Revenue Performance - Total revenues for Q2 2023 were $26.2 million, a decrease of 21% compared to Q2 2022, and $54.9 million for the first half of 2023, down 19% year-over-year [142]. - Licensing, NRE, and related revenues were $16.8 million for Q2 2023, a 24% decrease from Q2 2022, and $37.5 million for the first half of 2023, down 16% year-over-year [145]. - Royalty revenues were $9.4 million for Q2 2023, a 15% decrease from Q2 2022, and $17.4 million for the first half of 2023, down 25% year-over-year [146]. - Total revenues for the first half of 2023 were $39.7 million, a decrease from $50.0 million in the first half of 2022, reflecting a 20% decline [150]. - The five largest customers accounted for 43% of total revenues in Q2 2023, up from 36% in Q2 2022, indicating increased customer concentration [143]. Product and Market Insights - Connectivity products represented 77% of total revenues for the first half of 2023, compared to 74% in the same period of 2022 [145]. - CEVA shipped 1.7 billion devices in 2022, averaging over 50 devices per second, showcasing strong market presence [128]. - The addressable market for Bluetooth, Wi-Fi, UWB, and cellular IoT is projected to exceed 15 billion devices annually by 2027 [136]. - CEVA's technologies have been incorporated into over 16 billion chips shipped to date, highlighting the extensive reach of its product offerings [128]. Financial Metrics - CEVA's royalty revenues accounted for 36% of total revenues in Q2 2023, slightly up from 33% in Q2 2022, indicating a stable revenue stream [146]. - Cost of revenues for the second quarter of 2023 was $5.6 million, accounting for 21% of total revenues, compared to $6.8 million and 21% in the second quarter of 2022 [151]. - Gross margin for the first half of 2023 remained stable at 80%, consistent with the same period in 2022 [152]. - Research and development expenses for the first half of 2023 were $40.4 million, representing 74% of total revenues, up from 59% in the first half of 2022 [154]. - Operating expenses for the second quarter of 2023 were $26.9 million, slightly higher than $26.6 million in the second quarter of 2022 [153]. Cash Flow and Investments - Financial income, net, for the first half of 2023 was $2.58 million, significantly higher than $0.69 million in the first half of 2022 [159]. - The company recorded a foreign exchange gain of $0.36 million for the first half of 2023, compared to a loss of $0.26 million in the first half of 2022 [160]. - General and administrative expenses for the first half of 2023 were $8.2 million, up from $7.3 million in the first half of 2022, with a percentage of total revenues increasing from 11% to 15% [157]. - As of June 30, 2023, the company had approximately $135.6 million in cash, cash equivalents, short-term bank deposits, and marketable securities, a decrease from $147.7 million at December 31, 2022 [172]. - Cash used in operating activities for the first six months of 2023 was $9.9 million, consisting of a net loss of $10.7 million and adjustments for non-cash items of $10.7 million [176]. - The company invested $2.5 million in marketable securities during the first half of 2023, while cash inflow from marketable securities amounted to $21.7 million [174]. - Net cash provided by investing activities for the first six months of 2023 was $14.4 million, compared to a net cash outflow of $12.3 million for the same period in 2022 [179]. - The company had a cash outflow of $3.6 million for the acquisition of the VisiSonics business during the first half of 2023 [179]. - Interest income and gains from marketable securities for the second quarter of 2023 were $1.03 million, up from $0.58 million in the same period of 2022 [189]. - The unrealized losses associated with the company's investments were approximately $6.0 million as of June 30, 2023, due to changes in the interest rate environment [188]. - The company received $1.7 million from the exercise of stock-based awards during the first six months of 2023, consistent with the same period in 2022 [181]. - As of June 30, 2023, the company had 278,799 shares available for repurchase under its share repurchase program [180]. - The company expects its cash and cash equivalents, along with cash from operations, to be sufficient to fund operations for at least the next 12 months [181]. Workforce and Taxation - The number of research and development personnel increased to 339 as of June 30, 2023, from 333 a year earlier [155]. - The company is applying the Technological Preferred Enterprise tax track for its Israeli subsidiary, which is taxed at a rate of 12% on profits from intellectual property [168].

CEVA, Inc. (NASDAQ:CEVA) Q1 2023 Results Conference Call May 10, 2023 8:30 AM ET Company Participants Richard Kingston - Vice President, Market Intelligence and Investor Relations Amir Panush - Chief Executive Officer Yaniv Arieli - Chief Financial Officer Conference Call Participants Matt Ramsay - TD Cowen Kevin Cassidy - Rosenblatt Securities Martin Yang - Oppenheimer Suji Desilva - ROTH MKM Chris Reimer - Barclays David O'Connor - Exane BNP Paribas Operator Good day, and welcome to the CEVA, Inc., First ...

[PART I. FINANCIAL INFORMATION](index=5&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) Presents CEVA, Inc.'s unaudited interim condensed consolidated financial statements and management's discussion for the quarter [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) Presents CEVA, Inc.'s unaudited interim condensed consolidated financial statements, including balance sheets, statements of loss, and cash flows [Interim Condensed Consolidated Balance Sheets](index=6&type=section&id=Interim%20Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows a slight increase in total assets to $311.1 million as of March 31, 2023, from $308.4 million at the end of 2022. Total stockholders' equity also saw a minor increase to $259.9 million Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Total current assets** | $180,562 | $177,625 | | **Total assets** | $311,134 | $308,442 | | **Total current liabilities** | $35,037 | $33,278 | | **Total liabilities** | $51,264 | $49,571 | | **Total stockholders' equity** | $259,870 | $258,871 | [Interim Condensed Consolidated Statements of Loss](index=8&type=section&id=Interim%20Condensed%20Consolidated%20Statements%20of%20Loss) Net loss increased to $4.9 million in Q1 2023, driven by a 16% revenue decrease to $28.7 million and a shift to an operating loss Statements of Loss Summary (in thousands, except per share data) | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Total revenues | $28,735 | $34,391 | | Gross profit | $23,420 | $27,987 | | Operating income (loss) | $(4,793) | $468 | | Net loss | $(4,872) | $(1,696) | | Diluted net loss per share | $(0.21) | $(0.07) | [Interim Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Interim%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow shifted to a $5.1 million use in Q1 2023, with net cash from investing activities positive at $6.5 million Cash Flow Summary (in thousands) | Activity | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $(5,076) | $9,824 | | Net cash provided by (used in) investing activities | $6,540 | $(4,813) | | Net cash provided by financing activities | $1,673 | $1,720 | | **Increase in cash and cash equivalents** | **$3,198** | **$6,625** | [Notes to the Interim Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20the%20Interim%20Condensed%20Consolidated%20Financial%20Statements) The notes provide detailed explanations of the company's business, accounting policies, and specific financial statement items. Key disclosures include revenue disaggregation, major customer data, stock-based compensation details, and information on a subsequent acquisition - CEVA is a licensor of wireless connectivity and smart sensing technologies and a provider of chip design services, serving semiconductor and OEM companies across mobile, consumer, automotive, and IoT markets[26](index=26&type=chunk)[28](index=28&type=chunk) Revenue by Geography (Q1 2023 vs Q1 2022, in thousands) | Region | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | United States | $4,441 | $6,746 | | Europe and Middle East | $3,193 | $1,102 | | Asia Pacific | $20,626 | $26,543 | | Other | $475 | $— | - Customer concentration remains significant, with one customer (Customer A) accounting for **13% of total revenues** in Q1 2023. In Q1 2022, two different customers accounted for **12%** and **11%** of revenues, respectively[57](index=57&type=chunk) - In May 2023, subsequent to the quarter's end, the company entered into an agreement to acquire the VisiSonics 3D spatial audio business for an aggregate of **$3.6 million** at closing, plus potential additional payments[83](index=83&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2023 financial performance, noting a 16% revenue decrease to $28.7 million and a shift to operating loss and negative cash flow [Business Overview](index=31&type=section&id=Business%20Overview) CEVA is a leading licensor of wireless connectivity (5G, UWB, Bluetooth, Wi-Fi) and smart sensing technologies (DSPs, AI processors). The company sees significant growth drivers in mobile handsets, 5G infrastructure (PentaG2 platform), high-volume IoT applications, and smart devices like TWS earbuds and AR/VR headsets - In Q1 2023, the company signed a strategic licensing agreement with a leading Android smartphone OEM that is developing its own 5G modem, which could become a key future royalty source[92](index=92&type=chunk) - The company believes its broad IP portfolio for Bluetooth, Wi-Fi, UWB, and cellular IoT positions it to capitalize on an addressable market expected to exceed **15 billion devices** annually by 2027[95](index=95&type=chunk) - CEVA's Intrinsix chip design business unit extends its market reach into aerospace and defense and strengthens customer relationships by offering co-creation services[89](index=89&type=chunk) [Results of Operations](index=34&type=section&id=Results%20of%20Operations) Q1 2023 total revenues decreased 16% to $28.7 million, driven by a 33% drop in royalty revenue, resulting in an operating loss of $4.8 million Revenue Breakdown (in millions) | Revenue Type | Q1 2023 | Q1 2022 | % Change | | :--- | :--- | :--- | :--- | | Licensing, NRE and related | $20.7 | $22.4 | -7% | | Royalties | $8.0 | $12.0 | -33% | | **Total Revenues** | **$28.7** | **$34.4** | **-16%** | - The decrease in total revenues was mainly due to a pull-in of handset baseband shipments in Q4 2022, traditional seasonality, and inventory buildup in the smartphone and PC sectors[97](index=97&type=chunk)[103](index=103&type=chunk) - Thirteen IP license and NRE agreements were signed in Q1 2023, targeting diverse markets including 5G, Wi-Fi 6, Bluetooth, and automotive ADAS. Five of these were with first-time customers[101](index=101&type=chunk) Operating Expenses (in millions) | Expense Category | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Research and Development, Net | $20.8 | $20.2 | | Sales and Marketing | $3.0 | $2.9 | | General and Administrative | $4.0 | $3.6 | | Amortization of Intangibles | $0.3 | $0.8 | | **Total Operating Expenses** | **$28.2** | **$27.5** | [Liquidity and Capital Resources](index=37&type=section&id=Liquidity%20and%20Capital%20Resources) The company held $145.1 million in liquid assets as of March 31, 2023, with operating cash flow shifting to a $5.1 million use - Total cash, cash equivalents, bank deposits, and marketable securities stood at **$145.1 million** at the end of Q1 2023, down slightly from **$147.7 million** at year-end 2022[130](index=130&type=chunk) - The company used **$5.1 million** in cash from operations in Q1 2023, primarily due to the net loss and an increase in trade receivables and other prepaid assets[134](index=134&type=chunk) - No shares of common stock were repurchased during the first quarter of 2023. As of March 31, 2023, **278,799 shares** remained available for repurchase under the existing program[81](index=81&type=chunk)[139](index=139&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=40&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company is exposed to market risks primarily from foreign currency exchange rate fluctuations and interest rate changes. A majority of expenses are in non-USD currencies (NIS, Euro), creating exposure that is partially managed through a hedging program. The investment portfolio, consisting mainly of corporate bonds, is exposed to interest rate risk, which resulted in unrealized losses of $6.2 million as of March 31, 2023 - The company uses foreign currency cash flow hedges to mitigate risks from payroll expenses denominated in currencies other than the U.S. dollar[144](index=144&type=chunk) - The investment portfolio of corporate bonds had unrealized losses of approximately **$6.2 million** as of March 31, 2023, due to significant changes in the interest rate environment[146](index=146&type=chunk) [Item 4. Controls and Procedures](index=42&type=section&id=Item%204.%20Controls%20and%20Procedures) Based on an evaluation as of the end of the period, the company's Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of March 31, 2023. No material changes to internal control over financial reporting occurred during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2023[150](index=150&type=chunk) [PART II. OTHER INFORMATION](index=42&type=section&id=PART%20II.%20OTHER%20INFORMATION) Details legal proceedings, risk factors, equity sales, and other required disclosures for the period [Item 1. Legal Proceedings](index=42&type=section&id=Item%201.%20Legal%20Proceedings) The company reports that it is not a party to any litigation or other legal proceedings that are reasonably expected to have a material effect on its business, financial condition, or results of operations - CEVA is not currently involved in any material legal proceedings[152](index=152&type=chunk) [Item 1A. Risk Factors](index=42&type=section&id=Item%201A.%20Risk%20Factors) This section notes no material changes to the risk factors disclosed in the Annual Report on Form 10-K, except for an expanded discussion on the risks associated with the company's broad discretion over its cash and investments. This highlighted risk pertains to potential non-returns on investments, exposure to interest rate fluctuations causing unrealized losses on corporate bonds, and solvency risks of financial institutions - The company highlights its significant exposure to U.S. interest rate fluctuations due to its concentration of investments in corporate bonds, which led to unrealized losses of approximately **$6.2 million** as of March 31, 2023[155](index=155&type=chunk) - The company is also exposed to risks related to the solvency of banks where it holds deposits and investments, as balances exceed FDIC or similar insurance limits[156](index=156&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=43&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reports that there were no repurchases of its common stock during the three months ended March 31, 2023 - No common stock was repurchased during Q1 2023[158](index=158&type=chunk) [Other Items (3, 4, 5)](index=43&type=section&id=Other%20Items) Items 3 (Defaults Upon Senior Securities), 4 (Mine Safety Disclosures), and 5 (Other Information) are all reported as not applicable for this period - Items 3, 4, and 5 are not applicable[159](index=159&type=chunk)[160](index=160&type=chunk)[161](index=161&type=chunk) [Item 6. Exhibits](index=44&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including management compensation plans, CEO and CFO certifications, and XBRL data files - The exhibits include certifications from the Chief Executive Officer and Chief Financial Officer as required by the Sarbanes-Oxley Act[163](index=163&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 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: 000-49842 CEVA, INC. (Exact name of registrant as specified in its charter) Delaware 77-0556376 (State or other jurisdict ...

CEVA, Inc. (NASDAQ:CEVA) Q4 2022 Earnings Conference Call February 15, 2023 8:30 AM ET Company Participants Richard Kingston - Vice President, Market Intelligence and Investor Relations Amir Panush - Chief Executive Officer Yaniv Arieli - Chief Financial Officer Conference Call Participants Matt Ramsay - Cowen Kevin Cassidy - Rosenblatt Securities Suji Desilva - Roth Capital Chris Reimer - Barclays Martin Yang - Oppenheimer David O’Connor - BNP Paribas Gus Richard - Northland Operator Good day, and welcome ...

Financial Data and Key Metrics Changes - Revenue for Q3 2022 was $33.7 million, up 3% year-over-year from $32.8 million [18] - Licensing revenue was $22.3 million, reflecting 66% of total revenues, up 3% from $21.6 million [19] - Royalty revenue was $11.4 million, reflecting 34% of total revenues, up 2% from $11.2 million [19] - GAAP operating loss for Q3 was $4 million, down from a GAAP operating profit of $1.7 million in the same quarter a year ago [20] - Non-GAAP operating profit was $6.9 million, up 4% from Q3 2021 [21] - GAAP loss for the quarter was $21.3 million, with a diluted loss per share of $0.96 [21] Business Line Data and Key Metrics Changes - Licensing environment outperformed, with 18 licensing agreements across various market segments including ADAS and wireless audio devices [7][8] - Handset baseband royalties were up 16% year-over-year but down 20% sequentially due to inventory adjustments [9] - Base station IoT royalties were down 3% year-over-year but up 16% sequentially, driven by growing 5G RAN shipments [9][10] Market Data and Key Metrics Changes - China and the U.S. were the largest drivers of business, with Japan emerging as an important market due to automotive and industrial activities [8] - Shipped units by CEVA's licensees during Q3 2022 were 357 million units, down 23% from Q3 2021 [22] - Base station and IoT product shipments were 279 million units, down 20% sequentially and down 31% year-over-year [22] Company Strategy and Development Direction - The company aims to increase IP content by moving up the value chain and licensing software IP to OEMs [11][13] - The Penta-G RAN platform was announced to extend the portfolio for the 5G RAN market, reducing entry barriers for new entrants [12][49] - Focus on diversifying revenue through software IP for wearables and other devices, with over 50 licensees using CEVA technologies [13][14] Management's Comments on Operating Environment and Future Outlook - Management noted the further deterioration of consumer demand and extended COVID-19 restrictions in China affecting inventory levels [11] - The company expects royalty revenue to be lower by about 10% sequentially in Q4 due to softer demand in smartphones and consumer electronics [24] - Annual revenue is expected to be in the range of $132.5 million to $135 million, representing 8% to 10% annual growth over 2021 [24] Other Important Information - CEO Gideon Wertheizer announced retirement effective December 31, 2022, with Amir Panush set to take over [16][17] - The company has a strong cash position of $144 million and continues its buyback program [23] Q&A Session Summary Question: Comparison of 5G rollout in India to China - Management highlighted that India is an untapped area for 5G, with significant opportunities as they start from scratch [30][31] Question: Differences in licensing software IP contracts - Licensing software IP is royalty-based, allowing for optimization due to the company's understanding of its IP [32][34] Question: Changes in customer demand across verticals - Management noted a combination of supply easing and reduced demand leading to higher inventory levels, particularly in mobile and consumer products [38][40] Question: M&A environment and future acquisitions - No immediate M&A plans, but the company is open to exploring interesting technologies and add-ons in the future [43] Question: Update on automotive business and revenue timing - Revenue from automotive customers is expected to materialize around 2024-2025 due to the lengthy qualification process [64]

PART I. FINANCIAL INFORMATION [Financial Statements](index=6&type=section&id=Item%201.%20Financial%20Statements) CEVA, Inc.'s unaudited interim consolidated financial statements as of June 30, 2022, show increased revenues but net losses due to higher expenses and acquisition costs [Interim Condensed Consolidated Balance Sheets](index=6&type=section&id=Interim%20Condensed%20Consolidated%20Balance%20Sheets) The balance sheet as of June 30, 2022, shows a slight decrease in total assets and stockholders' equity compared to December 31, 2021, with total assets at $319.4 million Condensed Consolidated Balance Sheet Data (in thousands) | Account | June 30, 2022 (Unaudited) | December 31, 2021 | | :--- | :--- | :--- | | **Total Current Assets** | $173,572 | $188,980 | | **Total Assets** | **$319,407** | **$328,659** | | **Total Current Liabilities** | $31,589 | $35,440 | | **Total Liabilities** | **$45,702** | **$51,927** | | **Total Stockholders' Equity** | **$273,715** | **$276,732** | [Interim Condensed Consolidated Statements of Income (Loss)](index=8&type=section&id=Interim%20Condensed%20Consolidated%20Statements%20of%20Income%20(Loss)) Q2 2022 revenues increased to $33.2 million, but a net loss of $1.1 million was reported, with H1 revenues at $67.6 million and a $2.8 million net loss Statement of Income Highlights (in thousands, except per share data) | Metric | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 | | :--- | :--- | :--- | :--- | :--- | | **Total Revenues** | $33,195 | $30,457 | $67,586 | $55,859 | | **Gross Profit** | $26,370 | $26,764 | $54,357 | $49,785 | | **Operating Income (Loss)** | $(276) | $1,588 | $192 | $258 | | **Net Income (Loss)** | **$(1,123)** | **$315** | **$(2,819)** | **$(3,315)** | | **Diluted EPS** | **$(0.05)** | **$0.01** | **$(0.12)** | **$(0.15)** | [Interim Condensed Consolidated Statements of Cash Flows](index=12&type=section&id=Interim%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operations for H1 2022 decreased to $1.7 million, with increased investing and financing outflows leading to a $13.9 million decrease in cash and equivalents Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $1,711 | $8,431 | | **Net cash used in investing activities** | $(12,256) | $(4,222) | | **Net cash provided by (used in) financing activities** | $(2,737) | $1,577 | | **Decrease in cash and cash equivalents** | $(13,864) | $5,563 | [Notes to the Financial Statements](index=13&type=section&id=Notes%20to%20the%20Interim%20Condensed%20Consolidated%20Financial%20Statements) The notes detail business operations, accounting policies, and financial results, highlighting Asia Pacific as the primary market, customer concentration, and share repurchases - CEVA licenses wireless connectivity and smart sensing technologies, and provides chip design services through its Intrinsix subsidiary, targeting mobile, consumer, automotive, and IoT markets[26](index=26&type=chunk)[27](index=27&type=chunk) Revenue by Geography - H1 2022 (in thousands) | Region | Licensing, NRE, etc. | Royalties | Total | | :--- | :--- | :--- | :--- | | United States | $9,637 | $4,100 | $13,737 | | Europe & Middle East | $2,534 | $1,340 | $3,874 | | Asia Pacific | $32,345 | $17,630 | $49,975 | - For the six months ended June 30, 2022, one customer (Customer A) accounted for **11%** of total revenues, down from **21%** in the prior year period[65](index=65&type=chunk) - During the three and six months ended June 30, 2022, the company repurchased **136,091** shares of common stock for an aggregate price of **$4.5 million**[103](index=103&type=chunk) [Management's Discussion and Analysis (MD&A)](index=30&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q2 2022 financial performance, noting a 9% revenue increase to $33.2 million driven by licensing and NRE growth, and a strong liquidity position [Business Overview](index=30&type=section&id=BUSINESS%20OVERVIEW) CEVA licenses wireless connectivity and smart sensing technologies, with Intrinsix adding chip design services, driven by growth in 5G, IoT, and edge AI processors - CEVA's business model focuses on licensing IP for wireless connectivity and smart sensing, complemented by co-creation chip design services from its Intrinsix acquisition[108](index=108&type=chunk)[111](index=111&type=chunk) - Key growth drivers include 5G baseband processing, high-volume IoT connectivity (Bluetooth, Wi-Fi, UWB), TWS earbuds, and AI processors for edge devices[115](index=115&type=chunk)[116](index=116&type=chunk)[119](index=119&type=chunk) - In Q2 2022, **14** of **22** new IP licensing and NRE deals were for wireless connectivity, with eight for Wi-Fi platforms, indicating strong industry demand[113](index=113&type=chunk) [Results of Operations](index=32&type=section&id=RESULTS%20OF%20OPERATIONS) Q2 2022 total revenues increased 9% to $33.2 million, driven by licensing and NRE growth, but gross margin decreased and operating expenses rose, resulting in an operating loss Revenue Breakdown (in millions) | Revenue Type | Q2 2022 | Q2 2021 | % Change | | :--- | :--- | :--- | :--- | | Licensing, NRE & related | $22.1 | $15.5 | +42% | | Royalties | $11.1 | $14.9 | -26% | | **Total Revenues** | **$33.2** | **$30.5** | **+9%** | - The Q2 2022 royalty revenue decline was primarily due to a **$3.3 million** one-time payment from a customer in Q2 2021. Excluding this, royalty revenue would have been down only **4%** YoY[122](index=122&type=chunk)[128](index=128&type=chunk) - Gross margin decreased to **79%** in Q2 2022 from **88%** in Q2 2021, mainly due to higher cost of revenues from NRE-related costs associated with the Intrinsix business[133](index=133&type=chunk) - The company concluded **22** license and NRE agreements in Q2 2022, with **five** being first-time customers. Target applications include smartphones, smart home, PCs, ADAS, and 5G satellite communication[126](index=126&type=chunk) [Liquidity and Capital Resources](index=37&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) As of June 30, 2022, CEVA held $146.1 million in cash and investments, generated $1.7 million from operations, and repurchased shares, with sufficient capital for the next 12 months - Total cash, cash equivalents, bank deposits, and marketable securities amounted to **$146.1 million** as of June 30, 2022[153](index=153&type=chunk) - Net cash provided by operating activities for H1 2022 was **$1.7 million**, down from **$8.4 million** in H1 2021[158](index=158&type=chunk)[159](index=159&type=chunk) - The company repurchased **136,091** shares for **$4.5 million** in H1 2022 under its share repurchase program[162](index=162&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=39&type=section&id=Item%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company faces market risks including foreign currency fluctuations, interest rate risk on its investment portfolio with $5.2 million in unrealized losses, and credit risk - The company is exposed to foreign currency risk as most expenses are in NIS and Euro, while revenues are in USD. A hedging program is in place to mitigate this[165](index=165&type=chunk)[166](index=166&type=chunk) - The investment portfolio, consisting mainly of corporate bonds, had unrealized losses of approximately **$5.2 million** as of June 30, 2022, due to rising interest rates[168](index=168&type=chunk) - The company holds cash and deposits with major banks that exceed FDIC or similar insurance limits, posing a credit risk if these financial institutions were to fail[167](index=167&type=chunk) [Controls and Procedures](index=41&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2022, with no material changes to internal control over financial reporting - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2022[173](index=173&type=chunk) - There were no material changes in the company's internal control over financial reporting during the most recent fiscal quarter[173](index=173&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=41&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in any material legal proceedings - The company is not currently involved in any material legal proceedings[174](index=174&type=chunk) [Risk Factors](index=41&type=section&id=Item%201A.%20Risk%20Factors) This section outlines key business risks, including intense competition, reliance on limited customers, acquisition integration challenges, and geopolitical tensions - The company faces significant competition from Verisilicon, Cadence, Synopsys, ARM, and internal design teams at major semiconductor companies[180](index=180&type=chunk) - A significant portion of revenue is derived from a limited number of customers. UNISOC accounted for **11%** of total revenues for H1 2022[189](index=189&type=chunk) - The business is exposed to geopolitical risks, including U.S.-China trade tensions and the Russia-Ukraine conflict, which could disrupt the semiconductor supply chain and customer demand[211](index=211&type=chunk) - Challenges exist in integrating the Intrinsix acquisition and its business, which relies heavily on U.S. government contracts subject to budgetary constraints and policy shifts[218](index=218&type=chunk)[241](index=241&type=chunk)[242](index=242&type=chunk) [Share Repurchases](index=60&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q2 2022, the company repurchased 136,091 shares at an average price of $32.75, with 361,517 shares remaining available under the program Share Repurchases in Q2 2022 | Month | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2022 | 0 | N/A | | May 2022 | 121,729 | $32.74 | | June 2022 | 14,362 | $32.83 | | **Total** | **136,091** | **$32.75** | - As of June 30, 2022, **361,517** shares remained available for repurchase under the company's share repurchase program[264](index=264&type=chunk)[265](index=265&type=chunk)

Financial Data and Key Metrics Changes - Revenue for Q2 2022 was $33.2 million, up 9% year-over-year from $30.5 million in Q2 2021 [14] - Licensing revenue was $22.1 million, representing 67% of total revenue, up 42% from $15.5 million in Q2 2021 [14] - Royalty revenue was $11.1 million, down 26% year-over-year from $14.9 million in Q2 2021, but down only 4% when excluding a one-time adjustment from the previous year [14][15] - Gross margin was 79% on a GAAP basis and 82% on a non-GAAP basis, slightly better than expectations [15] - GAAP net loss for the quarter was $1.1 million, with diluted loss per share of $0.05, compared to net income of $3 million and $0.01 per share in Q2 2021 [18] Business Line Data and Key Metrics Changes - Licensing and NRE related revenue was $22.1 million, reflecting a strong licensing environment [14] - Base station and IoT royalty revenue contributed $7 million, flat from the previous quarter and up 6% year-over-year [15] - Handset-related royalties were $4.1 million, indicating a decline due to economic uncertainty and COVID impacts [36] Market Data and Key Metrics Changes - Asia remains a major driver of business, with increasing engagement from U.S.-based customers [8] - Bluetooth shipments increased by 35% year-over-year to 255 million units, while cellular shipments rose by 12% year-over-year to 20 million units [19] - The overall market for wearables is growing, with CEVA's technology being integrated into various devices [11] Company Strategy and Development Direction - CEVA is focusing on co-creation business models to enhance customer engagement and drive revenue growth [10][13] - The company sees significant potential in the coexistence of 5G and Wi-Fi technologies, positioning itself as a one-stop shop for both [12] - CEVA aims to leverage its IP portfolio to address key technology trends in the semiconductor market [13] Management's Comments on Operating Environment and Future Outlook - Management expressed satisfaction with financial performance despite macroeconomic challenges, particularly in the wireless space [7][13] - The company is monitoring economic uncertainties, especially in the handset market, but remains optimistic about growth in base station and IoT segments [21][22] - Future guidance indicates expectations for slightly improved gross margins and operating expenses in Q3 2022 [22][23] Other Important Information - CEVA's total operating expenses for Q2 were $26.6 million, below guidance due to favorable foreign exchange and timing of grants [16] - The company activated its share buyback program, repurchasing approximately 136,000 shares for about $4.5 million [19] Q&A Session Summary Question: Trends in different end markets and revenue guidance - Management noted challenges in providing specific revenue guidance due to the nature of customer reporting under revenue recognition rules, but highlighted positive trends in base station IoT and Bluetooth devices [26][28] Question: Impact of handset royalties - Handset royalties were identified as the weakest link, particularly in low and mid-tier smartphones, with expectations for recovery as economic conditions improve [29][32] Question: New IT deals and revenue mix - Management clarified that the number of new deals does not directly correlate with revenue due to complexities in customer relationships and project delivery [37][39] Question: Opportunities from Intrinsix - Intrinsix is expected to play a significant role in defense market projects, with ongoing design engagements [41] Question: Synergies between Wi-Fi and 5G - CEVA highlighted the technological synergies between Wi-Fi and 5G, emphasizing the integration of both technologies in customer offerings [42][43] Question: Customer ramp-up in 5G infrastructure - Management indicated strong customer relationships in the 5G space, with significant growth opportunities ahead [45][46] Question: Operating margin dynamics - The mix of licensing and royalty revenues is expected to influence operating margins, with a focus on maintaining margins in the low 80s [48][50] Question: M&A pipeline considerations - Management is actively exploring M&A opportunities but emphasizes the importance of strategic fit over valuation [52][53] Question: Co-creation agreement catalysts - The co-creation model is seen as beneficial for both CEVA and its customers, providing more visibility and potential for royalties [56][59] Question: Engagements with U.S. companies - Recent engagements have focused on wireless audio technologies for wearables, indicating a shift towards more complex projects [60][62]