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?
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.
The 10-K made for interesting reading, a US corporation with Irish, French and Israeli connections. IP, not drugs!
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.
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.
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).
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.
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.
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.
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…
To continue the story guys - the progress looks good and consistent, CEVA pre-announced year end numbers this week. The licensing activity and the numbers are very interesting and that leaves me with some research and thinking to do on this in order to disambiguate the intel impact within iPhone and the broader longer term opportunity (http://seekingalpha.com/article/4007619-ceva-story-just-appl…) - I’m hoping the eventual
If we look at revenues - these are estimated at above guidance at an all-time high too - $21.2m vs guidance of $18.5-19.5m. Whilst growing slightly with a lot of erratic seesawing in the numbers along the way (top and bottom line), since mid 2015 with the LTE roll out hitting full steam and the RivierraWave acquisition bedding in, Ceva numbers has been demonstrating the very model of growth.
Returning to the article in the link at the beginning of this post, I have been caught in 2 minds whether:
This is proving a short term bounce based on Intel (and therefore Ceva) winning a modem slot in a model of the iPhone and Qualcomm’s Snapdragon 810 getting kicked out of Samsung - leaving Ceva with an opportunity but with Qualcomm’s 820 back in Samsung and Intel’s modem under performing Qualcomm’s significantly - these gains could be very quickly reversed;
versus…
If actually and looking at the licensing activity these gains are coming from deep learning, visual intelligence, smart home and automotive arenas; then Ceva may actually have a long road of growth ahead of it and immune from short term Intel type boosts.
Err am I imagining it or has the Fool completely done away with board search functionality? Ok with help from Google and none from TMF’s pitiful remaining search function and to continue this thread…
The forward guidance beat expectations and the shares tanked.
No transcript yet but with Qualcomm in the litigation dog house it offers Intel and CEVA a ray of hope for continued Apple business along with their uber strong IoT success.
Ant
Somehow I get the feeling that MF regards the boards as a nuisance.
When to me they are the most important part of MF. No corrections after posting (a feature found on services like investors hub) now no search.
While I find MF recommendations useful ,I find some of the posters even more useful.
As you may have noticed - CEVA is by a long way the highest % gainer out of all my current holdings in my monthly portfolio review.
With Apple looking as though it is going to go nuclear on Qualcomm in favour of either Intel or an in-house chipset CEVA looks like it could be in for a good run. It is also very well positioned for 5G and for the next wave of bluetooth and Visual AI (e.g. ADAS etc).
They have just announced results which take the consistency in business performance to another level. Adding to the numbers I recorded previously, here are the revenues and earnings track record. https://seekingalpha.com/pr/16821121-ceva-inc-announces-firs…
Ceva revenue numbers are now demonstrating consistently solid double digit growth (every Q for the last 2 years). They seem to be settling around the 30% YoY growth rate.
They are becoming a worthy successor to my ARM fabless IP licensing investment… Ant
Ant
OK, Ant, you convinced me. I spent the entire morning getting a handle on the business and the financials. I liked what I saw, but it is an expensive company sporting a market cap ~ 10 annual revenues. Plus, insiders like to award themselves lotsa options for quick cash-outs. Sigh. Taking everything into consideration, I placed a GTC order to buy an entry position at $37.00. Meanwhile, I’ll keep studying the company. Like you, I’m rather partial to the ARM business model of fabless IP licensing.
Sure mate. If you want to play it safe you could wait till the iPhone 8 release tear down to see if Intel clean sweeps the modem chips away from Qualcomm. If that does happen it will be a big kicker for CEVA.
Ant
