CEVA, Inc. Announces Second Quarter 2018 Financial Results

MOUNTAIN VIEW, Calif. -- Aug. 7, 2018 -- CEVA, Inc. (NASDAQ: CEVA), the leading licensor of signal processing platforms and artificial intelligence processors for smarter, connected devices, announced today its financial results for the second quarter ended June 30, 2018.

Total revenue for the second quarter of 2018 was $17.5 million, a 15% decrease compared to $20.6 million reported for the second quarter of 2017. Second quarter 2018 licensing and related revenue was $10.0 million, a decrease of 3% when compared to $10.3 million reported for the same quarter a year ago. Royalty revenue for the second quarter of 2018 was $7.5 million, a decrease of 27% when compared to $10.2 million reported for the second quarter of 2017.

Gideon Wertheizer, CEO of CEVA, stated: "Our licensing business continued on track in the second quarter, with healthy demand for our AI, computer vision and connectivity products. Our second quarter royalty revenue came in below expectations due to continued unexpected weakness with one of our large Chinese handset baseband customers. We now expect the weakness with this Chinese customer to continue for the rest of the year and have reduced our annual royalty expectations accordingly. With that said, we are encouraged by a new production ramp and share gain of a flagship smartphone and the continued expansion of our non-handset baseband products. As a result, we expect royalties for the second half of the year to be both substantially stronger than the first half and deliver year-over-year growth with respect to the second half of 2018."

GAAP net loss for the second quarter of 2018 was $2.1 million, compared to $3.9 million net income reported for the same period in 2017. GAAP diluted loss per share for the second quarter of 2018 was $0.09, compared to diluted earnings per share of $0.17 a year ago. GAAP net income and diluted earnings per share for the second quarter of 2017 included a tax benefit of approximately $1.8 million as a result of the successful conclusion of a tax audit.

Non-GAAP net income and diluted earnings per share for the second quarter of 2018 were $0.9 million and $0.04, respectively, compared to $6.3 million non-GAAP net income and $0.28 diluted earnings per share reported for the second quarter of 2017. Non-GAAP net income and diluted earnings per share for the second quarter of 2018 excluded: (a) equity-based compensation expense, net of taxes, of $2.7 million, and (b) the impact of the amortization of acquired intangibles of $0.3 million associated with the acquisition of RivieraWaves and NB-IoT technologies. Net income and diluted earnings per share for the second quarter of 2017 excluded: (a) equity-based compensation expense, net of taxes, of $2.1 million, and (b) the impact of the amortization of acquired intangibles of $0.3 million associated with the acquisition of RivieraWaves.

During the quarter, CEVA completed nine license agreements. Four of the agreements were for CEVA DSP and AI platforms, including a third NeuPro AI license agreement, and five were for CEVA connectivity IPs. Eight of the agreements were for non-handset baseband applications and three were with first-time customers of CEVA. Customers' target markets for the licenses include advanced cameras, drones, smart speakers, smartphones, wireless headphones and IoT devices. Geographically, five of the deals signed were in China, one was in Europe and three were in the APAC region, including Japan.

Yaniv Arieli, Chief Financial Officer of CEVA, stated: "Despite lower-than-expected royalty revenue for the second quarter, we were pleased to see continued progress in our non-handset baseband customers, who shipped a new record level of 88 million CEVA-powered devices. On buyback, we purchased approximately 270,000 shares of our common stock in the second quarter for an aggregate consideration of approximately $9 million. In addition, our Board of Directors approved the expansion of this plan during the quarter, and as of June 30^th, we have a total of 700,000 shares of common stock available for repurchase. Moreover, CEVA's cash and cash equivalent balances, marketable securities and bank deposits were approximately $173 million at the end of the quarter."

Full Year 2018 Revenue Guidance and Commentary

As a result of the lower royalty revenue for the first half of 2018, the expectation of continued weakness with the Chinese handset baseband customer for the remainder of 2018, and the lack of visibility and uncertainty for the timing of resumption of royalties with the well-publicized ban of a Chinese base station customer, the company is lowering 2018 annual royalty guidance to a level representing a 10% decrease from 2017 royalty revenue. While it is encouraging that the base station customer has resumed operations, it's assumed, that it will take them a few months to rebuild their supply chain and to get back to full production and shipments. In light of the above and to be prudent, the company now projects total annual revenue to be approximately $80 million.

Financial Tables

To read financial tables, click here

CEVA Conference Call

On August 07, 2018 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/984/26513. 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: 10122115) from one hour after the end of the call until 9:00 a.m. (Eastern Time) on August 14, 2018. The replay will also be available at CEVA's web site www.ceva-dsp.com.

About CEVA, Inc.
CEVA is the leading licensor of signal processing platforms and artificial intelligence processors 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, industrial and IoT. Our ultra-low-power IPs for vision, audio, communications and connectivity include comprehensive DSP-based platforms for LTE/LTE-A/5G baseband processing in handsets, infrastructure and cellular IoT enabled devices, advanced imaging and computer vision for any camera-enabled device, audio/voice/speech and ultra-low power always-on/sensing applications for multiple IoT markets. For artificial intelligence, we offer a family of AI processors capable of handling the complete gamut of neural network workloads, on-device. For connectivity, we offer the industry's most widely adopted IPs for Bluetooth (low energy and dual mode) and Wi-Fi (802.11 a/b/g/n/ac/ax up to 4x4). Visit us at www.ceva-dsp.com