CEVA, Inc. Reports Third Quarter 2007 Financial Results

SAN JOSE, Calif., Nov. 1 /PRNewswire-FirstCall/ -- CEVA, Inc. (NASDAQ: CEVA); (LSE: CVA), a leading licensor of silicon intellectual property (SIP) platform solutions and DSP cores for mobile, consumer electronics and storage applications, today announced its financial results for the quarter ended September 30, 2007.

(Logo: http://www.newscom.com/cgi-bin/prnh/20051010/CEVALOGO)

Total revenue for the third quarter of 2007 was $8.7 million, an increase of 11% compared to $7.9 million reported for the third quarter of 2006. Third quarter of 2007 licensing revenue was $5.3 million, a decrease of 4% from $5.5 million reported for the third quarter of 2006. Royalty revenue for the third quarter of 2007 was $2.2 million, an increase of 55% over $1.4 million for the third quarter of 2006. Revenue from services for the third quarter of 2007 was $1.2 million, an increase of 30% compared to $1.0 million reported for the third quarter of 2006.

Net income for the third quarter of 2007 was $1.1 million, an increase of 226% compared to net income of $0.3 million for the third quarter of 2006. Diluted net income per share for the third quarter of 2007 was $0.05 per share, an increase of 150% compared to diluted net income of $0.02 per share for the third quarter of 2006.

In the third quarter of 2007 and 2006, the Company recognized an equity- based compensation expense of $0.5 million pursuant to the adoption of SFAS 123R. In the third quarter of 2007, the Company also recorded a gain of $0.4 million in interest and other income related to the disposal of an investment. Non-GAAP net income and diluted net income per share for the third quarter of 2007, excluding the equity-based compensation expense and gain on disposal of the investment, was $1.2 million and $0.06, respectively, an increase of 42% and 50%, respectively, compared to $0.9 million of non-GAAP net income and $0.04 of non-GAAP diluted net income per share for the third quarter of 2006. Non-GAAP net income and net income per share for the third quarter of 2006 excluded an equity-based compensation expense of $0.5 million.

During the third quarter of 2007, the Company concluded ten new license agreements, bringing the total number of new license agreements signed during the first nine months of 2007 to 27. Eight agreements were for CEVA DSP cores and platforms and two were for CEVA SATA technology. Target applications for customer deployment are 2G/3G/4G phones, wireless headsets, solid state disk (SSD) devices, surveillance equipment and fingerprint recognition systems. Geographically, two of the ten deals signed were in the U.S., five were in Europe and three were in the Asia Pacific region.

During the third quarter, CEVA signed a strategic licensing agreement with one of the Company's largest customers who extended their use of CEVA-X DSP cores to products for wireless applications. In addition, one of Japan's largest, branded, original equipment manufacturers licensed the CEVA MM2000 multimedia platform for its development of next generation surveillance camera equipment. This license agreement represents a key design win for CEVA in the fast growing surveillance market as the underlying technology transitions from analog to digital IP network-based systems.

Gideon Wertheizer, Chief Executive Officer of CEVA, stated: "The third quarter of 2007 was another solid quarter for CEVA in terms of expanding the licensee base, increasing the royalty revenue and building the pipeline. Our royalty revenue surpassed the $2.0 million mark for the first time in the Company's history, and we received during the third quarter the first royalty payment from one of the leaders in the 3G chipset market who is now shipping products incorporating our CEVA-X DSP cores in high volumes. We also are pleased with the recent traction our customers that incorporate our DSP core technologies have generated with leading mobile handset manufacturers."

Yaniv Arieli, Chief Financial Officer of CEVA, stated: "In the third quarter we achieved a few important financial milestones: royalty revenue trend is positive, profitability continues to improve during the first three quarters of 2007 and net income and EPS increased sequentially during the same period. The Company's positive cash flow also continues to improve sequentially and in the third quarter reached approximately $1.1 million. As of September 30, 2007, CEVA's cash balances and marketable securities were $66.0 million."

CEVA Conference Call

On November 1, 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 quarter.

  The conference call will be available via the following dial-in numbers:
    *  US Participants: Dial 1-877-493-9121 (Access Code: CEVA)
    *  UK/Rest of World: Dial +44-800-032-3836 (Access Code: CEVA)

For those who cannot access the live broadcast, a replay will be available by dialing 1-877-519-4471 (passcode: 9337401) for US domestic callers and +44- 800-169-3875 (passcode: 9337401) for international callers from two hours after the end of the call until 11:59 p.m. (Eastern Time) on November 8, 2007. The replay will also be available at CEVA's web site https://www.ceva-ip.com/.

About CEVA, Inc.

Headquartered in San Jose, Calif., CEVA is a leading licensor of silicon intellectual property (SIP) platform solutions and DSP cores for mobile, consumer electronics and storage applications. CEVA's IP portfolio includes comprehensive 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 https://www.ceva-ip.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 CEVA's results 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 statements about optimism about the pipeline buildup, the positive royalty revenue and profitability trend, and CEVA's ability to capitalize on the fast growing surveillance market and the traction generated by CEVA's customers with mobile handset manufacturers; and the potential additional royalty revenue associated with a CEVA customer that is a leader in the 3G chipset market and the ramp-up production of other customers with products that incorporate CEVA's technologies. The risks, uncertainties and assumptions include: the ability of the CEVA DSP cores and other technologies to continue to be strong growth drivers for the Company; the effect of intense competition within our industry; the effect of the challenging period of growth experienced by the industries in which we license our technology; the possibility that the market for our technology may not develop as expected; our ability to timely and successfully develop and introduce new technologies; our reliance on revenue derived from a limited number of licensees; our ability to improve our royalty revenue in future periods and other risks relating to our business and the pipeline of companies interested in our technologies, including, but not limited to, those that are described from time to time in the Company's Securities and Exchange Commission filings. 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            Nine Months ended
                               September 30,               September 30,
                            2007           2006          2007       2006
                          Unaudited      Unaudited    Unaudited    Unaudited
  Revenues:
  Licensing and royalties  $7,492          $6,938       $21,540    $21,553
  Other revenues            1,237             955         3,430      2,886

  Total revenues            8,729           7,893        24,970     24,439

  Cost of revenues          1,001             992         2,926      3,022

  Gross profit              7,728           6,901        22,044     21,417

  Operating expenses:
  Research and
   development, net         4,705           4,270        14,015     14,159
  Sales and marketing       1,471           1,414         4,645      4,791
  General and
   administrative           1,515           1,577         4,134      4,535
  Amortization of
   intangible assets           41              42           124        373

  Total operating
   expenses                 7,732           7,303        22,918     23,858

  Operating loss               (4)           (402)         (874)    (2,441)
  Interest and other
   income, net              1,170             778         2,620      1,949

  Income (loss) before
   taxes on income          1,166             376         1,746       (492)
  Taxes on income              54              35           204        185

  Net income (loss)        $1,112            $341        $1,542      $(677)

  Basic net income (loss)
   per share                $0.06           $0.02         $0.08     $(0.04)
  Diluted net income
   (loss) per share         $0.05           $0.02         $0.08     $(0.04)
  Weighted-average number
   of Common Stock used in
   computation of net
   income (loss) per share
   (in thousands):
  Basic                    19,647          19,239        19,516     19,150
  Diluted                  20,287          19,324        19,900     19,150



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

                                     Quarter ended     Nine Months ended
                                     September 30,       September 30,
                                    2007       2006       2007       2006
                                 Unaudited  Unaudited  Unaudited Unaudited
  Revenues:
  Licensing and royalties          $7,492     $6,938    $21,540    $21,553
  Other revenues                    1,237        955      3,430      2,886

  Total revenues                    8,729      7,893     24,970     24,439

  Cost of revenues                    982        978      2,871      2,984

  Gross profit                      7,747      6,915     22,099     21,455

  Operating expenses:
   Research and development, net    4,471      4,100     13,369     13,636
   Sales and marketing              1,395      1,336      4,395      4,533
   General and administrative       1,319      1,328      3,576      3,693
   Amortization of intangible assets   41         42        124        373

  Total operating expenses          7,226      6,806     21,464     22,235

  Operating income (loss)             521        109        635       (780)
  Interest and other income, net      745        778      2,195      1,892

  Income before taxes on income     1,266        887      2,830      1,112
  Taxes on income                      54         35        204        185

  Net income                       $1,212       $852     $2,626       $927
  Non-GAAP basic and diluted
   net income per share             $0.06      $0.04      $0.13      $0.05

  Weighted-average number of
   Common Stock used in computation
   of non-GAAP net income
   per share (in thousands):
  Basic                            19,647     19,239     19,516     19,150
  Diluted                          20,439     19,324     20,062     19,350



       Unaudited Reconciliation of GAAP to Non-GAAP Financial Measures
            (U.S. Dollars in thousands, except per share amounts)

                                    Quarter ended        Nine Months ended
                                     September 30           September 30
                                  2007         2006       2007       2006
                               Unaudited    Unaudited  Unaudited Unaudited
  GAAP net income (loss)        $1,112         $341       $1,542     $(677)
  Equity-based compensation
   expense included in cost
   of revenue                       19           14           55        38
  Equity-based compensation
   expense included in research
   and development expenses        234          170          646       523
  Equity-based compensation
   expense included in sales
   and marketing expenses           76           78          250       258
  Equity-based compensation
   expense included in general
   and administrative expenses     196          249          558       842
  Interest and other income,
   net (1)                        (425)           -         (425)      (57)
  Non-GAAP net income           $1,212         $852       $2,626      $927


  GAAP weighted-average number
   of Common Stock used in
   computation of net income
   (loss) per share (in thousands)
   (diluted)                    20,287       19,324       19,900    19,150
  Weighted-average number of
   shares related to outstanding
   options                           -            -            -       200
  Weighted-average number of
   options related to
   equity-based compensation
   expense                         152            -          162         -
  Non-GAAP weighted-average
   number of Common Stock used
   in computation of net income
   per share (in thousands)
   (diluted)                    20,439       19,324       20,062    19,350


  GAAP diluted net income
   (loss) per share              $0.05        $0.02        $0.08    $(0.04)
  Equity-based compensation
   expense                       $0.03        $0.02        $0.07     $0.09
  Interest and other income,
   net (1)                      $(0.02)           -       $(0.02)   $(0.00)
  Non-GAAP diluted net income
   per share                     $0.06        $0.04        $0.13     $0.05

   (1)  Results for the three months and nine months ended September 30,
        2007 and for the nine months ended September 30, 2006 included a
        gain of $0.4 million, $0.4 million and $0.1 million, respectively,
        reported in interest and other income related to the disposal of an
        investment.



                       CEVA, INC. AND ITS SUBSIDIARIES
                    CONDENSED CONSOLIDATED BALANCE SHEETS
                          U.S. Dollars in Thousands

                                                September 30, December 31,
                                                     2007           2006
                                                  Unaudited       Audited
  ASSETS
  Current assets:
   Cash and cash equivalents                       $42,679        $37,968
   Marketable securities and bank deposits          23,278         26,266
   Trade receivables, net                           10,994          8,421
   Deferred tax assets                                 761            613
   Prepaid expenses                                    803            564
   Other current assets                              1,494          1,890
     Total current assets                           80,009         75,722
   Long-term investments:
    Severance pay fund                               2,573          2,338
   Deferred tax assets                                 600            382
   Property and equipment, net                       1,767          1,706
   Investment                                        4,233          4,233
   Goodwill                                         36,498         36,498
   Other intangible assets, net                         77            201
     Total assets                                 $125,757       $121,080


  LIABILITIES AND STOCKHOLDERS' EQUITY
  Current liabilities:
   Trade payables                                     $541           $718
   Accrued expenses and other payables               8,691          9,462
   Taxes payable                                       131            135
   Deferred revenues                                   683            406
     Total current liabilities                      10,046         10,721

  Accrued severance pay                              2,842          2,519
  Accrued liabilities                                1,305          1,697

     Total liabilities                              14,193         14,937

  Stockholders' equity:
  Common Stock                                          20             19
  Additional paid in-capital                       146,567        142,826
  Other comprehensive income                           137              -
  Accumulated deficit                              (35,160)       (36,702)
     Total stockholders' equity                    111,564        106,143
     Total liabilities and stockholders' equity   $125,757       $121,080

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SOURCE: CEVA, Inc.

CONTACT: Yaniv Arieli, CFO, +1-408-514-2941, [email protected],
or Richard Kingston, +1-408-514-2976, [email protected], both of
CEVA, Inc.

Web site: https://www.ceva-ip.com/