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Q2 2010 Earnings Conference Call

July 28, 2010 7:30 AM ET


Richard Kingston – Director of Marketing & IR

Gideon Wertheizer – CEO

Yaniv Arieli – CFO


Gary Mobley – Benchmark Company

Brian Nugent – William Blair & Company

Matt Robinson – Wunderlich Securities

Allan Mishan – Brigantine

Warren Darilek – Morgan Keegan

Daniel Meron – RBC Capital Markets



Good morning. My name is Tarrika and I will be your conference operator today. At this time I would like to welcome everyone to the CEVA Second Quarter 2010 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 Mr. Richard Kingston, Director of Marketing and Investor Relations. Please go ahead, sir.

Richard Kingston

Thank you, and good morning, everyone, and welcome to CEVA’s Second 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 second quarter and provide financial guidance for the third 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 third quarter and fiscal 2010; general outlook for 2010; optimism about our licensing pipeline, royalty revenue, and increased design activities in 2010; optimism about our customers’ displacing TI and Qualcomm; optimism about market growth in LTE, home entertainment, base stations, set-top boxes, digital TVs, HD video, the Chinese TD-SCDMA market, and alternative WiFi connectivity devices and our position within them; and our customer production schedules 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 strong growth drivers for us; our success in penetrating new markets and maintaining our market position in existing markets; the effect of intense industry competition; the possibility that markets for our 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 licensing and 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 filing.

CEVA assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates.

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

Gideon Wertheizer

Thank you, Richard, and good morning to 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 second quarter of 2010. Our revenue for the quarter was $10.6 million, which represents a 16% increase when compared to the second quarter of 2009.

Revenue for the quarter was at the high-end of our guidance, and slightly higher than the previous record achieved in the first quarter. Royalty revenue for the second quarter of 2010 was $5.2 million, which was also a record high representing a 30% increase over the second quarter of 2009. This is the third consecutive quarter in which we have achieved record high royalty in our revenue.

During the second quarter, we completed nine new license agreements. All of the agreements were for our CEVA DSP cores, platforms and software. Geographically, four of the license agreements were in the U.S., four were in Asia and one was in Europe. While the application for the license has concluded during the quarter, our primarily basement process of 3G and 4G handset, mobile broadband, base stations, Voice over IP gateway, digital TV and Blu-ray DVD.

We are extremely happy with our achievement for the second quarter in relation to our licensing activity and our growing traction in basement market, including both market share and high-profiled quarter. The licensing agreement completed in this quarter is a growing demand for advance DSP technologies, particularly clearly (ph) in the mobile broadband markets with devices such as smartphones, tablets, laptops and other multimedia devices. Every device targeted, as providing mobile broadband connectivity, we required the inclusion of DSP technology.

I would like to highlight few important achievements on the licensing front. Three of the new licensing agreements executed during the quarter were for leading edge DSP to CEVA-XC, which mark an outstanding achievement for our technology that is revolutionary and new. We have discussed in the past that the value for completion of the CEVA-XC is ability to enable software modem or what is referable as Software Defined Radio (SDR)-capability, versus the common practice today of hardwired modems. A CEVA-XC base modem can support the main software, all the different varieties of wireless standouts, such as HSPA plus, LT, WiMAX, CDMA, GSM, WiFi and Mobile TV.

We have also mentioned in previous calls that the pipeline for the CEVA-XC is strong, which eventually led to three agreements signed during the quarter. One of the agreements is the French OEM that exhausted the CEVA exceed for the next generation version of the LTE, the LTE Advance. As a reminder, we have now two sales tier OEMs that recently licensed our technology we’re working for months, and are planning to design chips for their future smartphone and mobile broadband client.

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