CEVA, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Financial figures below are in U.S. dollars; amounts are rounded to millions unless stated otherwise. CEVA licenses wireless communications, sensing and edge-AI IP to semiconductor companies and equipment makers.
Financial performance and liquidity
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Revenue | $22.1m | $26.3m |
| Licensing and related revenue | $11.4m | $18.2m |
| Royalties | $10.7m | $8.0m |
| Gross profit / margin | $19.6m / 89% | $22.8m / 87% |
| Operating loss | $5.0m | $2.6m |
| Net loss | $5.4m | $4.9m |
| Net loss per share | $0.23 | $0.21 |
| Cash used in operating activities | $7.4m | $5.1m |
Revenue fell 16% year over year. Licensing revenue declined 37%, while royalties rose 33%; Q1 2024 royalties included a $1.0m benefit from resolving a royalty audit. Excluding that item, royalties increased 20%. Gross margin improved, but operating expenses remained above gross profit, resulting in a larger operating loss. Income tax expense was $1.7m, primarily reflecting Israeli withholding taxes that CEVA does not expect to recover.
At March 31, CEVA had $21.2m of cash and equivalents, $10.7m of short-term bank deposits and $126.9m of marketable securities, totaling $158.8m, versus $166.5m at year-end 2023. Management said these resources, together with operating cash flows, should fund operations for at least 12 months. The filing lists no borrowings; lease liabilities totaled $6.2m. Current assets were $205.8m and current liabilities $26.8m. Of the cash, deposits and securities, $129.7m was held by foreign subsidiaries; repatriation to the U.S. could incur taxes.
Changes versus the prior comparable period
- Licensing revenue fell to 52% of total revenue from 69%, while royalties rose to 48% from 31%.
- Reported customer chipset shipments incorporating CEVA technology increased 25% to 371 million. Management cited broad IoT restocking and growth across served end markets, while smartphone volumes were down sequentially and infrastructure remained soft.
- Research and development expense declined to $18.0m from $18.7m, principally due to lower contractor costs; total operating expenses declined to $24.5m from $25.4m.
- Operating cash use increased to $7.4m from $5.1m. Working-capital uses included higher receivables and prepaid expenses.
- Q1 2023 included a $2.2m loss from discontinued operations related to Intrinsix, sold in October 2023. Excluding that discontinued-operation loss, the continuing-operation net loss increased to $5.4m from $2.7m.
Outlook, commentary and risks
- Management expects 2024 revenue to grow 4%–8% year over year, with most growth expected in the second half. This is management’s outlook, not a guarantee.
- Some licensing deals were delayed into Q2 or later in 2024. CEVA reported 11 licensing agreements in Q1, including early-adopter deals for Bluetooth 6 and Wi-Fi 7, and three 5G deals. It also reported a significant next-generation IP deal after quarter-end.
- Management expects continued strength in Bluetooth, Wi-Fi and cellular IoT royalties, and an automotive ADAS royalty ramp in the second half. Smartphone-related revenue has declined in recent years.
- Customer and geographic concentration are material: the five largest customers generated 45% of Q1 revenue; Asia Pacific contributed 82%, including China at 62%. Two customers each contributed at least 10% of revenue. The five largest royalty customers generated 58% of royalties.
- CEVA said its Israeli operations were largely unaffected by the Israel-Hamas war, but employee reserve duty or a deterioration in conditions could disrupt operations. Currency movements also affect expenses; CEVA uses hedges but says they may not fully mitigate exposure.
- Marketable securities included approximately $3.5m of unrealized losses, largely attributed to interest-rate changes. Management said the credit-loss allowance was not material and it could hold securities to maturity, but recovery of market-value declines is not assured.
- CEVA acquired a Greek-based company in January for approximately $0.75m at closing, with approximately $2.1m additional consideration subject to employment and performance conditions. The company accounted for this as an asset acquisition.
- Management reported no material change in previously disclosed risk factors and no legal proceedings expected to have a material effect. Disclosure controls were deemed effective; no material change in internal control over financial reporting was reported.
Most important facts for investors to verify
- Whether delayed licensing agreements close and support the 4%–8% full-year revenue growth outlook, particularly the expected second-half weighting.
- Whether royalty growth persists after excluding the $1.0m audit resolution, and whether chipset shipments translate into sustained royalties.
- Whether operating cash use moderates as receivables and prepaid expenses change, given the continuing quarterly loss.
- How customer and China concentration, smartphone and infrastructure weakness, and geopolitical and foreign-exchange risks affect results.
- Whether the portfolio’s unrealized securities losses recover, and whether foreign-held liquidity is available for U.S. needs without material tax costs.