CEVA Reports Solid First Quarter 2005 Financial Results

Increased Adoption of DSP, GPS and Serial ATA Produce 22 Percent Quarterly Sequential Growth in Licensing Revenue

SAN JOSE, Calif., April 28 /PRNewswire-FirstCall/ -- CEVA, Inc. (NASDAQ: CEVA) the leading licensor of digital signal processors (DSP), communications and multimedia solutions to the semiconductor industry, today announced financial results for the first quarter of 2005, which ended March 31, 2005. CEVA recorded 9 percent sequential growth in total revenue and profits in line with the guidance issued by the Company for the first quarter.

First Quarter 2005

Total revenue for the first quarter of 2005 was $10.0 million, an increase of 9 percent compared to the $9.2 million reported in both the first and fourth quarter of 2004. First quarter 2005 licensing revenue of $7.1 million increased 22 percent from the fourth quarter of 2004, and 7.5 percent from the first quarter of 2004.

As in the fourth quarter 2004, seven license deals were completed in the first quarter 2005, representing strength across all key product technologies including DSP, GPS and Serial ATA. Moreover, CEVA will introduce a number of new technologies in the coming months which will add to its licensing strength in the second half of the year.

First quarter 2005 royalty revenue was $1.8 million, a decrease of 13 percent compared to $2.0 million reported in the fourth quarter 2004, reflecting the seasonality of our consumer-oriented licensees' product shipments, but up 49 percent compared to $1.2 million reported in the first quarter of 2004. The seasonality in royalty revenue in the first quarter of 2005 is similar to the 17 percent sequential decrease in royalty revenue from the fourth quarter 2003 to the first quarter 2004.

The first quarter gross margin was 87 percent compared with 89 percent in the prior quarter and 84 percent in the year ago first quarter. First quarter net income increased to $627,000 or $0.03 per share compared with fourth quarter 2004 net income of $187,000 or $0.01 per share. The Company reported net income of $409,000 or $0.02 per share in the year ago first quarter.

Commenting on the First Quarter, Chet Silvestri, Chairman and CEO of CEVA remarked:

"I am pleased to announce that the momentum we established in 2004 has continued into the first quarter of 2005, as we report a solid financial quarter with revenues and earnings both growing and the Company remaining cash flow positive. Licensing partners reported shipments of 30 million units in the first quarter of 2005 representing a 55 percent increase over the 19 million units shipped by our customers in the first quarter of 2004. We completed seven major licensing agreements during the first quarter of 2005, including major multi-use agreements for our Serial ATA and GPS 4000 technologies. During the quarter, the Company completed its first CEVA- TeakLite-II(TM) license. Teaklite-II is an enhanced design of the Company's highest-volume DSP and offers better performance, functionality and speed with backward software compatibility. CEVA expects many of its existing Teaklite licensees to be interested in this upgrade, and we look forward to seeing continued growth for this product in the coming quarters."

Solid Balance Sheet

As a result of generating cash during the quarter, the Company's cash balances and marketable securities were $60.3 million at March 31, 2005 compared to $59.6 million at December 31, 2004.

"Our continued sales and financial discipline has significantly reduced our DSO's from 106 days in the fourth quarter to 82 days at the end of the first quarter," noted Christine Russell, CFO of CEVA. "We will maintain continued focus on a reduction in DSOs throughout 2005 as we have substantially tightened our payment terms on new deals. Our full year guidance remains unchanged as we see revenue in the range of $44 million to $46 million, gross margin in the range of 88 percent to 90 percent, operating expense in the range of $36 million to $37 million, and net income in the range of $3.5 million to $4.5 million."

CEVA Conference Call

On April 28, 2005, CEVA management will conduct a conference call at 10:30 a.m. ET/15.30 p.m. London time, to discuss the operating performance for the quarter. To participate in the conference call, US domestic callers can dial 877-951-7311 and international callers can dial +44-207-019-0810, access code "CEVA."

The conference call will also be available live via the Internet by accessing the CEVA web site at http://www.ceva-dsp.com/. 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 1-877-267-9703 for US domestic callers and +44-0207-970-8261 for international callers from two hours after the end of the call until 11:59 p.m. (ET) on May 5, 2005. The replay will also be available at CEVA's web site http://www.ceva-dsp.com/.

About CEVA, Inc.

Headquartered in San Jose, Calif., CEVA is the leading licensor of DSP, communications and multimedia solutions to the semiconductor industry. CEVA licenses a family of programmable DSP cores, associated SoC system platforms, and a portfolio of application platforms including video processing, audio processing, speech processing, GPS location, Serial-ATA (SATA) and VoIP. In 2004, CEVA's silicon IP was shipped in more than 100 million devices. CEVA was created through the merger of the DSP licensing division of DSP Group and Parthus Technologies. For more information visit http://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 ever 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. The forward looking statements in this press release include statements concerning expected growth in sales from a number of technologies, including some recently introduced and expected to be introduced in the future, continued momentum of revenue growth and operating efficiencies, and CEVA's guidance with respect to its revenue, gross margins, total operating expenses and net income for 2005. The risks, uncertainties and assumptions referred to above include macroeconomic and geopolitical trends and events; intense competition within our industry; the industries in which we license our technology have experienced a challenging period of slow growth; that the market for the sale of our technology may not develop as expected, especially in the case of newly introduced or planned to be introduced technologies; our ability to timely and successfully develop and introduce new technologies; that we rely significantly on revenue derived from a limited number of licensees; the possible loss of key employees and/or senior management; and the challenges of managing a geographically dispersed operation. 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 INCOME
             U.S. DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA

                            Quarter ended    Year ended    Quarter ended
                              March 31,      December 31,   December 31,
                            2005     2004       2004(1)         2004
                         Unaudited Unaudited                  Unaudited

  Revenues:
   Licensing and
    royalties              $8,847   $7,769      $32,271                $7,840
      Other  revenue                        1,194        1,445                5,402                  1,329

      Total  revenues                    10,041        9,214              37,673                  9,169

      Cost  of  revenues                  1,293        1,510                5,178                  1,018

      Gross  profit                          8,748        7,704              32,495                  8,151

    Operating  expenses:
      Research  and
        development,  net                4,926        4,009              17,276                  4,661
      Sales  and  marketing            1,676        1,673                6,965                  1,806
      General  and
        administrative                    1,471        1,459                5,863                  1,354
      Amortization  of
        intangible  assets                  223            223                    892                      223

    Total  operating
      expenses                                  8,296        7,364              30,996                  8,044

    Operating  income                        452            340                1,499                      107
    Other  income,  net                      335            189                    796                      300
    Income  before
      taxes  on  income                        787            529                2,295                      407
    Taxes  on  income                          160            120                    645                      220

    Net  income                                    627            409                1,650                      187

    Basic  and  diluted
      net  income  per  share          $0.03        $0.02                $0.09                  $0.01

    Weighted-average  number
      of  Common  Stock  used
      in  computation  of
      net  income
      per  share
    (in  thousands):
    Basic                                        18,675      18,326              18,421                18,522
    Diluted                                    19,227      19,257              19,016                19,106


                                          CEVA,  INC.  AND  ITS  SUBSIDIARIES

                                    CONDENSED  CONSOLIDATED  BALANCE  SHEETS
                                                U.S.  DOLLARS  IN  THOUSANDS

                                                                                        March  31,                December  31,
                                                                                            2005                            2004(1)
                                                                                        Unaudited
    ASSETS
    Current  assets:
      Cash  and  cash  equivalents                                $  33,220                      $  28,844
      Marketable  securities                                            27,118                          30,794
      Trade  receivables,  net                                            9,045                          10,835
      Deferred  tax  assets                                                      158                                125
      Prepaid  expenses                                                        1,539                                703
      Other  current  assets                                                    943                                647
        Total  current  assets                                            72,023                          71,948
    Long-term  investments:
      Severance  pay  fund                                                    1,693                            1,713
    Deferred  tax  assets                                                          59                                  70
    Property  and  equipment,  net                                    4,184                            4,471
    Goodwill                                                                        38,398                          38,398
    Other  intangible  assets,  net                                  2,452                            2,563
    Total  assets                                                            $118,809                      $119,163


        LIABILITIES  AND  STOCKHOLDERS'  EQUITY
    Current  liabilities:
      Trade  payables                                                          $1,555                          $1,714
      Accrued  expenses  and  other  payables                  8,026                            9,816
      Taxes  payable                                                                  624                                707
      Deferred  revenues                                                      1,987                            1,751
        Total  current  liabilities                                  12,192                          13,988
    Long-term  liabilities:
      Accrued  severance  pay                                              1,847                            1,844
      Accrued  liabilities                                                      667                                782
        Total  long-term  liabilities                                2,514                            2,626

    Stockholders'  equity:
    Common  Stock:                                                                      19                                  19
    Additional  paid  in-capital                                  137,795                        136,868
    Accumulated  deficit                                                (33,711)
                (34,338)
      Total  stockholders'  equity                                104,103                        102,549
      Total  liabilities  and
        stockholders'  equity                                        $118,809                      $119,163

    (1)  The  year  ended  December  31,  2004  statement  of  income  and  balance  sheet
            information  has  been  derived  from  the  December  31,  2004  audited
            consolidated  financial  statements  of  the  Company.
 


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