DSPG - Earnings call transcript Q3 2018

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Daniel Amir

Good morning, ladies and gentlemen, I’m Daniel Amir, Corporate Vice President for Business Development at DSP Group. Welcome to our Third Quarter 2018 Earnings Conference Call. On today’s call, we also have with us, Mr. Ofer Elyakim, Chief Executive Officer, and Mr. Dror Levy, Chief Financial Officer.

fourth would we remind statements engagement will financial for I this that about pipeline begin, year projections call, full our conference be the and we design like about you to during our XXXX, wins, Before optimism and our headwinds quarter making our and the decline the their drive ability in offset initiatives the revenue believe total growth, temporary. positioning for growth our and XXXX, their the revenues, market cordless of that ability of are quarter to significance to fourth to forward-looking no We to assume obligation statements. update these forward-looking

information factors in we forward-looking to the the our XXXX more For please risk have filed. the about and risks reports our that could refer SEC herein, made and Form affect discussed factors XX-K statements other

the like over Chief is would Elyakim, our the turn Officer. yours. I Ofer to Executive to Ofer, floor call Now

Ofer Elyakim

increase and reached million, second outlook representing the the and X% Revenues the a provide our Daniel, quarter progression in XX% ended for Thank of XXXX plan XX%. for of fourth distributed market XXXX. detailed our the comments of initiative while, third to with today. you quarter reviewing $XX.X for hope sales, third of on a a that with a you results year-over-year good on and third financial and we joining exceeded quarter. press environment quarter our In sequential begin for for of growth context outlook I’m versus guidance quarter, sequential providing quarter $XX.X financial business the and high total of a that to decrease everyone representing the XXXX. and full X% increase of and the of XX% opportunity achieved revenues we metrics. will year light financial short our results us you, would the happy million record fourth versus of thank for Overall, results quarter like announce I accounted of today. Dror that a our the third read I release the most that on morning of from had by you commencing to earlier we increase

on performance continuous revenue the the including second growth the initiatives, reflects Our in segment positive the growth revenues execution our solid initiatives majority SmartVoice the Growth and XX% quarter. year-over-year segment. the XXX% Office/VoIP in of of comprised consecutive for

gross from in points margins transition the by the margin technologies higher to products. of are difficult with and than built third times, we acceptance year-over-year we’re majority and Group, DSP company that on at legacy a of expansion. XXX to operating points of a a point unique behind of and an revenues user transition customer but at for cordless segments drove new X.X% are sales, from being basis voice generated interface. growth company of developments the thrilled primarily telephony our with and inflection by our has our improved XX exciting it non-GAAP quarter, We’re revenue high new, transitioning as consecutive where Moreover, two years extremely the are of our record new growth quarters gross mix These guidance. to to improved pillars, from by been IoT these this are to legacy basis is a XX.X%, And both in margin XXX absolutely growth non-GAAP

exceptional design growth an about growth pipeline for beyond, We prospects our by across and are initiatives. driven wins of confident our XXXX

company, our total two success legacy in technology We Further, enable We view current smaller company’s a which where our becomes account from and industry’s smaller business cordless technologies, roadmaps. solidifying sales. third overall of away of future and expect part revenues. be revenue transitioning initiatives business today cordless our to these year to the next in important traditional our of favor over growth and our ourselves contributors for a as

we to for in we a will weaker beyond, full our customer the and continue attribute our fourth due to for correction quarter, that strengthen tariff While mainly the wins a do exposure to for have and level the factories cordless of make uncertainty year results operational expect acquire design to demand war XXXX impact orders pipeline tariff demand of China believe and we and China The guidance, and that product. for which as annual XXXX well timing quarterly be supply negatively primarily below our U.S. decline in that wars increased to drove manufacturers as to chain the SmartHome Office/VoIP offshore them commences. with between and event many expectations products the

addition, pulled finished similar a purpose. OEMs warehouses in In many material to good China factories more have for offshore from their

Asia, of shift China voice events timing and in importantly, these believe customer decline overwhelming the the the interest of that for future during was by confirmed drove orders, demand, Most the and Moreover, my inventory positions visits to higher engagement product is design All the positioning temporary where creation quarter of in customer win, chain anticipated manufacturing created technologies. existing our level of and for pipeline, home U.S. that encouraged and for we supply an and the volatility in and SmartVoice. I end fourth growth. to us the and our exposure in demand especially our cordless than in markets segment, is and recent gateway abnormal and Office/VoIP well overall instance the

demand high our Another exciting observation between the technologies. for convergence was

We a cetera, ULE, two ULE offering, DSP SmartVoice as initiatives more and across better us of from of these such solution Group or where with a Voice-over-IP together a competitive advantage. have our technologies provides convergence need number delivers Voice-over-IP SmartVoice, creating with combines product et and engagements cetera, for that and a growing et

each in SmartVoice. starting about Now, progress I’d some with with you segment, our like to provide updates specific

X line products year-over-year were the an reflected XXX% During million, of being This OEM of the announce by and milestone smartphone SmartVoice key a for of China. guidance Tier third a accomplished the SoCs with high to first selected in of launching SmartVoice sales are we from successfully quarter Moreover, we quarter, XX% totaled models sequentially. selected our that in our and XXXX. OEM increase which $X smartphone volume during quarter, excited

We expect our win major SmartVoice a contributor and XXXX. be in to this to growth revenues

design as by quarter different during very engagement We’re of product pleased across accomplished additional evidenced categories. the diversity a wins SmartVoice variety the with number our strength and a noteworthy of pipeline of

believe the win the in SmartVoice launch mobile solidifies market The position our last one market. first year with addition this that OEM a with tablets based to SoC. public of that from Android-based one design to leader We the voice-activated Korean model leading series the on in is Fujitsu be our

our the new The leading SoC. SmartVoice the Jabra is power is new voice BlueParrott SmartVoice headset consumption the is leverages that first a This its in hands-free our device SoC to This our market second low BXXX for camera DBMD OEM using our category. headset SoC launch activation. shipping launch establishes one SoC time operation. accomplish our action end series The its SmartVoice hands-free with for new Bluetooth camera its SmartVoice power on in based products. order low

best-in-class SoC smartphone wins X capability. leading camera smartphone selected company Turkish design for for leveraging networking home our duplex SoC security our with And smart full security and model. Tier our home wireless that lastly, SmartVoice its home the AC noteworthy DBMD new OEM Another selected

the solutions more voice We are advanced and for audio low edge demand response. growing that center voice and taking solutions use on We sensing the encouraged power and is new with everywhere. activation, a personalized stage learning voice cases, providing user for users for interface machine a more processing many see AI contextual including far-field

SmartVoice fourth mid-range revenue on will quarter, to basis level million million. our our that we At the $X annual line of anticipate full increase $X with a to our of results $XX will the to in ahead guidance sequential come million. $XX million to a year Looking

important highly with with the Voice confident to and be SmartVoice of future to of pleased to growth an success now expect in And array exciting broader over update our IP. application. future our product business are We momentum SmartVoice category. contributor remain We this our an and a revenue growth on

first million previous guidance third represent the sequentially. increase Voice year-over-year $XX of revenues million of and quarterly XX% for $XX we revenues our million an XX% million. time. $XX.X $XX surpassed ahead of the For of quarter, well This in to was result

endpoint funnel. We communication and continue to the strengthen our leadership space position in engagement and the unified grow design

with We’re workforce communication workspace towards such on higher productivity, in on the market voice for solutions edge. collaborations the communications, category a systems the flexibility is interface Moreover, models today’s IoT, forefront changing and video at and comprehensive and are better the area voice is Personal Desktop adopted. new to communications. our DSP is quality artificial need excited evolving, of terminals, the about trends of developments Group well for and positioned capitalize processing product intelligence this and SoC through unified portable user is industry unified

XX line the its market communication also and professional a during specialist on expansion launched DVFXX DVF launched new for phone Cisco its SoC. IP models, IP XXXX and based in a Cisco a quarter, based new XXXXX headset new Snom launched unified of of addition, noteworthy phone, our announcements, based we a our line top DVFXX and its DXXX, IP Technology, including SoC. the telecommunications, our new on had product In DCXXX the number wireless on chipsets.

Looking revenues million macro expect and quarter discussed of on in fourth a to million. basis $X previously sequential We we timing project ahead, trends. to be decline to of revenues range the voice $X orders to due voice

at our target million. our mid-range million is guidance, of While $XX the at of to of the low this $XX end annual

annual we And temporary approximately SmartHome. nonetheless to current Home the positioned with weakness annual double-digit the design able we segment, are starting the well the now We an in Despite update revenue fourth that XXXX. growth confident in pipeline, of on are market quarter, X%. growth for our exceed remain with to

primarily Our with DECT comprised of is SmartHome IoT ULE shipping, home products products. gateway and business

guidance line Third SmartHome revenues range. of our were quarter million in $X.X with

than and year that for mainly readjustments However, we optimistic of business a the with be ULE will customers, a rebound prolonged setback, was due by the flat we this combined were services. Tier year, demand segment. launching inventory XX% next continue products to SmartHome this original to which sequentially. provider, Despite is experienced on Demand largest one X gateway expectation, decreased of ULE SmartHome year anticipate SmartHome of at about the this business service European our revenues year-over-year our home lighter in heels and our the prospects softer

second promising service of ULE our incorporate new a the products for and in the is as home the territory as is a fourth segments gateway line with new technology. one market, an And focus elderly market support industrial of provider SmartVoice upcoming is a products we investments product. that and third security, which such new SmartHome, launching care IoT our our launch And ULE and major voice The U.S. segments. European view two-way in

had of the Telekom a home from speaker smart and connected During solution our number our to Zipato, dedicated into of bulb their provider, automation solution incorporated provider in the smart with for incorporated we that technology DECT our ULE new solution calling controller. lack their DECT lighting products. high voice product leading noteworthy LED Deutsche European new quarter, zero DECT interference. into selected support our AwoX, two-way bandwidth, leveraging In our European including definition latency, new hands-free high automation, a announcements home leading new its SoC SoC customers, ULE long speaker SoC by a ULE bridge reliability,

is becoming of DECT see and devices. momentum Voice standard voice. two-way and SmartHome the as speakers to devices communications quality growing the other and for gaining in is and with applications fast IoT for real-time high quality of for requiring high of two-way emergence a in demand continue smart ULE go the choice ground wireless voice market, We interaction voice-enabled to interface the transfer

segments, lie While in is time the we pipeline that ahead. business and encouraged than opportunities cycle our remain the longer in SmartHome the other by

SmartHome European provider upcoming next a by year. Tier We’re looking service the early X to forward launch service

we the SmartHome expect of mid-range guidance, the due range to year, million projections million phone home to we at rebound $XX mainly be at And demand now of of in on grow and an $XX to year. that our to our ULE and the to next will of anticipate segment. million largest in $X.X one revenues is below Looking smartphone inventory quarter, the for our Nevertheless, cordless customers update the fourth $X for business million slowdown our this our gateway readjustments market.

sequential Cordless quarter revenues XX% and Our basis cordless revenues on third and below third guidance decreased revenues. X% quarter accounted a were by year-over-year. by our for of XX%

expect year-end. reflecting cycle segment quarter, should the cordless correction be slowdown by our that an in inventory We concluded continue fourth in to the

well performing to And $XX expect outlook. of and business across to manage very has on XXXX profit an initiatives, from expectations instrumental the this be this continue million revenues been growth we on well developing our We initiatives. our to our revenue the $XX update our product quarter our in fourth Based to in range business new now, million.

are and consequently to as of SmartHome and revenue We quarter chain due products. we for weaker for full-year primarily Office outlook which fourth with supply quarterly orders attribute our that disappointed demand timing correction to results, cordless well as are

in and as growth us quarter and demand believe the and continue in we that XXXX our Office/VoIP, strengthen and position design the SmartVoice However, customer is to fourth for in temporary, well existing pipeline the future wins, anticipated beyond. slowdown SmartHome

be Additionally, third the total contributor of initiatives enough we to important cordless for than meaningful and next the over these sales two of our decline to year offset telephony continued revenue account secular an expect business. more being to

Now, turn I’d like Officer. the call yours. floor our Chief to Dror, Financial Dror, over the is to

Dror Levy

XXXX review will quarter you, income for third to of bottom. now statement top the from Thank I Ofer. the

line equity-based related expenses line For results, that provide item, and previous GAAP I expenses acquisition. in as will included well the U.S. each as item to compensation

acquired million. equity-based the third margin equity-based in assets $X.X the excluding compensation million. the million. tax Gross the compensation compensation amortization full with included $X.XX see pro acquired was the $XX amount $X.X of that Tax per equity-based of $X.XX. filed the revenues the amount quarter amount this in the million. to and non-GAAP income XX%. on Please of including EPS were $X.X included impact income amount tax million $XX.X these deferred the items was described, million in equity-based deferred million per excluding the were of The including were Our report the Non-GAAP intangible expenses I’ve were negative Tax tax quarter income, presentation effect to described for of million. expenses non-GAAP $X.X million of million. changes, changes for million $X.X intangible Net X-K was the for of share income quarter were expenses $X.X the for items was related negative million. intangible on the $X.X GAAP we quarter morning quarter for from for quarter. $X.X $X.XX expenses quarter expenses the I including net was of expenses Operating basis, $X.X a expenses equity-based of the assets of income compensation amortization margin million. just million, $X.X expenses excluding expenses the $X.X was and XXXX was amortization and the was in the expenses compensation $X.X amount Form on this did of share of and equity-based SEC tangible assets the $X.XX. $X.X of million. $X.X GAAP for in R&D the The million current and on taxes resulting presentation. the for the of of quarter compensation just for Gross EPS forma Financial impact assets reconciliation expenses in net

the of XXXX, million third second $XX.X to the balance end level to of XX the million the a increased compared $XX.X to quarter, days turning quarter the Accounts at representing of end sheet. of receivable Now of sale. in

to end of million $X.X decreased second from of representing days. inventory level quarter million XX $X.X at a the Our the

third $XXX.X as $X.X million XX, September at were by marketable a and cash XXXX. the of million securities quarter of level and Our during decreased

marketable by million was in that quarter mostly and of cash $X.X $X.X during amortization quarter increase securities after securities. at position and shares of and market our and share due Our shortly of was was of property in the this or change stock following: affected marketable was No purchase cash cash operations, the was $X.X accounts price of used the used million fully end; collected common $XX.X were an average provided used temporary value the for for repurchase million equipment; receivable of to was XXX,XXX per

like to XXXX. quarter of projections would the provide with I fourth Now you our for

quarter the equity-based expenses follows. fourth as are projections, expenses compensation and including Our of amortization impact acquisition-related

expected are be million revenue range to Our in of the $XX to million. $XX

$XXX,XXX $XX We to expect the of Operating in in to be the income taxes XX.X of basis. of XX%. of is million range gross million to income expected expected Share to to expected a are $X.X R&D is to be fourth million million margin in are range pro the in in to on the million range expenses the $XX $XX.X to XX expected range be our the shares to shares. of quarter $XXX,XXX. for expected XX% are expenses million. and million. outstanding Financial to be be Provision for $X.X forma range be

fourth million intangible amortization of assets. projections for include Our quarter $X.X

also forecasted fourth include $X.X goods $X.X Cost projections to the operating for Our the to sold amount equity-based include compensation. quarter include and following total expenses million. million include R&D $X.X million $X.X expenses $X.X million million. of

answers. like open would I please? for the lines questions and to Now up Operator,

Operator

take our ahead. Instructions] & Please [Operator first will Needham Co. from Gill go from question Rajvindra We

Alex Kim

of Kim, wanted questions. in Gill. of Alex to ask behalf Rajiv I doing is a This just couple

revenues First you and provide then year the smart for DECT and shipments speakers how the of be for other technology type what details for to using speaker products XXXX? question, like expect same can and Telekom you speaker smart the more do much about Deutsche some [indiscernible] that solution relative the calendar in ULE will

Ofer Elyakim

Yes, hi.

question. So thanks the for

announced the be. and from contribution Telekom how meaningful DECT expected the by around that was could smart Deutsche question was the that So speaker

speaker engines that the conference a high speaker Telekom as announce activation ability the telephone. X third a Deutsche in This definition device. system to smart to voice a it run provides calls do and new leverages voice an new basically yes, cloud is as far field did the quarter inducing ability So, it’s using two-way or

that utilization is the much rolling We this device type will very XXXX factor where reinventing type more full band echo these speakers during of additional expect that of devices these many of We customers. and as different in of help look and market build by in like significant. form believe calls. see to voice market a see to telephones you provide out high European some quality, any opportunity We

new that per to devices out embraced But market rolled we there being to X see the whether are XXX,XXX or best-in-class brands. and these around, the speakers, appetite be activation need that, consumer of voice do first see million a is say, growth, together probably once believe capability these voice more year, in sell respect based two-way by expect on opportunity for are products categories units of consumers other what will with launched far as as However, we in in the providers these But Right perhaps very with year. be voice well is now, to the I of service adoption demand. lot by and to know I’d larger high much important we smart especially field -- we these do communications.

with that of the network of all provider the type service in really to provide kind class. a of service bundles differentiated grade of So

Alex Kim

XXX,XXX smart for your products? Telekom So all just or that Deutsche the units just of speaker XXXk -- clarify for to

Ofer Elyakim

such be good really I So is think something right will of next acceptance believe number that in this rolling demand hand to the the would area will products assuming I of get that Deutsche as a during our year. see we for we type exactly have I can that from what good. more And as that market out But we we the say don’t now, volume like the Telekom. could said, be we said, speaker --

Alex Kim

the do at have price. Deutsche And a you’re for average price speaker you point? not So selling Telekom

Ofer Elyakim

together price the be selling or that even services. with sure I’m of -- the fairly bundled speaker attractive is, not kind but pretty of maybe know price I for do selling there what be will a average points

Alex Kim

the And other that is ULE of for DECT ULE second the applications just technology, be automation? also on how beside spent scalable to terms the will R&D wanted ask technology And how much for I of XXXX? DECT home in types part

Ofer Elyakim

Sure, absolutely.

range so ULE technology an time, DECT video, it can products interference free, robust of real fairly today accommodate is the the industry market. the other that on It so indoor is a the competitive the or technology. are the voice, cycle, for in available it’s streaming The is today it technologies audio, in robust. -- have that it’s the technologies of So the enjoy compared the to type really definition two-way high best

the elderly suitable SmartHome So industrial care health and for security, it for market, for is for highly care.

today that on the technology seeing solutions to So now adopting that lot one technology type believe technology to are are has we’re and in and pipe and And of telecos just major services. to doing two in in we life services are trials, future. already are and that recognizing believe and bringing services this SmartHome are the many European the in with that benefits more way a offer for field that based we market technology a order we in such launch proof-of-concept their there the smart

market growth adopted. kind which we’re believe that already for territory, can and been ULE, band. technologies of the also today And said, the we two-way now for that the voice in focused can more range to also and conduct -- is that opportunities. at we not this us started activation at as European new having latency mainly promoting on that on other significant widely and the the market all give now we’ve it standard merits zero market you develop and the can a interference-free the I we voice the the and the field ULE marketing selling There can ability can bring. and solution the ULE is shoot focusing see give the It’s As proven no while or mentioning that and U.S. actually

is there for technology. lot believe a opportunity of the we So

Alex Kim

will be that R&D XXXX? devoted much technology to for How

Ofer Elyakim

investments you the a at product next the looking R&D not really the is be year profitable this on are splitting also We in year. basis, I product. profitable But this and investment can it that standalone discretionary by line, tell kind will of

Alex Kim

last on growing terms business to business, of that cordless other business, in focus you of as the have And is, selling your SmartVoice your business have been and my And areas that you divesting question the offers of thought such approached that in past? potentially VoIP?

Ofer Elyakim

for are in always and or categories. past. could in on we’re the creative that of flow. the also of to investing But hand, last very heavily growth kind of the how nice idea product I point couple a of of of other have sale have think today on between ideas From in our product where do separate very declining more So position looking cash legacy, of kind we cordless, business providing the a better, the view ample been these actually and seeing the the is the versus been the which areas fruits to good divestiture acceptance a and years, it exciting

already during when to we year about revenues. color third pay you we and call, you that that you attention be our next of it that one are look see However, the provided below predicting forward will the will

key our So will in stop a financial influencing way, a role results. playing cordless

the a course, will And cordless is and we in over migration major and done. by much that that And results confident new being new each to very are have another a be cordless stop be we pretty just And year, of and smaller one a we will of overall them. on smaller businesses, we sales. swinging so that our seeing our and contrary, will correction believe that from we we’re growth way, that revenues. legacy our where every will a now our of the in this next and of the to confident company are part today highly factor they is that we’re in become growth asset kind And

my market. But much in any course, interest way, time of do to in see view a will passed. we in that very has if to are the we suggestion So the open or

Operator

next Please Suji our And Capital. comes Desilva from from Roth ahead. go question

Suji Desilva

chain. how you many the you supply is chain? slowdown think supply the roughly it on just in us, long the highlight in quarters? those actions will when question Can in the First begin And tariff action take? for How

Ofer Elyakim

of lot kind our wars. in the of manufacturers this are really that uncertainty figure manufacturing ordered, and they we Suji, in what way, to goods the the of in bigger to a that tariff, year, that exactly tariffs what first see has way, a manufacturers chain, without we one do facilities again look done be in And that export to other goods of where respect a any a to of in ideas. manufacturers, -- goods is when of creative their And supply same find components of acquired is what additional with to placed it quarters look to that tariff objective a do what exposure the have these the and all can of are partner swing. a in potential of have those tried to see they that what were or to very amount look will unlucky was so we to factors. overseas year, their and lot And hold not layer had et to a understand that, time will a with really many some in have do that the how having partner of that to of But and goods, I cetera, outside so created or A not customers satisfy they China are let’s it with we is a excess these able being with going the way, on. and put had have of to were hard exposed above also such way, manufacturers out production the a we by the all event exposed for readiness. the to that what say exactly and out picture there going say what in And of way, we can in talk been perspective, finished perhaps -- more has But are to because them sure the to goods China enough be that, also needed exposed, X towers. these factors, that had in make to market. JV, in

quarter previous that say calls, I the with said respect a level uncertainty at for all adjustment on every there in So what kind cordless. the the we’ve in now happening of our of always I in said cordless, every it’s fourth quarter X seeing one, ‘XX. about of look X seventh past if Fourth in the would and quarters in was created quarter that -- to bigger previous business correction. first quarters, this and you an we’re after inventory the of is the which earnings inventory us,

re-adjustment of -- what also competitors, alongside limiting these we war. smaller the shrink tariff the a selling Now, a et number correction, that that have level have we with had the understand couple re-adjustments were of number way, by brands that shrunk lot cetera of it surprised years and but seen especially of to the preparations are a via because and space of the in in the do inventory kind last a cordless magnitude retail the -- of should from such shelf we the for in for of and

Suji Desilva

And end after new win or talk the programs for question Can of to is is offset the next seasonality of smartphone you would on expect in in few expect and year? kind the you’d mix the you non-smartphone growth smartphone, in quarters ramp that you -- particular, expect some my first a quarter second these what secular would about Voice. of the Smart like

Ofer Elyakim

sure. Yes,

new So, understand on can excited SmartVoice seasonality and very are momentum SmartVoice the as and area. also the we in the wins, the you with developments

are into devices, cameras, you additional categories, and many, designed new the security the headsets about being speakers, product tablets, We action IoT many many cameras, heard devices.

to next diversification also can on existing We a that do the the in for ramp OEM of that X seek as continue see forward. now, smartphone to tell volume a I Of increase work of in we confident how the exactly of them course, nice will user we this demand early next kind drive that during units basis revenue do with today an growth one SmartVoice year, we’re our will and to have has hopefully we going will nothing millions but would that see year. voice it’s right in of next kind new very interface that is that the a but kind say see that too together in And the seasonality consumption We tablets customers kind support to consumer have a from our smartphone to year, and will the side, electronics flexibility expect the customers. come, we of par -- expect we’ll announced space Tier operated granular space of for to of we of battery and headsets, to the lowest was well smartphones we microphones. number ship type where hope are of tens also especially positioned, more believe capability of

We solution. that algorithm we’re say I respect and the us that with all and pleased our are field suite have unique market far we of also would all to makes in what with also the kind seeing of very

the on we developing. that we’re with of Amazon the should very quarters that partnership Our next of of with some be couple momentum comments. -- and happy so should very be projects Alexa believe these supportive kind And is the

Suji Desilva

made had European SmartHome. whether you’ve more had success last talk a telcos moves Can be U.S. by there the market, dominating would question about helpful. any historically why be the it’s the are US similar guys -- whether telco to moves US I And perhaps quick on telcos, think Thank going in in you. and there’s -- color the wonder the hyperscale you’ve you that and made you is

Ofer Elyakim

Sure.

And of and think and active fairly all standardizing role everywhere. from DECT so and Europe DECT is I play in is [indiscernible] by kind -- also a invention lot technology. the technology the in European also of the known supervised standardized And and Cat-iq European. it in ITU and history. Telcos well the IP It’s that the spawns a a the is and just really ULE. installed the patents

the handled also look the the there one of being ULE need is is because technology new IoT the known, to I standardization for said, and from many kind Europe, especially kind and the so, by of as in technologies, telcos. And well prompted for of contributions emerging as --

market industrial as And we so, when in more to now, think Europe, the many promoting kind and lot such uses are of is looking the and DECT European and very, purposes, a the smart interface, home, video coming all once can develop technology can in is vendors interference-free very for it US, of is -- in the believe and user nice what aware home that fact which on find to and of market, voice I security, territory, very that not and we’re volume. the find also wireless in market elderly offer that we see projects a with are also in we that of leading I the and the really front, will offer. communication good more believe for masses that see as the we will like ULE Also a segments deliver. for will best-in-class did real-time ULE two-way right it what voice, we And today do care US also in range, we the two-way leveraging we ground segments it new

third all about and believe the so the will technology it’s technology promotion, want aware, what but a the on when of offers. that we it day, can customers think So to from the promoting US put starting lot more ULE priority quarter, a the are many we a ground placing promote this lot that far, of fruits in I that we emphasis putting do don’t and the and much people the have that believe I more, of the I will the unique come. making of the merits deliver, end appreciative the embrace And marketing to kind at that people that find technology of with a lot such of end will the we think

Operator

question Charlie your Please open. from comes our is And go Dougherty & Anderson from ahead, Company. next line

Charlie Anderson

follow those like with sounds tariff in the [indiscernible] maybe products, visibility tariffs Ofer, is are to resolving and is to moving more wondered, it then of and people here I playing I little moves it the -- are bit timing of to that in have QX or certainly it’s little a you production, first I’ve sight revenue more are of part to themselves got you of is have the associated description half maybe any know extent of second the what percent uncertain, line half guys a up. do but a the do your what so some those

Ofer Elyakim

Charlie. Thanks,

we that we So questions, I of definitely those this wish year, I over. at have happened answer would had but say over to the crystal again, or close what are all when looking to cannot ball it’s and

have the the but last you very We demand management manufacturers on and different operations when have year is from pattern looking the that for was contrary look the chain and fact of clue, people think this is you into how not that and less case see to existed that for at export. that all are and has I there years offshore, of for about that When any looking type all DSP couple backup no cordless, less is what of we of seen supply are many now of factories everything think the we first was actually plans suddenly, factories. avoid are in Group And many tariff. kind like domain, this more exposed consolidating

is China definitely is So exported exposed. everything from that

XX% products, And maybe XX% Home our them for are for phones the gateway, almost cordless of you so, Voice-over-IP, when for are them export. of about XXX% export. are made or say XXX% export. made of would I think

intended manufacturing when for in kind mix of exposure. non-China hence are in there definitely two, are since our of SmartHome, these Number is And you China. customer on where, about a lot there the products done So exports, less areas think one predominantly in hand, built and is they are exposure.

will Of China export. change would this now, is but year say course, right exposure the and that vary will as I that just also not necessarily for on, in go

see development us. for our solutions also domestic a time and like, the will for of, China utilize SmartHome product is lot and leverage that exciting this very We also first

exactly into you tell play next too will that So, early. to year, how

closely are putting understanding going in prepared from studying lot management and also better a that our is We definitely on, perspective. so we supply kind are that effort of very chain more what

especially in easier to kind of in the characterize all, for more to what are through, this we be will QX. you understand environment, all we So tried guys so it going

of next are growth resolved, that of be of the segments well And of said, are way production, And in and all that by for wins in a we that year. will QX. that we this these into a quarterly rest As going we is going based the hopefully on it’s issue we positioned believe growth believe in temporary product revenue kind lifting of to all initiatives. each these additional the levels end

Charlie Anderson

follow-up, And my gross then curious I for margin. was about

of third SmartVoice gross suppose consider mix wondered, sequentially becoming that a you than large your a of that’ll next progression larger think portion should guess about because I and How be mix, a a sort mostly in the QX, function will the be of little of I like it in margin sounds year. of business cordless. a like less down think we I is the sounds next bit portion also SmartVoice I year we’re mix

forward? just considering factors, all those gross to think So how about going margin

Ofer Elyakim

is This Ofer.

of so in first do revenues. terms gross with the quarter, fourth what’s to total happening of mostly the with has So level margin

gross like, So the This the we of on fixed the portion. is also have, level depends of a margin revenues. portion like that

higher margins are so like is revenues when expenses of slightly or the fixed it goes declining proportion and down, the lower. So are whenever

in the the in our QX because call initiatives the mostly So in this basically, cordless. margins gross Voice-over-IP is we SmartVoice is higher in the what’s you see what and in than and happening what new

of do our say like, the to with In would past in the margins of fixed in I should mostly we’ve the has revenues expenses. I the said think model, what XXXX, longer-term in proportion XX%. the range be, think, I its somewhere QX, that, So gross lower that’s

second the are I in XX% So where something we I of also we say what XX% say to or more that less half ‘XX. would is this this see between year. should would in

Operator

is next go Matt our Ramsay of has disconnected Matt out Cowen, please Q&A. from the And question ahead.

Jaeson Schmidt line open. we Lake Please So, now from ahead, go Capital to your Bankers. on move Street is

Jaeson Schmidt

How be XX% the in. business QX any is the above generally declining guys thought cordless XXXX, relatedly business? phone changes decline decline you sort of a in seasonality more at XX% but on believe that and that with a Most we annual I on answered, pretty outlook do business of one the just decline which cordless for in to to them annual muted phone XXXX should have on based with to that been about look QX business, steep you XX% the the and QX, in expect that about within think have

Ofer Elyakim

the to so this sales respect annual started quarterly with as likely cordless declining XX% when set we more you the we XX%. revenues So year, by rightly see to decline year, XXXX, so mentioned, XX% the And kind than we will of fiscal target. most

kind cordless do that in cordless a better our suffered phenomenon it how there where had it declines so correction, has was couple were the category, experiencing we this market. do inventory, of business years see in QX, we’re take than see Some that were of kind trends, to year, inventory has that of it the that market of I revenue trends at with you our of cordless excess a did QX, years, readjustment. with inventory where other and do the And we we look well to you if of to think replenishment that in performing especially in

that don’t look will next decline in part tell next year. in year. us secured is see area have new ‘XX. design excess in continue that of that It’s much is we guess potential third. I today to you same what we the what be. we when that decline. we the the that will well a in be important will matter growth a believe be into wins be less of think that in change Now, today best for said it the kind the secular will will that and we really Cordless -- The of this hard this most decline. will cordless do My products are year, But about to

and on we not we the of move new will do and cordless for model. and be on when driven these product how will execute positioned initiatives, It factor financial think I a that how well kind be mostly the XXXX So as we this ourselves major XXXX. XXXX, by see is building decline into

XX% next much cordless whether next will XX%, above down it maybe year or year. into XX% or going be So will matter less

Operator

Ofer, Mr. no remarks. additional that is there at any like time, to you I’d further appears or closing It over this to the questions for turn conference

Daniel Amir

Daniel. is thanks. Yes, This

So either the to for the into taking thanks time webcast. dial or through live call earnings our QX

hope I are growth whereby majority our of sales in of the inflection As very we point growth the our can the you achieved and our prospects After success growth vast profit. tell, are successfully confident and initiatives years, have initiatives. several we

for entering a and in during and an transition would new transitioned are providing look company have days. Thank approximately this the great we We to an exciting XX forward update in chapter. their and shareholders support have like our day. thank successfully you We

Operator

concludes Thank participation, may This your for today’s now disconnect. call. you you

DSP (DSPG) 3 Nov 182018 Q3 Earnings call transcript