• Revenue: $28.4 million, up 24% year over year.

• Licensing Revenue: $17.3 million, up 28% year over year.

• Royalty Revenue: $11.2 million, up 19% year over year.

• Gross Margin: 90% GAAP, 91% non-GAAP.

• GAAP Operating Loss: $35,000, compared to a loss of $5.3 million in the same period last year.

• Non-GAAP Net Income: $4.2 million, compared to a net loss of $0.5 million last year.

• GAAP Net Loss: $0.3 million, with a diluted loss per share of $0.01.

• Non-GAAP Diluted EPS: $0.17.

• Shipped Units: 461 million units, up 24% year over year.

• Bluetooth Shipments: 266 million units, up 26% year over year.

• Cellular IoT Shipments: 40 million units, up 92% year over year.

• Wi-Fi Shipments: 35 million units, up 21% year over year.

• Cash and Cash Equivalents: Approximately $158 million.

• Warning! GuruFocus has detected 3 Warning Sign with CEVA.

Release Date: August 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• CEVA Inc (NASDAQ:CEVA) reported a strong second quarter, exceeding estimates with significant licensing execution and royalty growth driven by IoT and smartphone shipments.

• Licensing revenue increased by 28% year over year, with a healthy backlog heading into the third quarter due to significant deals signed.

• Royalty revenue grew 19% year over year, supported by strong smartphone shipments and increased market share in Bluetooth, Wi-Fi, and cellular IoT.

• CEVA Inc (NASDAQ:CEVA) launched two new IP products, NeuPro-Nano and Ceva-Waves Links, enhancing their AI and connectivity offerings.

• The company is seeing increased opportunities in the US semiconductor market, aligning with their growth strategy and indicating successful execution.

Negative Points

• Total GAAP operating expenses for the second quarter were at the higher end of guidance due to increased sales commissions and employee-related benefits.

• Despite strong quarterly results, the annual revenue guidance was not significantly increased, suggesting potential caution about future quarters.

• The majority of Wi-Fi shipments are still Wi-Fi 4, indicating a delay in the transition to higher-priced Wi-Fi 6 and Wi-Fi 7 technologies.

• CEVA Inc (NASDAQ:CEVA) faces competition in each specific IP area, despite having a comprehensive portfolio.

• The company is still recovering from a significant inventory correction in the smartphone market, which has not yet returned to peak levels.

Q & A Highlights

Q: Can you elaborate on the new technologies CEVA is rolling out, particularly the multi-protocol solution for wireless connectivity? A: Amir Panush, CEO: We have a strong position in Wi-Fi, Bluetooth, and UWB. Customers increasingly need multi-protocol IPs, and our new solution, Ceva-Waves Link, offers prequalified and preoptimized combinations for easier integration and faster deployment. This provides both time-to-market and performance advantages. We also offer complete software stacks for these technologies, including mesh networking capabilities.

Q: Given the strong quarterly results, why didn't CEVA increase its annual guidance more significantly? A: Yaniv Arieli, CFO: We had a growth plan for the year, focusing on doubling operating margins and EPS growth. While the second quarter was strong, we are cautiously optimistic and want to take it one step at a time. We expect the second half to be stronger than the first, with a focus on profitability.

Q: How are Wi-Fi shipments distributed by generation, and is there potential for higher royalties from newer Wi-Fi technologies? A: Yaniv Arieli, CFO: Most current shipments are Wi-Fi 4, but we anticipate significant upside from Wi-Fi 6 and 7 in the coming years. This will also include access points, which will increase average royalties per unit.

Q: What factors are driving CEVA's improved profitability, and how sustainable is it? A: Yaniv Arieli, CFO: We have refocused R&D efforts and managed expenses effectively, maintaining flat expenses while increasing revenue. This has led to improved operating margins and profitability, which we expect to sustain in the second half of the year.

Q: How is CEVA positioned competitively, especially in connectivity? A: Amir Panush, CEO: Our comprehensive wireless connectivity portfolio, combined with sensing and inference capabilities, positions us uniquely in the market. While we have competitors for specific IPs, our overall offering is strong, particularly in wireless connectivity.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.