CEVA

CEVA, Inc. (CEVA)

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CEVA, Inc. (CEVA)

Q4 2010 Earnings Call

January 31, 2011 8:30 a.m. ET

Executives

Richard Kingston – Director of Marketing and Investor Relations

Gideon Wertheizer – Chief Executive Officer

Yaniv Arieli – Chief Financial Officer

Analysts

Gary Mobley – Benchmark

Matt Robison – Wunderlich Securities

Anil Doradla – William Blair

Jay Srivatsa - Chardan Capital Market

Doug Rosenberg - RBC

Mark McKechnie - Gleacher & Company

Doug Whitman – Whitman Capital

Presentation

Operator

Good morning. My name is Jackie and I will be your conference operator today. At this time we would like to welcome everyone to the CEVA fourth quarter 2010 earnings 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. If you would like to ask a question during this time simply press star then number 1 on your telephone keypad. If you would like to withdraw your question press the pound key. Thank you. I would now like to turn the conference over to Mr. Richard Kingston, Director of Marketing and Investor Relations. Mr. Kingston, please go ahead.

Richard Kingston

Thank you and good morning everyone. Welcome to CEVA’s fourth quarter 2010 earnings conference call. This conference call will be conducted by Gideon Wertheizer, Chief Executive Officer of CEVA, Yaniv Arieli, Chief Financial Officer of CEVA, and I, Richard Kingston, Director of Marketing and Investor Relations. Gideon will cover the business aspects and the highlights of the quarter, followed by Yaniv, who will cover the financial results for the fourth quarter and annual 2010. Yaniv further will provide financial guidance for the first quarter of fiscal 2011.

I will start with forward-looking statements. 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 financial guidance for the first quarter and fiscal 2011, market data from AVR Research, iSupply, Shandem semiconductor industry and strategy analytic incorporated herein, optimism about our customer’s product pipelines and market penetration and such impact on our future revenues, including our customers in the Chinese local OEM market and mobile broadband device markets, optimism about the continued growth in the handset markets including LTE, 2-G and 4-G spaces, opportunities in the wireless infrastructure, HD audio and video, networking and machine-to-machine products and our ability to generate revenue from these new products and technologies.

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 and maintaining our market position in existing markets, the ability of products incorporating our technologies to achieve market acceptance, the effect of intense industry competition and consolidation, the possibility that markets for our technologies may not develop as expected or that products incorporating our technology 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. With that said, I would now like to turn the call over to Gideon.

Gideon Wertheizer

Thanks Richard. Good morning everyone and thank you for joining us today. I hope you had the opportunity to go through our press release with the financial results for the fourth quarter and fiscal 2010. Our revenue for the fourth quarter was $13 million, which was at the high end of our guidance range. We started (out with a vision of our client outlook during our third quarter earnings cycle). This (reflects) a record high and a 28% increase compared to the fourth quarter of 2009 and a 22% sequential increase.

Royalty revenue for the fourth quarter of 2010 was also an all time high of $7.5 million, representing a 55% increase over the fourth quarter of the year before and a 43% sequential increase. Operating margin reached 33% on a (non-GAAP) basis compared to 22% last year, which also represents a record high. Fourth quarter non-GAAP EPS increased 73%, which was a substantial increase when compared to the same period in 2009 and reached a record high of 19 cents. During the fourth quarter we completed five new license agreements.

All the agreements were for our CEVA DSP cores, platforms and software and one agreement was for our Bluetooth application. Geographically, three of the license agreements were in the US and two were in Asia. Target applications for the licenses concluded during the quarter are primarily 3-G and 4-G based on processors for handsets, cell phone cells and low power medical devices. The fourth quarter was by far the strongest quarter CEVA ever recorded in its eight-year history. It’s primarily the result from a strong momentum in the shipment of cellular based processors enabled by our DSP that are now widely deployed across all market segments, from intra-local ports and feature ports.

Targeted developing economies to high end smart phones and newer logic devices such as tablets, data storage and machine to machine equipment. On the licensing front we continue to increase our strategic customer base, which plans to use our advanced DSP for mass deployment of 4-G handsets, data cards, tablets and for new categories of smaller size microcells and to increase mobile broadband capacity and improve indoor voice quality. These strategic engagements will fuel our future royalty streams. Now let me take a moment and provide a few key highlights regarding 2010 accomplishments.

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