Record revenue, royalties, units shipped and gross margin drive 17% sequential improvement in fourth quarter earnings
2004 Fourth Quarter
Total revenue for the 2004 fourth quarter was $10.0 million, compared to $9.7 million reported in the third quarter 2004 and $9.6M in the year ago quarter. Fourth quarter licensing revenue was $6.7 million compared to $6.9 million in the third quarter 2004. A record seven license deals completed in the quarter, including two CEVA-X agreements, has resulted in a significantly increased order backlog. Fourth quarter 2004 royalty revenue was $2.0 million (20% of total revenue), representing an increase of 31% from $1.6 million reported in the third quarter 2004. Shipped units by licensees increased to a record 33 million in the fourth quarter 2004 compared to 31 million shipped in the third quarter 2004, and an 88% increase from 17.5 million units shipped in the fourth quarter 2003.
Commenting on the Fourth Quarter, Chet Silvestri, Chairman and CEO of CEVA said:
"I am pleased to report that we completed 2004 with our best ever quarterly performance for CEVA. In the fourth quarter CEVA grew revenues, earnings, and royalties while exiting the year with a substantially increased order backlog year-over-year. Another highlight of the quarter was that our licensing partners shipped a record 33 million units, up 88% over the fourth quarter 2003."
Fourth quarter gross margin was 90% compared with 88% in the prior quarter and 85% in the 2003 fourth quarter. Fourth quarter net income increased 17% to $653,000, or $0.03 per share compared with third quarter 2004 net income of $560,000, or $0.03 per share. The Company reported a net loss of $9.6 million, or $0.53 net loss per share in the year ago fourth quarter. The Company generated $1.9 million in cash during the 2004 fourth quarter.
The Company completed seven license agreements during the fourth quarter including major multi-use agreements for CEVA-X DSP and SATA technologies serving the wireless and consumer multimedia markets. In the quarter, the Company launched CEVA Mobile-Multimedia, a complete system-solution targeting the portable multimedia market; launched the CEVAnet third party developer partner program with over 30 independent developers; and announced licensing agreements with Atmel (targeting storage solutions), Zoran (targeting home multimedia solutions), Spreadtrum (targeting Chinese 3G solutions); and Sharp (targeting portable multimedia solutions).
Full-Year 2004 Review:
Total revenue for 2004 was $38.5 million, compared to $36.8 million reported in 2003. Excluding hard IP and certain other non-strategic IP revenues that CEVA exited from in 2003, CEVA's continuing operations achieved strong double digit growth in 2004. With a total of 24 license agreements in the year, 2004 licensing revenue was $27.1 million, compared to $25.7 million reported in 2003. 2004 royalty revenue was $6.0 million, compared to $4.1 million reported in 2003. Shipped units by licensees increased 94% to 106 million in 2004 compared to 55 million shipped in 2003.
"In 2004, we achieved our objectives of revenue growth and profitability. Our DSP business enjoyed robust demand in the year which we expect to sustain into 2005. Year-over-year units shipped by our licensees have nearly doubled to a record 106 million units in 2004. Our focused cost management has resulted in a profit throughout 2004 and cash generation for the year," added Silvestri.
2004 gross margin was 87% compared with 84% in 2003. Operating expenses for 2004 were $31.3 million, a decrease of 26% over $42.5 million recorded in 2003, principally as a result of $12 million restructuring and impairment charges in 2003. 2004 net income was $2.1 million or $0.11 per share, compared to a net loss of $12.0 million or $0.66 loss per share in 2003.
The company completed a total of 24 licenses in 2004. Major contributors for licensing activity were new technologies launched and deployed in the year including CEVA-X1620 DSP core (total of five licensees), CEVA Xpert Teak DSP (total of five licensees), and CEVA SATA serial connect (total of four licensees) technologies. In 2004, CEVA announced licensing agreements with industry leaders in wireless and consumer multimedia markets including Atmel, Eonex, Kawasaki, Oki, JRC, National Semiconductor, Renesas, Samsung, Sharp, Spreadtrum, Tower, UMC and Zoran.
Solid Balance Sheet
As a result of generating cash during the year, the Company's cash balances and marketable securities were $59.6 million at December 31, 2004. In addition, DSOs improved significantly in the fourth quarter 2004.
Building upon the success of its DSP technology and solutions, the Company is anticipating that revenue will grow strongly in 2005 and be in the range of $44 million to $46 million. The Company estimates that gross margin will be in the range of 88% to 90% and total operating expenses between $36 million and $37 million. The Company is expecting full year 2005 net income to be in the region of $3.5 million to $4.5 million.
"We anticipate that 2005 will be a year of continued growth for CEVA. We enter 2005 with a significantly increased order backlog, healthy sales pipeline and the expectation of continued growth in royalty unit shipments," concluded Silvestri, Chairman.
2004 Customer Adoption Highlights * CEVA Licenses Xpert-Teak DSP Platform To Sharp For Portable Multimedia Devices * Spreadtrum Launches World's First Chinese 3G Chipset Powered By CEVA- Teak DSP * CEVA Launches CEVAnet Partner Program To Extend DSP Offerings And Deliver Complete Solutions * Zoran Licenses And Deploys CEVA-TeakLite DSP Core To Power DVD Chipset Solution * Atmel Licenses Industry-Leading CEVA-X DSP And System Platform To Power Next-Generation High Performance Storage Applications * NemeriX Licenses CEVA GPS 4000 IP And Announces Assisted GPS Chipset Targeting Mobile Phone Market * Japan Radio Co. Licenses CEVA-Teak DSP Core For Baseband Radio Communications * CEVA Speeds Customer's Time To Silicon With The Launch Of CEVA Services * CEVA Confirmed As World's Leading Licensor Of DSP Intellectual Property * Renesas Technology Licenses CEVA's Xpert-Blue Platform And Achieves Bluetooth 1.2 Certification * CEVA Announces Foundry Program Partnership With Tower Semiconductor * CEVA Licenses CEVA-X DSP Architecture to Korea's EoNex to Power 3G Wireless Solutions * Samsung Licenses CEVA's Newest Generation CEVA-X DSP Core * Oki Electric Licenses and Deploys CEVA DSP Core to Power Digital Audio MP3 Consumer Chip Solution * CEVA Licenses Xpert-Teak DSP Platform To National Semiconductor * Kawasaki Microelectronics Partners with CEVA to Add Fully Compliant 1.5Gbps Serial ATA * CEVA Launches Foundry Program With UMC 2004 CEVA Technology Highlights * CEVA Shatters Performance Record for Licensable DSP Core With CEVA-X * CEVA Launches Mobile-Media - The First Fully Programmable Solution For Mobile-Multimedia Applications * CEVA Launches CEVA-XS System On Chip Platforms For Wireless And Consumer Multimedia Markets * CEVA Announces Launch Of Lowest-Power SGMII IP For Gigabit Ethernet Interfaces In Enterprise And Carrier Data Communications Systems * CEVA's GPS Solution Utilizes Proven DSP Technology to Lower Cost and Improve Battery Life of Global Positioning-Enabled Mobile Devices * CEVA Demonstrates Interoperability of Breakthrough Sub 80mW Serial ATA IP Solution * CEVA Launches Xpert-Media - A Complete, Licensable and Scalable Video and Audio Media Processing Platform * CEVA Announces Launch and Licensing of Xpert-Blue Bluetooth Communications IP CEVA Conference Call
On February 2, 2005, CEVA management will conduct a conference call at 11:00 a.m. EST/16.00 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."