CEVA, Inc. (CEVA) Q3 2024 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reveals strong financial performance with a 13% revenue increase, a significant rise in non-GAAP net income, and a healthy cash position. The Q&A indicates a robust pipeline and strategic focus on expanding Wi-Fi and AI capabilities. Despite some margin concerns, the positive guidance, share repurchase program, and strategic agreements suggest a positive outlook. The market is likely to react positively, with a predicted stock price movement of 2% to 8% over the next two weeks, given the company's strategic initiatives and financial health.
Key Financial Performance
Total Revenue $27.2 million, up 13% year-over-year from $24.1 million, driven by innovative product offerings and positive tailwinds in licensing and royalty businesses.
Licensing Revenue $15.6 million, up 12% year-over-year, reflecting 57% of total revenue, with 10 deals completed in the quarter.
Royalty Revenue $11.6 million, up 15% year-over-year, reflecting 43% of total revenue, driven by momentum in consumer and industrial end markets.
Gross Margin (GAAP) 85%, down from 90% year-over-year, due to customization work associated with key 5G advanced deals.
Gross Margin (Non-GAAP) 87%, down from 92% year-over-year, primarily due to the same customization work.
Total Operating Expenses $25.9 million, at the higher end of guidance, due to slightly higher equity-based compensation expenses.
Non-GAAP Operating Income $2.1 million, up 30% year-over-year from $1.6 million, with operating margins at 8% of revenue.
GAAP Operating Loss $2.6 million, slightly improved from a loss of $2.7 million year-over-year.
GAAP Net Loss $1.3 million, improved from a net loss of $2.8 million year-over-year.
Diluted Loss per Share (GAAP) $0.06, improved from a loss of $0.12 year-over-year.
Non-GAAP Net Income $3.4 million, up 137% year-over-year from $1.4 million.
Diluted Income per Share (Non-GAAP) $0.14, up 133% year-over-year from $0.06.
Shipped Units 522 million units, up 4% year-over-year, marking the second-highest quarterly shipments in Ceva’s history.
Cash and Cash Equivalents Approximately $158 million as of September 30, 2024.
Share Repurchase Approximately 186,000 shares repurchased for approximately $4.2 million.
Days Sales Outstanding (DSO) 51 days, improved from 59 days in the prior quarter.
Cash from Operating Activities $0.4 million generated during the quarter.
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Operating Highlights
NeuPro-Nano embedded AI NPU: First licensing deal secured for NeuPro-Nano, introduced in June 2024, indicating strong demand for embedded AI solutions.
PentaG 5G advanced platform: Strategic licensing agreement signed with an OEM for a 5G-Advanced modem, aimed at creating a peer-to-peer satellite network.
RealSpace spatial audio software: New licensing deal with a high-profile smartphone OEM to include RealSpace in multiple SKUs of headphones and TWS earbuds.
Royalty revenue growth: Royalty revenue grew 15% year-over-year, driven by strong performance in consumer and industrial IoT markets.
Bluetooth and Wi-Fi shipments: Combined shipments of Bluetooth, Wi-Fi, and cellular IoT surpassed 400 million units for the first time.
Gross margins: Gross margins were 85% GAAP and 87% non-GAAP, slightly below guidance due to customization work for key 5G advanced deals.
Operating expenses: Total operating expenses were $25.9 million, at the higher end of guidance due to increased equity-based compensation.
Market positioning: Ceva is raising its guidance for full-year 2024, indicating confidence in market positioning and operational execution.
M&A opportunities: Ceva is exploring M&A opportunities to enhance its wireless connectivity portfolio, leveraging its strong cash position.
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Risk or Challenges
Competitive Pressures: The company is experiencing competitive pressures in the semiconductor industry, particularly in the licensing and royalty sectors, as they strive to maintain market leadership and secure high-value deals.
Regulatory Issues: There are no specific regulatory issues mentioned, but the company acknowledges the uncertainties in the market that could impact future performance.
Supply Chain Challenges: The company noted a muted environment for 5G operator CapEx, which may reflect broader supply chain challenges affecting the industry.
Economic Factors: The overall economic environment is impacting demand for certain products, as seen in the moderate decline in smartphone shipments and the need for inventory restocking in the IoT chip market.
Customization Costs: Increased customization work for key 5G advanced deals is impacting gross margins, as R&D resources are allocated to meet specific customer requests.
Market Demand Fluctuations: The company is seeing fluctuations in market demand, particularly in the consumer IoT and smartphone sectors, which could affect future revenue growth.
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Guidance & Outlook
Total Revenue: Total revenue for the quarter came in at $27.2 million, up 13% year-over-year.
Licensing Revenue: Licensing revenue came in at $15.6 million, up 12% year-over-year with 10 deals completed in the quarter.
Royalty Revenue: Royalty revenue grew 15% year-over-year to $11.6 million.
Strategic Licensing Agreements: Signed a strategic licensing agreement for a 5G-Advanced modem and multiple other agreements in the 5G-Advanced space.
NeuPro-Nano NPU: Secured first licensing deal for NeuPro-Nano NPU, indicating strong demand for embedded AI.
RealSpace Software: Signed a licensing deal with a high-profile smartphone OEM for RealSpace spatial audio software.
Customer Engagement: Highest level of global customer engagement experienced, indicating strong market interest.
Backlog and Pipeline: Backlog and pipeline continue to improve, leading to raised guidance for full year 2024.
Revenue Growth Guidance: Expect overall revenues for the year to be in the range of 7%-9% growth.
Q4 Revenue Guidance: Total revenue for Q4 is expected to be in the range of $26.5 million to $28.5 million.
Gross Margin Guidance: Gross margin is expected to be approximately 88% on a GAAP basis and 89% on a non-GAAP basis.
Operating Expenses Guidance: GAAP OpEx is expected to be in the range of $25.2 million to $26.2 million.
Non-GAAP Operating Margins: Expect to double non-GAAP operating margins and operating profit for 2024 over 2023.
Earnings Power Guidance: Expect to double non-GAAP fully diluted EPS for 2024 over 2023.
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Shareholder Return Plan
Share Repurchase Program: In the third quarter of 2024, Ceva repurchased approximately 186,000 shares for approximately $4.2 million. The board of directors authorized an increase of 700,000 shares to the existing 10b-18 repurchase program, resulting in just over 1 million shares available for repurchase under the program.
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Key Q&A
Q:Can you clarify the drag on gross margin due to engineering time spent on a custom 5G modem platform? Will this extend into next quarter?
A:In our cost of revenues, we do bring up R&D resources when doing customization work for customers. This is strategic for large deals, and while it may drag margins down for a quarter or so, it’s an allocation of R&D cost, not an increase in overall expenses. We expect to maintain 89%-90% margins on an annual basis.
Q:Regarding the licensing deals, you announced 10 this quarter, which is lower than previous quarters. Is this significant or indicative of deal slippage?
A:The number of deals can vary quarter-to-quarter. We are satisfied with the quality of the deals we have, which is more important than the quantity. We typically aim for around 50 deals a year.
Q:Can you provide insight into the backlog and pipeline compared to the beginning of the year?
A:The current pipeline is the highest I've seen since I joined in early 2023. The backlog is strong, and we have raised our guidance for the year.
Q:Is there increased demand for customization beyond 5G advanced as OEMs build their own chips?
A:We see more value in our offerings rather than just customization. Most of our business is off-the-shelf IP, with only a few deals requiring customization.
Q:Can you provide additional color on the strong Wi-Fi shipment quarter? Is this level sustainable?
A:Wi-Fi shipments are still in the early ramp stage, and we expect significant growth in the long run. The trend is positive, but quarterly results can vary.
Q:Are there complementary companies you are considering for acquisition?
A:We are looking at M&A opportunities to build momentum across our wireless connectivity portfolio, and we have a strong balance sheet to support this.
Q:Review of Unclear Management Responses
A:Management did not provide a clear answer regarding the sustainability of the current level of Wi-Fi shipments, indicating that while the trend is positive, quarterly results can vary.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI developer
Advanced
Ceva
NeuPro Nano
New
Northland
OEMs
RealSpace
Smart Edge
Wi Fi
acquisition
audio
backlog
chip design
customization work
deal licensing
economics
expansion
expertise
fee
geography
integration
ish
market royalty
milestone
model
modem
momentum
partner
platform
rate
record
relationship
repurchase
road
semiconductor company
service
support
top
work deal
CEVA Transcript
CEVA, Inc. (CEVA) Q3 2025 Earnings Call Transcript
Positive11-10
The earnings call highlights strong financial performance with record shipments in cellular IoT and Wi-Fi, improved gross margins, and optimistic guidance for future royalty revenue growth. Despite a GAAP net loss, the company shows a positive trend in non-GAAP metrics. Q&A insights reveal promising partnerships, particularly with Microchip, and strong customer interest in new technologies. The lack of specific guidance details is a minor concern, but overall, the positive financial metrics and strategic developments indicate a likely positive stock reaction.
CEVA, Inc. (CEVA) Q2 2025 Earnings Call Transcript
Unknown8-11
The earnings call reveals a mixed performance with declining revenue and increasing losses, despite some positive trends in IoT shipments. The lowering of revenue guidance and higher-than-expected expenses contribute to a negative sentiment. While there is optimism in AI and NPU licensing, the lack of specific guidance and declining margins overshadow these positives. The Q&A section also highlights management's reluctance to provide detailed future guidance, adding uncertainty. Overall, the combination of financial underperformance and cautious outlook leads to a negative sentiment, likely resulting in a stock price decline.
CEVA, Inc. (CEVA) Q1 2025 Earnings Call Transcript
Unknown5-7
The earnings call reveals mixed signals: while total revenue and licensing revenue have grown, royalty revenue has declined, and there's a GAAP operating loss. The cautious revenue guidance and lack of a share repurchase program are concerning. Although there are positive signs in Wi-Fi royalties and licensing, economic uncertainty and a cautious approach impact sentiment negatively. The Q&A highlights management's lack of clarity on key competitive metrics, adding to uncertainty. Overall, the negative aspects outweigh the positives, suggesting a negative market reaction.
CEVA, Inc. (CEVA) Q3 2024 Earnings Call Transcript
Positive11-8
The earnings call reveals strong financial performance with a 13% revenue increase, a significant rise in non-GAAP net income, and a healthy cash position. The Q&A indicates a robust pipeline and strategic focus on expanding Wi-Fi and AI capabilities. Despite some margin concerns, the positive guidance, share repurchase program, and strategic agreements suggest a positive outlook. The market is likely to react positively, with a predicted stock price movement of 2% to 8% over the next two weeks, given the company's strategic initiatives and financial health.
CEVA Report
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