The deployment of 5G mobile networks in China is gathering pace, and Israeli fabless semiconductor company Ceva (Nasdaq: CEVA) is benefiting from it. The company, which licenses signal processing platforms and artificial intelligence processors, reported second quarter results yesterday that beat the analysts' consensus estimates. Ceva's share price rose 8.5% on Nasdaq yesterday to $45.58, giving the company a market cap of $1.003 bilion.
<p>Total revenue for the second quarter of 2020 was $23.6 million, representing a 28.4% increase over the $18.4 million reported for the second quarter of 2019, and 14% above the analysts' estimate. Non-GAAP net profit and diluted earnings per share for the second quarter of 2020 increased 130% and 140% respectively, to $2.9 million and $0.12, from $1.2 million and $0.05 for the second quarter of 2019. The analysts' estimate was for earnings per share of $0.04.
<p>Second quarter 2020 licensing and related revenue was $13.5 million, an increase of 25% in comparison with the $10.8 million reported for the same quarter a year ago. Royalty revenue for the second quarter of 2020 was $10.1 million, an increase of 33% in comparison with the $7.6 million reported for the second quarter of 2019.
<p>As in the previous quarter, when Ceva suspended its annual guidance, the company did not provide guidance for 2020, but repeated the forecast for licensing revenue of $51 million for the year, some $4 million higher than in 2019. On royalties, the company simply says that revenue will be higher in the second half of the year than in the first, that is, above $19.2 million, from which it can be understood that total revenue for 2020 will be at least $90 million (which is in line with the analysts' estimate). Total revenue in 2019 was $87.2 million.
<p>For the third quarter, operating expenses are expected to be a little lower than in the first two quarters, and the gross profit margin is expected to be 89%, similar to the margin for the second quarter.
<p>On a GAAP basis, Ceva made a net loss for the second quarter of 2020 of $1.1 million, which compares with a net loss of $1.5 million for the same period in 2019. The GAAP diluted loss per share for the second quarter of 2020 was $0.05, which compares with a GAAP diluted loss per share of $0.07 for the same period in 2019.
<p>The company reports that eight license agreements were concluded during the quarter, of which three were for smart sensing products and five were for connectivity products. One of the agreements was with a first-time customer. Geographically, seven of the deals signed were in China, and one was in the U.S.
<p>Ceva CEO Gideon Wertheizer said, "We produced our highest second quarter revenue on record despite the uncertain environment created by the Covid-19 pandemic. We are consistently growing our licensee base and expanding our market reach into new lucrative areas such as automotive powertrain where we concluded a key design win this quarter. Royalty revenues came in ahead of our expectations, driven by revenues from our base station and IoT product line that is up 77% year-over-year to $4.3 million.
<p>"We continuously monitor developments relating to the spread of the pandemic and US tensions with China, and remain focused on serving our customers and executing on our growth strategy."
<p>CFO Yaniv Arieli said, "With economic uncertainty still persisting, we remain prudent with regards to expenses and maintain a strong balance sheet. Our business generated $12.6 million of cash from operations in the first half of 2020, taking our cash and cash equivalent balances, marketable securities and bank deposits to approximately $157 million at the end of the quarter, with no debt."
<p>In the conference call after the release of the second quarter financials, Wertheizer said that from the third quarter on royalty revenue was expected to rise as a result of the rapid rollout of 5G cellular base stations in China. In the US, Ceva is expected to benefit from the federal government's decision to encourage "open" 5G networks (O-RAN), enabling mobile carriers to install hardware and software components from a variety of US providers such as Intel, Facebook, Cisco and Microsoft, which will in turn enable Ceva to expand its US customer base. Ceva management also said that the switch to 5G networks assist the growing trend of remote work and study, and supports expanded use of remote robotics, medical diagnostics, and medical treatment.
<p><i>Published by Globes, Israel business news - <a href=http://en.globes.co.il>en.globes.co.il</a> - on August 11, 2020</i>
<p><i>© Copyright of Globes Publisher Itonut (1983) Ltd. 2020</i>