CEVA Inc. Reports Second Quarter 2006 Financial Results

SAN JOSE, Calif., July 20 /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 second quarter ended June 30, 2006.

Total revenue for the second quarter of 2006 was $8.4 million, a decrease of 12% compared to $9.5 million reported for the second quarter of 2005. Total revenue for the second quarter of 2006 increased 3% sequentially compared to $8.1 million reported for the first quarter of 2006. Second quarter of 2006 licensing revenue was $6.0 million, a decrease of 9% from the second quarter of 2005 and an increase of 13% from the first quarter of 2006.

Second quarter of 2006 royalty revenue was $1.4 million, a decrease of 11% compared to $1.6 million reported for the second quarter of 2005 and a decrease of 21% compared to $1.8 million reported for the first quarter of 2006. Revenue from services was $1.0 million for the second quarter of 2006, a decrease of 27% compared to $1.3 million for the second quarter of 2005 and a decrease of 2% compared to the first quarter of 2006.

Net loss for the second quarter of 2006 was $0.2 million, compared to net loss of $2.2 million for the second quarter of 2005 and net loss of $0.8 million for the first quarter of 2006. Net loss per share for the second quarter of 2006 was $0.01 per share compared to net loss of $0.12 per share for the second quarter of 2005 and net loss of $0.04 per share for the first quarter of 2006. The net loss for the second quarter of 2005 did not reflect the quarterly expense associated with equity based compensation which under Statement of Financial Accounting Standards No. 123R, "Share Based Payments" is required to be expensed for periods commencing after January 1, 2006.

In the second quarter of 2006, the Company recognized an equity-based compensation expense of $0.5 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 the second quarter of fiscal 2006, excluding the equity-based compensation expense and the gain on investment, was $0.2 million and $0.01, respectively.

In the second quarter of 2006, nine license agreements were signed, bringing the total to sixteen new licensing agreements signed in the first six months of 2006. Of the nine license agreements, seven were for CEVA DSP cores and platforms, one for CEVA SATA technology and one for CEVA Bluetooth technology. In addition there was a renewal of a prepaid arrangement with an existing customer and a number of small PLL technology deals. Customer target applications for these licenses are cellular handsets, Mobile TV, consumer electronics, and networking products. Geographically, three license agreements were signed in the United States, five in Europe and one in the Asia Pacific region.

"The second quarter results illustrated continuous progress in our financial performance, both in revenue and profitability milestones set for 2006," said Gideon Wertheizer, Chief Executive Officer of CEVA. "We continue to reduce the company's operating expenses and for the first time in five quarters, we have presented a non-GAAP net income of $0.2 million. The recently announced divestment of our GPS technology and product line combined with the Company's cost control measures should further allow us to achieve additional profitability milestones."

Mr. Wertheizer added, "We signed nine license agreements in the second quarter, including one for our Mobile-Media2000 platform for deployment in a Mobile TV chip. This represents the fourth design win for our mobile multimedia platform in the lucrative personal multimedia player market and further reinforces our unique, all-in-software approach to developing multimedia platforms."

Yaniv Arieli, Chief Financial Officer of CEVA, commented, "As of June 30, 2006, our total cash and marketable securities position was $63.6 million. DSO for the second quarter hit a record low of 66 days. We believe that following the completion of the GPS divestment and realization of the related costs savings, management's goals of achieving positive operating income is obtainable in the near future."

CEVA Conference Call

On July 20, 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 1-888-459-5609 (CEVA reference number # 7595119)
  -- UK/Rest of World: Dial +44-800-032-3836 (CEVA reference number
      # 7595119)

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: 7595119) for U.S. domestic callers and +44-800-169-3875 (passcode: 7595119) for international callers from two hours after the end of the call until 11:59 p.m. (Eastern Time) on July 27, 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), Bluetooth, 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/.

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 achieving management goals relating to revenues and profitability, CEVA's cost costing measures and CEVA's ability to capitalize on the lucrative personal multimedia player market using its all-in-software approach. Additional forward-looking statements include Mr. Arieli's statements about the cost savings associated with the GPS divestment and achieving positive operating income in the near future. 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            Six Months ended
                               June 30,                  June 30,
                           2006       2005          2006        2005
                       Unaudited    Unaudited    Unaudited    Unaudited
  Revenues:
   Licensing and
    royalties             $7,455       $8,219      $14,615      $17,066
   Other revenue             957        1,309        1,931        2,503

  Total revenues           8,412        9,528       16,546       19,569

  Cost of revenues         1,135        1,116        2,030        2,409

  Gross profit             7,277        8,412       14,516       17,160

  Operating expenses:
   Research and
    development, net       4,873        5,515        9,889       10,441
   Sales and marketing     1,606        1,560        3,377        3,236
   General and
    administrative         1,474        1,611        2,958        3,082
   Amortization of
    intangible assets        141          218          331          441
   Reorganization and
    severance charge          --        1,657           --        1,657
   Impairment of assets       --          510           --          510

  Total operating
   expenses                8,094       11,071       16,555       19,367

  Operating income (loss)  (817)      (2,659)      (2,039)      (2,207)
  Interest and other
   income, net               630          443        1,171          778

  Income (loss) before
   taxes on income         (187)      (2,216)        (868)      (1,429)
  Taxes on income             30           --          150          160

  Net income (loss)        (217)      (2,216)      (1,018)      (1,589)

  Basic and diluted
   net income (loss) per
   share                 $(0.01)      $(0.12)      $(0.05)      $(0.08)

  Weighted-average number
   of Common Stock used
   in computation of
   net income (loss)
   per share
   (in thousands):
  Basic                   19,142       18,742       19,104       18,713
  Diluted                 19,142       18,742       19,104       18,713


                     CEVA, INC. AND ITS SUBSIDIARIES
         Non-GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
             U.S. dollars in thousands, except per share data

                             Quarter ended           Six Months ended
                               June 30,                  June 30,
                           2006         2005        2006         2005
                       Unaudited    Unaudited    Unaudited    Unaudited

  Revenues:
   Licensing and
    royalties             $7,455       $8,219      $14,615      $17,066
   Other revenue             957        1,309        1,931        2,503

  Total revenues           8,412        9,528       16,546       19,569

  Cost of revenues         1,126        1,116        2,006        2,409

  Gross profit             7,286        8,412       14,540       17,160

  Operating expenses:
   Research and
    development, net       4,739        5,515        9,536       10,441
   Sales and marketing     1,528        1,560        3,197        3,236
   General and
    administrative         1,190        1,611        2,365        3,082
   Amortization of
    intangible assets        141          218          331          441
  Total operating
    expenses               7,598        8,904       15,429       17,200

  Operating income (loss)  (312)        (492)        (889)         (40)
  Interest and
   other income, net         573          443        1,114          778

  Income (loss) before
   taxes on income           261         (49)          225          738
  Taxes on income             30           --          150          160

  Net income (loss)          231         (49)           75          578

  Non-GAAP basic and
   diluted net income
   (loss) per share        $0.01     $(0.003)       $0.004        $0.03

  Weighted-average number
   of Common Stock used in
   computation of non-GAAP
   net income (loss) per
   share (in thousands):
  Basic                   19,142       18,742       19,104       18,713
  Diluted                 19,443       18,742       19,372       19,088

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             Six Months ended
                              June 30,                   June 30,
                          2006        2005         2006         2005
                       Unaudited    Unaudited    Unaudited    Unaudited

  Reported net
   income (loss)
   per U.S. GAAP           (217)      (2,216)      (1,018)      (1,589)
       Adjustments
   Equity based
    compensation expense
    included in cost
    of revenue                 9           --           24           --
   Equity based
    compensation expense
    included in research
    and development
    expenses                 134                       353
   Equity based
    compensation expense
    included in sales
    and marketing expenses    78                       180
   Equity based
    compensation expense
    included in general
    and administrative
    expenses                 284                       593
   Interest and
    other income, net (1)   (57)           --         (57)           --
   Reorganization and
    severance charge (2)      --        1,657           --        1,657
   Impairment of assets (1)   --          510           --          510
   Non-GAAP net income
    (loss)                   231         (49)           75          578

  (1) Results for the second quarter 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 second quarter of 2005 included a reorganization and
      severance charge of $1.7 million associated with the previously
      announced plans to reduce the Company's operating expenses, primarily
      those related to general and administrative functions, and a one-time
      impairment charge of $0.5 million principally arising from our
      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 loss and net loss per share excluding non-cash equity-based compensation, a gain related to the disposal of an investment, reorganization and severance charge and impairment of assets charge provides meaningful supplemental information to investors as it 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 for its financial results for the first six months of 2006 in comparison to its financial results for the first six months of 2005 facilitates comparison of operating results across reporting periods since the Company's financial results for the first six 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

                                                  June 30,    December 31,
                                                    2006           2005
                                                  Unaudited       Audited
        ASSETS
  Current assets:
   Cash and cash equivalents                       $30,113        $35,111
   Marketable securities and bank deposits          33,480         26,509
   Trade receivables, net                            6,086          6,159
   Deferred tax assets                                 543            600
   Prepaid expenses                                    769          1,040
   Other current assets                              1,267          1,042
     Total current assets                           72,258         70,461
   Long-term investments:
   Severance pay fund                                2,205          1,912
   Deferred tax assets                                 382            292
   Property and equipment, net                       2,111          3,226
   Investment                                        5,984             --
   Goodwill                                         36,498         38,398
   Other intangible assets, net                        284          1,460
     Total assets                                 $119,722       $115,749

       LIABILITIES AND STOCKHOLDERS' EQUITY
  Current liabilities:
   Trade payables                                     $630           $548
   Accrued expenses and other payables               8,929          7,778
   Taxes payable                                       363            442
   Deferred revenues                                   377            453
     Total current liabilities                      10,299          9,221

   Accrued severance pay                             2,337          2,100
   Accrued liabilities                               1,967          2,195

     Total liabilities                              14,603         13,516

  Stockholders' equity:
  Common Stock:                                         19             19
  Additional paid in-capital                       142,722        138,818
  Accumulated deficit                             (37,622)       (36,604)
     Total stockholders' equity                    105,119        102,233
     Total liabilities and stockholders' equity   $119,722       $115,749

SOURCE: CEVA Inc.

CONTACT: Yaniv Arieli, CFO of CEVA, Inc., +1-408-514-2941, or
yaniv.arieli@ceva-dsp.com

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