false 0001173489 0001173489 2022-02-15 2022-02-15
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
 
Date of report (Date of earliest event reported): February 15, 2022
 
CEVA, INC.
(Exact Name of Registrant as Specified in Its Charter)
 
Delaware
(State or Other Jurisdiction of Incorporation)
 
000-49842
(Commission File Number)
77-0556376
(I.R.S. Employer Identification No.)
   
15245 Shady Grove Road, Suite 400, Rockville,
MD 
(Address of Principal Executive Offices)
20850
(Zip Code)
 
(240)-308-8328
(Registrant’s Telephone Number, Including Area Code)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 
☐
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
☐
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
☐
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
☐
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
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 is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Security Exchange Act of 1934 (§240.12b-2 of this chapter).
 
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. ☐
 
 
 
 
ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION
 
On February 15, 2022, CEVA, Inc. (the “Company”) announced its financial results for the quarter and year ended December 31, 2021. A copy of the press release, dated February 15, 2022, is attached and filed herewith as Exhibit 99.1. On the same day, the Company will hold a conference call to discuss its financial results for the fourth quarter and year ended December 31, 2021. A copy of the script of the conference call is attached hereto as Exhibit 99.2. This information, including Exhibits 99.1 and 99.2 attached hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Act of 1934, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference to such filing.
 
In addition to the disclosure of financial results for the quarter and year ended December 31, 2021 and 2020 in accordance with generally accepted accounting principles in the United States (“GAAP”), the press release and script also included non-GAAP operating income, non-GAAP net income and diluted earnings per share (“EPS”) figures for the referenced periods.
 
Non-GAAP operating income for the fourth quarter of 2021 excluded (a) equity-based compensation expenses, (b) the impact of the amortization of acquired intangibles associated with the acquisition of the Intrinsix and Hillcrest Labs businesses and investments in NB-IoT and Immervision technologies, (c) costs associated with the acquisition of the Intrinsix business, and (d) licensing, NRE and related revenues associated with the purchase price allocation (“PPA”) related to the acquisition of the Intrinsix business. Non-GAAP operating income for the fourth quarter of 2020 excluded (i) equity-based compensation expenses and (ii) the impact of the amortization of acquired intangibles associated with the acquisition of the Hillcrest Labs business and investments in NB-IoT and Immervision technologies.
 
Non-GAAP net income and diluted earnings per share for the fourth quarter of 2021 excluded (a) equity-based compensation expenses, net of taxes, (b) the impact of the amortization of acquired intangibles, net of taxes, associated with the acquisition of the Intrinsix and Hillcrest Labs businesses and investments in NB-IoT and Immervision technologies, (c) costs associated with the acquisition of the Intrinsix business, (d) income, net of taxes, associated with the reevaluation of an investment in another company, (e) income tax benefits associated with the PPA related to the acquisition of the Intrinsix business, and (f) licensing, NRE and related revenues associated with the PPA related to the acquisition of the Intrinsix business. Non-GAAP net income and diluted earnings per share for the fourth quarter of 2020 excluded (i) equity-based compensation expenses, net of taxes, and (ii) the impact of the amortization of acquired intangible and other assets, net of taxes, associated with the acquisition of the Hillcrest Labs business and investments in NB-IoT and Immervision technologies.
 
 
 
 
Non-GAAP operating income for the full year 2021 excluded (a) equity-based compensation expenses, (b) the impact of the amortization of acquired intangibles associated with the acquisition of the Intrinsix and Hillcrest Labs businesses and investments in NB-IoT and Immervision technologies, (c) costs associated with the acquisition of the Intrinsix business, and (d) licensing, NRE and related revenues associated with the PPA related to the acquisition of the Intrinsix business. Non-GAAP operating income for the full year 2020 excluded (i) equity-based compensation expenses and (ii) the impact of the amortization of acquired intangible assets associated with the acquisition of the Hillcrest Labs business and investments in NB-IoT and Immervision technologies.
 
Non-GAAP net income and diluted earnings per share for the full year 2021 excluded (a) equity-based compensation expenses, net of taxes, (b) the impact of the amortization of acquired intangibles, net of taxes, associated with the acquisition of the Intrinsix and Hillcrest Labs businesses and investments in NB-IoT and Immervision technologies, (c) costs associated with the acquisition of the Intrinsix business, (d) income, net of taxes, associated with the reevaluation of an investment in another company, (e) income tax benefits associated with the PPA related to the acquisition of the Intrinsix business, and (f) licensing, NRE and related revenues associated with the PPA related to the acquisition of the Intrinsix business. Non-GAAP net income and diluted earnings per share for the full year 2020 excluded (i) equity-based compensation expenses, net of taxes, and (ii) the impact of the amortization of acquired intangible assets associated with the acquisition of the Hillcrest Labs business and investments in NB-IoT and Immervision technologies.
 
The Company believes that the reconciliation of financial measures in the press release and script is useful to investors in analyzing the results for the quarters ended December 31, 2021 and 2020 because the exclusion of such expenses may provide a more meaningful analysis of the Company’s core operating results and comparison of quarterly results. Further, the Company believes it is useful for investors to understand how the expenses associated with the application of FASB ASC No. 718 are reflected on its statements of income. The reconciliation of financial measures should be reviewed 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 reconciliation, offer a more complete understanding of factors and trends affecting the Company’s business. The reconciliation of financial measures should not be viewed as a substitute for the Company’s reported GAAP results.
 
ITEM 9.01. Financial Statements and Exhibits.
 
 
(d)
 
Exhibits.
 
     
 
99.1
     
 
99.2
     
 
104
Cover Page Interactive Data File (embedded within the Inline XBRL document).
 
 
 
 
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
CEVA, INC.
 
       
Date:     February 15, 2022
By:
/s/ Yaniv Arieli
 
   
Yaniv Arieli
 
   
Chief Financial Officer
 
 
 
 
 

Exhibit 99.1

 

 

LOGO.JPG

 

 

 

CEVA, Inc. Announces Fourth Quarter 2021 Financial Results

 

●

Full year – record licensing, NRE and related revenue and number of customer agreements concluded, totaling $72.8 million and 73, respectively

●

Full year – record royalty revenue of $49.9 million, from CEVA-powered shipments of more than 1.6 billion units – 52 CEVA-powered devices every second in 2021

●

Q4 – Record revenues for third consecutive quarter

●

Q4 – Strategic agreements concluded with key customers for 5G fixed wireless access, Wi-Fi 7, Edge AI and first integrated IP solutions deal

 

Rockville, MD, February 15, 2022 – CEVA, Inc. (NASDAQ: CEVA), the leading licensor of wireless connectivity and smart sensing technologies and integrated IP solutions, today announced its financial results for the fourth quarter and full year ended December 31, 2021.

 

Total revenue for the fourth quarter of 2021 was $34.1 million, an all-time record high and a 21% increase compared to $28.1 million reported for the fourth quarter of 2020. Fourth quarter 2021 licensing, non-recurring engineering (NRE) and related revenue was $21.3 million, an increase of 77% when compared to $12.1 million reported for the same quarter a year ago. Royalty revenue for the fourth quarter of 2021 was $12.7 million, a decrease of 21% when compared to $16.1 million reported for the fourth quarter of 2020. Non-GAAP licensing, NRE and related revenues for the fourth quarter of 2021 was $21.5 million and non-GAAP total revenue for the fourth quarter of 2021 was $34.2 million. Non-GAAP licensing, NRE and related revenues and non-GAAP total revenues for the fourth quarter of 2021, both included a $0.2 million purchase price allocation adjustment associated with the Intrinsix acquisition.

 

Gideon Wertheizer, Chief Executive Officer of CEVA, stated: “Our record fourth quarter revenue and strong overall performance highlight the incredible demand for our comprehensive IP and chip design portfolio. In licensing, we concluded strategic agreements in 5G Fixed Wireless Access, Wi-Fi 7, Edge AI and the first integrated IP solution agreement combining IP and Intrinsix chip design. Royalties were impacted by the continued ramp down of 4G smartphones by a large Tier 1 OEM, but our base station & IoT product category continued to thrive, with quarterly revenue up 21% year-over-year from more than 330 million CEVA-powered smart and connected devices.”

 

1
 

 

Mr. Wertheizer continued: “2021 was a transformative year for CEVA as we expanded our technology proposition to address the abundant opportunities for comprehensive solutions that involve the combination of IP and chip design. Our record year is the result of our long-term strategic mission to grow and diversify our business and customer base beyond handset modems. This can be clearly seen by secular growth in our base station & IoT royalties, which grew 28% year over year to $28.6 million, resulting from 1.3 billion CEVA-powered devices, which more than offset the ramp down of 4G smartphones by the large Tier 1 OEM. We continue forming tighter relationships with key customers that trust our excellence and are interested in expanding the scope of business beyond IP licensing toward integrated IP solutions, where we benefit from a higher revenue share. This is evident in our record licensing, NRE and related revenue, which grew 39% year-over-year to $72.8 million. Heading into 2022, we’re invigorated and excited to address the huge opportunities ahead for the Company, and ultimately drive more value for our shareholders.”

 

During the quarter, 20 IP license and NRE agreements were concluded, targeting a wide variety of smart and connected use cases, including 5G for fixed wireless access, next-generation Wi-Fi 7 for access points, Edge AI for ADAS, 3D audio headsets, wireless audio and Bluetooth and Wi-Fi connectivity for a broad range of IoT applications. Four agreements were with first-time customers. Geographically, seven of the deals signed were in China, six in the U.S., six in APAC, and one in Europe.

 

GAAP operating income for the fourth quarter was $1.6 million, as compared to a GAAP operating income of $2.4 million for the same period in 2020. GAAP net income for the fourth quarter of 2021 was $3.9 million, as compared to a GAAP net income of $0.6 million reported for the same period in 2020. GAAP diluted earnings per share for the fourth quarter of 2021 was $0.17, as compared to a GAAP diluted earnings per share of $0.03 for the same period in 2020.

 

Non-GAAP operating income for the fourth quarter of 2021 increased 8% to $7.2 million from $6.7 million reported for the fourth quarter of 2020. Non-GAAP net income and diluted earnings per share for the fourth quarter of 2021 increased 13% and 10%, respectively, to $5.3 million and $0.22, respectively, from $4.7 million and $0.20 reported for the fourth quarter of 2020.

 

Non-GAAP operating income for the fourth quarter of 2021 excluded: (a) equity-based compensation expenses of $3.5 million, (b) the impact of the amortization of acquired intangibles of $1.6 million associated with the acquisition of the Intrinsix and Hillcrest Labs businesses and investments in NB-IoT and Immervision technologies, (c) $0.3 million of costs associated with the Intrinsix acquisition and (d) an addition of $0.2 million in licensing, NRE and related revenues associated with purchase price allocation for the Intrinsix acquisition. Non-GAAP operating income for the fourth quarter of 2020 excluded: (a) equity-based compensation expenses of $3.6 million and (b) the impact of the amortization of acquired intangibles of $0.8 million associated with the acquisition of the Hillcrest Labs business and investments in NB-IoT and Immervision technologies.

 

2
 

 

Non-GAAP net income and diluted earnings per share for the fourth quarter of 2021 excluded: (a) equity-based compensation expenses, net of taxes, of $2.7 million, (b) the impact of the amortization of acquired intangibles, net of taxes, of $1.4 million associated with the acquisition of the Intrinsix and Hillcrest Labs businesses and investments in NB-IoT and Immervision technologies, (c) $0.3 million of costs associated with the Intrinsix acquisition, (d) $1.5 million of income, net of taxes associated with the reevaluation of an investment in another company, (e) $1.7 million of income tax benefit associated with the purchase price allocation related to the Intrinsix acquisition and (f) an addition of $0.2 million in licensing, NRE and related revenues associated with purchase price allocation for the Intrinsix acquisition. Non-GAAP net income and diluted earnings per share for the fourth quarter of 2020 excluded: (a) equity-based compensation expense, net of taxes, of $3.4 million, and (b) the impact of the amortization of acquired intangible and other assets, net of taxes, of $0.7 million associated with the acquisition of the Hillcrest Labs business and investments in NB-IoT and Immervision technologies.

 

Full Year 2021 Review

 

Total revenue for 2021 was $122.7 million, an increase of 22%, when compared to $100.3 million reported for 2020. Licensing, NRE and related revenue for 2021 was a record $72.8 million, an increase of 39%, when compared to $52.5 million reported for 2020. Royalty revenue for 2021 was a record $49.9 million, representing an increase of 4%, as compared to $47.8 million reported for 2020.

 

GAAP operating income for 2021 was $3.5 million, as compared to a GAAP operating loss of $0.8 million reported for 2020. GAAP net income and diluted earnings per share for 2021 were $0.4 million and $0.02, respectively, compared to U.S GAAP net loss and diluted loss per share of $2.4 million and $0.11, respectively, reported for 2020.

 

Non-GAAP operating income for 2021 increased 43% to $22.7 million from $15.9 million reported for 2020. Non-GAAP net income and diluted earnings per share for 2021 were $15.3 million and $0.65, respectively, representing an increase of 11% and 8%, respectively, over $13.7 million and $0.60 reported for 2020.

 

Non-GAAP operating income for 2021 excluded (a) equity-based compensation expenses of $13.1 million, (b) the impact of the amortization of acquired intangibles of $4.3 million associated with the acquisition of the Intrinsix and Hillcrest Labs businesses and investments in NB-IoT and Immervision technologies, (c) $1.7 million of costs associated with the Intrinsix acquisition and (d) an addition of $0.2 million in licensing, NRE and related revenues associated with purchase price allocation for the Intrinsix acquisition. Non-GAAP operating income for 2020 excluded: (a) equity-based compensation expenses of $13.6 million and (b) the impact of the amortization of acquired intangibles of $3.0 million associated with the acquisition of the Hillcrest Labs business and investments in NB-IoT and Immervision technologies.

 

3
 

 

Non-GAAP net income and diluted earnings per share for 2021 excluded (a) equity-based compensation expenses, net of taxes, of $12.2 million, (b) the impact of the amortization of acquired intangibles, net of taxes, of $4.0 million associated with the acquisition of the Intrinsix and Hillcrest Labs businesses and investments in NB-IoT and Immervision technologies, (c) $1.7 million of costs associated with the Intrinsix acquisition, (d) $1.5 million of income, net of taxes associated with the reevaluation of an investment in another company (e) $1.7 million of income tax benefit associated with the purchase price allocation related to the Intrinsix acquisition and (f) an addition of $0.2 million in licensing, NRE and related revenues associated with purchase price allocation for the Intrinsix acquisition. Non-GAAP net income and diluted earnings per share for 2020 excluded (a) equity-based compensation expense, net of taxes, of $13.4 million, and (b) the impact of the amortization of acquired intangible assets, net of taxes, of $2.7 million associated with the acquisition of the Hillcrest Labs business, and investments in NB-IoT and Immervision technologies.

 

Yaniv Arieli, Chief Financial Officer of CEVA, stated: “2021 was a remarkable year for CEVA as our business continues to benefit from accelerated digitalization of everything. To expedite our growth and further exploit the opportunities for a broader offering of IP and chip design, we acquired Intrinsix Corp. With this acquisition, we also strengthened our presence in the U.S., gained access to the lucrative aerospace & defense markets and diversified our revenue streams geographically. At the end of the year, our balance sheet remains very strong, with our cash and cash equivalent balances, marketable securities and bank deposits of approximately $155 million, and no debt.”

 

The conference call will be available via the following dial in numbers:

 

 

●

U.S. Participants: Dial 1-844-435-0316 (Access Code: CEVA)

 

●

International Participants: Dial +1-412-317-6365 (Access Code: CEVA)

 

The conference call will also be available live via webcast at the following link: https://www.webcaster4.com/Webcast/Page/984/44317. 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 +1-877-344-7529 or +1-412-317-0088 (access code: 1887136) from one hour after the end of the call until 9:00 a.m. (Eastern Time) on February 22, 2022. The replay will also be available at CEVA's web site www.ceva-dsp.com.

 

4
 

 

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. Forward-looking statements include Mr. Wertheizer’s statements about growth in demand for CEVA’s IP and chip design portfolio, growth in the base station and IoT product category, and expectations for 2022, and Mr. Arieli’s guidance regarding the potential benefits of CEVA’s acquisition of Intrinsix. The risks, uncertainties and assumptions that could cause differing CEVA results include: the scope and duration of the COVID-19 pandemic; the extent and length of the restrictions associated with the COVID-19 pandemic and the impact on customers, consumer demand and the global economy generally; the ability of the CEVA DSP cores and other technologies to continue to be strong growth drivers for us; our continued success in penetrating new markets and maintaining our market position in existing markets; our ability to diversify the company’s royalty streams, the ability of products incorporating our technologies to achieve market acceptance, the effect of intense industry competition and consolidation, global chip market trends, the possibility that markets for CEVA’s technologies may not develop as expected or that products incorporating our technologies do not achieve market acceptance; our ability to timely and successfully develop and introduce new technologies; and general market conditions and other risks relating to our business, including, but not limited to, those that are described from time to time in our SEC filings. CEVA assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates.

 

About CEVA, Inc.

 

CEVA is the leading licensor of wireless connectivity and smart sensing technologies and integrated IP solutions for a smarter, safer, connected world. We provide Digital Signal Processors, AI engines, wireless platforms, cryptography cores and complementary software for sensor fusion, image enhancement, computer vision, voice input and artificial intelligence. These technologies are offered in combination with our Intrinsix IP integration services, helping our customers address their most complex and time-critical integrated circuit design projects. Leveraging our technologies and chip design skills, many of the world’s leading semiconductors, system companies and OEMs create power-efficient, intelligent, secure and connected devices for a range of end markets, including mobile, consumer, automotive, robotics, industrial, aerospace & defense and IoT.

 

Our DSP-based solutions include platforms for 5G baseband processing in mobile, IoT and infrastructure, advanced imaging and computer vision for any camera-enabled device, audio/voice/speech and ultra-low-power always-on/sensing applications for multiple IoT markets. For sensor fusion, our Hillcrest Labs sensor processing technologies provide a broad range of sensor fusion software and inertial measurement unit (“IMU”) solutions for markets including hearables, wearables, AR/VR, PC, robotics, remote controls and IoT. For wireless IoT, our platforms for Bluetooth (low energy and dual mode), Wi-Fi 4/5/6/6E (802.11n/ac/ax), Ultra-wideband (UWB) and NB-IoT are the most broadly licensed connectivity platforms in the industry.

 

CEVA is a sustainable and environmentally conscious company, adhering to our Code of Business Conduct and Ethics. As such, we emphasize and focus on environmental preservation, recycling, the welfare of our employees and privacy – which we promote on a corporate level. At CEVA, we are committed to social responsibility, values of preservation and consciousness towards these purposes.

 

Visit us at www.ceva-dsp.com and follow us on Twitter, YouTube, Facebook, LinkedIn and Instagram.

 

 

For More Information Contact:

 

Yaniv Arieli

CEVA, Inc.

CFO

+1.650.417.7941

yaniv.arieli@ceva-dsp.com

Richard Kingston

CEVA, Inc.

VP Market Intelligence, Investor & Public Relations

+1.650.417.7976

richard.kingston@ceva-dsp.com

 

5
 

 

CEVA, INC. AND ITS SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF INCOME (LOSS) – U.S. GAAP

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

 

 

   

Three months ended

   

Year ended

 
   

December 31,

   

December 31,

 
   

2021

   

2020

   

2021

   

2020

 
   

Unaudited

   

Unaudited

   

Unaudited

   

Unaudited

 

Revenues:

                               

Licensing, NRE and related revenues

  $ 21,327     $ 12,068     $ 72,827     $ 52,513  

Royalties

    12,730       16,077       49,879       47,813  
                                 

Total revenues

    34,057       28,145       122,706       100,326  
                                 

Cost of revenues

    5,923       2,490       16,827       10,749  
                                 

Gross profit

    28,134       25,655       105,879       89,577  
                                 

Operating expenses:

                               

Research and development, net

    18,694       16,315       72,504       62,010  

Sales and marketing

    3,504       3,135       12,861       11,907  

General and administrative

    3,762       3,223       14,296       14,116  

Amortization of intangible assets

    618       575       2,710       2,307  
                                 

Total operating expenses

    26,578       23,248       102,371       90,340  
                                 

Operating income (loss)

    1,556       2,407       3,508       (763 )

Financial income (loss), net

    (149 )     595       196       3,284  

Reevaluation of investment in other company

    1,984       —       1,984       —  
                                 

Income before taxes on income

    3,391       3,002       5,688       2,521  

Income tax expense (benefit)

    (487 )     2,367       5,292       4,900  
                                 

Net Income (loss)

  $ 3,878     $ 635     $ 396     $ (2,379 )
                                 

Basic net income (loss) per share

  $ 0.17     $ 0.03     $ 0.02     $ (0.11 )

Diluted net income (loss) per share

  $ 0.17     $ 0.03     $ 0.02     $ (0.11 )

Weighted-average shares used to compute net income (loss) per share (in thousands):

                               

Basic

    22,977       22,249       22,819       22,107  

Diluted

    23,359       22,911       23,251       22,107  

 

6
 

 

Unaudited Reconciliation of GAAP to Non-GAAP Financial Measures

U.S. Dollars in thousands, except per share amounts

 

   

Three months ended

   

Year ended

 
   

December 31,

   

December 31,

 
   

2021

   

2020

   

2021

   

2020

 
   

Unaudited

   

Unaudited

   

Unaudited

   

Unaudited

 

GAAP net income (loss)

  $ 3,878     $ 635     $ 396     $ (2,379 )

Equity-based compensation expense included in cost of revenues

    309       166       818       639  

Equity-based compensation expense included in research and development expenses

    1,852       1,759       7,287       6,874  

Equity-based compensation expense included in sales and marketing expenses

    441       542       1,626       2,038  

Equity-based compensation expense included in general and administrative expenses

    946       1,099       3,324       4,085  

Income tax benefit related to equity-based compensation expenses

    (842 )     (196 )     (842 )     (256 )

Amortization of intangible assets, net of taxes, related to acquisition of Intrinsix in 2021 and Hillcrest Labs business, investments in NB-IoT and Immervision technologies

    1,388       685       3,959       2,746  

Costs associated with the Intrinsix acquisition

    342       -       1,730       -  

Income associated with the reevaluation of investment in other company, net of taxes.

    (1,528 )     -       (1,528 )     -  

Income tax benefit and additional NRE revenues associated with the purchase price allocation (PPA) related to Intrinsix acquisition

    (1,481 )     -       (1,481 )     -  

Non-GAAP net income

  $ 5,305     $ 4,690     $ 15,289     $ 13,747  

GAAP weighted-average number of Common Stock used in computation of diluted net income (loss) and earning per share (in thousands)

    23,359       22,911       23,251       22,107  

Weighted-average number of shares related to outstanding stock-based awards (in thousands)

    375       305       314       979  

Weighted-average number of Common Stock used in computation of diluted earnings per share, excluding the above (in thousands)

    23,734       23,216       23,565       23,086  
                                 

GAAP diluted earnings (loss) per share

  $ 0.17     $ 0.03     $ 0.02     $ (0.11 )

Equity-based compensation expense, net of taxes

  $ 0.10     $ 0.14     $ 0.51     $ 0.59  

Amortization of intangible assets, net of taxes, related to acquisition of Intrinsix and Hillcrest Labs business, investments in NB-IoT and Immervision technologies

  $ 0.06     $ 0.03     $ 0.17     $ 0.12  

Costs associated with the Intrinsix acquisition

  $ 0.01       -     $ 0.07       -  

Income associated with the reevaluation of investment in other company, net of taxes.

  $ (0.06 )     -     $ (0.06 )     -  

Income tax benefit and additional NRE revenues associated with the purchase price allocation (PPA) related to Intrinsix acquisition

  $ (0.06 )     -     $ (0.06 )     -  

Non-GAAP diluted earnings per share

  $ 0.22     $ 0.20     $ 0.65     $ 0.60  
                                 
                                 

GAAP revenues - Licensing, NRE and related revenues

  $ 21,327     $ 12,068     $ 72,827     $ 52,513  

Purchase price allocation (PPA) for the Intrinsix acquisition

    180               180          

Non-GAAP Licensing, NRE and related revenues

    21,507       12,068       73,007       52,513  

Royalties

    12,730       16,077       49,879       47,813  

Total non-GAAP revenues

  $ 34,237     $ 28,145     $ 122,886     $ 100,326  

 

7
 

 

   

Three months ended

    Year ended  
   

December 31,

   

December 31,

 
   

2021

   

2020

   

2021

   

2020

 
   

Unaudited

   

Unaudited

   

Unaudited

   

Unaudited

 

GAAP Operating Income (loss)

  $ 1,556     $ 2,407     $ 3,508     $ (763 )

Equity-based compensation expense included in cost of revenues

    309       166       818       639  

Equity-based compensation expense included in research and development expenses

    1,852       1,759       7,287       6,874  

Equity-based compensation expense included in sales and marketing expenses

    441       542       1,626       2,038  

Equity-based compensation expense included in general and administrative expenses

    946       1,099       3,324       4,085  

Amortization of intangible assets related to acquisition of Intrinsix in 2021 and Hillcrest Labs business, investments in NB-IoT and Immervision technologies

    1,614       760       4,260       3,047  

Costs associated with the Intrinsix acquisition

    342       -       1,730       -  

Purchase price allocation (PPA) for the Intrinsix acquisition

    180               180          

Total non-GAAP Operating Income

  $ 7,240     $ 6,733     $ 22,733     $ 15,920  

 

8
 

 

CEVA, INC. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

(U.S. Dollars in thousands)

 

   

December 31,

   

December 31,

 
   

2021

     2020(*)  
   

Unaudited

   

Unaudited

 

ASSETS

               

Current assets:

               

Cash and cash equivalents

  $ 33,153     $ 21,143  

Marketable securities and short-term bank deposits

    121,708       108,987  

Trade receivables, net

    14,644       14,765  

Unbilled receivables

    12,805       16,459  

Prepaid expenses and other current assets

    6,670       6,205  

Total current assets

    188,980       167,559  

Long-term assets:

               

Bank deposits

    -       29,529  

Severance pay fund

    10,175       10,535  

Deferred tax assets, net

    15,850       10,826  

Property and equipment, net

    6,765       7,586  

Operating lease right-of-use assets

    8,827       9,052  

Goodwill

    74,777       51,070  

Intangible assets, net

    14,607       10,836  

Other long-term assets

    8,678       9,959  

Total assets

  $ 328,659     $ 306,952  
LIABILITIES AND STOCKHOLDERS’ EQUITY                

Current liabilities:

               

Trade payables

  $ 1,464     $ 894  

Deferred revenues

    8,661       2,434  

Accrued expenses and other payables

    22,041       21,883  

Operating lease liabilities

    3,274       2,969  

Total current liabilities

    35,440       28,180  
                 

Long-term liabilities:

               

Accrued severance pay

    10,551       11,226  

Operating lease liabilities

    5,130       5,772  

Other accrued liabilities

    806       885  

Total liabilities

    51,927       46,063  
                 

Stockholders’ equity:

               

Common stock

    23       22  

Additional paid in-capital

    235,386       233,172  

Treasury stock

    (13,790 )     (30,133 )

Accumulated other comprehensive income (loss)

    (372 )     478  

Retained earnings

    55,485       57,350  

Total stockholders’ equity

    276,732       260,889  

Total liabilities and stockholders’ equity

  $ 328,659     $ 306,952  

 

(*) Derived from audited financial statements

 

9
 

Exhibit 99.2

 

LOGOSML.JPG
CEVA, Inc. Q4 & FY 2021 Financial Results Conference Call - Prepared Remarks :: Feb 15, 2022

 

CEVA, INC.

Fourth Quarter and Full Year 2021 Financial Results Conference Call

Prepared Remarks of Gideon Wertheizer, Chief Executive Officer and
Yaniv Arieli, Chief Financial Officer

February 15, 2022

8:30 A.M. Eastern

 

Good morning everyone and welcome to CEVA’s fourth quarter and full year 2021 earnings conference call. I’m joined today by Gideon Wertheizer, Chief Executive Officer, and Yaniv Arieli, Chief Financial Officer of CEVA. Gideon will cover the business aspects and highlights from the fourth quarter and provide general qualitative data. Yaniv will then cover the financial results for the fourth quarter and full year 2021 and also provide guidance for the first quarter and full year 2022.

 

I will start with the forward-looking statements.

 

Forward Looking Statements

 

Please note that today’s discussion 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. Forward-looking statements include statements regarding demand for and benefits of our technologies; expectations regarding market dynamics, changes in the semiconductor industry, and our plans to capitalize on the foregoing; beliefs regarding benefits and impacts of the Intrinsix acquisition, including expansion into the aerospace and defense market and ability to offer integrated IP solutions and enriched security and assurance products; expectations and financial guidance regarding future performance, including growth in licenses, revenues and customer agreements and qualitative data for 2022; and objectives regarding sustainability. For information on the factors that could cause a difference in our results, please refer to our filings with the Securities and Exchange Commission. These include: the scope and duration of the pandemic; the extent and length of the restrictions associated with the pandemic and the impact on customers, consumer demand and the global economy generally; the ability of CEVA’s IPs for smarter, connected devices to continue to be strong growth drivers for us; our success in penetrating new markets and maintaining our market position in existing markets; the ability of new products incorporating our technologies to achieve market acceptance; the speed and extent of the expansion of the 5G and IoT markets; our ability to execute more base station & IoT license agreements; the effect of intense industry competition and consolidation; global chip market trends, including supply chain issues as a result of COVID-19 and other factors; and our ability to successfully integrate Intrinsix into our business. CEVA assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates.

 

1
 

 

LOGOSML.JPG
CEVA, Inc. Q4 & FY 2021 Financial Results Conference Call - Prepared Remarks :: Feb 15, 2022

 

With that said, I will now hand the call over to Gideon.

 

Gideon

 

Thank you, Richard. Good morning everyone and thank you for joining us today. The fourth quarter and the fiscal year 2021 was extremely intense and exceptionally successful. As the digital transformation drives industries to become connected and intelligent, our ubiquitous technology and collaborative business model present a significant and secular growth prospect. Our record financial results for 2021 and the 2022 guidance that Yaniv will shortly outline bodes well with these dynamics.

 

For the fourth quarter, we delivered record revenue of $34.1 million, the third consecutive quarter of record high revenue, up 22% compared to the fourth quarter of 2020. The licensing environment continues to be robust at $21.3 million on the back of 20 new agreements and 4 new first-time customers. The fourth quarter licensing engagements highlight the transformation in our value proposition from licensing of standardized IP Cores toward licensing of comprehensive IP platforms which leads to higher upfront licensing revenues and larger royalty opportunities. In this context, we executed a number of sizable agreements this quarter, among which are agreements with a Japanese OEM for the nationwide deployment of 5G fixed wireless access in Japan, a lead OEM customer for the next generation Wi-Fi 7, and a Tier 1 semiconductor company for an AI-based Advanced Driver Assistance Systems (“ADAS”) project. We also executed the first Integrated IP Solutions agreement, where we couple IP licensing with Intrinsix chip design for a comprehensive platform for a smart motor control product for a large US Semiconductor vendor.

 

Royalty revenue for the quarter came in ahead of our expectation at $12.7 million. Our diverse base station and IoT product category continues to expand, up 21% in royalty revenue versus the respective quarter last year. Our technologies being deployed in wearables, PCs, smart TVs, robot vacuum cleaners, surveillance cameras and in plenty of other IoT devices are key drivers for that growth. On 5G RAN, a key customer of ours released for field testing new 5G RAN products enabled by our latest and most advanced DSP, the XC16. Comparing to the fourth quarter of 2020, royalty revenue was down 21%, as a large US based handset OEM moved to 5G, for which it uses chips from a competitor, which we alluded to on prior calls.

 

2
 

 

LOGOSML.JPG
CEVA, Inc. Q4 & FY 2021 Financial Results Conference Call - Prepared Remarks :: Feb 15, 2022

 

For the full year 2021, our total non-GAAP revenue grew 22% to a record $122.9 million, driven by a step up in our licensing, NRE and related revenue. Revenue from this part of our business had record performance of $73 million, up 39% compared to last year, with 73 new agreements, up from 55 last year. These achievements in licensing are key for our business growth, as signing up licensees is the precursor for royalty revenue, which in turn scale our operating leverage and earnings per share. Our consistent and relentless efforts to grow and diversify our licensees is already apparent in the royalty revenue out of the base station & IoT segment, that grew by 29% year-over-year to a record $28.6 million and 69% in units and approaching 1.3 billion units. Overall, royalty revenue was a record high $49.9 million of which the strong growth in royalty revenue out of the Base Station and IoT category more than offset the decline in the handset category. To grow further our licensee base and strengthen our value proposition in these engagements, we completed the strategic acquisition of Intrinsix during the year. Intrinsix brings in a new customer base in the lucrative aerospace and defense markets and enables us to offer integrated IP solutions where we offer a combination of IP licensing with SoC design for an optimal performance outcome and a larger revenue share with our customers.

 

Let me at this stage walk you through the thought process we went through to determine our focused go to the market strategy. The ongoing turmoil in chip supply has made evident the foundational role the semiconductor industry has in technology innovation and the overall economy. According to Deloitte, In 2020, global semiconductor sales rose 6.6% to $440 billion even as global GDP shrank 3.5%. And for the next decade, the semi space is expected to show 50% faster growth than global GDP. Furthermore, geopolitical tensions and the criticality of chip supply to national security drive governments to spend and incentivize investment in the semi space, as can be seen by the anticipated U.S. senate bill for $52 billion investment in semiconductor technologies, the Chinese government’s announcement of $150 billion investment in the semi space over the next 10 years. This explosive demand for chips drives OEMs and IT companies to internalize their chip needs and to engage directly with foundries and IP companies. Also, the Chinese government’s ambitions to be self-sufficient in the semiconductor space encourages local investors and technologists to form new chip companies to drive the fast-growing electric car, industrial, and consumer products industries. Against this backdrop, CEVA’s broad IP portfolio and capabilities to expedite and streamline customer chip developments has opened new and sizable customer opportunities. Let me add more color on how we plan to capitalize on these tectonic changes.

 

3
 

 

LOGOSML.JPG
CEVA, Inc. Q4 & FY 2021 Financial Results Conference Call - Prepared Remarks :: Feb 15, 2022
 

Wireless

 

Wireless technologies, including cellular, Wi-Fi, Bluetooth and UWB have been a key strength for CEVA. Over the years, we have been able to focus on the right end markets and to build a very large base of key customers. We have earned a strong reputation, which enables us to engage with and sign-up top customers to drive next generations and new trends in wireless. Strategically, we will pivot on two main wireless trends.

 

First, the proliferation of 5G in broadband and massive IoT. The recent Ericsson Mobility report projects 5.5 billion cellular connections by 2027 that are not handsets, up from 1.9 billion connections in 2021. Cellular IoT applies to broad markets, among which are fixed wireless access devices, automotive, industrial, laptops and more. Cellular IoT is fundamental to enable smart transportation, smart grid, robotics, and remote healthcare. CEVA offers to OEMs and semiconductor companies targeting cellular IoT two highly integrated IP platforms, the PentaG for Mobile Broadband IoT, and DragonFly for massive IoT. We believe that by capitalizing on these two technologies and the upcoming new generations, place us in a position to address the whole market needs and to enable new entrants to penetrate this huge space.

 

Second is the Wi-Fi upgrade cycle. The Wi-Fi market is huge and growing. ABI Research forecasts 5.5 billion Wi-Fi devices by 2026, up from 3.5 billion in 2021. The rollout of the latest standard Wi-Fi 6, and recently 6E, is underway and expected to see more shipments than any prior standards as it extends beyond smartphones, PC and tablets, to smart home, industrial, cars, AR and VR and many more markets. The complexity encompassed in new Wi-Fi designs, along with new connected devices that require Wi-Fi IP integration, is driving strong momentum in our overall annual licensing & NRE business, which was up 39% in 2021 versus 2020. Our R&D investment will focus on the next generation, Wi-Fi7, which is expected to be in the market by 2024. As mentioned earlier, in the fourth quarter, we signed a lead customer Wi-Fi7 agreement with one of the largest OEMs in China which seeks to decouple its dependencies on the chip incumbents that currently dominate the advanced Wi-Fi chipset market.

 

4
 

 

LOGOSML.JPG
CEVA, Inc. Q4 & FY 2021 Financial Results Conference Call - Prepared Remarks :: Feb 15, 2022
 

Edge AI

 

Edge AI emerges from a growing need to hand over AI processing from the cloud to smart devices such as smartphones, cars, robots, or 5G base stations to gain faster response and higher security. Per a recent ABI research forecast, edge AI is a fast-growing market, expecting to surpass 1.3 billion units by 2026. CEVA has targeted the edge AI market from early on. We already have good penetration with edge AI in Automotive ADAS market where we are closely working with industry leaders including both semis and OEMs and, in the surveillance, and consumer markets. To further capitalize on our strength, we unveiled last month our new generation AI processor, the NeuPro-M. NeuPro-M delivers a significant performance leap compared to its predecessor, NeuPro-S, and for the first time introduces new concepts in AI architecture designs, security integration and chiplet scalability. Its heterogeneous, multiprocessor architecture offers performance ranging from 20 Tera Operations per Second (TOPS) to 1200 TOPS. Its use extends beyond video to a whole new range of AI usages such as Natural Language Processing, 5G network optimization, Level 4 and 5 fully autonomous cars, industrial machines and more. For the first time, NeuPro-M enables chiplet scalability for which our Intrinsix team can offer a turnkey design for heterogeneous SoC.

 

Wearable and Hearables

 

The onset of COVID-19 has increased the demand for wearable and wireless headsets and catalyzed innovation in these spaces. Wireless headsets are looking for high quality sound with smart and dynamic noise suppression. Smartwatches are disrupting the traditional watch market and are evolving into health and activity monitoring devices. Research firm Yole Développement forecasts that shipments of TWS earbuds, hearing aids, smartwatches and smart speakers will surpass 1.3 billion units by 2026. CEVA already has a strong position in the wearables and hearables space, with dozens of active customers. We are in a unique position to standardize wireless audio processing IP with our latest Bluebud platform. Last month, we enriched the Bluebud value proposition with the launch of Bluebud HD, a suite of pre-configured software for high quality audio, voice conversations and contextual awareness. Bluebud HD lowers the cost of entry for many semiconductors and OEM’s that lack the scarce expertise in wireless audio, which CEVA masters.

 

5
 

 

LOGOSML.JPG
CEVA, Inc. Q4 & FY 2021 Financial Results Conference Call - Prepared Remarks :: Feb 15, 2022

 

China

 

Our revenue out of China grew 30% this year versus last year. Unit shipments by our Chinese customers grew 38% versus 2020. We are the de-facto standard in wireless communication used by all the major players, among which are ZTE, Unisoc, Bestechnic, Beken, ASR Micro and others, which overall constitute more than 75 active customers. ZTE, our key customer in 5G base station RAN, is set to substantially grow network footprint in China, as can be seen by its recently securing 31% of the recent China mobile procurement bid for 5G 700Mhz networks, and 34% of the 5G standalone construction for China Telecom and China Unicom. We are uncovering sizable opportunities in automotive, robotics and mobile where leading OEMs are internalizing chip design. Our most advanced technologies and our brand recognition sets us up for further growth in China.

 

Next before my closing remarks, I want to update you on our objectives and commitments toward future sustainability. Companies around the world have provided sustainability plans for decreasing their carbon footprint over the next decade. At our end, being an IP company, our direct carbon footprint is minimal, with activities primarily by R&D engineers and no manufacturing facilities. However, we intend to take advantage of our expertise in wireless, AI and low power designs to help our customers achieve their own sustainability goals. As I stated above, we are focusing on Wireless IoT where our technologies can add resiliency and run time analytics to optimize energy and water utilization and to expedite the shift to renewable energy. We will also work with our base station RAN customers on next generation DSP technologies that will serve their objective of lower heat dissipation and energy consumption. We will continue to periodically consult with our investors of their perspectives on sustainability.

 

So in summary, CEVA is uniquely positioned to capitalize on the semiconductor momentum and market transformation toward digitization, AI and connectivity. Our customer pipeline at the end of the year is historically high. We believe our key customers are keenly receptive to our products road map and priorities and willing to expand the scope of engagements with us. We expect 2022 to be an exciting year with growing momentum in revenue, EPS and customer engagements. We are determined to continue to develop stand out products and consistently grow our customer base and licensing engagements to scale our business.

 

6
 

 

LOGOSML.JPG
CEVA, Inc. Q4 & FY 2021 Financial Results Conference Call - Prepared Remarks :: Feb 15, 2022

 

Finally, I would like to take this opportunity to thank all of our employees for their hard work and dedication, innovation and fantastic execution. I would like to extend my thanks to our partners, suppliers and to our shareholders for their confidence and support.

 

We wish you all a healthy, happy, and prosperous year and please stay safe! With that said, I’ll now turn the call over to Yaniv, who will outline our financials and guidance.

 

Yaniv

 

Thank you Gideon. I’ll start by further reviewing the results of our operations for the fourth quarter of 2021.

 

Revenue for the fourth quarter was a record high at $34.1 million, up 21% compared to $28.1 million for the same quarter last year, our third sequential all-time high. Non-GAAP revenue was $34.2 million, up 22% year-over-year, $0.2 million higher due to purchase price allocation (PPA) adjustment associated with the Intrinsix acquisition. The revenue breakdown is as follows:

 

-

Licensing, NRE and related revenue was $21.3 million, reflecting 63% of total revenues, up 78% as compared to the fourth quarter of 2020 and just slightly lower than third quarter 2021 record high result.

 

-

Royalty revenue was $12.7 million, reflecting 37% of total revenues, down 21% from $16.1 million for the same quarter last year, but up 13% sequentially.

 

-

Base station & IoT royalty revenue contributed $7.8 million in the quarter, up 21% year-over-year, including all time-high royalty contribution from our sensor fusion product line and continued strength across our base station and IoT product lines overall.

 

-

Quarterly gross margin was 83% on GAAP basis and 87% on non-GAAP basis, both higher than projected due to lower allocation of Intrinsix’s NRE costs from R&D into the cost of revenue expense line. Non-GAAP quarterly gross margin excluded approximately $0.3 million of equity-based compensation expenses and $1.0 million of amortization of other assets associated with the Intrinsix acquisition and Immervision investment.

 

7
 

 

 

LOGOSML.JPG
CEVA, Inc. Q4 & FY 2021 Financial Results Conference Call - Prepared Remarks :: Feb 15, 2022

 

-

Total operating expenses for the fourth quarter were $26.6 million, over the high-end of our guidance, due to lower allocation of Intrinsix’s NRE costs from R&D into the cost of revenue per our prior quarter’s guidance. Such shifts between these two expense line items may happen from time to time and are tied to the actual chip design work performed in the quarter. OPEX also included an aggregate equity-based compensation expense of approximately $3.2 million, amortization of acquired intangible assets associated with the Hillcrest Labs business and the Immervision investment of $1.0 million, and $0.3 million Intrinsix related deal costs. Total operating expenses for the fourth quarter, excluding equity-based compensation expenses, amortization of intangible assets and deal costs, were $22.4 million, over the high-end of our guidance, due to the same reasons I just stated for GAAP.

 

-

GAAP other income included a $1.5 million, reevaluation, net of taxes, of our investment in Cipia, formerly Eyesight Technologies, a leading provider of in-cabin sensing solutions for the automotive industry, that recently went public on the Tel-Aviv Stock Exchange. We will adjust our investment quarterly, based on the market valuation of the shares.

 

-

GAAP net income for the quarter was $3.9 million, and diluted earnings per share was 17 cents, compared to net income of $0.6 million and 3 cents for the fourth quarter of 2020.

 

-

Non-GAAP operating income increased 8% to $7.2 million from $6.7 million reported for the fourth quarter of 2020.

 

-

Non-GAAP net income and diluted EPS for the fourth quarter of 2021 was $5.3 million and 22 cents, respectively, significantly higher than our internal estimates. Net income and diluted EPS for the fourth quarter of 2020 were $4.7 million and 20 cents, respectively. Non-GAAP net income and diluted earnings per share for the fourth quarter of 2021 excluded: (a) equity-based compensation expenses, net of taxes, of $2.7 million, (b) the impact of the amortization of acquired intangibles, net of taxes, of $1.4 million associated with the acquisition of the Intrinsix and Hillcrest Labs businesses and investments in NB-IoT and Immervision technologies, (c) $0.3 million of costs associated with the Intrinsix acquisition, (d) $1.5 million of income, net of taxes associated with the reevaluation of an investment in another company, (e) $1.7 million of income tax benefit associated with the purchase price allocation related to the Intrinsix acquisition and (f) an addition of $0.2 million in licensing, NRE and related revenues associated with purchase price allocation for the Intrinsix acquisition. l Non-GAAP net income and diluted earnings per share for the fourth quarter of 2020 excluded: (a) equity-based compensation expense, net of taxes, of $3.4 million, and (b) the impact of the amortization of acquired intangible and other assets, net of taxes, of $0.7 million associated with the acquisition of the Hillcrest Labs business and investments in NB-IoT and Immervision technologies.

 

8
 

 

LOGOSML.JPG
CEVA, Inc. Q4 & FY 2021 Financial Results Conference Call - Prepared Remarks :: Feb 15, 2022

 

Other Related Data

 

-

Shipped units by CEVA licensees during the fourth quarter of 2021 were 416 million units, down 5% sequentially and down 14% from the fourth quarter 2020 reported shipments.

 

-

Of the 416 million units shipped, 83 million units, or 20%, were for handset baseband chips, reflecting a sequential increase of 148% from 33 million units of handset baseband chips shipped during the third quarter of 2021 and a 62% decrease from 149 million units shipped year over year. Our base station and IoT product shipments were 333 million in the quarter, down 18% sequentially and up 25% year-over-year.

 

-

Of note, sensor fusion was a record 21.8 million units in the quarter, with cellular IoT, Bluetooth and Wi-Fi also delivering strong contributions.

 

As for the Year

 

-

Our total shipments increased 24% year-over-year to over 1.6 billion units, an all-time record high and which equates to approximately 52 CEVA-powered devices sold every second in 2021.

 

-

Annual shipments of handsets were down 33% year-over-year to 383 million devices. The decline is attributable to the socket loss of a customer at a key OEM who was replaced by Qualcomm for 5G modem chipsets, and lower shipments of 2G feature phones in emerging markets.

 

9
 

 

 

LOGOSML.JPG
CEVA, Inc. Q4 & FY 2021 Financial Results Conference Call - Prepared Remarks :: Feb 15, 2022

 

-

Our base station and IoT product royalty revenue continued to grow and reached a new record level of $28.6 million, up from $22.3 million in 2020 and $13 million in 2019. In terms of units, base station and IoT product unit shipments were up 69% year-over-year to almost 1.3 billion units.

 

-

Our non-GAAP operating income for 2021 increased 43% to $22.7 million from $15.9 million reported for 2020.

 

-

Overall, excluding our Intrinsix business, we grew our revenues 14% year over year, with our non-GAAP licensing business growing 22% to $63.9 million. With the Intrinsix business now fully onboarded and the new opportunities outlined by Gideon earlier, we are excited by the potential ahead of us.

 

As for the Balance Sheet Items

 

-

As of December 31, 2021, CEVA’s cash and cash equivalent balances, marketable securities and bank deposits were $155 million. We did not repurchase any shares this year and have approximately 498,000 shares available for repurchase.

 

-

Our DSO for the fourth quarter of 2021 was 39 days, slightly lower than the prior quarter and below our norm level.

 

-

During the fourth quarter, we generated $11 million of cash from operations; depreciation and amortizations were $2.3 million and purchase of fixed assets was $0.7 - million. On an annual basis, we generated $25.8 million cash from operations compared to $15.2 million a year ago.

 

-

At the end of the year, our headcount was 476 people, of which 390 were engineers, slightly lower than a total of 485 people at the end of September 2021.

 

Now for the Guidance

 

As Gideon explained, we expect 2022 to be another exciting year with strong growth expected in licensing and NRE revenues and in royalties from our base station & IoT category. Overall, we are forecasting total revenue to be in the range of $141.5 million to $145.5 million, versus $122.9 million in 2021.

 

Our licensing, NRE and related revenues business is expected to continue to expand as we benefit from multiple growth vectors where we excel, in particular 5G, Wi-Fi 6 & 7, Edge AI and Wearables and Hearables. In addition, our new integrated IP solution offerings and expanded access to the lucrative aerospace & defense markets via Intrinsix present further compelling opportunities.

 

10
 

 

LOGOSML.JPG
CEVA, Inc. Q4 & FY 2021 Financial Results Conference Call - Prepared Remarks :: Feb 15, 2022

 

In royalties, our base station & IoT product category continues to flourish and will have a noticeable contribution to royalties in 2022. We anticipate royalties from base station RAN, Bluetooth, Wi-Fi and sensor fusion will be the main drivers and will outgrow their respective markets. Overall, we forecast another growth year in royalty revenues, where the strength of our base station & IoT royalty drivers will more than offset the anticipated decline in handset baseband royalties as the remaining 4G smartphones from a Tier 1 OEM are phased out over the course of the year.

 

On the expense side, we forecast just over $18 million in additional overall expenses, in 2022 versus 2021, recorded both in COGS and OPEX, as we consolidate the Intrinsix business on a full year basis compared to only seven months in 2021 and from other R&D ongoing investments.

 

Specifically, on COGS, we expect higher non-GAAP expenses of over $10 million due to the cost of NRE revenues from Intrinsix.

 

On OPEX, with our strong licensing execution in recent years and even stronger expectations for 2022, we will continue to support these new customers and reinforce our leadership with disciplined investments in R&D. Overall, non-GAAP OPEX increase will be approximately $8 million, part of it is also contributed to the consolidation of the Intrinsix business on a full year basis compared to only seven months in 2021.

 

Equity-based compensation is forecasted to be higher than 2021, around $16 million. This is due to special retention efforts targeting our employees, compared to pre-COVID-19 era and the recent competitive semiconductor industry in all our worldwide R&D sites.

 

Annual gross margins are forecast to be in the region of 80% on a GAAP basis and 82% to 84% on a non-GAAP basis.

 

Interest income is forecasted to be higher than 2021 due to increase interest rate environment, and hopefully better FX effects that we experienced in 2021, at $0.4 million per quarter.

 

Taxes are expected to be approximately 25% of pre-tax income on a non-GAAP basis.

 

Share count for 2022 is expected to be approximately 24.0 million shares.

 

11
 

 

LOGOSML.JPG
CEVA, Inc. Q4 & FY 2021 Financial Results Conference Call - Prepared Remarks :: Feb 15, 2022

 

Specifically for the First Quarter of 2022

 

-

Gross margin is expected to be approximately 80% on a GAAP and 82% on a non-GAAP basis, excluding an aggregate of $0.3 million of equity-based compensation expenses and $0.5 million of amortization of other assets associated with the Intrinsix acquisition and Immervision investment.

 

-

OPEX for the first quarter of 2022 is forecasted to be lower than fourth quarter of 2021 on GAAP basis and flattish on non-GAAP basis. GAAP-based OPEX is expected to be in the range of $26.4 million to $27.4 million. Of our anticipated total operating expenses for the first quarter, $3.2 million is expected to be attributable to equity-based compensation expenses and $0.8 million to the amortization of acquired intangible assets associated with the Hillcrest Labs, NB IoT and Immervision businesses and assets. Non-GAAP OPEX is expected to be in the range of $20 million – $21 million.

 

-

Net interest income is expected to be approximately $0.4 million.

 

-

As was the trend in the first quarter of 2021, taxes for the first quarter of 2022 are expected to be higher than the norm, with strong pipeline and backlog revenue mix for our connectivity products originating in France, which has a higher corporate tax rate, and from utilization of withholding taxes in Israel.

 

-

Share count for the first quarter of 2022 is expected to be 23.8 million shares.

 

Operator: You can now open the Q&A session.

 

Wrap Up: Richard

 

Thank you for joining us today and for your continued interest in CEVA. As a reminder, the prepared remarks for this conference call are filed as an exhibit to the Current Report on Form 8-K and accessible through the investor section of our website at https://investors.ceva-dsp.com.

 

With regards to upcoming events, we will be participating in the following virtual conferences:

 

-

Susquehanna Virtual Technology Conference, March 3rd and 4th.

 

-

34th Annual Roth Conference, March 13th to 15th.in Dana Point, California

 

Further information on these events and all events we will be participating in can be found on the investors section of our website.

 

 

Thank you and goodbye

 

 

12