So we delivered exceptional results for the first quarter. We achieved all-time high quarterly revenue, including our strongest licensing quarter ever and our key customer wins. Once we took advantage of the world largest consumer and wireless event, CES and Mobile World Congress, to announce our next generation platform for a range of applications and number of strategic agreements with customers. I will summarize these achievements in the next few minutes. Let me begin with the financial highlights. Revenue for the first quarter came in at new record-high of $21.3 million, up 29% year-over-year. Licensing and related revenue was also record-high approximately $9.5 million, up 10% year-over-year on the back of 11 deals that were completed. Of those 11 deals, eight were for DSP platform and three were for our connectivity IPs. All of the 11 deals were for non-handset baseband application, four of which were with the first-time customer. Customers target application includes 5G base station, automotive ADAS, surveillance camera, smartphones, smart-home appliances and variety of IoT devices enabled by our connectivity portfolio. The outstanding licensing performance during the quarter not only delivered record revenue but also enabled us to grow our backlog because of a number of comprehensive agreements for our most advanced technologies executed during the quarter. Therefore provide us with higher visibility and confidence in meeting the growth in annual licensing that we guided at the beginning of the year. On royalties, revenue came in slightly better than the guidance at $11.8 million, up 50% year-over-year, primarily driven by LTE shipments during the holiday season and record shipments by our Bluetooth customers. Let me, at this stage, elaborate on four different aspects of our licensing achievements. The first relates to a comprehensive agreement we still won base station OEMs that adopted two of our most advanced…

Thank you, Gideon. I will start by reviewing the results of our operations for the first quarter of 2017. Revenue for the first quarter was $21.3 million. This would also be our sixth consecutive quarterly all-time high record achievement, up 29% on a year-over-year basis. Revenue breakdown is as follows. Licensing and related revenues were $9.5 million, reflecting 45% of our total revenue, 10% higher as compared to the first quarter of 2016 and a new record high. Royalty revenue was $11.8 million, reflecting 55% of our total revenues, an impressive increase of 50% on a year-over-year basis and this would be the ninth successive quarter that we delivered year-over-year royalty growth. Total gross margin was 92% in both U.S. GAAP and non-GAAP basis. On non-GAAP basis included approximately $91,000 of equity-based compensation expense. Total operating for the first quarter was just above the mid-range of our guidance at $15.2 million. OpEx also included an aggregated equity-based compensation expense of approximately $1.9 million and $0.3 million for the amortization of the acquired intangibles of RivieraWaves. Total operating expenses for the first quarter, excluding equity-based compensation expenses and the amortization and intangibles, were $13.1 million, just over the mid-range of our guidance. U.S. GAAP net income and diluted EPS for the first quarter was up significantly by 128% and 111%, to $4.1 million and $0.19, respectively, over the first quarter of 2016. Non-GAAP net income and diluted EPS for the first quarter increased 77% and 65% year-over-year, to $6.3 million and $0.28, respectively. Both figures exclude equity-based compensation expenses, net of taxes of $1.8 million, and the impact of the amortization of acquired intangibles of RivieraWaves of $0.3 million. Other related data. Shipped units by CEVA licensees during the first quarter of '17 was all-time high. We reached 352 million units,…

We will now begin the question-and-answer session. [Operator Instruction]. At this time, we'll pause momentarily to assemble our roster. Our first question comes from Gary Mobley from Benchmark. Please go ahead.

Hi guys. Congrats on a solid quarter. I wanted to start out with where you finished, Yaniv. The EPS, non-GAAP EPS guidance of $0.26 to $0.28, that includes the $1.3 million tax benefit. Is that right?

Yes, correct, Gary.

Okay. All right, and you mentioned a 5G license agreement with a base station equipment OEM. I am curious to know, is this an existing licensee, or did you expand your footprint in the base station market?

Hi Gary, good morning. We said that this is the second base station licensee that we have with this advanced platform, the XC12. And yes, it is an existing licensee, meaning that this licensee took our prior generations of DSPs.

Okay. All right, and you're indicating another robust licensing quarter. You mentioned backlog increased, I guess, significantly I think is the adjective you used in your press release but yet your deferred revenue is flat sequentially. I note revenue is only one component of backlog but could you help us get a sense of the firmness of the backlog and where the source comes from?

So yes, the deferred revenue increases when we get paid. Not all the deals that happens in advance. We did find a few deals, one of them specifically in that same 5G arena that you asked about. That design win, we clearly have to do additional work for that specific customer. We haven't recognized that yet in Q1, although it was fine. And we will probably recognize it over the next couple of quarters. That's one of the big elements of the backlog. And with that said, we also concluded few other deals that we will deliver the technology and finalize the work around it during the second quarter, and that will be part of the revenue in Q2. So yes, we did increase our backlog from the year-end to Q1. Some of it falls into Q2, and this is why we were confident to get such high guidance on licenses. Some of it will move even to the third quarter of the year.

Okay. What are the LTE units in the quarter?

We were just over 80 million units I believe.

Okay. And looking at the non-mobile handset baseband royalty units, they continue to grow but that's been mostly a function of Bluetooth royalty unit growth and that's not necessarily a problem. Just sort of dissecting in non-mobile handset basebands, subtracting Bluetooth royalty units, it seems to be somewhat stagnant for the last few quarters, may be three or four quarters actually at a sub 20 million unit per quarter level. So I am just wondering if we're going to see an uptick in that, and which I guess, is not necessary to get us to that 700 million to 900 million non-mobile handset baseband royalty unit number for 2018.

So, Gary, the Bluetooth 5, it's a volume play and it's growing. What we do see is vision getting into mass production, so in terms of units, I mean, it's not comparable because Bluetooth is much more commoditized product. But in terms of contribution and ASPs, it's significantly higher. So if you ask about things that will flourish in the non-baseband section part of our business, vision is the next thing to come, the next in line.

Okay. I better hop in the queue. I appreciate. Thanks guys.

Thanks Gary.

Our next question is from Matt Ramsay from Canaccord Genuity. Please go ahead.

Thank you very much. Good afternoon, guys. Gideon, I wanted to talk a little bit about the royalty performance in the upcoming year. There is always a good bit of moving parts. But given the fact that you're going to be having much higher volume shipments of LTE chips from Intel, one of your big partners, and the outlook seems to have cleaned up a little bit at Samsung after the launch of the Galaxy S8. So I'm just wondering what the moving parts are to potentially be above your - at the midpoint of your guidance for the year, and any headwinds that you could call out that might be pressuring the results a little bit because there is - as always, there is moving parts but it seems to me that the outlook would have cleared itself up a little bit from when we talked last quarter. Thanks.

When it comes to the mobile side of the business, it's on the second half play because almost everybody is launching new SKUs and there is also the landscape is could change, moving things from the guys that used to dominate into Chinese one like Vivo and Oppo and all these guys. So for now we want to - we keep our guidance for the year. We have to see because it's all about new phones that's coming and then it's a matter of consumer adoption. It's very difficult to be precise on the mobile side of the business there. On the non-handset side, we see this, as I answered to Gary, last year smartphones coming into the market based on our vision technology in the same mindset, it's a matter of consumer adoption. They design new product and head on to our traditional business of the modem side of the business. And we have to see how things will evolve before we become more persistent and knowledgeable of the clients.

Got it. That makes sense. Thank you for that. I wanted to follow-up a little bit on the licensing. I know Gary had asked some questions about second quarter and into the third quarter. But, Yaniv, do you feel like this is a range that you guys are now comfortable operating in on a quarterly basis, given the strength of the pipeline? I know there has been $7 million to $8 million range for licensing in the past and then you guys had bumped it up a bit in recent quarters. So just for a long-term swap modeling, given the visibility that you mentioned in the call, how should we think about the rate on a quarterly basis going forward? Thanks.

Yes, sure. Matt, you're absolutely right that at the end of last year we took up the annual guidance and licensing is something that we have not done before, at least not from an organic point of view. It was done after the acquisition of RivieraWaves and adding the connectivity side and Bluetooth and Wi-Fi, and this is the first time we are doing it on our own, so to speak, and that's when we talked about the 10% increase somewhere between $34 million to $36 million. There is no doubt that the first part of the year is starting strong in licensing. With that said and true for every IT company, this is also the tricky part of the business because you don't have that booked in hedge for Q3 and Q4, and you have to bring those deals and you have to get to these levels. So I think for now, we will continue with what we have done in the past to try to achieve our goals and to come up and license these new technologies, and that's a key factor to it. And if Q3 or Q4 will stay at these levels or go down a little bit in order to make that $34 million to $36 million, we will see. But at least the market that we talked about earlier and the interest for all the different type of technologies is quite strong. So I am happier to be on this side of the table and this side of the answer versus being on the other side. So we will see how things develop.

Got it. That makes a lot of sense. And just the last question from me. OpEx has been ramping up - and actually I applaud the spending again some of these exciting new opportunities. But how should we think about OpEx growth, particularly R&D growth for the rest of the year and just the growth profile you guys want to have us think about longer term for the spending side of the business? Thank you.

Sure. I think this follows really very good with the prior question in that the increase in licensing and we talked about that in the last earnings call, is also a lot of investment in new R&D and this is a unique year that we did guide higher R&D of about $5 million which is not our - was not our common practice in the past. Some of you recall that is little bit due to lower grant payments of this in R&D project but the majority is related to more engineers and more EDA and related expenses. I think we are okay there. At least the next quarter or two, I see that the $14 million non-GAAP number as being something that's a target for us to keep and not grow - and grow behind it - above it. And if you manage that, then we are okay with our annual models and the like. So for now obviously investment is going into this new work of customization and new technologies and customers that we are bringing in and this is where we are spending the dollars and coming up every once in a while with new products around. So I think we are good with Q1 and Q2 is similar type of expense levels.

Thank you.

Sure. Thank you.

Our next question is from Matt Robison from Wunderlich. Please go ahead.

Hi, thanks. First, can you put on a little bit of perspective on the cadence for new applications and royalties this year, when you expect to see that start to ramp, and some color on India and China, what are you seeing from your licensee that is particularly well positioned in those markets? And then I didn't catch if you said that are you expecting to see anything from the chief scientists in the back half that will be offsetting the expenses?

So I will start with the business and let Yaniv respond on the chief scientists. So in terms of India and China, India is most of the people in the low-end - those that specialize in the low-end market are growing there. LTE is becoming almost a mandatory requirement by operator. Even though they don't have the network, it is mandatory requirement. I mentioned in my prepared remarks the LTE feature phone. I think also Qualcomm coming with a LTE feature phone. So there is a potential for a LTE feature phone in this respect, and that's when it comes to the pricing [ph] side. When it comes to other products that's coming to the market, so we have our first smartphone coming with our Vision Technology. We believe that vision in smartphone is going to be a mainstream because that's the way to get differentiation on the camera, and across the street, there is the VR, the AR or augmentation reality. In this kind of use case and applications, the demand for vision processing will increase. So we see Chinese companies coming and doing it and we see western company also, I think, processors in this respect. So we are going to see royalties coming from vision this year in the smartphone space and this become bigger and bigger as we go to 2018 and onward.

On the grant payments, around the May/June timeframe where all the different annual committees that exaggerate the different funding projects that were submitted, so I think next quarter we should have more color on what was approved and what was not and we will know a little bit better. For now, Q1 is always the slowest quarter of the year in the grants and this was the case this year as well.

Thank you.

Thank you, Matt.

Our next question is from Joseph Wolf from Barclays. Please go ahead.

Hi. It's Erica [ph] for Joseph. Just a couple of quick questions. First I guess regarding your involvement in automotive space with ADAS. How many - do you have other - I know you mentioned the agreement that you had announced in the comments. But do you have other partners on that initiative at all, and I guess, what types of partners are integrated, I guess, are you working with? And you mentioned commercial deployment on that agreement within the next year. Does that translate to revenue recognition within that timeframe, or when does that opportunity begin to generate revenue for you? And then I have one follow-up.

So okay, when it comes to automotive revenue, there is a few key partners we announced at the beginning of the year about ON Semi. They developed our technology for automotive space. In the prepared remarks, we mentioned we are doing the planning with existing customer that has a product in advance design stage and here we expect royalty coming from this specific customer in early 2018 commercial deployment in cars that will be sold and there is a new project coming - and by the way this is becoming a routine. Once you get into the automotive space and you get the credibility, then it's much easier to win new projects and to have a prolonged business in the automotive space. Do you have another question?

So on the revenue part is the royalty, the licensing fee is already been recognized and already signed these deals. The royalty is something that should start to contribute, as Gideon said, in 2018 from that specific customer and there will be few others that hopefully will follow a bit later on.

Okay. So early '18 is when we're looking for. Okay. And then just a follow-up on Matt's question from earlier in terms of seasonality on the royalty side of business more broadly and, I guess, thinking about that relative to the timing on some of the higher profile smartphone wins that you had, I mean, does that again tend to mirror the amounts or the rollouts of those new high profile smartphones so that you'd be seeing that start at the same time?

So remember that we report our royalties one quarter in the year, so whatever happens now in Q2 - and in Q1, whatever happens in Q1 and we saw some of the numbers out there, some of the big semiconductor companies in the industry guide down for - report down for the first quarter, that's what we report in Q2. So based on size, we always have that for many years. It's a seasonal effect that's common in the industry. It's even stronger in the non-baseband. If you look at all the Bluetooth public companies that reported so far, all the numbers for Q1 or post-Christmas, no new releases usually to in the winter time and the volumes are lower. So that's exactly what we transfer and will be transparent to us in Q2 royalties. Hopefully a quarter after, we will see the uptick in that the positive seasonality in Q3. We will have to wait and see down the royalty report, because as we mentioned, there are a lot of moving parts and timing and inventory and the buildup, the ramp-ups of SKUs. So that's what the exception - last year was an exception in Q2 on the royalty side. All the prior years, if I look back many, many years, this was pretty common practice.

Thank you.

Sure. Thank you.

Our next question is from Suji Desilva from Roth Capital. Please go ahead.

Hi Gideon. Hi Yaniv. Nice job on the quarter here. The shares popped up in baseband for 42% here from 36%. I am wondering if more share gain is implied in the 10% to 20% growth this year that you targeted, or what the other swing factors might be in the high-end there versus the low-end?

Well, it's almost a one-million-dollar question. The engines are ready. It's very difficult in the smartphone market to predict how things - it's a market that is extremely competitive and we have to take advantage at the time and see whether these are sustainable and we will have to see. But as I mentioned in my prepared remarks, the LTE market is almost untapped 25%, so this is where people are going to. This is where we have the technologies and that is very competitive and there are few players that don't use our technologies and they can get their own share of the wallet, so we have to see.

Okay, fair enough. And then can you update us on the progress of the wireless infrastructure, wins you have, and whether they are ramping to your - tracking towards your expectation for ramp in the second half? Any update there will be helpful.

We - in fact, we already got first royalty with both our customer in the baseband space. It was earlier than we anticipated, and this looks promising and we believe next year it will be even more noticeable.

Good to hear. And then lastly, in the automotive market, you talked about ADAS and you talked about Autonomous Driving, I guess. Can you talk about the content difference per car for you when you go from ADAS up to fully Autonomous Driving? What the delta might be there? Thanks.

Yes, the content is higher. The AD or Autonomous Driving architecture when it comes to our context, it's multi-core play. You cannot do all this work like [indiscernible] and it is multi-core, which means higher content and with all the implications. But it's - the AD space it's still early days there. This is our next objective. Right now, we are in the ADAS space, which is - could be a front-facing camera, it could be a rear camera, all those things that will have one processor. The royalties there is also higher than we know from others industries and this is where we plan and anticipate to have first royalties from the multi-space early next year.

Great. Thanks guys.

Thank you.

And our final question for today is from David O'Connor from Exane BNP Paribas. Please go ahead.

Yes, good morning, gentlemen. Thanks for taking my question. I have got a question on the low-end in China and the weakness that we're hearing about in that parts of the smartphone markets. Can you maybe talk a bit about your positioning there and if that's at all factored into your royalty guidance for the full-year, that 10% to 20%? That's my first question, and I have a follow-up. Thanks.

David, you asked about the low-end space in China on smartphone, right?

Yes.

Okay. So we don't see honestly - as a matter of fact, we don't see any weakness in the low-end space on the contrary. This is - it's a growing space. When you say China, you have to speak about the domestic market versus the export market, because a lot of Chinese OEMs are exporting to India and the other areas of emerging market there, and this is definitely a growing space and expected to grow. Yes, it's a competitive market. We have a few customers and also there is a big newcomer using our technology as well. So if you're asking me whether this is - we are expecting to grow. The answer is yes.

Okay, great. And maybe a follow-up on the neural network processing. This week with the embedded vision so much the top thing, we're seeing some announcements from peers, Cadence and others, optimizing processors for neural networks. Can you talk us more a little bit more about your competitive positioning there, and I am not sure if you've done any benchmark work versus peers that you can share with us, or just the - maybe an overall comment on the competitive environment there, would be helpful. Thanks.

Yes, we also saw this announcement of a competitor. Cadence is a competitor of ours in the vision space. Their approach is, I would call it, for neural network is a software-based. Our approach is more a hardware-software based. The hardware-software based approach is how to do and this is our advantage because this hardware-software approach is far advanced. The two main issues when it comes to a work [indiscernible] in neural net, meaning that you have to - in real-time as fast as possible to detect objects whether it's an autonomous car or whether it's a drone that you don't want the drone to crash. So with the hardware-based approach you get, first of all, faster respond time and you get lower power, which are very significant, especially when it comes to heat in cars or in drones, but it's not just a matter of battery, it's also a matter of heat. So this is the way to do this. This is our advantage. This is our high entry load [ph] that we manage by doing this kind of thing. Our competitors are going in a software-based approach, which is much easier to do for us. It's even easier. But this is not the right things to do in our opinion.

Very helpful. Thank you.

Thank you.

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

Thank you, Denise. Thank you, everybody, for joining us today, and for your continued interest and support of CEVA. We will be attending the following upcoming events and invite you to meet us there. Jefferies Technology Group Investor Conference on May 10 in Miami; Oppenheimer's 18th Annual Israeli Conference in Tel Aviv on May 17; the Benchmark Company one-on-one conference on June 1 in Chicago; and the Jefferies Israel Tech Trek, June 4 through 7, in Tel Aviv and Jerusalem. Please visit the Investor section of our website for further information on these events and other events that we will be attending. Thank you, and good bye.

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