Good morning. My name is Glen and I will be your conference operator today. At this time I would like to welcome everyone to the CEVA Q1 2010 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator instructions) Thank you. I will now turn the conference over to Mr. Richard Kingston, Director of Marketing and Investor Relations. Please go ahead, sir.

Thank you. Good morning everyone and welcome to CEVA’s first quarter 2010 earnings conference call. This conference call will be conducted by Gideon Wertheizer, Chief Executive Officer of CEVA; Yaniv Arieli, Chief Financial Officer of CEVA, and I, Richard Kingston, Director of Marketing and Investor Relations. Gideon will cover the business aspects and the highlights on the quarter followed by Yaniv who will cover the financial results for the quarter and provide financial guidance for the second quarter and fiscal 2010. I will start with the forward-looking statements. Today’s conference call contains forward-looking statements that involve risks and uncertainties as well as assumptions that if they materialize or prove incorrect could cause the results of CEVA to differ materially from those expressed or implied by such forward-looking statements and assumptions. Forward-looking statements include financial guidance for the second quarter and fiscal 2010, a general outlook for 2010, optimism about our licensing pipeline, royalty revenue, an increased design activities in 2010, optimism about our customers displacing It and Qualcomm, including Infineon and Broadcom, optimism about their market growth in LTE, set top boxes, digital TVs, HD video, the Chinese TD-SCDMA market, and alternative WiFi connectivity devices, and our position within them, and our customer production schedules, and our ability to generate revenues from new products and technologies. The risks, uncertainties and assumptions include the ability of the CEVA DSP cores and other technologies to continue to be a strong growth drivers for us; our success in penetrating new markets and maintaining our market position in existing markets; the effects of the intense industry competition; the possibility that markets for our technologies may not develop as expected or that products incorporating our technologies do not achieve market successes; our ability to timely and successfully develop and introduce new technologies; our ability to continue to improve our licensing and royalty revenue in future periods; and general market conditions and other risks relating to our business, including, but not limited to, those that are described from time-to-time in our SEC filings. CEVA assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates. With that said, I would like to now turn the call over to Gideon.

Thank you, Richard. Good morning to everyone, and thank you for joining us today. I hope you had the opportunity to review our press release with the financial results for the first quarter of 2010. Our revenue for the first quarter was $10.6 million, a record for CEVA, and above the mid-range of our guidance. Total revenues increased by 11% when compared to the first quarter of 2009. Royalty revenue for the first quarter of 2010 was $5 million, also a record, and representing a 32% increase over the first quarter of 2009. During the first quarter we concluded five new license agreement. Four of the agreements were for our CEVA DSP cores, platforms, and software, and one agreement was for SATA technology. Geographically, two of the license agreement were in Europe, and three in Asia. Target application for the licenses concluded during the quarter are primarily for 2G, 3G handsets, and data cards, set-top boxes, digital TV, and SSD drives. Our record revenue and to a larger extent our pipeline build-up during the quarter reflects a growing interest in our diverse product portfolio. This trend confirms to our market expectation following the general business improvement in our primary markets, particularly the cellular baseband market. I will elaborate on this subject later during the call. Another indicator of the increased design activity is the 37% sequential increase in our support revenue due to higher sales of software and hardware design kits needed for design activity. Higher sequential revenue, royalty revenue followed the seasonal trend whereby first quarter royalties reflect generally higher fourth quarter shipments. However, the magnitude of the increase was lower than – is typical. This is primarily due to the higher third quarter shipments reflected in our fourth quarter royalty revenue, which was driven by unique recovery quarter…

Thank you, Gideon. I will now review the results of our operations for the first quarter of 2010. Revenue for the first quarter was a record $10.6 million above the mid-range of our guidance and 11% higher than the first quarter of last year. The revenue breakdown is as follows. Licensing revenue were $4.6 million, reflecting 45% of total revenues, 4% higher than the first quarter of ’09. Royalty revenue was $5 million, an all-time record high, reflecting 47% of our total revenues and 32% higher than the first quarter of 2009. Service revenue was 0.9 million, which accounted for 8% of our total revenue, down 26% compared to $1.2 million for the first quarter of 2009. Quarterly gross margin was 93% on both U.S. GAAP and non-GAAP basis, which is an all-time record high for CEVA. For the first quarter of ’09 gross margin were 87% and 88% on GAAP and non-GAAP basis, respectively. As for the operating quarterly expense, research and development expenses were $4.6 million for the quarter, including approximately $200,000 of equity based compensation expenses. Sales and marketing costs were $1.8 million, including approximately $100,000 of equity-based compensation expenses. And our G&A cost were $1.5 million, including approximately $300,000 of equity-based compensation expense. Total operating expenses for the quarter were $8 million, which included an aggregated equity-based compensation expense of approximately $600,000, which is approximately 11% higher than the operating levels we had for the first quarter of ’09. Our total operating expenses for the first quarter excluding equity-based compensation expenses were $7.4 million, reflecting the mid-range of our guidance and approximately 15% higher than the operating levels from the prior year. The expense increase in overall operating expenses is associated partially with headcount increase in R&D, which should allow us to further leverage opportunities in…

(Operator instructions) And your first question comes from the line of Daniel Meron of RBC Capital Markets. Daniel Meron – RBC Capital Markets: Thanks, guys, and congrats on the ongoing execution. Gideon or Yaniv, first of all, if you can provide with info on the market share that you have in the cordless phone market as of last quarter?

Sure. The worldwide baseband market share went down marginally by 1%. It’s now at approximately 26% of the worldwide Q1 shipments. We believe that it will add to one customer in the low end, which grew significantly last year both in the second and third quarter and dealt with inventory management towards the end of the year. It’s a well-known effect in the market and a known practice to these specific customers, and we are getting only good indications for increased ramp-up and penetration these days to Samsung, LG, Nokia. So, overall, we are continuing to be positive in the continued market share gains for CEVA over the next couple of quarters. Daniel Meron – RBC Capital Markets: Okay. And should we think about the trajectory, 2010 unfolds, how is your market share?

You know, we never gave specific numbers I mean for the next quarter or for the next couple of quarters. We did give two or three year type of scenario that we believe we could reach at least 40% to 55% market share and I think I could you refer you to TI’s conference call. Earlier this week, they talked about on the call of having about $420 million of revenues coming from baseband in Q1 2010 for them. And in the Q&A mentioned that by the end of 2012, that number will be zero. We believe that the 2G low-end segment will probably be very low by the end of 2010. And the 3G market loss in baseband, although it’s not happening in middle of 2011 and onwards.

Daniel, this is Gideon. Let me just add a few more data points. First of all, Broadcom, they announced their Q1 results. They were not specific about the baseband market share and ramp-up, but they say that when it comes to Samsung and Nokia, it’s growing, and it has to be significant. The reason that we are required to be very specific is the timing of the – this opportunity. This is new models, new phones, operators take their time to just move meaning [ph] customer acceptance. So, the timing and the magnitude [ph] of this ramp-up is something that we know it’s happening but we don’t know the exact pattern. Daniel Meron – RBC Capital Markets: Okay, fair enough. And as far as your penetration into consumer electronics, I see that you guys a few wins in this space, can you give us a little bit more color on the trajectory that we should expect there? Is it just a matter of like waiting for two more years or so until you guys gain further traction in this space and then we can talk about meaningful market share in the various segments that you are going after and if you – are there any specific product that you think are going to be the ones that you guys are going to make a mark and just like you did in the handset market?

Yes, first of all, consumer electronic, let me draw your attention, what I said about one of the strategic business that was signed in Q1, this is a consumer electronic business. We – it’s a key customer that is new to us that is in the DTV and set-top box that decided to use our DSP for what we call demodulator. If you – I don’t if the – this is a bit technical, but in general, in every set-top box and DTV you have a demodulator function that is inherently a DSP function. So this customer is going to use us broadly in his products and we are going to – we are approaching this market with other customers as well, especially with our CEVA-XC. This is the growth engine for us on top of what the multimedia – the video (inaudible) activities that we so far with other customers. Other than these we have a few companies that – in the mobile multimedia space and they – I think we spoke, one of them is Rockchip. They have a significant department portfolio composed of tablets and they are approaching in the low end segment. And we have another customer we cannot name in the smartphone space that started to get into the (inaudible) actually. Daniel Meron – RBC Capital Markets: Okay, very good. Good luck. Thank you.

Thank you, Daniel.

Your next question comes from Matt Robinson of Wunderlich Securities. Matt Robinson – Wunderlich Securities: Hi, good morning. First, I have a couple of housekeeping items. What – you mentioned some headcount, I didn’t catch the overall headcount for the quarter.

182. Matt Robinson – Wunderlich Securities: Okay. And your – do you have a operating cash flow number? I know you mentioned the 6.1 and the 3.4 from the options, but a formal operating cash flow number, do you have that handy?

2.8 million, very similar to the net income. So, essentially in this line of business because we don’t have a significant CapEx expenditures, over a longer period of time, the net income and the free cash flows should be quite similar. Matt Robinson – Wunderlich Securities: You don’t have the depreciation CapEx handy? (Inaudible) But Gideon what kind of cores, or SoC’s, licenses were included in the five that you – I know you mentioned one set of license, but what were the product types for the others?

Well we had gotten an agreement about particular (inaudible). This is a company that is already using our technologies and going to expand to the 3G. The 3G becomes very significant in this space. We see well the cost then becomes the key element. In the – in my prepared remark I mentioned Tim Luke, an analyst saying that Samsung and LG are now getting to work with Infineon and Broadcom specifically. So, there is all the secret free license. There was another (inaudible) we did not find in Q1, but we have concluded and given out in last week, well definitely let’s see.

Okay, so two CEVA-X and then the – I mean another CEVA-XC so far this quarter.

Yes.

Yes. Matt Robinson – Wunderlich Securities: Okay, well congratulations on that. I think I am going to have to come back for my other question. That’s it from me for now.

Okay, thank you, Matt. The depreciation was $130,000 for the quarter. Matt Robinson – Wunderlich Securities: And that was CapEx less than that?

It was twice as that. $240- 50ish. Matt Robinson – Wunderlich Securities: Okay. Over.

Your next question comes from Brian Nugent, William Blair. Anil Doradla – William Blair: Hi, this is Anil Doradla. Hi. Couple of questions. One was, if I look at your full year guidance, $0.43 to $0.48 and I am trying to look at the year-over-year growth. On the high end it would be maybe somewhere around 15%. Now, that guidance that you have, can you give us a little bit more color on what you are assuming both on the royalty side and the licensing side. Given the variability in the licensing side, is that – I mean given that you’ve got more visibility on the royalty side, is that based on your greater traction on the royalty side while being conservative on the licensing side or can you give any color on that, that would be helpful.

Sure. You know for a long enough time, it’s known that as much as you have true understanding of the market and your customers and the magnitude of the changes that we have talked about earlier of the market share gains in royalties and so on and so forth, you don’t exactly have those numbers and Gideon that, the hockey stick event, until the quarter, the next quarter when you see those royalty reports and know which customer did better and what is picked up and so on and so forth. So we are very optimistic that the royalties will grow significantly so in 2010 from 2009. We took some (inaudible) and this is how we guided the annual – our annual guidance. The majority of the growth comes from royalties. That’s an IP model, a working IP model, that’s the healthy, profitable revenue stream. We just don’t want to guess before we actually see the numbers. We – so on a quarter by quarter by quarterly basis, we update them based on real, as much as real facts we conclude. And hope that at the end of the day we could do better than what we planned conservatively. On the licensing front, I think it’s is the same story. In the past last couple of years we’ve been quite consistent to be somewhere between $4 million to $6 million per quarter in licensing. Gideon mentioned in his earlier remarks that we have a very solid pipeline and a lot of interest, strong interest in our licensing, so we are very optimistic about this compared to a year ago. And I am sure we will revisit our annual guidance in July. It’s just too early to do it at this timeframe, but I hope I could give some new insight as soon as we finish another quarter later in this year. Anil Doradla – William Blair: So, Yaniv, the guidance for the year what do you assume for your royalty market share on a worldwide basis, can you give some color on that?

Anil, we were just asked that question ago – 10 minutes ago. We don’t break for the same exact reason that I just mentioned, we don’t bring in – or guess, a wild guess of an annual market share. We are at 26% today. I am sure that that number will increase by the end of the year, but it’s going to be 30% or 35% or 32%, it’s just a guess. I don’t think you know, and I don’t think anyone knows, because there are so many moving parts, good moving parts from TI, from Qualcomm, from the different players in the market, we are not magicians. We gather all this information, but we don’t have a magic spell to know what exactly are going to be the key models and the successful ones by – nine months from now. Anil Doradla – William Blair: Okay –

Go ahead. Anil Doradla – William Blair: No, no, go ahead, Yaniv.

No, so – the best tools we could give you is to look at the market dynamics, to look at our customer base. As Gideon mentioned too, to look at and I am sure you have at the Broadcom, the Infineons, the Spreadtrums, recent announcement and build your model from there. They continue to make and build share. The way they are showing and presenting optimism in their business for baseband and wireless, we should enjoy that and the upcoming wars. Anil Doradla – William Blair: And finally, Yaniv or Gideon, big picture question, we’ve been noticing kind of an accelerating pricing pressures with some of the larger guys especially in the 3G space. From your vantage point of view, what are you seeing, how are the dynamics playing out especially on the pricing environment kind of in the 3G space?

We have like everybody else, there is pressure on pricing from our standpoint. We are very unit driven and see how things are going. Right now that’s what we see in the pressure we see, but now – from our standpoint it’s per unit for us. Anil Doradla – William Blair: Okay. Thank you very much.

Thank you, Anil.

Your next question comes from Allan Mishan of Brigantine. Allan Mishan – Brigantine: Hey, guys, I saw the services rev ticked up nicely in the quarter after a couple of very low numbers. Do you expect this to be the new base level going forward at $900,000 or could it possibly recede again or maybe does it go higher, what are you expecting for that through the year?

I believe that the base was like in the last part of 2009 somewhere around $650,000 to $70.000. That would be the base. On top of that as we mentioned, there were some fairly interesting design activities by our customers, meaning they bought more design tools, bores, software that will just accelerate their development cycle. I believe this is going to be slightly higher than that may be by $100,000 than the base. I am not sure if Q1 will repeat itself, yet to be seen how many orders for more development tools will come in. So, I don’t think it’s going to really $600,000 or $650,000, but I would look at somewhere around $750,000 for Q2. Allan Mishan – Brigantine: Okay, thank you very much.

Thank you.

Your next question comes from Matt Robinson of Wunderlich Securities. Matt Robinson – Wunderlich Securities: I ask you before was that, can you give us a feel for how much of the royalty reports you have seen so far, is it 80% or 90% or – I know we have, we saw good numbers out of Broadcom a couple of nights ago. So, is your guidance based on 100% of your royalty reports or are you still waiting for a few of them?

No, we are still waiting. Most of our customers tend to report either at the end of the third month following the quarter or up to a few days, two weeks after that date. So we don’t have very – usually in our conference call we don’t have the full picture, we have a pretty good understanding how the next quarter could look like. I would say from that point of view you do see some seasonality in Q1. Some numbers you arrived at came in early very nice. On the other hand, you could see that LG, for example, came out with 20% lower quantities in Q1 compared to the previous quarter. And I think this is a typically seasonality to some of the OEM. We are not going to see that much of a decline. I believe that the overall decline because of the continued market share and other positive factors for us is going to be somewhere between 5% to 10% from this existing $5 million level, not worse than that. Matt Robinson – Wunderlich Securities: Okay, thanks, that’s helpful.

Sure. Thank you.

Your next question comes from Warren Darilek of Morgan Keegan. Warren Darilek – Morgan Keegan: Hello, gentlemen, appreciate the call. I had a question in regards to the large cash build-up you’ve accumulated over the years in forecast of rising cash flow as well. What are the thoughts for you and would you consider a meaningful or measurable dividend in the future? What are your thoughts there?

Well we – let me say this. First of all, our intention and focus is to provide shareholder value and the means that you could – you mentioned the dividend, it’s some thing that it is – these things we are considering and discussing continuously. On the other end, we are looking to grow the business and also (inaudible) we have pinpointed several opportunities that are complementary to our technology, meaning, we can leverage on what we are doing so far and get more business there. We don’t say we are not specifically, we don’t tell specific, but we have targeted few things, and we are looking for how this will help us to grow the business there non-organically. Warren Darilek – Morgan Keegan: Okay, thank you.

Sure, thank you.

And at this time I am showing no further questions.

Okay. Well, we’ll end the call there. Thank you again for joining us today and for your continued interest in CEVA. We will be attending the following events in the coming few months and I invite you to join us there The 11th Annual Israeli conference on May 16 at Tel Aviv, the Stern Agee Annual Semiconductor Conference on June 3, New York, ThinkEquity’s First Annual Semiconductor Conference also on June 3 in New York, the RBC Technology, Media, and Communications Conference on June 9 in New York, and the Piper Jaffray European Conference on June 22 in London. Thank you and good-bye.

And, ladies and gentlemen, thanks for participating in today’s CEVA Q1 2010 earnings conference call. This call will be available for replay beginning at 11:30 AM Eastern Time today through 11:59 PM Eastern Time Thursday, May 6, 2010. The conference ID number for the replay is 67571646. Again, the conference ID number for the replay is 67571646. The number to dial for the replay is 1-800-642-1687 or 1-706-645-9291. We thank you and appreciate your participation