CEVA Inc. Reports Third Quarter 2006 Financial Results

SAN JOSE, Calif. -- Oct. 25, 2006 -- 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.

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."

Financial Tables

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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 http://www.ceva-dsp.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 http://www.ceva-dsp.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 http://www.ceva-dsp.com/ .