DSPG - Earnings call transcript Q2 2020

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Ofer Elyakim

Thank you, Tali. Good morning, everyone, and thanks for joining us today. I hope that you had the opportunity to read our press release, which we distributed earlier this morning.

As we report our second quarter results, the world continues to face a major financial and health crisis, and during this call, we will elaborate on its implications on our business, review our results for the second quarter, comment on the progression of our business plan, and finally, provide context for our outlook. Dror will then provide you with details on our financial results for the second quarter and our projections for the third quarter. guidance in quarter all million, with the of environment delivered in, ahead challenging midpoint solid a revenues our the which operate we we of Despite range. of $XX.X

flat Second quarter while by X% sequentially, revenues year-over-year. down largely were

quarter most of and ambient and the of designs, be margins we $XX.X the of an for products. high-quality certain from audio of market, to impacted $XX.X of rate service hearable solutions total by and system margins during early solid accounted an SmartHome second to expenditures revert those million to rapidly-growing codec these in quarter, for the Group. pleased headwinds, GAAP nonrecurring one-time reported in below businesses, non-recurring a grew expertise mainly did expect the This level comprehensive collectively and the royalty cancellation versus acquisition Despite IoAT XX.X% revenues overall performance SoundChip's demand we expense. integral lower the XX% reflect low-power strengthened XX important By the R&D Gross hearable closed are We of and for quality first points our XX highest essentially which and our improve doubled third Non-GAAP come expanded Moreover, noise Communications our We by strategy OpEx. run into by basis macro available were SoundChip businesses quarter $XX margins technologies with reached mainly expenses million. gross first the quarter our part X% that burgeoning capabilities, will with year-over-year wireless OpEx benefited and and first update gross voice of operating offering discretionary the second and this July, transaction the non-GAAP therefore other XX.X%, quarter, revenues Moreover, acquisition segment. a in SmartVoice expenses around expertise, for respectively. negatively our in I'm the our Unified level million reaching market. versus reported quarter of the and our and to XXXX, have SoundChip. happy DSP of market. tape-out with combining you design and milestone in we because our and under the deliver the quarter that were our first our included is entering is now announced levels.

to spending from predominantly extent, the Unified on softer and and are in other and for revenues the temporary shortfall demand a specifically. related in in and especially two a in endpoints quarter, more home one a to record On environment, for in see offices, on to reducing home travel, on driving general those is manufacturing hit hard reduction products. hand, larger collaboration a work Unified our tools businesses, Unified expect retail, and spending in decline budgets we Communication hand, third We forward, Communication trends. resulting due to enterprise Looking industries Communication on contradicting and macro IT IT and including

essential. are success method today future. in the and factor carrying preferred for that a Hence, is and and that in element collaboration online business productive important communications. meeting, and regard accessories Unified recover. and in critical of weakness market the most However, Collaboration the our communication expansion voice Voice endpoints we as this believe will Communications voice is a temporary the is users their

will significantly is more believe opportunity spent and more there paradigm, that face-to-face and preference continue at which phone paradigm via home solutions means the a our are and tools and an video new While more this of global control we communications interactions new have substituting to we which In impact offices, under are a not work travel instead unique with voice touch. and calls collaboration a time in living instrumental working. immune from of economic play and things we to the role to technologies be pandemic,

and individuals to deploying addition, workforce organizations, more than In focused productivity. now communication and are tools ever, collaboration more necessary on maintain

innovative in a as pandemic. and are shifts solutions Our to role the technological have play significant technologies of accelerated well a positioned result these that

needs of and environment, to our In summary, both crisis lines much home. new We customers their products office at IoAT to of safer from leadership develop our to this to excited enable meet leverage and positioned technologies are aim a the and we're the solutions that about portfolio a upcoming provide stronger and to uniquely that productive businesses company. more in emerge these at our

Our trends. hearables we and position AI leading well as on IoT accelerating market sustainable solutions voice these growth for us capitalize long-term

address Now will I with each starting business SmartVoice. segment,

SmartVoice of for Europe and decline the a expected retail America, exacerbated sequential of During generated in year-over-year social We North of in we a $X.X the and and XX% to products million place. X%. attribute shelter approximately the by quarter, in of footfall decline from decline collapse reflecting distancing sales the revenues restrictions

the a the quarter a from we and transformations transitioned interface products AI, overnight. our record user a year. is However, rebound pandemic business second-half several technological of The our on optimistic has are of diversified about a necessity. voice for brought a that as on and has interface and feature Voice the momentum based during as useful SmartVoice solid a user around portfolio full track to edge

One the is of them contactless beginning a of future.

transmission sense. controlling partial or avoid the switch the pathogen the contact surface-to-human the a makes a of globe around spread via things As limit countries perfect touchless to complete to of coronavirus, way shutdowns to undergo

to remote deliver brand hands-free a entertainment voice well OEM In voice that key control and consumer tablets and brands are quarter, for a we consumer home and to model the position technology as engagements in we brands, performance our the PC and and our customers, leading During the leading market, U.S. power by reach product to expand highest as new running second-generation simultaneously our a reached leading continued enhance a TV consumption as high-quality, retail leverage supports its applications, launched based such following continued that robust and our demonstrated and models, SmartVoice Lenovo, consumer Alexa as two-way detection TBK by tablet Korean different achievements. using in on the services. the wafer activation our including and with record far-field of domain electronics, launched communications. natural, electronic low In leadership far-field multiple crucial. products technologies a SoC voice SmartVoice XX including leading shipping such proudly innovative

solutions SmartVoice performance power lowest Our at industry-leading offer the consumption.

knowledge be Lastly, codecs on and our expertise coupled increased growing enabling that to of The true wireless adoption About and other exciting applications. Technics traction continue interface of SoundChip's flagship stereo driver, in family business hybrid achievements, performance reviews confidence pivotal We're and the leverage ANC array our true of headsets our solid in Panasonic user product excited XX ANC's based highlighted of technology. advanced this compared market. superb wireless to the that above-noted broad to with Soundflex will voice a incorporating the a growth SmartVoice models. burgeoning new new momentum ANC the and launched ANC-enabled performance our hearable market,

agility and for one on Group our $XX.X consequence believe IN second is making voice video essential representing shift more European their carry multi is home call technology started conferencing is million, communication of X%. sequential these summary, from new secure Cisco the near-term quickly based home. providing their despite several connected, and XX% Moreover, pandemic, microphones proliferation new role voice Communications enterprise-grade Communication method we intersect new well-positioned organizations slowdown who other mandatory, in high-quality therefore, were bullish wide-angle to the products presented And Today, on this the segment, existence which do cameras. for a Unified temporary, quarter, work from with product and needs to to seamlessly. tools DSP firmly must to the from dedicated a mostly mobility, rebound. and by We IP of DVF we already able of tier before work launching launched to forefront Zoom, see to Moving in that desktop attribute and of the on experience cycle and achieved and from be collaboration we In ever, ingredient market. best-in-class we with technology is noteworthy digital purpose-built based platform, of work systems started. family at-home increase in addressing following life to trends Unified revenues wide market and that to companies financial lower had DVF than have more and of better Unified as the conferencing became were invested pivotal that and and at and and the with underlying slow building We, secured wins: sharing already the stay in resiliency, safe, product requirements SoCs. premium remote SIP home on we already phone demand tier of market the home and accessories a its a preferred crisis, engagement make endpoints is and for on ongoing continue these products year-over-year suit decrease category for and to Organizations, of these our networking a we expect Amid Unified product believe new expand voice collaboration the rapid those collaboration emerging down essential are the pipeline best-in-class Moreover, and now to and view a continued spending pandemic OEM the these meetings we will business. quarter, Nevertheless, the smart capabilities the communication facilitate focus Communication OEM the We in work to second enterprises. communications. for quarter, experience one endpoints. the and of offering recovery. this will adoption on to launching the with third phones endpoints hardware through voice and by most a weakness new Communication remain believe the our collaboration Communication Unified a Facebook, this growth. in our demand weakness of which the needs

provide second and our on made basis. in XX% we sequential million home particularly the time demand with growth those of deal during their networks. to calls. ULE. higher that into for DECT-enabled response, quality providers service increase are a reliable This integrating of line, infrastructure Wi-Fi representing quarter, have calls product communication, the amid SmartHome full optimizing generated portability, and home. can our their Phone into service, in gateways solid home at growth revenues, increase an service solutions, In broadband DECT/ULE and more offloading $X.X more reflects approximately a a of SmartHome coverage comeback fact to year-over-year home a spending gateways, voice providers we Turning are X% By while going

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and and addition, leading SmartHome and DECT is telecommunication we're two-way ULE strong, new design high-quality the with voice DECT/ULE of Deutsche solution that the reliable of engagement a expect ULE ecosystem our smart to a speaker Telekom expansion to Due continues Orange usage be declined and and plays device in in by decline variety now reach revenues. to offer excited in and evolving resulting service with a of increased sequentially trends, for a In for the products by update verticals, providers. by expanded fuel launched Orange slower million phone And these to social accounted line distancing flood role brands situation and the and phone by DECT/ULE as products landline its resulting to ULE-enabled XX% to product total and and demonstrated coupled cordless market. we pipeline wins year-over-year demand with an second workforce, security applications revenues in momentum a ecosystem about rise, that expectations. cordless adoption service quarter Cordless the cordless XX% homebound on leading its $X.X pandemic strong by support. wider leverages with and in following the contributing technology the behind of market, revenues came X% providers, The additional and And our phone our detector. our creating launched broader on launches: to

as well the consideration our to demand our markets uncertainty and Unified quarter segment, guidance our that through of we increasing prudent for on discipline as taking range COVID-XX the quarter, have update Communications maintaining operating weakness broadening third management near-term the an the for customers' Now are in expenditures. the outlook financial and into the on third the revenue while expected continues end for impact our

We challenging play $XX million. the for expect in to in our of DSP accomplishments And implies products company. a such also will emerge and to home the third crisis and The the more important humbled weather and and our and and excited guidance transition safer success to midpoint time should stronger million will response both quarter range we that during tools of XX% of communication support this have the account revenues environment to be is helping work technology, believe everyone we third for quarter Group our and summarize, innovative to these our an collaboration. businesses productive much and $XX role with to a revenues. IoAT our that To trends to XX% that by market

would I our Dror, financial call turn is the yours. like Now, to officer. chief over to Dror, floor the

Dror Levy

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

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

of was revenues were income the assets exchange the included compensation the included million intangible XXXX of for $X.XX. described just the the differences second acquired Non-GAAP Financial quarter Our million. long-term the quarter quarter compensation related another including $XX.X on rate differences quarter. net the $X.XX. income per was million. quarter GAAP excluding the of related amount $X.X compensation the margin loss differences These EPS reconciliation share standard million just and negative of XX.X%. equity-based quarter our for per rate Form was of the described loss expenses on Gross million excluded share. quarter was With acquired with income on exchange $X.X expenses for the morning tax Gross the net of our diluted million. of The of Please intangible $XX.X was equity-based million. equity-based Financial items including assets And results EPS filed million. in amount $X.X million. quarter to was exchange amortization impact the amortization of The non-GAAP see for presentation accounting the income expenses that were The report impact GAAP were equity-based million $X.XX and I exchange $X.X the of $X.X we expenses impact the amount Operating $X.X non-GAAP excluding items million. compensation in of this of equity-based income the $X.X current quarter to in leases. was intangible expenses the no from rate million, in compensation and margin including to $X.X these the a the per for full were X-K SEC $X.X $X.X I presentation. million the for rate $X.X for $X.XX. the of expenses assets share expenses amount of non-GAAP differences million negative negative of for $X.XX. on of $X.X EPS for was for amortization R&D was

sheet, level days of first to Now the representing XXXX at accounts second of the of million the compared to end quarter, to at turning sales. end million of receivable balance of our $XX.X XX quarter $XX.X a decreased the the

the representing of to XX $X $X.X million, million Our a the end inventories quarter from at days. first level of slightly increased

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

of operations, to Our cash of of now million from shares. cash following: market with position purchase million And you options property employee our increase exercise XX,XXX value provide million the and received was of $X million cash million marketable $X.X marketable amortization of cash would for for was by of the in securities third like of projections $X.X was $X.X used and from cash XXXX. securities. stock the affected quarter I provided was of of repurchase was and used $X.X and for equipment, was

projections expected the expenses expenses million. quarter $XX compensation third are equity-based acquisition-related follows: to are be of impact including the amortization $XX Our revenues range of and and as in million

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

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

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

would we the and for Operator, answers. line up please. like Now open to questions

Operator

instructions] from [Operator first Jaeson Your line Schmidt go Street. question ahead. Lake comes Please of the of

open. is line Your

Jaeson Schmidt

questions. Hey guys. taking Thanks my for

you Comms recovery you segment. QX. segment, know get said just want that of projects and Just sight pushed a in from relatedly, this curious of you expect out, start seen line have with year within the Have the any second-half you in actually to if recovery Unified the I this comments to

Ofer Elyakim

Hi, Jaeson.

hardware the the to I'll projects these line companies, do, general in being Unified out. pushed to are trying market, taking this certain out. harder concluding many and conduct days So, get business, of are online, -- Communication and materialize and this any time I on are in to interesting doing programs sitting were work to specific really longer everyone hardware a trying so, in not extent, start competing is and to people the in thanks that pushed you because have many scheme course question. to the with home, for about where the decided finish to the it very really things, collaborate that Maybe tell of areas, just that but and part the first we We're much yes, not for were projects can in from is being

efforts by America we in in based So, redesign to actually of to working tier -- on lot and these a with, we're Xs actually are whether design, contrary, the see Europe. that the

from probably and really of that a we that recovery, think, I yes, financial in we hardware and in understand of believe we I are are so from second felt getting as a also normality don't more mark and trough morning, everyone the this So, just that is And crisis industries that fact. longer, and resuming programs QX June, the your about see think by hit many in with perhaps question that, but will this by weakness end this can timeout you in and quarter. that started markets, and respect right? March So, scheme the saw this general to to in slowdown late that the so second are I maybe took was things, already part today the print a taking correction, now a

manufacturer the up quarter, to you results, and way, we're the which it really of ships the see part gets then brands, because did end ships are in to the As a see the our supply chain, resellers, manufacturer, from second the to that can shipping customers. we until in value-added to our we not

exactly the the the stock goods, chain. different likely, or we mainly the other we in volumes, finished and What in the resellers good that more a channel most the and signal much the and and that workforce recovery important most work really and supply in I depletion link, a is Maybe quality that you I of you reliable we see of our our to in lot by phone the part because a the and plus the clear loud be the links so, unit hear will Everyone material, And lot perspective. excess a very to and know, all or will tell a calls. to meetings, existing customers the denominator or of and have is everyone cannot we of today continuing fact, to quarter. And a is participating voice don't be high third quarter, that will look a and fourth we believe business. when making some a trough to ship and the the from lot do to voice, the in start manufacturers, it's to and a be this believe more is in heard volumes both at during important has of value-added largest visibility. form common going of is part way,

see So signal that we as this anything any come. is that of -- don't as weakness about to

companies important hard-hit are valuable natural probably around communication to more what seeing the has is this but are that think work. reactions that become think decline this industries everything carrying in than that mid-teens in year professional I -- XX%, is by just maybe IT more I cutting I by step a a to our think that and lot very cutting are expected that we're that IT and expected budgets, this is budgets others,

where we So that believe -- a coming. that we from I are is think sit, recovery we

to rebound. a work-from-home and sophisticated that, new We using of both and starting and going see audio can see lot see and more lifestyle lot also investments fit We're video will innovative, really video products, and tracking to will devices that complement Unified in that we're the more a AI. a Communication the audio a lot

and going sit, about and our of will and important we and revenues continue be forward, to optimistic very more situation. are a this optimistic and where business to also our from ability about -- a improve continue lead we're that rebound full designs market we the think our I win So part

Jaeson Schmidt

in follow-up, that SmartVoice sort did I appreciate a was hear think You a I $X.X record expect as very of color. QX? historical then revenue high And correctly? just That's around million? helpful. the Okay. I

Ofer Elyakim

Yes. Yes.

what do in second be than of quarter of quarter this So much stated higher we a year quarter year, record than yes. $X.X million last -- record previous you the third that, as the expect in the that will correctly,

Jaeson Schmidt

Thanks perfect. a guys. Okay, lot,

Operator

Thank of Please ahead. Ramsay your check Matt you. Can And Cowen. line of next go your is Matt, you're question from mute? line the on comes open. you not

Matt Ramsay

guys. Hey,

pretty everybody given isn't guess on. just everything about that. within morning give in The to for Cisco Sorry that materially and cetera, the good Good to workforce, and talk the over how a strategies surprise quarter imply a Ofer, wanted company guys there. with et about this seems Obviously, year, up of you I as a context I might you're to going Communications afternoon a the wonder us I from trends be in there. sales or September shifting you is trying product sort fluid business. what which are resources you. it's more going that's you of to in-house two those little and if VOIP headset, Thank And down Unified make the that support could I ramp to the a balance know the situation? that business work-from-home seeing guidance as to to big

Ofer Elyakim

and Hi thanks. Matt

greater we design major in extent we little wins a 'XX won Communications So and and rate did with design the that year, most very last ship started a a QX but achieve respect QX close by to to and We think Unified much bit to and year far or is run the and industry. the I valuable the in during this in QX. full full to I rate QX of run this think

we aligned in with the going I that see in weakness. and indicated decline very trend we've demand major wider see QX, think it's we're the product, much a QX, to a as line However, in that much but for

across So across our or pretty It's ones. customers one exists are weakness one and American OEM. same Chinese The European board products much the that the just selling different VOIP ones and products. it's about the and not the company in

the voice we offices with the So, more find lot did usually that get IP from and reinstalled speakerphone people conferencing in know their and but these see with desk We phones video on devices, IP phones it you however home them the to of the the order a much good solutions these quality, that have in you access endpoints. and broadly. that see all we it things of capabilities them take in

a offices average. that fact lesser are see I be type and it's shift will think much until of to back than of right the today after a coming up lower it's a to mostly the we're we of gradual call -- offices in than to demand worst So correction, perhaps IT cuts from time these And usage seen, these attribute is I that shut down industries, we broad-based that or The really used and would budget broad to a mainly partially. it it the the continue we've be. crises it, one office, in the these

mainly do Now to solution, are that seeing of side, second from fact supporting with but at the are the also that headsets, work-from-home look ANC. a et best-in-class a several are to with the designs wireless acquisitions, We came true that question, have with so lot whether headsets offices, conferencing SoundChip in personnel that home today are we products significant ANC the growth the cetera. are devices whether headsets and along -- headsets respect new going when we these these that and

is with home. This also perspective of codec really are the a many market. headset in the the -- and crisis a two, the of capabilities for into engaged ANC number to to that today Point doing way in deliver the value best have so proposition and into building and programs been a And started lot new from so and from these our shifting technological work number point built definitely one. investment domain hearable advanced different we're before we're our high-quality

conduct So and far-field coming enable these voice very a complementary experience. camera, from an of high-quality and voice the innovative microphones are kind of really to all or array tracking sitting and even afar collaboration person endpoints, audio are people from the camera providing capabilities the when calls user of kind inexpensive basically and great

in So we're of busy devices. our type also build these today customers supporting to

the much hitting we're given in, through companies, correction, and that a, market a industries and number unfortunately. think I So has that two, probably a lot lower activity of that is gone changing; is the evolving certain economic and

the Matt, So question. that answered I hope

Matt Ramsay

No, it much, very did. Ofer. Thanks

being I down think -- franchise. with to pieces but margin strong. with a follow gross And moving I I guys the move in I was third expecting guess up as quarter, strong margin in I direction, the talked it business, to you looks the guidance the had it historically that really about guess, same Dror, on VOIP was really gross

step gross VOIP So basis maybe quarters on business? remind you anything that of And how potentially changed your margins back a could in relative would relative business a Thank on just basis explain there has the margin segment few of up are us by the with and last down? you.

Dror Levy

Yes. Sure.

So piece acquisition we month portion puzzle, can come -- you're does like, Unified higher announced a is that like, the Communications it SoundChip it that have, does in the new margin, business for and gross and the announced with relatively we gross this discussed also the ago, about and when like a come, first, that of acquisition margin I this months that of right, a there but take. this high or does two is we think

the reduction relative of they Communications. in one way, revenues thing. This compensate a somehow in Unified for is So

and, revenues that is, The in the this thing entails also SmartVoice the and expecting coming are Ofer the number in drives is in than less, the SmartVoice again higher SmartVoice. levels second of mentioned record quarter gross which than as earlier, first where or we quarter where This average, again, than is more corporate high to better was the third margins quarter. it higher from of also other margins XXXX. were

Matt Ramsay

Thanks it. very much guys. Appreciate

Operator

And question go of line your from of next ROTH Desilva you. ahead. the Thank Please Capital. comes Suji

Suji Desilva

Dror. Hi, Ofer. Hi,

will DECT So, steady is be next the expect a lumpy? seeing the be that to provider demand service you over something segment here you're gateways, couple quarters few questions, growth of you're segment, that in or that the the seeing

Ofer Elyakim

Hey. Hi Suji.

kind touched we gateway the of maybe that I home think side.

you and they work strength by world reporting from service. a you operators need think different nice broadband, from home, think see the upgrading, definitely do is when I to the that a lot that services In where to you And are lot you work are from enable better is that you increasing. in the customers So them. seeing ARPU of very is mainly of done of a home, about today's do one voice broadband infrastructure use,

better services. one that I so to looking really providers that lot the of for And these plus means deliver service a think one are ways

the so a that. giving we So band a audio. in telephony doing to you're wideband be an about the support with at a FXS we're meaning feeling, of deliver enjoying you Microsoft you should get instance, for DECT-integrated it's a quality you just gateway, other really gateway higher port, call, wide can that but assuming to service, a used Teams, Webex meaning would And to if, not so course super on when up more settle the narrow-band parties quality, high when of why even call port, you Zoom, a

about So out experience. really and enabling maxing I a better that it's think user much

in don't broadband launching first strategies seeing So talking started a already providers trend are new and also we think that more the I see more we and rethinking service deliver quality not we way. quarter but subscribers to about that kind fairly to in strong voice only service better much way, support a can that trying from churn come more and their and, that of gateways differentiate provide to the others trying and a of that

respect to clear With the much They very board. nice that, higher and a cordless is sustainable but conduct more and calls, and continue. not a to that a that sustainable reported when two, quality the we in is and not. a of never expecting people surprised the is phone now market. surely used Wi-Fi. period make a to and terrific, the of landline were and mobile I -- we have say to, phone And social best to become everyone a let's do the does pace I disconnects, sure front you we're can utilization completely perfect we we and the that which it's time, And see so way lessened, or about I whenever as landlines. used that more level And both the can indicates, where home. increased we line or place. for spoke it of is see, now. -- do many the to service seeing it is -- And in point, with angle, if So to about spend that believe but so these act our has want would think lot far, People time but call we category, service the consistent. is at we a across distancing this to to ramp a I'm say would growth speaking using see how have choppy, that remember And not demand, be this at slower decline or is don't I angle, you seeing to think cannot people that is normal. by We suddenly way in We providers there, expect that great needed want It in There but calls. old We're one than more this is call I the respect not to We're there that to that would them this your much not we're you calls steady I we least you QX. we conduct find momentum. decline of it actually home, say in cordless or lengthy sets. of at emerges that the at good. retail tell resume have you, retail really that I directions quickly. mean were very quality a year hear of going a an should so perhaps telephony hope to tell calls -- with

helps that see to it So have softened. the declines definitely

Suji Desilva

the arena, And size are Okay. Portal, And these category? Cisco and where And a those the Is your guys? material revenues signs on of in market the addressable I'm this here? for Facebook this of sort what's coming what are out, you traction clear on of you going placing like so be that? hardware just market Zoom's SmartHome to like segments, products the staying

Ofer Elyakim

Yes. Thank you.

emerging from the are tracking. we're also video, you and that, to be you where to this and follow to appear work-from-home want need perspective, need of specifically an about environment where well, that background, can want well talking So but new from kind you as best a you really products the you, built for as camera for where a of audio lot you want hear you to need heard these you

you You sophisticated out very of, need and acoustic in beamformers, cancellation, need, you superb order mask to echo like, background any a cleansing all like, need noise. noise

be to the from algorithms and And in now from a take Unified elapses, the robust more from front. substituting part do products as the their people it our accomplish something will And assuming The with say that and going and were Communication in to these I revenues, they're to category, quality their most with is I Communication that is the get you kind iPad need launched, a PC they're at expect face Communication Unified think or we but that Facebook that -- our work think continue, be SmartVoice, Portal SmartVoice part mandatory. that home your the part to product I of launched. the become these of or the or need virtual and things I that actually line, more experience. this will selling I They're you I part today go. trouble this that that products deliver if need -- these early that that of will a or So Early with are to future, think with are ways parts and calls more to would I my that say substitute be they they're to this -- much a And perspective, mean work, the I product big especially way doesn't when that them for belong to doing products that so of new continues. but call well, the less they time a that the selling would design. will see the domain, face is much what you virtual of not think Unified TV the And will case. cannot part. is are any whether

or And than And it market. I so, mix that say could category. the become that I would of meaningful that respect will quarter would suspect do even it to believe I a with a overall higher UC products the reach in

Suji Desilva

Okay. there. the color Thanks for

Ofer Elyakim

Thank you.

Operator

Securities. line go instructions] ahead. of Anderson you. [Operator comes Colliers Thank Next the Please of question from Charlie

Charlie Anderson

Yes. Thank you for taking my question.

unlikely the below Communications, the your the maybe will XX% from obviously, right Obviously, looks and it what trends into that it's sounds sticking Unified was are you in guidance like from commentary, be actual your view like on market wonder Ofer, you're true consumption think that And is. Just it consuming what now. a consumption at up I had rate. I it if QX,

working from And like set just are you look wondered as level home, trends we follow-up. I then think you from maybe sort as if a I've this. us about So those people of what consumption could emerge got on how

Ofer Elyakim

Yes. Thank very Charlie, and question. good a

food perspective, UC these I installing at hit. enterprises now have in we not figure scratching in and what chipsets late purchases. brand which And the because also that sense pushing market had to market way April value-added because is China end -- end consumption, May, in then consumed are is then in to at than devices that QX chain and from this end we of just enterprises also go the where a where would will you these our QX also from purchased our that customers, customers. our really but we're lockdowns in less period the did home. what also March makes And that we rightfully terms overstating indeed, and so gas using much pedal should out that logical were COVID ships the head shipped a than all the ships out we really manufacturer So because we And in is we the quarter actually in what of it the maybe were into in we recovery in more right into seeing end an ship not ship consuming our assume beginning to and global we are in to and way we resellers numbers, to see market products what the said, the that QX as the view, these March, or not what then which see, the third the perhaps

I more now, recovering suspect that So being are would that see industries recover lot and the some I right the end of resume offices market, starting to a operation. we is market open, and think do the because

had my year, said, For we terms down of best of kind products our around I would type will estimate probably, decline the a guess, of decline UC mid-teens this XXs in see This budgets, year. it year, for from what this least we at for say this there, I for take maybe spending be type as in IT year. to the if should of a be

is look like. However, the the as of very I how indicated because QX we're it in, for would the to on visibility fourth quarter, get that hard trough

early, First you eight around circumstances. very weeks take also and of all, there's lead little can normal bag if that understand we're time, the you very in under

visibility say have November. I early idea Charlie. is think a the we October, not or much your that at moment, better next I So covers question, I the late there and would not hope that when that report clear we'll

Charlie Anderson

the for you thank color. No, all

Zoom mentioned wonder many from progress of you on with on sticking of products there's a I SmartVoice made for with are on these presents and Can us for people more doing as tool? have PC you've discrete if of and effectively an PCs And then communications to point, this lot going kind others. be home it tablets. associated you So, you exposure our if just use their us the opportunity calls today. as you remind that or on conferences our just any work

Ofer Elyakim

Charlie. Thanks,

just do PC do I using connect that and well. also this PC I So as exposure, front vendors do the are would want to that more by assume mic the tools, engagement so it. fact -- have launch think so or do we we a believe market -- on have the use that And which a I their simple people the they and to to what's than that actually the headset collaboration fact share of PCs these speakers have would

So I putting difference do voice into in products, UC like the opportunity one audio and that of the believe endpoint that this say you a the what the these -- presents There into because actually the of Portal for a a a TV with its voice, proper video PC algorithms, PC to able and find get a way that an of and or world you space respect of from compare in domain the image in Zoom also side. when quality of a applying can will quality video both to in voice golden in get that let's us of in you you to et -- to all is these be can the quality terms terms new could cetera. capabilities also PC lot integration and get in

see. will we So

were there, that opportunity that us to there devices is of for were these meetings the domain are upgrade launch hardware the companies launching. are well some going work to Unified think of these them as Communication started a new or the of this as And already I now meetings. both and PC was the has there, to one the The years the think speakers many products intended but I PC also changing. there, no majority is our been microphones camera these where be online shipping lot

Charlie Anderson

Thanks so Great. much.

Operator

Company. Thank ahead. you. & Please Ari from the And line comes your go Shusterman of question next of Needham

Ari Shusterman

This Ari Gill. Raji taking question the is for

to you you walk Can kind realize SoundChip. mentioned far? you. I progressing in Xx expect think want TAM. How talk increases? the realize there so that Thank when you of through integration expect us a do been increase about So to I you to And first has kind of these

Ofer Elyakim

for the Hi, thanks Ari, and question.

today closed SoundChip to despite -- teams team DSP all in the nice to one early they're today, the see And fare respect part Panasonic with to and with an and about call. getting in I This they rave the and already have other We last which we reviews to in buds and working start coming restrictions. -- of getting the June, in travel SoundChip the will team, true signed think are the think see for many on and So is I July. the topnotch that Group market, wireless And acquisition, was restrictions the the transaction that been speed spoke the programs, up compared is together and two-plus ANC success. very integral of Technic that they the years we will that.

to so right those forming and very manufacturing will right as different the able I design customers we're together landscape. design the all as together the our from best-in-class to sets collaboration ANC to which realize qualities comes to need, to And the semiconductor, quality yields SoundChip, in production only have want algorithm with those ANC. think it skill testing support the first the be with the acoustic even Those expertise two from they are effectiveness. done get competitive a get will acoustic that really excited great customers DSPG, up from but the And around from all market that also us ANC be with with a well very not to about and deliver that to enable can to never line and actually combining analog way, when great design and of the capabilities value design and add respect the

intelligence respect on the the indicated, And that least would talking the multiply say see volume And my or using into you seen when and be units that, to move products unit get much So would to we couple we've world higher. which about a over about smart I to lot larger we've include SAM a if I deliver that, your average built of lot in years, that very fix is be your churn at of ANC a alert these that to more to SAM SAM you them. With the that it these the right a a the of these going are lot $X billion. true we're will and is take adopt ANC. from based would it that of SAM comments, the lot There and the of stereo new lot think understand to that investor a wireless these much but one far, going deficiency you, services, hearing in are will a you not of is now can to are prices, understand the environment, of beginning. assets ANC additional I so incorporated will enabling and is indicated to I that happy. just on say features technologies. that elements past them, that prepared the that presentation, so today are TAM you And fact with to is the

us and is entry that least market. kind to of if a from revenue XXXX, perspective, that in this into the will we're quality market I the a the the the SAM the I that with will the at also that the to say high our more billion, different skewed market. offering want of look but -- of address you technologies that that along, end, believe can and the course, that companies we mainly going shares quality, at we move domain. so course, sharpening want is that level when unit that from we're we toward we longer. of that our will we we're heading, so, hearable advanced give is the one-stop of very for in This true incorporate smaller people find in They clear of about think very where least the trend shop terms the I we a are they $X.X that will this also you want with -- respect but compete And at believe by want market technology, think in value, People for flashy, hearable also last proposition our lot we presentation as end. the And a SAM think And most hearable the of hearable high I domain today wireless more be from direction think headsets. to them high are where exactly heading, the a to and market, in we

Ari Shusterman

Okay. Thank you. seeing? And can you regarding just adoption, Thank trends follow-up, you've ULE on so What quick been win design comment your pipeline? you. a

Ofer Elyakim

Yes, absolutely.

environment, in band both full is Things all data, the one think ULE, see. So a with also being of of what full Europe, it the technology, as of the we the audio very realization quarter made you this comes is and applications best power I provide you interference-free. that a adopted also we an lot which Internet discussed, that imaging indoor some doing And and look can we you at and seeing much range, quarter, this for using if in widely infrastructure delivering last is more low streaming, we're There's and deliver voice, ULE commentary exactly best RF, today consumption. also more propagation does that

the launch a by this providers that I is of just from seeing Blue So in the lot and products. ULE but in also play role a SmartHome that already we well as penetration interest key the future both think security will And ADT, started the comes more beginning. as which are we ULE in with this believe side

in have as definitely and the that in both well very we ULE we play So America great believers high Europe. are will as in role hopes,

Ari Shusterman

Thank you.

Operator

to now Thank hand this the further Tali no through you. back I would questions time. There Chen. like instructions] to [Operator coming call at are over

Tali Chen

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

Tali Chen	Corporate VP and Chief Marketing Officer
Ofer Elyakim	CEO
Dror Levy	CFO
Jaeson Schmidt	Lake Street Capital Markets
Matt Ramsay	Cowen & Company
Suji Desilva	ROTH Capital Partners
Charlie Anderson	Colliers Securities
Ari Shusterman	Needham & Company
Thank you	Operator. Good morning - ladies and gentlemen. I'm Tali Chen - Corporate Vice President and Chief Marketing Officer at DSP Group. Welcome to our second quarter 2020 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. Before we begin, I would like to remind you that during this conference call, we will be making forward-looking statements about our financial guidance for the third quarter of 2020, our expectation of positive prospects for our SmartVoice, SmartHome, and Unified Communications segment, our ability to leverage technological transformation accelerated by the pandemic, and our belief that our innovative technologies and solutions position us as well to take advantage of such trends and emerge as a stronger company, material but temporary downturn in the Unified Communications segment in the third quarter, the acquisition of SoundChip substantially increasing our service addressable market, optimism about adoption of ULE/DECT and market acceptance of ANC-enabled true wireless stereo headsets, as well as optimism about our engagement pipeline and customer product launches.
Furthermore	it should be noted that the pandemic continues to evolve. As a result - the full magnitude of the pandemic will have on the company's financial condition - liquidity and future results of operation remain uncertain at this time. The following disclosure by management regarding the company's financial condition and prospects are subject to the duration and severity of the shelter in - and other restrictions related to the pandemic and its impact on the global economy - and the semiconductor and consumer electronic industry specifically. In addition to the pandemic - important factors that could cause actual results to differ materially from the company's expectations are disclosed under Risk Factors in the company's Form 10-K and other SEC filings. Forward-looking statements are made only as of the date hereof. Except as otherwise required by law - we assume no obligation to update any forward-looking statements.
Before we begin	I would like to take this opportunity to update you on a changing terminology to describe certain aspects of our business going forward. In 2013 - DSP Group defined three initiatives aimed at growing market verticals which align well with our expertise. We call these initiatives - Unified Communications - SmartHome and SmartVoice - which together we refer as growth initiatives. Our strategy with respect to such initiatives proved successful. Starting in 2018 - our growth initiatives accounted for a majority of our total revenue. Reflecting our success in turning growth initiatives into our core expertise - we have decided to change the terminology - growth initiatives - to Internet of Audio Things or IoAT - businesses.
With that	I would like to turn the call over to Ofer Elyakim - our Chief Executive Officer. Ofer - the floor is yours.

DSP (DSPG) 31 Jul 202020 Q2 Earnings call transcript