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What changed in CEVA INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of CEVA INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+386 added−430 removedSource: 10-K (2024-03-07) vs 10-K (2023-03-01)

Top changes in CEVA INC's 2023 10-K

386 paragraphs added · 430 removed · 289 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

58 edited+15 added−26 removed28 unchanged
Biggest changeOur categories of products include the following: 1) Wireless communications ● CEVA-XC vector DSPs for 5G handsets, 5G RAN, and general purpose baseband processing ● PentaG2 - 5G NR modem platform for UE and for non-handset 5G vertical markets like Fixed Wireless Access, Industry 4.0, robotics and AR/VR devices that requires ultra-low-latency systems 2) AI and computer vision ● SensPro2 sensor hub platforms addressing imaging, vision, powertrain, applications, including DSP processors and a comprehensive software portfolio ● NeuPro-M platforms for AI applications, in a form of integrated and scalable system including a combination of dedicated AI processor, ultra-low power acceleration engines, memory architecture and smart interfaces to address multiple markets like automotive, surveillance, mobile and more ● CDNN: deep neural network graph compiler that enables AI developers to automatically compile, optimize and run pre-trained networks onto embedded devices 3) Sound ● CEVA-Bluebud wireless audio platform, CEVA-BX1, CEVA-BX2 and SensPro2 DSPs, AI accelerators, algorithms and software for sound-enabled application, including WhisPro speech recognition and ClearVox, a complete voice front-end software package for near and far-field voice-enabled devices ● Deep neural network compiler and tools 4) Sensor Fusion ● MotionEngine, sensor processing software, combining high accuracy 6-axis and 9-axis sensor fusion, dynamic sensor calibration, and many application specific features such as cursor control, gesture recognition, activity tracking, context awareness, and AR/VR stabilization 9 ● Sensor Hub DSPs, that serve as a hub for AI and DSP processing workloads associated with a wide range of sensors including camera, Radar, LiDAR, Time-of-Flight, microphones and inertial measurement units (IMUs) 5) Multipurpose DSP/controller ● CEVA-BX high level programmable, modern processors for a broad range of signal processing and control workloads 6) Wireless IoT ● RivieraWaves’ Bluetooth 5 (up to 5.3) dual mode and low energy platforms ● RivieraWaves’ Wi-Fi (4/5/6/6E up to 4x4) platforms ● UWB platform ● DragonFly platform for NB-IoT We deliver our DSP cores, platforms and AI processors in the form of a hardware description language definition (known as a soft core or a synthesizable core).
Biggest changeOur categories of products include the following: 1) 5G Mobile and Infrastructure ● Ceva-XC vector DSPs for 5G handsets, 5G RAN, and general purpose baseband processing ● PentaG2 - 5G NR modem platform for UE and for non-handset 5G vertical markets like Fixed Wireless Access, Industry 4.0, robotics and AR/VR devices that requires ultra-low-latency systems ● PentaG-RAN 2) Wireless IoT ● RivieraWaves’ Bluetooth 5dual mode and low energy platforms ● RivieraWaves’ Wi-Fi (6 and 7 up to 4x4) platforms 8 Table of Contents ● UWB platform ● Cellular IoT and RedCap platforms 3) Sense & Inference Processors & Platforms ● NeuPro-M NPU family to address multiple markets like automotive, surveillance, mobile and more ● SensPro2 sensor hub AI platforms addressing imaging, vision, powertrain, applications, including DSP processors, AI accelerators and a comprehensive software portfolio ● Ceva-BX1, Ceva-BX2 Audio AI DSPs 4) Sensing and Audio Software ● RealSpace Spatial Audio software package for immersive spatial audio with head-tracking, ● WhisPro speech recognition ● ClearVox, a complete voice front-end software package for near and far-field voice-enabled devices ● CDNN: deep neural network graph compiler that enables AI developers to automatically compile, optimize and run pre-trained networks onto embedded devices.
From time to time we develop a new signal processors, platforms, software solutions or connectivity products with close alignment with a number of 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.
From time to time, we develop new signal processors, platforms, software solutions or connectivity products in close alignment with a number of 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.
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. 13 We also rely on trademark, copyright and trade secret laws to protect our intellectual property.
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. We also rely on trademark, copyright and trade secret laws to protect our intellectual property.
Generally, these industry leaders become licensees for these products 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.
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.
Included among our licensees are the following customers: Actions, Ambiq, AIC Semi, Artosyn, ASPEED, ASR Micro, Atmosic, Autotalks, Beken, Bestechnic, Broadcom, Celeno, Ceragon, Cirrus Logic, Espressif, FujiFilm, GCT Semi, Goodix, iCatch, ICOM, InPlay, Intel, iRobot, Itron, Leadcore, LG Electronics, LifeSignals, Mediatek, Microchip, MorningCore, Nations, Nextchip, Nokia, Nordic Semi, Novatek, Nurlink, NXP, ON Semi, Synaptics, Optek, Oticon, Panasonic, Picocom, Renesas, Rockchip, Rohm, Samsung, Sanechips, Sharp, SiFive, SiFlower, SigmaStar, Socionext, Sony, Sonova, STMicroelectronics, Toshiba, Unisoc, Vatics, Winner Micro, Yamaha and ZTE.
Included among our licensees are the following customers: Actions, Ambiq, AIC Semi, Artosyn, ASPEED, ASR Micro, Atmosic, Autotalks, Beken, Bestechnic, Broadcom, Celeno, Ceragon, Cirrus Logic, Espressif, FujiFilm, GCT Semi, Goodix, iCatch, ICOM, InPlay, Intel, iRobot, Itron, Leadcore, LG Electronics, LifeSignals, Mediatek, Microchip, MorningCore, Nations, Nextchip, Nokia, Nordic Semi, Novatek, Nurlink, NXP, ON Semi, Sanechip, Synaptics, Optek, Oticon, Panasonic, Picocom, Renesas, Rockchip, Rohm, Samsung, Sanechips, Sharp, SiFive, SiFlower, SigmaStar, Socionext, Sony, Sonova, STMicroelectronics, Toshiba, Unisoc, Vatics, Winner Micro and Yamaha.
Our engineers possess significant experience in developing DSP cores and tools for 5G, computer vision, AI, connectivity products (Wi-Fi, UWB and Bluetooth), NB-IoT, and sensor processing and sensor fusion software.
Our engineers possess significant experience in developing AI 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.
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-dsp.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.
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, 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.
Our website and the information contained therein or connected thereto are not intended to be incorporated into this Annual Report on Form 10-K. 14
Our website and the information contained therein or connected thereto are not intended to be incorporated into this Annual Report on Form 10-K.
The advent of wireless connectivity technologies like 5G, Wi-Fi 6 and Bluetooth 5 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.
The advent of wireless connectivity technologies like 5G-Advanced, Wi-Fi 7 and Bluetooth 5 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.
By providing low power cellular DSP cores and platforms, we help companies overcome the entry barriers to the cellular IoT market without undertaking the complex and expensive R&D to develop these technologies internally. 5G/5G Advanced User Equipment and Infrastructure IPs As 5G networks 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 and vehicle-to-everything (V2X) communications, to name but a few.
By providing low power cellular digital signal processor (DSP) cores and platforms, we help companies overcome the entry barriers to the cellular IoT market without undertaking the complex and expensive R&D to develop these technologies internally. 5G/5G Advanced User Equipment and Infrastructure IPs As 5G networks 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 and vehicle-to-everything (V2X) communications, to name but a few.
In addition, with more complex designs and shorter time to market, it is no longer cost efficient and becoming progressively more difficult for most semiconductor companies to develop the signal processing platform, incorporating the complex DSPs like scalar and vector and AI accelerators and related graph compilers and data connectivity modem and PHY platforms.
In addition, with more complex designs and shorter time to market, it is no longer cost efficient and becoming progressively more difficult for most semiconductor companies to develop the signal processing platform, incorporating the complex DSPs like scalar and vector and NPUs and related graph compilers and data connectivity modem and PHY platforms.
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-dsp.com.
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.
Short Range Wireless IPs Wi-Fi, Bluetooth and ultra wideband (UWB) are key technologies for any company looking to address the mobile, SmartHome, Enterprise, and IoT end markets. Moreover, many companies wish to integrate these connectivity technologies into SoC designs rather than provide connectivity through an additional chip in the system.
Industry Background Short Range Wireless IPs Wi-Fi, Bluetooth and UWB are key technologies for any company looking to address the mobile, SmartHome, Enterprise, and IoT end markets. Moreover, many companies wish to integrate these connectivity technologies into SoC designs rather than provide connectivity through an additional chip in the system.
We have registered trademark 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 number of employees of CEVA as of December 31, 2022 by function and geographic location.
We have registered trademark 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. 12 Table of Contents Human Capital Resources The table below presents the number of employees of Ceva as of December 31, 2023 by function and geographic location.
We believe that the principal competitive elements in our field are signal processing IP performance, Intrinsix’s IP and NRE capabilities, 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 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.
In addition, as our intellectual property 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 to contain the cost of CEVA-based products. 7 We operate a licensing, non-recurring engineering (NRE) and royalty business model.
In addition, as our intellectual property 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 to contain the cost of Ceva-based products. We operate a licensing and royalty business model.
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, Asia Pacific (APAC) region, France and the United States. As of December 31, 2022, we had 31 employees in technical support.
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, 2023, we had 28 employees in technical support.
Customers We have licensed our signal processing cores, platforms, AI processors and connectivity IPs to leading semiconductor and OEM companies throughout the world. These companies 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.
Customers We have licensed our platforms, AI DSPs, NPUs and wireless connectivity IPs to leading semiconductor and OEM companies throughout the world. These companies 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.
Given the “design gap,” as well as the increasing complexity and the unique skill set required to develop a system-on-chip, many semiconductor design and manufacturing companies increasingly choose to license proven intellectual property, such as processor cores (e.g. DSP, CPU, GPU and AI), connectivity platforms (e.g.
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 intellectual property, such as processor cores (e.g. DSP, CPU, GPU and NPU, connectivity platforms (e.g.
We also recognize chip design skills and expertise are scarce nowadays and more companies are deciding to develop chips in-house, creating an even greater demand for IP and chip design services. Our IP portfolio is strategically aligned to allow us to exploit the most lucrative “design gaps” in the growing demand for smarter, connected devices.
We also recognize chip design skills and expertise are scarce nowadays and more companies are deciding to develop chips in-house, creating an even greater demand for IP. 7 Table of Contents Our IP portfolio is strategically aligned to allow us to exploit the most lucrative “design gaps” in the growing demand for smart edge devices.
Research and Development and Non-recurring Engineering Design Services Our research and development team is focused on improving and enhancing our existing products, as well as developing new products to broaden our offerings and market opportunities and providing NRE design services. These efforts are largely driven by current and anticipated customer and market needs.
Research and Development Our research and development team is focused 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 family of DSP-based platforms are targeted for baseband processing within cellular handsets, cellular IoT devices and base stations RAN, wired communications, advanced imaging, computer vision, radar application and deep neural networks, and audio, voice and sensing and Internet-of-Things related applications.
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.
The advent of IoT has resulted in significant demand for connectivity IPs that addresses this burgeoning market, among which are smart True Wireless Stereo earbuds, wearables, health monitoring, smart speakers, smart home appliances, and many other consumer and IoT devices.
The advent of IoT has resulted in significant demand for connectivity IPs that address this burgeoning market, which includes smart True Wireless Stereo (TWS) earbuds, wearables, health monitoring, smart speakers, smart home appliances, and many other consumers and IoT devices.
These legal protections afford only limited protection of our technology. We also seek to limit disclosure of our intellectual property 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 intellectual property.
We also seek to limit disclosure of our intellectual property 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 intellectual property.
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. 10 Sales and Marketing We license our technology through a direct sales force. As of December 31, 2022, we had 36 employees in sales and marketing.
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. 9 Table of Contents Sales and Marketing We license our technology through a direct sales force.
To capitalize on this industry shift, we intend to: ● develop and enhance our range of DSP cores and Edge AI hybrid processors with additional features, performance and capabilities; ● develop and expand our short range wireless IPs and customer base, providing the newest standards and the most complete offerings to streamline our customers’ deployments; ● continue to develop new generation of high performance DSPs and AI accelerators to pursue opportunities and grow our footprint in the 5G handset, cellular IoT base station RAN, automotive and headset markets; ● go up the “value chain” by adding and charging for software for our wireless, AI, voice, audio and IMU (Inertial Measurement Units) products ● expand our presence in AI for edge SoC market by capitalizing on our AI accelerators and CDNN graph compiler software technologies; ● continue to develop and enhance our range of complete and highly integrated platform solutions and to provide chip design services, as co-creation deals, to our licensing partners to deliver a complete and verified system solution, all the way up to full chip design; ● continue to prudently 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 within our worldwide community of semiconductor and OEM licensees who are developing CEVA-based solutions; 8 ● capitalize on our technology leadership in the development of advanced processor technologies, connectivity IPs and sensor fusion software to create and develop new, strategic relationships with OEMs and semiconductor companies to replace their internal DSPs or incumbent DSP suppliers 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.
To capitalize on this industry shift, we intend to: ● develop and enhance our range of DSP/AI processing platforms and NPUs with additional features, performance and capabilities; ● develop and expand our short range wireless IPs and customer base, providing the newest standards and the most complete offerings to streamline our customers’ deployments; ● continue to develop new generation of high performance platforms incorporating DSPs and AI accelerators to pursue opportunities and grow our footprint in the 5G addressable markets including infrastructure, automotive, mobile broadband and cellular IoT; ● go up the “value chain” by adding and charging for software for our wireless, AI, voice, spatial audio and IMU (Inertial Measurement Units) products; ● expand our presence in NPU for smart edge SoC by capitalizing on our AI accelerators and CDNN graph compiler software technologies; ● continue to prudently 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 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 IPs 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.
Our patents relate to our signal processing IP cores and application-specific platform technologies. As of December 31, 2022, we hold 66 patents in the United States, five patents in Canada, 88 patents in the EME (Europe and Middle East) region and 10 patents in Asia Pacific (APAC) region, totaling 169 patents, with expiration dates between 2023 and 2039.
Our patents relate to our signal processing IP cores and application-specific platform technologies. As of December 31, 2023, we hold 46 patents in the United States, eight patents in Canada, 90 patents in the EME (Europe and Middle East) region and 13 patents in Asia Pacific (APAC) region, totaling 157 patents, with expiration dates between 2024 and 2039.
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 internal engineering teams at companies such as Mediatek, Qualcomm, Samsung 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, Synopsys and internal engineering teams at companies such as Cypress (now part of 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 marketing 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 for chip design services in our main markets with WiPro and Cyient, and in the aerospace and defense markets with Marvell, ASIC North and First Pass Engineering.
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, Synopsys 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 Audio and Motion Sensing software market with Waves, Dolby and CyweeMotion.
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. We also provide NRE services to customers who require design expertise for their chip development programs. License fees and NRE services are invoiced in accordance with agreed-upon contractual terms.
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.
In addition, as of December 31, 2022, we have 11 patent applications pending in the United States, two pending patent applications in Canada, nine pending patent applications in the EME region, three pending global (PCT) patent applications and five pending patent applications in the APAC region, totaling 30 pending patent applications.
In addition, as of December 31, 2023, we have eight patent applications pending in the United States, eight pending patent applications in the EME region, three pending global (PCT) patent applications and three pending patent applications in the APAC region, totaling 22 pending patent applications.
International Sales and Operations Customers based in EME (Europe and Middle East) and APAC (Asia Pacific) accounted for 79% of our total revenues for 2022, 78% of our total revenues for 2021 and 79% for 2020, with customers in China accounting for 56%, 55% and 51% of total revenues for 2022, 2021 and 2020, respectively.
International Sales and Operations Customers based in Europe and Middle East (EME) and Asia Pacific (APAC) accounted for 90% of our total revenues for 2023, 88% of our total revenues for 2022 and 84% for 2021, with customers in China accounting for 59%, 63% and 59% of total revenues for 2023, 2022 and 2021, respectively.
We have sales offices and representation in Asia Pacific (APAC) region, Sweden, Israel, France and the United States. Maintaining close relationships with our customers and strengthening these relationships are central to our strategy.
As of December 31, 2023, we had 29 employees in sales and marketing. We have sales offices and representation in APAC region, Sweden, France and the United States. Maintaining close relationships with our customers and strengthening these relationships are central to our strategy.
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.
Ceva is 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.
Number Total employees 485 Function Research and development and NRE 372 Sales and marketing 36 Administration 46 Technical support 31 Location Israel 257 France 49 Ireland 12 China 18 United States 96 United Kingdom 9 Elsewhere 44 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.
Number Total employees 424 Function Research and development 322 Sales and marketing 29 Administration 45 Technical support 28 Location Israel 248 France 60 Ireland 11 China 16 United States 33 Serbia 31 Elsewhere 25 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.
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.
By choosing to license our IP, manufacturers can achieve the advantage of creating their own differentiated solutions and develop 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, 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. Aside from the in-house research and development groups, we do not compete with any individual company across the range of our market offerings.
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.
These devices require faster and low power connectivity, and a 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.
Design Gap The demand for smart edge devices, consumer, automotive, industrial, infrastructure, mobile and PC markets continue to grow. These devices require faster and low power connectivity, and a 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.
Our hardware IP products and solutions are licensed to customers who embed them into their System on Chip (SoC) designs to create power-efficient, intelligent, secure and connected devices.
Our application software IP is licensed primarily to OEMs who embed it in their System on Chip (SoC) designs to enhance the user experience, and OEMs also license our hardware IP products and solutions for their SoC designs to create power-efficient, intelligent, secure and connected devices.
We encourage our research and development personnel to maintain active roles in various international organizations that develop and maintain standards in the electronics and related industries.
In addition, we engage third party contractors with specialized skills as required to support our research and development efforts. 10 Table of Contents 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.
Our customers include many of the world’s leading semiconductor and original equipment manufacturer (OEM) companies targeting a wide variety of cellular and IoT end markets, including mobile, PC, consumer, automotive, robotics, industrial, aerospace and defense and medical. Our software IP is licensed primarily to OEMs who embed our software in their SoC.
Ceva is a trusted partner to over 400 of the leading semiconductor and original equipment manufacturer (OEM) companies targeting a wide variety of cellular and IoT end markets, including mobile, PC, consumer, automotive, smart-home, surveillance, robotics, industrial and medical.
Our revenue mix comprises primarily of IP licensing fees and related revenues, non-recurring engineering (NRE) revenues and royalties generated from the shipments of products deploying our IP. Related revenues include revenues from post contract support, training and sale of development systems and chips. NRE revenue is associated with our Intrinsix chip design business.
At Ceva, we are committed to social responsibility, values of preservation and consciousness towards these purposes. Our revenue mix comprises primarily of IP licensing fees and related revenues and royalties generated from the shipments of products deploying our IP. Related revenues include revenues from post contract support, training and sale of development systems and chips.
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 high performance and low power signal processing IPs and specialized AI platforms and software incorporating all the necessary hardware and software for target applications.
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 IPs that enable smart edge devices to connect, sense and infer data more reliably and efficiently.
Companies such as Mediatek, Samsung, 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 proprietary signal processing IP cores to third parties and, as a result, become direct competitors.
Companies such as Marvell, Samsung, and STMicroelectronics license our designs for some applications and use their own proprietary cores for other applications.
Proprietary Rights Our success and ability to compete are dependent on our ability to develop and maintain the proprietary aspects of our intellectual property 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.
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.
By licensing rather than developing these technologies in-house, companies can now get access to the latest standards and profiles from CEVA without undertaking the expensive research and development costs required to develop these technologies internally.
By licensing rather than developing these technologies in-house, companies can now get access to the latest standards and profiles from Ceva without undertaking the expensive research and development costs required to develop these technologies internally. 5 Table of Contents Cellular IoT IPs Cellular IoT, and specifically Narrowband IoT (NB-IoT), LTE Cat-1 and the upcoming RedCap standards have become key technologies for any company wishing to connect low power IoT devices over long distances, using cellular networks.
By not focusing on manufacturing or selling silicon products, we are free to widely license our technology and free to focus most of our resources on research and development. By choosing to license our IP, manufacturers can achieve the advantage of creating their own differentiated solutions and develop their own unique product roadmaps.
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 free to focus most of our resources on research and development.
We have 485 employees worldwide, with research and development facilities in Israel, the United States, France, Serbia, Ireland and the United Kingdom, and sales and support offices throughout Asia Pacific (APAC), Sweden, France, Israel and the United States. Industry Background DSP Cores Digital signal processing is a key underlying technology in many of today's fastest growing electronics markets.
We have more than 450 employees worldwide, with research and development facilities in Israel, France, Serbia, Ireland, the United States, the United Kingdom and from 2024 also in Greece, and sales and support offices throughout Asia Pacific (APAC), Sweden, France, Israel and the United States.
These platforms and solutions combine the hardware and software elements that are essential for designers deploying CEVA’s state-of-the-art DSP cores, platforms and AI processors. Platforms typically integrate a CEVA DSP core, hardware accelerators and coprocessors, optimized software, libraries and tool chain.
In order to reduce the cost, complexity, and risk in bringing products to market, Ceva has 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 research and development team consists of 372 engineers as of December 31, 2022, working in eight development centers located in Israel, France, the United States, Ireland, the United Kingdom and Serbia, including 47 engineers at Intrinsix either working on research and development projects or providing NRE services for chip design.
Our research and development team consists of 322 engineers as of December 31, 2023, working in seven development centers located in Israel, France, the United States, Ireland, the United Kingdom and Serbia, and from 2024 also in Greece.
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, resulting in a growing “design gap” between the increasing manufacturing potential and the constrained design capabilities.
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, resulting in a growing “design gap” between the increasing manufacturing potential and the constrained design capabilities. 6 Table of Contents Ceva ’ s Business Ceva addresses the requirements of the consumer, industrial, infrastructure, mobile and PC markets by designing and licensing a broad range of robust processors, platforms and software which streamline the design of solutions for developing a wide variety of application specific solutions that address the connect, sense and infer use cases of smart edge devices.
As a result, companies increasingly seek to license these IPs from CEVA or a third-party community of developers. Our Business Model Our objective is for our CEVA wireless connectivity and smart sensing platforms to become the de facto technologies across the mobile, consumer, automotive, robotics, industrial aerospace & defense and IoT markets.
As a result, companies increasingly seek to license these IPs from Ceva or a third-party community of developers. Our Business Model Our mission is for Ceva to be the partner of choice for transformative IP solutions for the smart edge.
For these markets, we offer a comprehensive portfolio of connectivity and smart sensing IPs, which include various types of specialized DSPs and platforms for 5G, computer vision, sound, AI, Wi-Fi, Bluetooth, UWB, cellular-IoT solutions, sensor fusion, sound and security and interconnectivity solutions for chiplets. We believe we are well-positioned to take full advantage of this growing demand.
Ceva offers expertise developing complete solutions in a number of key growth markets, including consumer, automotive, industrial, infrastructure, mobile and PC. For these markets, we offer a comprehensive portfolio of IPs which include various types of specialized platforms for 5G, computer vision, sound, AI, Wi-Fi, Bluetooth, UWB, cellular-IoT solutions, sensor fusion and spatial audio.
All CEVA cores can be manufactured on any process using any physical library, and all are accompanied by a complete set of tools and an integrated development environment. An extensive third-party network supports CEVA DSP cores, platforms and AI processors with a wide range of complementing software and platforms.
We deliver our platforms, AI DSPs and NPUs in the form of a hardware description language definition (known as a soft core or a synthesizable core). All Ceva hardware IPs can be manufactured on any process using any physical library, and all are accompanied by a complete set of tools and an integrated development environment.
The software required to process the sensor data and fuse the data from multiple sensors is complex and requires unique specialization.
The software required to process the sensor data and fuse the data from multiple sensors is complex and requires unique specialization. By licensing rather than developing this sensor processing software in-house, companies can focus their efforts developing the applications that utilize the processed sensor data to create differentiated, contextually aware devices.
Cellular IoT IPs Cellular IoT, and specifically Narrowband IoT (NB-IoT), LTE Cat-1 and the upcoming RedCap standards have become key technologies for any company 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 within a few large companies.
By its nature, cellular is a very complex technology, with most of the industry knowledge held within a few large companies.
In addition, we provide development platforms, software development kits and software debug tools, which facilitate system design, debug and software development. In order to reduce the cost, complexity, and risk in bringing products to market, CEVA has developed a suite of system platforms and solutions.
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 enable this goal, 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 differentiating technology. We recently expanded our business model through the acquisition of Intrinsix to offer our customers chip design services to help integrate our IP into their chip designs.
Our platforms for connect, sense and infer use cases in smart edge devices enables us to address the high volume markets of consumer, automotive, industrial, infrastructure, mobile and PC and work towards 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 differentiating technology.
CPU companies, such as ARM, Cadence, and Synopsys have added DSP acceleration, CNN acceleration and /or connectivity solutions and make use of it to provide platform solutions in the areas of baseband, video, imaging, vision, AI, audio and connectivity. 12 With respect to certain large potential customers, we also compete with internal engineering teams, which may design programmable signal processing IP core products in-house.
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 programmable signal processing IP core products in-house.
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ITEM 1. BUSINESS Company Overview Headquartered in Rockville, Maryland, CEVA is the leading licensor of wireless connectivity and smart sensing technologies and a provider of chip design services.
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ITEM 1. BUSINESS Company Overview Headquartered in Rockville, Maryland, Ceva is the leader in innovative silicon and software IP solutions that enable smart edge products to connect, sense, and infer data more reliably and efficiently.
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We offer Digital Signal Processors, AI processors, short and long range connectivity solutions, 5G wireless platforms and complementary software for sensor fusion, image enhancement, computer vision, voice input and artificial intelligence, all of which are key enabling technologies for a smarter, more connected world.
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With the industry’s only portfolio of comprehensive communications and scalable Edge AI IP, Ceva powers the connectivity, sensing, and inference in today’s most advanced smart edge products across consumer IoT, mobile, automotive, infrastructure, industrial, and personal computing.
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Our state-of-the-art technology is included in more than 15 billion chips shipped to date for a diverse range of end markets. In 2022, more than 1.7 billion CEVA-powered devices were shipped, equivalent to more than 50 devices every second.
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More than 17 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 are powered by Ceva.
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Our Intrinsix chip design business unit enables us to offer our customers SoC design services, which we refer to as co-creation, that take advantage of our IP portfolio, Intrinsix’s designed to deliver (D2D) and security IP and Intrinsix’s design capabilities for digital, mix signal and RF.
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The customers incorporate our IP into application-specific integrated circuits (ASICs) and application-specific standard products (ASSPs) that they manufacture, market and sell to consumer electronics companies.
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We believe that having chip design expertise as part of our offerings strengthens our relationships with customers, streamlines IP adoption, generates recurrent royalties and more. Furthermore, Intrinsix’s experience and customer base in the growing chip development programs with the U.S.
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Ceva’s 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, ultra-wide band (UWB) and 5G platform IP for ubiquitous, robust communications, to scalable Edge AI neural processing unit (NPU) IPs, sensor fusion processors and embedded application software that make devices smarter.
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Department of Defense and the Defense Advanced Research Projects Agency (DARPA) together with its IP offerings for processor security and chiplets extends CEVA’s serviceable market and revenue base. CEVA is a sustainability and environmentally conscious company.
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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.
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Digital signal processors (DSPs) are specialized high-speed processors that are optimized for performing repetitive arithmetic calculations on an array of data.
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Ceva’s 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.
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DSPs provide the foundation for a vast majority of today's electronic products that are smart and connected, enabling the sensing and wireless communications capabilities (e.g. 5G baseband and RAN processing, computer vision, deep neural network, sound processing and analytics). 5 Edge AI Hybrid Processors Edge AI Hybrid processors are a new breed of processors targeted at cost- and power-sensitive intelligent devices that use interchangeable workloads of traditional DSP and AI inferencing algorithms to enable intelligent vision, conversational AI, sensor fusion and contextual awareness.
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NPUs Neural processing units (NPUs) are specialized processors designed to accelerate neural network computations, such as machine learning and artificial intelligence. 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 CPUs or GPUs.
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The DSP is used to process conventional algorithms for imaging, vision, voice, sound, radar, among others, while the AI-related workloads such as classification, pattern matching, prediction and detection are handled by a combination of DSPs and AI accelerators. These Edge AI hybrid processors perform all AI inferencing on the device, with no need for cloud-based processing.
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Ceva's NeuPro NPU is tailored to meet the demands of AI applications. Offering high-performance inference capabilities while being power-efficient and offering high utilization, making it suitable for a wide range of smart edge devices, including smartphones, IoT devices, automotive, surveillance, and other smart cameras.
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These processors aim to mimic the human brain, allowing them to perform cognitive tasks for a wide range of functions, including vision, sound, real-time translation, user behavior and malware detection. Edge AI processors will make their way into billions of devices in the coming years, including mobile, consumer, medical, industrial and automotive applications.
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These two trends are occurring concurrently in the face of decreasing product lifecycles and constrained battery power.
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By licensing rather than developing this sensor processing software in-house, companies can focus their efforts developing the applications that utilize the processed sensor data to create differentiated, contextually aware devices. 6 Chiplets The development of monolithic SoCs at advanced nodes has become exponentially more expensive, and this, coupled with long design cycles and manufacturing lead times, has led to the emergence of chiplets as a viable, cost-effective alternative.
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We believe we are well-positioned to take full advantage of this growing demand.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIn 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 may increase if the grants we currently receive from the Israeli government are reduced or withheld. ● We 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 NRE solutions is lengthy, and even approved projects may have structured payment terms, which makes forecasting of our customer orders and revenues difficult. ● Intrinsix’s business relies heavily on contracts with U.S. government prime contractors, which exposes us to business volatility and risks, including government budgeting cycles and appropriations, potential early termination of contracts, procurement regulations, governmental policy shifts, security requirements, audits, investigations, sanctions and penalties. ● We may face difficulties in integrating Intrinsix into our business and offering turnkey IP solutions and co-creation projects. ● 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. ● We may not be able to adequately protect our intellectual property, and our business will suffer if we are sued for infringement of the intellectual property rights of third parties or if we cannot obtain licenses to these rights on commercially acceptable terms. ● The COVID-19 pandemic, or other outbreak of disease or similar public health threat, could materially and adversely affect our business, financial condition and results of operations. ● Cybersecurity threats or other security breaches could compromise sensitive information belonging to us or our customers and could harm our business and our reputation.
Biggest changeIn 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. 14 Table of Contents ● We 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 intellectual property, and our business will suffer if we are sued for infringement of the intellectual property 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.
If our Israeli, French and Irish subsidiaries were no longer to qualify for these lower tax rates or if the applicable tax laws were rescinded or changed, our operating results could be materially adversely affected.
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.
Although our Israeli and Irish subsidiaries historically, and starting in 2022 our French subsidiary as well, 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.
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.
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 difficult to sell our IP solutions.
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.
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 payment. We 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.
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 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.
In addition, pursuant to our acquisition of the RivieraWaves operations, we will benefit from certain research tax credits applicable to French technology companies, including, for example, the Crédit Impôt Recherche (CIR). The CIR is a French tax credit aimed at stimulating research activities.
In addition, pursuant to our acquisition of the RivieraWaves operations, we will benefit from certain research tax credits applicable to French technology companies, including, for example, the Crédit Impôt Recherche (“CIR”). The CIR is a French tax credit aimed at stimulating research activities.
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.
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; 25 Table of Contents ● 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.
If this requirement is not repealed or otherwise modified, it will materially increase our effective tax rate and reduce our operating cash flows. Further, 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.
If this requirement is not repealed or otherwise modified, it will materially increase our effective tax rate and reduce our operating cash flows. 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.
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 handset devices powered by CEVA technology sold in any given quarter compared to the prior quarter.
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 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 originated in China and the broader APAC region, and we cannot predict further developments.
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.
As a result, our past operating results should not be relied upon as an indication of future performance. 20 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.
As a result, our past operating results should not be relied upon as an indication of future performance. 20 Table of Contents 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.
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.
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.
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. 29 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.
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. 27 Table of Contents 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.
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 2022) and could be required to refund tax benefits already received.
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 2023) and could be required to refund tax benefits already received.
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 Asia Pacific region.
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.
Moreover, current economic conditions 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.
Moreover, current economic conditions may further prolong a customer’s decision-making process and design cycle. 16 Table of Contents 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.
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 products 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 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 IP solutions and NRE services 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.
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.
Because our IP solutions and NRE services 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.
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.
Since the French IP Box regime was enacted very recently, there is 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.
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.
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, and starting in 2020, also in France.
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.
Our success depends to a significant extent upon certain of our key employees and senior management, the loss of which could materially harm our business.
Our success depends to a significant extent upon certain of our key employees and senior management, the loss of whom could materially harm our business.
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 U.S./China trade and other relations.
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.
The primary customers for our products are semiconductor design and manufacturing companies, system OEMs and electronic equipment manufacturers, particularly in the telecommunications field. All of the industries we license into are highly competitive, cyclical and have been subject to significant economic downturns at various times.
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.
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, and our failure to do so may seriously harm our business.
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.
We expect that international customers generally, and sales to the Asia Pacific region and China in particular, will continue to account for a significant portion of our revenues for the foreseeable future.
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.
These risks and uncertainties could result in operational and administrative inefficiencies and added costs, which could adversely impact our results of operations. The sales cycle for our IP and NRE solutions is lengthy, and even approved projects may have structured payment terms, which makes forecasting of our customer orders and revenues difficult.
These risks and uncertainties could result in operational and administrative inefficiencies and added costs, which could adversely impact our results of operations. 24 Table of Contents 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 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-Christmas fourth quarter consumer product shipments.
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.
While we expect to engage in an orderly transition process as we integrate newly appointed officers and managers, we face a variety of risks and uncertainties relating to management transition and execution of our sales strategy, including diversion of management attention from business concerns, failure to retain other key personnel, loss of institutional knowledge, loss of sales prospects and inability to replenish our sales team in a manner needed to execute our sales strategy.
While we believe we have engaged in an orderly transition process as we have integrated newly appointed officers and managers, we face a variety of risks and uncertainties relating to management transition and execution of our sales strategy, including diversion of management attention from business concerns, failure to retain other key personnel, loss of institutional knowledge, loss of sales prospects and inability to replenish our sales team in a manner needed to execute our sales strategy.
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 markets, including handsets and consumer electronics products. The royalties we generate are reported by our customers.
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.
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, the broader Asia Pacific region and other international jurisdictions, could result in significant revenue shortfalls.
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, could result in significant revenue shortfalls.
Our business is dependent on IP licensing and NRE revenues, which may vary period to period. License agreements for our signal processing IP cores 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.
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.
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 34%, 41% and 48% of our total revenues for 2022, 2021 and 2020, respectively.
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 41%, 38%, and 44% of our total revenues for 2023, 2022 and 2021, respectively.
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, China and Japan. Significant judgment is required in determining our worldwide provision for income taxes and other tax liabilities.
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.
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, NRE 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; ● lengthy and unpredictable project approval and funding timelines characteristic of government agencies and other customers in the aerospace and defense markets, coupled with the ability, and frequent election, of government agencies and their contractors to discontinue programs with little or no advance notice; ● delays in the commercialization of end products that incorporate our technology; ● currency fluctuations, mainly the EURO and the NIS 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; 19 ● 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 (the “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 IPs, 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 accounting changes or adjustments, such as our third quarter 2022 write off of deferred tax assets; ● general political conditions, including global trade wars resulting from tariffs and business restrictions and bans imposed by government entities, like the well publicized 2018 ban associated with ZTE and the October 2022 announcement of broad restrictions on the transfer to China of certain advanced 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 or NB-IoT 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 resulting from the ongoing COVID-19 pandemic or any other future pandemic outbreak or public health threat.
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; 18 Table of Contents ● 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 (the “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 IPs, software and platforms; ● changes in our pricing policies and those of our competitors; 19 Table of Contents ● restructuring, asset and goodwill impairment and related charges, as well as other accounting changes or adjustments, such as our third quarter 2022 write off of deferred tax assets, and the fourth quarter 2023 tax charges related to Internal Revenue Code (“IRC”) Section 174; ● general political conditions, including global trade wars resulting from tariffs and business restrictions and bans imposed by government entities, like the well publicized 2018 ban associated with ZTE and the October 2023 announcement of the 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.
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 NRE revenues, which may vary 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. ● We generate a significant amount of our total revenues, especially royalty revenues, from the handset baseband market (for mobile handsets and for other modem connected devices) and our business and operating results may be materially adversely affected if we do not continue to succeed in these highly competitive markets. ● Because we have significant international operations, with a significant concentration of revenues in China, we may be subject to political, economic and other conditions relating to our international operations that could increase our operating expenses and disrupt our revenues and business.
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. ● We generate a significant amount of our total revenues, especially royalty revenues, from the mobile market (for mobile handsets) and our business and operating results may be materially adversely affected if our solutions are not incorporated in end products in these highly competitive markets. ● 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.
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 signal processing IPs are characterized by rapidly changing technology, emerging markets and new and developing end-user needs, and requiring significant expenditure for research and development.
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.
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. ● In order to sustain the future growth of our business, we must penetrate new markets and our new products must achieve widespread market acceptance but such additional revenue opportunities may not be implemented and may not be achieved. 15 ● 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.
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. ● In order to sustain the future growth of our business, we must penetrate new end markets and our new products must achieve widespread market acceptance, but such additional revenue opportunities may not be implemented and may not be achieved. ● 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.
For example, in October 2022 the U.S. Department of Commerce Bureau of Industry and Security imposed broad restrictions and compliance burdens on the transfer to China of certain advanced semiconductors and supercomputing items, software and technology subject to U.S. export controls, in addition to restricting sales to certain semiconductor fab facilities in China.
For example, in October 2023 the U.S. Department of Commerce Bureau of Industry and Security tightened restrictions and compliance burdens on the transfer to China of certain advanced artificial intelligence chips, semiconductors and supercomputing items, software and technology subject to U.S. export controls, in addition to restricting sales to certain semiconductor fab facilities in China.
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, 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 significant supply chain disruption.
You are advised, however, to consult any further disclosures we make in our reports filed with the Securities and Exchange Commission. 13 Table of Contents 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, 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.
Sales to UNISOC (formerly Spreadtrum Communications, Inc.), accounted for 14%, 21% and 14% of our total revenues for 2022, 2021 and 2020, respectively. With respect to our royalty revenues, 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.
Sales to UNISOC (formerly Spreadtrum Communications, Inc.), accounted for 13%, 16% and 21% of our total revenues for 2023, 2022 and 2021, respectively. With respect to our royalty revenues, 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.
Revenues from customers located in the Asia Pacific region account for a substantial portion of these revenues, with significant concentration of revenues in China, which accounted for 56%, 55% and 51% of total revenues for 2022, 2021 and 2020, respectively.
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 59%, 63% and 59% of total revenues for 2023, 2022 and 2021, respectively.
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 internal engineering teams at companies such as Mediatek, Qualcomm, Samsung, 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, Synopsys and internal engineering teams at companies such as Cypress (now part of 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 marketing 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 for chip design services in our main markets with WiPro and Cyient, and in the aerospace and defense markets with Marvell, ASIC North and First Pass Engineering.
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, Synopsys 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 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 Audio and Motion Sensing software market with Waves, Dolby, and CyweeMotion.
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 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.
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 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. 22 Table of Contents 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.
We compete on the basis of signal processing IP performance, Intrinsix’s IP and NRE capabilities, 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.
We compete on the basis of 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.
Three royalty paying customers each represented 10% or more of our total royalty revenues for 2021, and collectively represented 57% of our total royalty revenues for 2021, and four royalty paying customers each represented 10% or more of our total royalty revenues for 2020, and collectively represented 72% of our total royalty revenues for 2020.
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, and three royalty paying customers each represented 10% or more of our total royalty revenues for 2021, and collectively represented 57% of our total royalty revenues for 2021.
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.
We are subject to the risk of adverse claims and litigation alleging infringement of the intellectual property 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.
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 expense. Our research and development expenses were approximately $78.5 million, $72.5 million, and $62.0 million for 2022, 2021 and 2020, respectively.
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 $72.7 million, $70.3 million and $69.1 million for 2023, 2022 and 2021, respectively.
Approximately 79% of our total revenues for 2022, 78% for 2021 and 79% for 2020 were derived from customers located outside of the United States.
Approximately 90% of our total revenues for 2023, 88% for 2022 and 84% for 2021 were derived from customers located outside of the United States.
The sales cycle for our IP solutions and NRE services 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.
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.
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. 24 Our research and development expenses may increase if the grants we currently receive from the Israeli government are reduced or withheld.
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.
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 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.
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 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. ● If we determine that our goodwill and intangible assets have become impaired, we may incur impairment charges, which would negatively impact our operating results. 16 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 your shares of our common stock at or above the price you paid for them.
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 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. ● 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.
Our inability to compete effectively on these bases could have a material adverse effect on our business, results of operations and financial condition. 17 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.
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.
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.
If taxing authorities do not accept our tax positions and impose higher tax rates on our foreign operations, our overall tax expenses could increase. 28 Table of Contents 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 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 $147.7 million at year end 2022, $141.1 million was held by our foreign subsidiaries, with only $6.6 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.
Out of total cash, cash equivalents, bank deposits and marketable securities of $166.5 million at year end 2023, $136.4 million was held by our foreign subsidiaries, with only $30.1 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.
Qualifying income may be taxed at a favorable 10% CIT rate (plus social surtax, hence 10.3% in total). This new 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.
This new 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.
Tax Cuts and Jobs Act; ● 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 intellectual property; ● 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.
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 intellectual property; ● 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.
If we are unable to effectively manage and integrate our remote 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.
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.
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. 23 In order to sustain the future growth of our business, we must penetrate new markets and our new products must achieve widespread market acceptance but such additional revenue opportunities may not be implemented and may not be achieved.
In order to sustain the future growth of our business, we must penetrate new markets and our new products must achieve widespread market acceptance, but such additional revenue opportunities may not be implemented and may not be achieved. In order to expand our business and increase our revenues, we must penetrate new markets and introduce new products.
Although any 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. 31 If we determine that our goodwill and intangible assets have become impaired, we may incur impairment charges, which would negatively impact our operating results.
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.
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, especially end products for the handsets and consumer electronics markets.
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.
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. Various market data suggests that the semiconductor industry may be facing such a negative cycle presently, especially in the global handset market.
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.
In addition, 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. Although we have operated effectively under these requirements since our inception, we cannot predict the effect of these obligations on the company in the future.
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.
For example, our EURO cash balances increase significantly on a quarterly basis beyond our EURO liabilities from the CIR, which is generally refunded every three years. This has resulted a foreign exchange loss during 2021 due to the devaluation of our Euro cash balances as the U.S. dollar strengthened significantly during this period as compared to the Euro.
For example, our EURO cash balances increase significantly on a quarterly basis beyond our EURO liabilities from the CIR, which is generally refunded every three years.
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.
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 operations could be disrupted by the absence, for a significant period, of one or more of our key employees due to military service. 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.
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.
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.
The high interest rate environment and macroeconomic concerns related to slowdown may continue throughout the first half of 2024, or longer, 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.
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.
We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.
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.
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.
We currently receive research grants mainly from programs of the IIA. We recorded an aggregate of $5,014,000, $3,843,000 and $3,042,000 in 2022, 2021 and 2020, respectively. To be eligible for these grants, we must meet certain development conditions and comply with periodic reporting obligations.
We recorded aggregate research grants of $1,668,000, $4,850,000 and $3,595,000 in 2023, 2022 and 2021, respectively. To remain eligible for the grants we have received, we must meet certain development conditions and comply with periodic reporting obligations.
Our business will suffer if we are sued for infringement of the intellectual property 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 intellectual property rights of others.
If we were forced to change any of our brand names, we could lose a significant amount of our brand identity. 26 Table of Contents Our business will suffer if we are sued for infringement of the intellectual property rights of third parties or if we cannot obtain licenses to these rights on commercially acceptable terms.
We are exposed to the credit risk of our customers, which could result in material losses. As we diversify and expand our addressable market, we will enter into IP licensing arrangements with first time customers on which we do not have full visibility of their creditworthiness. Furthermore, we have significant business activities in the Asia Pacific region.
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.
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 new elective regime requires a direct link between the income benefiting from the preferential treatment and the R&D expenditures incurred and contributing to that income.
Our French subsidiary is entitled to a new 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.
Purchasing decisions also may be delayed because of a customer’s internal budget approval process or from the involvement of U.S. government agencies for project and budgetary approvals. 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.
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.
Furthermore, the third-party licensable intellectual property model is highly dependent on the market adoption of new services and products, such as low cost smartphones in emerging markets, LTE-based smartphones, mobile broadband, small cell base stations and the increased use of advanced audio, voice, computational photography and embedded vision in mobile, automotive and consumer products, as well as in IoT and connectivity applications in general in which we participate.
Furthermore, the third-party licensable intellectual property 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.
Therefore, a significant decrease in our royalty revenues could materially adversely affect our operating results. 21 Moreover, royalty rates may be negatively affected by macroeconomic trends (including the recent COVID-19 pandemic or future pandemics, other public health threats and their global impact) or changes in products mix.
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.
In addition, in recent months we have experienced transition in our senior management and sales teams, including the retirement of Gideon Wertheizer as our Chief Executive Officer effective December 31, 2022 and the appointment of Amir Panush as our Chief Executive Officer effective January 1, 2023, as well as the appointment of Gweltaz Toquet as our Chief Commercial Officer on January 1, 2023 following Issachar Ohana’s departure from his position as Executive Vice President of Worldwide Sales effective December 31, 2022.
In addition, we have experienced transitions in our senior management and sales teams, including the appointment of Amir Panush as our Chief Executive Officer effective January 1, 2023, the appointment of Gweltaz Toquet as our Chief Commercial Officer on January 1, 2023, and the appointment of Iri Trashanski as our Chief Strategy Officer on September 21, 2023.
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 intellectual property rights, confidentiality procedures and IP licensing arrangements to establish and protect our proprietary rights.
We rely on a combination of patent, copyright, trademark, trade secret, mask work and other intellectual property 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.
Aggressive competition could result in substantial declines in the prices that we are able to charge for our intellectual property or lose design wins to competitors. Many of our competitors are striving to increase their share of the growing signal processing IP markets and are reducing their licensing and royalty fees to attract customers.
Many of our competitors are striving to increase their share of the growing signal processing IP and wireless connectivity markets and are reducing their licensing and royalty fees to attract customers.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe 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; Sophia Antipolis, France, where we have a 10,823 square foot facility lease expiring in 2031; and Marlborough, Massachusetts, where we have a 10,775 square foot facility lease expiring in 2029.
Biggest changeWe 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 eight other buildings for our main additional engineering, sales, marketing, administrative, support, operations and design centers, including two other facilities located in each of the U.K., Ireland and China, and one other facility located in each of the U.S. and Japan.
We also lease seven other buildings for our main additional engineering, sales, marketing, administrative, support and operations, including two other facilities located in China, and one other facility located in each of the U.S., U.K., Ireland, Serbia and Japan.
Together with our principal offices, these twelve facilities cover an aggregate of approximately 109,595 square feet, ranging from 1,132 square feet to 57,425 square feet, with lease terms expiring from 2023 to 2034.
Together with our principal offices, these ten facilities cover an aggregate of approximately 97,689 square feet, ranging from 1,132 square feet to 57,425 square feet, with lease terms expiring from 2024 to 2034.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changePrior to joining Qualcomm, Mr. Panush led strategic marketing and partnerships at Atheros Communications, which was later acquired by Qualcomm. His earlier industry roles spanned software engineering and project management leadership at Texas Instruments and Comsys Mobile, which was acquired by Intel. Mr.
Biggest changeHis earlier industry roles spanned software engineering and project management leadership at Texas Instruments and Comsys Mobile, which was acquired by Intel. Mr. Panush holds a Master of Business Administration from Haas Business School, University of California at Berkeley and a bachelor’s degree, Cum Laude, in Computer Science from Technion Institute of Technology in Israel.
ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 32 EXECUTIVE OFFICERS OF THE REGISTRANT Below are the names, ages and principal recent business experience of our current executive officers. All such persons have been appointed by our board of directors to serve until their successors are elected and qualified or until their earlier resignation or removal.
ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 32 Table of Contents EXECUTIVE OFFICERS OF THE REGISTRANT Below are the names, ages and principal recent business experience of our current executive officers. All such persons have been appointed by our board of directors to serve until their successors are elected and qualified or until their earlier resignation or removal.
Boukaya holds a B.Sc. in Electronic Engineering from the Technion Technology Institute, graduated from Executive Program of Stanford Graduate School of Business, and holds several patents on DSP technology. Gweltaz Toquet , age 50, has served as our Chief Commercial Officer since January 2023. Mr.
Boukaya holds a B.Sc. in Electronic Engineering from the Technion Technology Institute, graduated from Executive Program of Stanford Graduate School of Business, and holds several patents on DSP technology. Gweltaz Toquet , age 51, has served as our Chief Commercial Officer since January 2023. Mr.
Toquet held several roles in sales, business development, product marketing and business line management at Freehand DSP and Texas Instruments. Mr. Toquet holds a Master of Science in Engineering degree from Institut Supérieur d’Electronique de Paris (ISEP). 33 PART II
Toquet held several roles in sales, business development, product marketing and business line management at Freehand DSP and Texas Instruments. Mr. Toquet holds a Master of Science in Engineering degree from Institut Supérieur d’Electronique de Paris (ISEP). 33 Table of Contents PART II
Michael Boukaya , age 48, has served as our Chief Operating Officer since April 2019. Prior to this position, Mr. Boukaya served as our Vice President and General Manager of the wireless business unit since 2014. Previously, Mr.
Michael Boukaya , age 49, has served as our Chief Operating Officer since April 2019. Prior to this position, Mr. Boukaya served as our Vice President and General Manager of the wireless business unit since 2014. Previously, Mr.
Amir Panush , age 49, has served as our Chief Executive Officer since January 2023. He joined us from InvenSense, Inc., a TDK group company, where he served as Chief Executive Officer and General Manager of TDK Corporation’s MEMS Sensors Business Group. Mr. Panush previously held various leadership positions at TDK following TDK’s successful acquisition of InvenSense in 2017.
Amir Panush , age 50, joined our board of directors on February 13, 2024 and has served as our Chief Executive Officer since January 2023. He joined us from InvenSense, Inc., a TDK group company, where he served as Chief Executive Officer and General Manager of TDK Corporation’s MEMS Sensors Business Group. Mr.
Mr Panush joined Invensense in 2015, serving as head of the company’s Strategy & Corporate Development, where he drove strategic expansion and diversification efforts. Prior to joining InvenSense, from May 2011 to March 2015, Mr. Panush served in various capacities at Qualcomm, most recently as the Senior Director of Product Management and Business Development for the IoE/IoT client business.
Panush previously held various leadership positions at TDK following TDK’s successful acquisition of InvenSense in 2017. Mr Panush joined Invensense in 2015, serving as head of the company’s Strategy & Corporate Development, where he drove strategic expansion and diversification efforts. Prior to joining InvenSense, from May 2011 to March 2015, Mr.
Panush holds a Master of Business Administration from Haas Business School, University of California at Berkeley and a bachelor’s degree, Cum Laude, in Computer Science from Technion Institute of Technology in Israel. Yaniv Arieli , age 54, has served as our Chief Financial Officer since May 2005. Prior to his current position, Mr. Arieli served as President of U.S.
Yaniv Arieli , age 55, has served as our Chief Financial Officer since May 2005. Prior to his current position, Mr. Arieli served as President of U.S.
Added
Panush served in various capacities at Qualcomm, most recently as the Senior Director of Product Management and Business Development for the IoE/IoT client business. Prior to joining Qualcomm, Mr. Panush led strategic marketing and partnerships at Atheros Communications, which was later acquired by Qualcomm.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeDividends We have historically not paid dividends and have no foreseeable plans to pay dividends. 34 Stock Performance Graph Notwithstanding anything to the contrary set forth in any of the Company ’ s previous or future filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, that might incorporate this proxy statement or future filings made by the Company under those statutes, the below Stock Performance Graph shall not be deemed filed with the United States Securities and Exchange Commission and shall not be deemed incorporated by reference into any of those prior filings or into any future filings made by the Company under those statutes. 12/31/17 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 CEVA, Inc. 100.00 47.87 58.42 98.60 93.70 55.43 NASDAQ Composite 100.00 97.16 132.81 192.47 235.15 158.65 S&P 500 100.00 95.62 125.72 148.85 191.58 156.88 S&P Semiconductors 100.00 93.57 154.61 251.02 359.18 248.88 Russell 2000 100.00 88.99 111.70 134.00 153.85 122.41 The stock performance graph above compares the percentage change in cumulative stockholder return on the common stock of our company for the period from December 31, 2017, through December 31, 2022, with the cumulative total return on The NASDAQ Global Market (U.S.) Composite Index, the S&P 500 Index, the S&P Semiconductors Select Industry Index (S&P SSII) and the Russell 2000 Index.
Biggest changeDividends We have historically not paid dividends and have no foreseeable plans to pay dividends. 34 Table of Contents Stock Performance Graph Notwithstanding anything to the contrary set forth in any of the Company ’ s previous or future filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, that might incorporate this proxy statement or future filings made by the Company under those statutes, the below Stock Performance Graph shall not be deemed filed with the United States Securities and Exchange Commission and shall not be deemed incorporated by reference into any of those prior filings or into any future filings made by the Company under those statutes. 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 Ceva, Inc. 100.00 122.05 205.98 195.74 115.78 102.78 S&P Semiconductors 100.00 165.23 268.27 383.86 265.98 359.96 Russell 2000 100.00 125.52 150.58 172.90 137.56 160.85 The stock performance graph above compares the percentage change in cumulative stockholder return on the common stock of our company for the period from December 31, 2018, through December 31, 2023, with the cumulative total return on the S&P Semiconductors Select Industry Index (S&P SSII) and the Russell 2000 Index.
Equity Compensation Plan Information Information as of December 31, 2022 regarding options, SARs, RSUs and PSUs granted under our stock plans and remaining available for issuance under those plans will be contained in the definitive 2023 Proxy Statement for the 2023 annual meeting of stockholders to be held on May 23, 2023 and incorporated herein by reference.
Equity Compensation Plan Information Information as of December 31, 2023 regarding options, SARs, RSUs and PSUs granted under our stock plans and remaining available for issuance under those plans will be contained in the definitive 2024 Proxy Statement for the 2024 annual meeting of stockholders to be held on May 21, 2024 and incorporated herein by reference.
This graph assumes the investment of $100 in our common stock (at the closing price of our common stock on December 31, 2017), the NASDAQ Global Market (U.S.) Composite Index, the S&P 500 Index, the S&P SSII and the Russell 2000 Index on December 31, 2017, and assumes dividends, if any, are reinvested.
This graph assumes the investment of $100 in our common stock (at the closing price of our common stock on December 31, 2018), the S&P SSII and the Russell 2000 Index on December 31, 2018, and assumes dividends, if any, are reinvested.
Accordingly, we plan to discontinue the use of the NASDAQ Composite Index and the S&P 500 in future filings. 35 Comparisons in the graph above are based upon historical data and are not indicative of, nor intended to forecast, future performance of our common stock.
Comparisons in the graph above are based upon historical data and are not indicative of, nor intended to forecast, future performance of our common stock.
As of February 23, 2023, there were approximately 432 holders of record, which we believe represents approximately 31,877 beneficial holders.
As of February 29, 2024, there were approximately 303 holders of record, which we believe represents approximately 32,133 beneficial holders.
Issuer Purchases of Equity Securities There were no repurchases of our common stock during the three months ended December 31, 2022. 2023 Annual Meeting of Stockholders We anticipate that the 2023 annual meeting of our stockholders will be held virtually on May 23, 2023.
Issuer Purchases of Equity Securities The table below sets forth the information with respect to repurchases of our common stock during the three months ended December 31, 2023.
Removed
The Russell 2000 Index and the S&P SSII have been added to the performance graph for the fiscal year ended December 31, 2022 and we plan to include them in future filings. The Russell 2000 Index is a widely used broad-based market index that we believe more accurately represents companies of comparable market capitalization.
Added
Period (a) Total Number of Shares Purchased (b) Average Price Paid per Share (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (d) Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (1) Month #1 (October 1, 2023 to October 31, 2023) __ __ __ 143, 721 Month #2 (November 1, 2023 to November 30, 2023) 91,042 $ 21.83 91,042 752, 679 Month #3 (December 1, 2023 to December 31, 2023) 52,679 $ 22.26 52,679 700, 000 TOTAL 143,721 $ 21.99 143,721 700, 000 (2) (1) 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 6,400,000 shares in 2010, 2013, 2014, 2018 and 2020.
Removed
Additionally, we believe that the S&P SSII is a more accurate representation of a published industry index that includes companies engaged in businesses similar to ours.
Added
On November 7, 2023, our Board of Directors authorized the repurchase of an additional 700,000 shares of our common stock pursuant to Rule 10b-18 of the Exchange Act.
Added
(2) The number represents the number of shares of our common stock that remain available for repurchase pursuant to our share repurchase program. 2024 Annual Meeting of Stockholders We anticipate that the 2024 annual meeting of our stockholders will be held virtually on May 21, 2024.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeOperating Expenses 2020 2021 2022 (in millions) Research and development, net $ 62.0 $ 72.5 $ 78.5 Sales and marketing $ 11.9 $ 12.9 $ 12.9 General and administration $ 14.1 $ 14.3 $ 15.3 Amortization of intangible assets $ 2.3 $ 2.7 $ 2.7 Impairment of assets $ — $ — $ 3.6 Total operating expenses $ 90.3 $ 102.4 $ 113.0 Change year-on-year — 13.3 % 10.4 % The increase in total operating expenses for 2022 as compared to 2021 principally reflected (1) 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, (2) higher salary and employee-related costs, mainly due to the inclusion of salary and related costs associated with Intrinsix employees in 2022, and higher EDA tools costs related to the Intrinsix business (costs related to the Intrinsix business were not incurred for the first five months of 2021 as the acquisition of Intrinsix was consummated in May 2021), and (3) higher outsourcing personal and services costs, partially offset with higher research grants received, mainly from the IIA.
Biggest changeOperating Expenses 2021 2022 2023 (in millions) Research and development, net $ 69.1 $ 70.3 $ 72.7 Sales and marketing $ 12.2 $ 11.5 $ 11.0 General and administration $ 12.8 $ 14.2 $ 14.9 Amortization of intangible assets $ 2.3 $ 2.0 $ 0.6 Impairment of assets $ — $ 3.6 $ — Total operating expenses $ 96.4 $ 101.6 $ 99.2 Change year-on-year — 5.3 % (2.3 )% 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.
Operating Activities 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.
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.
A substantial portion of our taxable income is generated in Israel and France, as well as in the U.S. due to GILTI and the requirement to capitalize R&D expenditures under IRC Section 174 over 5 years if sourced from the U.S. and over 15 years if sourced internationally.
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 R&D expenditures under IRC Section 174 over 5 years if sourced from the U.S. and over 15 years if sourced internationally.
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 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.
Deferred revenues, which represent a contract liability, include unearned amounts received under license and NRE agreements, unearned technical support and amounts paid by customers not yet recognized as revenues.
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 have not recorded any impairment charge during the years ended December 31, 2021 and 2020. In addition to the recoverability assessment, we routinely review the remaining estimated useful lives of our finite-lived intangible assets. If we reduce the estimated useful life assumption for any asset, the remaining unamortized balance would be amortized over the revised estimated useful life.
We have not recorded any impairment charge during the years ended December 31, 2023 and 2021. In addition to the recoverability assessment, we routinely review the remaining estimated useful lives of our finite-lived intangible assets. If we reduce the estimated useful life assumption for any asset, the remaining unamortized balance would be amortized over the revised estimated useful life.
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 NRE services and from support, training and sale of development systems and chips. We license our IP to semiconductor companies throughout the world.
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.
See Note 14 to our Consolidated Financial Statements for the year ended December 31, 2022 for further information regarding income taxes. We have filed or are in the process of filing local and foreign tax returns that are subject to audit by the respective tax authorities.
See Note 14 to our Consolidated Financial Statements for the year ended December 31, 2023 for further information regarding income taxes. We have filed or are in the process of filing local and foreign tax returns that are subject to audit by the respective tax authorities.
While we believe the resulting tax balances as of December 31, 2021 and 2022 are appropriately accounted for, the ultimate outcome of such matters could result in favorable or unfavorable adjustments to our consolidated financial statements and such adjustments could be material.
While we believe the resulting tax balances as of December 31, 2022 and 2023 are appropriately accounted for, the ultimate outcome of such matters could result in favorable or unfavorable adjustments to our consolidated financial statements and such adjustments could be material.
After the mandatory period, the customer may extend the support agreement on similar terms on an annual basis.
After the mandatory period, the customer may extend the support agreement on similar terms, usually on an annual basis.
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 now entitled to a new tax benefit of 10% applied to specific revenues under the French IP Box regime.
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%. 50 Table of Contents Our French subsidiary is now entitled to a new tax benefit of 10% applied to specific revenues under the French IP Box regime.
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, 2022.
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, 2023.
If the expected amortization period is one year or less, the commission fee is expensed when incurred. 41 Business Combinations and Valuation of Goodwill and Other Acquired Intangible Assets We allocate the fair value of purchase price consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair values.
If the expected amortization period is one year or less, the commission fee is expensed when incurred. 40 Table of Contents Business Combinations and Valuation of Goodwill and Other Acquired Intangible Assets We allocate the fair value of purchase price consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair values.
Adjustments for non-cash items primarily consisted of $7.6 million of depreciation and amortization of intangible assets, $14.5 million of equity-based compensation expenses, $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.
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.
To make this judgment, we make predictions of the amounts and category of taxable income from various sources and weigh all available positive and negative evidence about these possible sources of taxable income. 42 Accounting for tax positions requires judgments, including estimating reserves for potential uncertainties.
To make this judgment, we make predictions of the amounts and category of taxable income from various sources and weigh all available positive and negative evidence about these possible sources of taxable income. 41 Table of Contents Accounting for tax positions requires judgments, including estimating reserves for potential uncertainties.
We recorded UK tax credits and CIR benefits of $2,316,000, $2,547,000 and $3,485,000 for 2022, 2021 and 2020, 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 intellectual property which are expensed as incurred, and non-cash equity-based compensation expenses.
We recorded UK tax credits and CIR benefits of $2,641,000, $2,316,000 and $2,547,000 for 2023, 2022 and 2021, 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 intellectual property which are expensed as incurred, and non-cash equity-based compensation expenses.
During 2021, we invested $40.7 million of cash in bank deposits and marketable securities with maturities up to 57 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 $56.1 million.
In addition, during the same period, bank deposits and marketable securities were sold or redeemed for cash amounting to $52.3 million. During 2021, we invested $40.7 million of cash in bank deposits and marketable securities with maturities up to 57 months from the balance sheet date.
These devices are comprised of a range of different products at different royalty ASPs, spanning 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.
Royalty rates from these products are comprised of a range of ASPs, spanning 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.
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.
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).
Our amortization charges were $2.0 million, $1.6 million and $0.7 million for 2022, 2021 and 2020, respectively. In 2022 we recorded impairment charges of $2.0 relating to discontinued Immervision technology and non-performing assets of certain NB-IoT technology.
Our amortization charges were $0.4 million, $0.6 million and $0.7 million for 2023, 2022 and 2021, respectively. In 2022 we recorded impairment charges of $2.0 relating to discontinued Immervision technology and non-performing assets of certain NB-IoT technology.
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, which is a practical expediency permitted under ASC 606.
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.
Amortization of acquired assets related to the purchase of a license of NB-IoT technologies in the first quarter of 2018, to a strategic investment in Immervision in the third quarter of 2019, and to certain intangible assets associated with the Intrinsix acquisition in the second quarter of 2021.
Amortization of acquired assets related to the purchase of a license of NB-IoT technologies in the first quarter of 2018, to a strategic investment in Immervision in the third quarter of 2019, and to certain intangible assets associated with the VisiSonics acquisition in the second quarter of 2023.
Per research from Yole Group, 2.5 billion Edge AI devices will ship annually by 2026, illustrating the huge potential of the market. 38 ● Our Hillcrest Labs sensor fusion business unit allows us to address an important technology piece used in personal computers, robotics, TWS earbuds, smart TVs and many other smart sensing IP products, for smart sensing, in addition to our existing portfolio for camera-based computer vision and AI processing, and microphone-based sound processing.
Per research from Yole Group, 2.5 billion Edge AI devices will ship annually by 2026, illustrating the huge potential of the market. ● 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.
The increase in interest income and gains and losses from marketable securities, net, for 2022 as compared to 2021 reflected higher yields, offset with lower combined cash, bank deposits and marketable securities balances held. The decrease in interest income and gains and losses from marketable securities, net, for 2021 as compared to 2020 mainly reflected lower 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.
In 2022, the standard corporate income tax rate was further reduced to 25%. 51 Our Israeli subsidiary is entitled to various tax benefits as a technological enterprise.
From 2022 onward, the standard corporate income tax rate was further reduced to 25%. Our Israeli subsidiary is entitled to various tax benefits as a technological enterprise.
The royalty rate is based either on a certain percent of the chipset price or a fixed amount per chipset based on volume discounts. Royalty revenue was down in 2022 as compared to 2021 reflecting broad macro/consumer weakness and elevated inventory levels, especially in the second half of 2022.
The royalty rate is based either on a certain percent of the chipset price or a fixed amount per chipset based on volume discounts. 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.
Four royalty paying customers each represented 10% or more of our total royalty revenues for 2020, and collectively represented 72% of our total royalty revenues for 2020. We expect that a significant portion of our future revenues will continue to be generated by a limited number of customers.
Three royalty paying customers each represented 10% or more of our total royalty revenues for 2021, and collectively represented 57% of our total royalty revenues for 2021. We expect that a significant portion of our future revenues will continue to be generated by a limited number of customers.
Royalty Revenues 2020 2021 2022 Royalty revenues (in millions) $ 47.8 $ 49.9 $ 45.4 Change year-on-year — 4.3 % (9.0 )% 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.
Royalty Revenues 2021 2022 2023 Royalty revenues (in millions) $ 49.9 $ 45.4 $ 39.9 Change year-on-year — (9.0 )% (12.2 )% 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.
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 2021, we did not repurchase any shares of common stock.
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 2021, we did not repurchase any shares of common stock. As of December 31, 2023, we had 700,000 shares available for repurchase.
Non-cash equity-based compensation expenses included in cost of revenues for the years 2022, 2021 and 2020 were $1,461,000, $818,000, and $639,000, 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.
Non-cash equity-based compensation expenses included in cost of revenues for the years 2023, 2022 and 2021 were $826,000, $687,000, and $513,000, 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.
With respect to our royalty revenues, 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. Three royalty paying customers each represented 10% or more of our total royalty revenues for 2021, and collectively represented 57% of our total royalty revenues for 2021.
With respect to our royalty revenues, 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.
Out of total cash, cash equivalents, bank deposits and marketable securities of $147.7 million at year end 2022, $141.1 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.
Out of total cash, cash equivalents, bank deposits and marketable securities of $166.5 million at year end 2023, $136.4 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.
The increase in revenues in absolute dollars in APAC from 2021 to 2022 was partially attributed to the introduction of WiFi 6 standard as a key technology add-on to many consumer related devices, replacing or in many cases on top of Bluetooth technologies.
The increase in revenues in absolute dollars in APAC from 2021 to 2022 was partially attributed to the strong design activity and new WiFi 6 product refreshment as a key technology add-on to many consumer related devices, replacing or in many cases on top of Bluetooth technologies.
The amortization charges in 2022 and 2021 were incurred in connection with the amortization of intangible assets associated with (1) the acquisition of the Hillcrest Labs business, (2) the strategic investment in Immervision, and (3) the acquisition of Intrinsix in 2021.
The amortization charges in 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 and 2021 were incurred in connection with the amortization of intangible assets associated with the acquisition of the Hillcrest Labs and the strategic investment in Immervision.
Provision for Income Taxes During the years 2022, 2021 and 2020, we recorded tax expenses of $18.1 million, $5.3 million and $4.9 million, respectively. 50 The increase in provision for income taxes in 2022 as compared to 2021 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 reduced tax rate of 10% applied to specific revenues in our French subsidiary in 2022 (under the French IP Box regime, as compared to a corporate tax rate of 26.5% in 2021).
The increase in provision for income taxes in 2022 as compared to 2021 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 reduced tax rate of 10% applied to specific revenues in our French subsidiary in 2022 (under the French IP Box regime, as compared to a corporate tax rate of 26.5% in 2021).
Financial Income, net 2020 2021 2022 (in millions) Financial income, net $ 3.28 $ 0.20 $ 2.81 of which: Interest income and gains and losses from marketable securities, net $ 2.84 $ 1.47 $ 2.74 Foreign exchange gain (loss) $ 0.44 $ (1.27 ) $ 0.07 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.
Financial Income, net 2021 2022 2023 (in millions) Financial income, net $ 0.20 $ 2.81 $ 5.26 of which: Interest income and gains and losses from marketable securities, net $ 1.47 $ 2.74 $ 4.57 Foreign exchange gain (loss) $ (1.27 ) $ 0.07 $ 0.69 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 cash from changes in operating assets and liabilities primarily consisted of a decrease in trade receivables of $5.8 million, a decrease in prepaid expenses and other assets of $3.6 million, and an increase in deferred revenues of $5.1 million, partially offset by an increase in deferred taxes, net of $6.3 million (mainly due to an increase in withholding tax assets which can be utilized in future years), a decrease in accrued expenses and other payables of $1.7 million, and a decrease in accrued payroll and related benefits of $0.9 million.
The increase in cash from changes in operating assets and liabilities primarily consisted of a decrease in trade receivables of $5.8 million, a decrease in prepaid expenses and other assets of $3.6 million, and an increase in deferred revenues of $5.1 million, partially offset by an increase in deferred taxes, net of $6.3 million (mainly due to an increase in withholding tax assets which can be utilized in future years), a decrease in accrued expenses and other payables of $1.7 million, and a decrease in accrued payroll and related benefits of $0.9 million. 52 Table of Contents Cash flows from operating activities may vary significantly from quarter to quarter depending on the timing of our receipts and payments.
Non-cash equity-based compensation expenses included in research and development expenses, net for the years 2022, 2021 and 2020 were $8,540,000, $7,287,000 and $6,874,000, respectively. Research and development expenses are net of related government research grants, UK tax credits and research tax benefits applicable to CIR.
Non-cash equity-based compensation expenses included in research and development expenses, net for the years 2023, 2022 and 2021 were $9,133,000, $8,259,000 and $7,187,000, respectively. Research and development expenses are net of related government research grants, UK tax credits and research tax benefits applicable to CIR.
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.
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.
The adoption of this standard did not have a significant impact on our consolidated financial statements Recently Issued Accounting Pronouncement 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.
Recently Issued Accounting Pronouncement 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.
Research and development expenses, net of related government grants and French research tax benefits applicable to CIR, were 58.3% of our total revenues for 2022, as compared with 59.1% for 2021 and 61.8% for 2020. We recorded research grants under funding programs of $4,850,000 in 2022, compared with $3,595,000 in 2021 and $2,844,000 in 2020.
Research and development expenses, net of related government grants and French research tax benefits applicable to CIR, were 74.6% of our total revenues for 2023, as compared with 58.3% for 2022 and 60.7% for 2021. We recorded research grants under funding programs of $1,668,000 in 2023, compared with $4,850,000 in 2022 and $3,595,000 in 2021.
RESULTS OF OPERATIONS The following table presents line items from our consolidated statements of income (loss) as percentages of our total revenues for the periods indicated: 2020 2021 2022 Consolidated Statements of Income (Loss) Data: Revenues: Licensing, NRE and related revenue 52.3 % 59.4 % 66.3 % Royalties 47.7 % 40.6 % 33.7 % Total revenues 100.0 % 100.0 % 100.0 % Cost of revenues 10.7 % 13.7 % 20.1 % Gross profit 89.3 % 86.3 % 79.9 % Operating expenses: Research and development, net 61.8 % 59.1 % 58.3 % Sales and marketing 11.9 % 10.5 % 9.6 % General and administrative 14.1 % 11.7 % 11.4 % Amortization of intangible assets 2.3 % 2.2 % 2.0 % Impairment of assets — — 2.6 % Total operating expenses 90.1 % 83.5 % 83.9 % Operating income (loss) (0.8 )% 2.8 % (4.0 )% Financial income, net 3.3 % 0.2 % 2.1 % Remeasurement of marketable equity securities — 1.6 % (1.9 )% Income (loss) before taxes on income 2.5 % 4.6 % (3.8 )% Taxes on income 4.9 % 4.3 % 13.4 % Net income (loss) (2.4 )% 0.3 % (17.2 )% 44 Discussion and Analysis Below we provide information on the significant line items in our consolidated statements of income (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.
RESULTS OF OPERATIONS The following table presents line items from our consolidated statements of income (loss) as percentages of our total revenues for the periods indicated: 2021 2022 2023 Consolidated Statements of Income (Loss) Data: Revenues: Licensing and related revenue 56.2 % 62.4 % 59.1 % Royalties 43.8 % 37.6 % 40.9 % Total revenues 100.0 % 100.0 % 100.0 % Cost of revenues 9.1 % 12.5 % 12.0 % Gross profit 90.9 % 87.5 % 88.0 % Operating expenses: Research and development, net 60.7 % 58.3 % 74.6 % Sales and marketing 10.8 % 9.5 % 11.3 % General and administrative 11.2 % 11.8 % 15.3 % Amortization of intangible assets 2.0 % 1.7 % 0.6 % Impairment of assets — 2.9 % — Total operating expenses 84.7 % 84.2 % 101.8 % Operating income (loss) 6.2 % 3.3 % (13.8 )% Financial income, net 0.2 % 2.3 % 5.4 % Remeasurement of marketable equity securities 1.7 % (2.1 )% (0.0 )% Income (loss) before taxes on income 8.1 % 3.5 % (8.4 )% Taxes on income 6.0 % 15.0 % 10.5 % Net income (loss) from continuing operations 2.1 % (11.5 )% (18.9 )% Net income (loss) from discontinued operations (1.8 )% (7.7 )% 6.7 % Net income (loss) 0.3 % (19.2 )% (12.2 )% 43 Table of Contents Discussion and Analysis Below we provide information on the significant line items in our consolidated statements of income (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.
Investing Activities Net cash used in investing activities in 2022 was $15.1 million, as compared to net cash used in investing activities of $16.7 million in 2021 and net cash used in investing activities of $15.2 million in 2020.
Investing Activities Net cash provided by investing activities in 2023 was $10.8 million, as compared to net cash used in investing activities of $15.1 million in 2022 and net cash used in investing activities of $16.7 million in 2021.
In addition, at December 31, 2022, the amount of accrued severance pay was $9,064,000. 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, $589,000 is unfunded.
As a result, this amount is not included in the above table. In addition, at December 31, 2023, the amount of accrued severance pay was $7,524,000. 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.
Cash provided by operating activities in 2021 was $25.8 million and consisted of a net income of $0.4 million, adjustments for non-cash items of $19.6 million, and changes in operating assets and liabilities of $5.8 million. Adjustments for non-cash items primarily consisted of $7.0 million of depreciation and amortization of intangible assets, and $13.1 million of equity-based compensation expenses.
Cash provided by operating activities in 2021 was $25.8 million and consisted of a net income of $0.4 million, adjustments for non-cash items of $19.6 million, and changes in operating assets and liabilities of $5.8 million.
For a majority of our royalty revenues, we receive the actual sales data from our customers after the quarter ends and accounts for it as unbilled receivables.
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.
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, 2022. 52 Bank deposits are classified as short-term bank deposits and long-term bank deposits.
The amount of credit losses recorded for the twelve months ended December 31, 2023, 2022, and 2021, 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, 2023. Bank deposits are classified as short-term bank deposits and long-term bank deposits.
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.
As of December 31, 2023, the net amount of intangible assets associated with the acquisitions was $1.7 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.
We had a cash outflow of $56.0 million with respect to investments in marketable securities and a cash inflow of $32.2 million with respect to maturity, and sale, of marketable securities during 2020. Included in the cash inflow during 2020 was net proceeds of $11.5 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.
Geographic Revenue Analysis 2020 2021 2022 (in millions, except percentages) United States $ 20.8 20.8 % $ 26.7 21.8 % $ 28.1 20.9 % Europe, Middle East (EME) $ 12.0 11.9 % $ 6.9 5.6 % $ 10.0 7.5 % Asia Pacific (APAC) (1) $ 67.5 67.3 % $ 89.1 72.6 % $ 96.5 71.6 % (1) China $ 51.7 51.6 % $ 67.5 55.0 % $ 75.7 56.2 % 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.
Geographic Revenue Analysis 2021 2022 2023 (in millions, except percentages) United States $ 17.8 15.7 % $ 14.2 11.8 % $ 9.6 9.8 % Europe, Middle East (EME) $ 6.9 6.0 % $ 9.9 8.2 % $ 12.2 12.5 % Asia Pacific (APAC) (1) $ 89.1 78.3 % $ 96.5 80.0 % $ 75.7 77.7 % (1) China $ 67.5 59.3 % $ 75.7 62.8 % $ 57.5 59.0 % 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 amortized cost of marketable securities is adjusted for amortization of premium and accretion of discount to maturity, both of which, together with interest, are included in financial income, net.
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 to maturity, both of which, together with interest, are included in financial income, net.
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.
Sales to UNISOC represented 13%, 16% and 21% of our total revenues for 2023, 2022 and 2021, 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.
This has resulted in a foreign exchange gain of $0.07 million, a foreign exchange loss of $1.27 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) and a foreign exchange gain of 0.44 million for 2022, 2021 and 2020, respectively.
This has resulted in a foreign exchange gain of $0.69 million, a foreign exchange gain of $0.07 million and a foreign exchange loss of $1.27 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) for 2023, 2022 and 2021, respectively. 49 Table of Contents Remeasurement of marketable equity securities We recorded a loss of $0.0 million, a loss of $2.5 million, and a gain of $2.0 million in 2023, 2022 and 2021, respectively, related to remeasurement of marketable equity securities.
The decrease in cash from changes in operating assets and liabilities primarily consisted of an increase in trade receivables of $2.9 million, an increase in prepaid expenses and other assets of $0.6 million, and a decrease in deferred revenues of $1.2 million, partially offset by a decrease in accrued interest on bank deposits of $1.2 million, and an increase in accrued payroll and related benefits of $1.8 million.
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.
Non-cash equity-based compensation expenses included in general and administrative expenses for the years 2022, 2021 and 2020 were $2,954,000, $3,324,000 and $4,085,000, respectively. 49 Amortization of Intangible Assets Our amortization charges were $2.7 million, $2.7 million and $2.3 million for 2022, 2021 and 2020 respectively.
Non-cash equity-based compensation expenses included in general and administrative expenses for the years 2023, 2022 and 2021 were $3,795,000, $2,888,000 and $3,291,000, respectively. Amortization of Intangible Assets Our amortization charges were $0.6 million, $2.0 million and $2.3 million for 2023, 2022 and 2021 respectively.
Moving off-shore cash to our U.S. entity would result in significant additional tax expenses. 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.
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.
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.
Ceva is 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.
Capital equipment purchases of computer hardware and software used in engineering development, furniture and fixtures amounted to approximately $3.5 million in 2022, $2.2 million in 2021 and $2.9 million in 2020.
Capital equipment purchases of computer hardware and software used in engineering development, furniture and fixtures amounted to approximately $2.9 million in 2023, $3.5 million in 2022 and $2.2 million in 2021. In 2023, we had a cash inflow of $30.6 million following the sale of Intrinsix.
The increase in revenues in absolute dollars in the United States from 2021 to 2022 was mainly attributed to higher NRE chip design business, contributing for a full year, as compared to only 5 months in 2021, and more sensor fusion empowered chip sales, offset by less Intel based royalties post their divestment from the modem business.
The decrease in revenues in absolute dollars in the United States from 2021 to 2022 was mainly attributed to less Intel based royalties post their divestment from the modem business, partially offset by more sensor fusion empowered chip sales.
CURRENT TRENDS We believe that as the continuing digital transformation drives 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 Edge AI, 5G, Wi-Fi, Bluetooth and other product lines.
CURRENT TRENDS We believe that as the continuing digital transformation drives industries to become connected and intelligent, our ubiquitous technology and collaborative business model present a significant and secular growth prospect.
The following table sets forth the products and services as percentages of our total revenues in each of the periods set forth below: Year ended December 31, 2020 2021 2022 Connectivity products (baseband for handset and other devices, Bluetooth, Wi-Fi, NB-IoT, and SATA/SAS) 78 % 73 % 71 % Smart sensing products (AI, sensor fusion, audio/sound and imaging and vision) 22 % 27 % 29 % We expect to continue to generate a significant portion of our revenues for 2022 from the above products and services.
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: Year ended December 31, 2021 2022 2023 Connect (baseband for handset and other devices, Bluetooth, Wi-Fi and NB-IoT) 77 % 78 % 82 % Sense & Infer (sensor fusion, audio, sound, imaging, vision and AI) 23 % 22 % 18 % 44 Table of Contents We expect to continue to generate a significant portion of our revenues for 2024 from the above technologies.
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.
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.
Licensing, NRE and related revenue accounted for 66.3% of our total revenues for 2022, compared with 59.4% and 52.3% of our total revenues for 2021 and 2020, respectively.
Licensing and related revenue accounted for 59.1% of our total revenues for 2023, compared with 62.4% and 56.2% of our total revenues for 2022 and 2021, respectively.
Recoverability of these assets is measured by a comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate. If such assets are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the assets exceeds its fair market value.
If such assets are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the assets exceeds its fair market value.
Base station RAN royalties also grew, up 14% year-over-year, while lower shipments and royalties from PCs, robot vacuum cleaners, cameras and other consumer related technologies affected many of our customers. Our 2021 royalty revenue reached to a new record high.
Base station and IoT category, achieved record royalty revenues generated by a record 1.4 billion devices. Bluetooth royalties grew 11% year-over-year, generated from a record 1 billion unit shipments. Base station RAN royalties also grew, up 14% year-over-year, while lower shipments and royalties from PCs, robot vacuum cleaners, cameras and other consumer related technologies affected many of our customers.
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.
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.
In 2020 had a cash outflow of $0.2 million for the acquisition of the Hillcrest Labs business. 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.
In 2023, 2022 and 2021, we received $3.4 million, $3.5 million and $3.2 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.
LIQUIDITY AND CAPITAL RESOURCES As of December 31, 2022, we had approximately $21.3 million in cash and cash equivalents, $6.1 million in short term bank deposits, $112.1 million in marketable securities, and $8.2 million in long term bank deposits, totaling $147.7 million, as compared to $154.9 million at December 31, 2021.
LIQUIDITY AND CAPITAL RESOURCES As of December 31, 2023, we had approximately $23.3 million in cash and cash equivalents, $10.5 million in short term bank deposits, $132.7 million in marketable securities, and $0.0 million in long term bank deposits totaling $166.5 million, as compared to $146.5 million at December 31, 2022.
The absolute dollar and percentage increases in cost of revenues for 2022 as compared to 2021 principally reflected impairment charges 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 higher service costs and customization work for our customers, mainly due to the inclusion of salary and related NRE costs and EDA tools associated with the Intrinsix in 2022, which costs were not incurred for the first five months of 2021 as the acquisition of Intrinsix was consummated in May 2021.
The absolute dollar increases in cost of revenues for 2022 as compared to 2021 principally reflected impairment charges 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 higher customization work for our licensees.
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 2022, 2021 and 2020 were $1,550,000, $1,626,000 and $2,038,000, respectively.
The total number of sales and marketing personnel was 29 in 2023, as compared with 36 in both 2022 and 2021. 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.
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.
In accordance with FASB ASC No. 320, “Investments Debt Securities,” we classify marketable 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.
Total shipment volume in 2020 was 1.3 billion. 46 The five largest royalty-paying customers accounted for 65% of our total royalty revenues for 2022, compared to 68% of our total royalty revenues for 2021 and 76% of our total royalty revenues for 2020.
Total shipments in 2023 decreased 4% year-over-year to 1.62 billion units, down from 1.70 billion in 2022. Total shipment volume in 2021 was 1.65 billion. The five largest royalty-paying customers accounted for 58% of our total royalty revenues for 2023, compared to 64% of our total royalty revenues for 2022 and 68% of our total royalty revenues for 2021.
The average number of research and development personnel in 2022 was 325, compared to 310 in 2021 and 298 in 2020.
The average number of research and development personnel in 2023 was 330, compared to 325 in 2022 and 310 in 2021. The number of research and development personnel was 322 at December 31, 2023 as compared to 328 in 2022 and 311 in 2021.
Sales and marketing expenses as a percentage of our total revenues were 9.6% for 2022, as compared with 10.5% for 2021 and 11.9% for 2020. The total number of sales and marketing personnel was 36 in 2022, as compared with 36 in 2021 and 35 in 2020.
The decrease in sales and marketing expenses for 2022 as compared to 2021 principally reflected lower commission expenses. Sales and marketing expenses as a percentage of our total revenues were 11.3% for 2023, as compared with 9.5% for 2022 and 10.7% for 2021.
The absolute dollar increases in cost of revenues for 2021 as compared to 2020 principally reflected higher service costs for our customers, mainly due to incorporating for the first time, salary and related NRE costs associated with the Intrinsix business. 47 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 (the IIA), amortization of acquired assets and non-cash equity-based compensation expenses.
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 (the IIA), amortization of acquired assets and non-cash equity-based compensation expenses.
Our customers include many of the world’s leading semiconductor and original equipment manufacturer (OEM) companies targeting a wide variety of cellular and IoT end markets, including mobile, PC, consumer, automotive, Smart-home, surveillance, robotics, industrial, aerospace and defense and medical. Our software IP is licensed primarily to OEMs who embed our software it in their SoC.
Ceva is a trusted partner to over 400 of the leading semiconductor and original equipment manufacturer (OEM) companies targeting a wide variety of cellular and IoT end markets, including mobile, PC, consumer, automotive, smart-home, surveillance, robotics, industrial and medical.
The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. Stand-alone selling prices of IP license are typically estimated using the residual approach. Stand-alone selling prices of services are typically estimated based on observable transactions when these services are sold on a standalone basis.
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 license are typically estimated using the residual approach.
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.
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.
Purchase obligations relate to license agreements entered into for maintenance of design tools. Other purchase obligations consist of capital and operating purchase order commitments.
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.
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 accepts control of the IP, as the IP is functional without professional services, updates and technical support.
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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeWe 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.
Biggest changeTo 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 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.
We expect to continue to experience the effect of exchange rate and currency fluctuations on an annual and quarterly basis. 54 Table of Contents The majority of our cash and cash equivalents are invested in high grade certificates of deposits with major U.S., European and Israeli banks.
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, 2022, the unrealized losses associated with our investments were approximately $6.8 million due to the dramatic changes in the interest rate environment that took place in 2022.
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, 2023, the unrealized losses associated with our investments were approximately $3.7 million due to the dramatic changes in the interest rate environment that took place in 2022.
We recognized a net loss of 1.29 million, a net gain of 0.17 million and a net gain of $0.69 million for 2022, 2021 and 2020, respectively, related to forward and options contracts. We note that hedging transactions may not successfully mitigate losses caused by currency fluctuations.
We recognized a net loss of $1.08 million, a net loss of $1.29 million and a net gain of $0.17 million for 2023, 2022 and 2021, respectively, related to forward and options contracts. We note that hedging transactions may not successfully mitigate losses caused by currency fluctuations.
During 2022, 2021 and 2020, we recorded accumulated other comprehensive loss of $162,000, accumulated other comprehensive gain of $55,000 and accumulated other comprehensive loss of $49,000, respectively, from our forward and option contracts, net of taxes, with respect to anticipated payroll expenses for our non-U.S. employees.
During 2023, 2022 and 2021, we recorded accumulated other comprehensive gain of $1,095,000, accumulated other comprehensive loss of $162,000 and accumulated other comprehensive gain of $55,000, respectively, from our forward and option contracts, net of taxes, with respect to anticipated payroll expenses for our non-U.S. employees.
The increase in interest income and gains and losses from marketable securities, net, for 2022 as compared to 2021 reflected higher yields, offset with lower combined cash, bank deposits and marketable securities balances held. The decrease in interest income and gains and losses from marketable securities, net, for 2021 as compared to 2020 mainly reflected lower 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.
This has resulted in a foreign exchange gain of $0.07 million, a foreign exchange loss of $1.27 million and a foreign exchange gain of $0.44 million for 2022, 2021 and 2020, respectively.
This has resulted in a foreign exchange gain of $0.69 million, a foreign exchange gain of $0.07 million and a foreign exchange loss of $1.27 million for 2023, 2022 and 2021, respectively.
As of December 31, 2022, the amount of other comprehensive loss from our forward and option contracts, net of taxes, was $107,000, which will be recorded in the consolidated statements of income during the following six months.
As of December 31, 2023, the amount of other comprehensive gain from our forward and option contracts, net of taxes, was $988,000, which will be recorded in the consolidated statements of income during the following seven months.
However, we can provide no assurance that we will recover present declines in the market value of our investments. 55 Interest income and gains and losses from marketable securities, net, were $2.74 million in 2022, $1.47 million in 2021 and $2.84 million in 2020.
As we hold such bonds with unrealized losses to recovery, no credit loss was recognized during 2023. 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 $4.57 million in 2023, $2.74 million in 2022 and $1.47 million in 2021.
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. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See the Index to Financial Statements and Supplementary Data on page F-1.
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. ITEM 8.
Removed
As we hold such bonds with unrealized losses to recovery, no credit loss was recognized during 2022.
Added
The increase in interest income and gains and losses from marketable securities, net, for 2022 as compared to 2021 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.
Removed
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.
Added
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See the Index to Financial Statements and Supplementary Data on page F-1.

Other CEVA 10-K year-over-year comparisons