CEVA, Inc. Announces Third Quarter 2019 Financial Results

MOUNTAIN VIEW, Calif., Nov. 7, 2019 /PRNewswire/ -- CEVA, Inc. (NASDAQ: CEVA), the leading licensor of wireless connectivity and smart sensing technologies, announced today its financial results for the third quarter ended September 30, 2019.

Total revenue for the third quarter of 2019 was $23.5 million, a 10% increase compared to $21.4 million reported for the third quarter of 2018. Third quarter 2019 licensing and related revenue was $11.3 million, a 15% increase compared to $9.8 million reported for the third quarter of 2018. Royalty revenue for the third quarter of 2019 was $12.2 million, an increase of 5% when compared to $11.6 million reported for the third quarter of 2018.

Gideon Wertheizer, CEO of CEVA, stated: "We are very pleased to report strong third quarter results, driven by excellent performance in licensing and a substantial step up in our royalty revenue. We continue to make progress in growing our customer base, including comprehensive agreements with industry leaders in strategic markets such as ADAS, hearing aids and cellular IoT. Our royalty revenue growth reflects good momentum in both the handset baseband and non-handset aspects of our business. Our handset baseband customers benefitted from the launch of premium smartphones and share gain in the low-cost smartphone market. Our non-handset business continues to grow with record high quarterly revenues and unit shipments of 123 million, including first-time contribution from our newly acquired Hillcrest Labs sensor fusion business."

Of the fourteen license agreements completed during the quarter, one was for a smart sensing product and thirteen were for connectivity products. All of the licensing agreements signed during the quarter were for non-handset baseband applications and five were with first-time customers of CEVA. Customers' target markets include automotive ADAS, hearing aids, smart meters, true wireless stereo earbuds and a wide variety of IoT devices. Geographically, six of the deals signed were in China, five were in the U.S., two were in Europe and one was in APAC (excluding China).

GAAP net income and diluted earnings per share for the third quarter of 2019 was $0.8 million and $0.03, respectively, compared to $2.5 million and $0.11 reported for the same period in 2018. GAAP and non-GAAP net income and diluted earnings per share for the third quarter of 2019 included a tax benefit of approximately $1 million as a result of the conclusion of a tax audit.

Non-GAAP net income and diluted earnings per share for the third quarter of 2019 were $5.1 million and $0.22, respectively, compared to $5.2 million non-GAAP net income and $0.23 diluted earnings per share reported for the third quarter of 2018. Non-GAAP net income and diluted earnings per share for the third quarter of 2019 excluded: (a) equity-based compensation expense, net of taxes, of $2.6 million (b) the impact of the amortization of acquired intangibles of $0.8 million associated with the acquisitions of RivieraWaves and the Hillcrest Labs business, and investments in NB-IoT and Immervision technologies, and (c) deal expenses and write-off of an acquired lease associated with the Hillcrest Labs transaction of $0.8 million. Non-GAAP net income and diluted earnings per share for the third quarter of 2018 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 and investment in NB-IoT technologies.

Yaniv Arieli, Chief Financial Officer of CEVA, stated: "Our portfolio of IP for wireless connectivity and smart sensing applications continues to attract strong customer interest worldwide. This is clearly evident in our third quarter results, for both licensing and royalty revenues, where we recorded 15% and 5% year-over-year growth, respectively. At the end of the third quarter, our cash and cash equivalent balances, marketable securities and bank deposits were approximately $148 million, following the acquisition of the Hillcrest Labs sensor fusion business and the technology investment in Immervision's wide-angle imaging IP during the quarter."

CEVA Conference Call

On November 7, 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/984/31914. 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: 10135680) from one hour after the end of the call until 9:00 a.m. (Eastern Time) on November 14, 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 wireless connectivity and smart sensing technologies. We offer Digital Signal Processors, AI processors, wireless platforms and complementary software for sensor fusion, image enhancement, computer vision, voice input and artificial intelligence, all of which are key enabling technologies 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, robotics, industrial and IoT. Our ultra-low-power IPs include comprehensive DSP-based platforms for 5G baseband processing in mobile and infrastructure, advanced imaging and computer vision for any camera-enabled device and audio/voice/speech and ultra-low power always-on/sensing applications for multiple IoT markets. For sensor fusion, our Hillcrest Labs sensor processing technologies provide a broad range of sensor fusion software and IMU solutions for AR/VR, robotics, remote controls, and IoT. For artificial intelligence, we offer a family of AI processors capable of handling the complete gamut of neural network workloads, on-device. For wireless IoT, we offer the industry's most widely adopted IPs for Bluetooth (low energy and dual mode), Wi-Fi 4/5/6 (802.11n/ac/ax) and NB-IoT. 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 statements about CEVA's process in growing its customer base, the good momentum in the band set baseband and non-handset segments and CEVA's portfolio of IP for wireless connectivity and smart sensing applications attracting strong customer interest worldwide. 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 and connectivity 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


                                          
        CONDENSED CONSOLIDATED STATEMENTS OF INCOME - U.S. GAAP


                                        
        
              U.S. dollars in thousands, except per share data




                                                                         Three months ended                       Nine months ended


                                                                         September 30,                       September 30,


                                                           2019          2018          2019               2018



                                                               
            
              Unaudited




     Revenues:


      Licensing and related
       revenues                                         $11,269        $9,786       $33,084            $29,907



     Royalties                                          12,202        11,627        25,756             26,569






     Total  revenues                                    23,471        21,413        58,840             56,476





      Cost of revenues                                    2,767         2,006         7,283              5,966






     Gross profit                                       20,704        19,407        51,557             50,510






     Operating expenses:


      Research and
       development, net                                  13,873        11,897        38,593             35,756


      Sales and marketing                                 2,832         2,727         8,809              9,302


      General and
       administrative                                     3,509         2,406         8,360              8,193


      Amortization of
       intangible assets                                    757           225         1,177                676




      Total operating expenses                           20,971        17,255        56,939             53,927





      Operating income (loss)                             (267)        2,152       (5,382)           (3,417)


      Financial income, net                                 603           831         2,299              2,535





      Income (loss) before
       taxes on income                                      336         2,983       (3,083)             (882)


       Taxes on income (tax
        benefit)                                          (439)          440          (49)               847





      Net income (loss)                                    $775        $2,543      ($3,034)          ($1,729)





      Basic net income (loss)
       per share                                          $0.04         $0.12       ($0.14)           ($0.08)


      Diluted net income
       (loss) per share                                   $0.03         $0.11       ($0.14)           ($0.08)


      Weighted-average number of Common
       Stock used in computation of net
       income (loss) per share (in
       thousands):



     Basic                                              21,953        21,997        21,936             22,091



     Diluted                                            22,404        22,428        21,936             22,091



     
                
                  Unaudited Reconciliation of GAAP to Non-GAAP Financial Measures

       
              
                U.S. Dollars in thousands, except per share amounts




                                                                    Three months  ended                       Nine months ended


                                                                       September 30                          September 30


                                                                      2019           2018          2019      2018

                                                                                                           ---

                                                            
              
                Unaudited





                   GAAP net income
                    (loss)                                            $775         $2,543      ($3,034) ($1,729)


      Equity-based compensation
       expense included in cost of
       revenue

                                                                       168            155           464       480


      Equity-based compensation
       expense included in research
       and development expenses

                                                                     1,494          1,246         4,314     3,874


      Equity-based compensation
       expense included in sales and
       marketing expenses

                                                                       362            369         1,112     1,246


      Equity-based compensation
       expense included in general and
       administrative expenses

                                                                       728            697         1,957     2,483


      Income tax benefit
       related to equity-
       based compensation
       expenses                                                      (129)         (118)        (473)    (400)


      Amortization of
       intangible assets                                off of an acquired
       related to                                       lease related the
       acquisitions of                                  Hillcrest Labs
       RivieraWaves and                                 transaction
       Hillcrest Labs
       business,
       investments in NB-
       IoT and Immervision
       technologies, and
       deal costs and write                                          1,680            303         2,258       937


                   Non-GAAP net income                              $5,078         $5,195        $6,598    $6,891

                                                                                                           ===





      GAAP weighted-
       average number of
       Common Stock used in
       computation of
       diluted net income
       (loss) per share (in
       thousands)                                                    2,404                               22,091

                                                                    22,428         21,936



      Weighted-average
       number of shares
       related to
       outstanding stock-
       based awards (in
       thousands)                                                      489            390           850       897

                                                                                                           ---

      Weighted-average
       number of Common
       Stock used in
       computation of
       diluted earnings per
       share, excluding the
       above (in thousands
       )                                                            22,893         22,818        22,786    22,988




                   GAAP diluted earnings
                    (loss) per share                                  0.03          $0.11       ($0.14)  ($0.08)


      Equity-based
       compensation
       expense, net of
       taxes                                                         $0.12          $0.11         $0.32     $0.34


      Amortization of
       intangible assets                                off of an acquired
       related to                                       lease related the
       acquisitions of                                  Hillcrest Labs
       RivieraWaves and                                 transaction
       Hillcrest Labs
       business,
       investments in NB-
       IoT and Immervision
       technologies, and
       deal costs and write                                          $0.07          $0.01         $0.11     $0.04

                                                                                                           ---

                   Non-GAAP diluted
                    earnings per share                               $0.22          $0.23         $0.29     $0.30

                                                                                                           ===


                                   
           
                CEVA, INC. AND ITS SUBSIDIARIES


                                       
           CONDENSED CONSOLIDATED BALANCE SHEETS


                                     
           
                (U.S. Dollars in thousands)




                                                 
              
                September 30,  
        
        December 31,


                                                                                   2019    
        
        2018 (*)



                                                    
              
                Unaudited     
        
        Unaudited

                                                                                                            ---


     
                ASSETS



     Current assets:



     Cash and cash equivalents                                                 $14,851                  $22,260


      Marketable securities and short term
       bank deposits                                                            127,453                  123,608



     Trade receivables, net                                                      7,967                    9,971



     Unbilled receivables                                                       18,846                   16,185


      Prepaid expenses and other current
       assets                                                                     5,682                    5,264




     Total current assets                                                      174,799                  177,288




     Long-term assets:



     Bank deposits                                                               5,330                   21,864



     Severance pay fund                                                          9,732                    9,026



     Deferred tax assets, net                                                   10,891                    5,924



     Property and equipment, net                                                 7,891                    7,344


      Operating lease right-of-use assets                                        10,688                        -



     Goodwill                                                                   51,070                   46,612



     Intangible assets, net                                                     17,353                    2,700



     Other long term assets                                                      6,171                    6,505




     Total assets                                                             $293,925                 $277,263

                                                                                                            ===




     
                LIABILITIES AND STOC
             KHOLDERS' EQUITY





     Current liabilities:



     Trade payables                                                             $1,319                     $632



     Deferred revenues                                                           4,766                    3,593


      Accrued expenses and other payables                                        17,167                   17,527



     Operating lease liabilities                                                 2,442                        -



     Total current liabilities                                                  25,694                   21,752





     Long-term liabilities:



     Accrued severance pay                                                      10,447                    9,632



     Operating lease liabilities                                                 7,879                        -



     Other accrued liabilities                                                     545                        -



     Total liabilities                                                          44,565                   31,384






     Stockholders' equity:



     Common stock:                                                                  22                       22



     Additional paid in-capital                                                225,483                  223,250



     Treasury stock                                                           (35,492)                (39,132)


      Accumulated other comprehensive loss                                         (22)                 (1,114)



     Retained earnings                                                          59,369                   62,853




     Total stockholders' equity                                                249,360                  245,879



      Total liabilities and stockholders'
       equity                                                                  $293,925                 $277,263

                                                                                                            ===



               (*) Derived from audited
                financial statements

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SOURCE CEVA, Inc.