CEVA, Inc. Announces Third Quarter 2010 Financial Results

-- New license agreement for CEVA-XC with a major semiconductor company

MOUNTAIN VIEW, Calif., Oct. 26 — (PRNewswire) — CEVA, Inc. (Nasdaq: CEVA); (LSE: CVA), the leading licensor of silicon intellectual property (SIP) platform solutions and DSP cores for the mobile handsets, portable and consumer electronics markets, today announced its financial results for the third quarter ended September 30, 2010.

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Total revenue for the third quarter of 2010 was a record $10.7 million, an increase of 11% compared to $9.7 million reported for the third quarter of 2009. Third quarter of 2010 licensing revenue was $4.5 million, a decrease of 15% compared to $5.2 million reported for the third quarter of 2009. Royalty revenue for the third quarter of 2010 was $5.2 million, an increase of 42% over $3.7 million reported for the third quarter of 2009. Revenue from services for the third quarter of 2010 was $1 million, an increase of 35% from $0.7 million reported for the third quarter of 2009.

Gideon Wertheizer, Chief Executive Officer of CEVA, stated: "We are pleased with our solid performance in the third quarter, including a strategic agreement for the CEVA-XC DSP with a leading semiconductor company, a new power house in the wireless space. Our royalty revenue continues to grow, and we reached a new record high market share of 33% for the worldwide handset cellular baseband market."

"Furthermore, due to projections for stronger than expected shipments of products incorporating our technologies by a few of our customers in the third quarter, we currently anticipate significant sequential increase our fourth quarter royalty revenue," continued Mr. Wertheizer.

U.S. GAAP net income for the third quarter of 2010 was $3.0 million, an increase of 71% compared to $1.8 million reported for the same period in 2009. U.S. GAAP diluted earnings per share for the third quarter of 2010 was $0.13, an increase of 44% compared to $0.09 reported for the third quarter of 2009.

Non-GAAP net income and diluted earnings per share for the third quarter of 2010 reached all-time highs of $3.0 million and $0.14, respectively, representing an increase of 24% and 17%, respectively, over the $2.4 million and $0.12 reported for the third quarter of 2009.

Non-GAAP net income and diluted earnings per share for the third quarter of 2010 and 2009, excluded an aggregate equity-based compensation expense of $0.5 million and $0.7 million, respectively.  

During the quarter, the Company concluded six new licensing agreements. Five agreements were for CEVA DSP cores, platforms and software, and one agreement was for CEVA Bluetooth technology. Target applications for customer deployment are 3G/4G handset and mobile broadband processors, smart metering systems, and Android-based application processors for smartphones, tablets and ereaders. Geographically, two of the agreements signed were in the U.S., three were in Asia and one was in Europe.

Yaniv Arieli, Chief Financial Officer of CEVA, stated: "Our third quarter financial performance demonstrated continued progress towards our long term profitability milestones. We reached a new record high royalty revenue for the fourth consecutive quarter and also recorded all-time highs for GAAP and non-GAAP operating margins, which was driven by solid top line growth aligned with on-going expense management. In addition, we continued to generate significant positive cash flow during the quarter which further enhances our already strong balance sheet. As of September 30, 2010, CEVA's cash balance, marketable securities and bank deposits were $117.2 million, an increase of 8% from the second quarter of 2010."

CEVA Conference Call

On October 26, 2010, CEVA management will conduct a conference call at 8:30 a.m. Eastern Time / 1:30 p.m. London time, to discuss the operating performance for the quarter.

The conference call will be available via the following dial in numbers:

  • US Participants: Dial 1-877-493-9121 (Access Code: CEVA or 15781514)
  • UK/Rest of World: Dial +44-800-051-3806 (Access Code: CEVA or 15781514)

The conference call will also be available live via the Internet at the following link:   http://www.videonewswire.com/event.asp?id=72879.  Please go to the web site at least fifteen minutes prior to the call to register, download and install any necessary audio software.

For those who cannot access the live broadcast, a replay will be available by dialing 1-800-642-1687 (passcode: 15781514) for US domestic callers and +44-800-917-2646 (passcode: 15781514) for international callers from two hours after the end of the call until 11:59 p.m. (Eastern Time) on November 2, 2010. The replay will also be available at CEVA's web site www.ceva-dsp.com.

About CEVA, Inc.

CEVA is the world's leading licensor of silicon intellectual property (SIP) DSP cores and platform solutions for the mobile handsets, portable and consumer electronics markets. CEVA's IP portfolio includes comprehensive technologies for cellular baseband (2G / 3G / 4G), multimedia, HD video and audio, voice over packet (VoP), Bluetooth, Serial Attached SCSI (SAS) and Serial ATA (SATA). In 2009, CEVA's IP was shipped in over 330 million devices, powering handsets from 7 out of the top 8 handset OEMs, including LG, Motorola, Nokia, Samsung, Sony Ericsson and ZTE. Today, one in every three handsets shipped worldwide is powered by a CEVA DSP core. For more information, visit www.ceva-dsp.com.

Forward-Looking Statements

This press release contains forward-looking statements that involve risks and uncertainties, as well as assumptions that if they materialize or prove incorrect, could cause the results of CEVA to differ materially from those expressed or implied by such forward-looking statements and assumptions. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including Mr. Wertheizer's statement about CEVA's ability to achieve significant sequential increase in its fourth quarter 2010 royalty revenue.  The risks, uncertainties and assumptions include: the ability of the CEVA DSP cores and other technologies to continue to be strong growth drivers; the ability of products incorporating CEVA's technologies to achieve market acceptance; CEVA's success in penetrating new markets and maintaining its market position in existing markets; the effect of intense industry competition and consolidation; the possibility that the markets for CEVA's technologies may not develop as expected; CEVA's ability to timely and successfully develop and introduce new technologies; and general market conditions and other risks relating to CEVA's business, including, but not limited to, those that are described from time to time in its SEC filings. CEVA assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates.


CEVA, INC. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS – U.S. GAAP

U.S. dollars in thousands, except per share data


Quarter ended

Nine months ended


September 30,

September 30,


2010

2009

2010

2009


Unaudited

Unaudited

Unaudited

Unaudited

Revenues:





   Licensing

$  4,459

$  5,242

$  13,774

$  14,059

   Royalties

5,238

3,694

15,372

11,403

   Other revenues

978

723

2,739

2,820






Total revenues

10,675

9,659

31,885

28,282






Cost of revenues

1,001

849

2,578

3,211






Gross profit

9,674

8,810

29,307

25,071






Operating expenses:





   Research and development, net

4,129

4,061

13,243

12,132

   Sales and marketing

1,664

1,628

5,248

4,914

   General and administrative

1,593

1,525

4,709

4,555






Total operating expenses

7,386

7,214

23,200

21,601






Operating income

2,288

1,596

6,107

3,470

Interest and other income, net

493

551

1,591

3,402






Income before income tax

2,781

2,147

7,698

6,872

Income tax expense  (income)

(208)

394

527

1,436






Net income

2,989

1,753

7,171

5,436






Basic net income per share

$0.14

$0.09

$0.34

$0.28

Diluted net income per share

$0.13

$0.09

$0.32

$0.27

   Weighted-average number of Common Stock
    used in computation of net income
    per share (in thousands):





   Basic

21,244

19,689

20,989

19,588

   Diluted

22,356

20,492

22,114

20,087






Unaudited Reconciliation of GAAP to Non-GAAP Financial Measures

(U.S. Dollars in thousands, except per share amounts)



Quarter ended

Nine months ended


September 30,

September 30,


2010

2009

2010

2009


Unaudited

Unaudited

Unaudited

Unaudited

GAAP net income

2,989

1,753

7,171

5,436

Equity-based compensation expense included in cost of revenue

23

21

56

90

Equity-based compensation expense included in research and development expenses

183

197

489

689

Equity-based compensation expense included in sales and marketing expenses

92

138

300

442

Equity-based compensation expense included in general and administrative expenses

239

329

816

989

Other income

-

-

-

(1,901)(1)

Income tax expense  (income)

(500)(2)

-

(500)(2)

543(1)

Non-GAAP net income

3,026

2,438

8,332

6,288






GAAP weighted-average number of Common Stock used in computation of diluted net income per share (in thousands)

22,356

20,492

22,114

20,087

Weighted-average number of shares related to outstanding options

41

96

64

36

Weighted-average number of Common Stock used in computation of diluted net income per share, excluding equity-based compensation expense; capital gains associated with the divestment of CEVA's equity investment in GloNav Inc., net and tax income (in thousands)

22,397

20,588

22,178

20,123











GAAP diluted net income per share

$0.13

$0.09

$0.32

$0.27

Equity-based compensation expense

$0.03

$0.03

$0.08

$0.10

Other income

-

-

-

(0.09)(1)

Income tax  expense (income)

($0.02)(2)

-

$(0.02)(2)

$0.03(1)

Non-GAAP diluted net income per share

$0.14

$0.12

$0.38

$0.31






(1) Results for the nine months ended September 30, 2009 included a capital gain of $1.9 million reported in interest and other income, net, and the applicable tax expense of $0.5 million reported in taxes on income, related to the divestment of CEVA's equity interest in GloNav Inc. to NXP Semiconductors.

(2) Results for the three months and the nine months ended September 30, 2010 included $0.5 million of tax income associated with adjustments related to international cost allocations, as well as tax planning strategies to utilize certain deferred tax assets.





CEVA, INC. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

U.S. Dollars in Thousands


September 30,

December 31,


2010

2009


Unaudited

Audited

ASSETS



Current assets:



   Cash and cash equivalents

$  23,134

$  12,104

   Marketable securities and short term bank deposits

78,888

88,494

   Trade receivables, net

5,000

5,995

   Deferred tax assets

964

1,096

   Prepaid expenses and other accounts  receivables

5,507

5,345

       Total current assets

113,493

113,034




Long-term investments:

Long-term bank deposits  

15,153

-

Severance pay fund

5,144

4,455

Deferred tax assets

456

309

Property and equipment, net

1,462

1,148

Goodwill

36,498

36,498

       Total assets

$  172,206

$  155,444




LIABILITIES AND STOCKHOLDERS' EQUITY






Current liabilities:



   Trade payables

$  526

$  530

   Deferred revenues

766

432

   Accrued expenses and other payables

9,598

9,735

   Deferred tax liabilities

989

1,168

       Total current liabilities

11,879

11,865




Accrued severance pay

5,253

4,483




       Total liabilities

17,132

16,348




Stockholders' equity:



Common Stock

21

20

Additional paid in-capital

167,549

158,325

Other comprehensive income

421

251

Accumulated deficit

(12,917)

(19,500)

       Total stockholders' equity

155,074

139,096

       Total liabilities and stockholders' equity

$  172,206

$  155,444






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