GlobeNewswire Inc | Nov 3, 2021 07:35AM EDT

November 03, 2021

Third Quarter Revenues of $37.8 Million, an Increase of 45% YoYGAAP and Non-GAAP Gross Margins of 55.3% and 55.7%, respectively

SAN JOSE, Calif., Nov. 03, 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 third quarter ended September 30, 2021.

Third Quarter Financial Highlights (and Comparison to Third Quarter of 2020):Revenue breakdown (USD in millions)

Q3 2021 Q3 2020 vs. Q3 2020IoAT Revenues: SmartVoice $5.96 $7.20 down 17%SmartHome $6.86 $3.69 up 86%Unified Communications $14.42 $2.59 up 458%Total IoAT Revenues $27.24 $13.48 up 102%Cordless Revenues $10.52 $12.54 down 16%Total Revenues $37.76 $26.02 up 45%

-- GAAP and non-GAAP gross margin of 55.3% and 55.7%, respectively, a 460 and 420 basis point increase compared to the third quarter of 2020, respectively. -- GAAP zero loss per share and non-GAAP diluted earnings per share of $0.16, compared to GAAP loss per share of $0.08 and non-GAAP diluted earnings per share of $0.05 for the third quarter of 2020. -- GAAP operating income of $0.3 million and non-GAAP operating income of $4.5 million, compared to GAAP operating loss of $2.3 million and non-GAAP operating income of $1.0 million for the third quarter of 2020. -- GAAP net loss of less than $0.1 million and non-GAAP net income of $4.1 million, compared to GAAP net loss of $1.9 million and non-GAAP net income of $1.3 million for the third quarter of 2020. -- Generated $4.4 million of cash from operations, compared to $2.9 million of cash used in operations in the third quarter of 2020. -- Cash, deposits and marketable securities of approximately $133.4 million as of September 30, 2021.

Management Comments:Commenting on the results, Ofer Elyakim, CEO of DSP Group, stated: We are delighted that we have been able to execute a successful business transformation of DSP Group as evidenced by the substantially improved results on multiple fronts and culminating in the proposed acquisition by Synaptics. We believe this proposed combination will provide a great result for our stockholders who have supported us through this journey.

Third Quarter Non-GAAP Results:Non-GAAP net income and diluted earnings per share for the third quarter of 2021 were $4.1 million and $0.16, respectively, as compared to non-GAAP net income and diluted earnings per share of $1.3 million and $0.05, respectively, for the third quarter of 2020. Non-GAAP net income and diluted earnings per share for the third quarter of 2021 excluded the impact of amortization of acquired intangible assets in the amount of $0.3 million associated with previous acquisitions, equity-based compensation expenses of $2.7 million, $1.1 million of transaction costs related to the anticipated acquisition by Synaptics Incorporation, amortization of employee retention expenses related to the SoundChip acquisition of $0.03 million, non-cash expenses from exchange rate differences resulting from the lease accounting standard (ASC 842) in the amount of $0.04 million, and income resulting from changes in deferred taxes in the amount of $0.03 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 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 ASC 842 in the amount of $0.1 million, transaction expenses related to the acquisition of SoundChip in amount of $0.25 million, 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.

Proposed acquisition of DSP Group by SynapticsAs announced on August 30, 2021, DSP Group entered into an agreement and plan of merger with Synaptics Incorporated ("Synaptics") and a wholly-owned subsidiary of Synaptics. Under the terms of the merger agreement, Synaptics will acquire all outstanding shares of DSP Group common stock for a per share price of $22.00 in cash. DSP Groups Board of Directors unanimously approved the transaction and DSP Group filed definitive proxy materials with the Securities and Exchange Commission on October 25, 2021. The definitive proxy materials were mailed to DSP Groups stockholders of record as of October 18, 2021 for a special meeting of stockholders to vote on the merger and other matters. The virtual special meeting is scheduled for Monday, November 29, 2021 at 1:00 p.m. Pacific Time. The consummation of the merger is subject to approval by the stockholders of DSP Group and the satisfaction of other conditions set forth in the merger agreement. Subject to the satisfaction of the closing conditions to the merger, we currently expect to complete the transaction by year end.

In light of the pending transaction, DSP Group will not host an earnings conference call and will not provide guidance relating to its expected financial results for future periods.

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.

Additional Information and Where to Find It

In connection with the merger transaction, DSP Group filed definitive proxy materials with the SEC on October 25, 2021 and mailed such materials and a proxy card to each stockholder of record as of October 18, 2021. STOCKHOLDERS OF DSP GROUP ARE URGED TO READ THESE MATERIALS, INCLUDING ANY AMENDMENTS OR SUPPLEMENTS THERETO, AND ANY OTHER RELEVANT DOCUMENTS IN CONNECTION WITH THE TRANSACTION THAT DSP GROUP HAS FILED OR WILL FILE WITH THE SEC WHEN THEY BECOME AVAILABLE BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT DSP GROUP AND THE TRANSACTION. The definitive proxy statement and other relevant materials for DSP Group stockholders in connection with the transaction, and any other documents filed by DSP Group with the SEC, may be obtained free of charge at the SEC's website ( http://www.sec.gov) or at DSP Group's website ( http://www.dspg.com) or by writing to DSP Group at 2055 Gateway Place, San Jose, California 95110, attention Investor Relations.

Participants in the Solicitation

DSP Group and certain of its directors and executive officers and other members of management and employees may be deemed to be participants in the solicitation of proxies from DSP Groups stockholders with respect to the transaction. Information about DSP Groups directors and executive officers and their ownership of DSP Group's common stock, as well as their direct and indirect interests in the transaction, are set forth in DSP Groups definitive proxy materials filed with the SEC on October 25, 2021, and subsequent changes made by such persons on Statements of Changes in Ownership on Form 4 filed with the SEC.

Legal Notice Regarding Forward-Looking Statements

This release contains forward-looking statements that are subject to the safe harbors created under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business, including the expected timetable for completing the transaction, and can be identified by the fact that they do not relate strictly to historical or current facts. Such forward-looking statements may include words such as "expect," "anticipate," "intend," "believe," "estimate," "plan," target, strategy, continue, may, will, should, variations of such words, or other words and terms of similar meaning. All forward-looking statements reflect our best judgment and are based on several factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control. Such factors include, but are not limited to, the possibility that various conditions to the consummation of the proposed transaction between Synaptics and DSP Group will not be satisfied or waived, and the adverse impact associated with the announcement or pendency of the proposed transaction on the business relationships, operating results and employees of DSP Group, and other risks as identified from time to time in the SEC reports of DSP Group. Forward-looking statements are based on information available to DSP Group on the date hereof, and DSP Group expressly disclaims any obligation to publicly release any updates or any changes in expectations, or any change in events, conditions, or circumstances on which any forward-looking statement is based. Actual results and the timing of certain events could differ materially from the forward-looking statements.

Contact:Claus StetterVice President of Marketing & Communications DSP Group Inc.+1 +(650) 521 4082claus.stetter@dspg.com

DSP GROUP, INC.CONSOLIDATED STATEMENTS OF INCOME(In thousands, except per share amounts) Three Months Ended September Nine Months Ended September 30 30 2021 2020 2021 2020 (Unaudited) (Unaudited) (Unaudited) (Unaudited) Revenues $ 37,756 $ 26,020 $ 106,210 $ 82,595 Cost of 16,868 12,814 49,210 40,747 revenues Gross profit 20,888 13,206 57,000 41,848 Operating expenses:Research anddevelopment, 10,933 8,122 32,043 26,931 netSales and 5,292 4,117 15,820 13,563 marketingGeneral and 4,012 2,864 9,826 7,839 administrativeAmortizationof intangible 349 427 1,197 636 assets Totaloperating 20,586 15,530 58,886 48,969 expenses Operating 302 (2,324 ) (1,886 ) (7,121 )income (loss) Financial 216 343 951 1,535 income, net Income (loss)before taxes 518 (1,981 ) (935 ) (5,586 )on incomeIncome taxexpenses 548 (90 ) 837 (152 )(benefit) Net loss $ (30 ) $ (1,891 ) $ (1,772 ) $ (5,434 )Net loss per share:Basic and $ (0.00 ) $ (0.08 ) $ (0.07 ) $ (0.23 )dilutedWeightedaverage numberof shares usedin per share computationsof loss pershare:Basic and 24,141 23,562 24,134 23,399 diluted



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, 2021 2020 2021 2020 Unaudited Unaudited Unaudited UnauditedGAAP net income (loss) $ (30 ) $ (1,891 ) $ (1,772 ) $ (5,434 )Equity-based compensationexpense included in cost of 157 142 503 391 revenuesEquity-based compensationexpense included in 1,161 946 3,608 2,523 research and development,netEquity-based compensationexpense included in sales 646 646 2,017 1,821 and marketingEquity-based compensationexpense included in general 713 699 2,084 1,811 and administrativeAmortization of employee?sretention expenses relatedto the acquisition of - 67 134 67 SoundChip included in costof revenuesAmortization of employee?sretention expenses relatedto the acquisition of - 149 298 149 SoundChip included in salesand marketingAmortization of employee?sretention expenses relatedto the acquisition of 34 34 102 34 SoundChip included inresearch and development,netTransaction expensesrelated to the acquisition - 249 - 249 of SoundChipTransaction expensesrelated to the anticipated 1,096 - 1,096 - acquisition by SynapticsAmortization of intangible 349 427 1,197 636 assetsNon-cash expenses (income)from exchange ratesdifferences resulting from 44 90 (227 ) (71 )lease accounting standard(ASC 842)Income from changes ofdeferred taxes related tointangible assets and (34 ) (232 ) (432 ) (249 )equity-based compensationexpenseNon-GAAP net income $ 4,136 $ 1,326 $ 8,608 $ 1,927 Weighted-average number ofcommon stock used incomputation of GAAP diluted 24,141 23,562 24,134 23,399 net loss per share (inthousands) Weighted-average number ofshares related tooutstanding options, stock 1,494 1,565 1,505 1,616 appreciation rights andrestricted share units (inthousands) Weighted-average number ofcommon stock used incomputation of non-GAAP 25,635 25,127 25,639 25,015 diluted net earnings pershare (in thousands) GAAP diluted net loss per $ (0.00 ) $ (0.08 ) $ (0.07 ) $ (0.23 )shareEquity-based compensation 0.11 0.09 0.32 0.27 expenseAmortization of intangible 0.01 0.02 0.05 0.03 assetsTransaction expensesrelated to the acquisition - 0.01 - 0.01 of SoundChipAmortization of employee?sretention expenses related - 0.01 0.02 0.01 to the acquisition ofSoundChipNon-cash expenses fromExchange rates differencesresulting from lease - 0.01 (0.01 ) - accounting standard (ASC842)Transaction expensesrelated to the anticipated 0.04 - 0.04 - acquisition by SynapticsIncome from changes ofdeferred taxes related tointangible assets and - (0.01 ) (0.01 ) (0.01 )equity-based compensationexpenseNon-GAAP diluted net $ 0.16 $ 0.05 $ 0.34 $ 0.08 earnings per share

DSP GROUP, INC.CONSOLIDATED BALANCE SHEETS(In thousands) September 30, December 31, 2021 2020 (Unaudited) (Audited)Assets Current assets: Cash and cash equivalents $ 20,422 $ 16,936 Restricted deposits 579 548 Marketable securities and short-term deposits 52,945 50,615 Trade receivables, net 18,019 11,003 Inventories 7,009 9,061 Other accounts receivable and prepaid expenses 3,359 3,460 Total current assets 102,333 91,623 Property and equipment, net 6,252 6,574 Long term marketable securities and deposits 59,434 60,454 Severance pay fund 15,655 16,285 Operating leases? right of use assets 10,315 11,102 Deferred income taxes 6,012 6,893 Intangible assets, net 19,303 20,654 Long term prepaid expenses and lease deposits 2,498 2,888 Total long-term assets 113,217 118,276 Total assets $ 221,802 216,473 Liabilities and Stockholders? Equity Current liabilities: Trade payables $ 11,259 $ 10,708 Operating lease liability 3,020 2,974 Other current liabilities 19,063 15,724 Total current liabilities 33,342 29,406 Accrued severance pay 16,164 16,647 Operating lease liability 9,003 10,075 Accrued pensions 1,016 1,089 Deferred income taxes 898 1,073 Other long-term liabilities 1,945 1,945 Total long term liabilities 29,026 30,829 Stockholders? equity: Common stock 24 24 Additional paid-in capital 404,806 396,335 Accumulated other comprehensive loss (1,071 ) (637 )Less ? Cost of treasury stock (105,727 ) (108,509 )Accumulated deficit (138,598 ) (130,975 )Total stockholders? equity 159,434 156,238 Total liabilities and stockholders? equity $ 221,802 $ 216,473