CEVA Inc. Reports Third Quarter 2006 Financial Results

GAAP Net Income and Non-GAAP Operating Profit Reported for the Quarter; Continued Progress Towards Sustained Profitability and Demand for CEVA's Technologies

SAN JOSE, Calif., Oct. 25 /PRNewswire-FirstCall/ -- CEVA, Inc. (NASDAQ: CEVA) , the leading licensor of digital signal processor (DSP) cores, multimedia and storage platforms to the semiconductor industry, today announced financial results for the third quarter ended September 30, 2006.

(Logo: http://www.newscom.com/cgi-bin/prnh/20051010/CEVALOGO )

Total revenue for the third quarter of 2006 was $7.9 million, a decrease of 6% compared to $8.4 million for the third quarter of 2005. Licensing revenue for the third quarter of 2006 was $5.5 million, a decrease of 4% compared to $5.7 million for the third quarter of 2005. Royalty revenue for the third quarter of 2006 was $1.4 million, a decrease of 7% compared to $1.5 million for the third quarter of 2005. Revenue from services was $1.0 million for the third quarter of 2006, a decrease of 17% compared to $1.2 million for the third quarter of 2005.

Net income for the third quarter of 2006 was $0.3 million, compared to net loss of $0.5 million for the third quarter of 2005. Net income per share for the third quarter of 2006 was $0.02 per share compared to net loss of $0.03 per share for the third quarter of 2005. Net loss for the third quarter of 2005 did not reflect the quarterly equity-based compensation expense under Statement of Financial Accounting Standards No. 123R, "Share Based Payments" that is required to be expensed for periods commencing after January 1, 2006.

In the third quarter of 2006, the Company recognized an equity-based compensation expense of $0.5 million pursuant to the adoption of SFAS 123R. Non-GAAP net income and net income per share for the third quarter of 2006, excluding the equity-based compensation expense, was $0.9 million and $0.04, respectively. Non-GAAP net loss and non-GAAP net loss per share for the third quarter of 2005, excluding the effect of a reorganization and severance charge of $1.7 million associated with leased facility requirements and a gain of $1.5 million related to the disposal of an investment, would have been $0.4 million and $0.02, respectively.

In the third quarter of 2006, ten new license agreements were signed, bringing the total to twenty-six new license agreements signed in the first nine months of 2006. Of the ten new license agreements, seven were for CEVA DSP cores and platforms, two for CEVA SATA technology and one for CEVA Bluetooth technology. Customer target applications for these licenses are wireless, MobileTV, VoIP for optical networks and enterprise networking equipment. Geographically, one license agreement was signed in the United States, four in Europe and five in the Asia Pacific region, including Japan.

"The third quarter of 2006 was a successful quarter in terms of our growth strategy to drive new technologies into emerging markets," said Gideon Wertheizer, Chief Executive Officer of CEVA. "We secured a design win in the mobile WiMAX market with our newest DSP core, the CEVA-X1641 and positioned ourselves in the PON (Passive Optical Networks) network market with a design win for our VoIP (Voice over IP) platform at Kawasaki Microelectronics. We are also happy with the continued momentum of our DSP and Video technologies in the growing markets of MobileTV, SmartPhones and Ultra Low Cost (ULC) handsets."

Yaniv Arieli, Chief Financial Officer of CEVA, stated: "Despite a traditionally challenging third quarter in terms of licensing revenue due to the summer vacation season, we managed to achieve significant milestones with regards to reaching our profitability goals. The last time CEVA reported Non- GAAP positive operating income was six quarters ago, in the first quarter of 2005. We continue to monitor our expenses closely and put more emphasis on top line growth. Our balance sheet continues to be robust with positive overall cash flow of $0.2 million for the third quarter of 2006 and as of September 30, 2006, our total cash, investments, deposits and cash equivalents totaled $63.8 million."

CEVA Conference Call

On October 25, 2006, CEVA's management will conduct a conference call at 8:30 a.m. Eastern Time / 1:30 p.m. London time, to discuss the company's operating performance for the quarter. The conference call will be available via the following dial-in numbers:

    -- US Participants:  Dial 1-888-694-4641 (CEVA reference number # 7985458)
    -- UK/Rest of World:  Dial +44-800-032-3836 (CEVA reference number #
       7985458)

The conference call also will be available live via the Internet by accessing the CEVA web site at 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 1-877-519-4471 (passcode: 7985458) for US domestic callers and +44-800-169-3875 (passcode: 7985458) for international callers from two hours after the end of the call until 11:59 p.m. (Eastern Time) on November 1, 2006. The replay will also be available at CEVA's web site at www.ceva-dsp.com .

About CEVA, Inc.

Headquartered in San Jose, Calif., CEVA is the leading licensor of digital signal processor (DSP) cores, multimedia and storage platforms to the semiconductor industry. CEVA licenses a family of programmable DSP cores, associated SoC system platforms and a portfolio of application platforms, including multimedia, audio, Voice over Packet (VoP), Serial Attached SCSI (SAS) and Serial ATA (SATA). In 2005, CEVA's IP was shipped in over 130 million devices. 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 statements about the positive implications of the new design wins and the continued momentum of CEVA's DSP and Video technologies in the growing markets of MobileTV, SmartPhones and Ultra Low Cost (ULC) handsets. Additional forward- looking statements include Mr. Arieli's statements about achieving significant milestones with regards to reaching the Company's profitability goals, monitoring the Company's expenses and putting more emphasis on top line growth. The risks, uncertainties and assumptions include: the ability of the CEVA-X line of products to continue to be a strong growth driver for the Company; intense competition within, and challenging period of growth experienced by, the industry in which the Company competes; failure of the market for the Company's technology to develop as expected, especially in the case of newly introduced or planned to be introduced technologies; the Company's ability to timely and successfully develop and introduce new technologies and penetrate new markets; the Company's reliance on revenue derived from a limited number of licensees; the Company's ability to capitalize on the lucrative personal multimedia player market; the Company's ability to realize cost savings from the GPS divestment; the Company's ability to continue its cost saving measures, and other risks relating to the Company's business, including, but not limited to, those that are described from time to time in the Company's Securities and Exchange Commission filings, including but not limited to its Annual Report on Form 10-K for the fiscal year ended December 31, 2005, and its quarterly reports filed after the Form 10-K. 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,
                                                                  2006                2005                2006                      2005
                                                              Unaudited      Unaudited      Unaudited          Unaudited
        Revenues:

          Licensing  and  royalties      $6,938            $7,169        $21,553                  $24,235
          Other  revenue                                955              1,217            2,886                      3,720

        Total  revenues                            7,893              8,386          24,439                    27,955

        Cost  of  revenues                            992              1,003            3,022                      3,412

        Gross  profit                                6,901              7,383          21,417                    24,543

        Operating  expenses:
          Research  and                              4,270              5,036          14,159                    15,477
            development,  net
          Sales  and  marketing                1,414              1,619            4,791                      4,855
          General  and                                1,577              1,399            4,535                      4,481
            administrative
          Amortization  of                              42                  191                373                          632
            intangible  assets
          Reorganization  and                          -              1,650                    -                      3,307
            severance  charge
          Impairment  of  assets                      -                                            -                          510

        Total  operating  expenses        7,303              9,895          23,858                    29,262

        Operating  loss                              (402)          (2,512)        (2,441)                  (4,719)
        Interest  and  other                        778                1982            1,949                      2,760
          income,  net

        Income  (loss)  before                    376                (530)            (492)                  (1,959)
          taxes  on  income
        Taxes  on  income                                35                      -                185                          160

        Net  income  (loss)                          341                (530)            (677)                  (2,119)


        Basic  and  diluted  net
          income  (loss)  per  share        $0.02            $(0.03)        $(0.04)                  $(0.11)

          Weighted-average  number
            of  Common  Stock  used  in
            computation  of  net
            income  (loss)  per  share
            (in  thousands):
          Basic                                          19,239            18,875          19,150                    18,768
          Diluted                                      19,324            18,875          19,150                    18,768


                                              CEVA,  INC.  AND  ITS  SUBSIDIARIES
                      Non-GAAP  CONDENSED  CONSOLIDATED  STATEMENTS  OF  OPERATIONS
                              U.S.  dollars  in  thousands,  except  per  share  data


                                                                                  Quarter  ended            Nine  Months  ended
                                                                                  September  30,                September  30,
                                                                                2006              2005            2006              2005
                                                                        Unaudited    Unaudited    Unaudited    Unaudited

        Revenues:
          Licensing  and  royalties                  $6,938          $7,169        $21,553        $24,235
          Other  revenue                                            955            1,217            2,886            3,720

        Total  revenues                                        7,893            8,386          24,439          27,955

        Cost  of  revenues                                        978            1,003            2,984            3,412

        Gross  profit                                            6,915            7,383          21,455          24,543

        Operating  expenses:
          Research  and                                          4,100            5,036          13,636          15,477
            development,  net
          Sales  and  marketing                            1,336            1,619            4,533            4,855
          General  and                                            1,328            1,399            3,693            4,481
            administrative
          Amortization  of                                          42                191                373                632
            intangible  assets
          Total  operating  expenses                  6,806            8,245          22,235          25,445

        Operating  income  (loss)                          109              (862)            (780)            (902)
        Interest  and  other                                    778                475            1,892            1,253
          income,  net

        Income  (loss)  before                                887              (387)          1,112                351
          taxes  on  income
        Taxes  on  income                                            35                    -                185                160

        Net  income  (loss)                                      852              (387)              927                191

        Non-GAAP  basic  and
          diluted  net  income  (loss)
          per  share                                                  $0.04          $(0.02)          $0.05            $0.01

          Weighted-average  number
            of  Common  Stock  used  in
            computation  of  non-GAAP
            net  income  (loss)  per
            share  (in  thousands):
          Basic                                                      19,239          18,875          19,150          18,768
          Diluted                                                  19,324          18,875          19,350          19,067


        The  above  non-GAAP  condensed  consolidated  statements  of  operations  have
been  adjusted  to  exclude  the  following  items  to  U.S.  GAAP  reported  net  income
(loss):

                                                                              Quarter  ended                Nine  Months  ended
                                                                              September  30,                    September  30,
                                                                              2006            2005                2006              2005
                                                                        Unaudited    Unaudited    Unaudited    Unaudited

        Reported  net  income  (loss)                        341          (530)              (677)      (2,119)
          per  U.S.  GAAP
                    Adjustments
        Equity  based  compensation                            14                -                    38                  -
          expense  included  in  cost
          of  revenue
        Equity  based  compensation                          170                -                  523                  -
          expense  included  in
          research  and  development
          expenses
        Equity  based  compensation                            78                -                  258                  -
          expense  included  in  sales
          and  marketing  expenses
        Equity  based  compensation                          249                -                  842                  -
          expense  included  in
          general  and  administrative
          expenses
        Interest  and  other  income,                            -      (1,507)                (57)      (1,507)
          net  (1)
        Reorganization  and                                            -        1,650                      -          3,307
          severance  charge  (2)
        Impairment  of  assets  (2)                                -                -                      -              510
        Non-GAAP  net  income  (loss)                        852          (387)                927              191

        (1)  Results  for  the  three  and  nine  months  of  2005  included  a  gain  of  $1.5
                million  reported  in  interest  and  other  income  related  to  the  disposal
                of  an  investment.  Results  for  the  nine  months  of  2006  included  a  gain
                of  $0.1  million  reported  in  interest  and  other  income  related  to  the
                disposal  of  an  investment

        (2)  Results  for  the  three  and  nine  months  ended  September  30,  2005
                included  a  reorganization  and  severance  charge  of  $1.7  million  and
                $3.3  million,  respectively,  associated  with  leased  facility
                requirements.  Results  for  the  nine  months  ended  September  30,  2005
                also  included  a  one-time  impairment  charge  of  $0.5  million  principally
                arising  from  the  Company's  decision  to  cease  the  CEVA  Bluetooth
                technology  line.  This  $0.5  million  was  comprised  of  the  remaining
                intangibles  attributed  to  the  Bluetooth  technology  of  $0.4  million  and
                a  $0.1  million  charge  related  to  the  impairment  of  other  redundant
                assets.
 


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