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Q4 2008 Earnings Call

February 03, 2009 8:30 am ET


Yaniv Arieli - Chief Financial Officer

Gideon Wertheizer - Chief Executive Officer


Matt Robison - Pacific Growth Equities

Vijay Rakesh - Thinkequity

Daniel Meron - RBC Capital Markets

Bob Sales - LMK Capital Management

Robert Katz - Senvest



Good morning. My name is Cynthia and I will be your conference operator today. At this time, I would like to welcome everyone to the CEVA fourth quarter 2008 earnings results conference call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. (Operator Instructions) Thank you.

I’d now like to turn today’s call to Mr. Arieli, Chief Financial Officer of CEVA. Please go ahead sir.

Yaniv Arieli

Thank you. Good morning, everyone and welcome to CEVA’s fourth quarter 2008 earnings call. Today’s conference call includes forward-looking statements that involve risks and uncertainty, 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 statement and assumption.

Forward-looking statements include financial guidance for the first quarter of 2009, general outlook, and optimism about our royalty revenue growth, market position in the handset and consumer electronic markets and industry migration to our DSP cores and technology in the handset markets. Our ability to recapitalizes in the 3G trend and the trend towards the merchant solutions and the new mobile multimedia platform and our projections about customer’s production schedules.

The risks, uncertainties and assumptions include the ability of CEVA’s DSP cores and other technology to continue to be a strong growth driver for the company, the continuation of our market position, they ability of our reduction in overall 2000 expenses to produce and intern benefit. The effect of the intense competition within our industry, the possibility that the markets for our technology may not develop as exceed or expected, to possibility that our customer’s products incorporating our technologies do not succeed as expected.

Our ability to timely and successful develop and introduce new technologies, our reliance on the revenue derived from the limited number of licensees, our ability to improve our licensing and royalty revenues for future period and general market conditions. For more information, please refer to the risk factors described in our 2007 Form 10-K or other prior SEC filings.

CEVA assumes no obligation to update any forward-looking statements or information, which speak of their representative dates. This conference call will be conducted call will be conducted by Gideon Wertheizer, Chief Executive Officer of CEVA and myself, Chief Financial Officer of CEVA. Gideon, will cover the business aspects and the highlights from the quarter, while I will cover the financial results for the fourth quarter and fiscal 2008, as well as financial guidance for the first quarter of 2009.

With that said, I would now like to turn the call over to Gideon.

Gideon Wertheizer

Good morning to everyone and thank you for joining us today. I hope you had the opportunity to review our press release with the results of the fourth quarter and fiscal 2008. During the quarter, we reported total revenue of $10 million, which represent a 21% increase over the fourth quarter of 2007. Royalty revenue for the fourth quarter of 2008 was an all time record high of $4.3 million representing a 30% sequential increase as compared to the third quarter of 2008 and 41% higher than the royalty revenue for the fourth quarter of 2007.

During the fourth quarter, we concluded six new license agreements, all of which were for our CEVA, DSP cores platforms and software. Geographically, four of the license agreement were in Europe, one in Asia and one in the U.S. Target application for the license concluded during the quarter are mainly for 2G and 3G handsets, smartphones and mobile multimedia products.

The fourth quarter results introduced a new major milestone for our royalty revenue. For the first time in our history, royalty revenues shot-up to the $4 million benchmark to reach to a record of $4.3 million. This reflects a significant growth in the shipment of new advanced 3G phones and smartphone enabled by our technology. Also during the quarter, we had a substantial royalty contribution from an OEM of a well known new portable consumer product that started shipment during the quarter.

This shipped product is the newest generation of an existing product that is the key leader in its product categories and has been sold in high volume for the past three years. The later version of this product includes advanced multimedia capability for the first time, which is powered by our DSP technology semiconductor. We believe this new business segments further highlight the potential for our royalty revenue grow.

Licensing activity during the fourth quarter was consistent with what we planned and projected in light of the overall economic environment and concerns regarding research and development expenditure. We manage to focus and conclude agreement with those strategic committed customer having the financial resources and the research and design competency to license our technology.

Among the new agreements executed during the fourth quarter, we would like to highlight two customers. The first one is, one of the larger merchant chip suppliers in the handset market who signed a comprehensive agreement with us for the use of CEVA DSP cores in low-end and mid-range handset product. The second strategic agreement is with a leading Asia-based semiconductor company in the consumer market that is expanding into handset market targeting the rapidly growing 3G segment.

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