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DSP Group, Inc. Reports Third Quarter 2021 Results

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Third Quarter Revenues of $37.8 Million, an Increase of 45% YoY
GAAP and Non-GAAP Gross Margins of 55.3% and 55.7%, respectively

SAN JOSE, Calif., Nov. 03, 2021 (GLOBE NEWSWIRE) -- DSP Group®, Inc. (NASDAQ: DSPG), a leading global provider of wireless chipset solutions for converged communications, announced today its results for the third quarter ended September 30, 2021.

Third Quarter Financial Highlights (and Comparison to Third Quarter of 2020):
Revenue breakdown (USD in millions)

Q3 2021

Q3 2020

vs. Q3 2020

IoAT Revenues:

SmartVoice

$5.96

$7.20

down 17%

SmartHome

$6.86

$3.69

up 86%

Unified Communications

$14.42

$2.59

up 458%

Total IoAT Revenues

$27.24

$13.48

up 102%

Cordless Revenues

$10.52

$12.54

down 16%

Total Revenues

$37.76

$26.02

up 45%

  • GAAP and non-GAAP gross margin of 55.3% and 55.7%, respectively, a 460 and 420 basis point increase compared to the third quarter of 2020, respectively.

  • GAAP zero loss per share and non-GAAP diluted earnings per share of $0.16, compared to GAAP loss per share of $0.08 and non-GAAP diluted earnings per share of $0.05 for the third quarter of 2020.

  • GAAP operating income of $0.3 million and non-GAAP operating income of $4.5 million, compared to GAAP operating loss of $2.3 million and non-GAAP operating income of $1.0 million for the third quarter of 2020.

  • GAAP net loss of less than $0.1 million and non-GAAP net income of $4.1 million, compared to GAAP net loss of $1.9 million and non-GAAP net income of $1.3 million for the third quarter of 2020.

  • Generated $4.4 million of cash from operations, compared to $2.9 million of cash used in operations in the third quarter of 2020.

  • Cash, deposits and marketable securities of approximately $133.4 million as of September 30, 2021.

Management Comments:
Commenting on the results, Ofer Elyakim, CEO of DSP Group, stated: “We are delighted that we have been able to execute a successful business transformation of DSP Group as evidenced by the substantially improved results on multiple fronts and culminating in the proposed acquisition by Synaptics. We believe this proposed combination will provide a great result for our stockholders who have supported us through this journey.”

Third Quarter Non-GAAP Results:
Non-GAAP net income and diluted earnings per share for the third quarter of 2021 were $4.1 million and $0.16, respectively, as compared to non-GAAP net income and diluted earnings per share of $1.3 million and $0.05, respectively, for the third quarter of 2020. Non-GAAP net income and diluted earnings per share for the third quarter of 2021 excluded the impact of amortization of acquired intangible assets in the amount of $0.3 million associated with previous acquisitions, equity-based compensation expenses of $2.7 million, $1.1 million of transaction costs related to the anticipated acquisition by Synaptics Incorporation, amortization of employee retention expenses related to the SoundChip acquisition of $0.03 million, non-cash expenses from exchange rate differences resulting from the lease accounting standard (ASC 842) in the amount of $0.04 million, and income resulting from changes in deferred taxes in the amount of $0.03 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 third quarter of 2020 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 $2.4 million, non-cash expenses from exchange rate differences resulting from ASC 842 in the amount of $0.1 million, transaction expenses related to the acquisition of SoundChip in amount of $0.25 million, amortization of employees retention expenses related to the acquisition of SoundChip in amount of $0.25 million and income resulting from changes in deferred taxes in the amount of $0.2 million related to intangible assets acquired in current and previous acquisitions and equity-based compensation expenses.

Proposed acquisition of DSP Group by Synaptics
As announced on August 30, 2021, DSP Group entered into an agreement and plan of merger with Synaptics Incorporated ("Synaptics") and a wholly-owned subsidiary of Synaptics. Under the terms of the merger agreement, Synaptics will acquire all outstanding shares of DSP Group common stock for a per share price of $22.00 in cash. DSP Group’s Board of Directors unanimously approved the transaction and DSP Group filed definitive proxy materials with the Securities and Exchange Commission on October 25, 2021. The definitive proxy materials were mailed to DSP Group’s stockholders of record as of October 18, 2021 for a special meeting of stockholders to vote on the merger and other matters. The virtual special meeting is scheduled for Monday, November 29, 2021 at 1:00 p.m. Pacific Time. The consummation of the merger is subject to approval by the stockholders of DSP Group and the satisfaction of other conditions set forth in the merger agreement. Subject to the satisfaction of the closing conditions to the merger, we currently expect to complete the transaction by year end.

In light of the pending transaction, DSP Group will not host an earnings conference call and will not provide guidance relating to its expected financial results for future periods.

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.

Additional Information and Where to Find It

In connection with the merger transaction, DSP Group filed definitive proxy materials with the SEC on October 25, 2021 and mailed such materials and a proxy card to each stockholder of record as of October 18, 2021. STOCKHOLDERS OF DSP GROUP ARE URGED TO READ THESE MATERIALS, INCLUDING ANY AMENDMENTS OR SUPPLEMENTS THERETO, AND ANY OTHER RELEVANT DOCUMENTS IN CONNECTION WITH THE TRANSACTION THAT DSP GROUP HAS FILED OR WILL FILE WITH THE SEC WHEN THEY BECOME AVAILABLE BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT DSP GROUP AND THE TRANSACTION. The definitive proxy statement and other relevant materials for DSP Group stockholders in connection with the transaction, and any other documents filed by DSP Group with the SEC, may be obtained free of charge at the SEC's website (http://www.sec.gov) or at DSP Group's website (http://www.dspg.com) or by writing to DSP Group at 2055 Gateway Place, San Jose, California 95110, attention Investor Relations.

Participants in the Solicitation

DSP Group and certain of its directors and executive officers and other members of management and employees may be deemed to be participants in the solicitation of proxies from DSP Group’s stockholders with respect to the transaction. Information about DSP Group’s directors and executive officers and their ownership of DSP Group's common stock, as well as their direct and indirect interests in the transaction, are set forth in DSP Group’s definitive proxy materials filed with the SEC on October 25, 2021, and subsequent changes made by such persons on Statements of Changes in Ownership on Form 4 filed with the SEC.

Legal Notice Regarding Forward-Looking Statements

This release contains forward-looking statements that are subject to the safe harbors created under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business, including the expected timetable for completing the transaction, and can be identified by the fact that they do not relate strictly to historical or current facts. Such forward-looking statements may include words such as "expect," "anticipate," "intend," "believe," "estimate," "plan," “target,” “strategy,” “continue,” “may,” “will,” “should,” variations of such words, or other words and terms of similar meaning. All forward-looking statements reflect our best judgment and are based on several factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control. Such factors include, but are not limited to, the possibility that various conditions to the consummation of the proposed transaction between Synaptics and DSP Group will not be satisfied or waived, and the adverse impact associated with the announcement or pendency of the proposed transaction on the business relationships, operating results and employees of DSP Group, and other risks as identified from time to time in the SEC reports of DSP Group. Forward-looking statements are based on information available to DSP Group on the date hereof, and DSP Group expressly disclaims any obligation to publicly release any updates or any changes in expectations, or any change in events, conditions, or circumstances on which any forward-looking statement is based. Actual results and the timing of certain events could differ materially from the forward-looking statements.

Contact:
Claus Stetter
Vice President of Marketing & Communications
DSP Group Inc.
+1 +(650) 521 4082
claus.stetter@dspg.com

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

Three Months Ended September 30

Nine Months Ended September 30

2021

2020

2021

2020

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

Revenues

$

37,756

$

26,020

$

106,210

$

82,595

Cost of revenues

16,868

12,814

49,210

40,747

Gross profit

20,888

13,206

57,000

41,848

Operating expenses:

Research and development, net

10,933

8,122

32,043

26,931

Sales and marketing

5,292

4,117

15,820

13,563

General and administrative

4,012

2,864

9,826

7,839

Amortization of intangible assets

349

427

1,197

636

Total operating expenses

20,586

15,530

58,886

48,969

Operating income (loss)

302

(2,324

)

(1,886

)

(7,121

)

Financial income, net

216

343

951

1,535

Income (loss) before taxes on income

518

(1,981

)

(935

)

(5,586

)

Income tax expenses (benefit)

548

(90

)

837

(152

)

Net loss

$

(30

)

$

(1,891

)

$

(1,772

)

$

(5,434

)

Net loss per share:

Basic and diluted

$

(0.00

)

$

(0.08

)

$

(0.07

)

$

(0.23

)

Weighted average number of shares used in per share computations of loss per share:

Basic and diluted

24,141

23,562

24,134

23,399

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,

2021

2020

2021

2020

Unaudited

Unaudited

Unaudited

Unaudited

GAAP net income (loss)

$

(30

)

$

(1,891

)

$

(1,772

)

$

(5,434

)

Equity-based compensation expense included in cost of revenues

157

142

503

391

Equity-based compensation expense included in research and development, net

1,161

946

3,608

2,523

Equity-based compensation expense included in sales and marketing

646

646

2,017

1,821

Equity-based compensation expense included in general and administrative

713

699

2,084

1,811

Amortization of employee’s retention expenses related to the acquisition of SoundChip included in cost of revenues

-

67

134

67

Amortization of employee’s retention expenses related to the acquisition of SoundChip included in sales and marketing

-

149

298

149

Amortization of employee’s retention expenses related to the acquisition of SoundChip included in research and development, net

34

34

102

34

Transaction expenses related to the acquisition of SoundChip

-

249

-

249

Transaction expenses related to the anticipated acquisition by Synaptics

1,096

-

1,096

-

Amortization of intangible assets

349

427

1,197

636

Non-cash expenses (income) from exchange rates differences resulting from lease accounting standard (ASC 842)

44

90

(227

)

(71

)

Income from changes of deferred taxes related to intangible assets and equity-based compensation expense

(34

)

(232

)

(432

)

(249

)

Non-GAAP net income

$

4,136

$

1,326

$

8,608

$

1,927

Weighted-average number of common stock used in computation of GAAP diluted net loss per share (in thousands)

24,141

23,562

24,134

23,399

Weighted-average number of shares related to outstanding options, stock appreciation rights and restricted share units (in thousands)

1,494

1,565

1,505

1,616

Weighted-average number of common stock used in computation of non-GAAP diluted net earnings per share (in thousands)

25,635

25,127

25,639

25,015

GAAP diluted net loss per share

$

(0.00

)

$

(0.08

)

$

(0.07

)

$

(0.23

)

Equity-based compensation expense

0.11

0.09

0.32

0.27

Amortization of intangible assets

0.01

0.02

0.05

0.03

Transaction expenses related to the acquisition of SoundChip

-

0.01

-

0.01

Amortization of employee’s retention expenses related to the acquisition of SoundChip

-

0.01

0.02

0.01

Non-cash expenses from Exchange rates differences resulting from lease accounting standard (ASC 842)

-

0.01

(0.01

)

-

Transaction expenses related to the anticipated acquisition by Synaptics

0.04

-

0.04

-

Income from changes of deferred taxes related to intangible assets and equity-based compensation expense

-

(0.01

)

(0.01

)

(0.01

)

Non-GAAP diluted net earnings per share

$

0.16

$

0.05

$

0.34

$

0.08


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

September 30,

December 31,

2021

2020

(Unaudited)

(Audited)

Assets

Current assets:

Cash and cash equivalents

$

20,422

$

16,936

Restricted deposits

579

548

Marketable securities and short-term deposits

52,945

50,615

Trade receivables, net

18,019

11,003

Inventories

7,009

9,061

Other accounts receivable and prepaid expenses

3,359

3,460

Total current assets

102,333

91,623

Property and equipment, net

6,252

6,574

Long term marketable securities and deposits

59,434

60,454

Severance pay fund

15,655

16,285

Operating leases– right of use assets

10,315

11,102

Deferred income taxes

6,012

6,893

Intangible assets, net

19,303

20,654

Long term prepaid expenses and lease deposits

2,498

2,888

Total long-term assets

113,217

118,276

Total assets

$

221,802

216,473

Liabilities and Stockholders’ Equity

Current liabilities:

Trade payables

$

11,259

$

10,708

Operating lease liability

3,020

2,974

Other current liabilities

19,063

15,724

Total current liabilities

33,342

29,406

Accrued severance pay

16,164

16,647

Operating lease liability

9,003

10,075

Accrued pensions

1,016

1,089

Deferred income taxes

898

1,073

Other long-term liabilities

1,945

1,945

Total long term liabilities

29,026

30,829

Stockholders’ equity:

Common stock

24

24

Additional paid-in capital

404,806

396,335

Accumulated other comprehensive loss

(1,071

)

(637

)

Less – Cost of treasury stock

(105,727

)

(108,509

)

Accumulated deficit

(138,598

)

(130,975

)

Total stockholders’ equity

159,434

156,238

Total liabilities and stockholders’ equity

$

221,802

$

216,473