CEVA - for those in AMBA, AIOCF, SWKS, MBLY

I’ve been looking at the IOT connectivity plays and one left field emergent player that whilst still tiny is putting in monster shipment growth, happens to play in LTE cellular, wifi and Bluetooth and is moving from cell phone modem space into connectivity.

Their LTE shipments hit 27 million this quarter up 11x from year ago quarter. Bluetooth is up 186% to 31m units.

They see plenty of further shipment growth and repositioning into connectivity - including vision (automotives and surveillance), audio, automated home (Nest), and wearables as well as further tablet and smart phone share gain.

I can’t quite tell whether they would compete with or compliment AMBA, AIOCF, MBLY, SWKS, QCOM or even Sierra Wireless. Probably a mix but they are really going for it now.

Check it out…
Company is called CEVA…
http://finance.yahoo.com/q?s=CEVA
Latest results look good with revenues up 15%, royalties up 42%, GAAP earnings up 400%+ and non GAAP EPS up 83%. Q4 revenues are expected to grow ~15% and profits to double. The stock has moved to a 52 week high as a result. Royalties are expected to continue ballooning next quarter and next year. Current year P/E is ~35.

http://finance.yahoo.com/news/ceva-inc-announces-third-quart…
Here’s their call transcript…
http://finance.yahoo.com/news/edited-transcript-ceva-earning…

I haven’t done a TTM assessment which I will get around to, but they are rebounding in terms of top line and earnings growth and this is expected to continue.

IoT News flow examples:
http://finance.yahoo.com/news/vatics-chooses-ceva-imaging-vi…
http://finance.yahoo.com/news/socionext-licenses-deploys-cev…
http://finance.yahoo.com/news/silver-spring-networks-adopts-…
http://finance.yahoo.com/news/beken-adopts-ceva-dsp-connecti…
http://finance.yahoo.com/news/ceva-unveils-wi-fi-ip-11020018…
http://finance.yahoo.com/news/catena-partners-ceva-complete-…
http://finance.yahoo.com/news/cypher-partners-ceva-offer-inn…
http://finance.yahoo.com/news/ceva-brings-human-intelligent-…
http://finance.yahoo.com/news/rivierawaves-deal-boost-ceva-l…
http://finance.yahoo.com/news/ceva-mwc-2015-powering-era-130…
http://finance.yahoo.com/news/cyweemotion-partners-ceva-offe…

Cheers
Ant

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Ant,

The TTM earnings are 44 cents (22 + 6 + 8 + 8).

Note the GAAP earnings are quite a bit higher for this quarter at least.

At a closing price of $26.54, this yields a PE of 60.3.
1YRPEG - 0.73

Management is telling us profits will double next quarter on increasing revenue of 15%. I presume this is due to royalties that cost nothing.

With 44 cents expected next quarter, TTM EPS would be 80 cents with a PE of 33.2.

This is good enough for me to start reading through their last few conference calls. I am interested in your thoughts in general. What makes you like the company? What are the potential threats to their business? Any color you can add is appreciated.

Thanks for the heads up on this stock.

A.J.

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Thanks AJ.

This was a go nowhere stock a year ago. I have held for far too long. It was just another DSP company 10 years ago. If it had stayed in the cellular DSP/modem business I wouldn’t even be mentioning it. I was all for cutting this one however when I realized what had happened since I took my eye of the ball it holds some real attraction now.

The fact that they have repositioned into IOT connectivity, ridden the LTE wave nicely and have a balanced footing in Wifi, Bluetooth and cellular I think is pretty good. They have had real traction in licensing across the board in recent years and are now well placed.

They are going after AMBA, AIOCF, QCOM, SWKS & MBLY markets with visual intelligence, home automation as well as mobile computing connectivity.

These are big plays.

They have already guided Q4 to be 15% higher on revs and profits to double with earnings estimates of 16-18c vs 8c a year ago and $15-$16 million from $13.8 million in revs.
http://finance.yahoo.com/news/ceva-sees-q4-profit-doubling-1…

In the earnings transcript the unit shipment volume increases for next year are to expected to rise by between 35-200% (100-200m) for LTE.

Analysts have been moving their ratings up all year on this company.

They made a decent acquisition last year with Rivierawave which changed things. They are also another Israeli tech company that has all the advantages of operating in a hi tech nation with the strong R&D ecosystem without some of the downsides of the unicorn job market fickleness of silicon valley.

Look forward to other fools research on this.

Ant

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Ant,

Thanks for the quick reply. I, too, am interested in what others may find or may already know about this small company.

I looked back at their revenues and earnings going back to 2012, and you are right, this was going nowhere. 2012 was a fairly strong year posting earnings of 78 cents. Then revenue stagnated and earnings were depressed essentially until last quarter.

Obviously, this is by nature a very risky stock based on its market cap. Anyway, time to actually read through the articles you sent and the earnings.

The big question in my mind is what makes them think they can compete with the big boys in these big plays.

Take care,
A.J.

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Ant,

Their guidance for next quarter is Revenue $15M to $16M and non-GAAP EPS of $0.16 to $0.18.

When I read they expect profits to double, that was based on last year’s EPS of $0.08 during the fourth quarter and not sequentially.
I originally assumed it was sequentially which was a mistake. So, the 44 cents I estimated for next quarter is a far cry from management’s actual estimate!!!

Sorry for anyone who was mislead by my earlier post.

A.J.

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AJ yes it is a yoy not sequential forecast.
Ant

CEVA is supplier to chip companies. So companies like AMBA, SWKS, QCOM are either their customers or play complimentary role to them.
CEVA doesn’t compete with these semiconductor manes we follow on this board.

Agree, they have done admirable job expanding technologies and customer base, partly through acquisitions.

Their business model resemble to ARMH, which is fantastic… However, CEVA operates into a segment that is not as scalable as ARMH, so I would not see it as large and scalable opportunity as ARMH has / had.
Having said that, if the valuation is reasonable, this is a great company to own.

Just noticed 2 of the links are broken in the original post, apologies.

Ceva results…
http://finance.yahoo.com/news/ceva-sees-q4-profit-doubling-1…
Ceva transcript…
http://finance.yahoo.com/news/edited-transcript-ceva-earning…

Regards
Ant

Thanks Nilvest. I actually got into them via Parthus - the Irish Bluetooth company back in the TMT boom which CEVA bought out. It has done ok for me but the company is now more interesting than ever. They supply Alphabet/Google and Nest for a start, maybe Fitbit I think if not the Nike fuel band and perhaps even Mobileye. They are in all of the Samsung smart phone range now also. I think their LTE modem business does compete with Qualcomm. If Apple wanted to switch to another LTE supplier and Intel was not yet ready to support LTE then that could be nice!

Some good customers there.

Ant

Interesting site here… captures charting analysis, recommendations and newsflow altogether.

http://finviz.com/quote.ashx?t=ceva,$lscc

Ant

Ant, in the last conference call I came across this:

On the royalty front, from royalty reports we received thus far, we expect an increase of up to 25% in royalty revenue on a year-over-year basis, mainly due to growing unit shipments of LTE and connected products. This leads to an annual royalty revenue growth rate of approximately 22%, substantially above the overall cellular and semiconductor industries’ growth rates. This also marks CEVA’s return to annual royalty growth after three successive years of royalty declines.

What the heck was going on in the three years previously, and is the current growth sustainable?

Saul

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Management is telling us profits will double next quarter on increasing revenue of 15%… With 44 cents expected next quarter, TTM EPS would be 80 cents with a PE of 33.2.

AJ, you misunderstood! They are not doubling sequentially from 22 to 44 cents. They will double year-over-year from 8 cents to 16 to 18 cents. That’s a major difference in your thinking.

Saul

Saul,

AJ, you misunderstood! They are not doubling sequentially from 22 to 44 cents. They will double year-over-year from 8 cents to 16 to 18 cents

I noticed that shortly after I wrote the post and corrected it a few posts later in the thread. Hope I didn’t confuse anyone too much!

Thanks,
A.J.

Ant:

The 10-K made for interesting reading, a US corporation with Irish, French and Israeli connections. IP, not drugs! :wink:

CEVA’s IP business model is very attractive as evidenced by the success of ARM Holdings. One major difference I see is that ARM entered through underserved markets, first in embedded microprocessors and later in mobile in a classic disruptive technology approach. By the time Intel blinked ARM was firmly established. By contrast, CEVA went head to head in DSP so it’s no wonder they floundered. Now CEVA is expanding into connectivity which I don’t think is underserved and artificial intelligence which might be. They do seem to have a very nice ecosystem of partners.

From a risk aversion point of view wouldn’t it be better to wait to see results instead of betting on the promises. If they succeed, there will be over a decade to invest in them. I intend to follow them, thanks for the heads up.

Denny Schlesinger

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What the heck was going on in the three years previously, and is the current growth sustainable?

Hi Saul - basically I think the change has come about with CEVA’s focus on LTE which finally became the dominant modem chip set in mobile as well as moving beyond mobile into other connectivity spaces allied with their acquisition of Rivierawave.

It must have helped when QUALCOMM’s snapdragon got kicked out of Samsumg as that let Ceva in alongside the in house chip.

Cheers
Ant

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From a risk aversion point of view wouldn’t it be better to wait to see results instead of betting on the promises. If they succeed, there will be over a decade to invest in them. I intend to follow them, thanks for the heads up.

Hi Denny - thanks, yep you are probably right. I bought in during the TMT boom when PLDs, DSPs and Power ICs etc were supposed to be the next big thing. International Rectifier and Altera both finally got bought out bringing the investments into bagging proportions but not exactly wealth creating returns. Ceva stayed independent and really failed to get traction. If I wasn’t already in it I might wait a few quarters to see how it pans out. I was posting on it partly from the point of view of an early alert but also for those invested in stocks in allied spaces (AMBA, AIOCF, MBLY, SWKS etc).

Cheers
Ant

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Hi Saul - basically I think the change has come about with CEVA’s focus on LTE which finally became the dominant modem chip set in mobile as well as moving beyond mobile into other connectivity spaces allied with their acquisition of Rivierawave.

Thanks Ant

Guys

I raised this stock on the board a while back. Well their latest results are out and are a beat on revenues and earnings and the traction continues. I’m still wondering how long they can ride the LTE wave before whatever next replaces it in the 5G roll out or beforehand. In the meantime they are doing well.

http://seekingalpha.com/pr/16471630-ceva-inc-announces-first…

Q1 had a 19% increase in revenues with royalties rising 31% (driven by LTE) & licensing growing 10%. GAAP earnings and EPS rose 270% & 350% respectively. Non-GAAP earnings & EPS rose to $3.5m and 17c up 115% and 113%.

Their licensing activity (11 deals secured) were mostly outside of traditional base band across a mix of target markets (6 in DSP/Platforms and 5 in connectivity) and across a balance of geographies and with some new clients thrown in.

Still interesting for those of you watching from the sidelines. The analyst call should provide some guidance which I will follow up on.

I notice that I missed reporting on Q4 results which is found here…
http://finance.yahoo.com/news/ceva-inc-announces-fourth-quar…
Q4 grew 16% so the revenue growth appears to be accelerating - EPS growth was identical at 113% from 8c to 17c and 13 deals were signed.
Non-GAAP net income and diluted earnings per share for the fourth quarter of 2015 were $3.6 million and $0.17, respectively, representing an increase of 106% and 113% over the $1.7 million and $0.08 reported for the fourth quarter of 2014.

I haven’t done the 1YPEG yet but it should be starting to look interesting.

Cheers
Ant

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FYI Rolling quarterly EPS have been:

16 Q1 17  
15 Q4 17
15 Q3 22
15 Q2 6
15 Q1 8
14 Q4 8
14 Q3 12
14 Q2 0
14 Q1 16

They are forecasting a YoY ramp up in the second half of 2016 so the Q4/Q1 flat line is expected to bend up.

Ant

…and here’s the Q2 guidance.
In the second quarter Ceva expects revenue of $16.5-$17.5 million, up 24-31 percent from a year ago, with adjusted EPS of 17-19 cents, up from 6 cents a year earlier. Analysts are forecasting revenue of $15.9 million and EPS of 15 cents.
http://finance.yahoo.com/news/israels-ceva-q1-more-profit-13…

Ant

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