DSP Group, Inc. Reports Third Quarter 2019 Results
November 05 2019 - 7:00AM
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, 2019.
Third Quarter Financial
Highlights:
- Total revenues of $31.0 million, a year-over-year decrease of
5%: º Revenues from growth initiatives of $18.7 million
accounted for 60% of total revenues, a year-over-year decrease of
1% º Unified Communications segment
revenues of $10.0 million, a year-over-year decrease of 18%
º SmartVoice segment revenues of $5.0 million, a
year-over-year increase of 64% º SmartHome
segment revenues of $3.8 million, a year-over-year increase of
1%º Cordless revenues of $12.3 million, a year-over-year
decrease of 10%.
- GAAP and non-GAAP gross margin of 50.8% and 51.2%, an 80 and 90
basis point improvement, as compared to the third quarter of 2018
on GAAP and non-GAAP basis, respectively.
- GAAP and non-GAAP diluted earnings per share of $0.02 and
$0.10, respectively, compared to GAAP and non-GAAP diluted earnings
per share of $0.02 and $0.11, respectively, for the third quarter
of 2018.
- GAAP operating loss of ($0.3) million and non-GAAP operating
income of $1.7 million, compared to GAAP and non-GAAP operating
income of $0.3 million and $2.4 million, respectively, for the
third quarter of 2018.
- GAAP and non-GAAP tax benefit of $0.3 million and $0.2 million,
respectively, compared to GAAP and non-GAAP taxes on income of $0.4
million of $0.3 million, for the third quarter of 2018,
respectively.
- GAAP and non-GAAP net income of $0.5 million and $2.5 million,
respectively, compared to GAAP and non-GAAP net income of $0.4
million and $2.6 million, respectively, for the third quarter of
2018.
- Generated $0.2 million of cash from operations compared to none
in the third quarter of 2018.
- Cash, deposits and marketable securities of approximately
$120.9 million as of September 30, 2019.
Management Comments: Commenting
on the results, Ofer Elyakim, CEO of DSP Group, stated: “We are
pleased with our third quarter financial results that were ahead of
our guidance on most financial metrics. Revenues from growth
initiatives of $18.7 million accounted for 60% of revenues and
benefited from a favorable product mix, which drove GAAP and
non-GAAP gross margins of 50.8% and 51.2%, respectively. We are
excited by the recent round of cutting-edge product introductions
by Tier 1 OEMs, which are powered by our technologies, particularly
in our SmartVoice and SmartHome product lines, demonstrating the
emerging transformation of our business into a rising voice and IoT
franchise.”
Mr. Elyakim continued, “Looking ahead to the
fourth quarter, we project a year-over-year growth in revenues,
driven by solid demand for our SmartVoice and SmartHome product
lines, more than offsetting the continued decline in the cordless
industry, as well as the near-term softness in the Unified
Communications market, which we expect to fully recover in 2020
based on customers’ feedback, as well as major design wins we have
secured. Moreover, we are confident that our growth initiatives are
positioned well to represent approximately two thirds of our fourth
quarter revenues.”
Third Quarter Business
Highlights:
- Continued to grow and strengthen our SmartVoice franchise with
design wins and product launches for voice user interface with
leading consumer electronics OEMs, thereby driving dynamic growth
in a burgeoning market: º Oppo, a leading mobile OEM,
launched its new Reno2 and Realme X2 smartphones incorporating our
SmartVoice technology for its handsfree Breeno smart
assistantº GoPro launched Hero8 Black, with
high-fidelity audio and its cutting-edge Max camera featuring 360
audio, leveraging our low power DSP and our high performance
advanced audio and machine learning SoCº A leading IP
camera OEM selected our SmartVoice solution for three of its newly
launched productsº Lenovo, TCL and a leading mobile OEM
launched a number of new tablet models based on our SmartVoice
solutions
- Grew and diversified our SmartHome ecosystem with leading
global IoT vendors, building on the continued support from major
European and American service providers and OEMs that recognize
ULE’s unmatched characteristics for wireless indoor connectivity,
including superior range, interference-free spectrum and natural
support for two-way voice: º A leading European home
automation company selected ULE to drive its smart window blinds
solutionº A leading OEM launched a branded ULE-based
light bulb as part of its successful smart-home
offeringº An industrial IoT company selected our ULE
technology for its smart factory automation solution
- Solidified our leadership position in the Unified
Communications market despite the near-term market softness, as
demonstrated by the following new business wins coupled with
previous major design wins that position us well to resume growth
in this product line in 2020: º Poly launched its VVX
D230, a DECT IP Phone, based on our DVF99 SoCº Yealink
launched its W80B, an IP DECT multi-cell system, based on our
DCX81º A major Chinese vendor launched a new line of IP
phones based on our DVF97 SoC
Third Quarter GAAP
Results:Revenues for the third quarter of 2019 were $31
million, a decrease of 5% from revenues of $32.6 million for the
third quarter of 2018. Net income and earnings per share for the
third quarter of 2019 were $0.5 million and $0.02, respectively.
Net income and earnings per share for the third quarter of 2018
were $0.4 million and $0.02, respectively.
Third Quarter Non-GAAP
Results:Non-GAAP net income and diluted earnings per share
for the third quarter of 2019 were $2.5 million and $0.10,
respectively, as compared to non-GAAP net income and diluted
earnings per share of $2.6 million and $0.11, respectively, for the
third quarter of 2018. 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 exchange rate
differences resulting from the new lease accounting standard (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.
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 $0.4 million associated with
previous acquisitions and equity-based compensation expenses of
$1.8 million.
Earnings Conference Call
Details DSP Group will discuss its third quarter financial
results, along with its outlook and guidance for the fourth quarter
of 2019, 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 +1 866 966 1396 (domestic US) or +44 (0) 2071 928000
(international) approximately 10 minutes prior to the starting
time. The password is 1696137.
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/mmc/p/rka66b7u
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: 1696137.
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 third
quarter ended September 30, 2019 to the same period in 2018 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 about (i) the
emerging transformation of DSP Group’s business into a rising voice
and IoT franchise, (ii) near-term softness in Unified
Communications product line but resumption of growth in 2020, and
(iii) year-over-year revenue growth in the fourth quarter and
growth initiatives generating two thirds of revenues in the same
period. The results from these statements may not actually arise as
a result of various factors, including the market penetration of
DSP Group’s unified communications, 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 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 2018, 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 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. Experts in voice processing, DSP Group invests
heavily in innovation for the smart future, the result is
leading-edge semiconductor technology that is enabling our
customers to develop a new wave of products that bring enhanced
user experiences through innovation, like conversation technology.
From mobile phones to VoIP and virtual assistants using cloud-based
voice services, DSP Group is the answer to the growing demand for
the ever-expanding collection of voice controlled smart devices.
For more information, visit www.dspg.com.
Contact: Tali Chen, Chief
Marketing Officer, Tali.Chen@dspg.com
THIRD QUARTER 2019 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 |
|
2019 |
|
2018 |
|
|
2019 |
|
2018 |
|
(Unaudited) |
|
(Unaudited) |
|
|
(Unaudited) |
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
$ |
31,042 |
|
|
$ |
32,619 |
|
|
$ |
88,352 |
|
|
$ |
91,381 |
|
Cost of revenues |
|
15,262 |
|
|
|
16,315 |
|
|
|
43,697 |
|
|
|
46,311 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
15,780 |
|
|
|
16,304 |
|
|
|
44,655 |
|
|
|
45,070 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development, net |
|
9,244 |
|
|
|
9,614 |
|
|
|
26,725 |
|
|
|
27,503 |
|
Sales and marketing |
|
4,311 |
|
|
|
3,640 |
|
|
|
13,180 |
|
|
|
11,468 |
|
General and administrative |
|
2,388 |
|
|
|
2,362 |
|
|
|
7,617 |
|
|
|
7,612 |
|
Amortization of intangible assets |
|
104 |
|
|
|
425 |
|
|
|
312 |
|
|
|
1,276 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
16,047 |
|
|
|
16,041 |
|
|
|
47,834 |
|
|
|
47,859 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (loss) |
|
(267 |
) |
|
|
263 |
|
|
|
(3,179 |
) |
|
|
(2,789 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial income, net |
|
416 |
|
|
|
492 |
|
|
|
1,129 |
|
|
|
1,291 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before taxes on income |
|
149 |
|
|
|
755 |
|
|
|
(2,050 |
) |
|
|
(1,498 |
) |
Income tax expenses (tax benefit) |
|
(335 |
) |
|
|
350 |
|
|
|
(947 |
) |
|
|
139 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (loss) |
$ |
484 |
|
|
$ |
405 |
|
|
$ |
(1,103 |
) |
|
$ |
(1,637 |
) |
Net earnings (loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
0.02 |
|
|
$ |
0.02 |
|
|
$ |
(0.05 |
) |
|
$ |
(0.07 |
) |
Diluted |
$ |
0.02 |
|
|
$ |
0.02 |
|
|
$ |
(0.05 |
) |
|
$ |
(0.07 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares used in per share computations of
earnings (loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
22,957 |
|
|
|
22,449 |
|
|
|
22,752 |
|
|
|
22,603 |
|
Diluted |
|
23,940 |
|
|
|
23,338 |
|
|
|
22,752 |
|
|
|
22,603 |
|
|
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, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|
Unaudited |
|
Unaudited |
|
Unaudited |
|
Unaudited |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net Income (loss) |
$ |
484 |
|
|
$ |
405 |
|
|
$ |
(1,103 |
) |
|
$ |
(1,637 |
) |
Equity-based compensation expense included in cost of revenues |
|
109 |
|
|
|
114 |
|
|
|
346 |
|
|
|
320 |
|
Equity-based compensation expense included in research and
development, net |
|
677 |
|
|
|
781 |
|
|
|
2,202 |
|
|
|
2,134 |
|
Equity-based compensation expense included in sales and
marketing |
|
442 |
|
|
|
283 |
|
|
|
1,318 |
|
|
|
954 |
|
Equity-based compensation expense included in general and
administrative |
|
645 |
|
|
|
574 |
|
|
|
1,972 |
|
|
|
1,703 |
|
Amortization of intangible assets |
|
104 |
|
|
|
425 |
|
|
|
312 |
|
|
|
1,276 |
|
Non-cash exchange rates differences resulting from the new lease
accounting standard (ASC 842) |
|
210 |
|
|
|
- |
|
|
|
723 |
|
|
|
- |
|
Changes of deferred taxes related to intangible assets and
equity-based compensation expense |
|
(135 |
) |
|
|
39 |
|
|
|
(322 |
) |
|
|
(342 |
) |
Non-GAAP net income |
$ |
2,536 |
|
|
$ |
2,621 |
|
|
$ |
5,448 |
|
|
$ |
4,408 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of common stock used in computation of GAAP
diluted net earnings (loss) per share (in thousands) |
|
23,940 |
|
|
|
23,338 |
|
|
|
22,752 |
|
|
|
22,603 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of shares related to outstanding options,
stock appreciation rights and restricted share units (in
thousands) |
|
438 |
|
|
|
420 |
|
|
|
1,445 |
|
|
|
1,355 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of common stock used in computation of
non-GAAP diluted net earnings per share (in thousands) |
|
24,378 |
|
|
|
23,758 |
|
|
|
24,197 |
|
|
|
23,958 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP diluted net earnings (loss) per share |
$ |
0.02 |
|
|
$ |
0.02 |
|
|
$ |
(0.05 |
) |
|
$ |
(0.07 |
) |
Equity-based compensation expense |
|
0.07 |
|
|
|
0.07 |
|
|
|
0.25 |
|
|
|
0.21 |
|
Amortization of intangible assets |
|
0.01 |
|
|
|
0.02 |
|
|
|
0.01 |
|
|
|
0.05 |
|
Non-cash exchange rates differences resulting from the new lease
accounting standard (ASC 842) |
|
0.01 |
|
|
|
- |
|
|
|
0.03 |
|
|
|
- |
|
Changes of deferred taxes related to intangible assets and
equity-based compensation expense |
|
(0.01 |
) |
|
|
- |
|
|
|
(0.01 |
) |
|
|
(0.01 |
) |
Non-GAAP diluted net earnings per share |
$ |
0.10 |
|
|
$ |
0.11 |
|
|
$ |
0.23 |
|
|
$ |
0.18 |
|
|
DSP GROUP,
INC.CONSOLIDATED BALANCE SHEETS (In
thousands)
|
September 30, |
|
December 31, |
|
2019 |
|
2018 |
|
(Unaudited) |
|
(Audited) |
Assets |
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
18,379 |
|
|
$ |
12,146 |
|
Restricted deposits |
|
515 |
|
|
|
493 |
|
Marketable securities and short term deposits |
|
31,111 |
|
|
|
35,713 |
|
Trade receivables, net |
|
21,609 |
|
|
|
13,475 |
|
Inventories |
|
8,668 |
|
|
|
9,819 |
|
Other accounts receivable and prepaid expenses |
|
3,374 |
|
|
|
3,670 |
|
Total current assets |
|
83,656 |
|
|
|
75,316 |
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
6,871 |
|
|
|
2,748 |
|
|
|
|
|
|
|
|
|
Long term marketable securities and deposits |
|
70,899 |
|
|
|
75,538 |
|
Severance pay fund |
|
15,661 |
|
|
|
14,158 |
|
Operating leases |
|
12,023 |
|
|
|
- |
|
Deferred income taxes |
|
5,469 |
|
|
|
3,580 |
|
Intangible assets, net |
|
7,008 |
|
|
|
7,321 |
|
Long term prepaid expenses and lease deposits |
|
977 |
|
|
|
1,229 |
|
|
|
112,037 |
|
|
|
101,826 |
|
|
|
|
|
|
|
|
|
Total assets |
$ |
202,564 |
|
|
$ |
179,890 |
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
Trade payables |
$ |
8,338 |
|
|
$ |
9,579 |
|
Lease liability |
|
2,520 |
|
|
|
- |
|
Other current liabilities |
|
13,237 |
|
|
|
13,120 |
|
Total current liabilities |
|
24,095 |
|
|
|
22,699 |
|
|
|
|
|
|
|
|
|
Accrued severance pay |
|
15,944 |
|
|
|
14,348 |
|
Lease liability |
|
10,225 |
|
|
|
- |
|
Accrued pensions |
|
801 |
|
|
|
827 |
|
Deferred income taxes |
|
127 |
|
|
|
151 |
|
Total long term liabilities |
|
27,097 |
|
|
|
15,326 |
|
|
|
|
|
|
|
|
|
Stockholders’ equity: |
|
|
|
|
|
|
|
Common stock |
|
23 |
|
|
|
22 |
|
Additional paid-in capital |
|
384,737 |
|
|
|
378,855 |
|
Accumulated other comprehensive loss |
|
(774 |
) |
|
|
(2,324 |
) |
Less – Cost of treasury stock |
|
(114,940 |
) |
|
|
(122,325 |
) |
Accumulated deficit |
|
(117,674 |
) |
|
|
(112,363 |
) |
Total stockholders’ equity |
|
151,372 |
|
|
|
141,865 |
|
Total liabilities and stockholders’ equity |
$ |
202,564 |
|
|
$ |
179,890 |
|
|
|
|
|
|
|
|
|
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