CEVA, Inc. Reports Fourth Quarter and Year End 2006 Financial Results

Record Number of Licensing Deals Signed in the Quarter

SAN JOSE, Calif., Jan. 25, 2007 -- CEVA, Inc. (NASDAQ: CEVA)(LSE: CVA), a leading licensor of innovative intellectual property (IP) platform solutions and DSP cores for wireless, consumer and multimedia applications, today announced financial results for the fourth quarter and year ended December 31, 2006.

Total revenue for the fourth quarter of 2006 increased 5% to $8.1 million, compared to $7.7 million reported in the fourth quarter of 2005. Fourth quarter of 2006 licensing revenue increased 15% to $5.3 million compared to $4.6 million in the fourth quarter of 2005. Fourth quarter of 2006 royalty revenue was $1.7 million, a decrease of 15% compared to $1.9 million reported in the fourth quarter of 2005, but represented a 15% and 17% sequential increase from the second and third quarters of 2006, respectively. Revenue from services was $1.1 million for the fourth quarter of 2006 compared to $1.2 million in the fourth quarter of 2005.

Net income for the fourth quarter of 2006 was $0.6 million, compared to net loss of $0.1 million in the fourth quarter of 2005. Net income per share for the fourth quarter of 2006 was $0.03 per share compared to net loss of $0.01 per share for the fourth quarter of 2005.

In the fourth 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 fourth quarter of 2006, excluding the equity-based compensation expense, was $1.1 million and $0.06, respectively. Non-GAAP net loss and non-GAAP net loss per share for the fourth quarter of 2005, excluding the effect of a reorganization and severance charge of $0.1 million associated with leased facility requirements, would have been $0.2 million and $0.01, respectively.

During the quarter, the Company signed a record twelve new license agreements. Eight were for CEVA DSP cores and platforms, one for CEVA SATA technology and three for CEVA Bluetooth technology. Target applications for customer deployment are next generation cellular phones, Smart Phones, MobileTV, VoIP for optical networks and networking equipment. Geographically, of the twelve deals signed, three were signed in the U.S., two in Europe and seven in the Asia Pacific region.

Full Year 2006 Review:

Total revenue for 2006 was $32.5 million, representing a decrease of 9% compared to $35.6 million reported in 2005. A total of thirty eight new license agreements were signed in 2006, compared to twenty seven agreements in 2005. Licensing revenue in 2006 was $22.2 million, representing a decrease of 7% compared to $23.9 million reported in 2005. 2006 royalty revenue was $6.3 million, representing a decrease of 7% compared to $6.8 million reported in 2005. Shipped units by licensees increased 45% to a record 190 million in 2006 compared to 131 million shipped in 2005.

2006 net loss was $98,000 or $0.01 per share, compared to net loss of $2.3 million or $0.12 per share in 2005.

In 2006, the Company recognized an equity-based compensation expense of $2.2 million pursuant to the adoption of SFAS 123R and a gain of $0.1 million reported in interest and other income related to the disposal of an investment. Non-GAAP net income and net income per share for 2006, excluding the equity-based compensation expense and the gain of investment, was $2.1 million and $0.11, respectively. Non-GAAP net loss and non-GAAP net loss per share for 2005, excluding the effect of a reorganization and severance charge of $3.2 million associated with leased facility requirements, a gain of $1.5 million related to the disposal of an investment and impairment of assets of $0.5 million would have been $56,000 and $0.00, respectively.

Gideon Wertheizer, Chief Executive Officer of CEVA, stated: "The fourth quarter of 2006 was a strong licensing quarter for CEVA with a record twelve deals completed. Our DSP cores and multimedia platforms continued to drive licensing activity for the company with four strategic license agreements signed with first-tier semiconductor companies that plan to deploy our technologies in a broad range of products. We are also encouraged by the 17% sequential quarterly royalty revenue growth and 7% increase in terms of volume shipments. In the Asia Pacific region, we continued to build on our position as a leading IP player, completing seven new licensing agreements across our technology portfolio."

Wertheizer, continued: "In 2006, CEVA launched two new DSP cores in the CEVA-X family -- the CEVA-X1622 targeting baseband and multimedia applications and the Quad-MAC CEVA-X1641 DSP targeting WiMAX/4G modem applications. Both of these new DSP cores proved to be excellent additions to our technology portfolio and were licensed by leading semiconductor companies during the year. We continue to build on our "one stop shop" strategy for IP solutions, adding new software for our video, audio and VoIP platforms. Finally, in June 2006, we divested our GPS technology and product lines to a new fabless company in return for an equity ownership of 19.9% on a fully diluted basis in the new entity. The increased use of GPS technology in portable devices has been largely driven by the development of low-cost, highly-integrated GPS chipsets and not through the licensing of this technology. This divestment allowed us to focus our efforts and resources on our IP business and on building a profitable IP company. The positive results of this decision are already in evidence, with the company returning to operating profitability in the third and fourth quarters of this year."

Yaniv Arieli, Chief Financial Officer of CEVA, stated: "At the beginning of 2006, we targeted a number of financial goals for the Company, namely to reduce the Company's operating expenses and return the Company to operating profitability. We have managed to achieve both of these goals without impacting our research and development activities and have put in place a structure to enable us to achieve the goal of sustained profitability. During the year, we generated positive cash flow of $2.6 million and as of December 31st 2006, CEVA's cash balances and marketable securities were $64.2 million compared to $61.6 million at the end of 2005. In 2006 our gross margins continued to be among the highest in the semiconductor IP market at 88% of revenue. We also are pleased with recent design wins and the early production stage of key customers who have incorporated our IP, which may contribute to CEVA's royalty revenue growth in 2007.

Financial Tables

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CEVA Conference Call

On January 25, 2007 CEVA management will conduct a conference call at 8:30 a.m. Eastern Time / 1:30 p.m. London time, to discuss the operating performance for the fourth quarter and year ended December 31, 2006.

The conference call will be available via the following dial in numbers:
-- US Participants: Dial 1-888-694-4641 (CEVA reference number # 8308658)
-- UK/Rest of World: Dial +44-800-032-3836 (CEVA reference number # 8308658)

The conference call will also 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: 8308658) for US domestic callers and +44-800-169-3875 (passcode: 8308658) for international callers from two hours after the end of the call until 11:59 p.m. (Eastern Time) on February 1, 2007. The replay will also be available at CEVA's web site http://www.ceva-dsp.com/ .

About CEVA, Inc.

Headquartered in San Jose, Calif., CEVA is a leading licensor of innovative intellectual property (IP) platform solutions and DSP cores for wireless, consumer and multimedia applications. CEVA's IP portfolio includes comprehensive platform solutions for multimedia, audio, voice over packet (VoP), Bluetooth, Serial Attached SCSI (SAS) and Serial ATA (SATA), and a wide range of programmable DSP cores and subsystems with different price/performance metrics serving multiple markets. In 2006, CEVA's IP was shipped in over 190 million devices. For more information, visit http://www.ceva-dsp.com/ .