Forward-looking statements are not guarantees of future performance and involve risks and uncertainties. The forward-looking statements contained in this report are based on information that is currently available to us and expectations and assumptions that we deem reasonable at the time the statements were made. We do not undertake any obligation to update any forward-looking statements in this report or in any of our other communications, except as required by law. All such forward-looking statements should be read as of the time the statements were made and with the recognition that these forward-looking statements may not be complete or accurate at a later date.

Many factors may cause actual results to differ materially from those expressed or implied by the forward-looking statements contained in this report. These factors include, but are not limited to, those risks set forth in Part II – Item 1A – “Risk Factors” of this Form~~10-Q.~~ 10Q.

This report contains market data prepared by third party research firm. Actual market results may differ from their projections.

The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.

The financial information in this quarterly report includes the results of CEVA, Inc. and its subsidiaries (the “Company” or “CEVA”).

CEVA licenses a family of signal processing IPs ~~including programmable DSP cores~~in two types of categories: wireless connectivity and ~~application-specific~~smart sensing products. These products include comprehensive DSP-based platforms for ~~advanced imaging, computer vision and deep learning for many camera-enabled devices, sound, voice and audio, as well as long and short range wireless technologies forLTE/LTE-A/~~5G baseband processing in ~~handsets~~mobile and infrastructure, ~~short~~advanced imaging and computer vision for any camera-enabled device and audio/voice/speech and ultra-low power always-on/sensing applications for multiple IoT markets. For sensor fusion, CEVA’s Hillcrest Labs sensor processing technologies and SensPro™ sensor hub DSP provide a broad range of sensor fusion processing, software and IMU solutions for AR/VR, robotics, remote controls, and IoT. For artificial intelligence, CEVA offers a family of AI processors capable of handling the complete gamut of neural network workload and on-device. For wireless IoT, CEVA offers the industry’s most widely adopted IPs for~~Wi-Fi~~ Bluetooth (low energy and ~~Bluetooth IPs, wired interface for storage, Serial ATA (SATA)~~dual mode), Wi-Fi 4/5/6 (802.11n/ac/ax) and ~~Serial Attached SCSI (SAS).~~NB-IoT.

CEVA’s technologies are licensed to leading semiconductor and original equipment manufacturer (OEM) ~~companies in the form of intellectual property (IP).~~companies. These companies design, manufacture, market and sell application-specific integrated circuits (“ASICs”) and application-specific standard products (“ASSPs”) based on CEVA’s technology to wireless, consumer electronics and automotive companies for incorporation into a wide variety of end products.

Subsequent to CEVA’s acquisition of the business of Hillcrest Laboratories, Inc. (“Hillcrest Labs”) located in Rockville, Maryland, CEVA has extended such business into industrial, robotics and automotive spaces, and is developing new products that combine Hillcrest Labs’ sensor processing with CEVA’s other sensing and connectivity technologies to offer complete contextual computing solutions. Hillcrest Labs’ core technologies and research and development team play a pivotal role in these initiatives and CEVA’s future technological developments. As a result, CEVA has determined to make its Maryland office the U.S. headquarters, effective immediately.

The interim condensed consolidated financial statements have been prepared according to U.S Generally Accepted Accounting Principles (“U.S. GAAP”).

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, ~~2017~~ 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2017.~~ 2020. For further information, reference is made to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form~~10-K~~10K for the year ended December 31, ~~2016.~~2019.

The significant accounting policies applied in the annual consolidated financial statements of the Company as of December 31, ~~2016,~~ 2019, contained in the Company’s Annual Report on Form~~10-K~~10K filed with the Securities and Exchange Commission on ~~March 10, 2017,~~ February 28, 2020, have been applied consistently in these unaudited interim condensed consolidated financial ~~statements, except during~~ statements.

On January 1, 2020, the ~~three and nine months ended September 30, 2017, the adoption of~~Company adopted Accounting Standards Update (“ASU”)~~2016-09~~No.2016-13, “Financial Instruments – Credit Losses on Financial Instruments” (“ASU 2016-13”), which requires that expected credit losses relating to financial assets be measured on an amortized cost basis and available-for-sale debt securities be recorded through an allowance for credit losses. ASU 2016-13 limits the ~~forfeiture rates as they occur, rather than an estimate~~amount of credit losses to be recognized for available-for-sale debt securities to the amount by which carrying value exceeds fair value and also requires the reversal of previously recognized credit losses if fair value increases. The adoption by the Company of the new guidance did not have a material impact on its consolidated financial statements.

Trade receivables are recorded and carried at the original invoiced amount less an allowance for any potential uncollectible amounts. The Company makes estimates of expected ~~forfeitures (see Note 13)~~credit losses for the allowance for doubtful accounts and allowance for unbilled receivables based upon its assessment of various factors, including historical experience, the age of the trade receivable balances, credit quality of its customers, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect its ability to collect from customers. The estimated credit loss allowance is recorded as general and administrative expenses on the Company’s condensed consolidated statements of income (loss).

The Company holds investments in marketable securities, consisting principally of corporate bonds. The Company classifies marketable securities as available-for-sale in its current assets because they represent investments of cash available for current operations. The Company’s available-for-sale investments are carried at estimated fair value with any unrealized gains and losses, net of taxes, included in accumulated other comprehensive income (loss) in stockholders' equity. Available-for-sale debt securities with an amortized cost basis in excess of estimated fair value are assessed to determine what amount of that difference, if any, is caused by expected credit losses. Expected credit losses on available-for-sale debt securities are recognized in interest and other income (expense), net, on the Company’s condensed consolidated statements of income (loss), and any remaining unrealized losses, net of taxes, are included in accumulated other comprehensive income (loss) in stockholders' equity. The amount of credit losses recorded for the three and nine months ended September 30,2020 was not material. The Company has not recorded any impairment charge for unrealized losses during the periods presented. The Company determines realized gains or losses on sale of marketable securities on a specific identification method, and records such gains or losses as interest and other income (expense), net.

The preparation of the interim condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions. The Company’s management believes that the estimates, judgments and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the dates of the interim condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Under ASC 606, “Revenue from Contracts with Customers” (“ASC 606”), an entity recognizes revenue when or as it satisfies a performance obligation by transferring IP license or services to the customer, either at a point in time or over time. The Company recognizes most of its revenues at a point in time upon delivery of its IPs. The Company recognizes revenue over time on significant license customization contracts that are in the scope of ASC 606 by using cost inputs to measure progress toward completion of its performance obligations.

The following ~~is a summary~~table includes estimated revenue expected to be recognized in future periods related to performance obligations that are unsatisfied or partially unsatisfied at the end of~~available-for-sale~~ ~~marketable securities:~~

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~- CONTINUED~~

The following table provides information about disaggregated revenue by primary geographical market, major product line and timing of revenue recognition (in thousands):

The following table provides information about trade receivables, unbilled receivables and contract liabilities from contracts with customers (in thousands):

The Company receives payments from customers based upon contractual payment schedules; trade receivables are recorded when the right to consideration becomes unconditional, and an invoice is issued to the customer. Unbilled receivables associated with licensing and other include amounts related to the Company’s contractual right to consideration for completed performance objectives not yet invoiced. Unbilled receivables associated with royalties are recorded as the Company recognizes revenues from royalties earned during the quarter, but not yet invoiced, either by actual sales data received from customers, or, when applicable, by the Company’s estimation. Contract liabilities (deferred revenue) include payments received in advance of performance under the contract, and are realized with the associated revenue recognized under the contract.

During the three and nine months ended September 30, 2020, the Company recognized $226 and $3,541, respectively, that was included in deferred revenues (short-term contract liability) balance at January 1, 2020.

The Company leases substantially all of its office space and vehicles under operating leases. The Company's leases have original lease periods expiring between 2020 and 2034. Many of these leases include one or more options to renew. The Company does not assume renewals in its determination of the lease term unless the renewals are deemed to be reasonably certain at lease commencement. The Company has an option to extend the lease of one of its principal office spaces until 2028, which is reasonably certain to be renewed. Lease payments included in the measurement of the lease liability comprise the following: the fixed non-cancelable lease payments, payments for optional renewal periods where it is reasonably certain the renewal period will be exercised, and payments for early termination options unless it is reasonably certain the lease will not be terminated early.

Under Topic 842 “Leases,” all leases with durations greater than 12 months, including non-cancelable operating leases, are now recognized on the balance sheet. The aggregate present value of lease agreements are recorded as a long-term asset titled right-of-use assets. The corresponding lease liabilities are split between operating lease liabilities within current liabilities and operating lease liabilities within long-term liabilities.

The following is a summary of weighted average remaining lease terms and discount rates for all of the Company’s operating leases:

Total operating lease cost during the three and nine months ended September 30, 2020 was $652 and $1,883, respectively. Cash paid for amounts included in the measurement of operating lease liabilities was $623 and $1,968 during the three and nine months ended September 30, 2020, respectively.

The following table presents gross unrealized losses and fair values for those investments that were in an unrealized loss position as of September 30, ~~2017~~ 2020 and December 31, ~~2016,~~ 2019, and the length of time that those investments have been in a continuous loss position:

As of September 30, 2017 and December 31, 2016, management believes the impairments are not other than temporary and therefore the impairment losses were recorded in accumulated other comprehensive income (loss).

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~- CONTINUED~~

The following table presents gross realized gains and losses from sale ofavailable-for-sale marketable securities:

~~Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)~~ FASB ASC No.820, “Fair Value Measurements and Disclosures” defines fair value, establishes a framework for measuring fair value. Fair value is an exit price, representing the amount that would be received for selling an asset or paid for the transfer of a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. A ~~three-tier~~three-tier fair value hierarchy is established as a basis for considering such assumptions and for inputs used in the valuation methodologies in measuring fair value:

The Company measures its marketable securities and foreign currency derivative contracts at fair value. Marketable securities and foreign currency derivative contracts are classified within Level II as the valuation inputs are based on quoted prices and market observable data of similar instruments.

The table below sets forth the Company’s assets ~~and liabilities~~ measured at fair value by level within the fair value hierarchy. Assets ~~and liabilities~~ are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~- CONTINUED~~

(*) During the first quarter of 2018, the Company entered into an agreement to invest in certain NB-IoT technologies in the amount of $2,800, of which, technologies valued at $600 has not been received. Of the $2,200, $210 has not resulted in cash outflows as of September 30,2020. In addition, the Company participated in programs sponsored by the Hong Kong government for the support of the above investment, and as a result, the Company received during 2019, an amount of $239 related to the NB-IoT technologies, which reduced the gross carrying amount of intangible assets associated with the NB-IoT technology investment. The Company recorded the amortization cost of the NB-IoT technologies in “cost of revenues” on the Company’s interim condensed consolidated statements of income (loss).

~~NOTE 5: GEOGRAPHIC INFORMATION AND MAJOR CUSTOMER DATA~~Future estimated annual amortization charges are as follows:

The Company manages its business on the basis of ~~one~~1 reportable segment: the licensing of intellectual property to semiconductor companies and electronic equipment manufacturers (see Note 1 for a brief description of the Company’s business). The following is a summary of revenues within geographic areas:

The following table sets forth the customers that represented 10% or more of the Company’s total revenues in each of the periods set forth below.

Basic net income (loss) per share is computed based on the weighted average number of shares of common stock outstanding during each period. Diluted net income (loss) per share is computed based on the weighted average number of shares of common stock outstanding during each period, plus dilutive potential shares of common stock considered outstanding during the period, in accordance with FASB ASC No.260, “Earnings Per Share.”

~~NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~

The total number of shares related to outstanding equity-based awards excluded from the calculation of diluted net loss per share was 1,162,650 for both the three and nine months ended September 30, 2020. The weighted average number of shares related to outstanding equity-based awards excluded from the calculation of diluted net income per share, since their effect was anti-dilutive, was ~~0 and 39,856~~105,901 shares for the three ~~and nine~~ months ended September 30, ~~2017, respectively, and 92,103 and 349,428~~2019. The total number of shares related to the outstanding equity-based awards excluded from the calculation of diluted net loss per share was 1,385,525 for the ~~corresponding periods of 2016.~~nine months ended September 30, 2019.

The Company grants stock options and stock appreciation rights (“SARs”) capped with a ceiling to employees and stock options tonon-employee directors of the Company and its subsidiaries and provides the right to purchase common stock pursuant to the Company’s 2002 employee stock purchase plan to employees of the Company and its subsidiaries. The SAR unit confers the holder the right to stock appreciation over a preset price of the Company’s common stock during a specified period of time. When the unit is exercised, the appreciation amount is paid through the issuance of shares of the Company’s common stock. The ceiling limits the maximum income for each SAR unit. SARs are considered an equity instrument as it is a net share settled award capped with a ceiling (400% for SAR grants). The options and SARs granted under the Company’s stock incentive plans have been granted at the fair market value of the Company’s common stock on the grant date. Options and SARs granted to employees under stock incentive plans vest at a rate of 25% of the shares underlying the option after one year and the remaining shares vest in equal portions over the following 36 months, such that all shares are vested after four years. Options granted tonon-employee directors vest 25% of the shares underlying the option on each anniversary of the option grant. A summary of the Company’s stock option and ~~SARs~~SAR activities and related information for the nine months ended September 30, ~~2017,~~ 2020, are as follows:

As of September 30, ~~2017,~~ 2020, there was ~~$750~~$1 of unrecognized compensation expense related to unvested stock options and SARs. This amount is expected to be recognized over ~~a weighted-average period~~the fourth quarter of ~~1.4 years.~~

~~NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~

Starting in the second quarter of 2015, the Company granted to employees, including executive officers, andnon-employee directors, restricted stock units (“RSUs”) under the Company’s 2011 Stock Incentive ~~Plan.~~Plan (the “2011 Plan”). A RSU award is an agreement to issue shares of the Company’s common stock at the time the award or a portion thereof vests. RSUs granted to employees generally vest in three equal annual installments starting on the first anniversary of the grant date. Until the end of 2017,RSUs granted tonon-employee directors would generally vest in full on the first anniversary of the grant date. Starting in 2018, RSUs granted to non-employee directors would generally vest in two equal annual installments starting on the first anniversary of the grant date. The fair value of each RSU is the market value as determined by the closing price of the common stock on the day of grant. The Company recognizes compensation expenses for the value of its RSU awards, based on the straight-line method over the requisite service period of each of the awards.

On May 7, 2019, the Compensation Committee (the “Committee”) of the Board of Directors (the “Board”) of the Company approved, effective immediately, an amendment to the RSU award granted to the Company’s Chief Executive Officer (the “CEO”) on February 19, 2019, consisting of 30,000 RSUs that vest in a three-year period (the “Prior RSU Award”). The Committee and the CEO mutually agreed to amend the Prior RSU Award. In lieu of the Prior RSU Award, the CEO received (1) 10,000 time-based RSUs with the same original three-year vesting schedule starting with 1/3 on February 19, 2020, and (2) an opportunity to receive up to 24,000 performance-based restricted stock units (“PSUs”) based on the Company’s achievement of the 2019 license and related revenue goal of $41 million that was approved by the Board (the “2019 License Revenue Target”). If the Company’s results equal 100% of the 2019 License Revenue Target, the CEO would receive 20,000 PSUs. If the Company’s results were between 90% to 99% of the 2019 License Revenue Target, the CEO would receive the same proportion of the 20,000 PSUs. If the Company’s results exceeded 100% of the 2019 License Revenue Target, every 1% increase of the 2019 License Revenue Target, up to 120%, would result in an increase of 1% of the 20,000 PSUs to be awarded to the CEO. In 2019, the Company achieved 116% of the 2019 License Revenue Target, so based on the PSU award conditions, the CEO received 23,200 PSUs. The PSUs vest in a three-year period, with 1/3 of the PSUs having vested on February 19, 2020, and thereafter 1/3 of the remaining PSUs will vest on each of February 19, 2021 and February 19, 2022.

On July 19, 2019, the Company issued a total of 52,000 RSUs to 22 employees who joined the Company in connection with the Company's acquisition of the Hillcrest Labs business. The RSUs were granted outside of the Company’s existing equity plans and were granted as inducements to employment in accordance with NASDAQ Listing Rule 5635(c)(4). The RSUs were priced at $25.41 per share, the fair market value on the grant date, and vest over three years, with 34% of the RSUs vesting after one year and the remaining RSUs vesting in equal portions over the following 24 months, such that all RSUs vest after three years, subject to the employee's continuous service through each vesting date.

On February 20, 2020, the Committee granted 17,045, 5,113, 4,545 and 4,545 PSUs to each of the Company’s CEO, Executive Vice President, Worldwide Sales, Chief Financial Officer and Chief Operating Officer, respectively, pursuant to the 2011 Plan (collectively, the “Short-Term Executive PSUs”). The performance goals for the Short-Term Executive PSUs with specified weighting are as follows:

Additionally, PSUs representing an additional 20%, meaning an additional 3,410, 1,023, 909 and 909 PSUs, would be eligible for vesting for each of the Company’s CEO, Executive Vice President, Worldwide Sales, Chief Financial Officer and Chief Operating Officer, respectively, if the performance goals set forth above are exceeded.

Subject to achievement of the thresholds for the above performance goals for 2020, the Short-Term Executive PSUs vest 33.4% on February 20, 2021, 33.3% on February 20, 2022 and 33.3% on February 20, 2023.

Also, on February 20, 2020, the Committee granted 56,818, 35,511, 28,409 and 28,409 long-term PSUs to each of the Company’s CEO, Executive Vice President, Worldwide Sales, Chief Financial Officer and Chief Operating Officer, respectively, pursuant to the 2011 Plan (collectively, the “Long-Term Executive PSUs”). The Long-Term Executive PSUs shall vest upon the achievement of either of the following performance goals:

Furthermore, on February 20, 2020, the Committee granted an aggregate of 18,500 PSUs to certain key employees of the Company. The PSUs shall vest over three years upon the achievement of the following performance goals, with 34% of the PSUs vesting after one year and the remaining vesting in equal portions over the following 24 months, such that all PSUs shall vest after three years, subject to the employee's continuous service through each vesting date:

A summary of the Company’s RSU and PSU activities and related information for the nine months ended September 30, ~~2017,~~ 2020, are as follows:

As of September 30, ~~2017,~~ 2020, there was ~~$12,126~~$16,431 of unrecognized compensation expense related to unvested ~~RSUs.~~RSUs and PSUs. This amount is expected to be recognized over a weighted-average period of 1.5 years.

The following table shows the total equity-based compensation expense included in the interim condensed consolidated statements of ~~income:~~income (loss):

The fair value for rights to purchase shares of common stock under the Company’s employee stock purchase plan was estimated on the date of grant using the following assumptions:

The Company follows the requirements of FASB ASC No.815,” Derivatives and Hedging” which requires companies to recognize all of their derivative instruments as either assets or liabilities in the statement of financial position at fair value. The accounting for changes in fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging transaction and further, on the type of hedging transaction. For those derivative instruments that are

~~NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~

designated and qualify as hedging instruments, a company must designate the hedging instrument, based upon the exposure being hedged, as a fair value hedge, cash flow hedge, or a hedge of a net investment in a foreign operation. Due to the Company’s global operations, it is exposed to foreign currency exchange rate fluctuations in the normal course of its business. The Company’s treasury policy allows it to offset the risks associated with the effects of certain foreign currency exposures through the purchase of foreign exchange forward or option contracts (“Hedging Contracts”). The policy, however, prohibits the Company from speculating on such Hedging Contracts for profit. To protect against the increase in value of forecasted foreign currency cash flow resulting from salaries paid in currencies other than the U.S. dollar during the year, the Company instituted a foreign currency cash flow hedging program. The Company hedges portions of the anticipated payroll of itsnon-U.S. employees denominated in the currencies other than the U.S. dollar for a period of one to twelve months with Hedging Contracts. Accordingly, when the dollar strengthens against the foreign currencies, the decline in present value of future foreign currency expenses is offset by losses in the fair value of the Hedging Contracts. Conversely, when the dollar weakens, the increase in the present value of future foreign currency expenses is offset by gains in the fair value of the Hedging Contracts. These Hedging Contracts are designated as cash flow hedges.

For derivative instruments that are designated and qualify as a cash flow hedge (i.e., hedging the exposure to variability in expected future cash flows that is attributable to a particular risk), ~~the effective portion of~~ the gain or loss on the derivative instrument is reported as a component of other comprehensive income (loss) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Any gain or loss on a derivative instrument in excess of the cumulative change in the present value of future cash flows of the hedged item is recognized in current earnings during the period of change. As of September 30, ~~2017~~ 2020 and December 31, ~~2016,~~ 2019, the notional principal amount of the Hedging Contracts to sell U.S. dollars held by the Company was $0$5,000 and ~~$3,300,~~$5,500, respectively.

The fair value of the Company’s outstanding derivative instruments is as follows:

The Company recorded the fair value of derivative assets in “prepaid expenses and other current assets” and the fair value of derivative liabilities in “accrued expenses and other payables” on the Company’s interim condensed consolidated balance sheets.

The increase (decrease) in unrealized gains (losses) recognized in “accumulated other comprehensive ~~loss”~~gain (loss)” on derivatives, before tax effect, is as follows:

The net (gains) losses reclassified from “accumulated other comprehensive ~~loss”~~gain (loss)” into income are as follows:

~~NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~

The Company recorded in cost of revenues and operating expenses a net ~~loss of $2 and a net~~ gain of ~~$186~~$352 and $514 during the three and nine months ended September 30, ~~2017,~~ 2020, respectively, and a net gain of ~~$69~~$117 and ~~$191~~$304, respectively, for the comparable periods of ~~2016,~~2019, related to its Hedging Contracts.

The following tables summarize the changes in accumulated balances of other comprehensive income (loss), net of taxes:

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~- CONTINUED~~

The following table provides details about reclassifications out of accumulated other comprehensive ~~income:~~income (loss):

In February 2020, the Board authorized the repurchase by the Company of an additional 700,000 shares of common stock pursuant to the Company’s share repurchase program.

The Company did not repurchase any shares of ~~its~~ common stock during both the third quarter of 2020and the third quarter 2019. During the firstnine months ended September 30, ~~2017, as well as during the third quarter of 2016. During the first nine months ended September 30, 2016,~~ 2020, the Company repurchased ~~180,013~~202,392 shares of common stock at an average purchase price of ~~$18.98~~$23.62 per share for an aggregate purchase price of ~~$3,417.~~$4,780. During the firstnine months ended September 30, 2019, the Company repurchased 194,316 shares of common stock at an average purchase price of $25.01 per share for an aggregate purchase price of $4,861. As of September 30, ~~2017, 311,056~~2020, 497,608 shares of common stock remained available for repurchase pursuant to the Company’s share repurchase program.

~~NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~

The repurchases of common stock are accounted for as treasury stock, and result in a reduction of stockholders’ equity. When treasury shares are reissued, the Company accounts for the reissuance in accordance with FASB ASCNo. ~~505-30,~~505-30, “Treasury Stock” and charges the excess of the repurchase cost over issuance price using the weighted average method to retained earnings. The purchase cost is calculated based on the specific identified method. In the case where the repurchase cost over issuance price using the weighted average method is lower than the issuance price, the Company credits the difference to additionalpaid-in capital.

During the nine months ended September 30, 2017, the Company recorded a tax benefit of $1,800 as a result of the completion of a tax audit for prior years in a certain foreign tax jurisdiction. This amount includes a release of $130 in accrued interest related to unrecognized tax benefits. The reduction in the unrecognized tax benefits balance for prior years as a result of the completion of the tax audit for the nine months ended September 30, 2017 was $3,003.

In May 2014, the FASB issued a new standard related to revenue recognition. Under the new standard, revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The FASB has recently issued several amendments to the standard, including clarification on identifying performance obligations.

The guidance permits two methods of modification: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the cumulative~~catch-up~~ ~~transition method). The Company currently anticipates adopting the standard using the modified retrospective method rather than full retrospective method.~~

The new standard will be effective for the Company beginning on January 1, 2018, but adoption as of the original effective date of January 1, 2017 is permitted. The Company will adopt the new standard as of January 1, 2018.

The Company has made progress toward completing its evaluation of the potential changes from adopting this new standard on its financial reporting and disclosures. The Company has evaluated the impact of the standard on a majority of its revenue streams and associated contracts. The Company will complete the contract evaluations and validate the results throughout 2017. The Company formed an implementation work group and expects to complete the evaluation of the impact of the accounting and disclosure changes on its business processes, controls and systems throughout 2017, design any changes to such business processes, controls and systems, and implement the changes before the end of 2017.

Under the new standard, an entity recognizes revenue when or as it satisfies a performance obligation by transferring IP license or services to the customer, either at a point in time or over time. The Company expects to continue to recognize most of its revenue at a point in time upon delivery of its products. The Company expects to recognize revenue over time on significant license customization contracts that are covered by contract accounting standards using cost inputs to measure progress toward completion of its performance obligations, which is similar to the current method.

Based on its current analysis, the most significant effect on the Company, if any, will be related to certain deliverables that may be considered as distinct performance obligations separate from other performance obligations and will be measured using the relative standalone selling price basis.

In addition, incremental costs that are related to sales from contracts signed during the period would require capitalization. The Company also will consider if there is a significant financing component if the time between payment and performance is more than one year.

~~The Company continues to assess all potential impacts under the new revenues standard.~~

~~NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~

~~In February 2016, the FASB issued ASU2016-02,~~ “Leases (Topic 842),” which will replace the existing guidance in ASC 840, “Leases.” The updated standard aims to increase transparency and comparability among organizations by requiring lessees to recognize lease assets and lease liabilities on the balance sheet and requiring disclosure of key information about leasing arrangements. This ASU is effective for annual periods beginning after December 15, 2018, and interim periods within those annual periods; early adoption is permitted and modified retrospective application is required. The Company is in the process of evaluating this guidance to determine the impact it will have on its financial statements and related disclosures.

~~In March 2016, the FASB issued ASU2016-09,~~ ~~Compensation—Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting (“ASU2016-09”).~~ ~~ASU2016-09~~ simplifies several aspects of the accounting for share-based payment transaction, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. For public companies, ASU~~2016-09~~ ~~is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. The Company adopted ASU2016-09~~ during the nine months ended September 30, 2017, at which time it changed its accounting policy to account for forfeitures as they occur. There was no material impact of the adoption of this standard on the Company’s financial statements.

~~Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

You should read the following discussion together with the unaudited financial statements and related notes appearing elsewhere in this quarterly report. This discussion contains forward-looking statements that involve risks and uncertainties. Any or all of our forward-looking statements in this quarterly report may turn out to be wrong. These forward-looking statements can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. Factors which could cause actual results to differ materially include those set forth under in Part II – Item 1A – “Risk Factors,” as well as those discussed elsewhere in this quarterly report. See “Forward-Looking Statements.”

Management is actively monitoring the impact of the pandemic on the company’s financial condition, liquidity, operations, suppliers, industry, and workforce. Given the continual evolution of the COVID-19 pandemic and the global responses to curb its spread, we are not able to estimate the full effect of the pandemic on the company’s financial results for fiscal year 2020. The following discussions are subject to the future effects of the pandemic.

The financial information presented in this quarterly report includes the results of CEVA, Inc. and its subsidiaries.

Headquartered in ~~Mountain View, California,~~Rockville, Maryland, CEVA is athe leading licensor of wireless connectivity and smart sensing technologies. We offer a combination of digital signal ~~processing~~processors (DSPs), platforms solution and related software IP for a ~~smarter, connected world. We partner with semiconductor companies~~range of applications, including cellular, Bluetooth, Wi-Fi and ~~OEMs worldwide~~other short-range wireless connectivity, AI, computer vision, voice, audio and sensor fusion.

These IP products are licensed to customers who embed them into their system-on-chip (SoC) and microcontroller designs to create power-efficient, intelligent and connected ~~devices for a range~~devices. Our customers include many of ~~end markets, including mobile, consumer, automotive, industrial and Internet of Things (IoT). Ourultra-low-power~~ ~~IPs for vision, neural networks, sound, long and short range wireless, include comprehensiveDSP-based~~ ~~platforms forLTE/LTE-A/5G~~ baseband processing in handsets, infrastructure and IoT devices, advanced imaging, computer vision and deep learning for any camera-enabled device, as well as sound/voice/audio applications for multiple IoT markets. For short range wireless, we offer the ~~industry’s most widely adopted IPs for Bluetooth (low energy and dual mode) andWi-Fi~~ ~~(802.11 b/g/n/ac up to 4x4). We also offer wired interface for storage (SATA and SAS).~~

~~Our technologies are licensed to~~world’s leading semiconductor and original equipment manufacturer (OEM) companies throughout the world. These companies incorporate our IP into application-specific integrated circuits (“ASICs”) and application-specific standard products (“ASSPs”) that they manufacture, market and sell to wireless,targeting a wide variety of IoT end markets, including mobile, PC, consumer, automotive, robotics, industrial and ~~IoT companies.~~ medical.

Our ultra-low-power IPs are enabled by our own DSPs and controllers and are deployed in devices for smart sensing and connectivity workloads. Our smart sensing portfolio includes advanced technologies for cameras, microphones and inertial measurement units (IMU). Our camera platforms incorporate DSP cores, coprocessors and software technologies for AI, computer vision and imaging. Our microphone technologies incorporate DSP cores and software technologies for noise cancellation, echo cancellation and voice recognition. Our IMU technologies include processor agnostic software supporting sensor processing of accelerometers, gyroscopes, magnetometers, optical flow, as well as environmental sensors in devices. Our connectivity portfolio includes LTE and 5G mobile broadband platforms for handsets and base station RAN, NB-IoT for low bit rate cellular and Bluetooth and Wi-Fi technologies for wireless IoT.

We believe that our licensing business is robust with a diverse customer base and a myriad of target markets. Our state-of-the-art technology has shipped in more than 811 billion chips to date for a wide range of ~~diverse~~ end markets. ~~One in three handsets~~Every second, thirty devices sold worldwide isare powered by CEVA.

~~Our DSPs power many leading handset OEMs in the world today, including atier-one~~ U.S. brand, ASUS, Coolpad, HTC, Huawei, Intex, Karbonn, Lava, Lenovo, LG, Meizu, Micromax, OPPO, Samsung, Vivo, Xiaomi, ZTE and hundreds of local handset manufacturers in China and India. Based on internal data and Strategy Analytics’ provisional worldwide shipment data, CEVA’s worldwide market share of handset baseband chips that incorporate our technologies was approximately 35% of the worldwide shipment volume in the first half of 2017.

We believe the adoption of our ~~signal processing IP cores~~wireless connectivity and ~~software for applications outside of~~smart sensing products beyond our incumbency in the ~~cellular~~handset baseband market continues to progress. ~~As a testament to~~Reflecting this ~~growing~~ trend, during the third quarter of ~~2017,~~2020, we concluded ~~eight~~thirteen licensing deals, ~~all~~twelve of which are for~~non-cellular~~ ~~baseband~~ base station and IoT applications. ~~These license deals demonstrate that~~We continue to experience good demand for our ~~technologies are being integrated~~products and expand our market reach into ~~a broad range of end devices including 5G base stations, smartphones, automotive ADAS, drones, surveillance cameras, wearables, industrial IoT and a variety of Bluetooth andWi-Fi~~ ~~connected consumer and medical products. Moreover, during~~new areas. In the third quarter of 2020, we concluded an agreement with a leading automotive semiconductor company for an automotive ADAS application. We also concluded agreements broadly across our ~~royalty revenues derived fromnon-cellular~~ ~~baseband~~connectivity and sensing products, ~~approximately doubled year-over-year, contributing more than $2 million of royalty revenues during~~illustrating the ~~quarter.~~industry demand for our diverse IP portfolio.

We believe the following key elements represent significant growth drivers for the company:

~~Our specialization and competitive edge in digital signal processor technologies for next generation wireless such asLTE-A~~ ~~Pro, 5G, LTE-IoT, 802.11ac and 802.11axWi-Fi~~ technologies, and the inherent low cost and power and performance balance of our designs, put us in a strong position to simultaneously capitalize on mass market adoption of such technologies and address multiple markets and product sectors, including handsets, macro base stations, small cells,~~Wi-Fi~~ ~~routers and varieties of machine type communications such as connected cars, smart cities, industrial markets and more.~~

~~Together with our presence in the handset baseband market, our Bluetooth andWi-Fi~~ IPs allow us to expand further into IoT applications and substantially increase our overall addressable market. Our addressable market size is expected to be 35 billion devices by 2020, per data from ABI Research. Already, shipments of products incorporating our Bluetooth IP are sizeable, with more than 139 million CEVA-powered Bluetooth chips shipped in the first nine months of 2017, which is more than the amount that was shipped in the entire year of 2016.

The growing market potential for voice assisted devices, as voice is becoming the primary user interface for IoT applications, including mobile, automotive and consumer devices, offers an additional growth segment for the company. Our proven track record in audio/voice processing, with more than 6 billion audio chips shipped to date, puts us in a strong position to power audio roadmaps across this new range of addressable end markets.

~~OurCEVA-XM4~~ ~~intelligent vision processor and our newCEVA-XM6~~ vision processor and platform for deep learning provide highly compelling offerings for any camera-enabled device such as smartphones, tablets, automotive safety (ADAS), Autonomous Driving (AD), drones, robotics, security and surveillance, augmented reality (AR) and virtual reality (VR), drones, and signage. Per ABI Research, camera shipments are expected to exceed 2.7 billion units by 2018. We have already signed more than 45 licensing agreements for our imaging and vision DSPs across those markets, where our customers can add camera-related enhancements such as smarter autofocus, better picture using super resolution algorithms, and better image capture in~~low-light~~ environments. Other customers can add video analytics support to enable new services like augmented reality, gesture recognition and advanced safety capabilities in cars. This transformation in vision processing and neural net software and hardware needs is an opportunity for us to expand our footprint and content in smartphones, tablets, drones, surveillance, automotive ADAS and industrial IoT applications.

As a result of our diversification strategy beyond baseband for handsets, and our progress in addressing those new markets under the base station and IoT umbrella, we expect ~~significant~~a noticeable growth in royalty revenues derived from base station and IoT product category (formerly referred to as non-handset ~~baseband applications~~ products) over the next few ~~years, due~~years. This trend is evident in the third quarter, where we shipped a record 200 million base station & IoT devices, generating a record $7.9 million in royalties for this product category. These devices are comprised of a range of different products at different royalty ASPs, spanning from high volume Bluetooth to ~~a combination~~high value sensor fusion and base station RAN. The royalty ASP of ~~higher unit shipments~~our other products will be in between the two ranges.

Subsequent to our acquisition of ~~Bluetooth~~the business of Hillcrest Labs located in Rockville, Maryland, we extended this business into industrial, robotics and automotive spaces, and are developing new products that ~~bear lower ASPs,~~combine Hillcrest Labs’ sensor processing with ~~higher ASPs driven by base station~~our other sensing and ~~vision products.~~

~~Notwithstanding the various growth opportunities we have outlined above, our business operates~~connectivity technologies to offer complete contextual computing solutions. Hillcrest Labs’ core technologies and research and development team play a pivotal role in ~~a highly competitive and cyclical environment. The maintenance of our competitive position~~these initiatives and our future ~~growth are dependent on~~technological developments. As a result, we have determined to make our ~~ability to adapt to ever-changing technologies, short product life cycles, evolving industry standards, changing customer needs and~~Rockville, Maryland office the ~~trend towardsInternet-of-Things,~~ ~~handset baseband, connectivity, and voice, audio and video convergence in~~U.S. headquarters, effective immediately.

Throughout the ~~markets that~~COVID-19 outbreak, we ~~operate. Also, our business relies significantly on revenues derived from~~have continued operations. We have taken a ~~limited~~ number of ~~customers. The discontinuation of product lines or market sectors that incorporate~~precautionary health and safety measures to safeguard our ~~technology~~employees while maintaining business continuity. We are monitoring and assessing orders issued by ~~our significant customers or a change in direction of their business and our inability~~applicable governments to adapt our technology to their new business needs could have material negative implications for our future royalty revenues. Moreover, competition has historically increased pricing pressures for our products and decreased our average selling prices. Royalty payments under our existing license agreements also could be lower than currently anticipated for a variety of reasons, including decreased royalty rates triggeredensure compliance with evolving COVID-19 guidelines.

Despite the ongoing pandemic, we are encouraged by larger volume shipments, lower royalty rates negotiated with customers due to competitive pressure or consolidation among our customers. Some of our competitors have reduced their licensing and royalty fees to attract customers and expand their market share. In order to penetrate new markets and maintain our market share with our existing products, we may need to offer our products in the future at lower prices which may result in lower profits. In addition, our future growth is dependent not only on the continued success of our existing products but also the successful introduction of new products, which requires the dedication of resources into research and development which in turn may increase our operating expenses. Furthermore, since our products are incorporated into end products of our OEM and semiconductor customers, our business is very dependent on their ability to achieve market acceptance of their end products in the handset and consumer electronic markets, which are similarly very competitive. In addition, macroeconomic trends may significantly affect our operating results. For example, consolidation among our customers may negatively affect our revenue source, increase our existing customers’ negotiation leverage and make us more dependent on a limited number of customers. Also, since we derive a significant portion of our revenues from the handset baseband market, any negative trends in that market would adversely affect our financial results.

Moreover, the semiconductor and consumer electronics industries remain volatile, which makes it extremely difficult for our customers and us to accurately forecast financial results and plan for future business activities. Our license arrangements have not historically provided for substantial ongoing license payments so revenue recognized from licensing arrangements vary significantly from period to period, depending on the number and size of deals closed during a quarter, and is difficult to predict. Moreover, our royalty revenues are based on the sales of products incorporating the semiconductors or other productspersistent design activities of our customers and interests in our products. We are focused on continuing to expand our business to capitalize on the momentum we gained last year. We are further encouraged by recent indicators relating to our base station and IoT product category. During the first three quarters of 2020, the world encountered new trends and different seasonality than what we have encountered in prior years. Some consumer electronics products sold well and some new technologies were widely adopted due to social distancing and other restrictions. Nonetheless, prolonged measures to contain the spread of coronavirus poses uncertainty for economic activities. In particular, in emerging markets where our primary exposure is in low tier handsets, COVID -19 has had a negative impact. While the impact from COVID-19 on our financial results for the third quarter and the first nine months of 2020 was not material as set forth in the below section discussing the results of operations for the third quarter and the first nine months of 2020, we are currently unable to determine or predict the nature, duration or scope of the overall impact the pandemic will have on our business, results of operations, liquidity or capital resources for the reminder of the year. As of the date of this filing, significant uncertainty exists concerning the magnitude of the impact and duration of the pandemic. While we are confident about our licensing pipeline, we may face some near-term softness, mainly related to a ~~result we do not have direct access to information that will help us anticipate the timing~~shortfall in consumer spending and ~~amount of future royalties. We have very little visibility into the timetable of product shipments incorporating our technology by our customers.~~its impact on demand for consumer electronic products. As a result, our ~~past operating results should not be relied upon as an indication~~royalty revenue for 2020 is less certain due to the pandemic.

Total revenues were ~~$24.0~~$25.0 million and ~~$65.9~~$72.2 million for the third quarter and the first nine months of ~~2017,~~2020, respectively, representing an increase of ~~35%~~6% and ~~28%~~23%, respectively, as compared to the corresponding periods in ~~2016.~~2019. For the third quarter and the first nine months of 2020, the increase was due to both higher licensing and related revenues and higher royalty revenues in comparison to the corresponding periods in 2019. Net loss for the third quarter of 2020 was $0.7 million, as compared to net income of $0.8 million reported for the same period in 2019. The net loss for the third quarter of 2020 notwithstanding reaching higher revenues is primarily due to taxes. Third quarter 2020 financials include a tax expense of approximately $1 million due to withholding tax which cannot be utilized in future years, while third quarter 2019 financials included a tax benefit of approximately $1 million due to the successful conclusion of a tax audit.

Five largest customers accounted for ~~75%~~52% and ~~59%~~46% of our total revenues for the third quarter and the first nine months of ~~2017,~~2020, respectively, as compared to ~~65%~~54% and ~~64%~~48% for the comparable periods in ~~2016. Four~~2019. Two customers accounted for ~~20%,~~ 18%~~, 12%~~ and ~~21%~~16% of our total revenues for the third quarter of ~~2017,~~2020, as compared to two customers that accounted for ~~27%~~23% and ~~21%~~15% of our total revenues for the third quarter of ~~2016. Two~~2019. Three customers accounted for ~~22%~~13%, 12% and ~~17%~~13% of our total revenues for the first nine months of ~~2017,~~2020, as compared to two customers that accounted for ~~27%~~19% and ~~19%~~15% of our total revenues for the first nine months of ~~2016.~~2019. Sales to UNISOC (formerly Spreadtrum Communications, Inc.) represented ~~20%~~18% and ~~22%~~12% of our total revenues for the third quarter and the first nine months of ~~2017, respectively,~~2020, as compared to ~~27%~~15% for both comparable periods in ~~2016.~~2019. Generally, the identity of our other customers representing 10% or more of our total revenues varies from period to period, especially with respect to our licensing customers as we generate licensing revenues generally from new customers on a quarterly basis. With respect to our royalty revenues, ~~two~~three royalty paying customers represented 10% or more of our total royalty revenues for the third quarter of 2020, and four customers each represented 10% or more of our total royalty revenues for ~~both~~ the ~~third quarter and~~ first nine months of ~~2017,~~2020, and collectively represented ~~68%~~65% and ~~74%~~73% of our total royalty revenues for the third quarter and the first nine months of ~~2017,~~2020, respectively. ~~Three~~Two royalty paying customers each represented 10% or more of our total royalty revenues for the third quarter of ~~2016,~~2019, and ~~collectively represented 86% of our total royalty revenues for the third quarter of 2016. Two royalty paying~~three customers each represented 10% or more of our total royalty revenues for the first nine months of ~~2016,~~2019, and collectively represented ~~81%~~65% and 74% of our total royalty revenues for the third quarter and the first nine months of ~~2016.~~2019, respectively. We expect that a significant portion of our future revenues will continue to be generated by a limited number of customers. The concentration of our customers is explainable in part by consolidation in the semiconductor industry.

The following table sets forth the products and services as percentages of our total revenues for each of the periods set forth below:

~~We expect to continue to generate a significant portion of our revenues for 2017 from the above products and services.~~

Licensing and related revenues were ~~$14.0~~$12.4 million and ~~$33.9~~$40.4 million for the third quarter and the first nine months of ~~2017,~~2020, respectively, an~~all-time~~ ~~record high,~~ representing an increase of ~~88%~~10% and ~~44%~~22%, respectively, as compared to the corresponding periods in ~~2016.~~2019. The increase in licensing and related revenues for the third quarter of ~~2017 was due to a combination of~~2020 mainly reflected higher ~~licensing~~ revenues from our connectivity products associated mainly with 5G networks, Bluetooth and ~~activities from all business lines (other than connectivity), including recognition of revenue from a prior 5G related licensing agreement that was previously recorded as part of our backlog.~~Wi-Fi technologies. The increase in licensing and related revenues for the first nine months of ~~2017 was due to~~2020 mainly reflected higher ~~licensing~~ revenues ~~and activities~~from our connectivity products associated mainly with ~~vision and~~5G networks, base station, Bluetooth and Wi-Fi technologies, partially offset by a decrease in revenues from our computer vision products and ~~products,~~technologies.

Thirteen license agreements were concluded during the third quarter of 2020, of which ~~are part~~five were for connectivity and eight were for smart sensing. Six of the ~~company’s successful diversification strategy over~~thirteen deals were with first time customers. Target applications of our customers include ADAS, digital imaging, true wireless stereo earbuds, digital conferencing systems and a range of other smart IoT devices. Our licensing business in the ~~last few years.~~first nine months of the year was robust given our broad technology portfolio for 5G networks, IoT, Bluetooth and Wi-Fi which enabled us to consistently grow our licensee base and expand our market reach into new lucrative areas despite the uncertainty brought about by COVID-19.

Licensing and related revenues accounted for ~~58%~~50% and ~~51%~~56% of our total revenues for the third quarter and the first nine months of ~~2017,~~2020, respectively, as compared to ~~42%~~48% and ~~46%~~56% for the comparable periods of 2016. During the third quarter of 2017, we concluded eight new licensing deals. Of the eight new licensing deals completed during the quarter, three were with first time customers, and all of the licensing agreements completed during the quarter were for~~non-handset~~ baseband applications. Two of the agreements were for CEVA DSP cores, platforms and software and six were for CEVA connectivity IPs. Target markets for the licenses include 5G base stations, AI for smartphones and consumer and industrial IoT. Geographically, two of the deals signed were in China, three were in the U.S., and three were in the APAC region. Our licensing business is progressing well with a solid pipeline, diverse customer base and target markets.2019.

Royalty revenues were ~~$10.0~~$12.5 million and ~~$32.0~~$31.7 million for the third quarter and the first nine months of ~~2017,~~2020, respectively, representing ~~a decrease of 4% and~~ an increase of ~~15%~~3% and 23%, respectively, as compared to the corresponding periods in ~~2016.~~2019. Royalty revenues accounted for ~~42%~~50% and ~~49%~~44% of our total revenues for the third quarter and the first nine months of ~~2017,~~2020, respectively, as

compared to ~~58%~~52% and ~~54%~~44% for the comparable periods of ~~2016.~~2019. The ~~slight decrease~~increase in royalty revenues for the third quarter ~~of 2017 reflects noticeable softness across major handset vendors~~ and regions. In particular, China was experiencing excess inventory levels in low cost smartphones, partially due to slower migration to LTE smartphones in India and a pushout of a flagship model in the smartphone space. This was partially offset by higher volume shipments and royalty revenues of our~~non-handset~~ baseband products. As examples, higher vision-related royalty revenues were derived from new smartphones and cameras going into production during 2017 using our vision platform and higher volume shipments were evidenced by initial royalty reports from base station products utilizing our technologies. The increase in royalty revenues for the first nine months of ~~2017~~2020 reflects ~~an increase~~higher revenues driven by record shipments for our base station & IoT product category, formerly referred to as non-handset products. Royalty revenues from this category grew 86% sequentially and 105% year-over-year to reach a record $7.9 million and $15.9 million in ~~LTE~~the third quarter and the first nine months of 2020, respectively. We have benefitted from expedited 5G RAN deployments in China and a series of product launches and shipments enabled by our Bluetooth, Wi-Fi and sensor fusion technologies (with the highest contribution from our base station, sensor fusion business, Bluetooth and Wi-Fi technologies). In our handset baseband ~~shipments~~category, we saw a strong recovery in the third quarter from our China-based customers targeting low tier 4G smartphones for India and~~non-handset~~ ~~baseband shipments~~ other developing economies, which are gradually re-opening after COVID-19 lockdowns. Royalties from premium tier smartphones in ~~all of~~the third quarter declined on a year-over-year basis as a new 5G smartphone series launched last month by Apple will use modems from a supplier that does not incorporate our ~~different markets.~~technologies.

Our customers reported sales of ~~250~~349 million and ~~871 million~~841million chipsets incorporating our technologies for the third quarter and ~~first nine months of 2017, respectively, as compared to 270 million and 726 million for the comparable periods of 2016. Of those volumes, 61 million and 184 million were attributed tonon-handset~~ baseband for the third quarter and first nine months of 2017, respectively, as compared to 52 million and 131 million for the comparable periods of 2016. The decrease in chipsets for the third quarter of 2017 is attributable to a decrease in smartphone shipments. The increase in chipsets for the first nine months of ~~2017 is attributable to~~2020, respectively, an increase of 20% and 23%, respectively, from the corresponding periods in ~~ournon-handset~~ ~~baseband products and overall higher handset shipments.~~2019 for actual shipments reported.

The five largest royalty-paying customers accounted for ~~87% and 89%~~77% of our total royalty revenues for both the third quarter and the first nine months of ~~2017, respectively,~~2020, as compared to ~~94%~~86% and ~~92%~~83% for the comparable periods of ~~2016.~~2019.

Due to the nature of our license agreements and the associated potential large individual contract amounts, the geographic split of revenues both in absolute dollars and percentage terms generally varies from quarter to quarter.

Cost of revenues was ~~$1.7~~$2.5 million and ~~$5.0~~$8.3 million for the third quarter and the first nine months of ~~2017,~~2020, respectively, as compared to ~~$1.4~~$2.8 million and ~~$4.5~~$7.3 million for the comparable periods of ~~2016.~~2019. Cost of revenues accounted for 7%10% and 8%11% of our total revenues for the third quarter and the first nine months of ~~2017,~~2020, respectively, as compared to ~~8% and 9%~~12% for ~~the~~both comparable periods of ~~2016.~~2019. The ~~increase~~decrease for the third quarter of ~~2017~~2020 principally reflected ~~higher payments to IIA.~~lower customization work for our licensees and lower third-party IP costs (associated with the NB-IoT product line). The increase for the first nine months of ~~2017~~2020 principally reflected higher salaries and related costs (partially due to salary and related costs associated with the Hillcrest Labs employees being included in the results for the first half of 2020, which costs were not incurred for the first half of 2019), higher payments to the ~~IIA~~Israeli Innovation Authority of the Ministry of Economy and Industry in Israel (the “IIA”), higher~~non-cash~~ ~~equity-based compensation expenses,~~ materials related to the Hillcrest Labs business and higher amortization cost related to acquired assets (Immervision technologies), partially offset by lower ~~customization work for our licensees.~~third-party IP costs associated with the NB-IoT product line. Included in cost of revenues for the third quarter and the first nine months of ~~2017~~2020 was anon-cash equity-based compensation expense of ~~$125,000~~$159,000 and ~~$330,000,~~$473,000, respectively, as compared to ~~$65,000~~$168,000 and ~~$179,000~~$464,000 for the comparable periods of ~~2016.~~2019.

Gross margin for the third quarter and the first nine months of ~~2017~~2020 was ~~93%~~90% and ~~92%~~89%, respectively, as compared to ~~92% and 91%~~88% for ~~the~~both comparable periods of ~~2016.~~2019. The increase for both the third quarter and the first nine months of ~~2017~~2020 mainly reflected higher total revenues.

Total operating expenses were ~~$16.1~~$22.5 million and ~~$48.2~~$67.1 million for the third quarter and the first nine months of ~~2017,~~2020, respectively, as compared to ~~$12.6~~$21.0 million and ~~$38.7~~$57.0 million for the comparable periods of ~~2016.~~2019. The net increase in total operating expenses for ~~both~~ the third quarter of 2020 principally reflected higher salary and employee-related costs, mainly due to higher headcount, and higher non-cash equity-based compensation expenses. The net increase in total operating expenses for the first nine months of ~~2017~~2020 principally reflected (1) higher salary and employee-related costs, mainly due to higher headcount, and the inclusion of salary and related costs associated with the Hillcrest Labs employees for the first half of 2020, which costs were not incurred for the first half of 2019 as the acquisition of the Hillcrest Labs business was consummated in July 2019, (2) lower research grants received from the IIA, (3) higher allowance for credit losses, and (4) higher non-cash equity-based compensation expenses. The increase in total operating expenses ~~and~~for the first nine months of 2020 was partially offset by higher salary and related costs, mainly due to higher headcount associated with accelerated strategic research and development programs and collaborations with our customers to expedite their production ramps.

Our research and development expenses, net, were ~~$10.0~~$15.6 million and ~~$30.4~~$45.7 million for the third quarter and the first nine months of ~~2017,~~2020, respectively, as compared to ~~$7.3~~$13.9 million and ~~$23.1~~$38.6 million for the comparable periods of ~~2016.~~2019. The net increase for ~~both~~ the third quarter ~~and first nine months~~ of ~~2017~~2020 principally reflected higher salary and employee-related costs, mainly due to higher headcount, and lower research grants received from the ~~IIA, highernon-cash~~ ~~equity-based compensation expenses and~~IIA. The net increase for the first nine months of 2020 principally reflected (1) higher salary and ~~related~~employee-related costs, mainly due to higher headcount, and the inclusion of salary and related costs associated with ~~accelerated strategic~~the Hillcrest Labs employees for the first half of 2020, which costs were not incurred for the first half of 2019 as the acquisition of the Hillcrest Labs business was consummated in July 2019, (2) lower research grants received, mainly from the IIA, and (3) higher non-cash equity-based compensation expenses. The increase in research and development ~~programs and collaborations with our customers to expedite their production ramps.~~expenses for the first nine months of 2020 was partially offset by higher CIR received from the French tax authorities. Included in research and development expenses for the third quarter and the first nine months of ~~2017~~2020 werenon-cash equity-based compensation expenses of ~~$991,000~~$1,770,000 and ~~$2,834,000,~~$5,115,000, respectively, as compared to ~~$741,000~~$1,494,000 and ~~$2,162,000~~$4,314,000 for the comparable periods of ~~2016.~~2019. Research and development expenses as a percentage of our total revenues were ~~42% and 46%~~63% for both the third quarter and the first nine months of ~~2017, respectively,~~2020, as compared to ~~41%~~59% and ~~45%~~66% for the comparable periods of ~~2016.~~2019. The percentage increase for the third quarter of 2020, as compared to the comparable period of 2019, was due to the same reasons as set forth above for the increase in research and development expenses in absolute dollars for the comparable periods of 2020 and 2019. The percentage decrease for the first nine months of 2020, as compared to the comparable period of 2019, was due to higher total revenues for the first nine months of 2020 as compared to the comparable period of 2019, offset by the same reasons as set forth above for the increase in research and development expenses in absolute dollars for the comparable periods of 2020 and 2019.

The number of research and development personnel was ~~224~~304 at September 30, ~~2017,~~2020, as compared to ~~202~~290 at September 30, ~~2016.~~2019.

We anticipate that our research and development expenses will continue to increase in 2020, partially due to a full year of expenses associated with the Hillcrest Labs business.

Our sales and marketing expenses were ~~$3.1~~$2.7 million and ~~$9.4~~$8.8 million for the third quarter and the first nine months of ~~2017,~~2020, respectively, as compared to $2.8 million and ~~$8.5~~$8.8 million for the comparable periods of ~~2016.~~2019. The ~~increase~~slight decrease for the third quarter of ~~2017~~2020 primarily reflected ~~higher salary~~lesser travel and physical marketing activities and events (like trade shows), but more digital related activities at lesser costs, ~~and highernon-cash~~ ~~equity-based compensation expenses, partially offset by lower commission costs. The increase for the first nine months of 2017 primarily reflected higher salary and related costs and highernon-cash~~ ~~equity-based compensation expenses.~~due to COVID-19. Included in sales and marketing expenses for the third quarter and the first nine months of ~~2017~~2020 werenon-cash equity-based compensation expenses of ~~$381,000~~$533,000 and ~~$1,040,000,~~$1,496,000, respectively, as compared to ~~$179,000~~$362,000 and ~~$681,000~~$1,112,000 for the comparable periods of ~~2016.~~2019. Sales and marketing expenses as a percentage of our total revenues were ~~13%~~11% and ~~14%~~12% for the third quarter and the first nine months of ~~2017,~~2020, respectively, as compared to ~~15%~~12% and ~~16%~~15% for the comparable periods of ~~2016.~~2019.

The total number of sales and marketing personnel was 3435 at ~~both~~ September 30, ~~2017 and~~2020, as compared to 32 at September 30, ~~2016.~~2019.

Our general and administrative expenses were ~~$2.7~~$3.6 million and ~~$7.4~~$10.9 million for the third quarter and the first nine months of ~~2017,~~2020, respectively, as compared to ~~$2.2~~$3.5 million and ~~$6.3~~$8.4 million for the comparable periods of ~~2016.~~2019. The slight increase for the third quarter of 2020 primarily reflected higher non-cash equity-based compensation expenses, partially offset by a lease write-off related to the Hillcrest Labs acquisition recorded in the third quarter of 2019. The increase for ~~both~~ the ~~third quarter and~~ first nine months of ~~2017~~2020 primarily reflected higher ~~professional services~~allowance for credit losses and highernon-cash equity-based compensation expenses. Included in general and administrative expenses for the third quarter and the first nine months of ~~2017~~2020 werenon-cash equity-based compensation expenses of ~~$722,000~~$1,084,000 and ~~$2,142,000,~~$2,986,000, respectively, as compared to ~~$580,000~~$728,000 and ~~$1,626,000~~$1,957,000 for the comparable periods of ~~2016.~~2019. General and administrative expenses as a percentage of our total revenues were ~~11%~~14% and 15% for ~~both~~ the third quarter and the first nine months of ~~2017,~~2020, respectively, as compared to ~~12%~~15% and 14% for ~~both~~ the comparable periods of ~~2016.~~2019.

The number of general and administrative personnel was 2632 at September 30, ~~2017,~~2020, as compared to 2433 at September 30, ~~2016.~~2019.

Our amortization charges ~~were $0.3~~was $0.6 million and ~~$0.9~~$1.7 million for the third quarter and the first nine months of ~~2017,~~2020, respectively, as compared to ~~$0.3~~$0.8 million and ~~$0.9~~$1.2 million for the comparable periods of ~~2016.~~2019. The amortization charges for the third quarter and the first nine months of 2020 were incurred in connection with the amortization of intangible assets associated with (1) the acquisition of the Hillcrest Labs business, and (2) a technology investment in Immervision. The amortization charges for the third quarter and the first nine months of 2019 were incurred in connection with the amortization of intangible assets associated with (1) the acquisition of RivieraWaves, (2) the acquisition of the Hillcrest Labs business, and (3) a technology investment in ~~July 2014. As of~~Immervision. For more information about our intangible assets, see Notes 7 to the interim condensed consolidated financial statements for the three and nine months ended September 30, ~~2017, the net amount of intangible assets was $2.1 million.~~2020.

Financial income, net, consists of interest earned on investments, gains and losses from sale of marketable securities, accretion (amortization) of discounts (premiums) on marketable securities and foreign exchange movements.

The ~~increase~~decrease in interest income and gains and losses from marketable securities, net, during both the third quarter and the first nine months of ~~2017~~2020 principally reflected ~~higher~~lower combined cash, bank deposits and marketable securities balances held (mainly as a result of the acquisition of the Hillcrest Labs business and ~~higher~~the technology investment in Immervision during the third quarter of 2019) and lower yields.

We review our monthly expected majornon-U.S. dollar denominated expenditures and look to hold equivalentnon-U.S. dollar cash balances to mitigate currency fluctuations. This has resulted in a foreign exchange gain of ~~$0.03~~$0.36 million and ~~a foreign exchange loss of $0.05~~$0.43 million for the third quarter and the first nine months of ~~2017,~~2020, respectively, as compared to a foreign exchange loss of ~~$0.01~~$0.28 million and ~~$0.03~~$0.48 million for the comparable periods of ~~2016.~~2019.

Our income tax expenses ~~were $1.2~~was $1.8 million and ~~$1.0~~$2.5 million for the third quarter and the first nine months of ~~2017,~~2020, respectively, as compared to ~~$1.0~~income tax benefit of $0.4 million and ~~$2.0~~$0.1 million for the comparable periods of ~~2016.~~2019. The increase for the third quarter ~~of 2017 primarily reflected higher income before taxes on income. The decrease for~~and the first nine months of ~~2017~~2020 primarily reflected withholding tax expenses for which we will not be able to obtain a refund from certain tax authorities, and a tax benefit of ~~$1.8~~$1.0 million recorded in the third quarter of 2019 due to the release of a tax provision as a result of the completion of a tax audit in a certain foreign tax ~~jurisdiction, partially offset by higher~~jurisdiction.

We are subject to income ~~before~~and other taxes in the United States and numerous foreign jurisdictions. Our domestic and foreign tax liabilities are dependent on ~~income.~~the jurisdictions in which profits are determined to be earned and taxed. Additionally, the amount of taxes paid is subject to our interpretation of applicable tax laws in the jurisdictions in which we operate. A number of factors influence our effective tax rate, including changes in tax laws and treaties, as well as the interpretation of existing laws and rules. Federal, state, and local governments and administrative bodies within the United States, and other foreign jurisdictions have implemented, or are considering, a variety of broad tax, trade, and other regulatory reforms that may impact us. For example, the Tax Cuts and Jobs Act (the “U.S. Tax Reform”) enacted on December 22, 2017 resulted in changes to our U.S. corporate tax rate, our U.S. deferred income taxes, and the taxation of foreign earnings. It is not currently possible to accurately determine the potential comprehensive impact of these or future changes in tax laws, but these changes could have a material impact on our business and financial condition.

We have significant operations in Israel, France and the Republic of Ireland. A substantial portion of our taxable income is generated in Israel. Currently, our Israeli and Irish subsidiaries are taxed at rates substantially lower than U.S. tax rates.

Our Irish subsidiary qualified for a 12.5% tax rate on its trade. Interest income generated by our Irish subsidiary is taxed at a rate of 25%. Our French subsidiary qualified for a ~~33.3%~~28.0% tax rate ~~on its~~for all taxable profits.

Our Israeli subsidiary is entitled to various tax benefits ~~by virtue~~as a technological enterprise. In December 2016, the Economic Efficiency Law (Legislative Amendments for Applying the Economic Policy for the 2017 and 2018 Budget Years), 2016, which includes the Amendment to the Law for the Encouragement of ~~the “Approved Enterprise” and/or “Benefited Enterprise” status granted~~Capital Investments, 1959 (Amendment 73) (the “Amendment”), was published. The Amendment, among other things, prescribes special tax tracks for technological enterprises, which are subject to ~~its eight investment programs, as defined~~rules that were issued by the ~~Israeli Investment Law. In accordance with~~Minister of Finance in April 2017.

The new tax track under the ~~Investment Law, our Israeli subsidiary’s first seven investment programs were subject~~Amendment, which is applicable to corporate tax rate of 24% for the first nine months of 2017, and our Israeli subsidiary’s eighth investment program was subject to corporate tax rate of 10% for the first nine months of 2017. However, our Israeli subsidiary, is ~~eligible~~the “Technological Preferred Enterprise.” Technological Preferred Enterprise is an enterprise for ~~the erosion~~which total consolidated revenues of ~~tax basis with respect to~~ its ~~first seven investment programs,~~parent company and ~~this resulted in an increase~~all subsidiaries are less than 10 billion New Israeli Shekel (“NIS”). A Technological Preferred Enterprise, as defined in the ~~taxable income attributable to~~Amendment, that is located in the ~~eighth investment program, which was subject to a reduced tax rate~~center of ~~10% for the first nine months of 2017. The tax benefits under our Israeli subsidiary’s active investment programs are scheduled to gradually expire starting in 2020.~~

~~To maintain our Israeli subsidiary’s eligibility for the above tax benefits, it must continue to meet certain conditions under the Investment Law. Should~~Israel (where our Israeli subsidiary ~~fail~~is currently located), is taxed at a rate of 12% on profits deriving from intellectual property. Any dividends distributed to ~~meet such conditions~~“foreign companies,” as defined in the ~~future, these benefits would~~Amendment, deriving from income from technological enterprises will be ~~cancelled~~taxed at a rate of 4%. We are applying the Technological Preferred Enterprise tax track for our Israeli subsidiary from tax year 2020 and it would be subject to corporate tax in Israel at the standard corporate rate and could be required to refund tax benefits already received, with interest and adjustments for inflation based on the Israeli consumer price index.onwards.

Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.

We believe that the assumptions and estimates associated with revenue recognition, fair value of financial instruments, equity-based compensation and income taxes have the greatest potential impact on our consolidated financial statements. Therefore, we consider these to be our critical accounting policies and estimates.

See our Annual Report on Form10-K for the year ended December 31, ~~2016,~~2019, filed with the SEC on ~~March 10, 2017,~~February 28, 2020, for a discussion of additional critical accounting policies and estimates. There have been no changes in our critical accounting policies as compared to what was previously disclosed in the Annual Report on Form10-K for the year ended December 31, ~~2016.~~2019.

As of September 30, ~~2017,~~2020, we had approximately ~~$22.9~~$22.1 million in cash and cash equivalents, ~~$41.0~~$41.1 million in short term bank deposits, ~~$74.5~~$78.5 million in marketable securities, and ~~$39.2~~$11.4 million in long term bank deposits, totaling ~~$177.6~~$153.1 million, as compared to ~~$156.5~~$150.0 million at December 31, ~~2016.~~2019. The increase for the first nine months of ~~2017~~2020 principally reflected cash provided by operations, ~~and cash proceeds from exercise of stock-based awards,~~ partially offset by ~~the purchase~~funds used to repurchase 202,392 shares of ~~computers and platform tools during the first nine months~~common stock for an aggregate consideration of ~~2017, mainly for our research and development activities~~.approximately $4.8 million.

Out of total cash, cash equivalents, bank deposits and marketable securities of ~~$177.6~~$153.1 million, ~~$134.5~~$134.2 million was held by our foreign subsidiaries. Our intent is to permanently reinvest earnings of our foreign subsidiaries and our current operating plans do not demonstrate a need to repatriate foreign earnings to fund our U.S. operations. However, if these funds were needed for our operations in the United States, we would be required to accrue and pay ~~U.S.~~ taxes ~~as well as taxes in other countries~~ to repatriate these funds. The determination of the amount of additional taxes related to the repatriation of these earnings is not practicable, as it may vary based on various factors such as the location of the cash and the effect of regulation in the various jurisdictions from which the cash would be repatriated.

During the first nine months of ~~2017,~~2020, we invested ~~$67.2~~$62.3 million of cash in bank deposits and marketable securities with maturities up to 5860 months from the balance sheet date. In addition, during the same period, bank deposits and marketable securities were sold or redeemed for cash amounting to ~~$50.3~~$57.7 million. All of our marketable securities are classified asavailable-for-sale. The purchase and sale or redemption ofavailable-for-sale marketable securities are considered part of investing cash flow.Available-for-sale marketable securities are stated at fair value, with unrealized gains and losses reported in accumulated other comprehensive income (loss), a separate component of stockholders’ equity, net of taxes. We did not record any impairment charge for unrealized losses during the first nine months of 2020. Realized gains and losses on sales of investments, as determined on a specific identification basis, are included in the interim condensed consolidated statements of ~~income. We did not recognize any other-than-temporarily-impaired charges on marketable securities during the first nine months of 2017.~~income (loss). For more information about our marketable securities, see Notes 35 to the ~~attached Notes to the Interim Condensed Consolidated Financial Statements~~interim condensed consolidated financial statements for the three and nine months ended September 30, ~~2017.~~2020.

Bank deposits are classified as short-term bank deposits and long-term bank deposits. Short-term bank deposits are deposits with maturities of more than three months but no longer than one year from the balance sheet date, whereas long-term bank deposits are deposits with maturities of more than one year as of the balance sheet date. Bank deposits are presented at their cost, including accrued interest, and purchases and sales are considered part of cash flows from investing activities.

Cash provided by operating activities for the first nine months of ~~2017~~2020 was ~~$17.7~~$8.3 million and consisted of net ~~income~~loss of ~~$13.9~~$3.0 million, adjustments fornon-cash items of ~~$9.6~~$14.2 million, and changes in operating assets and liabilities of ~~$5.8~~$2.9 million. Adjustments fornon-cash items primarily consisted of ~~$2.4~~$4.3 million of depreciation and amortization of intangible assets ~~$6.3~~and $10.1 million of equity-based compensation ~~expenses and $0.9 million of amortization of premiums onavailable-for-sale~~ ~~marketable securities.~~expenses. The decrease ~~in cash from changes~~ in operating assets and liabilities primarily consisted of an increase in prepaid expenses and other assets of ~~$2.6~~$0.9 million, an increase in deferred taxes, net of $1.8 million (mainly due to an increase in withholding tax assets which can be utilized in future years) and a decrease in deferred revenues of $0.9 million, partially offset by a decrease in accrued interest on bank deposits of $0.8 million.

Cash provided by operating activities for the first nine months of 2019 was $4.3 million and consisted of net loss of $3.0 million, adjustments for non-cash items of $12.4 million, and changes in operating assets and liabilities of $5.1 million. Adjustments for non-cash items primarily consisted of $3.7 million of depreciation and amortization of intangible assets, $7.8 million of equity-based compensation expenses, $0.4 million of amortization of premiums on available-for-sale marketable securities and $0.4 million of unrealized foreign exchange loss. The decrease in operating assets and liabilities primarily consisted of an increase in prepaid expenses and other assets of $1.5 million (mainly as a result of ~~an increase in French research tax credits which is generally refunded every three years)~~payment of a yearly design tool subscription), an increase in accrued interest on bank deposits of $0.9 million, and an increase in deferred ~~tax assets,~~taxes, net of ~~$0.7 million, a decrease of deferred revenues of $2.0 million, a decrease in accrued payroll and related benefits of $1.5 million and a decrease in income taxes payable of $1.5~~$3.9 million (mainly due to (1) a release of a tax provision as a result of the completion of a tax audit in a certain foreign tax ~~jurisdiction), partially offset by a decrease in trade receivables of $2.2 million~~jurisdiction, and (2) an increase in ~~accrued expenses and other payables of $0.4 million.~~

~~Cash provided in operating activities for the first nine months of 2016 was $2.0 million and consisted of net income of $7.9 million, adjustments fornon-cash~~ ~~items of $7.3 million, and changes in operating assets and liabilities of $13.2 million. Adjustments fornon-cash~~ ~~items primarily consisted of $1.9 million of depreciation and amortization of intangible assets, $4.6 million of equity-based compensation expenses and $0.8 million of amortization of premiums onavailable-for-sale~~ marketable securities. The decrease in cash from changes in operating assets and liabilities primarily consisted of an increase in trade receivables of $13.2 million (mainly due to one of our large customer’s internal reorganization of its financial and legal entities which affected the timing of payments to us), an increase in prepaid expenses and other assets of $1.4 million, an increase in accrued interest on bank deposits of $0.4 million, an increase in deferredwithholding tax assets ~~net, of $0.6 million, and a decrease~~which can be utilized in ~~accrued payroll and related benefits of $0.4 million,~~future years), partially offset by an increase in ~~trade payables of $0.4 million, an increase in~~ deferred revenues of ~~$1.3 million and an increase in income tax payables of $0.9~~$1.2 million.

Cash flows from operating activities may vary significantly from quarter to quarter depending on the timing of our receipts and payments. Our ongoing cash outflows from operating activities principally relate to payroll-related costs and obligations under our property leases and design tool licenses. Our primary sources of cash inflows are receipts from our accounts receivable, to some extent, funding from ~~R&D~~research and development government grants and French research tax credits, and interest earned from our cash, deposits and marketable securities. The timing of receipts of accounts receivable from customers is based upon the completion of agreed milestones or agreed dates as set out in the contracts.

Net cash used in investing activities for the first nine months of ~~2017~~2020 was ~~$20.2~~$7.3 million, compared to ~~$6.4~~$9.3 million of net cash used byin investing activities for the comparable period of ~~2016.~~2019. We had a cash outflow of ~~$36.5~~$41.9 million and a cash inflow of ~~$23.3~~$28.3 million with respect to investments in marketable securities during the first nine months of ~~2017,~~2020, as compared to a cash outflow of ~~$32.5~~$18.7 million and a cash inflow of ~~$21.6~~$26.4 million with respect to investments in marketable securities during the first nine months of ~~2016.~~2019. For the first nine months of ~~2017,~~2020, we had net ~~investments~~proceeds of ~~$3.7~~$9.0 million infrom bank deposits, as compared to net proceeds of ~~$6.5~~$6.8 million from bank deposits for the comparable period of ~~2016.~~2019. We had a cash outflow of ~~$3.3~~$2.5 million and ~~$2.0~~$2.7 million during the first nine months of ~~2017~~2020 and ~~2016,~~2019, respectively, from purchase of property and ~~equipment (mainly~~equipment. For the first nine months of 2020 and 2019, we had a cash outflow of $0.2 million and $21.1 million, respectively, for ~~purchase~~the acquisition of ~~platform tools~~the Hillcrest Labs business and the technology investment in ~~both periods).~~

Net cash ~~provided by~~used in financing activities for the first nine months of ~~2017~~2020 was ~~$6.9~~$1.9 million, as compared to ~~$5.6~~$2.4 million of net cash ~~provided by~~used in financing activities for the comparable period of ~~2016.~~2019. The decrease is mainly due to higher proceeds received from the exercise of stock-based awards, as set forth below.

In August 2008, we announced that our board of directors approved a share repurchase program for up to one million shares of common stock which was further extended collectively by an additional ~~five million~~5,700,000 shares in 2010, 2013, 2014 and ~~2014.~~2018. In February 2020, our board of directors authorized the repurchase of an additional 700,000 shares of common stock. We did not repurchase any shares of common stock during the ~~first nine months~~third quarter of ~~2017.~~2020 and 2019. During the first nine months of ~~2016,~~2020, we repurchased ~~180,013~~202,392 shares of common stock pursuant to our share repurchase program, at an average purchase price of ~~$18.98~~$23.62 per share, for an aggregate purchase price of ~~$3.4~~$4.8 million. During the first nine months of 2019, we repurchased 194,316 shares of common stock pursuant to our share repurchase program, at an average purchase price of $25.01 per share, for an aggregate purchase price of $4.9 million. As of September 30, 2020, we had 497,608 shares available for repurchase.

During the first nine months of ~~2017,~~2020, we received ~~$6.9~~$2.9 million from the exercise of stock-based awards, as compared to ~~$9.0~~$2.4 million received for the comparable period of ~~2016.~~2019.

We believe that our cash and cash equivalents, short-term bank deposits and marketable securities, along with cash from operations, will provide sufficient capital to fund our operations for at least the next 12 months. We cannot provide assurances, however, that the underlying assumed levels of revenues and expenses will prove to be accurate. We believe the company has the financial resources to weather the expected short-term impacts of COVID-19. However, we have limited insight into the extent to which our business may be impacted by COVID-19, and there are many uncertainties, including the length and severity of the pandemic. An extended and severe pandemic may materially and adversely affect our future operations, financial position and liquidity.

In addition, as part of our business strategy, we occasionally evaluate potential acquisitions of businesses, products and technologies and minority equity investments. Accordingly, a portion of our available cash may be used at any time for the acquisition of complementary products or businesses or minority equity investments. Such potential transactions may require substantial capital resources, which may require us to seek additional debt or equity financing. We cannot assure you that we will be able to successfully identify suitable acquisition or investment candidates, complete acquisitions or investments, integrate acquired businesses into our current operations, or expand into new markets. Furthermore, we cannot provide assurances that additional financing will be available to us in any required time frame and on commercially reasonable terms, if at all. See “Risk Factors—We may seek to expand our business in ways that could result in diversion of resources and extra expenses.” for more detailed information.

A majority of our revenues and a portion of our expenses are transacted in U.S. dollars and our assets and liabilities together with our cash holdings are predominately denominated in U.S. dollars. However, the majority of our expenses are denominated in currencies other than the U.S. dollar, principally the NIS and the Euro. Increases in volatility of the exchange rates of currencies other than the U.S. dollar versus the U.S. dollar could have an adverse effect on the expenses and liabilities that we incur when remeasured into U.S. dollars. We review our monthly expectednon-U.S. dollar denominated expenditures and look to hold equivalentnon-U.S. dollar cash balances to mitigate currency fluctuations. This has resulted in a foreign exchange gain of ~~$32,000~~$356,000 and ~~a foreign exchange loss of $53,000~~$426,000 for the third quarter and the first nine months of ~~2017,~~2020, respectively, and a foreign exchange loss of ~~$5,000~~$278,000 and ~~$30,000~~$483,000 for the comparable periods of ~~2016.~~2019.

As a result of currency fluctuations and the remeasurement ofnon-U.S. dollar denominated expenditures to U.S. dollars for financial reporting purposes, we may experience fluctuations in our operating results on an annual and quarterly basis. To protect against the increase in value of forecasted foreign currency cash flow resulting from salaries paid in currencies other than the U.S. dollar during the year, we follow a foreign currency cash flow hedging program. We hedge portions of the anticipated payroll for ournon-U.S. employees denominated in currencies other than the U.S. dollar for a period of one to twelve months with forward and option contracts. During the third quarter and the first nine months of ~~2017,~~2020, we recorded accumulated other comprehensive loss of $0$198,000 and ~~$5,000,~~$26,000, respectively, from our forward and option contracts, net of taxes, with respect to anticipated payroll expenses for ournon-U.S. employees. During the third quarter and the first nine months of ~~2016,~~2019, we recorded accumulated other comprehensive loss of $29,000 and accumulated other comprehensive gain of ~~$5,000 and $23,000,~~$86,000, respectively, from our forward and option contracts, net of taxes, with respect to anticipated payroll expenses for ournon-U.S. employees. As of September 30, ~~2017, we had no~~2020, the amount of other comprehensive ~~gain/loss~~gain from our forward and option contracts, net of ~~taxes.~~taxes, was $23,000, which will be recorded in the consolidated statements of income (loss) during the following three months. We recognized a net ~~loss of $2,000 and a net~~ gain of ~~$186,000~~$352,000 and $514,000 for the third quarter and the first nine months of ~~2017,~~2020, respectively, and a net gain of ~~$69,000~~$117,000 and ~~$191,000~~$304,000 for the comparable periods of ~~2016,~~2019, related to forward and options contracts. We note that hedging transactions may not successfully mitigate losses caused by currency fluctuations. We expect to continue to experience the effect of exchange rate and currency fluctuations on an annual and quarterly basis.

The majority of our cash and cash equivalents are invested in high grade certificates of deposits with major U.S., European and Israeli banks. Generally, cash and cash equivalents and bank deposits may be redeemed and therefore minimal credit risk exists with respect to them. Nonetheless, deposits with these banks exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance limits or similar limits in foreign jurisdictions, to the extent such deposits are even insured in such foreign jurisdictions. While we monitor on a systematic basis the cash and cash equivalent balances in the operating accounts and adjust the balances as appropriate, these balances could be impacted if one or more of the financial institutions with which we deposit our funds fails or is subject to other adverse conditions in the financial or credit markets. To date, we have experienced no loss of principal or lack of access to our invested cash or cash equivalents; however, we can provide no assurance that access to our invested cash and cash equivalents will not be affected if the financial institutions that we hold our cash and cash equivalents fail.

We hold an investment portfolio consisting principally of corporate bonds. We have the ability to hold such investments until recovery of temporary declines in market value or maturity. Accordingly, as of September 30, ~~2017,~~2020, we believe the losses associated with our investments are temporary and no impairment loss was recognized during the first nine months of ~~2017.~~2020. However, we can provide no assurance that we will recover present declines in the market value of our investments.

Interest income and gains and losses from marketable securities, net, were ~~$0.79~~$0.66 million and ~~$2.20~~$2.26 million for the third quarter and the first nine months of ~~2017,~~2020, respectively, as compared to ~~$0.63~~$0.88 million and ~~$1.65~~$2.78 million for the comparable periods of ~~2016.~~2019. The ~~increase~~decrease in interest income, and gains and losses from marketable securities, net, during both the third quarter and the first nine months of ~~2017,~~2020 principally reflected ~~higher~~lower combined cash, bank deposits and marketable securities balances held (mainly as a result of the acquisition of the Hillcrest Labs business and ~~higher~~the technology investment in Immervision during the third quarter of 2019) and lower yields.

We are exposed primarily to fluctuations in the level of U.S. interest rates. To the extent that interest rates rise, fixed interest investments may be adversely impacted, whereas a decline in interest rates may decrease the anticipated interest income for variable rate investments. We typically do not attempt to reduce or eliminate our market exposures on our investment securities because the majority of our investments are short-term. We currently do not have any derivative instruments but may put them in place in the future. Fluctuations in interest rates within our investment portfolio have not had, and we do not currently anticipate such fluctuations will have, a material effect on our financial position on an annual or quarterly basis.

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, ~~2017.~~2020.

There has been no change in our internal control over financial reporting that occurred during our most recent fiscal quarter that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.

We are not a party to any litigation or other legal proceedings that we believe could reasonably be expected to have a material effect on our business, results of operations and financial condition.

This Form~~10-Q~~ 10Q contains forward-looking statements concerning our future products, expenses, revenue, liquidity and cash needs as well as our plans and strategies. These forward-looking statements are based on current expectations and we assume no obligation to update this information. Numerous factors could cause our actual results to differ significantly from the results described in these forward-looking statements, including the following risk factors.

There are no material changes to the Risk Factors described under the title “Factors That May Affect Future Performance” in our Annual Report on Form~~10-K~~ 10K for the fiscal year ended December 31, ~~2016~~2019 other than (1) changes to the Risk Factor below entitled: “We rely significantly on revenues derived from a limited number of customers who contribute to our royalty and license revenues;” (2) changes to the Risk Factor below entitled “Royalty rates could decrease for existing and future license agreements, which could materially adversely affect our operating results;” (3) changes to the Risk Factor below entitled “We generate a significant amount of our total revenues, especially royalty revenues, from the handset baseband market (for mobile handsets and for other modem connected devices) and our business and operating results may be materially adversely affected if we do not continue to succeed in these highly competitive markets;” (4) changes to the Risk Factor below entitled “Because we have significant international operations, we may be subject to political, economic and other conditions relating to our international operations that could increase our operating expenses and disrupt our revenues and business;” (5) changes to the Risk Factor below entitled “Our research and development expenses may increase if the grants we currently receive from the Israeli government ~~and European Union~~ are reduced or withheld;” (6) changes to the Risk Factor below entitled: “The Israeli tax benefits that we currently receive and the government programs in which we participate require us to meet certain conditions and may be terminated or reduced in the future, which could increase our tax expenses;” ~~and~~ (7) changes to the Risk Factor below entitled “Our product development efforts are time-consuming and expensive and may not generate an acceptable return, if ~~any.~~any;” and (8) changes to the Risk Factor below entitled “The COVID-19 pandemic, or other outbreak of disease or similar public health threat, could materially and adversely affect our business, financial condition and results of operations.”

The COVID-19 pandemic, or other outbreak of disease or similar public health threat, could materially and adversely affect our business, financial condition and results of operations.

The COVID-19 pandemic has resulted in government authorities implementing numerous measures to try to contain the virus, and these measures have impacted and may further impact our workforce and operations, the operations of our customers, and those of our respective vendors and suppliers. Furthermore, the outbreak has significantly increased economic and demand uncertainty and negatively impacted consumer confidence. Demand for consumer electronic products has softened due to social distancing and other restrictions. Therefore, we may face some near-term softness, mainly related to a shortfall in consumer spending and its negative impact on demand for consumer electronic products.

The spread of COVID-19 also has caused us to modify our business practices, and we may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers, and communities. Such actions may result in further disruptions to our supply chain, operations and facilities, and workforce. We cannot assure you that such measures will be sufficient to mitigate the risks posed by COVID-19, and our ability to perform critical functions could be harmed.

We cannot at this time quantify or forecast the full business impact of COVID-19. The degree to which COVID-19 impacts our business, financial condition, and results of operations will depend on future developments, which are highly uncertain, and to what extent normal economic and operating conditions can resume.

The markets in which we operate are highly competitive, and as a result we could experience a loss of sales, lower prices and lower revenues.

The markets for the products in which our technology is incorporated are highly competitive. Aggressive competition could result in substantial declines in the prices that we are able to charge for our intellectual property or lose design wins to competitors. Many of our competitors are striving to increase their share of the growing signal processing IP markets and are reducing their licensing and royalty fees to attract customers. The following industry players and factors may have a significant impact on our competitiveness:

~~we compete directly in the DSP~~

●

we compete directly in the signal processing cores space with Verisilicon, Cadence and Synopsys;

●

we compete with CPU IP or configurable CPU IP (offering DSP configured CPU and/or DSP acceleration and/or connectivity capabilities to their IP) providers, such as ARM (in the process of being acquired by NVidia), Synopsys and Cadence and the RISC-V open source;

●

we compete with internal engineering teams at companies such as Mediatek, Qualcomm, Samsung, Huawei and NXP that may design programmable DSP core products and signal processing cores in-house and therefore not license our technologies;

●

we compete in the short range wireless markets with ARM, Imagination Technologies (acquired by Canyon Bridge) and Mindtree;

we compete with CPU IP or configurable CPU IP (offering DSP configured CPU and/or DSP acceleration and/or connectivity capabilities to their IP) providers, such as ARM Holdings (acquired by SoftbBank), Imagination Technologies (in the process of being acquired by Canyon Bridge), Synopsys and Cadence;

●

we compete in embedded imaging and vision market with Cadence, Synopsys, Videantis, Verislicon, ARM and Verisilicon;

	●	we compete in AI processor marketing with AI processor and accelerator providers, including AImotive, Arm Limited, Cadence, Synopsys, Cambricon, Digital Media Professionals (DMP), Imagination Technologies, Nvidia open source NVDLA and Verisilicon; and
	●	we compete in the audio and voice applications market with Arm Limited, Cadence, Synopsys and Verisilicon.

~~we compete with internal engineering teams at companies such as Mediatek, Qualcomm, Samsung, Huawei and NXP that may design programmable DSP core productsin-house~~ ~~and therefore not license our technologies;~~

we compete in the SATA and SAS IP markets with several vendors, such as Semtech’s Snowbush IP Group and Synopsys, that offer similar products, thereby leading to pricing pressures for both licensing and royalty revenues;

~~we compete in the short range wireless markets with ARM Holdings, Mindtree, Imagination Technologies and STMicroelectronics;~~

we compete in embedded imaging and vision market with Cadence, Synopsys, Videantis, ARM Holdings (NEON technology) and GPU IP providers such as ARM Holdings, Imagination Technologies and Vivante (part of Verisilicon); and

~~we compete in the audio and voice applications market with ARM Holdings, Synopsys, Cadence and Verisilicon.~~

In addition, we may face increased competition from smaller, niche semiconductor design companies in the future. Some of our customers also may decide to satisfy their needs throughin-house design. We compete on the basis of signal processing IP performance, overall chip cost, power consumption, flexibility, reliability, communication and multimedia software availability, design cycle time, tool chain, customer support, name recognition, reputation and financial strength. Our inability to compete effectively on these bases could have a material adverse effect on our business, results of operations and financial condition.

Our quarterly operating results fluctuate from quarter to quarter due to a variety of factors, including our lengthy sales cycle, and may not be a meaningful indicator of future performance.

In some quarters our operating results could be below the expectations of securities analysts and investors, which could cause our stock price to fall. Factors that may affect our quarterly results of operations in the future include, among other things:

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the gain or loss of significant licensees, partly due to our dependence on a limited number of customers generating a significant amount of quarterly revenues;

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any delay in execution of any anticipated licensing arrangement during a particular quarter;

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delays in revenue recognition for some license agreements based on percentage of completion of customized work or other accounting reasons;

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the timing and volume of orders and production by our customers, as well as fluctuations in royalty revenues resulting from fluctuations in unit shipments by our licensees;

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royalty pricing pressures and reduction in royalty rates due to an increase in volume shipments by customers, end-product price erosion and competitive pressures;

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earnings or other financial announcements by our major customers that include shipment data or other information that implicates expectations for our future royalty revenues;

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the mix of revenues among licensing and related revenues, and royalty revenues;

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the timing of the introduction of new or enhanced technologies by us and our competitors, as well as the market acceptance of such technologies;

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the discontinuation, or public announcement thereof, of product lines or market sectors that incorporate our technology by our significant customers;

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our lengthy sales cycle and specifically in the third quarter of any fiscal year during which summer vacations slow down decision-making processes of our customers in executing contracts;

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delays in the commercialization of end products that incorporate our technology;

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currency fluctuations, mainly the EURO and the NIS versus the U.S. dollar;

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fluctuations in operating expenses and gross margins associated with the introduction of, and research and development investments in, new or enhanced technologies and adjustments to operating expenses resulting from restructurings;

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the approvals, amounts and timing of Israeli research and development government grants from the Israeli Innovation Authority of the Ministry of Economy and Industry in Israel (the “IIA”), EU grants and French research tax credits;

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the impact of new accounting pronouncements, including the new revenue recognition rules;

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the timing of our payment of royalties to the IIA, which is impacted by the timing and magnitude of license agreements and royalty revenues derived from technologies that were funded by grant programs of the IIA;

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statutory changes associated with research tax benefits applicable to French technology companies;

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our ability to scale our operations in response to changes in demand for our technologies;

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entry into new end markets that utilize our signal processing IPs, software and platforms;

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changes in our pricing policies and those of our competitors;

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restructuring, asset and goodwill impairment and related charges, as well as other accounting changes or adjustments;

●

general political conditions, including global trade wars resulting from tariffs and business restrictions and bans imposed by government entities, like the well publicized 2018 ban associated with ZTE, as well as other regulatory actions and changes that may adversely affect the business environment;

●

general economic conditions, including the current economic conditions, and its effect on the semiconductor industry and sales of consumer products into which our technologies are incorporated;

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delays in final product delivery due to unexpected issues introduced by our service or EDA tool providers; and

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delays in ratification of standards for Bluetooth, Wi-Fi or NB-IoT that can affect the introduction of new products.

~~any delay in execution of any anticipated licensing arrangement during a particular quarter;~~

~~delays in revenue recognition for some license agreements based on percentage of completion of customized work or other accounting reasons;~~

~~the timing and volume of orders and production by our customers, as well as fluctuations in royalty revenues resulting from fluctuations in unit shipments by our licensees;~~

~~royalty pricing pressures and reduction in royalty rates due to an increase in volume shipments by customers,end-product~~ ~~price erosion and competitive pressures;~~

~~earnings or other financial announcements by our major customers that include shipment data or other information that implicates expectations for our future royalty revenues;~~

~~the mix of revenues among licensing and related revenues, and royalty revenues;~~

~~the timing of the introduction of new or enhanced technologies by us and our competitors, as well as the market acceptance of such technologies;~~

~~the discontinuation, or public announcement thereof, of product lines or market sectors that incorporate our technology by our significant customers;~~

~~our lengthy sales cycle and specifically in the third quarter of any fiscal year during which summer vacations slow down decision-making processes of our customers in executing contracts;~~

~~delays in the commercialization of end products that incorporate our technology;~~

~~currency fluctuations, mainly the EURO and the NIS versus the U.S. dollar;~~

~~fluctuations in operating expenses and gross margins associated with the introduction of new or enhanced technologies and adjustments to operating expenses resulting from restructurings;~~

the approvals, amounts and timing of Israeli R&D government grants from the Israeli Innovation Authority of the Ministry of Economy and Industry in Israel (previously known as Office of the Chief Scientist of Israel) (the “IIA”), EU grants and French research tax credits;

~~statutory changes associated with research tax benefits applicable to French technology companies;~~

~~our ability to scale our operations in response to changes in demand for our technologies;~~

~~entry into new end markets that utilize our signal processing IPs, software and platforms;~~

~~changes in our pricing policies and those of our competitors;~~

~~restructuring, asset and goodwill impairment and related charges, as well as other accounting changes or adjustments; and~~

~~general economic conditions, including the current economic conditions, and its effect on the semiconductor industry and sales of consumer products into which our technologies are incorporated.~~

Each of the above factors is difficult to forecast and could harm our business, financial condition and results of operations. Also, we license our technology to OEMs and semiconductor companies for incorporation into their end products for consumer markets, including handsets and consumer electronics products. The royalties we generate are reported by our ~~customers and invoiced by us one quarter in arrears. As a result, our~~customers.

Our royalty revenues are affected by seasonal buying patterns of consumer products sold by OEMs, partially by our ~~OEM~~direct customers and partially by semiconductor customers that incorporate our technology into their end products and the market acceptance of such end ~~products supplied by our OEM customers.~~products. The ~~second~~first quarter in any given year is usually a sequentially down quarter for us in relation to royalty revenues as this period represents lower post-Christmas ~~first~~fourth quarter consumer product ~~shipments and little to no new introduction of handsets during the first quarter of the year.~~shipments. However, the magnitude of this ~~second~~first quarter decrease varies annually and has been impacted by global economic conditions, market share changes, exiting or refocusing of market sectors by our customers and the timing of introduction of new and existing handset devices powered by CEVA technology sold in any given quarter compared to the prior quarter.

Moreover, the semiconductor and consumer electronics industries remain volatile, which makes it extremely difficult for our customers and us to accurately forecast financial results and plan for future business activities. As a result, our past operating results should not be relied upon as an indication of future performance.

We rely significantly on revenues derived from a limited number of customers who contribute to our royalty and license revenues.

We derive a significant amount of revenues from a limited number of customers. ~~One customer, Spreadtrum, accounted for 22% and 27% of our total revenues for the first nine months of 2017 and 2016, respectively.~~ With respect to our royalty revenues, ~~two~~four royalty paying customers each represented 10% or more of our total royalty revenues for ~~both~~ the first nine months of ~~2017~~2020 and ~~2016, and collectively~~three royalty paying customers each represented ~~74% and 81%~~10% or more of our total royalty revenues for the first nine months of ~~2017~~2019, and ~~2016,~~collectively represented 73% and 74% of our total royalty revenues for the first nine months of 2020 and 2019, respectively. We expect that a significant portion of our future revenues will continue to be generated by a limited number of customers. The loss of any significant royalty paying customer could adversely affect our near-term future operating results. Furthermore, consolidation among our customers may negatively affect our revenue source, increase our existing customers’ negotiation leverage and make us further dependent on a limited number of customers. Moreover, the discontinuation of product lines or market sectors that incorporate our technology by our significant customers or a change in direction of their business and our inability to adapt our technology to their new business needs could have material negative implications for our future royalty revenues.

Our business is dependent on licensing revenues, which may vary period to period.

License agreements for our signal processing IP cores and platforms have not historically provided for substantial ongoing license payments so past licensing revenues may not be indicative of the amount of such revenues in any future period. We believe that there is a similar risk with RivieraWaves’ operations associated with Bluetooth andWi-Fi connectivity technologies. Significant portions of our anticipated future revenues, therefore, will likely depend upon our success in attracting new customers or expanding our relationships with existing customers. However, revenues recognized from licensing arrangements vary significantly from period to period, depending on the number and size of deals closed during a quarter, and is difficult to predict. In addition, as we expand our business into thenon-handset baseband markets, our licensing deals may be smaller but greater in volume which may further fluctuate our licensing revenues quarter to quarter. Our ability to succeed in our licensing efforts will depend on a variety of factors, including the performance, quality, breadth and depth of our current and future products as well as our sales and marketing skills. In addition, some of our licensees may in the future decide to satisfy their needs throughin-house design and production. Our failure to obtain future licensing customers would impede our future revenue growth and could materially harm our business.

Royalty rates could decrease for existing and future license agreements, which could materially adversely affect our operating results.

Royalty payments to us under existing and future license agreements could be lower than currently anticipated for a variety of reasons. Average selling prices for semiconductor products generally decrease over time during the lifespan of a product. In addition, there is increasing downward pricing pressures in the semiconductor industry on end products incorporating our technology, especially end products for the handsets and consumer electronics markets. As a result, notwithstanding the existence of a license agreement, our customers may demand that royalty rates for our products be lower than our historic royalty rates. We have in the past and may be pressured in the future to renegotiate existing license agreements with our customers. In addition, certain of our license agreements provide that royalty rates may decrease in connection with the sale of larger quantities of products incorporating our technology. Furthermore, our competitors may lower the royalty rates for their comparable products to win market share which may force us to lower our royalty rates as well. As a consequence of the above referenced factors, as well as unforeseen factors in the future, the royalty rates we receive for use of our technology could decrease, thereby decreasing future anticipated revenues and cash flow. Royalty revenues were approximately ~~42%~~50% and ~~49%~~44% of our total revenues for the third quarter and the first nine months of ~~2017, respectively.~~2020, respectively, as compared to 52% and 44% for the comparable periods of 2019. Therefore, a significant decrease in our royalty revenues could materially adversely affect our operating results.

Moreover, royalty rates may be negatively affected by macroeconomic trends (including the recent COVID-19 pandemic and its global impact) or changes in products mix. ~~For example, the shift away from feature phones by Intel and the handset baseband market by Broadcom and STMicroelectronics in 2014 negatively impacted our royalty revenues in 2014.~~ Furthermore, consolidation among our customers may increase the leverage of our existing customers to extract concessions from us in royalty rates. Moreover, changes in products mix such as an increase in lower royalty bearing products shipped in high volume likelow-cost feature phones and Bluetooth-based products in lieu of higher royalty bearing products like LTE phones could lower our royalty revenues.

We generate a significant amount of our total revenues, especially royalty revenues, from the handset baseband market (for mobile handsets and for other modem connected devices) and our business and operating results may be materially adversely affected if we do not continue to succeed in these highly competitive markets.

~~Our total~~

A significant portion of our revenues in general, and in particular our royalty revenues, are derived ~~solely~~ from baseband for ~~handset and for other devices represented 73% and 63% of our total revenues for the third quarter and first nine months of 2017, respectively.~~handsets. Any adverse change in our ability to compete and maintain our competitive position in the handset baseband market, including through the introduction by competitors of enhanced technologies that attract ~~OEM~~ customers that target those markets, would harm our business, financial condition and results of operations. Moreover, the handset baseband market is extremely competitive and is facing intense pricing pressures, and we expect that competition and pricing pressures will only increase. Furthermore, it can be very volatile with regards to volume shipments of different phones, standards and connected devices due to inventory build out or consumer demand changes or geographical macroeconomics, pricing changes, product discontinuations due to technical issues and timing of introduction of new phones and products. Our existing OEM or semiconductor customers also may fail to introduce new handset devices that attract consumers, lose a significant design win for a new product introduction or encounter significant delays in developing, manufacturing or shipping new or enhanced products in those ~~markets.~~markets or find alternative technological solutions and suppliers. The inability of our ~~OEM~~ customers to compete would result in lower shipments of products powered by our technologies which in turn would have a material adverse effect on our business, financial condition and results of operations. As an example, Intel Corporation, one of our customers, lost a design win for Apple’s new 5G smartphone series, and thereafter announced the sale of its 5G smartphone modem business to Apple. The loss of the design win has had an adverse effect on our royalty revenues from this specific customer and may also have an adverse effect on our overall market share. Our royalty revenues will be negatively impacted if we fail to offset loss of royalty revenues from Apple’s new 5G smartphone series with royalty revenues from other emerging products incorporating our technologies. Since a significant portion of our revenues ~~are~~is derived from the handset baseband market, adverse conditions in this market would have a material adverse effect on our business, financial condition and results of operations.

In order to sustain the future growth of our business, we must penetrate new markets and our new products must achieve widespread market acceptance but such additional revenue opportunities may not be implemented and may not be achieved.

In order to expand our business and increase our revenues, we must penetrate new markets and introduce new products, including additional non-baseband related products. We have invested significant resources in pursuing potential opportunities for revenue growth and diversify our revenue streams. Our continued success will depend significantly on our ability to accurately anticipate changes in industry standards and to continue to appropriately fund development efforts to enhance our existing products or introduce new products in a timely manner to keep pace with technological developments. However, there are no assurances that we will develop products relevant for the marketplace or gain significant market share in those competitive markets. Moreover, if any of our competitors implement new technologies before us, those competitors may be able to provide products that are more effective or at lower prices, which could adversely impact our sales and impact our market share. Our inability to penetrate new markets and increase our market share in those markets or lack of customer acceptance of our new products may harm our business and potential growth.

Because our IP solutions are components of end products, if semiconductor companies and electronic equipment manufacturers do not incorporate our solutions into their end products or if the end products of our customers do not achieve market acceptance, we may not be able to generate adequate sales of our products.

We do not sell our IP solutions directly toend-users; we license our technology primarily to semiconductor companies and electronic equipment manufacturers, who then incorporate our technology into the products they sell. As a result, we rely on our customers to incorporate our technology into their end products at the design stage. Once a company incorporates a competitor’s technology into its end product, it becomes significantly more difficult for us to sell our technology to that company because changing suppliers involves significant cost, time, effort and risk for the company. As a result, we may incur significant expenditures on the development of a new technology without any assurance that our existing or potential customers will select our technology for incorporation into their own product and without this “design win,” it becomes significantly difficult to sell our IP solutions. Moreover, even after a customer agrees to incorporate our technology into its end products, the design cycle is long and may be delayed due to factors beyond our control, which may result in the end product incorporating our technology not reaching the market until long after the initial “design win” with such customer. From initial productdesign-in to volume production, many factors could impact the timing and/or amount of sales actually realized from thedesign-in. These factors include, but are not limited to, changes in the competitive position of our technology, our customers’ financial stability, and our ~~customers’~~customers' ability to ship products according to our customers’ schedule. Moreover, current economic conditions may further prolong a customer’s decision-making process and design cycle.

Further, because we do not control the business practices of our customers, we do not influence the degree to which they promote our technology or set the prices at which they sell products incorporating our technology. We cannot assure you that our customers will devote satisfactory efforts to promote their end products which incorporate our IP solutions.

In addition, our royalties from licenses and therefore the growth of our business, are dependent upon the success of our customers in introducing products incorporating our technology and the success of those products in the marketplace. The primary customers for our products are semiconductor design and manufacturing companies, system OEMs and electronic equipment manufacturers, particularly in the telecommunications field. ~~These~~All of the industries we license into are highly competitive, cyclical and have been subject to significant economic downturns at various times. These downturns are characterized by production overcapacity and reduced revenues, which at times may encourage semiconductor companies or electronic product manufacturers to reduce their expenditure on our technology. If we do not retain our current customers and continue to attract new customers, our business may be harmed.

We depend on market acceptance of third-party semiconductor intellectual property.

The semiconductor intellectual property (SIP) industry is a relatively small and emerging industry. Our future growth will depend on the level of market acceptance of our third-party licensable intellectual property model, the variety of intellectual property offerings available on the market, and a shift in customer preference away fromin-house development of proprietary signal processing IP towards licensing open signal processing IP cores and platforms. Furthermore, the third-party licensable intellectual property model is highly dependent on the market adoption of new services and products, such as low cost smartphones in emerging markets,LTE-based smartphones, mobile broadband, small cell base stations and the increased use of advanced audio, voice, computational photography and embedded vision in mobile, automotive and consumer products, as well as in IoT and connectivity applications. Such market adoption is important because the increased cost associated with ownership and maintenance of the more complex architectures needed for the advanced services and products may motivate companies to license third-party intellectual property rather than design themin-house.

The trends that would enable our growth are largely beyond our control. Semiconductor customers also may choose to adopt a multi-chip,off-the-shelf chip solution versus licensing or using highly-integrated chipsets that embed our technologies. If the above referenced market shifts do not materialize or third-party SIP does not achieve market acceptance, our business, results of operations and financial condition could be materially harmed.

Because we have significant international operations, we may be subject to political, economic and other conditions relating to our international operations that could increase our operating expenses and disrupt our revenues and business.

Approximately ~~90%~~81% of our total revenues for the first nine months of ~~2017~~2020 were derived from customers located outside of the United States. We expect that international customers will continue to account for a significant portion of our revenues for the foreseeable future. As a result, the occurrence of any negative international political, economic or geographic events could result in significant revenue shortfalls. These shortfalls could cause our business, financial condition and results of operations to be harmed. Some of the risks of doing business internationally include:

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unexpected changes in regulatory requirements;

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fluctuations in the exchange rate for the U.S. dollar;

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imposition of tariffs and other barriers and restrictions, including trade tensions such as U.S.-China trade tensions;

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potential negative international community’s reaction to the U.S. Tax Cuts and Jobs Act;

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burdens of complying with a variety of foreign laws, treaties and technical standards;

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uncertainty of laws and enforcement in certain countries relating to the protection of intellectual property;

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multiple and possibly overlapping tax structures and potentially adverse tax consequences;

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political and economic instability, including terrorist attacks and protectionist polices; and

●

changes in diplomatic and trade relationships.

Revenues from customers located in the Asia Pacific region account for a substantial portion of our total revenues. We expect that revenue from international sales generally, and sales to the Asia Pacific region specifically, will continue to be a material part of our total revenues. Therefore, any financial crisis, trade negotiations or disputes or other major event causing business disruption in international jurisdictions generally, and in specific countries in the Asia Pacific region in particular, could negatively affect our future revenues and results of operations. For example, in 2018, the U.S. Department of Commerce’s Bureau of Industry and Security’s initial ban on exports of U.S. products to Chinese telecommunications OEM ZTE disrupted ZTE’s operations, which caused delays with our engagements with ZTE and negatively impacted our royalty revenues. Actions of any nature with respect to such customers may reduce our revenues from them and adversely affect our business and financial results.

~~fluctuations in the exchange rate for the U.S. dollar;~~

~~imposition of~~New tariffs and other ~~barriers~~trade measures could adversely affect our consolidated results of operations, financial position and ~~restrictions;~~

cash flows.

~~burdens~~

General trade tensions between the U.S. and China have been escalating since 2018, and are not fully resolved yet. While tariffs and other retaliatory trade measures imposed by other countries on U.S. goods have not yet had a significant impact on our business or results of ~~complying with~~operations, we cannot predict further developments, and such existing or future tariffs could have a ~~variety~~material adverse effect on our consolidated results of ~~foreign laws, treaties~~operations, financial position and ~~technical standards;~~

~~uncertainty of laws and enforcement in certain countries relating to the protection of intellectual property;~~

~~multiple and possibly overlapping tax structures and potentially adverse tax consequences;~~

~~political and economic instability, including terrorist attacks and protectionist polices; and~~

cash flows. Furthermore, changes in ~~diplomatic~~U.S. trade policy could trigger retaliatory actions by affected countries, which could impose restrictions on our ability to do business in or with affected countries or prohibit, reduce or discourage purchases of our products by foreign customers and higher prices for our products in foreign markets. For example, there are risks that the Chinese government may, among other things, require the use of local suppliers, compel companies that do business in China to partner with local companies to conduct business and provide incentives to government-backed local customers to buy from local suppliers. Changes in, and responses to, U.S. trade ~~relationships.~~

policy could reduce the competitiveness of our products and cause our sales and revenues to drop, which could materially and adversely impact our business and results of operations.

We depend on a limited number of key personnel who would be difficult to replace.

Our success depends to a significant extent upon certain of our key employees and senior management, the loss of which could materially harm our business. Competition for skilled employees in our field is intense. We cannot assure you that in the future we will be successful in attracting and retaining the required personnel.

The sales cycle for our IP solutions is lengthy, which makes forecasting of our customer orders and revenues difficult.

The sales cycle for our IP solutions is lengthy, often lasting three to nine months. Our customers generally conduct significant technical evaluations, including customer trials, of our technology as well as competing technologies prior to making a purchasing decision. In addition, purchasing decisions also may be delayed because of a customer’s internal budget approval process.

Furthermore, given the current market conditions, we have less ability to predict the timing of our customers’ purchasing cycle and potential unexpected delays in such a cycle. Because of the lengthy sales cycle and potential delays, our dependence on a limited number of customers to generate a significant amount of revenues for a particular period and the size of customer orders, if orders forecasted for a specific customer for a particular period do not occur in that period, our revenues and operating results for that particular quarter could suffer. Moreover, a portion of our expenses related to an anticipated order is fixed and difficult to reduce or change, which may further impact our operating results for a particular period.

Because our IP solutions are complex, the detection of errors in our products may be delayed, and if we deliver products with defects, our credibility will be harmed, the sales and market acceptance of our products may decrease and product liability claims may be made against us.

Our IP solutions are complex and may contain errors, defects and bugs when introduced. If we deliver products with errors, defects or bugs, our credibility and the market acceptance and sales of our products could be significantly harmed. Furthermore, the nature of our products may also delay the detection of any such error or defect. If our products contain errors, defects and bugs, then we may be required to expend significant capital and resources to alleviate these problems. This could result in the diversion of technical and other resources from our other development efforts. Any actual or perceived problems or delays may also adversely affect our ability to attract or retain customers. Furthermore, the existence of any defects, errors or failure in our products could lead to product liability claims or lawsuits against us or against our customers. A successful product liability claim could result in substantial cost and divert management’s attention and resources, which would have a negative impact on our financial condition and results of operations.

Our success will depend on our ability to successfully manage our geographically dispersed operations.

Most of our ~~employees are~~research and development staff is located in Israel. We also ~~added French employees after~~have research and development teams in France, Ireland, the ~~RivieraWaves~~United Kingdom and United States (following our acquisition of the Hillcrest Labs business from InterDigital in ~~2014.~~July 2019). Accordingly, our ability to compete successfully will depend in part on the ability of a limited number of key executives located in geographically dispersed offices to manage our research and development staff and integrate ~~management,~~them into our operations to effectively address the needs of our customers and respond to changes in our markets. If we are unable to effectively manage and integrate our remote operations, our business may be materially harmed.

Our operations in Israel may be adversely affected by instability in the Middle East region.

One of our principal research and development facilities is located in Israel, and most of our executive officers and some of our directors are residents of Israel. Although substantially all of our sales currently are being made to customers outside Israel, we are nonetheless directly influenced by the political, economic and military conditions affecting Israel. Any major hostilities involving Israel could significantly harm our business, operating results and financial condition.

In addition, certain of our employees are currently obligated to perform annual reserve duty in the Israel Defense Forces and are subject to being called to active military duty at any time. Although we have operated effectively under these requirements since our inception, we cannot predict the effect of these obligations on the company in the future. Our operations could be disrupted by the absence, for a significant period, of one or more of our key employees due to military service.

Terrorist attacks, acts of war or military actions and/or other civil unrest may adversely affect the territories in which we operate, and our business, financial condition and operating results.

Terrorist attacks ~~such as those that have occurred in France, where we have our wireless connectivity operations as a result of our acquisition of RivieraWaves,~~ and attempted terrorist attacks, military responses to terrorist attacks, other military actions, or governmental action in response to or in anticipation of a terrorist attack, or civil unrest, may adversely affect prevailing economic conditions, resulting in work stoppages, reduced consumer spending or reduced demand for end products that incorporate our technologies. These developments subject our worldwide operations to increased risks and, depending on their magnitude, could reduce net sales and therefore could have a material adverse effect on our business, financial condition and operating results.

Our research and development expenses may increase if the grants we currently receive from the Israeli government ~~and European Union~~ are reduced or withheld.

We currently receive research grants mainly from programs of the ~~IIA and the Seventh Framework Program of the European Union.~~IIA. We recorded an aggregate of ~~$2,359,000 for~~$1,746,000 in the first nine months of ~~2017.~~2020. The amounts in 2020 are lower compared to recent years as some programs were not approved by the IIA this year. We’ll do our best efforts to win part of these amounts in coming years. To be eligible for these grants, we must meet certain development conditions and comply with periodic reporting obligations. Although we have met such conditions in the past, should we fail to meet such conditions in the future our research grants may be repayable, reduced or withheld. The repayment or reduction of such research grants may increase our research and development expenses which in turn may reduce our operating income. Also, the timing of such payments from the IIA ~~and European Union~~ may vary from year to year and quarter to quarter, and we have no control on the timing of such payment.

Enacted tax legislation in the United States may impact our business.

We are subject to taxation in the United States, as well as a number of foreign jurisdictions. In December 2017, the ~~amount~~United States enacted U.S. tax reform. The legislation implements many new U.S. domestic and international tax provisions. Some aspects of ~~grants approved~~U.S. tax reform still remain unclear, and although additional clarifying guidance has been issued (by the Internal Revenue Services and the U.S. Treasury Department), there are still some areas that may not be clarified for some time. Also, a number of U.S. states have not yet updated their laws to take into account the new federal legislation. As a result, there may be further impact of the new laws on our future results of operations and financial condition. It is possible that U.S. tax reform, or interpretations under it, could change and could have a material adverse effect on our financial results.

The nature of our business requires the application of complex revenue recognition rules. Significant changes in U.S. generally accepted accounting principles, or GAAP, including the adoption of the new revenue recognition rules, could materially affect our financial position and results of operations.

We prepare our financial statements in accordance with GAAP, which is subject to interpretation or changes by the ~~IIA was substantially lower than prior years due~~Financial Accounting Standards Board, or FASB, the SEC, and other various bodies formed to ~~different allocation~~promulgate and ~~methodology~~interpret appropriate accounting principles. New accounting pronouncements and changes in accounting principles have occurred in the past and are expected to occur in the future, which may have a significant effect on our financial results. For example, pursuant to the new revenue recognition rules, effective as of January 1, 2018, an entity recognizes sales and usage-based royalties as revenue only when the later of the following events occurs: (1) the subsequent sale or usage occurs or (2) the performance obligation to which some or all of the sales-based or usage-based royalty allocated has been satisfied (or partially satisfied). Recognizing royalty revenue on a lag time basis is not permitted. As a result, the royalties we generate from customers is based on royalty of units shipped during the quarter as estimated by our customers, not a quarter in arrears that ~~IIA has implemented. We therefore forecast that~~we previously report. Adoption of this standard and any difficulties in implementation of changes in accounting principles, including uncertainty associated with royalty revenues for the quarter based on estimates provided by our ~~research~~customer, could cause us to fail to meet our financial reporting obligations, which could result in regulatory discipline and ~~developments costs will increase~~harm investors’ confidence in ~~2017 as compared to prior years.~~

us.

The Israeli tax benefits that we currently receive and the government programs in which we participate require us to meet certain conditions and may be terminated or reduced in the future, which could increase our tax expenses.

We enjoy certain tax benefits in Israel, particularly as a result of the “Approved Enterprise” and the “Benefited Enterprise” status of our facilities and ~~programs.~~programs through 2019, and the “Technological Preferred Enterprise” status of our facilities and programs from 2020 and onward. To maintain our eligibility for these tax benefits, we must continue to meet certain conditions, relating principally to adherence to the investment program filed with the Investment Center of the Israeli Ministry of Industry and Trade and to periodic reporting obligations. Should we fail to meet such conditions, ~~in the future,~~ these benefits would be cancelled and we would be subject to corporate tax in Israel at the standard corporate rate ~~(24%~~(23% in ~~2017)~~2020) and could be required to refund tax benefits already received. ~~In addition,~~Additionally, if we ~~cannot assure you that these~~increase our activities outside of Israel, for example, by acquisitions, our increased activities may not be eligible for inclusion in Israeli tax ~~benefits will be continued in the future at their current levels or otherwise. The tax benefits under our active investment programs are scheduled to gradually expire starting in 2020.~~benefit programs. The termination or reduction of certain programs and tax benefits ~~(particularly benefits available to us as a result of the “Approved Enterprise” and the “Benefited Enterprise” status of our facilities and programs)~~ or a requirement to refund tax benefits already received may seriously harm our business, operating results and financial condition.

We may have exposure to additional tax liabilities as a result of our foreign operations.

We are subject to income taxes in the United States and various foreign jurisdictions. In addition to our significant operations in Israel, we have operations in Ireland, France, the United Kingdom, China and Japan. Significant judgment is required in determining our worldwide provision for income taxes and other tax liabilities. In the ordinary course of a global business, there are many intercompany transactions and calculations where the ultimate tax determination is uncertain. We are regularly under audit by tax authorities. Our intercompany transfer pricing may be reviewed by the U.S. Internal Revenue Service and by foreign tax jurisdictions. Although we believe that our tax estimates are reasonable, due to the complexity of our corporate structure, the multiple intercompany transactions and the various tax regimes, we cannot assure you that a tax audit or tax dispute to which we may be subject will result in a favorable outcome for us. If taxing authorities do not accept our tax positions and impose higher tax rates on our foreign operations, our overall tax expenses could increase.

Our failure to maintain certain research tax benefits applicable to French technology companies may adversely affect the results of operations of our RivieraWaves operations.

Pursuant to our acquisition of the RivieraWaves operations, we will benefit from certain research tax credits applicable to French technology companies, including, for example, the Crédit Impôt Recherche (“CIR”). The CIR is a French tax credit aimed at stimulating research activities. The CIR can be offset against French corporate income tax due and the portion in excess (if any) may be refunded every three years. The French Parliament can decide to eliminate, or reduce the scope or the rate of, the CIR benefit, at any time or challenge our eligibility or calculations for such tax credits, all of which may have an adverse impact on our results of operations and future cash flows.

We are exposed to fluctuations in currency exchange rates.

A significant portion of our business is conducted outside the United States. Although most of our revenues are transacted in U.S. dollars, we may be exposed to currency exchange fluctuations in the future as business practices evolve and we are forced to transact business in local currencies. Moreover, the majority of our expenses are denominated in foreign currencies, mainly New Israeli Shekel (NIS) and the EURO, which subjects us to the risks of foreign currency fluctuations. Our primary expenses paid in currencies other than the U.S. dollar are employee salaries. Increases in the volatility of the exchange rates of currencies other than the U.S. dollar versus the U.S. dollar could have an adverse effect on the expenses and liabilities that we incur in currencies other than the U.S. dollar when remeasured into U.S. dollars for financial reporting purposes. We have instituted a foreign cash flow hedging program to minimize the effects of currency fluctuations. However, hedging transactions may not successfully mitigate losses caused by currency fluctuations, and our hedging positions may be partial or may not exist at all in the future. We also review our monthly expectednon-U.S. dollar denominated expenditure and look to hold equivalentnon-U.S. dollar cash balances to mitigate currency fluctuations. However, in some cases, we expect to continue to experience the effect of exchange rate currency fluctuations on an annual and quarterly basis. For example, our EURO cash balances increase significantly on a quarterly basis beyond our EURO liabilities from the CIR, which is generally refunded every three years.

We are exposed to the credit risk of our customers, which could result in material losses.

As we diversify and expand our addressable market, we will enter into licensing arrangements with first time customers with whom we don’t have full visible of their creditworthiness. Furthermore, we have increased business activities in the Asia Pacific region. As a result, our future credit risk exposure may increase. Although we monitor and attempt to mitigate credit risks, there can be no assurance that our efforts will be effective. Although any losses to date relating to credit exposure of our customers have not been material, future losses, if incurred, could harm our business and have a material adverse effect on our operating results and financial condition.

Our product development efforts are time-consuming and expensive and may not generate an acceptable return, if any.

Our product development efforts require us to incur substantial research and development expense. Our research and development expenses were approximately ~~$30.4million~~$45.7 million and $38.6 million for the first nine months of ~~2017.~~2020 and 2019, respectively. We may not be able to achieve an acceptable return, if any, on our research and development efforts.

The development of our products is highly complex. We occasionally have experienced delays in completing the development and introduction of new products and product enhancements, and we could experience delays in the future. Unanticipated problems in developing products could also divert substantial engineering resources, which may impair our ability to develop new products and enhancements and could substantially increase our costs. Furthermore, we may expend significant amounts on research and development programs that may not ultimately result in commercially successful products. Our research and development expense levels have increased ~~since~~steadily in the ~~third quarter of 2014 after the acquisition of RivieraWaves.~~past few years. As a result of these and other factors, we may be unable to develop and introduce new products successfully and in a cost-effective and timely manner, and any new products we develop and offer may never achieve market acceptance. Any failure to successfully develop future products would have a material adverse effect on our business, financial condition and results of operations.

If we are unable to meet the changing needs of ourend-users or address evolving market demands, our business may be harmed.

The markets for signal processing IPs are characterized by rapidly changing technology, emerging markets and new and developingend-user needs, and requiring significant expenditure for research and development. We cannot assure you that we will be able to introduce systems and solutions that reflect prevailing industry standards, on a timely basis, meet the specific technical requirements of ourend-users or avoid significant losses due to rapid decreases in market prices of our products, and our failure to do so may seriously harm our business.

We may seek to expand our business in ways that could result in diversion of resources and extra expenses.

We may in the future pursue acquisitions of businesses, products and technologies, establish joint venture arrangements, make minority equity investments or enhance our existing CEVAnet partnereco-system to expand our business. We are unable to predict whether or when any prospective acquisition, equity investment or joint venture will be completed. The process of negotiating potential acquisitions, joint ventures or equity investments, as well as the integration of acquired or jointly developed businesses, technologies or products may be prolonged due to unforeseen difficulties and may require a disproportionate amount of our resources and management’s attention. We cannot assure you that we will be able to successfully identify suitable acquisition or investment candidates, complete acquisitions or investments, or integrate acquired businesses or joint ventures with our operations. If we were to make any acquisition or investment or enter into a joint venture, we may not receive the intended benefits of the acquisition, investment or joint venture or such an acquisition, investment or joint venture may not achieve comparable levels of revenues, profitability or productivity as our existing business or otherwise perform as expected. The expansion of our CEVAnet partnereco-system also may not achieve the anticipated benefits. The occurrence of any of these events could harm our business, financial condition or results of operations. Future acquisitions, investments or joint ventures may require substantial capital resources, which may require us to seek additional debt or equity financing.

Future acquisitions, joint ventures or minority equity investments by us could result in the following, any of which could seriously harm our results of operations or the price of our stock:

~~issuance of equity securities that would dilute our current stockholders’ percentages of ownership;~~

●

issuance of equity securities that would dilute our current stockholders’ percentages of ownership;

●

large one-time write-offs or equity investment impairment write-offs;

●

incurrence of debt and contingent liabilities;

●

difficulties in the assimilation and integration of operations, personnel, technologies, products and information systems of the acquired companies;

●

inability to realize cost efficiencies or synergies, thereby incurring higher operating expenditures as a result of the acquisition;

●

diversion of management’s attention from other business concerns;

●

contractual disputes;

●

risks of entering geographic and business markets in which we have no or only limited prior experience; and

●

potential loss of key employees of acquired organizations.

~~largeone-time~~ ~~write-offs or equity investment impairment write-offs;~~

~~incurrence of debt and contingent liabilities;~~

~~difficulties in the assimilation and integration of operations, personnel, technologies, products and information systems of the acquired companies;~~

~~inability to realize cost efficiencies or synergies, thereby incurring higher operating expenditures as a result of the acquisition;~~

~~diversion of management’s attention from other business concerns;~~

~~contractual disputes;~~

~~risks of entering geographic and business markets in which we have no or only limited prior experience; and~~

~~potential loss of key employees of acquired organizations.~~

We may not be able to adequately protect our intellectual property.

Our success and ability to compete depend in large part upon the protection of our proprietary technologies. We rely on a combination of patent, copyright, trademark, trade secret, mask work and other intellectual property rights, confidentiality procedures and licensing arrangements to establish and protect our proprietary rights. These agreements and measures may not be sufficient to protect our technology from third-party infringement or protect us from the claims of others. As a result, we face risks associated with our patent position, including the potential need to engage in significant legal proceedings to enforce our patents, the possibility that the validity or enforceability of our patents may be denied, the possibility that third parties will be able to compete against us without infringing our patents and the possibility that our products may infringe patent rights of third parties.

Our trade names or trademarks may be registered or utilized by third parties in countries other than those in which we have registered them, impairing our ability to enter and compete in those markets. If we were forced to change any of our brand names, we could lose a significant amount of our brand identity.

Our business will suffer if we are sued for infringement of the intellectual property rights of third parties or if we cannot obtain licenses to these rights on commercially acceptable terms.

We are subject to the risk of adverse claims and litigation alleging infringement of the intellectual property rights of others. There are a large number of patents held by others, including our competitors, pertaining to the broad areas in which we are active. We have not, and cannot reasonably, investigate all such patents. From time to time, we have become aware of patents in our technology areas and have sought legal counsel regarding the validity of such patents and their impact on how we operate our business, and we will continue to seek such counsel when appropriate in the future. In addition, patent infringement claims are increasingly being asserted by patent holding companies~~(so-called~~ (so-called patent “trolls”), which do not use technology and whose sole business is to enforce patents against companies, such as us, for monetary gain. Because such patent holding companies do not provide services or use technology, the assertion of our own patents by way of counter-claim may be ineffective. Infringement claims may require us to enter into license arrangements or result in protracted and costly litigation, regardless of the merits of these claims. Any necessary licenses may not be available or, if available, may not be obtainable on commercially reasonable terms. If we cannot obtain necessary licenses on commercially reasonable terms, we may be forced to stop licensing our technology, and our business would be seriously harmed.

The future growth of our business depends in part on our ability to license to system OEMs andsmall-to-medium-sized semiconductor companies directly and to expand our sales geographically.

Historically, a substantial portion of our licensing revenues has been derived in any given period from a relatively small number of licensees. Because of the substantial license fees we charge, our customers tend to be large semiconductor companies or vertically integrated system OEMs. Part of our current growth strategy is to broaden the adoption of our products by small andmid-size companies by offering different versions of our products targeted at these companies. If we are unable to develop and market effectively our intellectual property through these models, our revenues will continue to be dependent on a smaller number of licensees and a less geographically dispersed pattern of licensees, which could materially harm our business and results of operations.

Our operating results are affected by the highly cyclical nature of the semiconductor industry.

We operate within the semiconductor industry which experiences significant fluctuations in sales and profitability. Downturns in the semiconductor industry are characterized by diminished product demand, excess customer inventories, accelerated erosion of prices and excess production capacity. Various market data suggests that the semiconductor industry may be facing such a negative cycle presently, especially in the global handset market. These factors could cause substantial fluctuations in our revenues and in our results of operations.

If we determine that our goodwill and intangible assets have become impaired, we may ~~dispose of or discontinue existing product lines and technology developments,~~incur impairment charges, which ~~may adversely~~would negatively impact our ~~future~~operating results.

Goodwill represents the excess of cost over the fair value of net assets acquired in business combinations. Under accounting principles generally accepted in the United States of America, we assess potential impairment of our goodwill and intangible assets at least annually, as well as on an ~~ongoing~~interim basis ~~we evaluate our various product offerings and technology developments in order to determine whether any should be discontinued or,~~ to the extent ~~possible, divested. We cannot guarantee~~ that ~~we have correctly forecasted,~~factors or ~~will correctly forecast~~indicators become apparent that could reduce the fair value of any of our businesses below book value. Impairment may result from significant changes in the ~~future,~~manner of use of the ~~right product lines~~acquired asset, negative industry or economic trends and ~~technology developments~~significant underperformance relative to ~~dispose~~historic or ~~discontinue or~~projected operating results. If we determine that our ~~decision to dispose of or discontinue various investments, products lines~~goodwill and ~~technology developments is prudent if market conditions change. In addition, there are no assurances that the discontinuance of various product lines will reduce~~intangible assets have become impaired, we may incur impairment charges, which could negatively impact our operating expenses or will not cause us to incur material charges associated with such decision. Furthermore, the discontinuance of existing product lines entails various risks, including the risk that we will not be able to find a purchaser for a product line or the purchase price obtained will not be equal to at least the book value of the net assets for the product line. Other risks include managing the expectations of, and maintaining good relations with, our customers who previously purchased products from our disposed or discontinued product lines, which could prevent us from selling other products to them in the future. We may also incur other significant liabilities and costs associated with our disposal or discontinuance of product lines, including employee severance costs and excess facilities costs.results.

Cybersecurity threats or other security breaches could compromise sensitive information belonging to us or our customers and could harm our business and our reputation.

We store sensitive data, including intellectual property, proprietary business information and our customer and employee information. Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions that could result in unauthorized disclosure or loss of sensitive data. Because the techniques used to obtain unauthorized access to networks, or to sabotage systems, change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. Furthermore, in the operation of our business we also use third-party vendors that store certain sensitive data. Any security breach of our own or a third-party vendor’s systems could cause us to benon-compliant with applicable laws or regulations, subject us to legal claims or proceedings, disrupt our operations, damage our reputation, and cause a loss of confidence in our products and services, any of which could adversely affect our business.

Our corporate tax rate may increase, which could adversely impact our cash flow, financial condition and results of operations.

We have significant operations in Israel, as well operations in the Republic of Ireland and France. A substantial portion of our taxable income historically has been generated in Israel. Currently, our Israeli and Irish subsidiaries are taxed at rates ~~substantially~~ lower than the U.S. tax rates. If our Israeli and Irish subsidiaries were no longer to qualify for these lower tax rates or if the applicable tax laws were rescinded or changed, our operating results could be materially adversely affected. In addition, because our Israeli, Irish and French operations are owned by subsidiaries of our U.S. parent corporation, distributions to the U.S. parent corporation, and in certain circumstances undistributed income of the subsidiaries, may be subject to U.S. taxes. Moreover, if U.S. or other authorities were to change applicable tax laws or successfully challenge the manner in which our subsidiaries’ profits are currently recognized, our overall tax expenses could increase, and our business, cash flow, financial condition and results of operations could be materially adversely affected. Also our taxes on the Irish interest income may be double taxed both in Ireland and in the U.S. due to U.S. tax regulations and Irish tax restrictions on ~~NOLs~~net operating losses to~~off-set~~ offset interest income. In addition, ~~starting in 2012,~~ our Israeli interest income also may be taxed both in Israel and the U.S due to different Controlled Foreign Corporation rules.

The anti-takeover provisions in our certificate of incorporation and bylaws could prevent or discourage a third party from acquiring us.

Our certificate of incorporation and bylaws contain provisions that may prevent or discourage a third party from acquiring us, even if the acquisition would be beneficial to our stockholders. Our board of directors also has the authority to fix the rights and preferences of shares of our preferred stock and to issue such shares without a stockholder vote. Our bylaws also place limitations on the authority to call a special meeting of stockholders. We have advance notice procedures for stockholders desiring to nominate candidates for election as directors or to bring matters before an annual meeting of stockholders. In addition, these factors may also adversely affect the market price of our common stock, and the voting and other rights of the holders of our common stock.

Our stock price may be volatile so you may not be able to resell your shares of our common stock at or above the price you paid for them.

Announcements of developments related to our business, announcements by competitors, quarterly fluctuations in our financial results, changes in the general conditions of the highly dynamic industry in which we compete or the national economies in which we do business, and other factors could cause the price of our common stock to fluctuate, perhaps substantially. For example, if we fail to achieve our near term financial guidance or longer term 2022 strategic goals announced at our analysts day in January 2019, our stock price may significantly decline. In addition, in recent years, the stock market has experienced extreme price fluctuations, which have often been unrelated to the operating performance of affected companies. These factors and fluctuations could have a material adverse effect on the market price of our common stock.

Item 2.
UNREGISTERED~~Item 2. UNREGISTERED~~ SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

There were no repurchases of our common stock during the three months ended September 30, ~~2017.~~2020.

Item 3.

DEFAULTS UPON SENIOR SECURITIES

~~Item 3. DEFAULTS UPON SENIOR SECURITIES~~

Not applicable.

Item 4.

MINE SAFETY DISCLOSURES

~~Item 4. MINE SAFETY DISCLOSURES~~

Not applicable.

Item 5.

OTHER INFORMATION

~~Item 5. OTHER INFORMATION~~

Not applicable.

Item 6. ~~EXHIBITS~~

EXHIBITS

Exhibit No.		Description
~~Exhibit~~ ~~No.~~		~~Description~~

31.1		Rule~~13a-14(a)~~ 13a14(a)/~~15d-14(a)~~15d14(a) Certification of Chief Executive Officer

31.2		Rule~~13a-14(a)~~ 13a14(a)/~~15d-14(a)~~15d14(a) Certification of Chief Financial Officer

32		Section 1350 Certification of Chief Executive Officer and Chief Financial Officer
101	The following materials from CEVA, Inc.’s Quarterly report on Form 10-Q for the quarter ended September 30, 2020, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the Condensed Consolidated Statements of Income (Loss), (ii) the Condensed Consolidated Balance Sheet, (iii) the Condensed Consolidated Statements of Cash Flows, (iv) the Condensed Consolidated Statements of Comprehensive Income (Loss), (v) Condensed Consolidated Statements of Changes in Stockholders’ Equity, and (vi) Notes to Condensed Consolidated Financial Statements.
~~101.INS~~104		Cover Page Interactive Data File (embedded within the Inline XBRL ~~Instance Document~~document).

~~101.SCH~~		~~XBRL Taxonomy Extension Schema Document~~

~~101.CAL~~		~~XBRL Taxonomy Extension Calculation Linkbase Document~~

~~101.DEF~~		~~XBRL Taxonomy Extension Definition Linkbase Document~~

~~101.LAB~~		~~XBRL Taxonomy Extension Labels Linkbase Document~~

~~101.PRE~~		~~XBRL Taxonomy Extension Presentation Linkbase Document~~

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	CEVA, INC.
			~~CEVA, INC.~~

Date: November ~~09, 2017~~		6, 2020	By:	/s/ GIDEON WERTHEIZER
				Gideon Wertheizer Chief Executive Officer (principal executive officer)

~~Date: November 09, 2017~~
Date: November 6, 2020	By:	/s/ YANIV ARIELI
				Yaniv Arieli Chief Financial Officer (principal financial officer and principal accounting officer)

Delaware
~~Delaware~~		77-0556376
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)
15245 Shady Grove Road, Suite 400, Rockville, MD 20850	20850
~~1174 Castro Street, Suite 210, Mountain View, California~~		~~94040~~
(Address of Principal Executive Offices)		(Zip Code)

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $.001 per share	CEVA	The NASDAQ Stock Market LLC


Large accelerated filer	☐	Accelerated filer	☒

Non-accelerated filer	☐	Smaller reporting company	☐
		~~Accelerated filer~~
Emerging growth company	☐		☒

~~Non-accelerated filer~~		☐		~~Smaller reporting company~~	☐

~~Emerging growth company~~		☐


	September 30, 2017			December 31, 2016			September 30, 2020			December 31, 2019
	Unaudited			Audited			Unaudited
ASSETS
Current assets:
Cash and cash equivalents	$	22,931		$	18,401		$	22,067		$	22,803
Short term bank deposits		40,966			46,247
Short-term bank deposits								41,158			56,915
Marketable securities		74,459			61,868			78,506			64,867
Trade receivables		12,885			15,044
Trade receivables (net of allowance for credit losses of $1,775 at September 30, 2020 and $327 at December 31, 2019)								28,979			28,307
Prepaid expenses and other current assets		4,588			3,152			6,888			5,660

Total current assets		155,829			144,712			177,598			178,552
Long term bank deposits		39,214			29,977
Long-term assets:
Bank deposits								11,376			5,368
Severance pay fund		9,243			7,941			9,624			9,881
Deferred tax assets		2,940			2,252
Deferred tax assets, net								12,317			10,605
Property and equipment, net		6,698			4,805			8,084			7,879
Operating lease right-of-use assets								10,824			11,066
Goodwill		46,612			46,612			51,070			51,070
Intangible assets, net		2,051			2,978			11,481			13,424
Investments in non-marketable equity securities								936			936
Other long-term assets		4,588			3,218			8,254			8,240

Total long-term assets		111,346			97,783			123,966			118,469

Total assets	$	267,175		$	242,495		$	301,564		$	297,021

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Trade payables	$	468		$	571		$	862		$	701
Deferred revenues		4,274			6,258			2,777			3,642
Accrued expenses and other payables		3,070			4,015			3,756			3,748
Accrued payroll and related benefits		10,655			11,751			15,991			15,894

Operating lease liabilities								2,505			2,393
Total current liabilities		18,467			22,595			25,891			26,378

Long term liabilities:
Long-term liabilities:
Accrued severance pay		9,752			8,349			10,328			10,551

Operating lease liabilities								7,960			8,273
Other accrued liabilities								814			662
Total long-term liabilities		9,752			8,349			19,102			19,486

Stockholders’ equity:
Preferred Stock:
$0.001 par value: 5,000,000 shares authorized; none issued and outstanding		—			—
Common Stock:
$0.001 par value: 60,000,000 shares authorized; 23,595,160 shares issued at September 30, 2017 (unaudited) and December 31, 2016. 21,971,347 and 21,273,500 shares outstanding at September 30, 2017 (unaudited) and December 31, 2016, respectively		22			21
Preferred Stock: $0.001 par value: 5,000,000 shares authorized; none issued and outstanding								0			0
Common Stock: $0.001 par value: 45,000,000 shares authorized; 23,595,160 shares issued at September 30, 2020 (unaudited) and December 31, 2019. 22,233,443 and 21,839,369 shares outstanding at September 30, 2020 (unaudited) and December 31, 2019, respectively								22			22
Additional paidin-capital		215,532			212,103			230,032			228,005
Treasury stock at cost (1,623,813 and 2,321,660 shares of common stock at September 30, 2017 (unaudited) and December 31, 2016, respectively)		(27,632	)		(39,507	)
Accumulated other comprehensive loss		(201	)		(497	)
Treasury stock at cost (1,361,717 and 1,755,791 shares of common stock at September 30, 2020 (unaudited) and December 31, 2019, respectively)								(30,754	)		(39,390	)
Accumulated other comprehensive income								361			94
Retained earnings		51,235			39,431			56,910			62,426

Total stockholders’ equity		238,956			211,551			256,571			251,157

Total liabilities and stockholders’ equity	$	267,175		$	242,495		$	301,564		$	297,021

	Nine months ended						Three months ended
	September 30,						September 30,
	2020			2019			2020			2019
Revenues:
Licensing and related revenue	$	40,445		$	33,084		$	12,420		$	11,269
Royalties		31,736			25,756			12,540			12,202
Total revenues		72,181			58,840			24,960			23,471
Cost of revenues		8,259			7,283			2,503			2,767
Gross profit		63,922			51,557			22,457			20,704
Operating expenses:
Research and development, net		45,695			38,593			15,603			13,873
Sales and marketing		8,772			8,809			2,711			2,832
General and administrative		10,893			8,360			3,566			3,509
Amortization of intangible assets		1,732			1,177			575			757
Total operating expenses		67,092			56,939			22,455			20,971
Operating income (loss)		(3,170	)		(5,382	)		2			(267	)
Financial income, net		2,689			2,299			1,020			603
Income (loss) before taxes on income		(481	)		(3,083	)		1,022			336
Income tax expense (benefit)		2,533			(49	)		1,761			(439	)
Net income (loss)	$	(3,014	)	$	(3,034	)	$	(739	)	$	775


Basic net income (loss) per share	$	(0.14	)	$	(0.14	)	$	(0.03	)	$	0.04
Diluted net income (loss) per share	$	(0.14	)	$	(0.14	)	$	(0.03	)	$	0.03


Weighted-average shares used to compute net income (loss) per share (in thousands):
Basic		22,059			21,936			22,163			21,953
Diluted		22,059			21,936			22,163			22,404


		Page
PART I.	FINANCIAL INFORMATION
~~PART I. FINANCIAL INFORMATION~~

Item 1.	Interim Condensed Consolidated Balance Sheets at September 30, ~~2017~~2020 (unaudited) and December 31, ~~2016~~2019	4
		3

Interim Condensed Consolidated Statements of Income (Loss) (unaudited) for the three and nine months ended September 30, ~~2017~~2020 and ~~2016~~2019	5
		4

Interim Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the three and nine months ended September 30, ~~2017~~2020 and ~~2016~~2019	6
	Interim Condensed Consolidated Statements of Changes In Stockholders’ Equity(unaudited) for the three and nine months ended September 30, 2020 and 2019	5	7

Interim Condensed Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, ~~2017~~2020 and ~~2016~~2019	8
		6

Notes to the Interim Condensed Consolidated Financial Statements			7	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations			18	24

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	32
Item 4.	Controls and Procedures	2533
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	33
Item ~~4. Controls and Procedures~~1A.	Risk Factors			26	34

~~PART II. OTHER INFORMATION~~

~~Item 1. Legal Proceedings~~			26

~~Item 1A. Risk Factors~~			26

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds			36	44

Item 3	Defaults Upon Senior Securities			36	44

Item 4	Mine Safety Disclosures			36	44
Item 5	Other Information	44
Item ~~5 Other Information~~6	Exhibits			36	44
SIGNATURES		45
~~Item 6 Exhibits~~			36

~~SIGNATURES~~			36

	●	Our belief that our licensing business is robust with a diverse customer base and a myriad of target markets;

	●	Our belief that demand for our products is good and that we are expanding our market reach into new areas;

	●	Our belief that the adoption of our wireless connectivity and smart sensing products beyond our incumbency in the handset baseband market continues to progress, and the concluded agreements for our connectivity and sensing products in the third quarter of 2020 illustrate the industry demand for our diverse IP portfolio;

	●	Our belief that we are an incumbent player in the largest space of the semiconductor industry - mobile handsets;

	●	Our belief that our PentaG platform for 5G handsets and 5G IoT endpoints is the most comprehensive baseband processor IP in the industry today and provides newcomers and incumbents with low entry barrier solution to address the needs for power 5G processing for smartphones, fixed wireless and a range of connected devices such robots, cars, smart cities and other devices for industrial applications;

	●	Our belief that our specialization and technological edge in signal processing platforms for 5G base station RAN put us in a strong position to capitalize on the growing 5G RAN across its new form factors, as well as small cells and private networks;

	●	Our belief that the growing market potential for voice assisted devices offers an additional growth segment for us and that our highly-integrated platforms, plus our proven track record in audio/voice processing and connectivity, put us in a strong position to power audio and voice roadmaps across a new range of addressable end markets;

	●	Our belief that our SensPro™ scalable DSP architecture enables us to address the transformation in devices enabled by these applications, and expand our footprint and content in smartphones, drones, consumer cameras, surveillance, automotive ADAS, voice-enabled devices and industrial IoT applications;

	●	Our belief that the growing use of vision processing, SLAM and neural net software are opportunities for us to expand our footprint and content in smartphones, drones, AR, XR, consumer cameras, surveillance, automotive ADAS, robotics and industrial IoT applications;

	●	Our belief that the trend to move AI workloads from the cloud to the edge represents new licensing and royalty drivers for us in coming years;

	●	Per research from Yole Développement, camera-enabled devices incorporating computer vision and AI are expected to exceed 1 billion units and devices incorporating voice AI are expected to reach 620 million units by 2022;

	●	Our belief that we are benefitting from expedited 5G RAN deployments in China;

	●	Our belief that markets for low tier 4G smartphones in India and other developing economies are gradually re-opening after COVID-19 lockdowns;

	●	Our belief that the Hillcrest Labs sensor fusion business unit allows us to address an important technology for smart sensing;

	●	Our belief that a new DSP/AI architecture we introduced that is dedicated to processing and fusing data generated by multiple sensors will help us address and leverage the market trend associated with the proliferation of sensors in electronics devices;

	●	Our belief that our Bluetooth, Wi-Fi and NB-IoT IPs allow us to expand further into IoT applications and substantially increase our value-add and overall addressable market, which is expected to be more than 9 billion devices annually by 2022 based on ABI Research and Ericsson Mobility Reports;

	●	Our expectation of significant growth in royalty revenues derived from base station and IoT applications over the next few years, which will be comprised of a range of different products at different royalty ASPs, spanning from high volume Bluetooth to high value sensor fusion and base station RAN, and that royalty ASP of our other products will be in between the two ranges;

	●	Our anticipation that our research and development expenses will continue to increase in 2020, partially due to a full year of expenses associated with the Hillcrest Labs business;

	●	Our anticipation that our cash and cash equivalents, short-term bank deposits and marketable securities, along with cash from operations, will provide sufficient capital to fund our operations for at least the next 12 months; and

	●	Our belief that changes in interest rates within our investment portfolio will not have a material effect on our financial position on an annual or quarterly basis.


	Nine months ended September 30,				Three months ended September 30,
	2017		2016		2017		2016
Revenues:
Licensing and related revenue	$	33,893	$	23,576	$	14,021	$	7,456
Royalties		32,013		27,881		10,023		10,390

Total revenues		65,906		51,457		24,044		17,846
Cost of revenues		5,030		4,453		1,726		1,422

Gross profit		60,876		47,004		22,318		16,424
Operating expenses:
Research and development, net		30,413		23,071		10,031		7,346
Sales and marketing		9,422		8,463		3,057		2,763
General and administrative		7,388		6,286		2,711		2,218
Amortization of intangible assets		927		927		309		309

Total operating expenses		48,150		38,747		16,108		12,636

Operating income		12,726		8,257		6,210		3,788
Financial income, net		2,147		1,617		821		615

Income before taxes on income		14,873		9,874		7,031		4,403
Income taxes		1,008		1,975		1,181		1,015

Net income	$	13,865	$	7,899	$	5,850	$	3,388

Basic net income per share	$	0.64	$	0.38	$	0.27	$	0.16

Diluted net income per share	$	0.62	$	0.37	$	0.26	$	0.15

Weighted-average shares used to compute net income per share (in thousands):
Basic		21,687		20,718		21,946		21,025

Diluted		22,480		21,395		22,683		21,883

	Nine months ended						Three months ended
	September 30,						September 30,
	2020			2019			2020			2019

Net income (loss):	$	(3,014	)	$	(3,034	)	$	(739	)	$	775
Other comprehensive income (loss) before tax:
Available-for-sale securities:
Changes in unrealized gains (losses)		349			1,131			165			(93	)
Reclassification adjustments for losses included in net income (loss)		15			38			0			3
Net change		364			1,169			165			(90	)
Cash flow hedges:
Changes in unrealized gains		484			401			127			83
Reclassification adjustments for gains included in net income (loss)		(514	)		(304	)		(352	)		(117	)
Net change		(30	)		97			(225	)		(34	)
Other comprehensive income (loss) before tax		334			1,266			(60	)		(124	)
Income tax expense (benefit) related to components of other comprehensive income (loss)		67			174			12			(38	)
Other comprehensive income (loss), net of taxes		267			1,092			(72	)		(86	)
Comprehensive income (loss)	$	(2,747	)	$	(1,942	)	$	(811	)	$	689

	Common stock
Nine months ended September 30, 2020	Number of shares outstanding			Amount			Additional paid-in capital			Treasury stock			Accumulated other comprehensive income		Retained earnings			Total stockholders’ equity
Balance as of January 1, 2020		21,839,369		$	22		$	228,005		$	(39,390	)	$	94	$	62,426		$	251,157
Net loss		—			0			0			0			0		(3,014	)		(3,014	)
Other comprehensive income		—			0			0			0			267		0			267
Equity-based compensation		—			0			10,070			0			0		0			10,070
Purchase of treasury stock		(202,392	)		0			0			(4,780	)		0		0			(4,780	)
Issuance of treasury stock upon exercise of stock-based awards		596,466			—	(*)		(8,043	)		13,416			0		(2,502	)		2,871
Balance as of September 30, 2020		22,233,443		$	22		$	230,032		$	(30,754	)	$	361	$	56,910		$	256,571

	Common stock
Three months ended September 30, 2020	Number of shares outstanding		Amount			Additional paid-in capital			Treasury stock			Accumulated other comprehensive income (loss)			Retained earnings			Total stockholders’ equity
Balance as of July 1, 2020		22,036,712	$	22		$	228,494		$	(35,197	)	$	433		$	58,629		$	252,381
Net loss		—		0			0			0			0			(739	)		(739	)
Other comprehensive loss		—		0			0			0			(72	)		0			(72	)
Equity-based compensation		—		0			3,546			0			0			0			3,546
Issuance of treasury stock upon exercise of stock-based awards		196,731		—	(*)		(2,008	)		4,443			0			(980	)		1,455
Balance as of September 30, 2020		22,233,443	$	22		$	230,032		$	(30,754	)	$	361		$	56,910		$	256,571

	Common stock
Nine months ended September 30, 2019	Number of shares outstanding			Amount			Additional paid-in capital			Treasury stock			Accumulated other comprehensive income (loss)			Retained earnings			Total stockholders’ equity
Balance as of January 1, 2019		21,787,860		$	22		$	223,250		$	(39,132	)	$	(1,114	)	$	62,853		$	245,879
Net loss		—			0			0			0			0			(3,034	)		(3,034	)
Other comprehensive income		—			0			0			0			1,092			0			1,092
Equity-based compensation		—			0			7,847			0			0			0			7,847
Purchase of treasury stock		(194,316	)		0			0			(4,861	)		0			0			(4,861	)
Issuance of treasury stock upon exercise of stock-based awards		390,634			—	(*)		(5,614	)		8,501			0			(450	)		2,437
Balance as of September 30, 2019		21,984,178		$	22		$	225,483		$	(35,492	)	$	(22	)	$	59,369		$	249,360

	Common stock
Three months ended September 30, 2019	Number of shares outstanding		Amount			Additional paid-in capital			Treasury stock			Accumulated other comprehensive income (loss)			Retained earnings			Total stockholders’ equity
Balance as of July 1, 2019		21,893,128	$	22		$	223,306		$	(37,498	)	$	64		$	58,751		$	244,645
Net loss		—		0			0			0			0			775			775
Other comprehensive loss		—		0			0			0			(86	)		0			(86	)
Equity-based compensation		—		0			2,752			0			0			0			2,752
Issuance of treasury stock upon exercise of stock-based awards		91,050		—	(*)		(575	)		2,006			0			(157	)		1,274
Balance as of September 30, 2019		21,984,178	$	22		$	225,483		$	(35,492	)	$	(22	)	$	59,369		$	249,360

	Nine months ended September 30,
	2020			2019
Cash flows from operating activities:
Net loss	$	(3,014	)	$	(3,034	)
Adjustments required to reconcile net loss to net cash provided by operating activities:
Depreciation		2,398			2,274
Amortization of intangible assets		1,943			1,412
Equity-based compensation		10,070			7,847
Realized loss, net on sale of available-for-sale marketable securities		15			38
Amortization of premiums on available-for-sale marketable securities		309			427
Unrealized foreign exchange (gain) loss		(532	)		461
Changes in operating assets and liabilities:
Trade receivables		(672	)		(657	)
Prepaid expenses and other assets		(947	)		(1,458	)
Operating lease right-of-use assets		242			(903	)
Accrued interest on bank deposits		758			(945	)
Deferred tax, net		(1,779	)		(3,856	)
Trade payables		100			689
Deferred revenues		(865	)		1,209
Accrued expenses and other payables		(43	)		(257	)
Accrued payroll and related benefits		287			251
Operating lease liability		(202	)		823
Income taxes payable		247			(63	)
Accrued severance pay, net		25			60
Net cash provided by operating activities		8,340			4,318

Cash flows from investing activities:

Acquisition of business		(204	)		(11,000	)
Purchase of property and equipment		(2,541	)		(2,664	)
Purchase of intangible assets		0			(10,140	)
Investment in bank deposits		(20,393	)		(13,346	)
Proceeds from bank deposits		29,393			20,165
Investment in available-for-sale marketable securities		(41,887	)		(18,738	)
Proceeds from maturity of available-for-sale marketable securities		17,192			3,888
Proceeds from sale of available-for-sale marketable securities		11,096			22,561
Net cash used in investing activities		(7,344	)		(9,274	)

Cash flows from financing activities:
Purchase of treasury stock		(4,780	)		(4,861	)
Proceeds from exercise of stock-based awards		2,871			2,437
Net cash used in financing activities		(1,909	)		(2,424	)
Effect of exchange rate changes on cash and cash equivalents		177			(29	)
Decrease in cash and cash equivalents		(736	)		(7,409	)
Cash and cash equivalents at the beginning of the period		22,803			22,260
Cash and cash equivalents at the end of the period	$	22,067		$	14,851

Supplemental information of cash-flow activities:
Cash paid during the period for:
Income and withholding taxes	$	4,048		$	3,845
Non-cash transactions:
Property and equipment purchases incurred but unpaid at period end	$	62		$	0
Right-of-use assets obtained in the exchange for operating lease liabilities	$	1,253		$	1,881

		Remainder of 2020				2021				2022
License and related revenues		$	5,208			$	4,040			$	368


	September 30, 2017 (Unaudited)
	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
Available-for-sale - matures within one year:
Corporate bonds	$	12,495	$	13	$	(5	)	$	12,503

		12,495		13		(5	)		12,503
Available-for-sale - matures after one year through five years:
Certificate of deposits		747		—		—			747
Government bonds		501		—		(4	)		497
Corporate bonds		60,940		91		(319	)		60,712

		62,188		91		(323	)		61,956
Total	$	74,683	$	104	$	(328	)	$	74,459


	December 31, 2016 (Audited)
	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
Available-for-sale - matures within one year:
Corporate bonds	$	9,456	$	4	$	(15	)	$	9,445

		9,456		4		(15	)		9,445
Available-for-sale - matures after one year through five years:
Government bonds		501		—		(4	)		497
Corporate bonds		52,490		3		(567	)		51,926

		52,991		3		(571	)		52,423
Total	$	62,447	$	7	$	(586	)	$	61,868

The remainder of 2020	$	881
2021		2,171
2022		1,861
2023		1,500
2024		1,149
2025 and thereafter		4,308
Total undiscounted cash flows		11,870
Less imputed interest		1,405
Present value of lease liabilities	$	10,465

	Nine months ended September 30, 2020 (unaudited)						Three months ended September 30, 2020 (unaudited)
	Licensing and related revenues		Royalties		Total		Licensing and related revenues		Royalties		Total
Primary geographical markets
United States	$	5,784	$	7,970	$	13,754	$	1,035	$	2,044	$	3,079
Europe and Middle East		4,980		5,037		10,017		347		478		825
Asia Pacific		29,681		18,729		48,410		11,038		10,018		21,056
Total	$	40,445	$	31,736	$	72,181	$	12,420	$	12,540	$	24,960

Major product/service lines
Connectivity products (baseband for handset and other devices, Bluetooth, Wi-Fi, NB-IoT and SATA/SAS)	$	31,679	$	25,037	$	56,716	$	8,821	$	9,752	$	18,573
Smart sensing products (AI, sensor fusion, audio/sound and imaging and vision)		8,766		6,699		15,465		3,599		2,788		6,387
Total	$	40,445	$	31,736	$	72,181	$	12,420	$	12,540	$	24,960

Timing of revenue recognition
Products transferred at a point in time	$	30,405	$	31,736	$	62,141	$	9,099	$	12,540	$	21,639
Products and services transferred over time		10,040		0		10,040		3,321		0		3,321
Total	$	40,445	$	31,736	$	72,181	$	12,420	$	12,540	$	24,960

	September 30, 2020 (unaudited)		December 31, 2019

Trade receivables	$	15,538	$	11,066
Unbilled receivables (associated with licensing and related revenue)		4,763		5,269
Unbilled receivables (associated with royalties)		8,678		11,972
Deferred revenues (short-term contract liabilities)		2,777		3,642

	September 30, 2020 (Unaudited)
Weighted average remaining lease term (years)		6.97
Weighted average discount rates		3.69	%

	September 30, 2020 (Unaudited)
	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
*Available-for-sale - matures within one year:*
Corporate bonds	$	12,486	$	72	$	0		$	12,558
		12,486		72		0			12,558
Available-for-sale - matures after one year through five years:
Corporate bonds		65,606		610		(268	)		65,948
		65,606		610		(268	)		65,948

Total	$	78,092	$	682	$	(268	)	$	78,506


	Less than 12 months					12 months or greater
	Fair value		Gross unrealized loss			Fair value		Gross unrealized loss
As of September 30, 2017 (unaudited)	$	37,050	$	(239	)	$	8,997	$	(89	)
As of December 31, 2016	$	48,663	$	(557	)	$	4,875	$	(29	)

	Less than 12 months					12 months or greater
	Fair value		Gross unrealized loss			Fair value		Gross unrealized loss
As of September 30, 2020 (unaudited)	$	34,352	$	(233	)	$	4,559	$	(35	)
As of December 31, 2019	$	22,852	$	(102	)	$	14,231	$	(32	)

	Nine months ended September 30,						Three months ended September 30,
	2020 (unaudited)			2019 (unaudited)			2020 (unaudited)		2019 (unaudited)

Gross realized gains from sale of available-for-sale marketable securities	$	4		$	1		$	0	$	1
Gross realized losses from sale of available-for-sale marketable securities	$	(19	)	$	(39	)	$	0	$	(4	)



Level I		Unadjusted quoted prices in active markets that are accessible on the measurement date for identical, unrestricted assets or liabilities;

	Level II		Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and

	Level III		Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).


	September 30, 2017		Level I		Level II		Level III
Description	(unaudited)		(unaudited)		(unaudited)		(unaudited)		September 30, 2020 (unaudited)		Level I (unaudited)		Level II (unaudited)		Level III (unaudited)
Assets:
Assets:
Marketable securities:
Certificate of deposits	$	747	$	—	$	747	$	—
Government bonds		497		—		497		—
Corporate bonds		73,215		—		73,215		—

Description	December 31, 2016		Level I		Level II		Level III
Assets:
Marketable securities:
Government bonds	$	497	$	—	$	497	$	—
Corporate bonds		61,371		—		61,371		—	$	78,506	$	0	$	78,506	$	0
Foreign exchange contracts		6		—		6		—		26		0		26		0

Description	December 31, 2019		Level I		Level II		Level III
Assets:
Marketable securities:
Corporate bonds		64,867		0		64,867		0
Foreign exchange contracts		56		0		56

			Nine months ended September 30, 2020 (unaudited)						Year ended December 31, 2019
	Weighted average amortization period (years)		Gross carrying amount		Accumulated amortization		Net		Gross carrying amount		Accumulated amortization		Net

Intangible assets –amortizable:

Intangible assets related to the acquisition of RivieraWaves
Customer relationships		4.5	$	272	$	272	$	0	$	272	$	272	$	0
Customer backlog		1.5		93		93		0		93		93		0
Core technologies		5.1		5,796		5,796		0		5,796		5,796		0

Intangible assets related to the acquisition of Hillcrest Labs business
Customer relationships		4.4		3,518		1,045		2,473		3,518		395		3,123
Customer backlog		0.5		72		72		0		72		65		7
Core technologies		7.5		2,475		398		2,077		2,475		150		2,325

Intangible assets related to an investment in Immervision
Core technologies		6.4		7,063		1,299		5,764		7,063		472		6,591

Intangible assets related to an investment in NB-IoT technologies
NB-IoT technologies (*)		7.0		1,961		794		1,167		1,961		583		1,378

Total intangible assets			$	21,250	$	9,769	$	11,481	$	21,250	$	7,826	$	13,424

2020	$	645
2021		2,582
2022		2,581
2023		1,906
2024		1,852
2025 and thereafter		1,915
	$	11,481

	Nine months ended September 30,					Three months ended September 30,
	2020 (unaudited)			2019 (unaudited)		2020 (unaudited)			2019 (unaudited)
Revenues based on customer location:
United States	$	13,754		$	7,713	$	3,079		$	3,811
Europe and Middle East (1)		10,017			13,245		825			6,911
Asia Pacific (2) (3)		48,410			37,882		21,056			12,749
	$	72,181		$	58,840	$	24,960		$	23,471

(1)Germany	$	*	)	$	10,613	$	*	)	$	5,425
(2)China	$	37,713		$	25,542	$	16,085		$	8,993
(3)Japan	$	*	)	$	6,544	$	*	)	$	*	)

										Number of options and SAR units (1)			Weighted average exercise price		Weighted average remaining contractual term		Aggregate intrinsic- value
	Number of options and SAR units (1)			Weighted average exercise price		Weighted average remaining contractual term		Aggregate intrinsic-value
Outstanding as of December 31, 2016		1,455,908		$	19.76
Outstanding as of December 31, 2019											642,253		$	20.14		3.5	$	4,718
Granted		—			—						0			—
Exercised		(588,972	)		19.74						(333,980	)		18.42
Forfeited or expired		(14,349	)		17.56						(21	)		16.20

Outstanding as of September 30, 2017 (2)		852,587		$	19.81		5.2	$	19,598

Exercisable as of September 30, 2017 (3)		604,327		$	19.18		4.7	$	14,271

Outstanding as of September 30, 2020 (2)											308,252		$	22.02		3.7	$	5,349
Exercisable as of September 30, 2020 (3)											298,752		$	21.74		3.6	$	5,266

Weighting	Goals
50%	Achievement of specified bookings in 2020 (“Specified Bookings”) for licensing and related revenues associated with certain of the Company’s technologies (the “Specified Booking Target”) in specific geographic region. If 90% of the Specified Booking Target is achieved, 90% of the bonus amount under this component would be payable with every 1% increase resulting in a corresponding increase in the bonus amount under this component.
30%	Execution of definitive license agreements for pre-determined software with at least five of seven original equipment manufacturers. If five such agreements are executed, 71% of the bonus amount under this component, which is subject to a 6% weighting, would be payable. If six agreements are executed, 86% of the bonus amount under this component, which is subject to a 6% weighting, would be payable.
20%	Execution of definitive license agreements with at least two customers in a predetermined strategic market.

						Number of RSUs and PSUs			Weighted Average Grant-Date Fair Value
	Number of RSUs			Weighted Average Grant-Date Fair Value
Unvested as of December 31, 2016		505,142		$	21.59
Unvested as of December 31, 2019							732,564		$	30.11
Granted		269,497			36.84		466,921			29.17
Vested		(193,399	)		21.46		(301,792	)		31.33
Forfeited or expired		(26,374	)		26.01		(43,295	)		29.82

Unvested as of September 30, 2017		554,866		$	28.84

Unvested as of September 30, 2020							854,398		$	29.18

					September 30, 2020		December 31, 2019
	September 30, 2017		December 31, 2016		(unaudited)
	(Unaudited)		(Audited)
Derivative assets:
Derivative assets:
Derivatives designated as cash flow hedging instruments:
Foreign exchange option contracts					$	3	$	14
Foreign exchange forward contracts	$	—	$	6		23		42

Total	$	—	$	6	$	26	$	56

																			Nine months ended September 30, 2020 (unaudited)								Three months ended September 30, 2020 (unaudited)
	Nine months ended September 30, 2017 (unaudited)									Three months ended September 30, 2017 (unaudited)									Unrealized gains (losses) on available-for- sale marketable securities		Unrealized gains (losses) on cash flow hedges			Total			Unrealized gains (losses) on available-for- sale marketable securities		Unrealized gains (losses) on cash flow hedges			Total
	Unrealized gains (losses) on available-for-sale marketable securities			Unrealized gains (losses) on cash flow hedges			Total			Unrealized gains (losses) on available-for-sale marketable securities			Unrealized gains (losses) on cash flow hedges			Total
Beginning balance	$	(502	)	$	5		$	(497	)	$	(278	)	$	—		$	(278	)	$	45	$	49		$	94		$	212	$	221		$	433
Other comprehensive income (loss) before reclassifications		277			161			438			82			(3	)		79
Other comprehensive income before reclassifications																				282		426			708			126		111			237
Amounts reclassified from accumulated other comprehensive income (loss)		24			(166	)		(142	)		(5	)		3			(2	)		11		(452	)		(441	)		0		(309	)		(309	)

Net current period other comprehensive income (loss)		301			(5	)		296			77			—			77			293		(26	)		267			126		(198	)		(72	)

Ending balance	$	(201	)	$	—		$	(201	)	$	(201	)	$	—		$	(201	)	$	338	$	23		$	361		$	338	$	23		$	361

	Nine months ended September 30, 2019 (unaudited)									Three months ended September 30, 2019 (unaudited)
	Unrealized gains (losses) on available-for- sale marketable securities			Unrealized gains (losses) on cash flow hedges			Total			Unrealized gains (losses) on available-for- sale marketable securities			Unrealized gains (losses) on cash flow hedges			Total

Beginning balance	$	(1,046	)	$	(68	)	$	(1,114	)	$	17		$	47		$	64
Other comprehensive income (loss) before reclassifications		977			354			1,331			(60	)		74			14
Amounts reclassified from accumulated other comprehensive income (loss)		29			(268	)		(239	)		3			(103	)		(100	)
Net current period other comprehensive income (loss)		1,006			86			1,092			(57	)		(29	)		(86	)
Ending balance	$	(40	)	$	18		$	(22	)	$	(40	)	$	18		$	(22	)


	Nine months ended September 30, 2016 (unaudited)									Three months ended September 30, 2016 (unaudited)
	Unrealized gains (losses) on available-for-sale marketable securities			Unrealized gains (losses) on cash flow hedges			Total			Unrealized gains (losses) on available-for-sale marketable securities			Unrealized gains (losses) on cash flow hedges			Total
Beginning balance	$	(427	)	$	8		$	(419	)	$	(32	)	$	26		$	(6	)
Other comprehensive income (loss) before reclassifications		416			194			610			34			66			100
Amounts reclassified from accumulated other comprehensive income (loss)		13			(171	)		(158	)		—			(61	)		(61	)

Net current period other comprehensive income (loss)		429			23			452			34			5			39

Ending balance	$	2		$	31		$	33		$	2		$	31		$	33