DSP Group (DSPG) Reports Q4 EPS of $0.04, Slight Miss on Revenues

DSP Group (NASDAQ: DSPG) reported Q4 EPS of $0.04, versus $0.06 reported last year. Revenue for the quarter came in at $26.06 million versus the consensus estimate of $26.1 million.

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%.
• 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 of December 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.

Management Comments: Commenting on the results, Ofer Elyakim, CEO of DSP Group, stated, “Our fourth quarter results were in line with our guidance on most metrics. Moreover, looking ahead to the first quarter, we expect our revenues to recover and grow on a sequential basis, as the cordless supply chain correction gradually eases and customer demand strengthens, propelled by key accomplishments across our growth initiatives. We expect to benefit from commencing mass shipments of SmartVoice products to a tier 1 Chinese smartphone OEM, securing a high-volume design win with a tier 1 OEM for our Office/VoIP products, and being selected as the primary IoT technology for Orange’s new connected home service in France, a milestone event for ULE.”

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 DSP Group. We are transitioning back into a growth technology company as the legacy cordless business becomes a smaller part of the company’s revenues, thereby allowing our growth initiatives to play a more meaningful role in driving revenue growth and margin expansion for the overall company.”

For earnings history and earnings-related data on DSP Group (DSPG) click here.

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