ceva performance

These are (relatively) good days for CEVA – despite its announcement that revenues fell 4% to $6.6bn, resulting in a net loss of $159m.

It’s an improvement on the previous year’s loss of $195m.

More crucially, perhaps, the 3PL also announced a refinancing plan, as indicated in The Loadstar‘s coverage last month, which will give it plenty of breathing space to service its $2.2bn debt pile.

The refinancing is attractively priced, with a good yield on offer, meaning CEVA should be well-placed for it to close on April 4.

The annual report showed revenue and EBITDA under pressure, but with narrowed net losses and a reasonable operating performance in the fourth quarter, the company remains bullish.

CEVA saw notable volume growth in its freight management arm, with air volumes up 6.7% in the year, and sea freight volume growth of 4.1% (compared with Panalpina’s 11% decline in revenues, and 7% decline in sea freight) – although CEVA did not state actual volumes.

But freight management revenue fell 5.6% to $3bn, “mainly due to movements of rates … and due to the effect of exchange rates”, said the company.

It added: “Net revenue margins contracted in both air and ocean freight in Q4 in view of the difficult peaks trading and a general increase in rates following the Hanjin bankruptcy.”

However, there was a more challenging working capital cycle.

In freight management, it also finished the global roll-out of its integrated freight management system, OFS, with the US.

Its contract logistics arm, meanwhile, racked up some “important business wins”. Despite a rocky start to the year, it accounted for 55% of the group’s revenues, but 69% of its EBITDA.

The group said it had taken some market share in Asia Pacific, which accounted for 24% of revenues – but 40% of its EBITDA, while the Americas contributed 34% of revenue, but just 14% of EBITDA. Europe brought 40% of revenues and 45% of EBITDA.

While the results show an improvement, there are some slight clouds – in the shape of cash flow – on the horizon.

As CEVA noted in its annual report, “a substantial portion of its cash flows from operations is dedicated to the repayment of its indebtedness and is not available for other purposes; it may restrict CEVA from making strategic acquisitions, introducing new technologies, or exploiting business opportunities”.

Its operating cash flow was down to $143m from $216m one year earlier, while net debt rose by almost $100m. With lower EBITDA, net leverage – as gauged by net debt/EBITDA – rose year-on-year.

Core free cash flow is down to about $70m, before some $200m of various interest costs are paid out. Which means the 3PL is burning about $356,000 or so a day, based on our estimates.

However, the good news is that gross cash and cash equivalents soared to $333m from $309m, while “headroom” rose to $615m from $576m. And with the refinancing plan in the pipeline, market concerns about CEVA’s financial backbone should be alleviated.

“Despite industry-wide challenges in 2016, our full-year results demonstrate that we continue to make positive headway,” said CEO Xavier Urbain.

“2016 was a year of significant progress in the transformation of CEVA, during which we had some important business wins, successfully addressed legacy issues and we continued to build a much stronger platform.

“The strong improvement in results in many of our markets were overshadowed by weaker performance in some countries, which we continue to address. We enter 2017 in a stronger position and I am confident that we will have a much better performance with our excellence programme leading to further cost savings.”

You can read the full results here.


Leave a Reply

  • Commentator

    March 11, 2017 at 11:18 am

    The real loss is not 160 million, but 224 million USD. See their financial publication p21. Accumulated deficit is 2.8 billion USD. If these are (relatively) good days, then I would like to have some of your medicine…

    • apasetti@hedgingbeta.com

      March 13, 2017 at 9:45 am

      Hi Commentator,

      As a matter of fact Ceva is in the market with a refinancing of its short-term debt maturing next year, which is a great achievement given how important this deal is for the business, and its future prospects.

      Re the losses, “real” losses is not something we recognise (do you mean adjusted? non-GAAP?), but we safely opted to disclosed their reported losses.

      Specifically, reported economic losses “before specific items and SBC” narrowed to $100m (2015: $163m), but total reported losses were $159m, down from $195m one year earlier. SBC: non-cash share based compensation costs.

      Reported losses are less important than core cash flows, obviously, given its net leverage, so they are just a little detail here, also given covenants not the debts.




      • apasetti@hedgingbeta.com

        March 13, 2017 at 10:00 am

        Specifically, Commentator, your net loss number includes -$12m of benefit obligations and -$53m of currency adjustments — these are items that, respectively, “will not be reclassified to profit and loss” and items that :may be reclassified subsequently to profit and loss”.

        So, these are unrealised losses.

        I also wondered, what do mean with “deficit” in this context? Gross debt?

        • Ben

          March 13, 2017 at 10:24 am

          Ale, I notice that not all comments are added here.. ( some people have tried to comments but their post was moderated?)

          My point is : when new CEO took this ship ( back in 2014) company posted Revenue for FY 2013 of over usd 8.3bln ( from memory ) now it is usd 6.4 , that is 22% drop … CEO and his protégée were telling they are building selling machine !
          Look at ration of Personnel cost to revenue ( back in2013) to what it is now.

          even this metric ( of efficiency ) have deteriorated …

          back to you .

          • Alex Lennane

            March 13, 2017 at 10:27 am

            Hi Ben,

            I think all the comments have been approved – we haven’t moderated any.

            Alex, The Loadstar

          • apasetti@hedgingbeta.com

            March 13, 2017 at 10:41 am

            Hi Ben,

            Emotions run high with Ceva. Of course, this remains a plain-vanilla restructuring, given certain performance metrics and the the capital structure — you have my full support there. Its bloated cost base in terms of operating expenses is one problem we flagged some time ago, and other headwinds (currency, increased competition, visibility of rates, etc etc) persist.

            However, here we have a company that is burning $350k a day and if its refi is successful, it will buy about 4 or 5 years for the smooth running of its business, even assuming it continues to burn the same amount of cash daily/monthly. It might have to raise more equity at some point, true, but this placement gives it time.

            Thanks much for your input. I think Alex clarified the possible issue about unpublished comments? I hope so!



          • Rok

            March 13, 2017 at 12:23 pm

            Did not they prove already that it is unsecessful? Was not it one of many debt restructures under pre text to get more time to get things sorted?

            In the last 3 years alone debt grew by over 350mln?
            Current mngmt team can not do it ,just look over last 3 year performance.
            We need young dinamic team who understand IT, Finance, independend thinkers as well as team players, did Operations or can draw you a process in 5min and know current trends.
            From what i hear people who run show around are just bloated sales people connected to CEO and who are good at “presentations”

          • apasetti@hedgingbeta.com

            March 13, 2017 at 12:52 pm

            Hi Rok,

            Thanks for your feedback.

            There are surely some structural issues here, at least financially, that prove this remains a very challenging corporate restructuring, but as long as CEVA can roll over existing debts well before the repayment is due, there is hope it will end up being successful, although recent performance has been disappointing.



      • Andromeda

        March 15, 2017 at 1:39 pm

        Hi Ale,
        Thanks for your comments. What would you say about the debt refinance next year? Do you think Apollo will keep CEVA or there will be a sale? And if there does happen a Sale then what do you think will happen to the existing employees?

        • apasetti@hedgingbeta.com

          March 15, 2017 at 4:21 pm

          Hi Andromeda,

          Thanks for your questions. A significant portion of debt — specifically the tranche maturing in May next week — is currently being refinanced, and given the price/duration mix, I do not see many problems with that.

          The word in the market is that Apollo wants out, and this refinancing deal could render CEVA more parable for potential acquirers. Re the existing employees, and what could happen to them, I don’t have any insight, am afraid.



          • apasetti@hedgingbeta.com

            March 15, 2017 at 4:35 pm

            *next week should read ‘next year”, pardon.

  • Dan

    April 25, 2017 at 12:55 pm

    Did Ceva refinanced debt maturing in 2018 with higher interest rate?

    • apasetti@hedgingbeta.com

      April 26, 2017 at 2:59 pm

      Dan, it replaced debt maturing in 2018 with more expensive debt. Thanks.

      • Tim

        April 27, 2017 at 9:54 am

        So, they are destroying income statement at the expense of a balance sheet.
        I guess when it comes to survival this is what you have to do..

        • apasetti@hedgingbeta.com

          April 27, 2017 at 11:31 am

          or, rather, they are betting on a recovery as they pushed back refinancing risk by about 3 years…

  • Peter

    May 03, 2017 at 5:59 am

    Al, judging by the past performance your comment would be viewed as too optimistic …just look at margins and sales deterioration in the last 3 years..

  • Stannus

    May 04, 2017 at 5:54 am

    Perhaps the CEVA team should reachout for help from DSV…
    DSV seem to understand their industry and be able to take over distressed businesses and turn them around plus make real cash.
    CEVA have been trying this forever and never get there.

    • apasetti@hedgingbeta.com

      May 04, 2017 at 10:11 am

      That would an interesting combination now that DSV has expended in North America, but CEVA needs to get its debt down if O wants to receive a decent valuation for its equity.

      Thanks, Stannus.

      • craig.stanford@ascap.com.au

        May 07, 2017 at 11:04 pm

        Albert Einstein said the definition of insanity is doing something over and over again and expecting a different result. Time for P/E get out and let someone else – who actually understands global logistics – have a go at fixing CEVA.

        • Ale Pasetti

          May 08, 2017 at 1:54 pm

          Ceva needs to get in better shape before that happens, although I agree there is a lot work to do. Thanks, Craig.