UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
|
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
|
For the quarterly period ended: |
OR
|
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
|
For the transition period from to |
Commission file number:
(Exact Name of Registrant as Specified in Its Charter)
|
|
|
|
(State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
|
|
20850 |
|
(Address of Principal Executive Offices) |
(Zip Code) |
(
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act
|
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
|
|
|
The |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one).
|
Large accelerated filer |
☐ |
|
☒ |
|
Non-accelerated filer |
☐ |
Smaller reporting company |
|
|
Emerging growth company |
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date:
|
Page |
||
|
PART I. |
||
|
Item 1. |
||
|
Notes to the Interim Condensed Consolidated Financial Statements |
||
|
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
|
|
Item 3. |
||
|
Item 4. |
||
|
PART II. |
||
|
Item 1. |
||
|
Item 1A. |
||
|
Item 2. |
||
|
Item 3 |
||
|
Item 4 |
||
|
Item 5 |
||
|
Item 6 |
||
FORWARD-LOOKING STATEMENTS
FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA
This Quarterly Report 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. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. Forward-looking statements are generally written in the future tense and/or are preceded by words such as “will,” “may,” “should,” “could,” “expect,” “suggest,” “believe,” “anticipate,” “intend,” “plan,” or other similar words. Forward-looking statements include the following:
|
● |
Our belief that our portfolio of wireless communications and sensing and edge AI technologies address some of the most important megatrends, including 5G, generative AI, embedded AI, industrial automation and vehicle electrification, and our belief in the continued interest in our IP portfolio due to these trends, in both traditional and new areas; |
|
● |
Our belief that our Bluetooth, Wi-Fi, Ultra Wide Band (UWB) and cellular IoT IPs allow us to address the high volume IoT industrial, consumer and smart home markets, and our expectation that the overall addressable market size will be more than 15 billion devices annually by 2027 based on research from ABI Research; |
|
● |
Our belief that Wi-Fi represents a significant royalty revenue opportunity in connection with our leading market position in licensing Wi-Fi 6 and our leadership position in Wi-Fi 7 IP; |
|
● |
Our belief that our PentaG2 platform, including the recently announced CevaXC22 multi-thread DSP, ensures we offer the most comprehensive baseband processor IP platform in the industry today, and that our 5G IPs provide newcomers and incumbents with a customizable solution to address the need for 5G, 5G Advanced and other communications in data centers and infrastructure; |
|
● |
Our belief that the high volume consumer audio markets, including True Wireless Stereo (TWS) earbuds, smartwatches, AR and VR headsets, and other wearable assisted devices, offers an incremental growth segment for our Bluetooth, Audio AI DSPs and software IPs, and our belief in the capabilities of our RealSpace Spatial Audio & Head Tracking Solution, WhisPro speech recognition technology and ClearVox voice input software to enhance the user experience and offer premium features; |
|
● |
Our belief that our SensPro2 sensor hub AI DSP family can address the growing demand for efficient, high-performance signal processing in sensor-based applications across various industries for applications such as smartphones, automotive safety (ADAS), autonomous driving, drones, robotics, security and surveillance, augmented reality (AR) and virtual reality (VR), natural language processing and voice recognition, which enables us to address the transformation in devices enabled by these applications and expand our footprint and content in smartphones, drones, consumer cameras, surveillance, ADAS, voice-enabled devices and industrial IoT applications; |
|
● |
Statements regarding third-party estimates of industry growth and future market conditions, including research from Bloomberg Intelligence which forecasts that hardware revenue associated with computer vision AI products and conversational AI devices will reach $61 billion and $108 billion, respectively, by 2030, indicating the size of the market opportunity; |
|
● |
Our belief that our newest generation family of AI neural processing units (NPUs) present a highly efficient and high-performance architecture to enable generative and classic AI on any device including communication gateways, optically connected networks, cars, notebooks and tablets, AR/VR headsets, smartphones, and any other cloud or edge use case from the edge all the way to the cloud, and that more than 2.5 billion Edge AI devices will ship annually by 2026 based on research from Yole Group; |
|
● |
Our belief that our recently announced NeuPro-Nano family of AI NPUs present a compelling position to add a cost- and power-efficient processor to microcontrollorer units and SoC designs to handle the complete AI workloads on-device, that based on research from ABI Research, by 2030, over 40% of TinyML shipments will be powered by dedicated TinyML hardware, representing billions of devices annually, and that NeuPro-Nano will allow us to expand on our strong position in IoT where we have a dominant position in wireless connectivity as customers increasingly look to add support for AI to their cost- and power-constrained chips for this market; |
|
● |
Our belief that our sensor fusion and spatial audio application software allows us to address an important technology piece used in personal computers, robotics, TWS earbuds, smart TVs and many other smart sensing IP products, in addition to our existing portfolio for camera-based computer vision and AI processing, and microphone-based sound processing; |
|
● |
Our belief that our customers can benefit from our capabilities as a one-stop-shop for processing many types of sensors; |
|
● |
Our belief that we are well positioned for long-term growth in shipments and royalty revenues derived from smart edge products as a result of our focus on silicon and software IP solutions that enable products to connect, sense and infer data; |
|
● |
Our belief that our ubiquitous technology and collaborative business model present a significant and secular growth prospect as digital transformation continues to drives industries to become connected and intelligent; |
|
● |
Our intention to continue to capitalize on the semiconductor momentum with our portfolio of technologies to enable three main use cases associated with smart edge devices – connect, sense and infer, and to focus on four main markets which include consumer, automotive, industrial and infrastructure, and our belief that such markets are large, diversified and represent the greatest opportunities for long-term growth; |
|
● |
Any statements regarding sales trends and financial results for the third and fourth quarter of and full year 2024 and other future periods, including our expectations with respect to future customers, contracts, revenues and expenses, regarding our customer pipeline, that a significant portion of our future revenues will continue to be generated by a limited number of customers in part due to consolidation in the semiconductor industry, that international customers will continue to account for a significant portion of our revenues for the foreseeable future, that an increasing portion of our new customers and revenues will be derived from international customers generally and sales to Asia Pacific in particular, that we can expand our customer base and revenues in Europe and the U.S., and that we will experience year-over-year revenue growth in 2024; |
|
● |
Our belief that our cash and cash equivalents, short-term bank deposits and marketable securities, along with cash from operations, will provide sufficient capital to fund our operations for at least the next 12 months; and |
|
● |
Our belief that fluctuations in high interest rates within our investment portfolio will not have a material effect on our financial position on an annual or quarterly basis. |
Forward-looking statements are not guarantees of future performance and involve risks and uncertainties. The forward-looking statements contained in this report are based on information that is currently available to us and expectations and assumptions that we deem reasonable at the time the statements were made. We do not undertake any obligation to update any forward-looking statements in this report or in any of our other communications, except as required by law. All such forward-looking statements should be read as of the time the statements were made and with the recognition that these forward-looking statements may not be complete or accurate at a later date.
Many factors may cause actual results to differ materially from those expressed or implied by the forward-looking statements contained in this report. These factors include, but are not limited to, those risks set forth in Part II – Item 1A – “Risk Factors” of this Form 10-Q.
This report contains market data prepared by third party research firm. Actual market results may differ from their projections.
INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
U.S. dollars in thousands, except share and per share data
|
September 30, 2024 |
December 31, |
|||||||
|
ASSETS |
||||||||
|
Current assets: |
||||||||
|
Cash and cash equivalents |
$ | $ | ||||||
|
Short-term bank deposits |
||||||||
|
Marketable securities |
||||||||
|
Trade receivables (net of allowance for credit losses of $ |
||||||||
|
Prepaid expenses and other current assets |
||||||||
|
Total current assets |
||||||||
|
Long-term assets: |
||||||||
|
Severance pay fund |
||||||||
|
Deferred tax assets, net |
||||||||
|
Property and equipment, net |
||||||||
|
Operating lease right-of-use assets |
||||||||
|
Goodwill |
||||||||
|
Intangible assets, net |
||||||||
|
Investments in marketable equity securities |
||||||||
|
Other long-term assets |
||||||||
|
Total long-term assets |
||||||||
|
Total assets |
$ | $ | ||||||
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
|
Current liabilities: |
||||||||
|
Trade payables |
$ | $ | ||||||
|
Deferred revenues |
||||||||
|
Accrued expenses and other payables |
||||||||
|
Accrued payroll and related benefits |
||||||||
|
Operating lease liabilities |
||||||||
|
Total current liabilities |
||||||||
|
Long-term liabilities: |
||||||||
|
Accrued severance pay |
||||||||
|
Operating lease liabilities |
||||||||
|
Other accrued liabilities |
||||||||
|
Total long-term liabilities |
||||||||
|
Stockholders’ equity: |
||||||||
|
Preferred Stock: $ |
||||||||
|
Common Stock: $ |
||||||||
|
Additional paid in-capital |
||||||||
|
Treasury stock at cost ( |
( |
) | ( |
) | ||||
|
Accumulated other comprehensive loss |
( |
) | ( |
) | ||||
|
Retained earnings |
||||||||
|
Total stockholders’ equity |
||||||||
|
Total liabilities and stockholders’ equity |
$ | $ | ||||||
The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF LOSS (UNAUDITED)
U.S. dollars in thousands, except per share data
|
Nine months ended |
Three months ended |
|||||||||||||||
|
September 30, |
September 30, |
|||||||||||||||
|
2024 |
2023 |
2024 |
2023 |
|||||||||||||
|
Revenues: |
||||||||||||||||
|
Licensing and related revenue |
$ | $ | $ | $ | ||||||||||||
|
Royalties |
||||||||||||||||
|
Total revenues |
||||||||||||||||
|
Cost of revenues |
||||||||||||||||
|
Gross profit |
||||||||||||||||
|
Operating expenses: |
||||||||||||||||
|
Research and development, net |
||||||||||||||||
|
Sales and marketing |
||||||||||||||||
|
General and administrative |
||||||||||||||||
|
Amortization of intangible assets |
||||||||||||||||
|
Total operating expenses |
||||||||||||||||
|
Operating loss |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
|
Financial income, net |
||||||||||||||||
|
Remeasurement of marketable equity securities |
( |
) | ( |
) | ||||||||||||
|
Loss from continuing operation before taxes on income |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
|
Income tax expense |
||||||||||||||||
|
Net loss from continuing operation |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
|
Discontinued operation (Note 4): |
||||||||||||||||
|
Net loss from discontinued operation |
( |
) | ( |
) | ||||||||||||
|
Net loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
|
Basic and diluted net loss per share from continuing operation |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
|
Basic and diluted net loss per share from discontinued operation |
$ | $ | ( |
) | $ | $ | ( |
) | ||||||||
|
Basic and diluted net loss per share |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
|
Weighted-average shares used to compute net loss per share (in thousands): |
||||||||||||||||
|
Basic and diluted |
||||||||||||||||
The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
U.S. dollars in thousands
|
Nine months ended |
Three months ended |
|||||||||||||||
|
September 30, |
September 30, |
|||||||||||||||
|
2024 |
2023 |
2024 |
2023 |
|||||||||||||
|
Net loss: |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
|
Other comprehensive income before tax: |
||||||||||||||||
|
Available-for-sale securities: |
||||||||||||||||
|
Changes in unrealized gains |
||||||||||||||||
|
Reclassification adjustments for (gains) losses included in net loss |
( |
) | ( |
) | ( |
) | ||||||||||
|
Net change |
||||||||||||||||
|
Cash flow hedges: |
||||||||||||||||
|
Changes in unrealized gains (losses) |
( |
) | ( |
) | ( |
) | ||||||||||
|
Reclassification adjustments for (gains) losses included in net loss |
( |
) | ( |
) | ||||||||||||
|
Net change |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
|
Other comprehensive income before tax |
||||||||||||||||
|
Income tax expense related to components of other comprehensive income |
||||||||||||||||
|
Other comprehensive income, net of taxes |
||||||||||||||||
|
Comprehensive income (loss) |
$ | ( |
) | $ | ( |
) | $ | $ | ( |
) | ||||||
The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)
U.S. dollars in thousands, except share data
|
Common stock |
||||||||||||||||||||||||||||
|
Nine months ended September 30, 2024 |
Number of shares outstanding |
Amount |
Additional paid-in capital |
Treasury stock |
Accumulated other comprehensive income (loss) |
Retained earnings |
Total stockholders’ equity |
|||||||||||||||||||||
|
Balance as of January 1, 2024 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ||||||||||||||||||
|
Net loss |
— | ( |
) | ( |
) | |||||||||||||||||||||||
|
Other comprehensive income, net |
— | |||||||||||||||||||||||||||
|
Equity-based compensation |
— | |||||||||||||||||||||||||||
|
Purchase of treasury stock |
( |
) |
) |
( |
) | ( |
) | |||||||||||||||||||||
|
Issuance of common stock upon exercise of stock-based awards |
) |
|||||||||||||||||||||||||||
|
Issuance of treasury stock upon exercise of stock-based awards |
( |
) | ( |
) | ||||||||||||||||||||||||
|
Balance as of September 30, 2024 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ||||||||||||||||||
|
Common stock |
||||||||||||||||||||||||||||
|
Three months ended September 30, 2024 |
Number of shares outstanding |
Amount |
Additional paid-in capital |
Treasury stock |
Accumulated other comprehensive income (loss) |
Retained earnings |
Total stockholders’ equity |
|||||||||||||||||||||
|
Balance as of July 1, 2024 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ||||||||||||||||||
|
Net loss |
— | ( |
) | ( |
) | |||||||||||||||||||||||
|
Other comprehensive income, net |
— | |||||||||||||||||||||||||||
|
Equity-based compensation |
— | |||||||||||||||||||||||||||
|
Purchase of treasury stock |
( |
) |
) |
( |
) | ( |
) | |||||||||||||||||||||
|
Issuance of treasury stock upon exercise of stock-based awards |
) |
( |
) | |||||||||||||||||||||||||
|
Balance as of September 30, 2024 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ||||||||||||||||||
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)
U.S. dollars in thousands, except share data
|
Nine months ended September 30, 2023 |
Number of shares outstanding |
Amount |
Additional |
Treasury stock |
Accumulated other comprehensive income (loss) |
Retained |
Total |
|||||||||||||||||||||
|
Balance as of January 1, 2023 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ||||||||||||||||||
|
Net loss |
— | ( |
) | ( |
) | |||||||||||||||||||||||
|
Other comprehensive income, net |
— | |||||||||||||||||||||||||||
|
Equity-based compensation |
— | |||||||||||||||||||||||||||
|
Purchase of treasury stock |
( |
) | ) | ( |
) | ( |
) | |||||||||||||||||||||
|
Issuance of common stock upon exercise of stock-based awards |
) | |||||||||||||||||||||||||||
|
Issuance of treasury stock upon exercise of stock-based awards |
( |
) | ( |
) | ||||||||||||||||||||||||
|
Balance as of September 30, 2023 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ||||||||||||||||||
|
Common stock |
||||||||||||||||||||||||||||
|
Three months ended September 30, 2023 |
Number of shares outstanding |
Amount |
Additional |
Treasury stock |
Accumulated other comprehensive income (loss) |
Retained |
Total |
|||||||||||||||||||||
|
Balance as of July 1, 2023 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ||||||||||||||||||
|
Net loss |
— | ( |
) | ( |
) | |||||||||||||||||||||||
|
Other comprehensive income, net |
— | |||||||||||||||||||||||||||
|
Equity-based compensation |
— | |||||||||||||||||||||||||||
|
Purchase of treasury stock |
( |
) | ) | ( |
) | ( |
) | |||||||||||||||||||||
|
Issuance of common stock upon exercise of stock-based awards |
) | |||||||||||||||||||||||||||
|
Issuance of treasury stock upon exercise of stock-based awards |
) | ( |
) | |||||||||||||||||||||||||
|
Balance as of September 30, 2023 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ||||||||||||||||||
|
(*) |
Amount less than $1. |
The accompanying notes are an integral part of the consolidated financial statements.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
U.S. dollars in thousands
|
Nine months ended |
||||||||
|
2024 |
2023 |
|||||||
|
Cash flows from operating activities: |
||||||||
|
Net loss |
$ | ( |
) | $ | ( |
) | ||
|
Adjustments required to reconcile net loss to net cash used in operating activities: |
||||||||
|
Depreciation |
||||||||
|
Amortization of intangible assets |
||||||||
|
Equity-based compensation |
||||||||
|
Realized gain on sale of available-for-sale marketable securities |
( |
) | ( |
) | ||||
|
Amortization of premiums (accretion of discount) on available-for-sale marketable securities |
( |
) | ||||||
|
Unrealized foreign exchange gain |
( |
) | ( |
) | ||||
|
Remeasurement of marketable equity securities |
||||||||
|
Changes in operating assets and liabilities: |
||||||||
|
Trade receivables, net |
( |
) | ( |
) | ||||
|
Prepaid expenses and other assets |
( |
) | ( |
) | ||||
|
Operating lease right-of-use assets |
||||||||
|
Accrued interest on bank deposits |
( |
) | ||||||
|
Deferred tax, net |
( |
) | ( |
) | ||||
|
Trade payables |
( |
) | ||||||
|
Deferred revenues |
||||||||
|
Accrued expenses and other payables |
||||||||
|
Accrued payroll and related benefits |
( |
) | ( |
) | ||||
|
Operating lease liability |
( |
) | ( |
) | ||||
|
Income taxes payable |
( |
) | ( |
) | ||||
|
Accrued severance pay, net |
||||||||
|
Net cash used in operating activities |
( |
) | ( |
) | ||||
|
Cash flows from investing activities: |
||||||||
|
Purchase of property and equipment |
( |
) | ( |
) | ||||
|
Acquisition of business |
( |
) | ||||||
|
Proceeds from the sale of Intrinsix (see note 4) |
||||||||
|
Asset acquisition |
( |
) | ||||||
|
Investment in bank deposits |
( |
) | ( |
) | ||||
|
Proceeds from bank deposits |
||||||||
|
Investment in available-for-sale marketable securities |
( |
) | ( |
) | ||||
|
Proceeds from maturity of available-for-sale marketable securities |
||||||||
|
Proceeds from sale of available-for-sale marketable securities |
||||||||
|
Net cash provided by (used in) investing activities |
( |
) | ||||||
|
Cash flows from financing activities: |
||||||||
|
Purchase of treasury stock |
( |
) | ( |
) | ||||
|
Proceeds from exercise of stock-based awards |
||||||||
|
Net cash provided by (used in) financing activities |
( |
) | ||||||
|
Effect of exchange rate changes on cash and cash equivalents |
( |
) | ||||||
|
Decrease in cash and cash equivalents |
( |
) | ( |
) | ||||
|
Cash and cash equivalents at the beginning of the period |
||||||||
|
Cash and cash equivalents at the end of the period |
$ | $ | ||||||
|
Supplemental information of cash-flow activities: |
||||||||
|
Cash paid during the period for: |
||||||||
|
Income and withholding taxes |
$ | $ | ||||||
|
Non-cash transactions: |
||||||||
|
Property and equipment purchases incurred but unpaid at period end |
$ | $ | ||||||
|
Right-of-use assets obtained in the exchange for operating lease liabilities |
$ | $ | ||||||
The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.
|
BUSINESS |
The financial information in this quarterly report includes the results of Ceva, Inc. and its subsidiaries (the “Company” or “Ceva”).
Ceva is the leader in innovative silicon and software IP solutions that enable smart edge products to connect, sense, and infer data more reliably and efficiently. With the industry’s only portfolio of comprehensive communications and scalable edge AI IP, Ceva powers the connectivity, sensing, and inference in today’s most advanced smart edge products across consumer IoT, mobile, automotive, infrastructure, industrial, and personal computing. More than 18 billion of the world’s most innovative smart edge products from AI-infused smartwatches, IoT devices and wearables to autonomous vehicles, 5G mobile networks and more are powered by Ceva.
Ceva is a trusted partner to many of the leading semiconductor and original equipment manufacturer (OEM) companies targeting a wide variety of cellular and IoT end markets, including mobile, PC, consumer, automotive, smart-home, surveillance, robotics, industrial and medical. The customers incorporate Ceva’s IP into application-specific integrated circuits (ASICs) and application-specific standard products (ASSPs) that they manufacture, market and sell to OEMs and original design manufacturers. Ceva’s application software IP is licensed primarily to OEMs who embed it in their System on Chip (SoC) designs to enhance the user experience, and OEMs also license Ceva’s hardware IP products and solutions for their SoC designs to create power-efficient, intelligent, secure and connected devices.
Ceva’s wireless communications, sensing and edge AI technologies are at the heart of some of today’s most advanced smart edge products. From Bluetooth connectivity, Wi-Fi, ultra-wide band (UWB) and 5G-Advanced platform IP for ubiquitous, robust communications, to scalable edge AI neural processing unit (NPU) IPs, sensor fusion processors and embedded application software that make devices smarter.
Ceva licenses its portfolio of wireless communications and scalable edge AI IP to its customers, breaking down barriers to entry and enabling them to bring new cutting-edge products to market faster, more reliably, efficiently and economically.
|
NOTE 2: |
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Basis of Presentation
The interim condensed consolidated financial statements have been prepared according to U.S. Generally Accepted Accounting Principles (“U.S. GAAP”).
The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2024, are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. For further information, reference is made to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
The significant accounting policies applied in the annual consolidated financial statements of the Company as of December 31, 2023, contained in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 7, 2024, have been applied consistently in these unaudited interim condensed consolidated financial statements.
Concentration of credit risk:
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash, cash equivalents, bank deposits, marketable securities, foreign exchange contracts and trade receivables. The Company invests its surplus cash in cash deposits and marketable securities in financial institutions and has established guidelines relating to diversification and maturities to maintain safety and liquidity of the investments.
The majority of the Company’s cash and cash equivalents are invested in high grade certificates of deposits with major U.S., European and Israeli banks. Generally, cash and cash equivalents and bank deposits may be redeemed on demand and therefore minimal credit risk exists with respect to them. Nonetheless, deposits with these banks exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance limits or similar limits in foreign jurisdictions, to the extent such deposits are even insured in such foreign jurisdictions. Generally, these cash equivalents may be redeemed upon demand, and therefore management believes that they bear a lower risk. The short-term bank deposits are held in financial institutions that management believes are institutions with high credit standing and, accordingly, minimal credit risk from geographic or credit concentration. Furthermore, the Company holds an investment portfolio consisting principally of corporate bonds. The Company has the ability to hold such investments until recovery of temporary declines in market value or maturity.
The Company’s trade receivables are geographically diverse, mainly in the Asia Pacific region, and also in the United States and Europe. Concentration of credit risk with respect to trade receivables is limited by credit limits, ongoing credit evaluation and account monitoring procedures. The Company performs ongoing credit evaluations of its customers. The Company makes estimates of expected credit losses based upon its assessment of various factors, including historical experience, the age of the trade receivable balances, credit quality of its customers, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect its ability to collect from customers.
During the nine-month period ended September 30, 2024, the Company recorded an additional allowance for credit losses in the amount to $
The Company has no off-balance-sheet concentration of credit risk.
Accounting Standards Recently Adopted by the Company
In June 2022, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") No. 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions, which clarifies the guidance when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security and introduces new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820. The guidance is effective for annual periods beginning after December 15, 2023, with early adoption permitted. The Company adopted ASU 2022-03 as of January 1, 2024. The adoption did not result in a material impact on the Company's interim condensed financial statements.
Accounting Standards Recently Issued, Not Yet Adopted by the Company
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires public entities to disclose information about their reportable segments’ significant expenses and other segment items on an interim and annual basis. Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosures and reconciliation requirements in ASC 280 on an interim and annual basis. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2023-07.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires public entities, on an annual basis, to provide disclosure of specific categories in the rate reconciliation, as well as disclosure of income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2023-09.
Use of Estimates
The preparation of the interim condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions. The Company’s management believes that the estimates, judgments and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the dates of the financial statements, the reported amounts of revenues and expenses during the reporting period, and amounts classified as a discontinued operation. Actual results could differ from those estimates.
|
NOTE 3: |
ACQUISITION |
In January 2024, the Company acquired
|
NOTE 4: |
HELD FOR SALE AND DISCONTINUED OPERATION |
On September 14, 2023, the Company and Intrinsix, then its wholly owned subsidiary, entered into a Share Purchase Agreement (the “Agreement”) with Cadence Design Systems, Inc. (“Cadence”), pursuant to which Cadence agreed to purchase all of the issued and outstanding capital shares of Intrinsix from the Company for $
Under ASC 205-20, "Discontinued Operation" when a component of an entity, as defined in ASC 205-20, has been disposed of or is classified as held for sale, the results of its operations, including the gain or loss on its component, are classified as discontinued operations and the assets and liabilities of such component are classified as assets and liabilities attributed to discontinued operations; that is, provided that the operations, assets and liabilities and cash flows of the component have been eliminated from the Company’s consolidated operations and the Company will have no significant continuing involvement in the operations of the component.
As a result of the Transaction, Intrinsix's results of operations and asset and liability balances are disclosed as a discontinued operation. All prior periods comparable results of operation, assets and liabilities have been retroactively included in discontinued operations.
The following table shows the Company's results of discontinued operation for the below presented period:
|
Nine months ended September 30, 2023 (unaudited) |
Three months ended September 30, 2023 (unaudited) |
|||||||
|
Revenues |
$ | $ | ||||||
|
Cost of revenue |
||||||||
|
Gross profit |
||||||||
|
Operating expenses: |
||||||||
|
Research and development, net |
||||||||
|
Sales and marketing |
||||||||
|
General and administrative |
||||||||
|
Amortization of intangible assets |
||||||||
|
Total operating expenses |
||||||||
|
Operating loss |
( |
) | ( |
) | ||||
|
Financial income, net |
||||||||
|
Loss from discontinued operations before taxes on income |
( |
) | ( |
) | ||||
|
Income tax expense |
||||||||
|
Net loss from discontinued operation |
$ | ( |
) | $ | ( |
) | ||
The following table presents cash flows from discontinued operations:
|
Nine months ended September 30, 2023 (unaudited) |
||||
|
Net cash flow used in operating activities (*) |
$ | ( |
) | |
|
Net cash flows used in investing activities |
( |
) | ||
(*)
|
NOTE 5: |
REVENUE RECOGNITION |
Under ASC No. 606, “Revenue from Contracts with Customers” (“ASC 606”), an entity recognizes revenue when or as it satisfies a performance obligation by transferring intellectual property (“IP”) licenses or services to the customer, either at a point in time or over time. The Company recognizes most of its revenues at a point in time upon delivery when the customer accepts control of the IP. The Company recognizes revenue over time on significant license customization contracts that are in the scope of ASC 606 by using cost inputs to measure progress toward completion of its performance obligations.
Revenues that are derived from the sale of a licensee’s products that incorporate the Company’s IP are classified as royalty revenues. Royalty revenues are recognized during the quarter in which the sale of the product incorporating the Company’s IP occurs. Royalties are calculated either as a percentage of the revenues received by the Company’s licensees on sales of products incorporating the Company’s IP or on a per unit basis, as specified in the agreements with the licensees. When the Company does not receive actual sales data from the customer prior to the finalization of its financial statements, royalty revenues are recognized based on the Company’s estimation of the customer’s sales during the quarter.
The following table includes estimated revenue expected to be recognized in future periods related to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period. The estimated revenues do not include amounts of royalties or unexercised contract renewals:
|
Remainder of
|
|
2026 and
|
||||||||||
|
Licensing and related revenues |
$ | $ | $ | |||||||||
Disaggregation of revenue:
The following table provides information about disaggregated revenue by primary geographical, use cases for the Company's technology portfolio, and timing of revenue recognition:
|
Nine months ended September 30, 2024 (unaudited) |
Three months ended September 30, 2024 (unaudited) |
|||||||||||||||||||||||
|
Licensing and related revenues |
Royalties |
Total |
Licensing and related revenues |
Royalties |
Total |
|||||||||||||||||||
|
Geography |
||||||||||||||||||||||||
|
United States |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
|
Europe and Middle East |
||||||||||||||||||||||||
|
Asia Pacific |
||||||||||||||||||||||||
|
Other |
— | — | ||||||||||||||||||||||
|
Total |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
|
Use cases for the Company’s technology portfolio |
||||||||||||||||||||||||
|
Connect (baseband for handset and other devices, Bluetooth, Wi-Fi and NB-IoT) |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
|
Sense & Infer (sensor fusion, audio, sound, imaging, vision and AI) |
||||||||||||||||||||||||
|
Total |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
|
Timing of revenue recognition |
||||||||||||||||||||||||
|
Products transferred at a point in time |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
|
Products and services transferred over time |
— | — | ||||||||||||||||||||||
|
Total |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
|
Nine months ended September 30, 2023 (unaudited) |
Three months ended September 30, 2023 (unaudited) |
|||||||||||||||||||||||
|
Licensing and related revenues |
Royalties |
Total |
Licensing and related revenues |
Royalties |
Total |
|||||||||||||||||||
|
Geography |
||||||||||||||||||||||||
|
United States |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
|
Europe and Middle East |
||||||||||||||||||||||||
|
Asia Pacific |
||||||||||||||||||||||||
|
Other |
||||||||||||||||||||||||
|
Total |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
|
Use cases for the Company’s technology portfolio |
||||||||||||||||||||||||
|
Connect (baseband for handset and other devices, Bluetooth, Wi-Fi and NB-IoT) |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
|
Sense & Infer (sensor fusion, audio, sound, imaging, vision and AI) |
||||||||||||||||||||||||