| ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
| Dec. 31, 2016 |
| Accounting Policies [Abstract] | |
| Organization | Organization:
CEVA, Inc. (“CEVA” or the “Company”) was
incorporated in Delaware on November 22, 1999. The Company was
formed through the combination of Parthus Technologies plc
(“Parthus”) and the digital signal processor (DSP)
cores licensing business and operations of DSP Group, Inc. in
November 2002. The Company had no business or operations prior to
the combination.
CEVA licenses a family of signal processing IPs, including
programmable DSP cores and application-specific platforms for
vision, advanced imaging, computer vision and deep learning for
many camera-enabled devices, sound, voice and audio, as well as
long and short range wireless technologies for LTE/LTE-A/5G
baseband processing in handsets and infrastructure, short range
wireless for Wi-Fi, Bluetooth IPs , and wired interface for
storage, Serial ATA (SATA) and Serial Attached SCSI (SAS).
CEVA’s technologies are licensed to leading semiconductor and
original equipment manufacturer (OEM) companies in the form of
intellectual property (IP). These companies design, manufacture,
market and sell application-specific integrated circuits
(“ASICs”) and application-specific standard products
(“ASSPs”) based on CEVA’s technology to wireless,
consumer electronics and automotive companies for incorporation
into a wide variety of end products. |
| Basis of Presentation | Basis of presentation:
The consolidated financial statements have been prepared according
to U.S Generally Accepted Accounting Principles (“U.S.
GAAP”). |
| Use of Estimates | Use of estimates :
The preparation of the 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 financial statements,
and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates. |
| Financial Statements in U.S. Dollars | Financial statements in U.S. dollars :
A majority of the revenues of the Company and its subsidiaries is
generated in U.S. dollars (“dollars”). In addition, a
portion of the Company and its subsidiaries’ costs are
incurred in dollars. The Company’s management has determined
that the dollar is the primary currency of the economic environment
in which the Company and its subsidiaries principally operate.
Thus, the functional and reporting currency of the Company and its
subsidiaries is the dollar.
Accordingly, monetary accounts maintained in currencies other than
the dollar are remeasured into dollars in accordance with Financial
Accounting Standards Board (“FASB”) Accounting
Standards Codification (“ASC”) No. 830,
“Foreign Currency Matters.” All transaction gains and
losses from remeasurement of monetary balance sheet items are
reflected in the consolidated statements of income as financial
income or expenses, as appropriate, which is included in
“financial income, net.” The foreign exchange losses
arose principally on the EURO and the NIS monetary balance sheet
items as a result of the currency fluctuations of the EURO and the
NIS against the dollar. |
| Principles of Consolidation | Principles of consolidation :
The consolidated financial statements incorporate the financial
statements of the Company and all of its subsidiaries. All
significant inter-company balances and transactions have been
eliminated on consolidation. |
| Cash Equivalents | Cash equivalents :
Cash equivalents are short-term highly liquid investments that are
readily convertible to cash with original maturities of three
months or less from the date acquired. |
| Short-term Bank Deposits | Short-term bank deposits :
Short-term bank deposits are deposits with maturities of more than
three months but less than one year from the balance sheet date.
The deposits are presented at their cost, including accrued
interest. The deposits bear interest annually at an average rate of
1.58%, 1.51% and 1.76% during 2014, 2015 and 2016,
respectively. |
| Marketable Securities | Marketable securities :
Marketable securities consist mainly of corporate bonds. The
Company determines the appropriate classification of marketable
securities at the time of purchase and re-evaluates such
designation at each balance sheet date. In accordance with FASB ASC
No. 320 “Investments- Debt and Equity Securities,”
the Company classifies marketable securities as available-for-sale.
Available-for-sale 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 marketable securities, as determined on a specific
identification basis, are included in financial income, net. The
amortized cost of marketable securities is adjusted for
amortization of premium and accretion of discount to maturity, both
of which, together with interest, are included in financial income,
net. The Company has classified all marketable securities as
short-term, even though the stated maturity date may be one year or
more beyond the current balance sheet date, because it is probable
that the Company will sell these securities prior to maturity to
meet liquidity needs or as part of risk versus reward
objectives.
The Company recognizes an impairment charge when a decline in the
fair value of its investments in debt securities below the cost
basis of such securities is judged to be other-than-temporary.
Factors considered in making such a determination include the
duration and severity of the impairment, the reason for the decline
in value and the potential recovery period. For securities that are
deemed other-than-temporarily impaired (“OTTI”), the
amount of impairment is recognized in the statement of income and
is limited to the amount related to credit losses, while impairment
related to other factors is recognized in other comprehensive
income (loss). The Company did not recognize OTTI on its marketable
securities in 2014, 2015 and 2016. |
| Long-term Bank Deposits | Long-term bank deposits :
Long-term bank deposits are deposits with maturities of more than
one year as of the balance sheet date. The deposits presented at
their cost, including accrued interest. The deposits bear interest
annually at an average rate of 1.74%, 1.82% and 1.97% during 2014,
2015 and 2016, respectively. |
| Property and Equipment, Net | Property and equipment, net :
Property and equipment are stated at cost, net of accumulated
depreciation. Depreciation is calculated using the straight-line
method over the estimated useful lives of the assets, at the
following annual rates:
%
Computers, software and equipment 10-33
Office furniture and equipment 7-33
Leasehold improvements 10-25
(the shorter of the expected
The Company’s long-lived assets are reviewed for impairment
in accordance with FASB ASC No. 360-10-35,
An asset to be disposed is reported at the lower of its carrying
amount or fair value less selling costs. No impairment was recorded
in 2014, 2015 and 2016. |
| Goodwill | Goodwill :
Goodwill is carried at cost and is not amortized but rather is
tested for impairment at least annually or between annual tests in
certain circumstances. The Company conducts its annual test of
impairment for goodwill on October 1st of each year.
The Company operates in one operating segment and this segment
comprises the only reporting unit.
There is a two-phase process for impairment testing of goodwill.
The first phase screens for potential impairment, while the second
phase (if necessary) measures impairment. Goodwill impairment is
deemed to exist if the net book value of a reporting unit exceeds
its estimated fair value. In such case, the second phase is then
performed, and the Company measures impairment by comparing the
carrying amount of the reporting unit’s goodwill to the
implied fair value of that goodwill. An impairment loss is
recognized in an amount equal to the excess. For each of the three
years in the period ended December 31, 2016, no impairment of
goodwill has been identified. |
| Intangible Assets, Net | Intangible assets, net :
Acquired intangible assets with definite lives are amortized over
their estimated useful lives. The Company amortizes intangible
assets on a straight-line basis with definite lives over periods
ranging from one and a half to five and a half years.
Intangible assets with definite lives are reviewed for impairment
whenever events or changes in circumstances indicate the carrying
amount of an asset may not be recoverable. Recoverability of these
assets is measured by comparison of their carrying amounts to
future undiscounted cash flows the assets are expected to generate.
If such assets are considered to be impaired, the impairment to be
recognized equals the amount by which the carrying value of the
assets exceeds its fair market value. The Company did not record
any impairments during the years ended December 31, 2014, 2015
and 2016. |
| Investments in Other Companies | Investments in other company :
The Company’s investment in one private company, in which it
holds minority equity interests, is presented at cost because the
Company does not have significant influence over the underlying
investee. The investment is reviewed periodically to determine if
its value has been impaired and adjustments are recorded as
necessary. During the years ended December 31, 2014, 2015 and
2016, no impairment loss was identified.
During 2014 and 2015, the Company received consideration of 774
EURO (approximately $1,032) and 99 EURO (approximately $111),
respectively, when one of its private companies, Antcor Advanced
Network Technologies S.A. (“Antcor”), a company in
which the Company had a minority investment, was acquired. Pursuant
to the acquisition agreement, the Company may receive additional
proceeds from the buyer within five years after closing of the
acquisition based on achievement of certain performance and other
milestones by Antcor. During the year ended December 31, 2014,
the Company recorded a loss of $404 from the sale of its investment
in Antcor. |
| Revenue Recognition | Revenue recognition :
The Company generates its revenues from (1) licensing
intellectual property, which in certain circumstances is modified
for customer-specific requirements, (2) royalty revenues, and
(3) other revenues, which include revenues from support,
training and sale of development systems.
The Company accounts for its IP license revenues and related
services in accordance with FASB ASC No. 985-605,
“Software Revenue Recognition.” Revenues are recognized
when persuasive evidence of an arrangement exists and no further
obligation exists, delivery has occurred, the license fee is fixed
or determinable, and collection is reasonably assured. A license
may be perpetual or time limited in its application. Revenue earned
on licensing arrangements involving multiple elements are allocated
to each element based on the “residual method” when
vendor specific objective evidence (“VSOE”) of fair
value exists for all undelivered elements and VSOE does not exist
for one of the delivered elements. VSOE of fair value of the
undelivered elements is determined based on the substantive renewal
rate as stated in the agreement.
Extended payment terms in a licensing arrangement may indicate that
the license fees are not deemed to be fixed or determinable. If the
fee is not fixed or determinable, revenue is recognized as payments
become due from the customer unless collection is not considered
reasonably assured, then revenue is recognized as payments are
collected from the customer, provided all other revenue recognition
criteria have been met.
Revenues from license fees that involve significant customization
of the Company’s IP to customer-specific specifications are
recognized in accordance with the principles set out in FASB ASC
No. 605-35-25, “Construction-Type and Production-Type
Contracts Recognition ,” using contract accounting on a
percentage of completion method. The amount of revenue recognized
is based on the total license fees under the agreement and the
percentage of completion achieved. The percentage of completion is
measured by the actual time incurred to date on the project
compared to the total estimated project requirements, which
corresponds to the costs related to earned revenues. Provisions for
estimated losses on uncompleted contracts are made during the
period in which such losses are first determined, in the amount of
the estimated loss on the entire contract.
Revenues that are derived from the sale of a licensee’s
products that incorporate the Company’s IP are classified as
royalty revenues. Royalty revenues are recognized during the
quarter in which the Company receives a report from the licensee
detailing the shipment of products that incorporate the
Company’s IP, which receipt is in the quarter following the
licensee’s sale of such products to its customers. Royalties
are calculated either as a percentage of the revenues received by
the Company’s licensees on sales of products incorporating
the Company’s IP or on a per unit basis, as specified in
the agreements with the licensees. Non-refundable payments on
account of prepaid units (prepaid royalties) are included within
the Company’s licensing and related revenue line on the
consolidated statements of operations.
In addition to license fees, contracts with customers generally
contain an agreement to provide for post contract support and
training, which consists of telephone or e-mail support, correction
of errors (bug fixing) and unspecified updates and upgrades. Fees
for post contract support, which takes place after delivery to the
customer, are specified in the contract and are generally mandatory
for the first year. After the mandatory period, the customer may
extend the support agreement on similar terms on an annual basis.
The Company recognizes revenue for post contract support on a
straight-line basis over the period for which technical support is
contractually agreed to be provided to the licensee, typically 12
months. Revenues from training are recognized as the training is
performed.
Revenues from the sale of development systems are recognized when
title to the product passes to the customer and all other revenue
recognition criteria have been met.
The Company usually does not provide rights of return. When rights
of return are included in the license agreements, revenue is
deferred until rights of return expire.
Deferred revenues include unearned amounts received under license
agreements, unearned technical support and amounts paid by
customers not yet recognized as revenues. |
| Cost of Revenue | Cost of revenue :
Cost of revenue includes the costs of products, services and
royalty expense payments to the Israeli Innovation Authority of the
Ministry of Economy and Industry in Israel (previously known as
Office of the Chief Scientist of Israel) “the Israeli
Innovation Authority”) (refer to Note 15c for further
details). Cost of product revenue includes materials and the
portion of development costs associated with product development
arrangements. Cost of service revenue includes salary and related
costs for personnel engaged in services, training and customer
support, and travel, telephone and other support costs. |
| Income Taxes | Income taxes :
The Company recognizes income taxes under the liability method. It
recognizes deferred income tax assets and liabilities for the
expected future consequences of temporary differences between the
financial reporting and tax bases of assets and liabilities. These
differences are measured using the enacted statutory tax rates that
are expected to apply to taxable income for the years in which
differences are expected to reverse. The effect of a change in tax
rates on deferred income taxes is recognized in the statements of
income during the period that includes the enactment date.
Valuation allowance is recorded to reduce the deferred tax assets
to the net amount that the Company believes is more likely than not
to be realized. The Company considers all available evidence, both
positive and negative, including historical levels of income,
expectations and risks associated with estimates of future taxable
income and ongoing tax planning strategies, in assessing the need
for a valuation allowance.
The Company accounts for uncertain tax positions in accordance with
ASC 740. ASC 740-10 contains a two-step approach to recognizing and
measuring uncertain tax positions. The first step is to evaluate
the tax position taken or expected to be taken in a tax return by
determining if the weight of available evidence indicates that it
is more likely than not that, on an evaluation of the technical
merits, the tax position will be sustained on audit, including
resolution of any related appeals or litigation processes. The
second step is to measure the tax benefit as the largest amount
that is more than 50% (cumulative probability) likely to be
realized upon ultimate settlement. The Company accrues interest and
penalties related to unrecognized tax benefits under taxes on
income. |
| Research and Development | Research and development :
Research and development costs are charged to the consolidated
statements of income as incurred. |
| Government Grants and Tax Credits | Government grants and tax credits :
Government grants received by the Company relating to categories of
operating expenditures are credited to the consolidated statements
of income during the period in which the expenditure to which they
relate is charged. Royalty and non-royalty-bearing grants from the
Israeli Innovation Authority for funding certain approved research
and development projects are recognized at the time when the
Company is entitled to such grants, on the basis of the related
costs incurred, and included as a deduction from research and
development expenses.
The Company recorded grants in the amounts of $4,586, $4,997 and
$6,410 for the years ended December 31, 2014, 2015 and 2016,
respectively. The Company’s Israeli subsidiary is obligated
to pay royalties amounting to 3%-3.5% of the sales of certain
products the development of which received grants from the Israeli
Innovation Authority in previous years. The obligation to pay these
royalties is contingent on actual sales of the products. Grants
received from the Israeli Innovation Authority may become repayable
if certain criteria under the grants are not met.
The French Research Tax Credit, Crédit d’Impôt
Recherche (“CIR”), is a French tax incentive to
stimulate research and development (“R&D”) which is
relevant for the Company’s French subsidiaries (RivieraWaves
and CEVA France). Generally, the CIR offsets the income tax to be
paid and the remaining portion (if any) can be refunded. The CIR is
calculated based on the claimed volume of eligible R&D
expenditures by the Company. As a result, the CIR is presented as a
deduction to “Research and development expenses” in the
consolidated statements of operations. During the year ended
December 31, 2014, 2015 and 2016, the Company recorded CIR in
the amount of $675, $1,414 and $1,485 respectively. |
| Employee Benefit Plan | Employee benefit plan :
Certain of the Company’s employees are eligible to
participate in a defined contribution pension plan (the
“Plan”). Participants in the Plan may elect to defer a
portion of their pre-tax earnings into the Plan, which is run by an
independent party. The Company makes pension contributions at rates
varying up to 10% of the participant’s pensionable salary.
Contributions to the Plan are recorded as an expense in the
consolidated statements of operations.
The Company’s U.S. operations maintain a retirement plan (the
“U.S. Plan”) that qualifies as a deferred salary
arrangement under Section 401(k) of the Internal Revenue Code.
Participants in the U.S. Plan may elect to defer a portion of their
pre-tax earnings, up to the Internal Revenue Service annual
contribution limit. The Company matches 100% of each
participant’s contributions up to a maximum of 6% of the
participant’s base pay. Each participant may contribute up to
15% of base remuneration. Contributions to the U.S. Plan are
recorded during the year contributed as an expense in the
consolidated statements of operations.
Total contributions for the years ended December 31, 2014,
2015 and 2016 were $561, $733 and $1,020, respectively. |
| Accrued Severance Pay | Accrued severance pay :
The liability of CEVA’s Israeli subsidiary for severance pay
is calculated pursuant to Israeli severance pay law for all Israeli
employees, based on the most recent salary of each employee
multiplied by the number of years of employment for that employee
as of the balance sheet date. The Israeli subsidiary’s
liability is fully provided for by monthly deposits with severance
pay funds, insurance policies and an accrual.
The deposited funds include profits and losses accumulated up to
the balance sheet date. The deposited funds may be withdrawn only
upon the fulfillment of the obligation pursuant to Israeli
severance pay law or labor agreements. The value of these policies
is recorded as an asset on the Company’s consolidated balance
sheets.
Severance pay expenses, net of related income, for the years ended
December 31, 2014, 2015 and 2016, were $1,113, $1,285 and
$1,348, respectively. |
| Equity-based Compensation | Equity-based compensation :
The Company accounts for equity-based compensation in accordance
with FASB ASC No. 718, “Stock Compensation” which
requires the recognition of compensation expenses based on
estimated fair values for all equity-based awards made to employees
and non-employee directors.
The Company estimates the fair value of options and stock
appreciation right (“SAR”) awards on the date of grant
using an option-pricing model. The value of the portion of an award
that is ultimately expected to vest is recognized as an expense
over the requisite service period in the Company’s
consolidated statements of income. The Company recognizes
compensation expenses for the value of its options and SARs, which
have graded vesting based on the accelerated attribution method
over the requisite service period of each of the awards, net of
estimated forfeitures. Estimated forfeitures are based on actual
historical pre-vesting forfeitures and the rate is adjusted to
reflect changes in facts and circumstances, if any. Estimated
forfeiture rate will be revised if actual forfeitures differ from
the initial estimates.
The Company recognizes compensation expenses for the value of its
restricted stock unit (“RSU”) awards, based on the
straight-line method over the requisite service period of each of
the awards, net of estimated forfeitures. The fair value of each
RSU is the market value as determined by the closing price of the
common stock on the day of grant.
The Company uses the Monte-Carlo simulation model for options and
SARs granted. The Monte-Carlo simulation model uses the assumptions
noted below. Expected volatility was calculated based upon actual
historical stock price movements over the most recent periods
ending on the grant date, equal to the expected option and SAR
term. The Company has historically not paid dividends and has no
foreseeable plans to pay dividends. The risk-free interest rate is
based on the yield from U.S. Treasury zero-coupon bonds with an
equivalent term. The Monte-Carlo model also considers the
suboptimal exercise multiple which is based on the average exercise
behavior of the Company’s employees over the past years, the
contractual term of the options and SARs, and the probability of
termination or retirement of the holder of the options and SARs in
computing the value of the options and SARs.
The fair value for the Company’s stock options and SARs
(other than share issuances in connection with the employee stock
purchase plan, as detailed below) granted to employees and
non-employees directors was estimated using the following
assumptions:
2014 2015 2016 (*
Expected dividend yield 0% 0% 0%
Expected volatility 33%-52% 33%-49% 38%-49%
Risk-free interest rate 0.1%-2.5% 0.2%-2.4% 0.5%-2.4%
Expected forfeiture (employees) 10% 10%
—
Expected forfeiture (executives) 5% 5% 5%
Contractual term of up to 10 years 10 years 10 years
Suboptimal exercise multiple (employees) 2.1 2.1
—
Suboptimal exercise multiple (executives) 2.4 2.4 2.4
(* During 2016, the Company did not
grant stock options nor SARs to its employees.
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:
2014 2015 2016
Expected dividend yield 0% 0% 0%
Expected volatility 29%-52% 35%-36% 29%-57%
Risk-free interest rate 0.1%-0.2% 0.1%-0.3% 0.3%-0.5%
Expected forfeiture 0% 0% 0%
Contractual term of up to 24 months 24 months 24 months
During the years ended December 31, 2014, 2015 and 2016, the
Company recognized equity-based compensation expense related to
stock options, SARs, RSUs and employee stock purchase plan as
follows:
Year ended
December 31,
2014 2015 2016
Cost of revenue $ 193 $ 155 $ 246
Research and development, net 2,027 1,838 2,860
Sales and marketing 909 568 922
General and administrative 1,882 1,454 2,208
Total equity-based compensation expense $ 5,011 $ 4,015 $ 6,236
As of December 31, 2016, there was $1,724 of unrecognized
compensation expense related to unvested stock options, SARs and
employee stock purchase plan . This amount is expected to be
recognized over a weighted-average period of 1.4 years. As of
December 31, 2016, there was $7,559 of unrecognized
compensation expense related to unvested RSUs. This amount is
expected to be recognized over a weighted-average period of 1.5
years. To the extent the actual forfeiture rate is different from
what the Company has estimated, equity-based compensation related
to these awards will be different from the Company’s
expectations.
FASB ASC No. 718 requires the cash flows resulting from the
tax deductions in excess of the equity-based compensation costs
recognized for those equity-based awards to be classified as
financing cash flows. During the years ended December 31,
2014, 2015 and 2016, the Company classified $0, $112 and $0,
respectively, of excess tax benefit from equity-based compensation
as financing cash flows. |
| Fair Value of Financial Instruments | Fair value of financial instruments :
The carrying amount of cash, cash equivalents, short term bank
deposits, trade receivables, other accounts receivable, trade
payables and other accounts payable approximates fair value due to
the short-term maturities of these instruments. Marketable
securities and derivative instruments are carried at fair value.
See Note 4 for more information. |
| Comprehensive Income (Loss) | Comprehensive income (loss) :
The Company accounts for comprehensive income (loss) in accordance
with FASB ASC No. 220, “Comprehensive Income.”
This statement establishes standards for the reporting and display
of comprehensive income (loss) and its components in a full set of
general purpose financial statements. Comprehensive income (loss)
generally represents all changes in stockholders’ equity
during the period except those resulting from investments by, or
distributions to, stockholders. The Company determined that its
items of other comprehensive income (loss) relate to unrealized
gains and losses, net of tax, on hedging derivative instruments and
marketable securities. |
| Concentration of Credit Risk | Concentration of credit risk :
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash, cash
equivalents, bank deposits, marketable securities, foreign exchange
contracts and trade receivables. The Company invests its surplus
cash in cash deposits and marketable securities in financial
institutions and has established guidelines relating to
diversification and maturities to maintain safety and liquidity of
the investments.
The majority of the Company’s cash and cash equivalents are
invested in high grade certificates of deposits with major U.S.,
European and Israeli banks. Generally, cash and cash equivalents
and bank deposits may be redeemed on demand and therefore minimal
credit risk exists with respect to them. Nonetheless, deposits with
these banks exceed the Federal Deposit Insurance Corporation
(“FDIC”) insurance limits or similar limits in foreign
jurisdictions, to the extent such deposits are even insured in such
foreign jurisdictions. While the Company monitors 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 the Company deposit its funds fails or is subject to other
adverse conditions in the financial or credit markets. To date the
Company has experienced no loss of principal or lack of access to
its invested cash or cash equivalents; however, the Company can
provide no assurance that access to its invested cash and cash
equivalents will not be affected if the financial institutions in
which the Company holds its cash and cash equivalents fail.
Furthermore, the Company holds an investment portfolio consisting
principally of corporate bonds. The Company has the ability to hold
such investments until recovery of temporary declines in market
value or maturity; accordingly, as of December 31, 2016, the
Company believes the losses associated with its investments are
temporary and no impairment loss was recognized during 2016.
However, the Company can provide no assurance that it will recover
declines in the market value of its investments.
The Company is 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.
The Company is exposed to financial market risks, including changes
in interest rates. The Company typically does not attempt to reduce
or eliminate its market exposures on its investment securities
because the majority of its investments are short-term.
The Company’s trade receivables are geographically diverse,
mainly in the United States, Europe and Asia Pacific. Concentration
of credit risk with respect to trade receivables is limited by
credit limits, ongoing credit evaluation and account monitoring
procedures. The Company performs ongoing credit evaluations of its
customers and to date has not experienced any material losses. The
Company makes judgments on its ability to collect outstanding
receivables and provides allowances for the portion of receivables
for which collection becomes doubtful. Provisions are made based
upon a specific review of all significant outstanding receivables.
In determining the provision, the Company considers the expected
collectability of receivables. Allowance for doubtful accounts
amounted to $25 and $0 as of December 31, 2015 and 2016,
respectively.
The Company has no off-balance-sheet concentration of credit
risk. |
| Derivative and Hedging Activities | Derivative 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 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 its
non-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
December 31, 2015 and 2016, the notional principal amount of
the Hedging Contracts to sell U.S. dollars held by the Company was
$3,200 and $3,300, respectively. |
| Advertising Expenses | Advertising expenses :
Advertising expenses are charged to consolidated statements of
income as incurred. Advertising expenses for the years ended
December 31, 2014, 2015 and 2016 were $792, $928 and $1,033,
respectively. |
| Treasury Stock | Treasury stock :
The Company repurchases its common stock from time to time pursuant
to a board-authorized share repurchase program through open market
purchases and repurchase plans in accordance with Rules 10b5-1 and
10b-18 of the United States Securities Exchange Act of 1934, as
amended.
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 ASC No. 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
additional paid-in capital. |
| Net Income (Loss) Per Share of Common Stock | Net income (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
year. Diluted net income (loss) per share is computed based on the
weighted average number of shares of common stock outstanding
during each year, plus dilutive potential shares of common stock
considered outstanding during the year, in accordance with FASB ASC
No. 260, “Earnings Per Share.”
Year ended
December 31,
2014 2015 2016
Numerator:
Net income (loss) $ (819 ) $ 6,267 $ 13,100
Denominator (in thousands):
Basic weighted-average common stock outstanding 20,622 20,480 20,850
Effect of stock options, stock appreciation rights and restricted
stock units
— 509 715
Diluted weighted-average common stock outstanding 20,622 20,989 21,565
Basic net income (loss) per share $ (0.04 ) $ 0.31 $ 0.63
Diluted net income (loss) per share $ (0.04 ) $ 0.30 $ 0.61
The weighted-average number of shares related to outstanding
options, SARs and RSUs excluded from the calculation of diluted net
income per share, since their effect was anti-dilutive, were
820,631 and 282,696 shares for the years ended December 31,
2015 and 2016, respectively. The total number of shares related to
the outstanding options excluded from the calculation of diluted
net loss per share was 3,316,380 for the year ended
December 31, 2014. |
| Recently Issued and Adopted Accounting Pronouncement | Recently Issued and Adopted Accounting
Pronouncement :
(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 FASB 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
January 1, 2018, but adoption as of the original effective
date 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 on its
financial reporting and disclosures. The Company has evaluated the
impact of the standard on majority of its revenue streams and
associated contracts. The Company expects to complete the contract
evaluations and validate the results during the first half of 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, if any,
will be related to certain deliverables that may be considered as a
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.
(b) Other accounting standards
In February 2016, the FASB issued ASU 2016-02, “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 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.
In March 2016, the FASB issued ASU 2016-09,
“Compensation-Stock Compensation,” which simplifies
several aspects of the accounting for share-based payments,
including immediate recognition of all excess tax benefits and
deficiencies in the income statement, changing the threshold to
qualify for equity classification up to the employees’
maximum statutory tax rates, allowing an entity-wide accounting
policy election to either estimate the number of awards that are
expected to vest or account for forfeitures as they occur, and
clarifying the classification on the statement of cash flows for
the excess tax benefit and employee taxes paid when an employer
withholds shares for tax-withholding purposes. The amendments in
this update became effective on January 1, 2017. The
Company’s adoption of ASU 2016-09 will not have a material
impact on its consolidated financial statements.
The FASB issued ASU 2016-13 “Measurement of Credit Losses on
Financial Instruments” requiring an allowance to be recorded
for all expected credit losses for financial assets. The allowance
for credit losses is based on historical information, current
conditions and reasonable and supportable forecasts. The new
standard also makes revisions to the other than temporary
impairment model for available-for-sale debt securities.
Disclosures of credit quality indicators in relation to the
amortized cost of financing receivables are further disaggregated
by year of origination. The new accounting guidance is effective
for interim and annual periods beginning after December 15,
2019 with early adoption permitted for interim and annual periods
beginning after December 15, 2018. The amendments will be
applied through a cumulative-effect adjustment to retained earnings
as of the beginning of the first reporting period in which the
guidance is effective. The Company is analyzing the impact of this
new standard and, at this time, cannot estimate the impact of
adoption on its net income. The Company plans to adopt ASU 2016-13
effective January 1, 2020.
In August 2016, FASB issued ASU 2016-15, “Statement of Cash
Flows (Topic 230): Classification of Certain Cash Receipts and Cash
Payments.” This update will make eight targeted changes to
how cash receipts and cash payments are presented and classified in
the statement of cash flows. The update is effective for fiscal
years beginning after December 15, 2017. The new standard will
require adoption on a retrospective basis unless it is
impracticable to apply, in which case it would be required to apply
the amendments prospectively as of the earliest date practicable.
The Company is currently evaluating the effect of this update on
its consolidated financial statements and related disclosures.
In January 2017, the FASB issued ASU No. 2017-04, Intangibles:
Goodwill and Other: Simplifying the Test for Goodwill Impairment.
To simplify the subsequent measurement of goodwill, the amendments
eliminate Step 2 from the goodwill impairment test. The
annual, or interim, goodwill impairment test is performed by
comparing the fair value of a reporting unit with its carrying
amount. An impairment charge should be recognized for the amount by
which the carrying amount exceeds the reporting unit’s fair
value; however, the loss recognized should not exceed the total
amount of goodwill allocated to that reporting unit. In addition,
the income tax effects of tax deductible goodwill on the carrying
amount of the reporting unit should be considered when measuring
the goodwill impairment loss, if applicable. The amendments also
eliminate the requirements for any reporting unit with a zero or
negative carrying amount to perform Step 2 of the goodwill
impairment test. An entity still has the option to perform the
qualitative assessment for a reporting unit to determine if the
qualitative impairment test is necessary. The amendments should be
applied on a prospective basis. The nature of and reason for the
change in accounting principle should be disclosed upon transition.
The amendments in this update should be adopted for annual or any
interim goodwill impairment tests in fiscal years beginning after
December 15, 2019. Early adoption is permitted on testing
dates after January 1, 2017. The Company is currently
evaluating the impact of adopting this new guidance on its
consolidated financial statements, but it is not expected to have a
material impact.
In January 2017, the FASB issued ASU No. 2017-01, Business
Combinations (Topic 805): Clarifying the Definition of a Business.
The amendments in this update provide a more robust framework to
use in determining when a set of assets and activities is a
business. Because the current definition of a business is
interpreted broadly and can be difficult to apply, stakeholders
indicated that analyzing transactions is inefficient and costly and
that the definition does not permit the use of reasonable judgment.
The amendments provide more consistency in applying the guidance,
reduce the costs of application, and make the definition of a
business more operable. The amendments in this update become
effective for annual periods and interim periods within those
annual periods beginning after December 15, 2017. The Company
is currently evaluating the impact of adopting this new guidance on
its consolidated financial statements, but it is not expected to
have a material impact.
In 2016, the company adopted ASU 2014-15, Disclosure of
Uncertainties about an Entity’s Ability to Continue as a
Going Concern (ASU 2014-15), that provides guidance on
management’s responsibility in evaluating whether there is
substantial doubt about a company’s ability to continue as a
going concern and to provide related footnote disclosures. The
adoption of ASU 2014-15 did not have an impact on the
Company’s consolidated financial statements or related
disclosures. |
| Acquisition of RivieraWaves | On July 4, 2014 (the “Closing Date”), the Company
acquired 100% of RivieraWaves SAS (“RivieraWaves”), a
privately-held, French-based company and a provider of wireless
connectivity intellectual property for Wi-Fi and
Bluetooth technologies. The Company agreed to pay an aggregate
of $18,378 to acquire RivieraWaves with $14,678 paid on the Closing
Date and the remaining amount of $3,700 payable upon the
satisfaction of certain milestones (the “Contingent
Consideration”). The Contingent Consideration was recognized
as a liability at fair value. During 2015, the Company fully paid
the Contingent Consideration.
In addition, the Company incurred acquisition-related costs in an
amount of $310, which were included in general and administrative
expenses for the year ended December 31, 2014.
The acquisition was accounted in accordance with Financial
Accounting Standards Board (“FASB”) Accounting
Standards Codification (“ASC”) No. 805,
“Business Combinations.” Under the acquisition method
of accounting, the total purchase price was allocated to the net
tangible and intangible assets of RivieraWaves acquired in the
acquisition, based on their fair values on the Closing Date.
The results of operations of RivieraWaves are included in the
Company’s consolidated financial statements as of the Closing
Date. The primary rationale for this acquisition was to further
expand CEVA’s non-cellular baseband business into advanced
technology offerings in connectivity, including Wi-Fi and Bluetooth
IP. The goodwill is primarily attributable to expected synergies
resulting from the acquisition.
In addition, as part of the acquisition, the Company established an
employee retention plan for the RivieraWaves employees at a cost of
approximately $3,400, to be payable on a semiannual basis for a
period of two years after the Closing Date. As of December 31,
2016, the Company fully paid the employee retention plan.
Details of the fair value of consideration transferred and the
purchase price allocation are as follows:
(a) Consideration transferred:
Cash $ 14,678
Fair value of Contingent Consideration 3,434
Total $ 18,112
(b) Under business combination
accounting, the total purchase price was allocated to
RivieraWaves’ net tangible and intangible assets based on
their estimated fair values as set forth below. The excess of the
purchase price over the net tangible and identifiable intangible
assets was recorded as goodwill.
Cash and cash equivalents $ 1,189
Bank deposits 1,384
Other assets 2,898
Intangible assets 6,161
Goodwill 10,114
Total assets 21,746
Current liabilities (2,201 )
Deferred tax liabilities, net (1,433 )
Total liabilities (3,634 )
Total $ 18,112
In performing the purchase price allocation, the Company
considered, among other factors, analysis of historical financial
performance, highest and best use of the acquired assets and
estimates of future performance of RivieraWaves’ products. In
its allocation, the Company also considered the fair value of
intangible assets based on a market participant approach to
valuation performed by a third party valuation firm using an income
approach and estimates and assumptions provided by management. The
following table sets forth the components of intangible assets
associated with the RivieraWaves acquisition:
Fair value
Core technologies (1) $ 5,796
Customer relationships (2) 272
Customer backlog (3) 93
Total intangible assets $ 6,161
(1) Core technologies represent a
combination of RivieraWaves’ processes and trade secrets
related to the design and development of its products. This
proprietary know-how can be leveraged to develop new technology and
improve the Company’s products and is amortized using the
straight line method.
(2) Customer relationships represent the
underlying relationships and agreements with RivieraWaves’
installed customer base and are amortized using the straight line
method.
(3) Customer backlog represents an order
or production backlog arises from contracts or sales orders and are
amortized using the straight line method. |
