

In royalties, we delivered strong year-over-year 18% revenue growth and shipped a record 2 billion Ceva-powered units, marking the first time in our history to reach this milestone number. Shipment strength was across the board, with numerous records achieved.

We derive a significant amount of revenues from a limited number of customers. Sales to UNISOC represented 15%, 13% and 16% of our total revenues for 2024, 2023 and 2022, respectively. Generally, the identity of our other customers representing 10% or more of our total revenues varies from period to period, especially with respect to our licensing customers as we generate licensing revenues generally from new customers on a quarterly basis. With respect to our royalty revenues, two royalty paying customers each represented 10% or more of our total royalty revenues for 2024, and collectively represented 46% of our total royalty revenues for 2024. Two royalty paying customers each represented 10% or more of our total royalty revenues for 2023, and collectively represented 45% of our total royalty revenues for 2023. Two royalty paying customers each represented 10% or more of our total royalty revenues for 2022, and collectively represented 46% of our total royalty revenues for 2022. We expect that a significant portion of our future revenues will continue to be generated by a limited number of customers. The concentration of our customers is explainable in part by consolidation in the semiconductor industry. The loss of any significant customer could adversely affect our near-term future operating results.

The following table sets forth use cases for Ceva technology portfolio as percentages of our total revenues in each of the periods set forth below:

We expect to continue to generate a significant portion of our revenues for 2025 from the above technologies.

Licensing and related revenue

Licensing and related revenue was $60.0 million, representing a 4% increase in 2024 as compared to 2023. We signed 43 licensing agreements across our extensive IP portfolio, down from 53 last year; 11 of those deals were with OEMs who are integrating our IP into their end products. In terms of end markets, 21 of the deals target consumer, 19for IIoT, with the remainder targeting mobile, including two with our anchor mobile customers that signed long-term agreements in the fourth quarter. Twelve of the customers licensed multiple technologies from our portfolio, demonstrating the synergistic strengths of our strategy to offer a broad portfolio of IP around connect, sense and infer.

This deal breakdown also indicates the benefits of our focus on the end markets with the largest licensing base and the greatest projected growth potential. In 2024, we experienced increased licensing revenue in the U.S., due to a few significant design wins in the second half of the year. We also witnessed good design activity for advanced 5G cellular technologies for multiple end markets. Moreover, we concluded multiple deals or upgrades and new deals for our Wi-Fi and Bluetooth 6 and 7 platforms with customers in consumer and industrials end markets. In 2023, we experienced a decrease in licensing revenue attributed to a slowdown in new design activity due to various reasons, including lack of funding of semiconductor companies, in part due to the higher interest rate environment, as well as the end of a period of exceptional consumer end market demand related to COVID spending following the substantial completion of most companies’ shift to hybrid work environments.

Licensing and related revenue accounted for 56.1% of our total revenues for 2024, compared with 59.1% and 62.4% of our total revenues for 2023 and 2022, respectively.

Royalty Revenues

We generate royalty revenues from our customers who ship units of chips incorporating our technologies. Our royalty revenues represent what our customers shipped during any quarter, or our best estimates for such shipments. The royalty rate is based either on a certain percent of the chipset price or a fixed amount per unit basis.

Royalty revenue increased in 2024 compared to 2023, as we delivered strong year-over-year 18% revenue growth and shipped a record 2 billion Ceva-powered units, marking the first time in our history to reach this milestone number. Shipment strength was across the board, with numerous records achieved. To highlight a few of these: we powered a record 1.1 billion Bluetooth devices, a record 179 million Wi-Fi devices, a record 170 million cellular IoT devices, 340 million smartphones, and 170 million other smart edge devices powered by our DSPs, AI Accelerators and sensor fusion software. In terms of end markets, consumer IoT was 53% of annual royalties, followed by mobile at 32% and IIoT at 16%. Looking ahead into 2025, we anticipate that our Wi-Fi royalties and shipments will continue to grow, with several high-volume Wi-Fi 6 customers getting into production and ramping now. Similarly, we expect continued growth of our Bluetooth and cellular IoT shipments with additional customers coming to market and strengthening our dominant position in these markets. Also, on the back of signing new long-term licensing deals with our 2 main mobile customers, we expect the royalty contribution from mobile to grow year-over-year.

Royalty revenue was down in 2023 as compared to 2022 reflecting broad macroeconomic and consumer demand weakness and elevated inventory levels, especially in the first half of 2023. The decline is mainly attributable to mobile and 5G RAN related royalties, which combined to be down 22% year-over-year. On the positive side and in line with the strength of our connectivity products, royalty revenues related to our Bluetooth, Wi-Fi and cellular IoT business lines combined to grow 5% year-over-year, mainly due to higher royalty rate contribution from our new Wi-Fi 6 customers. In terms of end markets, consumer IoT was 41% of royalties, followed by mobile at 36% and the growing IIoT end markets at 23%. Total shipments in 2023 decreased 4% year-over-year to 1.62 billion units, down from 1.70 billion in 2022.

The five largest royalty-paying customers accounted for 61% of our total royalty revenues for 2024, compared to 58% of our total royalty revenues for 2023 and 64% of our total royalty revenues for 2022.

Geographic Revenue Analysis

(in millions, except percentages)

A majority of our revenues during the past three years have originated in the APAC region, with China representing the largest revenue share of countries in the APAC region. The decrease in revenues in absolute dollars in APAC from 2022 to 2023 was partially attributed to the slowdown in the start of new design activity. The decrease in revenues in absolute dollars in APAC from 2023 to 2024 was partially attributed to China, were we witnessed slower design starts, continued geopolitical tensions and the continued impact of the prior year’s slowdown in the local macroeconomic environment.

The increase in revenues in absolute dollars in the United States from 2023 to 2024 was primarily driven by few key agreements signed with U.S.-based customers. One of them a long-term licensing agreement with a leading U.S. OEM to incorporate our technology into their in-house 5G modem. The decrease in revenues in absolute dollars in the United States from 2022 to 2023 was mainly attributed to a large, non-recurring licensing deal in our BlueBud platform, as well as the continued decrease in Intel based royalties post their divestment from the modem business. Moreover, we witnessed lower royalties from our sensor fusion empowered chips.

Revenues in the EME region remained constant from 2023 to 2024. The increase in revenues in absolute dollars and percentage in the EME region from 2022 to 2023 is primarily due to a significant new Wi-Fi / Bluetooth combo deal with a leading platform OEM in the electronics maker community whose devices are widely used in education and prototyping.

Cost of Revenues

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Cost of revenues equaled 11.9% of our total revenues for 2024, compared to 12.0% of our total revenues for 2023 and 12.5% of our total revenues for 2022. The absolute dollar increases in cost of revenues for 2024 as compared to 2023 principally reflected higher strategically beneficial customization work associated with the strategic 5G-Advanced deals we signed in the second half of 2024. The absolute dollar decreases in cost of revenues for 2023 as compared to 2022 principally reflected impairment charges, incurred in 2022, of prepaid assets with respect to (1) Immervision-related assets and services, and (2) certain non-performing assets related to NB-IoT technology, as well as lower customization work for our licensees.

Cost of revenues includes labor-related costs and, where applicable, costs related to overhead, subcontractors, materials, travel, royalty expenses payments to the Israeli Innovation Authority of the Ministry of Economy and Industry in Israel (IIA), amortization of acquired assets and non-cash equity-based compensation expenses. Non-cash equity-based compensation expenses included in cost of revenues for the years 2024, 2023 and 2022 were $713,000, $826,000 and $687,000, respectively. Royalty expenses relate to royalties payable to the IIA that amount to 3%-3.5% of the actual sales of certain of our products, the development of which previously included grants from the IIA. The obligation to pay these royalties is contingent on actual sales of these products. Amortization of acquired assets related to the purchase of a license of NB-IoT technologies in the first quarter of 2018 and to certain intangible assets associated with the VisiSonics acquisition in the second quarter of 2023. Our amortization charges were $0.5 million, $0.4 million and $0.6 million for 2024, 2023 and 2022, respectively. In 2022 we recorded impairment charges of $2.0 relating to discontinued Immervision technology and non-performing assets of certain NB-IoT technology.

Operating Expenses

(in millions)

The increase in total operating expenses for 2024 as compared to 2023 principally reflected higher allowance for credit losses. The decrease in total operating expenses for 2023 as compared to 2022 principally reflected: (1) an impairment charge of $3.6 million recorded in the third quarter of 2022 with respect to Immervision technology acquired in August 2019, as we decided to cease the development of this product line; (2) lower amortization of intangible assets, mainly related to Immervision; and (3) lower salary and employee-related costs, mainly associated with lower employee-related performance costs, partially offset with lower research grants received, mainly from the IIA, and higher non-cash equity-based compensation expenses.

Research and Development Expenses, Net

The net decrease in research and development expenses for 2024 as compared to 2023 principally reflected higher allocation of customization work for our licensees to cost of revenues and lower salaries and employee-related costs. The net increase in research and development expenses for 2023 as compared to 2022 principally reflected lower research grants received, mainly from the IIA, lower customization work for our licensees and higher non-cash equity-based compensation expenses, partially offset by lower salaries and employee-related costs mainly associated with lower employee-related performance costs. The average number of research and development personnel in 2024 was 327, compared to 330 in 2023 and 325 in 2022. The number of research and development personnel was 323 at December 31, 2024 as compared to 322 in 2023 and 328 in 2022.

We anticipate that our overall expense (cost of revenues and operating expenses) will continue to increase in 2025 but at a significantly lower growth rate than our topline growth, at a range of 2%-6%.

Research and development expenses, net of related government grants and French research tax benefits applicable to CIR, were 67.0% of our total revenues for 2024, as compared with 74.6% for 2023 and 58.3% for 2022. We recorded research grants under funding programs of $1,407,000 in 2024, compared with $1,668,000 in 2023 and $4,850,000 in 2022. We recorded UK tax credits and CIR benefits of $2,954,000, $2,641,000 and $2,316,000 for 2024, 2023 and 2022, respectively.

Research and development expenses consist primarily of salaries and associated costs, facilities expenses associated with research and development activities, project-related expenses connected with the development of our IP which are expensed as incurred, and non-cash equity-based compensation expenses. Non-cash equity-based compensation expenses included in research and development expenses, net for the years 2024, 2023 and 2022 were $9,298,000, $9,133,000 and $8,259,000, respectively. Research and development expenses are net of related government research grants, UK tax credits and research tax benefits applicable to CIR. We view research and development as a principal strategic investment and have continued our commitment to invest heavily in this area, which represents the largest of our ongoing operating expenses. We will need to continue to invest in research and development and such expenses may increase in the future to keep pace with new trends in our industry.

Sales and Marketing Expenses

The increase in sales and marketing expenses for 2024 as compared to 2023 principally reflected higher commission expenses and higher salaries and employee-related costs. The decrease in sales and marketing expenses for 2023 as compared to 2022 principally reflected lower salary and employee related costs, mainly associated with a one-time separation charge recorded in 2022 as a result of the departure of our former executive vice president of worldwide sales.

Sales and marketing expenses as a percentage of our total revenues were 11.8% for 2024, as compared with 11.3% for 2023 and 9.5% for 2022. The total number of sales and marketing personnel was 34 in 2024, as compared with 29 in 2023 and 36 in 2022. Sales and marketing expenses consist primarily of salaries, commissions, travel and other costs associated with sales and marketing activities, as well as advertising, trade show participation, public relations and other marketing costs and non-cash equity-based compensation expenses. Non-cash equity-based compensation expenses included in sales and marketing expenses for the years 2024, 2023 and 2022 were $1,801,000, $1,776,000 and $1,503,000, respectively.

General and Administrative Expenses

The increase in general and administrative expenses for 2024 as compared to 2023 principally reflected higher allowance for credit losses. The increase in general and administrative expenses for 2023 as compared to 2022 principally reflected higher professional services cost and higher non-cash equity-based compensation expenses, partially offset with lower salaries and related costs.

General and administrative expenses as a percentage of our total revenues were 15.8% for 2024, as compared with 15.3% for 2023 and 11.8% for 2022. The total number of general and administrative personnel was 45 in 2024, as compared with 45 in 2023 and 46 in 2022. General and administrative expenses consist primarily of fees for directors, salaries for management and administrative employees, accounting and legal fees, expenses related to investor relations and facilities expenses associated with general and administrative activities, allowance for credit losses and non-cash equity-based compensation expenses. Non-cash equity-based compensation expenses included in general and administrative expenses for the years 2024, 2023 and 2022 were $3,763,000, $3,795,000 and $2,888,000, respectively.

Amortization of Intangible Assets

Our amortization charges were $0.6 million, $0.6 million and $2.0 million for 2024, 2023 and 2022 respectively. The amortization charges in both 2024 and 2023 were incurred in connection with the amortization of intangible assets associated with the acquisition of the Hillcrest Labs and VisiSonics business. The amortization charges in 2022 were incurred in connection with the amortization of intangible assets associated with the acquisition of the Hillcrest Labs and the strategic investment in Immervision. As of December 31, 2024, the net amount of intangible assets associated with the acquisitions was $1.1 million.

Impairment of Assets

In 2022, we recorded an impairment charge of $3.6 million with respect to Immervision technology acquired in August 2019, as we decided to cease the development of this product line.

Financial Income, net

(in millions)

Financial income, net, consists of interest earned on investments, gains and losses from sale of marketable securities, accretion (amortization) of discount (premium) on marketable securities and foreign exchange movements.

The increase in interest income and gains and losses from marketable securities, net, for 2024 as compared to 2023 principally reflected higher combined cash, bank deposits and marketable securities balances held (mainly because of cash received from the sale of Intrinsix in October 2023) and higher yields. The increase in interest income and gains and losses from marketable securities, net, for 2023 as compared to 2022 reflected higher yields, offset with lower combined cash, bank deposits and marketable securities balances held.

We review our monthly expected major non-U.S. dollar denominated expenditures and look to hold equivalent non-U.S. dollar cash balances to mitigate currency fluctuations. However, our Euro cash balances increase significantly on a quarterly basis beyond our Euro liabilities, mainly from the French research tax benefits applicable to CIR, which is generally refunded every three years. This has resulted in a foreign exchange loss of $1.01 million (due to the devaluation of our Euro cash balances as the U.S. dollar strengthened significantly during this period as compared to the Euro), a foreign exchange gain of $0.69 million and a foreign exchange gain of $0.07 million for 2024, 2023 and 2022, respectively.

Remeasurement of Marketable Equity Securities

We recorded a loss of $0.1 million, a loss of $0.0 million, and a loss of $2.5 million in 2024, 2023 and 2022, respectively, related to remeasurement of marketable equity securities. Over time, other income (expense), net, may be affected by market dynamics and other factors. Equity values generally change daily for marketable equity securities and upon the occurrence of observable price changes or upon impairment of marketable equity securities. In addition, volatility in the global economic climate and financial markets could result in a significant change in the value of our investments.

Provision for Income Taxes

During the years 2024, 2023 and 2022, we recorded tax expenses of $6.0 million, $10.2 million and $18.1 million, respectively.

The decrease in provision for income taxes in 2024 as compared to 2023 principally reflected (1) a charge in 2023 to our deferred tax assets in the US, primarily related to a reduction of estimated forecasted GILTI inclusions, and (2) lower tax expenses on income generated in our French subsidiary (under the French IP Box regime). The decrease in provision for income taxes in 2023 as compared to 2022 principally reflected the impact of a charge to record a valuation allowance in 2022 due to a change in the estimation for taxable income for future years of our Israeli operations (as further described below), offset with a charge to our deferred tax assets in the U.S. primarily related to a reduction of estimated forecasted GILTI inclusions, and additional tax charges as a result of the completion of a tax audit in a certain foreign tax jurisdiction.

In 2022, based on the weight of available positive and negative evidence, we recorded a valuation allowance for certain deferred tax assets (including withholding tax assets) of our Israeli subsidiary due to uncertainty regarding its future taxable income. In assessing the realizability of deferred tax assets, the key assumptions used to determine positive and negative evidence included the Company’s cumulative taxable loss for the past three years, current trends related to actual taxable earnings or losses, and expected future reversals of existing taxable temporary differences, as well as projections for future annual results. Accordingly, we recorded a charge of $15.6 million in 2022 as a reserve against our deferred tax assets.

We are subject to income and other taxes in the United States and in numerous foreign jurisdictions. Our domestic and foreign tax liabilities are dependent on the jurisdictions in which profits are determined to be earned and taxed. Additionally, the amount of taxes paid is subject to our interpretation of applicable tax laws in the jurisdictions in which we operate. A number of factors influence our effective tax rate, including changes in tax laws and treaties as well as the interpretation of existing laws and rules. Federal, state, and local governments and administrative bodies within the United States, and other foreign jurisdictions have implemented, or are considering, a variety of broad tax, trade, and other regulatory reforms that may impact us. For example, the Tax Cuts and Jobs Act (the “U.S. Tax Reform”) enacted on December 22, 2017 resulted in changes in our corporate tax rate, our deferred income taxes, and the taxation of foreign earnings. It is not currently possible to accurately determine the potential comprehensive impact of future changes, but these changes could have a material impact on our business and financial condition.

We have significant operations in Israel and operations in France and the Republic of Ireland. A substantial portion of our taxable income is generated in Israel and France, as well as potentially in the U.S. due to GILTI and the requirement to capitalize research and development expenditures under IRC Section 174 over 5 years if sourced from the U.S. and over 15 years if sourced internationally. Although our Israeli, French and Irish subsidiaries are taxed at rates substantially lower than U.S. tax rates, the tax rates in these jurisdictions could nevertheless result in a substantial increase as a result of withholding tax expenses with respect to which we are unable to obtain a refund from the relevant tax authorities.

Our Irish subsidiary qualified for a 12.5% tax rate on its trade. Interest income generated by our Irish subsidiary is taxed at a rate of 25%.

Our French subsidiary is entitled to a tax benefit of 10% applied to specific revenues under the French IP Box regime. The French IP Box regime applies to net income derived from the licensing, sublicensing or sale of several IP rights such as patents and copyrighted software, including royalty revenues. This elective regime requires a direct link between the income benefiting from the preferential treatment and the research and development expenditures incurred and contributing to that income. Qualifying income may be taxed at a favorable 10% CIT rate (plus social surtax, hence 10.3% in total). Income not eligible for a tax benefit under the French IP Box regime is taxed at a regular rate of 25%.

Our Israeli subsidiary is entitled to various tax benefits as a technological enterprise. In December 2016, the Economic Efficiency Law (Legislative Amendments for Applying the Economic Policy for the 2017 and 2018 Budget Years), 2016, which includes the Amendment to the Law for the Encouragement of Capital Investments, 1959 (Amendment 73) (the “Amendment”), was published. The Amendment, among other things, prescribes special tax tracks for technological enterprises, which are subject to rules that were issued by the Minister of Finance in April 2017.

The tax track under the Amendment, which is applicable to our Israeli subsidiary, is the “Technological Preferred Enterprise”. Technological Preferred Enterprise is an enterprise for which total consolidated revenues of its parent company and all subsidiaries are less than 10 billion New Israeli Shekel (NIS). A Technological Preferred Enterprise, as defined in the Amendment, that is located in the center of Israel (where our Israeli subsidiary is currently located), is taxed at a rate of 12% on profits deriving from IP. Any dividends distributed to “foreign companies”, as defined in the Amendment, deriving from income from technological enterprises will be taxed at a rate of 4%.

To maintain our Israeli subsidiary’s eligibility for the above tax benefits, it must continue to meet certain conditions under the Investment Law. Should our Israeli subsidiary fail to meet such conditions in the future, these benefits would be cancelled and it would be subject to corporate tax in Israel at the standard corporate rate and could be required to refund tax benefits already received, with interest and adjustments for inflation based on the Israeli consumer price index.

For more information about our provision for income taxes, see Note 14 to the attached Notes to Consolidated Financial Statement for the year ended December 31, 2024.

LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 2024, we had approximately $18.5 million in cash and cash equivalents, $2.0 million in short term bank deposits and $143.1 million in marketable securities, totaling $163.6 million, as compared to $166.5 million at December 31, 2023. The decrease in 2024 as compared to 2023 principally reflected funds used to repurchase 375,219 shares of common stock for an aggregate consideration of approximately $8.5 million, partially offset by cash used in operating activities and unrealized investment gain on marketable securities of approximately $2.2 million.

Out of total cash, cash equivalents, bank deposits and marketable securities of $163.6 million at year end 2024, $135.1 million was held by our foreign subsidiaries. Our intent is to permanently reinvest earnings of our foreign subsidiaries and our current operating plans do not demonstrate a need to repatriate foreign earnings to fund our U.S. operations. However, if these funds were needed for our operations in the United States, we would be required to accrue and pay taxes to repatriate these funds. The determination of the amount of additional taxes related to the repatriation of these earnings is not practicable, as it may vary based on various factors such as the location of the cash and the effect of regulation in the various jurisdictions from which the cash would be repatriated. Moving off-shore cash to our U.S. entity would result in significant additional tax expenses.

During 2024, we invested $48.9 million of cash in bank deposits and marketable securities with maturities up to 34 months from the balance sheet date. In addition, during the same period, bank deposits and marketable securities were sold or redeemed for cash amounting to $49.6 million. During 2023, we invested $42.0 million of cash in bank deposits and marketable securities with maturities up to 36 months from the balance sheet date. In addition, during the same period, bank deposits and marketable securities were sold or redeemed for cash amounting to $28.8 million. During 2022, we invested $63.9 million of cash in bank deposits and marketable securities with maturities up to 45 months from the balance sheet date. In addition, during the same period, bank deposits and marketable securities were sold or redeemed for cash amounting to $52.3 million. All of our marketable securities are classified as available-for-sale. The purchase and sale or redemption of available-for-sale marketable securities are considered part of investing cash flow. Available-for-sale marketable securities are stated at fair value, with unrealized gains and losses reported in accumulated other comprehensive income (loss), a separate component of stockholders’ equity, net of taxes. Realized gains and losses on sales of investments, as determined on a specific identification basis, are included in the consolidated statements of income (loss). The amount of credit losses recorded for the twelve months ended December 31, 2024, 2023, and 2022, was immaterial. For more information about our marketable securities, see Notes 1 and 3 to the attached Notes to Consolidated Financial Statement for the year ended December 31, 2024.

Short-term bank deposits are deposits with maturities of more than three months but no longer than one year from the balance sheet date. Bank deposits are presented at their cost, including accrued interest, and purchases and sales are considered part of cash flows from investing activities.

Operating Activities

Cash provided by operating activities in 2024 was $3.5 million and consisted of a net loss of $8.8 million, adjustments for non-cash items of $20.0 million, and changes in operating assets and liabilities of $7.7 million. Adjustments for non-cash items primarily consisted of $4.1 million of depreciation and amortization of intangible assets, and $15.6 million of equity-based compensation expenses. The decrease in cash from changes in operating assets and liabilities primarily consisted of an increase in trade receivables, net of $6.8 million, and an increase in prepaid expenses and other current assets of $4.8 million (mainly related to unbilled receivables of $2.6 million classified as “other long-term assets” in our consolidated balance sheets), partially offset by an increase in accrued payroll and related benefits of $2.7 million.

Cash used in operating activities in 2023 was $6.3 million and consisted of a net loss of $11.9 million, adjustments for non-cash items of $8.8 million, and changes in operating assets and liabilities of $3.2 million. Adjustments for non-cash items primarily consisted of $4.9 million of depreciation and amortization of intangible assets (including $1.1 million from discontinued operations), $16.2 million of equity-based compensation expenses (including $0.7 million from discontinued operations), and $11.6 million of gain on sale of Intrinsix. The decrease in cash from changes in operating assets and liabilities primarily consisted of an increase in prepaid expenses and other current assets of $4.9 million, a decrease in accrued payroll and related benefits of $3.7 million, and a decrease in trade payables of $0.8 million, partially offset by a decrease in deferred taxes, net of $6.7 million.

Cash provided by operating activities in 2022 was $6.9 million and consisted of a net loss of $23.2 million, adjustments for non-cash items of $28.2 million, and changes in operating assets and liabilities of $1.9 million. Adjustments for non-cash items primarily consisted of $7.6 million of depreciation and amortization of intangible assets (including $2.2 million from discontinued operations), $14.5 million of equity-based compensation expenses (including $1.2 million from discontinued operations), $2.5 million of remeasurement of marketable equity securities, and $3.6 million of impairment of intangible assets with respect to Immervision technology acquired in August 2019, as we decided to cease the development of this product line. The increase in cash from changes in operating assets and liabilities primarily consisted of a decrease in deferred taxes, net of $7.8 million (primarily reflect the impact of a charge to record a valuation allowance in 2022), an increase in trade payable of $0.5 million, an increase in accrued payroll and related benefits of $1.0 million, and an increase in accrued expenses and other payables, including income taxes payable, of $2.5 million, partially offset by an increase of trade receivables of $3.8 million, an increase of prepaid expenses and other assets of $1.1 million, and a decrease in deferred revenues of $5.5 million.

Cash flows from operating activities may vary significantly from quarter to quarter depending on the timing of our receipts and payments. Our ongoing cash outflows from operating activities principally relate to payroll-related costs and obligations under our property leases and design tool licenses. Our primary sources of cash inflows are receipts from our accounts receivable, to some extent interest earned from our cash, deposits and marketable securities. The timing of receipts of accounts receivable from customers is based upon the completion of agreed milestones or agreed dates as set out in the contracts.

Investing Activities

Net cash used in investing activities in 2024 was $2.4 million, as compared to net cash provided by investing activities of $10.8 million in 2023 and net cash used in investing activities of $15.1 million in 2022. We had a cash outflow of $46.9 million with respect to investments in marketable securities and a cash inflow of $39.6 million with respect to maturity, and sale, of marketable securities during 2024. Included in the cash inflow during 2024 was net proceeds of $8.0 million from bank deposits. We had a cash outflow of $40.0 million with respect to investments in marketable securities and a cash inflow of $22.8 million with respect to maturity, and sale, of marketable securities during 2023. Included in the cash inflow during 2023 was net proceeds of $4.0 million from bank deposits. We had a cash outflow of $49.9 million with respect to investments in marketable securities and a cash inflow of $21.4 million with respect to maturity, and sale, of marketable securities during 2022. Included in the cash inflow during 2022 was net proceeds of $16.9 million from bank deposits. Capital equipment purchases of computer hardware and software used in engineering development, furniture and fixtures amounted to approximately $3.0 million in 2024, $2.9 million in 2023 and $3.5 million in 2022. In 2024 and 2023, we had a cash inflow of $0.5 million and $30.6 million, respectively, following the sale of Intrinsix. We had a cash outflow of $0.8 million in 2024 for the acquisition of a Greek-based company and a cash outflow of $3.6 million in 2023 for the acquisition of VisiSonics.

Financing Activities

Net cash used in financing activities in 2024 was $5.6 million, as compared to net cash used in financing activities of $2.8 million in 2023 and net cash used in financing activities of $3.3 million in 2022.

In August 2008, we announced that our board of directors approved a share repurchase program for up to one million shares of common stock which was further extended collectively by an additional 7,100,000 shares in 2010, 2013, 2014, 2018, 2020 and 2023. In November 2024, our board of directors authorized the repurchase by us of an additional 700,000 shares of common stock pursuant to Rule 10b-18 of the Exchange Act. In 2024, we repurchased 375,219 shares of common stock pursuant to our share repurchase program at an average purchase price of $22.54 per share, for an aggregate purchase price of $8.5 million. In 2023, we repurchased 278,799 shares of common stock pursuant to our share repurchase program at an average purchase price of $22.11 per share, for an aggregate purchase price of $6.2 million. In 2022, we repurchased 218,809 shares of common stock pursuant to our share repurchase program at an average purchase price of $31.01 per share, for an aggregate purchase price of $6.8 million.

In 2024, 2023 and 2022, we received $2.9 million, $3.4 million and $3.5 million, respectively, from the exercise of stock-based awards.

We believe that our cash and cash equivalent, short-term bank deposits and marketable securities, along with cash from operations, will provide sufficient capital to fund our operations for at least the next 12 months. We cannot provide assurance, however, that the underlying assumed levels of revenues and expenses will prove to be accurate.

In addition, as part of our business strategy, we occasionally evaluate potential acquisitions of businesses, products and technologies and minority equity investments. Accordingly, a portion of our available cash may be used at any time for the acquisition of complementary products or businesses or minority equity investments. Such potential transactions may require substantial capital resources, which may require us to seek additional debt or equity financing. We cannot assure you that we will be able to successfully identify suitable acquisition or investment candidates, complete acquisitions or investments, integrate acquired businesses into our current operations, or expand into new markets. Furthermore, we cannot provide assurance that additional financing will be available to us in any required time frame and on commercially reasonable terms, if at all. See “Risk Factors—We may seek to expand our business in ways that could result in diversion of resources and extra expenses.” for more detailed information.

Contractual Obligations

The table below presents the principal categories of our contractual obligations as of December 31, 2024:

($ in thousands)

Operating leasehold obligations principally relate to our offices in Israel, Ireland, United Kingdom, France, China, Japan, Serbia, Sweden and the United States. Purchase obligations relate to license agreements entered into for maintenance of design tools. Other purchase obligations consist of capital and operating purchase order commitments. Other than set forth in the table above, we have no long-term debt or capital lease obligations.

At December 31, 2024, our income tax payable, net of withholding tax credits, included $462,000 related to uncertain tax positions. Due to uncertainties in the timing of the completion of tax audits, the timing of the resolution of these positions is uncertain and we are unable to make a reasonably reliable estimate of the timing of payments. As a result, this amount is not included in the above table.

In addition, at December 31, 2024, the amount of accrued severance pay was $7,365,000. Severance pay relates to accrued severance obligations to our Israeli employees as required under Israeli labor laws. These obligations are payable only upon termination, retirement or death of the respective employee. Of this amount, $204,000 is unfunded.

A majority of our revenues and a portion of our expenses are transacted in U.S. dollars and our assets and liabilities together with our cash holdings are predominately denominated in U.S. dollars. However, the majority of our expenses are denominated in currencies other than the U.S. dollar, principally the NIS and the EURO. Increases in volatility of the exchange rates of currencies other than the U.S. dollar versus the U.S. dollar could have an adverse effect on the expenses and liabilities that we incur when remeasured into U.S. dollars. We review our monthly expected non-U.S. dollar denominated expenditures and look to hold equivalent non-U.S. dollar cash balances to mitigate currency fluctuations. However, our Euro cash balances increase significantly on a quarterly basis beyond our Euro liabilities, mainly from French research tax benefits applicable to the CIR, which is generally refunded every three years. This has resulted in a foreign exchange loss of $1.01 million (due to the devaluation of our Euro cash balances as the U.S. dollar strengthened significantly during this period as compared to the Euro), a foreign exchange gain of $0.69 million and a foreign exchange gain of $0.07 million for 2024, 2023 and 2022, respectively.

As a result of currency fluctuations and the remeasurement of non-U.S. dollar denominated expenditures to U.S. dollars for financial reporting purposes; we may experience fluctuations in our operating results on an annual and quarterly basis. To protect against the increase in value of forecasted foreign currency cash flow resulting from salaries paid in currencies other than the U.S. dollar during the year, we follow a foreign currency cash flow hedging program. We hedge portions of the anticipated payroll for our non-U.S. employees denominated in currencies other than the U.S. dollar for a period of one to twelve months with forward and option contracts. During 2024, 2023 and 2022, we recorded accumulated other comprehensive loss of $988,000, accumulated other comprehensive gain of $1,095,000 and accumulated other comprehensive loss of $162,000, respectively, from our forward and option contracts, net of taxes, with respect to anticipated payroll expenses for our non-U.S. employees. As of December 31, 2024, the amount of other comprehensive gain (loss) from our forward and option contracts, net of taxes, was $0. We recognized a net gain of $0.91 million, a net loss of $1.08 million and a net loss of $1.29 million for 2024, 2023 and 2022, respectively, related to forward and options contracts. We note that hedging transactions may not successfully mitigate losses caused by currency fluctuations. We expect to continue to experience the effect of exchange rate and currency fluctuations on an annual and quarterly basis.

The majority of our cash and cash equivalents are invested in high grade certificates of deposits with major U.S., European and Israeli banks. Generally, cash and cash equivalents and bank deposits may be redeemed and therefore minimal credit risk exists with respect to them. Nonetheless, deposits with these banks exceed the Federal Deposit Insurance Corporation (FDIC) insurance limits or similar limits in foreign jurisdictions, to the extent such deposits are even insured in such foreign jurisdictions. While we monitor on a systematic basis the cash and cash equivalent balances in the operating accounts and adjust the balances as appropriate, these balances could be impacted if one or more of the financial institutions with which we deposit our funds fails or is subject to other adverse conditions in the financial or credit markets. To date, we have experienced no loss of principal or lack of access to our invested cash or cash equivalents; however, we can provide no assurance that access to our invested cash and cash equivalents will not be affected if the financial institutions that we hold our cash and cash equivalents fail.

We hold an investment portfolio consisting principally of corporate bonds. We have the ability to hold such investments until recovery of temporary declines in market value or maturity. As of December 31, 2024, the unrealized losses associated with our investments were approximately $1.5 million due to the dramatic changes in the interest rate environment that took place in 2022. As we hold such bonds with unrealized losses to recovery, no credit loss was recognized during 2024. However, we can provide no assurance that we will recover present declines in the market value of our investments.

Interest income and gains and losses from marketable securities, net, were $5.89 million in 2024, $4.57 million in 2023 and $2.74 million in 2022. The increase in interest income and gains and losses from marketable securities, net, for 2024 as compared to 2023 principally reflected higher combined cash, bank deposits and marketable securities balances held (mainly because of cash received from the sale of Intrinsix in October 2023) and higher yields. The increase in interest income and gains and losses from marketable securities, net, for 2023 as compared to 2022 reflected higher yields, offset with lower combined cash, bank deposits and marketable securities balances held.

We are exposed primarily to fluctuations in the level of U.S. interest rates. To the extent that interest rates rise, fixed interest investments may be adversely impacted, whereas a decline in interest rates may decrease the anticipated interest income for variable rate investments. We typically do not attempt to reduce or eliminate our market exposures on our investment securities because the majority of our investments are short-term. We currently do not have any derivative instruments but may put them in place in the future. Fluctuations in interest rates within our investment portfolio have not had, and we do not currently anticipate such fluctuations will have, a material effect on our financial position on an annual or quarterly basis.

Evaluation of Disclosure Controls and Procedures.

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2024.

There has been no change in our internal control over financial reporting that occurred during our most recent fiscal quarter that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.

Management’s Annual Report on Internal Control Over Financial Reporting.

Our management is responsible for establishing and maintaining adequate internal control over the company’s financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. There are inherent limitations in the effectiveness of any internal control, including the possibility of human error and the circumvention or overriding of controls. Accordingly, even effective internal controls can provide only reasonable assurances with respect to financial statement preparation. Further because of changes in conditions, the effectiveness of internal controls may vary over time such that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2024. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) (COSO) in Internal Control-Integrated Framework. Based on its assessment using those criteria, management believes that our internal control over financial reporting was effective as of December 31, 2024.

Our independent registered public accountants audited the financial statements included in this Annual Report on Form 10-K and have issued a report concurring with management’s assessment of the company’s effective internal control over financial reporting, which appears in Item 8 of this Annual Report.