february 3 , 2020 - meetmax
TRANSCRIPT
February 3rd, 2020
2Private and Confidential. Copyright DSP Group, 2020. All rights reserved.
Forward Looking Statements
This presentation contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if proven incorrect, couldcause DSP Group's results and projections to differ materially from those expressed or implied by such forward-looking statements. All statementsother than statements of historical fact may be deemed forward-looking statements, including statements regarding market expansion ofproducts for new applications and our ability to capture a higher share of those markets, market expansion in VoIP, new shipments in SmartVoice,home gateway and ULE markets, and financial guidance for the fourth quarter of 2019. We do not endorse the financial forecasts of any analystsor comment on them if they differ from our own projections. Nothing in this presentation should be construed as a profit forecast. Pastperformance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, ismade regarding performance. Information, opinions, and estimates contained in this presentation reflect a judgment at its original date ofpublication by DSP Group and are subject to change without notice. We assume no obligation to update any forward-looking statements orfinancial guidance. Risks and uncertainties that could cause actual results to differ materially include: delays in the introduction of new products;slower than expected change in the nature of the residential communications domain; our ability to develop and produce new products atcompetitive costs and in a timely manner, including VoIP, SmartVoice, ULE and home gateway products; the possibility that such products may failto achieve broad market acceptance; the anticipated annual decline of the secular telephony market and our ability to offset the decline withrevenues from new products; our ability to manage costs; and assumptions pertaining to the level of demand for products that incorporate ourtechnologies. For more information regarding the risks and uncertainties that could cause actual results and projections to differ, as well as risksrelating to our business in general, see the discussion in the "Risk Factors" section of our Annual Report on Form 10-K for fiscal year 2018 andother reports that DSP Group has filed with the U.S. Securities and Exchange Commission. This investor presentation is updated as of February 3rd
2020
Our Voice will be LOUDER this
Year!
Capitalizing on our leadership in voice AI and IoT technologies, well positioned to
disrupt bourgeoning markets with a larger TAM
DSP Group(est. 1986)
>1BProducts w/ DSP Group
Inside
#1position in VoIP for Office and
Enterprise
>200patents
filed/granted
10locations
350employees
1994Publiclytraded
Leading global providerof voice AI and IoT technologies
32% Revenues
Unified Communications
• Comprehensive UC SoC offering• Best in class voice engines and algorithm
suite• HQ audio codecs
16% Revenues
• VUI SoC offering with low power Edge AI• HDClear for best in class far field
performance• HQ codecs and ANC
SmartVoice
14% Revenues
• Wireless IoT infrastructure based on ULE
• Offering superior range, fidelity, RT voice and audio support
SmartHome (IoT)
38% Revenues
• SoCs for Cordless phones
Cordless Phones
GROWTH MATURE
UC SmartVoice SmartHome
2020 SAM (Units) 2025 SAM (Units)
150m
200m
1.5b
2.1b
400m
600m
Our SAM is expected to grow
45% to 2.9B units ($6.5B) by 2025
Growth Initiatives Comprise Majority of Revenues andDrive Higher Gross Margins
15% 21% 28% 43% 46% 55% 63%
40% 40% 42% 44% 47% 49%
51%
0%
20%
40%
60%
80%
100%
2013 2014 2015 2016 2017 2018 2019
Growth Initiatives (% of Rev.) Gross Margins
Growth Initiatives Drive Future Growth and Leadership in Voice AI and IoT Technologies
2017 2018 2019
Cordless
$5 $11
$19 $17
$14
$16
$35 $39
$38
2017 2018 2019
SmartVoice SmartHome UC
Revenues in millions
$57
$64
$74
12%
15%$67
$53
$44
-21%
-18%
The Market Leader for Unified Communications SoCs
• Decline 1-3%• High quality desktop phone is still demanded in
the UC era. High-end Android phones emerge for voice, chat, and collaboration apps
Voice & Video over IP phones
~40%
• +10% YoY growth• Strong push of hosted SIP & cloud UCaaS by the
operators and ITSP’s
IP phones in the SMB/SIP phones
~40%
• +5-10% growth• lower-end segment emerging for SMB and
huddle rooms for open workspaces
Room conferencing phones
~5%
• 25% growth• DECT based phones growing due demand for
mobility and ease of deployment
Cordless IP systems
~10%
• Flat• demand in SMB for analog phone/fax; New
opportunities of cloud-to-phone-line voice bridging
1~8-port ATA (Analog Telephone Adapter)
~5%
• 5-10% growth• Demand for higher quality voice in IP door phone and
intercom markets• Growing categories of IoT hubs and smart assistants
New and vertical markets
Emerging
Our Market Differentiation and Value Proposition
Market focus
Complete ASSP’s portfolio
Superb voice algorithms
System cost optimization
Voice mobility with DECT
Mature & complete software
Dedicated R&D and customer support
Eco-system of partners for complete product solution
Serving All Major UC OEMs
Tablets & PCsVUI (Voice User Interface)
becomes interface of choice in tablets. Used to control
smart home and entertainment applications.
CamerasVoice is undergoing an
change in terms of enhancing voice and audio
user experience from Standard Definition to High
Definition, from limited interface to VUI and a need for a natural, robust far field
& two-way voice covering both indoor and outdoor
conditions.
TV/entertainment Voice activated TVs, RCUs,
OTT streamers and STB are gradually evolving from
basic push to talk VUI, to a rich far field, always on and
handsfree experience, supporting mid to far field
voice activation. Low power VUI is becoming increasingly
important for stand by devices like set top boxes and TVs to comply with
Energy Star requirements
HearablesThe bourgeoning market of
smart wearables such as wireless earbuds with active noise canceling augmented
hearing, and increased control over ambient sounds is propelling the demand for
edge AI and active noise cancelling headphones
SmartphoneVUI is integral part of smartphones, what
started mainly in high end models has now
become mainstream in mid-low end devices
SmartVoice Key Verticals and Market trends
Products integrating SmartVoiceSolutions
> 30 Vendors
> 70 products
> 80Mu shipped
SmartSpeaker Wearable Tablet Smartphone IoT
DSPG 3-mics Ref Kit
ZOE
Alexa Adapter
PS10
P3
F4
MAVID LS5BV
Microdot XS
Gear S2
Gear Sport
B550
issex
Aston Two
idreamX
Cervical Massager
Echo Frames
Nortek Libris 2.0
Office Smart
YouXuePai
优学派
Bonito
Umix6 U36
S5 S3 Pro
Tab-S5e
Tab-A10.5 Tab-S4
Tab ActivePro
Tab-View2
Smart Tab P10/M10 TB-X605F
Yoga Smart-Tab M8 Smart-Tab
Sugar
S11
T9
GM9Pro
A9 StarLiteA9 Star
A9sS LightLuxury
A8 Star A8s
RenoReno Z Reno2
Realme X2 K5
S7 EdgeS7 S7 A8 A8+
A9 A9 Pro
SeroOneRemoteBN59-01312A
Portal TV
Portable projector
HOMIX Smart thermostat
Light Smart Voice
Hero6 Hero7 Hero8 Max
Ultra 4K Pro 3 Doorbell
Smart Home
• The millions of homes where voice control has gained a foothold for smart home adoption will be a fertile ground for the wider adoption of a growing range of additional smart home devices
• Security SPs need a reliable solution for 2-Way Voice to turn the home security system into a communications control center, covering the entire home with intercom and a direct audio channel
• Interference free spectrum
• Superior range
• Natural two-way voice, minimal latency and guaranteed QOS
• Enhanced security
Market Trends Winning Factors for ULE
SmartHome & Consumer Industrial Security
More Leading Companies Adopting ULE as Their Primary IoT Solution
Press and Awards
DECT Ultra Low Energy (DECT ULE) integration will pair with Blue by ADT sensors and keypad, coming this spring, enabling the camera to function as a security hub.
Focused on Cash Flows
Cash flows from operations minus Capex
Free Cash Flows *Last Five Years (US $)
Total: $44.3M
Total Cash Position as of December 31st’, 2019 (US $):
$131.3M
No Debt
2015 $9.9M
2016 $14.4M
2017 $7.7M
2018 $7.5M
2019 $4.8M
Shareholder Friendly Approach
Share BuybackLast Five Years (US $)
Total: $40.7M
2015 $13.2M
2016 $10.7M
2017 $4.5M
2018 $12.3M
Q1 2020 Quarterly Guidance (Non GAAP)
Revenues
$28M-$30M
OpEx
$15.0M-$17.0M
LPS
($0.01)-($0.03)
Gross Margins
50.0%-52.0%
Short & Long-Term Target Model
2019 Actual Short Term Long Term
Revenues $117.6M 5%-10% 10%-15%
Non-GAAP Gross Margin 51.0% 50%-53% 53%-56%
Non-GAAP R&D 28% 24%-28% 15%-20%
Non-GAAP Operating Expenses 48% 40%-45% 30%-35%
Non-GAAP Operating Margin 3% 7%-13% 15%-20%
Key Takeaways
Reached an inflection point,
growth initiatives expected to
account for > 60% of revenues in 2019
Exciting position and momentum
in three dynamic markets
Established franchise
businesses in three highly valuable and
thriving verticals
Financially disciplined,
strong balance sheet and
shareholder friendly
Well positioned for significant long term revenue growth and
continued margin expansion in 2020
and beyond