8-K

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): November 1, 2017

CEVA, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	000-49842	77-0556376
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

1174 Castro St. Suite 210, Mountain View, CA	94040
(Address of Principal Executive Offices)	(Zip Code)

650/417-7900

(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))

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 November 1, 2017, CEVA, Inc. (the “Company”) announced its financial results for the quarter ended September 30, 2017. A copy of the press release, dated November 1, 2017, is attached and filed herewith as Exhibit 99.1. On the same day, the Company held a conference call to discuss its financial results for the quarter ended September 30, 2017. 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 it 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 quarters ended September 30, 2017 and 2016 in accordance with generally accepted accounting principles in the United States (“GAAP”), the press release also included non-GAAP net income and diluted earnings per share (EPS) figures for the respective quarters that excluded (i) equity-based compensation expenses, net of taxes, and (ii) the impact of the amortization of acquired intangibles associated with the Company’s acquisition of RivieraWaves SAS.

The Company believes that the reconciliation of financial measures in the press release is useful to investors in analyzing the results for the quarters and years ended September 30, 2017 and 2016 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	Press Release of CEVA, Inc., dated November 1, 2017.
99.2	Script of conference call of CEVA, Inc. held on November 1, 2017.

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:    November 1, 2017	By:	/s/ Yaniv Arieli
		Yaniv Arieli
		Chief Financial Officer

EX-99.1

Exhibit 99.1

CEVA, Inc. Announces Third Quarter 2017 Financial Results

• Record total revenue of $24 million, up 35% year-over-year

• Record quarterly licensing revenue of $14 million, up 88% year-over-year

• All-time high quarterly GAAP and non-GAAP net income of $5.8 million and $8.3 million, up 73% and 59% year-over-year, respectively

• All-time high quarterly non-GAAP EPS of $0.36

MOUNTAIN VIEW, Calif. – November 01, 2017 – CEVA, Inc. (NASDAQ: CEVA), the leading licensor of signal processing IP for smarter, connected devices, today announced its financial results for the third quarter ended September 30, 2017.

Total revenue for the third quarter of 2017 was $24 million, a 35% increase compared to $17.8 million reported for the third quarter of 2016. Third quarter 2017 licensing and related revenue was $14 million, an increase of 88% when compared to $7.5 million reported for the same quarter a year ago. Royalty revenue for the third quarter of 2017 was $10 million, a decrease of 4% when compared to $10.4 million reported for the third quarter of 2016.

Gideon Wertheizer, Chief Executive Officer of CEVA, stated: “Our third quarter record revenues considerably exceeded our expectations, driven by outstanding licensing execution and unprecedented demand for our IP. It is evident that our customers are increasingly placing greater value on our platform-based product strategy that expedites their development of high entry barrier technologies, including 5G, neural networks and short-range wireless. Furthermore, our design wins and customer relationships set the foundations for future royalty revenue streams as our licensees ship the next wave of smart and connected devices.”

GAAP net income for the third quarter of 2017 increased 73% to $5.8 million, compared to $3.4 million reported for the same period in 2016. GAAP diluted earnings per share for the third quarter of 2017 also increased 73%, to $0.26 from $0.15 a year ago.

Non-GAAP net income and diluted earnings per share for the third quarter of 2017 were $8.3 million and $0.36, respectively, representing a 59% and 50% increase, respectively, over the $5.2 million and $0.24 reported for the third quarter of 2016. Non-GAAP net income and diluted earnings per share for the third quarter of 2017 excluded: (a) equity-based compensation expense, net of taxes, of $2.1 million, and (b) the impact of the amortization of acquired intangibles of $0.3 million associated with the acquisition of RivieraWaves. Net income and diluted earnings per share for the third quarter of 2016 excluded: (a) equity-based compensation expense, net of taxes, of $1.5 million, and (b) the impact of the amortization of acquired intangibles of $0.3 million associated with the acquisition of RivieraWaves.

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During the quarter, CEVA completed eight license agreements. Two of the agreements were for CEVA DSP cores, platforms and software and six were for CEVA connectivity IPs. All of the licensing agreements signed during the quarter were for non-handset baseband applications and three were with first-time customers of CEVA. Customers’ target markets for the licenses include 5G base stations, A.I. for smartphones and consumer and industrial IoT. Geographically, two of the deals signed were in China, three were in the U.S. and three were in the APAC region.

Yaniv Arieli, Chief Financial Officer of CEVA, stated: “Our exceptional third quarter set new record highs across multiple key financial metrics, including total revenue, licensing revenue, operating income, GAAP and non-GAAP net income and non-GAAP fully diluted earnings per share. We also generated $7.1 million in the quarter from operating cash flow that continued to strengthen our balance sheet with our cash balance, marketable securities and bank deposits totaling approximately $178 million, with no debt.”

CEVA Conference Call

On November 01, 2017 CEVA management will conduct a conference call at 8:30 a.m. Eastern Time to discuss the operating performance for the quarter.

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/984/22872. 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: 10112881) from one hour after the end of the call until 9:00 a.m. (Eastern Time) on November 8, 2017. The replay will also be available at CEVA’s web site www.ceva-dsp.com.

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

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About CEVA, Inc.

CEVA is the leading licensor of signal processing IP for a smarter, connected world. We partner with semiconductor companies and OEMs worldwide to create power-efficient, intelligent and connected devices for a range of end markets, including mobile, consumer, automotive, industrial and IoT. Our ultra-low-power IPs for vision, audio, communications and connectivity include comprehensive DSP-based platforms for LTE/LTE-A/5G baseband processing in handsets, infrastructure and machine-to-machine devices, advanced imaging, computer vision and deep learning for any camera-enabled device, audio/voice/speech and ultra-low power always-on/sensing applications for multiple IoT markets. For connectivity, we offer the industry’s most widely adopted IPs for Bluetooth (low energy and dual mode), Wi-Fi (802.11 a/b/g/n/ac up to 4x4) and serial storage (SATA and SAS). Visit us at www.ceva-dsp.com and follow us on Twitter, YouTube and LinkedIn.

Forward Looking Statement

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 CEVA’s customers increasingly valuing its platform-based product strategy as a way to expedite their development of high entry barrier technologies, including 5G, neural networks and short range wireless, as well as the anticipation that CEVA’s current design wins and customer relationships set the foundations for future royalty revenue streams. The risks, uncertainties and assumptions include: the ability of the CEVA DSP cores and other technologies to continue to be strong growth drivers for us; our success in penetrating new markets, including in non-baseband markets, and maintaining our market position in existing markets; our ability to diversify the company’s licensing customers and royalty streams, the ability of products incorporating our technologies to achieve market acceptance, the speed and extent of the expansion of the 4G, 5G and LTE networks, the maturation of the IoT and connectivity markets, 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.

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CEVA, INC. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME – U.S. GAAP

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

	Three months ended September 30,				Nine months ended September 30,
	2017		2016		2017		2016
	Unaudited
Revenues:
Licensing and related revenues	$	14,021	$	7,456	$	33,893	$	23,576
Royalties		10,023		10,390		32,013		27,881
Total revenues		24,044		17,846		65,906		51,457
Cost of revenues		1,726		1,422		5,030		4,453
Gross profit		22,318		16,424		60,876		47,004
Operating expenses:
Research and development, net		10,031		7,346		30,413		23,071
Sales and marketing		3,057		2,763		9,422		8,463
General and administrative		2,711		2,218		7,388		6,286
Amortization of intangible assets		309		309		927		927
Total operating expenses		16,108		12,636		48,150		38,747
Operating income		6210		3,788		12,726		8,257
Financial income, net		821		615		2,147		1,617
Income before taxes on income		7,031		4,403		14,873		9,874
Income taxes		1,181		1,015		1,008		1,975
Net income		5,850		3,388		13,865		7,899
Basic net income per share	$	0.27	$	0.16	$	0.64	$	0.38
Diluted net income per share	$	0.26	$	0.15	$	0.62	$	0.37
Weighted-average number of Common Stock used in computation of net income per share (in thousands):
Basic		21,946		21,025		21,687		20,718
Diluted		22,683		21,883		22,480		21,395

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Unaudited Reconciliation of GAAP to Non-GAAP Financial Measures

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

	Three months ended September 30,						Nine months ended September 30,
	2017			2016			2017			2016
	Unaudited
GAAP net income	$	5,850		$	3,388		$	13,865		$	7,899
Equity-based compensation expense included in cost of revenue		125			65			330			179
Equity-based compensation expense included in research and development expenses		991			741			2,834			2,162
Equity-based compensation expense included in sales and marketing expenses		381			179			1,040			681
Equity-based compensation expense included in general and administrative expenses		722			580			2,142			1,626
Income tax benefit related to equity-based compensation expenses		(84	)		(51	)		(268	)		(148	)
Amortization of intangible assets related to RivieraWaves transaction		309			309			927			927
Non-GAAP net income	$	8,294		$	5,211		$	20,870		$	13,326
GAAP weighted-average number of Common Stock used in computation of diluted net income per share (in thousands)		22,683			21,883			22,480			21,395
Weighted-average number of shares related to outstanding stock-based awards (in thousands)		273			267			301			354
Weighted-average number of Common Stock used in computation of diluted earnings per share, excluding the above (in thousands )		22,956			22,150			22,781			21,749
GAAP diluted net income per share	$	0.26		$	0.15		$	0.62		$	0.37
Equity-based compensation expense, net of taxes	$	0.09		$	0.07		$	0.26		$	0.20
Amortization of intangible assets related to RivieraWaves transaction	$	0.01		$	0.02		$	0.04		$	0.04
Non-GAAP diluted net income per share	$	0.36		$	0.24		$	0. 92		$	0. 61

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CEVA, INC. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(U.S. Dollars in thousands)

	September 30, 2017			December 31, 2016 (*)
	Unaudited			Unaudited
ASSETS
Current assets:
Cash and cash equivalents	$	22,931		$	18,401
Marketable securities and short term bank deposits		115,425			108,115
Trade receivables, net		12,885			15,044
Prepaid expenses and other current assets		4,588			3,152
Total current assets		155,829			144,712
Long-term assets:
Bank deposits		39,214			29,977
Severance pay fund		9,243			7,941
Deferred tax assets		2,940			2,252
Property and equipment, net		6,698			4,805
Goodwill		46,612			46,612
Intangible assets, net		2,051			2,978
Other long term assets		4,588			3,218
Total assets	$	267,175		$	242,495
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Trade payables	$	468		$	571
Deferred revenues		4,274			6,258
Accrued expenses and other payables		13,725			15,766
Total current liabilities		18,467			22,595
Long-term liabilities:
Accrued severance pay		9,752			8,349
Total liabilities		28,219			30,944
Stockholders’ equity:
Common stock:		22			21
Additional paid in-capital		215,532			212,103
Treasury stock		(27,632	)		(39,507	)
Accumulated other comprehensive loss		(201	)		(497	)
Retained earnings		51,235			39,431
Total stockholders’ equity		238,956			211,551
Total liabilities and stockholders’ equity	$	267,175		$	242,495

(*) Derived from audited financial statements

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EX-99.2

Exhibit 99.2

Earnings Release Conference Call Script for the Quarter Ended September 30, 2017

This script is a textual representation of CEVA, Inc.’s conference call. While efforts are made to provide an accurate transcription, there may be errors, omissions, or inaccuracies in the reporting of the substance of the conference call. Information presented in the transcription was current only as of the date of the conference call, and may have subsequently changed materially. DSP Group, Inc. does not update or delete outdated information contained in this transcript, and disclaims any obligation to do so.

CEVA Inc. Q3 2017 Conf. Call Script

Thank you. Good morning everyone and welcome to CEVA’s third quarter 2017 earnings conference call. I’m joined today by Gideon Wertheizer, Chief Executive Officer of CEVA and Yaniv Arieli, Chief Financial Officer of CEVA. Gideon will cover the business aspects and the highlights from the quarter and provide general qualitative data. Yaniv will then cover the financial results for the third quarter and provide guidance for the fourth quarter and full year 2017. I will start with the forward-looking statements.

Forward Looking Statement

Today’s conference call 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 our financial guidance for the fourth quarter and full year 2017; optimism about the licensing pipeline and our product portfolio; anticipated licensing opportunities and potential royalty revenue in trends relating to 5G and LTE-IoT; projected customer ramp-up schedules, and optimism about the successive growth in the non-handset space. The risks, uncertainties and assumptions include: the ability of the CEVA signal processing IPs for smarter, connected devices to continue to be strong growth drivers for us; our success in penetrating new markets, specifically non-baseband 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 LTE and 5G networks, LTE-IoT and IoT space generally; our ability to execute more broad portfolio license agreements; customers’ ramp-up schedules and the impact on royalty revenues; the effect of intense industry competition and consolidation; global chip market trends; 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. With that said, I would now like to turn the call over to Gideon.

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Gideon

Thank you Richard and welcome everyone. Our third quarter financial results dramatically exceeded our expectations driven by record licensing revenues and activities. Across all of our product lines, we are experiencing favorable licensing dynamics, as customers are increasingly placing greater value in our platform-based strategy, which offers a holistic solution to high entry barrier technologies, in particular 5G, neural networks and short-range wireless.

Revenue for the third quarter came in at a record high $24 million, significantly higher than our guidance and up 35% year-over-year. Licensing and related revenue was also an all-time record high at $14 million, up 88% year-over-year. GAAP and non-GAAP net income and non-GAAP EPS also set company records. During the third quarter, we concluded eight deals, of which two were for our DSP cores and platforms and 6 were for our connectivity IPs. All of the deals were for non-handset baseband applications, and three were with first-time customers. Customers’ target markets for the licenses completed in the quarter were 5G base stations, surveillance, industrial and consumer IoT. On royalties, revenue came in at $10 million, down 4% vs. last year, reflecting above seasonal weakness in the smartphone market. This was however, partially offset by new shipments in our non-handset baseband segments, primarily for base station chips and computer vision products within smartphones, action cameras and 360-degree cameras.

Let me take the next few minutes to update you on recent market developments which we plan to capitalize on by leveraging our technology excellence and strong track record in cellular. Those developments present ongoing licensing opportunities and substantial royalty revenue potential as chips enabled by our technologies will reach mass production.

Last March, the 3GPP, which is the body in charge of cellular standardization decided to accelerate the milestone for finalizing the 5G New Radio standard toward the end of 2017. This paves the way for 5G trails as early as 2018 following by commercial products in 2019, one year ahead of what was originally planned. 5G is a disruptive technology, a pivot for multiple new services and products among which are: high definition video streaming, un-tethered virtual reality, augmentation reality, autonomous driving. AI and more. 5G will also be the key enabler for the Industry 4.0 initiative for which machine and factory automation will be revolutionized by using AI algorithms available in the cloud that will be accessible through fast and reliable 5G networks.

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These substantial opportunities drive governments and wireless carriers to expedite investments and regulations for 5G.

• In June, the Chinese government announced that it would invest over $400Bn in 5G deployments over the next 10 years.

• In the US, the FCC has been working to free up millimeter-wave spectrum for carriers to enable faster 5G networks. In this respect, Verizon and AT&T have announced 5G services at 28 and 39Ghz spectrum for the last mile delivery. It enables a much cheaper alternative for home broadband internet services, compared to fiber routing.

• South Korea is planning a commercial 5G network in time for the 2018 Winter Olympics.

• Last, the approval by the Department of Justice of the pending acquisition of Time Warner by AT&T and Verizon’s acquisition of AOL and Yahoo set the stage for video streaming services over 5G.

Our new advanced DSP platform, the XC12, has already been licensed to three of the top five base station OEMs who are intensively working on in-house chip solutions for 5G. We are also making progress with a few other key players in the space, which we have not had business relationships with in the past. Furthermore, we have a number of customers designing 5G mobile broadband chips for Smartphones and home routers based on our CEVA-X and XC platforms. Overall, 5G is a technology breakpoint, requiring new expertise and product offerings. We foresaw these needs and invested ahead of the market, enabling us to offer our customers a head start as the 5G market takes off.

An additional recent market acceleration is LTE-IoT, a provision of the LTE standard specifically targeted for low power, low data rate for IoT applications. According to a recent report from GSMA, by 2026, as many as 3.8 billion LTE-based IoT connections will be in operation for applications such as smart meters, smart cities, shared bikes, agriculture and more. China Mobile is leading the pace, aiming to invest $6B in the next two years. In anticipation of the proliferation of LTE-IoT-based chips and applications, we have taken significant steps with our technologies to reduce the entry barriers for many semiconductor companies who have no prior experience in cellular and are looking to benefit from this sizable and diversified market. In this regard, we have recently expanded our partnership with ASTRi of Hong Kong, a reputable RF and analog design service IP company. CEVA now acts as a one-stop-shop for a complete, drop-in NB-IoT solution. In China, Sanechips, formerly known as ZTE Microelectronics, has already launched Rosefinch7100, its first NB-IoT chip based on our CEVA-X1 IoT processor. This chip is expected to be in high volume production early next year.

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Moving to royalties, the third quarter royalty revenue reflects a soft smartphone market due to what appears to be a combination of transformation in the high-growth Indian smartphone market where LTE penetration is still small and a pushout of a top tier flagship handset. We, however, were encouraged by the growing shipments of base station basebands and vision products in smartphone and cameras, which partially offset the decline in handset royalty revenue.

To conclude, I am very pleased with our all-time-high licensing performance and profitability in the third quarter on the back of a stellar first half of the year. We are extremely excited about the recent licensing dynamics, driven by lucrative opportunities in 5G, LTE-IoT, Neural Network, Wi-Fi, Bluetooth and voice. The impact of this licensing momentum goes far beyond the initial revenue from these deals, as this momentum poses significant future royalty revenue potential from those extremely sizable markets.

With than said, let me turn the call over to Yaniv for the financials and the guidance.

Yaniv

Thank you Gideon, I’ll start by reviewing the results of our operations for the third quarter of 2017.

- Revenue for the third quarter was at an all-time high of $24 million, up 35% on a yearly basis. The revenue breakdown is as follows:

^○  Licensing and related revenue was approximately $14 million, reflecting 58% of total revenues, 88% higher as compared to the third quarter of 2016, a second sequential record high.

^○  Royalty revenue was $10 million, reflecting 42% of total revenues, and 4% lower on YoY basis.

- Quarterly gross margin was 93% on both U.S. GAAP and non-GAAP basis. Non-GAAP quarterly gross margin excluded approximately $0.1m of equity-based compensation expenses.

- Total operating expenses for the third quarter were just over the mid-range of our guidance at $16.1 million. OPEX also included an aggregate equity-based compensation expense of approximately $2.1 million, and $0.3 million for the amortization of acquired intangibles of RivieraWaves. Total operating expenses for the third quarter, excluding equity-based compensation expenses and amortization of intangibles, were $13.7 million, just over the mid-range of our guidance.

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- U.S. GAAP net income and diluted EPS for the quarter both increased dramatically, by 73% to $5.8 million and 26 cents, respectively, over the third quarter of 2016. US GAAP net income also reached an all-time record high.

- Non-GAAP net income and diluted EPS for the third quarter of 2017 both reached an all- time high and increased 59% and 50% year over year to $8.3 million and 36 cents, respectively. Those figures exclude equity-based compensation expenses, net of taxes, of $2.1 million, and the impact of the amortization of acquired intangibles of RivieraWaves, of $0.3 million.

Other related data:

- Shipped units by CEVA licensees during the third quarter of 2017 were 250 million, down 7% and 10% sequentially and from third quarter reported shipments of 2016, respectively. Of the 250 million units shipped, 189 million units, or 76%, were for handset baseband chips, reflecting a sequential decrease of 15% from 222 million units of handset baseband chips shipped during the second quarter of 2017 and a 13% decrease from 218 million units shipped year over year.

In non-baseband, volume shipments continued to increase 30% sequentially, and 3% on a YoY basis. The increase is due to higher quarterly Bluetooth, vision and base station shipments. From a revenue perspective, third quarter non-baseband royalty revenue increased sequentially by strong double digits (with volume increase) and on a year-over-year basis, approximately doubled, contributing approximately $2 million of the royalty revenues in the quarter.

As for the balance sheet items:

As of September 30, 2017, CEVA’s cash and cash equivalent balances, marketable securities and bank deposits grew to just shy of $178 million. Our DSO for the third quarter of 2017 was 49 days, compared to the prior quarter’s 46 days.

During the second quarter, we generated $7.1 million of net cash from operations; depreciation was $0.5 million and purchase of fixed assets was $1.1 million, mainly due to new software activations. At the end of Sept 2017, our headcount was 306 people, of which 246 were engineers.

Now for Guidance:

On licensing, as demonstrated throughout this year, we experience good interest for our technologies. Also, we expect the acceleration in 5G standardization and the proliferation of LTE-IoT, to create demand for our cellular solutions. As such, we are once again, raising our annual license target, the third time this year, from approximately $32 million last year to a new target of just over $43 million for 2017, representing over 35% annual growth.

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On royalties, after a soft third quarter in the handset space, we expect sequential increase in the fourth quarter in both our handset baseband and the non-handset products. Overall, this should enable us to record a new all-time high annual royalty revenue of over $43 million or possibly 7% annual growth.

Our guidance for the fourth quarter of 2017 is as follows:

Revenue for the fourth quarter of 2017 is expected to be in the range of $20.5 million to $21.5 million

- Gross margin is expected to be approximately 90% on GAAP basis and 91% on non-GAAP basis, excluding an aggregate of $0.1 million of equity-based compensation expenses. Both margins planned to be a bit lower than the norm, due to COGS expenses associated with our new partnership in the NB-IoT space.

- Overall OPEX should be similar to the third quarter. Q4-17 OPEX is expected to be in the range of $15.6 million to $16.6 million. Of our anticipated total operating expenses for the fourth quarter, $2.4m is expected to be attributable to equity-based compensation expenses and $0.3 million to the amortization of acquired intangibles. Non-GAAP OPEX is expected to be slightly lower than the third quarter we just reported, and in the range of $13m – $14m.

- Net interest income is expected to be approximately $0.75 million.

- Tax rate for the fourth quarter, similar to the third quarter actuals – on GAAP basis 17% and on non-GAAP basis is 13%.

- Share count for the fourth quarter of 2017 is expected to be approximately 23 million shares.

- U.S. GAAP fully diluted earnings per share is expected to be in the rage of 12 cents to 14 cents and non-GAAP EPS forecast, excluding the aggregate $2.4 million equity-based compensation expense, net of taxes, and amortization expenses, of $0.3 million, is expected to be in the range of 23 to 25 cents per share.

- For the full year, revenues are forecasted to be the highest in the company’s history just shy of $87 million and non GAAP fully diluted EPS of approximately $1.16, representing over 20% YoY growth.

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

Wrap Up: Richard

• Thank you for joining us today and for your continued interest in and support of CEVA. We will be attending the following upcoming events and invite you to meet with us there:

• ROTH Technology Corporate Access Day on November 15^th in New York

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• Exane BNP Paribas Midcap Forum on November 29^th in London

• Barclays Global Technology, Media and Telecommunications Conference on December 6^th in San Francisco

Please visit the investor section of our website for further information on these events and other events we will be attending.

Thank you and goodbye

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