CEVA, Inc. Announces Third Quarter 2020 Financial Results

MOUNTAIN VIEW, Calif., Nov. 5, 2020 /PRNewswire/ -- CEVA, Inc. (NASDAQ: CEVA), the leading licensor of wireless connectivity and smart sensing technologies, today announced its financial results for the third quarter ended September 30, 2020.

Total revenue for the third quarter of 2020 was $25.0 million, a 6% increase compared to $23.5 million reported for the third quarter of 2019. Third quarter 2020 licensing and related revenue was $12.4 million, an increase of 10% when compared to $11.3 million reported for the same quarter a year ago. Royalty revenue for the third quarter of 2020 was $12.5 million, an increase of 3% when compared to $12.2 million reported for the third quarter of 2019.

Thirteen license agreements were concluded during the quarter, of which eight were for smart sensing products and five were for connectivity products. Six of the agreements were with first-time customers. Customers' target applications include ADAS, digital imaging, true wireless stereo earbuds, digital conferencing systems for home office upgrades and a range of other smart IoT devices. Geographically, six of the deals signed were in APAC, four in the U.S, and three were in China.

Gideon Wertheizer, CEO of CEVA, stated: "Our third quarter results are a firm endorsement of our technology strengths and the hard work of our employees. We have made tremendous progress in our base station and IoT product category, whose royalty revenues grew 86% sequentially and 105% year-over-year, reflecting the fast deployment of 5G base stations in China and record contributions from our Bluetooth, Wi-Fi and sensor fusion technologies. We continue to capitalize on our broad portfolio and industry reach to expand our customer base and future royalty potential. Of note, we signed a strategic agreement with a leading automotive semiconductor player for driver assistance capabilities in new cars, further reinforcing our leadership position in this highly lucrative market."

GAAP net loss for the third quarter of 2020 was $0.7 million, as compared to a GAAP net income of $0.8 million reported for the same period in 2019. GAAP diluted loss per share for the third quarter of 2020 was $0.03, as compared to a GAAP diluted earnings per share of $0.03 for the same period in 2019. Third quarter 2020 financials included a $1 million tax expense due to withholding tax which cannot be utilized in future years. Third quarter 2019 financials included a tax benefit of approximately $1 million as a result of the successful conclusion of a tax audit.

Non-GAAP net income and diluted earnings per share for the third quarter of 2020 decreased 29% and 27%, respectively, to $3.6 million and $0.16, respectively, from $5.1 million and $0.22 reported for the third quarter of 2019. Non-GAAP net income and diluted earnings per share for the third quarter of 2020 excluded: (a) equity-based compensation expenses, net of taxes, of $3.7 million, (b) the impact of the amortization of acquired intangibles, net of taxes, of $0.7 million associated with the acquisition of the Hillcrest Labs business and investments in NB-IoT and Immervision technologies. 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.

Yaniv Arieli, Chief Financial Officer of CEVA, stated: "We are pleased with our strong financial performance in the third quarter, the highest third quarter revenue on record. The royalty contribution from base station & IoT product category was a record $7.9 million, derived from an all-time quarterly high 200 million units shipped in this product category. At the end of the quarter, our cash and cash equivalent balances, marketable securities and bank deposits were approximately $153 million, with no debt."

CEVA Conference Call

On November 5, 2020 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/984/37971. 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: 10148556) from one hour after the end of the call until 9:00 a.m. (Eastern Time) on November 12, 2020. The replay will also be available at CEVA's web site www.ceva-dsp.com.

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 (i) optimism associated with CEVA's base station and IoT product category that capitalizes on the fast deployment of 5G base stations in China and record contributions from its Bluetooth, Wi-Fi and sensor fusion technologies, (ii) capitalizing on CEVA's broad portfolio and industry reach to expand its customer base and future royalty potential, and (iii) reinforcing CEVA's leadership position in the highly lucrative automotive semiconductor market. The risks, uncertainties and assumptions that could cause differing CEVA results include: the scope and duration of the COVID-19 pandemic; the extent and length of the restrictions associated with the COVID-19 pandemic and the impact on customers, consumer demand and the global economy generally; the ability of the CEVA DSP cores and other technologies to continue to be strong growth drivers for us; our continued success in penetrating new 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 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.

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.


                                                                       
            
              CEVA, INC. AND ITS SUBSIDIARIES
                                                                          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,


                                                                                                                                  2020                          2019            2020                             2019

                                                                                                                                                                                                               ---

                                                                                                                        
      
     Unaudited  
            
            Unaudited  
     
     Unaudited   
            
           Unaudited




            Revenues:



            Licensing and related revenues                                                                                    $12,420                       $11,269         $40,445                          $33,084



            Royalties                                                                                                          12,540                        12,202          31,736                           25,756

                                                                                                                                                                                                               ---




            Total revenues                                                                                                     24,960                        23,471          72,181                           58,840

                                                                                                                                                                                                               ---




            Cost of revenues                                                                                                    2,503                         2,767           8,259                            7,283

                                                                                                                                                                                                               ---




            Gross profit                                                                                                       22,457                        20,704          63,922                           51,557

                                                                                                                                                                                                               ---




            Operating expenses:



            Research and development, net                                                                                      15,603                        13,873          45,695                           38,593



            Sales and marketing                                                                                                 2,711                         2,832           8,772                            8,809



            General and administrative                                                                                          3,566                         3,509          10,893                            8,360



            Amortization of intangible assets                                                                                     575                           757           1,732                            1,177






            Total operating expenses                                                                                           22,455                        20,971          67,092                           56,939

                                                                                                                                                                                                               ---




            Operating  income (loss)                                                                                                2                         (267)        (3,170)                         (5,382)



            Financial income, net                                                                                               1,020                           603           2,689                            2,299






             Income (loss) before taxes on income                                                                               1,022                           336           (481)                         (3,083)



            Income tax expense (benefit)                                                                                        1,761                         (439)          2,533                             (49)

                                                                                                                                                                                                               ---




            Net income (loss)                                                                                                  $(739)                         $775        $(3,014)                        $(3,034)






            Basic net income (loss) per share                                                                                 $(0.03)                        $0.04         $(0.14)                         $(0.14)

                                                                                                                                                                                                               ===


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

                                                                                                                                                                                                               ===


            Weighted-average shares used to compute net income (loss)
    per share (in thousands):



            Basic                                                                                                              22,163                        21,953          22,059                           21,936

                                                                                                                                                                                                               ===


            Diluted                                                                                                            22,163                        22,404          22,059                           21,936

                                                                                                                                                                                                               ===


                                                                                           
     
      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,


                                                                                                                                                                     2020                          2019        2020                          2019

                                                                                                                                                                                                                                           ---

                                                                                                                                                                Unaudited                    Unaudited  Unaudited                    Unaudited




              
                GAAP net income (loss)                                                                                                                 $(739)                         $775    $(3,014)                     $(3,034)



              Equity-based compensation expense included in cost of revenues                                                                                         159                           168         473                           464



              Equity-based compensation expense included in research and development                                                                               1,770                                    5,115
    expenses
                                                                                                                                                                    1,494                                    4,314



              Equity-based compensation expense included in sales and marketing                                                                                      533                                    1,496
    expenses
                                                                                                                                                                      362                                    1,112



              Equity-based compensation expense included in general and administrative                                                                             1,084                                    2,986
    expenses
                                                                                                                                                                      728                                    1,957



              Income tax (benefit) expense related to equity-based compensation                                                                                      124                         (129)       (60)                        (473)
    expenses



              Amortization of intangible assets, net of taxes, related to acquisitions of
    RivieraWaves and Hillcrest Labs business, investments in NB-IoT and
    Immervision technologies and deal costs and write off of an acquired
    lease related the Hillcrest Labs transaction                                                                                                                      684                         1,680       2,061                         2,258





              
                Non-GAAP net income                                                                                                                    $3,615                        $5,078      $9,057                        $6,598












              GAAP weighted-average number of Common Stock used in computation                                                                                    22,163                        22,404      22,059                        21,936
    of diluted net income (loss) and earning per share (in thousands)



              Weighted-average number of shares related to outstanding stock-based                                                                                 1,004                           489                                      850
    awards (in thousands)
                                                                                                                                                                                                            983

                                                                                                                                                                                                                                           ---






              Weighted-average number of Common Stock used in computation of                                                                                      23,167
    diluted earnings per share, excluding the above (in thousands)
                                                                                                                                                                   22,893                        23,042      22,786







              
                GAAP diluted income (loss) earnings per share                                                                                         $(0.03)                         0.03     $(0.14)                      $(0.14)



              Equity-based compensation expense, net of taxes                                                                                                      $0.16                         $0.12       $0.44                         $0.32



              Amortization of intangible assets, net of taxes, related to acquisitions of



              RivieraWaves and Hillcrest Labs business, investments in NB-IoT and                                                                                  $0.03                         $0.07       $0.09                         $0.11
    Immervision technologies and deal costs and write off of an acquired
    lease related the Hillcrest Labs transaction







              
                Non-GAAP diluted earnings per share                                                                                                     $0.16                         $0.22       $0.39                         $0.29


                                
              
                CEVA, INC. AND ITS SUBSIDIARIES
                                         CONDENSED CONSOLIDATED BALANCE SHEETS
                                              (U.S. Dollars in thousands)




                                                                           September 30, December 31,


                                                                                    2020    2019 (*)



                                                                             Unaudited     Unaudited

                                                                                                  ---


     
                ASSETS



     Current assets:



     Cash and cash equivalents                                                  $22,067       $22,803


      Marketable securities and short-term
       bank deposits                                                             119,664       121,782



     Trade receivables, net                                                      15,538        11,066



     Unbilled receivables                                                        13,441        17,241


      Prepaid expenses and other current
       assets                                                                      6,888         5,660




     Total current assets                                                       177,598       178,552




     Long-term assets:



     Bank deposits                                                               11,376         5,368



     Severance pay fund                                                           9,624         9,881



     Deferred tax assets, net                                                    12,317        10,605


      Property and equipment, net                                                  8,084         7,879


      Operating lease right-of-use assets                                         10,824        11,066



     Goodwill                                                                    51,070        51,070



     Intangible assets, net                                                      11,481        13,424



     Other long-term assets                                                       9,190         9,176




     Total assets                                                              $301,564      $297,021

                                                                                                  ===



                   LIABILITIES AND STOC
                KHOLDERS' EQUITY



     Current liabilities:



     Trade payables                                                                $862          $701



     Deferred revenues                                                            2,777         3,642


      Accrued expenses and other payables                                          3,421         3,660


      Accrued payroll and related benefits                                        15,991        15,894



     Taxes payable                                                                  335            88


      Operating lease liabilities                                                  2,505         2,393



     Total current liabilities                                                   25,891        26,378





     Long-term liabilities:



     Accrued severance pay                                                       10,328        10,551


      Operating lease liabilities                                                  7,960         8,273



     Other accrued liabilities                                                      814           662




     Total liabilities                                                           44,993        45,864






     Stockholders' equity:



     Common stock                                                                    22            22



     Additional paid in-capital                                                 230,032       228,005



     Treasury stock                                                            (30,754)     (39,390)


      Accumulated other comprehensive
       income                                                                        361            94



     Retained earnings                                                           56,910        62,426




     Total stockholders' equity                                                 256,571       251,157



      Total liabilities and stockholders'
       equity                                                                   $301,564      $297,021

                                                                                                  ===

               (*) Derived from audited
                   financial statements

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SOURCE CEVA, Inc.