CEVA(US:CEVA)2019-11-12 21:03Financial Performance - Total revenues for Q3 2019 were $23.4 million, representing a 10% increase year-over-year, while revenues for the first nine months were $58.8 million, a 4% increase compared to the same period in 2018[116]. - Licensing and related revenues reached $11.3 million in Q3 2019, up 15% year-over-year, and $33.1 million for the first nine months, an 11% increase compared to the same period in 2018[120]. - Royalty revenues for Q3 2019 were $12.2 million, a 5% increase year-over-year, while revenues for the first nine months were $25.8 million, a 3% decrease compared to the same period in 2018[123]. - The company expects licensing and related revenue to grow approximately 10% to 20% in 2022 compared to 2018 levels, with royalty revenue projected to be about two times the 2018 levels[115]. Customer and Market Insights - CEVA concluded fourteen licensing deals in Q3 2019, all for non-handset baseband applications, with five agreements made with first-time customers[122]. - Shipments of CEVA-powered non-cellular baseband products grew 29% year-over-year to reach 123 million units in Q3 2019, marking a record high for the company[104]. - The smart sensing product segment accounted for 21% of total revenues in the first nine months of 2019, up from 17% in the same period of 2018[119]. - CEVA's five largest customers accounted for 54% of total revenues in Q3 2019, a decrease from 64% in Q3 2018, indicating a slight diversification in customer base[117]. - The addressable market for Bluetooth, Wi-Fi, and NB-IoT is expected to exceed 9 billion devices annually by 2022, indicating significant growth potential in IoT applications[109]. Expenses and Profitability - Cost of revenues increased to $2.8 million in Q3 2019 from $2.0 million in Q3 2018, representing 12% of total revenues for both periods[127]. - Gross margin for Q3 2019 was 88%, down from 91% in Q3 2018, primarily due to higher costs of revenues[129]. - Total operating expenses rose to $21.0 million in Q3 2019 from $17.3 million in Q3 2018, driven by higher salary costs and expenses related to the Hillcrest Labs acquisition[130]. - Research and development expenses increased to $13.9 million in Q3 2019 from $11.9 million in Q3 2018, representing 59% of total revenues[132]. Cash Flow and Investments - As of September 30, 2019, the company had approximately $147.6 million in cash and cash equivalents, down from $167.7 million at December 31, 2018, primarily due to $21.0 million used for acquisitions[152]. - Cash provided by operating activities for the first nine months of 2019 was $4.3 million, compared to $4.1 million for the same period in 2018[156][157]. - Net cash used in investing activities for the first nine months of 2019 was $9.3 million, compared to $2.0 million for the same period in 2018[159]. - The company repurchased 194,316 shares of common stock at an average price of $25.01 per share for a total of $4.9 million during the first nine months of 2019[163]. - The company invested $32.1 million in cash in bank deposits and marketable securities with maturities up to 56 months during the first nine months of 2019[154]. Tax and Financial Position - Income tax benefits were $0.4 million in Q3 2019, compared to an expense of $0.4 million in Q3 2018, primarily due to the release of a tax provision following a tax audit[143]. - The Irish subsidiary qualified for a 12.5% tax rate on trade, while the French subsidiary has a 31.0% tax rate, with the first €500,000 of taxable profit taxed at a reduced 28% rate[144]. - The Israeli subsidiary's first seven investment programs were subject to a corporate tax rate of 23% for the first nine months of 2019, and the eighth program had a reduced rate of 10%[145]. Foreign Exchange and Market Risks - The company recorded a foreign exchange loss of $0.48 million for the first nine months of 2019, compared to a loss of $0.20 million in the same period of 2018[142]. - The company is exposed to fluctuations in U.S. interest rates, which may adversely impact fixed interest investments if rates rise[173]. - The company follows a foreign currency cash flow hedging program to protect against fluctuations in foreign currency cash flow related to non-U.S. employee payroll[168]. - The company does not currently have any derivative instruments but may implement them in the future to manage market exposures[173].