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Q4 2009 Earnings Call Transcript

January 28, 2010 8:30 am ET


Yaniv Arieli – CFO

Gideon Wertheizer – CEO


Anil Doradla – William Blair & Company

Allan Mishan – Brigantine

Matt Robison – Wedbush Securities

Daniel Meron – RBC Capital Markets

Doug Whitman – Whitman Capital



Good morning and welcome to the CEVA quarter four 2009 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator instructions) Thank you.

I would now like to turn the call over to Yaniv Arieli, CFO of CEVA Incorporated. You may begin.

Yaniv Arieli

Thank you. Good morning everyone and welcome to CEVA's fourth quarter and annual 2009 earnings conference call. This conference call will be conducted by Gideon Wertheizer, Chief Executive Officer of CEVA; and myself, Yaniv Arieli, Chief Financial Officer. Gideon will cover the business aspects and the highlights for the quarter and year, while I will cover the financial results for the fourth quarter and annual 2009, as well as the financial guidance for the first quarter and fiscal 2010.

I will start with the 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 of 2010 and fiscal ‘10, a general outlook for 2010, optimism about our royalty revenue in 2010, optimism about our growth of the cellular and home entertainment market, in particular the LTE markets, and our position within them, our pipeline, customer production schedule and our ability to generate revenues from new products and technologies.

The risks, uncertainties and assumptions include

the ability of the CEVA DSP cores and other technologies to continue to be a strong growth driver for us; our success in penetrating new markets and maintaining our market position in existing markets; the effects of the intense competition within our industry; the effects of the challenging period of growth experienced by industries in which we license our technologies in; the possibility that our markets for the new 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 continue to improve our royalty revenue in future periods; 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 representative dates.

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

Gideon Wertheizer

Good morning everyone, and thank you for joining us today. I hope you had the opportunity to review our press release with the financial results for the fourth quarter and annual 2009. During the quarter, we achieved revenue of $10.2 million, a 5% sequential increase over the third quarter of 2009, and 2% increase compared to the fourth quarter of 2008. This revenue figure is above the mid range of our previously stated guidance, and on par with our highest revenue figure in seven years, which was recorded during the third quarter of 2008.

Royalty revenue for the fourth quarter of 2009 was $4.8 million, a new record representing a 31% sequential increase over the third quarter of 2009, and 14% higher than our previous record high of $4.3 million reported for the fourth quarter of 2008.

During the fourth quarter, we concluded 9 new license agreements. Six of the agreements were for our CEVA DSP core platforms and software, two agreements were for our flash technology, and one agreement for our PLL technology. Geographically, three of the license agreements were in the US, five in Europe and one in Asia. Target applications for the licenses concluded during the quarter primarily for LTE and 3G data cards and handsets, wireless machine-to-machine applications, broadband residential gateways, SSDs and SAS-based storage equipment.

Our fourth quarter results were strong and we executed significant strategic event [ph] during the quarter which will have positive implication for our future, in particularly our expansion into the LTE market, the next-generation wireless technology. The licensing agreement for the fourth quarter included one key agreement with a first-tier handset maker that adopted our calls for the first time and another with a key semiconductor player in the fourth-generation wireless space that selected our best-in-breed DSP, the CEVA-XC.

On the royalty front, revenue for the quarter was a new record high, reflecting seasonal as well as continued market expansion in handset shipments as well as pickup in consumer products. We believe that the current economic environment has stabilized, which can lead to incremental improvement in our business in 2010. Our licensing pipeline is solid and includes opportunities in the cellular and home entertainment market.

Also our royalty revenue, which consistently grew throughout 2009 despite the global downturn is anticipated to maintain this positive trend, driven by shipments of first tier OEM in the handset space and the introduction of our technology in new mobile entertainment devices.

Before summarizing CEVA’s 2009 achievements, I would like to elaborate on two important fourth quarter license agreement we signed during the quarter, and our significant progress on the royalty front. A key strategic and comprehensive license agreement was completed with the first Tier 1 handset OEM that selected our DSP core for its next-generation LTE product line. The customer who cannot be disclosed at this stage is going to broadly use our DSPs for the first time, displacing Qualcomm and Texas Instruments, the incumbent supplier.

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