Company Successfully Identifies and Implements Cost Cutting Initiatives; Quarter Sees Continued Adoption of Key Multimedia and Serial ATA Technologies
Total revenue for the second quarter of 2005 was $9.5 million, a slight decrease of 1% as compared to $9.6 million reported for the second quarter of 2004. Second quarter of 2005 licensing revenue was $6.6 million, a decrease of 5% from the second quarter of 2004.
Second quarter of 2005 royalty revenue was $1.6 million, an increase of 30% as compared to $1.3 million for the second quarter of 2004. Revenue from services was $1.3 million for the second quarter of 2005 as compared to $1.4 million for the second quarter of 2004.
Net loss for the second quarter of 2005 was $2.2 million, as compared to net income of $0.5 million for the second quarter of 2004. Net loss per share for the second quarter of 2005 was $0.12, as compared to net income of $0.03 per share for the second quarter of 2004. Results for the second quarter of 2005 included a reorganization and severance charge of $1.7 million associated with the previously announced plans to reduce the Company's operating expenses, primarily those related to general and administrative functions, and a one-time impairment charge of $0.5 million principally arising from our 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.
Pro forma net loss and pro forma net loss per share for the second quarter of 2005, excluding the effect of the reorganization and severance charges and the impairment of assets charges described above would have been $49,000 and $0.003, respectively.
The Company believes that this pro forma presentation of results and net loss per share is useful to investors in comparing the results for the second quarter of 2005 to the same quarter of 2004, because it excludes items that management does not consider meaningful for purposes of analyzing the Company's operating results and making budget-planning decisions. Specifically, the Company's management believes the exclusion of the reorganization and impairment charges is useful to investors because such charges may not be indicative of the Company's core operating results when comparing the second quarters of 2004 and 2005.
In the second quarter of 2005, five new license agreements were completed, one less than reported for the second quarter last year. Of the five agreements signed in the quarter, three agreements were for multimedia platforms and related software, one agreement was for Serial ATA and one agreement was for a prepaid royalty DSP core. The customer's target applications for these technologies are Smartphones, consumer multimedia and networking devices.
Gideon Wertheizer, CEO of CEVA stated: "During the last few weeks we have concluded our strategic plans with two main objectives:
-- The continued focus on the development of highly integrated DSP based platforms composed of hardware and software for three main markets: Multimedia for mobile phones and consumer products, GPS for mobile phones and automotive and Serial ATA (SATA) for consumer electronics and servers.
-- Increased efficiency in the day-to-day operations of the company. In this respect we identified cost savings of approximately $2 million for 2005 relative to the company's previous 2005 operating expense guidance of $36 million to $37 million."
Mr. Wertheizer continued: "The licensing activities in this quarter indicate a clear shift in customer preference away from the traditional approach of licensing standalone DSPs, and towards licensing highly integrated application platforms incorporating all the necessary hardware and software for their target applications. Our customers perceive this 'one-stop-shop' approach as having higher value in terms of time-to-market, lower complexity and related research and development costs."
To further enrich CEVA's multimedia product offering, we recently unveiled CEVA-Audio, a fully programmable, low-power, low-cost digital audio platform targeting high-volume consumer products such as portable MP3 players and cell phones. CEVA-Audio also lowers development costs and reduces time-to-market for customers developing audio applications, both crucial factors for success in these high-volume, rapidly evolving markets.
Finally, as part of our ongoing strategy to re-focus the business, the Company has decided to cease development of our Bluetooth product line. Bluetooth has become a commodity item and differentiation between competing solutions is minimal. In addition, the short-range wireless market is migrating towards more powerful standards such as WiFi and Ultra WideBand where Bluetooth will not be needed. CEVA will continue to support its existing Bluetooth customers throughout their deployment process."
CEVA Conference Call
On July 20, 2005, CEVA's management will conduct a conference call at 10:30 a.m. EDT / 15.30 p.m. London time, to discuss the financial results for the quarter. To participate in the conference call, US domestic callers can dial 1-800-322-0079 and international callers can dial +44-800-917-4860. The conference call will also be available live via the Internet by accessing the CEVA web site at www.ceva-dsp.com.
For those who cannot access the live broadcast, a replay will be available by dialing 1-877-519-4471 (passcode: 6235275) for US domestic callers and +44-800-917-2646 (passcode: 7591655) for international callers from two hours after the end of the call until 11:59 p.m. (ET) on August 3, 2005. The replay will also be available at CEVA's web site www.ceva-dsp.com.
About CEVA, Inc.
Headquartered in San Jose, Calif., CEVA is the leading licensor of digital signal processor (DSP) cores, multimedia, GPS 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 video processing, audio processing, speech processing, GPS location, and Serial-ATA (SATA). 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 www.ceva-dsp.com
Forward-Looking Statements
This press release contains forward-looking statements concerning cost savings and 2005 operating expense guidance 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. The risks, uncertainties and assumptions include our ability to effectively implement measures to reduce our operating costs on a timely basis; intense competition within our industry; the industries in which we license our technology have experienced a challenging period of 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 on revenue derived from a limited number of licensees; and other risks relating to our business that are described from time to time in the Company's Securities and Exchange Commission reports, including but not limited to the Annual Report on Form 10-K for the fiscal year ended December 31, 2004, and 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
Six Months ended Quarter ended
June 30, June 30,
2005 2004 2005 2004
Unaudited Unaudited Unaudited Unaudited
Revenues:
Licensing and royalties $17,066 $15,949 $8,219 $8,180
Other revenue 2,503 2,841 1,309 1,396
Total revenues 19,569 18,790 9,528 9,576
Cost of revenues 2,409 2,961 1,116 1,451
Gross profit 17,160 15,829 8,412 8,125
Operating expenses:
Research and development,
net 10,441 8,231 5,515 4,222
Sales and marketing 3,236 3,391 1,560 1,718
General and administrative 3,082 2,954 1,611 1,495
Amortization of intangible
assets 441 446 218 223
Reorganization and severance
charge 1,657 -- 1,657 --
Impairment of assets 510 -- 510 --
Total operating expenses 19,367 15,022 11,071 7,658
Operating income (loss) (2,207) 807 (2,659) 467
Other income, net 778 351 443 162
Income (loss) before
taxes on income (1,429) 1,158 (2,216) 629
Taxes on income 160 255 -- 135
Net income (loss) (1,589) 903 (2,216) 494
Basic and diluted net
income (loss) per share $(0.08) $0.05 $(0.12) $0.03
Weighted-average number
of Common Stock used in
computation of net income
(loss) per share
(in thousands):
Basic 18,713 18,353 18,742 18,380
Diluted 18,713 19,083 18,742 18,909
CEVA, INC. AND ITS SUBSIDIARIES
Pro Forma CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
U.S. DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
Six Months ended Quarter ended
June 30, June 30,
2005 2004 2005 2004
Unaudited Unaudited Unaudited Unaudited
Revenues:
Licensing and royalties $17,066 $15,949 $8,219 $8,180
Other revenue 2,503 2,841 1,309 1,396
Total revenues 19,569 18,790 9,528 9,576
Cost of revenues 2,409 2,961 1,116 1,451
Gross profit 17,160 15,829 8,412 8,125
Operating expenses:
Research and development,
net 10,441 8,231 5,515 4,222
Sales and marketing 3,236 3,391 1,560 1,718
General and administrative 3,082 2,954 1,611 1,495
Amortization of intangible
assets 441 446 218 223
Total operating expenses 17,200 15,022 8,904 7,658
Operating income (loss) (40) 807 (492) 467
Other income, net 778 351 443 162
Income (loss) before taxes
on income 738 1,158 (49) 629
Taxes on income 160 255 -- 135
Net income (loss) 578 903 (49) 494
Pro forma basic and
diluted net income (loss)
per share $0.03 $0.05 $(0.003) $0.03
Weighted-average number
of Common Stock used in
computation of pro forma
net income (loss) per share
(in thousands):
Basic 18,713 18,353 18,742 18,380
Diluted 19,088 19,083 18,742 18,909
The above pro forma condensed consolidated statements of operations have
been adjusted to exclude the following items to U.S. GAAP reported net
income (loss):
Reported net income (loss)
per U.S. GAAP (1,589) 903 (2,216) 494
Adjustments
Reorganization and
severance charge 1,657 -- 1,657 --
Impairment of assets 510 -- 510 --
Pro forma net income (loss) 578 903 (49) 494
CEVA, INC. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
U.S. DOLLARS IN THOUSANDS
June 30, December 31,
2005 2004
Unaudited Audited
ASSETS
Current assets:
Cash and cash equivalents $37,929 $28,844
Marketable securities 21,717 30,794
Trade receivables, net 9,284 10,835
Deferred tax assets 147 125
Prepaid expenses 1,295 703
Other current assets 1,564 647
Total current assets 71,936 71,948
Long-term investments:
Severance pay fund 1,725 1,713
Deferred tax assets 56 70
Property and equipment, net 4,066 4,471
Goodwill 38,398 38,398
Other intangible assets, net 1,843 2,563
Total assets $118,024 $119,163
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade payables $1,702 $1,714
Accrued expenses and other payables 8,755 9,816
Taxes payable 676 707
Deferred revenues 2,056 1,751
Total current liabilities 13,189 13,988
Long-term liabilities:
Accrued severance pay 1,890 1,844
Accrued liabilities 671 782
Total long-term liabilities 2,561 2,626
Stockholders' equity:
Common Stock: 19 19
Additional paid in-capital 138,182 136,868
Accumulated deficit (35,927) (34,338)
Total stockholders' equity 102,274 102,549
Total liabilities and stockholders'
equity $118,024 $119,163
CONTACT: Yaniv Arieli, CFO of CEVA, Inc., +1-408-514-2941, or
Email Contact
Web site: http://www.ceva-dsp.com/