ceva20220331

ceva20220331_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended: March 31, 2022

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from to

Commission file number: 000-49842

CEVA, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	77-0556376
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

15245 Shady Grove Road, Suite 400, Rockville, MD 20850	20850
(Address of Principal Executive Offices)	(Zip Code)

(240)-308-8328

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $.001 per share	CEVA	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one).

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date: 23,206,605 of common stock, $0.001 par value, as of May 4, 2022.

TABLE OF CONTENTS

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Interim Condensed Consolidated Balance Sheets at March 31, 2022 (unaudited) and December 31, 2021	6
	Interim Condensed Consolidated Statements of Loss (unaudited) for the three months ended March 31, 2022 and 2021	7
	Interim Condensed Consolidated Statements of Comprehensive Loss (unaudited) for the three months ended March 31, 2022 and 2021	8
	Interim Condensed Consolidated Statements of Changes in Stockholders’ Equity (unaudited) for the three months ended March 31, 2022 and 2021	9
	Interim Condensed Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2022 and 2021	10
	Notes to the Interim Condensed Consolidated Financial Statements	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	31
Item 4.	Controls and Procedures	32
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	45
Item 3	Defaults Upon Senior Securities	45
Item 4	Mine Safety Disclosures	45
Item 5	Other Information	45
Item 6	Exhibits	45
SIGNATURES		46

FORWARD-LOOKING STATEMENTS

FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA

This Quarterly Report 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. Forward-looking statements are generally written in the future tense and/or are preceded by words such as “will,” “may,” “should,” “could,” “expect,” “suggest,” “believe,” “anticipate,” “intend,” “plan,” or other similar words. Forward-looking statements include the following:

●

Our belief that our IP licensing business and chip design expertise are solid with a diverse customer base and myriad target markets;

●

Our belief that the adoption of our wireless connectivity and smart sensing IP products beyond our incumbency in the handset baseband market continues to progress, and the concluded agreements for our connectivity and sensing products during the recent period illustrates the industry demand for our diverse IP portfolio;

●

Our belief that our PentaG platform for 5G handsets and 5G Broadband IoT endpoints is the most comprehensive baseband processor IP in the industry today and provides newcomers and incumbents with a comprehensive solution to address the need for 5G processing for smartphones, fixed wireless and a range of connected devices such as robots, cars, smart cities and other devices for industrial applications;

●

Our belief that our specialization and technological edge in signal processing platforms for 5G RAN put us in a strong position to capitalize on the growing 5G RAN across its new form factors, as well as small cells and private networks;

●

Our belief that the growing market for TWS ear buds and smartwatches, and AR and VR headsets and other wearable assisted devices, offers an incremental growth segment for us;

●

Our belief that our SensPro™ scalable DSP architecture strengthens our market positions and enables us to expand our content in smartphones, drones, consumer cameras, surveillance, automotive ADAS, voice-enabled devices and industrial IoT applications;

●

Our belief that our unique capability to combine our Bluetooth IP, audio DSP IP and software for contextual aware user experience puts us in a strong position to capitalize on the fast-growing True Wireless Stereo (TWS) markets of earbuds, smartwatches, hearing aids, device speakers, PCs, and more;

●

Our belief that the market opportunity for Edge AI represents new IP licensing and royalty drivers for the company in the coming years;

●

Statements regarding third-party estimates of industry growth and future market conditions, including the expectation that camera-enabled devices incorporating computer vision and AI will exceed 1 billion units and devices incorporating voice AI will reach 600 million units by 2025;

●

Our belief that the Hillcrest Labs sensor fusion business unit allows us to address an important technology piece used in personal computers, robotics, TWS earbuds, smart TVs and many other smart sensing IP products;

●

Our belief that our Bluetooth, Wi-Fi, UWB, cellular IoT and 5G IPs allow us to expand further into IoT applications and substantially increase our value-add and overall addressable market, which is expected to be more than 15 billion devices annually by 2026 based on ABI Research;

●

Our beliefs regarding the impact of the Intrinsix acquisition, including it providing new growth vectors, new market reach and a broader revenue base, it allowing us to expand into the lucrative aerospace and defense market, and our ability to offer customers integrated IP solutions that combine the CEVA IP portfolio and Intrinsix’s broad chip design competencies;

●

Our expectation that significant growth in royalty revenues will be derived from base station and IoT applications over the next few years, including from a range of different products at different royalty ASPs, spanning from high volume Bluetooth to high value sensor fusion and base station RAN;

●

Our efforts with respect to managing demand, supply chain disruptions and shortages;

●

Our expectations regarding competition;

●

Our expectations with respect to future customers, contracts and revenues, including expectations regarding our customer pipeline, our expectation that a significant portion of our future revenues will continue to be generated by a limited number of customers, and that international customers will continue to account for a significant portion of our revenues for the foreseeable future, that an increasing portion of our new customers and revenues will be derived from China and the remainder of the APAC region and that we will experience another growth year in royalty revenues;

●

Our anticipation that our cash and cash equivalents, short-term bank deposits and marketable securities, along with cash from operations, will provide sufficient capital to fund our operations for at least the next 12 months;

●

Our belief that changes in interest rates within our investment portfolio will not have a material effect on our financial position on an annual or quarterly basis; and

●

Our expectations regarding the impact of COVID-19 and the Russian military action against Ukraine on our business, operations, customers and the economy.

Forward-looking statements are not guarantees of future performance and involve risks and uncertainties. The forward-looking statements contained in this report are based on information that is currently available to us and expectations and assumptions that we deem reasonable at the time the statements were made. We do not undertake any obligation to update any forward-looking statements in this report or in any of our other communications, except as required by law. All such forward-looking statements should be read as of the time the statements were made and with the recognition that these forward-looking statements may not be complete or accurate at a later date.

Many factors may cause actual results to differ materially from those expressed or implied by the forward-looking statements contained in this report. These factors include, but are not limited to, those risks set forth in Part II – Item 1A – “Risk Factors” of this Form 10-Q.

This report contains market data prepared by third party research firm. Actual market results may differ from their projections.

PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands, except share and per share data

	March 31, 2022			December 31, 2021
	Unaudited
ASSETS
Current assets:
Cash and cash equivalents	$	39,778		$	33,153
Short-term bank deposits		29,972			31,410
Marketable securities		92,625			90,298
Trade receivables (net of allowance for credit losses of $288 as of March 31, 2022 and December 31, 2021)		23,508			27,449
Prepaid expenses and other current assets		11,421			6,670
Total current assets		197,304			188,980
Long-term assets:
Severance pay fund		10,011			10,175
Deferred tax assets, net		17,502			15,850
Property and equipment, net		7,842			6,765
Operating lease right-of-use assets		8,402			8,827
Goodwill		74,777			74,777
Intangible assets, net		13,440			14,607
Investments in marketable equity securities		1,788			2,919
Other long-term assets		3,974			5,759
Total long-term assets		137,736			139,679
Total assets	$	335,040		$	328,659

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Trade payables	$	3,176		$	1,464
Deferred revenues		8,731			8,661
Accrued expenses and other payables		4,127			4,030
Accrued payroll and related benefits		21,604			18,011
Operating lease liabilities		3,149			3,274
Total current liabilities		40,787			35,440
Long-term liabilities:
Accrued severance pay		10,666			10,551
Operating lease liabilities		4,707			5,130
Other accrued liabilities		801			806
Total long-term liabilities		16,174			16,487
Stockholders’ equity:
Preferred Stock:
$0.001 par value: 5,000,000 shares authorized; none issued and outstanding		—			—
Common Stock:
$0.001 par value: 45,000,000 shares authorized; 23,595,160 shares issued at March 31, 2022 and December 31, 2021. 23,204,274 and 22,984,552 shares outstanding at March 31, 2022 and December 31, 2021, respectively		23			23
Additional paid in-capital		235,563			235,386
Treasury stock at cost (390,886 and 610,608 shares of common stock at March 31, 2022 and December 31, 2021, respectively)		(8,828	)		(13,790	)
Accumulated other comprehensive loss		(2,438	)		(372	)
Retained earnings		53,759			55,485
Total stockholders’ equity		278,079			276,732
Total liabilities and stockholders’ equity	$	335,040		$	328,659

The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF LOSS (UNAUDITED)

U.S. dollars in thousands, except per share data

	Three months ended
	March 31,
	2022			2021
Revenues:
Licensing, NRE and related revenue	$	22,393		$	14,397
Royalties		11,998			11,005
Total revenues		34,391			25,402
Cost of revenues		6,404			2,381
Gross profit		27,987			23,021
Operating expenses:
Research and development, net		20,210			17,593
Sales and marketing		2,923			3,302
General and administrative		3,636			2,880
Amortization of intangible assets		750			576
Total operating expenses		27,519			24,351
Operating income (loss)		468			(1,330	)
Financial income, net		282			36
Remeasurement of marketable equity securities		(1,131	)		—
Loss before taxes on income		(381	)		(1,294	)
Income tax expense		1,315			2,336
Net loss	$	(1,696	)	$	(3,630	)

Basic net loss per share	$

SEC Form 10-Q filed by CEVA Inc.