Gideon Wertheizer – CEO Yaniv Arieli – CFO

Matt Robison – Wedbush Anil Doradla – William Blair Tom Ehrlich – RBC Capital Markets Robert Morrison [ph]

Thank you. Good morning, everyone, and welcome to CEVA’s second quarter 2009 earnings conference call.

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 statement and assumption. Forward-looking statements include financial guidance for the third quarter of ‘09, general outlook for the second half of the year, market statistics gathered from analysts, increasing our market share expansion, new product introductions by our customers, their production schedules, and our ability to generate revenue from those new products, as well as our ability to capitalize on the ultra low-cost phone, CDMA, netbook, 4G, LTE and high definition video trends.

The risks, uncertainties and assumptions include the ability of the CEVA DSP cores and other technologies to continue to be a strong growth driver for us; our success in penetrating new markets and maintaining our market position in existing markets; the effect of the intense competition within our industry; the effect of the challenging period of growth experienced by our industry in which we license our technologies too; the possibility that the markets for our technology may not develop as expected or that our products incorporating our technologies do not achieve market acceptance; our ability to timely and successfully develop and introduce new products and technologies; our ability to continue to monitor our royalty revenue in future periods and improve them; and general market conditions and other risks related 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 on their representative dates.

This conference call will be conducted by Gideon Wertheizer, Chief Executive Officer of CEVA, and I, Yaniv Arieli, Chief Financial Officer of CEVA. Gideon will cover the business aspects and the highlights for the recent quarter and I will cover the financial results for the second quarter of 2009 as well as the financial guidance for the third quarter of ‘09.

With that, I would like to turn the call over to Gideon.

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 second quarter of 2009.

During the quarter, we achieved total revenue of $9.1 million compared to $10.1 million recorded for the second quarter of 2008. Royalty revenue for the second quarter of 2009 was $4 million, significantly higher than the $3 million reported for the second quarter of 2008 and 5% higher than the first quarter of 2009.

We should note that the royalty revenue for the second quarter of 2009 includes approximately $0.9 million of catch-up royalties on past shipments resulting from a single customer. Excluding the catch-up royalties, our royalty revenue was $3.1 million.

I would like to remind you that our customer reports royalty one quarter in arrears. So the second quarter royalty revenue for CEVA reflects in fact the first quarter 2009 shipments during which time the industry was experiencing substantially lower demand in our primary market, the cellular handset and the consumer electronics.

During the second quarter, we concluded ten new license agreements. Eight of the agreements were for our CEVA DSP cores platforms and software and two agreements were for our SATA and PLL technologies.

Geographically, four of the license agreements are in Europe; four in Asia, which include Japan; and two in the US. Target applications for the licenses concluded during the quarter are primarily 4G handsets, HSPA+ femtocells, Passive Optical Networks and Media Phones.

In the second quarter, we continued to experience the impact of the global recession. Depressed R&D budget that was set [ph] at the beginning of the year based on the assumption of prolonged downturn continued to impact new development in IP licensing.

Our royalty revenue, excluding the recovery from the unreported royalties, reflects significantly lower shipment of consumer products during the first quarter. On the other hand, in our main market, the handset space, our market share significantly increased from 12% in the previous quarter to a record high of 18% for this quarter, mainly due to growing shipments in the emerging markets.

In a few minutes, I will further elaborate on this trend. Despite the challenging environment, we were able to generate revenue at the higher range of our guidance and continue to show healthy profitability metrics.

For example, non-GAAP operating margin doubled to 16% compared to 8% for the same period in 2008, while non-GAAP EPS increased by 14% to $0.08 per share compared to the same period in 2008. During the quarter, we continued to build our strong cash position, achieving free cash flow generation of $2.7 million.

As I mentioned earlier, we concluded ten new license agreements during the quarter. A noteworthy achievement in light of the (inaudible) companies are taking with R&D expenditures.

Of the agreements executed, we see increasing momentum for our LTE development, specifically for handsets and femtocells, which are small residential gateway that seek to provide cellular coverage in the residential setting or in enterprise premises. Our customers are considered to be leader in the baseband space and are using CEVA best of breed DSP core, the CEVA-X1641, for these developments.

We also are taking advantage of this strategic relationship to enable adoption of our next generation DSP, the CEVA-XC for next wave of LTE products that will offer substantially higher beat rate [ph] and more complexity. Now, a few key observation about the cellular handset markets.

As I stated earlier, we continued -- the continued slowdown in demand for handsets had no adverse impact on our continued market share expansions and the shipments of phones containing our DSP core. Our worldwide baseband market share as of the first quarter of 2009 grew to a record of 18% versus 12% at the end of 2008.

During the quarter, 46 million chips were shipped with our DSP cores, a record quarterly high for CEVA and up 29% versus 36 million in Q1 2009. This is an outstanding achievement given that (inaudible) during the first quarter, the industry experienced the highest quarter-over-quarter decline since Gartner started to cover industry back in 2001.

The main contributors to our market share expansion are, one, ultra low-cost phones in emerging markets. A new report from Juniper Research forecasts that between 2009 and 2014 annual sales of low-cost mobile handsets will rise by 22% to over than 700 million units.

Furthermore, it expected that over the next six years, nearly 80% of new mobile phone users will come from emerging markets. Two, CDMA handsets in China.

The CDMA space was originally invented and dominated by Qualcomm. Although CDMA deployments are substantially smaller than GSM deployment, CDMA is broadly used in larger markets such as US, Korea, and most recently in China.

(inaudible) branded CDMA based phone sales in China reached 5.8 million units in the first quarter, up 200% versus the same period in 2008. Also China Telecom, one of the big three integrated telecom operators in China, announced recently that they enter into strategic partnership agreement with our customers, VIA Technologies, to cooperate on CDMA technology development.

Dr. Ker Zhang, VIA Telecom’s CEO, the company had 3.7% market share last year and expects to expand the market share to 25% this year, as China 3G services take off.

VIA has more than ten customers, including the three largest suppliers in this space; Nokia, Samsung and LG. Going forward, we expect our market share to increase further as a result of the following recent customer announcements.

One, for the first Broadcom -- the first Broadcom power phone [ph] at Nokia was announced during the quarter, signaling the start of a highly anticipated threat up at Nokia. The Nokia 7020 uses a single-chip EDGE solution powered by CEVA DSP and is expected to be introduced to the market in Q4 of this year.

Infineon announced a new design win for EDGE for Nokia, bringing the number of design focus for CEVA DSP powered vendors at Nokia to five and further strengthening our presence as the world’s number one handset OEM. Broadcom also began volume shipments to Samsung during the quarter with their single-chip EDGE solutions.

The high profile Samsung Star S5230 has achieved strong sales to date, and the Samsung (inaudible) reported that the company expects to ship 10 million units of this phone worldwide by the end of 2009. During the quarter, Ericsson announced the F3307 embedded mobile broadband module for netbook enabled by our CEVA-X DSP.

Ericsson is working closely with Intel to validate the F3307 with Intel next generation netbook platform named Pine Trail-M. Ericsson estimates that more than 300 million netbooks will be sold between 2009 and 2014, with majority of such netbooks having mobile broadband capabilities.

With that said, I will now turn the call over to Yaniv to review the second quarter 2009 financials and provide future guidance.

Thank you, Gideon. I will now review the results of operations for the second quarter of ’09.

Revenue for the second quarter was $9.1 million, which was closer to the higher end of our guidance, compared to $10.1 million for the second quarter of 2008. The revenue breakdown was as follows.

Licensing revenue was $4.3 million, reflecting 47% of total revenues, lower than our five-year record high $6 million reported in the second quarter of ’08. The decrease was primarily due to lower corporate R&D investments by our customers as a result of the market downturn.

Royalty revenue was $4 million representing 43% of total revenue and significantly higher than the second quarter of 2008, of which we recorded royalty revenues of $3 million. The royalty revenue for the second quarter of 2009 includes approximately $0.9 million resulting from a catch-up royalty on past shipments, resulting from a single customer.

Excluding the catch-up royalties, our royalty revenue was $3.1 million, slightly higher than the same period in 2008. Our royalty revenue results are in line with our seasonal trend in which Q2 royalty revenue tends to be the lowest of the year, reflecting Q1 post-Christmas low shipments.

This seasonal trend was further impacted by the extremely weak Q1 ’09 demand in consumer electronics due to the economy slowdown. Service revenue was $0.9 million, reflecting 10% of total revenues and slightly down compared to $1 million for the second quarter of ’08.

Gross margins were 87% on US GAAP basis, consistent with the previous quarter and the second quarter last year. On a non-GAAP basis, which excludes equity-based compensation expenses, gross margins were 88%, also consistent with the previous quarter and the second quarter of last year.

As for the operating expenses, research and development expenses were $4 million for the quarter, including $0.2 million of equity-based compensation expenses. S&M were $1.6 million, including $0.2 million of equity-based compensation expenses, and our G&A expenses were $1.6 million, excluding $0.3 million of equity-based compensation.

Our total operating expenses for the quarter were $7.2 million, which include an aggregated equity-based compensation expense of approximately $0.7 million, and were in line with our guidance range. Total operating expenses for the second quarter, excluding equity-based compensation expenses, were $6.5 million, significantly lower than the $8.1 million for the second quarter of last year and slightly higher than the first quarter of ’09.

US GAAP operating margin for the second quarter of ’09 was 8% of total sales, significantly higher compared to only 1% for the second quarter of ’08. Non-GAAP operating margin for the second quarter of ’09, excluding equity-based compensation expenses, doubled from 8% during the second quarter of last year to 16% this year.

Interests and other income for the second quarter of ’09 was $2.4 million and include the $1.9 million pretax capital gain from our equity investment in GloNav sold to NXP Semiconductors. On the tax front, we’ve recorded a quarterly US GAAP tax expenses of $814,000.

And our US GAAP net income for the quarter grew 69% to $2.3 million and fully diluted net income per share grew 71% sequentially to $0.12 compared to $1.4 million and $0.07 respectively for the first quarter of 2009. On a year-over-year basis, US GAAP net income for the quarter grew 235% to $2.3 million and fully diluted net income per share grew 300% to $0.12 compared to $691,000 and $0.03 respectively for the second quarter of ’08.

Our non-GAAP net income and fully diluted EPS, excluding approximately $0.7 million of equity-based compensation expenses and the $1.9 million pretax capital gain, was $1.7 million or $0.08 per share, an increase of 13% and 14% respectively compared to the same period during last year. Other related data.

Shipped units by CEVA customers during the second quarter of ‘09 were 65 million units, up 10% from the first quarter of ’09 and down 7% from the second quarter of last year. Out of the 65 million units shipped, 46 million units or 71% are for baseband ships and reflect the significant increase from 36 million units reported in the prior quarter.

Also, of the 65 million units shipped in Q2, 57 million units were attributed to licensees currently paying per unit royalties and 8 million units were shipped by licenses who are under a prepaid arrangement. This compares to 59 million units shipped during the first quarter of ’09, of which 49 million units were attributed to per unit royalties and 10 million were attributed to prepayment arrangements.

During the last quarter, two customers started shipping SATA SSD, solid state drive related products, in low volume, generating small revenues for us for the first time. As of June 30th of this year, 21 licensees were shipping products and cooperating [ph] our technologies, persistent of 28 licensing arrangements.

Of the 28 licensing arrangements, 24 are under per-unit royalties and four are under prepaid arrangements. Now for the balance sheet, as of the end of June, our cash and cash equivalent balances and marketable securities were $87.7 million compared to $85.1 million at the end of the first quarter.

During the second quarter, we generated positive cash flow of approximately $2.7 million, including the $1.9 million of pretax capital gain from our investments in GloNav to NXP Semiconductors. Our DSO for the second quarter of ’09 was 55 days compared to 43 days for the prior quarter.

The increase is mainly due to the timing differences of closing licensing deals between the two quarters. With regards to our share purchase program, 106,000 shares remain available for the repurchase under the existing plan.

Now I would -- now for the guidance of Q3 2009. With regards to our third quarter revenue guidance, we are constantly monitoring feedback from our customers and other wireless players in the supply chain and reviewing related market trends for the remaining of 2009.

The key takeaway is that low inventory levels have bottomed. There is still limited visibility for Q3 and Q4 demand trends.

With that said, we believe our royalty revenues should increase for the upcoming quarter compared both to the second quarter of ’09 and to the third quarter of last year, mainly due to stronger signs of inventory relief in the handset market and continued demand in the emerging markets, as well as some improvement in the consumer electronic markets. As for the licensing revenues, despite concerns about sustainability about the economic recovery, we anticipate a gradual improvement for the second half of this year based on our pipeline and indications from our customers.

(inaudible) revenue guidance for the third quarter of 2009. Revenue is anticipated to be in the range of $8.6 million to $9.6 million.

Gross margin is expected to be at the level of 87% to 89%. Operating expenses, including equity-based compensation expenses, is expected to be in the range of $7.1 million to $8.1 million.

Of our anticipated total operating expenses for the third quarter, $0.7 million is expected to be attributed to equity-based compensation expenses, and on a non-GAAP basis, $6.4 million to $7.4 million. We have slightly increased our investment in R&D partially due to projects postponed from the second quarter.

We are encouraged by the pipeline of our newest technologies for the LTE and the high-definition video. Interest income is expected to be approximately $450,000.

Tax rate for the third quarter is expected to be approximately 10%. Our share count for the next quarter is expected to be in the range of $20.2 million to $20.8 million shares.

Our EPS guidance for the third quarter is slightly higher than the guidance we gave for the second quarter. US GAAP EPS is expected to be in the range of $0.02 to $0.04 per share, and on a non-GAAP EPS basis, excluding $0.7 million of equity-based compensation expenses forecasted, we are expecting to remain at the same level of the previous quarter of $0.06 to $0.08 per share.

We will now open the floor for questions.

Hi, guys, good morning and congratulations on the good quarter. First of all, on these -- what you described as a catch-up, can you give us a better sense as to over what period those shipments occurred that you accounted for in the second quarter?

Yes, this is few years. This is a regular audit that we have conducted, and the catch-up royalties have continued to be regular course of business in the IP space.

We audit our customers every once in a while and encountered a mismatch in the calculation which was fixed and will continue in an ongoing basis based on this new calculation.

Was this a consumer-type of an application or more of a cell phone type of a deal?

More consumer type.

Okay. And did you say that in terms of the gradual recovery in the back half, that was referred to licensing demand, is that what you meant to say?

Yes, you know, it’s based on -- you know, the way we saw it in the second quarter is that company was basically very, very conservative in terms of opening new projects that will require a higher investment, including IP. And the tendency was to try to do evolutionary project, reels type of projects, cost reduction projects.

Going forward to the second half, still visibility is not as it used to be, but we see the companies are looking more positively on the new projects. So the comment that Yaniv made was regarding licenses.

Okay. And as far as the royalties go in the current quarter, most of your peers in the semiconductor space have reported a pretty substantial increase, sequential increase in the chip sets sold.

And so that would normally be indicative of what you would recognize in the September quarter, correct?

Yes, that’s absolutely correct. To give you a little bit of flavor, we’re a little bit early because usually we get most of the royalty reports like a 30-day rafter at quarter-end, and we haven’t -- we don’t have yet the full picture.

But if you look at Q3 of last year, we had a royalty ramp-up of about 8% from Q2 to Q3. I believe that Q3 ramp-up this year could maybe be even twice as higher as the previous year.

So that does take into account the same assumptions that you mentioned. Again, we don’t have the full picture yet, but I believe it should be significantly higher than the ramp-up we had in previous years.

Okay. So you’re thinking in terms of royalties maybe in the range of $3.6 million or maybe a little higher than that?

More or less around that. Again, from our initial looking at the puzzle, which is not yet -- which are missing the few pieces.

Fair enough. What was the headcount in the quarter?

178.

Okay. And I’ll let somebody else ask question.

Thanks a lot.

Thank you, Matt.

Thanks a lot for taking my question. Yaniv, couple of questions.

Can you talk a little bit about the revenues derived on per license? Sounds like it’s been kind of in a gradual decline, the dollars per license agreement.

Can you talk about that a little bit?

Yes, sure. Let me give you a little bit of flavor there.

We don’t see that way. We had a pretty solid quarter with regards to ten new deals that were signed throughout the quarter, one of them including the catch-up royalty.

And out of those other nine technology deals, two are brand new customers using for the first time one of our technologies in the new space for them and for us. And this was quite exciting.

In this specific quarter, the rest of the deals were existing customers that paying back to us to either take new technologies or your pieces of software or new uses -- specific use for a new project that they had on hand. So if you recall, we have two types of business models [ph].

One is on a per-use basis and that we had a little bit more this quarter compared to others. And every once in a while we also have a very significant deal of $1 million to $2 million, which is a more comprehensive deal to use our technology across the multiple product lines.

Another way to look at it, if you look at last quarter, we had -- Q1, we had four 10% customer -- 10% of revenue type of deals, and in the second quarter we only had two. That means that there are also more diversification with regard to the number of customers and the number of different technologies that we license.

So, it varies. Sometime we have big deals, which are more across the board, and sometimes there are more specific deals of existing customers that come back and add more functionality.

And I think the combination is both throughout the last couple of years.

So I mean, can we make a general statement saying that when customers come back to you on the averaged licensing -- the per license revenue, it may be slightly lower than a new customer? Can we make that generalization or that is not an accurate way to look at it?

No, not at all, not an accurate way to look at it. Whoever comes back to a new use, they -- the costs for that additional use is already pre-defined in the original agreement.

So this could be a four-year old agreement, but the prices already have been negotiated upfront. So that will not change.

When a customer, whether it’s an existing or a new customer, joins, then they pay for the technology. I think what matters here price-wise is really what technology that customer uses.

If they want to use a CEVA-XC or a TeakLite III, these are CEVA -- one of the CEVA-X technologies. These are much newer and more expensive technologies than all the TeakLite types.

So I think the type of the technologies is what counts with regards to the pricing.

Now, switching to the royalty side, if I got my calculations right, it looks like on a per-unit basis, both sequential and year-over-year, there has been an increase. Given that you guys are doing well in the emerging markets and typically those handsets tend to be lower cost, I mean, can you walk me through the kind of puts and takes or how we are seeing an increased per-unit on the licensing -- on the royalty front?

Well, in the royalty front, eventually when it comes to emerging markets. the ultra low-cost royalties lowered, but the consumer, which was weak in the second quarter, the royalties tend to be higher and as well as all the 3G femtocells data cards.

We mentioned Ericsson Corporation with Intel, these are higher royalty.

All right. And finally, now you said you guys increased your market share from 12% to 18%.

What is that based on? Can you walk us through how you came up with that number?

Sure. This is something that we’ve been doing over the last two years when we started to realize that the story here at CEVA and the business model is starting to pick up and evolve from the 3% of market share we had two years ago to the record high 18% that we are reporting today.

It is based on all the chips out from the wireless side that we get on a quarterly basis, the reports that we get, divided by the number of the overall units sold -- phones sold taken by a nice [ph] supply on a quarterly basis. That’s the rationale of our market share in the handset space.

All right. Thank you very much.

Thank you, Anil.

Hey, guys, congratulations on the execution and thanks for taking my questions. First question here regards the market share dynamics.

You obviously gained some market share and reached 18%. How do you see yourself positioned by the end of 2009?

Is it still -- do you still expect something around 20% or are we heading even higher than that?

Well, it’s hard to say at this point how different trends that going -- the stimulus plan in China trends very much to the 3G development there and also the generation or production of 2G phones going to the emerging markets. (inaudible) So in general, saying the trend is -- I mean, we are expecting to see progress, but the extent of it is something that’s way forward.

Okay. Maybe I’ll rephrase that.

When you see your chips, your cores sent into chips in the marketplace, and I’m sure you find out once in a while regarding the ramp-up in Broadcom et cetera. Has something been front end loaded or come to realization earlier than expected, or are the devices sent on plan right now as far as you know?

The question is not that relevant [ph]. Let me try to explain why.

We -- it doesn’t really matter the linearity of how they ship their phones throughout the quarter because we only get once a quarter of royalty report. So whether it’s back end loaded or a new model comes out two days before the end of the quarter, it doesn’t matter as much.

We get once a quarter report, which summarizes all the different -- the three months of shipments. What I could say is that the news that we’ve been monitoring, and Gideon mentioned quite a few new design wins, Broadcom, Infineon, STE.

All these different new products, few of them he mentioned even quantities. LG was very bullish about a new product that they have in the market and then saw that they will have at least 10 million units sold in 2009.

All of these data trends are very positive and continue to be positive. The linearity when they are actually sold is not that of importance to us.

And as Gideon mentioned, in the longer term, we don’t see this trend of continuing to gain market share changing in any way or form. This will continue.

The magnitude (inaudible) monitor and share with you on a quarterly basis, but there is no doubt that this trend is continuing especially in the ultra low-cost market.

Thanks. And could you talk a little bit about the dynamics of signing license deals?

Has that changed over the quarter or over the past six months? Or how you’re still seeing usual back end loaded?

And that’s about that.

Back end loaded is something that is regular course of our business. Yes, the dynamics in terms of licensing people are more careful about committing.

In licensing, you have to pay upfront and it’s non-refundable. And companies are --especially because of budget -- licensing is like R&D expenses.

People set up budgets and take it to the -- and try to comply with it or work with it throughout the year. And at the beginning of the year, people tend to expect the downturn, as a result didn’t take into consideration to spend so much money in new projects.

So the business in general, the licensing business is soft, but we are not saying that there is no business. There is business.

And our objective here is to find those customers, find those projects that they are investing. And out of the current agreements that were signed last quarter, three of them are for LTE, which is (inaudible) next generation wireless technology.

And this is very encouraging for us because they are companies that are looking to 2011, 2013, et cetera.

Great. Thanks for the color here.

Last question. I might have missed it, but do you expect R&D -- the uptick in R&D expenses to go into fourth quarter and can you give us some color on where do you see operating expenses run rate going forward?

Thanks.

Yes. If you recall, we guided a little bit higher R&D over our operating expenses for Q2, but at the end of the day, the number was slightly lower than our trend, and this was mainly due to even us [ph] still putting a very tight control over expenses.

But from what we see and feel today based on the pipeline and based on the technologies and the features and time to market, we think that we are now in actual process of increasing slightly our R&D investments. And that is planned to take place now in the third quarter with a few additional hiring.

So that means that the range that we gave now for the overall operating expenses is something non-GAAP $6.4 million to $7.4 million. This is something that we are comfortable with for the rest of the year as well.

Great. Thanks a lot and again congratulations.

Thank you, Tom.

Hi. I wanted to ask you -- you said some of your licensing deals were for LTE.

Were any of those actually the XC or is that going to come later [ph]?

So it’s not yet the XC. XC is well -- this is not the kind of a third generation LTE project.

People are trying to do something fast. They are not dealing now with what is called multi-standard.

They are not dealing with what is called software-defined radio. These are the things that the XC provides an excellent solution.

Okay. One other thing I wanted to ask you about, there were some -- I thought that was quite interesting.

There is a link on your homepage to a number of articles, CEVA in the news. There is one that came out maybe a little over a month ago called “Analysis CEVA’s reversal of fortune.”

And it’s the first article I’ve seen on CEVA, which is more on the whole company as opposed to say an article on a new product. And I was a bit surprised there was a link there, because the article is not entirely positive.

There were two red flags that were raised that I can remember. One is that there are forces of convergence in the industry and it raised the question of whether long-term people are going to be doing separate licensing deals for DSP or whether that will converge with microprocessor cores and perhaps other IP.

And then the other question -- the other red flag that was raised was, it was suggested that the carryover in terms of software from 3G to 4G is not really that large. So it won’t necessarily be that important for customers to have backward compatibility in terms of software when they move to 4G.

Now, I guess the question is particularly with the last one. Do you agree with that?

And if so, should it be a concern?

Basically there are two things that I personally disagree. When you go to LTE, you go to WiMAX too, you go to HD video, this is not a territory of CPU.

Whatever you put there, A, from (inaudible) you cannot do it there. The power consumption goes to the roof.

And it doesn’t make sense to do it on a processor. You have to add all sort of hardwares, and once you add hardware, it’s not [ph] the processor type of solution.

So -- and this is where we are focusing. We are taking our new technology into those emerging applications where we can show clear performances both in the feature set [ph] that you can get out of it and the power consumption, which is critical in the mobile space.

Now, the second comment about compatibility, this is again something that we don’t seek from our customers. Compatibility -- people are investing hundreds of (inaudible) to grow into -- to developing into wireless or video.

And if there is a supplier like CEVA that provides both the leading edge technology and the compatibility, why would they go and do things in alone [ph], which they cannot do it efficiently anyway. So I think I saw this article, but in my opinion, it’s too simplistic.

Okay. And just one other question.

I know when you do a licensing deal. As part of that contract, you will reserve the right to do an audit of royalty reports or just to check on the royalty numbers later.

Do you -- how often you do those? How much do they cost?

And have there been any time in, say, the last year you had a problem in one of those audits, a disagreement?

I think the last two years -- let me back up a bit. In every agreement, as you mentioned, we have those rights.

We only took this action more seriously in the last two years and we’ve put an annual planning in place that of conducting annual royalty reports to all of our customers. We haven’t finished all of them yet.

We’re just doing it for the last two years, and we will go and do it all of them at the end of the day. And we usually use an external auditor in order to have a third-party objective work.

I would say the costs run somewhere around $20,000, $25,000 a piece. It takes some time and efforts from our side, but we also found over the last two years a few events, sometime in royalties, sometimes in a per-use basis of not understanding the definition correctly and reporting to us the number of users used.

And this is, as I mentioned earlier, a part of the ongoing licensing business that you want to make sure your customers comply the same way you understand and sign the licensing agreement with the actual contract. So from time to time we find something like we have done now in this recent quarter, and we will continue to monitor that actively as we go along.

Okay. Thanks then.

Thank you.

Yes. I would like to wrap up and thank you for joining us today and your continued interest in CEVA.

We’ll be presenting next month at the Oppenheimer Annual Communications and Technology and Internet Conference, which takes place on August 11 in Boston and invite you to join us there. Thank you, and good bye.