ceva20230331

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Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

ceva20230331_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, 2023

☐	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: 23,416,026 of common stock, $0.001 par value, as of May 4, 2023.

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TABLE OF CONTENTS

		Page
PART I.	FINANCIAL INFORMATION	5
Item 1.	Interim Condensed Consolidated Balance Sheets at March 31, 2023 (unaudited) and December 31, 2022	5
	Interim Condensed Consolidated Statements of Loss (unaudited) for the three months ended March 31, 2023 and 2022	6
	Interim Condensed Consolidated Statements of Comprehensive Loss (unaudited) for the three months ended March 31, 2023 and 2022	7
	Interim Condensed Consolidated Statements of Changes in Stockholders’ Equity (unaudited) for the three months ended March 31, 2023 and 2022	8
	Interim Condensed Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2023 and 2022	9
	Notes to the Interim Condensed Consolidated Financial Statements	10
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	32
Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 3	Defaults Upon Senior Securities	33
Item 4	Mine Safety Disclosures	33
Item 5	Other Information	33
Item 6	Exhibits	34
SIGNATURES		34

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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 having chip design expertise as part of our offerings through our Intrinsix business unit strengthens our relationships with customers, streamlines IP adoption, generates recurrent royalties and more, and that Intrinsix’s experience and customer base in the growing chip development programs with the U.S. Department of Defense and Defense Advanced Research Projects Agency (DARPA) together with its IP offerings for processor security and chiplets extends our serviceable market and revenue base;

●

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 smart sensing IP products during the recent period illustrates the exceptional interest in our wireless connectivity platforms, in both traditional and new areas;

●

Our belief that one of our key customers could become a key royalty payer in the future if it is successful in bringing its own 5G modem to its smartphones;

●

Our belief that our PentaG2 platform for 5G handsets and 5G IoT endpoints is the most comprehensive baseband IP platform in the industry today and provides newcomers and incumbents with a comprehensive solution to address the need for 5G processing for smartphones, fixed wireless access, satellite communications 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 base station radio access network (RAN) and our PentaG RAN platform put us in a strong position to capitalize on the growing 5G RAN demand and the its disintegration toward new architecture and form factors, and that our PentaG RAN platform for 5G RAN settings is the most comprehensive baseband processor IP in the industry today and provides customers and incumbents with a comprehensive solution to address the need for 5G;

●

Our belief that our Bluetooth, Wi-Fi, Ultra Wide Band (UWB) and cellular IoT IPs allow us to expand further into high volume IoT applications and substantially increase our value-add and overall addressable market, which is expected to be more than 15 billion devices annually by 2027 based on research from ABI Research;

●

Our belief that Wi-Fi presents a significant royalty opportunity given our dominant market position in licensing Wi-Fi 6 to more than 35 customers to date;

●

Our belief that the growing market for True Wireless Stereo (TWS) earbuds, smartwatches, AR and VR headsets, and other wearable assisted devices, offers an incremental growth segment for us for our software IP;

●

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 TWS markets of earbuds, smartwatches, Over-the-Counter (OTC) hearing aids, wireless speakers, PCs and more;

●

Our belief that our second generation SensPro2 sensor hub DSP family provides highly compelling offerings for any sensor-enabled devices and applications and enables us to address the transformation in devices enabled by these applications and expand our footprint and content in smartphones, drones, consumer cameras, surveillance, automotive safety, voice-enabled devices and industrial IoT applications;

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●

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 per research from Yole Group;

●

Our belief that our newest generation family of AI processors for deep learning at the edge, the NeuPro-M, represents new IP licensing and royalty drivers for us in the coming years, due to the increased deployment of neural networks in a wide range of camera-based devices, which is expected to be more than 2.5 billion Edge AI devices shipped annually by 2026 based on research from Yole Group;

●

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, in addition to our existing portfolio for camera-based computer vision and AI processing, and microphone-based sound processing;

●

Our expectation that royalty revenues in the base station and IoT product categories will grow over the next few years, including from a range of different products at different royalty ASPs, spanning from high volume Bluetooth and Wi-Fi to high value sensor fusion and base station RAN;

●

Our expectation that a significant portion of our future revenues will continue to be generated by a limited number of customers, in part due to consolidation in the semiconductor industry;

●

Our belief that volatility in the global economic climate and financial markets could result in a significant change in the value of our investments;

●

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 expectation that we will continue to experience the effect of exchange rate and currency fluctuations on an annual and quarterly basis; and

●

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

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.

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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, 2023			December 31, 2022
	Unaudited
ASSETS
Current assets:
Cash and cash equivalents	$	24,483		$	21,285
Short-term bank deposits		6,164			6,114
Marketable securities		106,142			112,080
Trade receivables (net of allowance for credit losses of $313 as of both March 31, 2023 and December 31, 2022)		35,007			31,250
Prepaid expenses and other current assets		8,766			6,896
Total current assets		180,562			177,625
Long-term assets:
Bank deposits		8,280			8,205
Severance pay fund		8,183			8,475
Deferred tax assets, net		9,434			8,599
Property and equipment, net		6,696			7,099
Operating lease right-of-use assets		10,034			10,283
Goodwill		74,777			74,777
Intangible assets, net		6,003			6,680
Investments in marketable equity securities		291			408
Other long-term assets		6,874			6,291
Total long-term assets		130,572			130,817
Total assets	$	311,134		$	308,442

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Trade payables	$	1,820		$	1,995
Deferred revenues		4,006			3,168
Accrued expenses and other payables		7,280			6,660
Accrued payroll and related benefits		19,073			18,473
Operating lease liabilities		2,858			2,982
Total current liabilities		35,037			33,278
Long-term liabilities:
Accrued severance pay		9,064			9,064
Operating lease liabilities		6,530			6,703
Other accrued liabilities		633			526
Total long-term liabilities		16,227			16,293
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, 2023 and December 31, 2022. 23,416,026 and 23,215,439 shares outstanding at March 31, 2023 and December 31, 2022, respectively		23			23
Additional paid in-capital		243,141			242,841
Treasury stock at cost (179,134 and 379,721 shares of common stock at March 31, 2023, and December 31, 2022, respectively)		(4,672	)		(9,904	)
Accumulated other comprehensive loss		(5,910	)		(6,249	)
Retained earnings		27,288			32,160
Total stockholders’ equity		259,870			258,871
Total liabilities and stockholders’ equity	$	311,134		$	308,442

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

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INTERIM CONDENSED CONSOLIDATED STATEMENTS OF LOSS (UNAUDITED)

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

	Three months ended
	March 31,
	2023			2022
Revenues:
Licensing, NRE and related revenue	$	20,721		$	22,393
Royalties		8,014			11,998
Total revenues		28,735			34,391
Cost of revenues		5,315			6,404
Gross profit		23,420			27,987
Operating expenses:
Research and development, net		20,791			20,210
Sales and marketing		3,045			2,923
General and administrative		4,048			3,636
Amortization of intangible assets		329			750
Total operating expenses		28,213			27,519
Operating income (loss)		(4,793	)		468
Financial income, net		1,455			282
Remeasurement of marketable equity securities		(117	)		(1,131	)
Loss before taxes on income		(3,455	)		(381	)
Income tax expense		1,417			1,315
Net loss	$	(4,872	)	$	(1,696	)
Basic net loss per share	$	(0.21	)	$	(0.07	)

Diluted net loss per share	$	(0.21	)	$	(0.07	)

Weighted-average shares used to compute net loss per share (in thousands):
Basic		23,334			23,103
Diluted		23,334			23,103

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,
	2023			2022

Net loss:	$	(4,872	)	$	(1,696	)
Other comprehensive income (loss) before tax:
Available-for-sale securities:
Changes in unrealized gains (losses)		730			(2,839	)
Reclassification adjustments for gains included in net loss		(92	)		—
Net change		638			(2,839	)
Cash flow hedges:
Changes in unrealized gains (losses)		(425	)		2
Reclassification adjustments for losses included in net loss		171			110
Net change		(254	)		112
Other comprehensive income (loss) before tax		384			(2,727	)
Income tax expense (benefit) related to components of other comprehensive income (loss)		45			(661	)
Other comprehensive income (loss), net of taxes		339			(2,066	)
Comprehensive loss	$	(4,533	)	$	(3,762	)

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

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

U.S. dollars in thousands, except share data

	Common stock										Accumulated
Three months ended March 31, 2023	Number of shares outstanding		Amount		Additional paid-in capital			Treasury stock			other comprehensive income (loss)			Retained earnings			Total stockholders’ equity
Balance as of January 1, 2023		23,215,439	$	23	$	242,841		$	(9,904	)	$	(6,249	)	$	32,160		$	258,871
Net loss		—		—		—			—			—			(4,872	)		(4,872	)
Other comprehensive income		—		—		—			—			339			—			339
Equity-based compensation		—		—		3,859			—			—			—			3,859
Issuance of treasury stock upon exercise of stock-based awards		200,587		—		(3,559	)		5,232			—			—			1,673
Balance as of March 31, 2023		23,416,026	$	23	$	243,141		$	(4,672	)	$	(5,910	)	$	27,288		$	259,870

Common stock

Accumulated

Three months ended March 31, 2022

Number of shares outstanding

Amount

SEC Form 10-Q filed by CEVA Inc.