DSPG - Earnings call transcript Q1 2020

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Q1 2020 DSP Group Incorporated Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] I must advise you that this conference is being recorded today, Monday May 4, 2020.

I would now like to turn the conference over to your first speaker today, Tali Chen. ahead. go please you, Thank

Tali Chen

call. Thank Officer; you. Corporate DSP I'm Chen, Financial Ofer earnings and Welcome have we with Officer. us Mr. morning, President and Dror ladies Mr. conference XXXX Vice quarter at Chief our gentlemen. today's Chief call, to also Executive Tali Elyakim, first Good On and Marketing Group. Chief Officer Levy,

about during our begin, would guidance making like this that conference I you be call, we second Before forward-looking the remind statements financial for XXXX. quarter will we to of

User result company, and customer belief and essential technologies, a we Our to will to associated our namely that position due pipeline our working distancing emerge optimism ULE DECT our uniquely Solutions Unified a take more stronger adoption Communications, optimism of about become launches. remote Voice of trends and social engagement the with Interface will advantage pandemic product us as Connectivity and about and as and

Furthermore, it pandemic the of should impact that to evolve. continues be noted the COVID-XX full

such, management condition the the effect following have by financial of company COVID-XX the company's uncertain. company's the future pandemic liquidity to operation discussion that the and full on condition, The effects pandemic. the will is of As subject financial about magnitude is the future

XX-K the Form In expectations company's are important COVID-XX actual risk other factors from in pandemic, defer addition the materially company's the results disclosed to that SEC could to cause factors filings. under and

date to any by we obligation law, as statements update Forward-looking required are statements. assume only hereof. Except otherwise the as made forward-looking no

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

Ofer Elyakim

had during unusual this all customers, Good that and read I continued today. thanking support I for earlier would Tali. and release to period. distributed us which of this you joining thanks morning. call our you, this by partners for opportunity everyone, their press our to like open hope we morning the Thank employees,

The challenge, course global of medical, financial, for on call, COVID-XX human including unprecedented of semiconductor implications pandemic the In elaborate and aspect this every its lives business. shall our affecting industry. presents an our we

We and our our context for outlook. provide second first provide on projections the for the our plan, the Dror of about and business the for comment you by begin for progression finally will our will our quarter, details reviewing first with financial results quarter. results quarter then then

outbreak holiday. operations At to first, factories customers’ solely March. was outbreak the COVID-XX prolonged as factories we and Those COVID-XX, in regulations gradually shutdown resumed worldwide compliance a our Year and the with a March moved the lockdown aimed as China and confined slowing chain reopen transition and failed model, home affected Moreover, that operations to went experienced after from work New mainly Chinese social a our spread the quite smoothly. at to early most supply distancing in in of of expanded west employees the

while within due distancing the social we now headwinds, guidance is has our time million quarter $XX.X what by Throughout year-over-year in Despite our first softened second to customers by able to and declining were a X% revenues products those of consumer and range shelter-in-place this quarter the deliver same restrictions. flat essentially Meanwhile, generate these for coming demand original our ability electronic intact. remained sequentially. quarter, for to extent the larger on and the products and time, serve to end and

during peak also innovative and at drove paid $X.X our confidence accounting by XX.X% revenues. respectively. growing in expenses achievement from by $XX.X in of initiatives to our revenues of drove sequentially met our while important year-over-year This total edge the and an gross AI and This XX% the first growing for to margins GAAP and quarter. X% reached X% success reflecting growth milestone Moreover, Moreover, quarter, million million, out non-GAAP business. we an non-GAAP declining XX.X% the SoC R&D

we For rate the historical year, remainder with the run spending. at our more aligned a do of our expect R&D to moderate run expenses

the temporary, have this even be interact. technologies on environment, essential. While In of will businesses become DSP for that and and some implications we consumers pandemic long-term such work, believe aspects we will certainly will live, more an how crisis Group's

the and We three is of more which which have Communications, living for become and growth the SmartHome, namely working. engines will developed which solutions and paradigm, world-class new SmartVoice, increasingly in Unified innovative be important of market verticals, company, the technologies under we has each

Unified the surge elaborate. orders an created home audio video shelter-in-place to and created In locations. has or increased This as demand from workforce working have efficiency mandatory products number UC Now, remote of let phones, Communication, and headsets, productivity. individuals the a such for global enhance systems conferencing me the in other

and increasing our solutions need Interface, products switches, User from cameras, Voice XX are already from benefit adding to many many preference User SmartVoice to positioned are and devices the Interface for voice-enabled, the contactless, more, germ-free, light more On well interface. remote-controls, powering Voice tablets to rising due for over different to human-machine

service Amid home and should from On into our two-way are and growing rate better the ULE decline to connectivity high home. addressing DECT IoT Solutions. for much-increased which home a demand realize full Connectivity for ULE COVID-XX calls communications the and drive business at DECT usage increased outbreak, our and for the significantly fare Moreover, cordless ensure made products and SmartHome legacy of much through the quality of voice reliable lesser voice coverage. IoT phones integration our home of can demand the even market. gateways

of about growth a confident we to mainly engagement face our the looking consumer our forward in may related each pipeline spending. near-term some and softness of potential initiatives, shortfall are we While

helping work having we environment summary, to productive people an control. device role In in safer new for everywhere home important are transition tools collaboration, more communication, to and touch-free a innovative enthused play and and with about

when solution-based our this as much technology’s execute to it continue stronger emerge strategy and crisis will ends. through We company a

to would segments business each Now, SmartVoice. starting address like the of I with

of the quarter and main X% million we related. both revenues from of approximately sequential We year-over-year factors, two COVID-XX During decline SmartVoice the a a $X to generated of attribute decline products, sales decline of XX%. reflecting

is forced the partners capacity with associated our customers’ extend lower have manufacturing the and Chinese week. these the to gradually were of quarter capacity Year manufacturing every shutdowns. many first in factories resumed first as production The Encouragingly, is increasing New factory

in are SmartVoice crucial with collapse more to distancing this ever, interface and as feature temporary the however, retail weakness resulted factor from in and that and Europe North voice We March, second from than in a and useful consumer believe change particularly, America behavior The is now social necessity. resulting in restrictions. a from shelter-in-place solutions user that our footfall moving

Disease public Prevention have in been Control other bodies and surfaces places Amid countries the traditionally the COVID-XX for touching buttons, in the recommend home, high among other that like similar avoid elevator more. alarm Likewise breakout, control, in and tablets. U.S. things switches, Centers keypads, and door handles, the to switches, and examples touched, of phones, advisable shared smart it light many devices is touching remote at surfaces avoid to

we accelerate Voice this and rapidly new a adoption faster embrace would We than have as result crisis will Interface as User development otherwise. we strongly of habits believe that more

application into use adoption products Voice to Interface User additional accelerates cases. As expect expand we

which an and continued the array powering consumer products. product of playing as in is engagements is and achievements. we electronic a with already leading role to quarter applications needs SmartVoice our addressing the in Group DSP during Moreover, portfolio following instrumental broad our reach these brands expand with demonstrated

technology leading SmartVoice company its into The with true win that launched integrated first, our a we secured platform a wireless earbuds. strategic design newly

time low combines Our accommodating smart ever true operation, ideally as wireless talk AI cancellation form hands is periods solution suited playback such the earbuds it of shrinking with active power, enabling and robust applications processing for longer factor. noise while free

and voice and field key SmartVoice and its products we multiple number BBK MXX+ PC our all activation and a saw based [ph] new and Lenovo far activation MXX tablet a SmartVoice simultaneously. tablet launched launched to solutions of the and launched leading SXW smart voice A wake SmartVoice robust word on voice tablet voice natural, with field of far our our record number high and activation models partners quality mobile In tabs deliver incorporating OEM SoC SoC. and field integrating supporting by that capability. the market launched far innovative two-way new leverage

performance raising bar broad powering continue leading In we continued market brand achievements, These the for by enhance camera. newly our Interface the pivotal outdoor drive quality camera Voice momentum that and security array continued applications. edge its believe to consumption launched on the selected of adoption business our will unique ability our devices. position down a to demonstrate and User with were leadership coupled new growth driver SmartVoice a to We for be exciting while of to power

year-over-year Moving high-quality million, voice segment, Even percent a we quarter as change COVID-XX on towards of in achieved before revenues to saw X%. the outbreak, Unified the of increase of increasing video need first in workspace and a for evolved ubiquitous strains a and Communications $XX.X and the X% an we it communications. the sequential increase representing

drove more Now million XXX optional. home users remote these collaborate using virtually than longer tools. from global work requirements no is to Work

imperative and high-quality in enterprise crucial are imperative ensure that makes productivity. and efficient office. the the is in and technology workforce the communication and the used underlying be reliable as tools tools they home So collaboration as it This to productive operations

say experts place some out companies having these that in many remain after policies home many of policies, pandemic. also work so With the will rolled from

look growing providers offerings intersect believe collaboration the well support Communications is best-in-class IoT, as as the Over and is they AI terminals, workforce technology these to to technology the companies that communication our product Unified to remote headsets, to group the needs portable their market and Voice these will User forefront months of next and unified few Interface seamlessly facilitate for on with edge. at DSP further endpoints connect the as trends the addressing their more well-positioned better efforts. enterprise offerings we expand

for quarter In headsets, systems. the demand DECT terminals XXXX of conferencing saw and portable accelerated first we

segment engagement selected Sangoma following and [ph] IP DECT We secured headset remain noteworthy product. HXX on continued and tier addition, to innovative highly a in position during our first wireless solution. continued this our on by the modem headset based based our our for of growth OEM strong a DECT quarter engagement launched one In launched over market wins. A the ISEIN an solution pipeline [indiscernible] desktop integrated phone and pipeline. XG expand solid Voice a the propelled Sangoma confident with our we networking

product our to line. Turning SmartHome

a $X amid strong technology the decrease During in basis, environment. million during approximately the China COVID-XX on value quarter proposition the representing this unique generated the the year-over-year a the line in first believe and ULE XX% Phone a shutdowns sequential of negatively in we comeback first factory X% we Nevertheless, current made of decrease revenues by impacted momentum calls DECT have and to SmartHome product outbreak. quarter. a our of presents

from is At In the daily in their higher XX% infrastructure around optimizing ULE soon communications, the can of home to with general made providers service tripled. has are By time, Gateway traffic U.S. In number service same patterns. response full calls typical more service integrating deal home of calls. and providers portability, into reliable in the up Internet DECT coverage. voice growth their provide quality from

strong digital a first the launched service voice phone and experienced British we ULE Ofcom, homes. offering BT the its leverage lines following home in this ULE in reflected demand connection. for This their from DECT solutions. reliable get During communication DECT time subscribers as benefit providers generation regulator's UK's highly IP an will based noteworthy order by interest development. by recommendation service all next our addresses quarter, to a more land throughout high-definition reliable, offering at to also Telecom on calls

branded launched phones BTs to directly connect [indiscernible] newly includes offering new home that gateway. BTs

expected two In selected addition enabled our that achievements half DECT solution of home this in as we by DECT providers to evidenced ULE expanded we the strategic and are second our new gateways these year. service to launch based customer

new These offer now service the in services to can voice. IoT leverage providers infrastructure to addition

technology. installed of advanced the ULE base based offer an our services example, is Korea in its process small DECT leveraging As businesses on to IoT ULE Telecom

products, in the and reliable spectrum emergencies about is edge ULE's especially required. the support, superior call of during excited ULE XXX also role crucial are interference-free advantages include which all that when are voice and We security security plays market. center support for audio two-way or inherently

communications service adoption selected brands, interest one by ULE We symptom. engagement with thereby provider technology expect in securities and all in see of voice the fuel resulting of increasing have security and our DECT coupled and leading strong ULE and is for among support leading these momentum we trends, traction with new the we pipeline strong products European our to additional ULE service expansion consistent in its in DECT fact The emergency providers providers.

And Phone now market. on update to the Cordless an

in-line accounted quarter of Cordless expectations. Phone revenues by Cordless revenues. were year-over-year first revenues Our X% for and $XX.X our XX% total with million to declined our

We fuel continue reinvest growth its initiative. flow future this profit our in prudently rich growth business manage to and cash performing well to

an To-date quarter. a update healthy second is consumer on for our our and deterioration Now for backlog in a quarter is and relatively despite lockdowns demand. the of activity indicative second for outlook the solid business

going and discipline our expect do market expenditures we an prudently we market in serve guidance environment are and dimensions economic However, while range businesses. consumers revenue of some uncertainty our a challenging on Hence, to in and managing the due impact its reflect unknown expected view markets these forward. and and increased downturn uptick operating dynamics, of this volatility financial taking see widening maintaining and to by cautionary to we a more

We $XX XX% growth to revenues that be guidance of implies quarter The in million. of $XX sequential should midpoint on guidance a revenue of XX% midpoint initiatives while also for million range implies account of year-over-year our range of our to basis. expect X% flat this the second second to The the quarter therefore decline revenues.

challenging more for proud that environments we summarize, helping communication our safer customers are and times that are response will our we accomplishments our excited and to stronger technologies. important To to crisis as by these company. productive from and role also in with emerge and these success this that the an and Group DSP during tools to transition innovative We home and collaboration market and a much work has solidify will products trends play believe

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

Dror Levy

we'll From the for for the in previous XXXX. as now [indiscernible] Ofer. the you, quarter provide top that the each item statement line expenses Thank included and to to well as related expenses line will bottom income first I compensation results and review item acquisitions. equity-based

for Our the of margin were XXXX $X.X $XX.X. included revenues million. for the first equity the the expenses compensation quarter Gross based for in margin was amount quarter million. of quarter $XX.X Gross

million expenses expenses equity compensation in R&D million expenses intangible of the for in amortization and were equity $XX.X the expenses acquired of $X.X $X.X assets $XX.X including quarter amount of were based of the including based Operating compensation the million in $X.X. amount amount million.

$X.X quarter was income from differences excluded Financial leases. for were the of related income million. associated million accounting quarter. for included exchange results to This rate the our exchange Financial term for quarter standard $X.X the the differences non-GAAP with long

Non-GAAP in of $X.X items million. amount I million tax million. quarter mostly was loss net $X.X of the was benefit of the related to just rate equity-based of a differences $X.X compensation tax compensation taxes net exchange Net $X.X million the resulting benefit income described million, amount was expenses assets $X the amortization With that amount in income benefit and intangible $X.X million, from expenses. million assets deferred and of loss of for effect equity-based the changes $X.X for including excluding a intangible in

equity-based GAAP impact loss The for on was of per was of negative loss share expenses acquired the $X.XX. per share The on negative intangible loss compensation per assets was the quarter $X.XX. share impact the $X.XX. of amortization

per the to of item see full of share X-K Please I've Form GAAP impact report the positive SEC morning described current was that was just $X.XX. income the that excluding this with a differences non-GAAP the loss $X.XX rate we and from presentation. presentation on non-GAAP exchange for reconciliation filed The this the

balance the to turning sheet. Now

first end the receivable of level of a to quarter $XX.X representing decreased quarter million of million days cash XXXX, the the $XX.X to fourth of Our at sale. compared end of XX the at

level million Our inventory increased 'XX $X.X end XX from quarter fourth to at of a $X the of the days. representing million, of

March marketable quarter and level decreased were as during first $XXX.X cash the million XXst, the Our of $X.X securities XXXX. by and million at of

equipment, of million affected following; received purchase position price securities million operations, was at million of cash share marketable stock an and of was was cash cash the property million cash of the $X.X by change $X.X was of used marketable and exercise by Our repurchase $X.X from quarter of of provided sorry, during of for $X.X and cash, used was of $X.X amortization average million employees, share options of $XX.X market in per securities. the - for value by share; XXX,XXX and the

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

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

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

expected range and margin R&D million. our range to $X are to million gross We XX%; in the to $X be be XX% the expenses of in of expect

expenses expected Operating $XXX,XXX. is non-GAAP to range million $XX $XXX,XXX be range $XX the income tax the is are million. be to basis. Income expected $X.X of in Financial of in to to a to be million expected approximately on

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

this projections forecasted second assets include $X.X include R&D the of for million million includes expenses operating Cost $X.X sold projection also $X.X and Our goods million. amounts in expenses expenses; $X.X $X.X of include of and million compensation amortization million, million include $X.X quarter following total to intangible to equity-based

to we'd please. answers. for Operator, up up the you can line and Now, the open line questions for Operator, like questions. open

Operator

question-and-answer Ladies of line and you. gentlemen, first Matt Thank question [Operator from the Instructions] now session. Ramsay. we will begin comes the Your

now. open Your line is

Matthew Ramsay

sizable some dig Communications like times all we're me, some in headwinds the Thank be you for and unprecedented in. be but guys a trends phone Ofer, big with seems work with on To and I demand to providers, obviously just bit trends, from and home Polycom appreciate portfolio. from going also working other of your of that voice I it I importance in the is little might would mean office the business Unified maybe some pieces have there big fairly wanted favor to calls the you business. home there commentary very people much a given and the business that to that the drive providers

that walk could us you. much exposure pieces might environment goes much really you business? what the Maybe and Unified pulls a might How transfer could Thank on have that a and of work on-prem it the that you of business? to into home just business, bit little office pushes from how be to Communications through the of

Ofer Elyakim

in and Matt, the Hi fact question. for

So, is you've heard our - are in DECT business, as which the the accessories, about on of both business split our well important Communication a from from as between extremely the way home Unified side headsets working office.

We have more the at the split, say side, XX-XX, voice. conferencing are on-prem then which mainly a so traditional UCaaS. And have conferencing XX% IP so we would I phones systems, about XX%

However, in two, between other the on-prem, because as to offered progress, models trivial of distinguish a becomes it are conducted a lot being time are for for really one the one two flavors, in offered the today way and that less UCaaS.

UCaaS the offering participants sure fully the for Unified think which front well. is a the to market packaged market is in for as I stimulating side, that Communications the driver So, growth all

the see quarter, So, the at our I can first tell we - from a thinking we bit to about maybe customers when better and you you that of we so what we've way more they're can our tell in are seen the have little trying with understand talking second I but what demand. and least quarter been

for from preparation from A, enterprises working by have that; a thought accommodate what others think with and practice. as people have that home abruptly the mode. their some without also standard work desk from to a or away home and happened I work already they employees walked home has And pre-installed office need they fairly has in equipment some from any way, So, mostly happened

they're to I collaboration will in operations the more and type productive with home lot or of see the and need home people office. pandemic will so is office that are definitely such what now believe be as many once But from we with is return of the a to the with resume at people invest any resume that to equip environment of working will a and event guarantee a corporation's there. that the that could This happen, something capabilities users, employees, as understanding

endpoint. I'd fact get number these in cases and in hearing we what also be getting endpoints Then also say whenever you of a and also of will two, since the individuals. Number sanitation are priority, the are most time, the is put a that usually, probably you new used new one or person are XX% by a

so, one. whether the productivity in that; market an the home have the these This evolving IP et that cetera, businesses a the to phone, and A, they're And a that we're video system, people invested enable tools tool, will from the headset, are invest these infrastructure work to environment communication conferencing in. et has to utilize seeing a is cetera, work endpoints, - is way number

endpoints, that you your see result And sitting is this new will number of a what as have two, on more personal may rapid prefer device replacement we a perhaps to the desk. since said, of item I've a

it that, the I would grown should addition in and is indicate has idea to that products operation just number also of desks the more that more more the say cover to in desks. considerably, thought would So,

and say design was from sure seeing announcements. headsets the that a some saw last this think win for seeing, I would also we this you demand and a is it also year, QX. that there I what greater So, in that we're we're in so nutshell than is in definitely of is what saw QX for there

normal to we than at a trying But because We're lot a robust bullish. from more that can seeing little and be should moment world you are to these having, on circumstances we're as are are trying the a are effect have again is -- we Home from least But when spending see the that we're see the fact cautious would we have really trends. other odd significant people our be despite shops to, headwinds, and very that backlog fundamentals that closed we no and the one that looking conversation at be and but an we're that in this not more happened definitely fairly also business. at in do that as the and forward, have much used as things they

Matthew Ramsay

Got Dror, you challenging to couple and guidance, parts. it a obviously respect of you, with ask the I obviously but got it. moving is here, if lot the visibility a Thank wanted questions of to might, give line midpoint million at you different I thinking how revenue of by items could guess of a about $XX the on the revenue, on division? little color us if each the you're

And down like guidance basis. the then, on a looks it OpEx is really sequential sharply

I there onetime memory a off but couple in from March a costs June OpEx. serves, quarter, think quarter the big if also the were pretty of into drop

would us talk that through could you. be Thank there, moving you the helpful? If parts

Dror Levy

Yes sure.

one. first the the segments, will of Ofer start one, different distribution that between with of growth about revenues what that revenues and asked XX% second basically the the I said the I'll the will for first of total you midpoint for Communications, account in quarter, is business we and expect repeat this So the SmartVoice that initiatives so is SmartHome totality Unified is

true. In the so terms is OpEx, of it yes

we had in two lower. second we This X that you So almost from that things, coming quarter. if lower were the were first the quarter. as OpEx there in something the in you first like or midpoint said $X the the than about point will it take is where first we discretionary expect spending some do quarter onetime is be million Again,

press of in over related also, review tape-out included of growth there, We that we the discretionary chance to need that belief to that in our and our future also you demonstrates that release, project a some we initiatives. our basically invest our to had spending still if to invest R&D

peak in quarter. So was first like the this the

quarter, the R&D run maintained if the rate you which around was XXXX, to run million. about of rate is guidance, so is slightly $X midpoint in $X.X again second the the below the take of Looking million,

spending the The $X are one not relates discretion that also Home, is fact be example from this million. This that most decrease also expenses second we and result fact et the time that quarter around have coming travel is cetera. in expected facilities from people some in both to for working like do

I should XXXX, we what the remainder for R&D levels this would spend the so see ahead, year. of is in looking of So we say the expect

run way a back bottom of course second prudent go XXXX. quarter used will our take see how OpEx to we to any and in we'll always that to that in way and the we and will is revenue will need evolve be front the we we then things the to see the on level necessary. So a that action be But we in deem

Matthew Ramsay

you the guys. back color thanks I'll the in hop queue, Thank for much very there.

Operator

Jaeson comes from question Next of the line Schmidt.

is open. Your line

Jaeson Schmidt

Hey guys thanks for questions. taking my

of you this in on Just following you there that type up if shifts year? of just on are about any that but hole structural orders at look Ofer the going in Unified market, a some Communications talked segment XXXX, curious in sort if maybe in segment, first the I on know going that you think has been

Ofer Elyakim

demand the performing demand. that where so least as it segment to respect we Jaeson, and have this as a the to think Communications see relates with that well I is first half during part, at we Hi so visibility, Unified

deliver operations not pulling, March. factories to ability pretty but as started of have course some say resume so I better, to equal, early in moderate Of would open or you some are operations it make if are products quarter was as and say QX with respect are you if customers me are doing worse, we look a doing let's have all indicated them the the the to May, not from most of resumed but in early even facilities today from capacity some ask

a a it manufacturing muted standpoint. quarter So, from quite was of

products looking respect taking conservative participants with hoping an share demand. and market are are cautious market demand, some - that more in to to of sure increase for pretty more the a Unified are on increase are are and I'm and produce some betting view Communications kind to more

I ask about accumulation. referrals brand to value to not would supply me of into distributors the into since an this customer, the to is the their the demand were type chain you quite up manufacturers level is If end of that there us and from added say fragmented chain

So, that the the do but a pull actually –or to certain of and us, think Inventories here ability information I in concern is could I because significant of the degree see on about based that, I right not of and in that focus signal. I see handed and to certain today now as inventories. manufacture can half, a cannot there, say be don't see second

as think carry. everyone material carefully customer, want with I they each future steps demand calculating well to much respect to calculating brand those is is with as their to that each carefully respect how

that in if in the pecking I like look spot the where get QX, are close April, rosy provide is have, they companies to I more for did I hold happening. forecasts, perhaps early in or so everyone draw to me when orders more limits they did top what much and and order ordering but things attention their or to I and think trying you we in attention, think or at maybe is that believe is March to everyone think May want paying ask want how appetite yes what

Jaeson Schmidt

cancellations [ph] very push been delays SmartVoice giving that's helpful. imagine uncertainty, I business, of outs And you Okay, the the there and manufacturing at then seen but any have looking probably programs? has

Ofer Elyakim

we portfolio. to cetera. it restrictions, shelter-in- devices of many SmartVoice, being of as so fairly place many, respect product in accessories hearables imagine, say more need and like with people are as a and home ranges and I But to can segments locked diversified stretches at spoke high IoT from, kind you is et SmartVoice different screens smart the consumer with would in so Yes, It about cetera. type et that

level hit consuming or the by people our at changes. Certain versus and survival of consumer are spending, impacted pattern the mode getting home behavioral the mode that of are fact categories regular

slowdown significant actually the in products a in see instance be of demand in of categories shift there So some actually are in could of and demand, others out but a actually very the nice side. also a some screens, revival stock, in and for lot we a smart collaboration

cancellations, about are binding me ask a you If thing. orders order usually

navigate we customers at nature able good serve So, will we that times. to a these least that are think seen condition and customers of I of the majority most would have far to I so the in our anything be not through uncertain of who and we say

Jaeson Schmidt

thanks lot Okay, guys. a

Ofer Elyakim

you. Thank

Operator

[Operator Instructions] Anderson. Charlie question line from the comes Next of

open, ask you a is line question. may Your

Unidentified Analyst

taking for thank you Yes, questions. my

back weakness there, making on but that's assumption you're And a more anything at maybe the extra going place be the you’re a all, bit to-date some from anticipating backlog numerically, there. year-over-year cautious like not I or seen wasn't really that good followup. it push some curious a you being are it quantify to maybe the to being of you backlog little backlog will? but able have then would you're Just got you why or conservative a sounded I've just I’m sort And perspective? and wonder

Ofer Elyakim

and the Charlie question. Yes. thanks Hi, for

and a copy I'll viewed maybe backlog how the use we it. is from So little how bit the way, like

weeks. So, the previous I that think is that in - our have our lead calls provide many we usually time roughly example did average eight many, this that product we for

let's say say, now two-thirds. would month over are would close well I mean into we wherever two-thirds that over fairly, be a you we quarter, if talking So, we're should that fairly the know about

of the alarm basically let's that of you tell gives the so really say vis-à-vis eight perhaps and the the and some average we are the form weeks ability understand additional will are you you different that also that due forecasted. quarter and do And are a going weeks, four the faster, the [indiscernible] missing longer. missing anticipated is are come since what pattern in where quarter certain a there for backlog that have that the weeks, we backlog us, items that way months with as that see is not are things you three so and the the it of we And certain part are you date to in gives would

outlets or So, more is I than at backlog the of also of let's last that out significant say shutdown four have the two ability many year, I say when get to were year world pretty, overall and in the the is I the of that the higher last it that the actually the when period where backlog means atmosphere Western we at limited would categories been am product period online, look but that stock. to seems the given same retail are same most now months say healthy, the fact I almost

online actually to product. consumers many online of this we serve a lot, course mean categories but line the preferred of is not I that there way the using get to Usually are is only products the the consume off way

seeing It's time we us basically that have a to have but we're anything, that for this economy also a think a bit shut to and wet more the prepared I need such get in around that not us we soon first what And scene we is wise consequences. it's made this decision just cautious that where raining people the it and be seen here. little have is will being we're given down

is I of period backlog at meant what fact strong the that and this the So, fairly by solid time. is this

that take now forecast cautious entire for really the given of and in these there the we're may doesn't we quarter. lot of more look that be All conservative a don't be know unknowns also of second uncertainties request tone the of the we will much it a and and more and the things at circumstances on how However, fulfill the a a hand very between also and could bookings there because to range happen be wanted because the special out, one could end kinds quarter. to but take push wider

Unidentified Analyst

on enough. that. follow-up revenue importance did fair great, that, could that all you like product wonder mention SoC I Okay that chip, strategic was edge the new timeline to you of I the speak to for my you AI so take question the curious if a that and of Thanks. on for chip color new Thank

Ofer Elyakim

Yes, variety sure, to [indiscernible] your to voice a the just detect in dictation devices we're listen participate evolution, [indiscernible] which classify which cases market different or in for sounds. to user a all there, edge of on as world input smart gets operate we others use I for all think not processed could environment that world a be one a kinds you could it’s so is interface, and we as but of of the be need it necessarily seeing an in voice

certain the in just of the let's on at really one in all inputs by emergency not the For to gets whatever audio traffic rolling of happening our our out detect order for SmartHome side, heavy this environmental alert customers home rather than edge processed business group into a say this and sending processing. to in gunshot are a lot security these that time audio the or burglar, sounds sounds systems, or instance sound are, is of detection at a about analyzed devices that so a traffic cloud the it's buildings

that coupled more to in versus that capabilities device enable edge devices especially to in basically that for past deliver a in lot would a much that, we accelerators software battery-operated. running to this also product consumption portfolio I have gradually is and say, the the analyses have A reduce an run power capabilities that, more to more on with the And we something is but built done significantly are in dedicated equipped tightly these

was make our competitive power smart threshold a talk enable lot that a a the other This and looking to more the more these analytics, recently meeting in that the if going product the this mentioned launched. a devices, In the products, no is primary was just is time. one And same is considerations capabilities of like real new to power time reduce and playback a script; X back so of wireless product product consumption. one we put at is power to longer at need, but the need consumption lot not

if it's domain what segments are of of the battery-operated lot to IoT, that in this at so the And devices glasses cetera, much big helps. I look but and if part there is serve is at both, you look Voice. if analytics are operated indeed it’s this we’re evolution smart you were color cameras, this and for battery our wireless which look is you a you lower a not have and Smart just this look are tablet, any doing we et the if smartphones, advanced an and in need pursuing much we power where at watches, that et we cetera, is hope for

Unidentified Analyst

so much. Great thank you

Operator

comes line Shusterman. question from Ari next the The of

Your a open, is line can you question. ask

Ari Shusterman

the is Raji taking for This Ari Gill. question

Thank of it's you going terms So, the you. I chain you talk in supply of to and nature supply? been first quarter how have magnitude experienced. about them talk want the about Can disruptions second in also of

Ofer Elyakim

the and for question. Ari thanks Hi Yes.

wafers chain in needed two the chain, and our this so in and testing shipping business. that is the supply the chains involved So, our first There products that chain supply will maybe and supply segment supplied so the on on supply gets disruptions, intact. chain to packaging, All were our I our our customers taking was them time. customers supply supply

the So there contrary, execution. are on no excellent issues,

after On first Lunar New shipped from Year during the a and about coming the hearing customers, produce quarter, the the first holiday, quarter certain we of the as of the open the about place two China we make takes so chain factories months new New and a one really in out Chinese product and our the factories factories from that a supply the did started world parts Year. where virus, to little after holiday, there that of there usually the news the finished have of a Year lot discussed right not them Chinese of endpoint, into point and a typically that the New was

with. it a the or at a New places in filling of resume full to these thereafter and capacity. say to where factories I start and is factories didn't the one weeks of familiar usually two of prolonged shifts back Chinese usually wiped year Year or a one and in happen. almost least way This manufacturing and get down come we're roughly month month the two got and operations most shutdown are gradually And employees they where within maybe holiday the week shut back would

ones that would peak the struggling, quarter say flipped, but demand. now second are to believe of the really right operation know factories we in since from that has trying already. mostly the that still are know right some In now to But the get end the impact the I capacity, most comes that from problem are what I I

some how we around impact and all more demand. would QXis I of the and So, would see end limitation is fact the end supply is in I chains this QX say different demand, terms say manufacturing, much market

Ari Shusterman

of expect this you the an Got more land voice particularly continue to and this throughout That's virus line? you on coronavirus you the your have impact seeing been year color on a talked products, and provide bit very helpful about for do you you. can uptick,

Ofer Elyakim

around our made to around the larger significant respect with optimism and so there calls in home was of seen it and and we around made a – in from the the increase and of number also from Yes, of press have I calls use the that landlines, think lot of number landline.

and think will will years. they continue offices than their in I to it use an people have persist more a such that environment lot previous if used home

network coming the quality And mobile cases not right quality is it of the from the whether need to is Wi-Fi everywhere communication will do for be one well as a required quality can more capabilities, In additional home, certain the it's have hear also as coming sources. ability HD channels heard really really where is communication well of or you this be or connection. at well, a of service, full landline, highly the reliable people audio from source

their more We actually all have leveraging very the that at landline providers of packages. to and have landline subscribers the nice service innovative with seen for kind short-term utilizing of offers packages people went are actually fact ability the rental many

a do address their and deciding to broadband order - what providers our that in new to facilitate in these including have ULE today believe I comments, number we from and did So, of seen say service DECT in include and offering you needs. also prepared

best data a were and a of and of happened trend usage, network unplanned more were of it to also usage for a Spain months lot in advocate get such lot by and multimedia Germany, data if these conducting landlines way UK, networks more is quality you want traffic. actually that and as And, for you in also in the out multimedia. accommodate is utilize voice the the heavy really not two tell of in cases or the or that built lot networks strange there the I and last can alleviate built lot in the to many They trend the for infrastructures to has other to the heavy regulators fairly

take point. seeing, don't a we that we're place know such what trend we’re if least is So from at will and and positioned really that end will we really believe where that we're think optimistic actually where up, benefit at happen, well this but to so this we're I

Ofer Elyakim

any next if there questions; operator more Are and not, question. the take we can

Operator

line from Suji of Okay, question the comes your Desilva. next

Your line is ask your open, question. may you

Suji Desilva

hi Dror. Ofer, Hi

to U.S., all So, perhaps, hard but kind point. this or is at is this outlook, Asia answer, question may any Europe, of it on be versus demand there mixed geographic color the

Dror Levy

Yes, Suji. hi

LatAm you that mostly to respect think chipset at I say maybe the goes ship would the mix in of is where vendor, when look way you and course, gets I the excluding other in this the like at third any U.S., actually that probably end-market world, Western utilized when in but to and with so Asia a we from our two Asia to, Europe, mix our Australia to look means basically of demand, one that thirds demand mix Australia. So,

level the is say reports et would some of with lot caution uncertainty consumer that, market, In say I and we is respect respect job would cetera. I think what be are that macroeconomic a to to there less at I of there see Asia, there the that of least right with given coming but spending. still now from would impact

our a for stronger dependency think from at today of domestic than we least Europe, I much So, China like point market we have the on that on have view in the Americas instance.

Suji Desilva

on visibility there hard then XXXX and given for half Unified guide Communications, versus takes the any know helpful. to second Okay, that's will be of the puts the versus any it’s I thoughts qualitative segments, SmartHome but actually and SmartVoice helpful? sake

Ofer Elyakim

impact we we a we moment say is hard it our in trends, are dividing predict that dynamic, regular what think these very I at and on situation home where and this will both we will and very evolve are between exactly What working So are again is have it to situation did products. in and this and believe their – to how very times benefit changing that well their time. from people positioned also office habits they it’s

say is I believe the our try and And second to would a this development. business, a a of that we in of deeper term, SmartHome kind more when dive derivative product a business do look do of the each we at much longer into categories,

announced market about We continue we ADT. started and have win already penetrate with the we as ability to are very have optimistic and security to our the do,

and lot us higher We a growth pipeline in in will lead business. that stronger a much help wins footprint lucrative revenue that design believe design more nice our potential will much very have a that and for revenues we also to build and

So, quarterly leading good solid there I and very volatility, customers. think that think I any concerns don't see longer Yes, but be build-up very there. engagement term could I with

moving that. very going is it ahead Communications from and asked pipeline. also of see forward, feel you does right our think now lot can a Very engagement in I about this it going of also Again, I he will There business grow. our to at lot really are and said, right hard dynamics remain to and strong. expectation Unified but predict the continue now, Matt's look least question in on. end game, strong as We as dynamics will this is confident

there much are which we be is, not during to I believe on different that now this positioned categories some of SmartVoice, the business. I categories tends say, more consumer-driven the that the and did right There quarter in is really we well well. some of did products, more many despite volatility would where that see And better a did as really fact

I market hard is, We wireless new prospects how encouraged and market will serving it to this and the of into do. very some by predict I exactly that to we're am our think, a that very build opportunity be have, believe great a will products. business. announced And with this units true which with will that still burgeoning just entry true lot the develop signal way a I our is the of wireless. we this

fruition think that we the see in to are also entertainment opportunities lot I we market, come tablets. a will - exciting

in see the segment still design see any don't that of be lesser with to right engagement volatility but problem me do trying time a type for pipeline, because world in a the and to down, the of of need demand of It's concern, harder prepared.” think is eight a the I and shut will weeks, just not the equip win probably really it's So, not “hey with there. you and lead quarterly more now but ourselves the number fact buildup the weeks, shorter I is that much the be but I it

Suji Desilva

Okay, thanks for the color Ofer.

Ofer Elyakim

you. Thank

Operator

at time. There Please continue. are no questions further this

Tali Chen

days. XX for Thank in in you. we look Group Thank you listening back interest you forward for and and to in your report to DSP

Operator

Thank today. conclude you participating. conference our for all does That

all may You disconnect.

DSP (DSPG) 4 May 202020 Q1 Earnings call transcript