ceva20210331

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ceva20210331_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, 2021

☐	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).

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: 22,813,421 of common stock, $0.001 par value, as of May 3, 2021.

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TABLE OF CONTENTS

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Interim Condensed Consolidated Balance Sheets at March 31, 2021 (unaudited) and December 31, 2020	5
	Interim Condensed Consolidated Statements of Loss (unaudited) for the three months ended March 31, 2021 and 2020	6
	Interim Condensed Consolidated Statements of Comprehensive Loss (unaudited) for the three months ended March 31, 2021 and 2020	7
	Interim Condensed Consolidated Statements of Changes In Stockholders’ Equity (unaudited) for the three months ended March 31, 2021 and 2020	8
	Interim Condensed Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2021 and 2020	9
	Notes to the Interim Condensed Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	30
Item 4.	Controls and Procedures	31
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42
Item 3.	Defaults Upon Senior Securities	42
Item 4.	Mine Safety Disclosures	42
Item 5.	Other Information	42
Item 6.	Exhibits	43
SIGNATURES		44

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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 licensing business is robust with a diverse customer base and myriad target markets;

	●	Our belief that the licensing environment continues to be healthy with strong demand for our product portfolio, in particular our wireless connectivity technologies, that will expand our market reach into the 5G IoT area;

	●	Our belief that the adoption of our wireless connectivity and smart sensing 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 we are an incumbent player in the largest space of the semiconductor industry - mobile handsets;

	●	Our belief that our PentaG platform for 5G handsets and 5G IoT endpoints is the most comprehensive baseband processor IP in the industry today and provides newcomers and incumbents with a low entry barrier solution to address the need for power 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 potential for voice assisted devices offers an additional growth segment for us and that our highly-integrated platforms, plus our proven track record in audio/voice processing and connectivity, put us in a strong position to power audio and voice roadmaps across a new range of addressable end markets;

	●	Our belief that our SensPro™ scalable DSP architecture enables us to address the proliferation of smart sensor devices, strengthen our market positions and expand our content in smartphones, drones, consumer cameras, surveillance, automotive ADAS, voice-enabled devices and industrial IoT applications;

	●	Our belief that our unique capabilities in wireless audio through the combination of our Bluetooth, audio DSP and software for voice, sound and motion sensing puts us in a strong position to capitalize on the fast-growing True Wireless Stereo (TWS) markets of earbuds, speakers, smartwatches and more;

	●	Our belief that the market opportunity for AI at the edge is on top of our existing product lines and represents new licensing and royalty drivers for the company in the coming years;

	●	Per research from Yole Développement, camera-enabled devices incorporating computer vision and AI are expected to exceed 1 billion units and devices incorporating voice AI are expected to reach 620 million units by 2022;

	●	Our belief that the Hillcrest Labs sensor fusion business unit allows us to address an important technology piece for smart sensing;

	●	Our belief that our Bluetooth, Wi-Fi, NB-IoT, UWB 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 9 billion devices annually by 2022 based on ABI Research and Ericsson Mobility Reports;

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

	●	Our expectations regarding competition;

	●	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;

	●	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;

	●	Our expectations regarding the impact of COVID-19 on our business, operations, customers and the economy; and

	●	Our beliefs about future exchange rates, including our expectation that based on trends to date, in 2021 we will have additional exchange rate expenses as compared to 2020 in the event of the ongoing devaluation of the U.S. dollar compared to the Shekel and Euro.

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 10Q.

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

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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, 2021			December 31, 2020
	Unaudited
ASSETS
Current assets:
Cash and cash equivalents	$	53,662		$	21,143
Short-term bank deposits		8,435			20,233
Marketable securities		83,884			88,754
Trade receivables (net of allowance for credit losses of $300 as of March 31, 2021 and December 31, 2020)		24,631			31,224
Prepaid expenses and other current assets		8,061			6,205
Total current assets		178,673			167,559
Long-term assets:
Bank deposits		28,156			29,529
Severance pay fund		10,403			10,535
Deferred tax assets, net		11,931			10,826
Property and equipment, net		7,829			7,586
Operating lease right-of-use assets		8,354			9,052
Goodwill		51,070			51,070
Intangible assets, net		10,190			10,836
Investments in non-marketable equity securities		936			936
Other long-term assets		7,991			9,023
Total long-term assets		136,860			139,393
Total assets	$	315,533		$	306,952

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Trade payables	$	818		$	894
Deferred revenues		3,394			2,434
Accrued expenses and other payables		3,393			3,843
Accrued payroll and related benefits		26,480			18,040
Operating lease liabilities		2,834			2,969
Total current liabilities		36,919			28,180
Long-term liabilities:
Accrued severance pay		11,000			11,226
Operating lease liabilities		5,056			5,772
Other accrued liabilities		909			885
Total long-term liabilities		16,965			17,883
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, 2021 (unaudited) and December 31, 2020. 22,811,090 and 22,260,917 shares outstanding at March 31, 2021 (unaudited) and December 31, 2020, respectively		23			22
Additional paid in-capital		227,671			233,172
Treasury stock at cost (784,070 and 1,334,243 shares of common stock at March 31, 2021 (unaudited) and December 31, 2020, respectively)		(17,708	)		(30,133	)
Accumulated other comprehensive income		93			478
Retained earnings		51,570			57,350
Total stockholders’ equity		261,649			260,889
Total liabilities and stockholders’ equity	$	315,533		$	306,952

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,
	2021			2020
Revenues:
Licensing and related revenue	$	14,397		$	14,495
Royalties		11,005			9,120
Total revenues		25,402			23,615
Cost of revenues		2,381			2,751
Gross profit		23,021			20,864
Operating expenses:
Research and development, net		17,593			15,113
Sales and marketing		3,302			3,168
General and administrative		2,880			3,664
Amortization of intangible assets		576			582
Total operating expenses		24,351			22,527
Operating loss		(1,330	)		(1,663	)
Financial income, net		36			831
Loss before taxes on income		(1,294	)		(832	)
Income tax expense		2,336			353
Net loss	$	(3,630	)	$	(1,185	)


Basic net loss per share	$	(0.16	)	$	(0.05	)
Diluted net loss per share	$	(0.16	)	$	(0.05	)


Weighted-average shares used to compute net loss per share (in thousands):
Basic		22,546			21,994
Diluted		22,546			21,994

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

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INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED)

U.S. dollars in thousands

	Three months ended March 31,
	2021			2020

Net loss:	$	(3,630	)	$	(1,185	)
Other comprehensive loss before tax:
Available-for-sale securities:
Changes in unrealized gains (losses)		(457	)		(778	)
Reclassification adjustments for losses included in net loss		—			2
Net change		(457	)		(776	)
Cash flow hedges:
Changes in unrealized gains (losses)		(50	)		201
Reclassification adjustments for losses included in net loss		22			—
Net change		(28	)		201
Other comprehensive loss before tax		(485	)		(575	)
Income tax benefit related to components of other comprehensive loss		(100	)		(132	)
Other comprehensive loss, net of taxes		(385	)		(443	)
Comprehensive loss	$	(4,015	)	$	(1,628	)

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

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

U.S. dollars in thousands, except share data

	Common stock
Three months ended March 31, 2021	Number of shares outstanding		Amount		Additional paid-in capital			Treasury stock			Accumulated other comprehensive income (loss)			Retained earnings			Total stockholders’ equity
Balance as of January 1, 2021		22,260,917	$	22	$	233,172		$	(30,133	)	$	478		$	57,350		$	260,889
Net loss		—		—		—			—			—			(3,630	)		(3,630	)
Other comprehensive loss		—		—		—			—			(385	)		—			(385	)
Equity-based compensation		—		—		3,198			—			—			—			3,198
Issuance of treasury stock upon exercise of stock-based awards		550,173		1		(8,699	)		12,425			—			(2,150	)		1,577
Balance as of March 31, 2021		22,811,090	$	23	$	227,671		$	(17,708	)	$	93		$	51,570		$	261,649

	Common stock
Three months ended March 31, 2020	Number of shares outstanding			Amount			Additional paid-in capital			Treasury stock			Accumulated other comprehensive income (loss)			Retained earnings			Total stockholders’ equity
Balance as of January 1, 2020		21,839,369		$	22		$	228,005		$	(39,390	)	$	94		$	62,426		$	251,157
Net loss		—			—			—			—			—			(1,185	)		(1,185	)
Other comprehensive loss		—			—			—			—			(443	)		—			(443	)
Equity-based compensation		—			—			3,107			—			—			—			3,107
Purchase of treasury stock		(202,392	)		—			—			(4,780	)		—			—			(4,780	)
Issuance of treasury stock upon exercise of stock-based awards		362,683			—	(*)		(5,529	)		8,137			—			(1,192	)		1,416
Balance as of March 31, 2020		21,999,660		$	22		$	225,583		$	(36,033	)	$	(349	)	$