UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DCD.C. 20549

FORM 10-Q

~~FORM10-Q~~

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended: ~~September 30, 2017~~March 31, 2023

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period fromto

Commission file number:000-49842

CEVA, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware
~~Delaware~~		77-0556376
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

~~1174 Castro Street,~~ 15245 Shady Grove Road, Suite ~~210, Mountain View, California~~400, Rockville, MD 20850		~~94040~~ 20850
(Address of Principal Executive Offices)		(Zip Code)

~~(650)417-7900~~

(240)-308-8328

(~~Registrant’s~~Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $.001 per share	CEVA	The NASDAQ Stock Market LLC

Indicate by check mark whether the ~~registrant:~~registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of RegulationS-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule12b-2 of the Exchange Act. (Check one).


Large accelerated filer	☐ ☒		Accelerated filer	☒ ☐

~~Non-accelerated filer~~		☐
Non-accelerated filer	☐		Smaller reporting company	☐

Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period offor complying with any new or revised financial accounting standards provided pursuant to ~~section~~Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act).

Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date: ~~21,974,975~~23,416,026 of common stock, $0.001 par value, as of ~~November 2, 2017.~~May 4, 2023.

Table of Contents

TABLE OF CONTENTS


			Page
PART I.	FINANCIAL INFORMATION				5

Item 1.	Interim Condensed Consolidated Balance Sheets at ~~September 30, 2017~~March 31, 2023 (unaudited) and December 31, ~~2016~~2022	5
		3

Interim Condensed Consolidated Statements of ~~Income~~Loss (unaudited) for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~2022	6
		4

Interim Condensed Consolidated Statements of Comprehensive ~~Income~~Loss (unaudited) for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~2022	7
	Interim Condensed Consolidated Statements of Changes in Stockholders’ Equity(unaudited) for the three months ended March 31, 2023 and 2022	5	8

Interim Condensed Consolidated Statements of Cash Flows (unaudited) for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~2022	9
		6

Notes to the Interim Condensed Consolidated Financial Statements			7	10

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations			18	24

Item 3.	Quantitative and Qualitative Disclosures about Market Risk			25	31

Item 4.	Controls and Procedures			26
	32
~~PART II. OTHER INFORMATION~~

~~Item 1. Legal Proceedings~~PART II.	OTHER INFORMATION		26
	32
Item ~~1A. Risk Factors~~1.	Legal Proceedings		26
	32
Item 1A.	Risk Factors	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds			36
	33
Item 3	Defaults Upon Senior Securities			36
	33
Item 4	Mine Safety Disclosures			36
	33
Item 5	Other Information			36
	33
Item 6 ~~Exhibits~~	Exhibits		36
	34
SIGNATURES				36	34

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FORWARD-LOOKING STATEMENTS

FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA

This Quarterly Report contains forward-looking statements that involve risks and uncertainties, as well as assumptions that if they materialize or prove incorrect, could cause the results of CEVA to differ materially from those expressed or implied by such forward-looking statements and assumptions. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. Forward-looking statements are generally written in the future tense and/or are preceded by words such as “will,” “may,” “should,” “could,” “expect,” “suggest,” “believe,” “anticipate,” “intend,” “plan,” or other similar words. Forward-looking statements include the following:

●

Our belief that having chip design expertise as part of our offerings through our Intrinsix business unit strengthens our relationships with customers, streamlines IP adoption, generates recurrent royalties and more, and that Intrinsix’s experience and customer base in the growing chip development programs with the U.S. Department of Defense and Defense Advanced Research Projects Agency (DARPA) together with its IP offerings for processor security and chiplets extends our serviceable market and revenue base;

●

Our belief that the adoption of our wireless connectivity and smart sensing IP products beyond our incumbency in the handset baseband market continues to progress, and the concluded agreements for our connectivity and smart sensing IP products during the recent period illustrates the exceptional interest in our wireless connectivity platforms, in both traditional and new areas;

●

Our belief that one of our key customers could become a key royalty payer in the future if it is successful in bringing its own 5G modem to its smartphones;

●

Our belief that our PentaG2 platform for 5G handsets and 5G IoT endpoints is the most comprehensive baseband IP platform in the industry today and provides newcomers and incumbents with a comprehensive solution to address the need for 5G processing for smartphones, fixed wireless access, satellite communications and a range of connected devices such as robots, cars, smart cities and other devices for industrial applications;

●

Our belief that our specialization and technological edge in signal processing platforms for 5G base station radio access network (RAN) and our PentaG RAN platform put us in a strong position to capitalize on the growing 5G RAN demand and the its disintegration toward new architecture and form factors, and that our PentaG RAN platform for 5G RAN settings is the most comprehensive baseband processor IP in the industry today and provides customers and incumbents with a comprehensive solution to address the need for 5G;

●

Our belief that our Bluetooth, Wi-Fi, Ultra Wide Band (UWB) and cellular IoT IPs allow us to expand further into high volume IoT applications and substantially increase our value-add and overall addressable market, which is expected to be more than 15 billion devices annually by 2027 based on research from ABI Research;

●

Our belief that Wi-Fi presents a significant royalty opportunity given our dominant market position in licensing Wi-Fi 6 to more than 35 customers to date;

●

Our belief that the growing market for True Wireless Stereo (TWS) earbuds, smartwatches, AR and VR headsets, and other wearable assisted devices, offers an incremental growth segment for us for our software IP;

●

Our belief that our unique capability to combine our Bluetooth IP, audio DSP IP and software for contextual aware user experience puts us in a strong position to capitalize on the fast-growing TWS markets of earbuds, smartwatches, Over-the-Counter (OTC) hearing aids, wireless speakers, PCs and more;

●

Our belief that our second generation SensPro2 sensor hub DSP family provides highly compelling offerings for any sensor-enabled devices and applications and enables us to address the transformation in devices enabled by these applications and expand our footprint and content in smartphones, drones, consumer cameras, surveillance, automotive safety, voice-enabled devices and industrial IoT applications;

~~Our belief that the adoption of our signal processing IP cores and software for applications outside of the cellular baseband market continues to progress;~~

~~Our belief that we will benefit from the handset market transitioning from feature phones to smartphones, particularly in emerging economies;~~

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~~Our belief that our Bluetooth andWi-Fi~~ ~~IPs allows us to expand further into IoT applications and increase our overall addressable market which is expected to be 35 billion devices by 2020, as per ABI Research;~~

●

Statements regarding third-party estimates of industry growth and future market conditions, including the expectation that camera-enabled devices incorporating computer vision and AI will exceed 1 billion units and devices incorporating voice AI will reach 600 million units by 2025 per research from Yole Group;

~~Our belief that our proven track record in audio/voice processing and the growing market potential for voice assisted devices offers an additional market opportunity for the company;~~

●

Our belief that our newest generation family of AI processors for deep learning at the edge, the NeuPro-M, represents new IP licensing and royalty drivers for us in the coming years, due to the increased deployment of neural networks in a wide range of camera-based devices, which is expected to be more than 2.5 billion Edge AI devices shipped annually by 2026 based on research from Yole Group;

~~Our belief that our specialization and competitive edge in digital signal processor technologies such asLTE-A~~ ~~Pro, 5G, LTE-IoT, 802.11ac and 802.11axWi-Fi~~ and the inherent low cost and power, and performance balance of our designs put us in a strong position to capitalize on market adoption of such next generation wireless technologies for multiple market and product sectors;

●

Our belief that the Hillcrest Labs sensor fusion business unit allows us to address an important technology piece used in personal computers, robotics, TWS earbuds, smart TVs and many other smart sensing IP products, in addition to our existing portfolio for camera-based computer vision and AI processing, and microphone-based sound processing;

Our belief that our vision processing IPs and neural net software and coprocessor hardware IPs offer additional growth in segments such smartphones, tablets, drones, surveillance and automotive ADAS and industrial IoT applications;

●

Our expectation that royalty revenues in the base station and IoT product categories will grow over the next few years, including from a range of different products at different royalty ASPs, spanning from high volume Bluetooth and Wi-Fi to high value sensor fusion and base station RAN;

~~Our belief that the transformation in vision processing is an opportunity for us to expand our footprint in smartphones;~~

●

Our expectation that a significant portion of our future revenues will continue to be generated by a limited number of customers, in part due to consolidation in the semiconductor industry;

~~Per ABI Research, cameras equipped with vision processing are expected to exceed 2.7 billion units by 2018;~~

●

Our belief that volatility in the global economic climate and financial markets could result in a significant change in the value of our investments;

~~Our belief thatnon-handset~~ baseband applications growth in royalties over the next few years will be a combination of higher unit shipments of Bluetooth products that bear lower ASPs, along with higher ASPs driven by base station and vision products;

●

Our anticipation that our cash and cash equivalents, short-term bank deposits and marketable securities, along with cash from operations, will provide sufficient capital to fund our operations for at least the next 12 months;

~~Our belief that our licensing business is progressing well with a solid pipeline, diverse customer base and target markets;~~

●

Our expectation that we will continue to experience the effect of exchange rate and currency fluctuations on an annual and quarterly basis; and

Our anticipation that our research and developments costs will increase in 2017 as compared to prior years, partially due to accelerated strategic research and development programs and collaboration with our customers to expedite their production ramps, as well as from the receipt of lower IIA research grants;

●

Our belief that fluctuations in high interest rates within our investment portfolio will not have a material effect on our financial position on an annual or quarterly basis.

~~Our belief that changes in interest rates within our investment portfolio will not have a material effect on our financial position on an annual or quarterly basis.~~

Forward-looking statements are not guarantees of future performance and involve risks and uncertainties. The forward-looking statements contained in this report are based on information that is currently available to us and expectations and assumptions that we deem reasonable at the time the statements were made. We do not undertake any obligation to update any forward-looking statements in this report or in any of our other communications, except as required by law. All such forward-looking statements should be read as of the time the statements were made and with the recognition that these forward-looking statements may not be complete or accurate at a later date.

Many factors may cause actual results to differ materially from those expressed or implied by the forward-looking statements contained in this report. These factors include, but are not limited to, those risks set forth in Part II – Item 1A – “Risk Factors” of this Form10-Q.

This report contains market data prepared by third party research firm. Actual market results may differ from their projections.

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PART I. FINANCIAL INFORMATION

~~Item 1.~~

~~FINANCIAL STATEMENTS~~

Item 1. FINANCIAL STATEMENTS

INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands, except share and per share data


	September 30, 2017			December 31, 2016			March 31, 2023			December 31, 2022
	Unaudited			Audited			Unaudited
ASSETS
Current assets:
Cash and cash equivalents	$	22,931		$	18,401		$	24,483		$	21,285
Short term bank deposits		40,966			46,247
Short-term bank deposits								6,164			6,114
Marketable securities		74,459			61,868			106,142			112,080
Trade receivables		12,885			15,044
Trade receivables (net of allowance for credit losses of $313 as of both March 31, 2023 and December 31, 2022)								35,007			31,250
Prepaid expenses and other current assets		4,588			3,152			8,766			6,896

Total current assets		155,829			144,712			180,562			177,625
Long term bank deposits		39,214			29,977
Long-term assets:
Bank deposits								8,280			8,205
Severance pay fund		9,243			7,941			8,183			8,475
Deferred tax assets		2,940			2,252
Deferred tax assets, net								9,434			8,599
Property and equipment, net		6,698			4,805			6,696			7,099
Operating lease right-of-use assets								10,034			10,283
Goodwill		46,612			46,612			74,777			74,777
Intangible assets, net		2,051			2,978			6,003			6,680
Investments in marketable equity securities								291			408
Other long-term assets		4,588			3,218			6,874			6,291

Total long-term assets		111,346			97,783			130,572			130,817

Total assets	$	267,175		$	242,495		$	311,134		$	308,442

LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Trade payables	$	468		$	571		$	1,820		$	1,995
Deferred revenues		4,274			6,258			4,006			3,168
Accrued expenses and other payables		3,070			4,015			7,280			6,660
Accrued payroll and related benefits		10,655			11,751			19,073			18,473

Operating lease liabilities								2,858			2,982
Total current liabilities		18,467			22,595			35,037			33,278

Long term liabilities:
Long-term liabilities:
Accrued severance pay		9,752			8,349			9,064			9,064

Operating lease liabilities								6,530			6,703
Other accrued liabilities								633			526
Total long-term liabilities		9,752			8,349			16,227			16,293

Stockholders’ equity:
Preferred Stock:
$0.001 par value: 5,000,000 shares authorized; none issued and outstanding		—			—
Common Stock:
$0.001 par value: 60,000,000 shares authorized; 23,595,160 shares issued at September 30, 2017 (unaudited) and December 31, 2016. 21,971,347 and 21,273,500 shares outstanding at September 30, 2017 (unaudited) and December 31, 2016, respectively		22			21
Preferred Stock: $0.001 par value: 5,000,000 shares authorized; none issued and outstanding								—			—
Common Stock: $0.001 par value: 45,000,000 shares authorized; 23,595,160 shares issued at March 31, 2023 and December 31, 2022. 23,416,026 and 23,215,439 shares outstanding at March 31, 2023 and December 31, 2022, respectively								23			23
Additional paidin-capital		215,532			212,103			243,141			242,841
Treasury stock at cost (1,623,813 and 2,321,660 shares of common stock at September 30, 2017 (unaudited) and December 31, 2016, respectively)		(27,632	)		(39,507	)
Treasury stock at cost (179,134 and 379,721 shares of common stock at March 31, 2023, and December 31, 2022, respectively)								(4,672	)		(9,904	)
Accumulated other comprehensive loss		(201	)		(497	)		(5,910	)		(6,249	)
Retained earnings		51,235			39,431			27,288			32,160

Total stockholders’ equity		238,956			211,551			259,870			258,871

Total liabilities and stockholders’ equity	$	267,175		$	242,495		$	311,134		$	308,442

The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.

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INTERIM CONDENSED CONSOLIDATED STATEMENTS OF ~~INCOME~~LOSS (UNAUDITED)

U.S. dollars in thousands, except per share data

									Three months ended
	Nine months ended September 30,				Three months ended September 30,				March 31,
	2017		2016		2017		2016		2023			2022
Revenues:
Licensing and related revenue	$	33,893	$	23,576	$	14,021	$	7,456
Licensing, NRE and related revenue									$	20,721		$	22,393
Royalties		32,013		27,881		10,023		10,390		8,014			11,998

Total revenues		65,906		51,457		24,044		17,846		28,735			34,391
Cost of revenues		5,030		4,453		1,726		1,422		5,315			6,404

Gross profit		60,876		47,004		22,318		16,424		23,420			27,987
Operating expenses:
Research and development, net		30,413		23,071		10,031		7,346		20,791			20,210
Sales and marketing		9,422		8,463		3,057		2,763		3,045			2,923
General and administrative		7,388		6,286		2,711		2,218		4,048			3,636
Amortization of intangible assets		927		927		309		309		329			750
Total operating expenses										28,213			27,519
Operating income (loss)										(4,793	)		468
Financial income, net										1,455			282
Remeasurement of marketable equity securities										(117	)		(1,131	)
Loss before taxes on income										(3,455	)		(381	)
Income tax expense										1,417			1,315
Net loss									$	(4,872	)	$	(1,696	)
Basic net loss per share									$	(0.21	)	$	(0.07	)

Total operating expenses		48,150		38,747		16,108		12,636
Diluted net loss per share									$	(0.21	)	$	(0.07	)

Operating income		12,726		8,257		6,210		3,788
Financial income, net		2,147		1,617		821		615

Income before taxes on income		14,873		9,874		7,031		4,403
Income taxes		1,008		1,975		1,181		1,015

Net income	$	13,865	$	7,899	$	5,850	$	3,388

Basic net income per share	$	0.64	$	0.38	$	0.27	$	0.16

Diluted net income per share	$	0.62	$	0.37	$	0.26	$	0.15

Weighted-average shares used to compute net income per share (in thousands):
Weighted-average shares used to compute net loss per share (in thousands):
Basic		21,687		20,718		21,946		21,025		23,334			23,103

Diluted		22,480		21,395		22,683		21,883		23,334			23,103

The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.

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INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE ~~INCOME~~LOSS (UNAUDITED)

U.S. dollars in thousands

	Three Months Ended
	March 31,
	2023			2022

Net loss:	$	(4,872	)	$	(1,696	)
Other comprehensive income (loss) before tax:
Available-for-sale securities:
Changes in unrealized gains (losses)		730			(2,839	)
Reclassification adjustments for gains included in net loss		(92	)		—
Net change		638			(2,839	)
Cash flow hedges:
Changes in unrealized gains (losses)		(425	)		2
Reclassification adjustments for losses included in net loss		171			110
Net change		(254	)		112
Other comprehensive income (loss) before tax		384			(2,727	)
Income tax expense (benefit) related to components of other comprehensive income (loss)		45			(661	)
Other comprehensive income (loss), net of taxes		339			(2,066	)
Comprehensive loss	$	(4,533	)	$	(3,762	)

   Nine months ended
September 30, Three months ended
September 30,
   2017 2016 2017 2016
Net income:
   $ 13,865 $ 7,899 $ 5,850 $ 3,388
Other comprehensive income before tax:

Available-for-sale securities:

Changes in unrealized gains
   322 492 96 46
Reclassification adjustments for (gains) losses included in net income
   33 16 (7 ) —


Net change
   355 508 89 46


Cash flow hedges:

Changes in unrealized gains (losses)
   180 218 (2 ) 75
Reclassification adjustments for (gains) losses included in net income
   (186 ) (191 ) 2 (69 )


Net change
   (6 ) 27 —   6


Other comprehensive income before tax
   349 535 89 52
Income tax expense related to components of other comprehensive income
   53 83 12 13


Other comprehensive income, net of taxes
   296 452 77 39


Comprehensive income
   $ 14,161 $ 8,351 $ 5,927 $ 3,427

The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.

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INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

U.S. dollars in thousands, except share data

	Common stock										Accumulated
Three months ended March 31, 2023	Number of shares outstanding		Amount		Additional paid-in capital			Treasury stock			other comprehensive income (loss)			Retained earnings			Total stockholders’ equity
Balance as of January 1, 2023		23,215,439	$	23	$	242,841		$	(9,904	)	$	(6,249	)	$	32,160		$	258,871
Net loss		—		—		—			—			—			(4,872	)		(4,872	)
Other comprehensive income		—		—		—			—			339			—			339
Equity-based compensation		—		—		3,859			—			—			—			3,859
Issuance of treasury stock upon exercise of stock-based awards		200,587		—		(3,559	)		5,232			—			—			1,673
Balance as of March 31, 2023		23,416,026	$	23	$	243,141		$	(4,672	)	$	(5,910	)	$	27,288		$	259,870

	Common stock										Accumulated
Three months ended March 31, 2022	Number of shares outstanding		Amount		Additional paid-in capital			Treasury stock			other comprehensive loss			Retained earnings			Total stockholders’ equity
Balance as of January 1, 2022		22,984,552	$	23	$	235,386		$	(13,790	)	$	(372	)	$	55,485		$	276,732
Net loss		—		—		—			—			—			(1,696	)		(1,696	)
Other comprehensive loss		—		—		—			—			(2,066	)		—			(2,066	)
Equity-based compensation		—		—		3,389			—			—			—			3,389
Issuance of treasury stock upon exercise of stock-based awards		219,722		—		(3,212	)		4,962			—			(30	)		1,720
Balance as of March 31, 2022		23,204,274	$	23	$	235,563		$	(8,828	)	$	(2,438	)	$	53,759		$	278,079

The accompanying notes are an integral part of the consolidated financial statements

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INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

U.S. dollars in thousands

	Three months ended March 31,
	2023			2022
Cash flows from operating activities:
Net loss	$	(4,872	)	$	(1,696	)
Adjustments required to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation		742			780
Amortization of intangible assets		677			1,167
Equity-based compensation		3,859			3,389
Realized gain on sale of available-for-sale marketable securities		(92	)		—
Amortization of premiums on available-for-sale marketable securities		23			123
Unrealized foreign exchange (gain) loss		(285	)		154
Remeasurement of marketable equity securities		117			1,131
Changes in operating assets and liabilities:
Trade receivables		(3,802	)		3,944
Prepaid expenses and other assets		(2,205	)		(3,034	)
Operating lease right-of-use assets		249			425
Accrued interest on bank deposits		(125	)		(9	)
Deferred tax, net		(880	)		(991	)
Trade payables		(412	)		736
Deferred revenues		838			70
Accrued expenses and other payables		357			92
Accrued payroll and related benefits		702			3,710
Operating lease liability		(275	)		(454	)
Accrued severance pay, net		308			287
Net cash provided by (used in) operating activities		(5,076	)		9,824

Cash flows from investing activities:
Purchase of property and equipment		(105	)		(909	)
Proceeds from bank deposits		—			1,385
Investment in available-for-sale marketable securities		—			(8,789	)
Proceeds from maturity of available-for-sale marketable securities		1,750			3,500
Proceeds from sale of available-for-sale marketable securities		4,895			—
Net cash provided by (used in) investing activities		6,540			(4,813	)

Cash flows from financing activities:
Proceeds from exercise of stock-based awards		1,673			1,720
Net cash provided by financing activities		1,673			1,720
Effect of exchange rate changes on cash and cash equivalents		61			(106	)
Increase in cash and cash equivalents		3,198			6,625
Cash and cash equivalents at the beginning of the period		21,285			33,153
Cash and cash equivalents at the end of the period	$	24,483		$	39,778

Supplemental information of cash-flow activities:
Cash paid during the period for:
Income and withholding taxes	$	1,860		$	2,355
Non-cash transactions:
Property and equipment purchases incurred but unpaid at period end	$	234		$	948
Right-of-use assets obtained in the exchange for operating lease liabilities	$	506		$	308

   Nine months ended
September 30,
   2017 2016
Cash flows from operating activities:

Net income
   $ 13,865 $ 7,899
Adjustments required to reconcile net income to net cash provided by operating activities:

Depreciation
   1,447 998
Amortization of intangible assets
   927 927
Equity-based compensation
   6,346 4,648
Realized loss, net on sale ofavailable-for-sale marketable securities
   33 16
Amortization of premiums onavailable-for-sale marketable securities
   907 757
Unrealized foreign exchange gain loss
   (24 ) (29 )
Changes in operating assets and liabilities:

Trade receivables
   2,159 (13,172 )
Prepaid expenses and other assets
   (2,572 ) (1,403 )
Accrued interest on bank deposits
   (3 ) (395 )
Deferred tax, net
   (741 ) (571 )
Trade payables
   (105 ) 370
Deferred revenues
   (1,984 ) 1,269
Accrued expenses and other payables
   416 (62 )
Accrued payroll and related benefits
   (1,532 ) (356 )
Income taxes payable
   (1,501 ) 894
Accrued severance pay, net
   60 176


Net cash provided by operating activities
   17,698 1,966


Cash flows from investing activities:

Purchase of property and equipment
   (3,340 ) (2,031 )
Investment in bank deposits
   (30,757 ) (19,100 )
Proceeds from bank deposits
   27,050 25,613
Investment inavailable-for-sale marketable securities
   (36,468 ) (32,498 )
Proceeds from maturity ofavailable-for-sale marketable securities
   8,086 7,316
Proceeds from sale ofavailable-for-sale marketable securities
   15,206 14,253


Net cash used in investing activities
   (20,223 ) (6,447 )


Cash flows from financing activities:

Purchase of treasury stock
   —   (3,417 )
Proceeds from exercise of stock-based awards
   6,898 8,998


Net cash provided by financing activities
   6,898 5,581
Effect of exchange rate changes on cash and cash equivalents
   157 (11 )


Increase in cash and cash equivalents
   4,530 1,089
Cash and cash equivalents at the beginning of the period
   18,401 18,909


Cash and cash equivalents at the end of the period
   $ 22,931 $ 19,998


Supplemental information of cash-flow activities:

Cash paid during the period for:

Income and withholding taxes, net of refunds
   $ 3,934 $ 1,604


Non-cash transactions:

Property and equipment purchases incurred but unpaid at period end
   $ —   $ 67

The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.

Table of Contents

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share data)

~~NOTE 1:~~

NOTE 1:

BUSINESS

The financial information in this quarterly report includes the results of CEVA, Inc. and its subsidiaries (the “Company” or “CEVA”).

CEVA licenses a family of ~~signal~~wireless connectivity and smart sensing technologies and is a provider of chip design services. The Company’s offerings include Digital Signal Processors (“DSPs”), AI processors, short and long range connectivity solutions, 5G wireless platforms and complementary software for sensor fusion, spatial audio, image enhancement, computer vision, voice input and artificial intelligence, all of which are key enabling technologies for a smarter, more connected world. These technologies are offered in combination with Non-Recurring Engineering (“NRE”) services from CEVA’s Intrinsix Corp. (“Intrinsix”) business, helping customers address their most complex and time-critical integrated circuit design projects. CEVA’s DSP-based solutions address the technology requirements of: 5G baseband processing ~~IPs,~~for mobile, broadband, cellular IoT and Radio Access Network (“RAN”); computer vision for any camera, 4D and LIDAR-enabled device; audio/voice/sound; and ultra-low-power always-on/sensing applications for wearables, hearables and multiple IoT markets. For motion sensors and sensor fusion, CEVA’s Hillcrest Labs sensor processing technologies provide a broad range of software and Inertial Measurement Unit (“IMU”) solutions for markets including ~~programmable DSP cores~~hearables, wearables, AR/VR, PC, robotics, remote controls and ~~application-specific~~IoT. For wireless IoT, the Rivierawaves platforms for ~~advanced imaging, computer vision~~Bluetooth (low energy and ~~deep learning for many camera-enabled devices, sound, voice~~dual mode), Wi-Fi 4/5/6/6E (802.11n/ac/ax), Ultra-WideBand (“UWB”) are the most broadly licensed connectivity platforms in the industry.

CEVA’s Intrinsix business also expands its market reach to the aerospace and ~~audio, as well as long~~defense markets and ~~short range wireless technologies forLTE/LTE-A/5G~~ ~~baseband processing~~allows it to offer co-creation solutions that combine CEVA’s standardized, off-the-shelf IP together with Intrinsix’s NRE design capabilities and IP in ~~handsets~~RF, mixed-signal, security, high complexity digital design, chiplets and ~~infrastructure, short range wireless forWi-Fi~~ ~~and Bluetooth IPs, wired interface for storage, Serial ATA (SATA) and Serial Attached SCSI (SAS).~~more.

CEVA’s technologies are licensed to leading semiconductor and ~~original equipment manufacturer (OEM) companies in the form of intellectual property (IP).~~Original Equipment Manufacturer (“OEM”) companies. These companies design, manufacture, market and sell ~~application-specific integrated circuits~~Application-Specific Integrated Circuits (“ASICs”) and ~~application-specific standard products~~Application-Specific Standard Products (“ASSPs”) based on CEVA’s technology to ~~wireless,~~mobile, consumer, ~~electronics~~automotive, robotics, industrial, aerospace & defense and ~~automotive~~IoT companies for incorporation into a wide variety of end products.

~~NOTE 2:~~

NOTE 2:

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The interim condensed consolidated financial statements have been prepared according to ~~U.S~~U.S. Generally Accepted Accounting Principles (“U.S. GAAP”).

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the three ~~and nine~~ months ended ~~September 30, 2017~~ March 31, 2023, are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2017.~~ 2023. For further information, reference is made to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form~~10-K~~10-K for the year ended December 31, ~~2016.~~2022.

The significant accounting policies applied in the annual consolidated financial statements of the Company as of December 31, ~~2016,~~ 2022, contained in the Company’s Annual Report on Form~~10-K~~10-K filed with the Securities and Exchange Commission on March ~~10, 2017,~~ 1, 2023, have been applied consistently in these unaudited interim condensed consolidated financial ~~statements, except during~~statements.

Accounting Standards Recently Issued, Not Yet Adopted by the ~~three and nine months ended September 30, 2017,~~ Company

In June 2022, the ~~adoption of~~Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ~~(“ASU”~~("ASU")~~2016-09~~ ~~relating~~No.2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions, which clarifies the ~~forfeiture rates as they occur, rather than~~guidance when measuring the fair value of an ~~estimate~~equity security subject to contractual restrictions that prohibit the sale of an equity security and introduces new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820. The guidance is effective for annual periods beginning after December 15, 2023, with early adoption permitted. The adoption of this standard is not expected to result in a significant impact on the ~~expected forfeitures (see Note 13).~~Company’s interim condensed consolidated financial statements.

Table of Contents

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except share data)

Use of Estimates

The preparation of the interim condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions. The Company’s management believes that the estimates, judgments and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the dates of the ~~interim condensed consolidated~~ financial statements, and the reported amounts of ~~revenue~~revenues and expenses during the reporting period. Actual results could differ from those estimates.

~~NOTE 3: MARKETABLE SECURITIES~~

NOTE 3:

REVENUE RECOGNITION

Under Accounting Standards Codification ("ASC") 606, “Revenue from Contracts with Customers” (“ASC 606”), an entity recognizes revenue when or as it satisfies a performance obligation by transferring intellectual property (“IP”) licenses or services to the customer, either at a point in time or over time. The Company recognizes most of its revenues at a point in time upon delivery when the customer accepts control of the IP. The Company recognizes revenue over time on NRE services or on significant license customization contracts that are in the scope of ASC 606 by using cost inputs to measure progress toward completion of its performance obligations.

The following ~~is a summary~~table includes estimated revenue expected to be recognized in future periods related to performance obligations that are unsatisfied or partially unsatisfied at the end of~~available-for-sale~~ ~~marketable securities:~~

the reporting period. The estimated revenues do not include amounts of royalties or unexercised contract renewals:

Remainder of 2023

2024

2025

2026

Licensing, NRE and related revenues
$ 10,083 $ 906 $ 519 $ 96
Disaggregation of revenue:
The following table provides information about disaggregated revenue by primary geographical market, major product line and timing of revenue recognition:

Three months ended March 31, 2023
(unaudited)

Three months ended March 31, 2022
(unaudited)

Licensing, NRE and related revenues

Royalties

Total

Licensing, NRE and related revenues

Royalties

Total

Primary geographical markets

United States
$ 2,791 $ 1,650 $ 4,441 $ 4,475 $ 2,271 $ 6,746
Europe and Middle East
2,334 859 3,193 437 665 1,102
Asia Pacific
15,121 5,505 20,626 17,481 9,062 26,543
Other
475 — 475 — — —
Total
$ 20,721 $ 8,014 $ 28,735 $ 22,393 $ 11,998 $ 34,391

Major product/service lines

Connectivity products (baseband for handset and other devices, Bluetooth, Wi-Fi, NB-IoT and SATA/SAS)
$ 16,532 $ 5,665 $ 22,197 $ 16,815 $ 9,062 $ 25,877
Smart sensing products (AI, sensor fusion, audio/sound and imaging and vision)
4,189 2,349 6,538 5,578 2,936 8,514
Total
$ 20,721 $ 8,014 $ 28,735 $ 22,393 $ 11,998 $ 34,391

Timing of revenue recognition

Products transferred at a point in time
$ 14,621 $ 8,014 $ 22,635 $ 15,932 $ 11,998 $ 27,930
Products and services transferred over time
6,100 — 6,100 6,461 — 6,461
Total
$ 20,721 $ 8,014 $ 28,735 $ 22,393 $ 11,998 $ 34,391
11
Table of Contents
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(in thousands, except share data)
Contract balances:

   September 30, 2017 (Unaudited)
   Amortized
cost    Gross
unrealized
gains    Gross
unrealized
losses    Fair
value
Available-for-sale - matures within one year:

Corporate bonds
   $ 12,495    $ 13    $ (5 )    $ 12,503








   12,495    13    (5 )    12,503
Available-for-sale - matures after one year through five years:

Certificate of deposits
   747    —      —      747
Government bonds
   501    —      (4 )    497
Corporate bonds
   60,940    91    (319 )    60,712








   62,188    91    (323 )    61,956
Total
   $ 74,683    $ 104    $ (328 )    $ 74,459








The following table provides information about trade receivables, unbilled receivables and contract liabilities from contracts with customers:

   December 31, 2016 (Audited)
   Amortized
cost    Gross
unrealized
gains    Gross
unrealized
losses    Fair
value
Available-for-sale - matures within one year:

Corporate bonds
   $ 9,456    $ 4    $ (15 )    $ 9,445








   9,456    4    (15 )    9,445
Available-for-sale - matures after one year through five years:

Government bonds
   501    —      (4 )    497
Corporate bonds
   52,490    3    (567 )    51,926








   52,991    3    (571 )    52,423
Total
   $ 62,447    $ 7    $ (586 )    $ 61,868








March 31, 2023
(unaudited)

December 31, 2022

Trade receivables
$ 17,430 $ 12,297
Unbilled receivables (associated with licensing, NRE and related revenue)
9,731 8,695
Unbilled receivables (associated with royalties)
7,846 10,258
Deferred revenues (short-term contract liabilities)
4,006 3,168
The Company receives payments from customers based upon contractual payment schedules; trade receivables are recorded when the right to consideration becomes unconditional, and an invoice is issued to the customer. Unbilled receivables associated with licensing, NRE and other include amounts related to the Company’s contractual right to consideration for completed performance objectives not yet invoiced. Unbilled receivables associated with royalties are recorded as the Company recognizes revenues from royalties earned during the quarter, but not yet invoiced, either by actual sales data received from customers, or, when applicable, by the Company’s estimation. Contract liabilities (deferred revenue) include payments received in advance of performance under the contract, and are realized with the associated revenue recognized under the contract.
During the three months ended March 31, 2023, the Company recognized $1,561 that was included in deferred revenues (short-term contract liability) balance at January 1, 2023.
NOTE 4:
LEASES
The Company leases substantially all of its office space and vehicles under operating leases. The Company's leases have original lease periods expiring between 2023 and 2034. Many leases include one or more options to renew. The Company does not assume renewals in its determination of the lease term unless the renewals are deemed to be reasonably certain. Lease payments included in the measurement of the lease liability comprise the following: the fixed non-cancelable lease payments, payments for optional renewal periods where it is reasonably certain the renewal period will be exercised, and payments for early termination options unless it is reasonably certain the lease will not be terminated early.
The following is a summary of weighted average remaining lease terms and discount rates for all of the Company’s operating leases:
March 31, 2023
(Unaudited)
Weighted average remaining lease term (years)
4.85
Weighted average discount rates
3.51 %
Total operating lease cost and cash payments for operating leases were as follows:

Three months ended
March 31,

2023
(unaudited)

2022
(unaudited)

Operating lease cost
$ 822 $ 800
Cash payments for operating leases
$ 819 $ 830
12
Table of Contents
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(in thousands, except share data)
Maturities of lease liabilities are as follows:
The remainder of 2023
$ 2,257
2024
2,589
2025
1,979
2026
970
2027
962
2028 and thereafter
1,361
Total undiscounted cash flows
10,118
Less imputed interest
730
Present value of lease liabilities
$ 9,388
NOTE 5:
MARKETABLE SECURITIES
The following is a summary of available-for-sale marketable securities:

March 31, 2023 (Unaudited)

Amortized
cost

Gross
unrealized
gains

Gross
unrealized
losses

Fair
value

Available-for-sale - matures within one year:

Corporate bonds
$ 23,397 $ — $ (1,517 ) $ 21,880

Available-for-sale - matures after one year through four years:

Corporate bonds
88,934 25 (4,697 ) 84,262
Total

$ 112,331 $ 25 $ (6,214 ) $ 106,142

December 31, 2022

Amortized
cost

Gross
unrealized
gains

Gross
unrealized
losses

Fair
value

Available-for-sale - matures within one year:

Corporate bonds
$ 17,552 $ — $ (1,330 ) $ 16,222

Available-for-sale - matures after one year through five years:

Corporate bonds
101,355 38 (5,535 ) 95,858

Total
$ 118,907 $ 38 $ (6,865 ) $ 112,080
13
Table of Contents
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(in thousands, except share data)
The following table presents gross unrealized losses and fair values for those investments that were in an unrealized loss position as of ~~September 30, 2017~~ March 31, 2023, and December 31, ~~2016,~~ 2022, and the length of time that those investments have been in a continuous loss position:

   Less than 12 months    12 months or greater
   Fair value    Gross
unrealized loss    Fair value    Gross
unrealized loss
As of September 30, 2017 (unaudited)
   $ 37,050    $ (239 )    $ 8,997    $ (89 )
As of December 31, 2016
   $ 48,663    $ (557 )    $ 4,875    $ (29 )

Less than 12 months

12 months or greater

Fair value

Gross unrealized loss

Fair value

Gross unrealized loss

As of March 31, 2023 (unaudited)
$ 36,115 $ (877 ) $ 64,211 $ (5,337 )
As of December 31, 2022
$ 58,706 $ (1,885 ) $ 48,539 $ (4,980 )
As of ~~September 30, 2017 and December~~March 31, ~~2016, management believes~~ 2023, the ~~impairments are not other than temporary and therefore the impairment~~allowance for credit losses ~~were recorded in accumulated other comprehensive income (loss).~~
~~NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~
~~(in thousands, except share data)~~
was not material.

The following table presents gross realized gains and losses from sale ofavailable-for-sale marketable securities:

   Nine months ended
September 30,    Three months ended
September 30,
   2017    2016    2017    2016
   (unaudited)    (unaudited)    (unaudited)    (unaudited)
Gross realized gains from sale ofavailable-for-sale marketable securities
   $ 14    $ 16    $ 8    $ 1
Gross realized losses from sale ofavailable-for-sale marketable securities
   $ (47 )    $ (32 )    $ (1 )    $ (1 )

Three months ended
March 31,

2023
(unaudited)

2022
(unaudited)

Gross realized gains from sale of available-for-sale marketable securities
$ 92 $ —
Gross realized losses from sale of available-for-sale marketable securities
$ — $ —
~~NOTE 4: FAIR VALUE MEASUREMENT~~
~~Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)~~
NOTE 6:
FAIR VALUE MEASUREMENT
FASB ASC No.820, “Fair Value Measurements and Disclosures” defines fair value, establishes a framework for measuring fair value. Fair value is an exit price, representing the amount that would be received for selling an asset or paid for the transfer of a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. A ~~three-tier~~three-tier fair value hierarchy is established as a basis for considering such assumptions and for inputs used in the valuation methodologies in measuring fair value:
Level I
Unadjusted quoted prices in active markets that are accessible on the measurement date for identical, unrestricted assets or liabilities;
Level II
Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and
Level III
Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).
The Company measures its marketable securities, investments in marketable equity securities and foreign currency derivative contracts at fair value. The carrying amount of cash, cash equivalents, short-term bank deposits, trade receivables, other accounts receivable, trade payables and other accounts payables approximate fair value due to the short-term maturity of these instruments. Investments in marketable equity securities are classified within Level I as the securities are traded in an active market. Marketable securities and foreign currency derivative contracts are classified within Level II as the valuation inputs are based on quoted prices and market observable data of similar instruments.
14
Table of Contents
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(in thousands, except share data)
The table below sets forth the Company’s assets and liabilities measured at fair value by level within the fair value hierarchy. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

Description

March 31, 2023 (unaudited)

Level I (unaudited)

Level II (unaudited)

Level III (unaudited)

Assets:

Marketable securities:

Corporate bonds
$ 106,142 — $ 106,142 $ —
Investments in marketable equity securities
291 291 — —

   September 30, 2017    Level I    Level II    Level III
Description
   (unaudited)    (unaudited)    (unaudited)    (unaudited)
Assets:

Marketable securities:

Certificate of deposits
   $ 747    $ —      $ 747    $ —
Government bonds
   497    —      497    —
Corporate bonds
   73,215    —      73,215    —
Description
   December 31, 2016    Level I    Level II    Level III
Assets:

Marketable securities:

Government bonds
   $ 497    $ —      $ 497    $ —
Corporate bonds
   61,371    —      61,371    —
Liabilities:

Foreign exchange contracts
   6    —      6    —   360 — 360 —
Description

December 31, 2022

Level I

Level II

Level III

Assets:

Marketable securities:

Corporate bonds
$ 112,080 — $ 112,080 —
Foreign exchange contracts
13 — 13 —
Investments in marketable equity securities
408 408 — —

Liabilities:

Foreign exchange contracts
119 — 119 —
NOTE 7:
INTANGIBLE ASSETS, NET

March 31, 2023 (unaudited)

December 31, 2022

Weighted average amortization period (years)

Gross carrying amount

Accumulated amortization

Impairment (*)

Net

Gross carrying amount

Accumulated amortization

Impairment (*)

Net

Intangible assets –amortizable:

Intangible assets related to the acquisition of Intrinsix business

Customer relationships
5.5 $ 3,604 $ 1,201 $ — $ 2,403 $ 3,604 $ 1,037 $ — $ 2,567
Customer backlog
1.5 421 421 — — 421 421 — —
Patents
5.0 218 80 — 138 218 69 — 149
Core technologies
3.0 3,329 2,035 — 1,294 3,329 1,757 — 1,572

Intangible assets related to the acquisition of Hillcrest Labs business

Customer relationships
4.4 $ 3,518 $ 3,070 $ — $ 448 $ 3,518 $ 2,998 $ — $ 520
Customer backlog
0.5 72 72 — — 72 72 — —
R&D Tools
7.5 2,475 1,222 — 1,253 2,475 1,140 — 1,335

Intangible assets related to Immervision assets acquisition

R&D Tools
6.4 $ 7,063 $ 3,507 $ 3,556 $ — $ 7,063 $ 3,507 $ 3,556 $ —

Intangible assets related to an investment in NB-IoT technologies

NB-IoT technologies (**)
7.0 $ 1,961 $ 1,494 $ — $ 467 $ 1,961 $ 1,424 $ — $ 537

Total intangible assets
$ 22,661 $ 13,102 $ 3,556 $ 6,003 $ 22,661 $ 12,425 $ 3,556 $ 6,680
15
Table of Contents
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(in thousands, except share data)
(*) During 2022, the Company recorded an impairment charge of $3,556 in operating expenses with respect to Immervision technology acquired in August 2019, as the Company has decided to cease the development of this product line.

~~NOTE 5: GEOGRAPHIC INFORMATION AND MAJOR CUSTOMER DATA~~
(**) During the first quarter of 2018, the Company entered into an agreement to acquire certain NB-IoT technologies in the amount of $2,800, of which technologies valued at $600 have not been received and have been written off during 2022. Of the $2,200, $210 has not resulted in cash outflows as of March 31,2023. In addition, the Company participated in programs sponsored by the Hong Kong government for the support of the above investment, and as a result, the Company received during 2019 an amount of $239 related to the NB-IoT technologies, which was reduced from the gross carrying amount of intangible assets. The Company recorded the amortization cost of the NB-IoT technologies in “cost of revenues” on the Company’s consolidated statements of income (loss).

Future estimated annual amortization charges are as follows:
Reminder of 2023
1,934
2024
1,909
2025
1,189
2026
956
2027
15
$ 6,003
NOTE 8:
a.
GEOGRAPHIC INFORMATION AND MAJOR CUSTOMER DATA
~~Summary information about geographic areas:~~
a.         Summary information about geographic areas:
The Company manages its business on the basis of one reportable segment: the licensing of intellectual property and co-creation solutions to semiconductor companies and electronic equipment manufacturers (see Note 1 for a brief description of the Company’s business). The following is a summary of revenues within geographic areas:

   Nine months ended
September 30,    Three months ended
September 30,
   2017    2016    2017    2016
Three months ended
March 31,

   (unaudited)    (unaudited)    (unaudited)    (unaudited)
2023
(unaudited)

2022
(unaudited)

Revenues based on customer location:

United States
   $ 6,162    $ 7,310    $ 1,237    $ 2,144 $ 4,441 $ 6,746
Europe and Middle East
   7,451    7,492    1,267    2,986 3,193 1,102
Asia Pacific (1) (2)
   52,293    36,655    21,540    12,716
Asia Pacific (1)
20,626 26,543
Other
475 —








$ 28,735 $ 34,391
   $ 65,906    $ 51,457    $ 24,044    $ 17,846








(1)China
   $ 31,008    $ 23,064    $ 15,188    $ 7,073
(2)S. Korea
   $ 13,852    $ 11,338    $ 5,076    $ 4,901
(1) China
$ 17,763 $ 22,971

b. ~~Major customer data as a percentage of total revenues:~~
b.         Major customer data as a percentage of total revenues:
The following table sets forth the customers that represented 10% or more of the Company’s total revenues in each of the periods set forth below.

Three months ended
March 31,

   Nine months ended
September 30, Three months ended
September 30, 2023 2022
   2017 2016 2017 2016
(unaudited)

(unaudited)

   (unaudited) (unaudited) (unaudited) (unaudited)
Customer A
   22 % 27 % 20 % 27 % 13 % —
Customer B
   17 % 19 % 18 % 21 % * ) 12 %
Customer C
   * ) —   12 % —   * ) 11 %
Customer D
   * ) * ) 21 % * )

*)
Less than 10%
~~NOTE 6: NET INCOME~~
16
Table of Contents
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(in thousands, except share data)
NOTE 9:
NET LOSS PER SHARE OF COMMON STOCK
Basic net income (loss) per share is computed based on the weighted average number of shares of common stock outstanding during each period. Diluted net income (loss) per share is computed based on the weighted average number of shares of common stock outstanding during each period, plus dilutive potential shares of common stock considered outstanding during the period, in accordance with FASB ASC No.260, “Earnings Per Share.”

Three months ended
March 31,

2023
(unaudited)

2022
(unaudited)

Numerator:

Net loss
$ (4,872 ) $ (1,696 )
Denominator (in thousands):

Basic weighted-average common stock outstanding
23,334 23,103
Effect of stock -based awards
— —
Diluted weighted average common stock outstanding
23,334 23,103

Basic net loss per share
$ (0.21 ) $ (0.07 )
Diluted net loss per share
$ (0.21 ) $ (0.07 )
~~NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~
~~(in thousands, except share data)~~

   Nine months ended
September 30,    Three months ended
September 30,
   2017    2016    2017    2016
   (unaudited)    (unaudited)    (unaudited)    (unaudited)
Numerator:

Net income
   $ 13,865    $ 7,899    $ 5,850    $ 3,388








Denominator (in thousands):

Basic weighted-average common stock outstanding
   21,687    20,718    21,946    21,025
Effect of stock -based awards
   793    677    737    858








Diluted weighted average common stock outstanding
   22,480    21,395    22,683    21,883








Basic net income per share
   $ 0.64    $ 0.38    $ 0.27    $ 0.16








Diluted net income per share
   $ 0.62    $ 0.37    $ 0.26    $ 0.15








The ~~weighted average~~total number of potential shares ~~related to outstanding equity-based awards~~ excluded from the calculation of diluted net ~~income~~loss per share ~~since~~due to their antidilutive effect was ~~anti-dilutive, was 0~~1,181,119 and ~~39,856 shares~~853,258 for the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~ March 31, 2023 and ~~92,103 and 349,428 for the corresponding periods of 2016.~~2022, respectively.
~~NOTE 7:~~
NOTE 10:
COMMON STOCK AND STOCK-BASED COMPENSATION PLANS
The Company ~~grants~~has historically granted a mix of stock options, ~~and~~ stock appreciation rights (“SARs”) capped with a ceiling and restricted stock units (“RSUs”) to employees and ~~stock options tonon-employee~~non‑employee directors of the Company and its subsidiaries under the Company’s equity plans and provides the right to purchase common stock pursuant to the Company’s 2002 employee stock purchase plan to employees of the Company and its subsidiaries. ~~The~~As of March 31, 2023, and December 31, 2022, there were no outstanding or exercisable SAR unit confers the holder the right to stock appreciation over a preset price of the Company’s common stock during a specified period of time. When the unit is exercised, the appreciation amount is paid through the issuance of shares of the Company’s common stock. The ceiling limits the maximum income for each SAR unit. SARs are considered an equity instrument as it is a net share settled award capped with a ceiling (400% for SAR grants). The options and SARs granted under the Company’s stock incentive plans have been granted at the fair market value of the Company’s common stock on the grant date. Options and SARs granted to employees under stock incentive plans vest at a rate of 25% of the shares underlying the option after one year and the remaining shares vest in equal portions over the following 36 months, such that all shares are vested after four years. Options granted to~~non-employee~~ directors vest 25% of the shares underlying the option on each anniversary of the option grant. A summary of the Company’s stock option and SARs activities and related information for the nine months ended September 30, 2017, are as follows:units left.

   Number of
options and
SAR units (1)    Weighted
average
exercise
price    Weighted
average
remaining
contractual
term
Aggregate
intrinsic-value
Outstanding as of December 31, 2016
   1,455,908    $ 19.76
Granted
   —      —
Exercised
   (588,972 )    19.74
Forfeited or expired
   (14,349 )    17.56





Outstanding as of September 30, 2017 (2)
   852,587    $ 19.81    5.2    $ 19,598








Exercisable as of September 30, 2017 (3)
   604,327    $ 19.18    4.7    $ 14,271








~~(1)~~ ~~The SAR units are convertible for a maximum number of shares of the Company’s common stock equal to 75% of the SAR units subject to the grant.~~
~~(2)~~ ~~Due to the ceiling imposed on the SAR grants, the outstanding amount equals a maximum of 775,403 shares of the Company’s common stock issuable upon exercise.~~
~~(3)~~ ~~Due to the ceiling imposed on the SAR grants, the exercisable amount equals a maximum of 551,645 shares of the Company’s common stock issuable upon exercise.~~
As
17
Table of September 30, 2017, there was $750 of unrecognized compensation expense related to unvested stock options and SARs. This amount is expected to be recognized over a weighted-average period of 1.4 years.
Contents
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(in thousands, except share data)
A summary of the Company’s stock option activities and related information for the three months ended March 31, 2023, are as follows:

Number of
options (1)

Weighted
average
exercise
price

Weighted
average remaining
contractual
term

Aggregate
intrinsic
value

Outstanding as of December 31, 2022
106,000 $ 20.24 2.0 $ 609
Granted
— —
Exercised
— —
Forfeited or expired
— —
Outstanding as of March 31, 2023
106,000 $ 20.24 1.8 $ 1,080
Exercisable as of March 31, 2023
106,000 $ 20.24 1.8 $ 1,080
(1)
Represent options granted to non-employee directors of the Company only. As of March 31, 2023, and December 31, 2022, there were no outstanding or exercisable options granted to employees left.
As of March 31, 2023, there were no unrecognized compensation expenses related to unvested stock options.

~~Starting in the second quarter of 2015, the Company granted to employees, including executive officers, andnon-employee~~ ~~directors, restricted stock units (“RSUs”) under the Company’s 2011 Stock Incentive Plan. A~~An RSU award is an agreement to issue shares of the Company’s common stock at the time the award or a portion thereof vests. RSUs granted to employees generally vest in three equal annual installments starting on the first anniversary of the grant date. Until the end of 2017,RSUs granted tonon-employee directors would generally vest in full on the first anniversary of the grant date. ~~The~~Starting in 2018, RSUs granted to non-employee directors would generally vest in two equal annual installments starting on the first anniversary of the grant date.
On November 9, 2022, the Company reported that Gideon Wertheizer had announced his intention to retire from his position as the Company’s Chief Executive Officer (“CEO”) and an employee of the Company, effective as of January 1, 2023. In connection with his retirement, the Company’s Board of Directors (the “Board”) of the Company determined to accelerate in full the vesting of Mr. Wertheizer’s 34,887 unvested RSUs.
On November 9, 2022, the Company publicly announced the appointment of Amir Panush as CEO of the Company to succeed Mr. Wertheizer, with his service as CEO to commence on January 1, 2023. In connection with his appointment as the Company’s CEO, Mr. Panush, effective January 1, 2023, received 46,911 RSUs with fair value of ~~each RSU is~~approximately $1,200 under the ~~market value as determined by~~Company’s Amended and Restated 2011 Stock Incentive Plan (the “2011 Plan”). The RSUs vest in three equal annual installments starting on the ~~closing price~~first anniversary of the ~~common stock~~grant date, conditioned upon Mr. Panush’s continued service with the Company.
On December 7, 2022, the Board appointed Gweltaz Toquet, who previously served as the Vice President of Sales for Europe and Asia Pacific, as Chief Commercial Officer (“CCO”) of the Company effective January 1, 2023. In connection with his appointment as the Company’s CCO, effective January 1, 2023, Mr. Toquet received 3,909 RSUs with fair value of approximately $100 under the Company’s 2011 Plan. The RSUs vest in three equal annual installments starting on the ~~day~~first anniversary of ~~grant. The Company recognizes compensation expenses for~~ the ~~value~~grant date, conditioned upon Mr. Toquet’s continued service with the Company.
On February 14, 2023, the Compensation Committee (the “Committee”) of ~~its RSU awards, based on~~ the ~~straight-line method over the requisite service period~~Board granted 14,541, 9,996, 8,179 and 5,452 RSUs, effective as ofFebruary 17, 2023, to each of the ~~awards.~~ Company’s CEO, Chief Financial Officer (“CFO”), Chief Operating Officer (“COO”) and CCO, respectively, pursuant to the 2011 Plan, or, with respect to the RSU award to the CEO, as an inducement award in accordance with Rule 5635(c)(4) of the Nasdaq Listing Rules granted on terms substantially similar to those of the 2011 Plan (an “Inducement Award”). The RSU grants vest 33.4% on February 17, 2024, 33.3% on February 17, 2025 and 33.3% on February 17, 2026.
18
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NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(in thousands, except share data)
Also, on February 14, 2023, the Committee granted 21,811, 6,664, 5,452 and 3,635 performance-based stock units, effective as of February 17, 2023, to each of the Company’s CEO, CFO, COO and CCO, respectively, pursuant to the 2011 Plan, or, with respect to the CEO, as an Inducement Award (collectively, the “Short-Term Executive PSUs”). The performance goals for the Short-Term Executive PSUs with specified weighting are as follows:
Weighting
Goals
50%
Vesting of the full 50% of the PSUs occurs if the Company achieves the 2023 license, NRE and related revenue target approved by the Board (the “2023 License Revenue Target”). The vesting threshold is achievement of 90% of 2023 License Revenue Target. If the Company’s achievement of the 2023 License Revenue Target is above 90% but less than 99% of the 2023 License Revenue Target, 91% to 99% of the eligible PSUs would be subject to vesting. If the Company’s actual result exceeds 100% of the 2023 License Revenue Target, every 1% increase of the 2023 License Revenue Target, up to 110%, would result in an increase of 2% of the eligible PSUs for the Company’s CFO, COO and CCO and an increase of 3% of the eligible PSUs for the Company’s CEO
25%
Vesting of the full 25% of the PSUs occurs if the Company achieves positive total shareholder return whereby the return on the Company’s stock for 2023 is greater than the S&P Semiconductors Select Industry index (the “S&P index”). The vesting threshold is if the return on the Company’s stock for 2023 is at least 90% of the S&P index. If the return on the Company’s stock, in comparison to the S&P index, is above 90% but less than 99% of the S&P index, 91% to 99% of the eligible PSUs would be subject to vesting. If the return on the Company’s stock exceeds 100% of the S&P index, every 1% increase in comparison to the S&P index, up to 110%, would result in an increase of 2% of the eligible PSUs for the Company’s CFO, COO and CCO and an increase of 3% of the eligible PSUs for the Company’s CEO
25%
Vesting of the full 25% of the PSUs occurs if the Company achieves positive total shareholder return whereby the return on the Company’s stock for 2023 is greater than the Russell 2000 index (the “Russell index”). The vesting threshold is if the return on the Company’s stock for 2023 is at least 90% of the Russell index. If the return on the Company’s stock, in comparison to the Russell index, is above 90% but less than 99% of the Russell index, 91% to 99% of the eligible PSUs would be subject to vesting. If the return on the Company’s stock exceeds 100% of the Russell index, every 1% increase in comparison to the Russell index, up to 110%, would result in an increase of 2% of the eligible PSUs for the Company’s CFO, COO and CCO and an increase of 3% of the eligible PSUs for the Company’s CEO
Accordingly, assuming maximum achievement of the performance goals set forth above, PSUs representing an additional 30%, meaning an additional 6,543, would be eligible for vesting of the Company’s CEO, and an additional 20%, meaning an additional 1,332, 1,090 and 727, would be eligible for vesting for each of the Company’s CFO, COO and CCO, respectively.
Subject to achievement of the thresholds the above performance goals for 2023, the Short-Term Executive PSUs vest 33.4% on February 17, 2024, 33.3% on February 17, 2025 and 33.3% on February 17,2026.
Also, on February 14, 2023, the Committee granted 60,587, 30,293, 30,293 and 30,293 PSUs, effective as of February 17, 2023, to each of the Company’s CEO, CFO, COO and CCO, respectively, pursuant to the 2011 Plan, or, with respect to the CEO, as an Inducement Award (collectively, the “Long-Term Executive PSUs”). The Long-Term Executive PSUs shall vest in full upon the first achievement of any of the following performance goals:
●
if the Company’s compound annual growth rate for non-GAAP Earnings Per Share (“EPS”) for each fiscal year over the three-year period from 2022 through 2025 reaches 10% or if the Company’s non-GAAP EPS for any fiscal year reaches $1.00 during the period between January 1, 2023 and December 31, 2025;
19
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NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(in thousands, except share data)
●
If the Company’s non-GAAP operating margin for any fiscal year reaches 20% during the period between January 1, 2023 and December 31, 2025;
●
If the Company’s compound annual growth rate for revenue for each fiscal year over the three year period from 2022 through 2025 reaches 10% or if the Company’s revenue for any fiscal year reaches $180 million during the period between January 1, 2023 and December 31, 2025; or
●
If the Company’s market capitalization (defined as total outstanding shares as of a given date multiplied by the closing price for the Company’s common stock as quoted by the NASDAQ Stock Market) reaches at least $1.1 billion for at least 30 days of consecutive trading.
A summary of the Company’s RSU and PSU activities and related information for the ~~nine~~three months ended ~~September 30, 2017,~~ March 31, 2023, are as follows:

Number of
RSUs and
PSUs

Weighted Average Grant-Date
Fair Value

   Number of
RSUs    Weighted Average
Grant-Date
Fair Value
Unvested as of December 31, 2016
   505,142    $ 21.59
Unvested as of December 31, 2022
879,277 $ 37.57
Granted
   269,497    36.84 389,560 23.56
Vested
   (193,399 )    21.46 (141,165 ) 40.02
Forfeited or expired
   (26,374 )    26.01 (52,553 ) 34.58




Unvested as of September 30, 2017
   554,866    $ 28.84




Unvested as of March 31, 2023 (unaudited)
1,075,119 $ 32.32
As of ~~September 30, 2017,~~ March 31, 2023, there was ~~$12,126~~$26,615 of unrecognized compensation expense related to unvested ~~RSUs.~~RSUs and PSUs. This amount is expected to be recognized over a weighted-average period of 1.5 years.
The following table shows the total equity-based compensation expense included in the interim condensed consolidated statements of ~~income:~~income (loss):

   Nine months ended
September 30,    Three months ended
September 30,
   2017    2016    2017    2016
Three months ended
March 31,

   (unaudited)    (unaudited)    (unaudited)    (unaudited)
2023
(unaudited)

2022
(unaudited)

Cost of revenue
   $ 330    $ 179    $ 125    $ 65 $ 404 $ 339
Research and development, net
   2,834    2,162    991    741 2,173 1,995
Sales and marketing
   1,040    681    381    179 393 333
General and administrative
   2,142    1,626    722    580 889 722








Total equity-based compensation expense
   $ 6,346    $ 4,648    $ 2,219    $ 1,565 $ 3,859 $ 3,389








The fair value for rights to purchase shares of common stock under the Company’s employee stock purchase plan was estimated on the date of grant using the following assumptions:

   Nine months ended
September 30, Three months ended
September 30,
   2017 2016 2017 2016 Three months ended
March 31
   (unaudited) (unaudited) (unaudited) (unaudited)
2023
(unaudited)

2022
(unaudited)

Expected dividend yield
   0 % 0 % 0 % 0 % 0 % 0 %
Expected volatility
   28%-46 % 29%-57 % 28%-43 % 29%-48 % 45 % 38 %
Risk-free interest rate
   0.5%-1.1 % 0.3%-0.5 % 0.6%-1.1 % 0.4%-0.5 % 4.8 % 0.5 %
Expected forfeiture
   0 % 0 % 0 % 0 %
Contractual term of up to
   24 months 24 months 24 months 24 months
Contractual term of (months)
6 6
~~NOTE 8:~~
20
Table of Contents
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(in thousands, except share data)
NOTE 11:
DERIVATIVES AND HEDGING ACTIVITIES
The Company follows the requirements of FASB ASC No.815,” Derivatives and Hedging” which requires companies to recognize all of their derivative instruments as either assets or liabilities in the statement of financial position at fair value. The accounting for changes in fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging transaction and further, on the type of hedging transaction. For those derivative instruments that are
~~NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~
~~(in thousands, except share data)~~
designated and qualify as hedging instruments, a company must designate the hedging instrument, based upon the exposure being hedged, as a fair value hedge, cash flow hedge, or a hedge of a net investment in a foreign operation. Due to the Company’s global operations, it is exposed to foreign currency exchange rate fluctuations in the normal course of its business. The Company’s treasury policy allows it to offset the risks associated with the effects of certain foreign currency exposures through the purchase of foreign exchange forward or option contracts (“Hedging Contracts”). The policy, however, prohibits the Company from speculating on such Hedging Contracts for profit. To protect against the increase in value of forecasted foreign currency cash flow resulting from salaries paid in currencies other than the U.S. dollar during the year, the Company instituted a foreign currency cash flow hedging program. The Company hedges portions of the anticipated payroll of itsnon-U.S. employees denominated in the currencies other than the U.S. dollar for a period of one to twelve months with Hedging Contracts. Accordingly, when the dollar strengthens against the foreign currencies, the decline in present value of future foreign currency expenses is offset by losses in the fair value of the Hedging Contracts. Conversely, when the dollar weakens, the increase in the present value of future foreign currency expenses is offset by gains in the fair value of the Hedging Contracts. These Hedging Contracts are designated as cash flow hedges.
For derivative instruments that are designated and qualify as a cash flow hedge (i.e., hedging the exposure to variability in expected future cash flows that is attributable to a particular risk), ~~the effective portion of~~ the gain or loss on the derivative instrument is reported as a component of other comprehensive income (loss) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Any gain or loss on a derivative instrument in excess of the cumulative change in the present value of future cash flows of the hedged item is recognized in current earnings during the period of change. As of ~~September 30, 2017~~ March 31, 2023, and December 31, ~~2016,~~ 2022, the notional principal amount of the Hedging Contracts to sell U.S. dollars held by the Company was $0$9,700 and ~~$3,300,~~$12,200, respectively.
The fair value of the Company’s outstanding derivative instruments is as follows:

   September 30,
2017    December 31,
2016
   (Unaudited)    (Audited)
March 31, 2023
(unaudited)

December 31, 2022

Derivative assets:

Derivatives designated as cash flow hedging instruments:

Foreign exchange forward contracts
   $ —      $ 6 $ — $ 13




Total
   $ —      $ 6 $ — $ 13




Derivative liabilities:

Derivatives designated as cash flow hedging instruments:

Foreign exchange option contracts
$ 128 $ 23
Foreign exchange forward contracts
232 96
Total
$ 360 $ 119
The Company recorded the fair value of derivative assets in “prepaid expenses and other current assets” and the fair value of derivative liabilities in “accrued expenses and other payables” on the Company’s interim condensed consolidated balance sheets.
The increase (decrease) in unrealized gains (losses) recognized in “accumulated other comprehensive ~~loss”~~gain (loss)” on derivatives, before tax effect, is as follows:

   Nine months ended
September 30,    Three months ended
September 30,
   2017    2016    2017    2016
Three months ended
March 31,

   (unaudited)    (unaudited)    (unaudited)    (unaudited)
2023
(unaudited)

2022
(unaudited)

Derivatives designated as cash flow hedging instruments:

Foreign exchange option contracts
   $ 88    $ 118    $ 1    $ 44 $ (105 ) $ —
Foreign exchange forward contracts
   92    100    (3 )    31 (320 ) 2








$ (425 ) $ 2
   $ 180    $ 218    $ (2 )    $ 75








21
Table of Contents
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(in thousands, except share data)
The net (gains) losses reclassified from “accumulated other comprehensive ~~loss”~~gain (loss)” into income are as follows:

Three months ended
March 31

2023
(unaudited)

2022
(unaudited)

Derivatives designated as cash flow hedging instruments:

Foreign exchange option contracts
$ — $ —
Foreign exchange forward contracts
171 110
$ 171 $ 110
~~NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~
~~(in thousands, except share data)~~

   Nine months ended
September 30,    Three months ended
September 30,
   2017    2016    2017    2016
   (unaudited)    (unaudited)    (unaudited)    (unaudited)
Derivatives designated as cash flow hedging instruments:

Foreign exchange option contracts
   $ (88 )    $ (70 )    $ (1 )    $ (21 )
Foreign exchange forward contracts
   (98 )    (121 )    3    (48 )








   $ (186 )    $ (191 )    $ 2    $ (69 )








The Company recorded in cost of revenues and operating expenses a net loss of $2$171 and ~~a net gain of $186~~$110 during the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2023 and 2022, respectively, ~~and a net gain of $69 and $191 for the comparable periods of 2016,~~ related to its Hedging Contracts.
~~NOTE 9: ACCUMULATED OTHER COMPREHENSIVE LOSS~~
NOTE 12:
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The following tables summarize the changes in accumulated balances of other comprehensive income (loss), net of taxes:

Three months ended March 31, 2023 (unaudited)

Three months ended March 31, 2022 (unaudited)

   Nine months ended September 30, 2017
(unaudited) Three months ended September 30, 2017
(unaudited)
Unrealized
gains (losses) on available-for-sale marketable securities

Unrealized gains (losses) on cash flow hedges

Total

Unrealized
gains (losses) on available-for-sale marketable securities

Unrealized gains (losses) on cash flow hedges

Total

   Unrealized
gains (losses) on
available-for-sale
marketable
securities Unrealized
gains
(losses) on
cash flow
hedges Total Unrealized
gains (losses) on
available-for-sale
marketable
securities Unrealized
gains
(losses) on
cash flow
hedges Total
Beginning balance
   $ (502 ) $ 5 $ (497 ) $ (278 ) $ —   $ (278 ) $ (6,142 ) $ (107 ) $ (6,249 ) $ (427 ) $ 55 $ (372 )
Other comprehensive income (loss) before reclassifications
   277 161 438 82 (3 ) 79 684 (426 ) 258 (2,167 ) 4 (2,163 )
Amounts reclassified from accumulated other comprehensive income (loss)
   24 (166 ) (142 ) (5 ) 3 (2 ) (92 ) 173 81 — 97 97


Net current period other comprehensive income (loss)
   301 (5 ) 296 77 —   77 592 (253 ) 339 (2,167 ) 101 (2,066 )


Ending balance
   $ (201 ) $ —   $ (201 ) $ (201 ) $ —   $ (201 ) $ (5,550 ) $ (360 ) $ (5,910 ) $ (2,594 ) $ 156 $ (2,438 )


~~NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~
~~(in thousands, except share data)~~

   Nine months ended September 30, 2016
(unaudited) Three months ended September 30, 2016
(unaudited)
   Unrealized
gains (losses) on
available-for-sale
marketable
securities Unrealized
gains
(losses) on
cash flow
hedges Total Unrealized
gains (losses) on
available-for-sale
marketable
securities Unrealized
gains
(losses) on
cash flow
hedges Total
Beginning balance
   $ (427 ) $ 8 $ (419 ) $ (32 ) $ 26 $ (6 )
Other comprehensive income (loss) before reclassifications
   416 194 610 34 66 100
Amounts reclassified from accumulated other comprehensive income (loss)
   13 (171 ) (158 ) —   (61 ) (61 )


Net current period other comprehensive income (loss)
   429 23 452 34 5 39


Ending balance
   $ 2 $ 31 $ 33 $ 2 $ 31 $ 33


The following table provides details about reclassifications out of accumulated other comprehensive ~~income:~~income (loss):

Details about Accumulated Other
Comprehensive Income Components
   Amount Reclassified from Accumulated Other Comprehensive
Income
Affected Line Item in the
Statements of Income
   Nine months ended
September 30, Three months ended
September 30,
   2017 2016 2017 2016
   (unaudited) (unaudited) (unaudited) (unaudited)
Unrealized gains (losses) on cash flow hedges
   $ 4 $ 4 $ —   $ 2    Cost of revenues
   160 160 (2 ) 57    Research and development
   10 13 —   5    Sales and marketing
   12 14 —   5    General and administrative



   186 191 (2 ) 69    Total, before income taxes
   20 20 1 8    Income tax expense



   166 171 (3 ) 61    Total, net of income taxes
Unrealized gains (losses) onavailable-for-sale marketable securities
   (33 ) (16 ) 7 —
Financial income (loss), net
   (9 ) (3 ) 2 —      Income tax benefit



   (24 ) (13 ) 5 —      Total, net of income taxes
   $ 142 $ 158 $ 2 $ 61    Total, net of income taxes



~~NOTE 10:~~
Details about
Accumulated Other
Comprehensive Income
(Loss) Components

Amount Reclassified from Accumulated Other Comprehensive
Income (Loss)

Affected Line Item
in the Statements of Income (Loss)

Three months ended March 31,

2023
(unaudited)

2022
(unaudited)

Unrealized losses on cash flow hedges
$ (4 ) $ (2 )
Cost of revenues
(147 ) (96 )
Research and development
(4 ) (3 )
Sales and marketing
(16 ) (9 )
General and administrative
(171 ) (110 )
Total, before income taxes
2 (13 )
Income tax expense (benefit)
(173 ) (97 )
Total, net of income taxes
Unrealized gains on available-for-sale marketable securities
92 —
Financial income (loss), net
— —
Income tax expense (benefit)
92 —
Total, net of income taxes
$ (81 ) $ (97 )
Total, net of income taxes
22
Table of Contents
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(in thousands, except share data)
NOTE 13:
SHARE REPURCHASE PROGRAM
The Company did not repurchase any shares of ~~its~~ common stock during both the ~~third quarter and~~ first ~~nine months ended September 30, 2017, as well as during the third~~ quarter of 2016. During the first nine months ended September 30, 2016, the Company repurchased 180,013 shares of common stock at an average purchase price of $18.98 per share for an aggregate purchase price of $3,417.2023 and 2022. As of ~~September 30, 2017, 311,056~~March 31, 2023, 278,799 shares of common stock remained available for repurchase pursuant to the Company’s share repurchase program.
~~NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~
~~(in thousands, except share data)~~

The repurchases of common stock are accounted for as treasury stock, and result in a reduction of stockholders’ equity. When treasury shares are reissued, the Company accounts for the reissuance in accordance with FASB ASCNo. ~~505-30,~~505-30, “Treasury Stock” and charges the excess of the repurchase cost over issuance price using the weighted average method to retained earnings. The purchase cost is calculated based on the specific identified method. In the case where the repurchase cost over issuance price using the weighted average method is lower than the issuance price, the Company credits the difference to additionalpaid-in capital.
~~NOTE 11: UNCERTAIN TAX POSITIONS~~
NOTE 14:
SUBSEQUENT EVENTS
~~During the nine months ended September 30, 2017,~~ In May 2023, the Company ~~recorded a tax benefit of $1,800 as a result~~entered into an agreement to acquire the VisiSonics 3D spatial audio business (“VisiSonics”). Under the terms of the ~~completion~~agreement, the Company agreed to pay an aggregate of ~~a tax audit for prior years~~$3,600 at closing, and each of VisiSonics’ two founders will be entitled to an additional payment of $100 payable in ~~a certain foreign tax jurisdiction. This amount includes a release~~equal monthly installments over the 12 month period following the closing in connection with their provision of ~~$130 in accrued interest related to unrecognized tax benefits.~~consulting services. The ~~reduction in the unrecognized tax benefits balance for prior years as a result of the completion of the tax audit~~final purchase price allocation for the ~~nine months ended September 30, 2017 was $3,003.~~
~~NOTE 12: IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS NOT YET ADOPTED~~
~~(a)~~ ~~Revenue recognition~~
In May 2014, the FASB issued a new standard related to revenue recognition. Under the new standard, revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The FASBacquisition has ~~recently issued several amendments to the standard, including clarification on identifying performance obligations.~~
The guidance permits two methods of modification: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the cumulative~~catch-up~~ ~~transition method). The Company currently anticipates adopting the standard using the modified retrospective method rather than full retrospective method.~~
~~The new standard will be effective for the Company beginning on January 1, 2018, but adoption~~not been determined as of the ~~original effective date~~filing of ~~January 1, 2017 is permitted. The Company will adopt the new standard as of January 1, 2018.~~
~~The Company has made progress toward completing its evaluation of the potential changes from adopting~~ this ~~new standard~~Quarterly Report on its financial reporting and disclosures. The Company has evaluated the impact of the standard on a majority of its revenue streams and associated contracts. The Company will complete the contract evaluations and validate the results throughout 2017. The Company formed an implementation work group and expects to complete the evaluation of the impact of the accounting and disclosure changes on its business processes, controls and systems throughout 2017, design any changes to such business processes, controls and systems, and implement the changes before the end of 2017.
Under the new standard, an entity recognizes revenue when or as it satisfies a performance obligation by transferring IP license or services to the customer, either at a point in time or over time. The Company expects to continue to recognize most of its revenue at a point in time upon delivery of its products. The Company expects to recognize revenue over time on significant license customization contracts that are covered by contract accounting standards using cost inputs to measure progress toward completion of its performance obligations, which is similar to the current method.
Based on its current analysis, the most significant effect on the Company, if any, will be related to certain deliverables that may be considered as distinct performance obligations separate from other performance obligations and will be measured using the relative standalone selling price basis.
In addition, incremental costs that are related to sales from contracts signed during the period would require capitalization. The Company also will consider if there is a significant financing component if the time between payment and performance is more than one year.
~~The Company continues to assess all potential impacts under the new revenues standard.~~
~~NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~
~~(in thousands, except share data)~~
Form 10-Q.

~~(b)~~ ~~Other accounting standard~~
~~In February 2016, the FASB issued ASU2016-02,~~ “Leases (Topic 842),” which will replace the existing guidance in ASC 840, “Leases.” The updated standard aims to increase transparency and comparability among organizations by requiring lessees to recognize lease assets and lease liabilities on the balance sheet and requiring disclosure
23
Table of key information about leasing arrangements. This ASU is effective for annual periods beginning after December 15, 2018, and interim periods within those annual periods; early adoption is permitted and modified retrospective application is required. The Company is in the process of evaluating this guidance to determine the impact it will have on its financial statements and related disclosures.
~~NOTE 13: RECENTLY ADOPTED ACCOUNTING STANDARDS~~
~~In March 2016, the FASB issued ASU2016-09,~~ ~~Compensation—Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting (“ASU2016-09”).~~ ~~ASU2016-09~~ simplifies several aspects of the accounting for share-based payment transaction, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. For public companies, ASU~~2016-09~~ ~~is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. The Company adopted ASU2016-09~~ during the nine months ended September 30, 2017, at which time it changed its accounting policy to account for forfeitures as they occur. There was no material impact of the adoption of this standard on the Company’s financial statements.
Contents
Item 2. ~~MANAGEMENT’S~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion together with the unaudited financial statements and related notes appearing elsewhere in this quarterly report. This discussion contains forward-looking statements that involve risks and uncertainties. Any or all of our forward-looking statements in this quarterly report may turn out to be wrong. These forward-looking statements can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. Factors which could cause actual results to differ materially include those set forth under in Part II – Item 1A – ~~“Risk~~“Risk Factors,” as well as those discussed elsewhere in this quarterly report. See ~~“Forward-Looking~~“Forward-Looking Statements.”
The financial information presented in this quarterly report includes the results of CEVA, Inc. and its subsidiaries.
BUSINESS OVERVIEW
~~The financial information presented in this quarterly report includes the results of CEVA, Inc. and its subsidiaries.~~
Headquartered in ~~Mountain View, California,~~Rockville, Maryland, CEVA is athe leading licensor of ~~signal processing IP~~wireless connectivity and smart sensing technologies and a provider of chip design services. We offer Digital Signal Processors (DSPs), AI processors, short and long-range connectivity solutions, 5G wireless platforms and complementary software for sensor fusion, image enhancement, computer vision, voice input and artificial intelligence, all of which are key enabling technologies for a smarter, more connected world. ~~We partner with semiconductor companies~~Our state-of-the-art technology is included in more than 16 billion chips shipped to date for a diverse range of end markets. In 2022, more than 1.7 billion CEVA-powered devices were shipped, equivalent to more than 50 devices every second.
Our hardware IP products and ~~OEMs worldwide~~solutions are licensed to customers who embed them into their System on Chip (SoC) designs to create power-efficient, intelligent, secure and connected ~~devices for a range~~devices. Our customers include many of ~~end markets, including mobile, consumer, automotive, industrial and Internet of Things (IoT). Ourultra-low-power~~ ~~IPs for vision, neural networks, sound, long and short range wireless, include comprehensiveDSP-based~~ ~~platforms forLTE/LTE-A/5G~~ baseband processing in handsets, infrastructure and IoT devices, advanced imaging, computer vision and deep learning for any camera-enabled device, as well as sound/voice/audio applications for multiple IoT markets. For short range wireless, we offer the ~~industry’s most widely adopted IPs for Bluetooth (low energy and dual mode) andWi-Fi~~ ~~(802.11 b/g/n/ac up to 4x4). We also offer wired interface for storage (SATA and SAS).~~
~~Our technologies are licensed to~~world’s leading semiconductor and original equipment manufacturer (OEM) companies ~~throughout~~targeting a wide variety of cellular and IoT end markets, including mobile, PC, consumer, automotive, smart-home, surveillance, robotics, industrial, aerospace and defense and medical. Our application software IP is licensed primarily to OEMs who embed it in their SoC designs.
Our ultra-low-power hardware IP offerings are deployed in devices for wireless connectivity and smart sensing workloads. Our wireless portfolio includes 5G baseband processing platforms for mobile broadband, cellular IoT and base station RAN, and UWB, Bluetooth and Wi-Fi technologies for a range of connectivity devices. Our smart sensing portfolio includes advanced DSP and AI technologies for cameras, radars, microphones, and other sensors, which enable computer vision, audio, voice, motion sensing and other applications. We also offer processor-agnostic sensor IP for the ~~world. These companies incorporate~~processing of accelerometers, gyroscopes, magnetometers and optical flow, as well as spatial audio, noise cancellation and voice recognition.
Our Intrinsix chip design business unit enables us to offer our customers SoC design services, which we refer to as co-creation, that take advantage of our IP ~~into application-specific integrated circuits (“ASICs”)~~portfolio, Intrinsix’s designed to deliver (D2D) and ~~application-specific standard products (“ASSPs”)~~security IP and Intrinsix’s design capabilities for digital, mix signal and RF. We believe that ~~they manufacture,~~having chip design expertise as part of our offerings strengthens our relationships with customers, streamlines IP adoption, generates recurrent royalties and more. Furthermore, Intrinsix’s experience and customer base in the growing chip development programs with the U.S. Department of Defense and the Defense Advanced Research Projects Agency (DARPA) together with its IP offerings for processor security and chiplets extends CEVA’s serviceable market and ~~sell~~revenue base.
CEVA is a sustainability and environmentally conscious company. We have adopted both a Code of Business Conduct and Ethics and a Sustainability Policy, in which we emphasize and focus on environmental preservation, recycling, the welfare of our employees and privacy – which we promote on a corporate level. At CEVA, we are committed to ~~wireless, consumer, automotive~~social responsibility, values of preservation and ~~IoT companies. Ourstate-of-the-art~~ ~~technology has shipped in more than 8 billion chips to date for a wide range of diverse end markets. One in three handsets sold worldwide is powered by CEVA.~~consciousness towards these purposes.
~~Our DSPs power many leading handset OEMs in the world today, including atier-one~~ U.S. brand, ASUS, Coolpad, HTC, Huawei, Intex, Karbonn, Lava, Lenovo, LG, Meizu, Micromax, OPPO, Samsung, Vivo, Xiaomi, ZTE and hundreds of local handset manufacturers in China and India. Based on internal data and Strategy Analytics’ provisional worldwide shipment data, CEVA’s worldwide market share of handset baseband chips that incorporate our technologies was approximately 35% of the worldwide shipment volume in the first half of 2017.
We believe the adoption of our ~~signal processing~~wireless connectivity and smart sensing IP ~~cores and software for applications outside of~~products beyond our incumbency in the ~~cellular~~handset baseband market continues to progress. ~~As a testament~~In particular, we continue to experience good interest in our wireless connectivity platforms, in both traditional and new areas. Reflecting this ~~growing~~ trend, ~~during~~in the ~~third~~first quarter of ~~2017, we~~2023, seven of the thirteen IP licensing and NRE deals concluded ~~eight licensing deals, all of which are~~were for~~non-cellular~~ baseband applications. These license deals demonstrate that our technologies are being integrated into a broad range of end devices including 5G base stations, smartphones, automotive ADAS, drones, surveillance cameras, wearables, industrial IoT and a variety of Bluetooth and~~Wi-Fi~~ ~~connected consumer and medical products. Moreover, during the third quarter, our royalty revenues derived fromnon-cellular~~ ~~baseband products approximately doubled year-over-year, contributing more than $2 million of royalty revenues during the quarter.~~ wireless connectivity.
We believe the following key elements represent significant growth drivers for the company:

●
CEVA is a player in mobile handsets, the largest space of the semiconductor industry. Our customers use our technologies for baseband, voice processing and Bluetooth connectivity. Our key customer currently has a strong foothold in low- and mid-tier LTE and 5G smartphone markets. In the first quarter of 2023, we completed a strategic licensing agreement for our DSPs with a leading Android smartphone OEM that is designing its own 5G modem in-house. If this OEM is successful in bringing their own 5G modem to its smartphones, we believe this customer could become a key royalty payer in the future.
CEVA is firmly established in the largest space in the semiconductor industry – baseband for mobile handsets. In particular, our presence in the LTE smartphone markets continue to grow as our customers targeting those markets are gaining market share at the expense
24
Table of the incumbents. During the first nine months of 2017, we reported 228 million LTE chipsets shipped, which is more than the amount that was shipped in the entire year of 2016. The royalty we derive from smartphones is higher on average than that of feature phones, so we are set to benefit as handset markets around the world continue to transition and shift away from feature phones to smartphones, particularly in emerging economies.Contents

~~Our specialization and competitive edge in digital signal processor technologies for next generation wireless such asLTE-A~~ ~~Pro, 5G, LTE-IoT, 802.11ac and 802.11axWi-Fi~~ technologies, and the inherent low cost and power and performance balance of our designs, put us in a strong position to simultaneously capitalize on mass market adoption of such technologies and address multiple markets and product sectors, including handsets, macro base stations, small cells,~~Wi-Fi~~ ~~routers and varieties of machine type communications such as connected cars, smart cities, industrial markets and more.~~
~~Together with our presence in the handset baseband market, our Bluetooth andWi-Fi~~ IPs allow us to expand further into IoT applications and substantially increase our overall addressable market. Our addressable market size is expected to be 35 billion devices by 2020, per data from ABI Research. Already, shipments of products incorporating our Bluetooth IP are sizeable, with more than 139 million CEVA-powered Bluetooth chips shipped in the first nine months of 2017, which is more than the amount that was shipped in the entire year of 2016.
●
We believe our PentaG2 platform for 5G handsets and 5G IoT endpoints is the most comprehensive baseband IP platform in the industry today and provides newcomers and incumbents with a comprehensive solution to address the need for 5G processing for smartphones, fixed wireless access, satellite communications and a range of connected devices such as robots, cars, smart cities and other devices for industrial applications. In the first quarter of 2023, we signed a strategic agreement with a wireless semiconductor player for our PentaG2 platform to develop a 5G RedCap targeting the broad markets where Broadband IoT is required.

The growing market potential for voice assisted devices, as voice is becoming the primary user interface for IoT applications, including mobile, automotive and consumer devices, offers an additional growth segment for the company. Our proven track record in audio/voice processing, with more than 6 billion audio chips shipped to date, puts us in a strong position to power audio roadmaps across this new range of addressable end markets.
●
Our specialization and technological edge in signal processing platforms for 5G base station RAN, and our PentaG RAN platform put us in a strong position to capitalize on the growing 5G RAN demand and its disintegration toward new architecture and form factors, including V-RAN, O-RAN, Active Antennas (AAU, RRU), private networks and small cells. We believe our PentaG RAN platform for 5G RAN settings is the most comprehensive baseband processor IP in the industry today and provides newcomers and incumbents with a comprehensive solution to address the need for 5G.

~~OurCEVA-XM4~~ ~~intelligent vision processor and our newCEVA-XM6~~ vision processor and platform for deep learning provide highly compelling offerings for any camera-enabled device such as smartphones, tablets, automotive safety (ADAS), Autonomous Driving (AD), drones, robotics, security and surveillance, augmented reality (AR) and virtual reality (VR), drones, and signage. Per ABI Research, camera shipments are expected to exceed 2.7 billion units by 2018. We have already signed more than 45 licensing agreements for our imaging and vision DSPs across those markets, where our customers can add camera-related enhancements such as smarter autofocus, better picture using super resolution algorithms, and better image capture in~~low-light~~ environments. Other customers can add video analytics support to enable new services like augmented reality, gesture recognition and advanced safety capabilities in cars. This transformation in vision processing and neural net software and hardware needs is an opportunity for us to expand our footprint and content in smartphones, tablets, drones, surveillance, automotive ADAS and industrial IoT applications.
●
Our broad Bluetooth, Wi-Fi, Ultra Wide Band (UWB) and cellular IoT IPs allow us to expand further into the high volume IoT applications and substantially increase our value-add. Our addressable market size for Bluetooth, Wi-Fi, UWB and cellular IoT is expected to be more than 15 billion devices annually by 2027 based on research from ABI Research. In the first quarter of 2023, we reported record high royalties from cellular IoT and Wi-Fi, including three new Wi-Fi 6 customers reporting royalties for the first time. We also signed a strategic agreement with a leading Wi-Fi access point OEM for our Wi-Fi 6 AP platform. We believe that Wi-Fi presents a significant royalty opportunity, given our dominant market position in licensing Wi-Fi 6 to more than 35 customers to date.
●
The growing market for True Wireless Stereo (TWS) earbuds, smartwatches, AR and VR headsets, and other wearable assisted devices, offers an incremental growth segment for us for our software IP. To better address this market, our spatial audio, MotionEngine for inertial measurement units (IMU), WhisPro speech recognition technology and ClearVox voice input software are offered in conjunction with our audio/voice DSPs.
●
Our unique capability to combine our Bluetooth IP, audio DSP IP and software for contextual aware user experience puts us in a strong position to capitalize on the fast-growing TWS markets of earbuds, smartwatches, Over-the-Counter (OTC) hearing aids, wireless speakers, PCs and more. Our BlueBud platform integrates all of these technologies, lowering the entry barriers for semiconductors and OEMs to develop differentiated, high-performance solutions for TWS devices.
●
Our second generation SensPro2 sensor hub DSP family provides highly compelling offerings for any sensor-enabled device and application such as smartphones, automotive safety (ADAS), autonomous driving (AD), drones, robotics, security and surveillance, augmented reality (AR) and virtual reality (VR), Natural Language Processing (NLP) and voice recognition. Per research from Yole Group, camera-enabled devices incorporating computer vision and AI are expected to exceed 1 billion units, and devices incorporating voice AI are expected to reach 600 million units by 2025. This latest DSP architecture enables us to address the transformation in devices enabled by these applications, and expand our footprint and content in smartphones, drones, consumer cameras, surveillance, automotive ADAS, voice-enabled devices and industrial IoT applications.
●
Neural networks are increasingly being deployed in a wide range of camera-based devices in order to make these devices “smarter.”  Our newest generation family of AI processors for deep learning at the edge, the NeuPro-M represents new IP licensing and royalty drivers for us in the coming years. Per research from Yole Group, 2.5 billion Edge AI devices will ship annually by 2026, illustrating the huge potential of the market.
●
Our Hillcrest Labs sensor fusion business unit allows us to address an important technology piece used in personal computers, robotics, TWS earbuds, smart TVs and many other smart sensing IP products, for smart sensing, in addition to our existing portfolio for camera-based computer vision and AI processing, and microphone-based sound processing. MEMS-based inertial and environmental sensors are used in an increasing number of devices, including robotics, smartphones, laptops, tablets, TWS earbuds, spatial audio headsets, remote controls and many other consumer and industrial devices. Hillcrest Labs’ innovative and proven MotionEngine™ software supports a broad range of merchant sensor chips and is licensed to OEMs and semiconductor companies that can run the software on CEVA DSPs or a variety of RISC CPUs. The MotionEngine software expands and complements CEVA’s smart sensing technology. Hillcrest Labs’ technology has already shipped in more than 250 million devices, indicative of its market traction and excellence. Along with our SensPro sensor fusion processors, our licensees can now benefit from our capabilities as a complete, one-stop-shop for processing all classes and types of sensors.
As a result of our diversification strategy beyond baseband for handsets, and our progress in addressing those new markets under the base station and IoT umbrella, we ~~expect~~continue to experience significant growth in shipments and royalty revenues derived from base station and IoT product category (formerly referred to as non-handset ~~baseband applications over~~ products). Unit shipments for this category were up 8% year-over-year for 2022 to almost 1.4 billion units. We expect royalty growth to continue in this product category for the next few ~~years, due~~years. These devices are comprised of a range of different products at different royalty ASPs, spanning from high volume Bluetooth and Wi-Fi to ~~a combination of higher unit shipments of Bluetooth products that bear lower ASPs, with higher ASPs driven by~~high value sensor fusion and base station ~~and vision products.~~
~~Notwithstanding the various growth opportunities we have outlined above, our business operates in a highly competitive and cyclical environment.~~RAN. The ~~maintenance~~royalty ASP of our competitive position and our future growth are dependent on our ability to adapt to ever-changing technologies, short product life cycles, evolving industry standards, changing customer needs and the trend towards~~Internet-of-Things,~~ handset baseband, connectivity, and voice, audio and video convergence in the markets that we operate. Also, our business relies significantly on revenues derived from a limited number of customers. The discontinuation of product lines or market sectors that incorporate our technology by our significant customers or a change in direction of their business and our inability to adapt our technology to their new business needs could have material negative implications for our future royalty revenues. Moreover, competition has historically increased pricing pressures for our products and decreased our average selling prices. Royalty payments under our existing license agreements also could be lower than currently anticipated for a variety of reasons, including decreased royalty rates triggered by larger volume shipments, lower royalty rates negotiated with customers due to competitive pressure or consolidation among our customers. Some of our competitors have reduced their licensing and royalty fees to attract customers and expand their market share. In order to penetrate new markets and maintain our market share with our existing products, we may need to offer our products in the future at lower prices which may result in lower profits. In addition, our future growth is dependent not only on the continued success of our existing products but also the successful introduction of new products, which requires the dedication of resources into research and development which in turn may increase our operating expenses. Furthermore, since our products are incorporated into end products of our OEM and semiconductor customers, our business is very dependent on their ability to achieve market acceptance of their end products in the handset and consumer electronic markets, which are similarly very competitive. In addition, macroeconomic trends may significantly affect our operating results. For example, consolidation among our customers may negatively affect our revenue source, increase our existing customers’ negotiation leverage and make us more dependent on a limited number of customers. Also, since we derive a significant portion of our revenues from the handset baseband market, any negative trends in that market would adversely affect our financial results.
Moreover, the semiconductor and consumer electronics industries remain volatile, which makes it extremely difficult for our customers and us to accurately forecast financial results and plan for future business activities. Our license arrangements have not historically provided for substantial ongoing license payments so revenue recognized from licensing arrangements vary significantly from period to period, depending on the number and size of deals closed during a quarter, and is difficult to predict. Moreover, our royalty revenues are based on the sales of products incorporating the semiconductors or other products will be in between the two ranges.
25
Table of our customers, and as a result we do not have direct access to information that will help us anticipate the timing and amount of future royalties. We have very little visibility into the timetable of product shipments incorporating our technology by our customers. As a result, our past operating results should not be relied upon as an indication of future results.Contents
RESULTS OF OPERATIONS
Total Revenues
Total revenues were ~~$24.0 and $65.9~~$28.7 million for the ~~third~~first quarter ~~and first nine months~~ of ~~2017, respectively,~~2023, representing ~~an increase~~a decrease of ~~35% and 28%~~16%, ~~respectively,~~ as compared to the corresponding ~~periods~~period in ~~2016.~~2022. The decrease in total revenues for the first quarter of 2023 was mainly due to the decrease in royalties from smartphone and PC that was primarily driven by a pull-in of handset baseband shipments in the fourth quarter of 2022, combined with traditional seasonality, and inventory buildup.
~~Five~~
Our five largest customers accounted for ~~75% and 59%~~39% of our total revenues for the ~~third~~first quarter ~~and first nine months~~ of ~~2017, respectively,~~2023, as compared to ~~65% and 64%~~47% for the comparable ~~periods~~period in ~~2016. Four customers~~2022. One customer accounted for ~~20%, 18%, 12% and 21%~~13% of our total revenues for the ~~third~~first quarter of ~~2017,~~2023, as compared to two customers that accounted for ~~27%~~12% and ~~21% of our total revenues for the third quarter of 2016. Two customers accounted for 22% and 17%~~11% of our total revenues for the first ~~nine months~~quarter of 2017, as compared to two customers that accounted for 27% and 19% of our total revenues for the first nine months of 2016. Sales to Spreadtrum represented 20% and 22% of our total revenues for the third quarter and first nine months of 2017, respectively, as compared to 27% for both comparable periods in 2016.2022. Generally, the identity of our ~~other~~ customers representing 10% or more of our total revenues varies from period to period, especially with respect to our IP licensing customers as we generate licensing revenues generally from new customers on a quarterly basis. With respect to our royalty revenues, two royalty paying customers each represented 10% or more of our total royalty revenues for both the third quarter and first nine months of 2017, and collectively represented 68% and 74% of our total royalty revenues for the third quarter and first nine months of 2017, respectively. Three royalty paying customers each represented 10% or more of our total royalty revenues for the third quarter of 2016, and collectively represented 86% of our total royalty revenues for the third quarter of 2016. Two royalty paying customers each represented 10% or more of our total royalty revenues for the first ~~nine months~~quarter of ~~2016,~~2023, and collectively represented ~~81%~~28% of our total royalty revenues for the first ~~nine months~~quarter of ~~2016.~~2023. Two royalty paying customers represented 10% or more of our total royalty revenues for the first quarter of 2022, and collectively represented 47% of our total royalty revenues for the first quarter of 2022. We expect that a significant portion of our future revenues will continue to be generated by a limited number of customers. The concentration of our customers is explainable in part by consolidation in the semiconductor industry.
The following table sets forth the products and services as percentages of our total revenues for each of the periods set forth below:

   Nine months
2017 Nine months
2016 Third Quarter
2017 Third Quarter
2016
DSP products (DSP cores and platforms):

Baseband for handset and other devices
   63 % 66 % 73 % 65 %
Othernon-baseband (audio, imaging and vision)
   24 % 15 % 16 % 14 %
Connectivity products (Bluetooth, WiFi and SATA/SAS)
   13 % 19 % 11 % 21 %

First Quarter
2023

First Quarter
2022

Connectivity products
77 % 75 %
Smart sensing products
23 % 25 %
~~We expect to continue to generate a significant portion of our revenues for 2017 from the above products and services.~~
Licensing, NRE and Related Revenues
Licensing, NRE and related revenues were ~~$14.0 million and $33.9~~$20.7 million for the ~~third~~first quarter ~~and first nine months~~ of ~~2017, respectively, anall-time~~ ~~record high,~~2023, representing ~~an increase~~a decrease of ~~88% and 44%~~7%, ~~respectively,~~ as compared to the corresponding ~~periods~~period in ~~2016.~~2022. The ~~increase~~decrease in licensing, and related revenues for the third quarter of 2017 was due to a combination of higher licensing revenues and activities from all business lines (other than connectivity), including recognition of revenue from a prior 5G related licensing agreement that was previously recorded as part of our backlog. The increase in licensingNRE and related revenues for the first ~~nine months~~quarter of ~~2017~~2023 was mainly due to ~~higher~~timing of deals closed. Our licensing, NRE and related revenues business continues to generate customer traction across our diversified portfolio.
Thirteen IP license and ~~activities associated with vision~~NRE agreements were concluded during the first quarter of 2023, targeting a wide variety of end markets and ~~base station technologies~~applications, including 5G for smartphones and ~~products, which are part~~broadband IoT, Wi-Fi 6 for access points and mesh networks, Bluetooth connectivity for TWS earbuds, consumer IoT and industrial devices, sensor fusion for robot vacuum cleaners and AI for automotive ADAS. Five of the ~~company’s successful diversification strategy over the last few years.~~thirteen deals were with first time customers.
Licensing and related revenues accounted for ~~58% and 51%~~72% of our total revenues for the ~~third~~first quarter ~~and first nine months~~ of ~~2017, respectively,~~2023, as compared to ~~42% and 46%~~65% for the comparable ~~periods~~period of 2016. During the third quarter of 2017, we concluded eight new licensing deals. Of the eight new licensing deals completed during the quarter, three were with first time customers, and all of the licensing agreements completed during the quarter were for~~non-handset~~ baseband applications. Two of the agreements were for CEVA DSP cores, platforms and software and six were for CEVA connectivity IPs. Target markets for the licenses include 5G base stations, AI for smartphones and consumer and industrial IoT. Geographically, two of the deals signed were in China, three were in the U.S., and three were in the APAC region. Our licensing business is progressing well with a solid pipeline, diverse customer base and target markets.2022.
Royalty Revenues
Royalty revenues were ~~$10.0 million and $32.0~~$8.0 million for the ~~third~~first quarter ~~and first nine months~~ of ~~2017, respectively,~~2023, representing a decrease of ~~4% and an increase of 15%~~33%, ~~respectively,~~ as compared to the corresponding ~~periods~~period in ~~2016.~~2022. Royalty revenues accounted for ~~42% and 49%~~28% of our total revenues for the ~~third~~first quarter ~~and first nine months~~ of ~~2017, respectively,~~2023, as
compared to ~~58% and 54%~~35% for the comparable ~~periods~~period of ~~2016.~~2022. The ~~slight~~ decrease in royalty revenues for the ~~third~~first quarter of ~~2017 reflects noticeable softness across major handset vendors and regions. In particular, China~~2023 was ~~experiencing excess inventory levels in low cost smartphones, partially~~mainly due to ~~slower migration to LTE smartphones in India~~customer inventory adjustments and ~~a pushout of a flagship model in the smartphone space. This was partially offset by higher volume shipments and royalty revenues of ournon-handset~~ ~~baseband products. As examples, higher vision-related royalty revenues were derived from new~~prolonged weak demand for smartphones and cameras going into production during 2017 using our vision platform and higher volume shipments were evidenced by initial royalty reports from base station products utilizing our technologies. The increase in royalty revenues for the first nine months of 2017 reflects an increase in LTE baseband shipments and~~non-handset~~ ~~baseband shipments in all of our different markets.~~PCs.
Our customers reported sales of ~~250 million and 871~~297 million chipsets incorporating our technologies for the ~~third quarter and~~ first ~~nine months of 2017, respectively, as compared to 270 million and 726 million for the comparable periods of 2016. Of those volumes, 61 million and 184 million were attributed tonon-handset~~ ~~baseband for the third quarter and first nine months of 2017, respectively, as compared to 52 million and 131 million for the comparable periods of 2016. The decrease in chipsets for the third~~ quarter of ~~2017 is attributable to~~2023, a decrease of 44% from the corresponding period in ~~smartphone shipments. The increase in chipsets~~2022 for ~~the first nine months of 2017 is attributable to an increase in ournon-handset~~ ~~baseband products and overall higher handset shipments.~~actual shipments reported.
The five largest royalty-paying customers accounted for ~~87% and 89%~~49% of our total royalty revenues for the ~~third~~first quarter ~~and first nine months~~ of ~~2017, respectively,~~2023, as compared to ~~94% and 92%~~63% for the comparable ~~periods~~period of ~~2016.~~2022.
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Table of Contents
Geographic Revenue Analysis

   Nine months
2017 Nine months
2016 Third Quarter
2017 Third Quarter
2016
   (in millions, except percentages) (in millions, except percentages)
United States
   $ 6.1    10 % $ 7.3    14 % $ 1.2    5 % $ 2.1    12 %
Europe and Middle East
   $ 7.5    11 % $ 7.5    15 % $ 1.3    5 % $ 3.0    17 %
Asia Pacific (1) (2)
   $ 52.3    79 % $ 36.7    71 % $ 21.5    90 % $ 12.7    71 %
(1)China
   $ 31.0    47 % $ 23.1    45 % $ 15.2    63 % $ 7.1    40 %
(2)S. Korea
   $ 13.9    21 % $ 11.3    22 % $ 5.1    21 % $ 4.9    27 %
First Quarter
2023 First Quarter
2022

(in millions, except percentages)
United States
$ 4.4 15 % $ 6.7 20 %
Europe and Middle East
$ 3.2 11 % $ 1.1 3 %
Asia Pacific (1)
$ 20.6 72 % $ 26.6 77 %
Other
$ 0.5 2 % $ — —

(1) China
$ 17.8 62 % $ 23.0 67 %
Due to the nature of our license agreements and the associated potential large individual contract amounts, the geographic split of revenues both in absolute dollars and percentage terms generally varies from quarter to quarter.
Cost of Revenues
Cost of revenues was ~~$1.7 million and $5.0~~$5.3 million for the ~~third~~first quarter ~~and first nine months~~ of ~~2017, respectively,~~2023, as compared to ~~$1.4 million and $4.5~~$6.4 million for the comparable ~~periods~~period of ~~2016.~~2022. Cost of revenues accounted for ~~7% and 8%~~18% of our total revenues for the ~~third~~first quarter ~~and first nine months~~ of ~~2017, respectively,~~2023, as compared to ~~8% and 9%~~19% for the comparable ~~periods~~period of ~~2016.~~2022. The ~~increase for the third quarter of 2017 principally reflected higher payments to IIA. The increase~~decrease for the first ~~nine months~~quarter of ~~2017~~2023 principally reflected ~~higher salary and related costs, higher payments to~~lower electronic design automation (EDA) tools associated with the ~~IIA and highernon-cash~~ ~~equity-based compensation expenses, partially offset by lower customization work for our licensees.~~Intrinsix business. Included in cost of revenues for the ~~third~~first quarter ~~and first nine months~~ of ~~2017~~2023 was anon-cash equity-based compensation expense of ~~$125,000 and $330,000, respectively,~~$404,000, as compared to ~~$65,000 and $179,000~~$339,000 for the comparable ~~periods~~period of ~~2016.~~2022.
Gross Margin
Gross margin for the ~~third~~first quarter ~~and first nine months~~ of ~~2017~~2023 was ~~93% and 92%~~82%, ~~respectively,~~ as compared to ~~92% and 91%~~81% for the comparable ~~periods~~period of ~~2016.~~2022. The increase for ~~both~~ the ~~third~~first quarter ~~and first nine months~~ of ~~2017~~2023 mainly reflected ~~higher~~lower cost of revenues as set forth above, offset by lower total revenues.
Operating Expenses
Total operating expenses were ~~$16.1 million and $48.2~~$28.2 million for the ~~third~~first quarter ~~and first nine months~~ of ~~2017, respectively,~~2023, as compared to ~~$12.6 million and $38.7~~$27.5 million for the comparable ~~periods~~period of ~~2016.~~2022. The net increase ~~in total operating expenses~~ for ~~both~~ the ~~third~~first quarter ~~and first nine months~~ of ~~2017~~2023 principally reflected lower research grants received, mainly from the ~~IIA, highernon-cash~~ ~~equity-based compensation expenses~~Israeli Innovation Authority of the Ministry of Economy and higher salary and related costs, mainly due to higher headcount associated with accelerated strategic research and development programs and collaborations with our customers to expedite their production ramps.
Industry in Israel (IIA).
Research and Development Expenses, Net
Our research and development expenses, net, were ~~$10.0 million and $30.4~~$20.8 million for the ~~third~~first quarter ~~and first nine months~~ of ~~2017, respectively,~~2023, as compared to ~~$7.3 million and $23.1~~$20.2 million for the comparable ~~periods~~period of ~~2016.~~2022. The ~~net~~ increase for ~~both~~ the ~~third~~first quarter ~~and first nine months~~ of ~~2017~~2023 principally reflected lower research grants received, mainly from the ~~IIA, highernon-cash~~ equity-based compensation expenses and higher salary and related costs, mainly due to higher headcount associated with accelerated strategic research and development programs and collaborations with our customers to expedite their production ramps.IIA. Included in research and development expenses for the ~~third~~first quarter ~~and first nine months~~ of ~~2017~~2023 werenon-cash equity-based compensation expenses of ~~$991,000 and $2,834,000, respectively,~~$2,173,000, as compared to ~~$741,000 and $2,162,000~~$1,995,000 for the comparable ~~periods~~period of ~~2016.~~2022. Research and development expenses as a percentage of our total revenues were ~~42% and 46%~~72% for the ~~third~~first quarter ~~and first nine months~~ of ~~2017, respectively,~~2023, as compared to ~~41% and 45%~~59% for the comparable ~~periods~~period of ~~2016.~~2022. The percentage increase for the first quarter of 2023, as compared to the comparable period of 2022, was due to lower revenues.
The number of research and development personnel was ~~224~~344 at ~~September 30, 2017,~~March 31, 2023, as compared to ~~202~~313 at ~~September 30, 2016.~~March 31, 2022.
Sales and Marketing Expenses
Our sales and marketing expenses were ~~$3.1 million and $9.4~~$3.0 million for the ~~third~~first quarter ~~and first nine months~~ of ~~2017, respectively,~~2023, as compared to ~~$2.8 million and $8.5~~$2.9 million for the comparable ~~periods~~period of ~~2016. The increase for the third quarter of 2017 primarily reflected higher salary and related costs and highernon-cash~~ ~~equity-based compensation expenses, partially offset by lower commission costs. The increase for the first nine months of 2017 primarily reflected higher salary and related costs and highernon-cash~~ ~~equity-based compensation expenses.~~2022. Included in sales and marketing expenses for the ~~third~~first quarter ~~and first nine months~~ of ~~2017~~2023 werenon-cash equity-based compensation expenses of ~~$381,000 and $1,040,000, respectively,~~$393,000, as compared to ~~$179,000 and $681,000~~$333,000 for the comparable ~~periods~~period of ~~2016.~~2022. Sales and marketing expenses as a percentage of our total revenues were ~~13% and 14%~~11% for the ~~third~~first quarter ~~and first nine months~~ of ~~2017, respectively,~~2023, as compared to ~~15% and 16%~~8% for the comparable ~~periods~~period of ~~2016.~~2022.
The total number of sales and marketing personnel was 35 at March 31, 2023, as compared to 34 at ~~both September 30, 2017 and September 30, 2016.~~March 31, 2022.
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General and Administrative Expenses
Our general and administrative expenses were ~~$2.7 million and $7.4~~$4.0 million for the ~~third~~first quarter ~~and first nine months~~ of ~~2017, respectively,~~2023, as compared to ~~$2.2 million and $6.3~~$3.6 million for the comparable ~~periods~~period of ~~2016.~~2022. The increase for ~~both~~ the ~~third~~first quarter ~~and first nine months~~ of ~~2017~~2023 primarily reflected higher professional services cost and highernon-cash equity-based compensation expenses. Included in general and administrative expenses for the ~~third~~first quarter ~~and first nine months~~ of ~~2017~~2023 werenon-cash equity-based compensation expenses of ~~$722,000 and $2,142,000, respectively,~~$889,000, as compared to ~~$580,000 and $1,626,000~~$722,000 for the comparable ~~periods~~period of ~~2016.~~2022. General and administrative expenses as a percentage of our total revenues were ~~11%~~14% for ~~both~~ the ~~third~~first quarter ~~and first nine months~~ of ~~2017,~~2023, as compared to ~~12%~~11% for ~~both~~ the comparable ~~periods~~period of ~~2016.~~2022.
The number of general and administrative personnel was 2649 at ~~September 30, 2017,~~March 31, 2023, as compared to 2451 at ~~September 30, 2016.~~March 31, 2022.
Amortization of ~~intangible assets~~Intangible Assets
Our amortization charges were $0.3 million ~~and $0.9 million~~ for the ~~third~~first quarter ~~and first nine months~~ of ~~2017, respectively,~~2023, as compared to ~~$0.3 million and $0.9~~$0.8 million for the comparable ~~periods~~period of ~~2016.~~2022. The amortization charges for the first quarter of 2023 and 2022 were incurred in connection with the amortization of intangible assets associated with the acquisition of ~~RivieraWaves~~Intrinsix and the acquisition of the Hillcrest Labs business. The amortization charges for the first quarter of 2022 were also incurred in ~~July 2014. As of September 30, 2017,~~connection with the ~~net amount~~amortization of intangible assets ~~was $2.1 million.~~associated with the strategic investment in Immervision. In the third quarter of 2022, we recorded an impairment charge in operating expenses with respect to all Immervision technology, as we decided to cease the development of this product line. For more information about our intangible assets, see Note 7 to the interim condensed consolidated financial statements for the three months ended March 31, 2023.
Financial Income, Net (in millions)

   Nine months
2017    Nine months
2016    Third Quarter
2017    Third Quarter
2016
Financial income, net
   $ 2.15    $ 1.62    $ 0.82    $ 0.62
of which:

Interest income and gains and losses from marketable securities, net
   $ 2.20    $ 1.65    $ 0.79    $ 0.63
Foreign exchange loss
   $ (0.05 )    $ (0.03 )    $ 0.03    $ (0.01 )

First Quarter
2023

First Quarter
2022

Financial income, net of which:
$ 1.45 $ 0.28
Interest income and gains and losses from marketable securities, net
$ 1.19 $ 0.37
Foreign exchange gain (loss)
$ 0.26 $ (0.09 )
Financial income, net, consists of interest earned on investments, gains and losses from sale of marketable securities, accretion (amortization) of discounts (premiums) on marketable securities and foreign exchange movements.
The increase in interest income and gains and losses from marketable securities, net, during the ~~third~~first quarter ~~and first nine months~~ of ~~2017~~2023 principally reflected higher yields, offset by lower combined ~~cash,~~ bank deposits and marketable securities balances ~~held and higher yields.~~
held.
We review our monthly expected majornon-U.S. dollar denominated expenditures and look to hold equivalentnon-U.S. dollar cash balances to mitigate currency fluctuations. However, our Euro cash balances increase significantly on a quarterly basis beyond our Euro liabilities, mainly from the French research tax benefits applicable to CIR, which is generally refunded every three years. This has resulted in a foreign exchange gain of ~~$0.03~~$0.26 million ~~and a~~for the first quarter of 2023, as compared to foreign exchange loss of ~~$0.05 million for the third quarter and first nine months of 2017, as compared to a foreign exchange loss of $0.01 million and $0.03~~$0.09 million for the comparable ~~periods~~period of ~~2016.~~2022.
Remeasurement of Marketable Equity Securities
We recorded a loss of $0.1 million and 1.1 million for the first quarter of 2023 and 2022, respectively, related to remeasurement of marketable equity securities, which we hold at cost. Over time, other income (expense), net, may be affected by market dynamics and other factors. Equity values generally change daily for marketable equity securities and upon the occurrence of observable price changes or upon impairment of marketable equity securities. In addition, volatility in the global economic climate and financial markets, could result in a significant change in the value of our investments.
Provision for Income Taxes
Our income tax expenses ~~were $1.2 million and $1.0~~was $1.4 million for the ~~third~~first quarter ~~and first nine months~~ of ~~2017, respectively,~~2023, as compared to ~~$1.0 million and $2.0~~$1.3 million for the comparable ~~periods~~period of ~~2016. The increase for~~2022.
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We are subject to income and other taxes in the ~~third quarter~~United States and in numerous foreign jurisdictions. Our domestic and foreign tax liabilities are dependent on the jurisdictions in which profits are determined to be earned and taxed. Additionally, the amount of taxes paid is subject to our interpretation of applicable tax laws in the jurisdictions in which we operate. A number of factors influence our effective tax rate, including changes in tax laws and treaties as well as the interpretation of existing laws and rules. Federal, state, and local governments and administrative bodies within the United States, and other foreign jurisdictions have implemented, or are considering, a variety of broad tax, trade, and other regulatory reforms that may impact us. For example, the Tax Cuts and Jobs Act (the “U.S. Tax Reform”) enacted on December 22, 2017 ~~primarily reflected higher~~resulted in changes in our corporate tax rate, our deferred income ~~before~~ taxes, and the taxation of foreign earnings. It is not currently possible to accurately determine the potential comprehensive impact of these or future changes, but these changes could have a material impact on ~~income. The decrease for~~our business and financial condition.
We have significant operations in Israel and operations in France and the ~~first nine months~~Republic of ~~2017 primarily reflected a tax benefit~~Ireland. A substantial portion of ~~$1.8 million~~our taxable income is generated in Israel and France, as well as in the U.S. due to global intangible low-taxed income (GILTI) and the ~~release of a tax provision as a result of~~requirement to capitalize R&D expenditures under IRC Section 174 over five years if sourced from the ~~completion of a tax audit in a certain foreign tax jurisdiction, partially offset by higher income before taxes on income. Currently,~~U.S. and over 15 years if sourced internationally. Although our Israeli and Irish subsidiaries, and, from 2022 onward, our French subsidiary, are taxed at rates substantially lower than U.S. tax ~~rates.~~rates, the tax rates in these jurisdictions could nevertheless result in a substantial increase as a result of withholding tax expenses with respect to which we are unable to obtain a refund from the relevant tax authorities.
Our French subsidiary is entitled to a tax benefit of 10% applied to specific revenues under the French IP Box regime. The French IP Box regime applies to net income derived from the licensing, sublicensing or sale of several IP rights such as patents and copyrighted software, including royalty revenues. This elective regime requires a direct link between the income benefiting from the preferential treatment and the R&D expenditures incurred and contributing to that income. Qualifying income may be taxed at a favorable 10% CIT rate (plus social surtax, hence 10.3% in total).
Our Irish subsidiary qualified for a 12.5% tax rate on its trade. Interest income generated by our Irish subsidiary is taxed at a rate of 25%. ~~Our French subsidiary qualified for a 33.3% tax rate on its profits.~~
Our Israeli subsidiary is entitled to various tax benefits ~~by virtue~~as a technological enterprise. In December 2016, the Economic Efficiency Law (Legislative Amendments for Applying the Economic Policy for the 2017 and 2018 Budget Years), 2016, which includes the Amendment to the Law for the Encouragement of ~~the “Approved Enterprise” and/or “Benefited Enterprise” status granted~~Capital Investments, 1959 (Amendment 73) (the “Amendment”), was published. The Amendment, among other things, prescribes special tax tracks for technological enterprises, which are subject to ~~its eight investment programs, as defined~~rules that were issued by the ~~Israeli Investment Law. In accordance with~~Minister of Finance in April 2017.
The new tax track under the ~~Investment Law, our Israeli subsidiary’s first seven investment programs were subject~~Amendment, which is applicable to corporate tax rate of 24% for the first nine months of 2017, and our Israeli subsidiary’s eighth investment program was subject to corporate tax rate of 10% for the first nine months of 2017. However, our Israeli subsidiary, is ~~eligible~~the “Technological Preferred Enterprise”. Technological Preferred Enterprise is an enterprise for ~~the erosion~~which total consolidated revenues of ~~tax basis with respect to~~ its ~~first seven investment programs,~~parent company and ~~this resulted in an increase~~all subsidiaries are less than 10 billion New Israeli Shekel (NIS). A Technological Preferred Enterprise, as defined in the ~~taxable income attributable to~~Amendment, that is located in the ~~eighth investment program, which was subject to a reduced tax rate~~center of ~~10% for the first nine months of 2017. The tax benefits under our Israeli subsidiary’s active investment programs are scheduled to gradually expire starting in 2020.~~
~~To maintain our Israeli subsidiary’s eligibility for the above tax benefits, it must continue to meet certain conditions under the Investment Law. Should~~Israel (where our Israeli subsidiary ~~fail~~is currently located), is taxed at a rate of 12% on profits deriving from intellectual property. Any dividends distributed to ~~meet such conditions~~“foreign companies”, as defined in the ~~future, these benefits would~~Amendment, deriving from income from technological enterprises will be ~~cancelled~~taxed at a rate of 4%. We are applying the Technological Preferred Enterprise tax track for our Israeli subsidiary from tax year 2020 and it would be subject to corporate tax in Israel at the standard corporate rate and could be required to refund tax benefits already received, with interest and adjustments for inflation based on the Israeli consumer price index.onwards.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.
We believe that the assumptions and estimates associated with revenue recognition, fair value of financial instruments, equity-based compensation and income taxes have the greatest potential impact on our consolidated financial statements. Therefore, we consider these to be our critical accounting policies and estimates.
See our Annual Report on Form10-K for the year ended December 31, ~~2016,~~2022, filed with the SEC on March ~~10, 2017,~~1, 2023, for a discussion of additional critical accounting policies and estimates. There have been no changes in our critical accounting policies as compared to what was previously disclosed in the Annual Report on Form10-K for the year ended December 31, ~~2016.~~2022.
LIQUIDITY AND CAPITAL RESOURCES
As of ~~September 30, 2017,~~March 31, 2023, we had approximately ~~$22.9~~$24.5 million in cash and cash equivalents, ~~$41.0~~$6.2 million in ~~short term~~short-term bank deposits, ~~$74.5~~$106.1 million in marketable securities, and ~~$39.2~~$8.3 million in ~~long term~~long-term bank deposits, totaling ~~$177.6~~$145.1 million, as compared to ~~$156.5~~$147.7 million at December 31, ~~2016.~~2022. The ~~increase~~decrease for the first ~~nine~~three months of ~~2017~~2023 principally reflected cash ~~provided~~used in operating activities, partially offset by ~~operations and~~ cash proceeds from exercise of stock-based awards ~~partially offset by the purchase~~ of ~~computers and platform tools during the first nine months~~approximately $1.7 million.
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Table of ~~2017, mainly for our research and development activities~~.Contents
Out of total cash, cash equivalents, bank deposits and marketable securities of ~~$177.6~~$145.1 million, ~~$134.5~~$140.0 million was held by our foreign subsidiaries. Our intent is to permanently reinvest earnings of our foreign subsidiaries and our current operating plans do not demonstrate a need to repatriate foreign earnings to fund our U.S. operations. However, if these funds were needed for our operations in the United States, we would be required to accrue and pay ~~U.S.~~ taxes ~~as well as taxes in other countries~~ to repatriate these funds. The determination of the amount of additional taxes related to the repatriation of these earnings is not practicable, as it may vary based on various factors such as the location of the cash and the effect of regulation in the various jurisdictions from which the cash would be repatriated.
During the first ~~nine~~three months of ~~2017,~~2023, we ~~invested $67.2 million~~had no new investments of cash in bank deposits and marketable ~~securities with maturities up to 58 months from the balance sheet date.~~securities. In addition, during the same period, ~~bank deposits and~~ marketable securities were sold or redeemed for cash amounting to ~~$50.3~~$6.6 million. All of our marketable securities are classified asavailable-for-sale. The purchase and sale or redemption ofavailable-for-sale marketable securities are considered part of investing cash flow.Available-for-sale marketable securities are stated at fair value, with unrealized gains and losses reported in accumulated other comprehensive income (loss), a separate component of stockholders’ equity, net of taxes. Realized gains and losses on sales of investments, as determined on a specific identification basis, are included in the interim condensed consolidated statements of ~~income. We did not recognize any other-than-temporarily-impaired charges on marketable securities during~~income (loss). The amount of credit losses recorded for the first ~~nine~~three months of ~~2017.~~2023 was immaterial. For more information about our marketable securities, see ~~Notes 3~~Note 5 to the ~~attached Notes to the Interim Condensed Consolidated Financial Statements~~interim condensed consolidated financial statements for the three ~~and nine~~ months ended ~~September 30, 2017.~~March 31, 2023.
Bank deposits are classified as short-term bank deposits and long-term bank deposits. Short-term bank deposits are deposits with maturities of more than three months but no longer than one year from the balance sheet date, whereas long-term bank deposits are deposits with maturities of more than one year as of the balance sheet date. Bank deposits are presented at their cost, including accrued interest, and purchases and sales are considered part of cash flows from investing activities.
Operating Activities
Cash ~~provided by~~used in operating activities for the first ~~nine~~three months of ~~2017~~2023 was ~~$17.7~~$5.1 million and consisted of net ~~income~~loss of ~~$13.9~~$4.9 million, adjustments fornon-cash items of ~~$9.6~~$5.0 million, and changes in operating assets and liabilities of ~~$5.8~~$5.2 million. Adjustments fornon-cash items primarily consisted of ~~$2.4~~$1.4 million of depreciation and amortization of intangible assets, ~~$6.3~~and $3.9 million of equity-based compensation expenses, ~~and $0.9~~offset with $0.3 million of ~~amortization of premiums onavailable-for-sale~~ ~~marketable securities.~~unrealized foreign exchange gain. The decrease in cash from changes in operating assets and liabilities primarily consisted of an increase in prepaid expenses and other assets of $2.6 million (mainly as a result of an increase in French research tax credits which is generally refunded every three years), an increase in deferred tax assets, net, of $0.7 million, a decrease of deferred revenues of $2.0 million, a decrease in accrued payroll and related benefits of $1.5 million and a decrease in income taxes payable of $1.5 million (mainly due to a release of a tax provision as a result of the completion of a tax audit in a certain foreign tax jurisdiction), partially offset by a decrease in trade receivables of $2.2 million and an increase in accrued expenses and other payables of $0.4 million.
~~Cash provided in operating activities for the first nine months of 2016 was $2.0 million and consisted of net income of $7.9 million, adjustments fornon-cash~~ ~~items of $7.3 million, and changes in operating assets and liabilities of $13.2 million. Adjustments fornon-cash~~ ~~items primarily consisted of $1.9 million of depreciation and amortization of intangible assets, $4.6 million of equity-based compensation expenses and $0.8 million of amortization of premiums onavailable-for-sale~~ ~~marketable securities. The decrease in cash from changes~~ in operating assets and liabilities primarily consisted of an increase in trade receivables of ~~$13.2~~$3.8 million, ~~(mainly due to one of our large customer’s internal reorganization of its financial and legal entities which affected the timing of payments to us),~~ an increase in prepaid expenses and other assets of ~~$1.4~~$2.2 million ~~an increase in accrued interest on bank deposits~~(mainly as a result of ~~$0.4 million,~~payment of a yearly design tool subscription), and an increase in deferred ~~tax assets,~~taxes, net of ~~$0.6~~$0.9 million, partially offset by an increase in deferred revenues of $0.8 million, and ~~a decrease~~an increase in accrued payroll and related benefits of ~~$0.4~~$0.7 million.
Cash provided by operating activities for the first three months of 2022 was $9.8 million and consisted of net loss of $1.7 million, adjustments for non-cash items of $6.7 million, and changes in operating assets and liabilities of $4.8 million. Adjustments for non-cash items primarily consisted of $1.9 million of depreciation and amortization of intangible assets, $3.4 million of equity-based compensation expenses, and $1.1 million of remeasurement of marketable equity securities. The increase in operating assets and liabilities primarily consisted of a decrease in trade receivables of $3.9 million, an increase in trade payables of $0.7 million, and an increase of accrued payroll and related benefits of $3.7 million, partially offset by an increase in ~~trade payables~~prepaid expenses and other assets of ~~$0.4~~$3.0 million (mainly as a result of payment of a yearly design tool subscription), and an increase in deferred ~~revenues~~taxes, net of ~~$1.3 million and an increase in income tax payables of $0.9~~$1.0 million.
Cash flows from operating activities may vary significantly from quarter to quarter depending on the timing of our receipts and payments. Our ongoing cash outflows from operating activities principally relate to payroll-related costs and obligations under our property leases and design tool licenses. Our primary sources of cash inflows are receipts from our accounts receivable, to some extent, funding from ~~R&D~~research and development government grants and French research tax credits, and interest earned from our cash, deposits and marketable securities. The timing of receipts of accounts receivable from customers is based upon the completion of agreed milestones or agreed dates as set out in the contracts.
Investing Activities
Net cash provided by investing activities for the first three months of 2023 was $6.5 million, compared to $4.8 million of net cash used in investing activities for the ~~first nine months of 2017 was $20.2 million, compared to $6.4 million of net cash used by investing activities for the~~ comparable period of ~~2016.~~2022. We had a cash ~~outflow of $36.5 million and a cash~~ inflow of ~~$23.3~~$6.6 million with respect to investments in marketable securities during the first ~~nine~~three months of ~~2017,~~2023, as compared to a cash outflow of ~~$32.5~~$8.8 million and a cash inflow of ~~$21.6~~$3.5 million with respect to investments in marketable securities during the first ~~nine~~three months of ~~2016.~~2022. For the first ~~nine~~three months of ~~2017,~~2022, we had ~~net investments of $3.7 million in bank deposits, as compared to net~~ proceeds of ~~$6.5~~$1.4 million from bank ~~deposits for the comparable period of 2016.~~deposits. We had a cash outflow of ~~$3.3~~$0.1 million and ~~$2.0~~$0.9 million during the first ~~nine~~three months of ~~2017~~2023 and ~~2016,~~2022, respectively, from purchase of property and ~~equipment (mainly for purchase of platform tools in both periods).~~
equipment.
Financing Activities
Net cash provided by financing activities for the first ~~nine~~three months of ~~2017~~2023 was ~~$6.9~~$1.7 million, as compared to ~~$5.6~~$1.7 million of net cash provided by financing activities for the comparable period of ~~2016.~~2022.
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In August 2008, we announced that our board of directors approved a share repurchase program for up to one million shares of common stock which was further extended collectively by an additional ~~five million~~6,400,000 shares in 2010, 2013, 2014, 2018 and ~~2014.~~2020. We did not repurchase any shares of common stock during both the first ~~nine~~three months of ~~2017. During the first nine months~~2023 and 2022. As of ~~2016,~~March 31, 2023, we ~~repurchased 180,013~~had 278,799 shares ~~of common stock pursuant to our share repurchase program, at an average purchase price of $18.98 per share,~~available for ~~an aggregate purchase price of $3.4 million.~~repurchase.
During the first ~~nine~~three months of ~~2017,~~2023, we received ~~$6.9~~$1.7 million from the exercise of stock-based awards, as compared to ~~$9.0~~$1.7 million received for the comparable period of ~~2016.~~2022.
We believe that our cash and cash equivalents, short-term bank deposits and marketable securities, along with cash from operations, will provide sufficient capital to fund our operations for at least the next 12 months. We cannot provide assurances, however, that the underlying assumed levels of revenues and expenses will prove to be accurate.
In addition, as part of our business strategy, we occasionally evaluate potential acquisitions of businesses, products and technologies and minority equity investments. Accordingly, a portion of our available cash may be used at any time for the acquisition of complementary products or businesses or minority equity investments. Such potential transactions may require substantial capital resources, which may require us to seek additional debt or equity financing. We cannot assure you that we will be able to successfully identify suitable acquisition or investment candidates, complete acquisitions or investments, integrate acquired businesses into our current operations, or expand into new markets. Furthermore, we cannot provide assurances that additional financing will be available to us in any required time frame and on commercially reasonable terms, if at all. ~~See “Risk Factors—We may seek to expand our business in ways that could result in diversion of resources and extra expenses.” for more detailed information.~~
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
A majority of our revenues and a portion of our expenses are transacted in U.S. dollars and our assets and liabilities together with our cash holdings are predominately denominated in U.S. dollars. However, the majority of our expenses are denominated in currencies other than the U.S. dollar, principally the NIS and the Euro. Increases in volatility of the exchange rates of currencies other than the U.S. dollar versus the U.S. dollar could have an adverse effect on the expenses and liabilities that we incur when remeasured into U.S. dollars. We review our monthly expectednon-U.S. dollar denominated expenditures and look to hold equivalentnon-U.S. dollar cash balances to mitigate currency fluctuations. However, our Euro cash balances increase significantly on a quarterly basis beyond our Euro liabilities, mainly from French research tax benefits applicable to the CIR, which is generally refunded every three years. This has resulted in a foreign exchange gain of ~~$32,000~~$263,000 for the first quarter of 2023, and a foreign exchange loss of ~~$53,000 for the third quarter and first nine months of 2017, respectively, and a foreign exchange loss of $5,000 and $30,000~~$89,000 for the comparable ~~periods~~period of ~~2016.~~2022.
As a result of currency fluctuations and the remeasurement ofnon-U.S. dollar denominated expenditures to U.S. dollars for financial reporting purposes, we may experience fluctuations in our operating results on an annual and quarterly basis. To protect against the increase in value of forecasted foreign currency cash flow resulting from salaries paid in currencies other than the U.S. dollar during the year, we follow a foreign currency cash flow hedging program. We hedge portions of the anticipated payroll for ournon-U.S. employees denominated in currencies other than the U.S. dollar for a period of one to twelve months with forward and option contracts. During the ~~third~~first quarter of 2023 and ~~first nine months of 2017,~~2022, we recorded accumulated other comprehensive loss of $0$253,000 and ~~$5,000,~~accumulated other comprehensive gain of $101,000, respectively, from our forward and option contracts, net of taxes, with respect to anticipated payroll expenses for ournon-U.S. employees. ~~During~~As of March 31, 2023, the ~~third quarter and first nine months~~amount of ~~2016, we recorded accumulated~~ other comprehensive ~~gain of $5,000 and $23,000, respectively,~~loss from our forward and option contracts, net of taxes, ~~with respect to anticipated payroll expenses for ournon-U.S.~~ ~~employees. As~~was $360,000, which will be recorded in the consolidated statements of ~~September 30, 2017, we had no other comprehensive gain/loss from our forward and option contracts, net of taxes.~~income (loss) during the following five months. We recognized a net loss of ~~$2,000~~$171,000 for the first quarter of 2023, and a net ~~gain~~loss of ~~$186,000 for the third quarter and first nine months of 2017, respectively, and a net gain of $69,000 and $191,000~~$110,000 for the comparable ~~periods~~period of ~~2016,~~2022, related to forward and options contracts. We note that hedging transactions may not successfully mitigate losses caused by currency fluctuations. We expect to continue to experience the effect of exchange rate and currency fluctuations on an annual and quarterly basis.
The majority of our cash and cash equivalents are invested in ~~high grade~~high-grade certificates of deposits with major U.S., European and Israeli banks. Generally, cash and cash equivalents and bank deposits may be redeemed and therefore minimal credit risk exists with respect to them. Nonetheless, deposits with these banks exceed the Federal Deposit Insurance Corporation ~~(“FDIC”)~~(FDIC) insurance limits or similar limits in foreign jurisdictions, to the extent such deposits are even insured in such foreign jurisdictions. While we monitor on a systematic basis the cash and cash equivalent balances in the operating accounts and adjust the balances as appropriate, these balances could be impacted if one or more of the financial institutions with which we deposit our funds fails or is subject to other adverse conditions in the financial or credit markets. To date, we have experienced no loss of principal or lack of access to our invested cash or cash equivalents; however, we can provide no assurance that access to our invested cash and cash equivalents will not be affected if the financial institutions that we hold our cash and cash equivalents fail.
We hold an investment portfolio consisting principally of corporate bonds. We have the ability to hold such investments until recovery of temporary declines in market value or maturity. ~~Accordingly, as~~As of ~~September 30, 2017, we believe~~March 31, 2023, the unrealized losses associated with our investments ~~are temporary and no impairment loss~~were approximately $6.2 million due to the dramatic changes in the interest rate environment that took place in 2022. As we tend to hold such bonds with unrealized losses to recovery, the allowance for credit losses was ~~recognized~~not material during the first ~~nine months~~quarter of ~~2017.~~2023. However, we can provide no assurance that we will recover present declines in the market value of our investments. See “Risk Factors— We have broad discretion with respect to the application of our cash, cash equivalents and financial investments, which may not yield returns for a variety of reasons, many of which may be outside of our control.” for more detailed information.
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Interest income and gains and losses from marketable securities, net, were ~~$0.79 million and $2.20~~$1.19 million for the ~~third~~first quarter ~~and first nine months~~ of ~~2017, respectively,~~2023, as compared to ~~$0.63 million and $1.65~~$0.37 million for the comparable ~~periods~~period of ~~2016.~~2022. The increase in interest income, and gains and losses from marketable securities, net, during the ~~third~~first quarter ~~and first nine months~~ of ~~2017,~~2023, principally reflected higher yields, offset by lower combined ~~cash,~~ bank deposits and marketable securities balances ~~held and higher yields.~~held.
We are exposed primarily to fluctuations in the level of U.S. interest rates. To the extent that interest rates rise, fixed interest investments may be adversely impacted, whereas a decline in interest rates may decrease the anticipated interest income for variable rate investments. We typically do not attempt to reduce or eliminate our market exposures on our investment securities because the majority of our investments are short-term. We currently do not have any derivative instruments but may put them in place in the future. Fluctuations in interest rates within our investment portfolio have not had, and we do not currently anticipate such fluctuations will have, a material effect on our financial position on an annual or quarterly basis.
Item 4. CONTROLS AND PROCEDURES
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of ~~September 30, 2017.~~March 31, 2023.
There has been no change in our internal control over financial reporting that occurred during our most recent fiscal quarter that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.
PART ~~II.~~II OTHER INFORMATION
Item 1.1 LEGAL PROCEEDINGS
We are not a party to any litigation or other legal proceedings that we believe could reasonably be expected to have a material effect on our business, results of operations and financial condition.
Item ~~1A.~~1A RISK FACTORS
~~This Form10-Q~~ ~~contains forward-looking statements concerning our future products, expenses, revenue, liquidity and cash needs~~
Other than as ~~well as our plans and strategies. These forward-looking statements are based on current expectations and~~described below, we assume no obligation to update this information. Numerous factors could cause our actual results to differ significantly from the results described in these forward-looking statements, including the following risk factors.
~~There are no~~have not identified any material changes to the Risk Factors ~~described under the title “Factors That May Affect Future Performance”~~previously disclosed in Part I—Item IA—“Risk Factors” in our Annual Report on Form10-K for the fiscal year ended December 31, ~~2016 other than (1) changes to the Risk Factor below entitled: “We rely significantly on revenues derived from a limited number~~2022, any one or more of ~~customers who contribute to our royalty and license revenues;” (2) changes to the Risk Factor below entitled “Royalty rates could decrease for existing and future license agreements,~~ which could, directly or indirectly, cause our actual financial condition and operating results to vary materially from past, or from anticipated future, financial condition and operating results. Any of those factors, in whole or in part, could materially and adversely affect our business, financial condition, operating ~~results;~~results and stock price. You should carefully consider the risks and uncertainties described in our Annual Report filed on Form 10-K for the fiscal year ended December 31, 2022, together with all of the other information in this Quarterly Report on Form 10-Q, including in “Part I—Item 2—” ~~(3) changes~~Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the condensed consolidated financial statements and related notes.
We have broad discretion with respect to the ~~Risk Factor below entitled “We generate~~application of our cash, cash equivalents and financial investments, which may not yield returns for a ~~significant~~variety of reasons, many of which may be outside of our control.
We have broad discretion in the application of our cash, cash equivalents and financial investments, and we may spend or invest these funds without the approval of stockholders in ways that do not improve our results of operations or enhance the value of our common stock. We have established a corporate investment policy governing the investment and management of our cash balances in excess of operational needs. Pursuant to this investment policy, we hold an investment portfolio of marketable securities consisting principally of corporate bonds in the amount of $112.1 million as of December 31, 2022 and $106.1 million as of March 31, 2023, out of total cash and cash equivalents, short-term bank deposits and marketable securities of $139.5 million and $136.8 million as of December 31, 2022 and March 31, 2023, respectively. These positions are reviewed by the audit committee of our ~~total revenues from~~board of directors on a quarterly basis.
Given the ~~handset baseband market (for mobile handsets and for other modem connected devices) and~~concentration of our ~~business and operating results~~investments in corporate bonds, we are significantly exposed to fluctuations in the level of U.S. interest rates. To the extent that interest rates rise, fixed interest investments may be ~~materially~~ adversely ~~affected if we do not continue to succeed~~impacted, whereas a decline in ~~these highly competitive markets;” (4) changes~~interest rates may decrease the anticipated interest income for variable rate investments. As of March 31, 2023, the unrealized losses associated with our investments in available-for-sale marketable securities were approximately $6.2 million due to the ~~Risk Factor below entitled “Because~~dramatic changes in the U.S. interest rate environment. As we ~~have significant international operations,~~tend to hold such bonds with unrealized losses to recovery, the allowance for credit losses was not material during either 2022 or the first quarter of 2023, however, we ~~may be subject~~can provide no assurance that we will recover present declines in the market value of our investments.
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Furthermore, we are also exposed to ~~political, economic and other conditions relating to our international operations that could increase our operating expenses and disrupt our revenues and business;” (5) changes~~risks related to the ~~Risk Factor below entitled “Our research and development expenses may increase if~~solvency of the grants we currently receive from the Israeli government and European Union are reduced or withheld;” (6) changes to the Risk Factor below entitled: “The Israeli tax benefits that we currently receive and the government programsbanks in which we ~~participate require us to meet certain conditions~~make our financial investments. While the majority of our cash and ~~may be terminated~~cash equivalents are invested in high grade certificates of deposits with major U.S., European and Israeli banks, deposits with these banks exceed the Federal Deposit Insurance Corporation (FDIC) insurance limits or ~~reduced~~similar limits in ~~the future, which could increase our tax expenses;” and (7) changes~~foreign jurisdictions, to the ~~Risk Factor below entitled “Our product development efforts~~extent such deposits are ~~time-consuming~~even insured in such foreign jurisdictions. We monitor on a systematic basis the cash and ~~expensive and may not generate an acceptable return, if any.”~~
~~The markets~~cash equivalent balances in ~~which we operate are highly competitive, and as a result we could experience a loss of sales, lower prices and lower revenues.~~
The markets for the products in which our technology is incorporated are highly competitive. Aggressive competition could result in substantial declines in the prices that we are able to charge for our intellectual property or lose design wins to competitors. Many of our competitors are striving to increase their share of the growing signal processing IP markets and are reducing their licensing and royalty fees to attract customers. The following industry players and factors may have a significant impact on our competitiveness:
~~we compete directly in the DSP cores space with Verisilicon, Cadence and Synopsys;~~
we compete with CPU IP or configurable CPU IP (offering DSP configured CPU and/or DSP acceleration and/or connectivity capabilities to their IP) providers, such as ARM Holdings (acquired by SoftbBank), Imagination Technologies (in the process of being acquired by Canyon Bridge), Synopsys and Cadence;
~~we compete with internal engineering teams at companies such as Mediatek, Qualcomm, Samsung, Huawei and NXP that may design programmable DSP core productsin-house~~ ~~and therefore not license our technologies;~~
we compete in the SATA and SAS IP markets with several vendors, such as Semtech’s Snowbush IP Group and Synopsys, that offer similar products, thereby leading to pricing pressures for both licensing and royalty revenues;
~~we compete in the short range wireless markets with ARM Holdings, Mindtree, Imagination Technologies and STMicroelectronics;~~
we compete in embedded imaging and vision market with Cadence, Synopsys, Videantis, ARM Holdings (NEON technology) and GPU IP providers such as ARM Holdings, Imagination Technologies and Vivante (part of Verisilicon); and
~~we compete in the audio and voice applications market with ARM Holdings, Synopsys, Cadence and Verisilicon.~~
~~In addition, we may face increased competition from smaller, niche semiconductor design companies in the future. Some of our customers also may decide to satisfy their needs throughin-house~~ design. We compete on the basis of signal processing IP performance, overall chip cost, power consumption, flexibility, reliability, communication and multimedia software availability, design cycle time, tool chain, customer support, name recognition, reputation and financial strength. Our inability to compete effectively on these bases could have a material adverse effect on our business, results of operations and financial condition.
~~Our quarterly operating results fluctuate from quarter to quarter due to a variety of factors, including our lengthy sales cycle, and may not be a meaningful indicator of future performance.~~
~~In some quarters~~ our operating ~~results could be below~~accounts and adjust the ~~expectations of securities analysts and investors, which could cause our stock price to fall. Factors that may affect our quarterly results of operations in the future include, among other things:~~
~~the gain or loss of significant licensees, partly due to our dependence on a limited number of customers generating a significant amount of quarterly revenues;~~
~~any delay in execution of any anticipated licensing arrangement during a particular quarter;~~
~~delays in revenue recognition for some license agreements based on percentage of completion of customized work or other accounting reasons;~~
~~the timing and volume of orders and production by our customers,~~balances as ~~well as fluctuations in royalty revenues resulting from fluctuations in unit shipments by our licensees;~~
~~royalty pricing pressures and reduction in royalty rates due to an increase in volume shipments by customers,end-product~~ ~~price erosion and competitive pressures;~~
~~earnings or other financial announcements by our major customers that include shipment data or other information that implicates expectations for our future royalty revenues;~~
~~the mix of revenues among licensing and related revenues, and royalty revenues;~~
~~the timing of the introduction of new or enhanced technologies by us and our competitors,~~appropriate, but these balances, as well as the ~~market acceptance of such technologies;~~
~~the discontinuation, or public announcement thereof, of product lines or market sectors that incorporate our technology by our significant customers;~~
~~our lengthy sales cycle and specifically in the third quarter of any fiscal year during which summer vacations slow down decision-making processes~~value of our ~~customers in executing contracts;~~
~~delays in the commercialization of end products that incorporate our technology;~~
~~currency fluctuations, mainly the EURO and the NIS versus the U.S. dollar;~~
~~fluctuations in operating expenses and gross margins associated with the introduction of new or enhanced technologies and adjustments to operating expenses resulting from restructurings;~~
the approvals, amounts and timing of Israeli R&D government grants from the Israeli Innovation Authority of the Ministry of Economy and Industry in Israel (previously known as Office of the Chief Scientist of Israel) (the “IIA”), EU grants and French research tax credits;
the timing of our payment of royalties to the IIA, which is impacted by the timing and magnitude of license agreements and royalty revenues derived from technologies that were funded by grant programs of the IIA;
~~statutory changes associated with research tax benefits applicable to French technology companies;~~
~~our ability to scale our operations in response to changes in demand for our technologies;~~
~~entry into new end markets that utilize our signal processing IPs, software and platforms;~~
~~changes in our pricing policies and those of our competitors;~~
~~restructuring, asset and goodwill impairment and related charges, as well as other accounting changes or adjustments; and~~
~~general economic conditions, including the current economic conditions, and its effect on the semiconductor industry and sales of consumer products into which our technologies are incorporated.~~
Each of the above factors is difficult to forecast and could harm our business, financial condition and results of operations. Also, we license our technology to OEMs and semiconductor companies for incorporation into their end products for consumer markets, including handsets and consumer electronics products. The royalties we generate are reported by our customers and invoiced by us one quarter in arrears. As a result, our royalty revenues are affected by seasonal buying patterns of consumer products sold by our OEM customers that incorporate our technology and the market acceptance of such end products supplied by our OEM customers. The second quarter in any given year is usually a sequentially down quarter for us in relation to royalty revenues as this period represents lower post-Christmas first quarter consumer product shipments and little to no new introduction of handsets during the first quarter of the year. However, the magnitude of this second quarter decrease varies annually and has been impacted by global economic conditions, market share changes, exiting or refocusing of market sectors by our customers and the timing of introduction of new and existing handset devices powered by CEVA technology sold in any given quarter compared to the prior quarter.
Moreover, the semiconductor and consumer electronics industries remain volatile, which makes it extremely difficult for our customers and us to accurately forecast financial results and plan for future business activities. As a result, our past operating results should not be relied upon as an indication of future performance.
~~We rely significantly on revenues derived from a limited number of customers who contribute to our royalty and license revenues.~~
We derive a significant amount of revenues from a limited number of customers. One customer, Spreadtrum, accounted for 22% and 27% of our total revenues for the first nine months of 2017 and 2016, respectively. With respect to our royalty revenues, two royalty paying customers each represented 10% or more of our total royalty revenues for both the first nine months of 2017 and 2016, and collectively represented 74% and 81% of our total royalty revenues for the first nine months of 2017 and 2016, respectively. We expect that a significant portion of our future revenues will continue to be generated by a limited number of customers. The loss of any significant royalty paying customer could adversely affect our near-term future operating results. Furthermore, consolidation among our customers may negatively affect our revenue source, increase our existing customers’ negotiation leverage and make us further dependent on a limited number of customers. Moreover, the discontinuation of product lines or market sectors that incorporate our technology by our significant customers or a change in direction of their business and our inability to adapt our technology to their new business needs could have material negative implications for our future royalty revenues.
~~Our business is dependent on licensing revenues which may vary period to period.~~
License agreements for our signal processing IP cores and platforms have not historically provided for substantial ongoing license payments so past licensing revenues may not be indicative of the amount of such revenues in any future period. We believe that there is a similar risk with RivieraWaves’ operations associated with Bluetooth and~~Wi-Fi~~ connectivity technologies. Significant portions of our anticipated future revenues, therefore, will likely depend upon our success in attracting new customers or expanding our relationships with existing customers. However, revenues recognized from licensing arrangements vary significantly from period to period, depending on the number and size of deals closed during a quarter, and is difficult to predict. In addition, as we expand our business into the~~non-handset~~ baseband markets, our licensing deals may be smaller but greater in volume which may further fluctuate our licensing revenues quarter to quarter. Our ability to succeed in our licensing efforts will depend on a variety of factors, including the performance, quality, breadth and depth of our current and future products, as well as our sales and marketing skills. In addition, some of our licensees may in the future decide to satisfy their needs through~~in-house~~ ~~design and production. Our failure to obtain future licensing customers would impede our future revenue growth and could materially harm our business.~~
~~Royalty rates could decrease for existing and future license agreements, which could materially adversely affect our operating results.~~
~~Royalty payments to us under existing and future license agreements~~corporate bonds, could be lower than currently anticipated for a variety of reasons. Average selling prices for semiconductor products generally decrease over time during the lifespan of a product. In addition, there is increasing downward pricing pressures in the semiconductor industry on end products incorporating our technology, especially end products for the handsets and consumer electronics markets. As a result, notwithstanding the existence of a license agreement, our customers may demand that royalty rates for our products be lower than our historic royalty rates. We have in the past and may be pressured in the future to renegotiate existing license agreements with our customers. In addition, certain of our license agreements provide that royalty rates may decrease in connection with the sale of larger quantities of products incorporating our technology. Furthermore, our competitors may lower the royalty rates for their comparable products to win market share which may force us to lower our royalty rates as well. As a consequence of the above referenced factors, as well as unforeseen factors in the future, the royalty rates we receive for use of our technology could decrease, thereby decreasing future anticipated revenues and cash flow. Royalty revenues were approximately 42% and 49% of our total revenues for the third quarter and first nine months of 2017, respectively. Therefore, a significant decrease in our royalty revenues could materially adversely affect our operating results.
Moreover, royalty rates may be negatively affected by macroeconomic trends or changes in products mix. For example, the shift away from feature phones by Intel and the handset baseband market by Broadcom and STMicroelectronics in 2014 negatively impacted our royalty revenues in 2014. Furthermore, consolidation among our customers may increase the leverage of our existing customers to extract concessions from us in royalty rates. Moreover, changes in products mix such as an increase in lower royalty bearing products shipped in high volume like~~low-cost~~ ~~feature phones and Bluetooth-based products in lieu of higher royalty bearing products like LTE phones could lower our royalty revenues.~~
We generate a significant amount of our total revenues from the handset baseband market (for mobile handsets and for other modem connected devices) and our business and operating results may be materially adversely affected if ~~we do not continue to succeed in these highly competitive markets.~~
Our total revenues derived solely from baseband for handset and for other devices represented 73% and 63% of our total revenues for the third quarter and first nine months of 2017, respectively. Any adverse change in our ability to compete and maintain our competitive position in the handset baseband market, including through the introduction by competitors of enhanced technologies that attract OEM customers that target those markets, would harm our business, financial condition and results of operations. Moreover, the handset baseband market is extremely competitive and is facing intense pricing pressures, and we expect that competition and pricing pressures will only increase. Furthermore, it can be very volatile with regards to volume shipments of different phones, standards and connected devices due to inventory build out or consumer demand changes or geographical macroeconomics, pricing changes, product discontinuations due to technical issues and timing of introduction of new phones and products. Our existing OEM customers also may fail to introduce new handset devices that attract consumers, or encounter significant delays in developing, manufacturing or shipping new or enhanced products in those markets. The inability of our OEM customers to compete would result in lower shipments of products powered by our technologies which in turn would have a material adverse effect on our business, financial condition and results of operations. Since a significant portion of our revenues are derived from the handset baseband market, adverse conditions in this market would have a material adverse effect on our business, financial condition and results of operations.
Because our IP solutions are components of end products, if semiconductor companies and electronic equipment manufacturers do not incorporate our solutions into their end products or if the end products of our customers do not achieve market acceptance, we may not be able to generate adequate sales of our products.
~~We do not sell our IP solutions directly toend-users;~~ we license our technology primarily to semiconductor companies and electronic equipment manufacturers, who then incorporate our technology into the products they sell. As a result, we rely on our customers to incorporate our technology into their end products at the design stage. Once a company incorporates a competitor’s technology into its end product, it becomes significantly more difficult for us to sell our technology to that company because changing suppliers involves significant cost, time, effort and risk for the company. As a result, we may incur significant expenditures on the development of a new technology without any assurance that our existing or potential customers will select our technology for incorporation into their own product and without this “design win,” it becomes significantly difficult to sell our IP solutions. Moreover, even after a customer agrees to incorporate our technology into its end products, the design cycle is long and may be delayed due to factors beyond our control, which may result in the end product incorporating our technology not reaching the market until long after the initial “design win” with such customer. From initial product~~design-in~~ ~~to volume production, many factors could impact the timing and/or amount of sales actually realized from thedesign-in.~~ These factors include, but are not limited to, changes in the competitive position of our technology, our customers’ financial stability, and our customers’ ability to ship products according to our customers’ schedule. Moreover, current economic conditions may further prolong a customer’s decision-making process and design cycle.
Further, because we do not control the business practices of our customers, we do not influence the degree to which they promote our technology or set the prices at which they sell products incorporating our technology. We cannot assure you that our customers will devote satisfactory efforts to promote their end products which incorporate our IP solutions.
In addition, our royalties from licenses and therefore the growth of our business, are dependent upon the success of our customers in introducing products incorporating our technology and the success of those products in the marketplace. The primary customers for our products are semiconductor design and manufacturing companies, system OEMs and electronic equipment manufacturers, particularly in the telecommunications field. These industries are highly competitive, cyclical and have been subject to significant economic downturns at various times. These downturns are characterized by production overcapacity and reduced revenues, which at times may encourage semiconductor companies or electronic product manufacturers to reduce their expenditure on our technology. If we do not retain our current customers and continue to attract new customers, our business may be harmed.
~~We depend on market acceptance of third-party semiconductor intellectual property.~~
The semiconductor intellectual property (SIP) industry is a relatively small and emerging industry. Our future growth will depend on the level of market acceptance of our third-party licensable intellectual property model, the variety of intellectual property offerings available on the market, and a shift in customer preference away from~~in-house~~ development of proprietary signal processing IP towards licensing open signal processing IP cores and platforms. Furthermore, the third-party licensable intellectual property model is highly dependent on the market adoption of new services and products, such as low cost smartphones in emerging markets,~~LTE-based~~ smartphones, mobile broadband, small cell base stations and the increased use of advanced audio, voice, computational photography and embedded vision in mobile, automotive and consumer products, as well as in IoT and connectivity applications. Such market adoption is important because the increased cost associated with ownership and maintenance of the more complex architectures needed for the advanced services and products may motivate companies to license third-party intellectual property rather than design them~~in-house.~~
~~The trends that would enable our growth are largely beyond our control. Semiconductor customers also may choose to adopt a multi-chip,off-the-shelf~~ chip solution versus licensing or using highly-integrated chipsets that embed our technologies. If the above referenced market shifts do not materialize or third-party SIP does not achieve market acceptance, our business, results of operations and financial condition could be materially harmed.
Because we have significant international operations, we may be subject to political, economic and other conditions relating to our international operations that could increase our operating expenses and disrupt our revenues and business.
Approximately 90% of our total revenues for the first nine months of 2017 were derived from customers located outside of the United States. We expect that international customers will continue to account for a significant portion of our revenues for the foreseeable future. As a result, the occurrence of any negative international political, economic or geographic events could result in significant revenue shortfalls. These shortfalls could cause our business, financial condition and results of operations to be harmed. Some of the risks of doing business internationally include:
~~unexpected changes in regulatory requirements;~~
~~fluctuations in the exchange rate for the U.S. dollar;~~
~~imposition of tariffs and other barriers and restrictions;~~
~~burdens of complying with a variety of foreign laws, treaties and technical standards;~~
~~uncertainty of laws and enforcement in certain countries relating to the protection of intellectual property;~~
~~multiple and possibly overlapping tax structures and potentially adverse tax consequences;~~
~~political and economic instability, including terrorist attacks and protectionist polices; and~~
~~changes in diplomatic and trade relationships.~~
~~We depend on a limited number of key personnel who would be difficult to replace.~~
Our success depends to a significant extent upon certain of our key employees and senior management, the loss of which could materially harm our business. Competition for skilled employees in our field is intense. We cannot assure you that in the future we will be successful in attracting and retaining the required personnel.
~~The sales cycle for our IP solutions is lengthy, which makes forecasting of our customer orders and revenues difficult.~~
The sales cycle for our IP solutions is lengthy, often lasting three to nine months. Our customers generally conduct significant technical evaluations, including customer trials, of our technology as well as competing technologies prior to making a purchasing decision. In addition, purchasing decisions also may be delayed because of a customer’s internal budget approval process.
Furthermore, given the current market conditions, we have less ability to predict the timing of our customers’ purchasing cycle and potential unexpected delays in such a cycle. Because of the lengthy sales cycle and potential delays, our dependence on a limited number of customers to generate a significant amount of revenues for a particular period and the size of customer orders, if orders forecasted for a specific customer for a particular period do not occur in that period, our revenues and operating results for that particular quarter could suffer. Moreover, a portion of our expenses related to an anticipated order is fixed and difficult to reduce or change, which may further impact our operating results for a particular period.
Because our IP solutions are complex, the detection of errors in our products may be delayed, and if we deliver products with defects, our credibility will be harmed, the sales and market acceptance of our products may decrease and product liability claims may be made against us.
Our IP solutions are complex and may contain errors, defects and bugs when introduced. If we deliver products with errors, defects or bugs, our credibility and the market acceptance and sales of our products could be significantly harmed. Furthermore, the nature of our products may also delay the detection of any such error or defect. If our products contain errors, defects and bugs, then we may be required to expend significant capital and resources to alleviate these problems. This could result in the diversion of technical and other resources from our other development efforts. Any actual or perceived problems or delays may also adversely affect our ability to attract or retain customers. Furthermore, the existence of any defects, errors or failure in our products could lead to product liability claims or lawsuits against us or against our customers. A successful product liability claim could result in substantial cost and divert management’s attention and resources, which would have a negative impact on our financial condition and results of operations.
~~Our success will depend on our ability to successfully manage our geographically dispersed operations.~~
Most of our employees are located in Israel. We also added French employees after the RivieraWaves acquisition in 2014. Accordingly, our ability to compete successfully will depend in part on the ability of a limited number of key executives located in geographically dispersed offices to integrate management, address the needs of our customers and respond to changes in our markets. If we are unable to effectively manage and integrate our remote operations, our business may be materially harmed.
~~Our operations in Israel may be adversely affected by instability in the Middle East region.~~
One of our principal research and development facilities is located in Israel, and our executive officers and some of our directors are residents of Israel. Although substantially all of our sales currently are being made to customers outside Israel, we are nonetheless directly influenced by the political, economic and military conditions affecting Israel. Any major hostilities involving Israel could significantly harm our business, operating results and financial condition.
In addition, certain of our employees are currently obligated to perform annual reserve duty in the Israel Defense Forces and are subject to being called to active military duty at any time. Although we have operated effectively under these requirements since our inception, we cannot predict the effect of these obligations on the company in the future. Our operations could be disrupted by the absence, for a significant period, of one or more of ~~our key employees due to military service.~~
~~Terrorist attacks, acts of war or military actions and/or other civil unrest may adversely affect~~ the ~~territories in~~financial institutions with which we ~~operate, and~~deposit our ~~business, financial condition and operating results.~~
~~Terrorist attacks such as those that have occurred in France, where~~funds or with respect to which we ~~have our wireless connectivity operations as a result of our acquisition of RivieraWaves, and attempted terrorist attacks, military responses~~hold bonds fails or is subject to ~~terrorist attacks,~~ other military actions, or governmental action in response to or in anticipation of a terrorist attack, or civil unrest, may adversely affect prevailing economic conditions, resulting in work stoppages, reduced consumer spending or reduced demand for end products that incorporate our technologies. These developments subject our worldwide operations to increased risks and, depending on their magnitude, could reduce net sales and therefore could have a material adverse ~~effect on our business, financial condition and operating results.~~
~~Our research and development expenses may increase if the grants we currently receive from the Israeli government and European Union are reduced or withheld.~~
We currently receive research grants from programs of the IIA and the Seventh Framework Program of the European Union. We recorded an aggregate of $2,359,000 for the first nine months of 2017. To be eligible for these grants, we must meet certain development conditions and comply with periodic reporting obligations. Although we have met such conditions in the ~~past, should we fail~~financial or credit markets. While our risk related to ~~meet such conditions in~~certain of our corporate bonds has increased recently due to the future our research grants may be repayable, reduced or withheld. The repayment or reduction of such research grants may increase our research and development expenses which in turn may reduce our operating income. Also, the timing of such payments from the IIA and European Union may vary from year to year and quarter to quarter, andrecent liquidity crisis at Credit Suisse, we have no control on the timing of such payment. In 2017, the amount of grants approved by the IIA was substantially lower than prior years due to different allocation and methodology that IIA has implemented. We therefore forecast that our research and developments costs will increase in 2017 as compared to prior years.
The Israeli tax benefits that we currently receive and the government programs in which we participate require us to meet certain conditions and may be terminated or reduced in the future, which could increase our tax expenses.
We enjoy certain tax benefits in Israel, particularly as a result of the “Approved Enterprise” and the “Benefited Enterprise” status of our facilities and programs. To maintain our eligibility for these tax benefits, we must continue to meet certain conditions, relating principally to adherence to the investment program filed with the Investment Center of the Israeli Ministry of Industry and Trade and to periodic reporting obligations. Should we fail to meet such conditions in the future, these benefits would be cancelled and we would be subject to corporate tax in Israel at the standard corporate rate (24% in 2017) and could be required to refund tax benefits already received. In addition, we cannot assure you that these tax benefits will be continued in the future at their current levels or otherwise. The tax benefits under our active investment programs are scheduled to gradually expire starting in 2020. The termination or reduction of certain programs and tax benefits (particularly benefits available to us as a result of the “Approved Enterprise” and the “Benefited Enterprise” status of our facilities and programs) or a requirement to refund tax benefits already received may seriously harm our business, operating results and financial condition.
~~Our failure to maintain certain research tax benefits applicable to French technology companies may adversely affect the results of operations of our RivieraWaves operations.~~
~~Pursuant~~not experienced any material adverse impact to our ~~acquisition of the RivieraWaves~~liquidity or to our current and projected business operations, we will benefit from certain research tax credits applicable to French technology companies, including, for example, the Crédit Impôt Recherche (“CIR”). The CIR is a French tax credit aimed at stimulating research activities. The CIR can be offset against French corporate income tax due and the portion in excess (if any) may be refunded every three years. The French Parliament can decide to eliminate, or reduce the scope or the rate of, the CIR benefit, at any time or challenge our eligibility or calculations for such tax credits, all of which may have an adverse impact on our results of operations and future cash flows.
~~We are exposed to fluctuations in currency exchange rates.~~
A significant portion of our business is conducted outside the United States. Although most of our revenues are transacted in U.S. dollars, we may be exposed to currency exchange fluctuations in the future as business practices evolve and we are forced to transact business in local currencies. Moreover, the majority of our expenses are denominated in foreign currencies, mainly New Israeli Shekel (NIS) and the EURO, which subjects us to the risks of foreign currency fluctuations. Our primary expenses paid in currencies other than the U.S. dollar are employee salaries. Increases in the volatility of the exchange rates of currencies other than the U.S. dollar versus the U.S. dollar could have an adverse effect on the expenses and liabilities that we incur in currencies other than the U.S. dollar when remeasured into U.S. dollars for financial reporting purposes. We have instituted a foreign cash flow hedging program to minimize the effects of currency fluctuations. However, hedging transactions may not successfully mitigate losses caused by currency fluctuations, and our hedging positions may be partial or may not exist at all in the future. We also review our monthly expected~~non-U.S. dollar~~ ~~denominated expenditure and look to hold equivalentnon-U.S.~~ dollar cash balances to mitigate currency fluctuations. However, in some cases, we expect to continue to experience the effect of exchange rate currency fluctuations on an annual and quarterly basis. For example, our EURO cash balances increase significantly on a quarterly basis beyond our EURO liabilities from the CIR, which is generally refunded every three years.
~~We are exposed to the credit risk of our customers, which could result in material losses.~~
As we diversify and expand our addressable market, we will enter into licensing arrangements with first time customers with whom we don’t have full visible of their creditworthiness. Furthermore, we have increased business activities in the Asia Pacific region. As a result, our future credit risk exposure may increase. Although we monitor and attempt to mitigate credit risks, there can be no assurance that our efforts will be effective. Although any losses to date relating to credit exposure of our customers have not been material, future losses, if incurred, could harm our business and have a material adverse effect on our operating results and financial condition.
~~Our product development efforts are time-consuming and expensive and may not generate an acceptable return, if any.~~
Our product development efforts require us to incur substantial research and development expense. Our research and development expenses were approximately $30.4million for the first nine months of 2017. We may not be able to achieve an acceptable return, if any, on our research and development efforts.
The development of our products is highly complex. We occasionally have experienced delays in completing the development and introduction of new products and product enhancements, and we could experience delays in the future. Unanticipated problems in developing products could also divert substantial engineering resources, which may impair our ability to develop new products and enhancements and could substantially increase our costs. Furthermore, we may expend significant amounts on research and development programs that may not ultimately result in commercially successful products. Our research and development expense levels increased since the third quarter of 2014 after the acquisition of RivieraWaves. As a result of these and other factors, we may be unable to develop and introduce new products successfully and in a cost-effective and timely manner, and any new products we develop and offer may never achieve market acceptance. Any failure to successfully develop future products would have a material adverse effect on our business, financial condition and results of operations.
~~If we are unable to meet the changing needs of ourend-users~~ ~~or address evolving market demands, our business may be harmed.~~
~~The markets for signal processing IPs are characterized by rapidly changing technology, emerging markets and new and developingend-user~~ needs, and requiring significant expenditure for research and development. We cannot assure you that we will be able to introduce systems and solutions that reflect prevailing industry standards, on a timely basis, meet the specific technical requirements of our~~end-users~~ ~~or avoid significant losses due to rapid decreases in market prices of our products, and our failure to do so may seriously harm our business.~~
~~We may seek to expand our business in ways that could result in diversion of resources and extra expenses.~~
~~We may in the future pursue acquisitions of businesses, products and technologies, establish joint venture arrangements, make minority equity investments or enhance our existing CEVAnet partnereco-system~~ to expand our business. We are unable to predict whether or when any prospective acquisition, equity investment or joint venture will be completed. The process of negotiating potential acquisitions, joint ventures or equity investments, as well as the integration of acquired or jointly developed businesses, technologies or products may be prolonged due to unforeseen difficulties and may require a disproportionate amount of our resources and management’s attention. We cannot assure you that we will be able to successfully identify suitable acquisition or investment candidates, complete acquisitions or investments, or integrate acquired businesses or joint ventures with our operations. If we were to make any acquisition or investment or enter into a joint venture, we may not receive the intended benefits of the acquisition, investment or joint venture or such an acquisition, investment or joint venture may not achieve comparable levels of revenues, profitability or productivity as our existing business or otherwise perform as expected. The expansion of our CEVAnet partner~~eco-system~~ ~~also may not achieve the anticipated benefits. The occurrence of any of these events could harm our business,~~ financial condition or results of ~~operations. Future acquisitions, investments~~operations from matters relating to the banking failures and other adverse developments affecting certain financial institutions in recent months. However, we can provide no assurance that access to our invested cash and cash equivalents or ~~joint ventures~~the value of our corporate bonds will not be affected if the relevant financial institutions fail.
Our cash position and investment returns may ~~require substantial capital resources, which may require us~~also be impacted by other factors outside of our control, including but not limited to ~~seek additional debt or equity financing.~~
~~Future acquisitions, joint ventures or minority equity investments by us could result~~rising levels of inflation globally, volatility in the ~~following, any of~~financial markets, and market and economic conditions in general. A loss on our investments may also negatively impact our liquidity, which ~~could seriously harm our results of operations or the price of our stock:~~
~~issuance of equity securities that would dilute our current stockholders’ percentages of ownership;~~
~~largeone-time~~ ~~write-offs or equity investment impairment write-offs;~~
~~incurrence of debt and contingent liabilities;~~
~~difficulties~~ in ~~the assimilation and integration of operations, personnel, technologies, products and information systems of the acquired companies;~~
~~inability to realize cost efficiencies or synergies, thereby incurring higher operating expenditures as a result of the acquisition;~~
~~diversion of management’s attention from other business concerns;~~
~~contractual disputes;~~
~~risks of entering geographic and business markets in which we have no or only limited prior experience; and~~
~~potential loss of key employees of acquired organizations.~~
Weturn may ~~not be able to adequately protect our intellectual property.~~
Our success and ability to compete depend in large part upon the protection of our proprietary technologies. We rely on a combination of patent, copyright, trademark, trade secret, mask work and other intellectual property rights, confidentiality procedures and licensing arrangements to establish and protect our proprietary rights. These agreements and measures may not be sufficient to protect our technology from third-party infringement or protect us from the claims of others. As a result, we face risks associated with our patent position, including the potential need to engage in significant legal proceedings to enforce our patents, the possibility that the validity or enforceability of our patents may be denied, the possibility that third parties will be able to compete against us without infringing our patents and the possibility that our products may infringe patent rights of third parties.
~~Our trade names or trademarks may be registered or utilized by third parties in countries other than those in which we have registered them, impairing~~hurt our ability to ~~enter and compete in those markets. If we were forced to change any of our brand names, we could lose a significant amount of our brand identity.~~
~~Our business will suffer if we are sued for infringement of the intellectual property rights of third parties or if we cannot obtain licenses to these rights on commercially acceptable terms.~~
We are subject to the risk of adverse claims and litigation alleging infringement of the intellectual property rights of others. There are a large number of patents held by others, including our competitors, pertaining to the broad areas in which we are active. We have not, and cannot reasonably, investigate all such patents. From time to time, we have become aware of patentsinvest in our technology areas and have sought legal counsel regarding the validity of such patents and their impact on how we operate our business, and we will continue to seek such counsel when appropriate in the future. In addition, patent infringement claims are increasingly being asserted by patent holding companies~~(so-called~~ patent “trolls”), which do not use technology and whose sole business is to enforce patents against companies, such as us, for monetary gain. Because such patent holding companies do not provide services or use technology, the assertion of our own patents by way of counter-claim may be ineffective. Infringement claims may require us to enter into license arrangements or result in protracted and costly litigation, regardless of the merits of these claims. Any necessary licenses may not be available or, if available, may not be obtainable on commercially reasonable terms. If we cannot obtain necessary licenses on commercially reasonable terms, we may be forced to stop licensing our technology, and our business would be seriously harmed.business.
~~The future growth of our business depends in part on our ability to license to system OEMs andsmall-to-medium-sized~~ ~~semiconductor companies directly and to expand our sales geographically.~~
Historically, a substantial portion of our licensing revenues has been derived in any given period from a relatively small number of licensees. Because of the substantial license fees we charge, our customers tend to be large semiconductor companies or vertically integrated system OEMs. Part of our current growth strategy is to broaden the adoption of our products by small and~~mid-size~~ companies by offering different versions of our products targeted at these companies. If we are unable to develop and market effectively our intellectual property through these models, our revenues will continue to be dependent on a smaller number of licensees and a less geographically dispersed pattern of licensees, which could materially harm our business and results of operations.
~~Our operating results are affected by the highly cyclical nature of the semiconductor industry.~~
We operate within the semiconductor industry which experiences significant fluctuations in sales and profitability. Downturns in the semiconductor industry are characterized by diminished product demand, excess customer inventories, accelerated erosion of prices and excess production capacity. These factors could cause substantial fluctuations in our revenues and in our results of operations.
~~We may dispose of or discontinue existing product lines and technology developments, which may adversely impact our future results.~~
On an ongoing basis, we evaluate our various product offerings and technology developments in order to determine whether any should be discontinued or, to the extent possible, divested. We cannot guarantee that we have correctly forecasted, or will correctly forecast in the future, the right product lines and technology developments to dispose or discontinue or that our decision to dispose of or discontinue various investments, products lines and technology developments is prudent if market conditions change. In addition, there are no assurances that the discontinuance of various product lines will reduce our operating expenses or will not cause us to incur material charges associated with such decision. Furthermore, the discontinuance of existing product lines entails various risks, including the risk that we will not be able to find a purchaser for a product line or the purchase price obtained will not be equal to at least the book value of the net assets for the product line. Other risks include managing the expectations of, and maintaining good relations with, our customers who previously purchased products from our disposed or discontinued product lines, which could prevent us from selling other products to them in the future. We may also incur other significant liabilities and costs associated with our disposal or discontinuance of product lines, including employee severance costs and excess facilities costs.
~~Cybersecurity threats or other security breaches could compromise sensitive information belonging to us or our customers and could harm our business and our reputation.~~
We store sensitive data, including intellectual property, proprietary business information and our customer and employee information. Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions that could result in unauthorized disclosure or loss of sensitive data. Because the techniques used to obtain unauthorized access to networks, or to sabotage systems, change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. Furthermore, in the operation of our business we also use third-party vendors that store certain sensitive data. Any security breach of our own or a third-party vendor’s systems could cause us to be~~non-compliant~~ with applicable laws or regulations, subject us to legal claims or proceedings, disrupt our operations, damage our reputation, and cause a loss of confidence in our products and services, any of which could adversely affect our business.
~~Our corporate tax rate may increase, which could adversely impact our cash flow, financial condition and results of operations.~~
We have significant operations in Israel, as well operations in the Republic of Ireland and France. A substantial portion of our taxable income historically has been generated in Israel. Currently, our Israeli and Irish subsidiaries are taxed at rates substantially lower than the U.S. tax rates. If our Israeli and Irish subsidiaries were no longer to qualify for these lower tax rates or if the applicable tax laws were rescinded or changed, our operating results could be materially adversely affected. In addition, because our Israeli, Irish and French operations are owned by subsidiaries of our U.S. parent corporation, distributions to the U.S. parent corporation, and in certain circumstances undistributed income of the subsidiaries, may be subject to U.S. taxes. Moreover, if U.S. or other authorities were to change applicable tax laws or successfully challenge the manner in which our subsidiaries’ profits are currently recognized, our overall tax expenses could increase, and our business, cash flow, financial condition and results of operations could be materially adversely affected. Also our taxes on the Irish interest income may be double taxed both in Ireland and in the U.S. due to U.S. tax regulations and Irish tax restrictions on NOLs to~~off-set~~ ~~interest income. In addition, starting in 2012, our Israeli interest income also may be taxed both in Israel and the U.S due to different Controlled Foreign Corporation rules.~~
~~Our stock price may be volatile so you may not be able to resell your shares of our common stock at or above the price you paid for them.~~
Announcements of developments related to our business, announcements by competitors, quarterly fluctuations in our financial results, changes in the general conditions of the highly dynamic industry in which we compete or the national economies in which we do business, and other factors could cause the price of our common stock to fluctuate, perhaps substantially. In addition, in recent years, the stock market has experienced extreme price fluctuations, which have often been unrelated to the operating performance of affected companies. These factors and fluctuations could have a material adverse effect on the market price of our common stock.
Item 2.2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
There were no repurchases of our common stock during the three months ended ~~September 30, 2017.~~March 31, 2023.
Item 3.3 DEFAULTS UPON SENIOR SECURITIES
Not applicable.
Item 4.4 MINE SAFETY DISCLOSURES
Not applicable.
Item 5.5 OTHER INFORMATION
Not applicable.
33
Table of Contents
Item 6.6 EXHIBITS

Exhibit
No. Description
10.1† 2023 Incentive Plan for Gweltaz Toquet, Chief Commercial Officer (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed February 21, 2023)*
~~Exhibit~~
~~No.~~31.1
~~Description~~
~~31.1~~ Rule~~13a-14(a)~~ 13a14(a)/~~15d-14(a)~~15d14(a) Certification of Chief Executive Officer
31.2
~~31.2~~
Rule~~13a-14(a)~~ 13a14(a)/~~15d-14(a)~~15d14(a) Certification of Chief Financial Officer
32
32
Section 1350 Certification of Chief Executive Officer and Chief Financial Officer
~~101.INS~~
101
The following materials from CEVA, Inc.’s Quarterly report on Form 10-Q for the quarter ended March 31, 2023, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the Condensed Consolidated Statements of Loss, (ii) the Condensed Consolidated Balance Sheet, (iii) the Condensed Consolidated Statements of Cash Flows, (iv) the Condensed Consolidated Statements of Comprehensive Loss, (v) Condensed Consolidated Statements of Changes in Stockholders’ Equity, and (vi) Notes to Condensed Consolidated Financial Statements.
~~XBRL Instance Document~~
104 Cover Page Interactive Data File (embedded within the Inline XBRL document).
~~101.SCH~~ ~~XBRL Taxonomy Extension Schema Document~~
~~101.CAL~~ ~~XBRL Taxonomy Extension Calculation Linkbase Document~~
~~101.DEF~~ ~~XBRL Taxonomy Extension Definition Linkbase Document~~
~~101.LAB~~ ~~XBRL Taxonomy Extension Labels Linkbase Document~~
~~101.PRE~~ ~~XBRL Taxonomy Extension Presentation Linkbase Document~~
† Indicates management compensatory plan or arrangement.
* Portions of this exhibit are redacted.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

~~CEVA, INC.~~
~~Date: November 09, 2017~~ ~~By:~~
~~/s/ GIDEON WERTHEIZER~~CEVA, INC.

Date: May 10, 2023
By: /s/ AMIR PANUSH
~~Gideon Wertheizer~~
Amir Panush
Chief Executive Officer

(principal executive officer)
Date: ~~November 09, 2017~~
~~By:~~ May 10, 2023
~~/s/~~By: /s/ YANIV ARIELI
Yaniv Arieli

Chief Financial Officer

(principal financial officer and principal accounting officer)

36
34

		Remainder of 2023				2024				2025				2026
Licensing, NRE and related revenues		$	10,083			$	906			$	519			$	96

	Three months ended March 31, 2023 (unaudited)						Three months ended March 31, 2022 (unaudited)
	Licensing, NRE and related revenues		Royalties		Total		Licensing, NRE and related revenues		Royalties		Total
Primary geographical markets
United States	$	2,791	$	1,650	$	4,441	$	4,475	$	2,271	$	6,746
Europe and Middle East		2,334		859		3,193		437		665		1,102
Asia Pacific		15,121		5,505		20,626		17,481		9,062		26,543
Other		475		—		475		—		—		—
Total	$	20,721	$	8,014	$	28,735	$	22,393	$	11,998	$	34,391

Major product/service lines
Connectivity products (baseband for handset and other devices, Bluetooth, Wi-Fi, NB-IoT and SATA/SAS)	$	16,532	$	5,665	$	22,197	$	16,815	$	9,062	$	25,877
Smart sensing products (AI, sensor fusion, audio/sound and imaging and vision)		4,189		2,349		6,538		5,578		2,936		8,514
Total	$	20,721	$	8,014	$	28,735	$	22,393	$	11,998	$	34,391

Timing of revenue recognition
Products transferred at a point in time	$	14,621	$	8,014	$	22,635	$	15,932	$	11,998	$	27,930
Products and services transferred over time		6,100		—		6,100		6,461		—		6,461
Total	$	20,721	$	8,014	$	28,735	$	22,393	$	11,998	$	34,391


	September 30, 2017 (Unaudited)
	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
Available-for-sale - matures within one year:
Corporate bonds	$	12,495	$	13	$	(5	)	$	12,503

		12,495		13		(5	)		12,503
Available-for-sale - matures after one year through five years:
Certificate of deposits		747		—		—			747
Government bonds		501		—		(4	)		497
Corporate bonds		60,940		91		(319	)		60,712

		62,188		91		(323	)		61,956
Total	$	74,683	$	104	$	(328	)	$	74,459


	December 31, 2016 (Audited)
	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
Available-for-sale - matures within one year:
Corporate bonds	$	9,456	$	4	$	(15	)	$	9,445

		9,456		4		(15	)		9,445
Available-for-sale - matures after one year through five years:
Government bonds		501		—		(4	)		497
Corporate bonds		52,490		3		(567	)		51,926

		52,991		3		(571	)		52,423
Total	$	62,447	$	7	$	(586	)	$	61,868

	March 31, 2023 (unaudited)		December 31, 2022

Trade receivables	$	17,430	$	12,297
Unbilled receivables (associated with licensing, NRE and related revenue)		9,731		8,695
Unbilled receivables (associated with royalties)		7,846		10,258
Deferred revenues (short-term contract liabilities)		4,006		3,168

	Three months ended March 31,
	2023 (unaudited)		2022 (unaudited)

Operating lease cost	$	822	$	800
Cash payments for operating leases	$	819	$	830

The remainder of 2023	$	2,257
2024		2,589
2025		1,979
2026		970
2027		962
2028 and thereafter		1,361
Total undiscounted cash flows		10,118
Less imputed interest		730
Present value of lease liabilities	$	9,388

	March 31, 2023 (Unaudited)
	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
Available-for-sale - matures within one year:
Corporate bonds	$	23,397	$	—	$	(1,517	)	$	21,880

Available-for-sale - matures after one year through four years:
Corporate bonds		88,934		25		(4,697	)		84,262
Total
	$	112,331	$	25	$	(6,214	)	$	106,142


	Less than 12 months					12 months or greater
	Fair value		Gross unrealized loss			Fair value		Gross unrealized loss
As of September 30, 2017 (unaudited)	$	37,050	$	(239	)	$	8,997	$	(89	)
As of December 31, 2016	$	48,663	$	(557	)	$	4,875	$	(29	)

	Less than 12 months					12 months or greater
	Fair value		Gross unrealized loss			Fair value		Gross unrealized loss
As of March 31, 2023 (unaudited)	$	36,115	$	(877	)	$	64,211	$	(5,337	)
As of December 31, 2022	$	58,706	$	(1,885	)	$	48,539	$	(4,980	)



Level I		Unadjusted quoted prices in active markets that are accessible on the measurement date for identical, unrestricted assets or liabilities;

Level II		Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and

Level III		Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

Description									March 31, 2023 (unaudited)		Level I (unaudited)		Level II (unaudited)		Level III (unaudited)
Assets:
Marketable securities:
Corporate bonds									$	106,142		—	$	106,142	$	—
Investments in marketable equity securities										291		291		—		—

	September 30, 2017		Level I		Level II		Level III
Description	(unaudited)		(unaudited)		(unaudited)		(unaudited)
Assets:
Marketable securities:
Certificate of deposits	$	747	$	—	$	747	$	—
Government bonds		497		—		497		—
Corporate bonds		73,215		—		73,215		—

Description	December 31, 2016		Level I		Level II		Level III
Assets:
Marketable securities:
Government bonds	$	497	$	—	$	497	$	—
Corporate bonds		61,371		—		61,371		—
Liabilities:
Foreign exchange contracts		6		—		6		—		360		—		360		—

Description	December 31, 2022		Level I		Level II		Level III
Assets:
Marketable securities:
Corporate bonds	$	112,080		—	$	112,080		—
Foreign exchange contracts		13		—		13		—
Investments in marketable equity securities		408		408		—		—

Liabilities:
Foreign exchange contracts		119		—		119		—

					March 31, 2023 (unaudited)								December 31, 2022
	Weighted average amortization period (years)		Gross carrying amount		Accumulated amortization		*Impairment ()**		Net		Gross carrying amount		Accumulated amortization		*Impairment ()**		Net

Intangible assets –amortizable:

Intangible assets related to the acquisition of Intrinsix business
Customer relationships		5.5	$	3,604	$	1,201	$	—	$	2,403	$	3,604	$	1,037	$	—	$	2,567
Customer backlog		1.5		421		421		—		—		421		421		—		—
Patents		5.0		218		80		—		138		218		69		—		149
Core technologies		3.0		3,329		2,035		—		1,294		3,329		1,757		—		1,572


Intangible assets related to the acquisition of Hillcrest Labs business
Customer relationships		4.4	$	3,518	$	3,070	$	—	$	448	$	3,518	$	2,998	$	—	$	520
Customer backlog		0.5		72		72		—		—		72		72		—		—
R&D Tools		7.5		2,475		1,222		—		1,253		2,475		1,140		—		1,335

Intangible assets related to Immervision assets acquisition
R&D Tools		6.4	$	7,063	$	3,507	$	3,556	$	—	$	7,063	$	3,507	$	3,556	$	—

Intangible assets related to an investment in NB-IoT technologies
NB-IoT technologies (**)		7.0	$	1,961	$	1,494	$	—	$	467	$	1,961	$	1,424	$	—	$	537

Total intangible assets			$	22,661	$	13,102	$	3,556	$	6,003	$	22,661	$	12,425	$	3,556	$	6,680


	Number of options and SAR units (1)			Weighted average exercise price		Weighted average remaining contractual term		Aggregate intrinsic-value
Outstanding as of December 31, 2016		1,455,908		$	19.76
Granted		—			—
Exercised		(588,972	)		19.74
Forfeited or expired		(14,349	)		17.56

Outstanding as of September 30, 2017 (2)		852,587		$	19.81		5.2	$	19,598

Exercisable as of September 30, 2017 (3)		604,327		$	19.18		4.7	$	14,271

	Number of options (1)		Weighted average exercise price		Weighted average remaining contractual term		Aggregate intrinsic value
Outstanding as of December 31, 2022		106,000	$	20.24		2.0	$	609
Granted		—		—
Exercised		—		—
Forfeited or expired		—		—
Outstanding as of March 31, 2023		106,000	$	20.24		1.8	$	1,080
Exercisable as of March 31, 2023		106,000	$	20.24		1.8	$	1,080

Weighting	Goals
50%	Vesting of the full 50% of the PSUs occurs if the Company achieves the 2023 license, NRE and related revenue target approved by the Board (the “2023 License Revenue Target”). The vesting threshold is achievement of 90% of 2023 License Revenue Target. If the Company’s achievement of the 2023 License Revenue Target is above 90% but less than 99% of the 2023 License Revenue Target, 91% to 99% of the eligible PSUs would be subject to vesting. If the Company’s actual result exceeds 100% of the 2023 License Revenue Target, every 1% increase of the 2023 License Revenue Target, up to 110%, would result in an increase of 2% of the eligible PSUs for the Company’s CFO, COO and CCO and an increase of 3% of the eligible PSUs for the Company’s CEO
25%	Vesting of the full 25% of the PSUs occurs if the Company achieves positive total shareholder return whereby the return on the Company’s stock for 2023 is greater than the S&P Semiconductors Select Industry index (the “S&P index”). The vesting threshold is if the return on the Company’s stock for 2023 is at least 90% of the S&P index. If the return on the Company’s stock, in comparison to the S&P index, is above 90% but less than 99% of the S&P index, 91% to 99% of the eligible PSUs would be subject to vesting. If the return on the Company’s stock exceeds 100% of the S&P index, every 1% increase in comparison to the S&P index, up to 110%, would result in an increase of 2% of the eligible PSUs for the Company’s CFO, COO and CCO and an increase of 3% of the eligible PSUs for the Company’s CEO
25%	Vesting of the full 25% of the PSUs occurs if the Company achieves positive total shareholder return whereby the return on the Company’s stock for 2023 is greater than the Russell 2000 index (the “Russell index”). The vesting threshold is if the return on the Company’s stock for 2023 is at least 90% of the Russell index. If the return on the Company’s stock, in comparison to the Russell index, is above 90% but less than 99% of the Russell index, 91% to 99% of the eligible PSUs would be subject to vesting. If the return on the Company’s stock exceeds 100% of the Russell index, every 1% increase in comparison to the Russell index, up to 110%, would result in an increase of 2% of the eligible PSUs for the Company’s CFO, COO and CCO and an increase of 3% of the eligible PSUs for the Company’s CEO

						Number of RSUs and PSUs			Weighted Average Grant-Date Fair Value
	Number of RSUs			Weighted Average Grant-Date Fair Value
Unvested as of December 31, 2016		505,142		$	21.59
Unvested as of December 31, 2022							879,277		$	37.57
Granted		269,497			36.84		389,560			23.56
Vested		(193,399	)		21.46		(141,165	)		40.02
Forfeited or expired		(26,374	)		26.01		(52,553	)		34.58

Unvested as of September 30, 2017		554,866		$	28.84

Unvested as of March 31, 2023 (unaudited)							1,075,119		$	32.32


	September 30, 2017		December 31, 2016
	(Unaudited)		(Audited)		March 31, 2023 (unaudited)		December 31, 2022
Derivative assets:
Derivatives designated as cash flow hedging instruments:
Foreign exchange forward contracts	$	—	$	6	$	—	$	13

Total	$	—	$	6	$	—	$	13

Derivative liabilities:
Derivatives designated as cash flow hedging instruments:
Foreign exchange option contracts					$	128	$	23
Foreign exchange forward contracts						232		96
Total					$	360	$	119

	Three months ended March 31
	2023 (unaudited)		2022 (unaudited)
Derivatives designated as cash flow hedging instruments:
Foreign exchange option contracts	$	—	$	—
Foreign exchange forward contracts		171		110
	$	171	$	110

																			Three months ended March 31, 2023 (unaudited)									Three months ended March 31, 2022 (unaudited)
	Nine months ended September 30, 2017 (unaudited)									Three months ended September 30, 2017 (unaudited)									Unrealized gains (losses) on available-for-sale marketable securities			Unrealized gains (losses) on cash flow hedges			Total			Unrealized gains (losses) on available-for-sale marketable securities			Unrealized gains (losses) on cash flow hedges		Total
	Unrealized gains (losses) on available-for-sale marketable securities			Unrealized gains (losses) on cash flow hedges			Total			Unrealized gains (losses) on available-for-sale marketable securities			Unrealized gains (losses) on cash flow hedges			Total
Beginning balance	$	(502	)	$	5		$	(497	)	$	(278	)	$	—		$	(278	)	$	(6,142	)	$	(107	)	$	(6,249	)	$	(427	)	$	55	$	(372	)
Other comprehensive income (loss) before reclassifications		277			161			438			82			(3	)		79			684			(426	)		258			(2,167	)		4		(2,163	)
Amounts reclassified from accumulated other comprehensive income (loss)		24			(166	)		(142	)		(5	)		3			(2	)		(92	)		173			81			—			97		97

Net current period other comprehensive income (loss)		301			(5	)		296			77			—			77			592			(253	)		339			(2,167	)		101		(2,066	)

Ending balance	$	(201	)	$	—		$	(201	)	$	(201	)	$	—		$	(201	)	$	(5,550	)	$	(360	)	$	(5,910	)	$	(2,594	)	$	156	$	(2,438	)


	Nine months ended September 30, 2016 (unaudited)									Three months ended September 30, 2016 (unaudited)
	Unrealized gains (losses) on available-for-sale marketable securities			Unrealized gains (losses) on cash flow hedges			Total			Unrealized gains (losses) on available-for-sale marketable securities			Unrealized gains (losses) on cash flow hedges			Total
Beginning balance	$	(427	)	$	8		$	(419	)	$	(32	)	$	26		$	(6	)
Other comprehensive income (loss) before reclassifications		416			194			610			34			66			100
Amounts reclassified from accumulated other comprehensive income (loss)		13			(171	)		(158	)		—			(61	)		(61	)

Net current period other comprehensive income (loss)		429			23			452			34			5			39

Ending balance	$	2		$	31		$	33		$	2		$	31		$	33


Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income											Affected Line Item in the Statements of Income
	Nine months ended September 30,						Three months ended September 30,
	2017			2016			2017			2016
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
Unrealized gains (losses) on cash flow hedges	$	4		$	4		$	—		$	2	Cost of revenues
		160			160			(2	)		57	Research and development
		10			13			—			5	Sales and marketing
		12			14			—			5	General and administrative

		186			191			(2	)		69	Total, before income taxes
		20			20			1			8	Income tax expense

		166			171			(3	)		61	Total, net of income taxes
Unrealized gains (losses) onavailable-for-sale marketable securities		(33	)		(16	)		7			—	Financial income (loss), net
		(9	)		(3	)		2			—	Income tax benefit

		(24	)		(13	)		5			—	Total, net of income taxes
	$	142		$	158		$	2		$	61	Total, net of income taxes

Details about Accumulated Other Comprehensive Income (Loss) Components	Amount Reclassified from Accumulated Other Comprehensive Income (Loss)						Affected Line Item in the Statements of Income (Loss)

	Three months ended March 31,
	2023 (unaudited)			2022 (unaudited)
Unrealized losses on cash flow hedges	$	(4	)	$	(2	)	Cost of revenues
		(147	)		(96	)	Research and development
		(4	)		(3	)	Sales and marketing
		(16	)		(9	)	General and administrative
		(171	)		(110	)	Total, before income taxes
		2			(13	)	Income tax expense (benefit)
		(173	)		(97	)	Total, net of income taxes
Unrealized gains on available-for-sale marketable securities		92			—		Financial income (loss), net
		—			—		Income tax expense (benefit)
		92			—		Total, net of income taxes
	$	(81	)	$	(97	)	Total, net of income taxes


	Nine months 2017			Nine months 2016			Third Quarter 2017			Third Quarter 2016
DSP products (DSP cores and platforms):
Baseband for handset and other devices		63	%		66	%		73	%		65	%
Othernon-baseband (audio, imaging and vision)		24	%		15	%		16	%		14	%
Connectivity products (Bluetooth, WiFi and SATA/SAS)		13	%		19	%		11	%		21	%

	First Quarter 2023			First Quarter 2022

Connectivity products		77	%		75	%
Smart sensing products		23	%		25	%


	Nine months 2017				Nine months 2016				Third Quarter 2017				Third Quarter 2016
	(in millions, except percentages)								(in millions, except percentages)
United States	$	6.1	10	%	$	7.3	14	%	$	1.2	5	%	$	2.1	12	%
Europe and Middle East	$	7.5	11	%	$	7.5	15	%	$	1.3	5	%	$	3.0	17	%
Asia Pacific (1) (2)	$	52.3	79	%	$	36.7	71	%	$	21.5	90	%	$	12.7	71	%
(1)China	$	31.0	47	%	$	23.1	45	%	$	15.2	63	%	$	7.1	40	%
(2)S. Korea	$	13.9	21	%	$	11.3	22	%	$	5.1	21	%	$	4.9	27	%

	First Quarter 2023		First Quarter 2022
Financial income, net of which:	$	1.45	$	0.28
Interest income and gains and losses from marketable securities, net	$	1.19	$	0.37
Foreign exchange gain (loss)	$	0.26	$	(0.09	)

Exhibit No.	Description
10.1†	2023 Incentive Plan for Gweltaz Toquet, Chief Commercial Officer (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed February 21, 2023)*
~~Exhibit~~ ~~No.~~31.1		~~Description~~

~~31.1~~		Rule~~13a-14(a)~~ 13a14(a)/~~15d-14(a)~~15d14(a) Certification of Chief Executive Officer
31.2
~~31.2~~		Rule~~13a-14(a)~~ 13a14(a)/~~15d-14(a)~~15d14(a) Certification of Chief Financial Officer
32
32		Section 1350 Certification of Chief Executive Officer and Chief Financial Officer

~~101.INS~~ 101	The following materials from CEVA, Inc.’s Quarterly report on Form 10-Q for the quarter ended March 31, 2023, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the Condensed Consolidated Statements of Loss, (ii) the Condensed Consolidated Balance Sheet, (iii) the Condensed Consolidated Statements of Cash Flows, (iv) the Condensed Consolidated Statements of Comprehensive Loss, (v) Condensed Consolidated Statements of Changes in Stockholders’ Equity, and (vi) Notes to Condensed Consolidated Financial Statements.
		~~XBRL Instance Document~~
104	Cover Page Interactive Data File (embedded within the Inline XBRL document).
~~101.SCH~~		~~XBRL Taxonomy Extension Schema Document~~

~~101.CAL~~		~~XBRL Taxonomy Extension Calculation Linkbase Document~~

~~101.DEF~~		~~XBRL Taxonomy Extension Definition Linkbase Document~~

~~101.LAB~~		~~XBRL Taxonomy Extension Labels Linkbase Document~~

~~101.PRE~~		~~XBRL Taxonomy Extension Presentation Linkbase Document~~


			~~CEVA, INC.~~

~~Date: November 09, 2017~~			~~By:~~		~~/s/ GIDEON WERTHEIZER~~CEVA, INC.

Date: May 10, 2023	By: /s/ AMIR PANUSH
		~~Gideon Wertheizer~~ Amir Panush Chief Executive Officer (principal executive officer)

Date: ~~November 09, 2017~~			~~By:~~	May 10, 2023	~~/s/~~By: /s/ YANIV ARIELI
					Yaniv Arieli Chief Financial Officer (principal financial officer and principal accounting officer)