Form 8-K DSP GROUP INC /DE/ For: Jul 30

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

 

Date of report (Date of earliest event reported): July 30, 2015

 

DSP GROUP, INC.
(Exact Name of Registrant as Specified in Its Charter)

 

Delaware
(State or Other Jurisdiction of Incorporation)

 

0-23006 (Commission File Number)	94-2683643 (I.R.S. Employer Identification No.)
161 S. San Antonio Road, Suite 10 Los Altos, CA (Address of Principal Executive Offices)	94022 (Zip Code)

 

408/986-4300
(Registrant’s Telephone Number, Including Area Code)

 

With a copy to:
Jaclyn Liu, Esq.
Morrison & Foerster llp
425 Market Street
San Francisco, CA 94105

 

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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

☐     Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐     Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐     Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐     Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION

 

On July 30, 2015, DSP Group, Inc. (the “Company”) announced its financial results for the quarter ended June 30, 2015. A copy of the press release, dated July 30, 2015, is attached and filed herewith as Exhibit 99.1. This information, including Exhibit 99.1 attached hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference to such filing.

 

In addition to the disclosure of financial results for the quarter ended June 30, 2015 in accordance with generally accepted accounting principles in the United States (“GAAP”), the press release also included non-GAAP net income and diluted earnings per share, for the quarters ended June 30, 2015 and 2014 that excluded (a) for the quarter ended June 30, 2015, the impact of amortization of acquired intangible assets in the amount of $321,000, associated with the acquisition of BoneTone Communications Ltd. (the “BoneTone Acquisition”), equity-based compensation expenses of $1,411,000 and amortization of deferred tax liability related to intangible assets acquired in the BoneTone Acquisition in the amount of $85,000, and (b) for the quarter ended June 30, 2014, the impact of amortization of acquired intangible assets in the amount of $397,000, associated with the acquisition of the Cordless and VoIP Terminals business of NXP B.V. and BoneTone Acquisition, equity-based compensation expenses of $1,461,000, amortization of deferred tax liability. related to intangible assets acquired in the BoneTone Acquisition in the amount of $97,000.

 

The Company believes that the non-GAAP presentation in the press release is useful to investors in analyzing the results for the quarters ended June 30, 2015 and 2014 because the exclusion of such expense may provide a more meaningful analysis of the Company’s core operating results. Further, the Company believes it is useful for investors to understand how the expenses associated with the application of FASB ASC No. 718 are reflected on its statements of income. The non-GAAP financial measures are used in addition to and in conjunction with results presented in accordance with GAAP, and are intended to provide additional insight into the Company’s operations that, when viewed with its GAAP results and the accompanying reconciliations to corresponding GAAP financial measures, offer a more complete understanding of factors and trends affecting the Company’s business. The non-GAAP presentation should not be viewed as a substitute for the Company’s reported GAAP results.

 

 

ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.

 

d. Exhibits

 

Exhibit No.	Description
99.1	Press Release of DSP Group, Inc., dated July 30, 2015.

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

	DSP GROUP, INC.
Date:     July 30, 2015	By:	/s/ Dror Levy
		Dror Levy Chief Financial Officer and Secretary

 

 

3

Exhibit 99.1 

 

DSP Group, Inc. Reports Second Quarter 2015 Earnings

Contribution from New Products Reaches 28% of Revenues and Drives Fourth Consecutive Quarter of Growth

 

LOS ALTOS, Calif., July 30, 2015 - 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, 2015.

 

 

Financial Results Highlights:

 

●	Non-GAAP and GAAP diluted EPS of $0.10 and $0.03, respectively, both exceeding guidance

 

●	Revenues of approximately $37.2 million up 3% year over year, above mid-point of guidance

 

●	Non GAAP gross margins of 41.1%, at the high end of guidance

 

●	Non-GAAP operating income of $2.4 million, at 6% of revenues, vs. non-GAAP operating income of $2.6 million in the second quarter of 2014

 

●	GAAP net income of $0.7 million, compared to $1.1 million in the second quarter of 2014

 

●	Generated $7.9 million of cash flows from operations

 

●	Repurchased 453,000 shares for a total consideration of $5.2 million

 

●	Cash, deposits and marketable securities of $120.1 million as of the end of the quarter

 

Management Comments:

 

Commenting on the results, Ofer Elyakim, CEO of DSP Group, stated, "We are pleased with our second quarter’s results, especially the record contribution from new products which are well received in the marketplace, with Office/VoIP and DECT/CAT-iq posting better than expected revenues.”

 

Mr. Elyakim added, "While we expect a slowdown in revenues for the third quarter of the year due to softening demand for DECT products and a delay in mobile revenues, we are still well positioned to achieve our objective of returning to revenue growth for the full year. More importantly, the successful market adoption of our new initiatives continues to increase our confidence in the long term growth in both revenues and profits.”

 

 

Products and Market Highlights:

 

●	New product contribution grew to 28% of revenues vs. 20% in the second quarter of 2014

 

●	Office/VoIP segment quarterly revenues of $5.2 million increased by 37% year over year

 

●	DECT/CAT-iq HGWs revenues of $4.2 million increased by 49% year over year

 

●	Launched DBMD4 , a new Always-On voice enhancement product, featuring ultra-low power consumption and best in class performance for mobile and wearable devices

 

●	Excelocity and SGW offer ATA and multiport VoIP gateway based on our DVF99 SoC

 

●	Introduced a DHAN ULE Module based on DHX91, enabling faster TTM and lower development costs

 

2015 Second Quarter Results

 

GAAP Results:

 

Revenues for the second quarter of 2015 were $37,247,000, an increase of 3% from revenues of $36,276,000 for the second quarter of 2014. Net income for the second quarter of 2015 was $730,000, as compared to net income of $1,088,000 for the second quarter of 2014. Basic and diluted income per share for the second quarter of 2015 was $0.03, as compared to basic and diluted income per share of $0.05 for the second quarter of 2014.

 

 

Non-GAAP Results:

 

Non-GAAP net income and diluted earnings per share for the second quarter of 2015 were $2,377,000 and $0.10, respectively, as compared to non-GAAP net income and diluted earnings per share of $2,849,000 and $0.12, respectively, for the second quarter of 2014. Non-GAAP net income and earnings per share for the second quarter of 2015 excluded the impact of amortization of acquired intangible assets in the amount of $321,000, associated with the acquisition of BoneTone Communications, equity-based compensation expenses of $1,411,000 and amortization of deferred tax liability related to intangible assets acquired in the BoneTone acquisition in the amount of $85,000.

 

Non-GAAP net income and earnings per share for the second quarter of 2014 excluded the impact of amortization of acquired intangible assets in the amount of $397,000, associated with the acquisitions of NXP’s CIPT business and BoneTone Communications, equity-based compensation expenses of $1,461,000 and amortization of deferred tax liability related to intangible assets acquired in the BoneTone acquisition in the amount of $97,000.

 

 

Earnings Conference Call Details:

 

DSP Group will discuss its second quarter financial results, along with its outlook and guidance for the third quarter of 2015, 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 1877 280 2342 (domestic US) or + 1718 354 1158 (international) approximately 10 minutes prior to the starting time. The password is DSP Group. 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: http://edge.media-server.com/m/p/a87wh8gm

 

A replay of the conference call will be available for a week following the call. To listen to the session, please dial +1 347 366 9565 (domestic US) or + 44 20 3427 0598 (international) and enter the company access code: 9737039#. For more information, please contact Dror Levy, CFO, at: Office: +972-9-952-9699, Email: [email protected].

 

 

Presentation on Non-GAAP Net Income Calculation

 

The Company believes that the non-GAAP presentation of net income and diluted EPS presented in this press release is useful to investors in comparing results for the quarter ended June 30, 2015 to the same period in 2014 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 expenses are reflected on 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 statement he expects a slowdown in revenues for the third quarter of the year due to softening demand for DECT products and a delay in mobile revenues, and that DSP Group is still well positioned to achieve its objective of returning to revenue growth for the full year, and that the successful market adoption of its new initiatives continues to increase the confidence in DSP Group’s long term growth in both revenues and profits. The results from these statements may not actually arise as a result of various factors, including the timing and ability of the consumer electronics market to recover and the corresponding recovery of DSP Group’s customers; unexpected delays in the commercial launch of new products, including in the mobile segment; slower than expected change in the nature of residential communications domain; 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 or 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 2014, 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.

 

 

DSP GROUP, INC.

    CONSOLIDATED STATEMENTS OF INCOME

    (In thousands, except per share amounts)

 

 

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2015				2014				2015				2014
		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
Revenues		$	37,247			$	36,276			$	75,282			$	69,162
Cost of revenues			22,012				21,495				44,512				41,367
Gross profit			15,235				14,781				30,770				27,795
Operating expenses:
Research and development, net			8,855				8,025				17,971				16,230
Sales and marketing			2,974				2,947				6,037				6,033
General and administrative			2,460				2,644				4,981				5,361
Amortization of intangible assets			321				397				642				794
Total operating expenses			14,610				14,013				29,631				28,418
Operating income (loss)			625				768				1,139				(623	)
Financial income, net			291				297				626				709
Income before taxes on income			916				1,065				1,765				86
Taxes on income (income tax benefit)			186				(23	)			262				(14	)
Net income		$	730			$	1,088			$	1,503			$	100
Net earnings per share:
Basic		$	0.03			$	0.05			$	0.07			$	0.00
Diluted		$	0.03			$	0.05			$	0.06			$	0.00
Weighted average number of shares used in per share computations of net income per share:
Basic			22,064				21,983				22,115				22,180
Diluted			23,717				23,035				23,801				22,706

 

 

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,
		2015				2014				2015				2014
		Unaudited				Unaudited				Unaudited				Unaudited
GAAP net income		$	730			$	1,088			$	1,503			$	100
Equity-based compensation expense included in cost of revenues			83				84				153				166
Equity-based compensation expense included in research and development, net			613				657				1,151				1,301
Equity-based compensation expense included in sales and marketing			178				169				330				331
Equity-based compensation expense included in general and administrative			537				551				1,030				1,106
Amortization of intangible assets			321				397				642				794
Amortization of deferred tax liability related to intangible assets			(85	)			(97	)			(170	)			(194	)
Non-GAAP net income		$	2,377			$	2,849			$	4,639			$	3,604
Weighted-average number of common stock used in computation of GAAP diluted net income per share (in thousands)			23,717				23,035				23,801				22,706
Weighted-average number of shares related to outstanding options, stock appreciation rights and restricted share units (in thousands)			406				455				379				1,044
Weighted-average number of common stock used in computation of non-GAAP diluted net income per share (in thousands)			24,123				23,490				24,180				23,750
GAAP diluted net income per share		$	0.03			$	0.05			$	0.06			$	0.00
Equity-based compensation expense			0.07				0.06				0.11				0.12
Amortization of intangible assets			0.01				0.02				0.03				0.04
Amortization of deferred tax liability related to intangible assets			(0.01	)			(0.01	)			(0.01	)			(0.01	)
Non-GAAP diluted net income per share		$	0.10			$	0.12			$	0.19			$	0.15

 

 

DSP GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands)

 

		June 30,				December 31,
		2015				2014
		(Unaudited)				(Audited)
Assets
Current assets:
Cash and cash equivalents		$	15,731			$	20,544
Restricted deposits			170				623
Marketable securities and short term deposits			11,974				11,508
Trade receivables, net			22,674				20,298
Inventories			14,067				15,635
Other accounts receivable and prepaid expenses			4,065				1,902
Deferred income taxes			780				775
Total current assets			69,461				71,285
Property and equipment, net			3,446				2,843
Long term marketable securities and deposits			92,206				92,269
Severance pay fund			11,545				10,860
Deferred income taxes			125				149
Intangible assets, net			9,769				10,411
Investment in other companies			2,200				2,200
Long term prepaid expenses and lease deposits			1,233				1,162
			117,078				117,051
Total assets		$	189,985			$	191,179
Liabilities and Stockholders’ Equity
Current liabilities:
Trade payables		$	15,250			$	15,282
Other current liabilities			14,363				16,411
Total current liabilities			29,613				31,693
Accrued severance pay			11,610				10,929
Accrued pensions			1,005				1,089
Deferred income taxes			675				845
Total long term liabilities			13,290				12,863
Stockholders’ equity:
Common stock			22				22
Additional paid-in capital			358,596				355,906
Accumulated other comprehensive income loss			(930	)			(1,566	)
Less – Cost of treasury stock			(121,929	)			(122,387	)
Accumulated deficit			(88,677	)			(85,352	)
Total stockholders’ equity			147,082				146,623
Total liabilities and stockholders’ equity		$	189,985			$	191,179

 

 

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