GlobeNewswire Inc | Feb 4, 2021 07:00AM EST

February 04, 2021

Fourth quarter revenues of $31.9 million, up 9% YoY, exceedingguidanceRecord high fourth quarter non-GAAP gross margins of 51.9%

SAN JOSE, Calif., Feb. 04, 2021 (GLOBE NEWSWIRE) -- DSP Group, Inc. (NASDAQ: DSPG), a leading global provider of wireless chipset solutions for converged communications, announced today its results for the fourth quarter and full year ended December 31, 2020.

FourthQuarter 2020 Financial Highlights (and Comparison to FourthQuarter 2019):

-- Total revenues of $31.9 million, a 9% increase: Revenues from IoAT (Internet of Audio Things) businesses of $18.1 million accounted for 57% of total revenues, a decrease of 8%. Unified Communications segment revenues of $8.2 million, a decrease of 17%. SmartVoice segment revenues of $5.0 million, an increase of 2%. SmartHome segment revenues of $4.8 million, an increase of 3%.Cordless revenues of $13.8 million, an increase of 42%. -- GAAP and non-GAAP gross margin of 51.3% and 51.9%, respectively, an increase of 40 and 70 basis points, respectively. -- GAAP loss per share of $0.06 and non-GAAP diluted earnings per share of $0.12, compared to zero GAAP diluted loss per share and non-GAAP diluted earnings per share of $0.06 for the fourth quarter of 2019. -- GAAP operating loss of $1.0 million and non-GAAP operating income of $2.9 million, compared to GAAP operating loss of $1.2 million and non-GAAP operating income of $0.7 million for the fourth quarter of 2019. -- GAAP net loss of $1.4 million and non-GAAP net income of $2.9 million, compared to GAAP net loss of $0.1 million and non-GAAP net income of $1.6 million for the fourth quarter of 2019. -- Generated $8.6 million of cash from operations, compared to $10.8 million of cash generated from operations in the fourth quarter of 2019. -- Cash, deposits and marketable securities of approximately $128.6 million as of December 31, 2020.

Full Year 2020 Financial Highlights (and Comparison to Full Year 2019)

-- Total revenues of $114.5 million, vs. $117.6 million in 2019, a 3% decrease.Revenues from IoAT businesses of $68.1 million, a year-over-year decrease of 8% when compared to 2019. Unified Communications segment revenues of $31.2 million, a year-over-year decrease of 18%. SmartVoice segment revenues of $20.2 million, a year-over-year increase of 4%. SmartHome revenues of $16.8 million, a year-over-year increase of 3%.Cordless revenues of $46.3 million, a year-over-year increase of 6%. -- GAAP and non-GAAP gross margin of 50.8% and 51.4%, respectively, an increase of 20 and 40 basis points, as compared to 2019 gross margin of 50.6% on GAAP and 51.0% on non-GAAP basis. -- GAAP operating loss of $8.1 million and non-GAAP operating income of $3.4 million, compared to GAAP operating loss of $4.4 million and non-GAAP operating income of $3.6 million in 2019. -- GAAP net loss of $6.8 million and non-GAAP net income of $4.8 million, compared to GAAP net loss of $1.2 million and non-GAAP net income of $7.0 million in 2019. -- GAAP loss per share of $0.29 and non-GAAP diluted earnings per share of $0.19, compared to GAAP loss per share of $0.05 and non-GAAP earning per share of $0.29 in 2019. -- Generated $14.6 million of cash from operating activities, compared to $10.5 million in 2019.

Management Comments:Commenting on the results, Ofer Elyakim, CEO of DSP Group, stated: We are very pleased with our fourth quarter financial results, and particularly with our diversified voice centric product portfolio that drove a strong finish to a volatile year. Fourth quarter revenues of $31.9 million exceeded our guidance range and grew by 9% year over year and 23% sequentially. These results were further propelled by digitally transformed work-live-study routines as evidenced by the accelerating demand for work from home products, including remote collaboration tools, cordless phones, voice AI and IoT devices.

Mr. Elyakim continued, Looking ahead, we are excited about the momentum surrounding our business and the pivotal role that our innovative technologies are playing in the newly emerging voice-centric marketplace. While industry-wide supply chain constraints are placing limitations on product deliveries, we are experiencing solid end-market demand across our different businesses and expect first quarter revenues to grow both sequentially and year-over-year. Moreover, the transformation to a voice-centric world positions us well for sustainable growth. Our dedicated focus and R&D investments in voice communications, Edge AI and IoT are paying off and have created a deep and diversified technology offering, which is evidenced by the following accomplishments: positioning ULE as a prime connectivity in the home security market, establishing SmartVoice franchise as the market leading solution in key consumer categories and proliferating our voice and video technologies in the evolving collaboration market.

Fourth Quarter Business Highlights:

-- Continued to grow and strengthen our SmartVoice franchise with design wins and product launches for voice user interfaces (VUIs) with leading consumer electronics OEMs, thereby driving dynamic growth in a burgeoning market: Major U.S. retail brand and Lenovo launched new tablet models based on our SmartVoice solution.A leading U.S. platform company launched its second-generation smart wearable product leveraging our SmartVoice edge AI SoCTaoTronics launched a new TWS headset based on our SmartVoice solution for its differentiated edge AI capabilities. -- Grew and diversified our SmartHome ecosystem with leading global IoT vendors that recognize ULEs unmatched characteristics for wireless indoor IoT, including superior range, interference-free spectrum and native support for two-way voice: A leading European service provider chose our DECT/ULE for its next generation professional smart security offering.A leading U.S. brand selected our DECT/ULE for its elderly care system that includes hub, pendant and additional assisted voice-enabled devices.Atlinks selected our DECT/ULE solution for its wireless Hi-Fi audio streaming product. -- Solidified our leadership position and expanded our market share in the Unified Communications market, as demonstrated by the following business wins: A Tier 1 UC OEM selected our high-end DVFxx solution to drive its next generation personal video collaboration system.A leading U.S. video collaboration vendor brand selected our SmartVoice voice communication engine for a hybrid collaboration endpoint.Yealink announced its new Microsoft Teams wireless DECT headset based on our industry leading solution.

Fourth Quarter and Year End GAAP ResultsRevenues for the fourth quarter of 2020 were $31.9 million, an increase of 9% from revenues of $29.3 million for the fourth quarter of 2019. Net loss and loss per share for the fourth quarter of 2020 were $1.4 million and $0.06, respectively. Net loss and loss per share for the fourth quarter of 2019 were $0.1 million and $0.00, respectively.

Revenues for the year ended December 31, 2020 were $114.5 million, a decrease of 3% from 2019 revenues of $117.6 million. Net loss for 2020 was $6.8 million, compared to a net loss of $1.2 million for 2019. Loss per share for 2020 was $0.29, compared to loss per share of $0.05 for 2019.

Fourth Quarter and Year-End Non-GAAP Results:Non-GAAP net income and diluted earnings per share for the fourth quarter of 2020 were $2.9 million and $0.12, respectively, as compared to non-GAAP net income and diluted earnings per share of $1.6 million and $0.06, respectively, for the fourth quarter of 2019. Non-GAAP net income and diluted earnings per share for the fourth quarter of 2020 excluded the impact of amortization of acquired intangible assets in the amount of $0.4 million associated with previous acquisitions, equity-based compensation expenses of $3.2 million, non-cash expenses from exchange rate differences resulting from lease accounting standard (ASC 842) in the amount of $0.7 million, amortization of employees retention expenses related to the acquisition of SoundChip in the amount of $0.25 million and income resulting from changes in deferred taxes in the amount of $0.3 million related to intangible assets acquired in previous acquisitions and equity-based compensation expenses. Non-GAAP net income and diluted earnings per share for the fourth quarter of 2019 excluded the impact of amortization of acquired intangible assets in the amount of $0.1 million associated with previous acquisitions, equity-based compensation expenses of $1.8 million, non-cash expenses from exchange rate differences resulting from ASC 842 in the amount of $0.1 million, and income resulting from changes in deferred taxes in the amount of $0.3 million related to intangible assets acquired in previous acquisitions and equity-based compensation expenses.

Non-GAAP net income and diluted earnings per share for the year ended December 31, 2020 were $4.8 million and $0.19, respectively, as compared to non-GAAP net income and diluted earnings per share of $7.0 million and $0.29, respectively, for the year ended December 31, 2019.

Non-GAAP net income and diluted earnings per share for the year ended December 31, 2020 excluded the impact of amortization of acquired intangible assets of $1.1 million associated with current and previous acquisitions; equity-based compensation expenses of $9.7 million, non-cash exchange rate differences resulting from ASC 842 in the amount of $0.6 million, transaction expenses related to the acquisition of SoundChip in the amount of $0.25 million, amortization of employees retention expenses related to the acquisition of SoundChip in the amount of $0.5 million and changes in deferred taxes related to intangible assets acquired in current and previous acquisitions and equity-based compensation expenses in the amount of $0.5 million.

Non-GAAP net income and diluted earnings per share for the year ended December 31, 2019 excluded the impact of amortization of acquired intangible assets of $0.4 million associated with previous acquisitions; equity-based compensation expenses of $7.6 million, non-cash exchange rate differences resulting from ASC 842 in the amount of $0.8 million, and changes in deferred taxes related to intangible assets acquired in previous acquisitions and equity-based compensation expenses in the amount of $0.6 million.

Earnings Conference Call DetailsDSP Group will discuss its fourth quarter financial results, along with its outlook and guidance for the first quarter of 2021, on its conference call at 8:30 a.m. ET today, and invites you to listen via our conference call or a live broadcast over the Internet.

Investors may access the conference call by dialing +16467413167 (domestic US) or +44 (0) 2071 928338 (international) approximately 10 minutes prior to the starting time. The password is 4996754.

The broadcast via the Internet can be accessed by interested parties through the Investor Relations section of DSP Groups website at www.dspg.com or link to: https://edge.media-server.com/mmc/p/4wohuk4f

A replay of the conference call will be available for a week following the call. To listen to the session, please dial +1 (917) 677-7532, domestically, or +44 (0) 3333009785, internationally, and enter the company access code: 4996754#

Presentation of Non-GAAP Net Income and EPSThe Company believes that the non-GAAP presentation of net income (loss) and diluted earnings (loss) per share presented in this press release is useful to investors in comparing results for the fourth quarter and ended December 31, 2020 and 2019 because the exclusion of the above noted expenses may provide a more meaningful analysis of the Companys core operating results. Further, the Company believes it is useful to investors to understand how the expenses associated with equity-based compensation and amortization of employees retention expenses related to the acquisition are reflected in its statements of income

Forward Looking StatementsThis press release contains statements that qualify as forward-looking statements under the Private Securities Litigation Reform Act of 1995, including Mr. Elyakims statements about: (i) the optimism about the companys momentum for its business and the pivotal role that its technologies are playing in the newly emerging voice-centric marketplace, (ii) the improving end market demand across the companys different businesses, (iii) expectation of first quarter revenues to grow both sequentially and year-over-year, (iv) belief that the transformation to a voice-centric world positions the company well for sustainable growth, and (v) dedicated focus and R&D investments in voice communications, Edge AI and IoT are paying off and have created a deep and diversified technology offering. The results from these statements may not actually arise as a result of various factors, including the scope and duration of the pandemic; the extent and length of the remote work environment and other restrictions associated with the pandemic and the impact on the demand for consumer electronics; SmartVoice and unified communications products and the global economy; the impact of industry-wide supply chain constraints; market penetration of DSP Groups Unified Communications, ULE, VUI, SmartVoice and SmartHome products; unexpected delays in the commercial launch of new products; unexpected inventory adjustments; the speed of decline in the cordless market; DSP Groups ability to manage costs; DSP Groups ability to develop and produce new products at competitive costs and in a timely manner and the ability of such products to achieve broad market acceptance; and general market demand for products that incorporate DSP Groups technology in the market. These factors and other factors which may affect future operating results or DSP Groups stock price are discussed under RISK FACTORS in the Form 10-K for fiscal 2019, as well as other reports DSP Group has filed with the Securities and Exchange Commission and which are available on DSP Groups website (www.dspg.com) under Investor Relations. DSP Group assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates.

About DSP Group DSP Group, Inc. (NASDAQ: DSPG) is a global leader in wireless chipsets for a wide range of smart-enabled devices. The company was founded in 1987 on the principles of experience, insight and continuous advancement which enable the company to consistently deliver next-generation solutions in the areas of voice, audio, video and data connectivity. DSP Group, an expert in voice processing, invests heavily in innovation for the smart future and designs leading-edge semiconductor technology that is enabling our customers to develop a new wave of products that bring enhanced user experiences through innovation. For more information, visit www.dspg.com.

Contact:Shiri Weiss, IR & Communications, Shiri.Weiss@dspg.com

An infographic PDF accompanying thisannouncement is available at http://ml.globenewswire.com/Resource/Download/59086ff8-cee7-4473-b8b5-275e03584a5a

DSP GROUP, INC.CONSOLIDATED STATEMENTS OF INCOME(In thousands, except per share amounts)

Three Months Ended Twelve Months Ended December 31 December 31 2020 2019 2020 2019 (Unaudited) (Unaudited) (Unaudited) (Audited) Revenues $ 31,885 $ 29,261 $ 114,480 $ 117,613 Cost of 15,543 14,369 56,290 58,066 revenues Gross profit 14,892 59,547 16,342 58,190Operating expenses:Research anddevelopment, 8,580 8,827 35,511 35,552 netSales and 4,642 4,485 17,665 marketing 18,205General and 3,671 2,701 11,510 10,318 administrativeAmortizationof intangible 430 104 1,065 416 assets Totaloperating 17,323 16,117 66,291 63,951 expenses Operating loss (981 ) (1,225 ) (8,101 ) (4,404 ) Financialincome (304 ) 525 1,231 1,654 (expenses),net Loss before taxes on (1,285 ) (700 ) (6,870 ) (2,750 )income Taxes onincome(tax 72 (613 ) (80 ) (1,560 )benefit) Net loss $ (1,357 ) $(87 ) $ (6,790 ) $ (1,190 )Net loss per share:Basic and $ (0.06 ) $ (0.00 ) $ (0.29 ) $ (0.05 )DilutedWeightedaverage numberof shares usedin per share computationsof loss pershare:Basic and 23,661 23,054 23,466 22,827 Diluted



Unaudited Reconciliation of GAAP to Non-GAAP Financial Measures(In thousands, except per share amounts) Three Months Ended Twelve Months Ended December 31, December 31, 2020 2019 2020 2019 Unaudited Unaudited Unaudited Unaudited GAAP net loss $ (1,357 ) $ (87 ) $ (6,790 ) $ (1,190 )Equity-based compensationexpense included in cost 133 102 524 448 of revenuesEquity-based compensationexpense included in 925 640 3,448 2,842 research and development,netEquity-based compensationexpense included in sales 605 440 2,426 1,758 and marketingEquity-based compensationexpense included in 1,504 611 3,315 2,583 general andadministrativeAmortization ofemployee?s retentionexpenses related to the 67 - 134 - acquisition of SoundChipincluded in cost ofrevenuesAmortization ofemployee?s retentionexpenses related to the 149 - 298 - acquisition of SoundChipincluded in sales andmarketingAmortization ofemployee?s retentionexpenses related to the 34 - 68 - acquisition of SoundChipincluded in research anddevelopment, netTransaction expensesrelated to the - - 249 - acquisition of SoundChipAmortization of 430 104 1,065 416 intangible assetsNon-cash expenses fromexchange ratesdifferences resulting 678 62 607 785 from lease accountingstandard (ASC 842)Income from changes ofdeferred taxes related tointangible assets and (277 ) (297 ) (526 ) (618 )equity-based compensationexpenseNon-GAAP net income $ 2,891 $ 1,575 $ 4,818 $ 7,024 Weighted-average numberof common stock used incomputation of GAAP 23,661 23,054 23,466 22,827 diluted net loss pershare (in thousands) Weighted-average numberof shares related tooutstanding options, 1,459 1,342 1,542 1,420 stock appreciation rightsand restricted shareunits (in thousands) Weighted-average numberof common stock used incomputation of non-GAAP 25,120 24,396 25,008 24,247 diluted net earnings pershare (in thousands) GAAP diluted net loss per $ (0.06 ) $ (0.00 ) $ (0.29 ) $ (0.05 )shareEquity-based compensation 0.13 0.07 0.40 0.31 expenseAmortization of 0.02 0.00 0.04 0.02 intangible assetsTransaction expensesrelated to the - - 0.01 - acquisition of SoundChipAmortization ofemployee?s retention 0.01 - 0.02 - expenses related to theacquisition of SoundChipNon-cash expenses fromExchange ratesdifferences resulting 0.03 0.00 0.03 0.03 from lease accountingstandard (ASC 842)Income from changes ofdeferred taxes related tointangible assets and (0.01 ) (0.01 ) (0.02 ) (0.02 )equity-based compensationexpenseNon-GAAP diluted net $ 0.12 $ 0.06 $ 0.19 $ 0.29 earnings per share

DSP GROUP, INC.CONSOLIDATED BALANCE SHEETS(In thousands)

December 31, December 31, 2020 2019 (Unaudited) (Audited) Assets Current assets: Cash and cash equivalents $ 16,936 $ 28,737 Restricted deposits 548 518 Marketable securities and short-term 50,411 39,141 depositsTrade receivables, net 11,003 15,382 Inventories 9,061 7,464 Other accounts receivable and prepaid 3,460 3,551 expensesTotal current assets 91,419 94,793 Property and equipment, net 6,574 6,805 Long term marketable securities and 62,884 deposits 60,658Severance pay fund 16,285 15,800 Operating leases? right of use assets 11,157 11,655 Deferred income taxes 6,893 6,377 Intangible assets, net 20,654 6,904 Long term prepaid expenses 2,888 707 Total long-term assets 118,535 104,327 Total assets $216,528 $ 205,925 Liabilities and Stockholders? Equity Current liabilities: Trade payables $ 10,708 $ 8,511 Operating lease liability 3,004 2,569 Other current liabilities 15,724 14,159 Total current liabilities 29,436 25,239 Accrued severance pay 16,647 16,074 Operating lease liability 10,100 10,436 Accrued pensions 1,089 963 Deferred income taxes 1,073 119 Other long-term liabilities 1,945 - Total long-term liabilities 30,854 27,592 Stockholders? equity: Common stock 24 23 Additional paid-in capital 396,335 386,534 Accumulated other comprehensive loss (637 ) (889 )Less ? Cost of treasury stock (108,509 ) (113,862 )Accumulated deficit (130,975 ) ) (118,712Total stockholders? equity 156,238 153,094 Total liabilities and stockholders? $216,528 $ 205,925 equity