SAN JOSE, Calif., Oct. 25 /PRNewswire-FirstCall/ — CEVA, Inc. (NASDAQ: CEVA)(LSE: CVA), the leading licensor of digital signal processor (DSP) cores, multimedia and storage platforms to the semiconductor industry, today announced financial results for the third quarter ended September 30, 2006.
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Total revenue for the third quarter of 2006 was $7.9 million, a decrease of 6% compared to $8.4 million for the third quarter of 2005. Licensing revenue for the third quarter of 2006 was $5.5 million, a decrease of 4% compared to $5.7 million for the third quarter of 2005. Royalty revenue for the third quarter of 2006 was $1.4 million, a decrease of 7% compared to $1.5 million for the third quarter of 2005. Revenue from services was $1.0 million for the third quarter of 2006, a decrease of 17% compared to $1.2 million for the third quarter of 2005.
Net income for the third quarter of 2006 was $0.3 million, compared to net loss of $0.5 million for the third quarter of 2005. Net income per share for the third quarter of 2006 was $0.02 per share compared to net loss of $0.03 per share for the third quarter of 2005. Net loss for the third quarter of 2005 did not reflect the quarterly equity-based compensation expense under Statement of Financial Accounting Standards No. 123R, “Share Based Payments” that is required to be expensed for periods commencing after January 1, 2006.
In the third quarter of 2006, the Company recognized an equity-based compensation expense of $0.5 million pursuant to the adoption of SFAS 123R. Non-GAAP net income and net income per share for the third quarter of 2006, excluding the equity-based compensation expense, was $0.9 million and $0.04, respectively. Non-GAAP net loss and non-GAAP net loss per share for the third quarter of 2005, excluding the effect of a reorganization and severance charge of $1.7 million associated with leased facility requirements and a gain of $1.5 million related to the disposal of an investment, would have been $0.4 million and $0.02, respectively.
In the third quarter of 2006, ten new license agreements were signed, bringing the total to twenty-six new license agreements signed in the first nine months of 2006. Of the ten new license agreements, seven were for CEVA DSP cores and platforms, two for CEVA SATA technology and one for CEVA Bluetooth technology. Customer target applications for these licenses are wireless, MobileTV, VoIP for optical networks and enterprise networking equipment. Geographically, one license agreement was signed in the United States, four in Europe and five in the Asia Pacific region, including Japan.
“The third quarter of 2006 was a successful quarter in terms of our growth strategy to drive new technologies into emerging markets,” said Gideon Wertheizer, Chief Executive Officer of CEVA. “We secured a design win in the mobile WiMAX market with our newest DSP core, the CEVA-X1641 and positioned ourselves in the PON (Passive Optical Networks) network market with a design win for our VoIP (Voice over IP) platform at Kawasaki Microelectronics. We are also happy with the continued momentum of our DSP and Video technologies in the growing markets of MobileTV, SmartPhones and Ultra Low Cost (ULC) handsets.”
Yaniv Arieli, Chief Financial Officer of CEVA, stated: “Despite a traditionally challenging third quarter in terms of licensing revenue due to the summer vacation season, we managed to achieve significant milestones with regards to reaching our profitability goals. The last time CEVA reported Non- GAAP positive operating income was six quarters ago, in the first quarter of 2005. We continue to monitor our expenses closely and put more emphasis on top line growth. Our balance sheet continues to be robust with positive overall cash flow of $0.2 million for the third quarter of 2006 and as of September 30, 2006, our total cash, investments, deposits and cash equivalents totaled $63.8 million.”
CEVA Conference Call
On October 25, 2006, CEVA’s management will conduct a conference call at 8:30 a.m. Eastern Time / 1:30 p.m. London time, to discuss the company’s operating performance for the quarter. The conference call will be available via the following dial-in numbers:
-- US Participants: Dial 1-888-694-4641 (CEVA reference number # 7985458)
-- UK/Rest of World: Dial +44-800-032-3836 (CEVA reference number #
7985458)
The conference call also will be available live via the Internet by accessing the CEVA web site at https://www.ceva-ip.com/ . 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 1-877-519-4471 (passcode: 7985458) for US domestic callers and +44-800-169-3875 (passcode: 7985458) for international callers from two hours after the end of the call until 11:59 p.m. (Eastern Time) on November 1, 2006. The replay will also be available at CEVA’s web site at https://www.ceva-ip.com/ .
About CEVA, Inc.
Headquartered in San Jose, Calif., CEVA is the leading licensor of digital signal processor (DSP) cores, multimedia 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 multimedia, audio, Voice over Packet (VoP), Serial Attached SCSI (SAS) and Serial ATA (SATA). In 2005, CEVA’s IP was shipped in over 130 million devices. For more information visit https://www.ceva-ip.com/ .
Forward-Looking Statements
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. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including Mr. Wertheizer’s statements about the positive implications of the new design wins and the continued momentum of CEVA’s DSP and Video technologies in the growing markets of MobileTV, SmartPhones and Ultra Low Cost (ULC) handsets. Additional forward- looking statements include Mr. Arieli’s statements about achieving significant milestones with regards to reaching the Company’s profitability goals, monitoring the Company’s expenses and putting more emphasis on top line growth. The risks, uncertainties and assumptions include: the ability of the CEVA-X line of products to continue to be a strong growth driver for the Company; intense competition within, and challenging period of growth experienced by, the industry in which the Company competes; failure of the market for the Company’s technology to develop as expected, especially in the case of newly introduced or planned to be introduced technologies; the Company’s ability to timely and successfully develop and introduce new technologies and penetrate new markets; the Company’s reliance on revenue derived from a limited number of licensees; the Company’s ability to capitalize on the lucrative personal multimedia player market; the Company’s ability to realize cost savings from the GPS divestment; the Company’s ability to continue its cost saving measures, and other risks relating to the Company’s business, including, but not limited to, those that are described from time to time in the Company’s Securities and Exchange Commission filings, including but not limited to its Annual Report on Form 10-K for the fiscal year ended December 31, 2005, and its quarterly 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
Quarter ended Nine Months ended
September 30, September 30,
2006 2005 2006 2005
Unaudited Unaudited Unaudited Unaudited
Revenues:
Licensing and royalties $6,938 $7,169 $21,553 $24,235
Other revenue 955 1,217 2,886 3,720
Total revenues 7,893 8,386 24,439 27,955
Cost of revenues 992 1,003 3,022 3,412
Gross profit 6,901 7,383 21,417 24,543
Operating expenses:
Research and 4,270 5,036 14,159 15,477
development, net
Sales and marketing 1,414 1,619 4,791 4,855
General and 1,577 1,399 4,535 4,481
administrative
Amortization of 42 191 373 632
intangible assets
Reorganization and - 1,650 - 3,307
severance charge
Impairment of assets - - 510
Total operating expenses 7,303 9,895 23,858 29,262
Operating loss (402) (2,512) (2,441) (4,719)
Interest and other 778 1982 1,949 2,760
income, net
Income (loss) before 376 (530) (492) (1,959)
taxes on income
Taxes on income 35 - 185 160
Net income (loss) 341 (530) (677) (2,119)
Basic and diluted net
income (loss) per share $0.02 $(0.03) $(0.04) $(0.11)
Weighted-average number
of Common Stock used in
computation of net
income (loss) per share
(in thousands):
Basic 19,239 18,875 19,150 18,768
Diluted 19,324 18,875 19,150 18,768
CEVA, INC. AND ITS SUBSIDIARIES
Non-GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
U.S. dollars in thousands, except per share data
Quarter ended Nine Months ended
September 30, September 30,
2006 2005 2006 2005
Unaudited Unaudited Unaudited Unaudited
Revenues:
Licensing and royalties $6,938 $7,169 $21,553 $24,235
Other revenue 955 1,217 2,886 3,720
Total revenues 7,893 8,386 24,439 27,955
Cost of revenues 978 1,003 2,984 3,412
Gross profit 6,915 7,383 21,455 24,543
Operating expenses:
Research and 4,100 5,036 13,636 15,477
development, net
Sales and marketing 1,336 1,619 4,533 4,855
General and 1,328 1,399 3,693 4,481
administrative
Amortization of 42 191 373 632
intangible assets
Total operating expenses 6,806 8,245 22,235 25,445
Operating income (loss) 109 (862) (780) (902)
Interest and other 778 475 1,892 1,253
income, net
Income (loss) before 887 (387) 1,112 351
taxes on income
Taxes on income 35 - 185 160
Net income (loss) 852 (387) 927 191
Non-GAAP basic and
diluted net income (loss)
per share $0.04 $(0.02) $0.05 $0.01
Weighted-average number
of Common Stock used in
computation of non-GAAP
net income (loss) per
share (in thousands):
Basic 19,239 18,875 19,150 18,768
Diluted 19,324 18,875 19,350 19,067
The above non-GAAP condensed consolidated statements of operations have been adjusted to exclude the following items to U.S. GAAP reported net income (loss):
Quarter ended Nine Months ended
September 30, September 30,
2006 2005 2006 2005
Unaudited Unaudited Unaudited Unaudited
Reported net income (loss) 341 (530) (677) (2,119)
per U.S. GAAP
Adjustments
Equity based compensation 14 - 38 -
expense included in cost
of revenue
Equity based compensation 170 - 523 -
expense included in
research and development
expenses
Equity based compensation 78 - 258 -
expense included in sales
and marketing expenses
Equity based compensation 249 - 842 -
expense included in
general and administrative
expenses
Interest and other income, - (1,507) (57) (1,507)
net (1)
Reorganization and - 1,650 - 3,307
severance charge (2)
Impairment of assets (2) - - - 510
Non-GAAP net income (loss) 852 (387) 927 191
(1) Results for the three and nine months of 2005 included a gain of $1.5
million reported in interest and other income related to the disposal
of an investment. Results for the nine months of 2006 included a gain
of $0.1 million reported in interest and other income related to the
disposal of an investment
(2) Results for the three and nine months ended September 30, 2005
included a reorganization and severance charge of $1.7 million and
$3.3 million, respectively, associated with leased facility
requirements. Results for the nine months ended September 30, 2005
also included a one-time impairment charge of $0.5 million principally
arising from the Company's 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.
These adjustments reconcile the Company’s reported results of operations to the NON-GAAP results of operations. The Company believes that presentation of net income (loss) and net income (loss) per share, excluding non-cash equity-based compensation, gains related to the disposal of investments, the reorganization and severance charge and the impairment charge, provides meaningful supplemental information to investors as such a presentation allows investors to better understand the underlying business trend of the Company and how the expenses associated with the adoption of SFAS 123R are reflected in the Company’s statements of operations. The Company also believes that the NON-GAAP presentation of excluding the equity-based compensation expense from its financial results for the first nine months of 2006 in comparison to its financial results for the first nine months of 2005 facilitates comparison of operating results across reporting periods since the Company’s financial results for the first nine months of 2005 would not have included equity-based compensation expense. The Company uses these NON-GAAP measures when evaluating its financial results as well as for internal planning and budgeting purposes. These NON-GAAP financial measures are used in addition to and in conjunction with results presented in accordance with GAAP, and are intended to provide additional insight into the Company’s operations that, when viewed with its GAAP results and the accompanying reconciliations to corresponding GAAP financial measures, offer a more complete understanding of factors and trends affecting the Company’s business. These NON-GAAP measures should not be viewed as a substitute for the Company’s reported GAAP results, and may be different than the NON-GAAP measures used by other companies.
CEVA, INC. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
U.S. Dollars in Thousands
September 30, December 31,
2006 2005
Unaudited Audited
ASSETS
Current assets:
Cash and cash equivalents $36,509 $35,111
Marketable securities and bank
deposits 27,259 26,509
Trade receivables, net 7,091 6,159
Deferred tax assets 571 600
Prepaid expenses 601 1,040
Other current assets 1,654 1,042
Total current assets 73,685 70,461
Long-term investments:
Severance pay fund 2,332 1,912
Deferred tax assets 434 292
Property and equipment, net 1,883 3,226
Investment 4,233 -
Goodwill 36,498 38,398
Other intangible assets, net 242 1,460
Total assets $119,307 $115,749
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade payables $638 $548
Accrued expenses and other payables 8,629 7,778
Taxes payable 331 442
Deferred revenues 589 453
Total current liabilities 10,187 9,221
Accrued severance pay 2,491 2,100
Accrued liabilities 1,829 2,195
Total liabilities 14,507 13,516
Stockholders' equity:
Common Stock: 19 19
Additional paid in-capital 142,062 138,818
Accumulated deficit (37,281) (36,604)
Total stockholders' equity 104,800 102,233
Total liabilities and
stockholders' equity $119,307 $115,749
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SOURCE: CEVA, Inc.
CONTACT: Yaniv Arieli, CFO, +1-408-514-2941, or
[email protected], or Richard Kingston, +1-408-514-2976, or
[email protected], both of CEVA, Inc.
Web site: https://www.ceva-ip.com/