Growth Initiatives Account for 58% of
Revenues; VoIP Revenues Reach a Record $12.1
Million;GAAP and Non GAAP Gross Margins of 50.0%
and 50.3%, Respectively, Exceeding Guidance
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, 2018.
Third Quarter Financial
Highlights:
- Total revenues of $32.6 million, a year-over-year decrease of
5%:
- Revenues from growth initiatives of $18.9 million, accounted
for 58% of total revenues, a year-over-year increase of 18%.
- Office/VoIP segment revenues of $12.1 million, a year-over-year
increase of 20%.
- SmartVoice segment revenues of $3.0 million, a year-over-year
increase of 123%.
- SmartHome segment revenues of $3.8 million, a year-over-year
decrease of 17%.
- Revenues from cordless products of $13.7 million accounted for
42% of total revenues, a year-over-year decrease of 25%.
- GAAP and non-GAAP gross margin of 50.0% and 50.3%, reflecting a
year-over-year improvement of 330 bps and 340 bps,
respectively.
- GAAP operating income of $0.3 million and non-GAAP operating
income of $2.4 million, compared to GAAP operating income of
$0.3 million and non-GAAP operating income of $2.1 million for
the third quarter of 2017.
- GAAP net income of $0.4 million and non-GAAP net income of $2.6
million, compared to GAAP net income of $0.6 million and
non-GAAP net income of $2.3 million for the third quarter of
2017.
- GAAP income per share of $0.02 and non-GAAP diluted earnings
per share of $0.11, compared to GAAP income per share of $0.02 and
non-GAAP diluted earnings per share of $0.10 for the third quarter
of 2017.
- Used less than $0.1 million of cash for operating activities,
compared to $1.7 million of cash used for operating activities
during the third quarter of 2017.
- Repurchased during the third quarter of 2018 approximately
313,000 shares for a total consideration of $3.9 million, $7.8
million left for repurchase under the existing share buyback
program.
- Cash, deposits and marketable securities of approximately
$119.7 million as of September 30, 2018.
Management Comments:
Commenting on the results, Ofer Elyakim, CEO of
DSP Group, stated, “We are pleased with our third quarter results
that were better than our guidance, and especially with our growth
initiatives comprising 58% of revenues and increasing 18%
year-over-year, thereby driving GAAP and non-GAAP gross margin
expansion to 50.0% and 50.3%, respectively. We are also confident
that we are well positioned for 2019 as a result of solid momentum
and recent design wins in our growth initiatives. For
instance, in our SmartVoice segment, we recently secured wins with
six of the world’s leading brands in consumer electronics,
including a tier 1 Chinese smartphone OEM.”
Mr. Elyakim added, “While these and other design
wins set us up well for 2019, we do expect a decline in the fourth
quarter, which will negatively impact our full year 2018 results,
mainly due to weaker quarterly demand for cordless that we
attribute primarily to a supply chain correction, as well as timing
of orders for SmartHome and Office/VoIP products. We believe the
anticipated decline in the fourth quarter is temporary as our
existing design wins, pipeline and customer demand continue to
strengthen across our growth initiatives and position us well for
future growth. Additionally, we expect these initiatives to be
important revenue contributors next year and to account for over
two thirds of our total sales.”
Mr. Elyakim added further, “As separately
announced today, we are delighted to welcome Eric Stauffer as DSP
Group’s new Chief Revenue Officer in charge of global sales, and
based in Silicon Valley. Eric joins DSP Group at an exciting
time and we look forward to his contributions to the leadership and
growth of our company.”
Third Quarter Financial
Highlights:
- Continue to extend our position in the unified communications
market as demonstrated by our design wins with leading OEMs and a
record revenue quarter:
- Cisco launched its new unified communication wireless headsets
based on our DVF and DCX81 chipsets.
- Cisco launched a new line of IP phone expansion modules, its
6800 and 8851/61, based on our DVF9919 SoC.
- Snom Technology, a leading European IP phone vendor, launched
its D735, a new top-line IP phone, based on our DVF9919 SoC.
- Continue to grow our engagement pipeline and design wins for
voice as a user interface with leading consumer electronics OEMs,
thereby helping to drive growth of a burgeoning new market:
- A leading Korean OEM launched a series of tablet models based
on our SmartVoice SoC.
- A tier 1 Chinese smartphone OEM selected our SmartVoice SoC for
a high volume smartphone model launching in the first quarter of
2019.
- A leading camera OEM selected our SmartVoice technology for its
new line of action cameras.
- Jabra selected our SmartVoice technology for its new
BlueParrott B550 Bluetooth headset.
- A tier 1 home networking OEM selected our SmartVoice technology
for its new Wi-Fi security camera.
- A leading Turkish smartphone OEM selected our SmartVoice
technology for its new smartphone model.
- Continue to expand ULE reach into new markets with innovative
products that leverage ULE’s unmatched characteristics for wireless
indoor IoT:
- Deutsche Telekom selected our DECT ULE SoC solution for its new
smart speaker with two-way HD voice to support hands-free calling
from the speaker.
- Zipato, a leading European provider in home automation,
incorporated our DECT ULE SoC solution into their new home
automation controller - Zipatile2.
- AwoX, a leading European smart lighting provider, incorporated
our DECT ULE SoC solution into their new connected LED bulb
products.
Third Quarter GAAP Results:
Revenues for the third quarter of 2018 were
$32.6 million, a decrease of 5% from revenues of $34.3 million for
the third quarter of 2017. Net income and diluted earnings
per share for the third quarter of 2018 were $0.4 million and
$0.02, respectively. Net income and diluted earnings per share for
the third quarter of 2017 were $0.6 million and $0.02,
respectively.
Third Quarter Non-GAAP
Results:Non-GAAP net income and diluted earnings per share
for the third quarter of 2018 were $2.6 million and $0.11,
respectively, as compared to non-GAAP net income and diluted
earnings per share of $2.3 million and $0.10, respectively, for the
third quarter of 2017. Non-GAAP net income and diluted
earnings per share for the third quarter of 2018 excluded the
impact of amortization of acquired intangible assets in the amount
of $425,000 associated with previous acquisitions and equity-based
compensation expenses of $1.8 million. Non-GAAP net income and
diluted earnings per share for the third quarter of 2017 excluded
the impact of amortization of acquired intangible assets of
$425,000 associated with previous acquisitions, equity-based
compensation expenses of $1.4 million, and changes in deferred
taxes in the amount of $157,000 related to intangible assets
acquired in previous acquisitions and equity-based compensation
expenses.
Earnings Conference Call
Details DSP Group will discuss its first quarter financial
results, along with its outlook and guidance for the fourth quarter
of 2018, 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 +1 800 458 4121 (domestic US) or +1 929 477 0324
(international) approximately 10 minutes prior to the starting
time. The password is 8368261. The broadcast via the Internet can
be accessed by all interested parties through the Investor
Relations section of DSP Group’s website at www.dspg.com or link
to: https://edge.media-server.com/m6/p/sg9ez874
A replay of the conference call will be
available for a week following the call. To listen to the session,
please dial +1 719 457 0820 (domestic US) or +44 20 7660 0134
(international) and enter the company access code: 8368261#.
Presentation of Non-GAAP Net Income and
EPSThe Company believes that the non-GAAP presentation of
net income and diluted earnings per share presented in this press
release is useful to investors in comparing results for the quarter
ended September 30, 2018 to the same period in 2017 because the
exclusion of the above noted expenses may provide a more meaningful
analysis of the Company’s core operating results. Further, the
Company believes it is useful to investors to understand how the
expenses associated with equity-based compensation are reflected in
its statements of income.
Forward Looking Statements This
press release contains statements that qualify as “forward-looking
statements” under the Private Securities Litigation Reform Act of
1995, including Mr. Elyakim’s statements that (i) the company is
well positioned for 2019 due to solid momentum and recent design
win in its growth initiatives, (ii) there will be a decline in the
fourth quarter, which will negatively impact the company’s full
year 2018 results and the company’s rationale for such decline,
including the temporary nature of some of the factors, (iii)
confidence that the company’s design wins, pipeline and customer
demand in the growth initiatives will continue to strengthen and
position the company well for future growth, and (iv) the
expectation that the growth initiatives to be important revenue
contributors and will account for over 2/3 of the total revenues in
2019. The results from these statements may not actually arise as a
result of various factors, including the market penetration of new
products such as products with Voice User Interface; unexpected
delays in the commercial launch of new products; speed of decline
in the cordless market; DSP Group's ability to manage costs; DSP
Group’s 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 Group’s technology in the market.
These factors and other factors which may affect future operating
results or DSP Group’s stock price are discussed under “RISK
FACTORS” in the Form 10-K for fiscal 2017, as well as other reports
DSP Group has filed with the Securities and Exchange Commission and
which are available on DSP Group’s 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 leading global provider of wireless chipset
solutions for converged communications. Delivering semiconductor
system solutions with software and hardware reference designs, DSP
Group enables OEMs/ODMs, consumer electronics (CE) manufacturers
and service providers to cost-effectively develop new
revenue-generating products with fast time to market. At the
forefront of semiconductor innovation and operational excellence
for over two decades, DSP Group provides a broad portfolio of
wireless chipsets integrating DECT/CAT-iq, ULE, Wi-Fi, PSTN,
HDClear™, video and VoIP technologies. DSP Group enables converged
voice, audio, video and data connectivity across diverse mobile,
consumer and enterprise products – from mobile devices, connected
multimedia screens, and home automation & security to cordless
phones, VoIP systems, and home gateways. Leveraging
industry-leading experience and expertise, DSP Group partners with
CE manufacturers and service providers to shape the future of
converged communications at home, office and on the go. For more
information, visit
www.dspg.com.
Contact:Daniel Amir Corporate
Vice President, Business Development, Strategy and Investor
RelationsWork: 1-415-726-5900, Daniel.amir@dspg.com
DSP GROUP,
INC. CONSOLIDATED STATEMENTS OF
INCOME (In thousands, except per share
amounts)
| |
|
Three Months EndedSeptember 30 |
Nine Months EndedSeptember 30 |
| |
|
2018 |
2017 |
2018 |
2017 |
| |
|
(Unaudited) |
(Unaudited) |
(Unaudited) |
(Unaudited) |
| |
|
|
|
|
|
|
Revenues |
|
$ |
32,619 |
$ |
34,277 |
$ |
91,381 |
|
$ |
93,511 |
|
| Cost of revenues |
|
|
16,315 |
|
18,270 |
|
46,311 |
|
|
50,760 |
|
| Gross profit |
|
|
16,304 |
|
16,007 |
|
45,070 |
|
|
42,751 |
|
| Operating expenses: |
|
|
|
|
|
| Research and development, net |
|
|
9,614 |
|
9,214 |
|
27,503 |
|
|
27,565 |
|
| Sales and marketing |
|
|
3,640 |
|
3,635 |
|
11,468 |
|
|
10,640 |
|
| General and administrative |
|
|
2,362 |
|
2,483 |
|
7,612 |
|
|
7,342 |
|
| Amortization of intangible assets |
|
|
425 |
|
425 |
|
1,276 |
|
|
1,275 |
|
| Total operating expenses |
|
|
16,041 |
|
15,757 |
|
47,859 |
|
|
46,822 |
|
| Operating income (loss) |
|
|
263 |
|
250 |
|
(2,789 |
) |
|
(4,071 |
) |
| |
|
|
|
|
|
| Financial income, net |
|
|
492 |
|
382 |
|
1,291 |
|
|
1,216 |
|
| Income
(loss) before taxes on income |
|
|
755 |
|
632 |
|
(1,498 |
) |
|
(2,855 |
) |
| Income tax
expenses |
|
|
350 |
|
54 |
|
139 |
|
|
19 |
|
| Net Income
(loss) |
|
$ |
405 |
$ |
578 |
$ |
(1,637 |
) |
$ |
(2,874 |
) |
| Net earnings (loss) per share: |
|
|
|
|
|
| Basic |
|
$ |
0.02 |
$ |
0.03 |
$ |
(0.07 |
) |
$ |
(0.13 |
) |
| Diluted |
|
$ |
0.02 |
$ |
0.02 |
$ |
(0.07 |
) |
$ |
(0.13 |
) |
| |
|
|
|
|
|
| Weighted average number
of shares used in per share computations of earnings (loss)
per share: |
|
|
|
|
|
|
| Basic |
|
|
22,449 |
|
22,276 |
22,603 |
|
|
22,186 |
|
| Diluted |
|
|
23,338 |
|
23,243 |
22,603 |
|
|
22,186 |
|
| 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, |
|
|
|
|
2018 |
2017 |
2018 |
2017 |
|
|
|
|
Unaudited |
Unaudited |
Unaudited |
Unaudited |
| GAAP net
income (loss) |
|
|
$ |
405 |
$ |
578 |
|
$ |
(1,637 |
) |
$ |
(2,874 |
) |
| Equity-based
compensation expense included in cost of revenues |
|
|
|
114 |
|
84 |
|
|
320 |
|
|
275 |
|
| Equity-based
compensation expense included in research and development, net |
|
|
|
781 |
|
576 |
|
|
2,134 |
|
|
1,815 |
|
| Equity-based
compensation expense included in sales and marketing |
|
|
|
283 |
|
273 |
|
|
954 |
|
|
870 |
|
| Equity-based
compensation expense included in general and administrative |
|
|
|
574 |
|
505 |
|
|
1,703 |
|
|
1,566 |
|
| Amortization of
intangible assets |
|
|
|
425 |
|
425 |
|
|
1,276 |
|
|
1,275 |
|
| Changes of deferred
taxes related to intangible assets and equity-based compensation
expense |
|
|
|
39 |
|
(157 |
) |
|
(342 |
) |
|
(319 |
) |
| Non-GAAP net
income |
|
|
$ |
2,621 |
$ |
2,284 |
|
$ |
4,408 |
|
$ |
2,608 |
|
|
|
|
|
|
|
|
|
|
Weighted-average number of common stock used in computation of GAAP
diluted net earnings (loss) per share (in thousands) |
|
|
|
23,338 |
|
23,243 |
|
|
22,603 |
|
|
22,186 |
|
|
|
|
|
|
|
|
|
|
Weighted-average number of shares related to outstanding options,
stock appreciation rights and restricted share units (in
thousands) |
|
|
|
420 |
|
392 |
|
|
1,355 |
|
|
1,404 |
|
|
|
|
|
|
|
|
|
|
Weighted-average number of common stock used in computation of
non-GAAP diluted net earnings per share (in thousands) |
|
|
|
23,758 |
|
23,635 |
|
|
23,958 |
|
|
23,590 |
|
|
|
|
|
|
|
|
|
|
GAAP diluted net income (loss) per
share |
|
|
$ |
0.02 |
$ |
0.02 |
|
$ |
(0.07 |
) |
$ |
( 0.13 |
) |
|
Equity-based compensation expense |
|
|
|
0.07 |
|
0.06 |
|
|
0.21 |
|
|
0.19 |
|
|
Amortization of intangible assets |
|
|
|
0.02 |
|
0.02 |
|
|
0.05 |
|
|
0.06 |
|
|
Changes of deferred taxes related to intangible assets and
equity-based compensation expense |
|
|
|
- |
|
- |
|
|
(0.01 |
) |
|
(0.01 |
) |
|
Non-GAAP diluted net earnings per share |
|
|
$ |
0.11 |
$ |
0.10 |
|
$ |
0.18 |
|
$ |
0.11 |
|
DSP GROUP,
INC.CONSOLIDATED BALANCE SHEETS (In
thousands)
|
|
|
|
September 30, |
December 31, |
|
|
|
|
2018 |
2017 |
|
|
|
|
(Unaudited) |
(Audited) |
|
Assets |
|
|
|
|
|
Current assets: |
|
|
|
|
| Cash and cash
equivalentsRestricted deposits |
|
|
$ |
11,359503 |
|
$ |
21,324524 |
|
|
Marketable securities and short term deposits |
|
|
|
34,410 |
|
|
24,697 |
|
|
Trade receivables, net |
|
|
|
21,448 |
|
|
13,416 |
|
|
Inventories |
|
|
|
8,247 |
|
|
9,422 |
|
|
Other accounts receivable and prepaid expenses |
|
|
|
2,843 |
|
|
3,167 |
|
| Total
current assets |
|
|
|
78,810 |
|
|
72,550 |
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
|
|
2,854 |
|
|
3,184 |
|
|
|
|
|
|
|
|
|
|
|
| Long
term marketable securities and deposits |
|
|
|
73,398 |
|
|
82,669 |
|
|
Severance pay fund |
|
|
|
14,755 |
|
|
15,190 |
|
|
Deferred income taxes |
|
|
|
855 |
|
|
1,043 |
|
|
Intangible assets, net |
|
|
|
7,746 |
|
|
9,022 |
|
| Long
term prepaid expenses and lease deposits |
|
|
|
1,642 |
|
|
1,541 |
|
| |
|
|
|
98,396 |
|
|
109,465 |
|
| Total assets |
|
|
$ |
180,060 |
|
$ |
185,199 |
|
| |
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity |
|
|
|
Current liabilities: |
|
|
|
|
| Trade
payables |
|
|
$ |
9,393 |
|
$ |
8,660 |
|
| Other
current liabilities |
|
|
|
12,342 |
|
|
12,819 |
|
| Total
current liabilities |
|
|
|
21,735 |
|
|
21,479 |
|
|
|
|
|
|
|
|
Accrued severance pay |
|
|
|
14,944 |
|
|
15,463 |
|
|
Accrued pensions |
|
|
|
868 |
|
|
883 |
|
|
Deferred income taxes |
|
|
|
146 |
|
|
424 |
|
|
Total long term liabilities |
|
|
|
15,958 |
|
|
16,770 |
|
| Stockholders’
equity: |
|
|
|
|
|
Common stock |
|
|
|
22 |
|
|
22 |
|
|
Additional paid-in capital |
|
|
|
377,162 |
|
|
372,041 |
|
|
Accumulated other comprehensive loss |
|
|
|
(2,658 |
) |
|
(1,874 |
) |
|
Less – Cost of treasury stock |
|
|
|
(121,286 |
) |
|
(118,397 |
) |
|
Accumulated deficit |
|
|
|
(110,873 |
) |
|
(104,842 |
) |
| Total
stockholders’ equity |
|
|
|
142,367 |
|
|
146,950 |
|
| Total liabilities and
stockholders’ equity |
|
|
$ |
180,060 |
|
$ |
185,199 |
|
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