Parthus Technologies Plc Announces Results for the Fourth Quarter and Full Year Ended December 31, 2001

January 30, 2002

[ Results Statement | PDF
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Dublin, Ireland - January 30, 2002 - Parthus Technologies plc
(LSE: PRH; Nasdaq: PRTH) today announced its financial results for the
fourth quarter and for the full year ended December 31, 2001.

Licensing and royalty revenue grew 70% year-on-year to $8.7
million, up sequentially from $8.2 million
Total revenue increased year-on-year from $9.3 million to
$10.5 million
Five licensing and royalty agreements were signed with four
new customers
Sharp Microelectronics (MachStream) and Fujitsu (BlueStream)
announced as licensees
NavStream 3000 license signed for planned deployment by a key
handset player
Total gross margin grew a further two basis points
sequentially to 75%
Pro forma* basic and diluted net loss per share amounted to
$0.0052 per ordinary share or $0.052 per ADS
Basic and diluted net loss per share amounted to $0.014 per
ordinary share or $0.14 per ADS

Licensing and royalty revenue grew 87% year-on-year to $30.0
million
Total revenue increased year-on-year from $31.9 million to
$40.9 million
25 licensing and royalty agreements were signed
14 new customers were added - six of the world's top 10
semiconductor companies are now licensees
Parthus IP is being deployed by licensees in wireless, digital
entertainment, automotive and wireline markets
Total gross margin grew 13 basis points to 71%
R&D investment increased with two new platforms, three
platform upgrades and two acquisitions completed
Pro forma* basic and diluted net losses per share amounted to
$0.021 per ordinary share or $0.215 per ADS
Basic and diluted net losses per share amounted to $0.062 per
ordinary share or $0.62 per ADS

* Pro forma results exclude amortization of goodwill
and intangibles, in process R&D charge, a restructuring charge and
non-cash stock compensation expense.

Commenting today, Brian Long, Chief Executive Officer, said:

"I
am pleased by Parthus' robust performance in 2001, particularly against
the backdrop of the worst semiconductor downturn on record. We
successfully grew our key licensing and royalties revenue line by 87% this
year and formed engagements with six of the world's top ten semiconductor
companies. Unquestionably near term market conditions in the semiconductor
industry remain challenging. Notwithstanding, we have a strong sales
pipeline illustrating the continued demand for our technology. We look
forward to sustaining Parthus' growth and development and returning to
profitability in the second half of 2002."

Commenting today, Elaine Coughlan, Chief Financial Officer, said:

"Despite the ongoing difficult operating environment, the positive
quarterly trends in growth of licensing revenue, improving gross margins
and a declining pro forma net loss per share continued. The flexibility in
our business model enabled us to make progress in aligning our cost base
with current and forecasted external conditions during the quarter. These
measures give us confidence in achieving breakeven and returning to
profitability in the second half of 2002."

Income Statement Total revenue for the fourth quarter amounted
to $10.5 million, a 13% year-on-year increase, and up by $52,000 on third
quarter 2001 revenue. IP licensing and royalty revenue grew to $8.7
million, up 70% from $5.1 million in the fourth quarter of 2000 and up 6%
from $8.2 million in the third quarter of 2001. Royalty revenue was
$115,000, up 55% year-on-year but down approximately 14% compared with the
third quarter. Royalties are paid one quarter in arrears and fourth
quarter revenues represent products shipped in the third quarter of 2001.
Overall royalty revenue accounts for 1% of total revenue. Higher margin IP
licensing and royalty revenue represented 83% of total revenue, up from
55% a year ago and from 79% of total revenue in the third quarter 2001. IP
creation revenue amounted to $1.2 million in the fourth quarter, down 55%
year-on-year and down 5% from the third quarter 2001. Hard IP revenue
volumes declined 40% to $579,000 from $961,000 in the third quarter and
down 62% year-on-year. These revenues reflect lower volumes being shipped
by the company's customers to end markets.

Gross margins grew to 75%, up 2% over the third quarter and a 13%
increase year-on-year. The gross margin improvement reflects the planned
shift in the mix of business and the continued growth of IP licensing
activity.

Research and development investment was marginally down sequentially
from $7.8 million to $7.7 million in the fourth quarter. Sales and
marketing expenditure increased by 6% to $2.7 million in the fourth
quarter reflecting increased sales activity with a high level of customer
meetings deferred from the third quarter. General and administrative costs
were flat quarter-on-quarter at $1.7 million. Overall, R&D and
SG&A costs increased by $71,000 or less than 1% sequentially, as the
full quarterly benefit of cost control measures taken in the fourth
quarter has yet to flow through.

In the fourth quarter, amortization of goodwill and intangibles
increased to $3.8 million from $3.7 million and non-cash stock
compensation expense amounted to $525,000, the same as in the third
quarter. In December, the company reduced headcount and the underlying
cost base resulting in a restructuring charge of $765,000 in the fourth
quarter. The company believes that it has the skills mix and operating
cost base to support future growth targets.

Interest and similar income was $1.3 million in the fourth quarter,
similar to the third quarter.

The pro forma net loss for the fourth quarter amounted to $3.0 million,
representing a loss of $0.0052 per ordinary share or $0.052 per ADS. This
compares with a pro forma net loss in the third quarter 2001 of $3.3
million, representing a loss of $0.0056 per ordinary share or $0.056 per
ADS. Pro forma results exclude amortization of goodwill and intangibles,
In process research and development charge, non-cash stock compensation
expense and the restructuring charge. The reported net loss for the fourth
quarter was $8.1 million, representing a loss of $0.014 per ordinary share
or $0.140 per ADS. This compares with a reported net loss for the third
quarter of $18.4 million, or a loss of $0.0318 per ordinary share or
$0.318 per ADS.

Executing to strategy, Parthus delivered a robust performance in 2001,
particularly against a backdrop of the worst semiconductor downturn on
record where industry revenues declined by more than 30% year-on-year.

Licensing Growth. Parthus' strategy is to engage in licensing
and royalty agreements with leading semiconductor and electronic product
companies that have a track record of successful adoption and deployment
of key next generation technologies. In the year, Parthus completed 25 new
licensing agreements against a target range of 12 to 20 per year.
Licensing revenue grew by 85% year-on-year shifting the total revenue mix
towards higher margin licensing revenue which accounted for 72% of total
revenue in 2001. In total the company has executed 74 licensing agreements
through the year end 2001, 51 with royalty components.

Portfolio agreements form an important part of Parthus' licensing
strategy. In 2001, Parthus signed its largest ever contract with
STMicroelectronics. This agreement is a multi-year licensing arrangement
for Parthus' complete portfolio of mobile Internet technologies and
platforms. STMicroelectronics is the one of the world's largest
semiconductor companies.

Customer Relationships. The company continued to successfully
execute its strategy of engaging with the world's leading semiconductor
and electronic products companies. Parthus added 14 new customers in 2001.
The customer base is now close to 50 world-wide. In the year, Parthus
announced licensing agreements with 3Com, Fujitsu, Hitachi, Motorola,
STMicroelectronics and Sharp Microelectronics amongst others. The
geographic mix of Parthus' revenues, 47% in the USA, 42% in Europe and 11%
in Asia, reflects the global spread of the company's customer base. A key
metric for Parthus is repeat business, which grew to 62% in 2001, up from
37% in the previous year.

Product Categories. A core component of Parthus' business model
is royalty payments when customers' products ship to market. The period
between the initial license agreement and product shipment is typically 18
to 24 months. The company anticipates that the number of customers
shipping products based on Parthus IP platforms will grow covering a broad
segment market including PDAs, Smartphones, Gaming Consoles, Automotive,
Home Entertainment Systems, Cellular Infrastructure, Digital Broadcast
Systems, Trucking Fleets, and Wireline Datacoms.

Technology Development. The rapid evolution of the
Mobile-Internet market has created significant demand for Silicon
Intellectual Property (SIP) providers to reduce complexity, risk and
time-to-market of next generation devices and technologies by delivering
complete, integrated silicon and software IP solutions. This is an
approach pioneered by Parthus and is termed 'platform-level IP'.

Parthus' strategy is to offer a portfolio of platform level-IP spanning
wireless communication (Bluetooth, GSM/GPRS), mobile computing (PDA,
Smartphone for Microsoft, Symbian and Linux OS) and key application IP (OS
support, Java, Multimedia, GPS location, application acceleration).
Parthus' platform level-IP approach is fundamental in reducing the
time-to-market, complexity, program risk and cost of deploying smart
connected mobile Internet devices. Parthus deploys platforms either as
stand-alone solutions, or as converged solutions which further enhance the
cost, power, and integration benefits of the platform level-IP approach.

In 2001, two new platforms were launched and licensed. The Parthus
MobiStream™ platform delivers next-generation performance for GSM/GPRS
(2.5G) wireless communications. MobiStream's unique architecture is
optimised for ultra-low power consumption, full bandwidth performance
GPRS, minimum silicon size and minimum cost. The MachStream™ acceleration
platform dramatically improves the performance and power dissipation of
key mobile Internet applications, including on-the-fly decompression of
wireless multimedia data and applications (e.g. JAR files, ZIP, GIFS,
etc.), and complex open software applications such as Java™ for J2ME
compliant devices. Through MachStream, an application on a typical PDA or
smartphone will run between 10x and 35x faster whilst battery life is
extended up to ten-fold.

Three enhanced platforms were also released. NavStream3000™ is the
latest and most advanced GPS silicon and software platform from Parthus.
The significant breakthrough with Parthus' NavStream 3000 is the rapid
ability to determine location in practically any environment. Parthus, in
partnership with both cellular handset manufacturers and mobile phone
operators, have undertaken extensive tests to obtain position fixes in
indoor environments including homes, office and industrial buildings in
under 3.5 seconds, exceeding United States FCC e911 requirements for speed
and accuracy. BlueStream™ Release 6 is the latest version of Parthus'
industry-leading Bluetooth platform offering many key upgrades and
enhancements that deliver greater Bluetooth functionality, reduced
time-to-certification, and lower cost of deployment. Since year-end the
company has announced two enhanced editions of the InfoStream™ mobile
computing platform optimized for Microsoft Pocket® PC 2002 and Microsoft®
Smartphone mobile technologies as well as an agreement for the development
for a Windows CE.Net mobile computing platform.

Partnering. Partnerships remain at the core of Parthus' platform
level-IP strategy. During the year Parthus built new strategic
partnerships with:

Microsoft- targeting the InfoStream platform at Microsoft®
PocketPC 2002, Smartphone and Win CE.NET smart mobile devices
Sun Microsystems- for the joint development and deployment of
Java™ technologies targeting wireless devices based on the Parthus
MachStream platform
Insignia Solutions- to integrate Parthus' MachStream hardware
acceleration platform with Insignia's JeodeTM software based Java
virtual machine technologies.
Symbian - targeting the InfoStream platform at Symbian OS for
smartphones.
Wipro Technologies- for semiconductor and system-level design
services around the portfolio of Parthus platforms.

Acquisitions. Parthus completed two acquisitions in 2001. The
company acquired the remaining 20% minority interest in Silicon Systems
Design Limited (SSD) from STMicroelectronics. SSD was the original
Parthus/ST entity that was responsible for IP creation activities. This
acquisition has significantly enhanced Parthus' engineering resources and
its ability to support higher levels of licensing activity. Parthus also
acquired Chicory Systems and launched MachStream, one of the most advanced
technologies for accelerating a suite of key mobile Internet applications
including a team of 26, including highly-qualified microprocessor
architects and algorithm development experts. Both acquisitions are fully
integrated at this point.

Organization. Headcount stood at 389 people at the end of 2001
compared with 387 people at the end of 2000, reflecting the difficult
semiconductor industry environment in 2001. The total number of engineers
at year end was 307 or 79% of the company's total workforce. Sales and
marketing personnel and general and administration staff accounted for 40
and 42 of the remaining employees, respectively. During the year,
headcount peaked at 429 employees in the second quarter. The reduction in
numbers reflects a temporary freeze on recruitment and replacement, except
in key designated skills such as software development, and a consolidation
of resources within the company following the exceptional 80% growth in
headcount in the preceding 18 months. These initiatives form part of an
overall cost management plan, initiated in the second half of the year, to
ensure that the company's cost base is in line with external industry and
macro operating conditions, while maintaining the skills mix and
organizational depth required to meet current and forecasted customer and
market demand.

Income Statement. Total revenue for the full year ended December
31, 2001 amounted to $40.9 million, up $9 million or 28% from $31.9
million for 2000. IP licensing and royalty revenue grew 87% to $30.0
million, up $13.9 million from $16.1 million for the year ended December
31, 2000. Licensing and royalty revenue accounted for 73% of total
revenue, up from 50% in 2000. Royalty revenue amounted to $532,000
compared with $124,000 for 2000. Royalty revenue was first recognized in
the third quarter of 2000. IP creation revenue declined to $6.8 million,
down from $12.4 million for 2000 in line with the continuing planned shift
away from lower-margin contract design work and also poor market
conditions. Hard IP revenue amounted to $4.2 million for the year ended
December 31, 2001 compared to $3.4 million for the nine months ended 31
December 2000.

Total gross margin increased from 58% for 2000 to 71% for 2001 and
reflects the shift in business activity to higher-margin licensing
revenue.

Research and development investment grew from $18.2 million in 2000 to
$28.6 million in 2001, as Parthus continued its investment, internally and
by acquisition, in developing and licensing a strong portfolio of
technology platforms. Sales and marketing expenses grew $2.0 million to
$10.9 million in 2001, from $8.9 million for the year 2000. General and
administrative expenses increased $2.0 million to $7.2 million for 2001,
up from $5.2 million for 2000. Operating expenses in 2001 do not reflect
the full-annualized impact of cost management measures undertaken in the
second half of the year. Amortization of goodwill and intangibles grew to
$9.2 million, from $1.1 million in 2000 reflecting the higher level of
acquisition activity in 2001. Non-cash stock compensation expense amounted
to $1.8 million, a decrease of $3.7 million from $5.5 million for the year
2000. The charge in 2000 relates primarily to the amortization of a
non-cash charge resulting from variable stock options that were granted to
some of the company's executives. Parthus incurred a once-off non-cash
charge of $10.9 million in the third quarter 2001 relating to In process
R&D in connection with the acquisition of Chicory Systems. Parthus
also incurred a restructuring charge in the fourth quarter of $765,000 as
a result of the cost management plan.

Interest and similar income increased $1.1 million, from $5.3 million
for the year 2000 to $6.4 million for the year 2001. This reflects the
higher cash balances held in 2001, offset by the lower interest rate
environment, which impacted overall returns on cash and cash equivalents
invested.

The pro forma net loss for the full year ended December 31, 2001
amounted to $12 million, representing a loss of $0.0215 per ordinary share
or $0.215 per ADS. This compares with a pro forma net loss for the full
year 2000 of $9.4 million, representing a loss of $0.020 per ordinary
share or $0.200 per ADS. Pro forma results exclude amortization of
goodwill and intangibles, In process R&D charge, restructuring charge
and non-cash stock compensation expense. The reported net loss for the
full year ended December 31, 2001 was $34.7 million, representing a loss
of $0.062 per ordinary share or $0.620 per ADS. This compares with a $16.0
million reported net loss, representing a loss of $0.034 per ordinary
share or $0.341 per ADS, for the full year 2000.

Balance sheet and cash flow

At December 31, 2001, total assets amounted to $206.0 million, compared
with total assets of $214.0 million at September 30, 2001, and $179.0
million at December 31, 2000. The quarterly change reflects the
amortization of intangible assets, quarterly movements in working capital
and a decrease in cash on hand. The year-on-year change reflects the
impact of acquisitions undertaken during 2001. Cash and cash equivalents
and short term investments amounted to $123.3 million at December 31, 2001
compared with $159.9 million at December 31, 2001.The primary reason for
the annual change is the $25.1 million invested in acquisitions undertaken
in 2001.

Deferred revenue decreased $921,000 to $4.8 million at the year end
from $5.7 million for the year-end 2000. The total 2001 cash outflow at
the operating level amounted to $7.9 million and is within the expected
annual cash flow range for the business. This compares with a cash inflow
of $2.9 million for the year 2000. Several factors affected cash flow in
the year 2001, particularly in the second half of the year as conditions
deteriorated in the operating environment. The timing of signing of
licensing agreements shifted in the third and fourth quarter to the latter
end of the quarter. Payment terms under license agreements have changed,
as customers implement aggressive cash management measures, with a smaller
upfront cash component under each contract. These changes have extended
the timing of cash receipts.

Goodwill and intangible assets amounted to $67.1 million at December
31, 2001 compared with $71.5 million at September 30, 2001 and $6.2
million at December 31, 2001. Accounts receivable amounted to $3.5 million
at year end compared with $4.5 million at the end of the third quarter and
$3.2 million at December 31, 2000.

Debtors' days outstanding decreased to 31 days, compared with 33 days
at December 31, 2000. This compares with 37 days in the third quarter 2001
and a peak of 49 days in the second quarter 2001.

Outlook We have commenced 2002 with a strong sales pipeline
illustrating continued demand for our technology. We have also seen
customers committing to new licenses since the start of the year. Despite
this, semiconductor industry visibility remains poor and a sustained pick
up in the industry is not forecast by industry analysts until the second
half of 2002. However, we believe that for the full year, Parthus has the
technology, cost and resource base in place for continued growth, and
remains on track to achieve a return to profitability in the second half
of 2002.

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This press release may contain "forward looking
statements" which are subject to certain risks and uncertainties that
could cause actual results to differ materially from those stated. Any
statements that are not statements of historical fact (including, without
limitation, statements to the effect that the company or its management
"believes," "expects," "anticipates," "plans" and similar expressions)
should be considered forward-looking statements. Important factors that
could cause actual results to differ from those indicated by such
forward-looking statements include the potential continuation of severe
weakness in the semiconductor industry and, in particular, in the wireless
communications market; uncertainties relating to the acceptance of
semiconductor intellectual property offerings, and quarterly variations in
the company's results. These factors and other uncertainties are discussed
in our 2000 Annual Report and Form 20-F, which was filed with the U.S.
Securities and Exchange Commission on June 26, 2001. Forward-looking
statements represent estimates as of today, and should not be relied upon
as representing the company's estimates as of any subsequent date.
Although the company may elect to update forward-looking statements in the
future, the company disclaims any responsibility to do so.

For further information About
ParthusCeva, Inc..

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Parthus Technologies Plc Consolidated Statement of Operations,
Consolidated Balance Sheets and Consolidated Cashflow Statement - US GAAP,
are available here
.

Results Statement | PDF
format ]

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