GlobeNewswire Inc | Nov 2, 2020 07:00AM EST

November 02, 2020

SAN JOSE, Calif., Nov. 02, 2020 (GLOBE NEWSWIRE) -- DSP Group, Inc. (NASDAQ: DSPG), a leading global provider of wireless chipset solutions for converged communications, announced today its results for the third quarter ended September 30, 2020.

Third Quarter Financial Highlights (and Comparison to Third Quarter of 2019):

-- Total revenues of $26.0 million, a 16% decrease: Revenues from IoAT (Internet of Audio Things) businesses of $13.5 million, a decrease of 28%. IoAT businesses accounted for 52% of total revenues in the quarter. Unified Communications segment revenues of $2.6 million, a decrease of 74%. SmartVoice segment revenues of $7.2 million, an increase of 45%. SmartHome segment revenues of $3.7 million, a decrease of 3%.Cordless revenues of $12.5 million, an increase of 2%. -- GAAP and non-GAAP gross margin of 50.8% and 51.6%, respectively, a 0 and 40 basis point increase, respectively. -- GAAP loss per share of $0.08 and non-GAAP diluted earnings per share of $0.05, compared to GAAP diluted earnings per share of $0.02 and non-GAAP diluted earnings per share of $0.10 for the third quarter of 2019. -- GAAP operating loss of $2.3 million and non-GAAP operating income of $1.0 million, compared to GAAP operating loss of $0.3 million and non-GAAP operating income of $1.7 million for the third quarter of 2019. -- GAAP net loss of $1.9 million and non-GAAP net income of $1.3 million, compared to GAAP net income of $0.5 million and non-GAAP net income of $2.5 million for the third quarter of 2019. -- Used $2.9 million of cash for operations, compared to $0.2 million of cash generated from operations in the third quarter of 2019. -- Used $13.9 million of net cash for the acquisition of SoundChip S.A., closed early July 2020. -- Cash, deposits and marketable securities of approximately $120.1 million as of September 30, 2020.

Management Comments:

Commenting on the results, Ofer Elyakim, CEO of DSP Group, stated: Our third quarter results reflect short-term disruptions to our business brought about by the pandemic, while highlighting the strategic importance and long-term growth potential of DSP Group's audio, voice, and connectivity technologies. We ended the quarter with revenues of $26.0 million, meeting the mid-point of our guidance range. Nevertheless, we are disappointed by our top-line results, which were negatively impacted by an expected yet acute decline in our Unified Communications revenues. We view this weakness as temporary and expect demand to recover as businesses shift to hybrid working models combining on-premise and remote work. Moreover, we successfully delivered record non-GAAP gross margins and reported record-high quarterly revenues in our SmartVoice business. The latter further underscores the positive impact of voice-centric market trends. In particular, our business is directly benefitting from increased adoption of voice user interfaces, a surge in voice call traffic, and demand for intuitive, seamless, and reliable collaboration tools.

Mr. Elyakim continued, Looking ahead to the fourth quarter of 2020, we are optimistic about the business momentum and our outlook. While industry-wide supply chain constraints are placing certain limitations on our product deliveries, we are experiencing improving end market demand across our different businesses, and we expect our fourth quarter revenues to grow both sequentially and year over year. We are excited about the momentum of our business as our products and technologies play a pivotal role in accelerating voice-centric market trends. We believe that our leadership in voice AI, IoT and hearables, following the acquisition and successful integration of SoundChip, brings a more diversified product offering and positions us well for sustainable long-term growth.

Third 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: Shipped the 100 millionth SmartVoice SoC, a milestone event that demonstrates the importance of voice as a user interface in applications ranging from mobile computing to entertainment and IoT.GoPro launched its new Hero9 with our SmartVoice technology integrated for always on voice.Lenovo and a leading mobile OEM launched a number of new tablet products with our SmartVoice solutions supporting multiple simultaneous wake word detection. -- 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:ADT launched Blue by ADT, a line of sensors and hub targeting the DIY security market based on our ULE and SmartVoice solutions.Deutsche Telekom launched its Speedport Pro Plus, a premium router for Wi-Fi 6 networks integrating our DECT/ULE SoC.Joined the Project Connected Home over IP (CHIP) initiative. -- Solidified our leadership position and expanded our market share in the Unified Communications market, as demonstrated by the following business wins:A Tier-1 OEM launched its top-of-the-line IP phone based on our DVF101 chipset for enhanced communications capabilities.Yealink launched the W59R professional DECT handset, the first product to integrate the new and advanced LC3Plus audio codec, based on our chipset.Panasonic launched the KX-TGP700, the first 16-line/16-handset single-cell DECT solution based on our DCX and DVF SoCs.

Third Quarter GAAP Results:

Revenues for the third quarter of 2020 were $26.0 million, a decrease of 16% from revenues of $31 million for the third quarter of 2019. Net loss and loss per share for the third quarter of 2020 were $1.9 million and $0.08, respectively. Net earnings and diluted earnings per share for the third quarter of 2019 were $0.5 million and $0.02, respectively.

Third Quarter Non-GAAP Results:Non-GAAP net income and diluted earnings per share for the third quarter of 2020 were $1.3 million and $0.05, respectively, as compared to non-GAAP net income and diluted earnings per share of $2.5 million and $0.10, respectively, for the third quarter of 2019. Non-GAAP net income and diluted earnings per share for the third 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 $2.4 million, non-cash expenses from exchange rate differences resulting from the new lease accounting standard (ASC 842) in the amount of $0.1 million, transaction expenses related to the acquisition of SoundChip in amount of $0.25 million and amortization of employees retention expenses related to the acquisition of SoundChip in amount of $0.25 million and income resulting from changes in deferred taxes in the amount of $0.2 million related to intangible assets acquired in current and previous acquisitions and equity-based compensation expenses. Non-GAAP net income and diluted earnings per share for the third 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 $1.9 million, non-cash expenses from exchange rate differences resulting from ASC 842 in the amount of $0.2 million, and 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 third quarter financial results, along with its outlook and guidance for the fourth quarter of 2020, 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 +1 877 870 9135 (domestic US) or +44 (0) 2071 928338 (international) approximately 10 minutes prior to the starting time. The password is 4187784.

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/hvdbb6wy

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: 4187784#

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 third quarter ended September 30, 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 strategic importance and long-term growth potential of the companys audio, voice and connectivity technologies, (ii) decline in Unified Communications revenues being temporary and the companys expectation that demand will recover as businesses shift to hybrid working models, (iii) positive impact of voice-centric market trends to the companys business, which is directly benefitting from increased adoption of voice user interface, a surge in voice call traffic and demand for intuitive, seamless, and reliable collaboration tools, (iv) the companys optimism about the business outlook which is characterized by improved end market demand across its different businesses, (v) the expectation of industry-wide supply chain constraints placing certain limitations on the companys product deliveries, (vi) the companys expectation that its fourth quarter revenues to grow both sequentially and year over year, (vii) the companys products and technologies play a pivotal role in accelerating voice-centric market trends, and (viii) the companys leadership in voice AI, IoT and hearables, following the SoundChip acquisition, brings a more diversified product offering and positions the company well for sustainable long-term growth. 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 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 supply chain constraints 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 GroupDSP 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

THIRD QUARTER 2020 RESULTS - INFOGRAPHIC



DSP GROUP, INC.CONSOLIDATED STATEMENTS OF INCOME(In thousands, except per share amounts) Three Months Ended Nine Months Ended September 30 September 30 2020 2019 2020 2019 (Unaudited) (Unaudited) (Unaudited) (Unaudited) Revenues $ 26,020 $ 31,042 $ 82,595 $ 88,352 Cost of 12,814 15,262 40,747 43,697 revenues Gross profit 13,206 15,780 41,848 44,655Operating expenses:Research anddevelopment, 8,122 9,244 26,931 26,725 netSales and 4,117 4,311 13,563 13,180 marketingGeneral and 2,864 2,388 7,839 7,617 administrativeAmortizationof intangible 427 104 636 312 assets

Total operating 15,530 16,047 48,969 47,834expenses Operating loss (2,324 ) (267 ) (7,121 ) (3,179 ) Financial 343 416 1,535 1,129 income, net

Income (loss) before taxes (1,981 ) 149 (5,586 ) (2,050 )on income

Income tax (90 ) (335 ) (152 ) (947 )benefit

Net Income $ (1,891 ) $ 484 $ (5,434 ) $ (1,103 )(loss)Net earnings(loss) per share:Basic $ (0.08 ) $ 0.02 $ (0.23 ) $ (0.05 )Diluted $ (0.08 ) $ 0.02 $ (0.23 ) $ (0.05 )Weightedaverage numberof shares usedin per share computationsof earnings(loss) pershare:Basic 23,562 22,957 23,399 22,752 Diluted 23,562 23,940 23,399 22,752

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

Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 Unaudited Unaudited Unaudited UnauditedGAAP net income (loss) $ (1,891 ) $ 484 $ (5,434 ) $ (1,103 )Equity-based compensationexpense included in cost of 142 109 391 346 revenuesEquity-based compensationexpense included in 946 677 2,523 2,202 research and development,netEquity-based compensationexpense included in sales 646 442 1,821 1,318 and marketingEquity-based compensationexpense included in general 699 645 1,811 1,972 and administrativeAmortization of employee?sretention expenses relatedto the acquisition of 67 - 67 - SoundChip included in costof revenuesAmortization of employee?sretention expenses relatedto the acquisition of 149 - 149 - SoundChip included in salesand marketingAmortization of employee?sretention expenses relatedto the acquisition of 34 - 34 - SoundChip included inresearch and development,netTransaction expensesrelated to the acquisition 249 - 249 - of SoundChipAmortization of intangible 427 104 636 312 assetsNon-cash expenses (income)from exchange ratesdifferences resulting from 90 210 (71 ) 723 lease accounting standard(ASC 842)Income from changes ofdeferred taxes related tointangible assets and (232 ) (135 ) (249 ) (322 )equity-based compensationexpenseNon-GAAP net income $ 1,326 $ 2,536 $ 1,927 $ 5,448 Weighted-average number ofcommon stock used incomputation of GAAP diluted 23,562 23,940 23,399 22,752 net earnings (loss) pershare (in thousands) Weighted-average number ofshares related tooutstanding options, stock 1,565 438 1,616 1,445 appreciation rights andrestricted share units (inthousands) Weighted-average number ofcommon stock used incomputation of non-GAAP 25,127 24,378 25,015 24,197 diluted net earnings pershare (in thousands) GAAP diluted net earnings $ (0.08 ) $ 0.02 $ (0.23 ) $ (0.05 )(loss) per shareEquity-based compensation 0.09 0.07 0.27 0.25 expenseAmortization of intangible 0.02 0.01 0.03 0.01 assetsTransaction expensesrelated to the acquisition 0.01 - 0.01 - of SoundChipAmortization of employee?sretention expenses related 0.01 - 0.01 - to the acquisition ofSoundChipNon-cash expenses fromExchange rates differencesresulting from lease 0.01 0.01 - 0.03 accounting standard (ASC842)Income from changes ofdeferred taxes related tointangible assets and (0.01 ) (0.01 ) (0.01 ) (0.01 )equity-based compensationexpenseNon-GAAP diluted net $ 0.05 $ 0.10 $ 0.08 $ 0.23 earnings per share

DSP GROUP, INC.CONSOLIDATED BALANCE SHEETS(In thousands) September 30, December 31, 2020 2019 (Unaudited) (Audited)Assets Current assets: Cash and cash equivalents $ 16,648 $ 28,737 Restricted deposits 517 518Marketable securities and short-term deposits 47,415 39,141 Trade receivables, net 11,602 15,382 Inventories 8,190 7,464 Other accounts receivable and prepaid expenses 5,086 3,551 Total current assets 89,458 94,793

Property and equipment, net 6,735 6,805 Long term marketable securities and deposits 55,555 62,884Severance pay fund 15,743 15,800 Operating leases? right of use assets 11,268 11,655 Deferred income taxes 6,963 6,377 Intangible assets, net 21,030 6,904 Long term prepaid expenses and lease deposits 2,130 707 Total long-term assets 112,689 104,327

Total assets $ 208,882 $ 205,925 Liabilities and Stockholders? EquityCurrent liabilities: Trade payables $ 7,842 $ 8,511 Operating lease liability 2,651 2,569 Other current liabilities 14,072 14,159 Total current liabilities 24,565 25,239 Accrued severance pay 16,110 16,074 Operating lease liability 9,888 10,436 Accrued pensions 1,021 963 Deferred income taxes 1,138 119 Other long-term liabilities 1,945 - Total long-term liabilities 30,102 27,592 Stockholders? equity: Common stock 24 23 Additional paid-in capital 393,168 386,534 Accumulated other comprehensive loss (688 ) (889 )Less ? Cost of treasury stock (109,670 ) (113,862 )Accumulated deficit (128,619 ) (118,712 )Total stockholders? equity 154,215 153,094 Total liabilities and stockholders? equity $ 208,882 $ 205,925