CEVA, Inc. Reports Fourth Quarter and Year End 2005 Financial Results

SAN JOSE, Calif. - January 26, 2006 - CEVA, Inc. (NASDAQ: CEVA; LSE: CVA), the leading licensor of digital signal processor (DSP) cores and communications solutions to the semiconductor industry, today announced financial results for the fourth quarter and year ended December 31, 2005.

Total revenue for the fourth quarter of 2005 was $7.7 million, compared to $9.2 million reported in the fourth quarter of 2004. Fourth quarter of 2005 licensing revenue was $4.6 million compared to $5.8 million in the fourth quarter of 2004. Fourth quarter of 2005 royalty revenue was $1.9 million (25% of total revenue), slightly down from $2.0 million reported in the fourth quarter of 2004, and 32% higher than royalty revenue reported in the third quarter of 2005. Revenue from services was $1.2 million for the fourth quarter of 2005 compared to $1.3 million in the fourth quarter of 2004.

Net loss for the fourth quarter of 2005 was $0.1 million, compared to net income of $0.2 million in the fourth quarter of 2004. Net loss per share for the fourth quarter of 2005 was $0.01 per share compared to net income of $0.01 per share for the fourth quarter of 2004.

In the fourth quarter, the Company signed ten new license agreements, two were for CEVA Mobile-Media2000 video and audio software, one for the CEVA-Audio platform, two for the CEVA-TeakLite DSP Core, three for the CEVA Bluetooth platform, one for the CEVA SATA platform and one prepaid royalty arrangement with an existing customer shipping in high volumes. In addition, a number of smaller deals for GPS design services and PLL technologies were completed.

Full Year 2005 Review:

Total revenue for 2005 was $35.6 million, compared to $37.7 million reported in 2004. With a total of 27 new license agreements in the year 2005, compared to 24 agreements in 2004, licensing revenue was $24.0 million, compared to $26.2 million reported in 2004. 2005 royalty revenue was $6.8 million, representing an increase of 13% compared to $6.0 million reported in 2004. Shipped units by licensees increased 8% to a record 115 million in 2005 compared to 106 million shipped in 2004.

2005 net loss was $2.3 million or $0.12 per share, compared to net income of $1.7 million or $0.09 per share in 2004.

Gideon Wertheizer, Chief Executive Officer of CEVA stated: "CEVA's flagship technology, the CEVA-X DSP managed to drive licensing activity in 2005 with ten new deals signed, particularly in the Asia Pacific region where it is recognized as the DSP-of-choice for leading wireless semiconductor companies. In addition, we licensed our mobile multimedia solutions to four of our strategic customers who plan to deploy it in 3G multimedia phones and portable video players."

Wertheizer, continued; "In 2005, CEVA launched three new platforms, two of which are DSP-based: CEVA-Audio, a low-cost digital audio platform; CEVA-VoP, a voice-over packet platform; and CEVA-SAS, a serial connectivity platform. The market in 2005 indicated a clear shift in customer preference away from the traditional approach of licensing standalone DSPs, and towards licensing highly integrated application platforms incorporating all the necessary hardware and software for their target applications. The introduction of these platforms, along with the continued development and improvement of the CEVA mobile multimedia, GPS and SATA platforms provides CEVA licensees with ease-of-integration, faster time-to-market and lower development costs for their leading-edge products."

Yaniv Arieli, Chief Financial Officer of CEVA stated: "Although we experienced a challenging year with respect to revenue, we have managed to improve the financial strength of the company. We generated positive cash flow of $2.0 million during the year. CEVA's cash balances and marketable securities were $61.6 million at December 31, 2005, compared to $59.6 million at the end of 2004. In addition, DSOs improved significantly during the year to 63 days compared to 105 days in 2004 and our working capital increased by $3.3 million. In 2005 our gross margins improved to 88% of revenue from 86% in 2004 and reached 90% gross margins in the fourth quarter of 2005. Finally, we are constantly monitoring our operating expenses closely and have managed to reach lower than expected costs in the fourth quarter of 2005."

2005 Customer Adoption Highlights

• K-Micro Licenses CEVA'S 90nm 3.0Gbps Serial ATA Technology to Enable Topaz Sub-System for Storage Applications
• Silicon Laboratories Deploys CEVA-Teak DSP Core in Industry's Most Highly-Integrated Single-Chip Phone for GSM/GPRS Handsets
• CEVA Xpert-Teak DSP Subsystem Powers National Semiconductor's New CP3SP33 Telematics Chip Targeting Analog-Rich Automotive Multimedia Applications
• CEVA and Ignios Demonstrate Multicore DSP
• CEVA-TeakLite DSP License Extended By STMicroelectronics For Next Generation DSL Central Office Chipsets
• TransChip and CEVA Collaborate to Create Highly Compact Video Streaming Solution for Multimedia Applications
• CEVA and Comsys to Demonstrate Comprehensive EDGE/GPRS/GSM Solution for Cellular Handsets at 3GSM World Congress 2005

2005 CEVA Technology Highlights

• CEVA Announces First Available Silicon of Mobile-Media2000 Solution For High-End Mobile Multimedia Applications
• CEVA Introduces Fully Integrated Ultra-Low Power Voice over IP (VoIP) Platform for Dual Mode VoIP/Cellular Phone Applications and Residential Gateways
• CEVA Expands Storage Interface Offering with Comprehensive Serial Attached SCSI (SAS) IP Solution
• CEVA Brings a High Performance, Low-Power Audio Platform to Consumer Devices
• CEVA Unveils a New Addition to the Powerful CEVA-X DSP Family
• CEVA-TeakLite-II Boosts Performance and Functionality of CEVA's Most Deployed DSP Core

Condensed Consolidated Statements Of Income & Condensed Consolidated Balance Sheets

Condensed Consolidated Statements of Income & Condensed Consolidated Balance Sheets are available for download here (pdf 29KB )

About CEVA, Inc.

For more information about CEVA, Inc, visit the about section of our website.