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DSP Group, Inc. Reports First Quarter 2021 Results

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First quarter revenues of $32.6 million, 16% YoY growth
Record IoAT revenues of 20.8 million, 14% YoY growth
Record non-GAAP gross margins of 52.7%

SAN JOSE, Calif., May 03, 2021 (GLOBE NEWSWIRE) -- DSP Group®, Inc. (NASDAQ:DSPG), a leading global provider of voice and wireless chipset solutions for converged communications, announced today its results for the first quarter ended March 31, 2021.

First Quarter Financial Highlights (and Comparisons to First Quarter of 2020):
Revenue breakdown (USD in millions)

  Q1 2021   Q1 2020   vs. Q1 2020
IoAT Revenues:          
SmartVoice $6.00   $4.00   up 50%
SmartHome $4.80   $4.00   up 22%
Unified Communications $10.00   $10.20   down 3%
Total IoAT Revenues $20.80   $18.20   up 14%
Cordless Revenues $11.80   $10.00   up 18%
Total Revenues $32.60   $28.20   up 16%
           
  • GAAP and non-GAAP gross margin of 52.0% and 52.7%, respectively, a 110 and 130 basis point increase, respectively.
  • GAAP loss per share of $0.06 and non-GAAP diluted earnings per share of $0.05, compared to GAAP and non-GAAP diluted loss per share of $0.11 and $0.04 for the first quarter of 2020.
  • GAAP operating loss of $1.8 million and non-GAAP operating income of $1.4 million, compared to GAAP operating loss of $3.4 million and non-GAAP operating loss of $1.5 million for the first quarter of 2020.
  • GAAP net loss of $1.3 million and non-GAAP net income of $1.3 million, compared to GAAP net loss of $2.5 million and non-GAAP net loss of $1.0 million for the first quarter of 2020.
  • Generated $0.8 million of cash from operations, compared to $0.9 million of cash generated from operations in the first quarter of 2020.
  • Cash, deposits and marketable securities of approximately $129.1 million as of March 31, 2021.

Management Comments:

Commenting on the results, Ofer Elyakim, CEO of DSP Group, stated: "We are excited about the solid demand for our products, as evidenced by first quarter revenues of $32.6 million, up 16% year-over-year and exceeding the mid-point of our guidance. We are particularly pleased by our IoAT businesses, which delivered a record quarter with revenues of $20.8 million. These results were driven by robust demand for voice-centric products, offset by certain supply chain constraints, a record quarter for our SmartHome business, solid momentum in our SmartVoice products, and a faster recovery of the Unified Communication segment. Our enhanced product mix contributed to another record high non-GAAP growth margin of 52.7%."

Mr. Elyakim continued, "Looking ahead, we expect the solid momentum to continue in the second quarter and project strong revenue growth both sequentially and year-over-year. The digital transformation was markedly accelerated by the global response to the pandemic and has stimulated innovation to enable the creation of new models for work, education, and interaction, underscoring the strategic importance of our technology to our customers. These trends support the long-term growth potential of DSP Group's audio, voice, and connectivity technologies. Our recent achievements include the increasing adoption of voice user interfaces (VUIs) in a broad array of applications, the successful penetration of DECT/ULE into the security market and the launch of new unified communications end points and hybrid collaboration devices by leading brands. While industry-wide supply-chain constraints are curbing product deliveries, the solid demand, coupled with our pipeline of opportunities, position us well for revenue growth in 2021."

First Quarter Business Highlights:

  • We continued to grow and strengthen our SmartVoice franchise with design wins and product launches for VUIs with leading consumer electronics OEMs, thereby driving dynamic growth in a burgeoning market. The achievements this quarter include:
    • Inauguration of a state-of-the-art audio AI innovation and testing lab in Straubing, Germany that is led by a world class team of audio and automotive sound experts.
    • One of the world's leading monitor and TV manufacturers chose our SmartVoice for its Smart Display offering.
    • Lenovo and TCL launched new tablet models based on our SmartVoice solutions for voice control.
  • We grew and diversified our SmartHome ecosystem with leading global vendors that recognize ULE's unmatched characteristics for wireless indoor IoT, including superior range, interference-free spectrum, and native support for two-way voice. Wins include:
    • British Telecom launched an Alexa-enabled home phone for UK broadband users based on our DECT/ULE technology.
    • A European security service provider launched a home security offering based on our DECT/ULE technology.
    • VTech launched a door bell solution leveraging our DECT/ULE technology for two-way voice support.
  • We solidified our leadership position and expanded our market share in the Unified Communications market, as demonstrated by the following wins:
    • A Tier-1 UC brand upgraded its DECT headset with our proprietary bit protection for the most reliable narrowband and wideband audio communication in dense wireless deployments, such as offices and call centers.
    • A tier 1 UC brand chose our DVF platform for its next generation IP phones.
    • Lenovo and Foneric chose our SmartVoice voice communication engine for a hybrid collaboration endpoint.

First Quarter Non-GAAP Results:

Non-GAAP net income and diluted income per share for the first quarter of 2021 were $1.3 million and $0.05, respectively, as compared to non-GAAP net loss and loss per share of $1.0 million and $0.04, respectively, for the first quarter of 2020. Non-GAAP net income and diluted earnings per share for the first quarter of 2021 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 $2.5 million, amortization of employee's retention expenses related to the acquisition of SoundChip S.A. of $0.25 million, non-cash income from exchange rate differences resulting from the lease accounting standard (ASC 842) in the amount of $0.4 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 first quarter of 2020 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 income from exchange rate differences resulting from ASC 842 in the amount of $0.4 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

Earnings Conference Call Details

DSP Group will discuss its first quarter financial results, along with its outlook and guidance for the second 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 + 1(877)8709135 (domestic US) or +44 (0) 2071 928338 (international) approximately 10 minutes prior to the starting time. The password is 4266177.

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/979kfwz6

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: 4266177

Presentation of Non-GAAP Net Income and EPS
The Company believes that the non-GAAP presentation of net income (loss) and diluted earnings per share presented in this press release is useful to investors in comparing results for the first quarter ended March 31, 2021 and 2020 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 retention expenses 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 expectation of DSP Group's solid momentum to continue and expectation for strong revenue growth both sequentially and year-over-year, (ii) the digital transformation trends supporting the long-term growth potential of DSP Group's audio, voice, and connectivity technologies, (iii) industry-wide supply-chain constraints curbing product deliveries, and (iv) DSP Group's strong demand, coupled with pipeline of opportunities, position the company well for revenue growth in 2021. The results from these statements may not actually arise as a result of various factors, including the continued duration of the COVID-19 pandemic and the impact on the demand for consumer electronics and the global economy; market penetration of DSP Group's unified communications, DECT/ULE, VUI, SmartVoice and SmartHome products; duration and impact of the industry-wide supply-chain constraints, 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 2020, 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/5027bf21-6fb9-46a9-a654-f4ed5e6a02ff

 
DSP GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
 
     
    Three Months Ended
March 31
    2021   2020
         
                 
    (Unaudited) (Unaudited)
       
Revenues   $ 32,647     $ 28,239  
Cost of revenues     15,666       13,858  
         
                 
             
Gross profit     16,981       14,381  
Operating expenses:      
Research and development, net     10,480       10,354  
Sales and marketing     5,202       5,011  
General and administrative     2,653       2,348  
Amortization of intangible assets     419       104  
             
Total operating expenses     18,754       17,817  
             
Operating loss     (1,773 )     (3,436 )
       
Financial income, net     641       903  
             
Loss before income tax expenses (benefit)     (1,132 )     (2,533 )
Income tax expenses (benefit)    
211
     
(68

)
             
Net loss   ($ 1,343 )   ($ 2,465 )
Net loss per share:            
Basic and diluted   $ (0.06 )   $ (0.11 )
       
Weighted average number of shares used in per share computations of loss per share:      
Basic and diluted     24,058       23,342  
       


    Three Months Ended
    March 31,
     2021     2020 
         
    Unaudited Unaudited
GAAP net Loss   ($ 1,343 )   ($ 2,465 )
Equity-based compensation expense included in cost of revenues     161       120  
Equity-based compensation expense included in research and development, net     1,142       751  
Equity-based compensation expense included in sales and marketing     626       555  
Equity-based compensation expense included in general and administrative     601       406  
Amortization of intangible assets     419       104  
Amortization of employee's retention expenses related to the acquisition of SoundChip included in cost of revenues     67       -  
Amortization of employee's retention expenses related to the acquisition of SoundChip included in sales and marketing     149       -  
Amortization of employee's retention expenses related to the acquisition of SoundChip included in research and development, net     34       -  
Non-cash Income from Exchange rates differences resulting from the new lease accounting standard (ASC 842)     (448 )     (416 )
Changes of deferred taxes related to intangible assets and equity-based compensation expense     (142 )     (66 )
Non-GAAP net income (loss)   $ 1,266     $ (1,011 )
             
Weighted-average number of common stock used in computation of GAAP diluted net loss per share (in thousands)     24,058       23,342  
       
Weighted-average number of shares related to outstanding options, stock appreciation rights and restricted share units (in thousands)     1,433       -  
       
Weighted-average number of common stock used in computation of non-GAAP diluted net earnings (loss) per share (in thousands)     25,491       23,342  
       
GAAP diluted net loss per share   $ (0.06 )   $ (0.11 )
Equity-based compensation expense     0.10       0.08  
Amortization of intangible assets     0.02       0.01  
Amortization of employee's retention expenses related to the acquisition of SoundChip     0.01       -  
Non-cash income from Exchange rates differences resulting from the new lease accounting standard (ASC 842)     (0.02 )     (0.02 )
Changes of deferred taxes related to intangible assets and equity-based compensation expense     -       -  
Non-GAAP diluted net earnings (loss) per share   $ 0.05     $ (0.04 )


 
DSP GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
       
    March 31, December 31,
     2021    2020 
    (Unaudited) (Audited)
Assets      
Current assets:      
Cash and cash equivalents
Restricted deposits
  $

20,018
565
    $

16,936
548
 
Marketable securities and short-term deposits     53,267       50,615  
Trade receivables, net     11,226       11,003  
Inventories     7,929       9,061  
Other accounts receivable and prepaid expenses     3,674       3,460  
Total current assets

    96,679       91,623  
Property and equipment, net     6,628       6,574  

Long term marketable securities and deposits
   
55,201
     
60,454
 
Severance pay fund     15,512       16,285  
Operating leases– right of use assets     10,876       11,102  
Deferred income taxes     6,572       6,893  
Intangible assets, net     20,044       20,654  
Long term prepaid expenses     2,687       2,888  
Total long-term assets     110,892       118,276  
                 
Total assets
  $ 214,199       216,473  
                 
Liabilities and Stockholders' Equity                
Current liabilities:      
Trade payables   $ 9,575     $ 10,708  
Operating lease liability     2,883       2,974  
Other current liabilities     13,465       15,724  
Total current liabilities     25,923       29,406  
       
Accrued severance pay     15,883       16,647  
Operating lease liability     9,489       10,075  
Accrued pensions     1,042       1,089  
Deferred income taxes     1,011       1,073  
Other long-term liabilities     1,945       1,945  
Total long-term liabilities     29,370       30,829  
Stockholders' equity:      
Common stock     24       24  
Additional paid-in capital     398,916       396,335  
Accumulated other comprehensive loss     (886 )     (637 )
Less – Cost of treasury stock     (103,300 )     (108,509 )
Accumulated deficit     (135,848 )     (130,975 )
Total stockholders' equity     158,906       156,238  
Total liabilities and stockholders' equity   $ 214,199       216,473  
                 


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