Q1 2004 Ceva Earnings Conference Call - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

OPERATOR: Thank you for standing by. Welcome to the CEVA first quarter 2004 financial results conference call. At this time, all participants are in a listen-only mode. Later, we will open up the call to your questions, and instructions for queuing up will be provided at that time. As a reminder, this conference is being recorded. The conference call is the property of CEVA, and any retransmission, or copying thereof, is strictly prohibited without express written consent of CEVA, Inc. I would now like to turn the conference over to Deborah Stapleton for introductions. Please go ahead.

DEBORAH STAPLETON, INVESTOR RELATIONS, CEVA: Thank you, operator, and thanks to all of you for joining us today. On the call today are Chet Silvestri, CEVA's President and CEO; Christine Russell, the company's CFO; and Barry Nolan, the Vice President of Marketing.

Before we begin the presentation of the first quarter results, I want to remind listeners that any statements contained in this conference call, including the Q&A period, that are not statements of historical fact, may be deemed to be forward-looking statements. Including statements with respect to CEVA's anticipated financial results for the second quarter fiscal 2004, and future quarters.

Words such as expected, believed, anticipates, plans, expects, will, and similar expressions, are intended to identify forward-looking statements. There are a number of important factors that could cause the results of CEVA to differ materially from those indicated by these forward-looking statements, including, among others, risks detailed from time to time in the company's SEC reports, including its annual report on Form 10K for the year ended December 31, 2003. CEVA does not undertake any obligation to update forward-looking statements.

Having said that, I'll now turn the call over to Chet Silvestri, the company's President and CEO.

CHET SILVESTRI, CEO, CEVA: Thank you, Deborah, and thank you all for attending the CEVA first quarter conference call. Today I'll discuss recent highlights of our business, and our progress in extending our position as the leading licenser of DSP and communications technology to the industry. After I complete my remarks, our CFO, Christine Russell, will then discuss the financial results.

We completed our first quarter with revenues of $9.2m, and a profit of $409,000, or 2 cents per share. This is within the range of guidance we gave, and demonstrates that we were able to achieve a significant goal of the fourth quarter realignment, profitability.

We completed five new licensing agreements in the quarter, three for our DSP technologies, and two for our GPS, or global positioning system technology. In addition, we continued our progress on a second key goal, extending our DSP leadership. Here industry adoption is a key indicator of our success. Last week we were very pleased to announce that Samsung had become the first licensee of our new CEVA-X product for their next generation 3G handsets. Samsung is a leader in the mobile industry, and the Samsung adoption of CEVA-X is a tremendous endorsement for us.

Also we have announced yesterday that EoNex, one of Asia's most progressive wireless players, has licensed CEVA-X for its next generation 3G wireless chipset. We now have three licensees for CEVA-X since its introduction in late Q4. In the quarter we also announced that technology leaders such as Kawasaki, Oki, Stepmind, and National Semiconductor, have licensed our technologies.

Geographically, we are continuing to see strong business growth in Asia. Our focus on adding sales, marketing, and business development resources in Asia have paid off. Asia has moved from being less than 15% of our revenue a year ago, to comprising 35% of our revenue in this quarter. I've just returned from a business tour of Korea and Japan, and saw strong interest in our latest technology, particular CEVA-X and Xpert GPS.

CEVA licensees continue to be successful, and to gain market share in the DSP market. Their combined semiconductor shipments containing our technology were up 9% sequentially, to 19m units in the quarter. Looking forward, we expect annualized CEVA license shipments of approximately 80m units in 2004; an increase of over 45% compared to 2003 buys.

The industry in general continues to grow. Last week Forward Concepts, the preeminent industry analyst for DSP, announced that final 2003 DSP revenue from the World Semiconductor Trade Statistics Group, was $6.1b, representing 26% growth over 2002. Consumer shipments, in dollars, grew 109%, and wireless shipments grew 32%. The combination of the wireless and consumer segments represented approximately 70% of that total dollar volume for 2003. These are the primary markets that we are targeting with our products. Forward Concepts is forecasting that 2004 will see 25% growth in total DSP shipments.

As the only meaningful independent source of leading edge DSP cores and solutions in the industry, CEVA is uniquely positioned to serve this growing market need. Our new product programs are on track to deliver on the DSP opportunity. The CEVA product strategy is focused on three areas; first, DSP cores, second, the framework for system on chip environment around these cores, and third, application, or full system solution, such as communications, multimedia, and GPS solutions that are powered by our DSP core.

In the quarter, we continued our aggressive ramp in our DSP portfolio, with the launch of two new application programs, Xpert-Blue, a complete Bluetooth 1.2 solution, and Xpert-Media, a complete audio and video platform for both the cellular and consumer electronics market. We've already secured two licensees for our Bluetooth platform, which is the first licensable Bluetooth standard version 1.2 in the industry.

Xpert-Media launched in February with planned shipment beginning in Q2, is a particularly exciting technology for us. It targets DSP's highest growing market, digital multimedia. Through patented techniques and innovative utilization of our DSP, we deliver audio and video multimedia processing in an all software solution, with performance and cost superiority over what is achievable in hardware today.

In the second quarter we'll continue this aggressive new product rollout. In a few weeks we'll be formally launching our Xpert-GPS platform, which is the eighth generation release of our GPS location technology. Uniquely, this platform is powered by CEVA DSP and is delivered as a largely software based, configurable product. We have already signed two licensees in the first quarter for our Xpert-GPS.

Also in the second quarter, we'll begin shipment of our voice over Internet protocol, or Xpert-VOP platform. VOIP is forecast to be the largest growth area in wired communications.

Binding all these applications to our DSP cores is a complex and challenging task for our licensees. To that end, we'll be delivering a major upgrade to our Xpert open framework environment. This release will deliver a standardized software framework, enabling fast and efficient DSP application developments and integration.

Partnering is also key to our strategy. Earlier in the quarter we announced the establishment of a foundry program with UMC, for our Teak and TeakLite DSP technology. In the second quarter we expect to add additional partners to our foundry program. …