8-K

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, 2020

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

Delaware
(State or Other Jurisdiction of Incorporation)

1-35256 (Commission File Number)	94-2683643 (I.R.S. Employer Identification No.)
2055 Gateway Place, #480, San Jose, California (Address of Principal Executive Offices)	95110 (Zip Code)

972-9-952-9696
(Registrant’s Telephone Number, Including Area Code)

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

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))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $.001 per share	DSPG	The NASDAQ Stock Market LLC

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On July 30, 2020, DSP Group, Inc. (the “Company”) announced its financial results for the quarter ended June 30, 2020. A copy of the press release, dated July 30, 2020, 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, 2020 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, 2020 and 2019 that excluded (a) for the quarter ended June 30, 2020, the impact of amortization of acquired intangible assets in the amount of $0.1 million associated with previous acquisitions, equity-based compensation expenses of $2.3 million, non-cash exchange rate differences resulting from the new lease accounting standard (ASC 842) in the amount of $0.3 million and expenses resulting from changes in deferred taxes in the amount of $0.1 million related to intangible assets acquired in previous acquisitions and equity-based compensation expenses, and (b) for the quarter ended June 30, 2019, the impact of amortization of acquired intangible assets in the amount of $0.1 million associated with previous acquisitions, equity-based compensation expenses of $2.1 million, non-cash exchange rate differences resulting from ASC 842 in the amount of $0.2 million and income resulting changes in deferred taxes in the amount of $0.1 million related to intangible assets acquired in previous acquisitions and equity-based compensation expenses.

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, 2020 and 2019 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, 2020.

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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, 2020	By:	/s/ Dror Levy
		Dror Levy Chief Financial Officer and Secretary

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EX-99.1

Exhibit 99.1

DSP Group, Inc. Reports Second Quarter 2020 Results

Significant Expansion of SAM and Growth Prospects Despite Short-term Disruptions in Global Market

San Jose, Calif., July 30, 2020 - DSP Group^®, Inc. (NASDAQ: DSPG), a leading global provider of voice and wireless chipset solutions for converged communications, announced today its results for the second quarter ended June 30, 2020.

Second Quarter Financial Highlights (and Comparisons to Second Quarter of 2019):

● Total revenues of $28.3 million, a 2% decrease:

o Revenues from IoAT (Internet of Audio Things) businesses (formerly “growth initiatives”) of $18.4 million accounted for 65% of total revenues, an increase of 4%.

o Unified Communications segment revenues of $10.1 million, an increase of 15%.

o SmartVoice segment revenues of $3.9 million, a decrease of 26%.

o SmartHome segment revenues of $4.3 million, an increase of 18%.

o Cordless revenues of $9.9 million, a decrease of 12%.

● GAAP and non-GAAP gross margin of 50.3% and 50.8%, respectively, a 60 and 70 basis point increase, respectively.

● GAAP loss per share of $0.05 and non-GAAP diluted earnings per share of $0.06, compared to GAAP loss per share of $0.02 and non-GAAP diluted earnings per share of $0.07 for the second quarter of 2019.

● GAAP operating loss of $1.4 million and non-GAAP operating income of $1.0 million, compared to GAAP operating loss of $1.3 million and non-GAAP operating income of $0.9 million, respectively for the second quarter of 2019.

● GAAP net loss of $1.1 million and non-GAAP net income of $1.6 million, compared to GAAP net loss of $0.5 million and non-GAAP net income of $1.7 million for the second quarter of 2019.

● Generated $8.0 million of cash from operations, compared to $3.0 million of cash from operations in the second quarter of 2019.

● Repurchased 29,000 shares of common stock for a total consideration of $0.4 million.

● Cash, deposits and marketable securities of approximately $137.5 million as of June 30, 2020.

Management Comments:

Commenting on the results, Ofer Elyakim, CEO of DSP Group, stated: “Our second quarter performance reflects prudent execution while navigating through a disrupted business environment brought about by the COVID-19 pandemic. We ended the quarter with revenues of $28.3 million, above the mid-point of our guidance range, driven by solid performance in our IoAT businesses that grew by 4% year over year to a total of $18.4 million and comprised 65% of total revenues. Our performance benefitted from solid results in our SmartHome and Unified Communications segments. Moreover, during the quarter, we announced our entry into the rapidly growing hearables market and strengthened our offerings with the acquisition of SoundChip that we closed on July 1st. By combining our core low-power voice processing and audio codec expertise with SoundChip’s system-level design expertise and patents around ambient noise cancellation, we have effectively doubled our potential service addressable market (SAM).”

Mr. Elyakim continued; “Primarily due to the pandemic’s impact on the global workforce, we currently expect a decline in revenues in the third quarter, particularly in the Unified Communications market. However, looking forward, the pandemic has changed culture and habits globally in ways that we believe will drive increased demand for our products in an environment that is increasingly reliant on high quality communications and remote collaboration tools. For instance, DSP Group’s best-in-class technologies for voice-as-a-user-interface, IoT and unified communications are key enabling technologies for major trends that have arisen from increased sensitivity to health and safety as well as convenience and efficiency for consumers and businesses. We are well positioned for long-term sustainable growth in the SmartVoice, SmartHome and Unified Communications markets and are very excited about the increase in our SAM and growth opportunities with our recent entry into the hearables market.”

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Second Quarter Business Highlights:

● Expanded our SAM by enabling a wide variety of features to support the growing hearables and VUI-enabled consumer products by leveraging our voice, edge-AI and ANC, thereby driving dynamic growth in a burgeoning market:

o A leading Korean OEM launched an innovative always-on remote control based on our SmartVoice SoC which enables multiple simultaneous wake-word detection, including Alexa Voice Services (AVS) support

o A leading U.S. retail brand launched a new branded tablet product based on our SmartVoice solution

o Leading Japanese and U.S. brands launched true wireless stereo (TWS) headset products based on our best-in-class Smart ANC Codec solution

● Grew and diversified our SmartHome ecosystem with leading IoT vendors that recognize ULE’s unmatched characteristics for wireless indoor connectivity. These characteristics include superior range, interference-free spectrum and native support for two-way voice:

o A leading European service provider selected our DECT/ULE technology for its new smart home gateway product

o Deutsche Telecom and Orange each launched a new smart speaker that leverages our DECT/ULE solution to offer reliable, high-performance, two-way voice support

o Orange expanded its smart home devices ecosystem and launched a flood sensor

● Solidified our leadership position in the Unified Communications market as demonstrated by the following business wins:

o A tier 1 OEM launched a premium conference phone with high-quality audio for smart meetings and sharing based on our DVF platform.

o A tier 1 European networking OEM launched a new family of SIP desktop IP phones that provides enterprise grade communication experience based on our DVF97 and DVF99 SoCs.

o Grandstream’s GRP series of Carrier-Grade IP Phones based on our DVF solution was awarded the 2020 TMC Labs INTERNET TELEPHONY Innovation Award

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Second Quarter GAAP Results:

Revenues for the second quarter of 2020 were $28.3 million, a decrease of 2% from revenues of $29 million for the second quarter of 2019. Net loss and loss per share for the second quarter of 2020 were ($1.1) million and ($0.05), respectively. Net loss and loss per share for the second quarter of 2019 were ($0.5) million and ($0.02), respectively.

Second Quarter Non-GAAP Results:

Non-GAAP net income and diluted earnings per share for the second quarter of 2020 were $1.6 million and $0.06, respectively, as compared to non-GAAP net income and diluted earnings per share of $1.7 million and $0.07, respectively, for the second quarter of 2019. Non-GAAP net income and diluted earnings per share for the second 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 $2.3 million, non-cash expenses from exchange rate differences resulting from the new lease accounting standard (ASC 842) in the amount of $0.3 million, and expenses resulted from 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 second quarter of 2019 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 $2.1 million, non-cash expenses from exchange rate differences resulting from ASC 842 in the amount of $0.2 million, and income resulted from 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 second quarter financial results, along with its outlook and guidance for the third quarter of 2020, 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) 870-9135 (domestic US) or +44 (0) 2071 928338 (international) approximately 10 minutes prior to the starting time. The password is 5493607

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/mjjkf9nc

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: 5493607#

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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 second quarter and ended June 30, 2020 and 2019 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.

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 that: (i) by combining DSP Group’s core low-power voice processing and audio codec expertise with SoundChip’s system-level design expertise and patents around ambient noise cancellation, the company has doubled its potential SAM; (ii) DSP Group currently expects a decline in revenues in the third quarter; (iii) DSP Group’s belief that the pandemic has changed culture and habits globally in ways that will drive increased demand for its products; (iv) DSP Group’s best-in-class technologies for voice-as-a-user-interface, IoT and unified communications are key enabling technologies for major trends that have arisen from the pandemic; (v) DSP Group is well positioned for long-term sustainable growth in the SmartVoice, SmartHome and Unified Communications markets; and (vi) DSP Group’s expectation of increasing its SAM and growth opportunities with its recent entry into the hearables market. The results from these statements may not actually arise as a result of various factors, including the scope and duration of the pandemic; the extent and length of the shelter-in-place and other restrictions associated with the pandemic and the impact on the demand for consumer electronics and the global economy; market penetration of DSP Group’s Unified Communications, ULE, VUI, SmartVoice and SmartHome products; 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 2019, 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.

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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:

Tali Chen, Chief Marketing Officer, Tali.Chen@dspg.com

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DSP GROUP, INC.

    CONSOLIDATED STATEMENTS OF INCOME

    (In thousands, except per share amounts)

	Three Months Ended June 30						Six Months Ended June 30
	2020			2019			2020			2019
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Revenues	$	28,336		$	29,034		$	56,575		$	57,310
Cost of revenues		14,075			14,615			27,933			28,435
Gross profit		14,261			14,419			28,642			28,875
Operating expenses:
Research and development, net		8,455			8,559			18,809			17,481
Sales and marketing		4,435			4,386			9,446			8,869
General and administrative		2,627			2,674			4,975			5,229
Amortization of intangible assets		104			104			208			208
Total operating expenses		15,621			15,723			33,438			31,787
Operating loss		(1,360	)		(1,304	)		(4,796	)		(2,912	)
Financial income, net		289			400			1,192			713
Loss before taxes on income		(1,071	)		(904	)		(3,604	)		(2,199	)
Income tax expenses (benefit)		6			(383	)		(62	)		(612	)
Net loss	$	(1,077	)	$	(521	)	$	(3,542	)	$	(1,587	)
Net loss per share:
Basic and diluted	$	(0.05	)	$	(0.02	)	$	(0.15	)	$	(0.07	)
Weighted average number of shares used in per share computations of loss per share:
Basic and diluted		23,301			22,757			23,321			22,650

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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,
	2020			2019			2020			2019
	Unaudited			Unaudited			Unaudited			Unaudited
GAAP net loss	$	(1,077	)	$	(521	)	$	(3,542	)	$	(1,587	)
Equity-based compensation expense included in cost of revenues		129			122			249			237
Equity-based compensation expense included in research and development, net		826			775			1,577			1,525
Equity-based compensation expense included in sales and marketing		620			474			1,175			876
Equity-based compensation expense included in general and administrative		706			689			1,112			1,327
Amortization of intangible assets		104			104			208			208
Non-cash expenses (income) from exchange rates differences resulting from the new lease accounting standard (ASC 842)		255			206			(161	)		512
Expenses (income) from changes of deferred taxes related to intangible assets and equity-based compensation expense		50			(105	)		(16	)		(186	)
Non-GAAP net income	$	1,613		$	1,744		$	602		$	2,912
Weighted-average number of common stock used in computation of GAAP diluted net loss per share (in thousands)		23,301			22,757			23,321			22,650
Weighted-average number of shares related to outstanding options, stock appreciation rights and restricted share units (in thousands)		1,663			1,522			1,572			1,457
Weighted-average number of common stock used in computation of non-GAAP diluted net earnings per share (in thousands)		24,964			24,279			24,893			24,107
GAAP diluted net loss per share	$	(0.05	)	$	(0.02	)	$	(0.15	)	$	(0.07	)
Equity-based compensation expense		0.09			0.08			0.17			0.17
Amortization of intangible assets		0.01			0.01			0.01			0.01
Non-cash expenses (income) from Exchange rates differences resulting from the new lease accounting standard (ASC 842)		0.01			0.01			(0.01	)		0.02
Expenses (income) from changes of deferred taxes related to intangible assets and equity-based compensation expense		-			(0.01	)		-			(0.01	)
Non-GAAP diluted net earnings per share	$	0.06		$	0.07		$	0.02		$	0.12

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DSP GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands)

	June 30,			December 31,
	2020			2019
	(Unaudited)			(Audited)
Assets
Current assets:
Cash and cash equivalents	$	38,198		$	28,737
Restricted deposits		512			518
Marketable securities and short-term deposits		50,645			39,141
Trade receivables, net		10,564			15,382
Inventories		8,127			7,464
Other accounts receivable and prepaid expenses		3,829			3,551
Total current assets		111,875			94,793
Property and equipment, net		6,582			6,805
Long term marketable securities and deposits		48,171			62,884
Severance pay fund		15,605			15,800
Operating leases– right of use assets		10,987			11,655
Deferred income taxes		6,607			6,377
Intangible assets, net		6,695			6,904
Long term prepaid expenses and lease deposits		850			707
Total long-term assets		88,915			104,327
Total assets	$	207,372		$	205,925
Liabilities and Stockholders’ Equity
Current liabilities:
Trade payables	$	9,127		$	8,511
Operating lease liability		2,403			2,569
Other current liabilities		16,198			14,159
Total current liabilities		27,728			25,239
Accrued severance pay		16,059			16,074
Operating lease liability		9,768			10,436
Accrued pensions		973			963
Deferred income taxes		82			119
Total long term liabilities		26,882			27,592
Stockholders’ equity:
Common stock		23			23
Additional paid-in capital		390,734			386,534
Accumulated other comprehensive loss		(554	)		(889	)
Less – Cost of treasury stock		(111,532	)		(113,862	)
Accumulated deficit		(125,909	)		(118,712	)
Total stockholders’ equity		152,762			153,094
Total liabilities and stockholders’ equity	$	207,372		$	205,925

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