DSPG - Earnings call transcript Q4 2018

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Tali Chen

Good morning, ladies and gentlemen, I’m Tali Chen, Corporate Vice President and Chief Marketing Officer at DSP Group. Welcome to our Fourth 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.

first XXXX interface would we initiative remind statements full will financial for I this that recognition such and about year IoT our begin, and guidance call, XXXX represent to our conference be leverage the XXXX, pipeline we optimism like the benefits for our revenues. engagement ULE, you to during our wireless some about Before for projections of and the quarter total making design growth the and of our and positioning two-third of for trends, the to wins, prevalence our of voice annual ability forward-looking no to obligation forward-looking these assume statements. We update

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

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

Ofer Elyakim

XXXX. everyone, progression the results and for Good read providing you, outlook thank you that our results press full the begin for opportunity reviewing and I a like comments by our financial on joining will detailed hope on I the to of we the and that release would year, about provide commenting for Thank plan, us Dror quarter first and our earlier our while, business of to context today. short In outlook. you our today. had Tali. morning, quarter distributed fourth you with the

momentum XX% an of of product our record our mix initiatives growth engagement highlighted the the new a in segment, gross SmartHome in This improved for drove well for solid customer accounted majority product initiatives customers across businesses, of including the Group. a coupled XX%. segment, from our of margins marked revenues revenues. year developments positioned activity, growth XXXX two-thirds the very fiscal to with achievements with new XXXX. high first total Our revenues Company’s and by These all-time Office/VoIP revenues, XX comprising also growth are for in new in us our XX account for These segment are the new SmartVoice that in customers we with to provide over growth six track and launches exciting customers new DSP that total on are which confidence

revenues, into a the back transitioning play initiatives legacy smaller technology a to growth revenue growth our role are as margin driving more becomes a We expansion. Company’s cordless in Company, thereby growth part and of business allowing the meaningful

XX% XXXX, quarter of the are to of sequential fourth growth third and high results. call. Moving of a were we fourth now with our quarter fourth of representing versus review our expected of of report record with million XX% $XX.X decrease guidance total time, decrease we At quarterly revenues quarter Overall, of quarter the XXXX. the an to versus initiatives happy previous in provided earnings of in-line revenues. Fourth the ended quarter for we total a a results accounted the XX% that same

high X and While of GAAP portion namely a with a chain supply securing supported of on initiatives, strengthens with as revenues disappointed shipments in as mainly eases our and to lower we setbacks a mass to the these across of of in recover Telephony products fixed correction include to on new gross Fourth line view connected Office/VoIP a cost lower top home France. our OEM, a customer and volume products, milestone SmartVoice for Cordless basis Chinese demand quarter impact grow by OEM and basis sequential was which win XX.X% the ULE, event a smartphone X were design factor, primary accomplishments a our Tier growth which and goods IoT key and technology XX.X% a temporary finally temporary for Tier expect are revenue gradually the sequential on we performance, selected margins the attributed and service non-GAAP for of a as respectively Orange’s base. higher our

We margins seen to already first in expect our gross level quarter the we fully to the have recover previously.

like I’d with segment the to Now, on to by move business SmartVoice. starting update

reflecting revenues guidance of sales million the were range During to our of XXXX. $X of from increase quarter, generated XX% $X quarter of of versus within products. the Revenues million, we $X.X a SmartVoice year-over-year million fourth approximately

at guidance versus full the low-end XXX% For $XX our annual but of to million we’re the by increased million. million XXXX, of SmartVoice year, our $XX.X revenues of $XX

for revenues within demand year which a and solutions demonstrated the quarter. we a year globally, We number smart experienced for the leading were smartphone impacted assistants, smart SmartVoice and and were extent the leveraging part weaker is during products hearables, category the products a the integral and SmartVoice Amazon across and our to negatively voice our technology and engines of stage greater ASR And in product XXXX, user variety speakers, quarter from of center applications both consumer-branded smartphone CES, Our wearables, a an tablets, segment. took record SmartVoice integrating IoT. the in Google wide fourth of At interface largest currently, by that. SmartVoice smartphones,

noteworthy different as the evidenced SmartVoice franchise, with of a and a depth, across categories. strength, product very additional of number variety We’re our accomplishments pleased by diversity of

to control shipments Tier two, field two-way experiences our Number products expansion the the provider voice first is of enable products. power, algorithms selected the This X one leadership far home suite voice-activated we tablet control. the and SmartVoice voice-activated remote our line controls low SmartVoice another market. smartphone Chinese technology of Electronics, Alexa advanced voice voice combined Simplehuman of that Universal TrulyHandsfree integrated with our enable our technology calls. leading began in of OEM. remote voice smart yet revolutionary position on SmartVoice based of of for into tablets Sensory’s and evidence hands-free, launched mass a SmartVoice into a Lenovo The control battery-operated, is technology with to our pre-processing

ranging see growing far many on machine demand to a addresses ones is voice response. a for encouraged cases, and contextual high more edge, voice power, sensing field activated performance mainstream. to are going AI We solutions including from voice, learning use innovative that providing the for processing that and user ultra-low We VoIP on interface and personalized audio environmental

to expect SmartVoice Looking driver for exciting during to ahead, environment smartphone products. positive business To powering first tempered the broad we and momentum momentum our in SmartVoice somewhat due expect market throughout while business to be array growth XXXX, of year and of the summarize, pleased quarter XXXX with the a important our softening our growth applications. SmartVoice are this we an continue

quarterly we relating XX%. material weakness year-over-year trade quarter, $XX.X guidance stimulated of order to mid the due Moving potential concerns China, good on and of $XX finished to year to to a increase decline annual The $XX Office meeting of ended total within in from segment. in the of warehouses a in was that million revenues orders representing revenues In the the million of $X.X of representing to war the VoIP with temporary the million outside overstocking our XX%. timing a talk. of expected of year-over-year We million, our delay of guidance, range fourth achieved uncertainties a while originating avoid

year. the business this major in in with are share excited win for you second quarter, VoIP during half design our very products volume a Tier securing the we achieved a of accomplishment with to X that We that shipping are by a expected OEM to high start

Google launched Android addition, solution to In based IP-SDMF our Audiocodes Microsoft a an system. on client operating launched enhanced AtlasIED running DVFXXX extend with leveraging IP VOIP speaker UC business SoC, on tele-presence our phone Teams audio. communication

and roadmap, solid our revenue come. we are that design in exceptional confident are growth and for positioned the product years pipeline We with XXXX to well

recover XXXX, For revenues expect grow year-over-year the we sequentially. and gradually quarter first both and VoIP of to

an the update segment, home which on includes cordless. to SmartHome and Now,

Turning to product SmartHome the line.

with gateway sensors and SmartHome product products is primarily comprised ULE products. of Our IoT line home shipping DECT

of $X.X to revenues exceeded the quarter, generated guidance During we our million in $X.X million $X million. and

revenues $XX.X guidance were of SmartHome our million. million annual year, million $XX to full the below for $XX However, of

mainly growth traction for and increased ULE customers and the of this at We recovery potential are products and home ULE are the shortfall, the of product XXXX softer-than-expected on existing for category we demand impacted disappointed of a heels this the inventory share which in from largest home Nonetheless, design with new one was momentum about confident combined readjustment by for expectation products. by and a our gateway customer gateway revenue market. gains in prolonged our

the awareness interference-free leading and and expand market. its leading technology to of which should Moreover, milestone makes our market as traction ULE’s the service superb ULE in audio adoption as role of and in IoT reliable the the announced us providers These future we as a Home unmatched This decided by and support. who natural the IoT provider leadership spectrum choice primary ULE’s ULE positioning have Service market the we the the our by During excited Europe technology. leveraging confident as the ULE. ULE developments, of choice and comes of of and benefits, side are event for Orange, presence provider. improved and increased mainstream range, the noteworthy other and year, Israeli report on a December wireless IoT. position event selected the IoT the called to for solidified are its milestone includes Connected French-based the Bezeq, for in voice to service the develop it European investments technology leading new in in play and in and service Maison-Connectee addition ULE This and recent Telekom we Hence, adoption Deutsche ULE Atlantic.

and Mr. Executive US. in track of Development that Bill solid of ability most as joined it ecosystems, served as We a building transformed excited he has to where see recently, brand vote an Designs a he strong a in the ZWave Bill built to with record as standard. of Vice to during IoT share strong industry at an also footprint legend President an us gain successful Business confidence it ULE’s highly market Sigma We’re and Scheffler, fourth the you veteran the quarter.

emergence Technicolor’s has and user voice-enabled Finally, high. the is two-way a becoming the real-time, the of been market level In activation transfer IoT accessories stronger, the natural use voice of voice language convergence connectivity of interest power and and customer’s between of and in communications technologies voice with and IoT plan standard is is voice-enabled reality gaining smart Two-Way never as bring the DECT the devices to and SmartVoice is requiring to for our evidenced generation speaker a of two-way interaction wireless SmartHome Systems ground Voice Amazon next speakers control selected on choice market to accessories voice of its smart fast other home. Voice in our to high go voice-enabled ULE as two-way field interface devices. with applications portable installed speaker ULE becoming Alexa, announcement SmartHome the voice Computer based by in the interference-free These quality for to two-way ULE Elite assistant. and the interface technologies. far many their

For an market. update on to of gradually on the sequential quarter improve expect XXXX, And throughout SmartHome the the and Cordless recover revenues to we basis year. first a now

quarter only This Our attributed the in quarter. chain sequential XX% by is Cordless we on for fourth with in correction that fourth primarily quarter declined revenues accounted Cordless supply revenues and a to Cordless our declined steeper year-over-year of fourth by basis. XX% revenues line XX% guidance. experienced revenues. were a decline

further we end well to look reinvest of legacy performing XX%. initiatives. the Cordless business year-over-year our XX% and XXXX, its declined at growth As business to manage range XX% develop high We continue of historical prudently these to at by back our profits shall our

voice part you penetration can interface significant and the with user growth and and acquiring communications XXXX, updates major the transition as a burgeoning and of is from markets IoT customers. engaging into of unified tell new our As a in accomplishment

a we today, number referred have involved has group placed record throughout of will efforts in regions know, you different variable happy engagements an of on customer continue to three cause have we The market customer On some growth activities areas. in are of new at long-term sales potential on expanding initiatives, have this basis, degree which contribution all the footprint. a we of our new Naturally, will offering As revenue significant such three to lumpiness several as inherently basis. we’re expanded believe collectively growth that to focus to within the engagements yield and plans. our stages maturity, markets the a say of these and quarterly I’m

overall transition our monitor that by tracking DSP way to legacy to As such, we products. from believe most progress effective the Group’s is new

revenues at to to XX% four transition overall XX% the to representing revenues last XXXX year of XXXX. new have of initiatives total Looking in we continuous three years, demonstrated in

of points a part enjoyed gross basis this non-GAAP also XXX have As in improvement transition, significant we of margins.

guidance we income Accordingly, margins Looking support our margins the into trend XXXX and operating our and long-term model to expect of in and this mid-XXs growth two continuation provide on beyond, going continue split low transition. revenue in the gross areas: forward this legacy the initiatives. will overall quarterly mid-teens. to this business guidance from of into focus shall we and call, Starting of

year-over-year in million, two-thirds a guidance. for by telephony transformed a generated Our business, Group, majority based growth seasonal range of than earnings our primarily this and initiatives our would cordless $XX revenue in will shifted sequential year in lines growth product initiatives, in revenues more and midpoint growth initiatives. year-over-year expect we DSP VoIP million, expectations details midpoint million the for growth future decline cordless the granular We And to a our $XX revenues contributors transition Based a will offset our to our which success. reports unique revenue and quarterly solid pillars, revenue company including To include which cordless to two we by that around revenues, implying revenues first at summarize, flattish XXXX our were to million and annual anticipate more we key guidance. being be across solidify growth will range be the our of and IoT driven increases account is continue the over initiatives our Moreover, is of year from the that quarter year on company to from telephony updates. declines that of and voice. expect while implying growth was sequential of that growth the of at in $XX and $XX SmartVoice

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

Dror Levy

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

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

$X.XX. of million. higher million. mostly of deferral quarter that million quarter years. The This excluding to equity-based earnings the the amount resulting future $X.X was benefits, impact of will assets of $X.X were represents see The for this expenses $X $X.XX. compensation equity-based per on expenses $XX.X filed was related tax equity-based were quarter utilized the Our assets the the expenses Gross impact report amortization of Gross R&D of income million. per quarter tax that expenses Financial assets million. be million. fourth revenues items tax loss the X-K for in we the XXXX of Please described, in the related share, of $X.X reconciliation in the $X.XX rates assets $X.X tax compensation the for excluding negative equity-based million of The on $X.X quarter million. the including benefit intangible current tax of the for included were changes to these Net the the positive EPS the $X.X margin of and amount for resulting expenses non-GAAP $X.X tax and quarter. presentation. just XX.X%. taxes I million. compensation R&D from intangible deferred $X deferred was as The Tax margin deferred net EPS in SEC and $X.X diluted of for the intangible million. a compensation items for amount $X.XX. the $XX.X on was acquired expenses was impact included at equity-based full equity-based $X.X intangible tax benefits negative was to $X.X changes, GAAP loss million amortization amount equity-based tax morning I’ve assets the including the from compensation presentation Form the income, was compensation of benefits with $X.X GAAP Income non-GAAP a $X.XX. million, for and the excluding assets of and tax share the expenses including assets $X.X amount benefit acquired in million amortization the expenses million of was in was in of million. Operating were intangible quarter million Non-GAAP described, net compensation was of

Now moving sheet. balance to the

receivable quarter, at $X.X million of decreased a days. at million accounts of at from the the a to fourth million, sale. Our XX of $XX.X days $X.X Inventory level end third XX the the $XX.X end XXXX increased of the million quarter compared level third quarter representing to end of the representing of of to

marketable the and $XXX.X million as at fourth cash quarter XX. of during securities the increased by Our December level were $X.X of and million

during $X.X used XXX,XXX of million an of to shares in cash $X.X of was value and marketable of share of and common for cash price position the by the the $X.X equipment; operations; from of per quarter securities. repurchase cash average marketable million received cash employees; securities amortization of exercise cash $XX.X million repurchase options these and Our following: million $X.X was at was million the property of by affected provided of for of securities was of was used and stock our $X.X increase

the to I Now would provide quarter you for of our first like with XXXX. guidance

are compensation $XX are Our million. range projection, Revenues first to including impact expected follows. amortization acquisition-related $XX the expenses to quarter expenses, and of the in of as equity-based be million

in be in tax gross expected $X are expected $XX the are of in the million to non-GAAP $XX.X million. be XX%. to approximately be expect Operating our and and the expenses benefit range income a of $X.X of the margin to in R&D expected on a million to we range be of basis. expect expenses range $XXX,XXX to to $XX.X $XXX,XXX, to We XX% range Financial million of is have million. to

shares of million shares the to shares. XX.X outstanding to Our million XX.X in are be expected range

Our of intangible the goods the total million $X.X million sold quarter amortization assets, amount equity-based first million cost projections million. $X.X include include of The compensation expenses also for million, to and to forecasted of operating $X.X include include following approximately expenses $X.X and million these $X.X projections $X.X R&D expenses. include

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

Operator

the please your first from Instructions] Certainly sir. question-and-answer from will the your question. ask Cowen. session. Ladies you, Ramsay and we Thank begin gentlemen, comes of now question Matt And [Operator line

Josh Buchalter

I’m Matt. growth. for taking new all product Josh my in and Buchalter, for Thanks It’s question on congrats the

I So on in the the maybe stand big was could amount you – sort you cordless voice hoping quarter provide sort quantified Voice China see on and as a inventory where were cordless today? you last impact the pretty tariffs. call, it correction of the was update and you. mentioning related impacted of to a things fourth an that from over Thank and IP them

Ofer Elyakim

Sure, for hi question. thanks the Josh, and

see we update that behind we areas we quarter, But from but a where where a and we uncertainties regarding updated improvement QX. do these we supply indeed improving see that last trade that quarter, will did was a not So expected believe gradual us. yet and we it place is did front war, the see two in certain which our fourth sequential in improvement we cordless took the gradually in impacted business that about one correction got in chain

– sequential shortfall point be QX. the the I restocking of would the in case paying a in during was good more one for at attributed the to to big the were items if avoid side, VoIP QX QX and the of order some finished On to reasons the a tariff that of sequential kind probably in year say main

finished of products included So way, chain good in outside the will. you stocked a more China, a that if were lot supply

Josh Buchalter

sorry. ahead, Go

Ofer Elyakim

of just that kind million understand the probably so of $X say, way correction. – value value I of we around on would the the – like net or impact, of So, or level I impact, would say so that it’s

Josh Buchalter

should I wins, mean, could guess, all about we I Telekom of the appreciate activity you you, us on see think and growth of that Thank and exciting results. generating there revenue, when some to vertical? Deutsche then SmartHome Okay. and can in color. pace think sort been Orange. congrats some the on about have how design help the you maybe obviously, we Thank with return that And the

Ofer Elyakim

Thank you.

is during we demand and that attributed we growth, in comments, in products, decreased really business service this so on mid-term Josh, So have – the right, a of And you respect now my initiatives, believe so will we around XXXX the the of that ecosystems launch with of and adjustment it’s mainly mainly to over. to the here, is what’s a is number see kind these would many such two – tell a developing inventory that Orange, comprised and that that carrying bag as this was a are Deutsche SmartHome kind the imply side, near the over. it’s respect we’ve a service in we demand, to that the to of decline future future future. decline out a provider Telekom, here in also hopefully services was that growth, also With I kind can and did providers, for Bezeq more say return as said, way factor it’s number are and two gateway from

expect overall would see – market more think growth. much in market move compared that I Operator, to more an we from SmartHome this markets, other this say So but question. to quarter-to-quarter. still can for infancy year, this next growing we is gradually see of the improving to and do to expect stage two at the we I

Operator

Certainly, sir.

line next from comes ask Lake the question question. Please you. Jaeson Thank of your Schmidt Street Your from Capital.

Jaeson Schmidt

your Ofer, in questions. the my largest mentioned Do SmartVoice prepared you Hey that in that represent XXXX? to segment. the thanks of guys, proportion continue expect smartphones remarks, taking for you

Ofer Elyakim

Sure.

majority majority our yes include do comprise -- So, of this revenues so in revenues, the that comprises incorporate XXXX. the the SoCs smartphones that indeed, SmartVoice of and

and the a little very we will remarks we of discuss and when we category. of is where remain guided where for unit volume of amount in fair expect kind smartphones. and what did we there is that we important and What the the kind results, QX bit, uncertainty look of actual that XXXX are prepared February fact of maybe in do that kind to today a significant but see in demand expected weakness still back at also in we it the January, and decline a We

out half design China with domestic of now also to, X market. wins and also in XXXX, would weakness Tier aspect visibility bit So did kind were of market expectations XXXX, which this from a all our certain China lack starting based see with that calendar achieved models is XXXX we what tell this of mainly I that of amount on and also that markets entered variety and fair say limited we shipping the for extent, market, there right on that greater domestic is second a but just can we of as demand the during fair at that forward. we the going coupled little to category I impacting but a course, is you into in by the reasons. we’ve a versus And forecast had of based started OEMs received we suffer amount on – today, forecast looking a a now the weakness there, of was there from such business back going that XXXX, of in know do

of of smartphones more is there. and are a visibility much kind lack there uncertainty So, –

Jaeson Schmidt

SmartVoice, in seen you sticking And domestic Chinese with the in have pressure? the helpful. or given That’s that pricing uncertainty Okay. significant any market, space

Ofer Elyakim

volatility as more of think the much kind of kind environment, is to the to that how are demand numbers do I pricing of numbers of factor, the forecasted. kind the actual and respect not with kind see kind So around a we that the it of up that versus necessarily shapes of

technology is I important view, us additional for And for we of unit have solution great, and that in exposed China. and wins effective very multi-microphones. our key consumption the to also of a efficient volume fairly the believe objective enable cost get also to it and our for we with category right to XXXX that given having large one we in from China that can actually power the lowest secure think point smartphone capabilities that outside to and voice still wake-on area fairly a the is

need volatility exists is And so this the positioned we enhance the category live and with we continue still for of smartphone a in to in great the that of and footprint think but lack to market, domain. product believe the we’re kind and visibility that well our us, I

Jaeson Schmidt

one last back I’ll the And in jump queue. from me Okay. and

we your How in OpEx increasing the mentioned for segment. investment You year? SmartHome should think about overall trending this

Ofer Elyakim

Dror, want to do take you this?

Dror Levy

sure. Yes,

in above should I to what what said increase going a overall we do that XXXX, look we will at penetrating like an Ofer U.S. marketing is for think or the OpEx are bring that to mostly doing, was marketing, going as said, investments total to to is Ofer mostly the we mostly invest in But it we R&D this so XXXX, second when level the this of unnecessarily So unnecessarily effort increase in I that slightly R&D, in sales that we’re also like back and think be where see in in get but to we uplift said I want segment. market. to

Jaeson Schmidt

lot. a thanks Okay,

Operator

Thank you.

your of Thank ask comes Your question you. from Charlie Please Company. next Anderson from Dougherty question. the line

Charlie Anderson

way, saw thanks very congrats ask ULE my well SmartVoice, I questions well. opportunities demonstration kind what in and other was solution kinds the got some I win there, follow-up. that technologies. providers interested, of the electronics calls design on curious of know the marriage how of I’ve and a interested of two I about of marrying pipeline a wanted stacking just you’ve to that you for that as are interesting about taking Yes, CES. there those talked and coming then traction at brands are up service is as consumer my in prior are your

Ofer Elyakim

Sure. Charlie. Thank you,

of and do Voice SmartVoice that indeed But a actually is cost The home The security that. that the variants very assistant ability all we kind the believe ULE is bigger really actually point smart good of between of is smart particular, type convergence hours someone than this assistance that quality SmartVoice of of interference-free many case the enable example and and capabilities of and accessories will also one. two-way enterprise range great convergence, streaming the customers. this and using and over provides that on in there. could and the IP kind also the over a use adding to in last for we music of battery-operated calls and great spectacular So that a the and for of of – device to kind convergence of Voice actually can and cost in voice unique could you and that it smart do that, many keeping offering for these band number like do a Bezeq, including conduct see of even a and suffice fairly top of combination the today, also playback IP and ULE voice fraction over

creates very So seeing are traction. that a pretty offering that solid all really of unique a kind – of we are

are demonstrated CES that in saw concept this what many just a I speakers embracing think we ULE. beginning that of was you smart

there. transmission, companies and to others connectivity Jazz, we and voice to Elite Djingo WiFi and were Orange best-in-class Deutsche France audio Telecom, many and that in by speakers demonstrated by Telekom that addition In many, provide saw other smart like

ULE. in which provided products the and of like prepared is about press of who building a more networking someone both future in and like in voice-enabled SmartVoice release domain, companies leader kind the is using kind comments color also or here also We significant that their a pretty technical also the

I as traditional actually instead concept over product audio as putting both do some wireless DECT. high the reviving adjusting are in many significant relevant to band a of other a many activation voice think well link investments following of very also and a new pretty quality the links take calls, voice as time, a wireless to ULE our customers of full

market quantify of is and year indeed, about willing the invest to and we do and the But that gets to combination. kind is potential that try kind we’re traction to and great try production this what want of I going the fact think of this and value. we happy So accept finally kind it into see very excited see to

of kind update it quarterly to on and continue we’ll you So monitor basis. a

Charlie Anderson

what the have ULE in between providers with competing is traction obviously in Deutsche Orange Telekom, many gone U.S. and of concerned, had have forward as guess you to I are And any curious Europe confidence color would like has far Do then be more what’s Great. in as that want there more feel or given someone sort U.S. invest ZigBee the those helpful. service Thanks. of technologies. have the I’m where you, there? available Z-Wave chosen to or you you sockets

Ofer Elyakim

Yes. Thanks, Charlie.

easy the So indeed IoT nothing domain. is in

ULE. service lot for look options technology when and evolution of I and OEMs a there are and are our and like needs for there the at place you of that this I think think market need a I is providers, sockets unique that that think a but is being the there presented,

the really think assets spectrum if guarantee technologies transmission, do the is lot to of a just that guarantee wav how if voice kind other of are cannot what that band. you network voice does the to ISM voice from not of ULE I interference-free, other that to like key in way mention support wireless, and can not there two-way guarantee do technology that ULE really to perspective, activation say or really when clutter you many in to record about no really and all in So streaming or that can that addressing want about, it send want and to and that needs et IoT really audio quality, today files or you think technology a would you cetera, that time, today’s many the do with does but do needs

You need a kind this and interference-free can role. of really that think ULE is very where strong a play technology I is

years, don’t asking we and that Z-Wave, Now not I Z-Wave Telekom Deutsche before. think technology, so that chose about France Bezeq Europe, used much the used ISM open we field band couple when – was have focused before in you’re Telecom they the of been U.S., that entered, the before used us. In the to also ULE, on U.S. the last playing

it or sockets or technology of find where mean the not are technology, providers plenty replace, other chosen to plenty do we the does basically do, necessarily of their have a can preferred sensors cannot way will already find support don’t however, to way we can technologies not a or ULE So cannot that there that incumbents play, need we like complement, of things number certain devices.

about one everything. just need of really service to find and ecosystem the that range the cases the powerful this this into the for win capabilities from because primary is develop providers about vendors, the playing will of is and use of US build values, device a to kind a merits market exactly DECT So of really to to we be kind don’t security focused way and through the which to and our convince plan of service We need will areas ULE. providers,

Charlie Anderson

Great, thanks much. so

Operator

from of the Capital. [Operator question RCH Suji Instructions]. your next from question. please And ask line comes Desilva you, the Thank

Suji Desilva

XXXX on Hi, in all here as from Ofer. me. Congrats the progress well Hi, Dror.

Following U.S., can what up you consider customers would the you’re sense about their that how timeframe, providers maybe expanding you in that XXXX you a of give our U.S. – set many that you are help can OEMs, how effort, the progress in market? quickly given a us you on of for kind you Charlie’s question expecting can penetrate expectations think securing the service

Ofer Elyakim

Suji. Thanks, Right.

and – and names kind a there the phases you’re in measure can the establish, production the and engagement already into the that technology being such of quality shipping the designed of that we activity that names many ourselves engagement, will is are really has way but when the potential amount for is the phase is represent the engagements where we are by get also right, business. and our and by is to really the evaluated, able we mass So stage number different to and phases say there where indeed of we – where it, measured

in I spoke to, with or and these are shipping. engagements sold I about products where Now when counting are but new that a these traction little XXXX, that bit really are customers mentioned traditional XX products this already we’ve about customers the are customer new year, shipping not customer

of because the So that XXXX, at measure a future can engaged really we number that to be ecosystem that the I really names want we to will about for that add think business. ourselves at is most I mentioned but we above quality the to the the represent for part, the believe I that and way they with be level that is will or able the we will

technology a that if easier So demand necessarily ability prepare a to – strategic today much is get the than actually not is ecosystem you you can to that that to et product, the than creator, the demand sensors if makes cetera, go lineup the company creator. those

will also from and So but I represent the can business think that potential to us both be quantity, our perspective. on very a much focus quality what future these on customers

So I hope I answered your question.

Suji Desilva

is is did. for phone of niche it switching a in it’s And S-curve it a of putting kind And rates? wins attach And of more a sort you’re people in sure. the is of feature appreciate UI? that smartphone in a kind what voice adoption, or it not now, from than quality rate and it side on also mainstream. just the just always not on and helped preventing general, voice, No, the of just if I the kind becoming getting, you the over attach a smartphones greater China, Is then game, is what to you’re there factor, maybe is so numbers

Ofer Elyakim

Yes. Thanks, Suji.

generic on domain more a kind the maybe So market. of smartphone the of and to description

talking voice factors that kind interface. high-volume battery that like about the were that with would it, speaker microphone you user So of devices are now operated, includes to embrace

list. that is convinced have and and I people different, capabilities. enough find What more are today using think vendors interface attractive, voice actually more think they trying to that users. smartphone voice that and quality I voice something vendors user the to good and user that to liking the interface is that usage is their there the and to be more that the smartphone believe commands believe And market to do be I is I of be on definitely for special to are ways So think drive

the X market think seeing more are using voice. people and guys and suggesting personal devices do more that phones via more definitely I that see and the their that and we statistics in Tier are the more

perspective. entire jump from that And in also China kind the they think sure cultural so that need also will package people really that, of and use and you the I make in it really attractive is market, to companies what a a offer more

So the such more that is market really interest, of right so also we much don’t plenty with coming see definitely kind hope traction that many in of it’s do see back, in and and the the products. more concepts see we I just anything market launches the XXXX feel is that I see think do there that definitely we’ll about and I that hope we’ll holding and in the

maybe play volume for the additional year coming such see we there are comments, going the that for prepared or which to or it high did mention was and highlight another point important so as some two. control, battery not also very the the operated TV play, as in Another – our devices in was visible not us market to remote

a key a far-field power kind development control midfield that due So a tablets we the coming unit. was when and kind domain also other for of believe battery on type of on computers a that low this these focus year devices are also certain regulation, necessary of up the or on. inside consumption regulation. either the TV operated one remote the personal it’s require one market I it of is it’s we’ll as the solution one now to think Both Last or will of hands-free battery, that on very and around

Suji Desilva

very the exciting looks it again. sir. like XXXX and Thanks Thanks comprehensive an for answer up, lined

Operator

Shusterman question you. And you. & from your Thank the [ph]. comes Ari next of line from Company Thank Needham

line is Your open. now

Ari Shusterman

Ari is this behalf talking of & from Well, you. on Needham Thank Raji Company. Hi. Gill

softness China shipments on my how as you So more within your smartphone color Tier you’re mobile China SmartVoice. shipments your Chinese of and is can penetrating a as give you bit in the question markets mass potentially begin well that products OEM effects SmartVoice international X besides considering through

Ofer Elyakim

Yes, you Ari very much. thank

question. your So

first was China more kind smartphone. So on part the of

in the going at of now, is China. that the for and definitely of see all China, a and think smartphone most thinking of general volumes, for market think in and what I of with the it’s and – following lot in XXXX pace I weakening true situation, limited U.S., kind manufacturing the out a said and I in coupled think we’ve the especially we consumer fact I uncertainties activity probably part, that because macro between China we in is We China the kind I softness also it’s the that around it’s see that area war of offshore smartphone certain that also of of fairly of also think a points XXXX visibility. coupled unit the think to macro out and entire kind trade the

well win amount as that revenues from it all that environment also excited and all, our a believe the beyond as unit OEMs. volumes, in SmartVoice today of an we in and definitely OEMs potentially hope and kind this get visibility and recovery the will we other add it’s is very start this see a models will of So transition We excellent hard to our with kind to more see of lot more to QX. that to are but business penetrate we’ll without

kind believe was on we most interface the the this and Now of in focused that markets, processors for years. so U.S. lot in will more we AI largest next believe innovative U.S. new leading today geographic our voices market marketing companies what make other sure the a that of and also the course we’re the opportunity that with question, or was the that of in and world’s of great the for the is our it about the match great I sales and of be and devices. I a markets There a of part between between which to edge some of are looking China in side platform investing is we’re U.S. primary and the your SmartVoice, that fit of Korea was DSPs is sort today the the say beyond and couple would other and U.S. OEMs there portfolio kind potential today order over are our addressing to materialized

Ari Shusterman

Okay. pivot for much of margin. And Yes, you so to your a just thank up, a answer. a bit quick gross follow

expect in softness your of seeing further softness in, deterioration macroeconomic you case margins So that and currently continued on? long-term line you how the do and to gross hold

Ofer Elyakim

as kind level change. I market is that of looking So go discussed want certain we that not the of gross at future a I and of that respect should to of we challenging – goods, down revenues believe does to XX% like the see fourth you saw direct impacting think margin that think our that to in be at margin, of don’t levels contribution, of the we but a we still that from the definitely change total gross cost of stay I in the even margins, model we fixed into long-term the I kind with part more I believe still gross any if levels level, the the starts situations. quarter, of where be this that think level

Operator

we this at Thank you. And please time, don’t have further any questions continue.

Tali Chen

you forward in look We to XX days. participating. you for Thank to report

Operator

Thank Thank conclude for for you, participating. gentlemen, you ladies today. that all our conference and does

disconnect. now may You

DSP (DSPG) 4 Feb 192018 Q4 Earnings call transcript