Ceva (CEVA) Risk Analysis

In some quarters our operating results could be below 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 IP 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, 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 IP licensing and related revenues, and royalty revenues;- the timing of the introduction of new or enhanced technologies by us and our competitors, 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 of our customers in executing contracts;- delays in the commercialization of end products that incorporate our technology;- currency fluctuations, mainly the Euro and the New Israeli Shekel versus the U.S. dollar;- fluctuations in operating expenses and gross margins associated with the introduction of, and research and development investments in, new or enhanced technologies and adjustments to operating expenses resulting from restructurings;- the approvals, amounts and timing of Israeli research and development government grants from the Israeli Innovation Authority of the Ministry of Economy and Industry in Israel (IIA), EU grants and French research tax credits;- the impact of new accounting pronouncements, including the new revenue recognition rules;- 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 IP, 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 tax write-offs and tax and accounting changes or adjustments, such as the fourth quarter 2023 tax charges related to Internal Revenue Code ("IRC") Section 174;- geopolitical conditions, including global trade competition and regulatory enhancements resulting from tariffs and business restrictions imposed by government entities[, such as the restricted party lists promulgated, expanded and updated by the U.S. government during the last several years], and further tightening of restrictions on the transfer to China of certain advanced AI chips, semiconductors and supercomputing items, as well as other regulatory actions and changes that may adversely affect the business environment;- 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;- delays in final product delivery due to unexpected issues introduced by our service or EDA tool providers;- delays in ratification of standards for Bluetooth, Wi-Fi, UWB or cellular standards that can affect the introduction of new products;- constraints on chip manufacturing capacity due to high demand or shutdowns of semiconductor fabrication plants and other manufacturing facilities; and - reductions in demand for consumer and digital devices due to lockdowns or overall financial difficulties caused by future pandemic outbreaks or public health threats. 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, mobile and industrial products. The royalties we generate are reported by our customers. Our royalty revenues are affected by seasonal buying patterns of consumer products sold by OEMs, partially by our direct customers and partially by semiconductor customers that incorporate our technology into their end products and the market acceptance of such end products. The first quarter in any given year is usually a sequentially down quarter for us in relation to royalty revenues as this period represents lower post-holiday fourth quarter consumer and mobile product shipments. However, the magnitude of this first 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 mobile devices powered by Ceva technology sold in any given quarter compared to the prior quarter. While the high interest rate environment and macroeconomic concerns related to slowdowns experienced in 2023 and 2024 have largely abated, these conditions continue in certain areas, and distort more traditional seasonality trends. 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 may in the future pursue acquisitions of businesses, products and technologies, establish joint venture arrangements or make minority equity investments 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 occurrence of any of these events could harm our business, financial condition or results of operations. Future acquisitions, investments or joint ventures may require substantial capital resources, which may require us to seek additional debt or equity financing. Future acquisitions, joint ventures or minority equity investments by us could result in the following, any of 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;- large one-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.