DSP Group, Inc. Reports Fourth Quarter 2018 and Full Year Results
Fourth Quarter Business and Financial Highlights:
- Total revenues of
$26.1 million , a year-over-year decrease of 17%:
° Revenues from growth initiatives of$15.5 million accounted for 59% of total revenues, a year-over-year increase of 1%.- Office/VoIP segment revenues of
$8.5 million , a year-over-year decrease of 10%. - SmartVoice segment revenues of
$4.1 million , a year-over-year increase of 83%. - SmartHome revenues of
$2.9 million , a year-over-year decrease of 21%.
- Cordless revenues of
$10.6 million , a year-over-year decrease of 33%.
- Office/VoIP segment revenues of
- GAAP and non-GAAP gross margin of 47.5% and 47.9%, compared to GAAP and non-GAAP gross margin of 47.8% and 48.1% for the fourth quarter of 2017.
- GAAP operating loss of
$2.9 million and non-GAAP operating loss of$0.7 million , compared to GAAP operating loss of$0.7 and non-GAAP operating income of$1.1 million for the fourth quarter of 2017. - GAAP net loss of
$0.3 million and non-GAAP net income of$1.0 million , compared to GAAP net loss of$0.1 and non-GAAP net income of$1.3 million for the fourth quarter of 2017. - GAAP loss per share of
$0.01 and non-GAAP diluted earnings per share of$0.04 , compared to GAAP loss per share of$0.01 and non-GAAP diluted earnings per share of$0.06 for the fourth quarter of 2017. - Generated
$6.7 million of cash from operating activities, compared to$7.1 million of cash generated from operating activities during the fourth quarter of 2017. - Repurchased approximately 231,000 shares of common stock for a total consideration of
$2.7 million . - Cash, deposits and marketable securities of approximately
$123.9 million as ofDecember 31, 2018 . - Continue to expand our position in the unified communications market as demonstrated by our design wins:
- Secured a major design-win with a tier 1 OEM based on our DVF101 SoC.
Audiocodes launched a Microsoft Teams Android based business phone based on our DVF101 SoC.- AtalsIED launched an IP speaker that extends tele-presence with enhanced audio based on our VoIP solution.
- Continue to grow our design pipeline for voice user interface with leading consumer electronics OEMs, thereby driving growth of a burgeoning new market:
- Began mass shipments of SmartVoice products to a tier 1 Chinese smartphone OEM.
- Lenovo™ Smart Tabs integrated our SmartVoice technology to enable Alexa voice experiences.
Universal Electronics developed a hands-free, low power, voice-activated remote control based on our SmartVoice technology.- Simplehuman announced that its new generation of voice activated trash cans is powered by our SmartVoice solution.
- Growing our ULE ecosystem with leading IoT vendors that recognize ULE’s unmatched characteristics for wireless indoor IoT:
Orange , France’s leading telecommunication service provider, announced Maison-Connectee, its new Smart Home service based on ULE.Technicolor announced its future voice enabled solutions based on our ULE and SmartVoice technologies.- Bezeq, Israel’s leading telecommunication service provider, selected our ULE technology to power its smart security solutions for enterprise customers.
- Elite Computer Systems selected our SmartVoice and ULE solutions to power its next-generation portable smart speaker with Amazon Alexa.
Full Year 2018 Financial Highlights:
- Total revenues of approximately
$117.4 million , a decrease of 6% vs.$124.8 million in 2017.- Revenues from growth initiatives of
$64.2 million , a year-over-year increase of 12% when compared to 2017.- Office/VoIP segment revenues of
$38.8 million , a year-over-year increase of 11%. - SmartVoice segment revenues of
$10.9 million , a year-over-year increase of 124%. - SmartHome revenues of
$14.5 million , a year-over-year decrease of 17%.
- Office/VoIP segment revenues of
- Cordless revenues of
$53.2 million , a year-over-year decrease of 21%.
- Revenues from growth initiatives of
- GAAP and non-GAAP gross margin of 48.9% and 49.3%, respectively, a 270 bps and 280 bps improvement, as compared to 2017 gross margin of 46.2% on GAAP and 46.5% on a non-GAAP basis.
- GAAP operating loss of
$5.6 million and non-GAAP operating income of$2.9 million , compared to GAAP operating loss of$4.8 million and non-GAAP operating income of$2.8 million in 2017. - GAAP net loss of
$2.0 million and non-GAAP net income of$5.4 million , compared to GAAP net loss of$3.0 million and non-GAAP net income of$3.9 million in 2017. - GAAP loss per share of
$0.09 and non-GAAP diluted earnings per share of$0.23 , compared to GAAP loss per share of$0.14 and non-GAAP earning per share of$0.17 in 2017. - Generated
$8.7 million of cash from operating activities, compared to$8.5 million in 2017. - Repurchased approximately 1 million shares of common stock for a total consideration of
$12.3 million .
Management Comments:
Commenting on the results,
Mr. Elyakim added, “2018 marked the first year in which a majority of the company’s revenues were generated by our growth initiatives, driving gross margins to an all-time record of 49%. The improving product mix, coupled with solid momentum across our growth businesses and continued excellent supply chain execution, provide us with confidence that we are well positioned for margin expansion and that these initiatives should account for over two thirds of our total revenues in 2019. These are exciting developments for
GAAP Results:
Fourth Quarter GAAP Results:
Revenues for the fourth quarter of 2018 were
Year End Results:
Revenues for the year ended
Non-GAAP Results:
Fourth Quarter Non-GAAP Results:
Non-GAAP net income and diluted earnings per share for the fourth quarter of 2018 were
Non-GAAP net income and diluted earnings per share for the fourth quarter of 2017 excluded the impact of amortization of acquired intangible assets of
Year End Non-GAAP Results:
Non-GAAP net income and diluted earnings per share for the year ended
Earnings Conference Call Details
Investors may access the conference call by dialing +1 866 966 1396 (domestic US) or +1 631 510 7495 (international) approximately 10 minutes prior to the starting time. The password is 5365029. 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/sxvr7cdx
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 33 3300 9785, internationally and enter the company access code: 5365029
Presentation of Non-GAAP Net Income and EPS
The 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 fourth quarter and year ended
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) improving product mix, coupled with solid momentum across our growth businesses and continued excellent supply chain execution, provide us with confidence that we are well positioned for margin expansion, (ii) our first quarter revenues will recover and grow on a sequential basis, and (iii) revenues from growth initiatives will account for over two thirds of the company’s total revenues for 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 and ULE products; unexpected delays in the commercial launch of new products; speed of decline in the cordless market;
About
Contact:
Tali Chen, Chief Marketing Officer, Tali.Chen@dspg.com
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
| Three Months Ended December 31 |
Twelve Months Ended December 31 |
||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Audited) | ||||||||||||
| Revenues | $ | 26,057 | $ | 31,242 | $ | 117,438 | $ | 124,753 | |||||||
| Cost of revenues | 13,681 | 16,298 | 59,991 | 67,058 | |||||||||||
| Gross profit | 12,376 | 14,944 | 57,447 | 57,695 | |||||||||||
| Operating expenses: | |||||||||||||||
| Research and development, net | 8,606 | 9,090 | 36,109 | 36,655 | |||||||||||
| Sales and marketing | 3,854 | 3,675 | 15,323 | 14,315 | |||||||||||
| General and administrative | 2,343 | 2,447 | 9,955 | 9,789 | |||||||||||
| Amortization of intangible assets | 425 | 425 | 1,700 | 1,700 | |||||||||||
| Total operating expenses | 15,228 | 15,637 | 63,087 | 62,459 | |||||||||||
| Operating loss | (2,852) | (693) | (5,640) | (4,764) | |||||||||||
| Financial income, net | 524 | 453 | 1,815 | 1,669 | |||||||||||
| Loss before taxes on income |
(2,328) |
(240) |
(3,825) |
(3,095) |
|||||||||||
| Income tax benefit | (2,007) |
(111) |
(1,868) |
(92) |
|||||||||||
| Net loss | $ | (321) | $ | (129) | $ | (1,957) | $ | (3,003) | |||||||
| Net loss per share: | |||||||||||||||
| Basic | $ | (0.01) | $ | (0.01) | $ | (0.09) | $ | (0.14) | |||||||
| Diluted | $ | (0.01) | $ | (0.01) | $ | (0.09) | $ | (0.14) | |||||||
| Weighted average number of shares used in per share computations of loss per share: | |||||||||||||||
| Basic | 22,240 | 22,360 | 22,512 | 22,229 | |||||||||||
| Diluted | 22,240 | 22,360 | 22,512 | 22,229 | |||||||||||
| Unaudited Reconciliation of GAAP to Non-GAAP Financial Measures | |||||||||||||
| (In thousands, except per share amounts) | |||||||||||||
| Three Months Ended December 31, |
Twelve Months Ended December 31 |
||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||
| Unaudited | Unaudited | Unaudited | Unaudited | ||||||||||
| GAAP net loss | $ (321) | $ (129) | $ (1,957) | $ (3,003) | |||||||||
| Equity-based compensation expense included in cost of revenues | 108 | 77 | 428 | 352 | |||||||||
| Equity-based compensation expense included in research and development, net | 739 | 534 | 2,873 | 2,349 | |||||||||
| Equity-based compensation expense included in sales and marketing | 294 | 245 | 1,248 | 1,115 | |||||||||
| Equity-based compensation expense included in general and administrative | 552 | 479 | 2,255 | 2,045 | |||||||||
| Amortization of intangible assets | 425 | 425 | 1,700 | 1,700 | |||||||||
| Changes of deferred taxes related to intangible assets and equity-based compensation expense | (790) | (303) | (1,131) | (622) | |||||||||
| Non-GAAP net income | $ 1,007 | $ 1,328 | $ 5,416 | $ 3,936 | |||||||||
| Weighted-average number of common stock used in computation of GAAP diluted net earnings (loss) per share (in thousands) | 22,240 | 22,360 | 22,512 | 22,229 | |||||||||
| Weighted-average number of shares related to outstanding options, stock appreciation rights and restricted share units (in thousands) | 1,203 | 1,303 | 1,317 | 1,379 | |||||||||
| Weighted-average number of common stock used in computation of non-GAAP diluted net earnings per share (in thousands) | 23,443 | 23,663 | 23,829 | 23,608 | |||||||||
| GAAP diluted net loss per share | $(0.01) | $(0.01) | $(0.09) | $(0.14) | |||||||||
| Equity-based compensation expense | 0.07 | 0.06 | 0.29 | 0.26 | |||||||||
| Amortization of intangible assets | 0.02 | 0.02 | 0.07 | 0.07 | |||||||||
| Changes of deferred taxes related to intangible assets and equity-based compensation expense | (0.04) | (0.01) | (0.04) | (0.02) | |||||||||
| Non-GAAP diluted net earnings per share | $ 0.04 | $ 0.06 | $ 0.23 | $ 0.17 | |||||||||
CONSOLIDATED BALANCE SHEETS
(In thousands)
| December 31, | December 31, | |||||
| 2018 | 2017 | |||||
| (Unaudited) | (Audited) | |||||
| Assets | ||||||
| Current assets: | ||||||
| Cash and cash equivalents | $ | 12,146 | $ | 21,324 | ||
| Restricted deposits | 493 | 524 | ||||
| Marketable securities and short term deposits | 35,713 | 24,697 | ||||
| Trade receivables, net | 13,475 | 13,416 | ||||
| Inventories | 9,819 | 9,422 | ||||
| Other accounts receivable and prepaid expenses | 3,670 | 3,167 | ||||
| Total current assets | 75,316 | 72,550 | ||||
| Property and equipment, net | 2,748 | 3,184 | ||||
| Long term marketable securities and deposits |
75,538 | 82,669 | ||||
| Severance pay fund | 14,158 | 15,190 | ||||
| Deferred income taxes | 3,580 | 1,043 | ||||
| Intangible assets, net | 7,321 | 9,022 | ||||
| Long term prepaid expenses and lease deposits | 1,229 | 1,541 | ||||
| 101,826 | 109,465 | |||||
| Total assets | $ | 179,890 | $ | 185,199 | ||
| Liabilities and Stockholders’ Equity | ||||||
| Current liabilities: | ||||||
| Trade payables | $ | 9,579 | $ | 8,660 | ||
| Other current liabilities | 13,120 | 12,819 | ||||
| Total current liabilities | 22,699 | 21,479 | ||||
| Accrued severance pay | 14,348 | 15,463 | ||||
| Accrued pensions | 827 | 883 | ||||
| Deferred income taxes | 151 | 424 | ||||
| Total long term liabilities | 15,326 | 16,770 | ||||
| Stockholders’ equity: | ||||||
| Common stock | 22 | 22 | ||||
| Additional paid-in capital | 378,855 | 372,041 | ||||
| Accumulated other comprehensive loss | (2,324) | (1,874) | ||||
| Less – Cost of treasury stock | (122,325) | (118,397) | ||||
| Accumulated deficit | (112,363) | (104,842) | ||||
| Total stockholders’ equity | 141,865 | 146,950 | ||||
| Total liabilities and stockholders’ equity | $ | 179,890 | $ | 185,199 | ||
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