CEVA, Inc. Announces Fourth Quarter and Year End 2018 Financial Results
MOUNTAIN VIEW, Calif., Feb. 13, 2019 /PRNewswire/ -- CEVA, Inc. (NASDAQ: CEVA), the leading licensor of signal processing platforms and artificial intelligence processors for smarter, connected devices, today announced its financial results for the fourth quarter and year ended December 31, 2018.
Total revenue for the fourth quarter of 2018 was $21.4 million, a decrease of 1%, when compared to $21.6 million reported for the fourth quarter of 2017. Fourth quarter 2018 licensing and related revenue was $10.5 million, an increase of 17%, when compared to $9.0 million reported for the same quarter a year ago. Royalty revenue for the fourth quarter of 2018 was $10.9 million, a decrease of 14%, when compared to $12.6 million reported for the fourth quarter of 2017, which period included a $0.9 million royalty catch up following an audit of a customer.
Gideon Wertheizer, Chief Executive Officer of CEVA, stated: "We had an excellent fourth quarter in terms of licensing with thirteen agreements signed, including a number of strategic agreements with premier customers. Notably, one agreement with a company targeting the 5G market was one of the largest signed in the company's history. Our fourth quarter royalties came in lower than expected, reflecting softness at a large smartphone OEM, primarily due to the slowing economy in China and lower overall demand for entry-level phones in emerging markets."
Mr. Wertheizer continued: "Our licensing business made solid progress in 2018, with forty nine license agreements signed with customers targeting a range of large and diversified markets, including 5G, cellular IoT, AI, Bluetooth and Wi-Fi connectivity. These new agreements, along with the more than one hundred and forty signed in the previous three years, form the foundation for significant market share expansion and royalty revenue growth in the coming years. Our 2018 royalty business was impacted by the headwinds in the handset market and the slower than originally anticipated expansion at our base station customers. Nevertheless, we continued to strengthen our footprint in our non-baseband markets, with shipments of more than 370 million devices, up 41% year over year. In particular, in the fast-growing Bluetooth space, we shipped in more than 300 million devices in 2018, and are excited by the growth opportunity as that market is expected to exceed 5 billion devices annually by 2022. As we enter 2019, we expect the elevated inventories in handsets to add to the usual seasonal weakness in our near-term royalties. With that said, we do expect continued expansion at our non-handset and base station customers, along with a recovery in handsets in the later part of the year. All in all, we are very excited by the market adoption of our leading-edge technologies in key growth areas, and believe we are on track to more than double our royalty revenue business in 2022."
During the quarter, CEVA completed thirteen license agreements. Seven of the agreements were for CEVA DSP and AI platforms, and six were for CEVA connectivity IPs. All of the licensing agreements signed during the quarter were for non-handset baseband applications and six were with first-time customers of CEVA. Customers' target markets for the licenses include 5G baseband processing, cellular IoT connectivity, advanced consumer and surveillance cameras, automotive connectivity, smart speakers, Bluetooth earbuds, Wi-Fi routers and other IoT devices. Geographically, nine of the deals signed were in China, two were in the U.S., and two were in the APAC region, including Japan.
GAAP net income for the fourth quarter of 2018 decreased 27% to $2.3 million, compared to $3.2 million reported for the same period in 2017. GAAP diluted earnings per share for the fourth quarter of 2018 decreased 29%, to $0.10 from $0.14 a year ago.
Non-GAAP net income and diluted earnings per share for the fourth quarter of 2018 were $5.2 million and $0.23, respectively, representing a 9% and 8% decrease, respectively, over the $5.7 million and $0.25 reported for the fourth quarter of 2017. Non-GAAP net income and diluted earnings per share for the fourth quarter of 2018 excluded: (a) equity-based compensation expense, net of taxes, of $2.0 million, (b) the impact of the amortization of acquired intangibles of $0.3 million associated with the acquisition of RivieraWaves and NB-IoT technologies, and (c) revaluation of investment in other company, net of taxes, of $0.7 million. Net income and diluted earnings per share for the fourth quarter of 2017 excluded: (a) equity-based compensation expense, net of taxes, of $2.3 million, and (b) the impact of the amortization of acquired intangibles of $0.3 million associated with the acquisition of RivieraWaves.
Full Year 2018 Review
Total revenue for 2018 was $77.9 million, a decrease of 11%, when compared to $87.5 million reported for 2017. Licensing and related revenue for 2018 was $40.4 million a decrease of 6%, when compared to $42.9 million reported for 2017. Royalty revenue for 2018 was $37.4 million, representing a decrease of 16%, as compared to $44.6 million reported for 2017.
U.S. GAAP net income and diluted net income per share for 2018 were $0.6 million and $0.03, respectively, a decrease of 97% and 96%, respectively, compared to $17.0 million and $0.75, respectively reported for 2017.
Non-GAAP net income and diluted earnings per share for 2018 were $12.1 million and $0.53, respectively, also representing a decrease of 54% and 55%, respectively, over $26.6 million and $1.17 reported for 2017. Non-GAAP net income and diluted earnings per share for 2018 excluded (a) equity-based compensation expense, net of taxes, of $9.7 million, (b) the impact of the amortization of acquired intangibles of $1.2 million associated with the acquisition of RivieraWaves and NB-IoT technologies, and (c) revaluation of investment in other company, net of taxes of $0.7 million. Non-GAAP net income and diluted earnings per share for 2017 excluded (a) equity-based compensation expense, net of taxes, of $8.4 million, and (b) the impact of the amortization of acquired intangibles of $1.2 million associated with the acquisition of RivieraWaves.
Yaniv Arieli, Chief Financial Officer of CEVA, stated: "In 2018, we continued to execute on our stock buyback program in the fourth quarter, purchasing approximately 129,000 shares of our common stock for an aggregate consideration of approximately $3 million. This brought our total stock repurchase for the year to approximately 656,000 shares for approximately $20 million. As of December 31, 2018, our cash and cash equivalent balances, marketable securities and bank deposits totaled $168 million, with no debt."
CEVA Conference Call
On February 13, 2019 CEVA management will conduct a conference call at 8:30 a.m. Eastern Time to discuss the operating performance for the quarter.
The conference call will be available via the following dial in numbers:
-- U.S. Participants: Dial 1-844-435-0316 (Access Code: CEVA)
-- International Participants: Dial +1-412-317-6365 (Access Code: CEVA)
The conference call will also be available live via webcast at the following link: https://www.webcaster4.com/Webcast/Page/984/28990. 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 +1-877-344-7529 or +1-412-317-0088 (access code: 10127731) from one hour after the end of the call until 9:00 a.m. (Eastern Time) on February 20, 2019. The replay will also be available at CEVA's web site www.ceva-dsp.com.
About CEVA, Inc.
CEVA is the leading licensor of signal processing platforms and artificial intelligence processors for a smarter, connected world. We partner with semiconductor companies and OEMs worldwide to create power-efficient, intelligent and connected devices for a range of end markets, including mobile, consumer, automotive, industrial and IoT. Our ultra-low-power IPs for vision, audio, communications and connectivity include comprehensive DSP-based platforms for LTE/LTE-A/5G baseband processing in handsets, infrastructure and cellular IoT (NB-IoT and Cat-M1) enabled devices, advanced imaging and computer vision for any camera-enabled device, audio/voice/speech and ultra-low power always-on/sensing applications for multiple IoT markets. For artificial intelligence, we offer a family of AI processors capable of handling the complete gamut of neural network workloads, on-device. For connectivity, we offer the industry's most widely adopted IPs for Bluetooth (low energy and dual mode) and Wi-Fi (Wi-Fi 4 (802.11n), Wi-Fi 5 (802.11ac) and Wi-Fi 6 (802.11ax) up to 4x4). Visit us at www.ceva-dsp.com and follow us on Twitter, YouTube, Facebook, LinkedIn and Instagram.
Forward Looking Statement
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. Forward-looking statements include Mr. Wertheizer's statements about CEVA's licensing agreements forming the foundation for significant market share expansion and royalty revenue growth in the coming years, the elevated inventories in handsets to add to the usual seasonal weakness in near-term royalties, expectation of continued expansion at our non-handset and base station customers, along with a recovery in handsets in the later part of the year, as well as the belief that CEVA is on track to more than double its royalty revenue business in 2022. The risks, uncertainties and assumptions that could cause differing CEVA results include: the ability of the CEVA DSP cores and other technologies to continue to be strong growth drivers for us; our success in penetrating new markets, including in non-baseband markets, and maintaining our market position in existing markets; our ability to diversify the company's royalty streams, the ability of products incorporating our technologies to achieve market acceptance, the speed and extent of the expansion of the 4G, 5G and LTE networks, the maturation of the IoT market, the effect of intense industry competition and consolidation, global chip market trends, the possibility that markets for CEVA's technologies may not develop as expected or that products incorporating our technologies do not achieve market acceptance; our ability to timely and successfully develop and introduce new technologies; and general market conditions and other risks relating to our business, including, but not limited to, those that are described from time to time in our 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
CONSOLIDATED STATEMENTS OF INCOME - U.S. GAAP
U.S. dollars in thousands, except per share data
Three months ended Year ended
December 31, December
2018 2017 2018 2017
---
Unaudited
Revenues:
Licensing and related
revenues $10,539 $9,006 $40,446 $42,899
Royalties 10,862 12,595 37,431 44,608
Total revenues 21,401 21,601 77,877 87,507
---
Cost of revenues 1,985 1,923 7,951 6,953
---
Gross profit 19,416 19,678 69,926 80,554
---
Operating expenses:
Research and
development, net 11,999 9,972 47,755 40,385
Sales and marketing 2,859 3,150 12,161 12,572
General and
administrative 2,161 3,100 10,354 10,488
Amortization of
intangible assets 225 309 901 1,236
Total operating expenses 17,244 16,531 71,171 64,681
---
Operating income (loss) 2,172 3,147 (1,245) 15,873
Financial income, net 883 879 3,418 3,026
Revaluation of
investment in other
company (870) (870)
Income before taxes on
income 2,185 4,026 1,303 18,899
Income taxes (benefit) (118) 863 729 1,871
---
Net income $2,303 $3,163 $574 $17,028
===
Basic net income per
share $0.11 $0.14 $0.03 $0.78
Diluted net income per
share $0.10 $0.14 $0.03 $0.75
Weighted-average number of Common Stock used in
computation of net income per share (in
thousands):
Basic 21,863 22,017 22,034 21,771
Diluted 22,197 22,801 22,503 22,561
===
Unaudited Reconciliation of GAAP to Non-GAAP Financial Measures
U.S. Dollars in thousands, except per share amounts
Three months ended Year ended
December 31 December
2018 2017 2018 2017
---
Unaudited
GAAP net income $2,303 $3,163 $574 $17,028
Equity-based
compensation expense
included in cost of
revenue 108 129 588 459
Equity-based
compensation expense
included in research
and development
expenses 1,267 1,005 5,141 3,839
Equity-based
compensation expense
included in sales
and marketing
expenses 341 388 1,587 1,428
Equity-based
compensation expense
included in general
and administrative
expenses 568 825 3,051 2,967
Income tax benefit
related to equity-
based compensation
expenses (312) (71) (712) (339)
Amortization of
intangible assets
related to
RivieraWaves
transaction and in
2018 NB-IoT
technologies 304 309 1,241 1,236
Revaluation of
investment in other
company, net of
taxes 670 670
Non-GAAP net income $5,249 $5,748 $12,140 $26,618
===
GAAP weighted-
average number of
Common Stock used in
computation of
diluted net income
per share (in
thousands) 22,197 22,801 22,503 22,561
Weighted-average
number of shares
related to
outstanding stock-
based awards (in
thousands) 404 228 388 283
---
Weighted-average
number of Common
Stock used in
computation of
diluted earnings per
share, excluding the
above (in thousands) 22,601 23,029 22,891 22,844
GAAP diluted net
income per share $0.10 $0.14 $0.03 $0.75
Equity-based
compensation
expense, net of
taxes $0.09 $0.10 $0.42 $0.37
Amortization of
intangible assets
related to
RivieraWaves
transaction and in
2018 NB-IoT
technologies $0.01 $0.01 $0.05 $0.05
Revaluation of
investment in other
company, net of
taxes $0.03 $0.03
Non-GAAP diluted net
income per share $0.23 $0.25 $0.53 $1.17
===
CEVA, INC. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(U.S. Dollars in thousands)
December 31, December 31,
2018 2017 (*)
Unaudited Unaudited
---
ASSETS
Current assets:
Cash and cash equivalents $22,260 $21,739
Marketable securities and short term
bank deposits 123,608 117,096
Trade receivables 9,971 14,480
Accrued revenues 16,185 2,014
Prepaid expenses and other current
assets 5,264 3,747
Total current assets 177,288 159,076
Long-term assets:
Bank deposits 21,864 44,518
Severance pay fund 9,026 8,910
Deferred tax assets 5,924 3,643
Property and equipment, net 7,344 6,926
Goodwill 46,612 46,612
Intangible assets, net 2,700 1,742
Other long term assets 6,505 5,385
Total assets $277,263 $276,812
===
LIABILITIES AND STOC
KHOLDERS' EQUITY
Current liabilities:
Trade payables $632 $392
Deferred revenues 3,593 4,399
Accrued expenses and other payables 17,527 18,004
Total current liabilities 21,752 22,795
Long-term liabilities:
Accrued severance pay 9,632 9,347
Total liabilities 31,384 32,142
Stockholders' equity:
Common stock: 22 22
Additional paid in-capital 223,250 217,417
Treasury stock (39,132) (26,056)
Accumulated other comprehensive loss (1,114) (586)
Retained earnings 62,853 53,873
Total stockholders' equity 245,879 244,670
Total liabilities and stockholders'
equity $277,263 $276,812
===
(*) Derived from audited financial statements
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SOURCE CEVA, Inc.
