OREANDA-NEWS. 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, 2016.

Second Quarter Financial Highlights:

  • GAAP and non-GAAP diluted earnings per share of $0.05 and $0.11, respectively
  • Revenues of approximately $36.2 million, above the mid-point of guidance
  • Non-GAAP gross margin of 44.2%, compared to non-GAAP gross margin of 41.1% in the second quarter of 2015
  • Non-GAAP operating income of $2.5 million, compared to non-GAAP operating income of $2.4 million in the second quarter of 2015
  • Non-GAAP net income of $2.6 million, compared to non-GAAP net income of $2.4 million in the second quarter of 2015
  • Generated $9.0 million of cash flow from operations, compared to $7.9 million in the second quarter of 2015
  • Repurchased 132,000 shares for a total consideration of $1.3 million
  • Cash, deposits and marketable securities of $122.7 million as of June 30, 2016

Management Comments:
Commenting on the results, Ofer Elyakim, CEO of DSP Group, stated, “Our second quarter performance reflects record results from new products of $15.9 million, or 44% of total revenues, propelled by market demand for our Mobile and Office/VoIP products. Also, we delivered better than expected non-GAAP gross margins of 44.2%, an expansion of 310 basis points year-over-year and 160 basis points sequentially, driven by record contributions from our new products that continue to capture a greater share of revenue.”

Mr. Elyakim added, “In the third quarter of 2016, we expect sequential revenue growth, led by the continued success of our new product initiatives and sequential improvement in the cordless segment. Our growth and long-term value propositions are now driven by our proven new product initiatives. We are achieving market leadership in Office/VoIP, and HDClear is rapidly gaining recognition as a key technology for voice activation and voice user interface across a range of IoT, audio and mobile devices.”

Second Quarter Product and Market Highlights:

  • Record new product revenues of $15.9 million, a year-over-year increase of 55%
  • Office/VoIP segment revenues of $7.4 million, a year-over-year increase of 42%
  • Mobile/HDClear segment revenues of $4.6 million, 13% of total revenues
  • IoT revenues of $1.3 million, a year-over-year increase of 42%
  • Home gateway revenues of $2.6 million, in line with guidance
  • Secured HDClear design win with a leading OEM for a non-smartphone application
  • Orange selected our DECT/CAT-iq products for its recently-launched home gateway
  • Ball-b selected our ULE SoC for its smart city rodent control metropolitan system
  • Smarte selected our ULE SoCs to power its new smart home product line

Second Quarter GAAP Results:
Revenues for the second quarter of 2016 were $36.2 million, a decrease of 3% from revenues of $37.2 million for the second quarter of 2015. Net income for the second quarter of 2016 was $1.1 million, as compared to net income of $0.7 million for the second quarter of 2015. Basic and diluted earnings per share for the second quarter of 2016 were $0.05, as compared to basic and diluted earnings per share of $0.03, for the second quarter of 2015.

Second Quarter Non-GAAP Results:
Non-GAAP net income and diluted earnings per share for the second quarter of 2016 were $2.6 million and $0.11, respectively, as compared to non-GAAP net income and diluted earnings per share of $2.4 million and $0.10, respectively, for the second quarter of 2015. Non-GAAP net income and earnings per share for the second quarter of 2016 exclude 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 $1.3 million; and amortization of deferred tax liability related to intangible assets acquired in the BoneTone acquisition in the amount of $80,000. Non-GAAP net income and earnings per share for the second quarter of 2015 exclude the impact of amortization of acquired intangible assets of $321,000 associated with the BoneTone acquisition; equity-based compensation expenses of $1.4 million; and amortization of deferred tax liability related to intangible assets acquired in connection with the BoneTone acquisition in the amount of $85,000.

Earnings Conference Call Details:
DSP Group will discuss its second quarter financial results, along with its outlook and guidance for the third quarter of 2016, 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 +1646 254 3388 (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/ktfne8sd

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(0)20 3427 0598 (international) and enter the company access code: 479321#

Presentation on Non-GAAP Net Income Calculation
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, 2016 to the same period in 2015 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.

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,
      2016       2015       2016       2015  
      (Unaudited)       (Unaudited)       (Unaudited)       (Unaudited)  
           
Revenues   $ 36,164     $ 37,247     $ 63,823     $ 75,282  
Cost of revenues     20,279       22,012       36,221       44,512  
           
Gross profit     15,885       15,235       27,602       30,770  
Operating expenses:          
Research and development, net     9,036       8,855       17,925       17,971  
Sales and marketing     3,323       2,974       6,715       6,037  
General and administrative     2,275       2,460       4,558       4,981  
Amortization of intangible assets     321       321       642       642  
           
Total operating expenses     14,955       14,610       29,840       29,631  
           
Operating income (loss)     930       625       (2,238 )     1,139  
           
Financial income, net     273       291       565       626  
           
Income (loss)  before taxes on income     1,203       916       (1,673 )     1,765  
Taxes on income     123       186       160       262  
           
Net income (loss)   $ 1,080     $ 730     $ (1,833 )   $ 1,503  
Net earnings (loss) per share:          
Basic   $ 0.05     $ 0.03     $ (0.08 )   $ 0.07  
Diluted   $ 0.05     $ 0.03     $ (0.08 )   $ 0.06  
           
Weighted average number of shares used in per share computations of  net earnings (loss) per share:          
Basic     21,739       22,064       21,725       22,115  
Diluted     22,845       23,717       21,725       23,801  
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,
      2016       2015       2016       2015  
      Unaudited       Unaudited       Unaudited       Unaudited  
GAAP net income   $ 1,080     $ 730     $ (1,833 )   $ 1,503  
Equity-based compensation expense included in cost of revenues     83       83       144       153  
Equity-based compensation expense included in research and development, net     521       613       947       1,151  
Equity-based compensation expense included in sales and marketing     194       178       325       330  
Equity-based compensation expense included in general and administrative     461       537       828       1,030  
Amortization of intangible assets     321       321       642       642  
Amortization of deferred tax liability related to intangible assets     (80 )     (85 )     (160 )     (170 )
Non-GAAP net income   $ 2,580     $ 2,377     $ 893     $ 4,639  
           
Weighted-average number of common stock used in computation of GAAP diluted net earnings per share (in thousands)     22,845       23,717       21,725       23,801  
           
Weighted-average number of shares related to outstanding options, stock appreciation rights and restricted share units (in thousands)     509       406       1,444       379  
           
Weighted-average number of common stock used in computation of non-GAAP diluted net earnings per share (in thousands)     23,354       24,123       23,169       24,180  
           
GAAP diluted net earnings (loss) per share   $ 0.05     $ 0.03     $ ( 0.08 )   $ 0.06  
Equity-based compensation expense     0.06       0.07       0.10       0.11  
Amortization of intangible assets     0.01       0.01       0.03       0.03  
Amortization of deferred tax liability related to intangible assets     (0.01 )     (0.01 )     (0.01 )     (0.01 )
Non-GAAP diluted net earnings per share   $   0.11     $   0.10     $   0.04     $   0.19