Press Release

Printer Friendly Version View printer-friendly version
<< Back
DSP Group, Inc. Reports Second Quarter 2018 Results

Growth Initiatives Account for 52% of Total Revenues

GAAP and Non GAAP Gross Margins of 49.1% and 49.5%, Respectively, Exceeding Guidance

MILPITAS, Calif., July 30, 2018 (GLOBE NEWSWIRE) -- DSP Group®, Inc. (NASDAQ: DSPG), a leading global provider of wireless chipset solutions for converged communications, announced today its results for the second quarter ended June 30, 2018.

Second Quarter Business and Financial Highlights:

  • Total revenues of $30.7 million, a year-over-year decrease of 2%:
    • Revenues from growth initiatives of $15.8 million accounted for 52% of total revenues, a year-over-year increase of 7%
      • Office/VoIP segment revenues of $9.8 million, a year-over-year increase of 14%
      • SmartVoice segment revenues of $2.2 million, a year-over-year increase of 147%
      • SmartHome segment revenues of $3.8 million, a year-over-year decrease of 27%
  • GAAP and non-GAAP gross margin of 49.1% and 49.5%, 280 bps and 290 bps improvement, as compared to the second quarter of 2017 on GAAP and non-GAAP basis, respectively
  • GAAP loss per share of ($0.01) and non-GAAP diluted earnings per share of $0.07, compared to GAAP loss per share of ($0.03) and non-GAAP diluted earnings per share of $0.06, respectively, for the second quarter of 2017
  • GAAP operating loss of ($0.7) million and non-GAAP operating income of $1.4 million, compared to GAAP operating loss of ($0.9) and non-GAAP operating income of $1.1 million, respectively, for the second quarter of 2017
  • GAAP net loss of ($0.3) million and non-GAAP net income of $1.6 million, compared to GAAP net loss of ($0.6) and non-GAAP net income of $1.4 million, respectively, for the second quarter of 2017
  • Generated $5.4 million of cash from operations compared to $7.2 million in the second quarter of 2017
  • Repurchased approximately 374,000 shares for a total consideration of $4.5 million, with $3.3 million remaining available for repurchase under existing board authorization
  • Cash, deposits and marketable securities of approximately $124.0 million as of June 30, 2018
  • Continue to solidify our leadership position in the unified communications market as demonstrated by our growing design wins with leading OEMs: 
    • Cisco launched wireless microphones for its flagship 8832 conferencing system based on our DVF, DCX81 and DHX91 chipsets
    • Audiocodes launched its 445HD, a new top-line IP phone, based on our DVF9919 SoC
  • Growing 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:
    • Amazon Alexa Voice Services (AVS) certified our 3-mic development kit for far-field voice activation, powered by HDClear algorithms and our DBMD5 SoC, targeting applications such as SmartSpeakers, IoT devices and Remote Controls
    • A leading Korean OEM launched a series of smartphone models based on our SmartVoice SoC
    • A Chinese smartphone OEM selected our SmartVoice SoC for its new smartphone model
  • Expanding ULE reach into new markets with innovative products that leverage ULE’s unmatched characteristics for wireless indoor IoT:
    • Leading European OEM launched a series of connected LED bulbs based on our ULE technology
    • Our DECT/ULE solution was selected by a leading Taiwanese ODM to run hands-free, high-definition voice calls for a new SmartSpeaker product        

Management Comments:
Commenting on the results, Ofer Elyakim, CEO of DSP Group, stated, “We are excited to report that our Office/VoIP, SmartVoice and SmartHome revenues accounted for the majority of our sales for the first time. Better product mix and operating efficiencies also drove better than expected gross and operating margins. Moreover, we accomplished a major milestone by receiving Amazon’s AVS certification for our far-field voice activation solution.”

Mr. Elyakim added, “Looking ahead to the third quarter, we expect a sequential increase in revenues, propelled by higher demand for our SmartVoice products, mainly for tablets and non-smartphone applications, and continued growth in demand for Office/VoIP products. More importantly, we are now at the inflection point where our growth initiatives will define our future and more than offset the secular decline of the cordless telephony market, thereby accelerating the company’s overall growth.”

Second Quarter GAAP Results:

Revenues for the second quarter of 2018 were $30.7 million, a decrease of 2% from revenues of $31.3 million for the second quarter of 2017.  Net loss and loss per share for the second quarter of 2018 were ($0.3) million and ($0.01), respectively. Net loss and loss per share for the second quarter of 2017 were ($0.6) million and ($0.03), respectively.

Second Quarter Non-GAAP Results:
Non-GAAP net income and diluted earnings per share for the second quarter of 2018 were $1.6 million and $0.07, respectively, as compared to non-GAAP net income and diluted earnings per share of $1.4 million and $0.06, respectively, for the second quarter of 2017.  Non-GAAP net income and diluted earnings per share for the second quarter of 2018 excluded the impact of amortization of acquired intangible assets in the amount of $425,000 associated with previous acquisitions; equity-based compensation expenses of $1.7 million; and changes in deferred taxes in the amount of $184,000 related to intangible assets acquired in previous acquisitions and equity-based compensation expenses.  Non-GAAP net income and diluted earnings per share for the second quarter of 2017 excluded the impact of amortization of acquired intangible assets of $425,000 associated with previous acquisitions; equity-based compensation expenses of $1.6 million; and changes in deferred taxes in the amount of $20,000 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 third 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 +1 800 239 9838 (domestic US) or +1 929 477 0448 (international) approximately 10 minutes prior to the starting time. The password is 9106519. 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/g7k55naq

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: 9106519#.

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 June 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 the company expects a sequential increase in revenues for the third quarter of 2018, and that revenues from growth initiatives will offset the secular decline of the cordless telephony market and accelerate the company’s overall growth. 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, including in the mobile and office segments; 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 Group
DSP 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 Relations
Work: 1-415-726-5900, Daniel.amir@dspg.com

DSP GROUP, INC.
    CONSOLIDATED STATEMENTS OF INCOME
    (In thousands, except per share amounts)

    Three Months Ended June 30 Six Months Ended June 30
     2018   2017 2018  2017 
    (Unaudited) (Unaudited) (Unaudited) (Unaudited)
           
Revenues    $ 30,651   $ 31,301   $ 58,762   $ 59,234  
Cost of revenues     15,598     16,804     29,995     32,490  
           
Gross profit       15,053       14,497       28,767       26,744  
Operating expenses:          
Research and development, net      8,891      9,161      17,889      18,351  
Sales and marketing     3,761     3,430       7,829       7,005  
General and administrative     2,669     2,372     5,250     4,859  
Amortization of intangible assets     425     425     850     850  
           
Total operating expenses     15,746     15,388     31,818     31,065  
           
Operating loss       (693 )     (891 )   (3,051 )   (4,321 )
           
Financial income, net       403       418     799     834  
                   
Loss before taxes on 
  income
    (290 )   (473 )   (2,252 )      (3,487 )
Income tax benefit (expenses)     (2 )   113     (211 )   (35 )
           
Net loss   $   (288 ) $   (586 ) $   (2,041 ) $   (3,452 )
Net earnings (loss) per share:          
  Basic   $   (0.01 ) $   (0.03 ) $   (0.09 ) $   (0.16 )
  Diluted   $   (0.01 ) $   (0.03 ) $   (0.09 ) $   (0.16 )
           
Weighted average number of shares used in per share computations of  lossper share:          
  Basic     22,681     22,180 22,680     22,141  
  Diluted     22,681     22,180 22,680     22,141  


Unaudited Reconciliation of GAAP to Non-GAAP Financial Measures
  (In thousands, except per share amounts)

    Three Months Ended   Six Months Ended 
    June 30,   June 30,
     2018   2017   2018   2017 
    Unaudited Unaudited Unaudited Unaudited
GAAP net loss   $   (288 ) $   (586 ) $   (2,041 ) $   (3,452 )
Equity-based compensation expense included in cost of revenues     108     94     206     191  
Equity-based compensation expense included in research and development, net     701     623     1,353     1,239  
Equity-based compensation expense included in sales and marketing     265     297     671     597  
Equity-based compensation expense included in general and administrative     586     543     1,129     1,061  
Amortization of intangible assets     425     425     850     850  
Changes of deferred taxes related to intangible assets and equity-based compensation expense     (184 )   20     (381 )   (162 )
Non-GAAP net income   $   1,613   $   1,416   $   1,787   $   324  
           
Weighted-average number of common stock used in computation of GAAP diluted net earnings per share (in thousands)     22,681     22,180     22,680     22,141  
           
Weighted-average number of shares related to outstanding options, stock appreciation rights and restricted share units (in thousands)     1,398     1,469     1,378     1,427  
           
Weighted-average number of common stock used in computation of non-GAAP diluted net earnings per share (in thousands)     24,079     23,649     24,058     23,568  
           
GAAP diluted net  loss per share   $   (0.01 ) $   (0.03 ) $   (0.09 ) $   (0.16 )
Equity-based compensation expense     0.07     0.07     0.14     0.14  
Amortization of intangible assets     0.02     0.02     0.04     0.04  
Changes of deferred taxes related to intangible assets and equity-based compensation expense     (0.01 )   -     (0.02 )   (0.01 )
Non-GAAP diluted net earnings per share   $   0.07   $   0.06   $   0.07   $   0.01  

DSP GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)

    June 30, December 31,
      2018    2017   
      (Unaudited)   (Audited)
Assets       
Current assets:      
Cash and cash equivalents
Restricted deposits
  $

16,143
506
  $

21,324
524
 
Marketable securities and short term deposits     30,684     24,697  
Trade receivables, net     16,622     13,416  
Inventories     8,366     9,422  
Other accounts receivable and prepaid expenses     3,196     3,167  
Total current assets

 
    75,517     72,550  
Property and equipment, net     3,071     3,184  
 

Long term marketable securities and deposits
      76,620       82,669  
Severance pay fund     14,683     15,190  
Deferred income taxes     1,124     1,043  
Intangible assets, net     8,172     9,022  
Long term prepaid expenses and lease deposits       1,598      1,541   
      102,197     109,465  
Total assets

 
  $ 180,785   $ 185,199  
Liabilities and Stockholders’ Equity  
Current liabilities:      
Trade payables   $ 9,851   $ 8,660  
Other current liabilities     11,897     12,819  
Total current liabilities     21,748     21,479  
       
 Accrued severance pay     14,814     15,463  
 Accrued pensions     870      883   
 Deferred income taxes       239        424   
 Total long term liabilities     15,923     16,770  
Stockholders’ equity:      
 Common stock     22     22  
 Additional paid-in capital     375,410     372,041  
 Accumulated other comprehensive loss     (2,698 )   (1,874 )
 Less – Cost of treasury stock      (119,200 )    (118,397 )
Accumulated deficit       (110,420 )     (104,842 )
Total stockholders’ equity       143,114     146,950  
Total liabilities and stockholders’ equity   $ 180,785   $ 185,199  

A PDF accompanying this announcement is available at http://resource.globenewswire.com/Resource/Download/988d3742-b479-4cc9-933d-62c21fe3944c

Primary Logo

DSP Group, Inc.