Q4 2023 CEVA Inc Earnings Call

Participants

Richard Kingston; VP of Market Intelligence, Investor & Public Relations; CEVA Inc

Amir Panush; Chief Executive Officer; CEVA Inc

Yaniv Arieli; Chief Financial Officer; CEVA Inc

Suji Desilva; Managing Director, Senior Research Analyst; Roth Capital Partners LLC

Kevin Cassidy; Analyst; Rosenblatt Securities Inc.

Martin Yang; Analyst; Oppenheimer & Co., Inc.

Chris Reimer; Analyst; Barclays Bank PLC

Gus Richard; Analyst; Northland Securities

David O’Connor; Analyst; BNP Paribas Exane

Presentation

Operator

Welcome to the CEVA Inc., fourth quarter and year end 2023 earnings conference call. (Operator Instructions) Please note this event is being recorded. I would now like to turn the conference over to Richard Kingston, Vice President of Market Intelligence, Investor and Public Relations. Please go ahead. Thank you.

Richard Kingston

Good morning, everyone, and welcome to CEVA's Fourth Quarter and Full Year 2023 earnings conference call. Joining me today are Amir Panush, Chief Executive Officer, and Yaniv Arieli, Chief Financial Officer of CEVA.
Before handing the call over to Amir, I would like to remind everyone that today's discussion contains forward-looking statements that involve risks and uncertainties as well as assumptions that if they materialize or prove incorrect, could cause the results of CEVA to differ materially from those expressed or implied by such forward-looking statements and assumptions. These forward-looking statements include statements regarding our market positioning, strategy and growth opportunities including expectations for expansion into new markets and use cases as well as expectations regarding our customers' production of products using our IP market trends and dynamics demand for and benefits of our technologies and our expectations on financial goals and guidance regarding future performance.
CEVA assumes no obligation to update any forward-looking statements or information which speak as of their respective dates in addition, following the divestment of the intrinsics business to Cadence, financial results for intrinsics were transitioned to a discontinued operation beginning in the third quarter of 2023 and all prior period financial results have been recast accordingly. We will also be discussing certain non-GAAP financial measures, which we believe provide a more meaningful analysis of our core operating results and comparison of quarterly results for reconciliation of non-GAAP financial measures is included in the earnings release we issued this morning and in the SEC filings section of our Investor Relations website.
With that said, I'd now like to turn the call over to Amir, who will review our business performance for the quarter, review the year and provide some insight into our ongoing business. Amir?

Amir Panush

Thank you, Richard, and good morning, everyone, and thank you for joining us today. 2023 was the beginning of a transformation of journey for silver, and I'm very pleased with the progress we made in my first year with the company following the recent in-depth strategic review to really understand our strength and technology leadership, we have positioned CEVA as a strong trusted partner for semiconductor companies and OEMs who need our IP to enable three fundamental use cases for Smart Edge devices. The ability to connect send and inferred data more reliably and efficiently. We have realigned our business to focus our investments and R&D efforts around these use cases and on mega end markets where we see very strong growth opportunities, consumer automotive, industrial and infrastructure even against a difficult business backdrop in 2023.
This continues to affect the semiconductor industry and its end markets. We are already seeing evidence, but our updated strategy is producing results. Our customer engagements are deeper across the value chain across our entire technology portfolio and expanding into new end markets and strategic opportunities. I will provide a review of the year shortly. But before that, I will review the fourth quarter. For the fourth quarter, our total revenues were in line with our expectations.
I'm proud of how we have and continue to manage through the challenges in the markets we serve and significantly improve our profitability and earnings power through our focus on operate operating efficiency in licensing, while the total licensing revenue recognized in the quarter was lower than usual. The interest in our diversified portfolio and potential new customer opportunities remain solid. We saw good progress on a number of fronts, including a strategic license deal with a US based MCU leader for our WiFi6 IP and a licensing deal. We have one of our major automotive customers to integrate our air software compiler into their latest chips.
In royalties, we saw a return to a year-over-year growth for the first time since Q3 2022. We have a rebound in mobile and across consumer, IoT and industrial IoT, where we have a large and diversified customer base. Both mobile and IoT markets produced our strongest warranty revenues of the year. Unit volume in the quarter were up 21% from the fourth quarter 2022 level. Overall in licensing, we signed 17 deals in the quarter, 11 of which were for our IPs, enabling connect use cases where we continue to leverage our broad portfolio of long and short-range wireless IPs to build our leadership position and market share in connectivity for Smart Edge devices.
This is evidenced by agreements spanning Bluetooth, WiFi, UWB, satellite, IoT and 5G RedCap signed in the quarter. As more and more chips designs, integrate connectivity has a mandatory requirement. As I mentioned, a few months ago, one of the deals was a leading US MCU company for WiFi6 IP. This company license our WiFi6 IP to augment their internal wireless connectivity development efforts and ensure they have a leading solution for their customers.
This is a trend that we are seeing more and more recently, where established companies, we have internal R&D teams and major investments around wireless connectivity need help to advance our product roadmap and stay competitive device constantly at the leading edge, with the latest standards developed in the same timeframe as the market leaders as these technologies become more complex and the demands on the customers to consistently be in the market with the latest features, we are viewed as a trusted partner who can help these companies reach their product development goals while reducing the risk and time to market.
This is why we are increasingly being recognized as the de facto choice for wireless connectivity IP globally, which forms the backbone of our Smart Edge strategy. We also had a good quarter in licensing for our hardware and software IPs for sensing and insurance with six deals signed highlighted by a licensing deal with one of our major automotive customers to integrate our AI software compiler into the latest chip. This customer had already licensed and deployed our AI engine to help high compute performance in their automotive systems on chip product family, targeting ADAS and autonomous driving. These SOCs are now in production and are expected to be deployed in mass market vehicle by the end of 2024.
The licensing deal we completed this quarter with this customer enables automotive tier one suppliers and OEMs direct access to our AI engine into SOC to deploy their proprietary AI software algorithms and allow them to bring value, add functionality and differentiation to the performance of their production vehicle. This is an important milestone for our customers and for CEVA as the automotive industry is constantly looking for open ADAS architectures as an alternative to cloud vertical solution that don't allow for differentiation. We anticipate that we will generate meaningful royalty revenues from automotive SOCs with initial royalties contributing solid growth in 2024 and continuing to grow in 2025 and beyond.
Other deals in the quarter under this category include customers for our RDOAI. and sensor fusion AIDSP.s and our voice processing software at C-BASS. When we speak about edge AI and smart edge devices. We are not just focusing on the insurance workload that most people associate with these devices. Every one of these devices needs to be connected in order to get data off the device and connected via the Internet. Every one of these devices needs to be able to sense its environment using vision, sound and motion and generate data. Every one of these devices will increasingly need some inference capabilities, great effort and act upon these data. This is what the Smart Edge is, and we are the only IP company capable of delivering that technology required to address all three use cases.
Turning now to royalties. For the quarter, we saw a strong recovery in mobile, driven by restocking demand for Android smartphones in emerging markets. In consumer IoT and the broad industrial IoT markets, demonstrating our diversified offering and customer base, we recorded our best quarter of the year with notable strength for our connectivity customers. This was our third consecutive quarter of royalty growth as we build momentum throughout the year. More significantly, this was the first quarter we surpassed $12 million in royalty since Q4 2021 and serves as a strong proof point for our royalty business potential going forward.
For the full year 2023, we reported total revenue of $97.4 million, 19% lower than 2022, primarily due to a return to a more normal licensing environment following a couple of years in which we were able to capitalize on a surge in design activity UI by exceptional consumer end market demand resulting from post-COVID spending and the shift to work-from-home. Licensing and related revenue was $57.6 million, down 23%.
We signed 53 licensing agreements across our extensive IP portfolio. 10 of those deals were with OEMs who are integrating our IPs into their end products. In terms of end markets, 29 of these deals target consumer and 23 for industrial IoT, including seven for automotive and one for other markets. This deal breakdown services, another indicator of our focus on the end markets. We have the largest licensing base and the greatest projected growth potential.
In full year royalties, despite the slow start to the year and the soft end market throughout 2023, royalty grew sequentially each quarter throughout the year to reach $39.8 million, down 12% year over year. The decline is mainly attributed to mobile and 5G ran related royalties, which combined to be down 22% year over year. On the positive side and in line with the trends of our connectivity products, royalty revenues related to our Bluetooth WiFi and cellular IoT business lines combine to grow 5% year over year, mainly due to the higher royalty rate contribution from our new WiFi six customers.
In terms of end markets, consumer IoT was 41% of royalties, followed by mobile at 36% and the growing industrial IoT end markets at 23%.
Looking ahead to 2024, we are excited by the royalty growth potential of our WiFi six warranties, the continuing momentum in our Bluetooth and cellular IoT customer base across consumer and industrial markets, and the expected initial ramp of automotive aid US royalties in the second half of the year.
Looking back on the year in terms of achievements and milestones, there are a few that I would like to elaborate on. As I mentioned earlier, we started the year with a strategic review of the business and decided to focus all our efforts on being a pure IT player. This led to the decision to divest the intrinsics aerospace and defense design services business.
In line with this strategy, in airfreight, we acquired VisualSonics, a small special audio software business, which bolsters our software business and enabled us to address the high-volume headsets in the Airbus space. We have value add software. This culminated with our first special. How do you deal with both India and number one, wearable and hearable OEM and number two worldwide behind only Apple.
The strategic review also led to the decision to give the company a brand refresh to better reflect our position as the trusted partner for transformative IP for this market. Collectively, these efforts have enabled us to align our investments and focus and were implemented in tandem with a stringent plan to control expenses and ensure we create operating leverage for the betterment of our shareholders. All of this culminated in our investors and analyst day in December where we shared our vision and strategy for the company. (technical difficulty)

Operator

Pardon me, it seems like we've lost connection with our speaker, please wait while we reconnect.
Pardon me, ladies and gentlemen, we've reconnected with our speaker line.

Amir Panush

Well, let me continue from where I think you stopped hearing us. So and in terms of new product launches, we had multiple achievements. For connectivity, we launched our most powerful DSP architecture to date, addressing 5G advanced use cases for infrastructure, industrial, mobile and new use cases like 5G satellite communication and 5G vehicle to have the same our UWB radar platform for automotive child present detection and our Bluetooth solution for electronic shelf labels and emerging high-volume market.
For sensing, we launched our channel funding Bluetooth solution, enabling high accuracy and secure positioning for automotive, industrial and IoT. For inference, we launched our scalable NPUA. architecture capable of running generate EVA in Smart Edge devices with industry-leading efficiency. All of these product introductions demonstrate our commitment to the Smart Edge and our diversified IP portfolio position and have been very well received by our customer base.
Moreover, these products will serve our licensing business in 2024, along with recent product introductions like our WiFi seven IP. Overall, looking across our cooperate product customer and end markets milestones in 2023. I'm extremely proud of what we have achieved, and I'm excited about what's ahead for 2024 and beyond. None of this would have been possible without the dedication, passion and incredible efforts of our employees worldwide. And I would like to take this opportunity to thank them.
Looking ahead into 2024 and our expectation, the Semiconductor Industry Association expect the global semiconductor industry to return to healthier growth following a weak 2023. There still remains, however, some short-term challenging condition in the industrial and automotive end markets, which are not expected to clear until the second half of the year and possible inventory buildup that we need to be was down in the first part of the year. Yaniv will provide quantitative guidance shortly.
Finally, I want to sincerely wish you and your families a successful and peaceful 2024. I look forward to meeting many of you at conferences, tradeshows and other industry events throughout the year.
Now I will turn the call over to Yaniv for the financials.

Yaniv Arieli

Thank you, Amir. I will now start by reviewing the results of operations for the fourth quarter of 2023. Revenue for the fourth quarter was $24.2 million as compared to $30.3 million for the same quarter last year. Our revenue breakdown is as follows. Licensing and related revenue were $11.8 million, reflecting 49% of our total revenue as compared to $19.4 million in the fourth quarter of 2022. Royalty revenue was $12.3 million, reflecting 51% of total revenue, up 13% from $10.9 million in the same quarter last year as this is a return to year-over-year growth in royalties for the first time since Q3 of 2022.
Quarterly gross margins came slightly better as expected on GAAP and in line with non-GAAP basis, gross margins were 91% on GAAP and 92% on non-GAAP basis. Our total operating expense for the fourth quarter was in line with the mid-range of our guidance at $24.7 million. Total non-GAAP operating expenses for the fourth quarter, excluding equity-based compensation expenses and amortization of intangibles and deal costs, were $20.3 million at the lower end of our guidance.
GAAP operating loss for the fourth quarter was $2.8 million, down from GAAP operating profit of $1 million in the same quarter a year ago. Our GAAP taxes were $7.2 million and non-GAAP taxes were $1.4 million. GAAP taxes expenses included $1.3 million of charges as a result of completion of a tax audit for prior years and the $4.5 million tax charge, including a one-time write write-off of the deferred tax asset related to Section 174 of the US tax code.
GAAP net loss for the fourth quarter of 2023 was $8.1 million and diluted loss per share was $0.34 as compared to net income of $4.5 million and diluted income per share of $0.19 for the fourth quarter of 2022. Non-GAAP net income and diluted EPS for the fourth quarter for of 2023 were $2.4 million and $0.10 respectively, as compared to $7 million and $0.29 reported for the same quarter last.
With respect to other related data, shipped units by CEVA licensees during the fourth quarter of 2023 were 453 million units, up 21% from the fourth quarter of 2022. Of the 453 million units reported, a 101 million units or 22% were attributed to mobile handset modems. 325 million units were for consumer IoT products, up from 286 million units in Q4 of 2022. 47 million units were for industrial IoT products up from 21 million a year ago.
Bluetooth shipments were 244 million units in the quarter, up 11% year over year. Cellular IoT shipments were a quarterly record high with 45 million units, up 82% year over year. Wi-fi shipments were 31 million units, down 17% year over year. However, WiFi royalties were up 86% year over year, reflecting the higher per unit royalty we get for WiFi6 shipments versus older generation of WiFi standards.
As for the year, our total units shipped were 1.6 billion units in 2023, down slightly from 1.7 billion in 2022, which estimate -- which equates to approximately 50 CEVA power devices sold every second in 2023. Annual mobile modem shipments were down 13% year over year to 286 million units, reflecting the soft smartphone market in 2023, particularly in the first part of the year. Annual consumer Iot related shipments were 1.15 billion units, down just 4% year over year. And our annual IoT related -- industrial IoT related shipments were 84 million units, up 17% year over year. Cellular IoT and audio AI BSP shipments both experienced growth in 2023, up 64% and 56% respectively, from 2022.
In terms of royalty contribution highlights, cellular IoT royalty revenue were at all-time record high, up 47% year over year. Our DOAIBSP royalty were up 111% year over year, and Wi-Fi royalty revenue were up 40% year over year.
As for the balance sheet items, as of December 31, 2023, same as cash, cash equivalent balances, marketable securities and bank deposits were $166 million. In 2023, we repurchased approximately 279,000 shares for approximately $6.2 million. And as of today, we have around 700,000 shares that are available for repurchase under the repurchase program has expanded back in November of 2023.
Our DSOs for the fourth quarter of last year continued to be lower than the norm at 32 days similar to the prior quarter. During the fourth quarter, we generated $5.5 million of cash from operating activities. Our ongoing depreciation and amortization were $1 million and purchase of fixed assets was $0.8 million. At the end of the fourth quarter, our headcount was 424 people of whom 350 were engineers.
Now for the guidance, as we recently presented and shared in our December 23 Analyst Day, CEVA's long term vision is to achieve a full year revenue growth of 8% to 12% CAGR. This will enable and generate significant earnings power, operating leverage and net income growth. Amir highlighted earlier our key 2023 achievements and our new focus on pure IP play.
And we are executing this plan one step at a time to address these three pillars of Connect sense. And in fact, our Licensing and related revenue business will continue to expand into new markets and use cases in the industrial, IoT and consumer IoT offering connectivity platform, AI solutions, including AI engines, NPUs and softer audio AI and more.
On royalties, we expect our connectivity products to continue to show strength in 2024 with royalty revenue related to our Bluetooth WiFi and cellular IoT business lines to grow. Smartphone have their seasonality trend and known headwinds. The consumer IoT and industrial IoT markets are large, diversified and present us with solid platform for long-term growth on an annual basis, our revenue is expected to grow 4% to 8% over 2023, with lower growth in the first half of the year and higher in the second half.
From the expense side, as we discussed, we implemented cost control measures to plan and keep our 2023 overall expenses, including both cost of revenues and OpEx, flattish at a range of $93 million to $96 million non-GAAP.
On the non-GAAP, I'd say, overall non-GAAP COG expense is expected to decrease approximately $1.5 million year over year. And our non-GAAP OpEx is expected to increase of approximately $2 million year over year.
Specifically for the first quarter of 2024, with typical seasonality in shipments of consumer IoT and mobile products, post the holiday season, we expect overall revenues to be 2% to 6% lower sequentially and with a different mix of licensing and royalty revenues than from the quarter we just reported.
Gross margin is expected to be approximately 91% on a GAAP basis and 92% on non-GAAP basis, excluding an aggregate $0.2 million of equity-based compensation expenses and $0.1 million of amortization of acquired intangibles. Our GAAP OpEx for the first quarter of '24 is expected to be in the range of $24.5 million to $25.5 million. The anticipated total operating expenses for the first quarter, $4 million is expected to be attributed to equity-based compensation expense and $0.2 million for amortization of acquired intangibles.
Therefore, our non-GAAP OpEx is expected to be in the range of $20.3 million to $21.3 million. Net interest income is expected to be approximately $1.4 million. Taxes for the first quarter is expected to be approximately $1.2 million and share count for the first quarter is expected to be approximately 25.3 million shares.
We can now open that Q&A session, please.

Question and Answer Session

Operator

(Operator Instructions) Suji Desilva, Roth MKM.

Suji Desilva

Congrats on the progress here. Maybe we could talk about the guidance and the first quarter and the full year. I'm curious, you know what you talked about the [different mix you need and the decline two to six]. Curious what the license royalty and the implications are there. And then for the quarter and the full year, what the expectations for mobile maybe even for the full year versus non-mobile will be helpful to understand.

Yaniv Arieli

Sure. A good morning. Overall, we're talking about 4% to 8% annual revenue growth for 2023. We're looking at similar start than we had in '23 that the first half, it may be a bit more milder, then things will pick up. Some of the products we are in and the consumer side also have that typical seasonality, and we have seen that in the past. So those are some of the assumptions that we have built in the model and obviously, licensing in two is a lumpy type of business.
When we look at it on an overall longer basis that generates the revenues, although in the last couple of years, we are also added software solutions and capabilities, which have a limited life and seeing if it all upfront fee, but a much, much higher royalty contribution and the immediate effect on an annual base. For example, audio and AI royalties grew more than double in dollars year over year, but they don't necessarily contribute to licensing.
So we look at the full mix, we're looking at growth in both of these segments, both licensing and royalties. On a quarterly basis, it's harder to get upfront and [AST606] made our life more difficult to know in advance how the royalty are going to look like. So our starting point is coming with the strongest quarter in royalties in 2023 and a gradual improvement from Q1 all the way to Q4 that would probably go down due to the typical seasonality in consumer and consumer and mobile that you asked about.
And with that said, lots of things should be higher in Q1 over Q4, for sure. That is the plan, a lot of moving pieces. But the from the product portfolio and the revenue mix, these are sort of the high pieces in the puzzle.

Amir Panush

And maybe I can add a little bit more color here, Suji. First good morning to everyone. And on top of fortunately, I've said so if we look at royalty going into 2024, there are several things that we are very encouraged by, and we see as a potential growth in 2024 versus last year. And one that we talk about quite a bit is our WiFi penetration and a transition from WiFi to WiFi six and with the higher average ASP and volume increase. And the other thing that will probably come more towards the end of the year is the automotive AI., some of those products go going into production and as well as I would say, overall, our customer base and the consumer IoT and industrial IoT on average are doing quite well. And we expect that to be a good tailwind in a strong place to go the warranty moving forward on the more a so called muted side, and it's really the situation with all 5G installment base.
And that's a market that probably in 2024 as far as what we see today is not going to recover significantly, maybe more towards the second half and then probably more in 2025 on mix. In terms of licensing, we have several new products that will and should generate for us increased licensing in 2020 for a WiFi seven that we already start licensing as well as the new products that right now in a significant evaluation across multiple potential customers. And we expect to be able to close some of those deals in 2024.

Suji Desilva

Okay, great. And then my other question is on the Autodesk win. Congrats on that. The I'm just wondering if the circumstances for that win was that a customer who had their own AI and they swapped it out for yours? What kind of tops? And you talked about seven auto wins. I'm curious if those are AI or a variety of products start with the first.

Yaniv Arieli

So the first thing is there is an existing customer. They license our technology, the hardware side of it a while back and build their own chip. The nice power, the interesting part for them is that the shape is progress of the deal that we close now is they have software capability that also their customers could have different sources of AI use cases and program the final product to be much more flexible. So it's an existing customer that is going into production this year. They added the software piece on top of the hardware solution that is ready now and it was a very interesting and the nice achievement that they're coming back and offering this type of solution in cars today this year. Amir, do you want to talk about the overall --?

Amir Panush

The deals are not AI only. It's across our product portfolio. Although all we signed, I believe, for a deal this quarter, three of them related let's close or to Vision AI capabilities and ADAS and one related to audio AI capabilities.

Operator

Kevin Cassidy, Rosenblatt Securities.

Kevin Cassidy

Congratulations on the good quarter. Can you let us know how is the trend for licensing? Are there customer programs that are getting delayed or even being canceled this year in market, are you seeing more deals or fewer deals? What are the issues that they have to say?

Amir Panush

Yes, Kevin, a few things. I would say first, if we take a step back and look at 2023 of all, definitely, that was a year that started with lots of lots of inventory correction that our customers need to go to prove that their so called more pressure on the business overall. And we have that generally speaking, the customers on average, taking more time to go and launch new products and new programs in place. So that's definitely drove some of the delays in 2023.
Specifically, for Q4, we are actually very encouraged with the number of deals that we signed 17 deals in the quarter. And more specifically, we had at least one deal for each of our product technology categories. So really across our diversified product portfolio, very good engagement with customers. We have a good significant number of deals and just the mix every quarter can change in terms of the type of deals and the size of deal and definitely as we go to 2024 and from the first half to the second half, we expect it also to see the larger, more meaningful deals also in that mix, which will drive overall with the rest of our deals the growth between 2022 and 2024.
But overall, I would say if we look at the different market segments, automotive and industrial pilot and a bit weaker in the first half. And we're expecting better correction of all interest to go back in second half.
Consumer IoT and consumer overall is holding up very nicely for us and that we expected to be with some seasonality of typically the Q1. Is that specifically more in mobile. Beyond that, we will we expect a good growth and during the rest of the 2024.

Yaniv Arieli

The last part of Amir's answer was related to royalties, not necessarily to the licensing question. So you got both angles.

Kevin Cassidy

And maybe just geographically, how is China's licensing opportunities?

Yaniv Arieli

China is still an important and big geography for us. A lot of the innovation and existing and repeating customers are coming back for newer generations of different technologies, whether it's the Bluetooth or WiFi or other connectivity, the solutions that we have today because I think that we are we have a very strong portfolio around that.
And what was the very interesting for us this quarter around is that the US was a stronger than usual for us and very, very strategic deal with the with an MCU player that we mentioned earlier in the meals prepared remark, and that was a positive change for Q4 revenue mix. It wasn't just China, but it was an interesting development in the US.

Operator

Martin Yang, Oppenheimer.

Martin Yang

Thank you for taking my question. Is on can you first talk about the revenue outlook it doesn't break broken down by consumer IoT and industrial IoT in '24, which segment should we expect stronger relative strength comparing to of our revenue growth outlook?

Yaniv Arieli

A great question Mark, and thanks for that. So let's repeat some of the highlights that we ended up 2023. So not a simple year for us and more of a transition year if we still look and do the analysis now at the end of the year here with how it looks like on the royalty front, the royalty, let's start with royalties a more than double for us. We showed growth both in units, 56%. I believe we said and revenue was up more than 100%.
Look at the sell of IoT, which is one of the top markets that we have continued to show separately from the modem and the Bluetooth and WiFi. This was the third element that we started breaking down, may be a year or so two years ago, units were up 64%, revenues were up 47%, almost 50% cellular IoT. So that has been working well.
Bluetooth sort of flattish year over year, mainly because of the slower start of the 2023. So we are flattish in revenues, which were about our units, which were about 1 billion units, if you recall last year first, very close to that, but slightly lower. And WiFi continues to be one of the strongest. The we'll have royalty contributors, both the licensing and royalty. The units were down year over year because it was a transition year also to WiFi six, which is a newer technology and the new generation, but because of having a new product and new customers that got in the base fee is much, much higher and we reached 40% higher revenues for WiFi royalties in 2023.
So four very or three very strong contributor should continue in 2024. We don't know the pace. We don't know when it's going to pick up in work. But we know that the industrial is very strong in all of these different connectivity solutions. Our our address to that is as much a consumer side, the low lights and Amir mentioned mainly the mobile, which started very low, but ramped up and corrected itself yet to be seen now 2024 looks like on an annual basis, it's difficult to forecast. But for now that started one of our growth drivers and the in the base station market, which suffered the largest saver, but overall was very muted and lowered 2023 just because 5G will bring for the cellular networks, any a key or Star use case that will that happened with deployment or increased deployment.
That's probably going to be muted also in 2024. The rest of the technologies and the market that we target around Edge AI should work out well.

Amir Panush

Maybe just one other comment to that marketing related to the industrial IoT, I would say overall, we finished this year with 23% of our total revenue. So this is definitely a significant portion of our revenue. Also moving forward, we expect that to grow in 2024 and more specifically, if you look at the technology that we're offering, so they're getting more and more embedded with the MCU ecosystems. And specifically in the industrial and automotive MCU ecosystem started with some of our connectivity offering and extended to WiFi more recently and now also some agile capabilities. And in the future, we expect also in fair, and that's where we see also the synergy of our technology into the Smart Edge and MCU ecosystem and specifically there for the industrial IoT market bucket space.

Martin Yang

And next question for mobile. In the longer term, maybe two to three years time horizon, do you think mobile could recover and back to that 2021 level? Or what where should we look at? How should we look at mobile in the longer term for amount of contribution to your company?

Yaniv Arieli

So the mobile market, as everybody knows, has consolidated significantly over the last couple of years. There was a handful of players in that industry, the biggest and well-known ones are the Qualcomms and the Mediatech, a few very successful for many years. The lower cost, the solutions like unit stock in recent years are as well, and there are still very big markets in the world, the replacement and new markets for low-cost feature for that, everybody calls the $5,000, a high end phone. And those markets we have very strong penetration and the solutions. So that could continue the pace of all that is not that clear to handsets haven't been that exciting of the market or use case in this year.
And there is one other OEM that they may change its mode, of course, and maybe things will look different in two to three years yet to be seen and no, I don't think anybody has the answer for that for that piece. The other use cases of 5G and connectivity have gone into other segments in other markets. And there we have seen licensing activity over the last, say, two to three years and where royalties should also come from that, not the handset market per se, but the private RAN and now lots of other solutions that could use the 5G.
Hopefully, that helps to answer the question right now, unless three or four years, if we looked at the slides, we presented also in the Analyst Day, you could see that the overall revenue at CEVA in the last five years double from $50 million to more than double $100 million coming from Smart Edge devices versus the mobile devices. So mobile is still there, but the big growth come from the newer markets that we've added on.

Amir Panush

And just more specifically at margins physically on parallel IoT, that is expansion of the 5G in mobile. That's where we have seen already this year. Very significant growth of in consumer industrial consumer, more in smart watches and those type of things where 5Gs are the type of technology.
So that technology is getting more and more embedded and in the industrial space also for all the different type of logistical logistic tracking, smart tracking and other so-called Industry 4.0 use cases and beyond as we move towards this year and next year. Also for different type of satellites, type of use cases for 5G. 5g advance will also propagate. We believe we can create for us and nice growth trajectory moving forward.

Operator

Chris Reimer, Barclays.

Chris Reimer

Thanks for taking my question and congratulations on the strong results. I wanted to ask about your long-term guidance around operating margin. I think at the conference recently you gave a target of 20% operating margin. And just wondering, I realize it's a long-term target, but I'm just wondering how you what's the constellation, what's the makeup of actually getting there? Does that consist of increasing a expanding gross margins? Or is that specifically no a expense, say, expansion whatsoever. I'm just wondering what the moving parts around that to that number?

Yaniv Arieli

It's magic, that's the way it was set at one step at a time with much more focus. And this is this is what Amir undertook last year and we have shared with you over the in the prepared remarks. If you look at the overall non-GAAP operating margin of the year, we ended up with about 4%. It was stronger in the second half, 7%, 8% in Q3 and Q4. And we looked into 2024 based on the guidance that we gave, we are planning to probably double, let's say, maybe slightly do even better than doubling it for '24.
So that's one milestone. If you reach the revenue levels that we talked about as we execute the R&D plans and focus on the expense with the right expense level that we have talked about. That's what that milestone will get you to. And if that continues over a few years, that's how we could and with more royalties, which bear a very high gross margins and fall to the pretax line that could get us to the next milestone or a few months, but it's not going to happen overnight, taking that to next stage to 20% and non-GAAP operating margin. So hopefully that a little bit more color on the on the timeline.

Amir Panush

Maybe just to add on that just for the top-level strategically of that. So first, this year, we are 20 -- sorry, last year 2023, we can back to a pure IP business model after the divestments of intrinsics. And with that, we guided will be 90% or above gross margin.
And then from the gross margin on the operating margin, it's really twofold. One is a continuous improvement and growth in our top line for the guidance I just gave for this year and from that on the long-term model that we gave in the Analyst Day and then on the OpEx side is really maintaining strong focus on where we see and where we believe we will see a long-term cost potential.
And one example of that is also the acquisition that we did last year with Sonic for 3D, especially audio software capabilities. And very quickly, we have been able to convert it into and licensing agreements and royalty bearing with the customer, which overall has been very synergetic on the OpEx side. And with that being a very good profitability moving forward to our business, both organically and non-organically, we are heavily focusing on the bottom line of how we can drive that the synergy as well as the operational margin leverage as we move forward.

Operator

Gus Richard, Northland.

Gus Richard

Yes, good morning or afternoon. Thank you for taking the question. I just want to make sure I understand the revenue guidance for the or for the full year on, does that comp include intrinsic revenue or is it just continuing ops in terms of the growth expectation?

Yaniv Arieli

It's just the Ceva IT part of it in transits. We took that out for last quarter discontinued operation, its value in your top line, it's down your expense. It's just in the gap with one line before the end of the discontinued operation. So it's not included in the numbers, the numbers, the revenue and overall net revenue numbers for last year were [97.4], and that is the basis for the growth and the percentages that we gave.

Chris Reimer

David O'Connor, BNP Paribas.

David O’Connor

Firstly, one for you given DM excitement as some what hearing around the AIPC. and the smartphone. I'm just wondering with your strong positioning at the edge and around IoT devices. Do you think there is a wave of at GRE licensing that's a frontier that has yet to happen? And you just haven't kind of seen that.
Yes, that's my first question. And then maybe for Yaniv, just on the model again, for that 6% sales growth for 2024, and can you rank for us kind of licensing versus royalties, which is higher or lower than that 6%, just to get an idea of the head and the trend there. And also do you expect to grow revenues on a quarterly basis through 2024?

Yaniv Arieli

Can you repeat your question?

David O’Connor

So the I'm just stuck just with the excitement around the AIPC. and AIN. are Yes. And yes, to your positioning at the edge and just thinking and is there a wave of licensing at the edge is yet to happen? Because you talked in your opening comments that kind of licensing is a bit lumpy. And so just trying to put that in context, was all the and what we're hearing around AI?

Amir Panush

Yes, definitely made it. So first, this is a focus area for us in 2024 and basically delivering our MPU and overall air portfolio and into the smart edge market segments, including automotive industrial, the consumer IoT later also into the infrastructure. And we have already several customers that are evaluating our technology in very deep evaluation, and we expect to be able to close some of those deals during 2024. So that's definitely part of our target and also part of our expectation in terms of the revenue growth in 2024.

Yaniv Arieli

And with regards to the model, we don't break out, we never did again because we don't have that crystal ball in royalties and volumes between licensing and royalties on an annual basis we believe both could grow year over year. So again, if you look at the numbers excluding intrinsic that where I was, we were just asked about $57.6 million of the licensing and related revenue basis from 2023, we believe it could it should go higher and be higher in 2024 and the $39.9 million of royalty, which suffered year over year, mainly because of the base station market that we talked about earlier should also be the basis for the growth. I'm not sure where it's going to end up both. We have them growing.
Our model showed incremental growth on an overall quarter by quarter as the year progresses, with Q1 being the lowest because of the seasonality of the modem and consumer devices. And in the royalties here, we have a little bit more insight because we have seen that trend in recent years. And I hope I answered the question that that's the high level, obviously the model for next year this year.

Operator

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

Richard Kingston

Thank you, Betsy, and thank you, everyone, for joining us today and for your continued interest in CVR. As a reminder, the prepared remarks for this conference call are filed as an exhibit to the current report on Form eight K are accessible through the Investors section of our website.
And with regards to upcoming events, we will be participating in the following conferences Mobile World Congress from February 26th to 29th in Barcelona, Spain, the Loop Capital Markets, Fifth Annual Investor Conference, March 12th in New York. That's 36th Annual ROTH Conference March 18th and 19 in Dana Point, California on the Mesirow America's Israeli Growth Conference, March 25th in New York. For further information on these events and all events we will be participating in can be found on the Investors section of our website. Thank you all and goodbye.

Operator

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