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): August 9, 2021

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 August 9, 2021, CEVA, Inc. (the “Company”) announced its financial results for the quarter ended August 9, 2021. A copy of the press release, dated August 9, 2021, 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 second quarter of 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 June 30, 2021 and 2020 in accordance with generally accepted accounting principles in the United States (“GAAP”), the press release and script also included non-GAAP net income and diluted earnings per share (EPS) figures for the referenced periods.

Non-GAAP net income and diluted earnings per share for (1) the second 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 acquisitions of the Intrinsix and Hillcrest Labs businesses, investments in NB-IoT and Immervision technologies, and (c) costs associated with the acquisition of Intrinsix; and (2) the second quarter of 2020 excluded (i) equity-based compensation expense, net of taxes, and (ii) the impact of the amortization of acquired intangibles, net of taxes, 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 June 30, 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 Press release of CEVA, Inc., dated August 9, 2021.

99.2 Script of the conference call of CEVA, Inc., dated August 9, 2021.

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:    August 9, 2021	By:	/s/ Yaniv Arieli
		Yaniv Arieli
		Chief Financial Officer

EX-99.1

Exhibit 99.1

CEVA, Inc. Announces Second Quarter 2021 Financial Results

● All-time record high total revenue of $30.5 million, up 29% year-over-year

● All-time record high shipments of Bluetooth, Wi-Fi and cellular IoT devices indicative of Company’s continued momentum and leadership in wireless connectivity

Rockville, MD, August 9, 2021 – CEVA, Inc. (NASDAQ: CEVA), the leading licensor of wireless connectivity and smart sensing technologies, today announced its financial results for the second quarter ended June 30, 2021.

Total revenue for the second quarter of 2021 was an all-time record high $30.5 million, a 29% increase compared to $23.6 million reported for the second quarter of 2020. Second quarter 2021 licensing, non-recurring engineering (NRE) and related revenue was $15.5 million, an increase of 15% when compared to $13.5 million reported for the same quarter a year ago. Royalty revenue for the second quarter of 2021 was $14.9 million, an increase of 48% when compared to $10.1 million reported for the second quarter of 2020. Royalty revenue included a payment of $3.3 million upon the resolution of a disagreement on royalties for past shipments.

Seventeen license agreements were concluded during the quarter, out of which six were with first time customers. Customers’ target applications and devices include True Wireless Stereo (TWS) earbuds, 5G smartphones, surveillance equipment, Wi-Fi 6 and 5G for telecom, enterprise and industrial markets, and a range of applications for IoT, consumer and medical. Geographically, nine of the deals signed were in China, two were elsewhere in the Asia-Pacific Region, five were in the U.S, and one was in Europe.

Gideon Wertheizer, CEO of CEVA, stated: “Our performance in the second quarter was exceptional, both in terms of financial metrics, with all-time high revenue, and in terms of market traction, where our IP portfolio continues to attract customers who rely on us to streamline and expedite their IoT and 5G strategies. With the acquisition of Intrinsix in the quarter, we are expanding our market reach to the large aerospace & defense space and enriching our business model, offering key customers optimized solutions that take advantage of our differentiated IP and competencies in RF, mixed-signal and security IP solutions. Our royalty mix continues to show strength in the base station and IoT category, with 5G base station radio access networks (RAN) returning to growth in the quarter and record shipments of Bluetooth, Wi-Fi and cellular IoT devices.”

GAAP net income for the second quarter of 2021 was $0.3 million, as compared to a net loss of $1.1 million reported for the same period in 2020. GAAP diluted earnings per share for the second quarter of 2021 was $0.01, as compared to a GAAP diluted loss per share of ($0.05) for the same period in 2020.

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Non-GAAP net income and diluted earnings per share for the second quarter of 2021 increased to $5.1 million and $0.22, respectively, from $2.9 million and $0.12 reported for the second quarter of 2020. Non-GAAP net income and diluted earnings per share for the second quarter of 2021 excluded: (a) equity-based compensation expense, net of taxes, of $2.9 million, (b) the impact of the amortization of acquired intangibles, net of taxes, of $0.9 million associated with the acquisitions of the Intrinsix and Hillcrest Labs businesses, investments in NB-IoT and Immervision technologies, and (c) $1.0 million of costs associated with the Intrinsix acquisition. Non-GAAP net income and diluted earnings per share for the second quarter of 2020 excluded: (a) equity-based compensation expenses, net of taxes, of $3.3 million, and (b) the impact of the amortization of acquired intangibles, net of taxes, of $0.7 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: “Our outstanding second quarter financial performance generated top-line growth year-over-year of 29%, and non-GAAP EPS growth of 83%. Licensing, NRE and related revenue included NRE revenues for the first time, as we completed the acquisition of Intrinsix prior to the end of the quarter. Our blended corporate tax rate was back to its forecasted levels as our revenue deal mix was more balanced. At the end of June 2021, our cash and cash equivalent balances, marketable securities and bank deposits were approximately $137 million, with no debt.”

CEVA Conference Call

On August 9, 2021, 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/984/42097. 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: 10158545) from one hour after the end of the call until 9:00 a.m. (Eastern Time) on August 16, 2021. The replay will also be available at CEVA's web site www.ceva-dsp.com.

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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 regarding the impact of the Intrinsix acquisition on the Company’s market reach and business model and demand for the Company’s products. 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 CEVA DSP cores and other technologies to continue to be strong growth drivers for us; our success in penetrating new markets, including in the base station and IoT 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 maturation of the connectivity, IoT and 5G markets, 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, 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; our ability to successfully integrate Intrinsix into our business; 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 for a smarter, safer, connected world. We offer Digital Signal Processors, AI processors, cryptography cores, wireless platforms and complementary software for sensor fusion, image enhancement, computer vision, voice input and artificial intelligence, all of which are offered in conjunction with our Intrinsix chip design capabilities for complete IP solutions. We partner with semiconductor companies and OEMs worldwide to create power-efficient, intelligent, secure and connected devices for a range of end markets, including mobile, PC, consumer, automotive, robotics, industrial, aerospace & defense, medical 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 (802.11n/ac/ax), Ultra-wideband (UWB) and NB-IoT are the most broadly licensed connectivity platforms in the industry.

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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

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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					Six months ended
	June 30,					June 30,
	2021		2020			2021			2020
	Unaudited		Unaudited			Unaudited			Unaudited
Revenues:
Licensing, NRE and related revenues	$	15,535	$	13,530		$	29,932		$	28,025
Royalties		14,922		10,076			25,927			19,196
Total revenues		30,457		23,606			55,859			47,221
Cost of revenues		3,693		3,005			6,074			5,756
Gross profit		26,764		20,601			49,785			41,465
Operating expenses:
Research and development, net		17,457		14,979			35,050			30,092
Sales and marketing		2,893		2,893			6,195			6,061
General and administrative		4,159		3,663			7,039			7,327
Amortization of intangible assets		667		575			1,243			1,157
Total operating expenses		25,176		22,110			49,527			44,637
Operating income (loss)		1,588		(1,509	)		258			(3,172	)
Financial income, net		356		838			392			1,669
Income (loss) before taxes on income		1,944		(671	)		650			(1,503	)
Taxes on income		1,629		419			3,965			772
Net income (loss)	$	315	$	(1,090	)	$	(3,315	)	$	(2,275	)
Basic and diluted net income (loss) per share	$	0.01	$	(0.05	)	$	(0.15	)	$	(0.10	)
Weighted-average shares used to compute net income (loss) per share (in thousands):
Basic		22,823		22,017			22,685			22,006
Diluted		23,140		22,017			22,685			22,006

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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					Six months ended
	June 30,					June 30,
	2021		2020			2021			2020
	Unaudited		Unaudited			Unaudited			Unaudited
GAAP net income (loss)	$	315	$	( 1,090	)	$	(3,315	)	$	(2,275	)
Equity-based compensation expense included in cost of revenues		119		156			262			314
Equity-based compensation expense included in research and development expenses		1,743		1,722			3,428			3,345
Equity-based compensation expense included in sales and marketing expenses		367		512			785			963
Equity-based compensation expense included in general and administrative expenses		677		1,027			1,629			1,902
Income tax benefit related to equity-based compensation expenses		—		(135	)		—			(184	)
Amortization of intangible assets, net of taxes, related to acquisition of Intrinsix and Hillcrest Labs business, investments in NB-IoT and Immervision technologies		851		684			1,537			1,377
Costs associated with the Intrinsix acquisition		1,005		—			1,005			—
Non-GAAP net income	$	5,077	$	2,876		$	5,331		$	5,442
GAAP weighted-average number of Common Stock used in computation of diluted net income (loss) per share (in thousands)		23,140		22,017			22,685			22,006
Weighted-average number of shares related to outstanding stock-based awards (in thousands)		343		1,015			739			973
Weighted-average number of Common Stock used in computation of diluted earnings per share, excluding the above (in thousands)		23,483		23,032			23,424			22,979
GAAP diluted net income (loss) per share	$	0.01	$	( 0.05	)	$	( 0.15	)	$	( 0.10	)
Equity-based compensation expense, net of taxes	$	0.13	$	0.14		$	0.27		$	0.28
Amortization of intangible assets, net of taxes, related to acquisition of Intrinsix and Hillcrest Labs business, investments in NB-IoT and Immervision technologies	$	0.04	$	0.03		$	0.07		$	0.06
Costs associated with the Intrinsix acquisition	$	0.04		—		$	0.04			—
Non-GAAP diluted earnings per share	$	0.22	$	0.12		$	0.23		$	0.24

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CEVA, INC. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(U.S. Dollars in thousands)

	June 30,			December 31,
	2021			2020 (*)
	Unaudited			Unaudited
ASSETS
Current assets:
Cash and cash equivalents	$	26,706		$	21,143
Marketable securities and short-term bank deposits		100,394			108,987
Trade receivables, net		10,484			14,765
Unbilled receivables		16,213			16,459
Prepaid expenses and other current assets		7,451			6,205
Total current assets		161,248			167,559
Long-term assets:
Bank deposits		10,167			29,529
Severance pay fund		10,210			10,535
Deferred tax assets, net		13,220			10,826
Property and equipment, net		7,421			7,586
Operating lease right-of-use assets		8,211			9,052
Goodwill		75,979			51,070
Intangible assets, net		14,753			10,836
Other long-term assets		9,416			9,959
Total assets	$	310,625		$	306,952
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Trade payables	$	2,077		$	894
Deferred revenues		4,382			2,434
Accrued expenses and other payables		19,759			21,883
Operating lease liabilities		3,063			2,969
Total current liabilities		29,281			28,180
Long-term liabilities:
Accrued severance pay		10,606			11,226
Operating lease liabilities		4,718			5,772
Other accrued liabilities		1,004			885
Total liabilities		45,609			46,063
Stockholders’ equity:
Common stock		23			22
Additional paid in-capital		230,083			233,172
Treasury stock		(17,210	)		(30,133	)
Accumulated other comprehensive income		239			478
Retained earnings		51,881			57,350
Total stockholders’ equity		265,016			260,889
Total liabilities and stockholders’ equity	$	310,625		$	306,952

(*) Derived from audited financial statements

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EX-99.2

Exhibit 99.2

CEVA, Inc. Q2 2021 Financial Results Conference Call - Prepared Remarks :: August 9, 2021

CEVA, INC.

Second Quarter 2021 Financial Results Conference Call

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

August 9, 2021

8:30 A.M. Eastern

Good morning everyone and welcome to CEVA’s second quarter 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 second quarter and provide general qualitative data. Yaniv will then cover the financial results for the second quarter and also provide qualitative data for the third quarter and full year 2021.

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 and related deal flow, including increased revenues from our Chinese wireless customer; expectations regarding market dynamics, including growth in the 4G and 5G handset space and TWS earbuds space; beliefs regarding benefits and impacts of the Intrinsix acquisition; and guidance and qualitative data for the third quarter and full year 2021. 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.

CEVA, Inc. Q2 2021 Financial Results Conference Call - Prepared Remarks :: August 9, 2021

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

Gideon

Thank you, Richard. Our second quarter results were exceptional and demonstrate the momentum in our business. Our customers place high value on our products in conjunction with their 5G and IoT roadmaps, and we’re continually experiencing successful rollouts of new CEVA-enabled products. Our revenue and earnings came in significantly ahead of our expectations on the back of a solid overall business environment despite industry-wide challenges with respect to semiconductor supply. Revenue in this quarter also incorporates a royalty payment owed to us after we constructively resolved a disagreement on royalty rates with a customer on past shipments. Late in the quarter, we concluded the acquisition of Intrinsix, a leading chip design specialist and security IP, which expands our market reach to the large aerospace and defense space and enable us to offer a compelling proposition of optimized IP solutions to our customers.

Total revenue for the second quarter of 2021 was an all-time record high $30.5 million, up 29% year-over-year. The licensing environment continues to be strong with good diversity of IP adoptions and targeted markets. Licensing revenue came at $15.5 million, up 15% year-over-year and included for the first-time, non-recurring engineering or NRE revenue from the Intrinsix business after we finalized the acquisition late last quarter. We signed seventeen new agreements, of which 6 were with first-time customers. Customer targeted markets reflect a brisk design activity in the True Wireless Stereo or TWS earbuds space, the growing adoption of Wi-Fi 6 and 5G in telecom, enterprise and industrial markets and a range of applications for IoT, consumer and medical. In addition, we signed a SensPro2 computer vision and AI DSP license agreement with a key customer that recently won designs with one of the largest China-based surveillance camera OEM, displacing Huawei HiSilicon with a CEVA-based solution. Also, at the beginning of the third quarter, we signed a comprehensive and sizable portfolio agreement with a key semiconductor player in the mobile market in China. The agreement extends our footprint and provides us additive royalty opportunities on LTE and 5G handset shipments derived from our connectivity IPs. Based on a recent report from CINNO Research in China, this customer managed to penetrate the top five list of smartphone chip suppliers in China in May for the first time, as its latest chips are adopted by top tier OEMs such as Honor and Realme.

CEVA, Inc. Q2 2021 Financial Results Conference Call - Prepared Remarks :: August 9, 2021

Royalty revenue came at $14.9 million in the quarter, up 48% year over year. Royalty unit shipments were 451 million on the back of strong demand for CEVA-powered Bluetooth, Wi-Fi and cellular IoT devices. Base station 5G RAN royalties grew substantially on a quarterly basis, reflecting share gains and the resumption of capital investment in 5G networks by Chinese operators. In handsets, our Chinese semiconductor customer continues to expand in the 4G and 5G market as it successfully penetrates top tier Chinese OEMs. This growth was offset by slightly lower than expected shipments by our Tier one U.S.-based OEM, which we believe is largely attributed to supply constraints and softness in India due to the pandemic. As noted earlier, the royalty revenue for the second quarter incorporates approximately $3.3 million due to us following our resolution of a disagreement on royalty rates.

Let me now provide some details on the market dynamics we are experiencing in one of our main markets, namely TWS earbuds. TWS earbuds, are expected to be the second largest category after smartphones in terms of unit volume. Its mass adoption has driven down the prices, making TWS earbuds affordable even in developing countries such as India. The technology is systematically progressing toward becoming an AI-based smart voice assistant like the smart speaker, and a health monitoring device to measure things like PPG, ECG, temperature, glucose level and fitness. The recent executive order by President Biden to allow Americans to buy hearing aids over the counter serves to diversify and expand the use of TWS into this very large and lucrative space. Our recently announced Bluebud platform is a key enabler for the smartification and diversification of TWS usages. It offers a comprehensive integration of the most prominent common denominators in all TWS earbuds, these being wireless connectivity, audio and sensor processing. Our RivieraWaves Bluetooth 5.2 controller and the CEVA BX1 DSP are two widely used and reputable technologies that successfully addresses the inherent challenges of low power, audio performance and cost. Furthermore, the Bluebud platform is enriched with a range of key software technologies from CEVA among which are SensLinQ, a software framework to seamlessly integrate the software and AI applications of different sensors, our ClearVox and Whispro technologies, for AI-based voice assistant capabilities and our MotionEngine for a range of UI and fitness applications. Bluebud’s unique proposition puts CEVA in position to become the de-facto standard in transforming earbuds from an audio -only device to a smart wireless device empowering advanced services such as AI-based virtual assistant and health-related features.

CEVA, Inc. Q2 2021 Financial Results Conference Call - Prepared Remarks :: August 9, 2021

On the Intrinsix front, the integration is underway and progressing smoothly. We are getting constructive feedback from customers in the defense and industrial spaces and have already started to reach out additional customers with our combined proposition. Intrinsix’s chip design and IP capabilities have a pivotal role to play in the expansion of CEVA’s business from licensing standardized IP toward the licensing of highly integrated IP based solutions powered by our portfolio of DSPs, connectivity, security, RF and mixed-signal IP. In capitalizing on Intrinsix’s technologies and expertise, CEVA is in an excellent position to move up in the value chain to address the needs of system and semiconductor customers for an optimized and differentiated chip designs that take advantage of CEVA’s high valued IP. This proposition in turn creates stronger ties with customers and larger revenue opportunities.

So, in summary, we continue to leverage on our diverse and high-valued technology portfolio to deepen engagements with customers and to capture the exploding demand for smart and connected devices. We are encouraged by our penetration in the 5G handset space, where we can address in addition to baseband processing additional business vectors such as wireless connectivity and audio. The TWS space and its evolution towards smart wearable devices present a huge market opportunity where we can capitalize on our unique excellence to combine audio and wireless connectivity. Last but not least, with the Intrinsix team on board, we are in the early stages of a secular growth trajectory where our enriched proposition provides us with access to new markets and lucrative customers engagements.

CEVA, Inc. Q2 2021 Financial Results Conference Call - Prepared Remarks :: August 9, 2021

On the supply shortage, we are working hard, shoulder to shoulder with our customer and suppliers to meet the outstanding demand for chips enabled by our IP. We hope supply constraints will not last much longer.

With that said, let me handover the call to Yaniv for the financials.

Yaniv

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

- Revenue for the second quarter was up 29% to $30.5 million, an new all-time high, as compared to $23.6 million for the same quarter last year. The revenue breakdown is as follows:

o Licensing, NRE and related revenue was approximately $15.5 million, reflecting 51% of total revenues, a 15% growth from $13.5 million for the second quarter of 2020. This is the first quarter we recorded NRE revenues, which resulted from our acquisition of Intrinsix in June. The NRE revenues totaled approximately $1.2 million.

o Royalty revenue was up 48% to $14.9 million, reflecting 49% of total revenues, compared to $10.1 million for the same quarter last year. Second quarter 2021 royalties included a royalty payment owed to us of approximately $3.3 million after we constructively settled a dispute on royalty rates with a customer.

o Quarterly gross margin was 88% on a GAAP basis and 89% on a non-GAAP basis, both lower than what we projected, as we integrated Intrinsix’s NRE costs into the cost of revenue. Non-GAAP quarterly gross margin excluded approximately $0.1 million of equity-based compensation expenses and $0.2 million of the impact of the amortization of acquired intangibles.

- Total GAAP operating expenses for the second quarter was over the higher-end of our guidance at $25.2 million, due to the integration of the Intrinsix’s expenses for the month of June, ahead of our expectations and prior quarter’s guidance, as well as $0.9 million associated with Intrinsix’s deal costs. OPEX also included an aggregate equity-based compensation expense of approximately $2.8 million, and $0.8 million for the amortization of acquired intangibles, including Intrinsix’s. Total Non-GAAP operating expenses for the second quarter, excluding equity-based compensation expenses and amortization of intangibles and deal costs, were $20.7 million, just over the high-end of our guidance, due to the integration of the Intrinsix’s expenses for the month of June, ahead of our expectations and prior quarter’s guidance.

CEVA, Inc. Q2 2021 Financial Results Conference Call - Prepared Remarks :: August 9, 2021

- Tax expense for the second quarter came in as expected, still with strong revenue mix and interest for our connectivity products originating in France, which has a high corporate tax rate of 26.5%.

- U.S. GAAP net income for the quarter was $0.3 million and diluted net income per share was 1 cent for the second quarter of 2021, as compared to net loss of $1.1 million and diluted loss per share of 5 cents for the second quarter of 2020.

- Non-GAAP net income and diluted EPS for the second quarter of 2021 were $5.1 million and 22 cents, up 77% and 83% year-over-year, respectively. Non-GAAP net income and diluted EPS for the second quarter of 2020 were $2.9 million and 12 cents, respectively. Second quarter 2021 figures exclude equity-based compensation expenses, net of taxes, of $2.9 million, the impact of the amortization of acquired intangibles in the amount of $1.0 million and $0.9 million of costs associated with the Intrinsix acquisition.

With respect to other related data

- Shipped units by CEVA licensees during the second quarter of 2021 were 451 million units, up 32% sequentially and up 95% from the second quarter 2020 reported shipments.

- Of the 451 million units shipped, 138 million units, or 31%, were for handset baseband chips, reflecting a sequential increase of 7% from 129 million units of handset baseband chips shipped during the first quarter of 2021 and a 39% increase from 99 million units shipped year over year.

- Our base station and IoT product shipments were a record 313 million units, up 48% sequentially and up 137% year over year.

- Of note, Bluetooth was a record 189 million units in the quarter, and Wi-Fi and cellular IoT units also reached record highs.

- 5G RAN base station shipments and revenues were stronger than in the last few quarters due to a customer in China delivering equipment for the continued 5G network rollout in China.

CEVA, Inc. Q2 2021 Financial Results Conference Call - Prepared Remarks :: August 9, 2021

As for the balance sheet items

- As of June 30, 2021, CEVA’s cash and cash equivalent balances, marketable securities and bank deposits were $137 million. We did not exercise our buyback plan this quarter, as we focused on the Intrinsix acquisition and expansion of our business.

- Our DSO for the second quarter of 2021 was 31 days, lower than to the prior quarter and lower than our norm.

- During the second quarter, cash used in operating activities was $6.8 million, depreciation and amortization was $1.6 million, and purchase of fixed assets was $0.2 million.

- At the end of the second quarter, our headcount included the Intrinsix team for the first time and was 468 people, of which 387 were engineers. This is up from a total of 412 people at the end of the first quarter of 2021, mainly due to adding the Intrinsix employees.

Now for the guidance

Given our strong top line performance during the first half of 2021 and the opportunities ahead, we are raising our annual revenue guidance to a $119 million - $121 million range, up approximately 20% versus our 2020 revenue. As Gideon alluded to earlier, we are experiencing a healthy licensing environment and the pipeline is solid. We also are expanding into new markets and can offer enriched value to our customers as the result of the integration of Intrinsix.

On royalties, our base station and IoT category continues to expand, as illustrated by record shipments this quarter, and the return to growth for our Chinese 5G RAN customer and a new 5G RAN customer ramping production. In mobile, our key Chinese wireless customer is expanding into top tier Chinese OEMs which will add to the royalty mix. We expect all these growth engines will help to offset the expected decline of royalties from the U.S.-based OEM that recently moved to Qualcomm based 5G modems.

Specifically for the third quarter of 2021

- Gross margin is expected to be approximately 81% on GAAP and 82% on non-GAAP basis, excluding an aggregate of $0.1 million of equity-based compensation expenses and $0.2 million of amortization of other assets associated with the Immervision investment. Both include a full quarter Intrinsix engineering COGS allocations for NRE projects.

CEVA, Inc. Q2 2021 Financial Results Conference Call - Prepared Remarks :: August 9, 2021

- OPEX for the third quarter of 2021 should be similar to or slightly lower than the second quarter. For the third quarter, GAAP-based OPEX is expected to be in the range of $24.4 million to $25.4 million. Of our anticipated total operating expenses for the second quarter, $3.1 million is expected to be attributable to equity-based compensation expenses, $0.9 million to the amortization of acquired intangibles and $0.3 million for Intrinsix holdback related expenses that we’ll record for the next two years on a quarterly basis. Non-GAAP OPEX is expected to be in the range of $20.1 million – $21.1 million.

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

- Taxes for the third quarter are expected to be approximately 22%-24% on non-GAAP basis.

- Share count for the third quarter of 2021 is expected to be 23.6 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:

● The Oppenheimer 24th Annual Technology, Internet & Communications Conference, August 10^th and 11^th

● Rosenblatt Securities Technology Summit – The Edge of AI, August 24^th to 26th

● Jefferies 2021 Semiconductor, IT Hardware and Communications, August 31^st and September 1^st

Further information on this event and all events we will be participating in can be found on the investor section of our website.

Thank you and goodbye         

XML

Document And Entity Information	Aug. 09, 2021
Document Information [Line Items]
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Document, Type	8-K
Document, Period End Date	Aug. 09, 2021
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Title of 12(b) Security	Common Stock
Trading Symbol	CEVA
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