CEVA (CEVA) Q4 2021 Earnings Call Transcript

CEVA (CEVA -0.58%)
Q4 2021 Earnings Call
Feb 15, 2022, 8:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day and welcome to the CEVA Inc. fourth quarter and full year 2021 earnings conference call. [Operator instructions] Please note today's event is being recorded. I would now like to turn the conference over to Richard Kingston, vice president, market intelligence investor, and public relations.

Please go ahead, sir.

Richard Kingston -- Vice President, Market Intelligence, Investor and Public Relations

Thank you, Rocco. Good morning everyone and welcome to CEVA's fourth quarter and full year 2021 earnings conference call. I'm joined today by Gideon Wertheizer, chief executive officer, and Yaniv Arieli, chief financial officer of CEVA. Gideon will cover the business aspects and highlights from the fourth quarter and provide general qualitative data.

Yaniv will then cover the financial results for the fourth quarter and full year 2021 and also provide guidance for the first quarter and full year 2022. I will start with the forward-looking statements. Please note 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. Forward-looking statements include statements regarding demand for and benefits of our technologies; expectations regarding market dynamics, changes in the semiconductor industry, and our plans to capitalize on the foregoing; beliefs regarding benefits and impacts of the Intrinsix acquisition, including expansion into the aerospace and defense market and ability to offer integrated IP solutions and enriched security and assurance products; expectations and financial guidance regarding future performance, including growth in licenses, revenues and customer agreements, and qualitative data for 2022; and objectives regarding sustainability.

For information on the factors that could cause a difference in our results, please refer to our filings with the Securities and Exchange Commission. These include the scope and duration of the pandemic; the extent and length of the restrictions associated with the pandemic and the impact on customers, consumer demand, and the global economy generally; the ability of CEVA's IPs for smarter, connected devices to continue to be strong growth drivers for us; our success in penetrating new markets and maintaining our market position in existing markets; the ability of new products incorporating our technologies to achieve market acceptance; the speed and extent of the expansion of the 5G and IoT markets; our ability to execute more base station and IoT license agreements; the effect of intense industry competition and consolidation; global chip market trends, including supply chain issues as a result of COVID-19 and other factors; and our ability to successfully integrate Intrinsix into our business. CEVA assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates. With that said, I will now hand the call over to Gideon.

Gideon?

Gideon Wertheizer -- Chief Executive Officer

Thank you, Richard. Good morning everyone and thank you for joining us today. The fourth quarter and the fiscal year 2021 was extremely intense and exceptionally successful. As the digital transformation drives industries to become connected and intelligent, our ubiquitous technology and collaborative business model present a significant and secular growth prospect.

Our record financial results for 2021 and the 2022 guidance that Yaniv will shortly outline bodes well with these dynamics. For the fourth quarter, we delivered record revenue of $34.1 million, the third consecutive quarter of record-high revenue, up 22% compared to the fourth quarter of 2020. The licensing environment continues to be robust at $21.3 million on the back of 20 new agreements and four first-time customers. The fourth quarter licensing engagements highlights the transformation in our value proposition from licensing of standardized IP Cores toward licensing of comprehensive IP platforms which leads to higher upfront licensing revenues and larger royalty opportunities.

In this context, we executed a number of sizable agreements this quarter, among which are agreements with a Japanese OEM for the nationwide deployment of 5G fixed wireless access in Japan, a lead OEM customer for the next generation Wi-Fi 7, and a Tier 1 semiconductor company for an AI-based Advanced Driver Assistance Systems "ADAS" project. We also executed the first Integrated IP Solutions agreement, where we couple IP licensing with Intrinsix chip design for a comprehensive platform for a smart motor control product for a large US Semiconductor vendor. Royalty revenue for the quarter came in ahead of our expectation at $12.7 million. Our diverse base station and IoT product category continues to expand, up 21% in royalty revenue versus the respective quarter last year.

Our technologies being deployed in wearables, PCs, smart TVs, robot vacuum cleaners, surveillance cameras, and in plenty of other IoT devices are key drivers for that growth. On 5G RAN, a key customer of ours released for field testing new 5G RAN products enabled by our latest and most advanced DSP, the XC16. Comparing to the fourth quarter of 2020, royalty revenue was down 21%, as a large US-based handset OEM moved to 5G, for which it uses chips from a competitor, which we alluded to on prior calls. For the full year 2021, our total non-GAAP revenue grew 22% to a record $122.9 million, driven by a step up in our licensing, NRE, and related revenue.

Revenue from this part of our business had record performance of $73 million, up 39% compared to last year, with 73 agreements, up from 55 last year. These achievements in licensing are key for our business growth, as signing up licensees is the precursor for royalty revenue, which in turn scale our operating leverage and earnings per share. Our consistent and relentless efforts to grow and diversify our licensees is already apparent in the royalty revenue out of the base station & IoT segment, that grew by 29% year over year to a record $28.6 million and 69% in units and approaching 1.3 billion units. Overall, royalty revenue was a record-high $49.9 million of which the strong growth in royalty revenue out of the Base Station and IoT category more than offset the decline in the handset category.

To grow further our licensee base and strengthen our value proposition in these engagements, we completed the strategic acquisition of Intrinsix during the year. Intrinsix brings in a new customer base in the lucrative aerospace and defense markets and enables us to offer integrated IP solutions where we offer a combination of IP licensing with SoC design for an optimal performance outcome and a larger revenue share with our customers. Let me at this stage walk you through the thought process we went through to determine our focused go to the market strategy. The ongoing turmoil in chip supply has made evident the foundational role the semiconductor industry has in technology innovation and the overall economy.

According to Deloitte, in 2020, global semiconductor sales rose 6.6% to $440 billion even as global GDP shrank 3.5%. And for the next decade, the semi space is expected to show 50% faster growth than global GDP. Furthermore, geopolitical tensions and the criticality of chip supply to national security drive governments to spend and incentivize investment in the semi space, as can be seen by the anticipated U.S. senate bill for $52 billion investment in semiconductor technologies, the Chinese government's announcement of $150 billion investment in the semi space over the next 10 years.

This explosive demand for chips, drives, OEMs and IT companies to internalize their chip needs and to engage directly with foundries and IP companies. Also, the Chinese government's ambitions to be self-sufficient in the semiconductor space encourages local investors and technologists to form new chip companies to drive the fast-growing electric car, industrial, and consumer products industries. Against this backdrop, CEVA's broad IP portfolio and capabilities to expedite and streamline customer chip developments has opened new and sizable customer opportunities. Let me add more color on how we plan to capitalize on these tectonic changes.

Wireless: Wireless technologies, including cellular, Wi-Fi, Bluetooth, and UWB have been a key strength for CEVA. Over the years, we have been able to focus on the right end markets and to build a very large base of key customers. We have earned a strong reputation, which enables us to engage with and sign-up top customers to drive next generations and new trends in wireless. Strategically, we will pivot on two main wireless trends.

First, the proliferation of 5G in broadband and massive IoT. The recent Ericsson Mobility report projects 5.5 billion cellular connections by 2027 that are not handsets, up from 1.9 billion connections in 2021. Cellular IoT applies to broad markets, among which are fixed wireless access devices, automotive, industrial, laptops, and more. Cellular IoT is fundamental to enable smart transportation, smart grid, robotics, and remote healthcare.

CEVA offers to OEMs and semiconductor companies targeting cellular IoT two highly integrated IP platforms, the PentaG for Mobile Broadband IoT, and DragonFly for massive IoT. We believe that by capitalizing on these two technologies and the upcoming new generations, place us in a position to address the whole market needs and to enable new entrants to penetrate this huge space. Second is the Wi-Fi upgrade cycle. The Wi-Fi market is huge and growing.

ABI Research forecasts 5.5 billion Wi-Fi devices by 2026, up from 3.5 billion in 2021. The rollout of the latest standard Wi-Fi 6, and recently 6E, is underway and expected to see more shipments than any prior standards as it extends beyond smartphones, PC and tablets, to smart home, industrial, cars, AR and VR, and many more markets. The complexity encompassed in new Wi-Fi designs, along with new connected devices that require Wi-Fi IP integration, is driving strong momentum in our overall annual licensing & NRE business, which was up 39% in 2021 versus 2020. Our R&D investment will focus on the next generation, Wi-Fi7, which is expected to be in the market by 2024.

As mentioned earlier, in the fourth quarter, we signed a lead customer Wi-Fi7 agreement with one of the largest OEMs in China which seeks to decouple its dependencies on the chip incumbents that currently dominate the advanced Wi-Fi chipset market. Edge AI: Edge AI emerges from a growing need to hand over AI processing from the cloud to smart devices such as smartphones, cars, robots, or 5G base stations to gain faster response and higher security. Per a recent ABI research forecast, edge AI is a fast-growing market, expecting to surpass 1.3 billion units by 2026. CEVA has targeted the edge AI market from early on.

We already have good penetration with edge AI in Automotive ADAS market where we are closely working with industry leaders including both semis and OEMs and, in the surveillance, and consumer markets. To further capitalize on our strength, we unveiled last month our new generation AI processor, the NeuPro-M. NeuPro-M delivers a significant performance leap compared to its predecessor, NeuPro-S, and for the first time introduces new concepts in AI architecture designs, security integration, and chiplet scalability. Its heterogeneous, multiprocessor architecture offers performance ranging from 20 Tera Operations per Second or TOPS to 1200 TOPS.

Its use extends beyond video to a whole new range of AI usages such as Natural Language Processing, 5G network optimization, Level 4 and 5 fully autonomous cars, industrial machines, and more. For the first time, NeuPro-M enables chiplet scalability for which our Intrinsix team can offer a turnkey design for heterogeneous SoC. Wearable and Hearables: The onset of COVID-19 has increased the demand for wearable and wireless headsets and catalyzed innovation in these spaces. Wireless headsets are looking for high-quality sound with smart and dynamic noise suppression.

Smartwatches are disrupting the traditional watch market and are evolving into health and activity monitoring devices. Research firm Yole Développement forecasts that shipments of TWS earbuds, hearing aids, smartwatches, and smart speakers will surpass 1.3 billion units by 2026. CEVA already has a strong position in the wearables and hearables space, with dozens of active customers. We are in a unique position to standardize wireless audio processing IP with our latest Bluebud platform.

Last month, we enriched the Bluebud value proposition with the launch of Bluebud HD, a suite of pre-configured software for high quality audio, voice conversations, and contextual awareness. Bluebud HD lowers the cost of entry for many semiconductors and OEM's that lack the scarce expertise in wireless audio, which CEVA masters. China: Our revenue out of China grew 30% this year versus last year. Unit shipments by our Chinese customers grew 38% versus 2020.

We are the de-facto standard in wireless communication used by all the major players, among which are ZTE, Unisoc, Bestechnic, Beken, ASR Micro, and others, which overall constitute more than 75 active customers. ZTE, our key customer in 5G base station RAN, is set to substantially grow network footprint in China, as can be seen by its recently securing 31% of the recent China mobile procurement bid for 5G 700Mhz networks, and 34% of the 5G stand-alone construction for China Telecom and China Unicom. We are uncovering sizable opportunities in automotive, robotics, and mobile where leading OEMs are internalizing chip design. Our most advanced technologies and our brand recognition sets us up for further growth in China.

Next before my closing remarks, I want to update you on our objectives and commitments toward future sustainability. Companies around the world have provided sustainability plans for decreasing their carbon footprint over the next decade. At our end, being an IP company, our direct carbon footprint is minimal, with activities primarily by R&D engineers and no manufacturing facilities. However, we intend to take advantage of our expertise in wireless, AI, and low-power designs to help our customers achieve their own sustainability goals.

As I stated above, we are focusing on Wireless IoT where our technologies can add resiliency and run time analytics to optimize energy and water utilization and to expedite the shift to renewable energy. We will also work with our base station RAN customers on next-generation DSP technologies that will serve their objective of lower heat dissipation and energy consumption. We will continue to periodically consult with our investors of their perspectives on sustainability. So in summary, CEVA is uniquely positioned to capitalize on the semiconductor momentum and market transformation toward digitization, AI, and connectivity.

Our customer pipeline at the end of the year is historically high. We believe our key customers are keenly receptive to our products road map and priorities and willing to expand the scope of engagements with us. We expect 2022 to be an exciting year with growing momentum in revenue, EPS, and customer engagements. We are determined to continue to develop standout products and consistently grow our customer base and licensing engagements to scale our business.

Finally, I would like to take this opportunity to thank all of our employees for their hard work and dedication, innovation, and fantastic execution. I would like to extend my thanks to our partners, suppliers, and to our shareholders for their confidence and support. We wish you all a healthy, happy, and prosperous year and please stay safe! With that said, I'll now turn the call over to Yaniv, who will outline our financials and guidance.

Yaniv Arieli -- Chief Financial Officer

Thank you, Gideon. I'll start by further reviewing our results of operations for the fourth quarter of 2021. Revenue for the fourth quarter was a record high at $34.1 million, up 21% compared to $28.1 million for the same quarter last year, our third sequential all-time high. Non-GAAP revenue was $34.2 million, up 22% year-over-year, $0.2 million higher due to the purchase price allocation adjustment associated with our Intrinsix's acquisition.

The revenue breakdown is as follows, Licensing, NRE, and related revenue was $21.3 million, reflecting 63% of our total revenue, up 78% as compared to the fourth quarter of 2020 and just slightly below our third quarter 2021 record high. Royalty revenue was $12.7 million, reflecting 37% of our total revenue, down 21% from $16.1 million for the same quarter last year, but up 13% sequentially. Base station & IoT royalty revenue contributed $7.8 million in the quarter, up 21% year-over-year, including all-time record high contribution from our sensor fusion product line and continued growth and strength across our base station and IoT product lines overall. Gross margins were 83% on GAAP basis and 87% on non-GAAP basis, both higher than projected due to lower allocation of Intrinsix's NRE costs from R&D into cost delinquence expense line.

Non-GAAP quarterly gross margin exclude approximately $0.3 million of equity-based compensation expenses and $1 million amortization of acquired assets associated with the Intrinsix acquisition and Immervision investment. Our total operating expenses for the fourth quarter was $26.6 million, over the high-end of our guidance, due to lower allocation of Intrinsix's NRE costs from R&D to the cost of revenue per our prior quarter guidance. Such shifts between the two expense line items may happen from time to time and are tied to the actual chip design work performed in the quarter. Opex also included aggregate equity-based compensation expenses of approximately $3.2 million, amortization of acquired intangibles of 1, and $0.3 million Intrinsix related deal costs.

Our total operating expenses for the fourth quarter, excluding equity-based compensation amortization of intangible and deal costs were $22.4 million, over the high-end of our guidance, due to the same reasons I just stated for GAAP. GAAP other income included a $1.5 million reevaluation, net of taxes of our investment in Cipia, formerly called Eyesight Technologies, a leading provider of in-cabin sensing solution in the automotive industry, that recently went public on the TelAviv Stock Exchange. We will adjust our investment quarterly based on the market valuation of their shares. GAAP net income for the quarter were $3.9 million and diluted net income per share $0.17 compared to net income of 0.6 and $0.03 for the fourth quarter of 2020.

Our non-GAAP operating income increased 8% to $7.2 million from $6.7 million for the same quarter last year. Our non-GAAP net income and diluted EPS for the fourth quarter was 5.3 and $0.22 respectively, significantly higher than our internal estimates. Net income and diluted EPS for the fourth quarter of 2020 were 4.7 and $0.20 respectively. Other related data, shipped units by CEVA's licensees during the fourth quarter were 416 million units, down 5% sequentially and down 14% from the fourth quarter of 2020 reported shipments.

The 416 million shipped, 83 million units or 20% were for handset baseband chips, reflecting a sequential increase of 148% from 33 million units and handset baseband chips during the third quarter of 2021 and a 62% decrease from 149 million units shipped a ago. Our base station and IoT product shipments were 333 million in the quarter, down 18% sequentially and up 25% year-over-year. Of note, sensor fusion was a record 21.8 million units in the quarter, with cellular IoT, Bluetooth and Wi-Fi also delivering strong contributions. As for the year, our total shipments increased 24% year-over-year to over 1.6 billion units, an all-time record high and which equates to approximately 52 CEVA-powered devices sold every second in 2021.

Annual shipments of handsets were down 33% year-over-year to 383 million devices. This decline is attributable to a socket loss of a customer at a key OEM who was replaced by Qualcomm for 5G modem chipsets and lower shipments of overall 2G feature phones in emerging market last year. Our base station and IoT product royalty revenue continued to grow and reached a new record level of $28.6 million, up from $22.3 million in 2020 and $13 million in 2019. In terms of units, base station and IoT product unit shipments were up 69% year-over-year to almost 1.3 billion devices.

Non-GAAP operating income from 2021 increased 43% to $22.7 million from $15.9 million reported from 2020. Overall, excluding our Intrinsix business, we grew our revenue 14% year-over-year, With non-GAAP licensing business growing 22% to almost 64 million units With the Intrinsix business now fully on board and with the new opportunities outlined by Gideon earlier, we are excited by the potential ahead of us. As for the balance sheet item, as of December 31st, 2021, CEVA's cash, cash equivalent balances marketable securities and bank deposits were $155 million. We did not repurchase any shares during the year and have approximately 0.5 million shares available for repurchase.

Our DSO's for the fourth quarter were 39 days, slightly lower than the prior quarter and below our norm level. During the fourth quarter, we generated $11 million of cash from operation, depreciation and amortization were $2.3 million, and purchase of fixed asset $0.7 million. On an annual basis, we generated $25.8 million from operations compared to $15.2 million a year ago. At the end of the year, our headcount was 476 people, of which 390 were engineers, slightly lower than 485 people at the end of September.

Now for the guidance, as Gideon explained, we expect 2022 to be another exciting year with strong growth expected in licensing and NRE revenue and in royalties from our base station & IoT category. Overall, we are forecasting total revenue to be in the range of $141.5 million to $145.5 million versus $122.9 million in 2021. Our licensing, NRE, and related revenue business is expected to grow and expand as we benefit from multiple growth vectors where we excel, in particular 5G, Wi-Fi 6 & 7, Edge AI, Wearables and Hearables. In addition to our new integrated IP solution offerings and expanded access to the lucrative aerospace & defense market via Intrinsix present further compelling opportunities.

In royalties, our base station & IoT product category continues to flourish and we will have a noticeable contribution in royalties in 2022. We anticipate royalties from base station RAN, Bluetooth, Wi-Fi, and sensor fusion will be the main drivers and will outgrow their representative markets. Overall, we forecast another growth year in royalty revenues, where the strength of our base station & IoT royalty drivers will more than offset the anticipated decline in handset base station royalties, and the remaining 4G smartphones from the Tier 1 OEM are phased out over the course of the year. On the expense side, we forecast just over $18 million in additional overall expenses in 2022 versus 2021, recorded both in COGS and opex, as we consolidate the Intrinsix business on a full-year basis compared to only seven months in 2021 and from our other R&D ongoing investments.

Specifically, on COGS, we expect higher non-GAAP expenses of over $10 million due to the cost of NRE revenues from Intrinsix. On opex, with a strong licensing execution in recent years and even stronger expectations for 2022, we will continue to support these new customers and reinforce our leadership with disciplined investments in R&D. Overall, non-GAAP opex increases will be approximately $8 million, part of it is also contributed to the consolidation of the Intrinsix business on a full-year basis compared to only seven months in 2021. Equity-based compensation is forecasted to be higher than 2021, around $16 million.

This is due to special retention efforts targeting our employees, compared to pre-COVID-19 era and the recent competitive semiconductor industry in all our worldwide R&D sites. Annual gross margin is forecasted to be in the region of 80% on a GAAP basis and 82% to 84% on a non-GAAP basis. Interest income is forecasted to be higher than 2021 due to the increased interest rate environment and hopefully better FX effects than we experienced in 2021 at approximately $0.4 million per quarter. Taxes are expected to be approximately 25% of pre-tax income on a non-GAAP basis and our share count for 2022 is expected to be approximately 24 million shares.

Specifically for the first quarter of 2022, gross margin is expected to be approximately 80% on a GAAP and 82% on a non-GAAP basis, excluding an aggregate $0.3 million of equity-based compensation expenses and $0.5 million of amortization of other assets. opex for the first quarter of 2022 is forecasted to be lower than the fourth quarter on a GAAP basis and flattish on a non-GAAP basis. GAAP-based opex is expected to be in the range of $26.4 million to $27.4 million. Of our anticipated total operating expenses for the first quarter of $3.2 million is expected to be attributable to equity-based compensation expense and $0.8 million for amortization.

Excluding those items, non-GAAP opex in the first quarter is expected to be in the range of $20 million to $21 million. Net interest income is expected to be approximately $0.4 million as was the trend in the first quarter of 2021, taxes in the first quarter of 2022 are expected to be higher than the norm, with strong pipeline and backlog revenue mix for our connectivity product, originating in France, which has a higher corporate tax rate and from utilization of withholding taxes in Israel. Last, the share count for the first quarter is expected to be approximately 23.8 million shares. Rocco, you could now open the Q&A session.

Questions & Answers:

Operator

Thank you. [Operator instructions] Today's first question comes from Suji Desilva with Roth Capital. Please go ahead.

Suji Desilva -- ROTH Capital Partners -- Analyst

Hi, Gideon. Hi, Yaniv. Congratulations on the results on the strong '22 guidance. If you could go into the revenue there that you guided and talk about what you think the revenue license mix is? And more generally, how should we think about the license model evolving here from what we've seen in the past?

Gideon Wertheizer -- Chief Executive Officer

Yeah, I mean what we are seeing is strong interest in WiFi and we mentioned WiFi 7, WiFi 6 is the mainstream one and we start seeing people are looking for WiFi 7. It's hard to find even semiconductor company that offer Wi-Fi 7 and we are in a position to offer it. In 5G, we mentioned in the call a very large agreement that we did in the more broadband IoT, broadband IoT is everything that outside of the mobile. We are extremely optimistic about the AGI market.

We came out with a fantastic product, which we call new forum and we already in the beginning of the quarter signed a lease customer for the AGI. And the first anchor in our business is everything that relate to wearables and wearables so TWS, headsets, gaming headsets, watches. So when you look on the composition, at least what we see today, these are the four large ones. On top of it, we have what Intrinsix bring in, it's a solid customer base.

There's a pretty large customer base, very loyal and with them, we are offering also to customer integrated IP solution, integrated IP solution is a sizable agreement. It's the IP plus the designs that Intrinsix can do and we basically adopt things in the semiconductor called semi custom, we do an IP version of the semi custom and the outcome is a large deal. So overall, you see a step up in the licensing that is not because of M&A and activity just a matter of growing activities and interest for customers.

Suji Desilva -- ROTH Capital Partners -- Analyst

OK. And then the license for '22, would you expect it to start becoming more lumpy given the use of Intrinsix, just to understand that dynamic?

Gideon Wertheizer -- Chief Executive Officer

Well, licensing in general is lumpy. The idea is to have a large pipeline and to try to see on a yearly basis that you are doing. So I don't anticipate, you know us for a while, we didn't come out with net surprises in licensing. And I think the way we see it now it's -- this will be the case in 2022.

I would add that for the beginning of the year, we're looking at a very strong pipeline and backlog for the beginning of '22 with some deals that are already signed in the quarter, so at least the beginning looks quite robust.

Suji Desilva -- ROTH Capital Partners -- Analyst

OK. Great. And then one quick follow-up, perhaps for Yaniv. The gross margin for 1Q you guided 82% for the full-year, you guided 82% to 84%, what are the drivers of expanding gross margin through '22? Thanks.

Yaniv Arieli -- Chief Financial Officer

Sure. A lot of it comes from the royalties. Obviously, the royalties is the high-margin business and the lucrative part of our business. And we see that ramping up toward the later part of the year with more base station activity and newer markets and newer players that should come into production with us in the second half of the year, that's one technical contributor.

The other is just that's more or less the changes because the licensing as we said earlier, it's more or less the same, sometimes one quarter could be stronger with a larger deal or versus the other, but there's nothing dramatical changes from the cost of that business. So technically, there will be -- set the tone for the gross margins.

Suji Desilva -- ROTH Capital Partners -- Analyst

OK. Thanks, Gideon. Thanks, Yaniv. Congratulations again on the progress.

Gideon Wertheizer -- Chief Executive Officer

Thank you.

Operator

And our next question today comes from Tavy Rosner with Barclays. Please go ahead.

Chris Reimer -- Barclays -- Analyst

Hi. This is Chris Reimer on for Tavy. Thank you for taking my question. You mentioned some of the potential from the Intrinsix integration beginning -- well, ramping up through next year.

Can you just talk a little more about that and what you're most excited about in terms of revenue drivers into next year?

Gideon Wertheizer -- Chief Executive Officer

So I believe you ask about the integrated IP solutions, that's the question? So first of all, last year, we signed the first agreement in this category of business. So the idea is to come to the customer with the IP that we have and you know that we have a pretty broad portfolio of IP and take care of not just providing the standard of SAP, but the whole platform for the customer. So there are many, especially OEM side that they want to go fast into the market and still let the experience of building an SoC and embedding IP and SoC. So we are coming and say, OK, let's build a business model that we do not just give you IP, but also do the whole design of your section or a chip.

And the benefit for us is that we get larger share of the wealth that come out of it. So in terms of license and royalties.

Yaniv Arieli -- Chief Financial Officer

So what Gideon was saying that we acquired Intrinsix six or so months ago, but we already in the second quarter, they were with us, we were able to change some of their business model and also collect royalties for those services. So that was the first step and it's already in design and we should be getting the royalties in the future. And we want to take this to another level, we're adding much more of CEVA's technologies on top of Intrinsix and doing this combination.

Chris Reimer -- Barclays -- Analyst

OK. Got it. And just looking into M&A, I don't know if it's down the table just now, but do you have anything maybe in the pipeline, are you comfortable with where you are from a technology standpoint right now?

Gideon Wertheizer -- Chief Executive Officer

No. I think we've made a lot of achievements. If you look at the licensing revenues over the last couple of years, that's the -- the answer to the question of do we have enough technologies, are the technologies interesting and growing the markets in the world today in the semi world, in the digital era that we talked about in the prepared remarks. So if you look at the -- in that aspect, I think we are doing there all the right things.

And obviously, there are more technologies out there that we're focusing, whether it's next generation or new things. So we're not done with it and we'll continue to --

Yaniv Arieli -- Chief Financial Officer

I should add to this when you do a licensing, it's just the first part of the success because this should be followed with royalties. So when you look on -- for a while, for the last few years, we are growing the licensing consistently and you look last year on the royalties coming from this licensing, what we call the base station and IOP, that's 29% year-over-year growth in royalties and we are talking about 1.3 billion units. I think it's 61% year-over-year unit growth. So that's how when this cycle, visual cycle works, this is how it work, you grow the licensing in two years further you see the royalties.

Chris Reimer -- Barclays -- Analyst

Got it. All right. Thank you very much. That's it for me.

Gideon Wertheizer -- Chief Executive Officer

Thank you.

Operator

And our next question comes from Matt Ramsey with Cowen and Company. Please go ahead.

Ethan Potasnick -- Cowen and Company -- Analyst

Yeah. Hi, there. This is Ethan Potasnick on for Matt Ramsey here. Congrats on the great quarter.

I wanted to kind of drill into the full-year '22 guide a little bit more, this is a bit broad, but could you guys discuss where you guys see most of the upside coming from? If you could kind of parse the origins on that growth between handsets and 5G? You guys gave some positive commentary out of some signals in China or is that Intrinsix or a mix between those sort of things? Thank you.

Gideon Wertheizer -- Chief Executive Officer

So it's -- let me try, Yaniv will add his perspective, but when you look on the licensing, it's -- we mentioned earlier, I think it was Suji's questions about all those drive. So we expect growth in this licensing, we have the product, we have the customer base with the market position and that's good because this creates the next cycle support. Now in terms of royalties, I would say in the base station, IoT is a solid growth. We have all -- it's a combination of new products because we have so many customers in the pipeline that start to ship and -- but things that we see in the position that we have this in smart TV, PC, earbuds this will be volume-driven.

Also in the 5G RAN, last year, when it comes to China was kind of a pause in terms of capital expenditure, but it looks like and we get to data point VP, a much larger win rate in China Mobile, China Unicom so and the XC16 which is the next -- the new chip that they roll out for field testing, so that gives us some indication for renewal expenditure in China more into not just the urban one, but rural and also in the industrial robotic they want to install, they want to rely on 5G. We have another customer that's showing production ramps and that's the 5G. In mobile, we believe 2022 will be the bottom when it comes to this large OEM that moves to 5G, which is not this technology and other and we have other -- we have other customers in this area. I think the other customers that we have in the handset, in the baseband side will benefit from the move of 5G from high tier to the low tier where this is the sweet spot.

And we have -- we signed up and that's something that we want to emphasize while we are here that CEVA play in 5G handset is not just in the basement process. So we have customers that license our connectivity, WiFi, and Bluetooth. So they're going to use our connectivity IP for handset. So one is already shipping, the other one is in design.

So that will be another angle that we see materialize in the year or early next year. And so that's when it comes to the royalty. So base station IoT growing, cellular, a bit mixed bag, but still we believe when it comes to the key customers, it's below, but the other customers likely to ship more than 2021.

Ethan Potasnick -- Cowen and Company -- Analyst

OK. Great. Very helpful. And then as a follow-up, while not generating a ton of royalty revenue currently, we've kind of seen some great progress for the burgeoning opportunities in auto.

And now with this sizable AI ADAS-based agreement you guys called out in the prepared remarks, I was wondering if you guys could expand a little bit more on auto, given some of the more accelerating trends we're seeing out there today?

Gideon Wertheizer -- Chief Executive Officer

Yeah, you mentioned those. Beyond the 5G and Wi-Fi which is extremely big and vibrant, ADAS is a growing market. We see very interesting OEMs and Tier 1 talking to us about chips that they want to make, talking about our AI in particular the new generation. So -- but this is, as you know, automotive, it's a longer cycle and a lot of things will happen and we need to build the first the license before start talking about royalties, royalties is more '25, 2025, 2026.

Ethan Potasnick -- Cowen and Company -- Analyst

OK. Great. Thank you.

Gideon Wertheizer -- Chief Executive Officer

Thank you.

Operator

And our next question today comes from Martin Yang at Oppenheimer. Please go ahead.

Martin Yang -- Oppenheimer and Company -- Analyst

Hi. Thank you for taking my question. My first question is on your 2022 outlook. So embedded in the guidance is roughly mid-teens growth, do you expect Intrinsix -- how do you expect Intrinsix to grow comparing to the other parts of the business?

Yaniv Arieli -- Chief Financial Officer

Yeah. We opened up Intrinsix for this year because it was new and it was only for seven months and trying to get it to quantify that add-on because it was something unique that we took and expect on. Going forward, as we explained here multiple times, I think in the prepared remarks and even the achievement so far with this ISP integrated service -- IPS yes, sorry, solutions is that we see Intrinsix today is part of CEVA. We see the IP offerings to semis and to OEMs today is a much more richer content and it's not just the pure IP, most of the public companies that deal with IP today do this and offer other services and other design wins and more help to the customer for revenues.

Obviously, these are larger deals and bigger opportunities and potentially with new customers that don't have the bandwidth to design their own chip, but if you could design a block for them or the chip for them, that opens up a new market that CEVA before that did not have. So going forward, I don't think we're going to break down Intrinsixs' with different segments of CEVA, from time to time maybe we give some qualitative data like we give on the base station, on a non-handset market that we are activating and see win some interesting deals or some interesting design wins that will highlight them. I think one of the most interesting one is the one that we talked few minutes ago about adding for the first time, not just chip design services, but also royalties for their end market. And if that's part of the CEVA business going forward, larger deals with licensing element, with an element and with an ongoing royalty element, so we are tied and could come back to the next generation and be part of the next-generation chip, both design and IP offering that again, new royalty stream, that overall strengthens the CEVA story and this is how we believe is the right way to approach the semi space today.

So I hope that answers your question?

Martin Yang -- Oppenheimer and Company -- Analyst

Yes. Understood. My next question is about any potential impact you see in the first calendar half on the supply chain shortages that may affect your outlook for royalty revenues?

Yaniv Arieli -- Chief Financial Officer

No, we've been two years now in COVID, lot of buzz and lot of issues around supply chain, but we haven't seen really any effect or is minimal to be more precise effect with one or two customers that guided lower last year due to chip design. You may have seen that more in the low-cost 2G phone, the feature phones, I think there was much more focus on higher-end devices last year and maybe those types of products in the emerging market got less attention and chips to build the model, maybe we saw a little bit in the base station side as well, but we haven't seen that as a problem. And hopefully, 2022 clears out more faster than it was in last year, but we haven't seen any real effect yet, at least significant ones by any of our customers.

Martin Yang -- Oppenheimer and Company -- Analyst

Got it. Thank you very much.

Gideon Wertheizer -- Chief Executive Officer

Thank you, Martin.

Operator

And ladies and gentlemen, this concludes our question-and-answer session. I'd like to turn the conference back over to Richard Kingston for closing remarks.

Richard Kingston -- Vice President, Market Intelligence, Investor and Public Relations

Great. Thank you. Thank you, everybody, for joining us today and for your continued interest in CEVA. As a reminder, the prepared remarks for this conference call are filed as an exhibit to the current report on Form 8-K and accessible through the Investor section of our website.

With regards to upcoming events, we will be participating in the following conferences, the Susquehanna Virtual Technology Conference, March 3rd and 4th, and the 34th Annual Roth Conference, March 13th to 15th in Dana Point, California. Further information on these events and all events we will be participating in can be found on the investor section of our website. Thank you, and goodbye.

Operator

[Operator signoff]

Duration: 60 minutes

Call participants:

Richard Kingston -- Vice President, Market Intelligence, Investor and Public Relations

Gideon Wertheizer -- Chief Executive Officer

Yaniv Arieli -- Chief Financial Officer

Suji Desilva -- ROTH Capital Partners -- Analyst

Chris Reimer -- Barclays -- Analyst

Ethan Potasnick -- Cowen and Company -- Analyst

Martin Yang -- Oppenheimer and Company -- Analyst

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