GlobeNewswire Inc | Aug 2, 2021 07:00AM EDT

August 02, 2021

Record IoAT Revenues of 24.8M, Up 35% YoY; Reaching 69% of Total RevenuesRecord non-GAAP Gross Margins of 54.1%Second Quarter Revenues of $35.8M, Up 26% YoY

SAN JOSE, Calif., Aug. 02, 2021 (GLOBE NEWSWIRE) -- DSP Group, Inc. (NASDAQ: DSPG), a leading global provider of voice and wireless chipset solutions for converged communications, announced today its results for the second quarter ended June 30, 2021.

Second Quarter Financial Highlights (and Comparisons to Second Quarter of 2020): Revenue breakdown (USD in millions)

Q2 2021 Q2 2020 vs. Q2 2020IoAT Revenues: SmartVoice $7.20 $3.95 up 82%SmartHome $5.74 $4.30 up 33%Unified Communications $11.82 $10.15 up 16%Total IoAT Revenues $24.76 $18.40 up 35%Cordless Revenues $11.05 $9.94 up 11%Total Revenues $35.81 $28.34 up 26%

-- GAAP and non-GAAP gross margin of 53.4% and 54.1%, respectively, a 330 and 310 basis point increase, respectively. -- GAAP loss per share of $0.02 and non-GAAP diluted earnings per share of $0.12, compared to GAAP loss per share of $0.05 and non-GAAP diluted earnings per share of $0.06 for the second quarter of 2020. -- GAAP operating loss of $0.4 million and non-GAAP operating income of $3.3 million, compared to GAAP operating loss of $1.4 million and non-GAAP operating income of $1.0 million for the second quarter of 2020. -- GAAP net loss of $0.4 million and non-GAAP net income of $3.2 million, compared to GAAP net loss of $1.1 million and non-GAAP net income of $1.6 million for the second quarter of 2020. -- Generated $6.8 million of cash from operations, compared to $8.0 million of cash generated from operations in the second quarter of 2020. -- Repurchased approximately 339,000 shares of common stock for a total consideration of $5.3 million. -- Cash, deposits and marketable securities of approximately $129.9 million as of June 30, 2021.

Management Comments:

Commenting on the results, Ofer Elyakim, CEO of DSP Group, stated: We are very pleased with our outstanding results. We successfully navigated tight supply chain challenges, posted a record quarter on virtually all fronts, and surpassed our guidance on most financial metrics. Revenues of $35.8 million were at the high-end of our guidance range, up 26% year-over-year and 10% sequentially. Revenue growth was driven by strong demand for voice-centric products, predominantly in our IoAT businesses, which reached record revenues of $25 million, up 35% year over year and 19% sequentially and comprising 69% of total revenues. The favorable mix of products and the solid revenue growth propelled record high non-GAAP gross margins of 54.1%.

Mr. Elyakim continued, Looking ahead to the third quarter, we expect the solid momentum in our business to continue, translating into revenue growth both sequentially and year over year. These are exciting times for DSP Group as markets shift favorably in our direction, driving record demand for our core expertise. These promising trends are propelled by new models of living, working and interacting, all of which increasingly rely on voice-centric products delivered by our IoAT businesses. The breadth and depth of our technology offering, including a comprehensive portfolio of software and silicon, uniquely positions DSP Group to capitalize on these large growth opportunities. We are experiencing record design activity, which positions us well for continued revenue growth ahead.

Second Quarter Business Highlights:

-- Grew and strengthened our SmartVoice franchise with design wins and product launches for edge AI applications with leading consumer electronics OEMs, thereby driving dynamic growth in a burgeoning market. Wins include: A leading U.S. platform company selected our SmartVoice products for two new product linesA leading consumer brand launched an innovative wearable device based on our SmartVoice solutionCuco chose our SmartVoice solution to enable voice control in its latest Smart Switch product -- Grew and diversified our SmartHome ecosystem with leading global IoT vendors that recognize ULEs unmatched characteristics for wireless IoT, including superior range, ease of deployment, low power, use of interference-free spectrum and native support for two-way voice. Wins include: A tier 1 security service provider launched an expanded product offering based on our ULE technologyA European telecommunication service provider launched a new broadband gateway model incorporating our DECT/ULE technologyA new cloud services offering by Cloud of Things included a hub based on our DECT/ULE technology -- Solidified our leadership position and expanded our market share in the Unified Communications market, as demonstrated by the following achievements: Our WFA conferencing offering passed Microsoft Teams labs compliancy requirements for voice conferencingA tier 1 unified communications OEM chose one of our multi core DSPs for its newly launched WFH deviceSangoma launched a line of new IP phones based on our DVF system-on-chip (SoC) platform

Second Quarter Non-GAAP Results:Non-GAAP net income and diluted earnings per share for the second quarter of 2021 were $3.2 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 second quarter of 2020. Non-GAAP net income and diluted earnings per share for the second quarter of 2021 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 $3.0 million, amortization of employee retention expenses related to the SoundChip acquisition of $0.25 million, non-cash expenses from exchange rate differences resulting from the lease accounting standard (ASC 842) in the amount of $0.2 million, and 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 second quarter of 2020 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 $2.3 million, non-cash expenses from exchange rate differences resulting from ASC 842 in the amount of $0.3 million, and expenses resulted from changes in deferred taxes in the amount of $0.1 million related to intangible assets acquired in previous acquisitions and equity-based compensation expenses

Earnings Conference Call Details

DSP Group will discuss its second quarter financial results, along with its outlook and guidance for the third 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 + 18778709135 (domestic US) or +44 2071 928338 (international) approximately 10 minutes prior to the starting time. The password is 1974048.

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

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: 1974048

Presentation of Non-GAAP Net Income and EPSThe Company believes that the non-GAAP presentation of net income (loss) and diluted earnings per share presented in this press release is useful to investors in comparing results for the second quarter and six months ended June 30, 2021 and 2020 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 retention expenses 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) solid momentum to drive revenue growth both sequentially and year over year, (ii) markets shifting favorably in DSP Groups direction which is driving record demand for its core expertise across all IoAT businesses, (iii) favorable trends, which will result in increasing reliance on voice-centric products coupled with DSP Groups technology offering, uniquely position DSP Group to capitalize on these large growth opportunities, and (iv) DSP Groups record design activity in the second quarter of 2021 should ensure sustainable revenue growth this year and beyond. The results from these statements may not actually arise as a result of various factors, including the duration of the COVID-19 pandemic; the extent and length of the shelter-in-place and other restrictions associated with the COVID-19 pandemic and the impact on the demand for consumer electronics and the global economy; impact of 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 2020, 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:Claus StetterVice President of Marketing & Communications DSP Group Inc.+1 +(650) 521 4082claus.stetter@dspg.com

An infographic PDF accompanying thisannouncement is available at http://ml.globenewswire.com/Resource/Download/b15d7ab8-3527-4dd7-8b49-ce41c50116f0

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

Three Months Ended Six Months Ended June 30 June 30 2021 2020 2021 2020 (Unaudited) (Unaudited) (Unaudited) (Unaudited) Revenues $ 35,807 $ 28,336 $ 68,454 $ 56,575 Cost of 16,676 14,075 32,342 27,933 revenues Gross profit 19,131 14,261 36,112 28,642 Operating expenses:Research anddevelopment, 10,630 8,455 21,110 18,809 netSales and 5,326 4,435 10,528 9,446 marketingGeneral and 3,161 2,627 5,814 4,975 administrativeAmortizationof intangible 429 104 848 208 assets Totaloperating 19,546 15,621 38,300 33,438 expenses Operating loss (415 ) (1,360 ) (2,188 ) (4,796 ) Financial 94 289 735 1,192 income, net Loss beforetaxes (321 ) (1,071 ) (1,453 ) (3,604 )onincome Income taxexpenses 78 6 289 (62 )(benefit) Net loss $ (399 ) $ (1,077 ) $ (1,742 ) $ (3,542 )Net loss per share:Basic and $ (0.02 ) $ (0.05 ) $ (0.07 ) $ (0.15 )diluted Weightedaverage numberof shares usedin per share computationsof loss pershare:Basic and 24,204 23,301 24,131 23,321 diluted

Unaudited Reconciliation of GAAP to Non-GAAP Financial Measures(In thousands, except per share amounts)

Three Months Ended Six Months Ended June 30, June 30, 2021 2020 2021 2020 Unaudited Unaudited Unaudited UnauditedGAAP net loss $ (399 ) $ (1,077 ) $ (1,742 ) $ (3,542 )Equity-based compensationexpense included in cost of 185 129 346 249 revenuesEquity-based compensationexpense included in 1,305 826 2,447 1,577 research and development,netEquity-based compensationexpense included in sales 745 620 1,371 1,175 and marketingEquity-based compensationexpense included in general 770 706 1,371 1,112 and administrativeAmortization of intangible 429 104 848 208 assetsAmortization of employee?sretention expenses relatedto the acquisition of 67 - 134 - SoundChip included in costof revenuesAmortization of employee?sretention expenses relatedto the acquisition of 149 - 298 - SoundChip included in salesand marketingAmortization of employee?sretention expenses relatedto the acquisition of 34 - 68 - SoundChip included inresearch and development,netNon-cash expenses (income)from exchange ratesdifferences resulting from 177 255 (271 ) (161 )the lease accountingstandard (ASC 842)Expenses (income) fromchanges of deferred taxesrelated to intangible (256 ) 50 (399 ) (16 )assets and equity-basedcompensation expenseNon-GAAP net income $ 3,206 $ 1,613 $ 4,471 $ 602 Weighted-average number ofcommon stock used incomputation of GAAP diluted 24,204 23,301 24,131 23,321 net loss per share (inthousands) Weighted-average number ofshares related tooutstanding options, stock 1,585 1,663 1,509 1,572 appreciation rights andrestricted share units (inthousands) Weighted-average number ofcommon stock used incomputation of non-GAAP 25,789 24,964 25,640 24,893 diluted net earnings pershare (in thousands) GAAP diluted net loss per $ (0.02 ) $ (0.05 ) $ (0.07 ) $ (0.15 )shareEquity-based compensation 0.12 0.09 0.22 0.17 expenseAmortization of intangible 0.01 0.01 0.03 0.01 assetsAmortization of employee?sretention expenses related 0.01 - 0.02 - to the acquisition ofSoundChipNon-cash expenses (income)from Exchange ratesdifferences resulting from 0.01 0.01 (0.01 ) (0.01 )the lease accountingstandard (ASC 842)Income from changes ofdeferred taxes related tointangible assets and (0.01 ) - (0.02 ) - equity-based compensationexpenseNon-GAAP diluted net $ 0.12 $ 0.06 $ 0.17 $ 0.02 earnings per share

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

June 30, December 31, 2021 2020 (Unaudited) (Audited)Assets Current assets: Cash and cash equivalents $ 16,175 $ 16,936 Restricted deposits 574 548Marketable securities and short-term deposits 48,681 50,615 Trade receivables, net 13,502 11,003 Inventories 6,384 9,061 Other accounts receivable and prepaid expenses 5,111 3,460 Total current assets 90,427 91,623

Property and equipment, net 6,501 6,574 Long term marketable securities and deposits 64,507 60,454 Severance pay fund 15,331 16,285 Operating leases? right of use assets 10,386 11,102 Deferred income taxes 6,410 6,893 Intangible assets, net 19,632 20,654 Long term prepaid expenses and lease deposits 2,470 2,888 Total long-term assets 118,736 118,276 Total assets $ 215,664 216,473 Liabilities and Stockholders? Equity Current liabilities: Trade payables $ 11,197 $ 10,708 Operating lease liability 2,874 2,974 Other current liabilities 16,534 15,724 Total current liabilities 30,605 29,406 Accrued severance pay 15,797 16,647 Operating lease liability 9,182 10,075 Accrued pensions 1,058 1,089 Deferred income taxes 948 1,073 Other long-term liabilities 1,945 1,945 Total long term liabilities 28,930 30,829 Stockholders? equity: Common stock 24 24 Additional paid-in capital 401,921 396,335 Accumulated other comprehensive loss (970 ) (637 )Less ? Cost of treasury stock (107,717 ) (108,509 )Accumulated deficit (137,129 ) (130,975 )Total stockholders? equity 156,129 156,238 Total liabilities and stockholders? equity $ 215,664 $ 216,473