Press Release Details

DSP Group, Inc. Reports Fourth Quarter 2020 and Full Year Results

Feb 4, 2021

Fourth quarter revenues of $31.9 million, up 9% YoY, exceeding guidance
Record high fourth quarter non-GAAP gross margins of 51.9%

SAN JOSE, Calif., Feb. 04, 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 fourth quarter and full year ended December 31, 2020.

Fourth Quarter 2020 Financial Highlights (and Comparison to Fourth Quarter 2019):

  • Total revenues of $31.9 million, a 9% increase:
    º  Revenues from IoAT (Internet of Audio Things) businesses of $18.1 million accounted for 57% of total revenues, a decrease of 8%.
       º  Unified Communications segment revenues of $8.2 million, a decrease of 17%.
       º  SmartVoice segment revenues of $5.0 million, an increase of 2%.
       º  SmartHome segment revenues of $4.8 million, an increase of 3%.
    º  Cordless revenues of $13.8 million, an increase of 42%.
  • GAAP and non-GAAP gross margin of 51.3% and 51.9%, respectively, an increase of 40 and 70 basis points, respectively.
  • GAAP loss per share of $0.06 and non-GAAP diluted earnings per share of $0.12, compared to zero GAAP diluted loss per share and non-GAAP diluted earnings per share of $0.06 for the fourth quarter of 2019.
  • GAAP operating loss of $1.0 million and non-GAAP operating income of $2.9 million, compared to GAAP operating loss of $1.2 million and non-GAAP operating income of $0.7 million for the fourth quarter of 2019.
  • GAAP net loss of $1.4 million and non-GAAP net income of $2.9 million, compared to GAAP net loss of $0.1 million and non-GAAP net income of $1.6 million for the fourth quarter of 2019.
  • Generated $8.6 million of cash from operations, compared to $10.8 million of cash generated from operations in the fourth quarter of 2019.
  • Cash, deposits and marketable securities of approximately $128.6 million as of December 31, 2020.

Full Year 2020 Financial Highlights (and Comparison to Full Year 2019):

  • Total revenues of $114.5 million, vs. $117.6 million in 2019, a 3% decrease.
    º  Revenues from IoAT businesses of $68.1 million, a year-over-year decrease of 8% when compared to 2019.
       º  Unified Communications segment revenues of $31.2 million, a year-over-year decrease of 18%.
       º  SmartVoice segment revenues of $20.2 million, a year-over-year increase of 4%.
       º  SmartHome revenues of $16.8 million, a year-over-year increase of 3%.
    º  Cordless revenues of $46.3 million, a year-over-year increase of 6%.
  • GAAP and non-GAAP gross margin of 50.8% and 51.4%, respectively, an increase of 20 and 40 basis points, as compared to 2019 gross margin of 50.6% on GAAP and 51.0% on non-GAAP basis.
  • GAAP operating loss of $8.1 million and non-GAAP operating income of $3.4 million, compared to GAAP operating loss of $4.4 million and non-GAAP operating income of $3.6 million in 2019.
  • GAAP net loss of $6.8 million and non-GAAP net income of $4.8 million, compared to GAAP net loss of $1.2 million and non-GAAP net income of $7.0 million in 2019.
  • GAAP loss per share of $0.29 and non-GAAP diluted earnings per share of $0.19, compared to GAAP loss per share of $0.05 and non-GAAP earning per share of $0.29 in 2019.
  • Generated $14.6 million of cash from operating activities, compared to $10.5 million in 2019.

Management Comments:
Commenting on the results, Ofer Elyakim, CEO of DSP Group, stated: “We are very pleased with our fourth quarter financial results, and particularly with our diversified voice centric product portfolio that drove a strong finish to a volatile year. Fourth quarter revenues of $31.9 million exceeded our guidance range and grew by 9% year over year and 23% sequentially. These results were further propelled by digitally transformed work-live-study routines as evidenced by the accelerating demand for work from home products, including remote collaboration tools, cordless phones, voice AI and IoT devices.”

Mr. Elyakim continued, “Looking ahead, we are excited about the momentum surrounding our business and the pivotal role that our innovative technologies are playing in the newly emerging voice-centric marketplace. While industry-wide supply chain constraints are placing limitations on product deliveries, we are experiencing solid end-market demand across our different businesses and expect first quarter revenues to grow both sequentially and year-over-year. Moreover, the transformation to a voice-centric world positions us well for sustainable growth. Our dedicated focus and R&D investments in voice communications, Edge AI and IoT are paying off and have created a deep and diversified technology offering, which is evidenced by the following accomplishments: positioning ULE as a prime connectivity in the home security market, establishing SmartVoice franchise as the market leading solution in key consumer categories and proliferating our voice and video technologies in the evolving collaboration market.”

Fourth 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:
    • Major U.S. retail brand and Lenovo launched new tablet models based on our SmartVoice solution.
    • A leading U.S. platform company launched its second-generation smart wearable product leveraging our SmartVoice edge AI SoC
    • TaoTronics launched a new TWS headset based on our SmartVoice solution for its differentiated edge AI capabilities.
  • Grew and diversified our SmartHome ecosystem with leading global IoT vendors that recognize ULE’s unmatched characteristics for wireless indoor IoT, including superior range, interference-free spectrum and native support for two-way voice:
    • A leading European service provider chose our DECT/ULE for its next generation professional smart security offering.
    • A leading U.S. brand selected our DECT/ULE for its elderly care system that includes hub, pendant and additional assisted voice-enabled devices.
    • Atlinks selected our DECT/ULE solution for its wireless Hi-Fi audio streaming product.
  • Solidified our leadership position and expanded our market share in the Unified Communications market, as demonstrated by the following business wins:
    • A Tier 1 UC OEM selected our high-end DVFxx solution to drive its next generation personal video collaboration system.
    • A leading U.S. video collaboration vendor brand selected our SmartVoice voice communication engine for a hybrid collaboration endpoint.
    • Yealink announced its new Microsoft Teams wireless DECT headset based on our industry leading solution.

Fourth Quarter and Year End GAAP Results:
Revenues for the fourth quarter of 2020 were $31.9 million, an increase of 9% from revenues of $29.3 million for the fourth quarter of 2019. Net loss and loss per share for the fourth quarter of 2020 were $1.4 million and $0.06, respectively. Net loss and loss per share for the fourth quarter of 2019 were $0.1 million and $0.00, respectively.

Revenues for the year ended December 31, 2020 were $114.5 million, a decrease of 3% from 2019 revenues of $117.6 million. Net loss for 2020 was $6.8 million, compared to a net loss of $1.2 million for 2019. Loss per share for 2020 was $0.29, compared to loss per share of $0.05 for 2019.

Fourth Quarter and Year-End Non-GAAP Results:
Non-GAAP net income and diluted earnings per share for the fourth quarter of 2020 were $2.9 million and $0.12, respectively, as compared to non-GAAP net income and diluted earnings per share of $1.6 million and $0.06, respectively, for the fourth quarter of 2019. Non-GAAP net income and diluted earnings per share for the fourth 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 $3.2 million, non-cash expenses from exchange rate differences resulting from lease accounting standard (ASC 842) in the amount of $0.7 million, amortization of employees retention expenses related to the acquisition of SoundChip in the amount of $0.25 million and income resulting from changes in deferred taxes in the amount of $0.3 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 fourth 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 $1.8 million, non-cash expenses from exchange rate differences resulting from ASC 842 in the amount of $0.1 million, and income resulting from changes in deferred taxes in the amount of $0.3 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 year ended December 31, 2020 were $4.8 million and $0.19, respectively, as compared to non-GAAP net income and diluted earnings per share of $7.0 million and $0.29, respectively, for the year ended December 31, 2019.

Non-GAAP net income and diluted earnings per share for the year ended December 31, 2020 excluded the impact of amortization of acquired intangible assets of $1.1 million associated with current and previous acquisitions; equity-based compensation expenses of $9.7 million, non-cash exchange rate differences resulting from ASC 842 in the amount of $0.6 million, transaction expenses related to the acquisition of SoundChip in the amount of $0.25 million, amortization of employees retention expenses related to the acquisition of SoundChip in the amount of $0.5 million and changes in deferred taxes related to intangible assets acquired in current and previous acquisitions and equity-based compensation expenses in the amount of $0.5 million.

Non-GAAP net income and diluted earnings per share for the year ended December 31, 2019 excluded the impact of amortization of acquired intangible assets of $0.4 million associated with previous acquisitions; equity-based compensation expenses of $7.6 million, non-cash exchange rate differences resulting from ASC 842 in the amount of $0.8 million, and changes in deferred taxes related to intangible assets acquired in previous acquisitions and equity-based compensation expenses in the amount of $0.6 million.

Earnings Conference Call Details
DSP Group will discuss its fourth quarter financial results, along with its outlook and guidance for the first quarter of 2021, 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 +16467413167 (domestic US) or +44 (0) 2071 928338 (international) approximately 10 minutes prior to the starting time. The password is 4996754.

The broadcast via the Internet can be accessed by 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/4wohuk4f

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: 4996754#

Presentation of Non-GAAP Net Income and EPS
The 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 fourth quarter and ended December 31, 2020 and 2019 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 and amortization of employees’ retention expenses related to the acquisition 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 optimism about the company’s momentum for its business and the pivotal role that its technologies are playing in the newly emerging voice-centric marketplace, (ii) the improving end market demand across the company’s different businesses, (iii) expectation of first quarter revenues to grow both sequentially and year-over-year, (iv) belief that the transformation to a voice-centric world positions the company well for sustainable growth, and (v) dedicated focus and R&D investments in voice communications, Edge AI and IoT are paying off and have created a deep and diversified technology offering. 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; the impact of industry-wide supply chain constraints; market penetration of DSP Group’s Unified Communications, ULE, VUI, 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 2019, 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 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.

Contact:
Shiri Weiss, IR & Communications, Shiri.Weiss@dspg.com

An infographic PDF accompanying this announcement is available at http://ml.globenewswire.com/Resource/Download/59086ff8-cee7-4473-b8b5-275e03584a5a


 
DSP GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
 
  Three Months Ended
December 31
Twelve Months Ended
December 31
  2020     2019     2020     2019  
  (Unaudited)     (Unaudited)     (Unaudited)     (Audited)  
                       
Revenues $ 31,885     $ 29,261     $ 114,480     $ 117,613  
Cost of revenues 15,543     14,369     56,290     58,066  
                       
Gross profit     16,342     14,892         58,190     59,547  
Operating expenses:                      
Research and development, net 8,580     8,827     35,511     35,552  
Sales and marketing 4,642     4,485         18,205     17,665  
General and administrative 3,671     2,701     11,510     10,318  
Amortization of intangible assets 430     104     1,065     416  
                       
Total operating expenses 17,323     16,117     66,291     63,951  
                       
Operating loss (981 )   (1,225 )   (8,101 )   (4,404 )
                       
Financial income (expenses), net    (304 )   525     1,231     1,654  
                        
Loss before taxes on income      (1,285 )        (700 )        (6,870 )        (2,750 )
                       
Taxes on income(tax benefit)   72       (613 )     (80 )     (1,560 )
                       
Net loss $ (1,357 )   $(87 )   $ (6,790 )   $ (1,190 )
Net loss per share:                      
Basic and Diluted $ (0.06 )   $ (0.00 )   $ (0.29 )   $ (0.05 )
Weighted average number of shares used in per share computations of loss per share:                      
Basic and Diluted 23,661     23,054     23,466     22,827  
                       

                                                              

Unaudited Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands, except per share amounts) 
     
  Three Months Ended      Twelve Months Ended
  December 31,             December 31,
  2020     2019     2020     2019  
  Unaudited     Unaudited     Unaudited     Unaudited  
GAAP net loss $ (1,357 )   $ (87 )   $ (6,790 )   $ (1,190 )
Equity-based compensation expense included in cost of revenues 133     102     524     448  
Equity-based compensation expense included in research and development, net 925      640      3,448      2,842  
Equity-based compensation expense included in sales and marketing  605     440     2,426     1,758  
Equity-based compensation expense included in general and administrative 1,504     611     3,315      2,583  
Amortization of employee’s retention expenses related to the acquisition of SoundChip included in cost of revenues 67     -     134     -  
Amortization of employee’s retention expenses related to the acquisition of SoundChip included in sales and marketing 149     -     298     -  
Amortization of employee’s retention expenses related to the acquisition of SoundChip included in research and development, net 34     -     68     -  
Transaction expenses related to the acquisition of SoundChip -     -     249     -  
Amortization of intangible assets 430     104     1,065     416  
Non-cash expenses from exchange rates differences resulting from lease accounting standard (ASC 842)  678      62      607     785  
Income from changes of deferred taxes related to intangible assets and equity-based compensation expense (277 )   (297 )   (526 )   (618 )
Non-GAAP net income $ 2,891     $ 1,575     $ 4,818     $ 7,024  
                       
Weighted-average number of common stock used in computation of GAAP diluted net loss per share (in thousands) 23,661     23,054     23,466     22,827  
                       
Weighted-average number of shares related to outstanding options, stock appreciation rights and restricted share units (in thousands) 1,459     1,342     1,542     1,420  
                       
Weighted-average number of common stock used in computation of non-GAAP diluted net earnings per share (in thousands) 25,120     24,396     25,008     24,247  
                       
GAAP diluted net loss per share $ (0.06 )   $ (0.00 )   $ (0.29 )   $ (0.05 )
Equity-based compensation expense 0.13     0.07     0.40     0.31  
Amortization of intangible assets 0.02     0.00     0.04     0.02  
Transaction expenses related to the acquisition of SoundChip -     -     0.01     -  
Amortization of employee’s retention expenses related to the acquisition of SoundChip 0.01     -     0.02     -  
Non-cash expenses from Exchange rates differences resulting from lease accounting standard (ASC 842)  0.03     0.00      0.03     0.03  
Income from changes of deferred taxes related to intangible assets and equity-based compensation expense (0.01 )    (0.01 )    (0.02 )    (0.02 )
Non-GAAP diluted net earnings per share $ 0.12   $ 0.06   $ 0.19   $ 0.29  
                 


DSP GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
 
  December 31,     December 31,  
  2020     2019  
  (Unaudited)     (Audited)  
Assets                  
Current assets:          
Cash and cash equivalents
$ 16,936     $ 28,737  
Restricted deposits 548     518  
Marketable securities and short-term deposits 50,411     39,141  
Trade receivables, net 11,003     15,382  
Inventories 9,061     7,464  
Other accounts receivable and prepaid expenses 3,460     3,551  
Total current assets
91,419     94,793  
           
Property and equipment, net 6,574     6,805  
           
Long term marketable securities and deposits                  60,658     62,884  
Severance pay fund 16,285     15,800  
Operating leases– right of use assets 11,157     11,655  
Deferred income taxes 6,893     6,377  
Intangible assets, net 20,654     6,904  
Long term prepaid expenses    2,888     707  
Total long-term assets 118,535     104,327  
           
Total assets
$ 216,528     $ 205,925  
           
Liabilities and Stockholders’ Equity          
Current liabilities:          
Trade payables $ 10,708     $ 8,511  
Operating lease liability 3,004     2,569  
Other current liabilities 15,724     14,159  
Total current liabilities 29,436     25,239  
           
Accrued severance pay 16,647     16,074  
Operating lease liability 10,100     10,436  
Accrued pensions 1,089     963  
Deferred income taxes 1,073     119  
Other long-term liabilities       1,945          -     
Total long-term liabilities 30,854     27,592  
           
Stockholders’ equity:          
Common stock 24     23  
Additional paid-in capital 396,335     386,534  
Accumulated other comprehensive loss (637 )   (889 )
Less – Cost of treasury stock (108,509 )   (113,862 )
Accumulated deficit     (130,975 )       (118,712 )
Total stockholders’ equity        156,238     153,094  
Total liabilities and stockholders’ equity $ 216,528     $  205,925  
           

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Source: DSP Group, Inc.