Growth Initiatives Account for 58% of Revenues;
VoIP Revenues Reach a Record
GAAP and Non GAAP Gross Margins of 50.0% and 50.3%, Respectively, Exceeding Guidance
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%.
- Office/VoIP segment revenues of
- Revenues from cordless products of
$13.7 million accounted for 42% of total revenues, a year-over-year decrease of 25%.
- Revenues from growth initiatives of
- 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 ofSeptember 30, 2018 .
Management Comments:
Commenting on the results,
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
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
Third Quarter Non-GAAP Results:
Non-GAAP net income and diluted earnings per share for the third quarter of 2018 were
Earnings Conference Call Details
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 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 quarter 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) 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;
About
Contact:
Corporate Vice President, Business Development, Strategy and Investor Relations
Work: 1-415-726-5900, Daniel.amir@dspg.com
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
| Three Months Ended September 30 |
Nine Months Ended September 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 | |||||
CONSOLIDATED BALANCE SHEETS
(In thousands)
| September 30, | December 31, | |||||||
| 2018 | 2017 | |||||||
| (Unaudited) | (Audited) | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents Restricted deposits |
$ |
11,359 503 |
$ |
21,324 524 |
||||
| 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 | ||||
